NOFA for the Operating Assistance and Capital Improvement Loan Components of the Flexible Subsidy Program for FY 1994 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

SUMMARY: This notice announces HUD's funding for the Operating

Assistance and Capital Improvement Loan components of the Flexible

Subsidy Program for Fiscal Year 1994. 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: The due date for submission of applications by project owners in

response to this NOFA is February 28, 1994. Application materials may

be obtained from the local HUD Field Office.

Applications must be physically received by the applicable HUD

Field Office Loan Management Branch on the due date by 4 p.m., local

time. Please see the Application Process section of this NOFA (Section

II) for further information on what constitutes proper submission of an

application.

The application deadline is firm as to date and hour. In the

interest of fairness to all competing applicants, HUD will treat as

ineligible for consideration any application that is not received on or

before the application deadline. Applicants should take this practice

into account and make early submission of their materials to avoid any

risk of loss of eligibility brought about by unanticipated delays or

other delivery-related problems.

FOR FURTHER INFORMATION CONTACT: Program Support Branch, Office of

Multifamily Housing Management, 451 Seventh Street SW., Washington DC

20410, telephone (202) 708-2654 (voice) or (202) 708-3938 (TDD for

hearing-impaired). (These are not toll-free telephone numbers.)

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 Authority

Sec. 201, Housing and Community Development Amendments of 1978 (12

U.S.C. 1715z-1a); sec. 7(d), Department of Housing and Urban

Development Act (42 U.S.C. 3535(d)).

B. Flexible Subsidy Program

1. Authorizing Legislation

Section 201 of the Housing and Community Development Amendments of

1978 (HCDA) 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 1987 amendments to section 201 of the HCDA created 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.

Sections 405 and 406 of the Housing and Community Development Act

of 1992 (Pub.L. 102-550, approved October 28, 1992) (1992 Act) further

amended section 201 of the HCDA. The amendments made to section 201 by

the 1992 Act were discussed in detail in the proposed rule published on

June 25, 1993 (58 FR 34506). That rule proposed to amend HUD's Flexible

Subsidy regulations at 24 CFR part 219 to bring these regulations into

conformity with the changes made to the Flexible Subsidy Program by the

1992 Act. The changes to the Flexible Subsidy Program made by the 1992

Act also were discussed and incorporated in the FY 1993 Flexible

Subsidy NOFA published on June 7, 1993 (58 FR 32022). The proposed

amendments to 24 CFR part 219 published on June 25, 1993 were adopted

by a final rule published on December 6, 1993 (58 FR 64138).

2. Assurance of Support of Preservation Efforts

This notice assures support of preservation efforts by providing

for a set-aside of $20.0 million for Flexible Subsidy Capital

Improvement funding to insured projects that are eligible 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.

The $20.0 million set-aside will be made available under a separate

notice of fund availability. The remainder of the Flexible Subsidy Fund

is made available under this NOFA for the award of funds to eligible

projects in accordance with the priorities specified in this NOFA.

C. Allocation Amounts

1. Total Available Funding for FY 1994

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 HUD in past

fiscal years, and amounts appropriated by the 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 to be funded at a minimum level of $30.0 million or 40 percent

of the amount in the Flexible Subsidy Fund, whichever is less. Any of

that amount not used for loans under that program before the last 60

days of a fiscal year shall become available for Operating Assistance

loans. This year, $30.0 million is less than 40 percent of the fund,

and therefore, is the amount designated for Capital Improvement Loans.

Funding availability for Fiscal Year 1994 is estimated as follows:

FY 1994 Appropriation................................... $35,747,000

Estimated Offsetting Collections........................ 76,916,000

Carryover of Unreserved 1993 Funds...................... 7,839,534

Estimated Available Funds--Fiscal Year 1994............. 120,502,534

Less: Set-aside for capital improvements for insured

projects with incentives under part 248 (available

under a separate funding action)................... 20,000,000

Net Available Funds under this NOFA..................... 100,502,534

Amount of Available Funds segregated for Capital

Improvement Loans under this NOFA...................... 10,000,000

Amount of Available Funds set aside for the Operating

Assistance component................................... 90,502,534

2. Distribution of Funds--Regional Allocation

For FY 1994, HUD is distributing the Flexible Subsidy funds under

this NOFA to each of its ten Regional Offices on the basis of a formula

allocation. The formula takes into consideration the number of

potentially eligible projects in each region and the extent of the

troubled project inventory.

