[Federal Register Volume 79, Number 191 (Thursday, October 2, 2014)]
[Notices]
[Pages 59502-59504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-23475]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. 5810-N-01]


Notice of Certain Operating Cost Adjustment Factors for 2015

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, 
2015. 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 Date: February 11, 2015.

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 (42 U.S.C. 1437f note) requires HUD to 
establish guidelines for rent adjustments based on an OCAF. The statute 
requiring HUD to establish OCAFs for Low-Income Housing Preservation 
and Resident Homeownership Act (LIHPRHA) (12 U.S.C. 4101, et seq.) 
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-

[[Page 59503]]

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, 2015, are calculated using the same method 
as those published in HUD's 2014 OCAF notice published on September 16, 
2013 (78 FR 56911). 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 September 16, 2013, 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, 2014 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: Census Quarterly Summary of State and 
Local Government Tax Revenue--Table 1 http://www2.census.gov/govs/qtax/2014/q1t1.xls. 12-month property taxes are computed as the total of 
four quarters of tax receipts for the period from April through March. 
Total 12-month taxes are then divided by the number of occupied housing 
units to arrive at average 12-month tax per housing unit. The number of 
occupied housing units is taken from the estimates program at the 
Bureau of the Census. http://www.census.gov/housing/hvs/data/histtab8.xls.
     Goods, Supplies, Equipment: May 2013 to May 2014 Bureau of 
Labor Statistics (BLS) Consumer Price Index, All Items Less Food, 
Energy and Shelter (Series ID CUUR0000SA0L12E) at the national level.
     Insurance: May 2013 to May 2014 Bureau of Labor Statistic 
(BLS) Consumer Price Index, Tenants and Household Insurance Index 
(Series ID CUUR0000SEHD) at the national level.
     Fuel Oil: October 2013-March 2014 U.S. Weekly Heating Oil 
and Propane Prices report. Average weekly residential heating oil 
prices in cents per gallon excluding taxes for the period from October 
7, 2013 through March 17, 2014 are compared to the average from October 
1, 2012 through March 18, 2013. For the States with insufficient fuel 
oil consumption to have separate estimates, the relevant regional 
Petroleum Administration for Defense Districts (PADD) change between 
these two periods is used; if there is no regional PADD estimate, the 
U.S. change between these two periods is used. http://www.eia.gov/dnav/pet/pet_pri_wfr_a_EPD2F_prs_dpgal_w.htm.
     Electricity: Energy Information Agency, February 2014 
``Electric Power Monthly'' report, Table 5.6.B. http://www.eia.gov/electricity/monthly/current_year/february2014.pdf.
     Natural Gas: Energy Information Agency, Natural Gas, 
Residential Energy Price, 2012-2013 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 2013; in 
these cases, data for these missing months were estimated using data 
from the surrounding months in 2013 and the relationship between that 
same month and the surrounding months in 2012. http://www.eia.gov/dnav/ng/ng_pri_sum_a_EPG0_PRS_DMcf_a.htm.
     Water and Sewer: May 2013 to May 2014 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 2013 to 2014, the wage 
increase component of the Virginia OCAF for 2015 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 2015 OCAF for 
Virginia. The OCAFs for 2015 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.

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    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.

Paperwork Reduction Act

    This notice reduces information collection requirements already 
submitted to the Office of Management and Budget (OMB) under the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). 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.

    Dated: September 26, 2014.
Carol J. Galante,
Assistant Secretary for Housing-Federal Housing Commissioner.

Appendix

               Operating Cost Adjustment Factors for 2015
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Alabama........................................................      1.9
Alaska.........................................................      2.2
Arizona........................................................      2.0
Arkansas.......................................................      1.9
California.....................................................      2.6
Colorado.......................................................      2.0
Connecticut....................................................      1.7
Delaware.......................................................      1.5
District of Columbia...........................................      2.3
Florida........................................................      2.2
Georgia........................................................      2.0
Hawaii.........................................................      1.5
Idaho..........................................................      2.5
Illinois.......................................................      1.7
Indiana........................................................      2.1
Iowa...........................................................      2.1
Kansas.........................................................      2.2
Kentucky.......................................................      2.1
Louisiana......................................................      2.7
Maine..........................................................      1.8
Maryland.......................................................      2.1
Massachusetts..................................................      2.4
Michigan.......................................................      1.4
Minnesota......................................................      2.4
Mississippi....................................................      2.4
Missouri.......................................................      2.0
Montana........................................................      2.2
Nebraska.......................................................      2.1
Nevada.........................................................      2.0
New Hampshire..................................................      2.2
New Jersey.....................................................      2.0
New Mexico.....................................................      2.4
New York.......................................................      2.2
North Carolina.................................................      2.0
North Dakota...................................................      2.0
Ohio...........................................................      2.0
Oklahoma.......................................................      1.8
Oregon.........................................................      2.2
Pacific Islands................................................      1.5
Pennsylvania...................................................      2.0
Puerto Rico....................................................      2.0
Rhode Island...................................................      2.7
South Carolina.................................................      2.2
South Dakota...................................................      2.0
Tennessee......................................................      2.0
Texas..........................................................      2.4
Utah...........................................................      2.2
Vermont........................................................      2.0
Virgin Islands.................................................      2.4
Virginia.......................................................      1.8
Washington.....................................................      2.2
West Virginia..................................................      1.6
Wisconsin......................................................      2.1
Wyoming........................................................      2.1
US Average.....................................................      2.1
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[FR Doc. 2014-23475 Filed 10-1-14; 8:45 am]
BILLING CODE 4210-67-P