[Federal Register Volume 70, Number 204 (Monday, October 24, 2005)]
[Rules and Regulations]
[Pages 61366-61367]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-21268]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 990

[Docket No. FR-4874-C-09]
RIN 2577-AC51


Revisions to the Public Housing Operating Fund Program; 
Correction to Formula Implementation Date

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

ACTION: Final rule; correction.

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SUMMARY: This document corrects HUD's final rule published on September 
19, 2005, that implements revisions to the public housing Operating 
Fund Program. The final rule includes dates from the proposed rule that 
assumed both an initial implementation of the revised formula in fiscal 
year (FY) 2006 and a one-year period for PHAs to transition to the new 
formula. In converting the rule from a proposed to final rule, HUD 
unintentionally failed to revise certain dates to reflect the updated 
schedule for implementation of the revised formula. Accordingly, the 
September 19, 2005, final rule inadvertently denies PHAs the one-year 
transition period. This document corrects the September 19, 2005, final 
rule to provide that the revised allocation formula will be implemented 
for calendar year 2007, and adjusts the related dates specified in the 
rule to reflect the corrected implementation date.

EFFECTIVE DATE: The final rule is effective on November 18, 2005.

FOR FURTHER INFORMATION CONTACT: Elizabeth Hanson, Public Housing 
Financial Management Division, Office of Public and Indian Housing, 
Department of Housing and Urban Development, 550 12th Street SW., Suite 
100, Washington, DC 20410; telephone (202) 475-7949 (this telephone 
number is not toll-free). Individuals with speech or hearing 
impairments may access this number through TTY by calling the toll-free 
Federal Information Relay Service at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 19, 2005, (70 FR 54983), HUD published a final rule 
amending the regulations of the Public Housing Operating Fund Program 
at 24 CFR part 990, to provide a new formula for distributing operating 
subsidy to public housing agencies (PHAs) and establish requirements 
for PHAs to convert to asset management. More detailed information 
about this rule can be found in the preamble to the September 19, 2005, 
final rule.

II. This Document

    The September 19, 2005, final rule establishes several requirements 
and determinations connected to the calendar year in which the 
distribution of operating subsidies will be made. Some of the dates in 
the final rule were carried over from the proposed rule and assumed 
both an initial implementation of the revised formula in FY2006, and a 
one-year transition period prior to implementation of the new formula.
    Given the timing of publication and the effective date of the final 
rule, initial implementation of the revised formula must be deferred to 
calendar year 2007 in order to provide PHAs with the necessary one year 
transition period. However, in converting this rule from a proposed 
rule to a final rule, HUD inadvertently failed to revise certain dates 
to reflect the updated schedule for implementation of the new formula, 
and unintentionally denied PHAs the one-year transition period.
    This document corrects certain provisions in the September 19, 
2005, final rule to appropriately reflect initial implementation of the 
revised Operating Fund formula in calendar year 2007. The corrections 
made by this document are necessary to assist PHAs in proper budgetary 
planning and to bring their policies and procedures into compliance 
with the new formula requirements. The effective date of the rule 
remains November 18, 2005, and all other dates contained in the final 
rule that do not affect the new formula allocation of operating 
subsidies are unchanged.
    The following section of this document describes the most 
significant corrections being made to the September 19, 2005, final 
rule.

III. Corrections to the September 19, 2005, Final Rule

    Revised subpart F of 24 CFR part 990 establishes procedures to 
assist PHAs in transitioning to the new funding levels under the new 
Operating Fund formula. As provided in Sec.  990.225 of the final rule, 
the determination of the amount and period of the transition funding 
will be based on the difference in subsidy levels between the revised 
formula and the formula in effect prior to implementation of the final 
rule. Differences in subsidy levels will be calculated using FY 2004 
data.
    1. Transition Funding. Under Sec. Sec.  990.230 and 990.235 of the 
final rule, PHAs that experience a decrease or increase in operating 
subsidy will have that decrease phased-in over a specified number of 
years following the effective date of the final rule (November 18, 
2005). The phase-in period is five years for subsidy reductions and two 
years for increases in operating subsidies. By specifying the date of 
November 18, 2005, the final rule incorrectly connects the first year 
of the phased-in reduction to initial formula implementation in FY 
2006. This document corrects Sec. Sec.  990.230 and 990.235 by removing 
references to specific dates.
    2. Discontinuation of subsidy reduction as a result of conversion 
to asset management (``stop-loss'' provision). As noted above, the 
final rule provides that phased-in reductions in operating subsidy will 
be discontinued if the PHA can demonstrate successful conversion to the 
asset management requirements contained in revised subpart H of the 
part 990 regulations. HUD will discontinue the reduction in accordance

[[Page 61367]]

with the corrected ``stop-loss'' schedule set forth in Sec.  990.230 of 
the final rule that reflects initial formula implementation in calendar 
year 2007. For example, the first demonstration date in the corrected 
schedule is October 1, 2006, as opposed to the October 1, 2005, date 
incorrectly provided in the September 19, 2005, final rule.

