NOFA for Capital Improvement Loans Under the Flexible Subsidy Program Awarded as Incentives Pursuant to Preservation Plans of Action; Notice DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This notice announces HUD's funding for that portion of the

Capital Improvement Loan component of the Flexible Subsidy Program set

aside for Fiscal Year 1994 to support approved plans of action under

the Emergency Low-Income Housing Preservation Act of 1987 (ELIHPA).

This document includes information concerning the following:

(a) The purpose of the NOFA and information regarding eligibility,

available amounts, and selection criteria;

(b) Application processing, including how to apply and how

selections will be made; and

(c) A checklist of steps and exhibits involved in the application

process.

DATES: Applications may be submitted beginning June 17, 1994. There is

no deadline for an application. An application may be submitted as soon

as a HUD Field Office has issued preliminary approval of a plan of

action under ELIHPA and as long as funds remain available.

ADDRESSES: Applications are to be submitted to the HUD Field Office by

which the owner has had a plan of action approved under ELIHPA.

FOR FURTHER INFORMATION CONTACT:

Frank Malone, Director, Multifamily Housing Preservation and Property

Disposition, Department of Housing and Urban Development, Room 6164,

451 Seventh Street, NW, Washington, DC 20410; telephone (202) 708-3555.

To provide service for persons who are hearing or speech-impaired, this

number may be reached via TDD by dialing the Federal Information Relay

Service on 1-800-877-TDDY (1-800-877-8339) or (202) 708-9300. (Except

for the TDD number, telephone numbers are not toll free.)

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Statement

The Office of Management and Budget has approved the use of the

Flexible Subsidy forms under OMB control number 2502-0395.

I. Purpose and Substantive Description

A. Statutory Background and Authority

Section 201 of the Housing and Community Development Amendments

(HCDA) of 1978 created the Flexible Subsidy Program to provide

Operating Assistance to eligible projects experiencing financial

difficulty. Operating Assistance is provided in the form of a deferred

loan and, in conjunction with other resources, is designed to restore

or maintain the physical and financial soundness of eligible projects.

The 1983 amendments to section 201 of the HCDA expanded the universe of

eligible projects and clarified that a project need not have an FHA-

insured mortgage to be eligible for Flexible Subsidy assistance (e.g.,

a non-insured section 236 project is eligible).

The Housing and Community Development Act of 1987 amended section

201 of HCDA to create a new category of assistance to be provided under

the Flexible Subsidy Program for projects that needed capital

improvements to achieve physical soundness that cannot be funded from

project reserve funds without jeopardizing other major repairs or

replacements that are reasonably expected to be required in the near

future.

The 1987 amendments to the Flexible Subsidy statute (Sections 185

and 186 of the Housing and Community Development Act of 1987) also

recognized the need to coordinate assistance under the Flexible Subsidy

Program with the initiative to preserve low- and moderate-income

housing, enacted in Title II of that Act. (In its comprehensive

revision of the 1987 Act, Title VI of the 1990 Cranston-Gonzalez

National Affordable Housing Act, at the new section 219, repeated the

listing of incentives the Secretary could agree to provide an owner as

part of a plan of action to prevent prepayment of a mortgage on a

project serving low- and moderate-income tenants. A capital improvement

loan was included as an incentive to owners.)

Section 405 of the Housing and Community Development Act of 1992,

in addition to making other amendments, removed the priority for

ELIHPA-eligible projects and imposed certain exclusivity restrictions

on Flexible Subsidy-assisted and ELIHPA- and LIHPRHA-eligible projects.

These provisions have been repealed by section 103(b) of the

Multifamily Housing Property Disposition Reform Act of 1994 (the 1994

Act).

Section 201(n)(1) of the HCDA, as amended by section 103(b)(3) of

the 1994 Act, authorizes the Department to set aside assistance for

Capital Improvement Loans for projects that are eligible for incentives

under ELIPHA. In addition, under section 201(n)(1), the Department is

authorized to make this assistance available on a noncompetitive basis.

This notice supports preservation efforts by announcing a set-aside

of $20 million for Flexible Subsidy Capital Improvement funding to

insured projects that are eligible under ELIHPA to receive incentives

in exchange for extending the low- to moderate-income use of the

projects under plans of action approved in accordance with 24 CFR part

248, subpart C.

B. Allocation Amounts

The Flexible Subsidy Fund is comprised of excess rental receipts

paid to HUD from owners of Section 236 projects, interest earned on the

fund, repayment of Operating Assistance loans made by the Department in

past fiscal years, and amounts appropriated by Congress, if any, to

carry out the purposes of the Flexible Subsidy Program.

