[Federal Register Volume 72, Number 76 (Friday, April 20, 2007)]
[Rules and Regulations]
[Pages 20018-20028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-7470]



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Part II





Department of Housing and Urban Development





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24 CFR Part 1000



 Native American Housing Assistance and Self-Determination Act 
(NAHASDA); Revisions to the Indian Housing Block Grant Program Formula; 
Final Rule

  Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Rules 
and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 1000

[Docket No. FR-4938-F-03]
RIN 2577-AC57


Native American Housing Assistance and Self-Determination Act 
(NAHASDA); Revisions to the Indian Housing Block Grant Program Formula

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

ACTION: Final rule.

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SUMMARY: This final rule makes several revisions to the regulations for 
the Indian Housing Block Grant (IHBG) program allocation formula. 
Through the IHBG program, HUD provides federal housing assistance to 
Indian tribes in a manner that recognizes the right of Indian self-
determination and tribal self-government. This final rule follows 
publication of a February 25, 2005, proposed rule and takes into 
consideration the public comments received on the proposed rule. Other 
than one conforming change, this final rule adopts the February 25, 
2005, proposed rule without change. HUD negotiated the proposed rule 
and final rule with active tribal participation and using the 
procedures of the Negotiated Rulemaking Act of 1990.

DATES: Effective Date. May 21, 2007.

FOR FURTHER INFORMATION CONTACT: Rodger J. Boyd, Deputy Assistant 
Secretary for Native American Programs, Office of Public and Indian 
Housing, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 4126, Washington, DC 20410-5000; telephone (202) 401-
7914 (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 (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On February 25, 2005, HUD published a proposed rule (70 FR 9490) to 
revise the regulations for the Indian Housing Block Grant (IHBG) 
program allocation formula. The IHBG program is authorized by the 
Native American Housing Assistance and Self-Determination Act of 1996 
(25 U.S.C. 4101 et seq.) (NAHASDA), which changed the way that housing 
assistance is provided to Native Americans. NAHASDA eliminated several 
separate assistance programs and replaced them with a single block 
grant program. NAHASDA and its implementing regulations at 24 CFR part 
1000 recognize tribal self-determination and self-governance while 
establishing reasonable standards of accountability. The part 1000 
regulations were developed with active tribal participation using the 
procedures of the Negotiated Rulemaking Act of 1990 (5 U.S.C. 561-570).
    Under the IHBG program, HUD makes assistance available to eligible 
Indian tribes for affordable housing activities. The amount of 
assistance made available to each Indian tribe is determined in 
accordance with the allocation formula that was developed as part of 
the NAHASDA negotiated rulemaking process (IHBG Formula). A regulatory 
description of the IHBG Formula is located in subpart D of 24 CFR part 
1000 (Sec. Sec.  1000.301-1000.340).
    The current IHBG Formula consists of two components: Need and 
Formula Current Assisted Stock (FCAS). Generally, the amount of annual 
funding for an Indian tribe is the sum of the Need component (subject 
to a minimum funding amount authorized by Sec.  1000.328) and the FCAS 
component. Based on the amount of funding appropriated annually for the 
IHBG program, HUD calculates the annual grant for each Indian tribe and 
provides this information to the Indian tribes. An Indian Housing Plan 
(IHP) for the Indian tribe is then submitted to HUD. If the IHP is 
found to be in compliance with statutory and regulatory requirements, 
the grant is made.
    Section 1000.306 of the IHBG program regulations provides that the 
IHBG Formula shall be reviewed within 5 years after issuance. 
Accordingly, HUD established the IHBG Formula Negotiated Rulemaking 
Committee (Committee) for the purposes of reviewing the regulations at 
24 CFR part 1000, subpart D, and negotiating recommendations for a 
possible proposed rule modifying the IHBG Formula. The Committee 
membership consisted of 24 elected officers of tribal governments (or 
authorized designees of those tribal governments). The Committee 
membership reflected a balanced representation of Indian tribes, both 
geographically and based on size. In addition to the tribal members, 
there were two HUD representatives on the Committee. The first meeting 
of the Committee took place in April 2003 and the Committee continued 
to meet thereafter on approximately a monthly basis. The Committee met 
a total of seven times to negotiate the proposed rule, with the final 
meeting being held in January 2004. All of the Committee sessions were 
announced in the Federal Register and were open to the public, and 
interested members of the public actively participated in the workgroup 
sessions. The February 25, 2005, proposed rule reflected the consensus 
decisions reached by the Committee during the negotiated rulemaking 
process on the best way to address certain areas of the IHBG Formula 
that the Committee determined required clarification, were outdated, or 
were not operating as intended by the original Negotiated Rulemaking 
Committee. The preamble to the February 25, 2005, proposed rule 
provides additional details regarding the proposed regulatory changes 
to the IHBG Formula, and the negotiated rulemaking process used to 
develop the proposed changes.

II. This Final Rule; Conforming Change to the February 25, 2005, 
Proposed Rule

    This final rule follows publication of the February 25, 2005, 
proposed rule and takes into consideration the public comments received 
on the proposed rule. The public comment period on the proposed rule 
closed on April 26, 2005. HUD received 49 public comments from Indian 
tribes on the proposed rule. The Committee met on January 31 through 
February 1, 2006, to review and consider responses to the public 
comments. A drafting workgroup was charged with developing the preamble 
to this final rule. The membership of the workgroup consisted of HUD 
and tribal representatives. The 2-day meeting, which was open to the 
public, was announced in the Federal Register through a notice 
published on January 13, 2006 (71 FR 2176).
    Conforming changes to appendices A and B were required based on the 
regulatory changes adopted by the Committee in this final rule. 
Therefore, these conforming changes to appendices A and B are adopted 
in this final rule. No other changes are made to the appendices.
    After careful consideration of the comments, the Committee reached 
consensus on making a conforming typographical change to Sec.  
1000.316(a)(2) and (a)(3). Other than these conforming changes (which 
are discussed below in this preamble), the regulatory revisions that 
were proposed in the February 25, 2005, proposed rule are unchanged in 
this final rule.

III. Discussion of Public Comments on the February 25, 2005, Proposed 
Rule

    This section of the preamble presents a summary of the significant 
issues raised by the public commenters on the February 25, 2005, 
proposed rule and

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the Committee's responses to these comments. For the convenience of 
readers, the discussion of the public comments is organized into three 
sections. The first section discusses the general comments that were 
received on the proposed rule. The second section discusses the public 
comments received on specific proposed regulatory changes contained in 
the proposed rule. The third section discusses the public comments 
received on non-consensus issues (i.e., those issues on which the 
Committee could not reach agreement on proposed regulatory language).

A. General Comments

    Comment. Twenty-eight commenters praised the IHBG Formula 
negotiated rulemaking process and offered support that all revisions to 
NAHASDA regulations be developed using negotiated rulemaking. Further, 
these commenters requested that all public comments be considered by 
the Committee in a face-to-face meeting before HUD develops the final 
rule.
    Response: The Committee appreciates the commenters' support for the 
negotiated rulemaking process and for the Committee's efforts. As noted 
above, this Committee met during January 31 through February 1, 2006, 
to consider the public comments and develop this final rule.

