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Staff proposes changes to affordable housing funding

Wednesday, June 19, 2013 by Michael Kanin

City budget and housing staff Tuesday recommended a series of changes to the way the city collects affordable housing funds, including a significant adjustment to the funding mechanisms for the city’s Housing Trust Fund that would turn it from a moribund asset to a major provider of affordable housing dollars.


Taken together, staff argues that the changes, if approved, would reduce the city’s reliance on affordable housing bond initiatives. In so doing, they would improve the stability of city’s affordable housing programs.


Council Member Laura Morrison, a strong supporter of local affordable housing, was encouraged. “My initial reaction to shifting the way that we do this is very positive,” she said. “It gives us a much more methodical sustained approach to affordable housing.”


Still, Mayor Pro Tem Sheryl Cole – who has called for a November 2013 affordable housing bond election – was not ready to give up on that prospect. “I don’t know if we are at the point in this juncture that we need to put off a bond election for the money that we don’t currently have as we consider these other long-term (ideas).”


The failure of a November 2012 affordable housing bond – and the accompanying loss of more than $70 million in potential housing funds – sent Council members searching for both a stopgap measure and a longer-term solution to the problem of relying on the ever-fickle ballot for affordable housing dollars. The short-term solution was $10.8 million in mid-year surplus allocations to the issue.


The longer-term fix began with a Council resolution that asked staff to explore options for future affordable housing funds. Staff returned to Council Tuesday with their response.


The proposal centers on the reconfiguration of the Housing Trust Fund. Established in 2000, the fund was supposed to draw on incremental tax revenues from new development built on city-owned lands in a region of Austin designated as the desired development zone. As it stands, the fund will collect $600,000 this year and $800,000 – a small fraction of the estimated $23.6 million in projected for FY2014 alone.


Staff’s recommendation would phase in a calculation of a set percentage of the city’s operations and maintenance tax revenue. Beginning in FY2014, that figure would rise from .25 percent to 2 percent in FY2018. At 2 percent, the figure would be $9.5 million – the bulk of an estimated $13.6 million in annual recurring operational expenses for Austin affordable housing.


That figure would be coupled with $9.7 million in annual grants, $4.7 million each year from the city’s general fund (by FY2018), and a diminishing bond program that would aim to provide $27.1 million between FY2014 and FY2018.


“What we’re really trying to focus on here is that there is an ongoing, recurring operating need of about $13.6 million,” said city Deputy Chief Financial Officer Ed Van Eenoo. “We wanted to try and find a stable source of operating funds for those recurring programs…We also want to provide a dedicated, sustainable (Capital Improvement) funding source of about $10 million annually…We’re also wanting to look at reducing reliance on cyclical bond elections.”


Despite the diminishing reliance on bonds, the approach would still have an increasing affect on taxes. Van Eenoo projects that the tax rate could go up by more than a penny by FY2018 under the proposal.


However, Deputy Chief Financial Officer Greg Canally also told Council members that – thanks to the failure of the November affordable housing bonds – they could raise $65 million without adjusting the tax rate at all. “Next year’s tax rate will be slightly lower than this year’s current tax rate,” Canally said. “Mainly that’s a result of the new bond program that we passed – that $306 million was less than we had originally talked to you about a year ago.”


Canally noted that if Council simply left the current debt tax rate where it is for FY2013, it would account for an extra $65 million.

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