[Federal Register Volume 62, Number 227 (Tuesday, November 25, 1997)]
[Rules and Regulations]
[Pages 62912-62920]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-30940]



[[Page 62911]]

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Part VI





Department of Housing and Urban Development





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24 CFR Part 570



Community Development Block Grants: New York Small Cities Program; 
Final Rule

  Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / 
Rules and Regulations  

[[Page 62912]]



DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-4155-F-02]
RIN 2506-AB91


Community Development Block Grants: New York Small Cities Program

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Final rule.

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SUMMARY: This rule amends the regulations for the Community Development 
Block Grants (CDBG) Small Cities Program for the State of New York. 
This rule eliminates the use of multiyear plans in the Small Cities 
Program for any NOFA published in calendar year 1997 or later. This 
rule also limits the maximum grant award under the annual Small Cities 
NOFA to any single, eligible unit of general local government to 
$400,000, except that counties may apply for a maximum of $600,000. HUD 
will honor grant awards for multiyear plans approved in response to 
NOFAs issued prior to calendar year 1997. In order to implement the 
reduction of grant limits, HUD intends to restrict competition under 
future annual Small Cities NOFAs to single purpose grants. This rule 
also makes minor technical and clarifying changes to the regulations.

EFFECTIVE DATE: December 26, 1997.

FOR FURTHER INFORMATION CONTACT: Cornelia Robertson Terry, State and 
Small Cities Division, Office of Community Planning and Development, 
Department of Housing and Urban Development, Room 7184, 451 Seventh 
Street, SW., Washington, DC 20410; telephone (202) 708-1322 (voice). 
(This is not a toll-free number.) Persons with hearing or speech 
impairments may access this number via TTY by calling the Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Title I of the Housing and Community 
Development Act of 1974 (42 U.S.C. 5300-5320) permits each State to 
elect to administer all aspects of the Community Development Block 
Grant (CDBG) Program annual fund allocation for the nonentitlement 
areas within its jurisdiction. The policies and procedures for HUD's 
CDBG Small Cities Program in 24 CFR part 570, subpart F, apply to 
grants for nonentitlement areas in States such as New York that did not 
elect to administer the CDBG Program.
    Section 226 of the Departments of Veterans Affairs and Housing and 
Urban Development, and Independent Agencies Appropriations Act, 1996 
(Pub. L. 104-134; approved April 26, 1996) (the Act) requires that HUD 
issue proposed and final rules for the requirements of the CDBG program 
for the State of New York before issuing a Notice of Funding 
Availability for funds made available for fiscal year (FY) 1997. In 
accordance with section 226, HUD published a proposed rule on June 11, 
1997 (62 FR 31944) in order to solicit public comments on the 
requirements of the New York CDBG Small Cities Program in 24 CFR part 
570, subpart F. (Although Secs. 570.429 and 570.430 also appear in 
subpart F and are set forth in this final rule, these sections only 
apply to the Small Cities Program in Hawaii.) HUD also solicited 
comments on two proposed changes to the New York Small Cities Program, 
as described below.

New York Small Cities Program Design

    On June 11, 1997, HUD proposed to remove paragraph (a)(3) of 
Sec. 570.421, and to add a new paragraph (f), which would eliminate the 
use of multiyear plans in the New York Small Cities Program for NOFAs 
published in calendar year 1997 or later. HUD will, however, continue 
to honor multiyear plans approved in response to NOFAs published prior 
to calendar year 1997. HUD also proposed to add a new paragraph (g) to 
the current regulations to provide that the maximum grant amount that 
HUD will award to an eligible unit of general local government in 
response to a NOFA for the annual Small Cities competition published in 
calendar year 1997 or later is $400,000, except that counties could 
apply for a maximum of $600,000 in HUD-administered Small Cities grant 
funds. HUD will, however, award larger grants as necessary to honor the 
terms of multiyear plans approved under the provisions of NOFAs 
published prior to calendar year 1997.

Discussion of Public Comments

    The deadline for public comments on the July 11, 1997 proposed rule 
was July 11, 1997. HUD received only 10 comments.

Grant Limits

    Several commenters offered support for HUD's proposal to limit 
maximum future grant amounts. These commenters included a private 
consultant and public and private housing and community development 
organizations. These commenters remarked that the grant limits will 
help spread the extremely limited funds to worthwhile projects in small 
communities across the State.
    Other commenters disagreed, however, arguing that communities need 
larger comprehensive grants in order to avert infrastructure 
dilapidation or to provide substantial housing assistance or economic 
development. These commenters included a United States Senator, a State 
senator, and others that commented on behalf of local communities.
    Although HUD recognizes that there are certain advantages of higher 
grant limits, HUD has determined that the grant limits contained in the 
June 11, 1997 proposed rule are appropriate and has adopted them in 
this final rule. In addition, in order to encourage units of general 
local government to act cooperatively to resolve regional problems that 
affect more than one locality, this final rule amends Sec. 570.422 to 
provide that the grant limit for joint applications will be the maximum 
single purpose grant limit established in Sec. 570.421(g) or a NOFA, 
multiplied by the number of participating governments in the 
cooperation agreement that was established to submit the joint 
application. For the purpose of determining such a multiple grant 
limit, and in order to receive such amount, this rule clarifies that a 
participating joint applicant must receive a substantial direct benefit 
from the activities proposed in the application and must not be acting 
solely on behalf of, or in conjunction with, another jurisdiction 
solely to raise the maximum grant amount that may be awarded. In 
addition, this rule provides that the statistics of each participant 
counted for maximum grant limits shall also be used for purposes of the 
selection factors referred to in Sec. 570.421(a).

