[Federal Register Volume 65, Number 76 (Wednesday, April 19, 2000)]
[Notices]
[Pages 21088-21092]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9733]



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Part III





Department of Housing and Urban Development





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Tenant-Based Section 8 Program: Procedures for Determining Baseline 
Unit Allocations, Verifying Unit Allocations, Accessing, Using, 
Restoration of and Recapture of Program Reserves and Transfers of 
Baseline Unit Allocations; Notice

Federal Register / Vol. 65, No. 76 / Wednesday, April 19, 2000 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Doc. No. FR-4459-N-07]


Tenant-Based Section 8 Program: Procedures for Determining 
Baseline Unit Allocations, Verifying Unit Allocations, Accessing, 
Using, Restoration of and Recapture of Program Reserves and Transfers 
of Baseline Unit Allocations

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

ACTION: Notice.

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SUMMARY: On October 21, 1999, HUD published its final rule specifying 
the method HUD will use in allocating housing assistance available to 
renew expiring contracts with public housing agencies (PHAs) for 
Section 8 tenant-based housing assistance. As required by statute, the 
final rule was developed using negotiated rulemaking procedures. This 
notice, which was also developed during the negotiated rulemaking 
process, provides guidance on several topics relating to the final 
rule, including the procedures for verifying unit allocations; the 
accessing, using, restoration of and recapture of program reserves in 
the Annual Contributions Contract (ACC) Reserve Account; and the 
transfer of baseline unit allocations. HUD will make the necessary 
revisions to its standard ACC to incorporate the policies and 
procedures announced in this notice.

FOR FURTHER INFORMATION CONTACT: Robert Dalzell, Office of Public and 
Indian Housing, Department of Housing and Urban Development, 451 
Seventh Street, SW, Room 4204, Washington, DC 20410; telephone (202) 
708-1380. (This is not a toll-free number.) Persons with hearing or 
speech impairments may access this number via TTY by calling the toll-
free Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:   

I. Introduction

    HUD developed this Notice during the negotiated rulemaking process 
that resulted in the publication of a revised 24 CFR 982.102 on October 
21, 1999 (64 FR 56882). The Notice covers five separate topics:

    <bullet> Section II (entitled ``Determination of Initial 
baseline (as of December 31, 1999)'') describes procedures for 
establishing the initial baseline number of units reserved for each 
PHA;
    <bullet> Section III (entitled ``Verifying Number of Renewal 
Units'') describes the procedures for verifying unit allocations;
    <bullet> Section IV (entitled ``Annual Contributions Contract 
(ACC) Reserve Account'') describes the procedures for accessing 
reserves in the ACC Reserve Account, the permissible uses of 
reserves, and the policy for restoration of depleted reserves;
    <bullet> Section V states HUD's policy on recapturing program 
reserves in the PHA's ACC Reserve Account; and
    <bullet> Section VI (entitled ``Reduction of Adjusted Baseline 
Number of Units and Budget Authority'') explains the procedures to 
be followed to require transfers of baseline unit allocations in the 
tenant-based Section 8 program.

    This Notice supersedes Notices PIH 98-65 and 99-1, as well as HUD's 
February 18, 1999 Federal Register notice (64 FR 8187). HUD will make 
the necessary revisions to its standard ACC to incorporate the policies 
and procedures announced in this Notice.
    The renewal funding methodology listed in revised 24 CFR 982.102 is 
designed to provide adequate funding for the number of units reserved 
for each PHA. PHAs have significant flexibility to manage their 
programs within the available funding including the amount of program 
reserves available in each PHA's ACC Reserve Account. HUD advises PHAs 
to use this flexibility first of all to ensure that they assist the 
number of families that equal the number of units reserved for the 
PHA--the baseline number of units. Because of local conditions, it is 
possible that PHAs may have some funds remaining after assisting the 
number of families that equal the PHA's baseline. HUD encourages PHAs 
in this situation to assist additional families; however, HUD also has 
to caution PHAs to carefully assess their local conditions 
(demographics of waiting list, turnover rate, future renewal funding) 
prior to issuing vouchers to families above those equivalent to the 
PHA's baseline. PHA's must plan ahead to avoid becoming overextended 
and unable to maintain adequate support for families in their tenant-
based program.

