[Federal Register Volume 70, Number 246 (Friday, December 23, 2005)]
[Rules and Regulations]
[Pages 76362-76371]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-24428]



[[Page 76361]]

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Part III





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; Interim Rule

  Federal Register / Vol. 70, No. 246 / Friday, December 23, 2005 / 
Rules and Regulations  

[[Page 76362]]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-4556-I-02; HUD-2005-0076]
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: Interim rule.

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SUMMARY: The interim rule implements certain statutory changes by 
revising HUD's regulations for the Community Development Block Grant 
(CDBG) program. Specifically, this interim rule prohibits state and 
local governments from using CDBG funds for ``job pirating'' activities 
that are likely to result in significant job loss. The rule also 
applies to section 108 loan guarantees, and the use of Brownfields 
Economic Development Initiative and Economic Development Initiative 
funds with section 108 loan guarantees and CDBG funding. This rule 
follows publication of an October 24, 2000, proposed rule and takes 
into consideration the public comments received on the proposed rule. 
The interim rule also provides the public with an additional 
opportunity to comment on the regulatory job pirating provisions.

DATES: Effective Date: February 21, 2006.
    Comment Due Date: February 21, 2006.

ADDRESSES: Interested persons are invited to submit comments regarding 
this rule to the Regulations Division, Office of General Counsel, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 10276, Washington, DC 20410-0500. Interested persons may also 
submit comments electronically through either:
     The Federal eRulemaking Portal at http://www.regulations.gov; or
     The HUD electronic Web site at http://www.epa.gov/feddocket. Follow the link entitled ``View Open HUD Dockets.'' 
Commenters should follow the instructions provided on that site to 
submit comments electronically.
    Facsimile (FAX) comments are not acceptable. In all cases, 
communications must refer to the docket number and title. All comments 
and communications submitted will be available, without change, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, please schedule an appointment to review the public comments 
by calling the Regulations Division at (202) 708-3055 (this is not a 
toll-free number). Copies are also available for inspection and 
downloading at http://www.epa.gov/feddocket.

FOR FURTHER INFORMATION CONTACT: Richard Kennedy, Office of Block Grant 
Assistance, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 7286, Washington, DC 20410-7000, 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, HUD-administered Small Cities, and Insular 
recipients: Michael Sowell, Community Planning and Development 
Specialist, State and Small Cities Division, (202) 708-1322.
    For Entitlement Communities: Stan Gimont, Director, Entitlement 
Communities Division, (202) 708-1577.
    For Section 108 program participants: Paul Webster, Director, 
Financial Management Division, (202) 708-1871.
    For Economic Development Initiative (EDI) and Brownfields Economic 
Development Initiative (BEDI) program participants: William Seedyke, 
EDI and BEDI Program Coordinator, Grants Management Division, (202) 
708-3484.
    Hearing- or speech-impaired individuals may access any of the 
telephone numbers listed in this section by calling the Federal 
Information Relay Service toll-free 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) (1974 HCD Act) establishes the statutory framework 
for the Community Development Block Grant (CDBG) Program. HUD's 
regulations implementing the CDBG program are located at 24 CFR part 
570 (entitled ``Community Development Block Grants''). As used in this 
rule, the term ``CDBG funding'' or reference to CDBG programs means, in 
addition to the Entitlement and State CDBG programs, those programs 
covered by the part 570 regulations (e.g., section 108 loan guarantees, 
Economic Development Initiative, Brownfields Economic Development 
Initiative, HUD-administered Small Cities, and Insular CDBG program). 
This rule does not apply to the Indian CDBG program.
    Section 105 of the 1974 HCD Act (42 U.S.C. 5305) was amended by 
section 588 of the Quality Housing and Work Responsibility Act of 1998 
(QHWRA) (Title V of the Fiscal Year 1999 HUD Appropriations Act, Public 
Law 105-276, approved October 21, 1998). Specifically, section 105 was 
amended to add a subsection (h) entitled ``Prohibition on Use of 
Assistance for Employment Relocation Activities.'' This 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 a significant job loss.
    Subsection 105(h) provides 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. The October 24, 2000, Proposed Rule