Multiyear Commitments

    Some of the commenters agreed with HUD's proposal to eliminate the 
use of multiyear plans in the Small Cities Program. These commenters 
included a private consultant and public and private housing and 
community development organizations.
    In response to previous suggestions from Small Cities grantees, HUD 
offered multiyear grant commitments in FY 1995, along with the increase 
in grant limits in FY 1996, to assist communities with longer term 
development programs within the context of a comprehensive strategy. 
These multiyear commitments assure continued funding during the second 
and/or third year, provided the applicant submits an acceptable 
application with the required

[[Page 62913]]

certifications and is able to demonstrate continued administrative 
capacity for carrying out grant activities, and sufficient appropriated 
funds are available. Multiyear plans are particularly beneficial for 
smaller communities, which lack full-time staff and must turn to high-
priced consultants to prepare Small Cities applications each year.
    The granting of multiyear commitments does not, however, unfairly 
reduce the pool of funds available for competition in future years. In 
the 5-year period from FY 1990 to FY 1994, prior to the offering of 
multiyear commitments, 46 communities received at least 3 annual 
grants. In effect, these 46 communities, based on the depth of their 
needs and the rating quality of their applications, had achieved a de 
facto multiyear status. In the last 2 fiscal years, the Small Cities 
Program has only extended multiyear commitments to 29 grantees 
(including 17 3-year commitments and 12 2-year commitments). Most of 
these multiyear commitments were awarded in single purpose grants to 
the smallest communities. Therefore, the multiyear commitments did not 
significantly change the availability of the funds, but reduced the 
administrative burden and cost of annual applications.
    In response to the support of the commenters, however, this final 
rule eliminates the use of multiyear plans in the Small Cities Program 
for NOFAs published in calendar year 1997 or later, as provided in the 
June 11, 1997 proposed rule.

Small Cities Funds in Entitlement Communities

    Two commenters remarked that Small Cities funds should not go to 
communities that are eligible for CDBG entitlement funds. Since the 
metropolitan areas are generally covered by entitlement funds, these 
commenters stressed that these areas should not also be able to make 
use of the Small Cities funds.
    Under the current regulations, entitlement communities are not 
eligible applicants for Small Cities CDBG nonentitlement funds. Section 
570.421(e) provides, however, that ``[a]n applicant may conduct 
eligible CDBG activities outside its boundaries. These activities must 
be demonstrated to be appropriate to meeting the applicant's needs and 
objectives, and must be consistent with State and local law.'' This 
provision allows a nonentitlement county, for example, to use funds in 
a metropolitan city or an urban county. HUD did not propose to change 
these requirements in the June 11, 1997 proposed rule.
    As some of the commenters noted, the strength of the Small Cities 
CDBG Program is that local communities can and should determine how the 
funds should be used. HUD supports such local decisionmaking about how 
best to meet local needs. Therefore, HUD has decided not to change the 
current regulations regarding the use of Small Cities CDBG funds in 
entitlement areas in response to the two commenters.

Set-Asides

    Two commenters expressed concern regarding the ``set-asides'' 
provided for in the Small Cities regulations for public service 
activities (Sec. 570.421(d)), imminent threats to public health and 
safety (Sec. 570.424), and economic development (Sec. 570.421(a)(5) of 
this rule; Sec. 570.421(a)(6) of the regulations prior to the 
effectiveness of this rule). These commenters argue that such ``set-
asides'' remove funds from the general competition that would otherwise 
be available for worthy community development activities.
    Although HUD appreciates the comments received on these provisions, 
there is no set-aside for public services. The regulations merely 
provide that no more than 15 percent of the State's nonentitlement 
allocation may be used for public services. This provision is 
consistent with the CDBG program as a whole. This is not a new 
provision; HUD did not specifically propose changes to this provision 
in the June 11, 1997 proposed rule. HUD has never held a separate 
competition for ``public service'' grants and has no authority to do so 
under the regulations.
    Imminent threat grants address health and safety related needs in 
communities. Only 15 percent of Small Cities funds may be used for such 
grants, and the actual percentage of imminent threat grants is far 
lower. This is not a new provision, and HUD proposed no changes to this 
provision. Therefore, notwithstanding the two comments received on this 
issue, this final rule retains the imminent threat set-aside to enable 
quick responses to disasters or emergencies that small cities face.
    Section 570.421(a)(5) of this rule, which allows HUD to fund 
economic development grants under certain circumstances, is not a new 
provision, and HUD proposed no changes to that provision. 
Notwithstanding the two comments HUD received, HUD has determined that 
it should retain this provision.
Minor Technical Changes and Clarifications
    HUD is also taking the opportunity in this final rule to make 
several minor technical changes and clarifications to the regulations 
for the Small Cities CDBG Program. These changes include correcting an 
inconsistency in Sec. 570.430(a) regarding the limitation on planning 
and administrative costs in the Hawaii program. This paragraph refers 
to Sec. 570.200(g) of the regulations for the Entitlement Program, 
under which the planning and administrative costs cap is calculated 
based on obligated funds. The Small Cities provision in 
Sec. 570.430(a), however, had relied upon expenditures. This final rule 
corrects that provision so that it consistently relies upon obligated 
funds.

Findings and Certifications

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made in accordance with HUD regulations in 24 CFR part 50 that 
implement section 102(2)(C) of the National Environmental Policy Act of 
1969 (42 U.S.C. 4223). The Finding is available for public inspection 
between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules 
Docket Clerk, Office of General Counsel, Room 10276, Department of 
Housing and Urban Development, 451 7th Street, SW, Washington, DC 
20410.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed this rule before publication, and by 
approving it certifies that this rule would not have a significant 
economic impact on a substantial number of small entities. This rule 
would make limited changes that would not have a significant impact on 
small entities.

Federalism

     The General Counsel, as the Designated Official under section 6(a) 
of Executive Order 12612, Federalism, has determined that this rule 
would not have substantial direct effects on States or their political 
subdivisions, or the relationship between the Federal Government and 
the States, or on the distribution of power and responsibilities among 
the various levels of government. This rule would make limited changes 
that would not have Federalism implications. As a result, this rule is 
not subject to review under the Order.

[[Page 62914]]

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-
4; approved March 22, 1995) (UMRA) establishes requirements for Federal 
agencies to assess the effects of their regulatory actions on State, 
local, and tribal governments, and on the private sector. This rule 
would not impose any Federal mandates on any State, local, or tribal 
governments, or on the private sector, within the meaning of the UMRA.

Catalogue of Federal Domestic Assistance

    The Catalogue of Federal Domestic Assistance program number is 
14.219, Community Development Block Grants--Small Cities Program.

