DBAS conducting analysis of impact of 1602 low income housing

Development Bank of American Samoa is conducting an analysis of the impact of the federally funded 1602 low income housing program, which has been in place for five years, although many units remain unoccupied and this is blamed on federal requirements, while Sen. Magalei Logovi’i believes DBAS should seek a waiver from the federal grantor, the U.S Treasury Department.

The analysis was revealed last Thursday during the Senate confirmation hearing of Ruth Matagi-Fa’atili, for a second term as DBAS president, whose nomination by the governor is subject to Senate endorsement only— she was unanimously confirmed by the Senate later on the same day.

The 1602 housing program has been the subject of criticism in the past by some lawmakers, project owners, or owners of the rental projects funded by 1602, and others in community because of the requirements — both income level and number of household members — to rent these units. They note the requirements are too high, compared to the average low income in American Samoa.

Additionally, the program, for which American Samoa received $30.77 million that was fully sub-awarded in 2010 to local property owners, is not helping low income families find affordable rental units, because of the “high income level” required. And this has left many units unoccupied.

For example, as of October 2015, the income required for 2 people to rent a one-bed room unit is $29,760 and the rent limit is $697, according to the 2015 “income and rent limit” document posted on the DBAS website - www.dbas.as — which also provides more information of previous years’ income and rent limit.

And for 8 people to rent a 5-bedroom unit, income level is $49,140 while the rent limit is $1,153, according to the document, which also shows that there are 120 project owners.

During Matagi-Fa’atili’s confirmation hearing, Sen. Tuaolo Manaia Fruean sought a status of the 1602 program, saying that many units are not occupied. Matagi-Fa’atili replied that DBAS is conducting a five-year analysis on the effectiveness of the 1602 to the community.

She pointed out that there are “good things” as well as “challenges” for the program and after conducting the analysis DBAS will make recommendations to the US Treasury, to help project developers (the project owners). “We have to collect the data first,” she said.

Tuaolo suggested that DBAS talk to government contractors about occupying the 1602 homes, so the home owners can repay their loans, made under the program. He says DBAS can negotiate with the government to get their contract workers to occupy these homes. 

What’s important is that income is coming in for project owners to repay their loans, he said and suggested that owners not hike the rent so high but keep at a lower rate even $200 or $300 a month - at least there is income to pay the loan.

Sen. Magalei Logovi’i followed up, asking for confirmation that temporary contract rentals are not allowed due to federal requirements, to which Matagi-Fa’atili said yes. Magalei wanted to know what DBAS is doing to have the federal government waive some of their stringent requirements, which is making it difficult for homeowners to get tenants.

Matagi-Fa’atili says during the analysis “we also have to identify what are some of the challenges that our people are going through. We’ll put that report together and will submit it to the US Treasury so they would know the challenges we are going through at our community through this program.”

But before a recommendation is made, “we need to collect the data,” from the last five years and “we can take that information, from five years ago and perhaps address any challenges of unmarketable areas, [owners] unable to rent their units.”

DBAS is looking at submitting its analysis and recommendation to the US Treasury in three months time.

Magalei, a former cabinet member in the Tauese and Togiola administrations, pointed out that ith any federal funding there are always restrictions and regulations. “But we also have to inform people off island that American Samoa is in a different isolated situation” when it comes to regulations towards a grant, he said.

“We are the people who need to inform” the federal grantor about the difference between American Samoa and state-side, said Magalei, adding that he agreed with Tuaolo that there are many 1602 homes not occupied. Furthermore, there are many people who want to rent those places, but cannot due to federal regulations and requirements.

The biggest controversy surrounding the program was when the US Justice Department charged a handful of owners over the way money allocated under the 1602 was used.

TAUSANI AIRLINE

Sen. Paepae Iosefa Faiai queried the status of the locally based Tausani Airlines’ loan from DBAS, to which Matagi-Fa’atili says the loan money is “not fully dispersed” to the airline because they didn’t meet all of the requirements and conditions of the loan. And the airline is making payments on the money already dispersed, she said.

Paepae says he hopes the airline is honest in making loan payments. Paepae, who is also Senate Transportation Committee chairman and an FAA certified airline pilot, says that when he is Honolulu this week for the ASG Employees Retirement Fund board meeting, he plans to communicate with the US Federal Aviation Administration regarding Tausani.

During his Senate confirmation hearing two weeks ago, now fully confirmed Agriculture Department director, Filifa’atali Michael Fuiava, who is also Tausani’s president, told senators that DBAS advanced $250,000 of the $400,000 loan. He also says Tausani is waiting for FAA to come on island to conduct certification.

FAA spokesperson Ian Gregor told Samoa News two weeks ago that the FAA is looking at this summer to commence certification of the start-up airline to serve the Manu’a island group, provided that Tausani is prepared.

More than two years ago, Tausani leased the ASG nine-passenger plane for Manu’a flights.

BACKGROUND OF 1602 LOW INCOME HOUSING AWARDS

Samoa News should point out that 1602 fund awards are not loan proceeds to the developer or owner of the project. According to the U.S. Treasury, on February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), an omnibus bill containing several parts including the American Recovery and Reinvestment Tax Act of 2009.

The purpose of the Recovery Act was to preserve and create jobs and promote economic recovery in the near term and to invest in infrastructure that will provide long-term economic benefits.

For American Samoa, DBAS oversaw award of the funds for the 1602 projects, making sure the federal requirements were met, and as the “awardee” — it continues to oversee the projects for compliance through “the 15-year period in which the owners maintain the housing units as affordable,” and annual reports to confirm compliance must be submitted to the US Treasury.

In this sense, these funds are not loans, but “assistant” cash to developers “to fill a gap in the developer’s costs for construction or acquisition and rehabilitation of rental housing for low-income families and individuals.”

According to federal documents on 1602 funding, “Section 1602 funds are in ‘exchange’ for 2009 Low-Income Housing Tax Credits. By receiving funds, the subawardees are electing to forego tax credits on a property.”

Samoa News understands from federal documents it has read on the Section 1602 funds — http//www.treasury.gov/intiatives/recovery/Documents/ — it is when requirements and compliance are not met, that the US Treasury Department says that the awardees (in this case DBAS) must have the subawardee (the developer given the cash by DBAS) pay back the money.

Samoa News understands this is generally when it becomes a loan, i.e. the developer has to pay the money back for non-compliance; and that DBAS is still pursuing some of the subawardees for ‘repayment’, while the federal government has prosecuted some subawardees for misuse of 1602 funds.