[Federal Register Volume 71, Number 226 (Friday, November 24, 2006)]
[Proposed Rules]
[Pages 68408-68410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-9363]



[[Page 68407]]

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

Part IV





Department of Housing and Urban Development





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



24 CFR Part 990



Public Housing Operating Fund Program; Revised Transition Funding 
Provision for Federal Fiscal Year 2007; Proposed Rule

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

[[Page 68408]]


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

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 990

[Docket No. FR-5105-P-01]
RIN 2577-AC72


Public Housing Operating Fund Program; Revised Transition Funding 
Provision for Federal Fiscal Year 2007

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

ACTION: Proposed rule.

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

SUMMARY: This proposed rule would modify HUD's regulations for 
transition funding under the Operating Fund Program. The Operating Fund 
Program, as revised by a September 19, 2005, final rule, adopted a new 
formula for determining the payment of operating subsidy to public 
housing agencies (PHAs). Transition funding is based on the difference 
in subsidy levels between the new formula and the formula in effect 
prior to the implementation of the September 19, 2005, final rule. As a 
result of the new formula PHAs may experience either an increase or 
decrease in the amount of funding that they receive. This proposed rule 
would revise the transition-funding schedule for those PHAs that will 
experience a decline in funding. For federal fiscal year (FFY) 2007 
only, the transition funding percentage loss for all PHAs will be 
capped at five percent of the difference between the two funding 
levels.

DATES: Comment Due Date: December 26, 2006.

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

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

SUPPLEMENTARY INFORMATION:

I. Background

    On September 19, 2005, (70 FR 54984), HUD published a final rule 
amending the regulations of the Public Housing Operating Fund Program 
at 24 CFR part 990, to provide a new formula for distributing operating 
subsidy to public housing agencies (PHAs) and to establish requirements 
for PHAs to convert to asset management. More detailed information 
about this rule can be found in the preamble to the September 19, 2005, 
final rule. Additionally, on October 24, 2005 (70 FR 61366), HUD 
published a technical correction (Correction Notice) correcting the 
September 19, 2005, final rule to provide that the revised allocation 
formula is to be implemented for calendar year 2007, and adjusting the 
related dates specified in the rule to reflect the corrected 
implementation date.

II. This Proposed Rule

    In accordance with both the September 19, 2005, final rule and the 
Correction Notice, the new Operating Fund formula for determining 
public housing operating subsidies goes into effect in calendar year 
2007. As a result of the new formula PHAs may experience either an 
increase or decrease in the amount of funding that they receive. HUD 
has posted tables on its Web site providing information on the fiscal 
impact of this change for PHAs under the new Operating Fund formula. 
The tables may be accessed at http://www.hud.gov.
    For PHAs experiencing a decline in operating subsidy as a result of 
the new formula, the September 19, 2005, final rule limits that 
reduction. Under the current regulations a PHA subject to a decline 
would have their subsidy reduced by 24 percent of the difference 
between the old and new funding levels in the first year following 
implementation. In each of the following three years the subsidy will 
be reduced by 43, 62, and 81 percent of the difference, respectively. 
In the last year of the implementation phase-in PHAs will be subject to 
the full decrease. The phase-in of the reduction in subsidy is designed 
to lessen the impact of the decline in funding, assisting PHAs with the 
conversion to asset management while continuing PHAs' ability to 
perform necessary functions and provide services. A PHA subject to a 
decline in operating subsidy may stop its losses by successfully 
demonstrating a conversion to asset management, commonly referred to as 
``stop loss.'' PHAs that will experience a gain under the new formula 
would receive 50 percent of their gain in FY 2007 and the full amount 
of the gain in FY 2008.
    Because of increased utility costs in public housing, which have 
resulted in reduced funding levels relative to total eligibility, HUD 
is proposing, for federal fiscal year (FFY) 2007, to implement a five 
percent difference phase-in for PHAs with declining funding. The 
September 19, 2005, final rule, was the product of negotiated 
rulemaking. The negotiated rulemaking committee discussed the phase-in 
of reductions at length and agreed upon the schedule established in the 
September 19, 2005, final rule. Implementation of a difference of 24 
percent at this time, given current utility costs, would in effect 
result in subsidy losses greater than the agreed upon 24 percent. This 
proposed rule, by limiting the loss to five percent of the difference 
between

