[Federal Register Volume 69, Number 193 (Wednesday, October 6, 2004)]
[Rules and Regulations]
[Pages 59761-59763]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22531]



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  Federal Register / Vol. 69, No. 193 / Wednesday, October 6, 2004 / 
Rules and Regulations  

[[Page 59761]]



OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 591

RIN 3206-AK29


Cost-of-Living Allowances (Nonforeign Areas); Methodology Changes

AGENCY: Office of Personnel Management.

ACTION: Final rule.

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

SUMMARY: The Office of Personnel Management (OPM) is making technical 
changes in the methodology used to determine nonforeign area cost-of-
living allowances (COLAs). The changes correct minor drafting errors; 
provide consistent treatment of sale prices; allow the use of non-
housing price data collected on St. John, U.S. Virgin Islands; correct 
and clarify the definition of survey areas; and allow a one-time 
prospective index adjustment for the Caribbean and Alaska areas 
concurrent with the effective date of any COLA rate changes resulting 
from the 2004 Pacific COLA surveys. OPM is making these changes in 
large part as the result of experience gained in recent COLA surveys 
and upon the recommendation of several groups established to assist us 
in administering the COLA program.

DATES: Effective November 5, 2004.

FOR FURTHER INFORMATION CONTACT: Donald L. Paquin, (202) 606-2838; fax: 
(202) 606-4264; or e-mail: [email protected].

SUPPLEMENTARY INFORMATION: Section 5941 of title 5, United States Code, 
authorizes the payment of cost-of-living allowances (COLAs) to 
employees of the Federal Government stationed in certain nonforeign 
areas outside the contiguous 48 States whose rates of basic pay are 
fixed by statute. Executive Order 10000, as amended, delegates to the 
Office of Personnel Management (OPM) the authority to administer 
nonforeign area COLAs and prescribes certain operational features of 
the program.
    The Government pays nonforeign area COLAs to General Schedule, U.S. 
Postal Service, and certain other Federal employees in Alaska, Hawaii, 
Guam and the Commonwealth of the Northern Mariana Islands (CNMI), 
Puerto Rico, and the U.S. Virgin Islands. OPM conducts COLA surveys in 
each allowance area to determine whether, and to what extent, local 
living costs are higher than those in the Washington, DC, area. OPM 
sets the COLA rate for each area based on the results of these surveys.
    On February 9, 2004, OPM published proposed regulatory changes in 
the Federal Register (69 FR 6020) which would (1) correct minor 
drafting errors; (2) provide consistent treatment of sale prices; (3) 
allow the use of non-housing price data collected on St. John, U.S. 
Virgin Islands; (4) correct and clarify the definition of the survey 
areas; and (5) allow a one-time prospective index adjustment for the 
Caribbean and Alaska areas concurrent with the effective date of any 
COLA rate changes resulting from the 2004 Pacific COLA surveys. We 
received six comments on these proposed changes.
    One comment was from members of the Hilo COLA Advisory Committee 
(CAC). Prior to each survey, OPM establishes CACs in each survey area 
to advise OPM on the COLA surveys and other issues relating to the 
administration of the COLA program. The Hilo CAC noted that the 
definition of the Hilo, Hawaii, survey area (which was stated as the 
``City of Hilo'') was incorrect because Hilo is not a municipality. 
Therefore, OPM is changing the survey area name to the ``Hilo area.''
    Another comment was from members of the Kailua Kona CAC who 
recommend that the Kailua Kona survey area be expanded to include 
Waimea and Waikoloa areas. OPM agreed to survey these areas on a test 
basis in the 2004 survey to determine the feasibility of expanding the 
survey area. OPM found that it was feasible to do so and agrees with 
the recommendation to expand the survey area. To reflect this change, 
OPM is changing the name of the survey area to the ``Kailua Kona/Waimea 
area,'' which includes Waikoloa.
    A third comment was from a member of the Survey Implementation 
Committee, established pursuant to the settlement in Caraballo, et al. 
v. United States, No. 1997-0027 (D.V.I.), August 17, 2000. The 
commenter recommended that OPM no longer collect housing data in 
eastern Puerto Rico because of the closing of Roosevelt Roads Naval 
Station. The commenter suggested that OPM consider surveying other 
areas in Puerto Rico. We agree that OPM may need to revise the areas in 
which it collects housing data in Puerto Rico. Therefore, we have 
removed the reference to eastern Puerto Rico from the Survey Area table 
in 5 CFR 591.215, removed a similar reference from Sec.  591.219(b), 
and allowed for the collection of housing data in other areas in Puerto 
Rico with significant Federal employment.
    Another member of the Survey Implementation Committee recommended 
that we clarify the exception in Sec.  591.219(b), which concerns the 
use of housing data collected in eastern Puerto Rico and in St. John. 
The commenter recommended that the exception state that OPM combines 
housing data collected for St. John with the data collected for St. 
Thomas to produce indexes for the St. Thomas/St. John survey area. We 
agree that the exception in Sec.  591.219(b) may have been confusing 
and have concluded that it is no longer needed. OPM analyzes the data 
it collects in St. Thomas/St. John in the same manner as the data it 
collects in Fairbanks/North Pole, Kailua Kona/Waimea, and other survey 
areas with multiple locations. Therefore, there is no exception 
applicable to St. John.
    A fifth commenter requested that OPM revise the proposed change in 
the definition of ``Washington, DC, area or DC area'' in Sec.  591.201 
to state exactly the situations the change will affect or cite the 
parts or subparts to which the revised definition applies. OPM proposed 
changing the definition of several survey areas to address the need to 
survey certain items on an exception basis in locations beyond the 
local jurisdiction. With one exception, the proposed definitional 
changes were limited to Sec.  591.215(a), which lists the survey areas. 
The exception is the Washington, DC, area, which is defined in Sec.  
591.201 and listed again with the other survey areas in Sec.  
591.215(a).

