[Federal Register Volume 65, Number 54 (Monday, March 20, 2000)]
[Notices]
[Pages 15046-15047]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-6727]



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Part II





Department of Housing and Urban Development





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Notice of Certain Operating Cost-Adjustment Factors; Notice

  Federal Register / Vol. 65, No. 54 / Monday, March 20, 2000 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4569-N-01]


Notice of Certain Operating Cost Adjustment Factors

AGENCY: Office of the Secretary, HUD.

ACTION: Publication of Fiscal Year (FY) 2000 Operating Cost Adjustment 
Factors (OCAFs) for Section 8 rent adjustments at contract renewal 
under section 524 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (MAHRA), as amended by the Preserving 
Affordable Housing for Senior Citizens and Families into the 21st 
Century Act of 1999, and under Low-Income Housing Preservation and 
Resident Homeownership Act of 1990 (LIHPRHA) Projects assisted with 
Section 8 Housing Assistance Payments.

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SUMMARY: This notice establishes factors used in rent adjustments under 
Section 524 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (MAHRA) as amended by the Preserving 
Affordable Housing for Senior Citizens and Families into the 21st 
Century Act of 1999, and under the Low-Income Housing Preservation and 
Resident Homeownership Act of 1990 (LIHPRHA).

EFFECTIVE DATE: March 20, 2000.

FOR FURTHER INFORMATION CONTACT: Willie Spearmon, Department of Housing 
and Urban Development, Office of Multifamily Housing, Office of 
Business Products, 451 Seventh Street, SW, Washington, DC 20410; 
Telephone (202) 708-3000; (This is not a toll-free number). 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. Operating Cost Adjustment Factors (OCAFs)

    Various statutes provide for rents under Section 8 project-based 
assistance contracts to be determined using OCAFs. The legislation 
requiring HUD to establish OCAFs for LIHPRHA projects and projects with 
contract renewals under Section 524 of MAHRA is similar in wording and 
intent, and HUD has developed factors that will be applied to both 
programs. Section 524 gives HUD broad discretion in setting OCAFs. The 
law simply refers to ``operating cost factors established by the 
Secretary.'' The one specific requirement is that application of an 
OCAF shall not result in a negative adjustment.
    An analysis of operating cost data for FHA-insured projects showed 
that their expenses could be grouped into nine categories: wages, 
employee benefits, property taxes, insurance, supplies and equipment, 
fuel oil, electricity, natural gas, and water and sewer. States are the 
lowest level of geographical aggregation at which there are enough 
projects to permit statistical analysis. Based on an analysis of these 
data, HUD derived estimates of the percentage of routine operating 
costs that were attributable to each of these nine expense categories. 
Data for projects with unusually high or low expenses due to unusual 
circumstances were deleted from analysis. No data was available for the 
Western Pacific Islands, and data for Hawaii was used to generate OCAFs 
for these areas.
    The best current measures of cost changes for the nine cost 
categories were selected. The only categories for which current data 
are available at the State level are for fuel oil, electricity, and 
natural gas. Current price change indices for the other six categories 
are only available at the national level. The Department had the choice 
of using dated State-level data or relatively current national data. It 
opted to use national data rather than data that would be two or more 
years older (e.g., the most current local wage data are for 1996). The 
data sources for the nine cost indicators selected used were as 
follows:
    Labor Costs--Bureau of Labor Statistics (BLS).
    Employment Benefit Costs--BLS Employment Cost Index.
    Property Taxes--BLS Consumer Price Index, All Items Index.
    Goods, Supplies, Equipment--BLS Producer Price Index, Finished 
Goods Less Food and Energy.
    Insurance--BLS Consumer Price Index, residential insurance index.
    Fuel Oil--U.S. Department of Energy, average State prices for #2 
residential fuel oil (U.S. average change was used for the States with 
too little fuel oil consumption to have values).
    Electricity--U.S. Department of Energy, ``Electric Power 
Monthly''--October 1999, ``Electric Sales and Revenue--1998.''
    Natural Gas--U.S. Department of Energy, ``Natural Gas Monthly'' 
average annual change (monthly data are available, but are so erratic 
that annual averages offer a more reliable measure).
    Water and Sewer--BLS Consumer Price Index Detailed Report.
    The sum of the nine cost components equals 100 percent of operating 
costs for purposes of OCAF calculations. To calculate the OCAFs, the 
selected inflation factors are multiplied by the relevant State-level 
operating cost percentages derived from the previously referenced 
analysis of FHA insured projects. For instance, if wages in Virginia 
comprised 50 percent of total operating cost expenses and wages 
increased by 4 percent from March 1998 to March 1999, the wage increase 
component of the Virginia OCAF for FY 2000 would be 2.0 percent (4% X 
50%). This 2.0 percent would then be added to the increases for the 
other eight expense categories to calculate the FY 2000 OCAF for 
Virginia. These types of calculations were made for each State for each 
of the nine cost components, and are included as the Appendix to this 
Notice.
    OCAFs are to be applied uniformly to all projects utilizing OCAFs 
as the method by which rents are adjusted upon expiration of the term 
of the contract. OCAFs are applied to project contract rent less debt 
service.