List of Subjects in 24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Lead poisoning, Loan 
programs--housing and community development, Low and moderate income 
housing, New communities, Northern Mariana Islands, Pacific Islands 
Trust Territory, Pockets of poverty, Puerto Rico, Reporting and 
recordkeeping requirements, Small cities, Student aid, Virgin Islands.

    Accordingly, for the reasons set out in the preamble, 24 CFR part 
570 is amended as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

    1. The authority citation for 24 CFR part 570 is revised to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 5301-5320.

    2. Subpart F is revised to read as follows:

Subpart F--Small Cities Program

Sec.
570.420  General.
570.421  New York Small Cities Program design.
570.422  Applications from joint applicants.
570.423  Application for the HUD-administered New York Small Cities 
Grants.
570.424  Grants for imminent threats to public health and safety.
570.425  HUD review and actions on applications for New York State 
applicants.
570.426  Program income.
570.427  Program amendments.
570.428  Reallocated funds.
570.429  Hawaii general and grant requirements.
570.430  Hawaii program operation requirements.
570.431  Citizen participation.
570.432  Repayment of Section 108 loans.

Subpart F--Small Cities Program


Sec. 570.420  General.

    (a) HUD administration of nonentitlement CDBG funds. Title I of the 
Housing and Community Development Act of 1974 permits each State to 
elect to administer all aspects of the Community Development Block 
Grant (CDBG) Program annual fund allocation for the nonentitlement 
areas within its jurisdiction. This subpart sets forth policies and 
procedures applicable to grants for nonentitlement areas in States that 
have not elected, in a manner and time prescribed by the Secretary, to 
administer the CDBG Program. States that elected to administer the 
program after the close of fiscal year 1984 cannot return 
administration of the program to HUD. A decision by a State to 
discontinue administration of the program would result in the loss of 
CDBG funds for nonentitlement areas in that State and the reallocation 
of those funds to all States in the succeeding fiscal year.
    (b) Scope and applicability. (1) This subpart describes the 
policies and procedures of the Small Cities Program which apply to 
nonentitlement areas in States where HUD administers the CDBG Program. 
HUD currently administers the Small Cities Program in only two States--
New York and Hawaii. This subpart principally addresses the 
requirements for New York, and Secs. 570.429 and 570.430 identify 
special procedures applicable to Hawaii.
    (2) The allocation of formula CDBG funds for use in nonentitlement 
areas of Hawaii and New York is as provided in subpart A of this part. 
The policies and procedures set forth in the following identified 
subparts of this part 570 apply to the HUD-administered Small Cities 
Program, except as modified or limited under the provisions thereof or 
this subpart:
    (i) Subpart A--General Provisions;
    (ii) Subpart C--Eligible Activities;
    (iii) Subpart J--Grant Administration;
    (iv) Subpart K--Other Program Requirements; and
    (v) Subpart O--Performance Reviews.
    (c) Public notification requirements. (1) Section 102 of the 
Department of Housing and Urban Development Reform Act of 1989 (42 
U.S.C. 3545) contains a number of provisions that are designed to 
ensure greater accountability and integrity in the provision of certain 
types of assistance administered by HUD. All competitive grants in the 
HUD-administered Small Cities Program in New York are affected by this 
legislation, and the requirements identified at 24 CFR part 4 apply to 
them. Imminent threat grants under Sec. 570.424 and section 108 
repayment grants under Sec. 570.432 are not affected by section 102 as 
they are not competitive grants.
    (2) The Hawaii HUD-administered Small Cities Program is not subject 
to section 102, since the funds are not distributed in a competitive 
manner.
    (d) Abbreviated consolidated plan. Applications for the HUD-
administered Small Cities Program which contain housing activities must 
include a certification that the proposed housing activities are 
consistent with the applicant's consolidated plan as described at 24 
CFR part 91.
    (e) National and primary objectives. (1) Each activity funded 
through the Small Cities Program must meet one of the following 
national objectives as defined under the criteria in Sec. 570.208. Each 
activity must:
    (i) Benefit low- and moderate-income families;
    (ii) Aid in the prevention or elimination of slums or blight; or
    (iii) Be an activity which the grantee certifies is designed to 
meet other community development needs having a particular urgency 
because existing conditions pose a serious and immediate threat to the 
health or welfare of the community where other financial resources are 
not available to meet such needs.
    (2) In addition to the objectives described in paragraph (e)(1) of 
this section, with respect to grants made through the Small Cities 
Program, not less than 70 percent of the total of grant funds from each 
grant and Section 108 loan guarantee funds received under subpart M of 
this part within a fiscal year must be expended for activities which 
benefit low- and moderate-income persons under the criteria of 
Secs. 570.208(a), or 570.208(d) (5) or (6). In the case of multiyear 
plans in New York State approved in response to NOFAs published prior 
to calendar year 1997, not less than 70 percent of the total funding 
for grants approved pursuant to a multiyear plan for a time period of 
up to 3 years must be expended for activities which benefit low- and 
moderate-income persons. Thus, 70 percent of the grant for year 1 of a 
multiyear plan approved in response to NOFAs published prior to 
calendar year 1997 must meet the 70 percent requirement, 70 percent of 
the combined grants from years 1 and 2 must meet the requirement, and 
70 percent of the combined grants from years 1, 2, and 3 must meet the 
requirement. In determining the percentage of funds expended for such 
activity, the provisions of

[[Page 62915]]

Sec. 570.200(a)(3) (i), (iii), (iv), and (v) shall apply.

(Approved by the Office of Management and Budget under control 
number 2506-0060).


Sec. 570.421  New York Small Cities Program design.

