Low-Income Public Housing; Performance Funding System: Elimination of Heating Degree Day Adjustment

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Public and Indian Housing

24 CFR Parts 905 and 990

[Docket No. R-94-1681; FR-2971-F-02]

RIN 2577-AA99

Low-Income Public Housing; Performance Funding System:

Elimination of Heating Degree Day Adjustment

AGENCY: Office of the Assistant Secretary for Public and Indian

Housing, HUD.

ACTION: Final rule.

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SUMMARY: This rule will eliminate the application of the heating degree

day adjustment factor in determining the component of operating subsidy

eligibility relating to utility consumption under the Performance

Funding System (PFS). The rule implements section 508 of the Cranston-

Gonzalez National Affordable Housing Act.

EFFECTIVE DATE: November 14, 1994.

FOR FURTHER INFORMATION CONTACT: For information concerning part 990,

Mr. John T. Comerford, Director, Financial Management Division, Office

of Assisted Housing, Public and Indian Housing, Room 4212, U.S.

Department of Housing and Urban Development, 451 Seventh Street, S.W.,

Washington D.C. 20410, telephone (202) 708-1872.

For information concerning part 905, Mr. Dominic Nessi, Director,

Office of Native American Programs, U.S. Department of Housing and

Urban Development, L'Enfant Plaza, Building 490, Room 8204, Washington

D.C. 20410, telephone (202) 755-0032.

Hearing or speech impaired individuals may call HUD's TDD number,

(202) 708-0850. [These telephone numbers are not toll-free.]

SUPPLEMENTARY INFORMATION:

I. Paperwork Reduction Statement

This rule eliminates a previously required adjustment and therefore

reduces the public reporting burden. The information collection

requirements contained in this rule have been reviewed by the Office of

Management and Budget under the Paperwork Reduction Act of 1980 (44

U.S.C. 3501-3520), and assigned OMB control number 2577-0029.

II. Background

Section 508 of the Cranston-Gonzalez National Affordable Housing

Act of 1990 (104 Stat. 4187) directs the Department to incorporate into

the PFS a methodology to adjust utility consumption to account for

Cooling Degree Days that is the same as the methodology used to account

for Heating Degree Days. The impetus for this legislation was that

housing agencies in the sunbelt who had to pay higher utility bills for

air conditioning during hot summers (e.g., in projects that were

``master-metered'' in which the cost of running air conditioning could

not be assigned to the tenant) wanted an adjustment in their PFS

payments to account for the increased utility consumption.

Consistent with the explicit policy stated in the statute, the

proposed rule contained a literal implementation of the statutory

language. However, the Department was concerned that its implementation

of this provision raised some basic questions and could create some

major distortions in the funding system. Because of this, it was

determined appropriate to open a discussion of policy alternatives in

the Notice of Proposed Rulemaking published in the Federal Register on

October 1, 1993 (58 FR 51261) and to invite public comment on the

issues surrounding implementation of this statutory provision.

Because of the potential importance of this change, and because the

Department was aware that there are additional factors to consider in

calculating cooling load and cost other than ambient temperatures, the

Preamble to the proposed rule described three alternate scenarios for

addressing the issue of heating and cooling degree day adjustments in

the PFS formula:

1. Implement cooling degree day adjustment exactly like the heating

degree day adjustment.

2. Isolate the consumption of the meter estimated to be used for

heating or cooling by tracking the monthly consumption, and perform a

cooling and heating degree days adjustment to the portion of utilities

estimated to be used for heating or cooling.

3. Drop all degree day adjustments in the PFS. We invited public

comment on these alternate approaches or suggestions of additional

alternatives.

III. Response to Public Comments

There were fifteen public comments on the proposed rule. The

fifteen commenters included 13 Housing Agencies (HAs), one taxpayer,

and the Council of Large Public Housing Authorities. Fourteen of the

fifteen commenters recommended that the Department adopt the third

option.

Only one commenter did not recommend the third option. Instead this

commenter presented options that combined elements of options 2 and 3:

(A) Establish areas to receive cooling allowances by geographical

zones rather than cooling degree days. A twenty year temperature

history could be the basis for the allowance. This would include

seasonal starting and stopping dates as well as intensity of energy

requirements.

(B) Develop formulae that allow less energies for well insulated

housing as well as additional energies for housing with high solar

gain. This could be done on a plus or minus percentage basis. An energy

audit would be helpful in establishing the anticipated energy use of

each unit.

(C) Collect energy use data from a variety of unit types, family

types, and samples of several existing housing units in the specified

zone. This data could be used as the basis for a fixed allowance for

cooling purposes during the zone area's cooling season.

