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 expenses ($448,569 net) Other expenses included debt service, $489,177; capital improvements, $4,001, 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. Here is a breakdown of the operating expenses of the eight projects during 1952: Utilities-- 591, 400 Cost of sales and services to tenants- Supplementary community serv $362, 200| Rents- Repairs, maintenance-. Management. 146, 725 Payments in lieu of taxes. 83, 244 Operating services-- 62, 350 ices Insurance. 18, 599 Collection losses funds. 17, 353 Here is description of what is included in each of the expense items tabulated above. 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, fis and other fees, and overhead expenses of project and central offices such as supplies, te 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 operatin 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 m payments in lieu of taxes. The other two projects, being owned by the city, simply turne 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 childre 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, bollet explosion, fidelity bonds, etc. Contributions to pension funds includes payment by the LMHC of half of the premier 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 i 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 the city, this payment is in effect an earmarked source of revenue for the fire departme If the $15,000 were not paid, the net income returned to the city's general fund would be increased by that amount. Rents consist of a ground rental charge paid by the city to the Louisville and Jefferson County Air Board for the land occupied by Bowman Field Homes. (Title to the buildings has been vested in the city of Louisville since Jan. 1, 1950.) Costs of sales and services to tenants are the expense of maintenance repairs that rest" from tenant negligence. This expenditure is balanced out by an identical amount receie from tenants and shown under operating income. Supplementary community services are costs of supplies and materials for health, recre tional, and educational programs conducted on the project. Most of the money was sper for recreational equipment. Collection losses are the account and notes of tenants which have been charged off. Ther amount to four one-hundredths of 1 percent of the total income from dwelling rent. See the following table: INCOME AND EXPENSES OF BOND-FINANCED PROJECTS, 1952 Their total payments to debt service ($489,176) amounted to about 31⁄2 percent of the total development cost of the 4 projects.10 (Limit on the amount of annual contribution by PHA is about 41⁄2 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 expenditures.-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 LaSalle 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 $84,425, which went to the city and to the PHA as restricted surplus payments. Paid to the city of Louisville_-. $75, 896 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 $340,000. The difference is paid by the Federal Government. Reserve provisions In From time to time certain sums are placed in reserve for various uses. 1951, the only year for which a consolidated operating statement is available, he fund showed a balance of $884,908.1 11 11 Breakdown of the allocations for various purposes in the reserve fund of $884,908 in In 1952 $129,034 was withdrawn from reserves." In 1950 $18,417 was withdrawn. 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 view-$278,267 loss 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, LaSalle 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 not, 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 $1,311,717 was spent for this purpose. Education accounted for $740,487 and general municipal services the remaining $584,503. Educating public housing children—$740,487 The city and the board of education are required by law to provide education 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 schools. as follows: When 3,419 is multiplied by $216.58, the average per-student-cost during 195152, $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 ecent 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 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? 18 This three-quarters of a million dollars represents only the money paid by Louisville rayers, 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: 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 only 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 general 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, 1952Average per capita cost for such services_Estimated population of housing projects_ Cost of services for public housing residents- WHERE DOES THE MONEY COME FROM? $14,047,90 386,10 83654 15. $384,36 In discussing the cost of public housing in the preceding part of the stud it was impossible to avoid touching on the subject of where the money came from. Hence, in the following pages it will be our purpose to review and sun marize what has been said earlier as well as to present additional information concerning the source of funds used to provide public housing in Louisville. The cost of public housing, as pointed out earlier, has three distinct aspects. 1. Capital costs-buying and clearing the land, then designing, erecting, and equipping the buildings ($32.1 million). 2. All operating costs-maintenance of buildings, salaries of employees, payments 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, pro 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 privat investors. The B bonds which ran for too long a period, at that time, to be f 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 are a splendid investment for the Government. In those days the bond issues wer for 60 years. Now the entire capital cost is carried by private investors and t bonds only run for 40 years. The Public Housing Administration guarante temporary loans that finance the planning and construction of a project. Whe 15 Population figures for all projects except Fincastle Heights were provided by th Louisville Municipal Housing Commission, as follows: The Fincastle figure was derived multiplying 250 (number of dwelling units) by 4 (average number of persons per family This total does not include funds collected for and turned over to the board of edas proceeds of bond issues, and State grants for streets and highways. Miscellaneone exp tures include such items as alcoholic beverage administrator, civil service board, fina department, etc. |