    On October 24, 2000 (65 FR 63756), HUD published a proposed rule to 
implement section 588 of QHWRA. The October 24, 2000, proposed rule 
proposed to prohibit state and local governments from using CDBG funds 
for job pirating activities. Job pirating was defined as the act of one 
community luring a business, and the jobs that would accompany it, from 
another community that could have significant impact on the economic 
viability of the latter community.
    The statute sought to ensure that CDBG funds would not be used to 
the detriment of one community for the prosperity of another. However, 
the statute did not define clearly what was meant by significant job 
loss, or what was considered a labor market area for entitlement and 
non-entitlement areas.
    HUD received 32 public comments on the October 24, 2000, proposed 
rule. Several commenters expressed a concern with respect to the issue 
of how the statute would be implemented particularly in non-entitlement 
areas. The objections raised regarding the non-entitlement portion of 
the proposed rule have been addressed in this interim rule without 
fundamentally changing the conceptual approach of the October 24, 2000, 
proposed rule. There were no substantial objections raised by 
commenters regarding HUD's implementation of the non-entitlement 
provision in the Entitlement CDBG

[[Page 76363]]

program. The changes made in this rule for the Entitlement program are 
principally to ensure consistency of application between the 
Entitlement and State CDBG programs. HUD believes this rule implements 
the statutory prohibition while maintaining the local flexibility of 
the CDBG program.

III. Significant Differences Between this Interim Rule and HUD's 
October 24, 2000, Proposed Rule

    This interim rule follows publication of the October 24, 2000, 
proposed rule and takes into consideration the public comments received 
on the proposed rule. In response to the public comments, HUD has made 
the following changes to the proposed rule. The rationale for these 
revisions is more fully explained in section IV of this preamble.
    1. ``De minimis'' job loss. This interim rule provides that a loss 
of 25 or fewer jobs as a result of a single activity does not 
constitute a significant job loss for purpose of the anti-pirating 
provisions.
    2. State designation of applicable Labor Market Area (LMA). The 
interim rule permits each state to combine LMAs in non-metropolitan 
areas to determine its LMAs for purposes of the anti-pirating 
requirements. States will be required to define or reaffirm prior 
definitions of their LMAs on an annual basis and retain records to 
substantiate such areas prior to any business relocation that would be 
impacted by this rule. States can obtain LMA designations at the 
following Bureau of Labor Standards Web site: http://www.bls.gov/lau/lmadir.pdf.
    3. Time limit on anti-piracy requirements. This interim rule 
establishes a time limit on the applicability of the anti-piracy 
requirements. In general, a job will be considered to be relocated if 
positions are eliminated at an existing operation within three years 
after the provision of CDBG assistance for the new operation.
    4. Streamlined reporting requirements. In place of the detailed 
information required under the proposed rule, this interim rule 
requires that the assisted business submit a certification that neither 
it nor any of its subsidiaries has plans to relocate jobs that will 
result in a significant job loss for a specific area. This 
certification will be part of the agreement committing CDBG assistance 
to the business.
    5. Definition of ``directly assist.'' This interim rule further 
defines ``directly assist.'' The provision of CDBG funds for activities 
pursuant to public facilities and indirect assistance that will provide 
benefit to multiple businesses does not fall under the definition of 
``directly assist,'' unless it includes the provision of infrastructure 
to aid a specific business.

