[Federal Register Volume 69, Number 112 (Thursday, June 10, 2004)]
[Rules and Regulations]
[Pages 32774-32782]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-12954]



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Part IV





Department of Housing and Urban Development





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24 CFR Part 570



Community Development Block Grant Program; Small Cities and Insular 
Areas Programs; Interim Rule

  Federal Register / Vol. 69 , No. 112 / Thursday, June 10, 2004 / 
Rules and Regulations  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-4919-I-01]
RIN 2506-AC17


Community Development Block Grant Program; Small Cities and 
Insular Areas Programs

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

ACTION: Interim rule.

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SUMMARY: This interim rule establishes regulations to implement a 
statutory change moving Community Development Block Grant (CDBG) 
program assistance for insular areas from section 107 (Special Purpose 
Grants) to section 106 (Allocation and Distribution of Funds) of the 
Housing and Community Development Act of 1974. As in the past under the 
Special Purpose Grant program, HUD will continue to make grants to 
insular area jurisdictions under the Insular Areas CDBG program for 
activities which principally benefit low- and moderate-income persons, 
aid in the elimination of slums or blighting conditions, or meet other 
community development needs having a particular urgency. This interim 
rule codifies the amended statutory funding mechanism for allocation of 
CDBG funds to insular areas, includes the Insular Areas CDBG program in 
subpart F and streamlines that subpart by removing sections no longer 
necessary for the Small Cities CDBG program, identifies the process by 
which insular areas will receive and report on grant funds under 
section 106, enables insular areas to apply for the Section 108 Loan 
Guarantee program, and makes other conforming and technical amendments.

DATES: Effective Date: July 12, 2004.
    Comment Due Date: August 9, 2004.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, Room 
10276, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Washington, DC 20410-0500. Electronic comments may be submitted 
through Regulations.gov (http://www.regulations.gov). Communications 
should refer to the above docket number and title. Facsimile (FAX) 
comments are not acceptable. A copy of each communication submitted 
will be available for public inspection and copying between 8 a.m. and 
5 p.m. weekdays at the above address.

FOR FURTHER INFORMATION CONTACT: Jamie Spakow, Community Planning and 
Development Specialist, State and Small Cities Division, Office of 
Block Grant Assistance, Office of Community Planning and Development, 
Room 7184, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-7000, telephone (202) 708-1322 (this 
is not a toll-free number). Individuals with speech or hearing 
impairments may access this number through TTY by calling the toll-free 
Federal Information Relay Service at 800-877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    The CDBG program, authorized under the Housing and Community 
Development Act of 1974 (HCD Act) (42 U.S.C. 5301 et seq.), has 
provided discretionary assistance as special purpose grants to 
qualifying insular area jurisdictions since Fiscal Year (FY) 1982. 
Through the CDBG program, HUD allocates funds by formula among eligible 
state and local governments, and also makes funds available to insular 
areas, for activities which principally benefit low- and moderate-
income persons, aid in the elimination of slums or blighting 
conditions, or meet other community development needs having a 
particular urgency. HUD's regulations for the portions of the CDBG 
program administered by HUD's Office of Community Planning and 
Development are located in 24 CFR part 570.
    Title V of Public Law 108-186 (117 Stat. 2685, approved December 
16, 2003) (title V) amended title I of the HCD Act, moving the insular 
areas funding authorization from section 107(a) (42 U.S.C. 5307(a)) to 
section 106(a) (42 U.S.C. 5306(a)). This revision identified a specific 
portion of the CDBG allocation for insular areas that is separate from 
the distribution for special purpose grants as well as from the 
entitlement and state formula distribution. The change provides the 
insular areas of Guam, the Northern Mariana Islands, the Virgin 
Islands, and American Samoa with greater assurance of annual CDBG 
program funding.
    With respect to the allocation of funds, title V establishes total 
ongoing annual insular areas funding at a level of $7,000,000, 
consistent with the level of funding received by insular areas while 
under the special purpose grant section of the HCD Act. Title V 
provides for the distribution of amounts to insular areas on the basis 
of the ratio of the population of each insular area to the population 
of all insular areas, which is also consistent with the past basis for 
distribution under the special purpose grant section. Title V also 
provides HUD with the authority to include other statistical criteria 
in the distribution formula as additional data become available from 
the Bureau of the Census, if such distribution criteria are contained 
in a regulation promulgated by HUD after notice and public comment. 
Finally, the greater assurance of continued funding provided by 
inclusion under section 106 of the HCD Act and the placement of the 
Insular Areas CDBG regulations in subpart F provide insular areas with 
the opportunity to apply for loan guarantees as described in section 
108 of the HCD Act and subpart M of 24 CFR 570.
    Because the Consolidated Appropriations Act, 2004 (Public Law 108-
199, approved January 23, 2004) made funds available to insular areas 
under section 107 rather than section 106, the regulations at 24 CFR 
570.405 applicable to insular areas grants under section 107 will 
govern FY2004 insular areas funding. The regulations added by this rule 
to govern insular areas funding under section 106 will apply to funds 
made available under section 106.