B. Comments on Specific Proposed Regulatory Changes

    Comment regarding the revised definition of Formula Area. The 
February 25, 2005, rule proposed to revise the definition of the term 
``Formula Area'' located in Sec.  1000.302. Many comments were received 
on various aspects of this revised definition. For example, five 
commenters objected to the inclusion of Oklahoma Tribal Statistical 
Areas (OTSAs), as defined by the U.S. Census, in the list of acceptable 
formula areas. The commenters wrote that the inclusion of OTSAs as 
formula areas will ``shift funding from Reservation restricted trust 
lands to Fee Simple State lands.'' Other commenters suggested that the 
rule be revised to remove Tribal Designated Statistical Areas (TDSAs) 
from the list of formula areas. These commenters recommended that the 
final rule should instead use the listing of federally recognized 
tribes published by the Department of Interior.
    Response: The final rule has not been revised in response to these 
comments. The Committee continues to believe that the proposed changes 
to the definition of Formula Area help to clarify the current 
definition and better address the different types of geographic areas 
served by Indian tribes. In response to the comments objecting to the 
inclusion of OTSAs, the Committee does not agree that the inclusion of 
such areas will necessarily result in a shift in funding and notes that 
the final rule continues to provide for challenges to the 
``grandfathering'' of the current formula areas for such tribal areas 
in Oklahoma. Additionally, geographic areas encompassed by OTSAs are 
not new to the formula, but rather reflect a change in terminology used 
by the Census Bureau. These geographic areas were previously referred 
to as Tribal Jurisdictional Statistical Areas and have historically 
been included in the IHBG formula. With regard to the commenters 
recommending the use of the list of federally recognized tribes, some 
federally recognized tribes do not have a reservation or trust land. 
Additionally, five state recognized tribes have been grandfathered into 
the IHBG program by statute. As noted above, the inclusion of TDSAs 
simply provides Indian tribes with another Formula Area option that may 
better reflect the geographic areas they serve.
    Comments regarding the definition of Alaska Formula Area. Several 
commenters raised concerns about the proposed definition of Alaska 
Formula Area. Some of these commenters were concerned about the 
procedures contained in the definition for crediting Alaska needs data. 
One of these commenters wrote that NAHASDA does not authorize HUD to 
grant IHBG funds to ``Alaska Native Villages,'' only to sovereign 
Indian or Alaska Native tribes, and suggested that the definition be 
revised accordingly. Some of the commenters raised concern about the 
provision for expanding Alaska Formula Areas. Several of these 
commenters objected to the perceived ``ability of any corporation to be 
able to expand their service or formula areas.'' Another commenter, 
however, requested that the final rule clarify the ability of Alaska 
Indian tribes to expand their Formula Area.
    Response: The rule has not been revised in response to these 
comments. The regulatory provision regarding Alaska Formula Areas 
addresses the unique circumstances of Indian tribes in Alaska, and is 
consistent with the statutory requirements of NAHASDA. The language 
regarding the crediting of formula data is identical to that found in 
Sec.  1000.327 of the current regulations. The change proposed by the 
February 25, 2005, rule was simply to transfer this language to the 
definition of Formula Area for purposes of clarity. With regard to the 
expansion of Alaska Formula Areas, the proposed and final rules make 
clear that Alaska tribes may seek to expand their Formula Areas in the 
same manner as any other Indian tribe. Alaska Native Villages have been 
listed and are recognized as ``federally recognized Indian tribes'' by 
the Secretary of Interior (70 FR 71194). Additionally, NAHASDA defines 
Alaska Native Villages, regional corporations, and village corporations 
as Indian tribes, expressly making them eligible for provisions under 
the statute.
    Comments on the population cap used to determine formula area. 
Several commenters wrote in support of the continued use of the ``cap'' 
on the population data that will be attributed to an Indian tribe 
within its Formula Area. In particular, the commenters supported the 
clarification that for state-recognized tribes the population data and 
formula allocation shall be limited to tribal enrollment figures 
reflecting tribal enrollment criteria in effect in 1996. The commenters 
wrote that the cap must be enforced to prohibit state recognized tribes 
from being credited with any new members.
    Response: The Committee agrees that the cap is necessary to 
maintain fairness for all Indian tribes. As explained in the preamble 
to the February 25, 2005, proposed rule, the provision regarding state-
recognized Indian tribes is statutorily based. The definition of state-
recognized tribe in section 4(12)(C)(ii) of NAHASDA requires that the 
allocation for such a tribe shall be determined based on tribal 
membership eligibility criteria in existence on the date of enactment 
(October 26, 1996). The language of the proposed rule (and adopted by 
this final rule) helps to ensure that state-recognized tribes will not 
be credited for any new members who do not meet the 1996 enrollment 
criteria. However, the rule does not prohibit a state-recognized Indian 
tribe from being credited with new members who meet the enrollment 
criteria in place in 1996 and it does not freeze a state-recognized 
Indian tribe's population data or formula allocation at 1996 levels.
    Comments regarding the expansion and redefinition of Formula Area. 
The proposed rule described new procedures governing the expansion or 
re-definition of an Indian tribe's Formula Area. One tribe objected to 
reducing the new area to the ``smallest U.S. Census unit or units'' 
when there are other reasonable boundaries that can be followed, such 
as municipal or tribal boundaries.
    Response: The rule has not been revised in response to this 
comment. The new requirements were carefully crafted by the Committee 
to ensure that

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an Indian tribe seeking to include additional geography within its 
approved Formula Area has the authority to provide housing services 
within the new geography and will serve the housing needs of Native 
Americans within the expanded Formula Area. The provision noted by the 
commenter is consistent with these goals because it limits expansion to 
those U.S. Census units for which the tribe can verify that it has the 
requisite legal authority and the ability to provide housing services. 
Despite differing views on its limitations, the Committee decided to 
base the limitation on U.S. Census data because such data is uniformly 
collected and accessible to all Indian tribes and because no acceptable 
alternative source has yet been developed and agreed upon.
    Comments regarding the definition of Substantial Housing Services. 
Among the required criteria for expanding its Formula Area, the Indian 
tribe must demonstrate that it is providing ``substantial housing 
services'' (as defined in the rule) within the new geographic area. 
Several of the commenters objected to the requirement that the tribe 
demonstrate affordable housing activities equal to at least 100 percent 
of the increase in its IHBG Formula allocation or 51 percent of the 
tribe's current formula allocation. The commenters wrote that this 
requirement establishes an excessively high and difficult threshold for 
expansion. Several commenters wrote that the definition would make it 
especially difficult for small tribes in California and Nevada, whose 
IHBG Formula allocation is based largely on the FCAS component needed 
for maintaining current housing stock, to include locations outside 
their existing Formula Areas even if they provide housing services to 
their enrolled members in those areas.
    Response: The rule has not been revised in response to these 
comments. As noted above in this preamble, the new requirements 
regarding the expansion of Formula Area were carefully crafted by the 
Committee. The definition of substantial housing services intentionally 
contains thresholds that are designed to ensure that an Indian tribe 
seeking to include additional geography within its approved Formula 
Area has the authority to provide housing services within the new 
geography and will serve the housing needs of Native Americans within 
the expanded Formula Area. However, the definition also contains the 
necessary flexibility to help address geographic and other differences 
among Indian tribes. Specifically, the rule permits Indian tribes to 
satisfy the substantial housing services requirements in one of two 
ways: to either provide 100 percent of the increase in its IHBG Formula 
allocation or 51 percent of the tribe's current formula allocation if 
certain other conditions are satisfied.
    Comments regarding the use of U.S. Census data in overlapping 
Formula Areas. Current regulations at Sec.  1000.326 specify how IHBG 
funds will be allocated where the Formula Areas of one or more tribes 
overlap. Among other factors, the allocation will be based upon the 
Indian tribe's proportional share of the population in the geographic 
area. Tribal membership in the geographic area (not including dually 
enrolled tribal members) will be based on data that all Indian tribes 
involved agree to use. The current regulation lists several suggested 
data sources, including tribal enrollment lists, Indian Health Service 
User Data, and Bureau of Indian Affairs data. This list is not 
exclusive, and the data used for this purpose has sometimes included 
U.S. Census data. For purposes of clarity, the proposed rule expanded 
the list of suggested data sources to explicitly include data from the 
U.S. Census. Five commenters objected to the use of Census data, 
suggesting that HUD instead utilize official enrollment data from the 
tribe.
    Response: The change clarifies that the U.S. Census data is one of 
several data sources that may be used to determine tribal population. 
The Committee notes that the regulation does not require the use of 
Census data and does not preclude the use of other data, including the 
tribal enrollment figures recommended by the commenters. Accordingly, 
the Committee determined that a change to the rule was not necessary.
    Comments regarding the required use of the Formula Response Form 
for reporting changes to FCAS. The February 25, 2005, rule proposed to 
add a new Sec.  1000.315 and Sec.  1000.319, both clarifying policies 
and procedures relating to the reporting of changes to FCAS. New Sec.  
1000.315 clarifies that the Formula Response Form is the only mechanism 
a recipient may use to report changes to the FCAS. New Sec.  1000.319 
provides that if a recipient receives an overpayment of funds because 
it failed to report changes on the Formula Response Form in a timely 
manner, the recipient must repay the funds within 5 fiscal years. 
Conversely, HUD has agreed to provide back funding for any undercount 
of units that occurred and was reported or challenged prior to October 
30, 2003. In their comments, 34 tribes offered support for these rule 
changes. The commenters supported the change on over- and under-
counting of FCAS, as well as the formula response form change at Sec.  
1000.319.
    Response: The Committee appreciates the support of the comments. 
The final rule adopts the provisions of proposed Sec. Sec.  1000.315 
and 1000.319 without change.
    Comments regarding the calculation of the operating subsidy 
component of FCAS. For clarity, the February 25, 2005, rule proposed to 
make a minor, non-substantive modification to Sec.  1000.316(a)(1). The 
current language of the regulation provides that the first of the three 
variables comprising the operating subsidy component of FCAS is ``the 
number of low-rent FCAS units multiplied by the FY 1996 national per 
unit subsidy (adjusted to full funding level) multiplied by an 
adjustment factor for inflation.'' The proposed provision would 
simplify this provision by establishing a separate definition of the 
term ``national per unit subsidy'' in Sec.  1000.302, which contains 
the definitions applicable to the IHBG program.
    Twenty-eight commenters wrote in support of the change. However, 
one of the commenters identified a typographical inconsistency between 
Sec.  1000.316(a)(1) and paragraphs (a)(2) and (a)(3) of Sec.  
1000.316. Specifically, the proposed rule inadvertently failed to 
include the same changes to paragraphs (a)(2) and (a)(3) as were 
proposed for paragraph (a)(1). The commenter requested that the final 
rule correct this error. Two other commenters submitted comments 
related to Sec.  1000.316, but that were outside the scope of the 
proposed rule and therefore not appropriate for inclusion at this final 
rule stage. Specifically, one commenter advocated the participation of 
all Indian tribes in the Section 8 voucher program, while the other 
commenter advocated for increased IHBG funding.
    Response: The Committee appreciates the support expressed by the 
commenters on the clarifying change. As noted above in this preamble, 
the final rule makes the necessary correction to paragraphs (a)(2) and 
(a)(3) of Sec.  1000.316.
    Comments regarding the FCAS modernization allocation for small 
Indian tribes. The February 25, 2005, rule proposed to implement a 
statutory amendment to NAHASDA by making various conforming changes to 
the IHBG regulations. Section 1003(g) of the Omnibus Indian Advancement 
Act (Pub. L. 106-568, approved December 27, 2000) added a new 
subsection