II. Determination of Initial Baseline (As of December 31, 1999)

    In order to calculate the allocation of renewal funding in the 
tenant based Section 8 program, HUD uses a renewal units number as a 
factor in its calculation (renewal units equal the number of units for 
which funding is reserved on HUD books for a PHA's program). HUD has 
established an initial baseline number of units reserved for each PHA 
as of December 31, 1999, to be used in calculating the renewal units 
number for calendar year 2000 and subsequent years (see 24 CFR 
Sec. 982.102(d)(1)(ii)). HUD used the following process to determine 
the December 31, 1999 initial baseline:
    Step 1: HUD determined the number of families assisted as of 
October 1, 1997. For purposes of calculating the initial baseline, HUD 
determined the number of assisted units under lease on October 1, 1997. 
The number of assisted units under lease was specified in the 
supporting documentation submitted by PHAs with the Voucher for Payment 
of Annual Contributions and Operating Statement (Form HUD-52681).
    Step 2: HUD determined the adjusted reserved number of units as of 
October 1, 1997. HUD determined the number of reserved units as of 
October 1, 1997. HUD then added the number of authorized units reserved 
after October 1, 1997 as a result of HUD's review, conducted in Federal 
Fiscal Year 1998, of leasing in excess of the number of units reserved, 
in accordance with PIH Notice 98-22 and letters sent to each affected 
PHA.\1\ The result of the addition is the adjusted reserved number of 
units.
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    \1\ This adjustment was necessary to avoid double counting units 
in the course of performing the comparison since a portion of the 
additional authorized units would also be included in the number of 
units leased on October 1, 1997.
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    Step 3: HUD compared the number of adjusted reserved units and the 
number of leased units as of October 1, 1997. In performing this step 
of the calculation, HUD compared the number of adjusted reserved units 
(from Step 2) and the number of leased units as of October 1, 1997 
(from Step 1) and used the higher of the two as the basis of further 
calculation in step 4. The comparison was done separately for the 
certificate and the voucher programs.
    Step 4: HUD added any additional units reserved for the PHA from 
October 1, 1997 to December 31, 1999 to the result of Step 3. HUD 
included all additional units reserved for the PHA from October 1, 1997 
until December 31, 1999. Adjustments included incremental funding as 
well as conversion funding awarded to provide continued assistance to 
assisted families pursuant to the conversion of project based 
assistance to tenant based assistance. HUD also included adjustments 
for assistance transferred from one housing agency to another.\2\
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    \2\ In this case, the gaining PHA's adjusted baseline would 
increase and the transferring PHA's adjusted baseline would decrease 
in an amount equal to the number of units transferred.
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    Step 5: Finally, HUD added the calculated number of units from Step 
4 in the certificate program to the calculated number of units from 
Step 4 in the voucher program to establish the

