The Charlottesville Redevelopment and Housing Authority could be forced pay $160,000 in cash relief to public-housing residents, after reaching a proposed settlement to a federal class-action lawsuit, the Legal Aid Justice Center announced Tuesday.
Before the settlement is final, it must be approved Nov. 4 by a federal judge, and make it through a fairness hearing after that, Legal Aid said.
Public-housing residents and Legal Aid brought the suit after they said the authority overcharged residents for electric utilities.
If approved, the settlement will provide $95,400 to public-housing residents to compensate for overpayment of utilities between June 7, 2007, and May 31, a release from Legal Aid said.
The suit, filed in June 2012, alleged that the housing authority did not properly adjust electric utility allowances between 2003 and this year, causing tenants to overpay for electricity. Under federal law, public-housing tenants may not be charged more than 30 percent of their monthly income for rent and utilities.
The housing authority must set an allowance for reasonable use of the utilities. The suit alleged that the housing authority set the allowance so low that residents who did not use excess electricity were charged a fee.
CRHA Executive Director Constance Dunn said the authority did not adjust the allowance because adjusting it would have meant charging residents more.
“The housing authority decided to enter into this agreement because of the cost of litigation and the effort that would have been required to prepare for litigation,” she said. “The utility allowances that we have been charging since the starting date of that lawsuit have been in favor of the residents. We could have raised the rates, but we didn’t.”
The settlement will not badly strain the authority’s finances, Dunn said.
“About $100,000 of that money is being covered by insurance, so it is not a huge hit,” she said.
In addition to the immediate payment, the settlement provides $15 a month for 36 months in utility credits for 270 current public-housing tenants, and $5 a month for 24 months after that, Legal Aid said.
The settlement will repay about 33 percent of the total utilities paid by 427 households in the timeframe specified in the suit, said Brenda Castañeda of the Legal Aid Justice Center.
The precise overage each household paid is unclear, Castañeda said.
“We don’t really know what the overage is, because what’s supposed to happen is CRHA is supposed to update the allowances every year, and they didn’t do that since 2003,” she said. “It’s a recognition that they were paying too much, but we don’t know how much too much.”
Dunn, who joined the CRHA in April 2012, said the housing authority is still owed more in back rent and utilities than it ever charged in surcharges.
Charlottesville Mayor Satyendra Huja, who sits on the housing authority board, said he is glad to see the suit settled.
“The settlement happened recently because there were some errors, and we need to compensate for those errors,” Huja said. “It is only appropriate that we do that. If there was an error, we need to correct it.”
City Councilor Dave Norris, a former CRHA board member, said the settlement is fair.
“It looks like residents will be getting credited for utility charges that were assessed incorrectly and because the administration did not perform the annual adjustments, so I’m glad that the matter is resolved,” Norris said. “My sense was that there wasn’t any malevolence involved in the fact that the housing authority did not annually adjust the formula. It was really more that they felt like utility rates go up, utility rates go down, they were just going to keep their formula the way it was.”