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Operating expenses ($1,315,029)

The most significant operating expense items were repairs and maintenance, $591,400; utilities, $362,200; and management, $146,725. These major items, plus a number of lesser items, make a total operating expense of $1,315,029.' Other erpenses ($448,569 net)

Other expenses included debt service, $189,177; capital improvements, $1,001, and restricted surplus payments, $84,425. Restricted surplus payments include net income paid to the Public Housing Administration and the net income paid to the city of Louisville on the two temporary veterans' housing projects.

Debt services. There were only four public housing projects operating in the city during 1952 which had to pay debt service charges as well as other normal expenses. They are Clarksdale, Beecher Terrace, Parkway Place, and Sheppard Square. Collectively, they showed a deficit of 26.1 percent of expenses. There is no debt service on the others because they were practically given by Federal Government.

ices

1,83

* Here is a breakdown of the operating expenses of the eight projects during 1932: Utilities $362, 200 Rents.

$11, 600 Repairs, maintenance. 591, 400 Cost of sales and services to Management

146, 725 tenants-
Payments in lieu of taxes. 83, 244 Supplementary community serv.
Operating services.-

62, 350
Insurance
18, 599 Collection losses

312 Contributions to pension

Miscellaneousfunds..

17, 353
Public safety

15, 000
Total_

1, 315.000 Here is description of what is included in each of the expense items tabulated abore:

Utilities includes water, sewer charges, electricity, gas fuel, and boilerroom operations including labor.

Repairs and maintenance includes all labor and material costs of painting and decorating maintenance of grounds and structures, and repairs and replacements for plumbing and gas system, electrical system, heating system, ranges and refrigerators and all other equipment.

Management expense includes project office salaries, central office sa'aries, legal, fiscal and other fees, and overhead expenses of project and central offices such as supplies, tele phones, postage, etc. (The 200

employees were paid an average of $2,382 in 1952. The total payroll expense of $476,582 is distributed among the various items of operating expense.)

Payments in lieu of taxes have been defined earlier as consisting of 10 percent of total shelter rent (gross rent minus utilities). In 1952, only the 6 permanent projects made payments in lieu of taxes. The other two projects, being owned by the city, simply turned over to the city their net operating income.

Operating services include janitorial and exterminating services for all projects, and watchmen at Bowman Field houses. The latter are required in order to keep children from climbing the fence that separates the project from one of the airplane runways.

Insurance includes the usual forms of coverage ; fire and extended coverage on buildings automobile liability, owners, landlords and tenants liability, workmen's compensation, boiler explosion, fidelity bonds. etc.

Contributions to pension funds includes payment by the LMHC of half of the premium for an employee pension plan written by a private insurance carrier. Employees pay the other half. (They are not covered by Federal social security, despite a recent suit filed in their behalf.)

Public safety consists solely of the $15,000 paid to the city of Louisville for providing fire protection services for Bowman Field Homes. Since Bowman Field is now a part of the city, this payment is in effect an earmarked source of revenue for the fire department If the $15,000 were not paid, the net income returned to the city's general fund would be increased by that amount.

Rerts consist of a ground rental charge paid by the city to the Louisville and Jeffersol County Air Board for the land occupied by Bowman Field Homes. (Title to the buildinr has been rested in the city of Louisville since Jan. 1, 1950.)

Costs of sales and services to tenants are the expense of maintenance repairs that resul! from tenant negligence. This expenditure is balanced out by an identical amount receive from tenants and shown under operating income.

Supplementary community services are costs of supplies and materials for health, recret tional, and educational programs conducted on the project. Most of the money was spent for recreational equipment.

Collection losses are the account and notes of tenants which have been charged off. The
amount to four one-hundredths of 1 percent of the total income from dwelling rent.
9 See the following table :

INCOME AND EXPENSES OF BOND-FINANCED PROJECTS, 1952
Total operating income---

$1, 026, 209 Total expenses.

1, 390, 236 Operating expenses.

$975, 623 Reserve provisions

(77, 844) Debt service--

489, 177 Capital improvements.

3, 280
Net deficit.---
Adjustment for prior years.
Adjusted deficit.

364, 027

(1, 3351

362,660

Deficit as percent of expense.

10

Their total payments to debt service ($489,176) amounted to about 342 percent of the total development cost of the 4 projects." (Limit on the amount of annual contribution by PHA is about 412 percent). This is a reasonably steady figure since it did not vary by more than $3,000 in any of the other 4 years under study.

Capital erpenditures.—The expenditure for capital improvements came from funds wtihdrawn from reserves created during prior years.

Restricted surplus payments.-Six of the projects did not have to pay debt service charges. No bonds were ever issued for the two PWA-built projects, College Court and La Salle Place. The city controls, under lease, the buildings of veterans' projects at Bowman Field and owns the land and improvements at Grand Avenue homes. (Permanent financing had been completed on Iroquois homes and Cotter homes on January 1, 1952, but the first debt service payment was not due until a year later.)

As a result, 4 of the projects showed a net operating income of $84,125, which went to the city and to the PHA as restricted surplus payments. Paid to the city of Louisville..