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302(d)(1)(B) to NAHASDA regarding operating and modernization funding 
for Indian tribes with Indian Housing Authorities (IHAs) that owned or 
operated fewer than 250 units developed under the United States Housing 
Act of 1937 (42 U.S.C. 1437 et seq.) (1937 Act). The proposed rule 
contained conforming changes to Sec.  1000.316 and Sec.  1000.340 to 
codify this statutory requirement.
    Twenty-nine commenters offered support for the proposed regulatory 
changes to accommodate the statutory amendment to NAHASDA regarding 
operating and modernization funding for tribes that owned or operated 
fewer than 250 units. Five commenters, although acknowledging that the 
regulatory changes were statutorily based, wrote that the statutory 
amendment is unfair to those tribes that did not receive the one-time 
competitive modernization grant in 1997. One commenter requested 
clarification regarding the effect of the regulatory change for Indian 
tribes that had more than 250 units on October 1, 1997.
    Response: The rule has not been revised in response to these 
comments. As the commenters acknowledged, the regulatory change 
conforms the IHBG regulations to the statutory language of section 
302(d)(1)(B) of NAHASDA. In response to the commenter requesting 
additional clarification, the statutory change does not affect the 
calculation of operating and modernization funding for Indian tribes 
that had more than 250 units on October 1, 1997.
    Comments regarding small programs/minimum funding. The February 25, 
2005, rule proposed numerous revisions to the minimum funding 
provisions at Sec.  1000.328. Among other changes, the rule proposed to 
remove the current provisions regarding the minimum IHBG Formula Need 
allocation for an Indian tribe in its first year of participation in 
the IHBG program. The rule also proposed to revise the minimum formula 
allocation an Indian tribe will receive under the Need component of the 
IHBG Formula after its first year of participation in the program. The 
February 25, 2005, proposed rule also proposed new eligibility 
requirements for minimum funding.
    Thirty-four comments offered support for the revised minimum 
funding provisions, and 28 of these commenters recommended that the 
provisions be adopted without change. Five commenters wrote that the 
minimum funding provisions will not provide small tribes with adequate 
funds to meaningfully address their housing needs. These commenters 
recommended that FCAS should not be considered in providing minimum 
funding, as these funds go toward maintenance of existing housing and 
do not address the unmet need for housing assistance. These commenters 
also objected to the requirement that the Indian tribe demonstrate a 
need for the minimum funding, writing that this requirement is 
unnecessary and duplicative because each tribe's IHP already contains a 
statement of needs.
    Response: The rule has not been revised in response to these 
comments. As noted in the preamble to the proposed rule, the minimum 
funding provision provides for a minimum needs allocation of $50,000 
based on current IHBG appropriations. The Committee continues to 
believe that this provision is fair to all Indian tribes while helping 
to ensure an adequate minimum level of funding for smaller tribes. With 
regard to the eligibility requirements, the Committee concluded they 
are necessary to ensure that the minimum funding provisions benefit 
Indian tribes that would otherwise be unable to provide even minimal 
housing services and that have a demonstrated need for such services. 
The requirement is not duplicative because tribes will demonstrate the 
presence of any households at or below 80 percent of median income only 
in the IHP.
    Comments regarding the adjustment of the Need variables using birth 
and death rate data. Section 1000.330 describes the data sources used 
for the Need component. The February 25, 2005, rule proposed to revise 
this section to codify existing procedures by specifying that the data 
for the Need variables shall be adjusted annually beginning the year 
after the Need data is collected, using Indian Health Service 
projections based upon birth and death rate data as provided by the 
National Center for Health Statistics.
    Twenty-eight commenters wrote in support of the consensus position 
on birth and death rates. Five commenters wrote that, while death and 
birth rates are a fair method to adjust the Need component, it should 
be the responsibility of the tribes to report annual enrollment 
certification instead of HUD.
    Response: The birth and death rate provision has been adopted 
without change. As noted, the regulatory change codifies an existing 
procedure that both Indian tribes and HUD have determined works 
effectively and fairly in adjusting the Formula Need component for 
birth and death rates. Procedures at Sec.  1000.336 have also been 
revised to include challenges of birth and death rate data used in 
computing Indian Health Service projections.
    Comments regarding data challenges and appeals of HUD formula 
determinations. The September 25, 2005, rule proposed to clarify and 
elaborate upon existing Sec.  1000.336, which describes the procedures 
that an Indian tribe, tribally designated housing entities (TDHE), and 
HUD may use to challenge data. Under the proposed rule, Sec.  1000.336 
would continue to authorize data challenges, but also provide for 
appeal of certain HUD formula determinations. Thirty-four commenters 
wrote in support of the proposed rule provisions regarding data 
challenges and appeals. However, five commenters objected to the use of 
U.S. Census data to determine need.
    Response: The consensus position as described in the proposed rule 
remains unchanged in the final rule. The Committee appreciates the 
support expressed by the majority of comments on this provision, and 
believes that the new regulatory language will assist both tribes and 
HUD by clarifying the policies and procedures for challenging data and 
appealing formula determinations.

C. Comments Regarding Nonconsensus Items

    Comments regarding formula median income. During negotiations, the 
Committee considered removing the definition of ``formula median 
income'' used in calculating the Need component of the IHBG Formula 
and, in its place, using the definition of ``median income'' provided 
under section 4 of NAHASDA. The Committee was unable to reach consensus 
on this issue and therefore a regulatory change was not contained in 
the February 25, 2005, proposed rule.
    A majority of commenters requested that the Committee revisit the 
issue. Twenty-nine commenters explained that there was not enough time 
to properly address the issue during the negotiations. They wrote that 
the use of two separate definitions of median income (one for the 
formula and the other for use elsewhere in the IHBG regulations) was 
confusing and contradictory to the intent of NAHASDA. The commenters 
also wrote that the formula definition unfairly results in some Indian 
tribes not receiving IHBG funding for low-income Indian families who 
must be served by the tribe.
    Response: No change has been made to the rule in response to these 
comments. As noted above and discussed in detail in the preamble to the 
proposed rule, the Committee could