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initial baseline (as of December 31, 1999) for each PHA.
    For example, on October 1, 1997, the ``Main Street'' Housing 
Authority was listed as having 100 reserved voucher units in HUD's 
records and subsequently reported that it was leasing 110 units in its 
voucher program at that time. HUD determined in 1998 that 5 units 
(vouchers) should be added to the Main Street Housing Authority as 
additional authorized units. In performing the first three steps of the 
calculation, HUD would have done the following: Step 1--determined that 
the housing authority was leasing 110 units as of October 1, 1997; Step 
2--added the 5 additional authorized units to the 100 reserved units to 
calculate a total of 105 adjusted reserved voucher units; and Step 3--
compared the 105 adjusted reserved units in the Main Street Housing 
Authority's voucher program to the 110 units reported as actually 
leased. Because the 110 units reported as leased exceeded the 105 
adjusted reserved units in the housing authority's voucher program, HUD 
would have used 110 units as the result of step 3 of the calculation 
for the housing authority's voucher program. Or alternatively, the 
housing authority might have reported that it was leasing 100 voucher 
units on October 1, 1997 in Step 1 in which case HUD would have 
compared the 100 units with the 105 adjusted reserved units in its 
voucher program and would have used 105 units as the result of Step 3 
of the calculation. HUD would have performed a similar analysis of the 
housing authority's certificate program. For example for Step 1--the 
housing authority reported a lease rate of 175 in its certificate 
program as of October 1, 1997. For Step 2--HUD's records listed the 
Main Street Housing Authority as having 200 reserved certificate units 
as of October 1, 1997. HUD would have compared the two and determined 
that 200 certificate units was the result of the calculation of Step 3.
    To continue the example for Step 4, in Fiscal Year 1998 HUD 
reserved funding for 10 voucher units for the Main Street Housing 
Authority under the Family Unification Program. In Fiscal Year 1999 the 
authority had 10 voucher units added to its inventory as a result of 
the conversion of a property from project based to tenant based 
assistance. All 20 of these additional units added subsequent to 1997 
would have been added to the number of units calculated in Step 3 to 
calculate the number of units for the housing authority's voucher 
program, 130. No units were added to the housing authority's 
certificate program after October 1, 1997. HUD's unit number for the 
certificate program would therefore remain 200 units.
    To complete the example for Step 5, HUD would have added the number 
of vouchers, 130 to the number of certificates, 200 to establish a 
December 31, 1999 initial baseline of 330 total units.

III. Verifying Number of Renewal Units

A. Section 8 Finance Division Exhibit

    HUD uses the number of renewal units to calculate the amount of 
renewal funding. HUD has determined the December 31, 1999 initial 
baseline number of units to be used for each PHA's renewal calculation 
for calendar year 2000.The initial baseline is a primary component of 
the renewal units factor.
    In March of 2000 the Section 8 Finance Division in the Headquarters 
Office of PIH has mailed to each PHA a letter with an exhibit that 
lists the number of units in the PHA's initial baseline (as of December 
31, 1999). An example of this exhibit is attached as Appendix A to this 
Notice. The Section 8 Finance Division will simultaneously send a copy 
of the exhibits to the Section 8 Financial Management Center (FMC).
    The exhibit will separately list:
    1. All of the unit counts assigned to each active increment in 
HUDCAPS for the PHA as of December 31, 1999;
    2. The number of leased units as of October 1, 1997;
    3. The number of reserved units as of October 1, 1997;
    4. Any additional authorized units reserved as a result of HUD's 
review of leasing in excess of contract levels conducted in Federal 
Fiscal Year 1998 and 1999 in accordance with letters sent to each 
affected PHA;
    5. Any units reserved for the PHA between October 1, 1997 and 
December 31, 1999;
    6. The total number of units scheduled to expire after December 31, 
2000;
    7. The total number of units determined to make up the Renewal 
Units for the purposes of calculating the allocation of renewal funding 
for calendar year 2000.

B. PHA Error Notifications

    PHAs will have 90 days from the date of the letter to review HUD's 
listing of the numbers of units and to notify HUD of any errors:
    1. The PHA's notification must at a minimum specify the 
increment(s) in error, state that the PHA believes that HUD has made an 
error in determining the number of units, indicate the correct number 
of units, include documentary evidence demonstrating that the unit 
count is in error and provide a narrative explanation of how the 
documentation shows that HUD's baseline unit exhibit is in error.
    2. The notification must be received by the FMC no later than 90 
days from date of the letter at the following address: ATTN: Baseline 
Unit Review, Denise Rock, 2345 Grand Blvd., Suite 1150, Kansas City, MO 
64108-2603;
    3. If the FMC does not receive a notification of errors within the 
prescribed time frame, HUD will consider the renewal units number and 
the other listed unit numbers established and will not consider later 
requests for adjustments to the unit count based on error except in 
extraordinary circumstances.

