[Federal Register Volume 59, Number 9 (Thursday, January 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-846]
[[Page Unknown]]
[Federal Register: January 13, 1994]
_______________________________________________________________________
Part V
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary
_______________________________________________________________________
NOFA for the Operating Assistance and Capital Improvement Loan
Components of the Flexible Subsidy Program for FY 1994
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Housing--Federal Housing
Commissioner
[Docket No. N-94-3692; FR-3601-N-01]
NOFA for the Operating Assistance and Capital Improvement Loan
Components of the Flexible Subsidy Program for FY 1994
AGENCY: Office of the Assistant Secretary for Housing--Federal Housing
Commissioner, HUD.
ACTION: Notice of Fund Availability (NOFA) for Fiscal Year 1994.
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SUMMARY: This notice announces HUD's funding for the Operating
Assistance and Capital Improvement Loan components of the Flexible
Subsidy Program for Fiscal Year 1994. This document includes
information concerning the following:
(a) The purpose of the NOFA and information regarding eligibility,
available amounts, and selection criteria;
(b) Application processing, including how to apply and how
selections will be made; and
(c) A checklist of steps and exhibits involved in the application
process.
DATES: The due date for submission of applications by project owners in
response to this NOFA is February 28, 1994. Application materials may
be obtained from the local HUD Field Office.
Applications must be physically received by the applicable HUD
Field Office Loan Management Branch on the due date by 4 p.m., local
time. Please see the Application Process section of this NOFA (Section
II) for further information on what constitutes proper submission of an
application.
The application deadline is firm as to date and hour. In the
interest of fairness to all competing applicants, HUD will treat as
ineligible for consideration any application that is not received on or
before the application deadline. Applicants should take this practice
into account and make early submission of their materials to avoid any
risk of loss of eligibility brought about by unanticipated delays or
other delivery-related problems.
FOR FURTHER INFORMATION CONTACT: Program Support Branch, Office of
Multifamily Housing Management, 451 Seventh Street SW., Washington DC
20410, telephone (202) 708-2654 (voice) or (202) 708-3938 (TDD for
hearing-impaired). (These are not toll-free telephone numbers.)
SUPPLEMENTARY INFORMATION:
Paperwork Reduction Statement
The Office of Management and Budget has approved the use of the
Flexible Subsidy forms under OMB control number 2502-0395.
I. Purpose and Substantive Description:
A. Statutory Authority
Sec. 201, Housing and Community Development Amendments of 1978 (12
U.S.C. 1715z-1a); sec. 7(d), Department of Housing and Urban
Development Act (42 U.S.C. 3535(d)).
B. Flexible Subsidy Program
1. Authorizing Legislation
Section 201 of the Housing and Community Development Amendments of
1978 (HCDA) created the Flexible Subsidy Program to provide Operating
Assistance to eligible projects experiencing financial difficulty.
Operating Assistance is provided in the form of a deferred loan and, in
conjunction with other resources, is designed to restore or maintain
the physical and financial soundness of eligible projects. The 1983
amendments to section 201 of the HCDA expanded the universe of eligible
projects and clarified that a project need not have an FHA-insured
mortgage to be eligible for Flexible Subsidy assistance (e.g., a non-
insured section 236 project is eligible).
The 1987 amendments to section 201 of the HCDA created a new
category of assistance to be provided under the Flexible Subsidy
Program for projects that needed capital improvements to achieve
physical soundness that cannot be funded from project reserve funds
without jeopardizing other major repairs or replacements that are
reasonably expected to be required in the near future.
Sections 405 and 406 of the Housing and Community Development Act
of 1992 (Pub.L. 102-550, approved October 28, 1992) (1992 Act) further
amended section 201 of the HCDA. The amendments made to section 201 by
the 1992 Act were discussed in detail in the proposed rule published on
June 25, 1993 (58 FR 34506). That rule proposed to amend HUD's Flexible
Subsidy regulations at 24 CFR part 219 to bring these regulations into
conformity with the changes made to the Flexible Subsidy Program by the
1992 Act. The changes to the Flexible Subsidy Program made by the 1992
Act also were discussed and incorporated in the FY 1993 Flexible
Subsidy NOFA published on June 7, 1993 (58 FR 32022). The proposed
amendments to 24 CFR part 219 published on June 25, 1993 were adopted
by a final rule published on December 6, 1993 (58 FR 64138).
2. Assurance of Support of Preservation Efforts
This notice assures support of preservation efforts by providing
for a set-aside of $20.0 million for Flexible Subsidy Capital
Improvement funding to insured projects that are eligible to receive
incentives in exchange for extending the low-to moderate-income use of
the projects under plans of action approved in accordance with 24 CFR
part 248.
The $20.0 million set-aside will be made available under a separate
notice of fund availability. The remainder of the Flexible Subsidy Fund
is made available under this NOFA for the award of funds to eligible
projects in accordance with the priorities specified in this NOFA.
C. Allocation Amounts
1. Total Available Funding for FY 1994
The Flexible Subsidy Fund is comprised of excess rental receipts
paid to HUD from owners of section 236 projects, interest earned on the
fund, repayment of Operating Assistance loans made by HUD in past
fiscal years, and amounts appropriated by the Congress, if any, to
carry out the purposes of the Flexible Subsidy Program.
