[Federal Register Volume 76, Number 207 (Wednesday, October 26, 2011)]
[Notices]
[Pages 66319-66320]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27816]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5569-N-01]


Notice of Certain Operating Cost Adjustment Factors for 2012

AGENCY: Office of the Assistant Secretary for Housing--Federal Housing 
Commissioner, HUD.

ACTION: Notice.

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SUMMARY: This notice establishes operating cost adjustment factors 
(OCAFs) for project based assistance contracts for eligible multifamily 
housing projects having an anniversary date on or after February 11, 
2012. OCAFs are annual factors used to adjust Section 8 rents renewed 
under section 524 of the Multifamily Assisted Housing Reform and 
Affordability Act of 1997 (MAHRA).

DATES: Effective Dates: February 11, 2012.

FOR FURTHER INFORMATION CONTACT: Stan Houle, Housing Program Manager, 
Office of Housing Assistance and Grant Administration, Department of 
Housing and Urban Development, 451 7th Street, SW., Washington, DC 
20410; telephone number 202-402-2572 (this is not a toll-free number). 
Hearing- or speech-impaired individuals may access this number through 
TTY by calling the toll-free Federal Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION:

I. OCAFs

    Section 514(e)(2) of MAHRA requires HUD to establish guidelines for 
rent adjustments based on an OCAF. The statute requiring HUD to 
establish OCAFs for LIHPRHA projects and projects with contract 
renewals or adjustments under section 524(b)(1)(A) of MAHRA is similar 
in wording and intent. HUD has therefore developed a single factor to 
be applied uniformly to all projects utilizing OCAFs as the method by 
which renewal rents are established or adjusted.
    LIHPRHA projects are low-income housing projects insured by the 
Federal Housing Administration (FHA). LIHPRHA projects are primarily 
low-income housing projects insured under section 221(d)(3) below-
market interest rate (BMIR) and section 236 of the National Housing 
Act, respectively. Both categories of projects have low-income use 
restrictions that have been extended beyond the 20-year period 
specified in the original documents, and both categories of projects 
also receive assistance under section 8 of the U.S. Housing Act of 1937 
to support the continued low-income use.
    MAHRA gives HUD broad discretion in setting OCAFs--referring, for 
example, in sections 524(a)(4)(C)(i), 524(b)(1)(A), 524(b)(3)(A) and 
524(c)(1) simply to ``an operating cost adjustment factor established 
by the Secretary.'' The sole limitation to this grant of authority is a 
specific requirement in each of the foregoing provisions that 
application of an OCAF ``shall not result in a negative adjustment.'' 
Contract rents are adjusted by applying the OCAF to that portion of the 
rent attributable to operating expenses exclusive of debt service.
    The OCAFs provided in this notice and applicable to eligible 
projects having a project based assistance contracts anniversary date 
of on or after February 11, 2012, are calculated using the same method 
as those published in HUD's 2011 OCAF notice published on November 8, 
2010 (75 FR 68616). Specifically, OCAFs are calculated as the sum of 
weighted average cost changes for wages, employee benefits, property 
taxes, insurance, supplies and equipment, fuel oil, electricity, 
natural gas, and water/sewer/trash using publicly available indices. 
The weights used in the OCAF calculations for each of the nine cost 
component groupings are set using current percentages attributable to 
each of the nine expense categories. These weights are calculated in 
the same manner as in HUD's November 8, 2010, notice. Average expense 
proportions were calculated using three years of audited Annual 
Financial Statements from projects covered by OCAFs. The expenditure 
percentages for these nine categories have been found to be very stable 
over time, but using three years of data increases their stability. The 
nine cost component weights were calculated at the state level, which 
is the lowest level of geographical aggregation with enough projects to 
permit statistical analysis. These data were not available for the 
Western Pacific Islands, so data for Hawaii were used as the best 
available indicator of OCAFs for these areas.
    The best current price data sources for the nine cost categories 
were used in calculating annual change factors. State-level data for 
fuel oil, electricity, and natural gas from Department of Energy 
surveys are relatively current and continue to be used. Data on changes 
in employee benefits, insurance, property taxes, and water/sewer/trash 
costs are only available at the national level. The data sources for 
the nine cost indicators selected used were as follows:
     Labor Costs: First quarter, 2011 Bureau of Labor 
Statistics (BLS) ECI, Private Industry Wages and Salaries, All Workers 
(Series ID CIU2020000000000I) at the national level and Private 
Industry Benefits, All Workers (Series ID CIU2030000000000I) at the 
national level.
     Property Taxes: 2009-2010 Census Quarterly Summary of 
State and Local Government Tax Revenue--Table 1 http://www2.census.gov/govs/qtax/2011/q1t1.pdf. Annual property taxes are computed as the 
total of four quarters of tax receipts. Total annual taxes are then 
divided by number of households to arrive at average annual tax per 
household. For 2009, the number of households is taken from the 
estimates program at the Bureau of the Census. http://www.census.gov/popest/housing/HU-EST2009.html. At the time