[[Page 68409]]

the two formulas, more closely reflects the impact of the transition 
funding that was agreed upon by the negotiated rulemaking committee. 
Assuming no change in appropriations, HUD estimates that PHAs 
experiencing a subsidy increase under the new formula will have their 
subsidy reduced by approximately 0.7 percent as a result of the 
extended transition schedule established by the proposed rule. While 
these PHAs have also experienced an increase in utility costs, the 
overall effect of this proposed rule is to more closely match the 
agreements reached during the negotiated rulemaking process.
    HUD will soon be publishing a separate proposed rule to modify the 
transition phase-in schedule for the years following FFY 2007 to 
reflect the one-time five percent cap that would be established by this 
proposed rule, and to afford PHAs, public housing residents, and other 
interested members of the public with the opportunity to provide 
additional input on the schedule for transition funding.

III. Justification for Reduced Comment Period

    For proposed rules issued for public comment, it is HUD's policy to 
afford the public ``not less than sixty days for submission of 
comments'' (24 CFR 10.1). In cases in which HUD determines that a 
shorter public comment period may be appropriate, it is also HUD's 
policy to provide an explanation of why the public comment period has 
been abbreviated. For the following reasons, HUD believes that a 
reduced 30-day comment period is justified for this proposed 
rulemaking.
    This proposed rule is designed to benefit PHAs experiencing a 
decline in operating subsidy for FFY 2007. One of the goals in 
implementing the new Operating Fund program was to produce more 
efficient and focused management of PHAs and their individual projects. 
Management of this kind requires adequate time to plan and allocate 
resources. PHAs experiencing a decline in operating subsidy will have 
to compensate for their loss in subsidy.
    A reduced comment period for this rule is justified because, to 
fully realize the benefits of this proposed change, PHAs must be able 
to rely on the one time five percent cap in formulating their FFY 2007 
budget and operations. Until this proposed rule is finalized and takes 
effect, PHAs (whether experiencing an increase or decrease in operating 
subsidy) have a fiduciary responsibility to budget and plan based on 
the transition-funding schedule codified in the current part 990 
regulations. This situation may require PHAs preparing budgets based on 
estimated operating subsidies reduced by 24 percent of the difference 
between the old and new formulas, to effect personnel changes, cancel 
or modify contracts, or take other necessary actions to conform their 
budgets to the codified transition funding schedule. To achieve the 
management objectives outlined in the September 19, 2005, final rule, 
PHAs should plan according to the actual subsidy that they are to 
receive. The reduced comment period will facilitate the issuance of a 
final rule that may take effect prior to or concurrent with PHA budget 
planning activities.
    Additionally, the shortened comment period is justified because the 
proposed regulatory change will relieve a budgetary constraint and does 
not impose additional regulatory requirements on PHAs. HUD believes 
that this proposed rule reflects the intent of the negotiated 
rulemaking committee to implement a reasonable transition funding 
schedule. The modification that would be made by this proposed rule 
benefits PHAs by accounting for the increased cost of utilities in the 
subsidy reduction that PHAs will face.
    Although HUD has determined that good cause exists to issue this 
proposed rule with a reduced public comment period, HUD recognizes the 
value of public comment in the rulemaking process, and is therefore 
seeking public comments for a period of 30 days. To ensure, however, 
receipt of the benefit of views from industry and other interested 
members of the public on this subject, HUD will consider comments that 
are received after the 30-day requested comment deadline up until 
issuance of the final rule. Although HUD ask commenters to strive to 
submit comments within 30-days of publication, HUD also seeks to ensure 
no important issues are overlooked as a result of the abbreviated 
public comment period.

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

Environmental Impact

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

Regulatory Flexibility Act

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

[[Page 68410]]

will meet HUD's objectives as described in the preamble to this rule.

Executive Order 13132, Federalism

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

Unfunded Mandates Reform Act

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

Catalog of Federal Domestic Assistance

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

List of Subjects in 24 CFR Part 990

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

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

PART 990--THE PUBLIC HOUSING OPERATING FUND PROGRAM

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

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

    2. Revise Sec.  990.230(a)(1) to read as set forth below and in 
Sec.  990.230(e), revise the third column in the second row of the 
chart to read ``5 percent of the difference.''


Sec.  990.230  PHAs that will experience a subsidy reduction.

    (a) * * *
    (1) 5 percent of the difference between the two funding levels in 
the first year of implementation of the formula contained in this part;
* * * * *

    Dated: October 20, 2006.
Paula O. Blunt,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 06-9363 Filed 11-22-06; 8:45 am]
BILLING CODE 4210-67-P