[Federal Register Volume 64, Number 177 (Tuesday, September 14, 1999)]
[Proposed Rules]
[Pages 49924-49929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-23699]



[[Page 49923]]

_______________________________________________________________________

Part VI





Department of Housing and Urban Development





_______________________________________________________________________



24 CFR Part 905



Allocation of Funds Under the Capital Fund; Capital Fund Formula; 
Proposed Rule

  Federal Register / Vol. 64, No. 177 / Tuesday, September 14, 1999 / 
Proposed Rules  

[[Page 49924]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 905

[Docket No. FR-4423-P-06]
RIN 2577-AB87


Allocation of Funds under the Capital Fund; Capital Fund Formula; 
Proposed Rule

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would implement, as required by statute, a 
new formula system for allocation of funds to public housing agencies 
for their capital needs. As also required by statute, this proposed 
rule was developed through negotiated rulemaking procedures.

DATES: Comments Due Date. October 14, 1999.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Rules Docket Clerk, Room 10276, Office of 
General Counsel, Department of Housing and Urban Development, 451 
Seventh Street, SW, Washington, DC 20410-0500. Comments should refer to 
the above docket number and title. A copy of each comment submitted 
will be available for public inspection and copying during regular 
business hours at the above address. Facsimile (FAX) comments are not 
acceptable.

FOR FURTHER INFORMATION CONTACT: William Flood, Director, Office of 
Capital Improvements, Public and Indian Housing, Room 4134, Department 
of Housing and Urban Development, 451 Seventh Street, SW, Washington, 
DC 20410-0500; telephone (202) 708-1640 ext. 4185 (this telephone 
number is not toll-free). Hearing or speech-impaired individuals may 
access this number via TTY by calling the toll-free federal Information 
Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 519 of the Quality Housing and Work Responsibility Act of 
1998 (Pub.L. 105-276, approved October 21, 1998) (referred to as the 
``Public Housing Reform Act'') amends section 9 of the U.S. Housing Act 
of 1937 to provide a ``Capital Fund,'' to be established by HUD for the 
purpose of making assistance available to public housing agencies 
(PHAs) to carry out capital and management activities. Amended section 
9 requires HUD to develop a formula for determining the amount of 
assistance provided to PHAs from the Capital Fund for a Federal fiscal 
year, and the formula is to include a mechanism to reward performance. 
The statute also requires that the Capital Fund formula is to be 
developed through negotiated rulemaking procedures.
    On March 19, 1999 (64 FR 13533), HUD published a notice of its 
intent to establish a negotiated rulemaking committee for the Capital 
Fund, and in this notice identified a list of possible interested 
individuals and organizations to serve on the negotiated rulemaking 
committee. The list of possible interested individuals and 
organizations included public housing agencies, national organizations 
representing public housing agencies, residents organizations, 
advocates for low-income housing, and other housing experts.
    On April 26, 1999 (64 FR 20234), HUD published the list of members 
of the negotiated rulemaking committee and announced its first set of 
meetings. The members participating in the negotiated rulemaking 
procedure for the Capital Fund formula are:

 National Housing Associations

Council of Large Public Housing Authorities (CLPHA)
National Association of Housing and Redevelopment Officials (NAHRO)
Public Housing Authorities Directors Association (PHADA)
National Organization of African Americans in Housing (NOAAH)
National Low Income Housing Coalition

 Housing Authorities

Philadelphia Housing Authority, Philadelphia, PA
Chicago Housing Authority, Chicago, IL
Dallas Housing Authority, Dallas, TX
Puerto Rico Public Housing Administration, San Juan, PR
Seattle Housing Authority, Seattle, WA
New York City Housing Authority, New York, NY
Dayton Metropolitan Housing Authority, Dayton, OH
Jersey City Housing Authority, Jersey City, NJ
San Diego Housing Commission, San Diego, CA
Macon Housing Authority, Macon, GA
Sanford Housing Authority, Sanford, ME
Housing Authority of the City of San Benito, San Benito, TX
City of La Junta Housing Authority, La Junta, CO
Housing Authority of the Town of Laurinburg, Laurinburg, NC
Madison Housing Authority, Madison, NJ

 Tenant and Community Organizations

Guinotte Manor Tenant Association, Kansas City, MO
Center for Community Change, Washington, DC
Hillside Family Resource Center, Milwaukee, WI
Mount Pleasant Estates Tenant Association, Newark, NJ