The other fourteen commenters recommended Option 3 because they

found the benefit in reduced paperwork and administrative burden

outweighs the benefit of an adjustment for temperature variations. As

one stated, ``Although theoretically, it appears prudent to adjust the

utility consumption figures for weather conditions, practically, it is

very difficult to do so with any degree of reliability.'' Another

commenter summed up the benefits of Option 3 in one sentence, ``It

would simplify the system, allow timely post year adjustments and would

average out over time.''

In response to this level of agreement, the Department is adopting

the third option and dropping all heating and cooling degree day

adjustments. This approach will greatly simplify the PFS. The rolling

base used to estimate utility consumption in the PFS will reflect the

HA's recent history of utility consumption including the impact of

local heating and cooling requirements. This rule will eliminate the

need to separately track the consumption of each meter used to supply

heating or air conditioning. This will reduce paperwork and the

administrative burden on the Department and the Housing Agencies. It

will eliminate the need to wait for publication of the degree day

factors before adjustments can be made. This three month delay also

affects the ability to develop ratings under the Public Housing

Management Assessment Program (PHMAP). On the negative side, HAs will

get only a 50 percent adjustment for consumption, without further

adjustment to reflect weather conditions. Assuming that weather

averages out over time, there will be no long term penalty or bonus.

IV. Timing of Implementation

By law, the PFS regulation remains in effect for the duration of a

HA's fiscal year without change. The revisions of this rule will affect

a particular HA's year end adjustments to its fiscal year beginning in

Calendar Year 1995. HAs will apply heating degree day adjustments to

their fiscal years which began during FFY 1994 and end in 12/94, 3/95,

6/95, and 9/95. The first years that will not be adjusted will be

fiscal years ending 12/95, 3/96, 6/96, and 9/96.

V. Findings and Certifications

A. Environmental Review

A Finding of No Significant Impact (FONSI) with respect to the

environment was made on the proposed rule in accordance with HUD

regulations in 24 CFR Part 50 which implements Section 102(2)(C) of the

National Environmental Policy Act of 1969, 42 U.S.C. 4332. That Finding

is available for public inspection during regular business hours in the

Office of the General Counsel, Rules Docket Clerk, at the above

address. Since the provisions of this final rule were anticipated as an

option stated in the proposed rule, that FONSI remains valid.

B. Regulatory Review

This rule was reviewed by the Office of Management and Budget under

Executive Order 12866, Regulatory Planning and Review. Any changes made

to the rule as a result of that review are clearly identified in the

docket file, which is available for public inspection in the office of

the Department's Rules Docket Clerk, room 10276, 451 Seventh Street,

SW, Washington, DC.

C. Impact on Small Entities

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this rule before publication and by

approving it certifies that this rule would not have a significant

economic impact on a substantial number of small entities. The rule may

result in changes in the level of operating subsidy eligibility for

certain public housing agencies, but we have no reason to believe that

it would have disproportionate effect on small HAs.

D. Federalism Impact

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

of Executive Order 12612, Federalism, has determined that the policies

contained in this rule would not have federalism implications and,

thus, are not subject to review under the Order. The rule refines an

established formula under which HUD calculates operating subsidies for

low-income housing developments, but contains no requirement for

explicit action by local officials and will not interfere with State or

local governmental functions.

E. Impact on the Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this rule would not have

potential significant impact on family formation, maintenance, and

general well-being, and, thus, is not subject to review under the

Order.

F. Regulatory Agenda

This rule is listed as item 1705 under the Office of Public and

Indian Housing in the Department's semiannual agenda of regulations

published on April 25, 1994 (59 FR 20424, 20474), under Executive Order

12866 and the Regulatory Flexibility Act.

G. Catalog

The Catalog of Federal Domestic Assistance Program numbers for this

rule are 14.146 and 14.147.

List of Subjects

24 CFR Part 905

Aged, Energy conservation, Grant programs--housing and community

development, Grant programs--Indians, Indians, Homeownership,

Individuals with disabilities, Lead poisoning, Loan programs--housing

and community development, Loan programs--Indians, Low and moderate

income housing, Public housing, Reporting and recordkeeping

requirements.

24 CFR Part 990

Grant programs--housing and community development, Public housing,

Reporting and recordkeeping requirements.

Accordingly, 24 CFR Parts 905 and 990 are amended as follows:

PART 905--INDIAN HOUSING PROGRAMS

1. The authority citation for part 905 is revised to read as

follows:

Authority: 25 U.S.C. 450e(b); 42 U.S.C. 1437a, 1437aa, 1437bb,

1437cc, 1437ee, and 3535(d).

Sec. 905.102 [Amended]

2. Section 905.102 is amended by removing the second sentence of

the definition of ``Allowable utilities consumption level (AUCL)'', and

by removing the definitions of ``Change factor'' and ``Heating degree

days (HDD)''.

