July 13, 2006 – A recommended General Fund budget of $750,000 for the V.I. Housing Finance Authority (VIHFA) is "acceptable," if another funding source is established to subsidize the cost of building affordable housing units throughout the territory, according to Clifford Graham, VIHFA's executive director.
During budget hearings Thursday, Graham explained that while the appropriation would cover a portion of VIHFA's personnel costs, operations are generally self-funded through revenues generated by mortgage, land and lease receipts, along with housing unit sales. However, additional money is needed in order for the authority to keep a balanced budget and continue to build new homes, he said.
"With the increasing cost of home ownership in the territory today, higher subsidies are necessary for clients to achieve homeownership," Graham said. "In addition, in order for the VIHFA to become self-sufficient, it must develop and sell at least 100 affordable housing units annually. This is not possible unless significant monies are available to subsidize the development costs or the purchase price of units."
To solve this problem, Graham proposed senators replenish the Housing Trust Fund, an account established in the mid-'80s to subsidize housing. Graham explained that the money in the fund – which originally derived from a return on a bond issue – was depleted in 1995 and never replaced. "While the V.I. Code provides that a portion of the annual property taxes paid on units developed under the Affordable Housing Program is to be deposited into the Housing Trust Fund, the fund has had a $0 balance for almost a decade," he said.
In the interim, VIHFA has pursued "all available federal funding options," including various federal grants, low-income housing tax credits, and Home Investments Partnership Program funds (federal dollars used primarily for first-time homebuyer assistance and the rehabilitation of homeownership units). "However, the vast amount of federal funding available for affordable housing here in the territory is either restricted to rental units or is targeted for specific income populations," Graham said.
The restrictions – coupled with increasing construction and insurance costs – have hampered the authority's ability to develop more housing units, he said. "Thus, virtually all affordable housing units must be subsidized to make it affordable to low- and moderate-income clients," Graham added. "However, the VIHFA generates a small, one-time profit upon the sale of each affordable housing unit it develops, or upon the origination or each new mortgage. So, to achieve our goals, the Housing Trust Fund must receive a significant infusion of cash now and a permanent, sustainable funding source must be identified to replenish the fund on an annual basis."
Graham suggested that senators use a portion of the Payment in Lieu of Property Taxes that Hovensa pays annually to the government to fund the Housing Trust. A regular infusion of $3 million from such a source would have various ripple effects within the community, including a reduction in homelessness, an increase in construction jobs, a decrease in unemployment and increased revenues for the government, he said.
Additional money would also improve the quality of houses being developed within the territory and allow the authority to develop more moderate-income housing units for residents ineligible for low-income programs, Graham said. "That is a significant portion of our housing population," he added.
Senators agreed, and told Graham that a portion of revenues generated from the local stamp tax is earmarked for affordable housing development. However, this fund had also not been replenished until recently, when the Legislature made a $5.5 million appropriation – included in a supplemental budget passed earlier this year – to fund various housing initiatives.
During Thursday's meeting, senators said they would look into utilizing the stamp tax revenues to fund the Housing Trust – which Graham said could possibly allow VIHFA to purchase land from the V.I. Housing Authority, a local agency operated through the U.S. Department of Housing and Urban Development.
Graham said the two entities have recently engaged in "a continuous, positive dialogue," which may result in the redevelopment of units on the former Warren E. Brown and Donoe housing project sites.
"We really must make sure you get the money, then," Sen. Louis P. Hill, chairman of the Finance Committee said. "And we'll look at the possibility of doing that within this budget process."
In response to a question from Sen. Liston Davis regarding how much land the authority holds throughout the territory, Graham said approximately 80 acres of land in Estate Nazareth on St. Thomas – including the site which houses Ivanna Eudora Kean High School – would be transferred to the Education Department for development.
Present during Thursday's meeting were Sens. Craig W. Barshinger, Roosevelt C. David, Liston Davis, Pedro "Pete" Encarnacion, Juan Figueroa-Serville, Hill, Neville James, Norman Jn Baptiste, and Ronald E. Russell.
Sen. Usie R. Richards was absent.
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