[[Page 66320]]

of computation data on the number of households was not yet available 
for 2010 so the 2009 number was used in its place.
     Goods, Supplies, Equipment: April 2010 to April 2011 
Bureau of Labor Statistics (BLS) Consumer Price Index, All Items Less 
Food, Energy and shelter (Series ID CUUR0000SA0L12E) at the national 
level.
     Insurance: April 2010 to April 2011 Bureau of Labor 
Statistic (BLS) Consumer Price Index, Tenants and Household Insurance 
Index (Series ID CUUR0000SEHD) at the national level.
     Fuel Oil: Energy Information Agency, 2009 to 2010 Retail 
Price of No. 2 Fuel Oil to Residential Consumers cents per gallon 
excluding taxes. Department of Energy multi-state fuel oil grouping 
averages used for the States with insufficient fuel oil consumption to 
have separate estimates. http://www.eia.gov/dnav/pet/pet_sum_mkt_a_EPD2_PRT_dpgal_a.htm
     Electricity: Energy Information Agency, March 2011 
``Electric Power Monthly'' report, Table 5.6.B. http://www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html
     Natural Gas: Energy Information Agency, Natural Gas, 
Residential Energy Price, 2009-2010 annual prices in dollars per 1,000 
cubic feet at the state level. Due to EIA data quality standards 
several states were missing data for one or two months in 2010; in 
these cases, data for these missing months were estimated using data 
from the surrounding months in 2010 and the relationship between that 
same month and the surrounding months in 2009. http://www.eia.doe.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_a.htm
     Water and Sewer: April 2010 to April 2011 Consumer Price 
Index, All Urban Consumers, Water and Sewer and Trash Collection 
Services (Series ID CUUR0000SEHG) at the national level.
    The sum of the nine cost component percentage weights equals 100 
percent of operating costs for purposes of OCAF calculations. To 
calculate the OCAFs, state-level cost component weights developed from 
AFS data are multiplied by the selected inflation factors. For 
instance, if wages in Virginia comprised 50 percent of total operating 
cost expenses and increased by 4 percent from 2009 to 2010, the wage 
increase component of the Virginia OCAF for 2012 would be 2.0 percent 
(50% * 4%). This 2.0 percent would then be added to the increases for 
the other eight expense categories to calculate the 2012 OCAF for 
Virginia. The OCAFs for 2012 are included as an Appendix to this 
Notice.

