[Federal Register Volume 59, Number 125 (Thursday, June 30, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-15846]


[[Page Unknown]]

[Federal Register: June 30, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905 and 990

[Docket No. R-94-1733; FR-3387-F-01]
RIN 2577-AB24

 

Annual Contributions for Operating Subsidy; Shared Savings From 
Utility Rate Reduction and Subsidy for Economic Self-Sufficiency and 
Anti-Drug Activities

AGENCY: Office of the Assistant Secretary for Public and Indian 
Housing, HUD.

ACTION: Final rule.

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SUMMARY: This final rule extends, for a period not to exceed an 
additional 6 years, the existing arrangement under which a public 
housing agency or Indian housing authority (hereinafter referred to 
collectively as ``HAs'') may share equally with the Department any cost 
reductions due to the differences between projected and actual utility 
rates in the first year that the reductions occur. The rate savings 
must be directly related to the actions of the HA and must be cost 
effective. In addition, the rule eliminates the need for a waiver 
before operating subsidy may be paid for certain units approved for 
nondwelling use to promote economic self-sufficiency services and anti-
drug activities.

EFFECTIVE DATE: August 1, 1994.

FOR FURTHER INFORMATION CONTACT: John T. Comerford, Director, Financial 
Management Division, Office of Assisted Housing, Room 4212, Department 
of Housing and Urban Development, 451 Seventh Street, SW., Washington, 
DC 20410. Telephone: (202) 708-1872; TDD: (202) 708-0850. (These are 
not toll-free numbers.)

SUPPLEMENTARY INFORMATION:

Information Collection Requirements

    The information collection requirements contained in the remaining 
sections of this rule have been submitted to the Office of Management 
and Budget (OMB) for review under the Paperwork Reduction Act of 1980 
(44 U.S.C. 3501-3520). No person may be subjected to a penalty for 
failure to comply with these information collection requirements until 
they have been approved and assigned an OMB control number. The OMB 
control number, when assigned, will be announced by separate notice in 
the Federal Register.
    Public reporting burden for the collection of information 
requirements contained in this rule is estimated to include the time 
for reviewing the instructions, searching existing data sources, 
gathering and maintaining the data needed, and completing and reviewing 
the collection of information. Information on the estimated public 
reporting burden is provided under the Preamble heading, Other Matters. 
Send comments regarding this burden estimate or any other aspect of 
this collection of information, including suggestions for reducing this 
burden, to the Department of Housing and Urban Development, Rules 
Docket Clerk, 451 Seventh Street, SW., Room 10276, Washington, DC 
20410-0500; and to the Office of Information and Regulatory Affairs, 
Office of Management and Budget, Attention: Desk Officer for HUD, 
Washington, DC 20503.

Background on Shared Utility Rate Savings

    Section 9(a)(3)(B)(i) of the United States Housing Act of 1937 (42 
U.S.C. 1437g) (the ``1937 Act'') provides that under the performance 
funding system in the first year that the reductions occur, any public 
housing agency shall share equally with the Department any cost 
reductions due to the differences between projected and actual utility 
rates attributable to actions taken by the agency which lead to such 
reductions.
    Section 114(c) of the Housing and Community Development Act of 1992 
(Pub. L. 102-550, approved October 28, 1992) (the ``1992 Act'') amended 
section 9(a)(3)(B)(i) of the 1937 Act to provide that in subsequent 
years, the Secretary may continue, with regard to energy savings, the 
sharing arrangement with the public housing agency for an additional 6 
years.
    As a result of section 201(b)(1) of the 1937 Act, the provisions of 
Title I of the 1937 Act apply to low-income housing developed or 
operated pursuant to a contract between the Secretary and an Indian 
housing authority. Therefore, the shared savings provisions under 
section 9(a)(3)(B)(i) extend to Indian housing authorities. However, 
under section 201(b)(2) no provision of Title I, or amendment to Title 
I, that is enacted after the date of enactment of the Indian Housing 
Act of 1988 (June 29, 1988) shall apply to public housing developed or 
operated pursuant to a contract between the Secretary and an Indian 
housing authority unless the provision explicitly provides for 
applicability. Therefore, absent such a provision, section 114(c) of 
the 1992 Act does not extend to Indian housing authorities. The 
Department, however, as matter of policy, is extending the shared 
savings arrangement to Indian housing authorities also. Not to do so 
would frustrate the goals of providing incentives to undertake energy 
conservation activities.
    Utility rate reduction measures include wellhead purchases of 
natural gas and administrative appeals or legal action beyond normal 
public participation in rate-making proceedings. It is important that 
an extension of the shared savings term provide adequate incentives and 
cover the increased administrative expense involved in undertaking 
energy conservation activities as sophisticated as a wellhead purchase 
program. The Department has a manifold interest in promoting the most 
economical purchasing arrangements in order to reduce the need for 
operating subsidies. There is, first and foremost, a national interest 
in reducing consumption of non-replaceable energy resources, and a 
parallel interest in making sure that energy resources are purchased 
economically and efficiently. In the context of the housing assistance 
programs, HUD is obliged to honor these over-all goals by encouraging 
energy conservation in assisted housing environments.

