[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.

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    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