II. This Interim Rule

    This interim rule amends HUD's part 570 regulations for the CDBG 
program to establish the policies and procedures governing the Insular 
Areas CDBG program consistent with section 106 of the HCD Act. The 
Insular Areas CDBG regulations that will govern funding under section 
106 are added to subpart F (renamed ``Small Cities and Insular Areas 
Programs'' by this rule) of 24 CFR part 570. This interim rule codifies 
in HUD's regulations the statutory basis for allocation of CDBG funding 
to insular area jurisdictions under section 106, identifies eligible 
activities and costs, and makes other conforming and technical 
amendments.
    To the greatest extent possible, this interim rule applies existing 
CDBG program regulatory requirements to Insular Areas CDBG awards under 
section 106. This interim rule enables insular areas to apply for the 
Section 108 Loan Guarantee program. This rule also streamlines subpart 
F by removing sections no longer necessary for the Small Cities CDBG 
program and identifies the process by which insular areas will receive 
and report on grant funds under section 106.
    The following discussion provides an overview of the specific 
regulatory amendments made by this interim rule:

A. Purpose and Primary Objective

    This interim rule expands the scope of subpart F, which formerly 
contained

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only regulations applicable to the HUD-administered Small Cities CDBG 
program. Subpart F now contains regulations applicable to two types of 
nonentitlement area CDBG funds: (1) The HUD-administered Small Cities 
program, and (2) the Insular Areas program. Conforming amendments are 
made to Sec.  570.1 in subpart A and Sec.  570.420 in subpart F to 
reflect this change. Regulations pertaining to the third type of 
nonentitlement CDBG program, the state-administered nonentitlement 
program, remain separate under Subpart I without revision.

B. Definitions

    This interim rule codifies the definitions that apply to the 
Insular Areas CDBG program in Sec.  570.3, which contains the 
definitions that also apply to other components of the CDBG program. 
The interim rule also makes technical corrections to Sec.  570.3 to 
remove terms related to the Indian CDBG program, as this program is now 
administered by HUD's Office of Public and Indian Housing and is 
codified separately at 24 CFR part 1003. The specific changes to Sec.  
570.3 are as follows:
    1. Insular area. Given enactment of title V and authorization of 
Insular Area CDBG funding under section 106 of the HCD Act, HUD is 
codifying the statutory definition of ``insular area'' in Sec.  570.3. 
Accordingly, this interim rule provides that the term ``insular area'' 
has the same meaning as provided in section 102(a)(24) of the Act. The 
term ``insular area'' means each of Guam, the Northern Mariana Islands, 
the Virgin Islands, and American Samoa.
    2. Applicant. This interim rule makes a technical correction by 
removing the reference to Indian tribes as eligible applicants for the 
CDBG program administered through HUD's Office of Community Planning 
and Development and codified at 24 CFR part 570. The Indian CDBG 
program is separately codified at 24 CFR part 1003 and administered by 
HUD's Office of Public and Indian Housing. Indian tribes are no longer 
eligible applicants under the part CDBG program codified at 24 CFR part 
570. Eligible applicants for CDBG under part 570 now include only 
states or units of general local government (including insular areas) 
making applications pursuant to the provisions of subparts D, E, F, G, 
I, or M of 24 CFR part 570.
    3. Indian tribe. The part 570 definition of Indian tribe is 
removed, as this definition is no longer relevant to the CDBG program 
administered by the Office of Community Planning and Development.

C. Allocation of Funds

    This interim rule makes a conforming change to Sec.  570.4(a) to 
include a reference to the allocation of appropriated funds to insular 
areas as being governed by the policies and procedures described in 
sections 106 and 107 of the HCD Act, as appropriate.

D. General Policies

    Section 570.200 of subpart C (applicable to all categories of the 
part 570 CDBG program, except the state-administered program under 
subpart I) has been revised to conform the applicability and 
implementation of the national and primary objectives under section 106 
of the HCD Act for the Insular Areas program. Conforming changes are 
made to Sec.  570.200(a)(2) and (a)(3) to specifically include insular 
area CDBG recipients. The change to Sec.  570.200(a)(3) allows these 
recipients to determine compliance with the 70 percent low- and 
moderate-income requirement over a period of up to three years for 
grants funded under section 106 of the HCD Act. The option of choosing 
a one- to three-year compliance measurement period in recipient 
certifications is already available to other recipients under section 
106. Because Sec.  570.200(a)(3) specifies that this flexibility 
applies to grants under section 106, insular area grantees must 
continue to determine compliance for funds received under section 107 
of the HCD Act on an annual basis.

E. Special Purpose Grants

    Until funds made available under section 107 are fully expended and 
these grants are closed out, insular area jurisdictions must continue 
to comply with the special purpose grant requirements of Sec.  570.400, 
Sec.  570.405, and other sections of part 570 applicable to the program 
at time of funding, as well as the terms of the grant agreements for 
those grants, and to implement their activities as outlined in each 
insular application and approved by HUD. A conforming change is made to 
Sec.  570.420(a) to state that fund reservations for insular areas 
under section 107 shall remain governed by the policies and procedures 
described in section 107(a)(1)(A) of the Act and Sec. Sec.  570.400 and 
570.405.

