HUD’s Office of Public and Indian Housing (PIH) issued guidance regarding public housing authorities’ ability to use excess operating reserves to make modest capital improvements in FY12. The guidance is contained in PIH Notice 2012-2.
Public housing authorities (PHAs) receive operating funds from HUD to cover the costs of operating and managing public housing. PHAs also receive capital funds from HUD for physical maintenance and improvement of public housing, as well as for management activities.
Notice 2012-2 provides five reminders:
- Operating funds may be used, with HUD approval, to repay debt incurred to finance public housing rehabilitation or development.
- Up to 20% of a PHA’s capital fund may be used for operating fund activities.
- PHAs with fewer than 250 public housing units have flexibility regarding use of their operating and capital funds.
- PHAs may use operating funds for emergencies that include damage to the housing stock.
- PHAs may use operating funds for a large modernization project through the Operating Fund Financing Program (OFFP).
The primary purpose of the Notice is to help PHAs plan for the use of excess reserves. The FY12 Appropriations Act permits PHAs to use excess operating reserves in FY12 for capital improvements that are not “large modernization projects.” HUD is defining a large modernization project as one with total project costs greater than 80% of the applicable HUD total development cost (TDC) limits.
The Notice states that the earlier PIH Notice 2011-55 described how to calculate operating reserves and recommended a minimum operating reserve level of the greater of $100,000 or four months of formula expenses (detailed in HUD Form 52723). HUD will provide minimum operating reserve levels in PHAs’ Calendar Year (CY) 2012 eligibility determination letters.
PHAs will not need HUD approval to use excess reserves for modest capital improvements, but they must be obligated by September 30, 2012.
PIH Notice 2012-2 is available at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/publications/notices.
PIH Notice 1011-55 is available at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/publications/notices/2011.
HUD total development cost limits are available at the capital fund webpage, column on the right, at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/capfund.
The Operating Fund webpage is currently “under construction” at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/am/of.
The Capital Fund webpage is at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/public_indian_housing/programs/ph/capfund