    (a) Selection system--(1) Competitive applications. Each 
competitive application will be rated and scored against at least the 
following factors:
    (i) Need-absolute number of persons in poverty as further explained 
in the NOFA;
    (ii) Need-percent of persons in poverty as further explained in the 
NOFA;
    (iii) Program Impact; and
    (iv) Fair Housing and Equal Opportunity, which may include the 
applicant's Section 3 plan and implementation efforts with respect to 
actions to affirmatively further fair housing. The NOFA described in 
paragraph (b) of this section will contain a more detailed description 
of these factors, and the relative weight that each factor will be 
given.
    (2) In addition HUD reserves the right to establish minimal 
thresholds for selection factors and otherwise select grants in 
accordance with Sec. 570.425 and the applicable NOFA.
    (3) Imminent threats to public health and safety. The criteria for 
these grants are described in Sec. 570.424.
    (4) Repayment of Section 108 loans. The criteria for these grants 
are described in Sec. 570.432.
    (5) Economic development grants. HUD intends to use the Section 108 
loan guarantee program to the maximum extent feasible to fund economic 
development projects in the nonentitlement areas of New York. In the 
event that there are not enough Section 108 loan guarantee funds 
available to fund viable economic development projects, if a project 
needs a grant in addition to a loan guarantee to make it viable, or if 
the project does not meet the requirements of the Section 108 program 
but is eligible for a grant under this subpart, HUD may fund Economic 
Development applications as they are determined to be fundable in a 
specific amount by HUD up to the sum set aside for economic development 
projects in a notice of funding availability, notwithstanding paragraph 
(g) of this section. HUD also has the option in a NOFA of funding 
economic development activities on a competitive basis, as a 
competitive application as described in paragraph (a)(1) of this 
section. In order for an applicant to receive Small Cities grant funds 
on a noncompetitive basis, the field office must determine that the 
economic development project will have a substantial impact on the 
needs identified by the applicant.
    (b) Notice of funding availability. HUD will issue one or more 
Notice(s) of Funding Availability (NOFA) each fiscal year which will 
indicate the amount of funds available, the annual grant limits per 
grantee, type of grants available, the application requirements, and 
the rating factors that will be used for those grants which are 
competitive. A NOFA may set forth, subject to the requirements of this 
subpart, additional selection criteria for all grants.
    (c) Eligible applicants. (1) Eligible applicants in New York are 
units of general local government, excluding: Metropolitan cities, 
urban counties, units of general local government which are 
participating in urban counties or metropolitan cities, even if only 
part of the participating unit of government is located in the urban 
county or metropolitan city. Indian tribes are also ineligible for 
assistance under this subpart. An application may be submitted 
individually or jointly by eligible applicants.
    (2) Counties, cities, towns, and villages may apply and receive 
funding for separate projects to be done in the same jurisdiction. Only 
one grant will be made under each funding round for the same type of 
project to be located within the jurisdiction of a unit of general 
local government (e.g., both the county and village cannot receive 
funding for a sewer system to be located in the same village, but the 
county can receive funding for a sewer system that is located in the 
same village as a rehabilitation project for which the village receives 
funding). The NOFA will contain additional information on applicant 
eligibility.
    (3) Counties may apply on behalf of units of general local 
government located within their jurisdiction when the unit of general 
local government has authorized the county to apply. At the time that 
the county submits its application for funding, it must submit a 
resolution by the governing body of the unit of local government that 
authorizes the county to submit an application on behalf of the unit of 
general local government. The county will be considered the grantee and 
will be responsible for executing all grant documents. The county is 
responsible for ensuring compliance with all laws, regulations, and 
Executive Orders applicable to the CDBG Program. HUD will deal 
exclusively with the county with respect to issues of program 
administration and performance, including remedial actions. The unit of 
general local government will be considered the grantee for the purpose 
of determining grant limits. The unit of general local government's 
statistics will be used for purposes of the selection factors referred 
to in Sec. 570.421(a).
    (d) Public service activities cap. Public service activities may be 
funded up to a maximum of fifteen (15) percent of a State's 
nonentitlement allocation for any fiscal year. HUD may award a grant to 
a unit of general local government for public service activities with 
up to 100 percent of the funds intended for public service activities. 
HUD will apply the 15 percent statewide cap to public service 
activities by funding public service activities in the highest rated 
applications in each NOFA until the cap is reached.
    (e) Activities outside an applicant's boundaries. An applicant may 
conduct eligible CDBG activities outside its boundaries. These 
activities must be demonstrated to be appropriate to meeting the 
applicant's needs and objectives, and must be consistent with State and 
local law. This provision includes using funds provided under this 
subpart in a metropolitan city or an urban county.
    (f) Multiyear plans. HUD will not make any new multiyear 
commitments for NOFAs published in calendar year 1997 or later. HUD 
will continue to honor the terms of the multiyear plans that were 
approved under the provisions of NOFAs published prior to calendar year 
1997.
    (g) Maximum grant amount. The maximum grant amount that will be 
awarded to a single unit of general local government in response to the 
annual Small Cities NOFA published in calendar year 1997 or later is 
$400,000, except that counties may apply for up to $600,000 in HUD-
administered Small Cities funds. HUD may specify lower grant limits in 
the NOFA, which may include different limits for different types of 
grants available or different types of applicants. This paragraph (g) 
does not apply to multiyear plans that were approved under the 
provisions of NOFAs published prior to calendar year 1997, nor does it 
apply to grants awarded in connection with paragraphs (a)(3) through 
(a)(5) of this section. The maximum limits in this paragraph (g) apply 
to grants for economic development projects awarded under NOFAs in 
which there is no set-aside of funds for such projects.


Sec. 570.422  Applications from joint applicants.

    Units of general local government may submit a joint application 
which addresses common problems faced by the jurisdictions, to the 
extent permitted

[[Page 62916]]

by the NOFA. A joint application must be pursuant to a written 
cooperation agreement submitted with the application. The cooperation 
agreement must authorize one of the participating units of government 
to act as the lead applicant which will submit the application to HUD, 
and must delineate the responsibilities of each participating unit of 
government with respect to the Small Cities Program. The lead applicant 
is responsible for executing the application, certifications, and grant 
agreement, and ensuring compliance with all laws, regulations, and 
Executive Orders applicable to the CDBG Program. HUD reserves the right 
to deal exclusively with the lead applicant with respect to issues of 
program administration and performance, including remedial actions. In 
the event of poor performance, HUD reserves the right to deny and/or 
restrict future funding to all units of general local government that 
are parties to the cooperation agreement. The maximum amount that may 
be awarded pursuant to a joint application is the maximum single grant 
limit established in a NOFA or pursuant to Sec. 570.421(g) multiplied 
by the number of participants in the cooperation agreement, provided 
that for the purpose of determining such a multiple grant limit, and in 
order to receive such amount, a participating joint applicant must 
receive a substantial direct benefit from the activities proposed in 
the application, and must not be acting solely on behalf of, or in 
conjunction with, another jurisdiction for the sole purpose of raising 
the maximum grant amount that may be awarded. In addition, the 
statistics of each participant counted for maximum grant limits 
purposes shall also be used for purposes of the selection factors 
referred to in Sec. 570.421(a).


