[Federal Register Volume 59, Number 116 (Friday, June 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14746]


[[Page Unknown]]

[Federal Register: June 17, 1994]


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Part IV





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner



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NOFA for Capital Improvement Loans Under the Flexible Subsidy Program 
Awarded as Incentives Pursuant to Preservation Plans of Action; Notice
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner
[Docket No. N-94-3764; FR-3681-N-01]

 
NOFA for Capital Improvement Loans Under the Flexible Subsidy 
Program Awarded as Incentives Pursuant to Preservation Plans of Action

AGENCY: Office of the Assistant Secretary for Housing-Federal Housing 
Commissioner, HUD.

ACTION: Notice of Fund Availability for Fiscal Year 1994.

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SUMMARY: This notice announces HUD's funding for that portion of the 
Capital Improvement Loan component of the Flexible Subsidy Program set 
aside for Fiscal Year 1994 to support approved plans of action under 
the Emergency Low-Income Housing Preservation Act of 1987 (ELIHPA). 
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: Applications may be submitted beginning June 17, 1994. There is 
no deadline for an application. An application may be submitted as soon 
as a HUD Field Office has issued preliminary approval of a plan of 
action under ELIHPA and as long as funds remain available.

ADDRESSES: Applications are to be submitted to the HUD Field Office by 
which the owner has had a plan of action approved under ELIHPA.

FOR FURTHER INFORMATION CONTACT:
Frank Malone, Director, Multifamily Housing Preservation and Property 
Disposition, Department of Housing and Urban Development, Room 6164, 
451 Seventh Street, NW, Washington, DC 20410; telephone (202) 708-3555. 
To provide service for persons who are hearing or speech-impaired, this 
number may be reached via TDD by dialing the Federal Information Relay 
Service on 1-800-877-TDDY (1-800-877-8339) or (202) 708-9300. (Except 
for the TDD number, telephone numbers are not toll free.)

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 Background and Authority
    Section 201 of the Housing and Community Development Amendments 
(HCDA) of 1978 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 Housing and Community Development Act of 1987 amended section 
201 of HCDA to create 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.
    The 1987 amendments to the Flexible Subsidy statute (Sections 185 
and 186 of the Housing and Community Development Act of 1987) also 
recognized the need to coordinate assistance under the Flexible Subsidy 
Program with the initiative to preserve low- and moderate-income 
housing, enacted in Title II of that Act. (In its comprehensive 
revision of the 1987 Act, Title VI of the 1990 Cranston-Gonzalez 
National Affordable Housing Act, at the new section 219, repeated the 
listing of incentives the Secretary could agree to provide an owner as 
part of a plan of action to prevent prepayment of a mortgage on a 
project serving low- and moderate-income tenants. A capital improvement 
loan was included as an incentive to owners.)
    Section 405 of the Housing and Community Development Act of 1992, 
in addition to making other amendments, removed the priority for 
ELIHPA-eligible projects and imposed certain exclusivity restrictions 
on Flexible Subsidy-assisted and ELIHPA- and LIHPRHA-eligible projects. 
These provisions have been repealed by section 103(b) of the 
Multifamily Housing Property Disposition Reform Act of 1994 (the 1994 
Act).
    Section 201(n)(1) of the HCDA, as amended by section 103(b)(3) of 
the 1994 Act, authorizes the Department to set aside assistance for 
Capital Improvement Loans for projects that are eligible for incentives 
under ELIPHA. In addition, under section 201(n)(1), the Department is 
authorized to make this assistance available on a noncompetitive basis.
    This notice supports preservation efforts by announcing a set-aside 
of $20 million for Flexible Subsidy Capital Improvement funding to 
insured projects that are eligible under ELIHPA 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, subpart C.
B. Allocation Amounts
    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 the Department in 
past fiscal years, and amounts appropriated by 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 (Section 201(j)(4)) to be funded at a minimum level of $30 
million or 40 percent of the amount in the Flexible Subsidy fund, 
whichever is less. This year, $30 million is less than 40 percent of 
the fund, and therefore, is the amount designated for Capital 
Improvement Loans. Of the $30 million set aside for Capital Improvement 
funding, $20 million is available under this NOFA for preservation 
projects. The remaining $10 million was made available under the 
Flexible Subsidy NOFA, published on January 13, 1994, at 59 FR 2270.
C. Eligibility.
    1. Types of Projects. The following types of rental or cooperative 
housing are eligible for Capital Improvement Loans:
    a. A project which meets the definition of ``eligible low-income 
housing'' as set forth at 24 CFR 248.201; and
    b. Has received preliminary approval of a plan of action pursuant 
to 24 CFR 248.233 which provides for a sale to a nonprofit or a limited 
equity cooperative.
    2. Conditions. Flexible Subsidy assistance will be made available 
in accordance with Section 201 of the Housing and Community Development 
Amendments (HCDA) of 1978, as amended by Section 103 of the Multifamily 
Housing Property Disposition Reform Act of 1994. Assistance can be 
provided only if the following conditions are determined to exist when 
a plan of action is approved:
    a. The assistance is necessary, when considered with other 
resources available to the project; it will restore or maintain the 
financial or physical soundness of the project; and it will 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.
    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 is or can reasonably be made structurally sound, as 
determined in accordance with an on-site inspection.
    e. All reasonable attempts have been made to take all appropriate 
actions and provide suitable housing for project residents.
    f. There is evidence of the existence of a feasible plan to involve 
the residents in project decisions.
    g. The project will be operated competently, as determined by HUD 
in a management review.
    h. Project management is in accordance with any management 
improvement and operating plan approved by HUD for the project.
    i. The Affirmative Fair Housing Marketing plan meets applicable 
requirements.
    j. The purchaser certifies that it will comply with all applicable 
equal opportunity statutes, including the provisions of the Fair 
Housing Act, Title VI of the Civil Rights Act of 1964, Executive Orders 
11063, 11246 and 11375, Section 504 of the Rehabilitation Act of 1973, 
the Age Discrimination Act of 1975, the Americans with Disabilities 
Act, Section 3 of the Housing and Urban Development Act of 1968, and 
all regulations issued pursuant to these authorities.
    k. The purchaser has funded the reserve for replacements account in 
accordance with HUD requirements, and yet the reserve account (and any 
other project funds available to fund the reserve account) 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.
D. Selection Criteria and Ranking Factors
    Each application for 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 HUD 
Headquarters.
    Under section 201(n)(1), as amended by section 103(b) of the 1994 
Act, Capital Improvement Loans for ELIHPA projects that are eligible 
for incentives may be made available on a noncompetitive basis. 
Submission and approval of the notices of intent and plans of action 
are subject to the eligibility of the owner filing them.
E. Other Loan Terms and Conditions
    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.
    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.
    Capital Improvement assistance may be provided in the form of an 
amortizing loan. The interest rate on the loan may not be less than 
three (3) percent (unless HUD determines that a lower rate is necessary 
to maintain rental rates, in accordance with Chapter 12 of HUD Handbook 
4350.6, Processing Plans of Action Under the Low-Income Housing 
Preservation and Resident Homeownership Act of 1990 and Form HUD-90010, 
Owner's Calculation of Tenant Rent Phase-In Due to POA approval, but in 
no case less than one percent) nor more than six (6) 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 disbursement 
of loan proceeds.
    A Capital Improvement Loan to a nonprofit organization may be in 
the form of a deferred note with a term coincident with the expiration 
of the project's insured mortgage note, accruing interest at a rate of 
one (1) percent. The deferred note will become due and payable upon a 
sale or refinancing of the project or at the expiration of the insured 
mortgage note.

