Some Public Housing Authorities Exploit Pay Cap Through Bonuses

Public housing authorities complied with an executive salary cap in 2013, according to new data, but some top officials still earned more than $155,500 last year in total compensation because of a loophole in the law.

Sixteen top executives at the country’s nearly 4,000 PHAs earned more in federally-funded total compensation (salary and bonus) than $155,500 in 2013, the data showed. That’s legal because the congressionally-mandated cap prohibits PHAs from using federal Section 8 and Section 9 funds to pay more in salary than the annual rate of basic pay for level IV positions on the Executive Schedule; that cap, however, does not apply to bonuses. In 2014, the cap increased to $157,100 because President Obama lifted the federal civilian pay freeze.

The highest earner based on total compensation using Section 8 and Section 9 funds last year was the chief finance officer of the Atlanta public housing authority, who collected $218,750 in federally-funded salary and bonus. Rounding out the top five for that category were the interim president and chief executive officer of Atlanta’s PHA ($200,750); the executive director of the Housing Authority of the Borough of Lodi in New Jersey ($197,989); the CEO of New Jersey’s Guttenberg Housing Authority ($195,639); and the executive director of Baltimore’s PHA ($181,769). The Chicago PHA used  Section 8 and Section 9 funds to pay salaries exceeding the cap in calendar year 2013, including a salary of $216,000 for its CEO, but fixed the mistake in early 2014 and “repaid the excess funds used from non-federal sources,” according to a Housing and Urban Development Department statement.

In fact, PHAs can pay their executives salaries that exceed the congressionally-mandated cap, if they use funds outside the federal pool of Section 8 (Housing Choice Voucher) and Section 9 (public housing capital and operating fund) money—and many do. For instance, the city manager of the Housing Authority of Santa Monica in California earned a salary of $353,484 based on 2013 compensation data, while the CEO of the Transitional Services of New York for Long Island drew a $338,594 salary that year, according to the data, which was self-reported by PHAs. No Section 8 or Section 9 funds were used to pay those officials’ salaries, according to the compensation survey.

Many PHAs reported to HUD that they did not use any Section 8 or 9 funds to pay their top officials.

“We believe Congress’ intent was [a cap of] $155,500,” said Jereon Brown, a spokesman for HUD, in an interview discussing the 2013 data. “We don’t believe that when you put the bonuses in there [exceeding the cap], you are following the true intent of the rule.” HUD is urging Congress to cap total compensation, instead of just salary, to close the existing loophole.

HUD said it was doing that in fiscal 2013 when it provided guidance urging PHAs to extend the salary cap to include bonuses, not just base salary. “We will take executive action to put this cap in place in fiscal year 2013 under our own regulations if necessary,” the department said at the time. Brown argued that the guidance was working, when looking at the most recent data compared to the 2010 statistics.

The data revealed that in 2013 the average total compensation for 9,814 PHA executives was $60,808, while the mediantotal compensation was $52,000. By comparison in 2010, the average cash compensation of a housing authority executive director was $82,299. Despite some eye-popping salaries in the database, more than 97 percent of PHA managers’ total cash compensation was less than $155,500 last year. Brown said HUD did “random checks” on the data supplied by PHAs and conducted on site visits to help enforce the organizations’ compliance with the salary cap. “Our focus is only on federal funding,” Brown said, noting that PHAs have other ways to “generate income” to pay their employees.

While HUD oversees PHAs, they are administered by states and localities, and are similar in structure to a school district.  Their employees are considered state employees, not employees of the federal government, as Brown pointed out several times. But the PHAs receive a lot of federal money, attracting the attention of Washington.

After reports surfaced in 2011 of excessive compensation at some PHAs across the country, Congress in fiscal 2012 imposed the salary cap on the amount of federal funds that can be used to pay their executives. Lawmakers included similar provisions in the appropriations laws for fiscal 2013 and fiscal 2014. HUD posted some PHA salary data online in 2012, and posted more comprehensive 2013 data last Friday, with no fanfare. In April, Sen. Charles Grassley, R-Iowa, put a hold -- which he has since lifted -- on the nomination of Katherine M. O’Regan as HUD’s assistant secretary for policy development and research because of the department’s failure at that point to respond to his request to release the salary data. 

Part of the complexity involved in enforcing the congressionally-mandated cap and reporting the data, Brown said, stems from the fact that many PHAs do not run on the same fiscal year schedule as the federal government. The federal government’s fiscal year runs from Oct. 1 through Sept. 30. “Each housing authority has a different fiscal year,” Brown said.

Uncle Sam spends roughly $6 billion to $7 billion annually on public housing.

Click here for some of 2013’s highest-paid PHA officials.

(Image via Loskutnikov/Shutterstock.com)