Flexible Subsidy funds available under this NOFA are distributed to

the ten Regional Offices in accordance with the following schedule:

------------------------------------------------------------------------

Capital

HUD region Operating improvement

assistance loan

------------------------------------------------------------------------

Region I................................... 7,240,203 800,000

Region II.................................. 4,525,127 500,000

Region III................................. 9,050,253 1,000,000

Region IV.................................. 15,385,431 1,700,000

Region V................................... 19,910,558 2,200,000

Region VI.................................. 9,955,279 1,100,000

Region VII................................. 5,430,152 600,000

Region VIII................................ 3,620,101 400,000

Region IX.................................. 11,765,329 1,300,000

Region X................................... 3,620,101 400,000

----------------------------

Totals................................. 90,502,534 10,000,000

------------------------------------------------------------------------

The Regional Offices will make awards under this NOFA in accordance

with the selection criteria and procedures described in this NOFA.

3. Emergency Assistance

The Secretary may, at his discretion, waive the NOFA requirements

set out in section 102(a)(1), (2) and (3) of the Department of Housing

and Urban Development Reform Act of 1989 (Pub. L. 101-235, approved

December 15, 1989) and approve the award of Flexible Subsidy assistance

for appropriate response to an emergency, e.g., hurricane, flood, etc.,

as provided for by section 102(a)(5) of said Act in cases where the

NOFA process would be too time-consuming to get the assistance to the

projects in need.

D. Eligibility

1. Types of Projects

The following types of rental or cooperative housing are eligible

for Flexible Subsidy assistance:

a. A project assisted under the section 236 interest reduction

program, including State Agency non-insured projects, the section

221(d)(5) program (commonly known as the 221(d)(3) Below Market

Interest Rate Program), or the Rent Supplement Program.

b. A project that was constructed more than 15 years before

assistance is to be provided under the Flexible Subsidy Program with a

direct loan under the section 202 Program for Housing for the Elderly

or the Disabled.

c. A project assisted under section 23 of the 1937 Act as in effect

immediately before January 1, 1975, that is ineligible for assistance

under the modernization program operated under the 1937 Act.

d. A project assisted under the Section 8 Housing Assistance

Payments Program after conversion from assistance under the section 236

Rental Assistance Payments Program or the Rent Supplement Program.

e. A project that met the criteria in item a or b above before

acquisition by HUD, and that has been sold by HUD subject to a mortgage

insured or held by HUD and subject to an agreement which provides that

the low- and moderate-income character of the project will be

maintained. An application for Flexible Subsidy assistance for a

project in this category must be received by HUD within three years of

the date of the sale of the project by HUD.

2. Conditions for Assistance

Flexible Subsidy assistance will be made available in accordance

with the conditions imposed by section 201 of HCDA, as amended by the

1992 Act. Accordingly, assistance under this NOFA can be provided only

if the following conditions are determined to exist:

a. The assistance is necessary, when considered with other

resources available to the project, to restore or maintain the

financial or physical soundness of the project; and to 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. This constitutes the minimum period for

low-income affordability restriction. As authorized by the 1992 Act,

HUD, at its discretion, may extend this period of restriction to the

remaining useful life of the housing.

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 owner, and any mortgagor of a project that does not

have an FHA-insured mortgage, has provided or agreed to provide the

required owner contribution.

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

determined in accordance with an on-site inspection.

