[Federal Register Volume 71, Number 226 (Friday, November 24, 2006)]
[Proposed Rules]
[Pages 68404-68406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19821]



[[Page 68403]]

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

Part III





Department of Housing and Urban Development





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



24 CFR Part 990



 Public Housing Operating Fund Program; Revised Transition Funding 
Schedule for Fiscal Year 2008 Through Fiscal Year 2012; Proposed Rule

  Federal Register / Vol. 71, No. 226 / Friday, November 24, 2006 / 
Proposed Rules  

[[Page 68404]]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 990

[Docket No. FR-5108-P-01]
RIN 2577-AC73


Public Housing Operating Fund Program; Revised Transition Funding 
Schedule for Fiscal Year 2008 Through Fiscal Year 2012

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would modify HUD's regulations for 
transition funding under the Operating Fund Program. The Operating Fund 
Program, as revised by a September 19, 2005, final rule, adopted a new 
formula for determining the payment of operating subsidy to public 
housing agencies (PHAs). Transition funding is based on the difference 
in subsidy levels between the new formula and the formula in effect 
prior to the implementation of the September 19, 2005, final rule. As a 
result of the new formula, PHAs may experience either an increase or 
decrease in the amount of funding that they receive. For PHAs 
experiencing a decline in operating subsidy as a result of the new 
formula, the September 19, 2005, final rule phases in the reduction 
over a period of years. This proposed rule would revise the schedule 
for those PHAs that will experience a decline in funding, by extending 
the transition phase-in period an additional year.

DATES: Comment Due Date: January 23, 2007.

ADDRESSES: Interested persons are invited to submit comments regarding 
this interim rule to the Office of the General Counsel, Rules Docket 
Clerk, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Room 10276 Washington, DC 20410-0001. Communications should refer 
to the above docket number and title and should contain the information 
specified in the ``Request for Comments'' section.
    Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
www.regulations.gov. HUD strongly encourages commenters to submit 
comments electronically. Electronic submission of comments allows the 
commenter maximum time to prepare and submit a comment, ensures timely 
receipt by HUD, and enables HUD to make them immediately available to 
the public. Comments submitted electronically through the http://www.regulations.gov Web site can be viewed by other commenters and 
interested members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable. 
In all cases, communications must refer to the docket number and title.
    Public Inspection of Public Comments. All comments and 
communications submitted to HUD will be available, without charge, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number via TTY by calling the Federal 
Information Relay Service at (800) 877-8339. Copies of all comments 
submitted are available for inspection and downloading at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Elizabeth Hanson, Deputy Assistant 
Secretary, Departmental Real Estate Assessment Center, Office of Public 
and Indian Housing, Department of Housing and Urban Development, 451 
Seventh Street, SW., Room 2000; Washington, DC 20410; telephone (202) 
475-7949 (this is not a toll-free number). Individuals with speech or 
hearing challenges may access this number through TTY by calling the 
toll-free Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On September 19, 2005 (70 FR 54984), 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 to 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. Additionally, on October 24, 2005 (70 FR 61366), HUD 
published a technical correction (Correction Notice) correcting the 
September 19, 2005, final rule to provide that the revised allocation 
formula is to be implemented for calendar year 2007, and adjusting the 
related dates specified in the rule to reflect the corrected 
implementation date.
    In accordance with both the September 19, 2005, final rule and the 
Correction Notice, the new Operating Fund formula for determining 
public housing operating subsidies goes into effect in calendar year 
2007. As a result of the new formula PHAs may experience either an 
increase or decrease in the amount of funding that they receive. HUD 
has posted tables on its Web site providing information on the fiscal 
impact of this change for PHAs under the new Operating Fund formula. 
The tables may be accessed at http://www.hud.gov.
    For PHAs experiencing a decline in operating subsidy as a result of 
the new formula, the September 19, 2005, final rule limits that 
reduction. Under the current regulations a PHA subject to a decline 
would have their subsidy reduced by 24 percent of the difference 
between the old and new funding levels in the first year following 
implementation. In each of the following three years the subsidy will 
be reduced by 43, 62, and 81 percent of the difference, respectively. 
In the last year of the implementation phase-in PHAs will be subject to 
the full decrease. The phase-in of the reduction in subsidy is designed 
to lessen the impact of the decline in funding, assisting PHAs with the 
conversion to asset management while continuing PHAs' ability to 
perform necessary functions and provide services. A PHA subject to a 
decline in operating subsidy may stop its losses by successfully 
demonstrating a conversion to asset management, commonly referred to as 
``stop loss.''
    Through two proposed rules, HUD would alter the transition phase-in 
schedule established in the September 19, 2005, final rule and 
Correction Notice. HUD has previously published a proposed rule to cap 
losses, for federal fiscal year (FFY) 2007, at 5 percent of the 
difference between the two funding levels. As explained in the preamble 
to the previous proposed rule, HUD has proposed this cap due to 
increased utility costs in public housing, which have resulted in 
reduced funding levels relative to total eligibility. This proposed 
rule would modify subsidy reduction schedule for the years after FFY 
2007.
    PHAs that will experience a gain under the new formula would 
receive 50 percent of their gain in FY2007 and the full amount of the 
gain in FY2008. Assuming no change in appropriations, HUD estimates 
that PHAs experiencing a subsidy increase under the new formula will 
have their subsidy reduced

[[Page 68405]]

by approximately 0.7 percent as a result of the extended transition 
schedule established by the proposed rule. While these PHAs have also 
experienced an increase in utility costs, the overall effect of this 
proposed rule is to more closely match the agreements reached during 
the negotiated rulemaking process that developed the revised Operating 
Fund formula.

