[Federal Register Volume 66, Number 227 (Monday, November 26, 2001)]
[Notices]
[Pages 59080-59081]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-29268]



[[Page 59079]]

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

Part III





Department of Housing and Urban Development





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



Public Housing Assessment System (PHAS) Information About PHAS Interim 
Scoring Methodology for Public Housing Agencies (PHAs) With Fiscal 
Years Ending On or After September 30, 2001: Introduction; Notice

  Federal Register / Vol. 66, No. 227 / Monday, November 26, 2001 / 
Notices  

[[Page 59080]]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4710-N-01]


Public Housing Assessment System (PHAS) Information About PHAS 
Interim Scoring Methodology for Public Housing Agencies (PHAs) With 
Fiscal Years Ending On or After September 30, 2001: Introduction

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

ACTION: Notice.

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

SUMMARY: HUD assesses America's public housing agencies (PHAs) under 
the Public Housing Assessment System (PHAS). Under the PHAS, HUD 
evaluates PHAs based on four key indicators: (1) The physical condition 
of the PHA's properties; (2) the PHA's financial condition; (3) the 
PHA's management operations; and (4) the residents' assessment (through 
a resident survey) of the PHA's performance. This notice, together with 
two other notices published in today's Federal Register, provides 
additional information on an interim PHAS scoring process for two of 
the four PHAS indicators and other relevant information about PHAS 
scoring.
    This interim scoring for the Physical Condition Indicator and the 
Financial Condition Indicator is effective for PHAs with fiscal years 
ending (FYEs) September 30, 2001, December 31, 2001, March 31, 2002, 
June 30, 2002, and September 30, 2002. During the interim period HUD 
expects to give extensive consideration to potential improvements in 
the public housing assessment system. HUD expects this consideration to 
lead to further changes in the assessment system. If this does not 
occur, however, the scoring notices published prior to today would 
become effective at the end of the interim period (with any necessary 
technical corrections) and PHAS scores would be issued for effect based 
on these notices.

DATES: Comments Due Date: December 26, 2001.

FOR FURTHER INFORMATION CONTACT: For further information contact the 
Real Estate Assessment Center (REAC), Attention: Wanda Funk, U.S. 
Department of Housing and Urban Development, 1280 Maryland Avenue, SW, 
Suite 800, Washington, DC 20024, telephone REAC's Customer Service 
Center at (888) 245-4860 (this is a toll free number) or the Office of 
Public and Indian Housing, Attention: Judy Wojciechowski, Director of 
PHAS Operations, U.S. Department of Housing and Urban Development, 1280 
Maryland Avenue, SW, Suite 800, Washington, DC 20024, telephone (202) 
708-4932 extension 3464. Persons with hearing or speech impairments may 
access these telephone numbers via TTY by calling the Federal 
Information Relay Service at (800) 877-8339. Additional information is 
available from the REAC web site at http://www.hud.gov/reac/.

SUPPLEMENTARY INFORMATION

1. Overview of the PHAS

    On September 1, 1998 (63 FR 46596), HUD published a final rule, 
codified at 24 CFR Part 902, that established a new system for the 
assessment of America's public housing. The PHAS became effective for 
all PHAs with FYE on and after September 30, 1999. The Department 
amended the PHAS rule on January 11, 2000 (65 FR 1712), and deferred 
full implementation of PHAS for PHAs with FYE September 30, 1999 and 
December 31, 1999. The May 30, 2001 notice (66 FR 29342) provided that 
these PHAs would receive an assessment score based only on the 
Management Operations Indicator (MASS) in lieu of a PHAS score.
    On June 6, 2000 (65 FR 36042), HUD issued a technical correction to 
the January 11, 2000, final rule, and further deferred full 
implementation of PHAS for PHAs with FYE on and after June 30, 2000.
    The Conference Report 106-988 for the Department's Fiscal Year 2001 
Appropriations Act (Pub L. 106-377, approved October 27, 2000), 
directed the Department to, among other things, continue to assess the 
accuracy and effectiveness of the PHAS system, to perform a 
statistically valid test of PHAS, conduct a thorough analysis of the 
results, and have the methodology and results reviewed by an 
independent expert before taking any adverse action against a PHA based 
solely on its PHAS score. On March 1, 2001, HUD provided a report 
addressing these issues to the Congressional Committees on its 
Appropriations.
    In addition, consistent with the direction of the conferees, HUD 
issued a PIH notice (Notice PIH 2001-5) on January 19, 2001, which 
provided that prior to March 1, 2001, HUD would not take adverse action 
against PHAs solely on the basis of PHAS scores. ``Adverse action'' was 
defined as troubled designations based upon the official composite PHAS 
score. In accordance with the PIH Notice, all official troubled/
substandard designations (with the exception of a substandard 
designation under the Management Assessment Scoring System (MASS)), 
beginning with PHAs with June 30, 2000, FYE dates, were held in 
abeyance prior to March 1, 2001, the date on which HUD submitted the 
report to its Congressional committees.
    Given those events, HUD published a notice in the Federal Register 
on May 30, 2001 (66 FR 29342), further deferring full implementation of 
PHAS until after June 30, 2001. As provided in this notice, PHAs with 
FYE dates of June 30, 2000, through June 30, 2001, received an 
assessment score based solely on the MASS in accordance with 24 CFR 
part 902, subpart D of the PHAS regulation, as amended by the January 
11, 2000, final rule, and corrected by the June 6, 2000, PHAS Technical 
Correction.

