[Code of Federal Regulations] [Title 24, Volume 4] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 24CFR990.105] [Page 706-710] TITLE 24--HOUSING AND URBAN DEVELOPMENT CHAPTER IX--OFFICE OF ASSISTANT SECRETARY FOR PUBLIC AND INDIAN HOUSING, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PART 990_THE PUBLIC HOUSING OPERATING FUND PROGRAM--Table of Contents Subpart A_The Operating Fund Formula Sec. 990.105 Computation of allowable expense level. The PHA shall compute its Allowable Expense Level using forms prescribed by HUD, as follows: (a) Computation of Base Year Expense Level. The Base Year Expense Level includes Payments in Lieu of Taxes (PILOT) required by a Cooperation Agreement even if PILOT is not included in the Operating Budget for the Base Year because of a waiver of the requirements by the local taxing jurisdiction(s). The Base Year Expense Level includes all other operating expenditures as reflected in the PHA's Operating Budget for the Base Year except the following: (1) Utilities expense; (2) Cost of an independent audit; (3) Adjustments applicable to budget years before the Base Year; (4) Expenditures supported by supplemental subsidy payments applicable to budget years before the Base Year; (5) All other expenditures which are not normal fiscal year expenditures as to amount or as to the purpose for which expended; and (6) Expenditures which were funded from a nonrecurring source of income. (b) Adjustment. In compliance with the above six exclusions, the PHA shall adjust the AEL by excluding any of these items from the Base Year Expense Level if this has not already been accomplished. If such adjustment is made in the second or some subsequent fiscal year of receipt of operating subsidy under this part, the AEL shall be adjusted in the year in which the adjustment is made, but the adjustment shall not be applied retroactively. If the PHA does not make these adjustments, the HUD Field Office shall compute the adjustments. [[Page 707]] (c) Computation of Formula Expense Level. The PHA shall compute its Formula Expense Level in accordance with a HUD-prescribed formula that estimates the cost of operating an average unit in a particular PHA's inventory. It uses weights and a Local Inflation Factor assigned each year to derive a Formula Expense Level for the current year and the requested budget year. The formula is the sum of the following six numbers and the weights of the formula and the formula are subject to updating by HUD: (1) The number of pre-1940 rental units occupied by poor households in 1980 as a percentage of the 1980 population of the community multiplied by a weight of 7.954. This census-based statistic applies to the county of the PHA, except that, if the PHA has 80% or more of its units in an incorporated city of more than 10,000 persons, it uses city- specific data. County data will exclude data for any incorporated cities of more than 10,000 persons within its boundaries. (2) The Local Government Wage Rate multiplied by a weight of 116.496. The wage rate used is a figure determined by the Bureau of Labor Statistics. It is a county-based statistic, calibrated to a unit- weighted PHA standard of 1.0. For multi-county PHAs, the local government wage is unit-weighted. For this formula, the local government wage index for a specific county cannot be less than 85% or more than 115% of the average local government wage for counties of comparable population and metro/non-metro status, on a state-by-state basis. In addition, for counties of more than 150,000 population in 1980, the local government wage cannot be less than 85% or more than 115% of the wage index of private employment determined by the Bureau of Labor Statistics and the rehabilitation cost index of labor and materials determined by the R.S. Means Construction Cost Index. (3) The lesser of the current number of the PHA's two or more bedroom units available for occupancy, or 15,000 units, multiplied by a weight of .002896. (4) The current ratio of the number of the PHA's two or more bedroom units available for occupancy in high-rise family projects to the number of all the PHA's units available for occupancy multiplied by a weight of 37.294. For this indicator, a high-rise family project is defined as averaging 1.5 or more bedrooms per unit available for occupancy and averaging 35 or more units available for occupancy per building and containing at least one building with units available for occupancy that is 5 or more stories high. (5) The current ratio of the number of the PHA's three or more bedroom units available for occupancy to the number of all the PHA's units available for occupancy multiplied by a weight of 22.303. (6) An equation calibration constant of -.2344. (d) Computation of Allowable Expense Level (AEL). The PHA shall compute its Allowable Expense Level as follows: (1) AEL for first budget year of operating subsidy under this part where Base Year Expense Level does not exceed the top of the range. Every PHA whose Base Year Expense Level is less than the top of the range shall compute its AEL for the first budget year of operating subsidy under this part by adding the following to its Base Year Expense Level (before adjustments under Sec. 990.110): (i) Any increase approved by HUD in accordance with Sec. 990.110; (ii) The increase (decrease) between the Formula Expense Level for the Base Year and the Formula Expense Level for the first budget