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not reach consensus on whether to revise the definition of formula 
median income. Because decision-making during the negotiated rulemaking 
process was based on consensus, the absence of consensus on formula 
median income, even after full consideration of public comments, 
precluded the Committee from adopting the changes proposed by the 
commenters. Moreover, such a revision would not have been appropriate 
at this final rule stage, as it would require additional notice and 
public comment.
    Comments regarding the Section 8 inflation factor. During 
negotiations on the proposed rule, the Committee considered various 
proposals to remove the inflation adjustment factor for Section 8 units 
in calculating FCAS, but was unable to reach consensus on a regulatory 
change. There were several comments received that made suggestions 
outside the scope of the proposed rule. Specifically, five commenters 
suggested that the regulations be revised to provide that as an 
individual Section 8 voucher expires, the associated funding be placed 
in a ``pot'' in the same way as other FCAS are conveyed. One commenter 
raised an objection to the statutory language of section 502(a) of 
NAHASDA, which, according to the commenter, effectively includes 
Section 8 assistance to be treated as FCAS.
    Response: The rule has not been revised in response to these 
comments. This was an item on which the Committee was unable to reach 
consensus. Further, the change recommended by the commenters could not 
be made at this final rule stage without additional notice and comment 
rulemaking. The comment objecting to section 502(a) of NAHASDA pertains 
to statutory language that may be revised only through legislative 
amendment.
    Comments regarding substantial noncompliance. Section 1000.534 of 
the IHBG program regulations describes those tribal actions that 
constitute substantial noncompliance with IHBG program requirements. As 
explained in Sec.  1000.538, HUD may take certain actions against an 
Indian tribe that has failed to comply substantially with the IHBG 
program requirements, but only after reasonable notice and opportunity 
for a hearing conducted in accordance with 24 CFR part 24. The 
Committee considered expanding the actions deemed to constitute 
substantial noncompliance and, therefore, entitle the Indian tribe to a 
formal hearing prior to any reduction or adjustment of its IHBG grant. 
During negotiations, there were two objections to the proposed 
expansion of substantial noncompliance and, therefore, consensus was 
not reached on this proposal. Several commenters expressed concern on 
the failure of the Committee to find consensus on the proposal to amend 
Sec. Sec.  1000.534 and 1000.538.
    Response: No change has been made to the rule in response to these 
comments. As noted above, the Committee could not reach consensus on 
whether to revise the regulatory provisions concerning substantial 
noncompliance. Because the negotiated rulemaking process required 
consensus and because consensus was not reached on this item, the 
Committee did not adopt the changes recommended by the commenters. 
Moreover, such revisions would not be appropriate at this final rule 
stage because they would require additional notice and opportunity for 
public comment.
    Comments regarding the replacement of the Allowable Expense Level 
(AEL). The IHBG Formula currently uses an adjustment factor known as 
the Allowable Expense Level (AEL), which serves as a substitute 
measurement of geographic and other differences in the monthly per-unit 
operating costs incurred by an Indian tribe to operate Current Assisted 
Stock. During negotiations, some members of the Committee expressed 
dissatisfaction with the AEL, stating that it is not reflective of the 
true costs of operating affordable housing units and that individual 
AEL levels were often inaccurately calculated. Other Committee members, 
however, felt that general use of the AEL is an acceptable method for 
allocating IHBG operating funds among the Indian tribes but that 
individual AEL determinations should be subject to challenge by 
individual Indian tribes. The Committee was unable to reach consensus 
on this issue and, therefore, a regulatory change was not contained in 
the February 25, 2005, proposed rule. HUD agreed to a study of the use 
of the AEL. This Indian housing cost study is currently underway. 
Twenty-nine commenters submitted comments regarding possible changes to 
the AEL, but were divided in their opinions. Some of the commenters 
were concerned about the failure of the Committee to find consensus on 
AEL and expressed support for changes through legislation or future 
regulatory changes. Others supported the continued use of AEL as an 
adjustment factor to account for the higher costs associated with 
differing geographic locations.
    Response: No change has been made to the rule in response to the 
comments. As noted, the Committee was unable to reach consensus on a 
proposed regulatory change and, therefore, did not adopt the 
commenters' suggested change in this final rule. Accordingly, a 
revision to the AEL would not be appropriate at this final rule stage, 
since it would require additional notice and public comment.
    Comments regarding the use of multi-race U.S. Census data. In 
calculating the Need component, pursuant to Sec.  1000.330, HUD uses 
U.S. Census population data. The 2000 U.S. Census reported for the 
first time both those persons who identify themselves solely as 
American Indian/Alaska Native (AIAN) and those who also identify with 
another race. HUD made the determination to use the 2000 Census data. 
HUD's current calculation of the Need component incorporates all 
persons who identify as AIAN, without regard to whether they also 
identify as another race. During the negotiations for the proposed 
rule, proponents of using this data stated that the use of single-race 
data does not reflect the best available information and would exclude 
some persons who identified as multi-race and are eligible to be served 
under NAHASDA. Other Committee members, however, expressed objections 
to the use of this multi-race data, stating that the purpose of 
NAHASDA, which is to assist Native Americans, would be better served by 
limiting the population data to those persons designating themselves as 
being solely AIAN. The Committee was unable to reach consensus on this 
issue and, therefore, a regulatory change was not contained in the 
February 25, 2005, proposed rule. Thirty-four commenters opposed the 
use of multi-race Census data and urged the Committee to revisit this 
issue. The tribes stated that the change to multi-race data has the 
effect of drastically increasing some tribes' funding and decreasing 
that of others. In particular, one commenter wrote that the use of 
multi-race data would shift funding from traditional Native Villages to 
more urban areas. Several commenters suggested a compromise position 
providing for calculation of the Need component based on the average of 
individuals designating themselves solely as AIAN and the number of 
persons also designating themselves as belonging to other racial 
categories. One commenter suggested that tribal enrollment criteria 
should be used as the determining factor where eligibility is in 
question. Four commenters wrote in support of the multi-race Census 
data. One of these commenters stated that tribal members can be more 
than one race provided they meet the criteria established by the tribe. 
Two

[[Page 20023]]

commenters wrote that not using multi-race data would result in 
undercounting of tribal membership. Another commenter offered general 
support for the use of multi-race Census data in the IHBG allocation 
formula.
    Response: The rule has not been revised in response to these 
comments. As discussed above, the Committee was unable to reach 
consensus on the issue of multi-race data and, therefore, a regulatory 
change at this final rule stage would be inappropriate without advance 
notice and the opportunity for public comment. Further, Senate Report 
109-109 accompanying the Fiscal Year 2006 HUD Appropriations Act (Pub. 
L. 109-115; approved November 30, 2005) provides for HUD to reassess, 
using notice and comment rulemaking procedures, its decision to use 
multi-race data. Consistent with the language of the Senate Report, on 
December 12, 2006, HUD published a notice in the Federal Register (71 
FR 74748) that solicited public comment on the use of multi-race data 
in the computation of the IHBG allocation formula.

IV. 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 action, as provided under section 3(f)(1) of the Order). 
The docket file is available for public inspection in the Regulations 
Division, Office of General Counsel, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-
0500. Due to security measures at the HUD Headquarters building, please 
schedule an advance appointment to review the docket file by calling 
the Regulations Division at (202) 708-3055 (this is not a toll-free 
number).

Paperwork Reduction Act

    The information collection requirements contained in this proposed 
rule have been approved by OMB under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520) and assigned OMB control number 2577-0218. 
In accordance with the Paperwork Reduction Act, an agency may not 
conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection displays a currently 
valid OMB control number.

Environmental Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment was made at the proposed rule stage in accordance with HUD 
regulations at 24 CFR part 50, which implement section 102(2)(C) of the 
National Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). That 
FONSI remains applicable to this final rule and is available for public 
inspection between the hours of 8 a.m. and 5 p.m. weekdays in the 
Regulations Division, Office of General Counsel, Department of Housing 
and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, 
DC 20410-0500. Due to security measures at the HUD Headquarters 
building, please schedule an advance appointment to review the FONSI by 
calling the Regulations Division at (202) 708-3055 (this is not a toll-
free number).

Regulatory Flexibility Act

    The Regulatory Flexibility Act (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. This rule would not 
impose substantive new requirements on Indian tribes. Rather, the rule 
addresses those areas of the IHBG Formula that HUD and Indian tribal 
representatives determined require clarification, are outdated, or are 
not operating as intended. Moreover, HUD negotiated the amendments 
contained in this final rule with representatives of Indian tribes, and 
the rule reflects the consensus decisions reached by HUD and its tribal 
negotiating partners on the best way to address the required changes to 
the IHBG Formula. The potential burden of the regulatory changes on 
Indian tribes was considered and addressed as part of the negotiated 
rulemaking process. Accordingly, the undersigned certifies that this 
rule will not have a significant economic impact on a substantial 
number of small entities.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA) (2 
U.S.C. 1531-1538) 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 does not impose 
any federal mandate on state, local, or tribal governments, or on the 
private sector within the meaning of UMRA.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the IHBG 
program is 14.867.

