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Background to the Study The cost of operating 1937 Act housing was one recurring topic of discussion at the recent Negotiated Rulemaking meetings concerning the Indian Housing Block Grant (IHBG) formula. The following excerpt from the January 14, 2004 of the Committee provides some of the context and impetus for this study. The entire text of the minutes of this meeting of the Formual Negotiated Rulemaking Committee can be reviewed at: January Minutes. Minutes for all meetings and distributed documents can be found at Negotiated Rulemaking.
FORMULA NEGOTIATED RULEMAKING COMMITTEE MEETING January 13 – 16, 2004 Las Vegas, NV The sixth meeting of the Formula Negotiated Rulemaking Committee was held on January 13 – 16, 2004, at the Crowne Plaza Hotel in Las Vegas, NV. Committee Members in Attendance: Governor Bill Anoatubby (Wayne Scribner, alt.), Dr. Blake Kazama, Mr. Rodger Boyd, Mr. Bruce LaPointe, Ms. Virginia Brings Yellow (Coni Wilson, alt.), Mr. Michael Liu, Mr. Robert Carlile, Ms. Judith Marasco (Sami Difuntorum, alt.), Mr. Larry Coyle, Mr. Johnny Naize, Mr. Wayne Ducheneaux, Mr. Michael Reed, Mr. Joel Frank, Mr. Jack Sawyers, Mr. Robert Gauthier (Jason Adams, alt.), Mr. Marty Shuravloff, Ms. Carol Gore, Mr. Russell Sossamon, Mr. Ray Gorynski, Ms. Darlene Tooley, Mr. Ron Hoffman, Chairman Eddie Tullis, Mr. Terry Hudson, Chairman Brian Wallace (Phil Bush, alt.), and Mr. Marvin Jones [Ms. Barbara Baker, designated alternate for Mr. Sawyers also attended, although due to Mr. Sawyer’s presence, was not required to perform any Committee duties.] WEDNESDAY MORNING, JANUARY 14, 2004 FULL COMMITTEE Extracted Discussion of AEL and 1937 Act Housing Operating Costs LaPointe stated that he supports being able to challenge AEL, but is not certain whether using the national average is the way to accomplish it. Mr. Sawyers asked if there is any other way of adjusting, aside from the challenge, because in his opinion the AEL needs to be adjusted since tribes are being hurt badly by the existing regulation. He then suggested that perhaps the second proposal is the way to go so that there is a challenge. Mr. LaPointe stated that he would support the second option. A/S Liu stated that he concurs with Mr. Gorynski, and added that as he has stated on numerous occasions, HUD would like to deal with real costs. He also stated that he did not agree on opening up an appeals process on unreal costs. He reiterated that he had previously suggested that AEL not be used at all, and so HUD cannot support a challenge to AEL. Mr. Ducheneaux pointed out that if AEL isn’t a true cost, he would prefer to go with something that can be challenged. Ms. Wilson commented that there is one pot of NAHASDA funds, and all this does is shift money form one area to another. She pointed out that the tribes have the greatest need in the nation. She added that there is $290 million for CAS, and if more money is shifted into CAS, then the amount available for Needs will decrease. She stated that based on this, she can’t approve either proposal. She reiterated that she does not want to take money out of Needs to subsidize existing homes that are already receiving funds. Mr. Hudson asked about the Harvard Study, and was there a particular method of estimating these costs that we could have used. Mr. Sossamon stated that there are criticisms on the Harvard Study form an Indian standpoint, specifically, that the study didn’t include Indian housing. He added that in workgroup discussion, it was suggested that although the AEL is flawed, it’s the devil we know. He added that it was also suggested that perhaps there could be a similar study performed on Indian housing. Mr. Adams emphasized that there has been a great deal of work on this issue, and that they have come to the table trying to understand all the positions that have been presented. He reiterated that the AEL is frozen in time, set many years ago. He stated that although he understands HUD’s position on a challenge, there is an inequity in his region. Mr. Reed commented that there was an opportunity to bring forward a new method in the workgroup, and didn’t. Mr. Ducheneaux pointed out that the reason nothing was brought forth was that they were cautioned that OMB would not allow challenge. Mr. Sawyers called for consensus. Ms. Falkner asked if there were any other comments. Mr. Ducheneaux stated that he has heard form the beginning that everyone is committed to what’s fair and equitable, and he can’t understand how the existing regulation is fair and equitable. He stated that half of his budget is spent driving from one place to another. He pointed out