Background on Subsidy for Nondwelling Uses

    On September 6, 1991, the Department published a proposed rule that 
would have established new conditions under which a PHA or an IHA could 
have included vacant units in its computation of eligibility for 
operating subsidy. The comment period for this proposed rule was 
reopened on June 22, 1992 (57 FR 27716). Ultimately, as a result of 
congressional action, the proposed rule was not pursued to a final 
rule. See, Departments of Veterans Affairs and Housing and Urban 
Development, and Independent Agencies Appropriations Act, 1992 (Pub. L. 
102-139, approved October 29, 1991; 106 Stat. 757), and section 114(b) 
of the Housing and Community Development Act of 1992 (Pub. L. 102-550, 
approved October 28, 1992; 106 Stat. 3691).
    A number of the provisions contained in the proposed rule were 
opposed by commenters. However, the aspect of the proposed rule that 
would permit the payment of operating subsidy, under certain 
conditions, for units approved for nondwelling use for economic self-
sufficiency and anti-drug activities was not controversial. The 
comments received on this aspect generally supported the proposed rule, 
but urged the Department to adopt an even more generous treatment of 
nondwelling space in the calculation of operating subsidy eligibility. 
However, in this final rule the Department is adopting only the 
provisions that appeared in the proposed rule, and only to the extent 
that those provisions reflect the existing practice. The Department is 
clarifying in Secs. 905.720(b)(2) and 990.198(b)(2) that an IHA or PHA 
need demonstrate only that non-utility operating costs are not 
available from other funding. This conforms to existing practice.
    Currently, the Department is permitting PHAs and IHAs to continue 
receiving operating subsidy for units that are no longer available for 
occupancy because they have been removed from the rent roll and 
approved for economic self-sufficiency and anti-drug activities. Under 
Notice PIH 90-39 (PHA) (issued August 24, 1990), a PHA or an IHA may 
request a waiver to allow consideration of such units in its 
calculation of operating subsidy eligibility. Therefore, the effect of 
the revisions to Secs. 905.720 and 990.108(b) in this final rule is not 
to change current treatment of these units in the calculation of 
operating subsidy eligibility, but merely to reduce the administrative 
burdens of all parties involved in the waiver process.

This Rule

    The existing regulation on shared utility rate savings provides an 
incentive to HAs to implement utilities conservation programs, 
particularly rate-savings programs like wellhead purchase, when 
calculating eligibility for operating subsidy under the Performance 
Funding System, but limits the effect of that incentive to one year. 
This revision to the regulation does not change the mechanism for 
granting the incentive, but extends the authorization for the shared 
savings arrangement up to an additional six years. HUD will continue to 
require that the HA be able to demonstrate in each annual budget that 
there are real rate reduction savings in each of the years for which 
the extended incentive applies.
    In addition, the revisions in this rule will eliminate the need to 
seek a waiver to permit the payment of operating subsidy for certain 
units approved for nondwelling use for economic self-sufficiency and 
anti-drug activities.
    To achieve the regulatory goals discussed above, this rule amends 
24 CFR 905.715(b)(2), 905.720(b), 905.730(c), 990.107(b)(2), 
990.108(b), and 990.110(c)(1)(i).