C. FMC Review of Error Notifications

    The FMC will review any error notifications submitted by PHAs 
within a reasonable time period in light of the number of error 
notifications received \3\ (while the error notification is under 
review, HUD will not change the allocation of renewal funding to 
compensate for the asserted error):
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    \3\ The FMC will attempt to complete its reviews within 60 days.
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    1. If the FMC determines that an error has occurred, it will make 
an adjustment to the PHA's renewal unit count; however, in making its 
determination, the FMC will review and revise any element in 
calculation of the initial baseline and the number of renewal units.
    a. If HUD determines there is sufficient funding available, HUD 
will make appropriate adjustments to the applicable PHA's renewal unit 
count for the calendar year in which it makes the determination, 
otherwise the adjustment will be applied to the following calendar year 
(it will not be retroactive).
    b. The FMC will send the PHA a revised unit exhibit with a 
description of when and how the adjustment to compensate for the error 
will be made (with a copy to the Section 8 Finance Division in PIH 
Headquarters).
    2. If the FMC determines that there is no error, it will send a 
letter to the notifying PHA indicating that it does not believe that 
there is an error with an explanation of its reasoning.
    3. If a PHA disagrees with the FMC's determination (either 
concluding that there is no error or disagreeing with the number of 
units in error), it can ask for the Assistant Secretary of Public and 
Indian Housing to reconsider the

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determination of the FMC in accordance with the following procedure:
    a. Its request for reconsideration must be sent to the FMC and 
received no later than 30 days after the date of the FMC's reply to the 
PHA's notification.
    b. The request for reconsideration must clearly state the nature of 
the disagreement and the reason that the determination of the FMC is 
incorrect.
    c. The FMC will forward the request to the Section 8 Finance 
Division in PIH Headquarters.
    d. The Assistant Secretary shall have the same ability to respond 
to the PHA's error notification that the FMC has in III.C.1 and III.C.2 
above.
    e. The Assistant Secretary for Public and Indian Housing will reply 
to the request for reconsideration within a reasonable time period 
(generally within 30 days).
    i. If the Assistant Secretary agrees with all or part of the PHA's 
request for reconsideration, the Assistant Secretary will issue an 
appropriate directive to the FMC and will also provide a written 
response to the applicable PHA.
    ii. If the Assistant Secretary disagrees with the PHA's request for 
reconsideration, the Assistant Secretary will provide the PHA with a 
written response explaining why the PHA's request will not be further 
considered.
    iii. The decision of the Assistant Secretary shall be final.

IV. Annual Contributions Contract (ACC) Reserve Account

A. General

    HUD continues to maintain local program reserves (ACC reserve 
accounts) for each PHA's program in the amount determined by HUD in 
accordance with the PHA's Consolidated Annual Contributions Contract. 
In accordance with the Quality Housing and Work Responsibility Act of 
1998 (Pub.L. 105-276, 112 Stat. 2461, approved October 21, 1998) (the 
Public Housing Reform Act), HUD revised its methodology for allocating 
funding for the renewal of expiring contracts in the tenant-based 
Section 8 program. HUD anticipates that some PHAs may not receive 
adequate budget authority to support the adjusted baseline number of 
units under the revised allocation system. Some PHAs may experience 
increases in the cost per unit of tenant-based assistance that exceed 
the per unit costs predicted by the revised renewal allocation 
methodology and would therefore not have sufficient funds to support 
the adjusted baseline. In order to provide reasonable assurance that 
there will be adequate funding to support families assisted in the 
tenant-based Section 8 program, HUD believes that PHAs should have 
access to an Annual Contributions Contract (ACC) Reserve Account. The 
approved reserve level is 1/6th of the current year projected 
expenditures from the PHA's approved budget for a given year.
    There are separate ACC Reserve Accounts for both the certificate 
and voucher programs. The amounts in each program reserve (certificate 
or voucher) are fungible and can be budgeted and requisitioned, as 
needed, from the ACC Reserve Account for either program. Amounts 
accumulated by a PHA in the ACC Reserve Account above the approved 
reserve level are considered excess reserves.