II. MAHRA OCAF Procedure

    The Multifamily Assisted Housing Reform and Affordability Act of 
1997, title V of Pub. L. 105-65 (approved October 7, 1997), 42 U.S.C. 
1437f note (MAHRA) as amended by the Preserving Affordable Housing for 
Senior Citizens and Families into the 21st Century Act of 1999, created 
the Mark-to-Market Program to reduce the cost of Federal housing 
assistance, enhance HUD's administration of such assistance, and to 
ensure the continued affordability of units in certain multifamily 
housing projects. Section 524 of MAHRA authorizes renewal of Section 8 
project-based assistance contracts for projects without Restructuring 
Plans under the Mark-to-Market Program, including renewals that are not 
eligible for Plans and those for which the owner does not request 
Plans. Renewals must be at rents not exceeding comparable market rents 
except for certain projects. For Section 8 Moderate Rehabilitation 
projects, other than single room occupancy projects (SROs) under the 
Stewart B. McKinney Homeless Assistance Act (Mckinney Act, 42 U.S.C. 
11301 et seq.), that are eligible for renewal under section 524(b)(3) 
of MAHRA, the renewal rents are required to be set at the lesser of: 1) 
the existing rents under the expiring contract, as adjusted by the 
OCAF; 2) fair market rents (less any amounts allowed for tenant-
purchased utilities; or 3) Comparable market rents for the market area.

III. Findings and Certifications

    Environmental Impact. This issuance sets forth rate determinations 
and related external administrative

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requirements and procedures that do not constitute a development 
decision affecting the physical condition of specific project areas or 
building sites. Accordingly, under 24 CFR 50.19(c)(6), this notice is 
categorically excluded from environmental review under the National 
Environmental Policy Act of 1969 (42 U.S.C. 4321).
    Executive Order 13132, Federalism. This final rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of Executive Order 13132 (entitled ``Federalism'').
    Catalog of Federal Domestic Assistance Number. The Catalog of 
Federal Domestic Assistance Number for this program is 14.187.

    Dated: March 13, 2000.
Andrew Cuomo,
Secretary.

Appendix

FY 2000 Operating Cost Adjustment Factors (OCAF) for Rent Adjustments at
                       Section 8 Contract Renewal
                              [In percent]
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                             State                                Total
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Alabama........................................................      2.6
Alaska.........................................................      2.4
Arizona........................................................      2.3
Arkansas.......................................................      2.2
California.....................................................      2.0
Colorado.......................................................      2.4
Connecticut....................................................      2.0
Delaware.......................................................      2.5
Dist. of Columbia..............................................      2.5
Florida........................................................      2.2
Georgia........................................................      2.0
Hawaii.........................................................      1.3
Idaho..........................................................      2.5
Illinois.......................................................      1.7
Indiana........................................................      2.4
Iowa...........................................................      2.2
Kansas.........................................................      2.0
Kentucky.......................................................      2.2
Louisiana......................................................      2.0
Maine..........................................................      1.9
Maryland.......................................................      2.4
Massachusetts..................................................      1.6
Michigan.......................................................      2.2
Minnesota......................................................      2.0
Mississippi....................................................      2.4
Missouri.......................................................      2.3
Montana........................................................      2.4
Nebraska.......................................................      2.1
Nevada.........................................................      2.9
New Hampshire..................................................      2.2
New Jersey.....................................................      2.0
New Mexico.....................................................      1.8
New York.......................................................      2.0
N. Carolina....................................................      2.5
N. Dakota......................................................      2.7
Ohio...........................................................      2.4
Oklahoma.......................................................      2.1
Oregon.........................................................      2.7
Pennsylvania...................................................      2.2
Rhode Island...................................................      1.1
S. Carolina....................................................      2.5
S. Dakota......................................................      2.1
Tennessee......................................................      2.7
Texas..........................................................      2.0
Utah...........................................................      2.7
Vermont........................................................      2.4
Virginia.......................................................      2.2
Washington.....................................................      2.4
W. Virginia....................................................      2.5
Wisconsin......................................................      2.3
Wyoming........................................................      2.5
Pacific Islands................................................      2.1
Puerto Rico....................................................      2.4
Virgin Islands.................................................      2.0
U.S. Average...................................................      2.1
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[FR Doc. 00-6727 Filed 3-17-00; 8:45 am]
BILLING CODE 4210-32-P