68408 Federal Register / Vol. 71, No. 226 / Friday, November 24, 2006 / Proposed Rules 

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 


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


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68410 Federal Register / Vol. 71, No. 226 / Friday, November 24, 2006 / Proposed Rules 

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 § 990.230(a)(1) to read as set 

forth below and in § 990.230(e), revise 

the third column in the second row of 

the chart to read ‘‘5 percent of the 

difference.’’

§ 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 


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