The Capital Improvement Loan portion of the program is required by
statute to be funded at a minimum level of $30.0 million or 40 percent
of the amount in the Flexible Subsidy Fund, whichever is less. Any of
that amount not used for loans under that program before the last 60
days of a fiscal year shall become available for Operating Assistance
loans. This year, $30.0 million is less than 40 percent of the fund,
and therefore, is the amount designated for Capital Improvement Loans.
Funding availability for Fiscal Year 1994 is estimated as follows:
FY 1994 Appropriation................................... $35,747,000
Estimated Offsetting Collections........................ 76,916,000
Carryover of Unreserved 1993 Funds...................... 7,839,534
Estimated Available Funds--Fiscal Year 1994............. 120,502,534
Less: Set-aside for capital improvements for insured
projects with incentives under part 248 (available
under a separate funding action)................... 20,000,000
Net Available Funds under this NOFA..................... 100,502,534
Amount of Available Funds segregated for Capital
Improvement Loans under this NOFA...................... 10,000,000
Amount of Available Funds set aside for the Operating
Assistance component................................... 90,502,534
2. Distribution of Funds--Regional Allocation
For FY 1994, HUD is distributing the Flexible Subsidy funds under
this NOFA to each of its ten Regional Offices on the basis of a formula
allocation. The formula takes into consideration the number of
potentially eligible projects in each region and the extent of the
troubled project inventory.
Flexible Subsidy funds available under this NOFA are distributed to
the ten Regional Offices in accordance with the following schedule:
------------------------------------------------------------------------
Capital
HUD region Operating improvement
assistance loan
------------------------------------------------------------------------
Region I................................... 7,240,203 800,000
Region II.................................. 4,525,127 500,000
Region III................................. 9,050,253 1,000,000
Region IV.................................. 15,385,431 1,700,000
Region V................................... 19,910,558 2,200,000
Region VI.................................. 9,955,279 1,100,000
Region VII................................. 5,430,152 600,000
Region VIII................................ 3,620,101 400,000
Region IX.................................. 11,765,329 1,300,000
Region X................................... 3,620,101 400,000
----------------------------
Totals................................. 90,502,534 10,000,000
------------------------------------------------------------------------
The Regional Offices will make awards under this NOFA in accordance
with the selection criteria and procedures described in this NOFA.
3. Emergency Assistance
The Secretary may, at his discretion, waive the NOFA requirements
set out in section 102(a)(1), (2) and (3) of the Department of Housing
and Urban Development Reform Act of 1989 (Pub. L. 101-235, approved
December 15, 1989) and approve the award of Flexible Subsidy assistance
for appropriate response to an emergency, e.g., hurricane, flood, etc.,
as provided for by section 102(a)(5) of said Act in cases where the
NOFA process would be too time-consuming to get the assistance to the
projects in need.
D. Eligibility
1. Types of Projects
The following types of rental or cooperative housing are eligible
for Flexible Subsidy assistance:
a. A project assisted under the section 236 interest reduction
program, including State Agency non-insured projects, the section
221(d)(5) program (commonly known as the 221(d)(3) Below Market
Interest Rate Program), or the Rent Supplement Program.
b. A project that was constructed more than 15 years before
assistance is to be provided under the Flexible Subsidy Program with a
direct loan under the section 202 Program for Housing for the Elderly
or the Disabled.
c. A project assisted under section 23 of the 1937 Act as in effect
immediately before January 1, 1975, that is ineligible for assistance
under the modernization program operated under the 1937 Act.
d. A project assisted under the Section 8 Housing Assistance
Payments Program after conversion from assistance under the section 236
Rental Assistance Payments Program or the Rent Supplement Program.
e. A project that met the criteria in item a or b above before
acquisition by HUD, and that has been sold by HUD subject to a mortgage
insured or held by HUD and subject to an agreement which provides that
the low- and moderate-income character of the project will be
maintained. An application for Flexible Subsidy assistance for a
project in this category must be received by HUD within three years of
the date of the sale of the project by HUD.
2. Conditions for Assistance
Flexible Subsidy assistance will be made available in accordance
with the conditions imposed by section 201 of HCDA, as amended by the
1992 Act. Accordingly, assistance under this NOFA can be provided only
if the following conditions are determined to exist:
a. The assistance is necessary, when considered with other
resources available to the project, to restore or maintain the
financial or physical soundness of the project; and to preserve the
low- and moderate-income character of the project.
b. The owner has agreed to maintain the low- and moderate-income
character of the project for a period at least equal to the remaining
term of the project mortgage. This constitutes the minimum period for
low-income affordability restriction. As authorized by the 1992 Act,
HUD, at its discretion, may extend this period of restriction to the
remaining useful life of the housing.
c. The assistance will be less costly to the Federal Government
over the useful life of the project than other reasonable alternatives
of preserving the occupancy character of the project.
d. The project owner, and any mortgagor of a project that does not
have an FHA-insured mortgage, has provided or agreed to provide the
required owner contribution.
e. The project is or can reasonably be made structurally sound, as
determined in accordance with an on-site inspection.
f. All reasonable attempts have been made to take all appropriate
actions and provide suitable housing for project residents.
g. There is a feasible plan to involve the residents in project
decisions as demonstrated through documentation submitted to HUD.
h. The project is operated competently and has complied with all
regulatory and administrative requirements, as determined by HUD in a
management review.
i. Project management is in accordance with any management
improvement and operating (MIO) plan approved by HUD for the
project.1
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\1\Under HUD's Flexible Subsidy Program, the MIO Plan consists
of two parts--Part I and Part II. The components of both parts are
discussed in Section III.A.1.a. and 1.b of this NOFA, 24 CFR
219.210, and in sections 5-3 and 5-4 of HUD Handbook 4355.1, REV-1,
Flexible Subsidy. Unless specific reference is made in this NOFA to
either Part I or Part II, reference simply to the MIO Plan is
intended to refer to both parts.