IV. Discussion of Public Comments on the October 24, 2000, Proposed 
Rule

    Twenty-one of the 32 comments came from states, with many of the 
remaining comments coming from organizations that represent non-
entitlement areas. The states and organizations that represent non-
entitlement areas wrote that the proposed rule was flawed as labor 
market areas did not relate to the true commuting patterns in rural 
areas, and that there needed to be a de minimis number of jobs that 
would not trigger the operation of this rule. As a result of the 
comments from states and organizations representing non-entitlement 
areas, this rule makes the following changes to the proposed rule.
    A. Significant Loss of Jobs. Many commenters raised questions or 
concerns regarding the definition of ``significant job loss'' contained 
in the October 24, 2000, proposed rule. Under the proposed rule, a loss 
of jobs would be considered significant if the number of jobs lost is 
equal to or greater than one-tenth of one percent (0.1%) of the total 
number of jobs in the labor force. However, in all cases a loss of 500 
or more jobs is considered significant.
    Several commenters wrote that the percentage used to calculate 
significant job loss would adversely affect smaller, rural areas. For 
example, under the proposed rule, a loss of 10 jobs in a labor market 
area containing 10,000 jobs would have triggered the application of the 
rule. The commenters recommended several alternatives to address this 
concern. Several commenters, for example, suggested that HUD not use a 
percentage to calculate significant job loss and instead simply rely on 
the second component of the definition (i.e., a loss of 500 or more 
jobs). Other commenters suggested raising the percentage used to 
determine whether job loss is significant. Several commenters suggested 
that HUD establish a de minimis number of lost jobs that would not 
trigger the operation of the anti-pirating provisions.
    HUD continues to believe that a percentage-based calculation is 
useful for determining significant job loss, since such a calculation 
may be uniformly applied to varying sized labor forces. However, HUD 
also recognizes that a percentage-based test may be difficult to apply 
to small communities where the loss of a handful of jobs may be 
sufficient to trigger the anti-pirating provisions. After considering 
the public comments on this issue, HUD has modified the proposed rule 
to provide that a loss of 25 or fewer jobs as a result of a single 
activity will not constitute a significant job loss.
    According to the Office of Advocacy of the U.S. Small Business 
Administration, there are approximately 4.4 million firms in the U.S. 
that employ 25 employees or fewer out of a total of nearly 5.5 million 
firms nationwide. There are only 470,356 firms that employ between 25 
and 500 employees. Approximately 80 percent of firms in the U.S. employ 
fewer than 25 workers. HUD believes the potential impact of any single 
business relocating from one labor market to another would be minimal 
on the employment rate in that given labor market area. Furthermore, 
while HUD has taken every measure to minimize the burden of compliance 
with this rule on businesses in general, HUD believes that it would be 
overly burdensome to impose such requirements on businesses that employ 
25 or fewer employees.
    B. Problems with the Definition of LMAs in Rural Areas. Several 
commenters objected to the use of LMAs defined by the U.S. Department 
of Labor for purposes of determining significant job loss. The 
commenters wrote that the size and composition of LMAs vary throughout 
the country, thus limiting their usefulness in consistently and 
uniformly measuring job loss. The majority of the commenters on this 
issue wrote that the LMAs do not accurately reflect commuter patterns 
in rural areas. These commenters wrote that the U.S. Department of 
Labor LMA definition did not work for rural areas, as the LMA 
definition was for a single county, when the real commuting area is a 
multicounty area.
    The commenters suggested various ways to remedy the perceived 
difficulties with use of LMAs. Some commenters suggested that HUD 
replace the use of LMAs with use of the relevant jurisdiction, such as 
the city or county. Other commenters recommended that HUD permit 
jurisdictions to voluntarily combine and designate themselves as an LMA 
for purposes of the anti-pirating provisions.
    Since publication of the October 24, 2000, proposed rule, the 
Office of Management and Budget has issued a revised definition of LMA 
that HUD believes lessens the prevalence of the concerns raised by the 
commenters. Specifically, under the revised definition of LMA, all non-
metropolitan areas in each state are grouped into small LMAs usually 
consisting of one or more counties. To further address the concerns 
raised by the commenters, the interim rule permits each state to