B. Procedures for Accessing ACC Reserve Account

    A PHA will be permitted to access up to 50% of its approved reserve 
level under the circumstances noted below if the PHA is not designated 
as troubled under the Section 8 Management Assessment Program (SEMAP) 
and is not in breach of its ACC. To access balances in the ACC Reserve 
Account, the PHA must submit a budget or budget revision to the FMC.
    In order for a non-troubled PHA that has not breached its ACC to 
access ACC Reserve Account balances in excess of 50% of the approved 
reserve level, it must submit the following to the FMC:
    1. A budget or budget revision.
    2. A narrative justification that clearly outlines the 
circumstances that cause the PHA to need to access reserves in the ACC 
Reserve Account.
    3. A plan that describes:
    a. The appropriate steps that it is taking to ensure that it will 
not exceed its budget authority, including balances in the ACC Reserve 
Account, in the current fiscal year;
    b. How it will reduce (and ultimately eliminate) its reliance on 
reserve funding over the subsequent 2 years; and
    c. In instances in which the PHA is obligated to restore reserves, 
its plan for restoring reserves.
    PHAs designated as troubled under SEMAP may access reserves only 
after the FMC has approved the request. The FMC shall inform the 
applicable Troubled Agency Recovery Center (TARC) in the event a 
troubled PHA requests access to its reserves and shall also inform the 
TARC of the proposed decision on the request. A troubled PHA may be 
required by the FMC and/or the TARC to provide documentation and/or 
justification to substantiate its request to access reserve funds.

C. Permissible Uses of ACC Reserves

    1. Supporting the Reserved Number of Units. A PHA must compare the 
budget authority assigned to the PHA by HUD pursuant to the allocation 
of renewal funding with the actual per unit costs the PHA is incurring. 
If at any time the PHA determines that the overall cost of maintaining 
assistance for the number of families assisted under the PHA's program 
(but not exceeding the number of units reserved to the PHA) has 
increased to a level that will not be supported within the budget 
authority that HUD has assigned to the PHA, the PHA may request 
authorization to use a portion of its ACC Reserve Account. In this 
instance HUD will restore depleted reserves in accordance with Section 
IV.D. below subject to the availability of funds.
    2. Supporting Units Above the Reserved Number of Units. a. A PHA 
may issue as many vouchers as can be prudently supported within the 
PHA's allocated annual budget authority even if the number of vouchers 
exceeds the number of units reserved for the PHA. PHAs that exercise 
this flexibility are engaging in ``maximized leasing.'' ``Maximum 
leased units'' means the number of leased units in excess of the number 
reserved. It is important for PHAs that take advantage of maximized 
leasing to examine the long term impact of maximized leasing to ensure 
that it does not jeopardize adequate support for the reserved number of 
units in subsequent years.
    The units supported above the PHA's reserved number of units 
(maximized leased units) will not be supported by HUD's calculation of 
the allocation of renewal funding. The PHA may not receive sufficient 
budget authority in subsequent years to be able to maintain maximized 
leased units exceeding the number of units reserved. The PHA may use 
the ACC Reserve Account to maintain assistance for maximized leased 
units on a temporary basis while the PHA takes steps to reduce the size 
of its program through attrition back to its reserved number of units 
or the number of units that can be supported by its allocated budget 
authority on a long term basis. The PHA may not use the ACC Reserve 
Account to support units beyond the number of units supported by annual 
budget authority (apart from the ACC Reserve Account) for more than a 
year except under exceptional circumstances. A PHA that uses the ACC 
Reserve Account in this situation must restore the amount of reserves 
depleted to support maximized leased units by using less than its full

