While the August board meeting, in good summer form, lasted for no more than 45 minutes, there were a few items housing advocates will find of interest. First, the agency is losing its Deputy Director, Patricia Hippe, to Colorado. Second, Commissioner Tingerthal reported on her briefing session with the governor. And third, in a rare move, the agency is making available Housing Preservation Funds to repair public housing. The board was also provided a report on critical risks facing the Agency.
Deputy Director Patricia Hippe Resigns
Patricia Hippe served under several commissioners as both the agency's Chief Financial Officer (CFO) and Deputy Director. Starting in October she will take a similar position with the Colorado Housing Finance Agency. Hippe has been recognized for her leadership and skills both within and outside the agency. In 2006, Finance and Commerce included her in its Top Women in Finance list. Commissioner Tingerthal said that Don Wyszynski will take over from Hippe as CFO, though not her Deputy Director duties. Wyszynski has worked as a financial advisor at the agency and was also a top candidate for Commissioner when Governor Dayton took office. Tingerthal will be assessing the reassignment of Hippe's other duties.
Tingerthal Briefs Governor Dayton on Minnesota Housing
Commissioner Tingerthal reported to the board that Governor Dayton hosted individual post-session meetings with each of his commissioners. He had asked the commissioners to describe for him their agency's accomplishments, challenges being faced, and the objectives it has set for itself. For her report, Tingerthal stated that her biggest concern was the potential loss of the housing tax credit and the tax exempt bond allocations at the federal level. These critical resources are at risk as Congress considers tax reform as one strategy for reducing the federal deficit. Also, Tingerthal told the governor that she was also concerned about the erosion of state and local housing resources, particularly human service funding used with supportive housing. She specifically mentioned her disappointment that the state failed to allocate bonding for housing in the 2011 special legislative session.
Looking ahead, Tingerthal spoke of developing new streamlined business processes at the Agency. She also pointed out to the governor the need to reform and reenergize the state's Interagency Council on Homelessness. She mentioned the urgency of creating a new framework for preserving existing affordable rental housing and the need to provide incentives for owners to participate in federal subsidy programs. Tingerthal said that she was pleased with the governor's response to her presentation.
Public Housing Property Receives Preservation Funding*
In response to a very difficult situation for a public housing property in Forest Lake, the Agency agreed to use its preservation funding to preserve this ailing public housing development. Although Minnesota Housing has used bonding dollars from the legislature for public housing renovation, it has refrained from using appropriated funds to preserve federally assisted housing for publicly owned properties. The Agency's funding source (PARIF) for preserving federally assisted housing has been used exclusively for privately owned properties except in 2007-8 when the legislature appropriated a funding amount specifically for public housing repairs. In August however, the board approved a $354,000 PARIF program deferred payment loan to the Washington County HRA to improve the 40 unit Whispering Pines public housing property in Forest Lake. Whispering Pines, built in 1971 and in deteriorated condition, has been the only property owned by the Forest Lake HRA. The HRA, lacking staff capacity, is on the verge of dissolution, reported Agency staff. Washington County has agreed to take over the property, but only if needed repairs are made. In addition to Minnesota Housing funds, resources from both HRAs are being used to restore the property.
Critical Risks
Chief Risk Officer Will Thompson presented a report to the board's audit committee assessing risks the agency faces. The report establishes a baseline assessment of risk from which Thompson and the agency's managers will develop risk mitigation plans. The report identifies potential risks that would impede the Agency's achievement of its Affordable Housing and Strategic plans' goals. The report identifies four topics deemed "high risk": bond markets, business continuity, information technology, and interest rates.
- Regarding bonding, the report states: "Volatility in bond markets threatens the ability of the Agency to raise capital and affects how the Agency will be able to achieve its mission." The report adds that the Agency is placed at a competitive disadvantage compared to commercial lenders in "setting loan interest rates and providing down payment assistance" because there is currently no added value to the tax exempt status of Agency long term bonds.
- Business continuity concerns are associated with the state shutdown. The Agency needs to update its business continuity planning to better weather any potential business interruption. Several components of business continuity that need to be addressed include: too few staff with substantial institutional knowledge, a need for succession planning, and lack of a comprehensive record retention program.
- The report also suggests that information technology will need to be developed and refined to adapt to rapid changes in the Agency's business model. The report states that information from non-IT staff can be difficult to obtain: "There is a perception of tightly controlled channels of communication and decision making which may inhibit collaboration and the ability to move forward on projects." The report also stated that in the coming year, there is a plan and budget for substantial information system improvements to consolidate program data in a common database.
- Interest rate fluctuations present both challenges and opportunities, concludes the report. Regarding the challenges, the report states that low rate environments are stressful to Agency cash flows. They are associated with high numbers of mortgage loan prepayments, a need to produce new loans to offset the loss of high yielding non-mortgage securities, and diminished earnings on undisbursed state appropriations.
The report also provides the Agency with risk mitigation strategies in response to each of the risks facing the Agency.
*The original blog post stated that Minnesota Housing's PARIF funds had never before been used for public housing. While in general the agency has not opted to use funds other than bonding dollars for public housing, there has been one exception. In 2007 the state legislature appropriated $2.5 million in PARIF funds earmarked for rehabilitation of public housing, which was matched by $2.5 million in agency reserves for the same purpose.
