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Lolo: DBAS administers Section 1602 by the rules

reporters@samoanews.com

The federal low income housing grant for low income families called Section 1602 was in the spotlight last week Friday, when DBAS president Lolo Letalu Moliga came before the House Government Operations Committee to explain the program.

The brief hearing — lasting a little over a half hour — gave Lolo the floor to explain the program, which included a report, “American Samoa Section 1602 Summary” that he passed out to lawmakers.

There was only one question posed to the DBAS president during the hearing, and it was from Tualauta House representative Larry Sanitoa.

Samoa News notes that the House Government Operations Committee is chaired by Faimealelei Allen, who is also a member of the DBAS Board.

After Lolo’s presentation, and Sanitoa’s question, the committee chair said the report that was provided by the DBAS president is “over complete” and the lawmakers’ questions should all be answered in the report that was provided. Soon after, the hearing came to an end.

HEARING

The DBAS president provided a short history of the beginning of the Section 1602 grant program, noting that it was initiated by Gov. Togiola Tulafono when Utu Abe Malae was president of DBAS.

Lolo said there was a Memorandum of Understanding that was signed between Togiola and Utu back in 2006 so when he (Lolo) came on board with DBAS, the governor asked him to prioritize looking into what could be done to bring the 1602 program to American Samoa.

He told lawmakers that a total of $30,778,499 received by American Samoa had been spent on 132 projects. A report provided to lawmakers states that from the 132 projects, 512 units have been created. Lolo said 65% to 70% of the units are complete.

“Several homes are now occupied and the owners of the units are collecting rent already, however, the delay of incomplete units is that homeowners are waiting for ASPA to connect the water and electricity”, he said.

The DBAS president said people who are complaining about DBAS regarding the 1602 grant program are those whose applications were denied.

Tualauta Rep. Larry Sanitoa asked the DBAS president if the bank will provide more assistance to the families whose projects are incomplete, and whose funds from the bank had been used.

Lolo replied that 65% to 70% of projects have been completed and the remaining incomplete units have up until December 31, 2012 to be finished.

He added that there are two major projects still underway, and most of the unfinished units are in their final phases of construction.

“The bank is pushing for the completion of these units by the end of the year, which is the deadline. According to law, the units that are incomplete have to reimburse the US Treasury for the monies used for the housing.”

He explained that every applicant was informed about the terms of their project — the bank provides 85% while it was a requirement that the home owner put up 15% of the costs, (which, according to the 1602 summary, could be in the form of cash, loans from Builders, Credit Lines with Building Suppliers, or labor contracts, etc.)

Lolo said the grant program has abided by every regulation and every policy since it was first approved by the US treasury and the American Samoa Economic Stimulus and Recovery Office.

The written report provided to lawmakers by DBAS President included a list of names of the developers/ owners who received funds to construct the low income units under the program. No grant amounts to individual developers were made public.

However, the summary report distributed at the hearing answers many questions posed by the public about the Section 1602 low income housing grant, including the amount that can be charged for rent and who qualifies to rent the low income houses.

THE AMERICAN SAMOA SECTION 1602 SUMMARY REPORT

In particular, the report identifies Section 1602 as a grant for the development of low income housing projects “in lieu of low income housing credits for 2009 under the American Recovery and Reinvestment Act (ARRA) of 2009.”

The housing credit program has never been utilized by American Samoa. It is a federal program that annually allocates federal tax credits through the Low Income Housing Tax Credit Program (Section 42), which “may be purchased by off island investors needing federal tax credits in exchange for their investment in the creation of low income rental units.”

American Samoa was able to initiate Section 1602 by exchanging their tax credit allocations from 2008 - 09 for grant funds that “would be sub-awarded to project owners in order to create” the low income rental units.

According to the report, it is “a one-time grant award and is administered by the US Department of Treasury.” DBAS is the administrator of the the grant program as designated in Executive Order No. 008-2006.

The report answers questions it notes as ‘frequently asked’, such as: Who could apply for section 1602 grant funds; Were the Section 1602 grants only for Low Income people; and What would Section1602 Grants pay for.

Of interest, is the question: Were DBAS Board Members or Employees eligible to participate?

Answer: Yes.

“DBAS confirmed with its off-island consultant (Spectrum Enterprises) that the law was silent on this issue. DBAS further confirmed this with the US Department of Treasury Office of Inspector General (OIG).

“The DBAS Board of Directors passed a board resolution allowing DBAS Board Members and Employees to participate in the Section 1602 program as long as they were not involved in the project selection process.”

Samoa News was able to identify from the list provided in the report of people who were given grant funds, one BOD member and one former BOD member, but not any employees of DBAS.

The list also identifies two senators (one is the former BOD mentioned above) and one House representative, all who are current sitting members of the Fono as receiving grants for low income housing rental units.

The report further answers the questions about who qualifies to rent these units, and how the rents are set.

First the rents and incomes are set by the federal government — the US Department of Housing and Urban Development (HUD) and published annually.

HUD uses LIHTC Income Limits for 2011.

The rents are based on the 2011 MTSP (Multifamily Tax Subsidy Projects) Income Limits/ VLI (Very Low Income) income limits. Both of these income limits use 60% of a median US family income to denote ‘Income Limit’ and therefore how much rent can be charged by the developer/ owner of the rental units.

While the program dictates the maximum amount of rent to charge, it does not stipulate a minimum. Most important, however, is the rent MUST INCLUDE UTILITIES, i.e. electricity and water — not telephone or cable television.

With the cost of local electricity and water in mind, here is the breakdown per the report.

Number of Bedrooms                      Rent

Efficiency (Studio)                            $627

1                                                          $671

2                                                          $805

3                                                          $930

4                                                          $1,038

5                                                          $1,145

The report says it does not matter how low the rents go, but utilities cannot be charged, “the landlord must pay for” utilities. That is unless a Utility Allowance is calculated by an “engineer and submitted to DBAS for review and approval. The allowance provides a reasonable amount that the tenant should pay toward their utilities. The utility allowance would be deducted from the monthly rent being charged. The tenant would then be responsible for paying their own utilities.”

The report notes that “the maximum number of occupants per unit is governed by local building codes.” It also indicates that if the owner cannot find qualified renters, the units must remain empty until qualified renters are found.

Can units be rented to family members? Yes, they can be, but renters must meet the eligibility to occupy the units, including non preference to family members, when units are announced publicly as being available for rent.

To determine low income scales to qualify as a low income household to rent these units, the LIHTC Income for 2011 for Properties Using 60% Income Limits is as follows, according to the report.

Person           Income Limit

1                      25,080

2                      28, 620

3                      32, 220

4                      35, 760

5                      38, 640

6                      41, 520

7                      44, 400

8                      47, 220

9                      50, 040

10                   52, 920

11                   55,800

12                   58, 620

A final note on the program is that DBAS is responsible to monitor the program during the 15-year Compliance Period, which is how long the low income rental units are restricted to low income tenants/ renters. There is also an additional 15-year Extended Use Period, but a request to be released from the project and its obligations can be made during this time. DBAS will charge a Compliance Monitoring Fee of $40 per unit per year (even if the unit is vacant).

For full review of the summary report handed out by the DBAS president, click on pdf attachment below to dowload,

AttachmentSize
1602 summary.pdf4.13 MB


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