List of Subjects in 24 CFR Part 1000

    Aged, Grant programs--housing and community development, Grant 
programs--Indians, Individuals with disabilities, Low and moderate 
income housing, Public housing, Reporting and recordkeeping 
requirements.

0
Accordingly, for reasons discussed in the preamble, HUD amends 24 CFR 
part 1000 as follows:

PART 1000--NATIVE AMERICAN HOUSING ACTIVITIES

0
1. The authority citation for 24 CFR part 1000 continues to read as 
follows:

    Authority: 25 U.S.C. 4101 et seq.; 42 U.S.C. 3535(d).


0
2. In Sec.  1000.302, revise the definition of ``Formula Area'' and 
add, in alphabetical order, definitions of the terms ``National Per 
Unit Subsidy'' and ``Substantial Housing Services'' to read as follows:


Sec.  1000.302  What are the definitions applicable to the IHBG 
formula?

* * * * *
    Formula area. (1) Formula areas are:
    (i) Reservations for federally recognized Indian tribes, as defined 
by the U.S. Census;
    (ii) Trust lands;
    (iii) Department of the Interior Near-Reservation Service Areas;
    (iv) Former Indian Reservation Areas in Oklahoma Indian Areas, as 
defined by the U.S. Census as Oklahoma Tribal Statistical Areas 
(OTSAs);
    (v) Congressionally Mandated Service Areas;
    (vi) State Tribal Areas as defined by the U.S. Census as State 
Designated American Indian Statistical Areas (SDAISAs);
    (vii) Tribal Designated Statistical Areas (TDSAs);
    (viii) California Tribal Jurisdictional Areas established or 
reestablished by federal court judgment; and
    (ix) Alaska formula areas described in paragraph (4) of this 
definition.
    (2)(i) For a geographic area not identified in paragraph (1) of 
this definition, and for expansion or re-definition of a geographic 
area from the prior year, including those identified in paragraph (1) 
of this definition, the Indian tribe must submit, on a form agreed to 
by HUD, information about the geographic area it wishes to include in

[[Page 20024]]

its Formula Area, including proof that the Indian tribe, where 
applicable, has agreed to provide housing services pursuant to a 
Memorandum of Agreement (MOA) with the tribal and public governing 
entity or entities of the area, or has attempted to establish such an 
MOA; and either:
    (A) Could exercise court jurisdiction; or
    (B) Is providing substantial housing services and will continue to 
expend or obligate funds for substantial housing services, as reflected 
in the form agreed to by HUD for this purpose.
    (ii) Upon receiving a request for recognition of a geographic area 
not identified in paragraph (1) of this definition, HUD shall make a 
preliminary determination. HUD shall notify all potentially affected 
Indian tribes of the basis for its preliminary determination by 
certified mail and provide the Indian tribes with the opportunity to 
comment for a period of not less than 90 days. After consideration of 
the comments, HUD shall announce its final determination through 
Federal Register notice.
    (iii) No Indian tribe may expand or redefine its Formula Area 
without complying with the requirements of paragraphs (2)(i) and (ii) 
of this definition, notwithstanding any changes recognized by the U.S. 
Census Bureau.
    (iv) The geographic area into which an Indian tribe may expand 
under this paragraph (2) shall be the smallest U.S. Census unit or 
units encompassing the physical location where substantial housing 
services have been provided by the Indian tribe.
    (3) Subject to a challenge by an Indian tribe with a Formula Area 
described under paragraph (1)(iv) of this definition, any federally 
recognized Indian tribe assigned Formula Area geography in Fiscal Year 
2003 not identified in paragraphs (1) and (2) of this definition, shall 
continue to be assigned such Formula Area in subsequent fiscal years, 
provided that the Indian tribe continues to provide an appropriate 
level of housing services within the Formula Area as monitored by HUD 
using the definition of substantial housing services contained in this 
section as a guideline but not as a requirement.
    (4) Notwithstanding paragraphs (1), (2), and (3) of this 
definition, Alaska needs data shall be credited as set forth in Sec.  
1000.327 to the Alaska Native Village (ANV), the regional Indian tribe, 
or to the regional corporation established pursuant to the Alaska 
Native Claims Settlement Act (33 U.S.C. 1601 et seq.) (ANCSA). For 
purposes of Sec.  1000.327 and this definition:
    (i) The formula area of the ANV shall be the geographic area of the 
village or that area delineated by the TDSA established for the ANV for 
purposes of the 1990 U.S. Census or the Alaska Native Village 
Statistical Area (ANVSA) established for the ANV. To the extent that 
the area encompassed by such designation may substantially exceed the 
actual geographic area of the village, such designation is subject to 
challenge pursuant to Sec.  1000.336. If the ANVSA or the TDSA is 
determined pursuant to such challenge to substantially exceed the 
actual area of the village, then the geographic formula area of the ANV 
for purposes of Sec.  1000.327 shall be such U.S. Census designation as 
most closely approximates the actual geographic area of the village.
    (ii) The geographic formula area of the regional corporation shall 
be the area established for the corporation by the ANCSA.
    (iii) An Indian tribe may seek to expand its Alaska formula area 
within its ANCSA region pursuant to the procedures set out in paragraph 
(2) of this definition. Formula Area added in this way shall be treated 
as overlapping pursuant to Sec.  1000.326, unless the Indian tribe's 
members in the expanded area are less than 50 percent of the AIAN 
population. In cases where the Indian tribe is not treated as 
overlapping, the Indian tribe shall be credited with population and 
housing data only for its own tribal member residents within the new or 
added area. All other population and housing data for the area shall 
remain with the Indian tribe or tribes previously credited with such 
data.
    (5) In some cases the population data for an Indian tribe within 
its Formula Area is greater than its tribal enrollment. In general, to 
maintain fairness for all Indian tribes, the tribe's population data 
will not be allowed to exceed twice an Indian tribe's enrolled 
population. However, an Indian tribe subject to this cap may receive an 
allocation based on more than twice its total enrollment if it can show 
that it is providing housing assistance to substantially more non-
member Indians and Alaska Natives who are members of another federally 
recognized Indian tribe than it is to members. For state-recognized 
Indian tribes, the population data and formula allocation shall be 
limited to their tribal enrollment figures as determined under 
enrollment criteria in effect in 1996.
    (6) In cases where an Indian tribe is seeking to receive an 
allocation more than twice its total enrollment, the tribal enrollment 
multiplier will be determined by the total number of Indians and Alaska 
Natives to whom the Indian tribe is providing housing assistance (on 
July 30 of the year before funding is sought) divided by the number of 
members to whom the Indian tribe is providing housing assistance. For 
example, an Indian tribe that provides housing to 300 Indians and 
Alaska Natives, of which 100 are members, the Indian tribe would then 
be able to receive an allocation for up to three times its tribal 
enrollment if the Indian and Alaska Native population in the area is 
three or more times the tribal enrollment.
* * * * *
    National per unit subsidy is the Fiscal Year 1996 national per unit 
subsidy (adjusted to full funding level) multiplied by an adjustment 
factor for inflation.
* * * * *
    Substantial housing services are:
    (1) Affordable housing activities funded from any source provided 
to AIAN households with incomes 80 percent of the median income as 
defined in NAHASDA (25 U.S.C. 4103 (14)) or lower, equivalent to 100 
percent or more of the increase in the IHBG formula allocation that the 
Indian tribe would receive as a result of adding the proposed 
geography; or
    (2) Affordable housing activities funded with IHBG funds provided 
to AIAN households with incomes 80 percent of the median income as 
defined in NAHASDA (25 U.S.C. 4104(14)) or lower, equivalent to 51 
percent or more of the Indian tribe's current total IHBG grant; and 
either:
    (i) Fifty-one percent or more of the Indian tribe's official 
enrollment resides within the geographic area; or
    (ii) The Indian tribe's official enrollment constitutes 51 percent 
or more of the total AIAN persons within the geography.
    (3) HUD shall require that the Indian tribe annually provide 
written verification, on a form approved by HUD, that the affordable 
housing activities it is providing meet the definition of substantial 
housing services.
* * * * *

0
3. Revise Sec.  1000.306(b) to read as follows:


Sec.  1000.306  How can the IHBG Formula be modified?