F. Subpart F--General Section

    Subpart F formerly referred only to the Small Cities program. This 
interim rule revises the General section of subpart F at Sec.  570.420 
to include the Insular Areas program and to clarify the applicability 
of the remaining subpart F sections to the Small Cities and Insular 
Areas CDBG programs.
    1. Administration of nonentitlement CDBG funds. Introductory 
language at Sec.  570.420(a) has been revised to indicate that two 
categories of nonentitlement CDBG programs are now covered in this 
subpart, the Small Cities and Insular Areas programs. The description 
of the Small Cities program that originally composed the entire text of 
paragraph (a) has been redesignated as Sec.  570.420(a)(1), and Sec.  
570.420(a)(2) has been added to describe the Insular Areas program in 
accordance with the statutory change.
    2. Scope and applicability. This interim rule simplifies and 
clarifies the applicability of the remaining sections of subpart F, 
while also incorporating regulations to administer the Insular Areas 
program. References to regulatory sections applicable to the Small 
Cities program are further delineated as applicable only to New York, 
Hawaii, or small city grant recipients from either state. A new Sec.  
570.420(b)(2) has been added to refer to sections applicable to the 
Insular Areas program, including the treatment of grants under section 
107. The previous Sec.  570.420(b)(2) (except for the first sentence, 
which has been redesignated as Sec.  570.420(f)(1), as described below) 
has been redesignated as Sec.  570.420(b)(3), and outlines the 
applicability of the other subparts of part 570 to the Small Cities and 
Insular Areas programs. A new reference about the applicability of 
subpart M, loan guarantees, has been added. This reference supports the 
continued ability to apply for section 108 loan guarantees under the 
Small Cities program, and provides this option for insular area 
grantees for the first time.
    3. Public notification requirements. Section 570.420(c)(3) has been 
added to indicate that Section 102 of the HUD Reform Act of 1989 (42 
U.S.C. 3545) is not applicable to the Insular Areas CDBG program under 
section 106, since these funds are not distributed by HUD on a 
competitive basis.
    4. Abbreviated consolidated plan. A conforming revision to Sec.  
570.420(d) includes the Insular Areas program under section 106 in the 
requirement to include a certification of consistency of proposed 
housing activities with an applicant's consolidated plan.
    5. National and primary objectives. Consistent with the conforming 
change made in Sec.  570.200(a)(3), discussed above, Sec.  
570.420(e)(3) has been added to provide the options that Insular Areas 
grantees under section 106 will have for measuring compliance with the 
primary

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objective of 70 percent benefit to low- and moderate-income persons. 
Under the Special Purpose Grant program pursuant to section 107, 
insular area recipients were required to measure compliance based on 
each individual funding award. For funds made available under section 
106, insular area jurisdictions will have the same flexibility afforded 
to entitlement and state grantees of measuring compliance on a one- to 
three-year basis. In the certifications to their consolidated plan, 
insular area jurisdictions must specify the measurement period to be 
used.
    6. Allocation of Funds. This rule redesignates the first sentence 
of Sec.  570.420(b)(2), which describes the Small Cities allocation 
method, as Sec.  570.420(f)(1) and adds the allocation method for the 
Insular Areas program under section 106 as Sec.  570.420(f)(2).

G. Obsolete Small Cities Regulations

    Under the Small Cities CDBG program, HUD directly administers 
allocations for nonentitlement areas in states that have not elected to 
administer their own nonentitlement programs. In recent years, HUD has 
administered the Small Cities program in only two states--New York and 
Hawaii. The State of New York currently administers its own 
nonentitlement funding under the State CDBG program, beginning with 
FY2000 funding. The Consolidated Appropriations Act, 2004 contained 
provisions to fund directly the three county recipients of the Hawaii 
Small Cities program as urban counties under the Entitlement CDBG 
program, starting in FY2005, if the State of Hawaii does not elect to 
administer the State CDBG program. HUD intends to separately issue 
revised regulations to implement the Hawaii program's change in status. 
In order to simplify subpart F, along with the incorporation of new 
Insular Areas program regulations, this interim rule removes the 
following regulatory sections of the Small Cities Program that are no 
longer required (because the State of New York now administers its own 
program): Sec.  570.422--Applications from joint applicants; Sec.  
570.423--Application for the HUD-administered New York Small Cities 
Grants; Sec.  570.424--Grants for imminent threats to public health and 
safety (under the New York Small Cities program), Sec.  570.425--HUD 
review and actions on applications for New York State applicants, and 
Sec.  570.428--Reallocated (Small Cities) funds.
    This rule also makes a conforming change to remove from 24 CFR 
570.206(f) the reference to Sec.  570.433, a section that was 
previously removed from the subpart F CDBG program regulations.