that his reservation is the size of Connecticut. He also added that the AEL was cut because the tribe wasn’t performing well, and HUD should have come out to provide training. He reiterated that the cost of maintaining homes on his reservation is high, for example, they have the highest cost per watt in the nation and it gets as cold as -52ºF in the winter. Mr. Sawyers yielded to Ms. Kidder, who pointed out that there are many tribes whose AEL is below the national average. She reiterated that the cost of building and maintaining houses is not being met, and the AEL in no way reflects the actual costs. She stated that this is a straight inequity. Ms. Tooley, referring to the second proposal, asked if there is challenge language elsewhere in the regulations or does language have to be developed to challenge. Mr. Sawyer responded that it is his understanding that HUD would develop the challenge language. A/L Liu stated that both OMB and HUD would like to see AEL removed totally, which is why the issue was brought up to begin with. He reiterated that HUD is not attempting to preserve AEL. However, he added that if AEL were to be preserved as part of the formula, HUD would have a difficult time in knowing where to start an appeals process. He pointed out that every challenge would win, because HUD and OMB recognize that the AEL is not real. A/S Liu agreed that the Harvard Study lacks information on Indian country. However, he noted that the opportunity to look at real costs could only be done by moving on a comprehensive basis. He added that the committee was not prepared to go that way for a variety of reasons. He restated that the goal is acid-based management decisions and true costs. A/S Liu reiterated that this is something we need to work toward, but that HUD doesn’t believe that this proposal will get us there or help us reach that goal. Mr. Naize yielded to Mr. Carl who stated that it appears that the committee will not be able to reach consensus. He agreed that we do have a common goal, and asked if there something that can come out of this committee that will address the real costs. A/S Liu responded that he is working on allocating resources for a study to identify a methodology that will enable us to move toward that supports acid-based, true cost management. He reiterated that we are going to have to move toward that and that further discussion will likely be necessary. Ms. Tooley asked if such as study is in the works, and 5 years from now a committee will be addressing this again, would it be acceptable to have the challenge available to get us through the next five years. She added that this would provide a mechanism to address the issue in cases where the AEL is clearly inequitable. Mr. Adams agreed with Ms. Tooley, but added that he was fearful that the committee missed an opportunity to address the inequities. Mr. Adams reiterated that there will have to be some give and take to address the inequities, and that he wanted to make certain that others at the table are willing to correct the situation. A/S Liu stated that given the gravity of this issue and the direction of Congress, he is surely expecting that this subject will be brought up by Negotiated Rulemaking prior to 5 years from now. He added that Congress would do it for us if we don’t do it ourselves. Mr. Sossamon summarized (this statement) to (say that) in the subsequent Neg-Reg that you (A/S Liu) have indicated you are committed to, will include the AEL issue. He added that it was his understanding was that the next Neg-Reg would exclude all formula issues. A/S Liu responded that we would work to deal with the issues that need to be addressed, and some may deal with those issues that relate to the formula. He pointed out that any negotiated rulemaking addresses the issues that need to be addressed. He added that AEL is definitely an issue that must be dealt with. Ms Tooley then asked, given all that and what the future will bring, can we live at this time with the ability to challenge the existing process. Ms. Wilson stated that she is not insensitive to needs and inequities, but she is concerned about the shift in funds from Need to CAS. She reiterated that the money has to come from someplace, and that it would be in everyone’s interest to challenge, adding that the Quinault AEL is also low. She then stated that she was not prepared to risk her tribe’s Need funding, and until the committee come up with a fix that helps everyone, she cannot support taking money out of the Need allocation. Mr. Naize pointed out that the committee is discussing an issue that is a non-consensus item, and are talking about what may occur. He stated that the