Budget Cuts May Hit Housing Fund Hard : Government: Trust Fund that promotes construction and rehabilitation of low-income housing could be victim of state’s decision to give less money to San Diego.
The Housing Trust Fund is in trouble.
Established through a 5-4 vote of the San Diego City Council two years ago, the fund faces its fiercest test during the next three weeks, when council members work out its future--specifically, whether to slash its funding to offset budget cuts imposed on the city by the state.
State cuts may slice the budget by up to $52 million, and the threat to “essential” services, such as police and fire protection, make reductions in other areas, in the words of City Manager Jack McGrory, almost imperative.
Those who favor the fund say housing is an essential service and praise the program for promoting the construction and rehabilitation of homes for the poor. The Housing Trust Fund provides hope, they say--in the form of housing, jobs and enhanced self-esteem.
Those who oppose it--including McGrory and Mayor Maureen O’Connor--argue that the $3.2 million a year it receives in hotel-motel revenue is more desperately needed for a shrinking city budget that may shrink further, depending on actions in Sacramento.
It is McGrory’s recommendation that all but $1.9 million of the $3.2 million be earmarked for other uses, which proponents say would weaken the program to the point of killing it. Some say McGrory has indicated verbally that he would like the entire $3.2 million redirected.
The fund’s only other source of revenue is fees from developers, who have been savaged by the recession. As a result, the $12 million a year or so expected to trickle to the fund via developers hasn’t materialized, making hotel-motel revenue, or transient occupancy tax, its primary allotment.
Deputy City Manager Severo Esquivel, the acting director of the San Diego Housing Commission, says fees from developers are expected to provide about $1.6 million to the fund in the next fiscal year, which begins July 1.
John Craven, program director for the Housing Trust Fund, says the agency develops housing, rehabilitates existing housing, provides transitional housing, helps first-time home buyers, gives support to nonprofit corporations that want to build affordable housing and assists in placing a few people in mobile homes.
Craven lists among the highlights of the program its commitment to build new housing tailored specifically to women and children, and to substance abusers, as well as the development of hundreds of new rental units.
“It will really, really hurt,” Craven said about possible cuts. “We will simply have to sit down and rethink. The program has been a great tool for neighborhood revitalization. We’ve funded several community-development organizations, so that neighborhoods that really need help are starting to get it.”
He said the fund has provided the City Heights Community Development Organization with a technical assistance grant that allowed it to “acquire a couple of new buildings, which were then made available to low-income renters.”
Craven said the fund carried a $7.35-million budget through fiscal year 1992, and he is projecting one as low as $3.8 million for the next fiscal year, barring even further cuts.
Anne Wilson is the director of the Local Initiatives Support Corp., a nonprofit group that seeks money from banks, foundations and other sources to create a revolving loan pool for the development and construction of low-income housing.
Wilson calls the potential collapse of the Housing Trust Fund nothing less than tragic.
“It would be a tremendous loss for San Diego,” she said. “It would be particularly damaging to Barrio Logan, Sherman Heights, City Heights and San Ysidro. It would not hurt my group, per se, but would force us to move to other areas of the county to develop low-cost housing--areas such as Chula Vista and Escondido.
“But it could also hurt the city in acquiring matching grants. Groups willing to provide those would probably look elsewhere in the state, at a time when San Diego is starting to be considered for such programs.”
Wilson says the Housing Trust Fund, still in its formative stages, needs “years to grow and develop.” Citing an example, she said the fund provided $1 million used to finance 144 low-income rental units in Barrio Logan.
She notes that, since its inception, the fund has helped finance 718 housing units and 338 shelter beds with a “leverage ratio”--referring to money allocated by other sources, after the fund’s initial outlay--of $5.50 to $1. Officials say the total money gleaned from federal agencies, banks and other investors is about $29 million.
“It would be crazy to kill a program that does what this one does,” Wilson said. “Cutting the money wouldn’t kill it--just cut it off at its knees. The Housing Trust Fund really put San Diego on the map as a place to promote and provide low-income housing, and, prior to that, San Diego just hadn’t done much.”
She said that, for many years, “the city never paid much attention to the housing needs of low-income people, and it’s choked our economy. Businesses continually cite the city’s lack of low-income housing as why they don’t want to come here and will, instead, go elsewhere.”
Wilson is one of the few proponents of the fund who sounds optimistic about the council’s decision. She even believes that O’Connor, who voted against the fund and has, for the most part, remained a critic, will change her mind and end up supporting it.
Los Angeles, Wilson said, offers the most telling example of why crippling the fund would set a bad precedent.
“The riots in L.A. did not happen because there were not enough police,” she said. “They happened because of a lack of opportunity, a lack of hope. . . . They feel total frustration in South Central L.A. You drop a match in, and it sparks. We’re not immune from seeing that here.”
But McGrory said cuts in the program are necessary, not because the fund isn’t worthy, but because something, somewhere, has to give.
“We just can’t start cutting the meat of city services,” he said. “Police, fire, code-enforcement, library, maintenance. . . . Those you have to protect. So, we need a one-time source of revenue, such as the Housing Trust Fund money for (fiscal year) 1993.”
Paul Downey, the mayor’s spokesman, echoed her concerns about the fund, which she voted against when it was created in 1990.
“She wants to take a good, hard look at it,” Downey said. “Public safety is our No. 1 priority, so she wants to review all options very carefully. The latest news from Sacramento is that we may receive as much as $52 million in cuts (of monies apportioned by the state to the city). That’s a tremendous impact.”
Downey said the threatened cuts would be derived from the state canceling the city’s share of vehicle license, property and sales tax fees. The San Diego City Council met with state representatives on Friday to discuss the cuts.
Downey said the mayor’s feeling is that, with the San Diego Housing Commission “firing on all cylinders, as it should be, we could provide the low-income housing services that, granted, are desperately needed,” making the trust fund a moot issue.
But Charles (Shuf) Swift, one of seven members of the commission, says the Housing Trust Fund is needed to guarantee “low-income housing to the folks who need it most.”
Swift cited several studies that listed the high cost of living in San Diego--and in particular, housing costs--as why businesses are turning increasingly to other cities and states.
Programs willing to match funds with trust-fund money may be forced to look elsewhere, Swift said, adding that the San Francisco Bay Area has a far better record than San Diego County.
Swift said the fund “provides a subsidy that can close the gap between what the poor can afford and what it costs to build housing.” Cutting the fund’s budget would, he said, reduce the already dangerously low level of new-housing construction.
Craven, the trust fund’s program director, said it was different from the Housing Commission in role and function.
“The trust fund has no corporate identity,” he said. “It uses the Housing Commission--it makes all of its loans through the Housing Commission--but the trust fund’s ordinance specifically details how the money is spent, and that’s a significant difference.”
Craven said, however, that every decision made by the fund’s board of directors is passed on to the Housing Commission, which has the ultimate say. Such decisions are then adopted, modified or rejected.
Esquivel, acting director of the Housing Commission, declined to comment on the fund’s budget controversy, saying his recommendation to McGrory was private.
But Esquivel praised the fund for “continuing to provide housing of many different types. It’s also an important source of local funds that provide either the match for federal programs that require that, or it funds housing that fails to qualify for federal or state funds.
“It also enhances the role that private, nonprofit corporations can play in developing and operating affordable housing projects. It does many, many things that are good at a time when we need them.”
