Operating Fund Negotiated Rulemaking Committee reaches final agreement

Consensus achieved on outstanding issues

With a 25-1 vote, the operating fund negotiated rulemaking committee concluded its work late Wednesday night, June 9. Two days of intensive negotiations produced agreements on remaining disputes. Prominent among these were the definition of eligible unit months, utility funding, asset repositioning, and HUD's future plans including using actual costs and utility benchmarks to fund housing authorities.

Funding will now be based on eligible unit months, rather than available unit months. An agency will be allowed up to 3 percent vacancies, and units under modernization or used for resident services are also eligible for funding. Other categories, such as litigation, disasters, casualty losses and market conditions will require HUD approval to receive funding. For federal fiscal year 2006, eligible units will be calculated on an authority wide basis, but in subsequent years, they will be calculated project by project.

Although there will be no utility adjustment at the end of each fiscal year, utility funding will be based on a rate which uses a 12 month historical average and is then adjusted for inflation, as has been done traditionally with the AEL. This agreement will not eliminate the rate risk for HAs, as costs may increase faster than inflation, but it does mean authorities will receive the best possible rate at the time funding is determined.

Agencies with approved demolition plans for properties will receive asset repositioning funding starting six months after the first unit is vacated based on its relocation plan. For the first 12 months, funding will be 75 percent of the agency's project expense level, and then it will decline to 50 percent for the second twelve months and 25 percent for the third twelve months.

The rule indicates that HUD intends to base funding on each project's actual costs by the year 2011. It also states that HUD will pursue utility benchmarking. In each case, though, the Department agreed to convene a panel based on the Federal Advisory Committee Act (FACA) to examine the ramifications of these changes before proceeding to rulemaking. These meetings will be held in 2009.

The agreement clarified that agencies which have funding decreased under the Harvard formula will be able to stop their losses at 5 percent of the difference between their old and new subsidy levels if they complete the transition to project based accounting and management by October 5, 2005.

A more comprehensive analysis of the committee's agreement and the new rule will be provided in the next issue of the Advocate.

PHADA FRONT