[[Page 59762]]

    Because the purpose of Sec.  591.201 is to define terms that OPM 
uses throughout subpart B, we believe it would be impractical to cite 
within the definition of the ``Washington, DC, area or DC area'' each 
section where the term is used. OPM also believes it would be 
impractical to state exactly which situations (i.e., items and 
locations) the expanded definition addresses. Survey items change from 
one survey to the next, in large part based on CAC recommendations. 
From experience OPM has learned that it sometimes must survey items, 
such as golf, snow skiing, and air travel, in areas beyond the local 
jurisdictions listed in the table in Sec.  591.215(a). Therefore, OPM 
proposed expanding several of those areas on an exception basis. The 
proposed change lists golf, snow skiing, and air travel as examples 
because setting in regulation exactly which items OPM can survey 
outside a jurisdiction would be overly restrictive and would weaken 
OPM's ability to accommodate CAC suggestions. Therefore, we are not 
adopting the commenter's suggestion, but we are making additional 
changes in the title and column headings in the table in Sec.  
591.215(a) to further clarify survey area definitions.
    Before each survey, OPM consults with the local CACs concerning 
item selection, including any items we might survey outside local 
jurisdictions. We also include a list of the items surveyed in the 
survey reports we publish for comment in the Federal Register. The item 
descriptions identify which items OPM surveyed beyond local 
jurisdictions.
    The sixth commenter stated that Federal employees should not 
receive COLA increases. The commenter noted the high cost of living in 
the Washington, DC, area and stated that she did not believe Federal 
employees in other areas needed to receive more than employees in the 
DC area. OPM notes that section 5941 of title 5, United States Code, 
and Executive Order 10000 require the Federal Government to pay COLAs 
to Federal employees in areas outside the contiguous 48 States where 
living costs are substantially higher than in Washington, DC. Under 
this authority, OPM sets COLA rates after surveying and comparing 
living costs in the COLA areas and the DC area.

Executive Order 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that these regulations will not have a significant 
economic impact on a substantial number of small entities because they 
will affect only Federal agencies and employees.

List of Subjects in 5 CFR Part 591

    Government employees, Travel and transportation expenses, Wages.

Office of Personnel Management.
Kay Coles James,
Director.


0
Accordingly, the Office of Personnel Management amends subpart B of 5 
CFR part 591 as follows:

PART 591--ALLOWANCES AND DIFFERENTIALS

Subpart B--Cost-of-Living Allowance and Post Differential--
Nonforeign Areas

0
1. The authority citation for subpart B of 5 CFR part 591 continues to 
read as follows:

    Authority: 5 U.S.C. 5941; E.O. 10000, 3 CFR, 1943-1948 Comp., p. 
792; and E.O. 12510, 3 CFR, 1985 Comp., p. 338.


0
2. In Sec.  591.201, revise the definition of ``Washington, DC, area or 
DC area'' to read as follows:


Sec.  591.201  Definitions.

* * * * *
    Washington, DC, area or DC area means the District of Columbia; 
Montgomery County, MD; Prince Georges County, MD; Arlington County, VA; 
Fairfax County, VA; Prince William County, VA; and the independent 
cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas 
Park, Virginia; and in the context of certain survey items, includes 
additional geographic locations beyond these jurisdictions.

0
3. In Sec.  591.213, revise paragraph (b)(1) to read as follows:


Sec.  591.213  What prices does OPM collect?

* * * * *
    (b) * * *
    (1) OPM does not collect coupon prices, clearance prices, going-
out-of-business prices, or area-wide distress sale prices.
* * * * *

0
4. In Sec.  591.215, revise paragraph (a) to read as follows:


Sec.  591.215  Where does OPM collect prices in the COLA and DC areas?