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j. The Affirmative Fair Housing Marketing plan meets applicable
requirements.
k. The owner certifies that he/she will comply with all applicable
equal opportunity statutes.
l. The project is not receiving financial assistance under the
ELIHPA or the LIHPRHA.
m. In the case of an application for a Capital Improvement Loan,
the owner has funded the reserve for replacements in accordance with
HUD requirements, and yet the reserve (and any other project funds
available to fund the reserve) is insufficient to finance both the
capital improvements for which assistance is being requested, and other
capital improvements that are reasonably expected to be required within
the next 24 months.
3. Owner Contribution
a. Limited dividend and profit-motivated. These types of owners who
seek Operating Assistance must make a minimum financial contribution of
25 percent of the amount needed to render the project financially and
physically sound. If seeking a Capital Improvement Loan, the owner must
contribute 25 percent of the total estimated cost of the capital
improvements involved. In addition, a profit-motivated owner or an
owner of a limited-dividend project seeking Operating Assistance under
the Flexible Subsidy Program must agree to waive the right to pay
distributions while any portion of the Operating Assistance loan is
outstanding.
b. Non-profit. The owner or sponsor of a non-profit rental or non-
profit cooperative project seeking Operating Assistance must make a
contribution toward the total amount needed. However, if HUD determines
that neither the owner (mortgagor) nor the sponsor has the financial
capacity to make a cash contribution, HUD may permit the non-profit
owner to contribute to the project in the form of services. If seeking
a capital improvement loan, a non-profit owner, other than a
cooperative association, is exempt from providing a contribution.
Owners of cooperative projects are not exempt and must contribute 25
percent of the total estimated cost of the capital improvements
involved.
c. Source of contribution. In no instance may the owner
contribution be taken from project income. Also, cash that was
previously agreed to be contributed as a condition for approval of
purchase of the project (i.e., transfer of physical assets (TPA)) may
not be considered for this purpose unless a finding is made that the
additional work and cost required were not anticipated or deemed
necessary at the time of HUD's preliminary approval of the TPA and
preliminary approval of the TPA was received not later than 36 months
prior to the Flexible Subsidy application. However, cash contributions
made by the owner within 36 months before the Flexible Subsidy
application, from sources other than project income, may be considered.
In the case of a Capital Improvement Loan, and in accordance with
the amendments made to section 201 of the HCDA by section 405(e) of the
1992 Act, when an owner has spent its own money, to attempt to repair
capital items within the 36 months before the application, and the
repair was unsuccessful and has resulted in a need for a replacement
(to be funded by a Capital Improvement Loan), that expenditure will be
considered for credit for purposes of meeting the contribution
requirement.
In addition to the required owner contribution, other non-federal
sources of funding must be pursued aggressively. These include grants
or loans from State or local governments, e.g., community development
block grants. Note that the infusion of funding from non-Federal
sources does not eliminate or reduce the requirement for an owner
contribution of 25 percent.
4. Special Eligibility Limits
A project owner may request and receive Flexible Subsidy more than
once during the term of the mortgage. However, a repair or replacement
item is eligible for Operating Assistance only if no previous payment
of HUD-related assistance has been made (e.g., previous Operating
Assistance, Housing Development Grant or Community Development Block
Grant) for that particular repair or replacement item. A repair or
replacement item is eligible for a Capital Improvement Loan to a
project owner who has previously received Flexible Subsidy assistance
only if the capital items which are the subject of the application have
reached the end of their useful life.
A repair or replacement included as an action item on the Form HUD-
9835 (project improvement program) and made by the owner on an
emergency basis before execution of the Flexible Subsidy contract may
be funded with Operating Assistance only if the owner received advance
approval from the HUD Field Office to proceed with the emergency
repair.
E. Selection Criteria and Funding Priorities
1. Field Review
Each application for Operating Assistance and/or a Capital
Improvement Loan will be reviewed by the HUD Field Office having
jurisdiction over the project in question. Field Offices will recommend
applications for funding to the HUD Regional Office.
2. Funding Priorities Established by the 1992 Act
Funding will be awarded within each component of the Flexible
Subsidy Program (Operating Assistance and Capital Improvement Loans) to
applications in the category order as specified below under this
paragraph 2.
Category 1. Insured projects, designated as troubled by the HUD
Field Office, for which half or more of the MIO dollar amount (for
Operating Assistance) or Capital Improvement amount is designated for
emergency health and safety problems which, if allowed to continue,
could present an imminent threat to the life, health, and safety of
project residents. Assistance is limited to those projects with
emergency problems that are of such a magnitude that:
(a) They cannot be mitigated at a cost that can be in any way
absorbed within the operating budget; and
(b) Their continuation could potentially result in tenant
displacement.
Accounts payable included in the MIO Plan for operating assistance
may be considered ``emergency'' only to the extent that they directly
relate to vital services provided to the project (e.g., utility
payables). (Examples of emergency health and safety problems involving
possible capital improvements that may be included in this category are
broken heating systems, leaking gas stoves and falling balconies.)