H. Application Requirements for Insular Area Grants Funded Under 
Section 106

    Subpart F of this interim rule establishes CDBG grant application 
requirements under section 106 for use by insular areas.
    1. Consolidated plan. In Sec.  570.440, this rule provides the 
options for insular area jurisdictions to prepare either an abbreviated 
consolidated plan following the requirements of 24 CFR 91.235, or a 
full consolidated plan under part 91 following the requirements of 
subparts A--General, B--Citizen Participation and Consultation, C--
Local Governments: Contents of Consolidated Plan, and F--Other General 
Requirements. Most insular areas have submitted information in the past 
under section 107 that is similar to an abbreviated consolidated plan 
under section 106 as part of the annual application for funding under 
the Special Purpose Grant program. Section 570.440 also uses the 
section 106 terminology of proposed and final ``statements'' rather 
than ``applications'' to recognize the recent change in Insular Areas 
CDBG program status under title V. HUD specifically invites comments on 
the issue of whether future regulatory revisions should require insular 
areas funded under section 106 to complete a full consolidated plan.
    2. Certifications. This interim rule specifies the required Insular 
Areas CDBG certifications at Sec.  570.440(e), consistent with those 
already required in a consolidated plan.
    3. Submission requirement. Consistent with the existing 
consolidated plan requirements, Sec.  570.440(d) of this interim rule 
provides insular area jurisdictions with additional flexibility in 
determining their program year under section 106 and requires 
submission of final statements at least 45 days before the start of the 
program year. Under the Special Purpose Grant program pursuant to 
section 107, all insular areas use October 1 as their program year 
start date. October 1 is the start of the federal fiscal year. October 
1, 2004, will continue to be the program year start date for FY2004 
funds, which are being made available under section 107. This rule 
allows insular area jurisdictions to change their program year start 
dates in future years under section 106. HUD does not recommend 
choosing a program year start date during the six months following the 
beginning of a federal fiscal year, as there may be delay in a 
jurisdiction's ability to access funds. For example, choosing a FY2005 
program year start date of January 1, 2005 might result in the 
jurisdiction's inability to access federal fiscal year 2005 funds until 
several months into that program year because of the time required to 
make the funds available to the jurisdiction. Similarly, a jurisdiction 
should also consider the impact of program year timing issues relative 
to 24 CFR 91.10 and 91.15 on its operations under full consolidated 
plan requirements.
    4. HUD actions. This interim rule specifies that HUD will notify 
insular area jurisdictions promptly of actions taken with regard to a 
final statement submitted for funding under section 106, and describes 
the conditions necessary for approval at Sec.  570.440(f). This section 
is consistent with existing requirements applicable to nonentitlement 
grantees in subpart F and in subpart O of part 570.
    5. Program amendments. Section 570.440(j) of this rule outlines an 
insular area jurisdiction's responsibility for including policies and 
procedures for program amendments in its citizen participation plan and 
HUD's minimum requirements in this area, including a public comment 
period for substantial amendments, consistent with the consolidated 
plan requirements at Sec.  91.105. Citizen participation requirements 
are further described in this interim rule at Sec.  570.441.
    6. Other flexibilities and requirements. At Sec.  570.440, this 
interim rule changes, for purposes of funding under section 106, the 
process for an insular area jurisdiction to be reimbursed for preaward 
costs. Insular areas will be subject to the requirements of Sec.  
570.200(h) for costs incurred prior to its program year start date. 
That section prescribes a limit of the greater of 25 percent of that 
year's grant or $300,000 for preaward costs that meet the other 
requirements of this section, including consolidated plan, 
environmental, and citizen participation requirements. Under the 
Special Purpose Grant program pursuant to section 107 at Sec.  570.405, 
preaward costs require specific HUD approval at the application level 
before they can be incurred. At Sec.  570.440(i), an insular area under 
section 106 has the additional flexibility to incorporate float funding 
in its program, the same option available to entitlements. This option 
is possible as a result of the greater assurance of funding provided by 
inclusion under section 106 of the HCD Act. These changes are 
applicable only to awards under section 106.

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I. Citizen Participation

    At Sec.  570.441, the interim rule requires, for funding under 
section 106, insular area jurisdictions to develop and follow detailed 
citizen participation plans. There are two primary options available to 
insular area jurisdictions. Jurisdictions preparing abbreviated 
consolidated plans in accordance with Sec.  91.235 must follow the 
citizen participation requirements outlined in Sec.  570.441, which are 
consistent with the nonentitlement area citizen participation 
requirements at Sec.  570.431. Jurisdictions preparing full 
consolidated plans must follow the citizen participation requirements 
detailed in the consolidated plan regulations at 24 CFR 91.100 and 
91.105. There is one notable exception based in statute to the latter 
requirement--an insular area jurisdiction does not have to comply with 
the Sec.  91.100(a)(4) requirement for consultation with adjacent units 
of general local government. Adjacent units of general local government 
outside of the insular area itself are not relevant because such other 
jurisdictions are not contiguous with the insular areas.
    HUD notes that insular areas intending to make applications for the 
Section 108 Loan Guarantee program must ensure that they follow the 
presubmission and citizen participation requirements outlined in the 
loan guarantee regulations at Sec.  570.704.

J. Subpart M Loan Guarantees

    Some minor revisions to the Section 108 Loan Guarantee program 
regulations at Sec. Sec.  570.704(a)(1)(v) and 570.705(a)(2)(iii) are 
necessary to clarify the ability of insular areas jurisdictions to 
apply for loan guarantees. Section 570.704(a)(1)(v) is amended to 
permit a ``nonentitlement public entity,'' a term that includes insular 
areas, to submit loan guarantee and grant applications simultaneously. 
In Sec.  570.705(a)(2)(iii), the words ``in an insular area'' and 
reference to the new insular area regulations at Sec.  570.440 are 
added to allow each insular area jurisdiction to have an unpaid balance 
of loan guarantees up to five times the amount of its most recent 
grant. HUD notes that while insular area jurisdictions may now apply 
for the Section 108 Loan Guarantee program, the approval of insular 
area applications (as with any other type of application) will be 
subject to all of the program's underwriting and other criteria.

K. Timeliness

    HUD will establish timeliness standards for the Insular Areas 
program under section 106 by regulation at a later date. Until then, 
insular area jurisdictions that will be funded under section 106 are 
encouraged to adopt and achieve the timeliness standards for section 
570.902(a) currently applicable to entitlement jurisdictions. In the 
meantime, HUD specifically invites comments on the idea of adopting the 
Sec.  570.902(a) standards as the Insular Areas program timeliness 
standards under section 106.