Sec. 570.423  Application for the HUD-administered New York Small 
Cities Grants.

    (a) Proposed application. The applicant shall prepare and publish a 
proposed application and comply with citizen participation requirements 
as described in Sec. 570.431. The applicant should follow the citizen 
participation requirements of 24 CFR part 91 if it submits a complete 
consolidated plan.
    (b) Final application. The applicant shall submit to HUD a final 
application containing its community development objectives and 
activities. This final application shall be submitted, in a form 
prescribed by HUD, to the appropriate HUD office. The application also 
must contain a priority nonhousing community development plan, in 
accordance with 24 CFR 91.235.
    (c) Certifications. (1) Certifications shall be submitted in a form 
prescribed by HUD. If the application contains any housing activities, 
the applicant shall certify that the proposed housing activities are 
consistent with its abbreviated consolidated plan, as described at 24 
CFR part 91.
    (2) In the absence of evidence (which may, but need not, be derived 
from performance reviews or other sources) which tends to challenge in 
a substantial manner the certifications made by the applicant, the 
certifications will be accepted by HUD. However, if HUD does have 
available such evidence, HUD may require the submission of additional 
information or assurances before determining whether an applicant's 
certifications are satisfactory.
    (d) Thresholds. The HUD Office may use any information available to 
it to make the threshold judgments required by the applicable NOFA, 
including information related to the applicant's performance with 
respect to any previous assistance under this subpart. The annual 
performance and evaluation report required under Sec. 570.507(a) is the 
primary source of this information. The HUD Office may request 
additional information in cases where it is essential to make the 
required performance judgments.

(Approved by the Office of Management and Budget under control 
number 2506-0060).


Sec. 570.424  Grants for imminent threats to public health and safety.

    (a) Criteria. The following criteria apply for an imminent threat 
to public health or safety:
    (1) The Director of Community Planning and Development of the HUD 
office may, at any time, invite an application for funds available 
under this subpart in response to a request for assistance to alleviate 
an imminent threat to public health or safety that requires immediate 
resolution. HUD shall verify the urgency and the immediacy of the 
threat with an appropriate authority other than the applicant prior to 
acceptance of the application, and the Director of Community Planning 
and Development of the HUD Office shall review the claim to determine 
if, in fact, an imminent threat to public health or safety does exist. 
For example, an applicant with documented cases of disease resulting 
from a contaminated drinking water supply has an imminent threat to 
public health, while an applicant ordered to improve the quality of its 
drinking water supply over the next 2 years does not have an imminent 
threat within the definition of this paragraph (a). A natural disaster 
is prima facie evidence of an imminent threat to public health or 
safety. These funds are to be used to deal with those threats that 
represent a unique and unusual circumstance, not for the type of threat 
that occurs with frequency in a number of communities within the State 
of New York.
    (2) The applicant does not have sufficient local resources, and 
other Federal or State resources are unavailable to alleviate the 
imminent threat.
    (3) All imminent threat projects must meet the requirement of 
Sec. 570.420(e).
    (b) HUD action. (1) Fifteen percent of the funds allocated to New 
York State in the Small Cities Program may be reserved to alleviate 
imminent threats to the public health or safety unless a lesser amount 
is specified in a NOFA. Applications shall be submitted in accordance 
with Sec. 570.423.
    (2) Applications which meet the requirements of this section may be 
approved by the Director of Community Planning and Development of the 
HUD Office without competition.
    (3) The only funds reserved for imminent threats to the public 
health or safety are those specified by this section as modified by the 
NOFA. After the funds have been depleted, HUD shall not consider 
further requests for grants relating to imminent threats during that 
fiscal year.
    (c) Letter to proceed. Notwithstanding Sec. 570.425(a)(3), after a 
determination has been made that an imminent threat exists, HUD may 
issue the applicant a letter to proceed to incur costs to alleviate the 
imminent threat. Reimbursement of such costs is dependent upon HUD 
approval of the final application.
    (d) Environmental review. Pursuant to 24 CFR 58.34(a)(10), grants 
for imminent threats to public health or safety are excluded from some 
or all of the environmental review requirements of 24 CFR part 58, to 
the extent provided therein.


Sec. 570.425  HUD review and actions on applications for New York State 
applicants.

    (a) Final application submission--(1) Submission deadline. HUD will 
establish a time period during which final applications must be 
submitted to the appropriate office. The dates for this period will be 
published in a notice in the Federal Register.
    (2) Incomplete applications. Applications must contain the 
information required by HUD. Information relative to the application 
will not be accepted or considered if received after the submission 
deadline,