Other Matters

Justification for Final Rule

    The Department has determined that notice and public comment are 
unnecessary and contrary to the public interest before making this rule 
effective because it is an extension of an ongoing policy which rewards 
a HA for its action to secure a reduction in utility rates.

Information Collection Requirements

    The information collection requirements contained in this rule have 
been submitted to the Office of Management and Budget under the 
Paperwork Reduction Act of 1980 (44 U.S.C. 3501-3520). The Department 
has determined that the following provisions contain information 
collection requirements. 

                               Tabulation of Reporting and Recordkeeping Burdens                                
----------------------------------------------------------------------------------------------------------------
                                                                                         Estimated              
                                                                 No. of     Frequency     average     Estimated 
                          Sections                            respondents  of response    response      annual  
                                                                                          time (in    burden (in
                                                                                          hours)        hours)  
----------------------------------------------------------------------------------------------------------------
Reporting burden:                                                                                               
    905.720(b)(2), 990.108(b)(2)............................          200            1            8        1,600
    905.730(c)(1)(i), 990.110(c)(1)(i)......................          100            1            2          200
    905.720(b)(2)(i)-(v), 990.108(b)(2)(i)-(v)..............          200            1            4         800 
                                                             ---------------------------------------------------
      Total reporting burden................................  ...........  ...........  ...........        2,600
Recordkeeping burden:                                                                                           
    905.720(b)(2)(v), 990.108(b)(2)(v)......................          200            1            2         400 
                                                             ---------------------------------------------------
      Total recordkeeping burden............................  ...........  ...........  ...........         400 
                                                             ===================================================
      Total burden..........................................  ...........  ...........  ...........       3,000 
----------------------------------------------------------------------------------------------------------------

Environmental Review

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR Part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969. The Finding of No Significant Impact is available for 
public inspection between 7:30 a.m. and 5:30 p.m. weekdays in the 
Office of the Rules Docket Clerk, Office of the General Counsel, 
Department of Housing and Urban Development, Room 10276, 451 Seventh 
Street, S.W., Washington, D.C. 20410.

Regulatory Flexibility Act

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication and by 
approving it certifies that this rule does not have a significant 
economic impact on a substantial number of small entities. This rule 
pertains only to an arrangement between HUD and certain HAs.

Executive Order 12612, Federalism

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
does not have ``federalism implications'' because it does not have 
substantial direct effects on the States (including their political 
subdivisions), or on the distribution of power and responsibilities 
among the various levels of government.

Executive Order 12606, the Family

    The General Counsel, as the Designated Official under Executive 
Order 12606, the Family, has determined that this rule does not have 
potential significant impact on family formation, maintenance, and 
general well-being. It pertains only to an arrangement between HUD and 
certain HAs.

Semi-Annual Agenda of Regulations

    This rule was listed as item number 1706 in the Department's 
Semiannual Agenda of Regulations published on April 25, 1994 (59 FR 
20424, 20474) in accordance with Executive Order 12866 and the 
Regulatory Flexibility Act.

Catalog of Federal Domestic Assistance

     The Federal domestic assistance number is 14.850.

List of Subjects

24 CFR Part 905

    Aged, Energy conservation, Grant programs--housing and community 
development, Grant programs--Indians, Indians, Individuals with 
disabilities, Lead poisoning, Loan programs--housing and community 
development, Loan programs--Indians, Low and moderate income housing, 
Public housing, Reporting and recordkeeping requirements.

24 CFR Part 990

    Grant programs--housing and community development, Public housing, 
Reporting and recordkeeping requirements.

    Accordingly, the Department amends 24 CFR parts 905 and 990 as 
follows:

PART 905--INDIAN HOUSING PROGRAMS

    1. The authority for part 905 is revised to read as follows:

    Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437a, 1437aa, 1437bb, 
1437cc, 1437ee, and 3535(d).