III. Justification for Interim Rulemaking

    HUD generally publishes a rule for public comment before issuing a 
rule for effect, in accordance with its own regulations on rulemaking 
in 24 CFR part 10. However, part 10 provides for exceptions to the 
general rule if the agency finds good cause to omit advance notice and 
public participation. The good cause requirement is satisfied when 
prior public procedure is ``impractical, unnecessary, or contrary to 
the public interest'' (24 CFR 10.1). For the following reasons, HUD has 
determined that it would be unnecessary to delay the effectiveness of 
this rule in order to solicit prior public comments.
    This interim rule merely codifies in HUD's regulations the 
statutory policies and procedures mandated by title V, which transfer 
the Insular Areas program from eligibility under section 107 of the HCD 
Act to eligibility under section 106 of the HCD Act, and makes existing 
sections of 24 CFR parts 91 and 570 that apply to section 106 
nonentitlement grants also applicable to the Insular Areas program. 
Accordingly, the interim rule only changes the administration of the 
Insular Areas program from being subject to regulatory requirements 
relevant to section 107 to being subject to existing regulatory 
requirements relevant to section 106, consistent with the title V 
statutory amendments. In addition, section 501(g) of title V requires 
HUD to issue regulations carrying out the amendments made by title V to 
take effect not later than the expiration of the 90-day period 
beginning on the date of the enactment of Public Law 108-186.
    Although HUD believes that good cause exists to publish this rule 
for effect without prior public comment, HUD recognizes the value of 
public comment in the development of its regulations. HUD has, 
therefore, issued these regulations on an interim basis and has 
provided the public with a 60-day comment period. HUD welcomes comments 
on the regulatory amendments made by this interim rule, as well as 
advance comments on the adoption of full consolidated planning and 
reporting requirements and timeliness standards for insular area CDBG 
grantees as discussed in more detail under the applicable sections of 
this preamble. The public comments will be addressed in the final rule 
or, if necessary, in a new proposed rule.

IV. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866 (entitled ``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, as provided under section 3(f)(1) of the 
order). Any changes made to the rule subsequent to its submission to 
OMB are identified in the docket file, which is available for public 
inspection in the Regulations Division, Room 10276, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Washington, DC 20410-0500.

Unfunded Mandates Reform Act

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

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this interim rule and in so 
doing certifies that this rule will not have a significant

[[Page 32778]]

economic impact on a substantial number of small entities for the 
following reasons. This rule only codifies in HUD's regulations 
statutory policies and procedures that transfer the Insular Areas 
program from eligibility under section 107 of the HCD Act to 
eligibility under section 106 of the HCD Act and makes existing 
sections of 24 CFR parts 91 and 570 that apply to section 106 
nonentitlement grants also applicable to the Insular Areas program. As 
such, the rule does not significantly differ from the current status in 
terms of the impact on the number of entities, the amount of funding, 
or the governing requirements applicable.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

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. 4332(2)(C)). The Finding of No Significant 
Impact is available for public inspection between the hours of 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Room 10276, Department of Housing and Urban Development, 451 
Seventh Street, SW., Washington, DC 20410-0500.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the CDBG 
Small Cities Program is 14.219.

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.


0
Accordingly, HUD amends 24 CFR parts 570 as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

0
1. The authority citation for 24 CFR part 570 continues to read as 
follows:

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


0
2. In Sec.  570.1, revise paragraph (a)(2) to read as follows:


Sec.  570.1  Purpose and primary objective.

    (a) * * *
    (2) Nonentitlement Funds: HUD-administered Small Cities and Insular 
Area programs (subpart F);
* * * * *
0
3. In Sec.  570.3, revise the definition of applicant, remove the 
definition of Indian tribe, and add, in alphabetical order, the 
definition of insular area, to read as follows:


Sec.  570.3  Definitions.

* * * * *
    Applicant means a State or unit of general local government that 
makes application pursuant to the provisions of subpart E, F, G or M.
* * * * *
    Insular area shall have the meaning provided in section 102(a)(24) 
of the Act.
* * * * *

0
4. In Sec.  570.4, revise paragraph (a) to read as follows:


Sec.  570.4  Allocation of funds.

    (a) The determination of eligibility of units of general local 
government to receive entitlement grants, the entitlement amounts, the 
allocation of appropriated funds to States for use in nonentitlement 
areas, the reallocation of funds, the allocation of appropriated funds 
to insular areas, and the allocation of appropriated funds for 
discretionary grants under the Secretary's Fund shall be governed by 
the policies and procedures described in sections 106 and 107 of the 
Act, as appropriate.
* * * * *

0
5. In Sec.  570.200, revise paragraph (a)(2) and the introductory 
paragraph of (a)(3) to read as follows:


Sec.  570.200  General policies.

    (a) * * *
    (2) Compliance with national objectives. Grant recipients under the 
Entitlement and HUD-administered Small Cities programs and recipients 
of insular area funds under section 106 of the Act must certify that 
their projected use of funds has been developed so as to give maximum 
feasible priority to activities which will carry out one of the 
national objectives of benefit to low- and moderate-income families or 
aid in the prevention or elimination of slums or blight. The projected 
use of funds may also include activities that the recipient certifies 
are 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. Consistent 
with the foregoing, each recipient under the Entitlement or HUD-
administered Small Cities programs, and each recipient of insular area 
funds under section 106 of the Act must ensure and maintain evidence 
that each of its activities assisted with CDBG funds meets one of the 
three national objectives as contained in its certification. Criteria 
for determining whether an activity addresses one or more of these 
objectives are found in Sec.  570.208.
    (3) Compliance with the primary objective. The primary objective of 
the Act is described in section 101(c) of the Act. Consistent with this 
objective, Entitlement recipients, recipients of the HUD-administered 
Small Cities program in Hawaii, and recipients of insular area funds 
under section 106 of the Act must ensure that over a period of time 
specified in their certification not to exceed three years, not less 
than 70 percent of the aggregate of CDBG fund expenditures shall be for 
activities meeting the criteria under Sec.  570.208(a) or under Sec.  
570.208(d)(5) or (6) for benefiting low- and moderate-income persons. 
For grants under section 107 of the Act, insular area recipients must 
meet this requirement for each separate grant. See Sec.  570.420(e)(3) 
for additional discussion of the primary objective requirement for 
insular areas funded under section 106 of the Act. The requirements for 
the HUD-administered Small Cities program in New York are at Sec.  
570.420(e)(2). Additional requirements for the HUD-administered Small 
Cities program in Hawaii are at Sec.  570.430(e). In determining the 
percentage of funds expended for such activities:
* * * * *

