[Federal Register Volume 60, Number 1 (Tuesday, January 3, 1995)]
[Proposed Rules]
[Pages 304-306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-32309]




[[Page 303]]

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Part VI





Department of Housing and Urban Development





_______________________________________________________________________



Office of the Assistant Secretary for Public and Indian Housing



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24 CFR Ch. IX



Vacancy Rule: Intent To Establish a Negotiated Rulemaking Advisory 
Committee; Proposed Rule

  Federal Register / Vol. 60, No. 1 / Tuesday, January 3, 1995 / 
Proposed Rules   
[[Page 304]]

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Ch. IX

[Docket No. N-94-3858; FR-3647-N-01]
RIN 2577-AB44


Vacancy Rule: Notice of Intent To Establish a Negotiated 
Rulemaking Advisory Committee and Notice of First Meeting

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

ACTION: Notice of intent to establish committee and of first meeting.

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SUMMARY: The Department is considering the establishment of a 
Negotiated Rulemaking Advisory Committee under the Federal Advisory 
Committee Act (FACA). The purpose of the Committee would be to discuss 
and negotiate a proposed rule that would change the current method of 
determining the payment of operating subsidies to vacant public housing 
units. The Committee would consist of representatives with a definable 
interest in the outcome of a proposed rule. HUD has prepared a charter 
and has initiated the requisite consultation process pursuant to the 
FACA, Executive Order 12838, and the implementing regulations.

DATES: Comments must be received by February 2, 1995.
    If the charter is approved and a final determination is made to 
form the Committee, the first meeting will take place March 7-9, 1995, 
at a location to be announced in Washington, D.C.

ADDRESSES: Interested persons are invited to submit comments regarding 
the proposed Committee and membership to the Rules Docket Clerk, Office 
of General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410-0500. 
Comments or any other communications submitted should consist of an 
original and four copies and refer to the above docket number and 
title. Facsimile (FAX) comments are not acceptable. The docket will be 
available for public inspection and copying between 7:30 a.m. and 5:30 
p.m. weekdays at the above address.
    The exact location of the first meeting on March 7-9, 1995, in 
Washington, D.C., will be announced in a subsequent Federal Register 
notice. Interested persons may also contact John Comerford, at the 
telephone number listed below, for this information.

FOR FURTHER INFORMATION CONTACT: John T. Comerford, Director, Financial 
Management Division, Public and Indian Housing, Room 4212, Department 
of Housing and Urban Development, 451 Seventh Street, SW, Washington, 
DC 20410-0500; telephone (202) 708-1872, or (202) 708-0850 (TDD). 
(These telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