 Other Groups

National Housing Conference
Fannie Mae

 Federal Government

U.S. Department of Housing and Urban Development
    The negotiated rulemaking committee (``the committee'') first 
convened on April 28 and 29, 1999. Additional committee meetings were 
held on May 11-12, May 25-26, June 17-18, June 23-24, July 8-9, July 
26-27, and August 3-4, 1999.
    As part of its deliberation of formula models and formula 
components, the committee considered at length a study conducted on 
capital needs in public housing by a consulting firm. The study 
included physical inspections of public housing at 219 PHAs throughout 
the country including 684 developments containing 229,973 units. The 
study found that the existing modernization needs of public housing 
remain well over twenty billion dollars.
    The formula proposed by the committee in this rule is based, in 
part, on this study. The study, however, contained some limitations in 
scope, required inspector judgment regarding the necessity of modest 
upgrades, was not designed to cover some aspects of modernization such 
as the reconfiguration of units where needed, necessarily had to 
estimate future needs based on experience with respect to other housing 
stock rather than direct observations, and could not, in itself, answer 
the question how the formula should address differences in needs among 
individual housing authorities. Given the limitations of the study, the 
committee decided to limit any funding reductions in going from the old 
to the new formula to six percent of a PHA's Federal Fiscal Year 1999 
formula share for comparable units.
    The Capital Fund formula proposed in this rule fulfills the 
statute's mandate of including a mechanism to reward performance. The 
proposed formula also provides for a replacement housing factor, in 
recognition that funding for this purpose will facilitate demolition of 
obsolete housing and allow some of the remaining housing needs in the 
affected communities to be addressed.

[[Page 49925]]

    In its development of the proposed formula, the committee discussed 
at substantial length the importance of resident participation to the 
success of public housing, including a PHA's capital programs. The 
committee noted that the Public Housing Reform Act places value on 
resident participation by requiring at least one resident on the PHA 
Board of Commissioners, resident involvement in the PHA Plan process 
(through Resident Advisory Boards) and additional involvement as 
reflected in HUD's resident participation regulations (24 CFR part 
964). Accordingly, measures to promote more effective resident 
participation will be categorized as eligible Capital Fund management 
improvement expenses, and also will be categorized as eligible public 
housing operating expenses under the appropriate regulations. Examples 
of eligible capital fund management improvement expenses include but 
are not limited to reasonable: staff support, outreach, training, 
meeting and office space, childcare, transportation, access to 
computers, provided all such expenses are directly related to Capital 
Fund activities. HUD may provide more specifics in further regulations 
or notices.
    The Committee went further and recommended the need for additional 
standards for resident participation which can be enforced by HUD. 
Additional standards need to be adopted through a separate rule. HUD 
has committed to undertake a rulemaking process regarding additional 
standards for resident participation and promulgate any necessary rules 
during the coming fiscal year. To further promote effective public 
housing programs including resident participation, HUD will: conduct 
training for resident organizations and housing authorities on the new 
Public Housing Reform Act; and clarify in the PHA Plan regulation that 
reasonable resources for the Resident Advisory Boards must provide 
reasonable means for them to become informed on programs covered by the 
PHA Plan, to communicate in writing and by telephone with assisted 
families and hold meetings with those families, and to access 
information regarding covered programs on the internet, taking into 
account the size and resources of the PHA.

