166
(b) PERFORMANCE FUNDS.—
(1) IN GENERAL.—The Secretary shall establish
2 funds for the provision of grants to eligible public
housing agencies under this title, as follows:
(A) CAPITAL
FUND.—A capital fund to
provide capital and management improvements
to public housing developments.
(B) OPERATING
FUND.—An operating
fund for public housing operations.
(2) FLEXIBILITY OF FUNDING.—
(A) IN GENERAL.—A public housing agen-
cy may use up to 20 percent of the amounts
from a grant under this title that are allocated
and provided from the capital fund for activities
that are eligible under section 1203(a)(2) to be
funded with amounts from the operating fund.
(B) 
FULL
FLEXIBILITY
FOR
SMALL
PHA’S.—In the case of a public housing agency
that owns or operates less than 250 public
housing dwelling units and is (in the determina-
tion of the Secretary) operating and maintain-
ing its public housing in a safe, clean, and
healthy condition, the agency may use amounts
from a grant under this title for any eligible ac-
tivities under section 1203(a), regardless of the
167
fund from which the amounts were allocated
and provided.
(c) AMOUNT OF GRANTS.—The amount of the grant
under this title for a public housing agency for a fiscal
year shall be the amount of the allocation for the agency
determined under section 1204, except as otherwise pro-
vided in this title and title XV.
(d) ELIGIBILITY.—A public housing agency shall be
an eligible public housing agency with respect to a fiscal
year for purposes of this title only if—
(1) the Secretary has entered into a block grant
contract with the agency;
(2) the agency has submitted a local housing
management plan to the Secretary for such fiscal
year;
(3) the plan has been determined to comply
with the requirements under section 1106 and the
Secretary has not notified the agency that the plan
fails to comply with such requirements;
(4) the agency is exempt from local taxes, as
provided under subsection (e), or receives a contribu-
tion, as provided under such subsection;
(5) no member of the board of directors or
other governing body of the agency, or the executive
director, has been convicted of a felony;
168
(6) the agency has entered into an agreement
providing for local cooperation in accordance with
subsection (f); and
(7) the agency has not been disqualified for a
grant pursuant to section 1205(a) or title XV.
(e) PAYMENTS IN LIEU OF STATE AND LOCAL TAX-
ATION OF PUBLIC HOUSING DEVELOPMENTS.—
(1) EXEMPTION
FROM
TAXATION.—A public
housing agency may receive a block grant under this
title only if—
(A)(i) the developments of the agency (ex-
clusive of any portions not assisted with
amounts provided under this title) are exempt
from all real and personal property taxes levied
or imposed by the State, city, county, or other
political subdivision; and
(ii) the public housing agency makes pay-
ments in lieu of taxes to such taxing authority
equal to 10 percent of the sum, for units
charged in the developments of the agency, of
the difference between the gross rent and the
utility cost, or such lesser amount as is—
(I) prescribed by State law;
(II) agreed to by the local governing
body in its agreement under subsection (f)
169
for local cooperation with the public hous-
ing agency or under a waiver by the local
governing body; or
(III) due to failure of a local public
body or bodies other than the public hous-
ing agency to perform any obligation under
such agreement; or
(B) the agency complies with the require-
ments under subparagraph (A) with respect to
public housing developments (including public
housing units in mixed-income developments),
but the agency agrees that the units other than
public housing units in any mixed-income devel-
opments (as such term is defined in section
1221(c)(2)) shall be subject to any otherwise
applicable real property taxes imposed by the
State, city, county or other political subdivision.
(2) EFFECT
OF
FAILURE
TO
EXEMPT
FROM
TAXATION.—Notwithstanding paragraph (1), a pub-
lic housing agency that does not comply with the re-
quirements under such paragraph may receive a
block grant under this title, but only if the State,
city, county, or other political subdivision in which
the development is situated contributes, in the form
of cash or tax remission, the amount by which the
170
taxes paid with respect to the development exceed 10
percent of the gross rent and utility cost charged in
the development.
(f) LOCAL COOPERATION.—In recognition that there
should be local determination of the need for low-income
housing to meet needs not being adequately met by private
enterprise, the Secretary may not make any grant under
this title to a public housing agency unless the governing
body of the locality involved has entered into an agreement
with the agency providing for the local cooperation re-
quired by the Secretary pursuant to this title. The Sec-
retary shall require that each such agreement for local co-
operation shall provide that, notwithstanding any order,
judgment, or decree of any court (including any settlement
order), before making any amounts provided under a
grant under this title available for use for the production
of any housing or other property not previously used as
public housing, the public housing agency shall—
(1) notify the chief executive officer (or other
appropriate official) of the unit of general local gov-
ernment in which the public housing for which such
amounts are to be so used is located (or to be lo-
cated) of such use; and
(2) pursuant to the request of such unit of gen-
eral local government, provide such information as