[[Page 62917]]

unless the information is specifically requested in writing by HUD.
    (3) Pre-agreement costs. HUD authorizes a unit of general local 
government to incur costs during a Federal fiscal year in which a grant 
is made or the prior fiscal year for preparation of a CDBG grant 
application, planning costs eligible under Sec. 570.205, environmental 
assessments, and project engineering and design costs for eligible 
activities under Secs. 570.201 through 570.204 before the establishment 
of a formal grant relationship between the applicant and HUD. Costs of 
such activities for the funded application may be charged to the grant 
should it be funded, provided that the activities are undertaken in 
accordance with the requirements of this subpart, and 24 CFR part 58. 
It is understood that the incurring of costs described in this 
paragraph creates no obligation on HUD to approve the application.
    (b) HUD action on final application--(1) Review and notification. 
Following the review of the applications, HUD will promptly notify each 
applicant of the action taken with regard to its application. 
Documentation which supports HUD's decisions on applications will be 
available to the public.
    (2) Conditional approval. HUD may make a conditional approval, in 
which case the grant will be approved but the obligation and 
utilization of funds will be restricted. The reasons for the 
conditional approval and the actions necessary to remove the condition 
will be specified. Failure to satisfy the condition may result in a 
termination of the grant.
    (3) HUD will not make a Small Cities grant when it is determined 
that the grant will only have a minimal or insignificant impact on the 
grantee.
    (4) Individual grant amounts. In determining appropriate grant 
amounts to be awarded, HUD may take into account the size of the 
applicant, the level of demand, the scale of the activity proposed 
relative to need and operational capacity, the number of persons to be 
served, the amount of funds required to achieve project objectives and 
the administrative capacity of the applicant to complete the activities 
in a timely manner.
    (c) Streamlined application requirement for previous applicants. 
HUD may provide pursuant to a NOFA that if an applicant notifies HUD in 
writing within the application period specified in a NOFA that it 
wishes to be so considered, HUD will consider unfunded applications 
from the prior round or competition that meet the threshold 
requirements of the NOFA. The applicant will have the option of 
withdrawing its application, or amending or supplementing the 
application for succeeding rounds of competition. If there is no 
significant change in the application involving new activities or 
alteration of proposed activities that will significantly change the 
scope, location or objectives of the proposed activities or 
beneficiaries, there will be no further citizen participation 
requirement to keep the application active for succeeding rounds of 
competition. Applicants availing themselves of the option to have an 
application from the previous round or competition reconsidered by HUD 
must submit a new abbreviated or full consolidated plan, if the new 
competitive funding round is in a different fiscal year than the 
funding round or competition for which the application was originally 
submitted.


Sec. 570.426  Program income.

    (a) The provisions of Sec. 570.504(b) apply to all program income 
generated by a specific grant and received prior to grant closeout.
    (b) If the unit of general local government has another ongoing 
CDBG grant at the time of closeout, the program income will be 
considered to be program income of the ongoing grant. The grantee can 
choose which grant to credit the program income to if it has multiple 
open CDBG grants.
    (c) If the unit of general local government has no open ongoing 
CDBG grant at the time of closeout, program income of the unit of 
general local government or its subrecipients which amounts to less 
than $25,000 per year will not be considered to be program income 
unless needed to repay a Section 108 guaranteed loan. When more than 
$25,000 of program income is generated from one or more closed out 
grants in a year after closeout, the entire amount of the program 
income is subject to the requirements of this part. This will be a 
subject of the closeout agreement described in Sec. 570.509(c).


Sec. 570.427  Program amendments.

    (a) HUD approval of certain program amendments. Grantees shall 
request prior HUD approval for all program amendments involving new 
activities or alteration of existing activities that will significantly 
change the scope, location, or objectives of the approved activities or 
beneficiaries. Approval is subject to the following:
    (1) Programs or projects that include new or significantly altered 
activities are rated in accordance with the criteria for selection 
applicable at the time the original preapplication or application 
(whichever is applicable) was rated. The rating of the program or 
projects proposed which include the new or altered activities proposed 
by the amendment must be equal to or greater than the lowest rating 
received by a funded project or program during that cycle of ratings.
    (2) Consideration shall be given to whether any new activity 
proposed can be completed promptly.
    (3) If the grant was received on a noncompetitive basis, the 
proposed amended project must be able to be completed promptly, and 
must meet all of the threshold requirements that were required for the 
original project. If the proposal is to amend the project to a type of 
project that was rated competitively in the fiscal year that the 
noncompetitive project was funded, the new or altered activities 
proposed by the amendment must receive a rating equal to or greater 
than the lowest rating received by a funded project or program during 
that cycle of ratings.
    (b) Documentation of program amendments. Any program amendments 
that do not require HUD approval must be fully documented in the 
grantee's records.
    (c) Citizen participation requirements. Whenever an amendment 
requires HUD approval, the requirements for citizen participation in 
Sec. 570.431 must be met.


Sec. 570.428  Reallocated funds.

    (a) General. This section governs reallocated funds originally 
allocated for use under 24 CFR part 570, subpart F (Small Cities 
Program).
    (b) Assignment of funds to be reallocated. Reallocated funds may 
be:
    (1) Used at any time necessary for a Section 108 repayment grant 
under Sec. 570.432;
    (2) Added to the next Small Cities Program competition;
    (3) Used to fund any application not selected for funding in the 
most recent Small Cities competition, because of a procedural error 
made by HUD; or
    (4) Used to fund the most highly ranked unfunded application or 
applications from the most recent Small Cities Program competition.
    (c) Timing. Funds which become available shall be used as soon as 
practicable.


Sec. 570.429  Hawaii general and grant requirements.

    (a) General. This section applies to the HUD-administered Small 
Cities Program in the State of Hawaii.
    (b) Scope and applicability. Except as otherwise provided in this 
section, the policies and procedures outlined in

[[Page 62918]]