II. Overview of the Capital Fund Formula

    The following provides an overview of the key components of the 
Capital Fund Formula.
    (1) The proposed Capital Fund formula contains a provision for 
emergency funding, as did the formula for allocation of funds under 
section 14 of the U.S. Housing Act of 1937 (USHA) (section 14 funds). 
Section 519(k) of the Public Housing Reform Act (section 9(k) of the 
USHA) provides for a set-aside of up to two percent of the available 
Capital Fund and Operating Fund dollars for emergencies, other 
disasters, and housing needs related to the settlement of litigation, 
and additional funds that the Secretary may reserve for purposes 
specified in section 9(k). (See Sec. 905.10(b) of proposed rule.)
    (2) The proposed rule also provides for formula allocation based on 
relative need, similar to that provided by the formula for allocation 
of section 14 funds. (See Sec. 905.10(c) of proposed rule.)
    (3) The formula for allocation of section 14 funds included 
allocation for ``backlog needs.'' The proposed Capital Fund formula 
contains an allocation for ``existing modernization needs.'' (See 
Sec. 905.10(d) of proposed rule.)
    (4) The proposed Capital Fund formula contains an allocation for 
``accrual needs,'' which is modeled on the ``accrual needs'' provision 
of the section 14 formula. (See Sec. 905.10(e) of proposed rule.)
    (5) The proposed Capital Fund formula provides for calculation of 
the number of units, as did the prior formula for allocation of section 
14 funds. (See Sec. 905.10(f) of the proposed rule.)
    (6) The proposed Capital Fund formula sets out the method for 
computation of formula shares under the CFF. (See Sec. 905.10(g) of the 
proposed rule.)
    (7) The proposed Capital Fund formula provides for a limit or 
``cap'' on the amount of capital funding that a PHA may lose as a 
result of the transition to the new CFF from the former formula for 
section 14 funds. The proposed rule provides that for comparable units, 
no PHA can lose more than 6% of its formula share in going from the old 
to the new formula. (See Sec. 905.10(h) of the proposed rule.)
    (8) The proposed Capital Fund formula also provides a replacement 
housing factor. The proposed rule provides that for units that are lost 
from the formula system because of demolition, disposition or 
conversion, these units will be funded only for purposes of replacement 
housing for 5 years and then for another 5 years if the planning, 
leveraging, obligation and expenditure requirements are met. The 
proposed rule provides that as a prior condition of a PHA's receipt of 
additional funds for replacement housing, provided for the second 5-
year period or any portion of the second 5-year period, the PHA must 
obtain a firm commitment of substantial additional funds other than 
public housing funds for replacement housing. (See Sec. 905.10(i) of 
the proposed rule.)
    The proposed rule provides that PHAs are required to obligate 
assistance received for replacement housing within: (1) 24 months from 
the date that funds become available to the PHA; or (2) with specific 
HUD approval, 24 months from the date that the PHA accumulates adequate 
funds to undertake replacement housing. The proposed rule also provides 
that to the extent the PHA has not obligated any funds provided as a 
result of the replacement housing factor within the times specified by 
the rule or expended such funds within a reasonable time, the amount of 
funds to be provided to the PHA as a result of the application of the 
second 5 years of the replacement housing factor shall be reduced. (See 
Sec. 905.10(i)(7) of the proposed rule.)
    (9) Under the proposed CFF, the results of the new formula (the 
CFF) and the old formula (the formula for section 14 funds), the 
capping, and the replacement housing factor yield a base formula 
amount. The base formula for each PHA is then adjusted depending on 
whether the PHA is a high performer. The proposed rule includes a 
performance reward factor that provides PHAs that are designated high 
performers under the Public Housing Assessment System (PHAS) will 
receive 3% above their base formula amount in the first five years 
these performance rewards are given, and 5% above their base formula 
amount in future years. This methodology anticipates that any new 
performance measurement system will mature over time. This increase 
above the base formula amount is subject to the condition that for each 
year a performance reward increase is provided, non-high performers 
lose no more than 5% of their base formula amount in the redistribution 
of formula funds from non-high performers to high performers. (See 
Sec. 905.10(j) of the proposed rule.)

III. Justification for Reduced Public Comment Period

    It is the general practice of the Department to provide a 60-day 
public comment period on all proposed rules. The Department, however, 
is reducing its usual 60-day public comment period to 30 days for this 
proposed rule. The Public Housing Reform Act contemplates that the new 
Capital Fund formula will be effective Federal Fiscal

[[Page 49926]]

Year 2000. In an effort to have a final formula in place as close to 
beginning of that fiscal year as possible, and given that the formula 
was developed through the negotiated rulemaking process, in which 
representatives of all affected parties participated, the Department 
believes that a 30-day public comment period is justified under these 
circumstances.

IV. Findings and Certifications

Environmental Impact

    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 (42 U.S.C. 4223). The Finding of No Significant Impact is 
available for public inspection between the hours of 7:30 a.m. and 5:30 
p.m. weekdays 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.

