Apparently, saving for a rainy day isn't always a good idea.
Following action at its board of directors meeting Tuesday, the Warren County Housing Authority is joining authorities nationwide in trying to defend their rainy day funds.
Their opponent: the U.S. Department of Housing and Urban Development (HUD).
Congress appropriated nearly $4 billion for housing authority operating subsidies through HUD for 2012. The figure was a cut in subsidies, but it would have provided approximately 80 percent of funds for which authorities were eligible.
However, due to efforts to reduce government spending, many authorities received part or none of the funds.
Their mistake was saving too much money.
Before funds were dispersed, Congress authorized HUD to require authorities with operating reserves above a HUD-determined threshold to pay all or part of the expenses normally covered by the subsidies. An authority's operating reserves constitute the money saved to get through fiscal tough times and handle unexpected expenses.
As a result, housing authorities nationwide have had to find ways to pay their own way in 2012.
For Warren County's housing authority, which has a significant reserve relative to its size, it amounts to approximately $300,000 in unreceived scheduled subsidies.
At their June 19 meeting, board members decided to take action.
A May 21 joint letter from the National Association of Housing and Redevelopment Officials and the Public Housing Authorities Directors Association invited the authority to join litigation tentatively planned to be filed in federal Court of Federal Claims. The lawsuit will allege a breach of contract between HUD and housing authorities across the country.
According to the letter, approximately $750 million in funds affected by the congressional authorization are at issue.
In order to receive a share of possible monetary compensation through the lawsuit, a housing authority must be an active plaintiff. Possible monetary awards would come out of a U.S. Treasury Department Judgment Fund, leaving the HUD appropriation available to continue to fund housing.
Board members approved paying a $2,000 fee to cover legal expenses and join the lawsuit.
Public housing authorities identify their properties as Asset Management Projects (AMPs), which designate a group of properties into a single operating entity for purposes of management. The HUD subsidies at issue in the lawsuit deal with funding for AMPs.
In the first half of 2012, the county housing authority's two AMPs have dipped into reserves for a total of $258,410 in otherwise HUD subsidy eligible funding. It breaks down to $14,366 in AMP 4 (Rouse Manor) funds and $244,044 in AMP 1 (public housing sites excluding Rouse Manor) funds. According to authority Treasurer Tracey Kranak, the difference fits with cost projections of where the authority budget would be if HUD subsidies had been received.