Category 2. Insured projects, designated by the HUD Field Office as
troubled with serious financial and physical problems, whose sponsors
do not have the necessary funds available to cure the immediate
problems and in which the income stream cannot be sufficiently improved
to meet the project's expenses without first correcting its physical
problems.
Category 3. HUD-held projects and projects assisted under section
202 of the HCDA, designated by the HUD Field Office as troubled for
which half or more of the MIO dollar amount (for Operating Assistance)
or Capital Improvement amount is designated for emergency health and
safety problems which, if allowed to continue, could present an
imminent threat to the life, health, and safety of project residents.
Assistance is limited to those projects with emergency problems that
are of such a magnitude that (a) they cannot be mitigated at a cost
that can be in any way absorbed within the operating budget; and (b)
their continuation could potentially result in tenant displacement.
Category 4. HUD-held projects and projects assisted under section
202 of the HCDA, designated by the HUD-Field Office as troubled, with
serious financial and physical problems, which do not have available
necessary funds to cure the immediate problems, and in which the income
stream cannot be sufficiently improved to meet the project's expenses
without first correcting its physical problems.
Category 5. State Agency non-insured projects designated as
troubled with emergency problems presenting an imminent threat to the
life, health and safety of tenants shall be funded first in this
category, and troubled projects with serious financial and physical
problems, where the owner has insufficient income and cannot improve
the income stream to address the problems, shall be funded next.
Category 6. State Agency owned projects designated as troubled with
emergency problems presenting an imminent threat to the life, health
and safety of tenants shall be funded first in this category, and
troubled projects with serious financial and physical problems, where
the owner has insufficient income and cannot improve the income stream
to address the problems, shall be funded next.
3. Funding Eligible Projects Within the Priority Categories
The above categories represent the order of priority that each HUD
Regional Office will implement to fund eligible projects seeking
assistance under the Operating Assistance and Capital Improvement Loan
components of the Flexible Subsidy Program. All projects in a given
category will be funded prior to projects in succeeding categories.
When available funds are insufficient to fund all projects within a
given category, to the extent of available funds, projects in that
category will be funded in accordance with their rank. Projects in
succeeding categories will not be funded. Scoring and ranking of
projects will be based on the following considerations.
The financial distress of a project will be assessed to determine
which projects within each funding category are most in need. The
severity of a project's financial condition and its ability to meet
short-term operating needs and obligations, including debt service
payments, will be measured by HUD, using financial data contained in
the project's most recently audited balance sheet and statement of
profit and loss.
In assessing financial distress, HUD will use the following ratios,
awarding a maximum of 15 points for each ratio. Projects with poor
financial ratios (e.g., income/expense ratios with a negative value)
will be assigned higher point scores than projects with break-even or
positive income/expense ratios from operations.
TN13JA94.010
Up to an additional 15 points will be assigned to those
applications where the project serves as a residence for low-income
families, and HUD determines that other suitable housing is unavailable
for such families in the area in which the project is located. Up to an
additional 15 points will be assigned for applicants, other than owners
of cooperatives, submitting documented evidence that there exist or
will exist significant opportunities for residents to be involved in
management and/or participate in the ownership of the project.
F. Other Loan Terms and Conditions
1. Operating Assistance
Operating Assistance may be used to correct physical deficiencies
which have resulted from deferral of regularly scheduled maintenance
and repairs, financial deficiencies that have accrued as a result of
prior years' operating deficits, and operating deficits which will
accrue during the assistance year.
Project deficiencies which require capital improvements are
eligible for Operating Assistance only if they are necessary to meet
local building codes or to maintain the project in a decent, safe and
sanitary condition, and it is determined that Operating Assistance is
the most efficient method of funding the improvements. Operating
Assistance may not be used to repair or replace items that have already
received HUD-related assistance; provide major new improvements; or to
make repairs needed due to an owner's failure to honor a commitment in
a TPA or Workout Agreement.
Operating Assistance is provided as a deferred loan with an
interest rate of one percent per annum and no maturity date. In
general, repayment in full is required when the term of the mortgage
expires, the mortgage insurance terminates, or a TPA is approved by
HUD. Owners may not pay distributions as long as the Operating
Assistance loan is outstanding. However, owners do retain the right to
accrue distributions and may pay them from surplus cash after the
Operating Assistance loan is repaid.
2. Capital Improvement Loan
Repair items eligible for funding as a Capital Improvement Loan
include any major repair or replacement of building components or other
on-site improvements included in allowable costs when the project was
built, e.g., sewer laterals, roof structures, ceilings, wall or floor
structures, foundations, plumbing, heating, cooling, electrical systems
and major equipment, as well as any major repair or replacement of any
short-lived building equipment or component before the expiration of
its useful life. All capital improvements must be implemented in
accordance with HUD's Flexible Subsidy regulations at 24 CFR part
219.125 (Environmental Requirements).
Improvements eligible for funding may also include limited
supplements or enhancements to mechanical equipment To The Extent They
Are Needed For The Health And Safety Of The Residents (e.g., air
conditioning, heating equipment, and building sprinkler systems) where
they do not exist; improvements necessary to comply with HUD's
standards in 24 CFR part 8 for accessibility to individuals with
handicaps; and cost effective energy efficiency improvements.
Improvements eligible for funding as a Capital Improvement Loan do not
include maintenance of any building components or equipment.