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

actions and provide suitable housing for project residents.

g. There is a feasible plan to involve the residents in project

decisions as demonstrated through documentation submitted to HUD.

h. The project is operated competently and has complied with all

regulatory and administrative requirements, as determined by HUD in a

management review.

i. Project management is in accordance with any management

improvement and operating (MIO) plan approved by HUD for the

project.1

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\1\Under HUD's Flexible Subsidy Program, the MIO Plan consists

of two parts--Part I and Part II. The components of both parts are

discussed in Section III.A.1.a. and 1.b of this NOFA, 24 CFR

219.210, and in sections 5-3 and 5-4 of HUD Handbook 4355.1, REV-1,

Flexible Subsidy. Unless specific reference is made in this NOFA to

either Part I or Part II, reference simply to the MIO Plan is

intended to refer to both parts.

---------------------------------------------------------------------------

j. The Affirmative Fair Housing Marketing plan meets applicable

requirements.

k. The owner certifies that he/she will comply with all applicable

equal opportunity statutes.

l. The project is not receiving financial assistance under the

ELIHPA or the LIHPRHA.

m. In the case of an application for a Capital Improvement Loan,

the owner has funded the reserve for replacements in accordance with

HUD requirements, and yet the reserve (and any other project funds

available to fund the reserve) 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.

3. Owner Contribution

a. Limited dividend and profit-motivated. These types of owners who

seek Operating Assistance must make a minimum financial contribution of

25 percent of the amount needed to render the project financially and

physically sound. If seeking a Capital Improvement Loan, the owner must

contribute 25 percent of the total estimated cost of the capital

improvements involved. In addition, a profit-motivated owner or an

owner of a limited-dividend project seeking Operating Assistance under

the Flexible Subsidy Program must agree to waive the right to pay

distributions while any portion of the Operating Assistance loan is

outstanding.

b. Non-profit. The owner or sponsor of a non-profit rental or non-

profit cooperative project seeking Operating Assistance must make a

contribution toward the total amount needed. However, if HUD determines

that neither the owner (mortgagor) nor the sponsor has the financial

capacity to make a cash contribution, HUD may permit the non-profit

owner to contribute to the project in the form of services. If seeking

a capital improvement loan, a non-profit owner, other than a

cooperative association, is exempt from providing a contribution.

Owners of cooperative projects are not exempt and must contribute 25

percent of the total estimated cost of the capital improvements

involved.

c. Source of contribution. In no instance may the owner

contribution be taken from project income. Also, cash that was

previously agreed to be contributed as a condition for approval of

purchase of the project (i.e., transfer of physical assets (TPA)) may

not be considered for this purpose unless a finding is made that the

additional work and cost required were not anticipated or deemed

necessary at the time of HUD's preliminary approval of the TPA and

preliminary approval of the TPA was received not later than 36 months

prior to the Flexible Subsidy application. However, cash contributions

made by the owner within 36 months before the Flexible Subsidy

application, from sources other than project income, may be considered.

In the case of a Capital Improvement Loan, and in accordance with

the amendments made to section 201 of the HCDA by section 405(e) of the

1992 Act, when an owner has spent its own money, to attempt to repair

capital items within the 36 months before the application, and the

repair was unsuccessful and has resulted in a need for a replacement

(to be funded by a Capital Improvement Loan), that expenditure will be

considered for credit for purposes of meeting the contribution

requirement.

In addition to the required owner contribution, other non-federal

sources of funding must be pursued aggressively. These include grants

or loans from State or local governments, e.g., community development

block grants. Note that the infusion of funding from non-Federal

sources does not eliminate or reduce the requirement for an owner

contribution of 25 percent.

4. Special Eligibility Limits

A project owner may request and receive Flexible Subsidy more than

once during the term of the mortgage. However, a repair or replacement

item is eligible for Operating Assistance only if no previous payment

of HUD-related assistance has been made (e.g., previous Operating

Assistance, Housing Development Grant or Community Development Block

Grant) for that particular repair or replacement item. A repair or

replacement item is eligible for a Capital Improvement Loan to a

project owner who has previously received Flexible Subsidy assistance

only if the capital items which are the subject of the application have

reached the end of their useful life.

