Short-Term Strategies Subcommittee

Short-Term Strategies Subcommittee

Minutes June 19, 2008 Meeting

Attending at VHCB or by conference phone: Jeff Staudinger, Kathleen Berk, Tammy Surprise, Sam Falzone, Rick DeAngelis, Devin Green,Will Belongia, and Richard Moffi

Rick opened the meeting by introducing the list (see attached) of the ideas that were brainstormed during the June 11 session and grouped as “short-term” . Rick took an additional step and grouped them into the following 5 categories:

1. Short-Term Funding
2. LIHEAP (Fuel Assistance)
3. Rental Assistance Related Issues
4. Metering and charging for use
5. Mgt Practices

We took note of the fact that there are two other committees that are working in areas that are closely related to short-term needs. They are Bulk Purchase of Fuel and Tenant Related Strategies. Eric Schmidt is chairing the Bulk Purchase Group and will also try to join us in the future. Rick will try to participate in the Tenant Group.

Short-Term Funding

We discussed why aflexible source of funds is important: pay the bills, pre-buy larger quantities, quick weatherization fixes, and for servicing needs.Jeff pointed out that fuel costs this year will be about 2X what they were in 2007, so owners need a way to meet this cost. There is not a stream of income in place yet to pay for it.

The following sources of short-term cash were discussed:

1. VCLF - Will stated that VCLF could lend at an interest or, if some subsidized funds were available to help it could be the manager of the funds.

1. VHFA -Sam stated the VHFA is willing to make funds available for their portfolio as part of alow-cost pool of funds for this purpose. He also stated that VHFA is willing to consider additional advances where there is a VHFA loan in place to meet short-term cash needs. Either a mortgage modification or refinancing could be made for the additional cash. Sam also mentioned a bond refunding that is coming up as a potential source of low-cost funds and debt restructuring.

1. Reserves

VHFA does allow, on a case by case the advance of replacement reserves or other operating reserves for pre-buying and bulk purchase of fuel. VHCB’s position is that it allows borrowing from operating reserves on a case by case basis, but does not favor borrowing from replacement reserves. VHCB prefers that managers borrow from a line of credit or other source for pre-payment of fuel.Neither VHFA or VHCB allow the use or comingling of replacement and other reserves between different projects.

Rural Development/USDA: Tammy stated that RD’s approach is on a case by case basis. If a project or sponsor needs funds for a pre-buy they will work with the manager.They will look at the whole budget including rents, CNA's, reserves, etc and work on the best approach or possible changes for making sure the fuel is paid.

1. Portfolio Analysiss– we discussed the importance of analysis of individual project budgets to determine the cash need and identify possible solutions (e.g. rent increase, borrowing from operating reserves, short-term financing, etc). Sam and Tammy stated the willingness of VHFA and USDA to be availablefor this kind of analysis for projects in which they are lenders. Eric Schmitt of Housing Vermont will be working with their co-general partners to do the same. Rick stated that VHCB is willing to work with owners of those VHCB projects that have neither VHFA, Housing Vermont nor USDA participation.

1. McArthur Grant Application – Sam gave an overview of a $3 million grant application that was recently submitted by VHFA and VHCB and which focuses on preservation of existing housing including energy related investments. However, the focus is not short-term funding.

1. Federal/State Funding – at this time there are no short-term sources of funds.

LIHEAP/Fuel Assistance

Richard Moffi gave us an overview of LIHEAP (Low Income Heating Emergency Assistance Program):

• This is a federally funded program that the state operates. It pays benefits to offset heating costs of home owners and renters whohave a “fuel liability” – either they have to purchase their own heating fuel or when their landlord bills the tenant for fuel. These benefits are paid directly to the heating fuel company on behalf of the recipient.
• If heat is included in the rent (known in the program as “heated renters”), the benefits are much lower - 30% of a fuel liability benefit. These benefits are paid directly to the recipient as a cash payment.
• Last year there were 15,400 homeowners and renters who participated in the Program with an average total benefit of $1,362. There were 1,600 heated renters who participated in the program with an average benefit of $401.
• Richard explained that in order to receive a “fuel liability” benefit that renters must either pay the cost of home heat directly of a fuel supplier or the landlord bills them for heating fuel that they use. A heat surcharge charged by the landlord is a heat liability. A LIHEAP eligible tenant with a fuel surcharge could apply for assistance to pay the surcharge.

We discussed some of the barriers to using this system to help landlords get more money for fuel:

1. Richard stated that there is not enough money in the Program to meet the demand. The New England states are currently lobbying Congress to increase the amount of LIHEAP assistance.

1. The fuel surcharge approach would have to comply with tenant lease terms (or the lease would have to be amended), rental assistance programs (section 8 and USDA), and rent restriction programs (LIHTC/HOME/VHCB).

1. The tenant has to be income eligible. The eligibility level is 125% of poverty level. (Richard sent a income eligibility chart that Rick will convert to median income. A quick glance at it suggests that this standard is roughly equivalent to 30-40% of HUD medians.) Many tenants will not be income eligible.

1. The tenant has to apply.

Rental Assistance Related Issues/Metering and charging for use/Mgt Practices

Kathy, Sam and Tammy will look at RA programs interfacing with LIHEAP rent program. Otherwise, we tabled these issues for the next meeting.

NEXT STEPS

• Kathy and Sam will discuss the issue of fuel surcharge and the Section 8 Program. Kim Roy at VHFA will be asked to look at the issue for LIHTC Projects. Tammy will consider the same question for USDA.

• Richard will keep us updated on LIHEAP and how housers can use it.

• Rick will convert the LIHEAP eligibility chart to HUD median income. Rick will coordinate with the Tenant Committee to see who is focusing on short-term management related measures to spend less on fuel.

• Rita and Rick and Craig Peltier will discuss how best to project fuel needs and costs for each portfolio. This is essential for each owner but it may also be valuable to have a methodology to allow us to aggregate the cost increase on a statewide basis.

NEXT MEETINGis JULY 24th, 2:30 PM at VHCB. Rick will send an email with the call-in number