The Capital Improvement Loan portion of the program is required by

statute (Section 201(j)(4)) to be funded at a minimum level of $30

million or 40 percent of the amount in the Flexible Subsidy fund,

whichever is less. This year, $30 million is less than 40 percent of

the fund, and therefore, is the amount designated for Capital

Improvement Loans. Of the $30 million set aside for Capital Improvement

funding, $20 million is available under this NOFA for preservation

projects. The remaining $10 million was made available under the

Flexible Subsidy NOFA, published on January 13, 1994, at 59 FR 2270.

C. Eligibility.

1. Types of Projects. The following types of rental or cooperative

housing are eligible for Capital Improvement Loans:

a. A project which meets the definition of ``eligible low-income

housing'' as set forth at 24 CFR 248.201; and

b. Has received preliminary approval of a plan of action pursuant

to 24 CFR 248.233 which provides for a sale to a nonprofit or a limited

equity cooperative.

2. Conditions. Flexible Subsidy assistance will be made available

in accordance with Section 201 of the Housing and Community Development

Amendments (HCDA) of 1978, as amended by Section 103 of the Multifamily

Housing Property Disposition Reform Act of 1994. Assistance can be

provided only if the following conditions are determined to exist when

a plan of action is approved:

a. The assistance is necessary, when considered with other

resources available to the project; it will restore or maintain the

financial or physical soundness of the project; and it will preserve

the low- and moderate-income character of the project.

b. The owner has agreed to maintain the low- and moderate-income

character of the project for a period at least equal to the remaining

term of the project mortgage.

c. The assistance will be less costly to the Federal Government

over the useful life of the project than other reasonable alternatives

of preserving the occupancy character of the project.

d. The project is or can reasonably be made structurally sound, as

determined in accordance with an on-site inspection.

e. All reasonable attempts have been made to take all appropriate

actions and provide suitable housing for project residents.

f. There is evidence of the existence of a feasible plan to involve

the residents in project decisions.

g. The project will be operated competently, as determined by HUD

in a management review.

h. Project management is in accordance with any management

improvement and operating plan approved by HUD for the project.

i. The Affirmative Fair Housing Marketing plan meets applicable

requirements.

j. The purchaser certifies that it will comply with all applicable

equal opportunity statutes, including the provisions of the Fair

Housing Act, Title VI of the Civil Rights Act of 1964, Executive Orders

11063, 11246 and 11375, Section 504 of the Rehabilitation Act of 1973,

the Age Discrimination Act of 1975, the Americans with Disabilities

Act, Section 3 of the Housing and Urban Development Act of 1968, and

all regulations issued pursuant to these authorities.

k. The purchaser has funded the reserve for replacements account in

accordance with HUD requirements, and yet the reserve account (and any

other project funds available to fund the reserve account) is

insufficient to finance both the capital improvements for which

assistance is being requested and other capital improvements that are

reasonably expected to be required within the next 24 months.

D. Selection Criteria and Ranking Factors

Each application for a Capital Improvement Loan will be reviewed by

the HUD Field Office having jurisdiction over the project in question.

Field Offices will recommend applications for funding to HUD

Headquarters.

Under section 201(n)(1), as amended by section 103(b) of the 1994

Act, Capital Improvement Loans for ELIHPA projects that are eligible

for incentives may be made available on a noncompetitive basis.

Submission and approval of the notices of intent and plans of action

are subject to the eligibility of the owner filing them.

E. Other Loan Terms and Conditions

Repair items eligible for funding as a Capital Improvement Loan

include any major repair or replacement of building components or other

on-site improvements included in allowable costs when the project was

built, (e.g., sewer laterals, roof structures, ceilings, wall or floor

structures, foundations, plumbing, heating, cooling, electrical systems

and major equipment), as well as any major repair or replacement of any

short-lived building equipment or component before the expiration of

its useful life.

Improvements eligible for funding may also include limited

supplements or enhancements to mechanical equipment, to the extent they

are needed for the health and safety of the residents (e.g., air

conditioning, heating equipment, and building sprinkler systems), where

they do not exist; improvements necessary to comply with HUD's

standards in 24 CFR part 8 for accessibility to individuals with

handicaps; and cost effective energy efficiency improvements.

Improvements eligible for funding as a Capital Improvement Loan do not

include maintenance of any building components or equipment.