A repair or replacement included as an action item on the Form HUD-

9835 (project improvement program) and made by the owner on an

emergency basis before execution of the Flexible Subsidy contract may

be funded with Operating Assistance only if the owner received advance

approval from the HUD Field Office to proceed with the emergency

repair.

E. Selection Criteria and Funding Priorities

1. Field Review

Each application for Operating Assistance and/or 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 the HUD Regional Office.

2. Funding Priorities Established by the 1992 Act

Funding will be awarded within each component of the Flexible

Subsidy Program (Operating Assistance and Capital Improvement Loans) to

applications in the category order as specified below under this

paragraph 2.

Category 1. Insured projects, designated as troubled by the HUD

Field Office, for which half or more of the MIO dollar amount (for

Operating Assistance) or Capital Improvement amount is designated for

emergency health and safety problems which, if allowed to continue,

could present an imminent threat to the life, health, and safety of

project residents. Assistance is limited to those projects with

emergency problems that are of such a magnitude that:

(a) They cannot be mitigated at a cost that can be in any way

absorbed within the operating budget; and

(b) Their continuation could potentially result in tenant

displacement.

Accounts payable included in the MIO Plan for operating assistance

may be considered ``emergency'' only to the extent that they directly

relate to vital services provided to the project (e.g., utility

payables). (Examples of emergency health and safety problems involving

possible capital improvements that may be included in this category are

broken heating systems, leaking gas stoves and falling balconies.)

Category 2. Insured projects, designated by the HUD Field Office as

troubled with serious financial and physical problems, whose sponsors

do not have the necessary funds available to cure the immediate

problems and in which the income stream cannot be sufficiently improved

to meet the project's expenses without first correcting its physical

problems.

Category 3. HUD-held projects and projects assisted under section

202 of the HCDA, designated by the HUD Field Office as troubled for

which half or more of the MIO dollar amount (for Operating Assistance)

or Capital Improvement amount is designated for emergency health and

safety problems which, if allowed to continue, could present an

imminent threat to the life, health, and safety of project residents.

Assistance is limited to those projects with emergency problems that

are of such a magnitude that (a) they cannot be mitigated at a cost

that can be in any way absorbed within the operating budget; and (b)

their continuation could potentially result in tenant displacement.

Category 4. HUD-held projects and projects assisted under section

202 of the HCDA, designated by the HUD-Field Office as troubled, with

serious financial and physical problems, which do not have available

necessary funds to cure the immediate problems, and in which the income

stream cannot be sufficiently improved to meet the project's expenses

without first correcting its physical problems.

Category 5. State Agency non-insured projects designated as

troubled with emergency problems presenting an imminent threat to the

life, health and safety of tenants shall be funded first in this

category, and troubled projects with serious financial and physical

problems, where the owner has insufficient income and cannot improve

the income stream to address the problems, shall be funded next.

Category 6. State Agency owned projects designated as troubled with

emergency problems presenting an imminent threat to the life, health

and safety of tenants shall be funded first in this category, and

troubled projects with serious financial and physical problems, where

the owner has insufficient income and cannot improve the income stream

to address the problems, shall be funded next.

3. Funding Eligible Projects Within the Priority Categories

The above categories represent the order of priority that each HUD

Regional Office will implement to fund eligible projects seeking

assistance under the Operating Assistance and Capital Improvement Loan

components of the Flexible Subsidy Program. All projects in a given

category will be funded prior to projects in succeeding categories.

When available funds are insufficient to fund all projects within a

given category, to the extent of available funds, projects in that

category will be funded in accordance with their rank. Projects in

succeeding categories will not be funded. Scoring and ranking of

projects will be based on the following considerations.

The financial distress of a project will be assessed to determine

which projects within each funding category are most in need. The

severity of a project's financial condition and its ability to meet

short-term operating needs and obligations, including debt service

payments, will be measured by HUD, using financial data contained in

the project's most recently audited balance sheet and statement of

profit and loss.

In assessing financial distress, HUD will use the following ratios,

awarding a maximum of 15 points for each ratio. Projects with poor

financial ratios (e.g., income/expense ratios with a negative value)

will be assigned higher point scores than projects with break-even or

positive income/expense ratios from operations.