Regulatory Planning and Review

    The Office of Management and Budget has reviewed this proposed rule 
under Executive Order 12866 (captioned ``Regulatory Planning and 
Review'') and determined that this rule is a ``significant regulatory 
action'' as defined in section 3(f) of the Order (although not an 
economically significant regulatory action under the Order). Any 
changes made to this rule as a result of that review are identified in 
the docket file, which is available for public inspection during 
regular business hours (7:30 a.m. to 5:30 p.m.) at the Office of the 
General Counsel, Rules Docket Clerk, Room 10276, U.S. Department of 
Housing and Urban Development, 451 Seventh Street, SW, Washington, DC 
20410-0500.

Regulatory Flexibility Act

    The Secretary has reviewed this proposed rule before publication 
and by approving it certifies, in accordance with the Regulatory 
Flexibility Act (5 U.S.C. 605(b)), that this proposed rule would not 
have a significant economic impact on a substantial number of small 
entities. The proposed rule would implement a new system for formula 
allocation of funds to PHAs for their capital needs. The new system is 
established to provide minimum impact on all PHAs, small and large. The 
new formula provides that no PHA can lose more than 6% of its formula 
share for comparable units in going from the old to the new formula. 
Accordingly, the formula will not have a significant economic impact on 
any PHA. Notwithstanding HUD's determination that this proposed rule 
would not have a significant economic impact on small entities, HUD 
specifically invites comments regarding alternatives to this proposed 
rule that would meet HUD's objectives as described in this preamble.

Federalism Impact

    The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that the policies 
contained in this proposed rule would not have substantial direct 
effects on States or their political subdivisions, on the relationship 
between the Federal Government and the States, or on the distribution 
of power and responsibilities among the various levels of government. 
This proposed rule would provide a new system of formula allocation of 
assistance to PHAs for their capital needs. As a result, the proposed 
rule is not subject to review under the Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) requires Federal agencies to assess the effects of 
their regulatory actions on State, local, and tribal governments and on 
the private sector. This proposed rule does not impose, within the 
meaning of the UMRA, any Federal mandates on any State, local, or 
tribal governments or on the private sector.

List of Subjects in 24 CFR Part 905

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

    For the reasons discussed in the preamble, part 905 is proposed to 
be added to title 24 of the Code of Federal Regulations as follows:

PART 905--THE PUBLIC HOUSING CAPITAL FUND PROGRAM

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


Sec. 905.10  Capital Fund formula (CFF).

    (a) General. This section describes the formula for allocation of 
capital funds to PHAs. The formula is referred to as the Capital Fund 
formula (CFF).
    (b) Emergency reserve and use of amounts. (1) In each Federal 
fiscal year after Federal Fiscal Year (FFY) 1999, from amounts approved 
in the appropriation act for funding under this part, HUD shall reserve 
an amount not to exceed that authorized by 42 U.S.C. 1437g(k), for use 
for assistance in connection with emergencies and other disasters, and 
housing needs resulting from any settlement of litigation, and may 
reserve such other amounts for other purposes authorized by 42 U.S.C. 
1437g(k).
    (2) Amounts set aside under paragraph (b) of this section may be 
used for assistance for any eligible use under the Capital Fund, 
Operating Fund, or tenant-based assistance in accordance with section 8 
of the U.S. Housing Act of 1937 (42 U.S.C. 1437f).
    (3) The use of any amounts as provided under paragraph (b) of this 
section relating to emergencies (other than disasters and housing needs 
resulting from settlement of litigation) shall be announced through 
Federal Register notice.
    (c) Formula allocation based on relative needs. After determining 
the amounts to be reserved under paragraph (b) of this section, HUD 
shall allocate the amount remaining in accordance with the CFF. The CFF 
measures the existing modernization needs and accrual needs of PHAs.
    (d) Allocation for existing modernization needs under the CFF. HUD 
shall allocate half of the available Capital Fund amount based on the 
relative existing modernization needs of PHAs, determined in accordance 
with this paragraph (d) of this section.
    (1) Determination of existing modernization need. (i) Statistically 
reliable data are available. Where HUD determines that statistically 
reliable data concerning the existing modernization need identified in 
paragraph (d) of this section are available for individual PHAs, HUD 
will base its allocation of the Capital Fund amount on direct estimates 
of the existing modernization need, based on the most recently 
available, statistically reliable data. The PHAs of the cities of New 
York City and Chicago are covered by paragraph (d)(1)(i) of this 
section.
    (ii) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning the existing 
modernization need identified in paragraph (d) of this section are not 
available for individual PHAs, HUD will base its allocation on 
estimates of the existing modernization need using the factors 
described in paragraph (d)(2) of this section.
    (2) For PHAs greater than or equal to 250 or more units in FFY 
1999, estimates of the existing modernization need will be based on the 
following:
    (i) Objective measurable data concerning the following PHA, 
community and development

