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Statement of Need: In an environment of competing priorities, managers need tools to prioritize needs and to model alternative strategies. A PNA an energy audit are essential tools to a long-term strategy for the proactive management of property to move away from inefficient and reactionary management that contributes to property deterioration and obsolescence. Strategies to reduce energy costs are key to HUDs mission of providing long-term affordable housing to those most in need-funds spent on utilities are not spent on property improvements and reduce the proportion of tenant rent payments that are used more usefully for physical maintenance and improvement. Energy audits reveal strategies for saving limited resources that can be recycled into more improvements than would otherwise occur.

Summary of the Legal Basis: The Energy Policy Act of 2005, Public Law 109-58 (Approved August 8, 2005), amended section 9(d)(1) of the U. S. Housing Act of 1937, 42 U.S.C. 1437g(d)(1), to add at subparagraphs (K) and (L), as two of the capital and management activities under the capital fund, improvement of energy use and water efficiency, and "integrated utility management and capital planning to maximize energy conservation and efficiency measures." This rule provides for the integrated utility management and capital planning necessary to fulfill this mandate.

Alternatives: HUD determined that its primary alternative was to not revise its regulations concerning physical needs assessment and energy audits. Other than inaction, there is not an alternative to: extending the requirement to perform a physical needs assessment to all PHAs to provide the data needed for better management of the Capital Fund; to changing the current 5 year term of the required PNA to a 20 year term to create a useful strategic planning tool for authorities, and to provide HUD with longer term visibility of needs in the housing portfolio; or to implementing provisions of the Energy Policy Act of 2005 requiring "integrated utility management and capital planning to maximize energy conservation and efficiency measures". However, the current lack of integration between energy audits and the PNA, as well as the overly short life-cycle planning period, make inaction a non-viable approach when it comes to assuring that HUD's requirements for the capital fund are in compliance with the Energy Policy Act of 2005, that the PHA's capital needs will be met, and that actions taken to meet those needs will be integrated with necessary energy improvements.

Anticipated Costs and Benefits: With respect to the energy audit, there are minor costs to the extent that the requirements for the energy audit in this rule exceed the current requirements. HUD's analysis suggests that using conservative assumptions, the economic burden of energy audits to PHAs would be $39,864,536 ($32.86 X 1,213,163) every 5 years, or $7,972,907 annually. A mitigating adjustment of 50 percent to account for the existing burden is not an unreasonable assumption. Such an adjustment would reduce the 5-year and annual additional burden to $19,932,268 and $3,986,453, respectively. With respect to PNAs, HUD estimates that full compliance with the rule will cost PHAs, collectively, up to $29 million once every 5 years or an average of $5.9 million annually. The rule will not have any budgetary impact to the Federal Government, as costs to implement the PNA will be accommodated within HUD's existing budget authority. There are also benefits to this rule. With respect to energy audits, for example, if this rule resulted in a 10 percent increase in efficiency, that would translate into significant savings for PHAs, which often pay for utilities in the form of a utility allowance for residents. With respect to PNAs, benefits include identifying capital expenses far enough in advance to allow for consideration of the most efficient method of payment; identifying synergies in the timing and intensity of capital improvements, and avoiding duplicative or wasteful expenditures; making possible a preventive maintenance strategy to maximize the useful life of property components; encouraging the implementation of energy efficiency measures; and increased occupancy and enhanced health and safety as a result of more habitable units.

Risks: This rule poses no risk to public health, safety, or the environment.