0
6. In Sec.  570.206, revise the first sentence of paragraph (f) to read 
as follows:


Sec.  570.206  Program administrative costs.

* * * * *
    (f) Submission of applications for federal programs. Preparation of 
documents required for submission to HUD to receive funds under the 
CDBG and UDAG programs. * * *
* * * * *

[[Page 32779]]


0
7. Revise the heading of subpart F in part 570 to read as follows:

Subpart F--Small Cities and Insular Areas Programs

0
8. Revise Sec.  570.420 to read as follows:


Sec.  570.420  General.

    (a) Administration of nonentitlement CDBG funds by HUD or Insular 
Areas--(1) Small cities. The Act permits each State to elect to 
administer all aspects of the 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.
    (2) Insular areas. Title V of Public Law 108-186 amended the Act to 
move the insular areas funding authorization from sections 107(a) and 
(b) to section 106(a). This revision identified a specific portion of 
the CDBG allocation for insular areas that is separate from the 
distribution for special purpose grants, as well as from the 
Entitlement and State formula distribution. The insular areas of Guam, 
the Northern Mariana Islands, the Virgin Islands, and American Samoa 
are permitted to administer all aspects of their Community Development 
Block Grant (CDBG) program under section 106 of the Act in accordance 
with their final statement as further described at Sec.  570.440.
    (b) Scope and applicability. (1) This subpart describes the 
policies and procedures of the Small Cities Program that 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 (for grants prior to FY2000) and Hawaii. The small cities 
portion of this subpart principally addresses the requirements for New 
York in Sec. Sec.  570.421, 570.426, 570.427, and 570.431. Sections 
570.429 and 570.430 identify special procedures applicable to Hawaii. 
Section 570.432 is applicable to both New York and Hawaii.
    (2) This subpart also describes the policies and procedures 
governing community development block grants to insular areas under 
section 106 of the Act. Sections 570.440 and 570.441 identify 
procedures applicable to the Insular Areas program under section 106 of 
the Act. Fund reservations for insular areas under section 107 of the 
Act shall remain governed by the policies and procedures described in 
section 107(a)(1)(A) of the Act and Sec. Sec.  570.400 and 570.405 of 
this part.
    (3) The policies and procedures set forth in the following 
identified subparts of this part apply to the HUD-administered Small 
Cities and Insular Areas programs, 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;
    (v) Subpart M--Loan Guarantees; and
    (vi) 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 
statute, 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 
because they are not competitive grants.
    (2) The Hawaii HUD-administered Small Cities program is not subject 
to section 102 because the funds are not distributed by HUD on a 
competitive basis.
    (3) The Insular Areas program under section 106 of the Act is not 
subject to section 102 because the funds are not distributed by HUD on 
a competitive basis.
    (d) Abbreviated consolidated plan. Applications for the HUD-
administered Small Cities Program and the Insular Areas program under 
section 106 of the Act that 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 and the Insular Areas program under 
section 106 of the Act must meet one of the following national 
objectives as defined under the criteria in Sec.  570.208:
    (i) Benefit low- and moderate-income families;
    (ii) Aid in the prevention or elimination of slums or blight; or
    (iii) Be an activity that 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 and 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 Sec.  
570.208(a) or of Sec.  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 three 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 Sec.  570.200(a)(3)(i), (iii), (iv), and 
(v) shall apply.
    (3) In addition to the objectives described in paragraph (e)(1) of 
this section, grants made through the Insular Areas program shall also 
comply with the primary objective of 70 percent benefit to low- and 
moderate-income persons. Insular area recipients must meet this 
requirement for each separate grant under section 107 of the Act. For 
grants made under section 106 of the Act, insular area recipients must 
ensure that over a period of time specified in their certifications not 
to exceed three years, not less than 70 percent of the aggregate of 
CDBG fund expenditures shall be for low- and moderate-income activities 
meeting the criteria under Sec.  570.208(a) or under Sec.  
570.208(d)(5) or (6). See also Sec.  570.200(a)(3) for further 
discussion of the primary objective.

[[Page 32780]]

    (f) Allocation of funds--(1) Small cities. The allocation of 
formula CDBG funds for use in nonentitlement areas of Hawaii is as 
provided in subpart A of this part.
    (2) Insular areas. The allocation of appropriated funds for insular 
areas under section 106 of the Act shall be governed by the policies 
and procedures described in section 106(a)(2) of the Act and Sec. Sec.  
570.440 and 570.441 of this subpart. The annual appropriations 
described in this section shall be distributed to insular areas on the 
basis of the ratio of the population of each insular area to the 
population of all insular areas.


Sec.  570.422  [Removed]

0
9. Remove Sec.  570.422.


