[Federal Register Volume 65, Number 206 (Tuesday, October 24, 2000)]
[Proposed Rules]
[Pages 63756-63761]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27191]



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Part V





Department of Housing and Urban Development





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24 CFR Part 570



Prohibition on Use of Community Development Block Grant Assistance for 
Job-Pirating Activities; Proposed Rule

  Federal Register / Vol. 65, No. 206 / Tuesday, October 24, 2000 / 
Proposed Rules  

[[Page 63756]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-4556-P-01]
RIN 2506-AC04


Prohibition on Use of Community Development Block Grant 
Assistance for Job-Pirating Activities

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement section 588 of the Quality 
Housing and Work Responsibility Act of 1998 by revising HUD's 
regulations for the Community Development Block Grant (CDBG) program. 
Section 588 prohibits State and local governments from using CDBG funds 
for ``job pirating'' activities that are likely to result in 
significant job loss. Job-pirating, in this context, refers to the use 
of CDBG funds to lure or attract a business and its jobs from one 
community to another community.

DATES: Comments Due Date: December 26, 2000.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Rules Docket Clerk, Office of General 
Counsel, Room 10276, U.S. Department of Housing and Urban Development, 
451 Seventh Street, SW., Washington, DC 20410. Comments should refer to 
the above docket number and title. A copy of each comment submitted 
will be available for public inspection and copying weekdays between 
7:30 a.m. and 5:30 p.m. at the above address. Comments submitted by 
facsimile (FAX) will not be accepted.

FOR FURTHER INFORMATION CONTACT: Richard Kennedy, Office of Block Grant 
Assistance, Room 7286, U.S. Department of Housing and Urban 
Development, 451 Seventh Street, SW., Washington, DC 20410; telephone 
(202) 708-3587 (this is not a toll-free number).
    In addition, program participants may contact their respective 
program offices by calling the applicable telephone number listed below 
(these telephone numbers are not toll-free).
    For State CDBG recipients: Steve Johnson, Director, State & Small 
Cities Division, (202) 708-1322.
    For Entitlement Communities: Sue Miller, Acting Director, 
Entitlement Communities Division, (202) 708-1577.
    For Section 108, EDI, and BEDI program participants: Paul Webster, 
Director, Office of Community and Economic Development Finance, (202) 
708-1871.
    Hearing- or speech-impaired individuals may access any of the 
telephone numbers listed in this section by calling the toll-free 
Federal Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Statutory Background

    Title I of the Housing and Community Development Act of 1974 (42 
U.S.C. 5301-5320) (referred to as the ``1974 HCD Act'') establishes the 
statutory framework for the Community Development Block Grants (CDBG) 
Program. HUD's regulations implementing the CDBG program are located at 
24 CFR part 570 (entitled ``Community Development Block Grants'').
    Section 588 of the Quality Housing and Work Responsibility Act of 
1998 (Title V of the FY 1999 HUD Appropriations Act; Pub.L. 105-276, 
approved October 21, 1998) amended section 105 of the 1974 HCD Act (42 
U.S.C. 5305). Specifically, section 588 added, at the end of section 
105, a new subsection (h) entitled ``Prohibition on Use of Assistance 
for Employment Relocation Activities.'' This new subsection prohibits 
the use of CDBG funds to facilitate the relocation of for-profit 
businesses from one labor market area to another if the relocation is 
likely to result in significant job loss.
    New subsection (h) reads as follows:

    (h) Prohibition on Use of Assistance for Employment Relocation 
Activities.--Notwithstanding any other provision of law, no amount 
from a grant under section 106 made in fiscal year 1999 or any 
succeeding fiscal year may be used to assist directly in the 
relocation of any industrial or commercial plant, facility, or 
operation, from one area to another area, if the relocation is 
likely to result in a significant loss of employment in the labor 
market area from which the relocation occurs.