Background

    HUD uses a formula approach called the Performance Funding System 
(PFS) to distribute operating subsidies to public housing agencies 
(PHAs) and Indian housing authorities (IHAs). (NOTE: the term housing 
agency (HA) is used by HUD to mean both PHAs and IHAs.) A regulatory 
description of the PFS can be found at 24 CFR 990. Although somewhat 
oversimplified, the amount of subsidy received by a HA is the 
difference between projected expenses and projected income, with the 
PFS regulations detailing how these projections will be made. HAs 
calculate their PFS eligibility annually and submit a request for 
funding as part of their budget process. While the amount varies, this 
subsidy can represent a substantial amount of revenue to a HA. In 1994, 
HUD distributed over $2.6 billion in operating subsidies to HAs.
    The amount of dwelling rental income expected to be received is an 
important element in estimating subsidy eligibility. If rental income 
increases, it can generally be expected that operating subsidy 
eligibility will decrease. Likewise, if rental income decreases, an HA 
may receive a greater amount of subsidy. With some exceptions, HUD 
expects that HAs will project an occupancy level of 97 percent. This 
standard of 97 percent has been part of the PFS since its 
implementation in 1975.
    That part of the PFS that deals with the projection of occupancy 
levels is known as the vacancy rule. The vacancy rule was published as 
a final rule in 1986 (51 FR 16835, May 7, 1986) and was intended to 
create incentives to HAs to return vacant units to occupancy and to 
maintain an occupancy level of 97 percent or higher. The rule provided 
these incentives by defining the conditions under which HUD would 
approve the use of an occupancy level of less than 97 percent; by 
specifying that an HA need not use an occupancy level higher than 97 
percent; and, in recognition that a low number of vacancies may make it 
difficult for a small HA to reach 97 percent, by finding it acceptable 
to use an occupancy percentage based on having five or fewer vacant 
units.
    In September 1991, HUD published a proposed rule (56 FR 45814, 
September 6, 1991) that would have made significant changes to the way 
in which vacant units would be considered eligible for operating 
subsidy. These changes included:
    1. Increasing the occupancy standard from 97 percent to 98 percent;
    2. Eliminating HUD-approved Comprehensive Occupancy Plans (COPs) as 
a means to justify using less than the occupancy standard;
    3. Limiting the amount of subsidy paid for vacant units greater 
than 2 percent of the total number of units available for occupancy; 
and
    4. Instituting a year-end review to compare the actual occupancy 
achieved with the projected occupancy percentage.
    HUD argued that the changes were needed in order to correct what it 
perceived to be a situation in which full operating subsidies (100 
percent of the Allowable Expense Level) being paid for vacant units in 
modernization programs or in COPs were greater than the direct 
operating expenses incurred by the HA. With regard to COPs, HUD stated 
that HAs with the most extensive and difficult vacancy problems were 
expected to develop five year COPs in 1986 and that most of these would 
soon expire.
    Before the comment period on the proposed rule expired, Congress 
inserted language in HUD's Appropriation Act for 1992 (105 Stat. 757) 
that prohibited HUD from using appropriated funds to implement the 
proposed rule. Later, Congress included a provision in the Housing and 
Community Development Act of 1992 (section 114(b), Pub. L. 102-550; 
approved October 28, 1992) to require that any changes to the PFS 
relating to the payment of operating subsidies to vacant public housing 
units be accomplished only through the use of negotiated rulemaking 
procedures.

Regulatory Negotiation

    Negotiated rulemaking, or ``reg-neg'', is a relatively new process 
for the Federal government and this will be the first use of the 
process at HUD. The basic concept of reg-neg is to have the agency that 
is considering drafting a rule bring together representatives of 
affected interests for face-to-face negotiations that are open to the 
public. The give-and-take of the negotiation process is expected to 
foster [[Page 305]] constructive, creative, and acceptable solutions to 
difficult problems.
    In July 1994, HUD entered into an Interagency Agreement with the 
Federal Mediation and Conciliation Service (FMCS) for convening 
services that would assist HUD in assessing the feasibility of 
assembling a balanced committee willing and able to work towards the 
goal of consensus on a proposed rule that is within HUD's statutory 
authority and addresses the issues of the interested parties. If HUD 
proceeded with the formation of a negotiated rulemaking committee, the 
Interagency Agreement called for FMCS to provide facilitating services.
    The final convening report was provided to HUD in September 1994 
and concludes that ``there is sufficient support to re-examine the 
vacancy rule through a regulatory negotiations process.'' A copy of the 
report titled Convening Report for Regulatory-Negotiations on HUD's 
Vacancy Rule is available in the office of the Rules Docket Clerk at 
the above address.

Chartering of Reg-Neg Committee

    As a general rule, an agency of the Federal Government is required 
to comply with the requirements of the Federal Advisory Committee Act 
(FACA) when it establishes or uses a group of non-Federal members as a 
source of advice. Under FACA, HUD must receive a charter for this reg-
neg committee. HUD has prepared a charter and sent it to the Office of 
Management and Budget for approval. If the charter is approved and 
schedule changes are not necessary as a result of public comments, the 
Committee will be convened in accordance with this notice.

Substantive Issues for Negotiation

    The convening report identified the following issues to be 
addressed by the Committee:
     What constitutes an acceptable level of vacancies for 
housing authorities of various size classifications?
     What criteria should be used for providing less than full 
subsidy?
     What criteria should be used for providing full subsidy 
despite less than full occupancy?

