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Statements Versus Facts:
Part Four!

by Jul Kamen and
Jacquelyn Tarpy

13 December 2010


On November 12, 2010, PBS Channel 8, in Houston, hosted a panel discussion on Galveston's public housing. The participants were Mayor Joe Jaworski, GHA Chair Paula Neff, and GOGP president David Stanowski. 

Many statements were made regarding various aspects of public housing: why we need it, who lives in it, who pays for it, and what type offers the best solution. Although this was not a debate, many of their remarks need clarification.

This is the fourth in a series of articles to examine these statements against the facts. 

1) We will paraphrase the panelist's statement.
2) Give the exact location on the video where the entire statement can be found.
3) Provide the facts regarding that statement. 

The reader can then judge for themselves the validity of the statement against the facts provided.


Background:

This discussion centers around GHA's current plan to build 200-300 public housing units in scattered sites within existing neighborhoods in Galveston. GHA would need to acquire existing buildings and/or vacant lots to do this.

Statement:

Jaworski:
“Even though the federal government will own the land, it's going to generate a 'Payment in Lieu of Taxes' (PILOT) which will probably double what the City gets right now (in property tax)." For the entire quote, slide the cursor beneath the video to 13:35 minutes.



Facts:

1.) "The PILOT cannot exceed the property tax that would apply to the property if it were not tax-exempt."

Therefore, for the PILOT to "pay double" the property tax is actually prohibited; which makes it IMPOSSIBLE!

Source: Property Taxes on HUD-run Housing



2.) GHA has been subject to the PILOT for several years.

Prior Payments to the City of Galveston:

2006:

(979 PH units):
 $13,000.00

2007:
(979 PH units): $4,944.00

2008:

(979 PH units January-August)
(410 PH units September-December):
 
$2,819.00

2009:
(410 PH units): $2,819.00

Source: City of Galveston


3.) HUD calculates the PILOT in the following way:

For low income and elderly projects, the maximum PILOT payment is 10% of the annual rent collected for occupied units. 

Annual rent cannot be more than 30% of a resident's "adjusted annual income".  Deductions for child care, medical expenses, and dependents are applied before arriving at the "adjusted annual income" of a tenant. 

Source: Property Taxes on HUD-run Housing

Until the specific lots and/or properties are identified for scattered sites, we can only estimate how the property tax paid under private ownership would compare to what would be paid under PILOT.


4.) Property Tax versus Payment in Lieu of Taxes (PILOT).

Note: All property tax figures shown below reflect only the City of Galveston's portion of the total property tax, and 
are calculated using 2010 appraised values multiplied by 2010 City tax rates from Galveston County CAD.
 
Property Tax Payments:
a.) An upscale apartment complex similar to the type that the Mayor assures us GHA will be building, located west of 61st Street, pays an estimated $192 of property tax per unit.

b.) Sandpiper Cove, a project based Public Housing complex, located in Galveston, pays an estimated $48 of property tax per unit.

c.) A four-plex in the East End pays $249 of property tax per unit.

d.) A four-plex near 48th Street pays $207 of property tax per unit.

Payment in Lieu of Taxes:
GHA’s PILOT was $13,000 in 2006 which is $13 per unit, and $4,944 in 2007 which is $5 per unit.

Property Payment/
Unit
$100,000
Single-Family Home
$554
East End Four-Plex $249
48th Street Four-Plex $207
Upscale Apartment Complex $192
Sandpiper Cove $48
2006 GHA PILOT $13
2007 GHA PILOT $5


5.) Non-Collection of Property Tax.

It has been suggested that when property owners are delinquent on their property taxes, if GHA bought those properties, then at least the city would "get something". However, this situation should raise the question of why the City has failed to collect property tax from private property owners in the past, and what guarantees that they will collect PILOT from GHA in the future?

There is also the possibility that the PILOT could be dramatically changed or canceled at some future date.

Learn Purchase Real Estate for Cents on the Dollar!

Conclusion:
Based upon past performance, the formulas for calculating the Total Tenant Payment, and HUD rules against the PILOT paying more than the property tax due from a private owner, it is extremely unlikely PILOT will come anywhere near providing the same income to the City that privately owned property would generate, let alone "double" that amount, which is prohibited by HUD.

Therefore, there does not appear to be any financial incentive, whatsoever, to convert private property to federally owned public housing scattered sites, which caps the amount of money those properties can payout to the level of the PILOT.

 







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