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annual budget authority in subsequent years.
    b. A PHA that is close to leasing all of the units that can be 
supported within annual budget authority may issue more vouchers than 
the PHA can actually support with annual budget authority (without 
using its ACC Reserve Account) on the assumption that not all issued 
units will ultimately be used. PHAs that are close to leasing a number 
of units that fully utilizes their available annual budget authority 
can be expected to occasionally exceed their annual budget authority 
based on more families than predicted leasing units; in such instances 
the PHA is permitted to support units not supported by annual budget 
authority through use of the ACC Reserve Account. PHAs are to manage 
their lease-up and turnover rates to attempt to achieve full 
utilization of their annual budget authority without relying on the ACC 
Reserve Account. PHAs that use the ACC Reserve Account in this 
situation must restore the amount of ACC Reserve Account funds used to 
temporarily support lease-up that exceeds annual budget authority by 
using less than their full annual budget authority in subsequent years.
    c. A PHA that has had to use the ACC Reserve Account to support 
units beyond its reserved number of units must not admit families on 
its waiting list until the number of families in its program is reduced 
below the reserved number of units through attrition \4\ or it is able 
to support families from the waiting list within its annual budget 
authority apart without using funds in the ACC Reserve Account.
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    \4\ In this instance, the PHA cannot simply return to 100% 
leasing of its reserved number of units before it can start issuing 
new vouchers because if it does it will again become overextended. 
It must drop at least one unit below the reserved number of units to 
be in a position to issue new vouchers.
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D. Restoration of Depleted Reserves.

    Subject to the availability of appropriated funds, HUD will restore 
ACC Reserve Account amounts to the \1/6\th level in accordance with the 
following:
    1. HUD will determine the amount by which the ACC Reserve Account 
is depleted below the approved reserve level based on the ACC Reserve 
Account level recorded in HUDCAPS from the most recent year end 
statement approved and processed by the FMC compared to the approved 
budget for the current year at the time that the Department calculates 
the amounts to be restored.
    2. HUD will determine if a PHA has leased more than its reserved 
number of units based on its most recent HUD approved Year End 
Statement; if the PHA has leased more than its reserved number of 
units, HUD will not restore any depleted ACC Reserve Account for such 
an agency during the PHA's current fiscal year. However, HUD may grant 
an exception to this policy on a case by case basis where a PHA has 
substantially depleted the ACC Reserve Account and HUD has determined 
that the PHA is not providing long term support for units not supported 
by annual budget authority.
    3. HUD shall determine the schedule for restoration of depleted ACC 
Reserves in instances where a PHA has not leased more than its reserved 
number of units or HUD has determined that the housing agency is not 
providing long term support for units not supported by annual budget 
authority apart from the funds in the ACC Reserve Account.

V. Excess ACC Reserve Amounts

    At its discretion, HUD may recapture ACC Reserve Account amounts in 
excess of the approved reserve level.

VI. Reduction of Adjusted Baseline Number of Units and Budget 
Authority

    A. Beginning with PHA Fiscal Years December 31, 1999 and 
thereafter, HUD will assess the leasing rate and use of budget 
authority of each PHA on an annual basis when HUD processes the PHA's 
year end statement (Approximately six months after the end of the PHA's 
fiscal year) to determine if HUD will transfer some or all of the PHA's 
unexpended annual budget authority to another PHA.
    B. In performing the assessment, HUD will exclude units (and their 
associated budget authority) awarded to the PHA for: litigation 
purposes; on schedule replacement/relocation purposes; as well as 
budget authority for a funding increment whose effective date is less 
than 8 months prior to the end of the PHA's fiscal year in which such 
funds are reallocated.
    For example for calendar year 2000 the Main Street Housing 
Authority has an adjusted baseline of 130 units. In 1999, HUD awarded 
10 units to the PHA to provide for relocation of 10 families living in 
10 units of public housing approved for demolition. The demolition is 
not scheduled to take place until the end of calendar year 2000 and the 
10 units are being held by the PHA until they are needed to support the 
demolition. For the purposes of assessing the PHA's lease-up rate, HUD 
would exclude the 10 units and only perform the assessment on the 120 
units remaining. It would take the 10 units and multiply them by the 
adjusted per unit cost for the housing authority ($4,800) and subtract 
the result from the housing authority's overall budget authority 
($48,000) in performing the assessment below.
    C. If the assessment reveals that the PHA's lease rate is less than 
90% of the reserved number of units (``90% unit threshold'') and the 
PHA has expended less than 90% of its annual budget authority (90% 
annual budget authority threshold''), HUD will issue a warning to the 
PHA, the applicable PHA governing board and the chief executive officer 
of the unit of local or state government. The warning will state that 
if the PHA fails to increase its lease rate to 95% of the number of 
reserved units by the time that it submits its 2nd budget after the 
warning (approximately 16 months after the warning), then it's 
unexpended baseline authority would be subject to reallocation by HUD 
to another PHA.
    For example, the Main Street Housing Authority has a fiscal year 
that ends on December 31, 1999. At the time that it submits its year 
end statement (around February of 2000), it reports that the number of 
units months leased for its 1999 fiscal year was 1020 (the equivalent 
of 85 units out of the possible 130) and that it expended $408,000 out 
of a total annual budget authority of $611,000. When HUD performs its 
assessment in conjunction with approving the year end statement (around 
June of 2000), it will perform the following steps:
    1. HUD will subtract the 10 relocation units from 130 adjusted 
baseline number of units.
    2. For the remaining 120 units available for lease-up, HUD will 
compare the possible units months leased (120  x  12 or 1,440) with the 
number of actual units months leased (1020) to derive the lease-up 
percentage (71%).
    3. Since the lease-up percentage falls below the 90% threshold, HUD 
will determine the percentage use of annual budget authority as 
follows:
    a. HUD will first subtract the annual budget authority for the 10 
excluded relocation units ($48,000) from the total annual budget 
authority for the PHA ($611,000) to determine the available annual 
budget authority ($611,000-$48,000=$563,000).
    b. HUD will then divide the amount expended ($408,000) by the 
amount of the available budget authority ($563,000) to determine the 
percentage of budget authority utilization ($408,000/$563,000=72%).
    In this instance the assessment would indicate that the housing 
authority should be issued a warning based on the