[[Page 49927]]

characteristics applied to each development:
    (A) The average number of bedrooms in the units in a development. 
(Equation co-efficient: 4604.7);
    (B) The total number of units in a development as of FFY 1999. 
(Equation co-efficient: 10.17);
    (C) The proportion of units in a development in buildings completed 
in 1978 or earlier. In the case of acquired developments, HUD will use 
the Date of Full Availability (DOFA) date unless the PHA provides HUD 
with the actual date of construction. When provided with the actual 
date of construction, HUD will use this date (or, for scattered sites, 
the average dates of construction of all the buildings), subject to a 
50-year cap. (Equation co-efficient: 4965.4);
    (D) The rolling three-year average of the cost index of 
rehabilitating property in the area. (Equation co-efficient: -10608);
    (E) The extent to which the units of a development were in a non-
metropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation co-efficient: 2703.9);
    (F) The PHA is located in the southern census region, as defined by 
the Census Bureau. (Equation co-efficient: -269.4);
    (G) The PHA is located in the western census region, as defined by 
the Census Bureau. (Equation co-efficient: -1709.5);
    (H) The PHA is located in the midwest census region as defined by 
the Census Bureau. (Equation co-efficient: 246.2)
    (ii) An equation constant of 13851.
    (A) Newly constructed units. Units with a DOFA date of October 1, 
1999, or thereafter, will be considered to have a zero existing 
modernization need.
    (B) Acquired developments. Developments acquired by a PHA with a 
DOFA date of October 1, 1999, or thereafter, will be considered by HUD 
to have a zero existing modernization need.
    (3) For PHAs with less than 250 units in FFY 1999, estimates of the 
existing modernization need will be based on the following:
    (i) Objective measurable data concerning the following PHA, 
community and development characteristics applied to each development:
    (A) The average number of bedrooms in the units in a development. 
(Equation co-efficient: 1427.1);
    (B) The total number of units in a development as of FFY 1999. 
(Equation co-efficient: 24.3);
    (C) The proportion of units in a development in buildings completed 
in 1978 or earlier. In the case of acquired developments, HUD will use 
the DOFA date unless the PHA provides HUD with the actual date of 
construction, in which case HUD will use the actual date of 
construction (or, for scattered sites, the average dates of 
construction of all the buildings), subject to a 50-year cap. (Equation 
co-efficient: -1389.7);
    (D) The rolling three-year average of the cost index of 
rehabilitating property in the area. (Equation co-efficient: -20163);
    (E) The extent to which the units of a development were in a non-
metropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation co-efficient: 6157.7);
    (F) The PHA is located in the southern census region, as defined by 
the Census Bureau. (Equation co-efficient: 4379.2);
    (G) The PHA is located in the western census region, as defined by 
the Census Bureau. (Equation co-efficient: 3747.7);
    (H) The PHA is located in the midwest census region as defined by 
the Census Bureau. (Equation co-efficient: -2073.5)
    (ii) An equation constant of 24762.
    (A) Newly constructed units. Units with a DOFA date of October 1, 
1999, or thereafter, will be considered to have a zero existing 
modernization need.
    (B) Acquired developments. Developments acquired by a PHA with a 
DOFA date of October 1, 1999, or thereafter, will be considered by HUD 
to have a zero existing modernization need.
    (4) Calibration of existing modernization need for the rolling 
three-year average of the cost index of rehabilitating property in the 
area. The estimated existing modernization need, as determined under 
paragraphs (d)(1) (d)(2) or (d)(3) of this section, shall be adjusted 
by the values of the rolling three-year average of the cost index of 
rehabilitating property in the area.
    (e) Allocation for accrual needs under the CFF. HUD shall allocate 
the other half remaining under the Capital Fund based upon the relative 
accrual needs of PHAs, determined in accordance with paragraph (e) of 
this section.
    (1) Determination of accrual need. (i) Statistically reliable data 
are available. Where HUD determines that statistically reliable data 
concerning accrual need identified in paragraph (e) of this section are 
available for individual PHAs, HUD will base its allocation of the 
Capital Fund amount on direct estimates of accrual need, based on the 
most recently available, statistically reliable data. The PHAs of the 
cities of New York City and Chicago are covered by paragraph (e)(1)(i) 
of this section.
    (ii) Statistically reliable data are unavailable. Where HUD 
determines that statistically reliable data concerning accrual need 
identified in paragraph (e) of this section are not available for 
individual PHAs, HUD will base its allocation on estimates of accrual 
need using the factors described in paragraph (e)(2) of this section.
    (2) For PHAs greater than or equal to 250 or more units, estimates 
of the accrual need will be based on the following:
    (i) Objective measurable data concerning the following PHA, 
community and development characteristics applied to each development:
    (A) The average number of bedrooms in the units in a development. 
(Equation co-efficient: 324.0);
    (B) The extent to which the buildings in a development average 
fewer than 5 units. (Equation co-efficient: 93.3);
    (C) The age of a development as of FFY 1998, as determined by the 
DOFA date (date of full availability). In the case of acquired 
developments, HUD will use the DOFA date unless the PHA provides HUD 
with the actual date of construction, in which case HUD will use the 
actual date of construction (or, for scattered sites, the average dates 
of construction of all the buildings), subject to a 50-year cap. 
(Equation co-efficient: -7.8);
    (D) Whether the development is a family development. (Equation co-
efficient: 184.5);
    (E) The rolling three-year average of the cost index of 
rehabilitating property in the area. (Equation co-efficient: -252.8);
    (F) The extent to which the units of a development were in a non-
metropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation co-efficient: -121.3);
    (G) PHA size of 6600 or more units in FFY 1999. (Equation co-
efficient:-150.7);
    (H) The PHA is located in the southern census region, as defined by 
the Census Bureau. (Equation co-efficient: 28.4);
    (I) The PHA is located in the western census region, as defined by 
the Census Bureau. (Equation co-efficient: -116.9);
    (J) The PHA is located in the midwest census region as defined by 
the Census Bureau. (Equation co-efficient: 60.7)
    (ii) An equation constant of 1371.9,
    (3) For PHAs with less than 250 units, estimates of the accrual 
need will be based on the following:
    (i) Objective measurable data concerning the following PHA, 
community and development