II. Application and Funding Award Process

A. Obtaining and Preparing Applications
    Applicants may obtain application packages from the local HUD Field 
Office.
    An application must reflect the improvements required as a 
condition of approval of the plan of action. In addition, all other 
deficiencies, which are to be corrected with funds from sources other 
than Flexible Subsidy, must be identified on the work write-up and cost 
estimate and Management Improvement and Operation (MIO) plan Part II 
(Forms HUD-9835, HUD-9835-A, and HUD-9835-B) as if Flexible Subsidy 
were being requested.
B. Submitting Applications
    Complete applications for a Flexible Subsidy Capital Improvement 
Loan pursuant to plans of action receiving preliminary approval under 
ELIHPA must be received in the HUD field office not more than 30 days 
following the issuance of preliminary approval. Timeliness of 
submission will allow the Department to review the application within 
the 30-day mandatory review period and in time to issue final approval 
of the plan of action in the period required by Part 248.219.
    After HUD receives the application, it will review it against the 
improvements agreed upon in the plan of action. HUD may also conduct a 
comprehensive management review to ensure that all management issues 
are addressed as part of the MIO plan requirements.
C. Funding Award Process: Compliance with HUD Reform Act.
    1. Section 103. In accordance with the requirements of section 103 
of the Department of Housing and Urban Development Reform Act of 1989 
(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. However, applicants that 
are declared ineligible will be notified of their ineligibility at the 
time such determination is made.
    Noncompetitive individual funding allocations and announcements 
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 will be 
made available to the public. All awards will be disclosed publicly at 
the conclusion of each selection.
    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 a Federal Register 
notice of recipients of HUD assistance awarded. (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 generally 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 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 on February 25, 1994 at FR 59 9332 
for further information on requesting these decisions.) Additional 
requests for information about applications, HUD certifications, and 
assistance adjustments, either before assistance is provided or 
subsequently, are to be made under the Freedom of Information Act (24 
CFR part 15).