committee supports coming to a solution, but is relying on HUD leadership. He added that it appears as though the committee is wasting time on something that will not come to consensus. Mr. Sawyers yielded to Ms. Kidder, who directed the committee to TR 32, which demonstrates the reduction in MH units over time. She stated that as a result, money is going over to the Need side. She also pointed out that in her tribe, there are people living below the poverty level who are not being picked up at all in the Need side. Mr. Sawyers added that every issue shifts funds and that everyone in the committee knows that the money comes from all of us and we are shifting funds because it is fair and equitable. He stated that if we continue to say that we can’t support something because it shifts fund, the committee members might as well go home. Mr. Adams asked if there was an opportunity for a tribe to submit information to HUD could that be the beginning of a process that enables HUD that to document that our costs are grossly inadequate. Mr. Boyd yielded to A/S Liu, who reiterated that the goal would be to work with tribes to come up with something that removes AEL. He emphasized that this is an important element. He added that as data are collected and models are developed, this would change. However, he could not commit to such change on an ad hoc basis through appeals. A/S Liu stated that HUD has made a commitment to start the process. He added that HUD was beginning to allocate funds to collect data to replace AEL, which will be based on something closer to actual costs. He pointed out that unlike public housing with 350,000 entities, in the case of Indian housing there are many fewer entities and that will be an advantage. Mr. Gorynski reemphasized that the data collection and surveys can be done by each tribe to provide information on actual costs. He suggested that in the next year, the tribes start documenting to establish real costs. Mr. Sossamon acknowledged HUD’s commitment to move toward this goal and asked that HUD develop the data collection instruments in communication with the tribes and the tribal housing professionals in order to ensure that the information collected reflects real costs. He further requested that clear explanations be provided where certain costs are disallowed certain costs, so that the tribes understand the instrument when it is finalized. For example, he cited the OIG report in which the resulting goals and objectives were seen as paternalistic. He restated that the tribes are interested and committed to a study and want it to be as reflective of reality as possible. Mr. Hudson asked A/S Liu if it would be appropriate or accurate to state that within two years there would be a replacement for AEL and would it be possible to include language to that effect in the regulations. A/S Liu responded that it is reasonable to expect that there will be research and dialogue, and that he would hope that there would be some actual implementation. However, he added that he didn’t think it would be prudent to include in the regulations. He did add that it would be prudent to include in the preamble that the committee has had this discussion, that there is an interest in identifying real costs, and that HUD is committed to doing this. A/S Liu reiterated that this would not be a regulation, but would be in the Preamble. Mr. Naize yielded to Mr. Carl who commented that during the first Neg-Reg there was specific language regarding revisiting the issues, and asked if the Assistant Secretary would be willing to include a specific time period now. A/S Liu stated that he was not ready to do that, and would need to confer with the attorneys and others, and that all the committee members would need to discuss this further with tribal leaders to identify the best way to proceed. He clarified that he was not saying that the answer is no, but he thinks that language can be included in the preamble to achieve that course of action. Mr. Carl stated that the committee was formed to resolve issues and this issue would likely come back and be part of the regulations. He added that the conditions are such that our needs are not being met, and as CAS decreases, there is even larger challenge. A/S Liu stated that he would work on language before the end of this session. He added that HUD prefers that it be part of the Preamble, rather than part of the regulations, and that if there is time available, the group would be able to discuss it further. Mr. Hudson asked if stopping the clock to reserve some time to revisit this issue could be considered. Ms. Falkner pointed out that the committee agreed not to stop the clock.