Committee Membership

    The FMCS conveners consulted and interviewed over 30 officials of 
various organizations interested and affected by the vacancy rule. 
Three national HA associations--the Council of Large Public Housing 
Authorities (CLPHA), the National Association of Housing and 
Redevelopment Officials (NAHRO), and the Public Housing Authority 
Directors Association (PHADA)--worked together to suggest executive 
directors of HAs for committee membership that would reflect a balance 
among HAs in terms of size and number of vacant units. The national 
associations committed themselves to serving as staff support to the 
HAs selected for membership.
    After reviewing the recommendations of the FMCS conveners, HUD has 
tentatively identified the following list of possible interests and 
parties:

Housing Agencies

     Housing Authority of the City Of Houston, TX
     Cuyahoga Metropolitan Housing Authority, Cleveland, OH
     New York City, NY Housing Authority
     Newark, NJ Housing Authority
     Reno, NV Housing Authority
     Littleton, CO Housing Authority
     Housing Authority of the City of South Bend, IN

Tenant Organizations and Public Interest Groups

     National Tenants Organization, Ft. Pierce, FL
     Bromley Heath Tenant Management Corporation, Jamaica 
Plains, MA
     New Jersey Association of Public and Subsidized Housing 
Residents, Newark, NJ
     National Housing Law Project, Washington, DC
     Housing and Development Law Institute, Washington, DC
     Illinois Association of Housing Authorities

Federal Government

     U.S. Department of Housing and Urban Development
    Comments and suggestions on this tentative list of committee 
members are invited. HUD does not believe that each potentially 
affected organization or individual must necessarily have its own 
representative. However, HUD must be satisfied that the group as a 
whole reflects a proper balance and mix of interests. Negotiation 
sessions will be open to members of the public, so individuals and 
organizations that are not members of the committee may attend all 
sessions and communicate informally with members of the committee.

Requests for Representation

    If in response to this Notice, an additional individual or 
representative of an interest requests membership or representation on 
the committee, HUD, in consultation with the FMCS conveners, will 
determine whether that individual or representative will be added to 
the committee. Each additional nomination for membership on the 
committee must include the name of the nominee and a description of the 
interests the nominee would represent, evidence that the nominee is 
authorized to represent relevant parties, a written commitment that the 
nominee shall participate in good faith, and the reasons that the 
members proposed in this notice do not adequately represent the 
interests of the person submitting the nomination. HUD will make the 
decision on membership based on whether the individual or interest 
would be substantially affected by the proposed rule and whether the 
individual or interest is already adequately represented on the 
committee.

Final Notice Regarding Committee Establishment

    After reviewing any comments on this Notice and any requests for 
representation, HUD will issue a final notice. That notice will 
announce the establishment of a Negotiated Rulemaking Advisory 
Committee, unless HUD's charter request is disapproved or HUD decides, 
based on comments and other relevant considerations, that such action 
is inappropriate.

Tentative Schedule

    If the final determination is that the committee should be formed 
and negotiations started, HUD plans to hold the first meeting of the 
committee on March 7-9, 1995. On March 7, the meeting will start at 
10:00 a.m. and run until completion; on March 8, the meeting will start 
at 9:00 a.m. and run until completion; and on March 9, the meeting will 
start at 9:00 a.m. and run until approximately 1:00 p.m. The exact 
location of the meeting in Washington, D.C., will be announced in a 
subsequent Federal Register notice. Interested persons may also contact 
John Comerford, at the telephone number listed above, for this 
information. The purpose of the meeting is to orient members to the 
reg-neg process, establish a basic set of understandings and ground 
rules (protocols) regarding the process that will be followed in 
seeking a consensus, and begin to address the issues. This meeting is 
open to the public.
    Decisions with respect to future meetings will be made at the first 
meeting and from time to time thereafter. Notices of future meetings 
will be published in the Federal Register if time 
permits. [[Page 306]] 
    To prevent delays that might postpone timely issuance of a proposed 
rule, HUD intends to terminate the committee's activities if it does 
not reach consensus within 5 months of the first meeting. The process 
may end earlier if the FMCS conveners/facilitators believe that 
sufficient progress cannot be made or that an impasse has developed 
that cannot be resolved.

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

    Dated: December 20, 1994.
Joseph Shuldiner,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 94-32309 Filed 12-30-94; 8:45 am]
BILLING CODE 4210-33-P