Allocation Adjustment

2012 Operating Subsidy Allocation Adjustment Implementation Process Description

  • The President’s FY 2012 budget request included an offset (allocation adjustment) from PHA operating reserves. Throughout the year, the Department led discussions with industry stakeholders and elected officials about the implementation of the allocation adjustment. The FY 2012 Appropriations Act (P.L. 112-55) included a provision that permitted HUD to offset up to $750 million from PHA’s excess operating reserves. To determine an individual PHA’s adjustment, HUD identified the amount of reserves above a minimum reserve level. Next, each PHA's proportionate share of the $750 million was calculated. Where a PHA's proportionate share of the $750 million exceeded their Operating Subsidy eligibility, their allocation adjustment was capped to 12 months of their eligibility.

    Allocation Adjustment Review Process
  • Throughout 2011 HUD hosted numerous meetings and discussions with representatives from the low-income housing industry, individual housing authorities, as well as elected officials and their staffs. HUD used these discussions to solicit and incorporate feedback from the industry and elected representatives into its approach to development and implementation of the 2012 Public Housing Operating Subsidy allocation adjustments. Out of these discussions surfaced three major concerns: allowing PHAs to recognize current obligations that may not have been reflected on their most recently submitted financial statement; providing an opportunity to correct misreported financial entries; and preserving current and impending mixed finance and development transactions. To address these concerns, the Department created an upfront appeals process that permitted PHAs to request to exclude portions of their operating reserves for a variety of reasons, including FDS errors, obligations and commitments, and other circumstances. A full description of the exclusion appeal process as well as permitted exclusions can be found in Notice PIH 2011-55.
  • To assist PHAs in understanding the subsidy allocation adjustment and its potential impact on their agency, HUD posted estimates of each PHA’s initial allocation adjustment on its web site. The initial estimates were based on the most recent financial data available. These estimates were provided to serve as a guide for PHAs in their budgetary process as well as in its determination of whether or not to submit an appeal.
  • In addition to the general process described in the Notice, the Department made a concerted effort to ensure that all appeals were reviewed in a consistent manner, that the review process was fair, and that PHAs had the opportunity to provide appropriate justification to exclude any funds placed in reserves in error, or for which the PHA had an evolved and firm planned use. The process provided for multiple opportunities for PHAs to submit additional documentation to support their original submission, included multiple layers of HUD review to ensure that the process was fair and non-arbitrary, and that HUD’s determinations were transparent, including a description of the reasoning for all negative decisions.

CY 2012 Operating Reserves Calculation Tool

CY 2012 Set-Aside for Financial Hardship

Additional Background information on the Allocation Adjustment