Sec.  570.423  [Removed]

0
10. Remove Sec.  570.423.


Sec.  570.424  [Removed]

0
11. Remove Sec.  570.424.


Sec.  570.425  [Removed]

0
12. Remove Sec.  570.425.


Sec.  570.428  [Removed]

0
13. Remove Sec.  570.428.

0
14. Add a new Sec.  570.440 in subpart F to read as follows:


Sec.  570.440  Application requirements for insular area grants funded 
under section 106.

    (a) Applicability. The requirements of this section apply to 
insular grants funded under section 106 of the Act. An insular area 
jurisdiction may choose to prepare program statements following either:
    (1) The abbreviated consolidated plan procedures described in this 
subpart and in 24 CFR 91.235; or
    (2) The complete consolidated plan procedures applicable to local 
governments, discussed at 24 CFR 91.200 through 91.230.
    (b) Proposed statement. An insular area jurisdiction shall prepare 
and publish a proposed statement and comply with the citizen 
participation requirements described in Sec.  570.441, if it submits an 
abbreviated consolidated plan under 24 CFR 91.235. The jurisdiction 
shall follow the citizen participation requirements of 24 CFR 91.105 
and 91.100 (with the exception of Sec.  91.100(a)(4)), if it submits a 
complete consolidated plan.
    (c) Final statement. The insular area jurisdiction shall submit to 
HUD a final statement describing its community development objectives 
and activities. The statement also must include a priority nonhousing 
community development plan in accordance with 24 CFR 91.235. This final 
statement shall be submitted, together with the required 
certifications, to the appropriate field office in a form prescribed by 
HUD.
    (d) Submission requirement. Each insular area jurisdiction shall 
submit its final statement to HUD no later than 45 days before the 
start of its program year. Each jurisdiction may choose the start date 
for the annual period of its program year that most closely fits its 
own needs. HUD may grant an extension of the submission deadline for 
good cause.
    (e) Certifications. The insular area jurisdiction's final statement 
must be accompanied by appropriate certifications as further described 
under 24 CFR 91.225. The jurisdiction should submit all general 
certifications, as well as all program certifications for each program 
from which it receives funding, if it submits a complete consolidated 
plan. For insular area jurisdictions receiving CDBG funds under an 
abbreviated consolidated plan, these certifications shall include at a 
minimum:
    (1) The following general certifications described at Sec.  
91.225(a) of this title: Affirmatively furthering fair housing; anti-
displacement and relocation plan; drug-free workplace; anti-lobbying; 
authority of jurisdiction; consistency with plan; acquisition and 
relocation; and Section 3.
    (2) The following CDBG certifications described at Sec.  91.225(b) 
of this title: Citizen participation; community development plan; 
following a plan; use of funds; excessive force; compliance with anti-
discrimination laws; compliance with lead-based paint procedures; and 
compliance with laws.
    (f) HUD action on final statement. Following the review of the 
statement, HUD will promptly notify each jurisdiction of the action 
taken with regard to its statement. HUD will approve a grant if the 
jurisdiction's submissions have been made and approved in accordance 
with 24 CFR part 91, and if the certifications required in such 
submissions are satisfactory to HUD. The certifications will be 
satisfactory to HUD for this purpose, unless HUD determines pursuant to 
subpart O of this part that the jurisdiction has not complied with the 
requirements of this part, has failed to carry out its consolidated 
plan (or abbreviated consolidated plan) as provided under Sec.  
570.903, or has determined that there is evidence, not directly 
involving the jurisdiction's past performance under this program, that 
tends to challenge in a substantial manner the jurisdiction's 
certification of future performance. If HUD makes any such 
determination, however, further assurances may be required to be 
submitted by the jurisdiction as HUD may deem warranted or necessary to 
find the jurisdiction's certification satisfactory.
    (g) Reimbursement for pre-award costs. Insular area jurisdictions 
may request reimbursement for pre-award costs in accordance with Sec.  
570.200(h).
    (h) Float funding. An insular area jurisdiction may use undisbursed 
funds in the line of credit and its CDBG program account that are 
budgeted in final statements or action plans for one or more activities 
that do not need the funds immediately, subject to the limitations 
described in Sec.  570.301(b).
    (i) Program amendments. (1) The insular area jurisdiction's citizen 
participation plan (see Sec.  570.441) must specify the criteria the 
jurisdiction will use for determining what changes in the 
jurisdiction's planned or actual activities will constitute a 
substantial amendment to its final statement. It must include changes 
in the use of CDBG funds from one eligible activity to another among 
the changes that qualify as a substantial amendment.
    (2) The citizen participation plan must provide citizens with 
reasonable notice and an opportunity to comment on substantial 
amendments. The citizen participation plan must state how reasonable 
notice and an opportunity to comment will be given, as well as provide 
a period of not less than 30 days to receive comments on the 
substantial amendment before the amendment is implemented.
    (3) The citizen participation plan shall require the jurisdiction 
to consider comments or views of citizens received in writing, or 
orally at public hearings, if any, in preparing the substantial 
amendment of its statement. A summary of comments or views not accepted 
and the reasons for non-acceptance shall be attached to the substantial 
amendment.
    (4) Any program amendment, regardless of whether it is considered 
to be substantial, must be fully documented in the jurisdiction's 
records.
    (j) Performance reports. Each insular area jurisdiction must submit 
annual performance reports in accordance with 24 CFR 91.520.