Capital Improvement assistance may be provided in the form of an

amortizing loan. The interest rate on the loan may not be less than

three (3) percent (unless HUD determines that a lower rate is necessary

to maintain rental rates, in accordance with Chapter 12 of HUD Handbook

4350.6, Processing Plans of Action Under the Low-Income Housing

Preservation and Resident Homeownership Act of 1990 and Form HUD-90010,

Owner's Calculation of Tenant Rent Phase-In Due to POA approval, but in

no case less than one percent) nor more than six (6) percent. The rate

is determined taking into consideration the project's ability to absorb

the rent increase and the percentage of the tenants receiving rental

assistance. Interest on the Capital Improvement Loan starts to accrue

and the loan amortization period begins immediately upon disbursement

of loan proceeds.

A Capital Improvement Loan to a nonprofit organization may be in

the form of a deferred note with a term coincident with the expiration

of the project's insured mortgage note, accruing interest at a rate of

one (1) percent. The deferred note will become due and payable upon a

sale or refinancing of the project or at the expiration of the insured

mortgage note.

II. Application and Funding Award Process

A. Obtaining and Preparing Applications

Applicants may obtain application packages from the local HUD Field

Office.

An application must reflect the improvements required as a

condition of approval of the plan of action. In addition, all other

deficiencies, which are to be corrected with funds from sources other

than Flexible Subsidy, must be identified on the work write-up and cost

estimate and Management Improvement and Operation (MIO) plan Part II

(Forms HUD-9835, HUD-9835-A, and HUD-9835-B) as if Flexible Subsidy

were being requested.

B. Submitting Applications

Complete applications for a Flexible Subsidy Capital Improvement

Loan pursuant to plans of action receiving preliminary approval under

ELIHPA must be received in the HUD field office not more than 30 days

following the issuance of preliminary approval. Timeliness of

submission will allow the Department to review the application within

the 30-day mandatory review period and in time to issue final approval

of the plan of action in the period required by Part 248.219.

After HUD receives the application, it will review it against the

improvements agreed upon in the plan of action. HUD may also conduct a

comprehensive management review to ensure that all management issues

are addressed as part of the MIO plan requirements.

C. Funding Award Process: Compliance with HUD Reform Act.

1. Section 103. In accordance with the requirements of section 103

of the Department of Housing and Urban Development Reform Act of 1989

(HUD Reform Act) and HUD's implementing regulations at 24 CFR part 4,

no selection information will be made available to applicants or other

persons not authorized to receive this information during the period of

HUD review and evaluation of the applications. However, applicants that

are declared ineligible will be notified of their ineligibility at the

time such determination is made.

Noncompetitive individual funding allocations and announcements

will be made, as funding determinations are completed, through the HUD

Regional or Field Offices after notification to the Congressional

delegation. No information regarding any unfunded application will be

made available to the public. All awards will be disclosed publicly at

the conclusion of each selection.

2. Section 102. Section 102 contains a number of provisions that

are designed to ensure greater accountability and integrity in the

provision of certain types of assistance administered by HUD. The

following requirements concerning documentation and public access,

disclosures, and subsidy layering determinations are applicable to

assistance awarded under this NOFA.

a. Documentation and public access. HUD will ensure that

documentation and other information regarding each application

submitted pursuant to this NOFA are sufficient to indicate the basis

upon which assistance was provided or denied. This material, including

any letters of support, will be made available for public inspection

for a five-year period beginning not less than 30 days after the award

of the assistance. Material will be made available in accordance with

the Freedom of Information Act (5 U.S.C. 552) and HUD's implementing

regulations at 24 CFR part 15. In addition, HUD will include the

recipients of assistance pursuant to this NOFA in a Federal Register

notice of recipients of HUD assistance awarded. (See 24 CFR 12.14(a)

and 12.16(b), and the notice published in the Federal Register on

January 16, 1992 (57 FR 1942), for further information on these

requirements.)

b. Disclosures. HUD will make available to the public for five

years all applicant disclosure reports (Form HUD-2880) submitted in

connection with this NOFA. Update reports (also Form HUD-2880) will be

made available along with the applicant disclosure reports, but in no

case for a period generally less than three years. All reports--both

applicant disclosures and updates--will be made available in accordance

with the Freedom of Information Act (5 U.S.C. 552) and HUD's

implementing regulations at 24 CFR part 15. (See 24 CFR subpart C, and

the notice published in the Federal Register on January 16, 1992 (57 FR

1942), for further information on these disclosure requirements.)

c. Subsidy-layering determinations. 24 CFR 12.52 requires HUD to

certify that the amount of HUD assistance is not more than is necessary

to make the assisted activity feasible after taking into account other

government assistance. HUD will make the decision with respect to each

certification available to the public free of charge, for a three-year

period. (See the notice published on February 25, 1994 at FR 59 9332

for further information on requesting these decisions.) Additional

requests for information about applications, HUD certifications, and

assistance adjustments, either before assistance is provided or

subsequently, are to be made under the Freedom of Information Act (24

CFR part 15).