A capital improvement may not be financed partly by Operating
Assistance and partly by a Capital Improvement Loan. However, an owner
may apply for a Capital Improvement Loan to cover eligible capital
improvements and simultaneously apply for Operating Assistance to cover
deferred liabilities. Only one application would be required, but it
must include all required documents for each program.
Capital Improvement assistance must be provided in the form of an
amortizing loan. The interest rate on the loan may not be less than 3
percent nor more than 6 percent unless HUD determines that a lower rate
is necessary to maintain reasonable rental rates. However, in no case
may the interest rate be less than 1 percent. The rate is determined
taking into consideration the project's ability to absorb the rent
increase and the percentage of the tenants receiving rental assistance.
Interest on the Capital Improvement Loan starts to accrue and the loan
amortization period begins immediately upon full disbursement of loan
proceeds.
II. Application and Funding Award Process
A. Obtaining and Preparing Applications
1. Obtaining Applications
Applicants may obtain application materials from the local HUD
Field Office.
2. Necessity to Specify Type of Assistance for Which Application is
Being Made
An owner may apply for an Operating Assistance Loan only, a Capital
Improvement Loan only, or both an Operating Assistance Loan and a
Capital Improvement Loan simultaneously in a single application
package. The application cover letter must clearly state the type (or
types) of loan for which application is being made. Each application
will be treated separately under the selection criteria and ranking
factors cited in the NOFA.
3. Applying for Both Types of Assistance
If application is being made for both an Operating Assistance Loan
and a Capital Improvement Loan simultaneously, with the exception of
the Management Objectives, Action Items, and Sources and Uses of Funds
(Forms HUD-9835, HUD-9835-A, HUD-9835-B), those documents which are
common to both programs may be submitted only once. However, all
documents required for each program must be included in the application
package.
Two distinct and separate sets of Management Objectives, Action
Items, and Sources and Uses of Funds (Forms HUD-9835, HUD-9835-A, HUD-
9835-B) are required; taken together they must contain the entire
comprehensive plan to correct all project deficiencies. The MIO Plan
and Forms HUD-9835 for the Operating Assistance Loan application must
contain all items for which funding is being requested under Operating
Assistance; the Forms HUD-9835 for the Capital Improvement Loan must
contain all items for which funding is being requested under the
Capital Improvement Loan program.
In addition, deficiencies, which are to be corrected with funds
from sources other than Flexible Subsidy, must be identified on the MIO
Plan and Forms HUD-9835 as if Flexible Subsidy assistance were being
requested. Note that, if a limited-dividend project is selected for
Operating Assistance, the owner must agree to waive his right to pay
distributions as long as the Operating Assistance Loan is outstanding.
B. Submitting Applications
1. To ensure consideration for funding under this NOFA, completed
applications must be physically received by the HUD Field Office Loan
Management Branch before or on the due date by 4 p.m. local time. It is
not sufficient for an application to bear a postmark date within the
submission time period. The HUD Field Office will date-stamp incoming
applications to evidence (timely or late) receipt, and, on request,
provide the applicant with an acknowledgement of receipt.
After HUD receives the application, it will perform a physical
inspection to assure that the MIO Plan addresses in a comprehensive
fashion all the financial and physical deficiencies. HUD also will
conduct a comprehensive management review to assure that all management
issues are addressed as part of the MIO Plan and project operation and
improvement program. HUD may require changes to the MIO Plan as a
result of the physical inspection or comprehensive management review.
2. Applications received after the due date and time specified in
this NOFA may be considered for funding in FY 1994 only if it is
determined that assistance is needed immediately in response to
emergency circumstances, and only to the extent that contract authority
is available to satisfy the request for assistance.
C. Funding Award Process: Compliance With HUD Reform Act
1. Section 103
In accordance with the requirements of section 103 of the HUD
Reform Act and HUD's implementing regulations at 24 CFR part 4, no
selection information will be made available to applicants or other
persons not authorized to receive this information during the period of
HUD review and evaluation of the applications (see also Section VI of
this NOFA). However, applicants that are declared ineligible or late
will be notified of their ineligibility at the time such determination
is made.
The disclosure prohibition of section 103 applies to HUD assistance
programs that entail a competition for the distribution of the
assistance. Under the Flexible Subsidy Program, if a given HUD Regional
Office determines that competition is not necessary for the
distribution of funds in a priority category, because there are
sufficient funds to award assistance to all eligible projects in that
category, then the Regional Office will begin the process of awarding
funds to each eligible project in that category.
Noncompetitive individual funding allocations and announcements in
a given priority category will be made, as funding determinations are
completed, through the HUD Regional or Field Offices after notification
to the Congressional delegation. No information regarding any unfunded
application or any competition in any other category will be made
available to the public. All awards will be disclosed publicly at the
conclusion of the entire selection process. These procedures are in
accordance with the requirements of section 103.