* * * * *
    (b) The IHBG Formula shall be reviewed not later than May 21, 2012 
to determine if a subsidy is needed to operate and maintain NAHASDA 
units or if any other changes are needed in respect to funding under 
the Formula

[[Page 20025]]

Current Assisted Stock component of the formula.
* * * * *

0
4. Add Sec.  1000.315 to read as follows:


Sec.  1000.315  Is a recipient required to report changes to the 
Formula Current Assisted Stock (FCAS) on the Formula Response Form?

    (a) A recipient shall report changes to information related to the 
IHBG formula on the Formula Response Form, including corrections to the 
number of Formula Current Assisted Stock (FCAS), during the time period 
required by HUD. This time period shall be not less than 60 days from 
the date of the HUD letter transmitting the form to the recipient.
    (b) The Formula Response Form is the only mechanism that a 
recipient shall use to report changes to the number of FCAS.

0
5. In Sec.  1000.316, revise paragraphs (a)(1), (a)(2), and (a)(3) and 
paragraph (b) to read as follows:


Sec.  1000.316  How is the Formula Current Assisted Stock (FCAS) 
Component developed?

* * * * *
    (a) * * *
    (1) The number of low-rent FCAS units multiplied by the national 
per unit subsidy;
    (2) The number of Section 8 units whose contract has expired but 
had been under contract on September 30, 1997, multiplied by the FY 
1996 national per unit subsidy; and
    (3) The number of Mutual Help and Turnkey III FCAS units multiplied 
by the national per unit subsidy.
    (b) Modernization allocation. (1) For Indian tribes with an Indian 
Housing Authority that owned or operated 250 or more public housing 
units on October 1, 1997, the modernization allocation equals the 
number of Low Rent, Mutual Help, and Turnkey III FCAS units multiplied 
by the national per-unit amount of allocation for FY 1996 modernization 
multiplied by an adjustment factor for inflation.
    (2) For Indian tribes with an Indian Housing Authority that owned 
or operated fewer than 250 public housing units on October 1, 1997, the 
modernization allocation equals the average amount of funds received 
under the assistance program authorized by section 14 of the 1937 Act 
(not including funds provided as emergency assistance) for FYs 1992 
through 1997.

0
6. Add Sec.  1000.319 to read as follows:


Sec.  1000.319  What would happen if a recipient misreports or fails to 
correct Formula Current Assisted Stock (FCAS) information on the 
Formula Response Form?

    (a) A recipient is responsible for verifying and reporting changes 
to their Formula Current Assisted Stock (FCAS) on the Formula Response 
Form to ensure that data used for the IHBG Formula are accurate (see 
Sec.  1000.315). Reporting shall be completed in accordance with 
requirements in this Subpart D and the Formula Response Form.
    (b) If a recipient receives an overpayment of funds because it 
failed to report such changes on the Formula Response Form in a timely 
manner, the recipient shall be required to repay the funds within 5 
fiscal years. HUD shall subsequently distribute the funds to all Indian 
tribes in accordance with the next IHBG Formula allocation.
    (c) A recipient will not be provided back funding for any units 
that the recipient failed to report on the Formula Response Form in a 
timely manner.
    (d) HUD shall have 3 years from the date a Formula Response Form is 
sent out to take action against any recipient that fails to correct or 
make appropriate changes on that Formula Response Form. Review of FCAS 
will be accomplished by HUD as a component of A-133 audits, routine 
monitoring, FCAS target monitoring, or other reviews.

0
7. Revise Sec.  1000.326(b) to read as follows:


Sec.  1000.326  What if a formula area is served by more than one 
Indian tribe?

* * * * *
    (b) Tribal membership in the geographic area (not to include dually 
enrolled tribal members) will be based on data that all Indian tribes 
involved agree to use. Suggested data sources include tribal enrollment 
lists, the U.S. Census, Indian Health Service User Data, and Bureau of 
Indian Affairs data.
* * * * *

0
8. Revise Sec.  1000.328 to read as follows:


Sec.  1000.328  What is the minimum amount that an Indian tribe may 
receive under the need component of the formula?

    (a) Subject to the eligibility criteria described in paragraph (b) 
of this section, the minimum allocation in any fiscal year to an Indian 
tribe under the need component of the IHBG Formula shall equal 0.007826 
percent of the available appropriations for that fiscal year after set 
asides.
    (b) To be eligible for the minimum allocation described in 
paragraph (a) of this section, an Indian tribe must:
    (1) Receive less than $200,000 under the FCAS component of the IHBG 
Formula for the fiscal year; and
    (2) Demonstrate the presence of any households at or below 80 
percent of median income.

0
9. In Sec.  1000.330, revise the heading and designate the existing 
text of paragraph (a) and add new paragraphs (b) and (c) to read as 
follows:


Sec.  1000.330  What are the data sources for the need variables?

* * * * *
    (b) The data for the need variables shall be adjusted annually 
beginning the year after the need data is collected, using Indian 
Health Service projections based upon birth and death rate data as 
provided by the National Center for Health Statistics.
    (c) Indian tribes may challenge the data described in paragraphs 
(a) and (b) of this section pursuant to Sec.  1000.336.
0
10. Revise Sec.  1000.336 to read as follows:


Sec.  1000.336  How may an Indian tribe, TDHE, or HUD challenge data or 
appeal HUD formula determinations?

    (a) An Indian tribe, TDHE, or HUD may challenge data used in the 
IHBG Formula and HUD formula determinations regarding:
    (1) U.S. Census data;
    (2) Tribal enrollment;
    (3) Formula area;
    (4) Formula Current Assisted Stock (FCAS);
    (5) Total Development Cost (TDC);
    (6) Fair Market Rents (FMRs); and
    (7) Indian Health Service projections based upon birth and death 
rate data provided by the National Center for Health Statistics.
    (b) An Indian tribe or TDHE may not challenge data or HUD formula 
determinations regarding Allowable Expense Level (AEL) and the 
inflation factor.
    (c) The challenge and the collection of data and the appeal of HUD 
formula determinations is an allowable cost for IHBG funds.
    (d) An Indian tribe or TDHE that seeks to appeal data or a HUD 
formula determination, and has data in its possession that are 
acceptable to HUD, may submit the data and proper documentation to HUD. 
Data used to challenge data contained in the U.S. Census must meet the 
requirements described in Sec.  1000.330(a). Further, in order for a 
census challenge to be considered for the upcoming fiscal year 
allocation, documentation must be submitted by March 30th.

[[Page 20026]]

    (e) HUD shall respond to all challenges or appeals not later than 
45 days after receipt and either approve or deny the validity of such 
data or challenge to a HUD formula determination in writing, setting 
forth the reasons for its decision. Pursuant to HUD's action, the 
following shall apply:
    (1) In the event HUD challenges the validity of the submitted data, 
the Indian tribe or TDHE and HUD shall attempt in good faith to resolve 
any discrepancies so that such data may be included in the formula 
allocation.
    (2) Should the Indian tribe or TDHE and HUD be unable to resolve 
any discrepancy within 30 calendar days of receipt of HUD's denial, the 
Indian tribe or TDHE may request reconsideration of HUD's denial in 
writing. The request shall set forth justification for reconsideration.
    (3) Within 20 calendar days of receiving the request, HUD shall 
reconsider the Indian tribe or TDHE's submission and either affirm or 
reverse its initial decision in writing, setting forth HUD's reasons 
for the decision.
    (4) Pursuant to resolution of the dispute:
    (i) If the Indian tribe or TDHE prevails, an adjustment to the 
Indian tribe's or TDHE's subsequent allocation for the subsequent year 
shall be made retroactive to include only the disputed fiscal year(s); 
or
    (ii) If HUD prevails, it shall issue a written decision denying the 
Indian tribe or TDHE's petition for reconsideration, which shall 
constitute final agency action.
    (f) In the event HUD questions that the data contained in the 
formula does not accurately represent the Indian tribe's need, HUD 
shall request the Indian tribe to submit supporting documentation to 
justify the data and to provide a commitment to serve the population 
indicated in the geographic area.
0
11. Revise Sec.  1000.340 to read as follows:


Sec.  1000.340  What if an Indian tribe is allocated less funding under 
the IHBG Formula than it received in Fiscal Year (FY) 1996 for 
operating subsidy and modernization?

