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PHA Executive Compensation  Beginning in 2012, provisions were added to the annual appropriations act establishing a $155,500 cap on the federal contribution that a PHA could use toward an executive’s salary.  The federal contribution was defined as amounts paid from Section 8 (HCV) and Section 9 (Public Housing and CFP) funds.  HUD’s legal interpretation was and still is that Section 8 and Section 9 funds include management and other fees paid to COCC from Public Housing, CFP, as well as the HCV, even though these fees are supposed to be defederalized. 2

PHA Executive Compensation (cont’d)  Since 2012 there have been a series of changes, including:  The amount of the salary cap, which as varied by year for 2012 through 2015  The definition of what compensation is subject to the cap (e.g. sometimes bonus not included and sometimes bonus is included)  The reporting format and requirements for HUD to monitor this, utilizing form HUD

PHA Executive Compensation (cont’d)  This segment of the workshop will seek to clarify:  What the rules are by year, but most importantly for 2014 which HUD is currently reviewing, and for 2015 which is near its end;  How to know if you are in compliance or not in compliance;  Available strategies to cover salaries that are above the cap and/or otherwise work around this. 4

Salary Cap by Year (this applies to the PHA’s fiscal year) 2012$155,500 base salary only, excludes bonuses 2013 $155,500 base salary only, excludes bonuses 2014 $157,100 base salary only, excludes bonus 2015 $158,700 cap includes base salary and bonus, incentive pay, and all other cash compensation 2016 not determined at date of this writing 5

Covering Excess Salaries  As stated, PHAs with a COCC are still paying executive salaries from Section 8 and Section 9 funds, because HUD considers the management, bookkeeping, and asset management fees from AMPs, CFP and HCV to still be federal funds.  PHAs without a COCC are paying executive salaries from Section 8 and Section 9 funds to the extent that the applicable employees are allocated to Public Housing, CFP and HCV. 6

 When the salary caps were first established, PHAs could use funds accumulated prior to 2012 (e.g. COCC reserves) to cover the excess salaries.  Until 2015, PHAs could strategically package compensation into a combination of base salary, incentive pay and bonus to avoid the cap.  In fact bonuses and incentive compensation were not subject to the salary cap until So for 2014, which is now being evaluated by HUD, only base salary is subject to the 2014 cap. 7

Covering Excess Salaries  Non Public Housing, Non CFP and Non HCV funds coming in to the PHA are not considered Section 8 or Section 9 funds and can be used to cover excess salaries. Examples:  Management Fees coming from Non-HUD Properties or Programs  Developer Fees  Not Other Income generated from AMPs  HUD does not have any directives concerning how to do this, so the PHA choose which dollars are used to cover excess salaries (see example on next page) 8

Example  This PHA has one position that is over the 2015 salary cap. In previous years a loophole was available, to pay the CEO a combination of salary and bonus. Bonus was paid outside of the cap. That loophole was closed in The excess salary is $175,000 minus $158,700. On the next slide we will see that the excess is covered by developer fees. 9

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CEO/ED Comparability Analysis Per PIH (effective until amended, superceded, or rescinded by HUD): “PHA Boards of Commissioners or equivalent authorities should explicitly consider comparability in setting or making significant changes to the compensation of PHA executive directors or other chief executive officers. As determined by each Board, appropriate data as to comparability may include, for example, independent compensation surveys and information concerning compensation provided to comparable PHA executive directors, to comparable state and local public officials, and to comparable private sector executives.” 11

“The specifics are up to each Board, and while PHAs normally need not provide the specific information utilized for this purpose to HUD, they are required to retain this information and provide it to HUD if requested in a particular case. It is important that all PHA Boards of Commissioners and equivalent authorities understand and implement these requirements. By executing the PHA Certification of Compliance with PHA Plans and Related Regulations to accompany the PHA 5-year and annual PHA Plan, the Chairperson of the Board of Commissioners or other authorized PHA official will certify that the PHA has complied with the comparability analysis requirements, as they certify their compliance with all Federal requirements.” 12