2. Section 102
Section 102 contains a number of provisions that are designed to
ensure greater accountability and integrity in the provision of certain
types of assistance administered by HUD. The following requirements
concerning documentation and public access, disclosures, and subsidy
layering determinations are applicable to assistance awarded under this
NOFA.
a. Documentation and public access. HUD will ensure that
documentation and other information regarding each application
submitted pursuant to this NOFA are sufficient to indicate the basis
upon which assistance was provided or denied. This material, including
any letters of support, will be made available for public inspection
for a five-year period beginning not less than 30 days after the award
of the assistance. Material will be made available in accordance with
the Freedom of Information Act (5 U.S.C. 552) and HUD's implementing
regulations at 24 CFR part 15. In addition, HUD will include the
recipients of assistance pursuant to this NOFA in its quarterly Federal
Register notice of all recipients of HUD assistance awarded on a
competitive basis. (See 24 CFR 12.14(a) and 12.16(b), and the notice
published in the Federal Register on January 16, 1992 (57 FR 1942), for
further information on these requirements.)
b. Disclosures. HUD will make available to the public for five
years all applicant disclosure reports (Form HUD-2880) submitted in
connection with this NOFA. Update reports (also Form HUD-2880) will be
made available along with the applicant disclosure reports, but in no
case for a period less than three years. All reports--both applicant
disclosures and updates--will be made available in accordance with the
Freedom of Information Act (5 U.S.C. 552) and HUD's implementing
regulations at 24 CFR part 15. (See 24 CFR part 12, subpart C, and the
notice published in the Federal Register on January 16, 1992 (57 FR
1942), for further information on these disclosure requirements.)
c. Subsidy-layering determinations. 24 CFR 12.52 requires HUD to
certify that the amount of HUD assistance is not more than is necessary
to make the assisted activity feasible after taking into account other
government assistance. HUD will make the decision with respect to each
certification available to the public free of charge, for a three-year
period. (See the notice published in the Federal Register on January
16, 1992 (57 FR 1942) for further information on requesting these
decisions.) Requests for additional information about applications, HUD
certifications, and assistance adjustments, both before assistance is
provided or subsequently, are to be made under the Freedom of
Information Act (24 CFR part 15).
D. Coordination of Assistance
Section 405(f) of the 1992 Act requires the coordination of the
allocation of Flexible Subsidy assistance with the allocation of
assistance made under section 8 of the 1937 Act and section 203 of the
HCDA.
Application review and determination for the award of section 8
assistance under the Section 8 Loan Management Set-Aside (LMSA) program
will be made during the same time period as the final application
review and determinations for the award of Flexible Subsidy assistance.
To ensure coordination of assistance under these two programs, HUD will
identify those projects seeking assistance under the Flexible Subsidy
program which have been approved for the award of LMSA. For those
projects so identified, a further review will be made to evaluate the
effect of the award of LMSA on the project's cash flow and the enhanced
ability of the project to fund MIO repair items from the increased
project operating income. By taking into consideration all funding
sources, this review will insure that the infusion of Flexible Subsidy
assistance together with the LMSA represents the appropriate solution
to satisfying the project's need for stabilization of project
operations and maintenance or restoration of the project to an
acceptable physical and financial condition.
With respect to coordination of assistance under section 203 of the
HCDA, HUD does not intend to provide Flexible Subsidy assistance when
there exists delinquent indebtedness to the Government, or where a
project is either owned by HUD or HUD anticipates foreclosure.
III. Checklist of Application Submission Requirements
A. Operating Assistance Under the Flexible Subsidy Program
The following items must be submitted with an application for
Operating Assistance under the Flexible Subsidy Program.
1. Items Pertaining to Project Operation and Improvement.
a. Management Improvement and Operating (MIO) Plan Part I. (Refer
to section 5-3 of HUD Handbook 4355.1, Rev-1, Flexible Subsidy, for
further discussion of MIO Plan Part I.)
The MIO Plan Part I must include documentation of eligibility and
fully address all financial, management, and physical deficiencies of
the project. To be included in every MIO Plan are:
(1) A detailed maintenance schedule;
(2) A schedule for correcting past deficiencies in maintenance,
repairs, and replacements;
(3) A plan to upgrade the project to meet cost-effective energy
efficiency standards approved by HUD;
(4) A plan to improve financial and management control systems;
(5) An updated annual operating budget (Form HUD-92547-A) if the
last budget was submitted more than 90 days before; and
(6) A description of cost controls, procedures and savings.
b. MIO Plan Part II-- Management Objectives, Action Items, and
Sources and Uses of Funds (Forms HUD-9835, HUD-9835-A, HUD-9835-B).
(Refer to section 5-4 of HUD Handbook 4355.1, Rev.1, Flexible Subsidy,
for further discussion of MIO Plan Part II.)
(1) Management Objectives must be specific, measurable, and must
address all management deficiencies including actions which will be
performed to improve management and personnel and upgrade tenant
services, and provide opportunities for resident involvement in
management of the project, as appropriate.
(2) Action Items must address all project deficiencies, including
those which are to be corrected using resources other than Flexible
Subsidy assistance. Action Items must be written in a manner which
specifically describes the scope of the work and provides an estimate
of the cost of the work to be performed. In addition, they must be
structured so as to be highly visible items for which expenditures and
work progress can be easily monitored. For example, if boilers are to
be replaced, the description should identify the malfunctioning unit,
its age, and its location, e.g., building number, basement/roof. A
further explanation should identify the replacement unit, the estimated
cost per unit and the labor cost associated with the entire
replacement. Failure to provide the requisite comprehensiveness and
specificity may adversely affect the funding decision.
All emergency repair Action Items must be clearly identified and
must be accompanied by a full and detailed justification as to the
reasons the repair should be considered ``emergency'' in nature,
including supporting documentation as appropriate, e.g., fire or
building code violations or inspections from local government
authorities.
