Asset Management Orientation for PHA Boards

Overview of Asset Management Orientation for PHA Boards Section 1: Overview of Asset Management Section 2: Asset Management Building Blocks Section 3: The Central Office Cost Center

Training Format Designed for PHA Board members Designed for PHA Board members Based on the curriculum presented at live, regional training sessions conducted in 2007 Based on the curriculum presented at live, regional training sessions conducted in 2007 Features include: Features include:  Fully narrated presentation slides  Ability to navigate between slides  Exercises in each section  Ability to download the training to your computer  Access to reference materials and websites

Basic Instructions for Presentation Viewer

Section 1: Overview of Asset Management

Overview of Asset Management Learning Objectives Provide a brief history of the events leading up to Public Housing’s conversion to asset management Provide a brief history of the events leading up to Public Housing’s conversion to asset management Identify key dates associated with the transition to asset management Identify key dates associated with the transition to asset management Define asset management Define asset management Distinguish asset management from property management Distinguish asset management from property management Describe key roles and responsibilities under asset management, particularly the PHA Board’s role as owner Describe key roles and responsibilities under asset management, particularly the PHA Board’s role as owner

History and Background 1998: Quality Housing and Work Responsibility Act 1998: Quality Housing and Work Responsibility Act 1999: Negotiated-Rulemaking I, Funding of Harvard Cost Study 1999: Negotiated-Rulemaking I, Funding of Harvard Cost Study 2003: Cost Study Completed 2003: Cost Study Completed 2004: Negotiated-Rulemaking II 2004: Negotiated-Rulemaking II 2005: Final Rule on Operating Fund Program 2005: Final Rule on Operating Fund Program New Operating Subsidy FormulaNew Operating Subsidy Formula Asset Management Requirement for PHAs with 250+ UnitsAsset Management Requirement for PHAs with 250+ Units 2006: PIH Notice (Interim Guidance/Financial Reporting) 2006: PIH Notice (Interim Guidance/Financial Reporting) 2007: PIH Notice (Final Guidance/Financial Reporting) 2007: PIH Notice (Final Guidance/Financial Reporting) 2008 Appropriations Bill (Include full name here) 2008 Appropriations Bill (Include full name here)

A Look at the PHA Inventory Size Category Number of PHAs % of Total Units Less than 250 units 2,32717% 250 or more units 80583% Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.

Gainers and Decliners Under the New Operating Fund Formula Gainers/Decliners Category Number of PHAs % of Total PHAs Gainers2,30474% Decliners81426% Data is based on the “Operating Fund Annual Report Calendar Year 2007,” October 31, 2007.

“PHAs shall manage their properties according to an asset management model, consistent with the management norms in the broader multi-family management industry. PHAs shall also implement project-based management, project-based budgeting, and project-based accounting, which are essential components of asset management.” “PHAs shall manage their properties according to an asset management model, consistent with the management norms in the broader multi-family management industry. PHAs shall also implement project-based management, project-based budgeting, and project-based accounting, which are essential components of asset management.” Revisions to the Public Housing Operating Fund Program; Final Rule HUD, September 19, 2005 Central Tenet of Asset Management

Key Implementation Dates Determination of Asset Management Projects (AMPs) – Calendar Year 2006 Determination of Asset Management Projects (AMPs) – Calendar Year 2006 Implementation of new Operating Fund Formula – Calendar Year 2007 Implementation of new Operating Fund Formula – Calendar Year 2007 Project-Based Budgeting/Accounting (PBB/A) – Fiscal Year 2007 Project-Based Budgeting/Accounting (PBB/A) – Fiscal Year 2007 Cost Reasonableness Standards – Fiscal Year 2008 Cost Reasonableness Standards – Fiscal Year 2008 New Public Housing Assessment System – Effective Second Year of PBB/A New Public Housing Assessment System – Effective Second Year of PBB/A Full implementation of Asset Management – Fiscal Year 2011 Full implementation of Asset Management – Fiscal Year 2011

Effective Dates for Implementation PHA Fiscal Year-End PBB and PBA Cost Reasonableness * June 7/1/2007 through 6/30/2008 7/1/2008 through 6/30/2009 Sept 10/1/2007 through 9/30/ /1/2008 through 9/30/2009 Dec 1/1/2008 through 12/31/2008 1/1/2009 through 12/31/2009 Mar 4/1/2008 through 3/31/2009 4/1/2009 through 3/31/2010 *Extension through 2011 on case-by-case basis

Asset Management Definition Asset management … is a process of making investment decisions for a collection (portfolio) of assets, based on the mission, goals, and objectives of the owner, lender, sponsor, or regulatory body.