Background to the Study

The cost of operating 1937 Act housing was one recurring topic of discussion at the recent Negotiated Rulemaking meetings concerning the Indian Housing Block Grant (IHBG) formula. The following excerpt from the January 14, 2004 of the Committee provides some of the context and impetus for this study. The entire text of the minutes of this meeting of the Formual Negotiated Rulemaking Committee can be reviewed at: January Minutes. Minutes for all meetings and distributed documents can be found at Negotiated Rulemaking.

FORMULA NEGOTIATED RULEMAKING COMMITTEE MEETING
January 13 – 16, 2004
Las Vegas, NV

The sixth meeting of the Formula Negotiated Rulemaking Committee was held on January 13 – 16, 2004, at the Crowne Plaza Hotel in Las Vegas, NV.

Committee Members in Attendance: Governor Bill Anoatubby (Wayne Scribner, alt.), Dr. Blake Kazama, Mr. Rodger Boyd, Mr. Bruce LaPointe, Ms. Virginia Brings Yellow (Coni Wilson, alt.), Mr. Michael Liu, Mr. Robert Carlile, Ms. Judith Marasco (Sami Difuntorum, alt.), Mr. Larry Coyle, Mr. Johnny Naize, Mr. Wayne Ducheneaux, Mr. Michael Reed, Mr. Joel Frank, Mr. Jack Sawyers, Mr. Robert Gauthier (Jason Adams, alt.), Mr. Marty Shuravloff, Ms. Carol Gore, Mr. Russell Sossamon, Mr. Ray Gorynski, Ms. Darlene Tooley, Mr. Ron Hoffman, Chairman Eddie Tullis, Mr. Terry Hudson, Chairman Brian Wallace (Phil Bush, alt.), and Mr. Marvin Jones

[Ms. Barbara Baker, designated alternate for Mr. Sawyers also attended, although due to Mr. Sawyer’s presence, was not required to perform any Committee duties.]

WEDNESDAY MORNING, JANUARY 14, 2004
FULL COMMITTEE

Extracted Discussion of AEL and 1937 Act Housing Operating Costs

LaPointe stated that he supports being able to challenge AEL, but is not certain whether using the national average is the way to accomplish it. Mr. Sawyers asked if there is any other way of adjusting, aside from the challenge, because in his opinion the AEL needs to be adjusted since tribes are being hurt badly by the existing regulation. He then suggested that perhaps the second proposal is the way to go so that there is a challenge. Mr. LaPointe stated that he would support the second option. A/S Liu stated that he concurs with Mr. Gorynski, and added that as he has stated on numerous occasions, HUD would like to deal with real costs. He also stated that he did not agree on opening up an appeals process on unreal costs. He reiterated that he had previously suggested that AEL not be used at all, and so HUD cannot support a challenge to AEL.

Mr. Ducheneaux pointed out that if AEL isn’t a true cost, he would prefer to go with something that can be challenged. Ms. Wilson commented that there is one pot of NAHASDA funds, and all this does is shift money form one area to another. She pointed out that the tribes have the greatest need in the nation. She added that there is $290 million for CAS, and if more money is shifted into CAS, then the amount available for Needs will decrease. She stated that based on this, she can’t approve either proposal. She reiterated that she does not want to take money out of Needs to subsidize existing homes that are already receiving funds.
Mr. Hudson asked about the Harvard Study, and was there a particular method of estimating these costs that we could have used. Mr. Sossamon stated that there are criticisms on the Harvard Study form an Indian standpoint, specifically, that the study didn’t include Indian housing. He added that in workgroup discussion, it was suggested that although the AEL is flawed, it’s the devil we know. He added that it was also suggested that perhaps there could be a similar study performed on Indian housing. Mr. Adams emphasized that there has been a great deal of work on this issue, and that they have come to the table trying to understand all the positions that have been presented. He reiterated that the AEL is frozen in time, set many years ago. He stated that although he understands HUD’s position on a challenge, there is an inequity in his region.

