Legal Updates: Your Cooperative May be Affected
RANDALL PENTIUK, Esq.

Unless Congress miraculously acts in a bi-partisan manner, the federal government will be forced to have automatic 8.4% across the board spending cuts beginning January 1, 2013.

Our member cooperatives should start to plan for the likely event that those cuts become a reality. What HUD will do and how HUD will handle the cuts is not known at the moment. If the cooperative has a project based Section 8 contract, there is a possibility that individual members’ participation to rent (carrying charges) will rise from 30% to 35%. This possibility and the possible short funding, which we experienced a few years ago, would require Boards with a HUD subsidized or a HUD insured cooperative, to make difficult decisions. It is important for these Boards to begin to plan NOW.

Please note that the 8.4% cut equals 1/12 or one month of annual subsidies. What will your cooperative do if it loses one month’s worth of subsidies? MAHC urges members to start planning now for the worst case scenario and hope not to have to use it.

Some ideas you may want to consider are:

  • Draft an alternative budget;
  • Start assessing your members now to cover the difference and build a nest egg fund;
  • Look for non-essential services that may be reduced or eliminated;
  • Research alternative funding possibilities;
  • Or a combination of the above.

Please note that the above are a few key suggestions. MAHC strongly recommends that you work with your cooperatives professionals and legal counsel to draft your own plan.

You should also reach out to your Senators and Representatives (especially since this is an election year!). Tell them what traumatic harm these cuts will have on your cooperative. To find out who represents you, please use the link to “Contacting the Congress”

http://www.contactingthecongress.org

Please quickly e-mail your Senators and Representatives and tell them to protect HUD from severe budget cuts to the specific programs that currently help your cooperative (e.g., Project based Section 8, 236, 202, etc).