[[Page 49928]]

characteristics applied to each development:
    (A) The average number of bedrooms in the units in a development. 
(Equation co-efficient: 325.5);
    (B) The extent to which the buildings in a development average 
fewer than 5 units. (Equation co-efficient: 179.8);
    (C) The age of a development as of FFY 1998, as determined by the 
DOFA date (date of full availability). In the case of acquired 
developments, HUD will use the DOFA date unless the PHA provides HUD 
with the actual date of construction. When provided with the actual 
date of construction, HUD will use this date (or, for scattered sites, 
the average dates of construction of all the buildings), subject to a 
50-year cap. (Equation co-efficient: -9.0);
    (D) Whether the development is a family development. (Equation co-
efficient: 59.3);
    (E) The rolling three-year average of the cost index of 
rehabilitating property in the area. (Equation co-efficient: -1570.5);
    (F) The extent to which the units of a development were in a non-
metropolitan area as defined by the Census Bureau during FFY 1996. 
(Equation co-efficient: -122.9);
    (G) The PHA is located in the southern census region, as defined by 
the Census Bureau. (Equation co-efficient: -564.0);
    (H) The PHA is located in the western census region, as defined by 
the Census Bureau. (Equation co-efficient: -29.6);
    (I) The PHA is located in the midwest census region as defined by 
the Census Bureau. (Equation co-efficient: -418.3)
    (ii) An equation constant of 3193.6.
    (4) Calibration of accrual need for the rolling three year average 
of the cost index of rehabilitating property in the area. The estimated 
accrual need, as determined under either paragraph (e)(2) or (e)(3) of 
this section, shall be adjusted by the values of the rolling three-year 
average of the cost index of rehabilitation.
    (f) Calculation of number of units. (1) General. For purposes of 
determining the number of a PHA's public housing units, and the 
relative modernization needs of PHAs, HUD shall count as one unit each 
public housing and section 23 bond-financed unit under the ACC, except 
that it shall count as one-fourth of a unit each existing unit under 
Turnkey III program. In addition, HUD shall count as one unit each 
existing unit under the Mutual Help program. Units that are added to an 
PHA's inventory will be added to the overall unit count so long as the 
units are under ACC amendment and have reached DOFA by the date HUD 
establishes for the Federal Fiscal Year in which the CFF is being run 
(hereafter called the ``reporting date''). Any such increase in units 
shall result in an adjustment upwards in the number of units under the 
CFF. New units reaching DOFA after the reporting date will be counted 
for CFF purposes as of the following Federal Fiscal Year.
    (2) Conversion of units. (i) Increases in the number of units 
resulting from the conversion of existing units will be added to the 
overall unit count so long as the units are under ACC amendment by the 
reporting date;
    (ii) For purposes of calculating the number of converted units, HUD 
shall regard the converted size of the unit as the appropriate unit 
count (e.g., a unit that originally was counted as one unit under 
paragraph (f)(1) of this section, but which later was converted into 
two units, shall be counted as two units under the ACC);
    (iii) For purposes of calculating the number of converted units, 
HUD shall make no adjustments prior to the first 10 units lost or 
gained as a result of conversion in a development.
    (3) Reduction of units. For developments losing units as a result 
of demolition, disposition or conversion, the number of units on which 
capital funding is based will be the number of units reported as 