Mr. Reed commented that there was an opportunity to bring forward a new method in the workgroup, and didn’t. Mr. Ducheneaux pointed out that the reason nothing was brought forth was that they were cautioned that OMB would not allow challenge.
Mr. Sawyers called for consensus. Ms. Falkner asked if there were any other comments. Mr. Ducheneaux stated that he has heard form the beginning that everyone is committed to what’s fair and equitable, and he can’t understand how the existing regulation is fair and equitable. He stated that half of his budget is spent driving from one place to another. He pointed out that his reservation is the size of Connecticut. He also added that the AEL was cut because the tribe wasn’t performing well, and HUD should have come out to provide training. He reiterated that the cost of maintaining homes on his reservation is high, for example, they have the highest cost per watt in the nation and it gets as cold as -52ºF in the winter. Mr. Sawyers yielded to Ms. Kidder, who pointed out that there are many tribes whose AEL is below the national average. She reiterated that the cost of building and maintaining houses is not being met, and the AEL in no way reflects the actual costs. She stated that this is a straight inequity. Ms. Tooley, referring to the second proposal, asked if there is challenge language elsewhere in the regulations or does language have to be developed to challenge. Mr. Sawyer responded that it is his understanding that HUD would develop the challenge language.

A/L Liu stated that both OMB and HUD would like to see AEL removed totally, which is why the issue was brought up to begin with. He reiterated that HUD is not attempting to preserve AEL. However, he added that if AEL were to be preserved as part of the formula, HUD would have a difficult time in knowing where to start an appeals process. He pointed out that every challenge would win, because HUD and OMB recognize that the AEL is not real. A/S Liu agreed that the Harvard Study lacks information on Indian country. However, he noted that the opportunity to look at real costs could only be done by moving on a comprehensive basis. He added that the committee was not prepared to go that way for a variety of reasons. He restated that the goal is acid-based management decisions and true costs. A/S Liu reiterated that this is something we need to work toward, but that HUD doesn’t believe that this proposal will get us there or help us reach that goal.

Mr. Naize yielded to Mr. Carl who stated that it appears that the committee will not be able to reach consensus. He agreed that we do have a common goal, and asked if there something that can come out of this committee that will address the real costs. A/S Liu responded that he is working on allocating resources for a study to identify a methodology that will enable us to move toward that supports acid-based, true cost management. He reiterated that we are going to have to move toward that and that further discussion will likely be necessary. Ms. Tooley asked if such as study is in the works, and 5 years from now a committee will be addressing this again, would it be acceptable to have the challenge available to get us through the next five years. She added that this would provide a mechanism to address the issue in cases where the AEL is clearly inequitable. Mr. Adams agreed with Ms. Tooley, but added that he was fearful that the committee missed an opportunity to address the inequities. Mr. Adams reiterated that there will have to be some give and take to address the inequities, and that he wanted to make certain that others at the table are willing to correct the situation.

A/S Liu stated that given the gravity of this issue and the direction of Congress, he is surely expecting that this subject will be brought up by Negotiated Rulemaking prior to 5 years from now. He added that Congress would do it for us if we don’t do it ourselves. Mr. Sossamon summarized (this statement) to (say that) in the subsequent Neg-Reg that you (A/S Liu) have indicated you are committed to, will include the AEL issue. He added that it was his understanding was that the next Neg-Reg would exclude all formula issues. A/S Liu responded that we would work to deal with the issues that need to be addressed, and some may deal with those issues that relate to the formula. He pointed out that any negotiated rulemaking addresses the issues that need to be addressed. He added that AEL is definitely an issue that must be dealt with.