(3) The Sources and Uses of Funds will serve to document how much
each source will contribute to the Project Improvement Account in the
implementation of the MIO Plan. It must be signed by both the owner and
the management agent.
2. Application for Flexible Subsidy Assistance (Form HUD-9826 (2/
93)).\2\
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\2\The certification of compliance with the Uniform Relocation
Assistance and Real Property Acquisition Policies Act of 1970, and
the certification of compliance with the equal opportunity and
nondiscrimination statutes and regulations, which were listed as
individual items under previous Flexible Subsidy NOFAs, are now part
of the Application for Flexible Subsidy Assistance.
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3. Budget Worksheet, Income & Expenses Projections (Form HUD-92547
or HUD approved equivalent).
4. All documentation required by HUD Notice H-90-17, Combining Low-
Income Housing Tax Credits (LIHTC) with HUD Programs, and by the Notice
of Administrative Guidelines to be Applied to Assistance Programs of
the Office of Housing, published on April 9, 1991 (56 FR 14436).
5. Anti-lobbying Certification for Contracts, Grants, Loans and
Cooperative Agreements for Grants Exceeding $100,000; and Disclosure of
Lobbying Activities (Standard Form-LLL if warranted. Standard Form-LLL
is required if funds other than federally appropriated funds will be or
have been used to lobby the Executive or Legislative branches of the
Federal Government regarding specific contracts, grants, loans or
cooperative agreements.
6. Form HUD-2530, Previous Participation Certificate(s) for all
principals requiring clearance under these procedures.
7. Affirmative Fair Housing Marketing Plan on Form HUD-935.2.
8. Form HUD-2880, Applicant/Recipient Disclosure/Update Report, as
required under subpart C of 24 CFR part 12, Accountability in the
Provision of HUD Assistance.
B. Capital Improvement Loan Program (CILP)
The following items must be submitted with an application for a
Capital Improvement Loan under the Flexible Subsidy Program.
1. A work write-up and cost estimates listing:
a. the major project components that have failed, or are likely to
fail or seriously deteriorate within the next 24 months;
b. capital items that can be upgraded to meet cost-effective energy
efficiency standards approved by HUD;
c. supplements or enhancements to mechanical equipment and the
extent they are needed for health or safety reasons; and
d. amounts needed to comply with the Department's standards as set
forth in 24 CFR part 8, which concern accessibility by individuals with
handicaps.
2. Application for Flexible Subsidy Assistance (Form HUD-9826 (2/
93)).
3. All documentation required by HUD Notice H-90-17, Combining Low-
Income Housing Tax Credits (LIHTC) with HUD Programs, and by the Notice
of Administrative Guidelines to be Applied to Assistance Programs of
the Office of Housing, published on April 9, 1991 (56 FR 14436).
4. Anti-lobbying Certification for Contracts, Grants, Loans and
Cooperative Agreements for Grants Exceeding $100,000; and the
Disclosure of Lobbying Activities (Standard Form-LLL), if warranted.
Standard Form-LLL is required if funds other than federally
appropriated funds will be or have been used to lobby the Executive or
Legislative branches of the Federal Government regarding specific
contracts, grants, loans or cooperative agreements.
5. A Comprehensive Technical Energy Audit. A Comprehensive
Technical Energy Audit (CTEA) is required only when either of the
below-listed conditions is met. (For guidance on preparation of the
CTEA, see Chapter 12 of HUD Handbook 4350.1 REV-1, Multifamily Asset
Management and Project Servicing.) When neither of the below-listed
conditions is met, an energy analysis that is provided by a local
utility company and that contains a measure of cost-effectiveness
information is acceptable in meeting this requirement.
a. Implementation of energy conservation measures is a primary
purpose of the CILP loan.
b. The cost of energy conservation measures accounts for 50% or
more of the proposed CILP loan.
6. MIO Plan Part I. (See item 1.a under Section III.A. of this
NOFA.). A MIO Plan Part I for the Capital Improvement Loan Program is
required only when one or more of the following conditions exist:
a. The project is in default or was in default at any time during
the one-year period preceding the application date.
b. The project received a Below Average or Unsatisfactory rating
for Overall Physical Condition or for Maintenance Policies and
Practices on the most recent HUD-9822, Physical Inspection Report
(unless the owner has since corrected the problems in a manner
satisfactory to HUD).
c. The project received a Below Average or Unsatisfactory rating in
the Financial Management Section or Overall Management Section on the
HUD-9834, Management Review, in the past 24 months (unless the owner
has corrected the problems through a substitution of management agent,
management personnel, or otherwise, in a manner satisfactory to HUD).
7. MIO Plan Part II, Management Objectives, Action Items, and
Sources and Uses of Funds (Forms HUD-9835, HUD-9835-A, HUD-9835-B).
(See item 1.b under Section III.A of this NOFA.)
8. A statement outlining the owner's contribution.
9. Form HUD-2530, Previous Participation Certificate(s) for all
principals requiring clearance under these procedures.
10. Form HUD-2880, Applicant/Recipient Disclosure/Update Report, as
required under subpart C of 24 CFR part 12, Accountability in the
Provision of HUD Assistance.
IV. MIO Plan Review
Within 30 days of receipt by HUD from the owner of the MIO Plan
Part I, HUD will advise the owner, in writing, whether or not the MIO
Plan Part I meets the submission requirements as stated in Section
III.A.1.a. of this NOFA. Should HUD fail to inform the owner of its
disapproval within the 30-day time-frame, the MIO Plan Part I shall be
considered to be approved. If HUD disapproves the MIO Plan Part I, no
further consideration will be given to the applicant for award of funds
under this NOFA.