III. Checklist of Application Submission Requirements

The following items are required as part of each application:

A. A work write-up and cost estimates listing the major project

components that have failed, or are likely to fail or seriously

deteriorate within the next 24 months; capital items that can be

upgraded to meet cost-effective energy efficiency standards approved by

HUD; supplements or enhancements to mechanical equipment and the extent

they are needed for health or safety reasons; and amounts needed to

comply with the Department's standards as set forth in 24 CFR part 8,

dealing with accessibility to individuals with handicaps.

B. All documentation required by HUD Notice, published on February

25, 1994, at FR59 9332, Combining Low-Income Housing Tax Credits

(LIHTC) with HUD Programs, and by the Notice of Administrative

Guidelines to be applied to assistance programs of the Office of

Housing, published on April 9, 1991 (56 FR 14436).

C. Anti-lobbying Certification for Contracts, Grants, Loans and

Cooperative Agreements for grants exceeding $100,000; and, if

warranted, Disclosure of Lobbying Activities (Standard Form-LLL) if

other than federally appropriated funds will be or have been used to

lobby the Executive or Legislative branches of the Federal Government

regarding specific contracts, grants, loans or Cooperative agreements.

Form SF-LLL, Byrd Amendment Disclosure and Certification Regarding

Lobbying should be submitted only if the applicant determines it is

applicable. The SF-LLL form may not need to be submitted with all

applications.

D. Environmental Requirements. A comprehensive technical energy

analysis which includes a review of all capital improvements for which

assistance is requested, and related capital items whose improvement or

upgrading will result in cost-effective energy efficiency improvements.

The results of the analysis will be a list of specified improvements,

their costs and evidence of their cost effectiveness. An energy

analysis that is provided by a local utility company and that contains

a measure of cost-effectiveness information may be acceptable in

meeting this requirement. All applications will be reviewed for

compliance with 24 CFR 219.125, Environmental requirements as

applicable.

E. MIO Plan Part II, Management Objectives, Action Items, and

Sources and Uses of Funds (Forms HUD-9835, 9835-A, and HUD-9835-B).

Refer to Section 5-4 of HUD HANDBOOK 4355.1, Rev. 1, Flexible Subsidy,

for further discussion of MIO Plan Part II. Management Objectives must

be specific, measurable, and must address all management deficiencies

including actions which will be performed to improve management and

personnel and upgrade tenant services, as appropriate.

Action Items must address all project deficiencies, including those

which are to be corrected using resources other than Flexible Subsidy

assistance. Action Items must be written in a manner which specifically

describes the scope of the work and provides an estimate of the cost of

the work to be performed. In addition, they must be structured so as to

be highly visible items for which expenditures and work progress can be

easily monitored. For example, if boilers are to be replaced, the

description should identify the malfunctioning unit, its age, and its

location, e.g., building number, basement/roof. A further explanation

should identify the replacement unit, the estimated cost per unit and

the labor cost associated with the entire replacement.

F. Form HUD-2530, Previous Participation Certificate, for all

principals requiring clearance under these procedures.

G. Certification of compliance with the requirements of the Uniform

Relocation Assistance and Real Property Acquisition Policies Act of

1970, as amended (42 U.S.C. 4601-4655), and its implementing

regulations at 49 CFR part 24, and HUD Handbook 1378, Tenant

Assistance, Relocation and Real Property Acquisition.

I. Affirmative Fair Housing Marketing plan (Form HUD-935.2).

J. Certification that the applicant will comply with the provisions

of the Fair Housing Act, Title VI of the Civil Rights Act of 1964,

Executive Orders 11063, 11246 and 11375, the American with Disabilities

Act, Section 504 of the Rehabilitation Act of 1973, the Age

Discrimination Act of 1975, Section 3 of the Housing and Urban

Development Act of 1968, and all regulations issued pursuant to these

authorities.

K. Form HUD-2880, Applicant/Recipient Disclosure/Update Report, as

required under subpart C of 24 CFR part 12, Accountability in the

Provision of HUD Assistance.

IV. Deficient Applications

A. Application Review

Within 30 days of receipt by HUD of the application from the owner,

HUD will advise the owner, in writing, whether or not the application

meets the submission requirements as stated in Part III above. Should

HUD fail to inform the owner of its disapproval within the 30-day time

frame, the application shall be considered to be approved. If HUD

disapproves the application, an ELIHPA plan of action may not receive

final approval.