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fact that its lease up rate is 71% and its budget authority utilization 
rate is 72%--both below the 90% thresholds.
    D. When the PHA submits its second budget after receipt of the 
warning, the PHA will provide a status report on its lease-up rate to 
the FMC. If the PHA has failed to achieve a lease up rate of 95% of its 
total number of reserved number of units minus any special category 
units (e.g., units reserved for relocation purposes or due to 
litigation), the FMC will reduce both the PHA's annual budget authority 
and its adjusted baseline number of units.
    1. In this instance, the FMC will require that budget authority not 
required to support currently assisted families through the end of 
contract increment(s) terms(s) will be deleted from the PHA's budget so 
as to bring its budget authority utilization rate to 95%. Budgetary 
authority amounts deleted from the PHA's budget will be made available 
for reallocation.
    2. HUD will calculate the number of units the deleted budget 
authority under section D.1. above would have supported based on the 
PHA's adjusted per unit cost.
    3. HUD will delete the number of units calculated under section 
D.2. for the purpose of calculating future renewal funding for the PHA.
    For example, the Main Street Housing Authority will process its 
first budget about 4 months after having received the warning in 
October of 2000. At the time that it processes its second budget after 
the warning in October of 2001, it would provide a report on its status 
in terms of its lease-up rate. At that time, it reports that its lease 
up rate has improved from the equivalent of 85 units to 105 units. The 
lease-up percentage would have increased from 71% to 88%. It would also 
report that its budget authority utilization rate increased from 72% to 
85% (from $408,000 to $478,550). In this instance HUD would calculate 
the amount of budget authority that would bring the PHA to 95% 
utilization of its budget authority ($478,550/.95=$503,157). HUD would 
then delete the remaining budget authority ($563,000 -$503,157=$59,842) 
from the PHA's annual budget authority. HUD would also calculate the 
number of units that the subtracted budget authority represents 
($59,842 divided by $4,800 per unit cost = 12 units) and subtract those 
units from the PHA's adjusted baseline for the purpose of calculating 
future renewals.
    E. Each year HUD will issue a PIH Notice (and subsequent Federal 
Register) notice outlining the criteria for determining the PHAs to be 
recipients of reallocated budget authority. The notice will outline the 
process for implementing the transfer as well as the number of units 
and the priority for reallocating budget authority.

    Dated: April 12, 2000.
Harold Lucas,
Assistant Secretary for Public and Indian Housing.
[FR Doc. 00-9733 Filed 4-18-00; 8:45 am]
BILLING CODE 4210-33-P