Sec. 905.715 [Amended]

3. Section 905.715 is amended by:

a. Removing the last sentence of paragraph (a);

b. Removing from paragraph (b)(2), the phrase ``paragraph (f)'',

and adding in its place the phrase ``paragraph (e)'';

c. Removing from the introductory text of paragraph (c), the phrase

``paragraph (g)(1)'', and adding in its place the phrase ``paragraph

(f)(1)'';

d. Removing from paragraph (c)(2)(iii), the phrase ``paragraph

(e)'', and adding in its place the phrase ``paragraph (d)'', and by

removing from the end of paragraph (c)(2)(iii), the phrase ``and no

change factor shall be applied'';

e. Removing from paragraph (c)(4)(i), in two places, the phrase

``paragraph (g)'', and adding in its place the phrase ``paragraph

(f)'';

f. Removing paragraph (c)(4)(ii), and by redesignating paragraph

(c)(4)(iii) as paragraph (c)(4)(ii);

g. Removing paragraph (d);

h. Redesignating paragraph (e) as paragraph (d), and by removing

from the last sentence of the paragraph the phrase, ``No change factor

shall be applied to actual per-unit per-month utility expenses, and'',

and by capitalizing the next word ``Subsequent'';

i. Redesignating paragraph (f) as paragraph (e), and by removing

the phrase ``(after adjustment for heating degree days in accordance

with paragraph (d) of this section)''; and

j. Redesignating paragraph (g) as paragraph (f).

Sec. 905.730 [Amended]

4. Section 905.730 is amended by:

a. Removing from paragraph (c)(2)(i), the phrase ``(adjusted for

heating degree days in accordance with Sec. 905.715(d),''; and

b. Amending paragraph (c)(2)(ii), by removing the phrase

``Sec. 905.715(g)(1)'', and adding in its place the phrase

``Sec. 905.715(f)(1)''; by removing from the second sentence, the

phrase ``using a heating degree day adjustment for space heating

utilities and''; and by removing the third and fourth sentences, ``The

heating degree day experience during the frozen rolling base period

will be used instead of the degree days in the year being adjusted. The

documentation on the degree days shall be supplied by the IHA and is

subject to HUD approval.''

PART 990--ANNUAL CONTRIBUTIONS FOR OPERATING SUBSIDY

5. The authority citation for part 990 continues to read as

follows:

Authority: 42 U.S.C. 1437(g) and 3535(d).

Sec. 990.102 [Amended]

6. In Sec. 990.102, the second sentence of the definition of

``Allowable Utilities Consumption Level (AUCL)'' is removed, and the

definitions of ``Change Factor'' and ``Heating Degree Days (HDD)'' are

removed.

Sec. 990.107 [Amended]

7. Section 990.107 is amended by:

a. Removing the last sentence of paragraph (a);

b. Removing from paragraph (b)(2), the phrase ``paragraph (f)'' and

adding in its place the phrase ``paragraph (e)'';

c. Removing from the introductory text of paragraph (c), the phrase

``paragraph (g)(1)'', and adding in its place the phrase ``paragraph

(f)(1)'';

d. Removing from paragraph (c)(2)(iii), the phrase ``paragraph

(e)'', and adding in its place the phrase ``paragraph (d)'', and by

removing the phrase ``and no Change Factor shall be applied'';

e. Removing from paragraph (c)(4)(i), in two places, the phrase

``paragraph (g)'', and adding in their place the phrase ``paragraph

(f)'';

f. Removing paragraph (c)(4)(ii), and by redesignating paragraph

(c)(4)(iii) as paragraph (c)(4)(ii);

g. Removing paragraph (d);

h. Redesignating paragraph (e) as paragraph (d), and amending the

newly redesignated paragraph (d) by removing the phrase, ``No Change

Factor shall be applied to actual PUM utility expenses, and'', and by

capitalizing the next word ``Subsequent'';

i. Redesignating paragraph (f) as paragraph (e), and amending by

removing the phrase ``(after adjustment for heating degree days in

accordance with paragraph (d) of this section)''; and

j. Redesignating paragraph (g) as paragraph (f).

Sec. 990.110 [Amended]

8. Section 990.110 is amended by:

a. Removing from paragraph (c)(2)(i), the phrase ``(adjusted for

Heating Degree Days in accordance with Sec. 990.107(d),''; and

b. Amending paragraph (c)(2)(ii), by removing the phrase

``Sec. 990.107(g)(1)'' and adding in its place the phrase

``Sec. 990.107(f)(1)'', by removing the phrase ``using a heating degree

day adjustment for space heating utilities and'', and by removing the

sentences ``The heating degree day experience during the frozen rolling

base period will be used instead of the degree days in the year being

adjusted. The documentation on the degree days must be supplied by the

PHA and is subject to HUD approval.''

Dated: October 5, 1994.

Michael B. Janis,

General Deputy Assistant Secretary for Public and Indian Housing.

[FR Doc. 94-25391 Filed 10-12-94; 8:45 am]

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