eligible for capital funding as of the reporting date. Units are 
eligible for funding until they are removed due to demolition, 
disposition or conversion in accordance with a schedule approved by 
HUD.
    (g) Computation of formula shares under the CFF. (1) Total 
estimated existing modernization need. The total estimated existing 
modernization need of a PHA under the CFF is the result of multiplying 
for each development the PHA's total number of formula units by its 
estimated existing modernization need per unit, as determined by 
paragraph (d) of this section, and calculating the sum of these 
estimated development needs.
    (2) Total accrual need. The total accrual need of a PHA under the 
CFF is the result of multiplying for each development the PHA's total 
number of formula units by its estimated accrual need per unit, as 
determined by paragraph (e) of this section, and calculating the sum of 
these estimated accrual needs.
    (3) PHA's formula share of existing modernization need. A PHA's 
formula share of existing modernization need under the CFF is the PHA's 
total estimated existing modernization need divided by the total 
existing modernization need of all PHAs.
    (4) PHA's formula share of accrual need. A PHA's formula share of 
accrual need under the CFF is the PHA's total estimated accrual need 
divided by the total existing accrual need of all PHAs.
    (5) PHA's formula share of capital need. A PHA's formula share of 
capital need under the CFF is the average of the PHA's share of 
existing modernization need and its share of accrual need (by which 
method each share is weighted 50%).
    (h) CFF capping. (1) For units that are eligible for funding under 
the CFF (including replacement housing units discussed below) a PHA's 
CFF share will be its share of capital need, as determined under the 
CFF, subject to the condition that no PHA's CFF share for units funded 
under CFF can be less than 94% of its formula share had the FFY 1999 
formula system been applied to these CFF eligible units. The FFY 1999 
formula system is based upon the FFY 1999 Comprehensive Grant formula 
system for PHAs that were 250 or more units in FFY 1999 and upon the 
FFY 1999 Comprehensive Improvement Assistance Program (CIAP) formula 
system for PHAs that were less than 250 units in FFY 1999.
    (2) For a Moving to Work PHA whose agreement provides that its 
capital formula share is to be calculated in accordance with the 
previously existing formula, the PHA's CFF share, during the term of 
the agreement, may be the formula share that the PHA would have 
received had the FFY 1999 formula funding system been applied to the 
CFF eligible units.
    (i) Replacement housing factor to reflect formula need for 
developments with demolition, disposition, or conversion occurring on 
or after October 1, 1998. (1) Replacement housing factor generally. 
PHAs that have a reduction in units attributable to demolition, 
disposition, or conversion of units during the period (reflected in 
data maintained by HUD) that lowers the formula unit count for the CFF 
calculations qualify for application of a replacement housing factor, 
subject to satisfaction of criteria stated in paragraph (i)(5) of this 
section.
    (2) When applied. The replacement housing factor will be added, 
where applicable, for the first 5 years after the reduction in units 
described in paragraph (i)(1) of this section, and will be added for an 
additional 5 years if the planning, leveraging, obligation and 
expenditure requirements are met. As a prior condition of a PHA's 
receipt of additional funds for replacement housing, provided for the 
second 5-year period or any portion thereof, a PHA must obtain a firm 
commitment of

