Governor Patrick's Budget Message on Housing Authorities

Governor Patrick proposed a series of reforms to public housing authorities through his budget proposal that was submitted this week. Obviously the uproar over Chelsea has brought heightened scrutiny to how Housing Authorities conduct business in Massachusetts. The Patrick Administration is also looking at possible consolidations between smaller Housing Authorities. Good public policy? What do you think?

In the FY 2013 budget, the Patrick-Murray Administration proposes a series of reforms to address the governance structure, financial transparency and management of the state’s public housing portfolio.

There are roughly 80,000 public housing units in Massachusetts, of which 50,000 are state funded. This public housing is the largest source of affordable housing for extremely low-income residents across the state. Many of the units are more than 60 years old. The combination of age and a lack of investment by prior Administrations has left much of the portfolio at risk of being uninhabitable.

Since 2007, the Patrick-Murray Administration has invested nearly $400 M in capital improvements to the public housing portfolio in an effort to preserve public housing for those who need it most. The Administration has also increased operating subsidies to help maintain housing and will propose another modest increase in this budget.

As the Administration increases funding for public housing, it is also proposing a number of reforms to improve the management and increase efficiency and transparency of local housing authorities to ensure that we are meeting the goal of housing for low-income families.

Financial and Reporting Reforms

There are 242 Local Housing Authorities (LHAs) in Massachusetts. Each LHA is an independent authority, overseen by a Board of Directors. The Board is responsible for oversight of the finances and operations of the LHA. Most LHAs are funded by a combination of state, federal and local funding.

The proposed reforms recognize that while the state provides funding to LHAs, it does not directly manage or oversee the authorities’ finances. These reforms focus on increasing transparency, setting standards in line with those of other independent authorities and reviewing the rules and penalties for non-compliance.

Enhanced Reporting and Financial Reforms

Governor Patrick will file legislation to eliminate compensation, where it exists, for LHA board members.

Effective immediately via administrative action, the Department of Housing and Community Development (DHCD) will:

Require LHAs with state public housing to provide DHCD with the top five salaries of the highest-paid management staff;

Set a maximum salary for LHA Executive Directors;

Require LHA board members to certify Executive Director salaries and detailed benefits every year when budgets are submitted. Boards also would be required to match payroll documents to actual expenditures;

Cap annual salary increases at a level consistent with comparable municipal employees.
Prohibit state subsidies from being utilized for Executive Directors’ buyouts that are above and beyond what a state employee would be eligible for;

Require reports to confirm monthly meetings occur and to confirm the attendance of board members;
Make ethics and other training in best practices from the National Association of Housing and Redevelopment Officials (NAHRO), in collaboration with DHCD, mandatory for public housing employees and board members and required to receive state funding;

Require more detailed auditing procedures including verifying director compensation and salary schedule, and work with the State Auditor to review and potentially revise their auditing process;
Require year-end Financial Certification that would require Executive Directors to present year-end financials to their respective Boards. Boards and Executive Directors would then jointly certify and submit statements to DHCD. Currently LHA Executive Directors and Fee Accountants complete and submit a form to DHCD certifying year-end financials;

Re-examine delegated Authority for Procurement to allow authority for purchases, where they already exist, to continue to be delegated from the Board to the Executive Director, but that purchases above certain thresholds be required to be approved by the Board; and

Deem any LHA which does not comply with all of DHCD’s existing and enhanced reporting requirements a LHA “Not in Good Standing” with the Department. Make any LHA “Not in Good Standing” ineligible to receive state funding until current on all reporting.

Review the Rules

A comprehensive review of existing regulations, contracts and agreements that help DHCD manage the LHAs should be the final phase and should reflect all decisions and changes made regarding the actions presented above.

Changes in Governance and Management

Governor Patrick recognizes the importance of public housing in Massachusetts and has increased funding for public housing throughout his term. However, in light of recent events, he believes that reforms should be considered that will improve the accountability of housing authorities to the local, state and federal funders as well as to the residents, including whether to regionalize or otherwise consolidate oversight into fewer separate authorities. To this end, Governor Patrick will sign an Executive Order establishing a Commission on Housing Authority Governance Reform. The Commission will confer with public housing stakeholders in Massachusetts and in other states, and develop, within 60 days, recommendations to the Governor for ways to strengthen housing authority oversight.

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