Standard & Poor’s Ratings Services believes that the uncertainty of capital fund appropriations could pose risks to the credit quality of Capital Fund Financing Programs (CFFP).
We have assessed the long-term credit implications of public housing authorities’ (PHAs) CFFP appropriations risk following the release of the House Appropriations Subcommittee’s 2012 Department of Housing & Urban Development (HUD) funding bill and the Senate House Appropriations Subcommittee’s 2012 HUD funding bill. The House bill appropriates $1.532 billion for the public housing capital fund for 2012, which represents an historic 25% decrease from 2011, while the Senate bill provides $1.875 billion for the capital fund, an 8% decrease, or $165 million, below the 2011 appropriation. The CFFP enables authorities to use future annually appropriated modernization funding to secure long-term debt that permits PHAs to borrow sufficient funds to accelerate the modernization and repair of the aging and deteriorated housing stock in their portfolio.
Standard & Poor’s notes these proposed cuts follow an 18% drop in 2010’s appropriation to $2.044 billion. If enacted, 2012 would be second time in the last six consecutive years that public housing modernization funding has been cut. And it would also be the largest two-year decrease in the last 20 years. If funding continues to decrease, it will lead to lower debt service coverage (DSC) for rated issues and, potentially, lower ratings.
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