[[Page 49929]]

substantial additional funds other than public housing funds for 
replacement housing, as determined by HUD.
    (3) Computation of replacement housing factor. The replacement 
housing factor consists of the difference between the CFF share without 
the CFF share reduction of units attributable to demolition, 
disposition or conversion, and the CFF share that resulted after the 
reduction of units attributable to demolition, disposition or 
conversion.
    (4) Replacement housing funding in FFY 1998 and 1999. Units that 
received replacement housing funding in FFY 1998 will be treated as if 
they had received two years of replacement housing funding by FFY 2000. 
Units that received replacement housing funding in FFY 1999 will be 
treated as if they had received one year of replacement housing funding 
as of FFY 2000.
    (5) PHA eligibility for replacement housing factor. A PHA is 
eligible for application of this factor only if the PHA satisfies the 
following criteria:
    (i) The PHA requests the application of the replacement factor;
    (ii) The PHA will use the funding in question only for replacement 
housing;
    (iii) The restored funding that results from the use of the 
replacement factor is used to provide replacement housing in accordance 
with the PHA's five-year PHA plan, as approved by HUD in accordance 
with part 903 of this chapter;
    (iv) The PHA has not received funding for public housing units that 
will replace the lost units under the public housing development, Major 
Reconstruction of Obsolete Public Housing, HOPE VI programs, or 
programs that otherwise provide for replacement with public housing 
units;
    (v) A PHA that has been determined by HUD to be troubled that is 
not already under the direction of HUD or a court-appointed receiver, 
in accordance with part 902 of this chapter, must use an Alternative 
Management Entity as defined in part 902 of this chapter for 
development of replacement housing and must comply with any applicable 
provisions of its Memorandum of Agreement executed with HUD under that 
part; and
    (vi) Any development of replacement housing by any PHA must be done 
in accordance with applicable HUD requirements and regulations.
    (6) Failure to provide replacement housing in a timely fashion. If 
the PHA does not use the restored funding that results from the use of 
the replacement housing factor to provide replacement housing in a 
timely fashion, as outlined in paragraph (i)(7)(i) of this section and 
in accordance with applicable HUD requirements and regulations, and 
make reasonable progress on such use of the funding, in accordance with 
HUD requirements and regulations, HUD will require appropriate 
corrective action under these regulations; may recapture and reallocate 
the funds; or may take other appropriate action.
    (7) Requirement to obligate and expend replacement housing factor 
funds within specified period. (i) In addition to the requirements 
otherwise applicable to obligation and expenditure of funds, PHAs are 
required to obligate assistance received as a result of the replacement 
housing factor within:
    (A) 24 months from the date that funds become available to the PHA; 
or
    (B) With specific HUD approval, 24 months from the date that the 
PHA accumulates adequate funds to undertake replacement housing.
    (ii) To the extent the PHA has not obligated any funds provided as 
a result of the replacement housing factor within the times required by 
this paragraph, or expended such funds within a reasonable time, the 
amount of funds to be provided to the PHA as a result of the 
application of the second 5 years of the replacement housing factor 
shall be reduced.
    (j) Performance reward factor. PHAs that are determined as high 
performers under the Public Housing Assessment System (PHAS) for their 
most recent fiscal year can receive 3% in the first five years these 
awards are given (for any year in this 5-year period in which the 
performance reward is earned), and 5% above their base formula amount 
in future years (for any year in which the performance reward is 
earned), subject only to the condition each year that no PHA will lose 
more than 5% of its base formula amount as a result of the 
redistribution of funding from non-high performers to high performers. 
The first performance awards will be given based upon PHAS scores for 
PHA fiscal years ending December 31, 1999, March 31, 2000, June 30, 
2000, and September 30, 2000, with PHAs typically having received those 
PHAS scores within approximately 3 months after the end of those fiscal 
years.

    Dated: September 8, 1999.
Deborah Vincent,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 99-23699 Filed 9-13-99; 8:45 am]
BILLING CODE 4210-33-P