II. This Proposed Rule

    This proposed rule would implement new subsection 105(h) of the 
1974 HCD Act by revising HUD's CDBG program regulations at 24 CFR part 
570. The proposed rule would establish a new Sec. 570.210 (entitled 
``Prohibition of use of assistance for employment relocation 
activities''), which would describe the CDBG job-pirating prohibitions. 
These anti-pirating provisions would also be incorporated in subpart I 
of the part 570 regulations. Subpart I describes the policies and 
procedures governing the State-administered CDBG program. Specifically, 
the proposed rule would revise Sec. 570.482 (entitled ``Eligible 
activities'') to describe the job-pirating provisions for the State-
administered CDBG program. The anti-pirating provisions described in 
Sec. 570.482 would be parallel to those found in proposed Sec. 570.210.

III. Significant Features of the Proposed Rule

    A. Covered programs. This proposed rule would apply to the CDBG 
program. In addition, the proposed rule would also apply to the Section 
108 Loan Guarantee program, the Economic Development Initiative (EDI) 
program, the Brownfields Economic Development Initiative (BEDI) 
program, and CDBG assistance to Insular Areas. HUD has decided to 
include these additional programs in the coverage of the proposed rule 
since they all provide assistance for economic development activities 
authorized by the CDBG program.
    B. Direct assistance to for-profit businesses. Section 105 of the 
1974 HCD Act authorizes the provision of direct CDBG assistance to for-
profit businesses. Specifically, subsection 105(a)(17) authorizes CDBG 
recipients to provide direct assistance to for-profit businesses for 
economic development activities. Additionally, subsection 105(a)(15) 
authorizes recipients to provide CDBG funds to Community-Based 
Development Organizations (CBDOs) for economic development activities 
that increase economic opportunities, or that stimulate or retain 
businesses or permanent jobs. CBDOs may carry-out economic development 
activities directly or they may assist for-profit businesses similar to 
the way CDBG recipients assist for-profit businesses.
    New subsection 105(h) targets CDBG assistance to for-profit 
businesses. In accordance with the statutory language of new subsection 
105(h), the proposed rule would prohibit the provision of CDBG 
assistance to for-profit businesses (including business expansions) 
under subsections 105(a)(15) and 105(a)(17) of the 1974 HCD Act, if:
    (1) The funding will assist in the relocation of a plant, facility, 
or operation; and
    (2) If the relocation is likely to result in a significant loss of 
jobs in the area from which the relocation occurs.
    As noted, HUD proposes to apply the job-pirating prohibition rule 
to those business expansions that result in the relocation of all or a 
portion of an operation to the expansion site, if the relocation would 
result in a significant loss in the number of jobs at the current 
facility. When a business expands to a site outside of its current 
labor market

[[Page 63757]]

area, the expansion may or may not involve a relocation of a product 
line or jobs. HUD specifically invites public comment on whether the 
anti-pirating prohibitions should apply to CDBG-assisted business 
expansion activities that may or may not have the potential for future 
job relocation. HUD also invites public comment on whether this 
proposed rule might have an impact on the expansion of electronic 
commerce on the internet and, if so, any suggestions for addressing 
such impact. Finally, while this proposed rule is directed to CDBG 
assistance made available to for-profit businesses that might relocate 
from one labor market area to another, the statutory provision does not 
specifically identify for-profit businesses, per se. In that regard, 
while there is the potential that some not-for-profit businesses may 
have fairly substantial levels of employment and might have the 
potential for business relocation and job loss, HUD believes that the 
likelihood of CDBG assistance to a not-for-profit business relocation 
is limited. HUD invites comments on its decision to limiting this rule 
to for-profit businesses.
    C. Infrastructure improvements. In the development of this proposed 
rule, HUD also considered how new subsection 105(h) applies to CDBG 
recipients that provide assistance indirectly to for-profit businesses. 
This indirect assistance may take the form of infrastructure 
improvements (such as water and sewer lines, utilities and roadway 
improvements) as well as buildable sites, rail spurs, and other 
amenities in industrial parks. State and local CDBG recipients may also 
facilitate businesses indirectly through the development of business 
incubator buildings. The development of business incubator buildings 
indirectly assists for-profit businesses through the provision of 
reduced rents, shared administrative services, etc.
    CDBG recipients may carry out these activities under subsection 
105(a)(14) of the 1974 HCD Act, as well as subsections 105(a)(1), (2), 
(4), or (7), which govern the use of CDBG funds for acquisition of real 
property, public facilities improvements, clearance, demolition, and 
disposition of real property. A recipient may use these provisions to 
assist a business in relocating from one area to another.
    This proposed rule provides that, when a CDBG recipient enters into 
a written agreement with a business to fund any of the activities 
described above in consideration for the relocation of the business, 
this is equivalent to providing direct assistance to the business. 
Accordingly, the proposed rule would apply. HUD specifically invites 
public comment on whether the anti-pirating prohibitions of this 
proposed rule should apply to infrastructure and other indirect CDBG 
assistance.
    D. Definition of ``Operation''. New subsection 105(h) prohibits the 
use of CDBG assistance to assist in the relocation of any industrial or 
commercial plant, facility, or ``operation'' from one area to another 
area. This proposed rule would define the term ``operation'' to include 
any equipment, position, employment opportunity, production capacity or 
product line. HUD specifically solicits public comments regarding this 
proposed definition of the term ``operation.''
    E. Definition of ``Area''. The statutory language of new subsection 
105(h) prohibits the relocation of any industrial or commercial plant, 
facility, or operation, from ``one area to another,'' if the relocation 
is likely to result in significant job loss. HUD proposes to interpret 
the phrase ``area'' to be synonymous with the term ``Labor Market Area 
(LMA),'' as defined by the U.S. Bureau of Labor Statistics (BLS). The 
BLS defines an LMA as:

    (a)n economically integrated area within which individuals can 
live and find employment within a reasonable distance or can readily 
change jobs without changing their place of residence.

    HUD believes that the BLS definition is the most logical one to 
use, for two reasons:
    (1) It ensures consistency of definitions and data across the 
country; and
    (2) It enhances consistency of approach among Federal programs.
    These are important considerations because potentially affected 
projects may involve a business relocating from one type of market area 
to a very different type of market area in a different region of the 
country. In addition, assembling financing for economic development 
projects often involves combining funding from multiple Federal 
programs or agencies.
    LMAs include metropolitan statistical areas (MSA) and primary 
metropolitan statistical areas (PMSA), defined by the Office of 
Management and Budget, and small labor market areas. The proposed rule 
would be applicable to moves from one LMA to another, regardless of the 
type of area (e.g., from an MSA to a PMSA, or from an MSA to a small 
labor market area, etc.) or the type of CDBG grantee providing 
assistance (e.g., entitlement, non-entitlement, or State). For example, 
moving a business from the City of Denver (located in the Denver, CO 
MSA) to Adams County, CO (also located in the Denver, CO MSA) would not 
be subject to the anti-pirating provisions of this proposed rule since 
both Denver and Adams County are located in the same LMA.
    HUD specifically invites public comments on the appropriateness of 
using the BLS definition of LMA for purposes of this rulemaking.
    F. Determining ``significant job loss''. As noted above, new 
subsection 105(h) prohibits CDBG assistance for business relocation 
activities that ``will result in a significant loss of employment'' in 
the LMA from which the relocation occurs. This proposed rule would 
require that a CDBG grantee, in determining whether a significant job 
loss would occur, collect labor force statistics for the LMA where the 
business is located before the relocation occurs. As proposed in this 
rule, the CDBG grantee would also be required to document the number of 
jobs that the business plans to relocate to the new LMA.
    Annual unemployment rates for metropolitan areas are reported to 
the nearest .1 percent (.001). Unemployment statistics for States and 
non-metropolitan areas also suggest that State unemployment rates vary 
between 0.1 percent and 0.9 percent. (Source: Bureau of the Census, 
Local Area Unemployment Statistics, Table 1--Civilian labor force and 
unemployment by state and metropolitan area, 1998-99.) This proposed 
rule would provide that a business relocation results in a 
``significant job loss'' when the number of displaced jobs equals one-
tenth percent or more of the total number of jobs in the LMA from which 
the relocation occurs.
    The following example, provided in chart form, illustrates the 
factors that a CDBG grantee would be required to consider in 
determining whether a business relocation would result in a significant 
job loss. In the example, a city has proposed funding a business that 
plans to relocate from any of the following areas. The business plans 
on relocating on July 1 and the move would result in the relocation of 
50 jobs.