$75, 896 Paid to PHA

8, 529 The $75,896 paid to the city of Louisville is net operating income from Bowman Field and Grand Avenue Homes. The surplus is smaller in this case because the cost of operation is spread over a small number of units. The city of Louisville Municipal Housing Commission obtained title to these projects on February 28, 1953, on a contract by which they pay to the Federal Government for 40 years the net income after management expenses and after creating proper reserves for expenses and maintenance. This amounted to only $1,500 in 1952. In more normal years (years in which heavy payments into reserve funds are not made) about $8,500 per year will be paid. This means that over the 40-year period the Commission will secure title to properties costing $1,949,233 for about 310,000. The difference is paid by the Federal Government. Reserve provisions

From time to time certain sums are placed in reserve for various uses. In 1951, the only year for which a consolidated operating statement is available, he fund showed a balance of $884,908."

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11 Breakdown of the allocations for various purposes in the reserve fund of $884,908 in 351 follows:

Operating expense-
Debt service

$457, 919

324, 314 Working capital..

67, 170 Repairs, maintenance, replacements.

22, 938 Demolition

8. 000 Operating improvements.

3. 080 Annual contribution allowance.

1, 487 Total

884, 908

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In 1952 $129,034 was withdrawn from reserves." In 1950 $18,417 was witbdrawn. None was placed in reserve in 1950 or 1952 but $66,506 was placed in reserve in 1949 and $16,268 in 1951.

The fund is occasionally depleted by large expenditures, such as a major paint job for several projects. The commission then takes a larger than ordinary portion (three-fourths or more) of its guaranteed annual subsidy as a means of replenishing the fund. Over the years 55 percent is the average available subsidy that has been used. Prior year's adjustment

The net deficit of $364,148 for 1952 is decreased by an adjustment of $1,456, which represents an expense applied to a prior year but which was not placed in the records until this year. (It is handled as an adjustment to prevent distortion of expenses of the year under analysis.) Second point of view—$286,796 1088

The second point of view is that in which only the permanent housing units are considered. This leaves out the two temporary veterans' projects—Bowman Field and Grand Avenue—which showed a net operating income of $75,896 since they were built entirely at Federal expense and had no debt service charges.

This amount was paid to the city and, therefore, was not applicable toward the overall deficit. If it were applicable, it would reduce the deficit to $286,796. Third point of viero-$278,267 1088

The third point of view would appear to reduce the deficit further by deducting the surplus of two projects built by the Federal Government, which had to be paid to the Public Housing Administration rather than applied against the deficit.

The projects in question, La Salle Place and College Court, showed a surplus in 1952 of $8,527 since they had no debt service charges. If this amount were applicable against the overall public housing deficit (which it technically is noti, the figure would become $278,267—which is the lowest conceivable net deficit. Municipal services cost-$1,311,717

The third aspect of the cost of public housing is the expense of providing municipal services for the residents of the projects. In 1952 a total of $1,311,71: was spent for this purpose. Education accounted for $740,487 and general munieipal services the remaining $584,503. Educating public housing children-$740,487

The city and the board of education are required by law to provide educatiot opportunities for all the children of school age in the city of Louisville, no matter where they live.

The cost of educating children residing in the eight projects managed by the LMHC can be determined quite accurately. In November 1952 the Louisville Board of Education, by means of pupil-attendance records, established that there were 3,419 children living in these projects who attended Louisville public schors. as follows:

12 See the following table:

COMPARISON OF RESERVES WITHDRAWALS WITH OPERATINO EXPENSES

Project

Amount withdrawn

Total oper ating expe

Beecher Terrace.
Clarksdale
LaSalle Place
Grand Avenue
College Court.
Parkway Place
Sheppard Squaro.
Bowman Field.

$40, 876
33, 424
23, 387
13, 992
12, 593
2, 128
1, 418
1, 218

Total or average.

129, 034

Clarksdale --
765 | Bowman Field..

320 Parkway Place_.

165 Beecher Terrace_734 | College Court..

100 Sheppard Square---523 | Grand Avenue (estimated).

75 When 3,419 is multiplied by $216.58, the average per-student-cost during 195112, $740,487 is obtained. This is the cost of educating children who attend pubic schools and who reside in the public housing projects."? Projects bear $26,730 (3.6 percent) of the load

The population of the 8 projects is about 15,000–4 percent of the total populaion of Louisville. But included in this group of residents is 8 percent of the hildren attending public schools.

Added to this disproportionately heavy burden placed on Louisville educational acilities is the fact that the board of education's share of payments, in lieu of axes, and operating surplus received by the city amounted to only $26,730 in he fiscal year 1951-52.