TN13JA94.010

Up to an additional 15 points will be assigned to those

applications where the project serves as a residence for low-income

families, and HUD determines that other suitable housing is unavailable

for such families in the area in which the project is located. Up to an

additional 15 points will be assigned for applicants, other than owners

of cooperatives, submitting documented evidence that there exist or

will exist significant opportunities for residents to be involved in

management and/or participate in the ownership of the project.

F. Other Loan Terms and Conditions

1. Operating Assistance

Operating Assistance may be used to correct physical deficiencies

which have resulted from deferral of regularly scheduled maintenance

and repairs, financial deficiencies that have accrued as a result of

prior years' operating deficits, and operating deficits which will

accrue during the assistance year.

Project deficiencies which require capital improvements are

eligible for Operating Assistance only if they are necessary to meet

local building codes or to maintain the project in a decent, safe and

sanitary condition, and it is determined that Operating Assistance is

the most efficient method of funding the improvements. Operating

Assistance may not be used to repair or replace items that have already

received HUD-related assistance; provide major new improvements; or to

make repairs needed due to an owner's failure to honor a commitment in

a TPA or Workout Agreement.

Operating Assistance is provided as a deferred loan with an

interest rate of one percent per annum and no maturity date. In

general, repayment in full is required when the term of the mortgage

expires, the mortgage insurance terminates, or a TPA is approved by

HUD. Owners may not pay distributions as long as the Operating

Assistance loan is outstanding. However, owners do retain the right to

accrue distributions and may pay them from surplus cash after the

Operating Assistance loan is repaid.

2. Capital Improvement Loan

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. All capital improvements must be implemented in

accordance with HUD's Flexible Subsidy regulations at 24 CFR part

219.125 (Environmental Requirements).

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.

A capital improvement may not be financed partly by Operating

Assistance and partly by a Capital Improvement Loan. However, an owner

may apply for a Capital Improvement Loan to cover eligible capital

improvements and simultaneously apply for Operating Assistance to cover

deferred liabilities. Only one application would be required, but it

must include all required documents for each program.

Capital Improvement assistance must be provided in the form of an

amortizing loan. The interest rate on the loan may not be less than 3

percent nor more than 6 percent unless HUD determines that a lower rate

is necessary to maintain reasonable rental rates. However, in no case

may the interest rate be less than 1 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 full disbursement of loan

proceeds.

II. Application and Funding Award Process

A. Obtaining and Preparing Applications

1. Obtaining Applications

Applicants may obtain application materials from the local HUD

Field Office.

2. Necessity to Specify Type of Assistance for Which Application is

Being Made

An owner may apply for an Operating Assistance Loan only, a Capital

Improvement Loan only, or both an Operating Assistance Loan and a

Capital Improvement Loan simultaneously in a single application

package. The application cover letter must clearly state the type (or

types) of loan for which application is being made. Each application

will be treated separately under the selection criteria and ranking

factors cited in the NOFA.

3. Applying for Both Types of Assistance

If application is being made for both an Operating Assistance Loan

and a Capital Improvement Loan simultaneously, with the exception of

the Management Objectives, Action Items, and Sources and Uses of Funds

(Forms HUD-9835, HUD-9835-A, HUD-9835-B), those documents which are

common to both programs may be submitted only once. However, all

documents required for each program must be included in the application

package.

Two distinct and separate sets of Management Objectives, Action

Items, and Sources and Uses of Funds (Forms HUD-9835, HUD-9835-A, HUD-

9835-B) are required; taken together they must contain the entire

comprehensive plan to correct all project deficiencies. The MIO Plan

and Forms HUD-9835 for the Operating Assistance Loan application must

contain all items for which funding is being requested under Operating

Assistance; the Forms HUD-9835 for the Capital Improvement Loan must

contain all items for which funding is being requested under the

Capital Improvement Loan program.