year of operating subsidy under this part; and (iii) The sum of the Base Year Expense Level, and any amounts described in paragraphs (d)(1) (i) and (ii) of this section multiplied by the Local Inflation Factor. (2) AEL for first budget year of operating subsidy under this part where Base Year Expense Level exceeds the top of the range. Every PHA whose Base Year Expense Level exceeds the top of the range shall compute its AEL for the first budget year of operating subsidy under this part by adding the following to the top of the range (not to its Base Year Expense Level, as in paragraph (d)(1) of this section): (i) The increase (decrease) between the Formula Expense Level for the Base Year and the Formula Expense Level for the first budget year of operating subsidy under this part; [[Page 708]] (ii) The sum of the figure equal to the top of the range and the increase (decrease) described in paragraph (d)(2)(i) of this section, multiplied by the Local Inflation Factor. (If the Base Year Expense Level is above the AEL, computed as provided above, the PHA may be eligible for Transition Funding under Sec. 990.106.) (3) AEL for first budget year of operating subsidy under this part for a new project. A new project of a new PHA or a new project of an existing PHA that the PHA decides to place under a separate ACC, which did not have a sufficient number of units available for occupancy in the Base Year to have a level of operations representative of a full fiscal year of operation is considered to be a ``new project.'' The AEL for the first budget year of operating subsidy under this part for a ``new project'' will be based on the AEL for a comparable project, as determined by the HUD Field Office. The PHA may suggest a project or projects it believes to be comparable. In determining what constitutes a ``new project'' under this paragraph, HUD will be guided by its public housing development regulations at 24 CFR part 941. (4) Adjustment of AEL for budget years after the first budget year of operating subsidy under this part. HUD may adjust the AEL of budget years after the first year of operating subsidy under this part, in accordance with the provisions of Sec. 990.105(b) or Sec. 990.108(c). (5) Allowable Expense Level for budget years after the first budget year of operating subsidy under this part. For each budget year after the first budget year of operating subsidy under this part, the AEL shall be computed as follows: (i) The AEL shall be increased by any increase to the AEL approved by HUD under Sec. 990.108(c). (ii) The AEL for the Current Budget Year also shall be adjusted as follows: (A) Increased by one-half of one percent (.5%); and (B) If the PHA has experienced a change in the number of units in excess of 5% or 1,000 units, whichever is less, since the last adjustment to the AEL based on this paragraph, it shall use the increase (decrease) between the Formula Expense Level calculated using the PHA's characteristics that applied to the Requested Year when the last adjustment to the AEL was made based on this paragraph and the Formula Expense Level calculated using the PHA's characteristics for the Requested Budget Year. (iii) The amount computed in accordance with paragraphs (d)(5)(i) and (ii) of this section shall be multiplied by the Local Inflation Factor. (6) Adjustment of AEL for budget years after the first budget year of operating subsidy under this part. HUD may adjust the AEL of budget years after the first year of operating subsidy under this part, in accordance with the provisions of Sec. 990.105(b) or Sec. 990.108(c). (e) Computation of FHA-based operating expense level (FHAEL) for application in FY 2001.--(1) HUD calculation of FHAEL. For every PHA that is eligible to receive operating subsidy under the Operating Fund Formula, HUD will calculate an FHAEL (based upon FY 2000 data and for application in FY 2001) as follows: (i) Step 1: Calculation of average national operating cost. HUD will calculate an FHA-based national average cost of operating a two-bedroom public housing unit, exclusive of utility costs and property taxes. The average national cost will be calculated using privately managed (FHA multifamily insured and/or assisted) rental housing financial data available to HUD for the most recent year of full reporting and adjusted to reflect a two-bedroom size by using Section 8 Fair Market Rent (FMR) relationships (i.e., increase or decrease the national average cost depending on whether the average cost-weighted bedroom size is greater or less than 2.0 bedrooms per unit). (See 24 CFR part 888 for additional information regarding FMRs.) (ii) Step 2: Adjustment of average national two-bedroom operating cost for local cost differences. HUD will adjust the average national two-bedroom operating cost for local cost differences using the location adjustment factors provided in the R.S. Means Residential Construction Costs Index. (iii) Step 3: Adjustment of average national operating cost for PHA- specific bedroom-size distribution. For each PHA, HUD will further adjust the average [[Page 709]] national operating cost for the bedroom size distribution of the PHA using Section 8 FMR cost relationships (i.e., increase or decrease the average national cost depending on whether the average cost-weighted bedroom size for the PHA's inventory is greater or less than 2.0 bedrooms per unit). (iv) Step 4: Update of PHA-specific average