2. Purpose of This Notice

    As provided in the May 30, 2001, notice, the Department met with 
public housing stakeholders (including representatives of PHAs and 
residents, housing advocacy representatives, governmental 
representatives and other groups), to discuss specific PHAS concerns 
and possible solutions. In addition, the Department explained the need 
for an immediate, comprehensive assessment system for all PHAs 
beginning with FYE September 30, 2001.
    As a result of these discussions and further consideration by the 
Department, the Department will make two scoring changes for an interim 
period to provide transition assistance applicable to the issuance of 
overall PHAS scores. More specifically, the Department is revising the 
scoring methodology for the Financial Condition Indicator and the 
Physical Condition Indicator on an interim basis. PHAs with FYEs 
September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002, 
and September 30, 2002 will be scored on their Physical Condition 
Indicator and Financial Condition Indicator using the interim scoring 
methodology. During the interim assessment period, the Department will 
continue to meet with public housing stakeholders in order to further 
discuss PHAS and the scoring processes. With respect to any action that 
may be taken, and consistent with the PHAS rule, HUD will provide 
advance notice of any changes and provide the opportunity for comment.
    This notice provides an overview of the changes to the PHAS scoring 
methodology that will be in effect for the interim assesment period.

3. Changes From the Current PHAS Assessment Methodology

    Under the PHAS, HUD evaluates a PHA based on the following four

[[Page 59081]]

indicators: (1) The physical condition of the PHA's public housing 
properties; (2) the PHA's financial condition; (3) the PHA's management 
operations; and (4) the residents' assessment (through a resident 
survey) of the PHA's performance. Of the total 100 points available for 
a PHAS score, a PHA may receive up to 30 points each for physical, 
financial and management operations, with resident assessment 
accounting for the remaining ten possible points.

A. Physical Condition Indicator

    Current Scoring Assessment. Under the current PHAS scoring 
assessment methodology, a property's overall physical condition is a 
weighted average of the following five inspectable area scores:
    (1) Site (Weight 15%).
    (2) Building Exterior (Weight 15%).
    (3) Building Systems (Weight 20%).
    (4) Common Areas (Weight 15%).
    (5) Dwelling Units (Weight 35%).
    These weights are assigned if all inspectable items are present for 
each area and for each building and unit. All of the inspectable items 
may not be present in every inspectable area. When items are missing in 
an area, the area weights are modified to reflect the missing items so 
that they once again total 100%.
    Interim Scoring Assessment. The following changes are made to the 
Physical Condition Indicator scoring process.
    (1) Physical Condition Indicator Scoring. Under the interim PHAS 
scoring, all five areas will be inspected, scored, and the inspection 
data captured in the system. However, for assessment purposes, a 
property's score, and hence, a PHA's overall Physical Condition 
Indicator score, will be derived only from the deficiencies observed in 
the Building Systems and Dwelling Units. As a result, the area weights 
assigned to Site, Building Exterior and Common Areas, are being re-
distributed to Building Systems and Dwelling Units. A property score is 
still based on a 100-point scale.
    (2) Physical Condition Inspections. (a) For PHAs with a Physical 
Condition Indicator score of less than 24 on the 30-point scale, 
properties will be inspected once a year; and (b) For PHAs with a 
Physical Condition Indicator score of 24 or greater on the 30-point 
scale, properties will be inspected every two years.

