Guest MINDSETTER™ Gary Morse: Raimondo’s Economic Trojan Horse
Monday, October 20, 2014
Last week, Treasurer Raimondo declared that a core component of her economic plan as Governor would be based on increased construction of public housing.
It's hard to argue with affordable housing since housing is so important. The issue is whether affordable housing build-out is a well thought out strategy to promote long term economic growth and stabilize property taxes in RI.
The bulk of housing money will come from the US Department of Housing and Urban Development (HUD). But there are strings attached to HUD money that few people in politics think about.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTHUD Money Is Not Free
HUD has shown that it's no longer content to be just a benevolent source of "free" housing money. HUD is flexing its muscle in an effort to implement nationwide public policy changes designed to urbanize suburban communities across America. Backing up that initiative is the billions of dollars HUD disburses annually, together with some little known federal rules, and the federal courts for those who take the money, but don't play by HUD rules.
The rules under HUD's Affirmatively Furthering Fair Housing (AFFH) initiative requires that any community taking HUD funds be mandated to keep records on the minority populations down to the neighborhood level(aka census blocks). Where neighborhoods are shown to have low minority populations, a plan must be on file in town hall outlining how they will address expansion of minority populations throughout all parts of the community.
The Trojan Horse
What happens when a community takes HUD money, but doesn't play by HUD's AFFH rules? The first victim to feel HUD's legal sting was Westchester County, NY. In a strange irony, the victims included Bill and Hillary Clinton.
In 1999, as the Clinton's were wrapping up life in the White House, they purchased a $1.7 million dollar Westchester home in the wealthy hamlet of Chappaqua. Six years later, Westchester County was sued by HUD on a charge that the County had falsely certified that they were in compliance with AFFH rules.
The essence of the HUD lawsuit was that people who purchase homes in expensive suburban neighborhoods do so primarily as a financial shelter against low income housing. Price exclusivity had been deemed by HUD to be an impediment to universal fair housing.
In 2009, Westchester accepted a $51 million dollar settlement agreement paid for by local taxpayers requiring that affordable housing be implemented starting with those census blocks having the lowest minority populations. Impact to the property tax base was not a consideration with HUD. For those living in Westchester, this has been a 5 year nightmare. The Clinton's are reportedly shopping around for a new place to live in the Hamptons.
Most Rhode Island communities have never considered that they too could be sued by HUD for the same reasons. Certifying that a HUD compliant plan exists in the town records is based on the honor system. HUD doesn't review any housing plans for compliance until a complaint is filed. In spite of the fact that HUD money comes to many RI communities via the State, the State indemnifies itself from any harm should a community be sued by HUD.
Lessons on destabilizing property taxes
If Treasurer Raimondo wants to look at the long term impact of government tinkering with market forces, she only needs to look at the current fiscal condition of the City of Woonsocket. For over two decades, the City of Woonsocket experimented with a business plan based on HUD money to build affordable housing. Woonsocket has now realized, too late, that the plan destabilized their property tax base, and there is little that can be done to repair the damage.
Woonsocket is now suffering with a State imposed "supplemental" property tax to cure what has been the slow erosion of their property tax base. Affordable housing advocates don't want to discuss these financial realities, but Woonsocket was forced to.
In November, 2013, Woonsocket Mayor Leo Fontaine delivered a presentation in Superior Court entitled "Unprecedented Fiscal Emergency" outlining the financial condition of Woonsocket as part of ongoing testimony in their own local pension lawsuit. Part of the problem was the simple economics of Woonsocket’s declining property tax base being incapable of carrying the weight of municipal obligations. In 2012, bond and pension obligations were 20% of their property tax base. A healthy community should manage to a target debt load closer to 5% of the overall property tax base.
When job creators look at places to manufacture things, and create manufacturing jobs, they look at numbers like debt load, property taxes, and other relevant statistics. It's a math problem.
For too long, RI has ignored the hard math that manufacturers don't ignore. An economic plan should start by viewing RI's problems through the eyes of job creators. Decent long term jobs will make housing affordable, not government tinkering
Gary Morse is a retired communications consultant living in Barrington, and active in the debate on affordable housing policies.
Related Slideshow: 10 Questions Gina Raimondo Has to Answer When Running for Governor
Related Articles
- NEW: Kennedy Donated to Pell, Raimondo, Not Taveras
- Raimondo Goes Negative on Hit TV Ad on Taveras
- Taveras Swings Back at Raimondo
- NEW: Fung Calls on Raimondo to Release Hedge Fund Research
- NEW: Fung Calls on Raimondo to Release Hedge Fund Research
- NEW: Taveras Criticizes Raimondo on Wall Street “Blind Spot”
- Don Roach: When Will the Taveras and Raimondo Fireworks Begin?
- NEW: Raimondo Blasts Taveras for Property Tax Hikes in Providence
- Raimondo’s Top Hedge Fund is Being Investigated by Feds
- Father of RI General Treasurer Gina Raimondo Dies at Age 87
- New Poll Show Raimondo Has Trouble with Women
- POLL: Pell Streaking, Taveras Sinking and Raimondo Leading
- Raimondo 1000+ Jobs Claim - Narragansett Beer Has 13
- Guest MINDSETTER™ Jeffrey Girgenti: Why La Salle Took Down the Photo of Gina Raimondo
- The Scoop: Cianci, Elorza Spar Over Public Safety, GOP Ups the Heat on Raimondo/Reed Ad, and More
- Russell Moore: Is Raimondo Just a Smooth Lincoln Chafee?
- Doherty Endorses Raimondo for Governor
- Clinton to Visit Rhode Island to Campaign for Raimondo for Governor
- The Scoop: RI GOP Blasts Raimondo/Reed Commercial, Lynch Called for Pierson Resignation, and More
- INVESTIGATION: Raimondo Investment Program’s Fees Exceed Gains
- Will Labor Divide Spell Victory for Raimondo?
- Block Calls Out Raimondo For Failing To Support 2010 Tax Reform
- Democratic Governor’s Primary Winner is Gina Raimondo
- The Scoop: Fung Poll Shows Dead Heat With Raimondo