Looming Challenges: Financial

Looming Challenges: Financial

Both HCD and HABC are facing serious financial challenges. The Department does not have the capital funding adequate to improve neighborhoods or the public housing now operated by the Housing Authority.

The capital budget for HCD- those funds used to finance housing developments- will be dramatically impacted over the next five years due to borrowings against future Community Development Block Grant (CDBG) funds (the most flexible source of federal funds coming from the federal government), through what is known as the Section 108 loan program. The City receives approximately $32 million in CDBG funds annually. When all of the funds authorized to be borrowed under Section 108 loans are drawn down for projects such as Sandtown, Historic East Baltimore Community Action Coalition (HEBCAC), public housing replacement and other development efforts, about $15 million of annual CDBG funds will be needed to pay the debt service on these loans, seriously reducing the City’s ability to carry out new programs.

In the Housing Authority, total capital needs to fix public housing units are $390 million, or about $29,000 per unit. These figures do not include costs for the redesign or improvement of project grounds, internal roads, and infrastructure. Given existing HUD formulas, HABC can expect to receive $160 million over the next five years’less than half of the amount needed simply to keep up with needed improvements. The portion of this amount available for actual repairs is considerably lower because a substantial portion of these HUD funds support HABC staffing. The project team estimates that at current spending patterns, only $5,300 per unit is available for actual repairs. The consequence is that unless staffing costs are reduced or additional HUD funds obtained, it is likely that public housing conditions in the city will decline over the next five years.

In FY2000, HABC faced a budget deficit of approximately $8 million. The newly appointed Commissioner and management team have successfully reduced the FY2000 deficit, but the agency faces another $8 million budget shortfall in FY 2001, necessitating further cost-cutting measures to balance the FY2001 budget.

It is clear that both HCD and HABC must institute greater financial control over their programs. HABC handles an annual budget of approximately $205 million without a chief financial officer. The agency lacks a regular financial reporting system and suffers from inadequate budget planning, as demonstrated by the projected $8 million FY2001 budget deficit. Within HCD, the situation is similar. Cost containment is difficult, and budgeting tends to be incremental.

Introduction: Department of Housing and Community Development
Looming Challenges: Financial
Looming Challenges: Internal Structures and Systems
Recommendations and Projected Results