On March 18, 2009, HUD issued guidance to public housing authorities (PHAs) regarding the use of capital fund formula grants received under the American Recovery and Reinvestment Act of 2009 (ARRA). This guidance institutes special requirements that govern the use of funds, timelines for public comment processes and procurement. The guidance applies only to capital funds distributed pursuant to HUD's capital fund formula under ARRA (referred to below as "Formula Capital Funds"). It does not apply to the additional $1 billion in capital funds to be distributed through a competitive process.

The guidance includes the following new information and clarifications:

Comment Period for Plan Amendments For PHAs that must amend their Annual or Five-Year Action Plans to include new uses of the Formula Capital Funds, the public comment period is shortened to 10 calendar days. PHAs are still responsible for completing the required information and activities in the abbreviated time period.

Physical Needs Assessments (PNA) PHAs must provide a PNA as specified by HUD, but need not do so before commencing modernization work using the Formula Capital Funds.

Procurement Priority must be given to contracts that a PHA can award within 120 days from February 17, 2009. To facilitate this tight deadline, HUD has waived state and local procurement requirements. The guidance confirms that HUD will support noncompetitive procurements on a contract-by-contract basis that conform to federal requirements to the extent necessary to meet this deadline. PHAs that conduct noncompetitive procurements must retain detailed documentation of these procurements and make them available to HUD upon request. To implement this guidance, PHAs must amend their procurement policies to permit these special procurement provisions.

Extensions for Other Capital Fund Grants Any PHA that fails to meet its deadlines for obligating other capital fund grants will not be given an extension simply because the agency placed a priority on the expenditure of Formula Capital Funds.

Funding Uses and Restrictions Although the Formula Capital Funds may generally be expended for any eligible use of capital funds, including deferred maintenance, there are several new restrictions, including the following:

  • Funds may not be used for operations or rental assistance activities.

  • A PHA may not substitute Formula Capital Funds for other capital funds that were already obligated for a program.

  • Administrative expenditures are limited to 10 percent of the total grant. There are limits on how much of this amount may be drawn down at any given time.

  • Up to 20 percent of the total grant may be used for management improvements, but these may not include operations or rental assistance activities unless applied to force account work on a capital project.

Obligation and Expenditure Deadlines Funds must be obligated and expended within tighter deadlines than those normally applicable to capital funds. The start date for the grants, and the date from which compliance with the deadlines is measured, is March 18, 2009. Deadlines are as follows:

  • 100 percent of Formula Capital Fund grants must be obligated within one year.

  • At least 60 percent of the Formula Capital Fund grants must be expended within two years.

  • 100 percent of the Formula Capital Fund grants must be expended within three years.

The full text of the guidance, please see HUD's Notice PIH 2009-12 (HA).

For more information, contact Amy Glassman at glassmana@ballardspahr.com or 202.661.7680.


Copyright © 2009 by Ballard Spahr LLP.
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