subparts A, C, J, K, O of this part, and in Secs. 570.420, 570.430, and 
570.432, apply to the HUD-administered Small Cities Program in the 
State of Hawaii.
    (c) Grant amounts. (1) For each eligible unit of general local 
government, a formula grant amount will be determined which bears the 
same ratio to the total amount available for the nonentitlement area of 
the State as the weighted average of the ratios between:
    (i) The population of that eligible unit of general local 
government and the population of all eligible units of general local 
government in the nonentitlement areas of the State;
    (ii) The extent of poverty in that eligible unit of general local 
government and the extent of poverty in all the eligible units of 
general local government in the nonentitlement areas of the State; and
    (iii) The extent of housing overcrowding in that eligible unit of 
general local government and the extent of housing overcrowding in all 
the eligible units of general local government in the nonentitlement 
areas of the State.
    (2) In determining the average of the ratios under this paragraph 
(c), the ratio involving the extent of poverty shall be counted twice 
and each of the other ratios shall be counted once. (0.25 + 0.50 + 0.25 
= 1.00).
    (d) Adjustments to grants. Grant amounts under this section may be 
adjusted where an applicant's performance is judged inadequate, 
considering:
    (1) Capacity to utilize the grant amount effectively and 
efficiently;
    (2) Compliance with the requirements of Sec. 570.902(a) for timely 
expenditure of funds beginning with grants made in FY 1996. In making 
this calculation, all outstanding grants will be considered. For the FY 
1995 grant the requirement is substantial compliance with the 
applicant's schedule or schedules submitted in each previously funded 
application;
    (3) Compliance with other program requirements based on monitoring 
visits and audits.
    (e) Reallocation. (1) Any amounts that become available as a result 
of adjustments under paragraph (d) of this section, or any reductions 
under subpart O of this part, shall be reallocated in the same fiscal 
year to any remaining eligible applicants on a pro rata basis.
    (2) Any formula grant amounts reserved for an applicant that 
chooses not to submit an application shall be reallocated to any 
remaining eligible applicants on a pro rata basis.
    (3) No amounts shall be reallocated under paragraph (e) of this 
section in any fiscal year to any applicant whose grant amount was 
adjusted under paragraph (d) of this section or reduced under subpart O 
of this part.
    (f) Required submissions. In order to receive its formula grant 
under this subpart, the applicant must submit a consolidated plan in 
accordance with 24 CFR part 91. That part includes requirements for the 
content of the consolidated plan, for the process of developing the 
plan, including citizen participation provisions, for the submission 
date, for HUD approval, and for the amendment process.
    (g) Application approval. HUD will approve an application if the 
jurisdiction's submissions have been made and approved in accordance 
with 24 CFR part 91 and the certifications required therein are 
satisfactory to the Secretary. The certifications will be satisfactory 
to the Secretary for this purpose unless the Secretary has determined 
pursuant to subpart O of this part that the grantee has not complied 
with the requirements of this part, has failed to carry out its 
consolidated plan as provided under Sec. 570.903, or has determined 
that there is evidence, not directly involving the grantee's past 
performance under this program, that tends to challenge in a 
substantial manner the grantee's certification of future performance. 
If the Secretary makes any such determination, however, further 
assurances may be required to be submitted by the grantee as the 
Secretary may deem warranted or necessary to find the grantee's 
certification satisfactory.
    (h) Grant agreement. The grant will be made by means of a grant 
agreement executed by both HUD and the grantee.
    (i) Conditional grant. The Secretary may make a conditional grant 
in which case the obligation and use of grant funds for activities may 
be restricted. Conditional grants may be made where there is 
substantial evidence that there has been, or there will be, a failure 
to meet the performance requirements or criteria described in subpart O 
of this part. In such case, the conditional grant will be made by means 
of a grant agreement, executed by HUD, which includes the terms of the 
condition specifying the reason for the conditional grant, the actions 
necessary to remove the condition and the deadline for taking those 
actions. The grantee shall execute and return such an agreement to HUD 
within 60 days of the date of its transmittal. Failure of the grantee 
to execute and return the grant agreement within 60 days may be deemed 
by HUD to constitute rejection of the grant by the grantee and shall be 
cause for HUD to determine that the funds provided in the grant 
agreement are available for reallocation in accordance with section 
106(c) of the Act. Failure to satisfy the condition may result in a 
reduction in the grant amount pursuant to Sec. 570.911.

(Approved by the Office of Management and Budget under control 
number 2506-0060)


Sec. 570.430  Hawaii program operation requirements.

    (a) Limitation on planning and administrative costs. For grants 
made with allocations prior to FY 1995, no more than 20 percent of the 
sum of the grant plus program income received during the grant period 
shall be expended for planning and program administrative costs. For 
grants received from allocations in FY 1995 and thereafter, a grantee 
will be considered to be in conformance with the requirements of 
Sec. 570.200(g) if funds obligated for planning and administration 
during the most recently completed program year do not exceed 20 
percent of the sum of the grant made for that program year and the 
program income received from post FY 1994 grants during that program 
year.
    (b) Performance and evaluation reports. Grantees will follow the 
requirements of Sec. 570.507(a) for entitlement grant recipients for 
all grants received in FY 1995 and thereafter. Grantees will continue 
following the requirements of Sec. 570.507(a) for HUD-administered 
small cities grants for grants received prior to FY 1995 until those 
grants are closed out.
    (c) Grant closeouts. Grants received prior to FY 1995 shall be 
closed out in accordance with the procedures in Sec. 570.509. Grants 
received in FY 1995 and thereafter shall not be closed out 
individually. A grantee's entire program shall be closed upon program 
completion if a grantee ceases its participation in the Small Cities 
Program.
    (d) Public Services. Starting with the FY 1996 grant, grantees may 
follow the provisions of Sec. 570.201(e)(1) that refer to entitlement 
grantees, allowing grantees to use 15 percent of the program income 
received in the previous program year in addition to 15 percent of the 
grant amount for public services.
    (e) Compliance with the primary objective. Starting with the FY 
1995 grant, grantees may select a time period of one, two or three 
program years in which to meet the requirement that not less than 70 
percent of the aggregate of CDBG fund expenditures be for activities 
benefitting low- and moderate-

[[Page 62919]]

 income persons. Grants made from allocations prior to FY 1995 will be 
considered individually for meeting the primary objective, and 
expenditures for grants from pre-FY 1995 allocations made during and 
after FY 1995 will not be considered in determining whether the primary 
objective has been met for post-1994 allocations. If the State of 
Hawaii decides to administer the Community Development Block Grant 
Program for nonentitlement units of general local government in Hawaii, 
the State will be bound by the time period for meeting the primary 
objective that was chosen by each nonentitlement grantee within the 
State until those time periods have expired.
    (f) Program amendments for grants received prior to FY 1995. 
Grantees must follow the requirements of 24 CFR 91.505 when amending 
their program with regard to grants received prior to FY 1995. For 
purposes of this paragraph (f), the term consolidated plan as used in 
24 CFR 91.505 means an application submitted under the Hawaii program 
for pre-FY 1995 funds. Also for purposes of this paragraph (f), to 
comply with the requirements of 24 CFR 91.505, grantees must refer to 
their current citizen participation plans (adopted in accordance with 
24 CFR 91.505) to determine the criteria for substantial amendment and 
the citizen participation process to be followed.