II. This Proposed Rule

    This proposed rule would revise the schedule for those PHAs that 
will experience a decline in funding, by extending the transition 
phase-in period an additional year. The proposed regulatory change 
reflects HUD's proposal to cap subsidy losses at 5 percent for FFY 2007 
only. The revised schedule that would be established by this proposed 
rule would result in a 24 percent reduction in FFY 2008, 43 percent in 
FFY 2009, 61 percent 2010, and 81 percent in 2011.The phase-in would 
conclude with the full reduction being experienced in FFY 2012. This 
transition phase-in schedule is intended to provide PHAs experiencing a 
reduction in operating subsidy with adequate time to plan and prepare 
their budget and management operations. All other provisions of the 
September 19, 2005, final rule and the Correction Notice would remain 
unchanged and in effect.

III. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``Regulatory Planning and Review''). 
OMB 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, as provided under section 3(f)(1) of the 
Order). Any changes made to the rule subsequent to its submission to 
OMB are identified in the docket file, which is available for public 
inspection in the Regulations Division, Room 10276, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-0500. Due to security measures at the 
HUD Headquarters building, please schedule an appointment to review the 
docket file by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Individuals with speech or hearing 
challenges may access this number through TTY by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

Environmental Impact

    This proposed rule provides operating instructions and procedures 
in connection with activities under a Federal Register document that 
has previously been subject to a required environmental review. 
Accordingly, under 24 CFR 50.19(c)(4), this Notice is categorically 
excluded from environmental review under the National Environmental 
Policy Act (42 U.S.C. 4321).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
The entities that would be subject to this rule are public housing 
agencies that administer public housing. Under the definition of 
``small governmental jurisdiction'' in section 601(5) of the RFA, the 
provisions of the RFA are applicable only to those public housing 
agencies that are part of a political jurisdiction with a population of 
under 50,000 persons. The number of entities potentially affected by 
this rule is therefore not substantial.
    Further, this proposed rule modifies the transition funding 
percentage for FFY 2007 for PHAs experiencing a decline in funding 
between the old and new funding formulas, easing the transition for 
PHAs of all sizes.
    Accordingly, the undersigned certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities. Notwithstanding HUD's determination that this rule will not 
have a significant effect on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in the preamble to this rule.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This rule will not have federalism 
implications and would not impose substantial direct compliance costs 
on State and local governments or preempt State law within the meaning 
of the Executive Order.

Unfunded Mandates Reform Act

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

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) Program number is 
14.850.

List of Subjects in 24 CFR Part 990

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

    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR part 990 to read as follows:

PART 990--THE PUBLIC HOUSING OPERATING FUND PROGRAM

    1. The authority citation for 24 CFR part 990 continues to read as 
follows:

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

    2. In Sec.  990.230, revise paragraphs (a), (b), and (c) and the 
chart in paragaph (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) 5 percent of the difference between the two funding levels in 
the first year of implementation of the formula contained in this part;
    (2) 24 percent of the difference between the two funding levels in 
the second year of implementation of the formula contained in this 
part;
    (3) 43 percent of the difference between the two levels in the 
third year of implementation of the formula contained in this part;
    (4) 62 percent of the difference between the two levels in the 
fourth year of implementation of the formula contained in this part; 
and
    (5) 81 percent of the difference between the two levels in the 
fifth year of implementation of the formula contained in this part.

[[Page 68406]]

    (b) The full amount of the reduction in the operating subsidy level 
shall be realized in the sixth year of 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 $5,000 (5 percent of the difference). 
Thus, the PHA will receive an operating subsidy amount of this rule 
plus a transition-funding amount of $95,000 (the $100,000 difference 
between the two subsidy amounts minus the $5,000 reduction limit).
* * * * *
    (e) * * *

------------------------------------------------------------------------
       Funding period          Demonstration date   Reduction limited to
------------------------------------------------------------------------
Prior to year 1.............  October 1, 2006.....  5 percent of the
                                                     difference between
                                                     the two funding
                                                     levels.
Year 1......................  October 1, 2007.....  5 percent of the
                                                     difference.
Year 2......................  October 1, 2008.....  24 percent of the
                                                     difference.
Year 3......................  October 1, 2009.....  43 percent of the
                                                     difference.
Year 4......................  October 1, 2010.....  62 percent of the
                                                     difference.
Year 5......................  October 1, 2011.....  81 percent of the
                                                     difference.
Year 6......................  October 1, 2012.....  Full reduction
                                                     reached.
------------------------------------------------------------------------

* * * * *

    Dated: October 20, 2006.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
 [FR Doc. E6-19821 Filed 11-22-06; 8:45 am]
BILLING CODE 4210-67-P