B. Submission of Substantive Changes

Substantive changes or supplements to the application may be

submitted by the applicant at any time. These include changes to the

work write up, cost estimates or Form HUD-9835. However, submission of

substantive changes will cause HUD's 30-day mandatory review time to

recommence upon resubmission and will delay consideration of approval

of a plan of action.

V. Other Matters

Prohibition Against Lobbying Activities

The use of funds awarded under this NOFA is subject to the

disclosure requirements and prohibitions of section 319 of the

Department of Interior and Related Agencies Appropriations Act for

Fiscal Year 1990 (31 U.S.C. 1352), and the implementing regulations at

24 CFR part 87. These authorities prohibit recipients of Federal

contracts, grants, or loans from using appropriated funds for lobbying

the Executive or Legislative Branches of the Federal Government in

connection with a specific contract, grant, or loan. The prohibition

also covers the awarding of contracts, grants, cooperative agreements,

or loans unless the recipient has made an acceptable certification

regarding lobbying. Under 24 CFR part 87, applicants, recipients, and

subrecipients of assistance exceeding $100,000 must certify that no

Federal funds have been or will be spent on lobbying activities in

connection with the assistance.

Prohibition Against Lobbying of HUD Personnel

Section 13 of the Department of Housing and Urban Development Act

(42 U.S.C. 3537b) contains two provisions dealing with efforts to

influence HUD's decisions with respect to financial assistance. The

first imposes disclosure requirements on those who are typically

involved in these efforts--those who pay others to influence the award

of assistance or the taking of a management action by the Department

and those who are paid to provide the influence. The second restricts

the payment of fees to those who are paid to influence the award of HUD

assistance, if the fees are tied to the number of housing units

received or are based on the amount of assistance received, or if they

are contingent upon the receipt of assistance.

Section 13 was implemented by final rule published in the Federal

Register on May 17, 1991 (56 FR 29912). See 24 CFR Part 86. If readers

are involved in any efforts to influence the Department in these ways,

they are urged to read 24 CFR Part 86, particularly the examples

contained in Appendix A.

Any questions concerning Part 86 should be directed to Garry L.

Phillips, Acting Director, Office of Ethics, Room 2158, Department of

Housing and Urban Development, 451 Seventh Street, SW, Washington, DC

20410-3000. Telephone: (202) 708-3815 (TDD Voice). (This is not a toll-

free number.) Forms necessary for compliance with the rule may be

obtained from the local HUD office.

Prohibition Against Advance Information on Funding Decisions

Section 103 of the Reform Act proscribes the communication of

certain information by HUD employees to persons not authorized to

receive that information during the selection process for the award of

assistance that entails a competition for its distribution. HUD's

regulations implementing section 103 are codified at 24 CFR part 4 (see

56 FR 22088, May 13, 1991). (See also Section II.C. of this NOFA.) In

accordance with the requirements of Section 103, HUD employees involved

in the review of applications and in the making of funding decisions

under a competitive funding process are restrained by 24 CFR part 4

from providing advance information to any person (other than an

authorized employee of HUD) concerning funding decisions, or from

otherwise giving any applicant an unfair competitive advantage. Persons

who apply for assistance in this competition should confine their

inquiries to the subject areas permitted by 24 CFR part 4. Applicants

who have questions should contact the HUD Office of Ethics (202) 708-

3815. (This is not a toll-free number.)

Environmental Impact

A Finding of No Significant Impact with respect to the environment

has been made in accordance with HUD regulations that implement Section

102(2)(C) of the National Environmental Policy Act of 1969 (42 U.S.C.

4332). The Finding of No Significant Impact is available for public

inspection during business hours in the Office of the Rules Docket

Clerk, Office of General Counsel, Room 10276, Department of Housing and

Urban Development, 451 Seventh Street, SW, Washington, DC 20410.

Federalism Executive Order

The General Counsel, as the Designated Official under Section 6(a)

of Executive Order 12612, Federalism, has determined that this Notice

of Fund Availability will not have substantial, direct effects on

States, on their political subdivisions, or on their relationship with

the Federal Government, or on the distribution of power and

responsibilities between them and other levels of government.

Family Executive Order

The General Counsel, as the Designated Official under Executive

Order 12606, the Family, has determined that this Notice of Fund

Availability will not have a significant impact on family formation,

maintenance or well being, and therefore, is not subject to review

under the order. The NOFA, insofar as it funds emergency repairs to

multifamily housing projects, will assist in preserving decent housing

stock for families residing there. Catalog. The Catalog of Federal

Domestic Assistance Program number is 14.164.

Dated: June 13, 1994.

Nicolas P. Retsinas,

Assistant Secretary for Housing-Federal Housing Commissioner.

[FR Doc. 94-14746 Filed 6-16-94; 8:45 am]

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