    (a) If an Indian tribe is allocated less funding under the 
modernization allocation of the formula pursuant to Sec.  
1000.316(b)(2) than the calculation of the number of Low Rent, Mutual 
Help, and Turnkey III FCAS units multiplied by the national per-unit 
amount of allocation for FY 1996 modernization multiplied by an 
adjustment factor for inflation, the Indian tribe's modernization 
allocation is calculated under Sec.  1000.316(b)(1). The remaining 
grants are adjusted to keep the allocation within available 
appropriations.
    (b) If an Indian tribe is allocated less funding under the formula 
than an IHA received on its behalf in FY 1996 for operating subsidy and 
modernization, its grant is increased to the amount received in FY 1996 
for operating subsidy and modernization. The remaining grants are 
adjusted to keep the allocation within available appropriations.
0
12. Revise Appendices A and B to part 1000 to read as follows:

APPENDIX A TO PART 1000--INDIAN HOUSING BLOCK GRANT FORMULA MECHANICS

    This appendix shows the different components of the IHBG 
formula. The following text explains how each component of the IHBG 
formula is calculated.
    1. The Indian Housing Block Grant (IHBG) formula is calculated 
by initially determining the amount a tribe receives for Formula 
Current Assisted Stock (FCAS) (See Sec. Sec.  1000.310 and 
1000.312). FCAS funding is comprised of two components, Operating 
subsidy (Sec.  1000.316(a)) and Modernization (Sec.  1000.316(b)).
    2. The operating subsidy component is calculated based on the 
national per unit subsidy (Sec.  1000.302 National Per Unit Subsidy) 
for operations for each of the following types of programs--Low 
Rent, Homeownership (Mutual Help and Turnkey III), and Section 8. A 
tribe's total count of units in each of the above categories is 
multiplied by the relevant national per unit subsidy. That amount is 
summed and multiplied by a local area cost adjustment factor for 
management.
    3. The local area cost adjustment factor for management is 
called AELFMR. AELFMR is the greater of a tribe's Allowable Expense 
Level (AEL) or Fair Market Rent (FMR) factor, where the AEL and FMR 
factors are determined by dividing each tribe's AEL and FMR by their 
respective national weighted average (weighted on the unadjusted 
allocation under FCAS operating subsidy). The adjustment made to the 
FCAS component of the IHBG formula is then the new AELFMR factor 
divided by the national weighted average of the AELFMR (See Sec.  
1000.320).
    4. The Modernization component is determined using two methods 
depending on the number of public housing units that a tribe's 
housing authority operated prior to NAHASDA.
    (a) For Indian tribes with an Indian housing authority (IHA) 
that owned or operated 250 or more public housing units on October 
1, 1997, the modernization allocation equals the number of Low Rent, 
Mutual Help, and Turnkey III FCAS units multiplied by the national 
per-unit amount of allocation for FY 1996 modernization multiplied 
by an adjustment factor for inflation (See Sec.  1000.316(b)(1)).
    (b) For Indian tribes with an IHA that owned or operated fewer 
than 250 units on October 1, 1997, the modernization allocation 
equals the average amount of funds received under the assistance 
program authorized by section 14 of the 1937 Act (not including 
funds provided as emergency assistance) for FYs 1992 through 1997 
(See Sec.  1000.316(b)(2)).
    (c) The modernization amount is then multiplied times a local 
area cost adjustment factor for construction, the TDC. The 
construction adjustment factor is the TDC for the area divided by 
the weighted national average for TDC (weighted on the unadjusted 
allocation for modernization (See Sec.  1000.320).
    5. After determining the total amount allocated under FCAS for 
each tribe, it is summed for every tribe. The national total amount 
for FCAS is subtracted from the remaining available funds to 
determine the total amount to be allocated under the Need component 
of the IHBG formula.
    6. The Need component of the IHBG formula is calculated using 
seven factors using data from sources defined in Sec.  1000.330 
weighted as set forth in Sec.  1000.324 as follows: 22 percent of 
the allocated funds will be allocated by a tribe's share of the 
total Native American households paying more than 50 percent of 
their income for housing and living in the Indian tribe's formula 
area, 25 percent of the funds allocated under Need will be allocated 
by a tribe's share of the total Native American households 
overcrowded and/or without kitchen or plumbing living in their 
formula area, and so on. The current national totals for each of the 
need variables will be distributed annually by HUD with the Formula 
Response Form (See Sec.  1000.332). The national totals will change 
as tribes update information about their formula area and data for 
individual areas are challenged (See Sec. Sec.  1000.334 and 
1000.336). The Need component is then calculated by multiplying a 
tribe's share of housing need by a local area cost adjustment factor 
for construction (the TDC) (See Sec.  1000.338).
    7. Tribes that receive less than $200,000 under the FCAS 
component of the IHBG formula and that can demonstrate the presence 
of any households at or below 80 percent of median income are 
guaranteed to receive no less than a specified minimum under the 
Needs component of the formula. The specified minimum amount shall 
equal .007826 percent of the available appropriations for that FY 
after set asides. The increase in funding for the tribes receiving 
the minimum need amount is funded by a reallocation from other 
tribes whose needs allocation exceeds the minimum need amount. This 
is necessary in order to keep the total allocation within the 
appropriation level (See Sec.  1000.328).
    8. A tribe's preliminary grant is calculated by summing the FCAS 
and Need allocations. This amount is subject to two final 
adjustments:
    (a) If an Indian tribe with an IHA that owned or operated fewer 
than 250 units on October 1, 1997, is allocated less funding under 
the averaging method (Sec.  1000.316(b)(2)) than the calculation of 
the number of Low Rent, Mutual Help, and Turnkey III FCAS multiplied 
by the national

[[Page 20027]]

per-unit amount of allocation for FY 1996 modernization multiplied 
by an adjustment factor for inflation, the Indian tribe's 
modernization allocation is calculated under Sec.  1000.316(b)(1). 
The grants of all other tribes are proportionately adjusted to keep 
the allocation within available appropriations.
    (b) Next, this preliminary grant is compared to how much a tribe 
received in FY 1996 for operating subsidy and modernization. If a 
tribe received more in FY 1996 for operating subsidy and 
modernization than it does under the IHBG formula allocation, its 
grant is adjusted up to the FY 1996 level (See Sec.  1000.340(b)). 
Indian tribes receiving more under the IHBG formula than in FY 1996 
``pay'' for the upward adjustment for the other tribes by having 
their own grants adjusted downward. Because many more Indian tribes 
have grant amounts above the FY 1996 level than those with grants 
below the FY 1996 level, each tribe contributes very little, 
relative to their total grant, to fund the adjustment.

Appendix B to Part 1000--IHBG Block Grant Formula Mechanisms

    1. The Indian Housing Block Grant (IHBG) formula consists of two 
components, the Formula Current Assisted Stock (FCAS) and Need. 
Therefore, the formula allocation before adjusting for the statutory 
requirement that a tribe's minimum grant will not be less than the 
tribe's Fiscal Year (FY) 1996 Operating Subsidy and Modernization 
funding, can be represented by:

unadjGRANT = FCAS + NEED.

    2. NAHASDA requires that the FCAS be provided for before 
allocating funds based on need. Therefore, FCAS must be calculated 
first. FCAS consists of two components, Operating Subsidy (OPSUB) 
and Modernization (MOD), such that:

FCAS = OPSUB + MOD.

    3. OPSUB consists of three main parts: number of Low-Rent units; 
number of Section 8 units; and number of Mutual Help and Turnkey III 
units. Each of these main parts are adjusted by the national per 
unit subsidy (Sec.  1000.302 National Per Unit Subsidy) and local 
area costs as reflected by the greater of the AEL factor or FMR 
factor. The AEL factor is defined in Sec.  1000.302 as the relative 
difference between a local area Allowable Expense Level (AEL) and 
the national weighted average for AEL (NAEL). The FMR factor is also 
defined in Sec.  1000.302 as the relative difference between a local 
area Fair Market Rent (FMR) and the national weighted average for 
FMR.

