UNITED STATES SENATE
Committee on Banking, Housing and Urban Affairs
Housing and Transportation Subcommittee
Senator Wayne Allard, Chairman

Testimony of
F. ALLEN HESTER
Assistant to the Executive Director,
Saint Paul (MN) Public Housing Agency on
HUD's PUBLIC HOUSING ASSESSMENT SYSTEM (PHAS)

March 21, 2000


INTRODUCTION

Thank you Mr. Chairman and Committee members. My name is Allen Hester, and I am the Assistant to the Executive Director of the Saint Paul (Minnesota) Public Housing Agency (PHA).

We thank you for holding this hearing, and especially we thank Senator Allard and Minnesota Senator Rod Grams for inviting Saint Paul to participate. The Saint Paul PHA has benefited from a good working relationship with Senator Grams and his able staff members. He has visited our properties, asked our opinions on issues relating to public housing, and introduced important legislation on housing concerns, some of which became law. Senator Grams has demonstrated great understanding and support for the housing needs of low income families and elderly and disabled individuals in Minnesota and across the country.]

We appreciate the invitation to testify because we are very concerned that HUD is rushing to implement PHAS before it is ready. HUD has spent two and a half years planning, paying consultants and selectively discussing issues with housing authority representatives, but their system still is not sufficiently tested, verified, and accepted as valid to implement. We offer the following recommendations:

On March 15th Senators Bond and Mikulski wrote an excellent letter to Secretary Cuomo specifically requesting that HUD "delay the implementation of PHAS until it has remedied the problems with the system [and] test[ed] the new system on a statistically valid sample." The Senators' letter cites specific problems with PHAS and requests pertinent information from HUD. I hope copies of the letter will be shared with this committee and that it will be made part of the record of these proceedings.

The previous speakers have described some of the most significant problems in PHAS, and we agree with their comments and recommendations. Our experience has been the same in many ways, and also different in a few important respects which I will explain in a moment.

Part of the challenge of operating public housing effectively is the wide variety of local conditions. In Saint Paul we have overcome some unique challenges (like housing thousands of families from Southeast Asia) and benefited from solid support from our City government and a strong non-profit social service network.

Because of the variations among the 3100 housing agencies in the country, we rely on our three national housing groups to speak for us. I am referring to CLPHA, PHADA and NAHRO (Council of Large Public Housing Authorities, Public Housing Authorities Directors Association, and the National Association of Housing and Redevelopment Authorities). Most of what I will say today has been said or written to HUD officials by the excellent professional staff members of the three housing groups. They speak for us and thousands of other well-run housing agencies, as well as the smaller number of agencies which are struggling to improve. We rely on HUD to work cooperatively with these organizations as the legitimate representatives for our thousands of individual housing agencies.

Some HUD officials have tried to deflect criticism of PHAS by saying the industry groups don't speak for the housing agencies, and that individual PHA's are trying to avoid accountability for poor performance. Neither is true. The Saint Paul PHA runs Public Housing and Section 8 well - we know how to do it right. (See Exhibit 1: PHA Profile sheet) We believe this is an important foundation for our comments on PHAS.

The Saint Paul PHA SUPPORTS a public housing performance assessment system which is fair and credible. We encouraged HUD to develop PHMAP (the Public Housing Management Assessment System, a predecessor of PHAS), and that rating system confirmed that we were performing well.

FINANCIAL CONDITIONS

The PHAS Physical Conditions indicator has sparked more controversy, but the PHAS Financial Conditions indicator may be a greater impediment to operating public housing in the long run. In its present form it is not a reliable indicator of a well-run agency. Financial strength and stability are important, but the PHAS tests are too detailed, too complicated, too intrusive, and less grounded in accepted industry practices and standards. Here are our recommendations:

HUD is trying to establish meaningful benchmarks for physical conditions, measuring sidewalk cracks, holes in walls, etc. For the financial indicators HUD is comparing each PHA to a "peer group" of similar-sized agencies. Whether that approach is a good idea or not, it necessarily requires more time - a year or more - to gather the data, determine the distributions within each peer group, and then announce the proposed standards and accept comments. Then the standards should be issued and followed in the next year's assessments. PHA's will know how they will be scored and (maybe) can plan their actions accordingly.

However, HUD's first year of data collected under PHAS is not much use because the required accounting system has shifted in the meantime. We supported the shift from "HUD accounting" methods to GAAP (generally accepted accounting principles), but it is not an easy or quick transition, and the results are not entirely predictable. And it keeps changing - HUD has issued four or five guidebooks on GAAP and Financial Indicators over the last year. Therefore HUD still needs to collect a year's worth of data before even proposing the standards which will be used in the official scoring. (Imagine the confusion if physical inspections standards depended on "peer group" scores from last year. Analogy: Radar gun - Could police give tickets for going too fast or too slow compared to different vehicles on different roads - over the course of a week?) If HUD is going to use the financial indicators based on peer group data, they must extend the advisory period.

Even with a much longer advisory period, the PHAS financial indicators are too detailed, intrusive and uncertain.

We (all PHA's) have not reported Section 8 numbers aggregated along with public housing data - we don't know what to expect. Some public housing measurements like vacancy days are meaningless in Section 8.

PHYSICAL CONDITIONS:

What's wrong with implementing the PHAS physical conditions inspection protocol now?

WHAT'S THE RISK OF IMPLEMENTING PHAS "TOO SOON"?

Again, our recommendations to Congress and HUD are:

Thank you again for the opportunity to testify on this important issue.

ATTACHMENTS

INTRODUCING THE SAINT PAUL PUBLIC HOUSING AGENCY

Saint Paul, the capital of Minnesota, is a city of 272,000 residents. While a medium-sized city, it lies contiguous to Minneapolis, which has 368,000 residents. Together, Saint Paul and Minneapolis comprise the central cities of the seven county Twin Cities metropolitan area, which has a total population of 2.2 million.

Jon M. Gutzmann
Executive Director