[[Page 76364]]

combine LMAs in non-metropolitan areas to determine its LMAs for 
purposes of the anti-pirating requirements.
    States are required to define or reaffirm prior definitions of 
their LMAs on an annual basis and retain records to substantiate such 
areas prior to any business relocation that would be impacted by this 
rule. Under this interim rule, metropolitan LMAs cannot be combined, 
nor can a non-metropolitan LMA be combined with a metropolitan LMA. The 
area defined by the state must also be coterminous. HUD will revisit 
this issue in the future if there is evidence of abuse by states in 
configuring LMAs.
    In those situations where a particular state decides not to define 
its LMAs in non-metropolitan areas, then the area(s) defined by the 
U.S. Department of Labor for that particular non-metropolitan area 
shall be used. It should be noted that the state losing one or more net 
jobs is the state with the responsibility for defining the LMAs.
    C. Time Limit on Anti-Piracy Requirements. Many commenters from 
non-entitlement areas suggested that a limit should be set on the 
length of time during which changes in employment may be considered to 
be as a result of CDBG assistance. HUD agrees and has established a 
time limit on the applicability of the anti-piracy requirements. A job 
will be considered to be relocated if positions are eliminated at an 
existing operation within three years after the provision of CDBG 
assistance for the new operation. HUD has determined that three years 
is an appropriate time period to define relocating existing operations. 
Most states allow no more than three years for a project to be 
completed and expect the majority, if not all, of the jobs to be 
created in this time frame. However, if the contractual agreement 
between the recipient (entitlement grantee, state, or state grant 
recipient) and the assisted business allows a time period longer than 
three years for the business to create jobs, then the provisions of 
this rule will apply for the duration of that agreement.
    D. Provision of Infrastructure Assistance Should Not be Subject to 
the Rule. The majority of commenters wrote that infrastructure 
assistance should not be covered by the rule as it is not a deciding 
factor on whether a business will relocate to an area. Several of these 
commenters wrote that assistance for infrastructure development is 
indirect assistance and, therefore, outside the scope of the statutory 
anti-pirating prohibition, which applies solely to direct assistance. A 
minority of commenters, however, thought infrastructure assistance 
should be covered by the rule. HUD continues to believe that the rule 
should cover infrastructure assistance when a grantee, participating 
unit of general local government, subrecipient, Community-Based 
Development Organization (CBDO), or a nonprofit organization serving 
the development needs of communities in non-entitlement areas, directly 
assists in the relocation of a business. The Department does not 
consider infrastructure assistance to be indirect assistance in such 
cases, since there is no difference between providing infrastructure 
assistance and making a loan to a business when there is a written 
agreement in which a business commits to create jobs. However, if CDBG 
funds are provided to assist infrastructure to aid a specific business 
that is the subject of an agreement with the specific assisted 
business, those funds would fall under the definition of ``directly 
assist.'' The interim rule clarifies the definition of ``directly 
assist'' to include this distinction.
    E. Recordkeeping Requirements. Many commenters stated that the 
recordkeeping requirements of the proposed rule were onerous and would 
discourage economic development projects. HUD agrees that the proposed 
information collection requirements would have imposed an undue burden 
on certain businesses. For example, requiring information on all of a 
business' facilities with the number of jobs at each facility would 
prevent the provision of assistance to national retail operations, as 
provision of this information would be onerous for corporations such as 
Target or McDonald's, for example, to complete. As a result, HUD has 
streamlined the proposed reporting requirements. In place of the 
detailed information required under the proposed rule, this interim 
rule requires that the assisted business submit a certification that 
neither it nor any of its subsidiaries has plans to relocate jobs that 
will result in a significant job loss. This certification will be part 
of the agreement committing CDBG assistance to the business.
    F. Applicability to nonprofits. Several commenters wrote in support 
of the exemption of non-profit organizations from the anti-pirating 
requirements. Other commenters, however, questioned the non-profit 
exemption. Most of these commenters agreed that there is little 
likelihood of nonprofit group use of CDBG assistance for job relocation 
purposes. However, the commenters wrote that the relocation of some 
large nonprofit organizations could potentially result in a significant 
job loss. These commenters also wrote that the statutory anti-pirating 
requirements do not specifically single out for-profit businesses.
    HUD has not revised the rule in response to these comments. As the 
commenters acknowledge, the potential that CDBG assistance will result 
in a nonprofit group relocating is limited. However, as some commenters 
questioned the non-profit exemption, HUD is inviting specific comments 
on examples of situations where relocations of nonprofit organizations 
have resulted in significant job losses.