In addition, deficiencies, which are to be corrected with funds

from sources other than Flexible Subsidy, must be identified on the MIO

Plan and Forms HUD-9835 as if Flexible Subsidy assistance were being

requested. Note that, if a limited-dividend project is selected for

Operating Assistance, the owner must agree to waive his right to pay

distributions as long as the Operating Assistance Loan is outstanding.

B. Submitting Applications

1. To ensure consideration for funding under this NOFA, completed

applications must be physically received by the HUD Field Office Loan

Management Branch before or on the due date by 4 p.m. local time. It is

not sufficient for an application to bear a postmark date within the

submission time period. The HUD Field Office will date-stamp incoming

applications to evidence (timely or late) receipt, and, on request,

provide the applicant with an acknowledgement of receipt.

After HUD receives the application, it will perform a physical

inspection to assure that the MIO Plan addresses in a comprehensive

fashion all the financial and physical deficiencies. HUD also will

conduct a comprehensive management review to assure that all management

issues are addressed as part of the MIO Plan and project operation and

improvement program. HUD may require changes to the MIO Plan as a

result of the physical inspection or comprehensive management review.

2. Applications received after the due date and time specified in

this NOFA may be considered for funding in FY 1994 only if it is

determined that assistance is needed immediately in response to

emergency circumstances, and only to the extent that contract authority

is available to satisfy the request for assistance.

C. Funding Award Process: Compliance With HUD Reform Act

1. Section 103

In accordance with the requirements of section 103 of the 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 (see also Section VI of

this NOFA). However, applicants that are declared ineligible or late

will be notified of their ineligibility at the time such determination

is made.

The disclosure prohibition of section 103 applies to HUD assistance

programs that entail a competition for the distribution of the

assistance. Under the Flexible Subsidy Program, if a given HUD Regional

Office determines that competition is not necessary for the

distribution of funds in a priority category, because there are

sufficient funds to award assistance to all eligible projects in that

category, then the Regional Office will begin the process of awarding

funds to each eligible project in that category.

Noncompetitive individual funding allocations and announcements in

a given priority category 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 or any competition in any other category will be made

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

conclusion of the entire selection process. These procedures are in

accordance with the requirements of section 103.

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 its quarterly Federal

Register notice of all recipients of HUD assistance awarded on a

competitive basis. (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 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 part 12, 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 in the Federal Register on January

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

decisions.) Requests for additional information about applications, HUD

certifications, and assistance adjustments, both before assistance is

provided or subsequently, are to be made under the Freedom of

Information Act (24 CFR part 15).

D. Coordination of Assistance

Section 405(f) of the 1992 Act requires the coordination of the

allocation of Flexible Subsidy assistance with the allocation of

assistance made under section 8 of the 1937 Act and section 203 of the

HCDA.

Application review and determination for the award of section 8

assistance under the Section 8 Loan Management Set-Aside (LMSA) program

will be made during the same time period as the final application

review and determinations for the award of Flexible Subsidy assistance.

To ensure coordination of assistance under these two programs, HUD will

identify those projects seeking assistance under the Flexible Subsidy

program which have been approved for the award of LMSA. For those

projects so identified, a further review will be made to evaluate the

effect of the award of LMSA on the project's cash flow and the enhanced

ability of the project to fund MIO repair items from the increased

project operating income. By taking into consideration all funding

sources, this review will insure that the infusion of Flexible Subsidy

assistance together with the LMSA represents the appropriate solution

to satisfying the project's need for stabilization of project

operations and maintenance or restoration of the project to an

acceptable physical and financial condition.

With respect to coordination of assistance under section 203 of the

HCDA, HUD does not intend to provide Flexible Subsidy assistance when

there exists delinquent indebtedness to the Government, or where a

project is either owned by HUD or HUD anticipates foreclosure.

III. Checklist of Application Submission Requirements

A. Operating Assistance Under the Flexible Subsidy Program

The following items must be submitted with an application for

Operating Assistance under the Flexible Subsidy Program.