OPSUB = [LR * LRSUB + (MH+TK) * HOSUB + S8 * S8SUB ] * AELFMR

Where:
LR = number of Low-Rent units.
LRSUB = national per unit subsidy for Low-Rent units ($2,440*INF).
MH+TK = number of Mutual Help and Turnkey III units.
HOSUB = national per unit subsidy for Homeownership units 
($528*INF).
S8 = number of Section 8 units.
S8SUB = national per unit subsidy for Section 8 units = 
($3,625*INF).
AELFMR = greater of AEL Factor or FMR Factor weighted by national 
average of AEL Factor and FRM Factor.
AEL FACTOR = AEL/NAEL.
AEL = local Allowable Expense Level.
NAEL = national weighted average for AEL.
FMR FACTOR = FMR/NFMR.
FMR = local Fair Market Rent.
NFMR = national weighted average for FMR.
NAELFMR = national weighted average for greater of AEL Factor or FMR 
factor.
Where:

INF = adjustment for inflation since 1995, as determined by the 
Consumer Price Index for housing.

    4. The modernization component, MOD, is calculated by two 
different methods, depending on whether the tribe had an Indian 
housing authority (IHA) that owned or operated more than 250 public 
housing units on October 1, 1997.
    a. MOD1996 is calculated for all tribes and considers the number 
of Low-Rent, and Mutual Help and Turnkey III FCAS units. Each of 
these is adjusted by the national per-unit modernization amount in 
1996 adjusted for inflation.

MOD1996 = [LR + MH+TK] *MODPU *INF.

Where:

LR = number of Low-Rent units.
MH = number of Mutual Help units.
TK = number of Turnkey III units.
MODPU = national per-unit amount for modernization in 1996 ($1,974).
INF = adjustment for inflation since 1995, as determined by the 
Consumer Price Index for housing.

    b. MODAVG is calculated only for tribes that had an IHA that 
owned or operated fewer than 250 public housing units on October 1, 
1997, as the annual average amount they received for FYs 1992 
through 1997 under the assistance program authorized by section 14 
of the 1937 Act (not including emergency assistance).

MODAVG = Average (FY 1992 to FY 1997) amount received by Section 14 
of the 1937 Act.

    c. For Indian tribes with an IHA that owned or operated 250 or 
more public housing units on October 1, 1997, the modernization 
calculation is based on MOD1996, adjusted for local area costs:

MOD = MOD1996* TDC/NTDC.

Where:

TDC = Local Total Development Costs defined in Sec.  1000.302.
NTDC = weighted national average for TDC of tribes with CAS.

    d. For Indian tribes with an IHA that owned or operated fewer 
than 250 units on October 1, 1997, the modernization calculation is 
based on MODAVG, adjusted for local area costs.

MOD = MODAVG* TDC/NTDC.

    5. Now that calculation for FCAS is complete, funds available 
for allocation using the Need component of the formula can be 
determined:

NEED FUNDS = APPROPRIATION - NATCAS.

Where:

APPROPRIATION = dollars provided for distribution through the IHBG 
formula.
NATCAS = National summation of FCAS allocation for all tribes.

    6. Two iterations are necessary to compute the final Need 
allocation. The first iteration consists of seven weighted criteria 
that allocate need funds based on a tribe's population and housing 
data. This allocation is then adjusted for local area cost 
differences based on TDC relative to the national weighted average. 
This can be represented by:

NEED1 = [(0.11 * PER / NPER) + (0.13 * HHLE30 / NHHLE30) + (0.07 * 
HH30T50 / NHH30T50) + (0.07 * HH50T80 / NHH50T80) + (0.25 * OCRPR / 
NOCRPR) + (0.22 * SCBTOT / NSCBTOT) + (0.15 * HOUSHOR / NHOUSHOR)] * 
NEED FUNDS * (TDC/NATDC).

Where:

PER = American Indian and Alaskan Native (AIAN) persons.
NPER = national total of PER.
HHLE30 = AIAN households less than 30% of median income.
NHHLE30 = national total of HHLE30.
HH30T50 = AIAN households 30% to 50% of median income.
NHH30T50 = national total of HH30T50.
HH50T80 = AIAN households 50% to 80% of median income.
NHH50T80 = national total of HH50T80.
OCRPR = AIAN households crowded or without complete kitchen or 
plumbing.
NOCRPR = national total of OCRPR.
SCBTOT = AIAN households paying more than 50% of their income for 
housing.
NSCBTOT = national total SCBTOT.
HOUSHOR = AIAN households with an annual income less than or equal 
to 80% of formula median income reduced by the combination of 
current assisted stock and units developed under NAHASDA.
NHOUSHOR = national total of HOUSHOR.
TDC = Local Total Development Costs defined in Sec.  1000.302.
NATDC = weighted national average for TDC of tribes with need.

    7. The second iteration in computing the Need allocation 
consists of adjusting the Need allocation computed above to take 
into account the minimum needs provision. Tribes that receive less 
than $200,000 under the FCAS component of the IHBG formula and that 
can demonstrate the presence of any households at or below 80 
percent of median income are guaranteed to receive no less than a 
specified minimum amount under the Needs component of the formula. 
The specified minimum amount shall equal .007826 percent of the 
available appropriations for that fiscal year after set asides.

MINFUNDING = APPROPRIATION* .00007826

    If in the first Need computation, a qualified tribe is allocated 
less than the minimum Needs funding level, its Need allocation will 
go up. Other tribes whose Needs allocations are greater than the 
minimum needs amount will have their allocations adjusted downward 
to keep the total allocation within available funds:


[[Page 20028]]


If NEED1 < MINFUNDING and FCAS < $200,000 and (HHLE30 + HH30T50 + 
HH50T80) > 0, then NEED 2 = MINFUNDING.
If NEED1 > = MINFUNDING, then NEED2 = NEED1 - {UNDERMIN$ * [(NEED1 - 
MINFUNDING) / OVERMIN$]{time} .

Where:

MINFUNDING = minimum needs amount
UNDERMIN$ = for all tribes qualifying for an increase under the 
minimum needs provision, sum of the differences between MINFUNDING 
and NEED1.
OVERMIN$ = for all tribes with needs allocations larger than the 
minimum needs amount, the sum of the difference between NEED1 and 
MINFUNDING.

    8. The next step is to compute a preliminary unadjusted grant 
allocation (unadjGRANT) that will serve as the basis for further 
adjustments called for in Sec.  1000.340.

unadjGRANT = FCAS + NEED, where both FCAS and NEED are calculated 
above.

    9. As required by Sec.  1000.340(a), if an Indian tribe with an 
IHA that owned or operated fewer than 250 units on October 1, 1997, 
is allocated less funding under the averaging method (Sec.  
1000.316(b)(2)) than the calculation of the number of Low-Rent, 
Mutual Help, and Turnkey III FCAS is multiplied by the national per-
unit amount of allocation for FY 1996 modernization multiplied by an 
adjustment factor for inflation, then, the Indian tribe's 
modernization allocation is calculated under Sec.  1000.316(b)(1). 
The grants of all other tribes are proportionately adjusted to keep 
the allocation within available appropriations.

If MODAVG < MOD1996,
then GRANT1 = unadjGRANT + (MOD1996*(TDC/NTDC)) - (MODAVG* (TDC/
NTDC)).

Otherwise,

GRANT1 = unadjGRANT - [UNDERMOD$ * (unadjGRANT / OVERMODGRANT$)]

Where:

UNDERMOD$ = for all tribes qualifying for an increase to 
modernization, the sum of the differences between local cost 
adjusted MOD1996 and local cost adjusted MODAVG.
OVERMODGRANT$ = for all tribes not qualifying for an increase to 
modernization, the sum of their unadjusted grant amounts.

    10. As called for in Sec.  1000.340(b), a final adjustment 
occurs to ensure that no tribe is allocated less funding under the 
formula than an IHA received on its behalf in FY 1996 for operating 
subsidy and modernization. Indian tribes receiving more under the 
IHBG formula than in FY 1996 ``pay'' for the upward adjustment for 
the other tribes by having their grants adjusted downward, so long 
as the adjustment does not reduce their grant below the minimum 
funding amount.

Let TEST = GRANT1 - OPMOD96.
If TEST is less than 0, then GRANT2 = OPMOD96.
If TEST is greater than 0 and GRANT1 > MINFUNDING, then GRANT2 = 
GRANT1 - [UNDER1996 * (TEST / OVER1996)].
Where:

OPMOD96 = funding received by tribe in FY 1996 for Operating Subsidy 
and Modernization.
UNDER1996 = for all tribes with TEST less than 0, sum of the 
absolute value of TEST.
OVER1996 = for all tribes with TEST greater than 0, sum of TEST.
GRANT2 is the approximate grant amount in any given year for any 
given tribe.

    Dated: April 12, 2007.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. E7-7470 Filed 4-19-07; 8:45 am]
BILLING CODE 4210-67-P