V. Corrections to Deficient Applications
HUD will notify an applicant, in writing, shortly after the
expiration of the NOFA response deadline of any technical deficiencies
in the application. In order to receive further consideration for
assistance, the applicant must submit corrections to the Loan
Management Branch within 14 calendar days from the postmark date of
HUD's letter notifying the applicant of any such deficiencies.
Corrections to technical deficiencies will be accepted within the 14
day time limit, but substantive changes or supplements to the
application initiated by the applicant will not be accepted.
Applicants will be permitted to correct those deficiencies
determined to be technical, (i.e., those that do not change the
substance of the application, e.g., a missing certification, or missing
signature) or to make changes as required by HUD. Technical
deficiencies do not include owner-initiated changes to the MIO Plan or
Form HUD-9835. Applicants will be required to cure any such deficiency
within 14 days from the date of HUD's written notice to the applicant
of the problem(s). Deficiencies determined to be substantive and not
made at the direction of HUD may not be corrected.
VI. Other Matters
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations that implement section
102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C.
4332). The Finding of No Significant Impact is available for public
inspection during business hours in the Office of the Rules Docket
Clerk, Office of General Counsel, room 10276, Department of Housing and
Urban Development, 451 Seventh Street, SW., Washington, DC 20410.
Federalism Executive Order
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this Notice
of Fund Availability will not have substantial, direct effects on
States, on their political subdivisions, or on their relationship with
the Federal Government, or on the distribution of power and
responsibilities between them and other levels of government.
Family Executive Order
The General Counsel, as the Designated Official under Executive
Order 12606, the Family, has determined that this Notice of Fund
Availability will not have a significant impact on family formation,
maintenance or well being, and therefore, is not subject to review
under the order. The NOFA, insofar as it funds emergency repairs to
multifamily housing projects, will assist in preserving decent housing
stock for families residing there.
Prohibition Against Lobbying Activities: The Byrd Amendment
The use of funds awarded under this NOFA is subject to the
disclosure requirements and prohibitions of section 319 of the
Department of Interior and Related Agencies Appropriations Act for
Fiscal Year 1990 (31 U.S.C. 1352) (the ``Byrd Amendment''), and the
implementing regulations at 24 CFR part 87. These authorities prohibit
recipients of Federal contracts, grants, or loans from using
appropriated funds for lobbying the Executive or Legislative Branches
of the Federal Government in connection with a specific contract,
grant, or loan. The prohibition also covers the awarding of contracts,
grants, cooperative agreements, or loans unless the recipient has made
an acceptable certification regarding lobbying. Under 24 CFR part 87,
applicants, recipients, and subrecipients of assistance exceeding
$100,000, and applicants for Federal commitments exceeding $150,000
must certify that no Federal funds have been or will be spent on
lobbying activities in connection with the assistance.
Indian Housing Authorities (IHAs) established by an Indian tribe as
a result of the exercise of the tribe's sovereign power are excluded
from coverage of the Byrd Amendment, but IHAs established under State
law are not excluded from the statute's coverage.
Prohibition Against Lobbying of HUD Personnel
Section 13 of the Department of Housing and Urban Development Act
(42 U.S.C. 3537b) contains two provisions dealing with efforts to
influence HUD's decisions with respect to financial assistance. The
first imposes disclosure requirements on those who are typically
involved in these efforts--those who pay others to influence the award
of assistance or the taking of a management action by the Department
and those who are paid to provide the influence. The second restricts
the payment of fees to those who are paid to influence the award of HUD
assistance, if the fees are tied to the number of housing units
received or are based on the amount of assistance received, or if they
are contingent upon the receipt of assistance.
HUD's regulation implementing section 13 is codified at 24 CFR part
86. If readers are involved in any efforts to influence the Department
in these ways, they are urged to read the final rule, particularly the
examples contained in appendix A of the rule. Appendix A of this rule
contains examples of activities covered by this rule.
Any questions concerning the rule should be directed to the Office
of Ethics, room 2158, Department of Housing and Urban Development, 451
Seventh Street, SW., Washington DC 20410. Telephone: (202) 708-3815
(voice/TDD). This is not a toll-free number. Forms necessary for
compliance with the rule may be obtained from the local HUD office.
Prohibition Against Advance Disclosure of Funding Decisions
Section 103 of the HUD Reform Act proscribes the communication of
certain information by HUD employees to persons not authorized to
receive that information during the selection process for the award of
assistance. HUD's regulation implementing section 103 is codified at 24
CFR part 4. HUD employees involved in the review of applications and in
the making of funding decisions are restrained by 24 CFR part 4 from
providing advance information to any person (other than an authorized
employee of HUD) concerning funding decisions, or from otherwise giving
any applicant an unfair competitive advantage. Persons who apply for
assistance in this competition should confine their inquiries to the
subject areas permitted by 24 CFR part 4. Applicants who have questions
should contact the HUD Office of Ethics (202) 708-3815 (voice/TDD).
(This is not a toll-free number.)
Catalog. The Catalog of Federal Domestic Assistance Program
number is 14.164.
Dated: December 22, 1993.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-846 Filed 1-12-94; 8:45 am]
BILLING CODE 4210-27-P