1. Items Pertaining to Project Operation and Improvement.

a. Management Improvement and Operating (MIO) Plan Part I. (Refer

to section 5-3 of HUD Handbook 4355.1, Rev-1, Flexible Subsidy, for

further discussion of MIO Plan Part I.)

The MIO Plan Part I must include documentation of eligibility and

fully address all financial, management, and physical deficiencies of

the project. To be included in every MIO Plan are:

(1) A detailed maintenance schedule;

(2) A schedule for correcting past deficiencies in maintenance,

repairs, and replacements;

(3) A plan to upgrade the project to meet cost-effective energy

efficiency standards approved by HUD;

(4) A plan to improve financial and management control systems;

(5) An updated annual operating budget (Form HUD-92547-A) if the

last budget was submitted more than 90 days before; and

(6) A description of cost controls, procedures and savings.

b. MIO Plan Part II-- Management Objectives, Action Items, and

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

(1) 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, and provide opportunities for resident involvement in

management of the project, as appropriate.

(2) 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. Failure to provide the requisite comprehensiveness and

specificity may adversely affect the funding decision.

All emergency repair Action Items must be clearly identified and

must be accompanied by a full and detailed justification as to the

reasons the repair should be considered ``emergency'' in nature,

including supporting documentation as appropriate, e.g., fire or

building code violations or inspections from local government

authorities.

(3) The Sources and Uses of Funds will serve to document how much

each source will contribute to the Project Improvement Account in the

implementation of the MIO Plan. It must be signed by both the owner and

the management agent.

2. Application for Flexible Subsidy Assistance (Form HUD-9826 (2/

93)).\2\

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\2\The certification of compliance with the Uniform Relocation

Assistance and Real Property Acquisition Policies Act of 1970, and

the certification of compliance with the equal opportunity and

nondiscrimination statutes and regulations, which were listed as

individual items under previous Flexible Subsidy NOFAs, are now part

of the Application for Flexible Subsidy Assistance.

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3. Budget Worksheet, Income & Expenses Projections (Form HUD-92547

or HUD approved equivalent).

4. All documentation required by HUD Notice H-90-17, 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).

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

Cooperative Agreements for Grants Exceeding $100,000; and Disclosure of

Lobbying Activities (Standard Form-LLL if warranted. Standard Form-LLL

is required if funds 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.

6. Form HUD-2530, Previous Participation Certificate(s) for all

principals requiring clearance under these procedures.

7. Affirmative Fair Housing Marketing Plan on Form HUD-935.2.

8. 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.

B. Capital Improvement Loan Program (CILP)

The following items must be submitted with an application for a

Capital Improvement Loan under the Flexible Subsidy Program.

1. A work write-up and cost estimates listing:

a. the major project components that have failed, or are likely to

fail or seriously deteriorate within the next 24 months;

b. capital items that can be upgraded to meet cost-effective energy

efficiency standards approved by HUD;

c. supplements or enhancements to mechanical equipment and the

extent they are needed for health or safety reasons; and

d. amounts needed to comply with the Department's standards as set

forth in 24 CFR part 8, which concern accessibility by individuals with

handicaps.

2. Application for Flexible Subsidy Assistance (Form HUD-9826 (2/

93)).

3. All documentation required by HUD Notice H-90-17, 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).

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

Cooperative Agreements for Grants Exceeding $100,000; and the

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

Standard Form-LLL is required if funds 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.

5. A Comprehensive Technical Energy Audit. A Comprehensive

Technical Energy Audit (CTEA) is required only when either of the

below-listed conditions is met. (For guidance on preparation of the

CTEA, see Chapter 12 of HUD Handbook 4350.1 REV-1, Multifamily Asset

Management and Project Servicing.) When neither of the below-listed

conditions is met, an energy analysis that is provided by a local

utility company and that contains a measure of cost-effectiveness

information is acceptable in meeting this requirement.

a. Implementation of energy conservation measures is a primary

purpose of the CILP loan.

b. The cost of energy conservation measures accounts for 50% or

more of the proposed CILP loan.