Ms Tooley then asked, given all that and what the future will bring, can we live at this time with the ability to challenge the existing process. Ms. Wilson stated that she is not insensitive to needs and inequities, but she is concerned about the shift in funds from Need to CAS. She reiterated that the money has to come from someplace, and that it would be in everyone’s interest to challenge, adding that the Quinault AEL is also low. She then stated that she was not prepared to risk her tribe’s Need funding, and until the committee come up with a fix that helps everyone, she cannot support taking money out of the Need allocation.

Mr. Naize pointed out that the committee is discussing an issue that is a non-consensus item, and are talking about what may occur. He stated that the committee supports coming to a solution, but is relying on HUD leadership. He added that it appears as though the committee is wasting time on something that will not come to consensus. Mr. Sawyers yielded to Ms. Kidder, who directed the committee to TR 32, which demonstrates the reduction in MH units over time. She stated that as a result, money is going over to the Need side. She also pointed out that in her tribe, there are people living below the poverty level who are not being picked up at all in the Need side. Mr. Sawyers added that every issue shifts funds and that everyone in the committee knows that the money comes from all of us and we are shifting funds because it is fair and equitable. He stated that if we continue to say that we can’t support something because it shifts fund, the committee members might as well go home. Mr. Adams asked if there was an opportunity for a tribe to submit information to HUD could that be the beginning of a process that enables HUD that to document that our costs are grossly inadequate. Mr. Boyd yielded to A/S Liu, who reiterated that the goal would be to work with tribes to come up with something that removes AEL. He emphasized that this is an important element. He added that as data are collected and models are developed, this would change. However, he could not commit to such change on an ad hoc basis through appeals. A/S Liu stated that HUD has made a commitment to start the process. He added that HUD was beginning to allocate funds to collect data to replace AEL, which will be based on something closer to actual costs. He pointed out that unlike public housing with 350,000 entities, in the case of Indian housing there are many fewer entities and that will be an advantage.

Mr. Gorynski reemphasized that the data collection and surveys can be done by each tribe to provide information on actual costs. He suggested that in the next year, the tribes start documenting to establish real costs. Mr. Sossamon acknowledged HUD’s commitment to move toward this goal and asked that HUD develop the data collection instruments in communication with the tribes and the tribal housing professionals in order to ensure that the information collected reflects real costs. He further requested that clear explanations be provided where certain costs are disallowed certain costs, so that the tribes understand the instrument when it is finalized. For example, he cited the OIG report in which the resulting goals and objectives were seen as paternalistic. He restated that the tribes are interested and committed to a study and want it to be as reflective of reality as possible.

Mr. Hudson asked A/S Liu if it would be appropriate or accurate to state that within two years there would be a replacement for AEL and would it be possible to include language to that effect in the regulations. A/S Liu responded that it is reasonable to expect that there will be research and dialogue, and that he would hope that there would be some actual implementation. However, he added that he didn’t think it would be prudent to include in the regulations. He did add that it would be prudent to include in the preamble that the committee has had this discussion, that there is an interest in identifying real costs, and that HUD is committed to doing this. A/S Liu reiterated that this would not be a regulation, but would be in the Preamble. Mr. Naize yielded to Mr. Carl who commented that during the first Neg-Reg there was specific language regarding revisiting the issues, and asked if the Assistant Secretary would be willing to include a specific time period now. A/S Liu stated that he was not ready to do that, and would need to confer with the attorneys and others, and that all the committee members would need to discuss this further with tribal leaders to identify the best way to proceed. He clarified that he was not saying that the answer is no, but he thinks that language can be included in the preamble to achieve that course of action.

Mr. Carl stated that the committee was formed to resolve issues and this issue would likely come back and be part of the regulations. He added that the conditions are such that our needs are not being met, and as CAS decreases, there is even larger challenge. A/S Liu stated that he would work on language before the end of this session. He added that HUD prefers that it be part of the Preamble, rather than part of the regulations, and that if there is time available, the group would be able to discuss it further. Mr. Hudson asked if stopping the clock to reserve some time to revisit this issue could be considered. Ms. Falkner pointed out that the committee agreed not to stop the clock.