0
15. Add a new Sec.  570.441 in subpart F to read as follows:


Sec.  570.441  Citizen participation--insular areas.

    (a) General. An insular area jurisdiction submitting an abbreviated 
consolidated plan under 24 CFR 91.235 shall comply with the citizen

[[Page 32781]]

participation requirements described in this section. An insular area 
jurisdiction submitting a complete consolidated plan in accordance with 
24 CFR 91.200 through 91.230 shall follow the citizen participation 
requirements of Sec.  91.100 and Sec.  91.105, except for Sec.  
91.100(a)(4). For funding under section 106 of the Act, these 
requirements are applicable to all aspects of the Insular Areas 
program, including the preparation of the proposed statement and final 
statements as described in Sec.  570.440. The requirements for citizen 
participation do not restrict the responsibility or authority of the 
jurisdiction for the development and execution of its community 
development program.
    (b) Citizen participation plan. The insular area jurisdiction must 
develop and follow a detailed citizen participation plan and must make 
the plan public. The plan must be completed and available before the 
statement for assistance is submitted to HUD, and the jurisdiction must 
certify that it is following the plan. The plan must set forth the 
jurisdiction'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 jurisdiction'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 jurisdiction plans to 
make available (or to require others to make available) to persons 
displaced by CDBG-funded activities, even if the jurisdiction 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 jurisdiction. 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 jurisdiction 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 jurisdiction's policies and procedures must provide for 
timely written answers to written complaints and grievances within 15 
working days after the receipt of the complaint, where practicable; and
    (6) Encouraging citizen participation, particularly by low- and 
moderate-income persons who reside in areas in which CDBG funds are 
proposed to be used.
    (c) Publication of proposed statement. (1) The insular area 
jurisdiction shall publish a proposed statement consisting of the 
proposed community development activities and community development 
objectives in order to afford affected citizens an opportunity to:
    (i) Examine the statement's contents to determine the degree to 
which they may be affected;
    (ii) Submit comments on the proposed statement; and
    (iii) Submit comments on the performance of the jurisdiction.
    (2) The requirement for publishing in paragraph (c)(1) of this 
section may be met by publishing a summary of the proposed statement in 
one or more newspapers of general circulation and by making copies of 
the proposed statement available at libraries, government offices, and 
public places. The summary must describe the contents and purpose of 
the proposed statement and must include a list of the locations where 
copies of the entire proposed statement may be examined.
    (d) Preparation of a final statement. An insular area jurisdiction 
must prepare a final statement. In the preparation of the final 
statement, the jurisdiction shall consider comments and views received 
relating to the proposed statement and may, if appropriate, modify the 
final statement. The final statement shall be made available to the 
public and shall include the community development objectives, 
projected use of funds, and the community development activities.
    (e) Program amendments. To assure citizen participation on program 
amendments to final statements, the insular area 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
    (5) Make the final amendment to the community development program 
available to the public before its submission to HUD.
    (f) Performance reports. (1) The citizen participation plan must 
provide citizens with reasonable notice and an opportunity to comment 
on performance reports. The citizen participation plan must state how 
reasonable notice and an opportunity to comment will be given. The 
citizen participation plan must provide a period of not less than 15 
days to receive comments on the performance report before it is to be 
submitted to HUD.
    (2) The citizen participation plan shall require the jurisdiction 
to consider comments or views of citizens received in writing or orally 
at public hearings in preparing the performance report. A summary of 
these comments or views shall be attached to the performance report.
    (g) Application for loan guarantees. Insular area jurisdictions 
intending to apply for the Section 108 Loan Guarantee program must 
ensure that they follow the applicable presubmission and citizen 
participation requirements of Sec.  570.704.

0
16. In Sec.  570.704, revise paragraph (a)(1)(v) to read as follows:

[[Page 32782]]

Sec.  570.704  Application requirements.

    (a) * * *
    (1) * * *
    (v) If an application for loan guarantee assistance is to be 
submitted by an entitlement or nonentitlement public entity 
simultaneously with the public entity's submission for its grant, the 
public entity shall include and identify in its proposed and final 
consolidated plan the activities to be undertaken with the guaranteed 
loan funds, the national objective to be met by each of these 
activities, the amount of any program income expected to be received 
during the program year, and the amount of guaranteed loan funds to be 
used. The public entity shall also include in the consolidated plan a 
description of the pledge of grants, as required under Sec.  
570.705(b)(2). In such cases the proposed and final application 
requirements of paragraphs (a)(1)(i), (iii), and (iv) of this section 
will be deemed to have been met.
* * * * *

0
17. Revise the introductory paragraph of Sec.  570.705(a)(2)(iii) to 
read as follows:


Sec.  570.705  Loan requirements.

    (a) * * *
    (2) * * *
    (iii) Nonentitlement public entities eligible under subpart F of 
this part. No commitment to guarantee shall be made with respect to a 
nonentitlement public entity in an insular area or the State of Hawaii 
if the total unpaid balance of debt obligations guaranteed under this 
subpart (excluding any amount defeased under the contract entered into 
under Sec.  570.705(b)(1)) on behalf of the public entity would thereby 
exceed an amount equal to five times the amount of the most recent 
grant made pursuant to Sec.  570.429 or Sec.  570.440 (as applicable) 
to the public entity.
* * * * *

    Dated: May 11, 2004.
Roy A. Bernardi,
Assistant Secretary for Community Planning and Development.
[FR Doc. 04-12954 Filed 6-9-04; 8:45 am]
BILLING CODE 4210-32-P