6. MIO Plan Part I. (See item 1.a under Section III.A. of this

NOFA.). A MIO Plan Part I for the Capital Improvement Loan Program is

required only when one or more of the following conditions exist:

a. The project is in default or was in default at any time during

the one-year period preceding the application date.

b. The project received a Below Average or Unsatisfactory rating

for Overall Physical Condition or for Maintenance Policies and

Practices on the most recent HUD-9822, Physical Inspection Report

(unless the owner has since corrected the problems in a manner

satisfactory to HUD).

c. The project received a Below Average or Unsatisfactory rating in

the Financial Management Section or Overall Management Section on the

HUD-9834, Management Review, in the past 24 months (unless the owner

has corrected the problems through a substitution of management agent,

management personnel, or otherwise, in a manner satisfactory to HUD).

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

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

(See item 1.b under Section III.A of this NOFA.)

8. A statement outlining the owner's contribution.

9. Form HUD-2530, Previous Participation Certificate(s) for all

principals requiring clearance under these procedures.

10. 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. MIO Plan Review

Within 30 days of receipt by HUD from the owner of the MIO Plan

Part I, HUD will advise the owner, in writing, whether or not the MIO

Plan Part I meets the submission requirements as stated in Section

III.A.1.a. of this NOFA. Should HUD fail to inform the owner of its

disapproval within the 30-day time-frame, the MIO Plan Part I shall be

considered to be approved. If HUD disapproves the MIO Plan Part I, no

further consideration will be given to the applicant for award of funds

under this NOFA.

V. Corrections to Deficient Applications

HUD will notify an applicant, in writing, shortly after the

expiration of the NOFA response deadline of any technical deficiencies

in the application. In order to receive further consideration for

assistance, the applicant must submit corrections to the Loan

Management Branch within 14 calendar days from the postmark date of

HUD's letter notifying the applicant of any such deficiencies.

Corrections to technical deficiencies will be accepted within the 14

day time limit, but substantive changes or supplements to the

application initiated by the applicant will not be accepted.

Applicants will be permitted to correct those deficiencies

determined to be technical, (i.e., those that do not change the

substance of the application, e.g., a missing certification, or missing

signature) or to make changes as required by HUD. Technical

deficiencies do not include owner-initiated changes to the MIO Plan or

Form HUD-9835. Applicants will be required to cure any such deficiency

within 14 days from the date of HUD's written notice to the applicant

of the problem(s). Deficiencies determined to be substantive and not

made at the direction of HUD may not be corrected.

VI. Other Matters

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.

Prohibition Against Lobbying Activities: The Byrd Amendment

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) (the ``Byrd Amendment''), 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, and applicants for Federal commitments exceeding $150,000

must certify that no Federal funds have been or will be spent on

lobbying activities in connection with the assistance.

Indian Housing Authorities (IHAs) established by an Indian tribe as

a result of the exercise of the tribe's sovereign power are excluded

from coverage of the Byrd Amendment, but IHAs established under State

law are not excluded from the statute's coverage.

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.

HUD's regulation implementing section 13 is codified at 24 CFR part

86. If readers are involved in any efforts to influence the Department

in these ways, they are urged to read the final rule, particularly the

examples contained in appendix A of the rule. Appendix A of this rule

contains examples of activities covered by this rule.

Any questions concerning the rule should be directed to the Office

of Ethics, room 2158, Department of Housing and Urban Development, 451

Seventh Street, SW., Washington DC 20410. Telephone: (202) 708-3815

(voice/TDD). 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 Disclosure of Funding Decisions

Section 103 of the HUD 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. HUD's regulation implementing section 103 is codified at 24

CFR part 4. HUD employees involved in the review of applications and in

the making of funding decisions 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 (voice/TDD).

(This is not a toll-free number.)

Catalog. The Catalog of Federal Domestic Assistance Program

number is 14.164.

Dated: December 22, 1993.

Nicolas P. Retsinas,

Assistant Secretary for Housing-Federal Housing Commissioner.

[FR Doc. 94-846 Filed 1-12-94; 8:45 am]

BILLING CODE 4210-27-P