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SF Housing Authority finance report: HUD recapture left $22.5M shortfall; authority used reserves and new investments
Summary
Agency finance staff told commissioners HUD recaptured reserves last year, leaving an operating shortfall of $22.5 million. Staff described investment of reserve funds in U.S. Treasury securities to earn higher yields and said reserves have been used to cover pension liabilities and site arrears.
San Francisco Housing Authority finance staff told the board that a federal recapture of Housing Assistance Payments (HAP) reserves last year produced a $22.5 million shortfall in HAP funding and that the authority is seeking recovery of those funds from the U.S. Department of Housing and Urban Development (HUD).
Roy Lobo, finance department staff, said the agency has appealed the recapture and continues to work with HUD; the housing authority has requested the $22,500,000 and is monitoring when those funds will be committed. "We are $22,500,000 in shortfall today," Lobo said, adding that the agency has taken steps to manage cash flows and contingency needs while it seeks the federal recovery.
Finance staff described how the authority has used or earmarked reserve balances. The agency invested COCC (central office cost center) and public housing reserve funds in U.S. Treasury instruments, citing capital preservation, return and liquidity as objectives; those investments have yielded roughly 4.8% annually in presentation slides. The finance presentation said COCC reserves grew from about $5.6 million to $5.9 million and the public housing reserve grew from about $8.4 million to $10.3 million after investment.
Staff said some reserve funds have been applied to pay site operating arrears (including delinquent water bills and insurance) and shortfalls at Hope VI properties managed by third parties; the presentation listed use of COCC reserves for consulting, insurance payments and delinquent utility bills at North Beach and Plaza East. The public housing reserve is earmarked primarily to pay a pension withdrawal liability estimated at $12 million tied to layoffs associated with past asset repositioning.
Commissioners asked for clearer presentation of how multiple reserve buckets relate to the pension liability. Finance staff and CEO Tanya Lettaju said HUD accounting rules segregate certain reserves and that staff would prepare a consolidated summary showing available reserves and the amounts earmarked for pension liabilities and other commitments.
The CEO and finance director noted that HUD has authority to sweep certain reserves; staff said that last fiscal year the authority's reserves were swept and the agency's appeals were initially denied. "We are at the mercy of the federal government in their ability to take funds or leave them with us," the CEO told commissioners. Staff said they would continue to meet monthly with HUD and would report updates on the $22.5 million request to the board.
The finance presentation also described expected year-end accruals and timing issues affecting a reported $1.1 million variance between year-to-date expenses and the approved budget. Staff said some expenses will be accrued in the current fiscal year and therefore will affect final year-end results.
Commissioners requested a clearer summary slide tying the various reserve accounts to outstanding liabilities and asked staff to make that summary available before the next finance committee meeting.