    (a) Survey areas. Each COLA area has one survey area, except Hawaii 
County, HI, and the U.S. Virgin Islands COLA areas. Hawaii County has 
two survey areas: the Hilo area and the Kailua Kona/Waimea area. The 
U.S. Virgin Islands also has two survey areas: the Island of St. Croix 
and the Islands of St. Thomas and St. John. The Washington, DC, area 
has three survey areas: the District of Columbia, the Maryland suburbs 
of the District of Columbia, and the Virginia suburbs of the District 
of Columbia. OPM collects non-housing data throughout the survey area, 
and for selected items such as golf, snow skiing, and air travel, OPM 
collects non-housing data in additional geographic locations. OPM may 
collect housing data throughout the survey area or in specific housing 
data collection areas. The following table shows the survey areas:

                              Survey Areas
------------------------------------------------------------------------
                                           Survey areas and geographic
        COLA and reference areas                     coverage
------------------------------------------------------------------------
Anchorage..............................  City of Anchorage.\1\
Fairbanks..............................  Fairbanks/North Pole area.\1\
Juneau.................................  Juneau/Mendenhall/Douglas
                                          area.\1\
Rest of Alaska.........................  See paragraph (c) of this
                                          section.
Honolulu...............................  City and County of Honolulu.
Hawaii County..........................  Hilo area.\1\
                                         Kailua Kona/Waimea area.
Kauai..................................  Kauai Island.
Maui...................................  Maui Island.
Guam & CNMI............................  Guam.
Puerto Rico............................  San Juan/Caguas area.\2\
U.S. Virgin Islands....................  St. Croix.
                                         St. Thomas/St. John area.\3\
Washington, DC-DC......................  District of Columbia.\1\

[[Page 59763]]

 
Washington, DC-MD......................  Montgomery County and Prince
                                          Georges County.\1\
Washington, DC-VA......................  Arlington County, Fairfax
                                          County, Prince William County,
                                          City of Alexandria, City of
                                          Fairfax, City of Falls Church,
                                          City of Manassas, and City of
                                          Manassas Park.\1\
------------------------------------------------------------------------
\1\ For selected items, such as golf, snow skiing, and air travel, these
  survey areas may include additional geographic locations beyond these
  jurisdictions.
\2\ OPM may collect housing data in other areas in Puerto Rico that have
  a significant concentration of Federal employees stationed in those
  areas.
\3\ OPM collects housing data in St. John. OPM also may collect non-
  housing data from selected outlets in St. John.

* * * * *

0
5. In Sec.  591.216, revise paragraph (b) to read as follows:


Sec.  591.216  How does OPM combine survey data for the DC area and for 
COLA areas with multiple survey areas?

* * * * *
    (b) COLA areas with multiple survey areas. OPM computes weighted 
average indexes at the item, PEG, MEG, and/or overall level by using 
the corresponding indexes and Federal employment weights from each 
survey area within the COLA area.

0
6. In Sec.  591.219, revise paragraph (b) to read as follows:


Sec.  591.219  How does OPM compute shelter price indexes?

* * * * *
    (b) OPM then uses these characteristics and rental prices and/or 
estimates in hedonic regressions (a type of multiple regression) to 
compute for each COLA survey area the price index for rental and/or 
rental equivalent units of comparable quality and size between the COLA 
survey area and the Washington, DC, area.

0
7. In Sec.  591.222, revise paragraph (c) to read as follows:


Sec.  591.222  How does OPM use the expenditure weights to combine 
price indexes?

* * * * *
    (c) Step 3. OPM repeats the process described in Step 2 at each 
level of aggregation within the PEG to produce a price index for the 
PEG, at the PEG level to produce an index for the MEG, and at the MEG 
level to produce the overall price index for the COLA area.

0
8. In Sec.  591.224, revise paragraph (b) and add paragraph (c) to read 
as follows:


Sec.  591.224  How does OPM adjust price indexes between surveys?

* * * * *
    (b) Paragraph (a) of this section applies beginning with the 
effective date of the results of the 2005 survey conducted in Puerto 
Rico and the U.S. Virgin Islands.
    (c) Based on additional housing data that may be collected before 
the 2005 survey conducted in Puerto Rico and the U.S. Virgin Islands, 
OPM will adjust as warranted the price indexes and COLA rates for 
Puerto Rico, the U.S. Virgin Islands, and the COLA areas in the State 
of Alaska. OPM will implement any such adjustments on a one-time basis 
on the effective date of the results of the 2004 surveys conducted in 
Hawaii and Guam/CNMI, and subject to Sec.  591.228. OPM will publish 
such adjustments as provided in Sec.  591.229.

[FR Doc. 04-22531 Filed 10-5-04; 8:45 am]
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