[[Page 63758]]



                                                       Example of Calculating Significant Job Loss
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                                           (B)  Number of
                                             persons in
                                           labor force in
  (A)  CDBG grantee/name of labor market     area where         (C)  One-tenth percent of labor force      (D)  Number of jobs leaving the area  Must be
    area (LMA)  Area where business is       business is             Multiply column (B) by .001           less than number in column (C) to be eligible
            currently located                 currently                                                                    for assistance
                                           located  (June
                                                1999)
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Chattanooga, TN                                   219,709  219,709  x  .001 = 219.709                      50 Not
Chattanooga, TN-GA MSA...................                                                                  Prohibited.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Logan, NE                                          19,714  19,714  x  .001 = 19.71                         50
Lincoln-Logan-McPherson SLMA.............                                                                  Prohibited.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Jefferson County, CO                            1,162,479  1,162,479  x  .001 = 1,162.48                   50
Denver, CO PMSA..........................                                                                  Not Prohibited.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(MSA: Metropolitan Statistical Area)
(PMSA: Primary MSA)
(SLMA: Small LMA)

    Labor force statistics are provided monthly and annually for each 
LMA. Labor force data may be obtained from the BLS web site at http://www.bls.gov/lauhome.htm. CDBG grantees may also write to their State 
employment statistics contact person to receive local employment data. 
A list of State employment statistics contact names is provided at the 
following Internet address: http://www.bls.gov/ofolist.htm. To obtain a 
list of LMAs or for questions regarding local area unemployment 
statistics, contact the BLS Local Area Unemployment Statistics Division 
by calling (202) 606-6392 or e-mail the Division at the following 
address: [email protected].
    Even in large LMAs, however, a one-tenth of a percent job loss of 
the total labor market may constitute a large number of employees. 
Therefore, this proposed rule provides that in all cases a loss of 500 
or more jobs will be considered to constitute a significant job loss. 
HUD specifically solicits public comments on the use of labor force 
data and the impact of the .1 percent and the 500 jobs threshold for 
determining significant job loss.

IV. Activities and Businesses Exempt From the Job Piracy 
Prohibition

    A. General. This proposed rule would not apply to any of the 
following:
    (1) Relocation assistance required by the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act (URA) of 1970, as 
amended, (42 U.S.C. 4601-4655) (implemented by HUD at 24 CFR part 42) 
and by the CDBG regulations at Secs. 570.488 and 570.606;
    (2) Start-up businesses;
    (3) Microenterprises; and
    (4) Assistance to businesses that buy equipment and/or inventory in 
arms-length transactions and move the equipment and/or inventory to 
another area.
    B. Relocation assistance. HUD proposes to exclude relocation 
assistance required to be provided to a business under the URA. 
Businesses that receive such assistance and are required to relocate 
generally are not voluntarily relocating. HUD does not believe that the 
anti-pirating provisions were intended to prevent businesses that are 
forced to relocate as a result of a government action covered by the 
URA from relocating to another area.
    C. Start-up businesses and microenterprises. HUD considered whether 
start-up businesses and microenterprises should be subject to the job-
pirating restrictions, but has determined that these types of business 
were not the intended targets of the statutory prohibition. Such 
businesses generally have five or fewer employees and typically do not 
seek resources to relocate jobs to other areas.
    D. CDBG-assisted arms length transactions. The exemption for 
businesses that buy equipment and inventory in arms length transactions 
is meant to protect assisted businesses that simply purchase equipment 
and inventory that are located in one area and move them to a new 
location. The job piracy prohibition targets businesses that move 
existing operations from one labor market area to another.
    This proposed rule would apply to CDBG assistance to a business 
that: (1) Shuts down or downsizes a facility and sells the equipment in 
a non-arms length transaction (an example of a non-arm's length 
transaction is a firm selling equipment to a subsidiary); or
    (2) Sells, in an arms length transaction, an interest in an 
existing business, product line, customer base or the entire stock-in-
trade and goodwill of an existing business.
    This proposed rule would not apply to assistance to a business that 
only purchases used equipment in an arms length transaction. HUD 
believes that the sale and purchase of equipment, inventories, or other 
business assets on the open market were not intended to be included 
under the business relocation provisions of new subsection 105(h).
    The following examples illustrate the applicability of this 
proposed rule to the sale of business equipment and inventory:

    Example 1: A city provides CDBG assistance to a business for the 
purchase of equipment. The business will purchase the equipment 
through a used equipment broker. The equipment is currently owned by 
a firm that is downsizing. Upon purchase of the equipment, the new 
owner will move the equipment to another State from where the 
equipment is currently located.
    Example 2: A city provides CDBG assistance to a firm that 
intends to buy the product line of a business and to relocate the 
entire product line to another LMA.
    In both cases, HUD would examine the following:
    (1) Will the CDBG assistance directly assist in the relocation 
of the business?
    (2) Will the relocation result in significant job loss?
    Example 1: In the first example, the CDBG assistance did not 
trigger the relocation of the equipment, nor was the relocation of 
the equipment related to any loss of jobs. The current equipment 
owner's decision to downsize, regardless of another business' 
subsequent purchase of equipment and inventory, was the reason for 
the job loss in this example. The use of CDBG funds to purchase 
equipment in an arms-length transaction such as this would not be 
prohibited under this proposed rule.
    Example 2: In this example, the CDBG assistance would directly 
assist the move of an operation from one LMA to another. The 
proposed rule would prohibit this assistance if the relocation of 
the product line is likely to result in significant job loss in the 
LMA from which the proposed relocation would occur.

[[Page 63759]]

    HUD specifically invites comments on what forms of sale or 
transfer of a business' assets should be covered by the anti-
pirating provisions of this rule.

V. Documentation Requirements for CDBG Recipients and Businesses

    This proposed rule would require that for each CDBG assisted 
business covered by this proposed rule that the recipient's CDBG 
project file must document the following: whether or not the business 
has a plant, facility or operation in a LMA outside of the recipient's 
LMA; and if the business has one or more plants, facilities or 
operations located in other LMAs, the location and number of employees 
at each such plant, facility or operation. Prior to a decision to 
provide CDBG assistance to a business that has a plant, location or 
facility in other LMAs, the recipient shall document whether the number 
of workers employed by the business at each of the locations would 
constitute a significant job loss as proposed in this rule. If the 
recipient decides to commit CDBG assistance to a business (whether 
directly or indirectly), the grantee must require and obtain, as a 
condition for assistance, a certification from the assisted business 
that neither it, nor any of its subsidiaries, has plans to relocate 
jobs at the time the agreement is signed. The business must provide 
this certification to the grantee as a part of the agreement committing 
CDBG assistance to the business. Further, the agreement must provide 
that, in the event the CDBG assistance results in a business relocation 
subject to this proposed rule, the business will reimburse the CDBG 
recipient for any assistance (with interest) provided to, or expended 
on behalf of, the business.
    The purpose of this certification is to prohibit businesses, 
especially those with similar facilities/operations in other LMAs, from 
using CDBG assistance to establish a new facility with the intent of 
subsequently relocating existing operations to the new facility. If the 
business plans to relocate jobs, then it would be required to certify 
as to the number of jobs at the current facility, and the number of 
those positions that would be relocated once the CDBG assisted facility 
was fully operational. If the number of jobs to be relocated exceeds 
the threshold for significant job loss, CDBG assistance could not be 
provided.
    HUD solicits public comments on the documentation required to be 
collected and maintained by the recipient and the proposed business 
certification and the penalties if a business fails to meet the 
certification.

VI. Findings and Certifications

Public Reporting Burden

    The information collection requirements contained in this proposed 
rule have been submitted to the Office of Management and Budget (OMB) 
under the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). In 
accordance with the Paperwork Reduction Act, HUD may not conduct or 
sponsor, and a person is not required to respond to, a collection of 
information unless the collection displays a currently valid OMB 
control number. The current OMB control number for the CDBG Entitlement 
program is 2506-0077. The current OMB control number for the CDBG 
States program is 2506-0085. These information collection numbers will 
be revised to include the information burden projected in this proposed 
rule.
    The burden of the information collections in this proposed rule is 
estimated as follows:

Reporting and Recordkeeping Burden

----------------------------------------------------------------------------------------------------------------
                                                                                     Estimated
                                                                     Number of     average time      Estimated
                Section reference                    Number of     responses per        for        annual burden
                                                      parties       respondent      requirement     (in hours)
                                                                                    (in hours)
----------------------------------------------------------------------------------------------------------------
Sec.  570.200(e) and Sec.  570.506(c)
 (Maintenance of Required Documentation):
    Local.......................................             337               1            .333             112
    Federal.....................................             100               1            .5                50
Sec.  570.210(c) (Statement):
    Local.......................................             337               1           2                 674
    Federal.....................................              40               1           1                  40
Sec.  570.482(h)(3) (Statement):
    Local.......................................              51               1           2                 102
    Federal.....................................              10               1           2                  20
Total Local Reporting and Recordkeeping Burden    ..............  ..............  ..............             888
 (Hours)........................................
Total Federal Reporting and Recordkeeping Burden  ..............  ..............  ..............             110
 (Hours)........................................
----------------------------------------------------------------------------------------------------------------

    In accordance with 5 CFR 1320.8(d)(1), HUD is soliciting comments 
from members of the public and affected agencies concerning this 
collection of information to:
    (1) Evaluate whether the proposed collection of information is 
necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility;
    (2) Evaluate the accuracy of the agency's estimate of the burden of 
the proposed collection of information;
    (3) Enhance the quality, utility, and clarity of the information to 
be collected; and
    (4) Minimize the burden of the collection of information on those 
who are to respond; including through the use of appropriate automated 
collection techniques or other forms of information technology, e.g., 
permitting electronic submission of responses.
    Interested persons are invited to submit comments regarding the 
information collection requirements in this proposal. Comments must be 
received within sixty (60) days from the date of this proposal. 
Comments must refer to the proposal by name and docket number (FR-4556) 
and must be sent to:

Joseph F. Lackey, Jr., HUD Desk Officer, Office of Management and 
Budget, New Executive Office Building, Washington, DC 20503;
    and
Sheila Jones, Reports Liaison Officer, Office of the Assistant 
Secretary for Community Planning and Development, Department of 
Housing & Urban Development, 451 7th Street, SW, Room 7232, 
Washington, DC 20410.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4223). The Finding of No Significant Impact is 
available for public inspection between the hours of 7:30 a.m. and 5:30 
p.m. weekdays in the

[[Page 63760]]

Office of the Rules Docket Clerk, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW, Washington, DC.

Regulatory Flexibility Act

    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. There are no 
anti-competitive discriminatory aspects of the rule with regard to 
small entities and there are not any unusual procedures that would need 
to be complied with by small entities. Nevertheless, HUD is sensitive 
to the fact that the uniform application of requirements on entities of 
differing sizes often places a disproportionate burden on small 
businesses. HUD, therefore, is soliciting alternatives for compliance 
from small entities as to how these small entities might comply in a 
way that is less burdensome to them.

Federalism Impact

    Executive Order 13132 (entitled ``Federalism'') prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on State and local 
governments and is not required by statute, or the rule preempts State 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This proposed rule would not have 
federalism implications and would not impose substantial direct 
compliance costs on State and local governments or preempt State law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. This proposed rule does not impose 
any Federal mandates on any State, local, or tribal governments or the 
private sector within the meaning of Unfunded Mandates Reform Act of 
1995.

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, Regulatory Planning and Review. OMB determined 
that this rule is a ``significant regulatory action'' as defined in 
section 3(f) of the Order (although not an economically significant 
regulatory action under the Order). Any changes made to this rule as a 
result of that review are identified in the docket file, which is 
available for public inspection in the office of the Department's Rules 
Docket Clerk, Room 10276, 451 Seventh Street, SW, Washington, DC 20410-
0500.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) program numbers 
for the programs in covered by this proposed rule are as follows:

 Community Development Block Grant entitlement program--14.218;
 State CDBG program--14.228;
 HUD Small Cities CDBG program--14.219;
 Economic Development Initiative & Brownfields Economic 
Development Initiative programs--14.246
 Section 108 Loan Guarantee program--14.248
 Insular Areas--14.225.