B. Financial Condition Indicator

    Current Scoring Assessment. Under the current PHAS scoring 
assessment methodology, the Financial Condition Indicator consists of 
the following six components:
    (1) Current Ratio (Maximum points possible: 9.0).
    (2) Number of Months Expendable Fund Balance (Maximum points 
possible: 9.0).
    (3) Tenant Receivable Outstanding (Maximum points possible: 4.5).
    (4) Occupancy Loss (Maximum points possible: 4.5).
    (5) Expense Management/Utility Consumption (Maximum points 
possible: 1.5).
    (6) Net Income (Maximum points possible: 1.5).
    Currently, five of the six components, excluding Net Income, are 
calculated according to peer groupings. All PHAs as a group determine 
the mean score and each PHA is then ranked accordingly. Scoring 
thresholds were developed to make the peer groupings possible. The 
thresholds identify a point below which component values are clearly 
financially unacceptable; thus component values beyond these thresholds 
result in a score of zero. For component values within the acceptable 
range, PHAs receive a score based on their performance relative to 
their peers. This score is determined by a PHA's position in the 
distribution of values for each component and peer group represented by 
percentiles. For those components on a 4.5 point scale, the cut points 
are set at the 50th and 95th percentiles. For those components on a 9.0 
point scale, the cut points are set at the 30th, 80th and 95th 
percentile. For the Current Ratio and Months Expendable Fund Balance 
components, a PHA receives zero points for component values of less 
than one. With a component value of one or greater, a PHA would receive 
a Current Ratio or Months Expendable Fund Balance component score of 
between 1.0 and 9.0 which corresponds to the 30th and 80th percentiles. 
The actual number of points provided is determined by the distribution 
of the data, and therefore varies by size category.
    Interim Scoring Assessment. During the interim PHAS scoring, the 
Financial Condition Indicator scoring process will remain the same 
except for component #1, Current Ratio, and component #2, Number of 
Months Expendable Fund Balance. Under the interim scoring process, the 
score for Current Ratio and Number of Months Expendable Fund Balance 
will not be based on peer groups. PHAs with a Current Ratio or Months 
Expendable Fund Balance component value of less than one will receive 
zero points for these two components. If the component values for 
Current Ratio and Months Expendable Fund Balance are equal to or 
greater than one, then PHAs, regardless of standing in relation to 
their peers, will receive the full 9 points for each component.

4. Database Adjustments, Technical Reviews, and Appeals of PHAS 
Scores

    During the interim scoring period, a PHA may use the three methods 
set forth in the PHAS regulation to request a review of its PHAS 
scores. A PHA may request a database adjustment pursuant to Sec. 902.25 
of the PHAS regulation, request a technical review pursuant to 
Sec. 902.68 of the PHAS regulation, and appeal its overall PHAS score 
pursuant to Sec. 902.69.

5. Additional Information About the Interim PHAS Assessment Process

    The notices that follow this introductory notice are specifically 
directed to providing further information about the interim PHAS 
scoring assessment process for the two PHAS indicators that are 
impacted. The notices, published in today's Federal Register and that 
immediately follow this introductory notices, are:
     Notice of Interim Assessment Methodology for the Physical 
Condition Indicator of PHAS.
     Notice of Interim Assessment Methodology for the Financial 
Condition Indicator of PHAS.

6. Findings and Certifications

    Environmental Review. This notice and the two accompanying notices 
provide operating instructions and procedures in connection with 
activities under 24 CFR Part 902, which has previously been subject to 
a Finding of No Significant Impact. Accordingly, under 24 CFR 
50.19(c)(4), these notices are categorically excluded from 
environmental review under the National Environmental Policy Act (42 
U.S.C. 4321).

    Dated: November 19, 2001.
Michael Liu,
Assistant Secretary, Public and Indian Housing.
[FR Doc. 01-29268 Filed 11-23-01; 8:45 am]
BILLING CODE 4210-33-P