    2. In Sec. 905.715, paragraph (b)(2) is revised to read as follows:


Sec. 905.715  Computation of utilities expense level.

* * * * *
    (b) * * *
    (2) If an IHA takes action, such as a wellhead purchase of natural 
gas, or administrative appeals or legal action beyond normal public 
participation in rate-making proceedings to reduce the rate it pays for 
utilities (including water, fuel oil, electricity, and gas), then the 
IHA will be permitted to retain one-half of the cost savings during the 
first 12 months attributable to its actions. Upon determination that 
the action was cost-effective in the first year, the IHA may be 
permitted to retain one-half the annual cost savings for an additional 
period not to exceed six years, if the actions continue to be cost-
effective. See also paragraph (f) of this section and Sec. 905.730(c).
* * * * *
    3. In Sec. 905.720, the text of paragraph (b) following the heading 
is designated as paragraph (b)(1), and new paragraph (b)(2) is added, 
to read as follows:


Sec. 905.720  Other costs.

* * * * *
    (b) * * *
    (1) * * *
    (2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for 
operating subsidy under the conditions provided in this paragraph 
(b)(2), and the costs attributable to them are to be included in the 
operating budget. If a unit satisfies the conditions stated in 
paragraphs (b)(2) (i) through (v) of this section, it will be eligible 
for subsidy at the rate of the AEL for the number of months the unit is 
devoted to such use. Approval will be given for a period of no more 
than three years. Renewal of the approval to allow payments after that 
period may be made only if the IHA can demonstrate that no other 
sources for paying the non-utility operating costs of the unit are 
available:
    (i) The unit must be used for either economic self-sufficiency 
activities directly related to maximizing the number of employed 
residents or for anti-drug programs directly related to ridding the 
development of illegal drugs and drug-related crime. The activities 
must be directed toward and for the benefit of residents of the 
development.
    (ii) The IHA must demonstrate that space for the service or program 
is not available elsewhere in the locality and that the space used is 
safe and suitable for its intended use or that resources are committed 
to make the space safe and suitable.
    (iii) The IHA must demonstrate satisfactorily that other funding is 
not available to pay for the non-utility operating costs. All rental 
income generated as a result of the activity must be reported as income 
in the operating subsidy calculation.
    (iv) Operating subsidy may be approved for only one site (involving 
one or more contiguous units) per Indian housing development for 
economic self-sufficiency services or anti-drug programs, and the 
number of units involved should be the minimum necessary to support the 
service or program. Operating subsidy for any additional sites per 
development can only be approved by HUD Headquarters.
    (v) The IHA must submit a certification with its Performance 
Funding System Calculation that the units are being used for the 
purpose for which they were approved and that any rental income 
generated as a result of the activity is reported as income in the 
operating subsidy calculation. The IHA must maintain specific 
documentation of the units covered. Such documentation should include a 
listing of the units, the street addresses, and project/management 
control numbers.
* * * * *
    4. In Sec. 905.730, paragraph (c)(1)(i) is revised to read as 
follows:


Sec. 905.730  Adjustments.

* * * * *
    (c) * * *
    (1) Rates. (i) A decrease in the utilities expense level because of 
decreased utility rates--to the extent funded by operating subsidy--
will be deducted by HUD from future operating subsidy payments. 
However, where the rate reduction covering utilities, such as water, 
fuel oil, electricity, and gas, is directly attributable to action by 
the IHA, such as wellhead purchase of natural gas, or administrative 
appeals or legal action beyond normal public participation in rate-
making proceedings, then the IHA will be permitted to retain one-half 
of the cost savings attributable to its actions for the first year and, 
upon determination that the action was cost-effective in the first 
year, for up to an additional six years, as long as the actions 
continue to be cost-effective, and the other one-half of the cost 
savings will be deducted from operating subsidy otherwise payable.
* * * * *

PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY

    5. The authority for part 990 is revised to read as follows:

    Authority: 42 U.S.C. 1437(g) and 3535(d).