List of Subjects in 24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grant, 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 discussed in the preamble, HUD 
proposes to amend 24 CFR part 570 as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

    1. The authority citation for part 570 continues to read as 
follows:

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

    2. Revise the third sentence of Sec. 570.200(e) to read as follows:


Sec. 570.200  General policies.

* * * * *
    (e) * * * A written determination is required for any activity 
carried out under the authority of Secs. 570.201(f), 570.201(i)(2), 
570.201(p), 570.201(q), 570.202(b)(3), 570.206(f), 570.209, 570.210, 
and 570.309.
* * * * *
    3. Add Sec. 570.210 to read as follows:


Sec. 570.210  Prohibition on use of assistance for employment 
relocation activities.

    (a) Prohibition. CDBG funds may not be used to directly assist a 
business, including a business expansion, in the relocation of a plant, 
facility, or operation from one labor market area (LMA) to another LMA 
if the relocation is likely to result in a significant loss of jobs in 
the LMA from which the relocation occurs.
    (b) Definitions. The following definitions apply to this section:
    (1) Directly assist. Directly assist means the provision of CDBG 
funds for activities pursuant to:
    (i) Sec. 570.203(b);
    (ii) Sec. 570.204(a)(2); or
    (iii) Secs. 570.201(a), 570.201(b), 570.201(c), 570.201(d), 
570.201(l), 570.203(a), or Sec. 570.204 when the grantee, subrecipient, 
or (in the case of an activity carried out pursuant to Sec. 570.204) a 
Community Based Development Organization enters into an agreement with 
a business to undertake one or more of these activities as a condition 
of the business relocating a facility, plant, or operation to the 
grantee's LMA.
    (2) Labor market area (LMA). An LMA is an area defined by the U.S. 
Bureau of Labor Statistics. An LMA is an economically integrated 
geographic area within which individuals can live and find employment 
within a reasonable distance or can readily change employment without 
changing their place of residence. Grantees must use employment data, 
as defined by the U.S. Bureau of Labor Statistics, for the LMA in which 
the affected business is currently located and from which current jobs 
may be lost.
    (3) Operation. A business operation includes any equipment, 
employment opportunity, production capacity or product line of the 
business.
    (4) Significant loss of jobs. A loss of jobs is significant if the 
number of jobs to be lost in the LMA in which the affected business is 
currently located is equal to or greater than one-tenth of one percent 
(.1%) of the total number of persons in the labor force. In all cases, 
however, a loss of 500 or more jobs constitutes a significant job loss.
    (c) Statement.--(1) General. A written agreement with a for-profit 
entity that receives direct assistance covered by this section must 
include a statement as to whether the assisted activity will result in 
the relocation of any industrial or commercial plant, facility, or 
operation from one LMA to another.
    (2) Required information. If applicable, the agreement shall 
identify the for-profit entity's:

[[Page 63761]]

    (i) Current plant(s), facility(ies), and operation(s);
    (ii) The number of jobs that currently exist at each plant, 
facility, and operation; and
    (iii) The number of jobs that will exist at each plant, facility, 
and operation once the assisted facility is fully operational.
    (3) Reimbursement of assistance. In the event that assistance 
results in a relocation prohibited under this section, the agreement 
shall provide for reimbursement to the recipient of any assistance 
(with interest) provided to, or expended on behalf of, the for-profit 
entity.
    (d) Assistance not covered by this section. This section does not 
apply to:
    (1) Relocation assistance. Relocation assistance required by the 
Uniform Assistance and Real Property Acquisition Policies Act (URA) of 
1970, as amended (42 U.S.C. 4601-4655);
    (2) Microenterprises. Assistance to microenterprises eligible under 
Sec. 570.201(o);
    (3) Start-up businesses. Assistance to a start-up business (i.e., a 
business that does not have an operating history before receiving CDBG 
assistance); and
    (4) Arms-length transactions. Assistance to a business that 
purchases business equipment, inventory, or other physical assets in an 
arms-length transaction, including the assets of an existing business, 
provided that the purchase does not result in the relocation of the 
sellers' business operation (including customer base or list, goodwill, 
product lines, or trade names) from one LMA to another LMA and produces 
a significant loss of jobs in the LMA from which the relocation occurs.
    4. Add Sec. 570.482(h) to read as follows:


Sec. 570.482  Eligible activities.