This means the board of education received from the project property, via he city, only 3.6 percent of what it had to spend in educating public housing hildren and that its cost exceeded its share of public housing payments by 736,757. It is hardly conceivable that this differential would be balanced by ersonal property tax payments by project residents. 'our projects pay nothing to schools

Four projects had a clause in their cooperation and management agreements pecifying that one-third of their payments in lieu of taxes should go to the ouisville Board of Education. The others did not have such an agreement. hey paid $73,000 to the city-but none of it went to the board of education." The result is obvious. The city board of education receives only 17.9 percent : the money paid in lieu of taxes instead of 33 percent. (The actual amount ceived during the fiscal year 1951-52 was $26,730.) One-third of the total amount paid to the city would have been $53,046 or 24,487 more than the amount actually received by the board of education. In "cent years the Government has recommended such a specification in new project greements to assure boards of education of a fairer share of payments in lieu

14

taxes. 'hy the differential? One final question might be raised. The board of education shares equally ith the city on taxes levied on privately owned real property. Why is oneird instead of one-half chosen as the amount which should go to education om public housing developments, and this amount applied in less than half e cases?

13 This three-quarters of a million dollars represents only the money paid by Louisville xpayers, State aid having been subtracted, as shown in the following computation. The erage per-student cost of $216.58 is obtained this way: Divide total operating costs of 0.781,530 by 42,281, the average daily membership for the entire Louisville public school stem during the year 1951-52 ; from the resulting $254.99 subtract $38.41, the average ate allocation per student, thus leaving $216.58. See the following table:

PAYMENTS TO LOUISVILLE BOARD OF EDUCATION

Project

Amount paid

to city of Louisville

in 1952

Amount of this payment

allotted to board of education Jan, 1 to Dec. 31,

1952

Percent

$2, 219

0.3313 .3343

1, 041

LaSalle Place.
College Court.
Clarksdale.
Beecher Terrace
Parkway Place
Sheppard Square
Bowman Field.
Grand Avenue..

i'ii

!!

$6,658

3,123 22, 290 20, 951 19, 090 11, 130 69, 826 6,070

Vone None None None 23, 276 2,023

.00 .00 .00 .00

.333 .3313

Total or average

159, 138

28, 559

17.9

If the board of education received one-half of all the money paid the city in lieu of taxes it would have received $79,570 in the calendar year 1952 instead of $28,559. But even if this were done, public housing would still be paying culp 10.2 percent of what it costs to educate project children. This is an indirect cost which cannot be shown on the public housing balance sheet. General municipal services for public housing-$584,503

Determining what it costs to provide general municipal services for residents of public housing projects is more difficult than computing the cost of education

, Several managers of city departments were asked to suggest the best way of obtaining this figure. Each person consulted said the only practical way was to compute the per capita cost and multiply it by the 15,866 population of all Louisville public housing projects. This suggestion was followed.

Calculated on this basis, it cost approximately $584,503 to provide genera municipal services for public housing residents during fiscal 1951-52, as follows: Cost of general services for entire population.Estimated population of Louisville July 1, 1952. Average per capita cost for such services. Estimated population of housing projects..

15,4 Cost of services for public housing residents.

15

$14,047,

386, 1

$184,56

WHERE DOES THE MONEY COME FROM?

In discussing the cost of public housing in the preceding part of the study it was impossible to avoid touching on the subject of where the money cane from. Hence, in the following pages it will be our purpose to review and sur marize what has been said earlier as well as to present additional information concerning the source of funds used to provide public housing in Louisvile.

The cost of public housing, as pointed out earlier, has three distinct aspect

1. Capital costs-buying and clearing the land, then designing, erecting, api equipping the buildings ($32.1 million). 2. All operating costs-maintenance of buildings, salaries of employees,

11 ments of interest and principal on capital debt, etc. ($1,763,597 in 1952).

3. Cost of providing municipal and educational services to residents of the projects/schools, fire protection, repair of streets, collection of garbage, print sion of parks and playgrounds, etc. ($1,311,717).

Where does the money come from? Source of long-term capital funds

In the earlier days of financing, housing bonds were divided into A and B bonds. The A bonds were the earlier maturities, and were purchased by priste investors. The B bonds which ran for too long a period, at that time, to be af interest to private investors were purchased by the Federal Government. The B bonds bear interest of 1 percent over the going Federal rate and therefore an a splendid investment for the Government. In those days the bond issues wet for 60 years. Now the entire capital cost is carried by private investors and the bonds only run for 40 years. The Public Housing Administration guarante temporary loans that finance the planning and construction of a project. We

16 Population figures for all projects except Fincastle Heights were provided by the Louisville Municipal Housing Commission, as follows: The Fincastle figure was desired multiplying 250 (number of dwelling units) by 4 (average number of persons per Clarksdale

3, 230 | College Court. Parkway Place.

2, 989 Grand Avenue Beecher Terrace

2, 981

Fincastle Heights..
Bowman Field.

2, 131
Sheppard Square.

1, 821

Total.---
La Salle Place

877 10 Here is how the $14,047,908 cost for general services for fiscal 1951-52 was distributed among the various functions : Public works..

$3, 596, 583 | University of Louisville Police

2, 329, 240 Public library Health.

1, 824, 118 Miscellaneous Fire protection.

1, 725, 635 Welfare.

1, 269, 597

Total.---
Parks, recreation

886, 011 This total does not include funds collected for and turned over to the board of diri proceeds of bond issues, and State grants for streets and highways. Miscellaneous parent tures include such items as alcoholic beverage administrator, civil service boerd, om department, etc.

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