II. MAHRA and LIHPRHA OCAF Procedures

    MAHRA, as amended, created the Mark-to-Market Program to reduce the 
cost of federal housing assistance, enhance HUD's administration of 
such assistance, and ensure the continued affordability of units in 
certain multifamily housing projects. Section 524 of MAHRA authorizes 
renewal of Section 8 project-based assistance contracts for projects 
without restructuring plans under the Mark-to-Market Program, including 
projects that are not eligible for a restructuring plan and those for 
which the owner does not request such a plan. Renewals must be at rents 
not exceeding comparable market rents except for certain projects. As 
an example, for Section 8 Moderate Rehabilitation projects, other than 
single room occupancy projects (SROs) under the McKinney-Vento Homeless 
Assistance Act (42 U.S.C. 11301 et seq.), that are eligible for renewal 
under section 524(b)(3) of MAHRA, the renewal rents are required to be 
set at the lesser of: (1) The existing rents under the expiring 
contract, as adjusted by the OCAF; (2) fair market rents (less any 
amounts allowed for tenant-purchased utilities); or (3) comparable 
market rents for the market area.
    LIHPRHA (see, in particular, section 222(a)(2)(G)(i), 12 U.S.C. 
4112 (a)(2)(G) and HUD's regulations at 24 CFR. 248.145(a)(9)) requires 
that future rent adjustments for LIHPRHA projects be made by applying 
an annual factor, to be determined by HUD to the portion of project 
rent attributable to operating expenses for the project and, where the 
owner is a priority purchaser, to the portion of project rent 
attributable to project oversight costs.

III. Findings and Certifications

Environmental Impact

    This issuance sets forth rate determinations and related external 
administrative requirements and procedures that do not constitute a 
development decision affecting the physical condition of specific 
project areas or building sites. Accordingly, under 24 CFR 50.19(c)(6), 
this notice is categorically excluded from environmental review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321).

Catalog of Federal Domestic Assistance Number

    The Catalog of Federal Domestic Assistance Number for this program 
is 14.187.

    Dated: October 20, 2011.
Carol J. Galante,
Acting Assistant Secretary for Housing--Federal Housing Commissioner.

Appendix

               Operating Cost Adjustment Factors for 2012
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Alabama........................................................      1.8
Alaska.........................................................      2.2
Arizona........................................................      1.8
Arkansas.......................................................      1.3
California.....................................................      2.3
Colorado.......................................................      2.2
Connecticut....................................................      1.6
Delaware.......................................................      1.3
District of Columbia...........................................      1.8
Florida........................................................      1.3
Georgia........................................................      1.9
Hawaii.........................................................      4.3
Idaho..........................................................      1.8
Illinois.......................................................      2.1
Indiana........................................................      1.2
Iowa...........................................................      1.8
Kansas.........................................................      2.0
Kentucky.......................................................      1.8
Louisiana......................................................      2.4
Maine..........................................................      2.5
Maryland.......................................................      1.3
Massachusetts..................................................      1.0
Michigan.......................................................      2.3
Minnesota......................................................      1.8
Mississippi....................................................      1.6
Missouri.......................................................      2.1
Montana........................................................      1.4
Nebraska.......................................................      1.8
Nevada.........................................................      1.7
New Hampshire..................................................      2.0
New Jersey.....................................................      1.2
New Mexico.....................................................      2.2
New York.......................................................      2.4
North Carolina.................................................      1.9
North Dakota...................................................      2.1
Ohio...........................................................      1.7
Oklahoma.......................................................      2.2
Oregon.........................................................      2.0
Pacific Islands................................................      1.9
Pennsylvania...................................................      2.0
Puerto Rico....................................................      2.0
Rhode Island...................................................      1.7
South Carolina.................................................      1.9
South Dakota...................................................      2.3
Tennessee......................................................      1.6
Texas..........................................................      1.3
Utah...........................................................      1.8
Vermont........................................................      3.3
Virgin Islands.................................................      2.3
Virginia.......................................................      1.6
Washington.....................................................      2.3
West Virginia..................................................      2.3
Wisconsin......................................................      1.9
Wyoming........................................................      1.6
U.S. Average...................................................      1.8
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[FR Doc. 2011-27816 Filed 10-24-11; 4:15 pm]
BILLING CODE 4210-67-P