    6. In Sec. 990.107, paragraph (b)(2) is revised to read as follows:


Sec. 990.107  Computation of utilities expense level.

* * * * *
    (b) * * *
    (2) If a PHA takes action, such as wellhead purchase of natural 
gas, or administrative appeals or legal action beyond normal public 
participation in rate-making proceedings to reduce the rate it pays for 
utilities (including water, fuel oil, electricity, and gas), then the 
PHA will be permitted to retain one-half of the cost savings during the 
first 12 months attributable to its actions. Upon determination that 
the action was cost-effective in the first year, the PHA may be 
permitted to retain one-half the annual cost savings for an additional 
period not to exceed six years, if the actions continue to be cost-
effective. See also paragraph (f) of this section and Sec. 990.110(c).
* * * * *
    7. In Sec. 990.108, the text of paragraph (b) is designated as 
paragraph (b)(1), and new paragraph (b)(2) is added, to read as 
follows:


Sec. 990.108  Other costs.

* * * * *
    (b) * * *
    (2) Units approved for nondwelling use to promote economic self-
sufficiency services and anti-drug activities are eligible for 
operating subsidy under the conditions provided in this paragraph 
(b)(2), and the costs attributable to them are to be included in the 
operating budget. If a unit satisfies the conditions stated in 
paragraphs (b)(2) (i) through (v) of this section, it will be eligible 
for subsidy at the rate of the AEL for the number of months the unit is 
devoted to such use. Approval will be given for a period of no more 
than three years. Renewal of the approval to allow payments after that 
period may be made only if the PHA can demonstrate that no other 
sources for paying the non-utility operating costs of the unit are 
available:
    (i) The unit must be used for either economic self-sufficiency 
activities directly related to maximizing the number of employed 
residents or for anti-drug programs directly related to ridding the 
development of illegal drugs and drug-related crime. The activities 
must be directed toward and for the benefit of residents of the 
development.
    (ii) The PHA must demonstrate that space for the service or program 
is not available elsewhere in the locality and that the space used is 
safe and suitable for its intended use or that the resources are 
committed to make the space safe and suitable.
    (iii) The PHA must demonstrate satisfactorily that other funding is 
not available to pay for the non-utility operating costs. All rental 
income generated as a result of the activity must be reported as income 
in the operating subsidy calculation.
    (iv) Operating subsidy may be approved for only one site (involving 
one or more contiguous units) per public housing development for 
economic self-sufficiency services or anti-drug programs, and the 
number of units involved should be the minimum necessary to support the 
service or program. Operating subsidy for any additional sites per 
development can only be approved by HUD Headquarters.
    (v) The PHA must submit a certification with its Performance 
Funding System Calculation that the units are being used for the 
purpose for which they were approved and that any rental income 
generated as a result of the activity is reported as income in the 
operating subsidy calculation. The PHA must maintain specific 
documentation of the units covered. Such documentation should include a 
listing of the units, the street addresses, and project/management 
control numbers.
* * * * *
    8. In Sec. 990.110, paragraph (c)(1)(i) is revised to read as 
follows:


Sec. 990.110  Adjustments.

* * * * *
    (c) * * *
    (1) Rates. (i) A decrease in the Utilities Expense Level because of 
decreased utility rates--to the extent funded by the operating 
subsidy--will be deducted by HUD from future operating subsidy 
payments. However, where the rate reduction covering utilities, such as 
water, fuel oil, electricity, and gas, is directly attributable to 
action by the PHA, such as wellhead purchase of natural gas, or 
administrative appeals or legal action beyond normal public 
participation in rate-making proceedings, then the PHA will be 
permitted to retain one-half of the cost savings attributable to its 
actions for the first year and, upon determination that the action was 
cost-effective in the first year, for up to an additional six years, as 
long as the actions continue to be cost-effective, and the other one-
half of the cost savings will be deducted from operating subsidy 
otherwise payable.
* * * * *
    Dated: June 24, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-15846 Filed 6-29-94; 8:45 am]
BILLING CODE 4210-33-P