0
Accordingly, FR Doc. 05-18624, Revisions to the Public Housing 
Operating Fund Program; Final Rule, (FR-4874-F-08), published in the 
Federal Register on September 19, 2005 (70 FR 54984), is corrected as 
follows:

PART 990--[AMENDED]

0
1. On page 55003, in the second column, correct Sec.  990.195(c) to 
read as follows:


Sec.  990.195  Calculation of formula income.

* * * * *
    (c) Frozen at 2004 level. After a PHA's formula income is 
calculated as described in paragraph (a) of this section, it will not 
be recalculated or inflated for fiscal years 2007 through 2009, unless 
a PHA can show a severe local economic hardship that is impacting the 
PHA's ability to maintain some semblance of its formula income (see 
subpart G of this part--Appeals). A PHA's formula income may be 
recalculated if the PHA appeals to HUD for an adjustment in its 
formula.
* * * * *

0
2. In Sec.  990.225, on page 55004, in the second column, correct the 
first sentence to read as follows:


Sec.  990.225  Transition determination.

    The determination of the amount and period of the transition 
funding shall be based on the difference in subsidy levels between the 
formula set forth in this part and the formula in effect prior to 
implementation of the formula set forth in this part. * * *
* * * * *

0
3. In Sec.  990.230, on page 55004, in the third column, correct 
paragraphs (a), (b), (c), and (e) to read as follows:


Sec.  990.230  PHAs that will experience a subsidy reduction.

    (a) For PHAs that will experience a reduction in their operating 
subsidy, as determined in Sec.  990.225, such reductions will have a 
limit of:
    (1) 24 percent of the difference between the two funding levels in 
the first year following implementation of the formula contained in 
this part;
    (2) 43 percent of the difference between the two funding levels in 
the second year following implementation of the formula contained in 
this part;
    (3) 62 percent of the difference between the two levels in the 
third year following implementation of the formula contained in this 
part; and
    (4) 81 percent of the difference between the two levels in the 
fourth year following implementation of the formula contained in this 
part.
    (b) The full amount of the reduction in the operating subsidy level 
shall be realized in the fifth year following implementation of the 
formula contained in this part.
    (c) For example, a PHA has a subsidy reduction from $1 million 
under the formula in effect prior to implementation of the formula 
contained in this part to $900,000 under the formula contained in this 
part using FY 2004 data. The difference would be calculated at $100,000 
($1 million-$900,000 = $100,000). In the first year, the subsidy 
reduction would be limited to $24,000 (24 percent of the difference). 
Thus, the PHA will receive an operating subsidy amount of this rule 
plus a transition-funding amount of $76,000 (the $100,000 difference 
between the two subsidy amounts minus the $24,000 reduction limit).
* * * * *
    (e) The schedule of reductions for a PHA that will experience a 
reduction in subsidy is reflected in the table below.

----------------------------------------------------------------------------------------------------------------
                                  Demonstration dated
         Funding period                    by                             Reduction limited to
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Prior to year 1.................  October 1, 2006....  5 percent of the difference between
                                                       the two funding levels.
Year 1..........................  October 1, 2007....  24 percent of the difference.
Year 2..........................  October 1, 2008....  43 percent of the difference.
Year 3..........................  October 1, 2009....  62 percent of the difference.
Year 4..........................  October 1, 2010....  81 percent of the difference.
Year 5..........................  October 1, 2011....  Full reduction reached.
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* * * * *

0
4. In Sec.  990.235, on page 55005, in the first and second columns, 
correct paragraphs (a), (b), and (c) to read as follows:


Sec.  990.235  PHAs that will experience a subsidy increase.

    (a) For PHAs that will experience a gain in their operating 
subsidy, as determined in Sec.  990.225, such increases will have a 
limit of 50 percent of the difference between the two funding levels in 
the first year following implementation of the formula contained in 
this part.
    (b) The full amount of the increase in the operating subsidy level 
shall be realized in the second year following implementation of the 
formula contained in this part.
    (c) For example, a PHA's subsidy increased from $900,000 under the 
formula in effect prior to implementation of the formula contained in 
this part to $1 million under the formula contained in this part using 
FY 2004 data. The difference would be calculated at $100,000 ($1 
million-$900,000 = $100,000). In the first year, the subsidy increase 
would be limited to $50,000 (50 percent of the difference). Thus, in 
this example the PHA will receive the operating subsidy amount of this 
rule minus a transition-funding amount of $50,000 (the $100,000 
difference between the two subsidy amounts minus the $50,000 transition 
amount).
* * * * *

    Dated: October 19, 2005.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 05-21268 Filed 10-21-05; 8:45 am]
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