operating cost to reflect FY 2000 costs. HUD will update this PHA-specific operating cost to reflect increased FY 2000 operating costs by using the Public Housing AEL inflation factor. (2) Availability of FHAEL to PHA. HUD will make the following information available to each PHA: (i) FHAEL. The FHAEL for the PHA; (ii) PHA bedroom distribution. The PHA bedroom distribution used to make the PHA-specific bedroom adjustment under paragraph (e)(1)(iii) of this section; and (iii) Base average national cost. The two-bedroom base average national cost calculated under paragraph (e)(1)(i) of this section. (3) Use of FHAEL for FY 2000 for PHAs with less than 500 units under contract. Each PHA with less than 500 units shall review the FHAEL and bedroom distribution provided by HUD, and do the following: (i) The PHA will determine if the bedroom size distribution used by HUD was appropriate.--(A) Mandatory recalculation. If the bedroom size distribution calculated by the PHA produces a weighted average bedroom size that differs by more than .02 from the weighted average used by HUD, the PHA shall recalculate its FY 2000 FHAEL using the two-bedroom base average national operating cost provided by HUD. (B) Discretionary recalculation. If the bedroom size distribution calculated by the PHA produces a weighted average bedroom size that differs by less than .02 from the weighted average used by HUD, the PHA may recalculate its FY 2000 FHAEL using the two-bedroom base average national operating cost provided by HUD. (ii) Comparison of FHAEL to AEL. The PHA shall compare its FHAEL with its approved FY 2000 AEL. (iii) If the PHA has less than 250 units. PHAs with less than 250 units shall use the higher of their current AEL or 85% of the FHAEL. However, in no case will the PHA use an amount that exceeds 120% of its FHAEL for purposes of FY 2001 subsidy determinations under the Operating Fund Formula (see paragraph (e)(3)(v) of this section). (iv) If the PHA has 250-499 units. PHAs with 250-499 units shall use the higher of their current AEL, or 70% of FHAEL. However, in no case will the PHA use an amount that exceeds 120% of its FHAEL for purposes of FY 2001 subsidy determinations under the Operating Fund Formula (see paragraph (e)(3)(v) of this section). (v) If the PHA with less than 500 units has an AEL greater than 120% of its FHAEL. If a PHA with less than 500 units has an FY 2000 AEL that is greater than 120% of its FHAEL, the PHA shall use 120% of its FHAEL in place of its actual FY 2000 AEL for purposes of FY 2001 subsidy determinations under the Operating Fund Formula. (4) Use of FHAEL for FY 2000 for PHAs with more than 500 units under contract. Each PHA with more than 500 units shall review the FHAEL and bedroom distribution provided by HUD and do the following: (i) The PHA shall determine if the bedroom size distribution used by HUD was appropriate.--(A) Mandatory recalculation. If the bedroom size distribution calculated by the PHA produces a weighted average bedroom size that differs by more than .02 from the weighted average used by HUD, the PHA shall recalculate its FY 2000 FHAEL using the two-bedroom base average national operating cost provided by HUD. (B) Discretionary recalculation. If the bedroom size distribution calculated by the PHA produces a weighted average bedroom size that differs by less than .02 from the weighted average used by HUD, the PHA may recalculate its FY 2000 FHAEL using the two-bedroom base average national operating cost provided by HUD. (ii) Comparison of FHAEL to AEL. The PHA shall compare its FHAEL with its approved FY 2000 AEL. (iii) If the PHA's FY 2000 AEL is less than or equal to 85% of its FHAEL. If the PHA's FY 2000 AEL is less than or equal to 85% of its FHAEL, the PHA [[Page 710]] shall use its FY 2000 AEL for purposes of FY 2001 subsidy determinations under the Operating Fund Formula. (iv) If the PHA's FY 2000 AEL is greater than 85% of its FHAEL. If the PHA's FY 2000 AEL is greater than 85% of its FHAEL, the PHA shall use 98.64% of its FY 2000 AEL for purposes of calculating its FY 2001 subsidy determinations under the Operating Fund Formula. (v) Inapplicability of AEL reduction to certain PHAs. The AEL reduction described in paragraph (e)(4)(iv) of this section does not apply to the PHAs of the Virgin Islands, Puerto Rico, Guam and Alaska. These PHAs will use their FY 2000 AELs for purposes of FY 2001 subsidy determinations, regardless of whether the PHA's AEL is greater than 85% of its FHAEL. (vi) Cap on AEL value reduction. In no instance shall a PHA subject to an AEL reduction, reduce the FY 2000 AEL value used in calculating its FY 2001 AEL for purposes of operating subsidy determinations to a value less than 85% of its FHAEL. (f) Flood insurance adjustment for FY 2001. To simplify the calculation of operating subsidy, the AEL computation for the PHA's fiscal year beginning in 2001 will include an additional step following the determination made in accordance with paragraphs (a) through (e) of this section: the AEL per unit month derived in accordance with those paragraphs is to be adjusted by adding the flood insurance charge per unit month, as reflected in the last HUD approved subsidy calculation for FY 2000. This adjustment is a one-time permanent adjustment made only in FY 2001. However, if the flood map is revised at a future date, HUD will adjust the AEL for the affected PHAs in accordance with this paragraph.