Asset Management vs. Property Management Asset Management Asset Management  Mission/goals/policies  Strategic decision making Property Management Property Management  Day-to-day management/operations

A Look at Entities, Roles and Functions PIH Field Offices PHA Staff or Mgmt Company PHA Board EntityRoleFunction Owner Regulator Operator Property Management Oversight and Monitoring Asset Management

Difference in PHA Missions Who to serve Who to serve Quality of housing Quality of housing Standard of affordability Standard of affordability Social goals Social goals

Operating Fund Program Final Rule and Small PHAs PHAs with fewer than 250 units are not required to convert to asset management. Still, they will be: PHAs with fewer than 250 units are not required to convert to asset management. Still, they will be: Subject to new funding formulaSubject to new funding formula Required to use the new year-end financial reporting template (FDS, or Financial Data Schedule)Required to use the new year-end financial reporting template (FDS, or Financial Data Schedule) Affected by change in PHASAffected by change in PHAS Small PHAs may choose to implement asset management and follow the key business rules like any larger PHA Small PHAs may choose to implement asset management and follow the key business rules like any larger PHA

PHA Board: Owner Role Review activities for conformance with missions and goals Review activities for conformance with missions and goals Evaluate progress and recommend corrective action Evaluate progress and recommend corrective action Monitor performance Monitor performance Stay up-to-date on industry information Stay up-to-date on industry information Foster relationships with key stakeholders Foster relationships with key stakeholders

Asset Management Changes from Appropriations Act of 2008 The Consolidated Appropriations Act of 2008 contained two provisions which pertain directly to asset management. The two provisions are: PHA election to be exempt from asset management for PHAs with unitsPHA election to be exempt from asset management for PHAs with units Use of Capital Fund proceeds to pay for central office costsUse of Capital Fund proceeds to pay for central office costs The first provision is only effective for CY The second is considered permanent legislation.

400-Unit Exemption for CY 2008 For the purpose of being exempt from asset management, the size threshold increased from 250 units to 400 units For the purpose of being exempt from asset management, the size threshold increased from 250 units to 400 units Does not change small PHA threshold for other program areas Does not change small PHA threshold for other program areas PHAs between units that elect to convert will not have option of “alternative asset management model” (available only for PHAs of less than 250 units) PHAs between units that elect to convert will not have option of “alternative asset management model” (available only for PHAs of less than 250 units) Exemption only authorized for CY 2008 Exemption only authorized for CY 2008 PHA must notify HUD via CY 2008 operating subsidy submissions by April 25, 2008 PHA must notify HUD via CY 2008 operating subsidy submissions by April 25, 2008

400-Unit Exemption: Implications Will not implement fee for service model, and will not create a COCC Will not implement fee for service model, and will not create a COCC Will not receive the $4 PUM asset management add-on Will not receive the $4 PUM asset management add-on All units will be combined into one AMP, possibly affecting Project Expense Levels (PELs) All units will be combined into one AMP, possibly affecting Project Expense Levels (PELs) Refer to PIH Notice for additional implications Refer to PIH Notice for additional implications

Capital Fund Program Changes PHAs may transfer Capital Funds to Operations for payment of central office costs PHAs may transfer Capital Funds to Operations for payment of central office costs In implementing this provision, PHAs must maintain cost allocations for overhead costs (in lieu of fee-for-service/management fees) and, therefore, not establish a COCC In implementing this provision, PHAs must maintain cost allocations for overhead costs (in lieu of fee-for-service/management fees) and, therefore, not establish a COCC Overhead costs must still be considered reasonable and necessary Overhead costs must still be considered reasonable and necessary Large PHAs may still only transfer up to 20% to “Operations” Large PHAs may still only transfer up to 20% to “Operations”

Workshop 1.1: Asset Management Change Assessment How might asset management change the way your PHA does business? How might asset management change the way your PHA does business? As a group, please discuss and provide an answer to the question above.

End of Section 1