* * * * *
    (h) Prohibition on use of assistance for employment relocation 
activities--(1) Prohibition. CDBG funds may not be used to directly 
assist a business, including a business expansion, in the relocation of 
a plant, facility, or operation from one labor market area (LMA) to 
another LMA if the relocation is likely to result in a significant loss 
of jobs in the LMA from which the relocation occurs.
    (2) Definitions. The following definitions apply to the paragraph:
    (i) Directly assist. Directly assist means the provision of CDBG 
funds to a business pursuant to section 105(a)(15) or (17) of the 
Housing and Community Development Act of 1974, as amended. Direct 
assistance also includes assistance under section 105(a)(1), (2), (4), 
(7) and (14), of the Housing and Community Development Act of 1974, as 
amended, when the grantee enters into an agreement with a business to 
undertake one or more of these activities as a condition of the 
business relocating a facility, plant, or operation to the grantee's 
LMA.
    (ii) Labor market area (LMA). An LMA is an area defined by the U.S. 
Bureau of Labor Statistics. An LMA is an economically integrated 
geographic area within which individuals can live and find employment 
within a reasonable distance or can readily change employment without 
changing their place of residence. Grantees must use employment data, 
as defined by the Bureau of Labor Statistics, for the LMA in which the 
affected business is currently located and from which current jobs may 
be lost.
    (iii) Operation. A business operation includes any equipment, 
employment opportunity, production capacity or product line of the 
business.
    (iv) Significant loss of jobs. A loss of jobs is significant if the 
number of jobs to be lost in the LMA in which the affected business is 
currently located is equal to or greater than one-tenth of one percent 
(.1%) of the total number of persons in the labor force. In all cases, 
however, a loss of 500 or more jobs constitutes a significant job loss.
    (3) Statement--(i) General. A written agreement with a for-profit 
entity that receives direct assistance covered by this paragraph must 
include a statement as to whether the assisted activity will result in 
the relocation of any industrial or commercial plant, facility, or 
operation from one LMA to another.
    (ii) Required information. If applicable, the agreement shall 
identify the for-profit entity's:
    (A) Current plant(s), facility(ies), and operation(s);
    (B) The number of jobs that currently exist at each plant, 
facility, and operation; and
    (C) The number of jobs that will exist at each plant, facility, and 
operation once the assisted facility is fully operational.
    (iii) Reimbursement of assistance. In the event that assistance 
results in a relocation prohibited under this paragraph, the agreement 
shall provide for reimbursement to the recipient of any assistance 
(with interest) provided to, or expended on behalf of, the for-profit 
entity.
    (4) Assistance not covered by this paragraph. This paragraph does 
not apply to:
    (i) Relocation assistance. Relocation assistance required by the 
Uniform Assistance and Real Property Acquisition Policies Act (URA) of 
1970, as amended (42 U.S.C. 4601-4655);
    (ii) Microenterprises. Assistance to microenterprises eligible 
under Sec. 570.201(o);
    (iii) Start-up businesses. Assistance to a start-up business (i.e., 
a business that does not have an operating history before receiving 
CDBG assistance); and
    (iv) Arms-length transactions. Assistance to a business that 
purchases business equipment, inventory, or other physical assets in an 
arms-length transaction, including the assets of an existing business, 
provided that the purchase does not result in the relocation of the 
sellers' business operation (including customer base or list, goodwill, 
product lines, or trade names) from one LMA to another LMA and produces 
a significant loss of jobs in the LMA from which the relocation occurs.
    5. Revise Sec. 570.506(c) to read as follows:


Sec. 570.506  Records to be maintained.

* * * * *
    (c) Records that demonstrate that the recipient has made the 
determinations required as a condition of eligibility of certain 
activities, as prescribed in Secs. 570.201(f), 570.201(i)(2), 
570.201(p), 570.201(q), 570.202(b)(3), 570.206(f), 570.209, 570.210, 
and 570.309.
* * * * *

    Dated: September 29, 2000.
Cardell Cooper,
Assistant Secretary for Community Planning and Development.
[FR Doc. 00-27191 Filed 10-23-00; 8:45 am]
BILLING CODE 4210-29-P