(Approved by the Office of Management and Budget under control 
number 2506-0020.)


Sec. 570.431  Citizen participation.

    (a) General. An applicant that is located in a nonentitlement area 
of a State that has not elected to distribute funds shall comply with 
the citizen participation requirements described in this section, 
including requirements for the preparation of the proposed application 
and the final application. The requirements for citizen participation 
do not restrict the responsibility or authority of the applicant for 
the development and execution of its community development program.
    (b) Citizen participation plan. The applicant must develop and 
follow a detailed citizen participation plan and must make the plan 
public. The plan must be completed and available before the application 
for assistance is submitted to HUD, and the applicant must certify that 
it is following the plan. The plan must set forth the applicant's 
policies and procedures for:
    (1) Giving citizens timely notice of local meetings and reasonable 
and timely access to local meetings, information, and records relating 
to the grantee's proposed and actual use of CDBG funds including, but 
not limited to:
    (i) The amount of CDBG funds expected to be made available for the 
coming year, including the grant and anticipated program income;
    (ii) The range of activities that may be undertaken with those 
funds;
    (iii) The estimated amount of those funds proposed to be used for 
activities that will benefit low- and moderate-income persons;
    (iv) The proposed CDBG activities likely to result in displacement 
and the applicant's plans, consistent with the policies developed under 
Sec. 570.606(b), for minimizing displacement of persons as a result of 
its proposed activities; and
    (v) The types and levels of assistance the applicant plans to make 
available (or to require others to make available) to persons displaced 
by CDBG-funded activities, even if the applicant expects no 
displacement to occur;
    (2) Providing technical assistance to groups representative of 
persons of low- and moderate-income that request assistance in 
developing proposals. The level and type of assistance to be provided 
is at the discretion of the applicant. The assistance need not include 
the provision of funds to the groups;
    (3) Holding a minimum of two public hearings, for the purpose of 
obtaining citizens' views and formulating or responding to proposals 
and questions. Each public hearing must be conducted at a different 
stage of the CDBG program. Together, the hearings must address 
community development and housing needs, development of proposed 
activities and review of program performance. There must be reasonable 
notice of the hearings and the hearings must be held at times and 
accessible locations convenient to potential or actual beneficiaries, 
with reasonable accommodations including material in accessible formats 
for persons with disabilities. The applicant must specify in its plan 
how it will meet the requirement for hearings at times and locations 
convenient to potential or actual beneficiaries;
    (4) Meeting the needs of non-English speaking residents in the case 
of public hearings where a significant number of non-English speaking 
residents can reasonably be expected to participate;
    (5) Responding to citizen complaints and grievances, including the 
procedures that citizens must follow when submitting complaints and 
grievances. The applicant's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days of the receipt of the complaint, where practicable; and
    (6) Encouraging citizen participation, particularly by low- and 
moderate-income persons who reside in slum or blighted areas, and in 
other areas in which CDBG funds are proposed to be used.
    (c) Publication of proposed application. (1) The applicant shall 
publish a proposed application consisting of the proposed community 
development activities and community development objectives in order to 
afford affected citizens an opportunity to:
    (i) Examine the application's contents to determine the degree to 
which they may be affected;
    (ii) Submit comments on the proposed application; and
    (iii) Submit comments on the performance of the applicant.
    (2) The requirement for publishing in paragraph (c)(1) of this 
section may be met by publishing a summary of the proposed application 
in one or more newspapers of general circulation, and by making copies 
of the proposed application available at libraries, government offices, 
and public places. The summary must describe the contents and purpose 
of the proposed application, and must include a list of the locations 
where copies of the entire proposed application may be examined.
    (d) Preparation of a final application. An applicant must prepare a 
final application. In the preparation of the final application, the 
applicant shall consider comments and views received related to the 
proposed application and may, if appropriate, modify the final 
application. The final application shall be made available to the 
public and shall include the community development objectives and 
projected use of funds, and the community development activities.
    (e) New York grantee amendments. To assure citizen participation on 
program amendments to final applications that require HUD approval 
under Sec. 570.427, the grantee shall:
    (1) Furnish citizens information concerning the amendment;
    (2) Hold one or more public hearings to obtain the views of 
citizens on the proposed amendment;
    (3) Develop and publish the proposed amendment in such a manner as 
to afford affected citizens an opportunity to examine the contents, and 
to submit comments on the proposed amendment;
    (4) Consider any comments and views expressed by citizens on the 
proposed amendment and, if the grantee finds it appropriate, modify the 
final amendment accordingly; and

[[Page 62920]]

    (5) Make the final amendment to the community development program 
available to the public before its submission to HUD.


Sec. 570.432  Repayment of section 108 loans.

    Notwithstanding any other provision of this subpart, a unit of 
general local government in a nonentitlement area where the State has 
not elected to administer the CDBG program shall be eligible for Small 
Cities Grant assistance hereunder for the sole purpose of paying any 
amounts due on debt obligations issued by such unit of general local 
government (or its designated public agency) and guaranteed by the 
Secretary pursuant to section 108 of the Act (see subpart M of this 
part). The award of grant assistance for such purpose shall be 
consistent with section 106(d)(3)(B) of the Act, in such amount, and 
subject to such conditions as the Secretary may determine. Since 
guaranteed loan funds (as defined in Sec. 570.701) are required to be 
used in accordance with national and primary objective requirements, 
and other applicable requirements of this part, any grant made to make 
payments on the debt obligations evidencing the guaranteed loan shall 
be presumed to meet such requirements, unless HUD determines that the 
guaranteed loan funds were not used in accordance with such 
requirements. Any such determination by HUD shall not prevent the 
making of the grant in the amount of the payment due, but it may be 
grounds for HUD to take appropriate action under subpart O of this part 
based on the original noncompliance.

    Dated: November 19, 1997.
Jacquie Lawing,
General Deputy Assistant Secretary for Community Planning and 
Development.
[FR Doc. 97-30940 Filed 11-21-97; 10:06 am]
BILLING CODE 4210-29-P