III. Checklist of Application Submission Requirements

    The following items are required as part of each application:
    A. A work write-up and cost estimates listing the major project 
components that have failed, or are likely to fail or seriously 
deteriorate within the next 24 months; capital items that can be 
upgraded to meet cost-effective energy efficiency standards approved by 
HUD; supplements or enhancements to mechanical equipment and the extent 
they are needed for health or safety reasons; and amounts needed to 
comply with the Department's standards as set forth in 24 CFR part 8, 
dealing with accessibility to individuals with handicaps.
    B. All documentation required by HUD Notice, published on February 
25, 1994, at FR59 9332, 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).
    C. Anti-lobbying Certification for Contracts, Grants, Loans and 
Cooperative Agreements for grants exceeding $100,000; and, if 
warranted, Disclosure of Lobbying Activities (Standard Form-LLL) if 
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. 
Form SF-LLL, Byrd Amendment Disclosure and Certification Regarding 
Lobbying should be submitted only if the applicant determines it is 
applicable. The SF-LLL form may not need to be submitted with all 
applications.
    D. Environmental Requirements. A comprehensive technical energy 
analysis which includes a review of all capital improvements for which 
assistance is requested, and related capital items whose improvement or 
upgrading will result in cost-effective energy efficiency improvements. 
The results of the analysis will be a list of specified improvements, 
their costs and evidence of their cost effectiveness. An energy 
analysis that is provided by a local utility company and that contains 
a measure of cost-effectiveness information may be acceptable in 
meeting this requirement. All applications will be reviewed for 
compliance with 24 CFR 219.125, Environmental requirements as 
applicable.
    E. MIO Plan Part II, Management Objectives, Action Items, and 
Sources and Uses of Funds (Forms HUD-9835, 9835-A, and 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. 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, as appropriate.
    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.
    F. Form HUD-2530, Previous Participation Certificate, for all 
principals requiring clearance under these procedures.
    G. Certification of compliance with the requirements of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970, as amended (42 U.S.C. 4601-4655), and its implementing 
regulations at 49 CFR part 24, and HUD Handbook 1378, Tenant 
Assistance, Relocation and Real Property Acquisition.
    I. Affirmative Fair Housing Marketing plan (Form HUD-935.2).
    J. Certification that the applicant will comply with the provisions 
of the Fair Housing Act, Title VI of the Civil Rights Act of 1964, 
Executive Orders 11063, 11246 and 11375, the American with Disabilities 
Act, Section 504 of the Rehabilitation Act of 1973, the Age 
Discrimination Act of 1975, Section 3 of the Housing and Urban 
Development Act of 1968, and all regulations issued pursuant to these 
authorities.
    K. 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. Deficient Applications

A. Application Review
    Within 30 days of receipt by HUD of the application from the owner, 
HUD will advise the owner, in writing, whether or not the application 
meets the submission requirements as stated in Part III above. Should 
HUD fail to inform the owner of its disapproval within the 30-day time 
frame, the application shall be considered to be approved. If HUD 
disapproves the application, an ELIHPA plan of action may not receive 
final approval.
B. Submission of Substantive Changes
    Substantive changes or supplements to the application may be 
submitted by the applicant at any time. These include changes to the 
work write up, cost estimates or Form HUD-9835. However, submission of 
substantive changes will cause HUD's 30-day mandatory review time to 
recommence upon resubmission and will delay consideration of approval 
of a plan of action.

V. Other Matters

Prohibition Against Lobbying Activities
    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), 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 must certify that no 
Federal funds have been or will be spent on lobbying activities in 
connection with the assistance.
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.
    Section 13 was implemented by final rule published in the Federal 
Register on May 17, 1991 (56 FR 29912). See 24 CFR Part 86. If readers 
are involved in any efforts to influence the Department in these ways, 
they are urged to read 24 CFR Part 86, particularly the examples 
contained in Appendix A.
    Any questions concerning Part 86 should be directed to Garry L. 
Phillips, Acting Director, Office of Ethics, Room 2158, Department of 
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC 
20410-3000. Telephone: (202) 708-3815 (TDD Voice). (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 Information on Funding Decisions
    Section 103 of the 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 that entails a competition for its distribution. HUD's 
regulations implementing section 103 are codified at 24 CFR part 4 (see 
56 FR 22088, May 13, 1991). (See also Section II.C. of this NOFA.) In 
accordance with the requirements of Section 103, HUD employees involved 
in the review of applications and in the making of funding decisions 
under a competitive funding process 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. (This is not a toll-free number.)
 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. Catalog. The Catalog of Federal 
Domestic Assistance Program number is 14.164.

    Dated: June 13, 1994.
Nicolas P. Retsinas,
Assistant Secretary for Housing-Federal Housing Commissioner.
[FR Doc. 94-14746 Filed 6-16-94; 8:45 am]
BILLING CODE 4210-27-P