V. This Interim Rule

    This interim rule follows publication of and takes into 
consideration the public comments received on HUD's October 24, 2000, 
proposed rule. As noted above, this interim rule makes several changes 
to the proposed rule in response to the public comments. HUD has 
decided to issue this rule as an interim rule to afford the public with 
another opportunity to comment, and specifically to the changes made to 
the rule based on earlier comments. All comments received in response 
to this interim rule will be considered during development of the final 
rule.
    This interim rule would implement section 105(h) of the 1974 HCD 
Act by revising HUD's CDBG program regulations at 24 CFR part 570. For 
the Entitlement CDBG program, the interim 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. Other related sections of the Entitlement 
regulations would be revised. For the State CDBG program, the interim 
rule would revise Sec.  570.482 (entitled ``Eligible activities'') to 
describe the job pirating provisions for the state-administered CDBG 
program.
    In situations where a natural disaster has occurred and the 
President has declared the area a disaster under Title IV of the Robert 
T. Stafford Disaster Relief and Emergency Assistance Act, grantees can 
request suspension of certain statutory provisions.

A. Significant Features of the Interim Rule

    1. 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, section 105(a)(17) authorizes CDBG 
recipients to provide direct assistance to for-profit businesses for 
economic development activities. Additionally, section

[[Page 76365]]

105(a)(15) authorizes recipients to provide CDBG funds to Community-
Based Development Organizations (CBDOs) and other nonprofit entities 
for economic development activities that increase economic 
opportunities, or that stimulate or retain businesses or permanent 
jobs. CBDOs and other nonprofit entities may implement economic 
development activities directly or they may assist for-profit 
businesses similar to the way CDBG recipients assist for-profit 
businesses.
    Section 105(h) targets CDBG assistance to for-profit businesses. 
Pursuant to section 105(h), this interim rule would prohibit the 
provision of CDBG assistance to for-profit businesses (including 
business expansions) under sections 105(a)(15) and 105(a)(17) of the 
1974 HCD Act, if:
    (i) The funding will assist in the relocation of a plant, facility, 
or operation; and
    (ii) The relocation is likely to result in a significant loss of 
jobs in the area from which the relocation occurs.
    As noted, HUD will 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. 
This rule is not intended to apply to situations in which a business 
starts a new operation in a new location, which is unrelated to 
existing operations, and later decides to reduce or eliminate the 
existing operation. For example, a business presently manufactures 
lawnmowers in city A, and decides to diversify its operations by 
opening a plant (with CDBG assistance) to assemble computer circuit 
boards in city B, which is in a different LMA. Two years later, because 
of changes in the industry, the business decides to get out of the 
lawnmower business and to focus exclusively on computer circuit boards; 
it closes the lawnmower factory or sells the factory to a competitor. 
This scenario would not constitute job pirating, because the circuit 
board plant constitutes a completely different operation with very 
different job positions from the lawnmower factory. The firm's decision 
to exit the lawnmower business was unrelated to the decision to enter 
the computer circuit board business. However, a company that plans to 
open a new plant outside its current LMA, with the express intent to 
consolidate its production of ``goods'' at that location, and then 
shuts down an older facility elsewhere up to three years later, would 
trigger the anti-pirating provision if there was a significant loss of 
jobs.
    HUD also decided that the rule should not cover the business 
activities of nonprofit entities. HUD will revisit this issue in the 
future if there is evidence of abuse from job pirating involving 
nonprofit entities.
    2. Infrastructure improvements. The October 24, 2000, proposed rule 
considered how section 105(h) applies to CDBG recipients that provide 
assistance indirectly to for-profit businesses. The proposed rule 
stated that indirect assistance may take the form of buildable sites, 
rail spurs, and other amenities in industrial parks. CDBG recipients 
may carry out these activities under section 105(a)(14) of the 1974 HCD 
Act, as well as sections 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. 
After reviewing the comments on the October 24, 2000, proposed rule, 
the Department believes that using CDBG funding for these activities 
assists directly in the relocation of a business when a CDBG recipient, 
participating unit of general local government, subrecipient, or CBDO 
enters into a written agreement to provide the assistance as a 
condition of the business relocating to the recipient's jurisdiction. 
Under such circumstances, the Department discerns no difference between 
providing infrastructure assistance and making a loan to a business. 
The Department does not consider infrastructure assistance to be 
indirect assistance in such cases, since there is no difference between 
providing infrastructure assistance and making a loan to a business 
when there is a written agreement in which a business commits to create 
jobs.
    3. Definition of ``Operation.'' Section 105(h) prohibits the use of 
CDBG assistance with respect to the relocation of any industrial or 
commercial plant, facility, or ``operation'' from one area to another. 
This interim rule defines the term ``operation'' to include, but not be 
limited to, any equipment, position, employment opportunity, production 
capacity, or product line.
    4. Definition of ``Area.'' Section 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. For metropolitan areas, HUD defines the term 
``area'' as synonymous with the term ``Labor Market Area (LMA),'' as 
defined by the U.S. Bureau of Labor Statistics (BLS) (http://www.bls.gov/lau/laugeo.htm). The BLS defines an LMA as:

[a]n economically integrated area within which individuals can 
reside and find employment within a reasonable distance or can 
readily change jobs without changing their place of residence. In 
addition, LMAs are nonoverlapping and geographically exhaustive.

    LMAs include metropolitan statistical areas (MSAs) and Metropolitan 
Divisions, defined by the Office of Management and Budget (OMB), and 
small LMAs. Metropolitan Division is a new OMB term that has replaced 
Primary Metropolitan Statistical Areas (PMSAs). A Metropolitan Division 
consists of a county or a group of counties within a Core Based 
Statistical Area that has a core population of at least 2.5 million. A 
Metropolitan Division consists of one or more main/secondary counties 
that represent an employment center or centers, plus adjacent counties 
associated with the main county or counties through commuting ties. A 
Micropolitan Statistical Area is viewed as an area with urban clusters 
of at least 10,000 population, but less than a population of 50,000. 
The Micropolitan Statistical Area comprises the central county or 
counties containing the core, plus adjacent outlying counties having a 
high degree of social and economic integration with the central county 
as measured through commuting.
    HUD received multiple comments in response to the October 24, 2000, 
proposed rule that indicated the BLS definition of LMA does not work in 
rural areas for the purposes of this rule. Some commenters stated that 
in many states rural LMAs tended to be single-county entities while the 
true commuting area is a multicounty area. Using the BLS definitions 
could give a distorted view of the distances an employee could commute 
in order to maintain employment in a job that has moved to a new 
location. In response to these comments, HUD has determined that in 
non-metropolitan areas, a state may choose to use the BLS definition of 
LMA, or it may combine LMAs if that gives a more accurate definition of 
the true commuting area for a portion of a state. States would be 
required to define their LMAs and retain records to substantiate such 
areas prior to any business relocation that would be impacted by this 
rule. It should be noted that metropolitan LMAs cannot be combined, nor 
can a non-metropolitan LMA be combined with a metropolitan LMA. 
Combined LMAs will still be referred to as LMAs. Also, a state can be 
more restrictive in its definitions (e.g., a state can forbid units of 
general local government from using State CDBG

[[Page 76366]]

funds to fund any business relocation if the state so chooses).
    HUD believes that the BLS definition of a LMA is the most logical 
one to use for metropolitan jurisdictions, for two reasons:
    (i) It ensures consistency of definitions and data across the 
country; and
    (ii) It enhances consistency of approach among federal programs.
    The interim rule would be applicable to business relocations from 
one LMA to another, regardless of the type of area (e.g., from a MSA to 
a Metropolitan Division, or from a MSA to a small LMA, etc.) or the 
type of CDBG grantee providing assistance (e.g., entitlement city or 
state grant recipient). As a result, the rule defines LMAs for both 
entitlement and non-entitlement areas in both the entitlement and State 
CDBG regulations. The only exception is that the rule will not be 
applicable to moves to Indian reservations; however, the statute is 
applicable to moves to reservations.
    For instance, moving a business from the City of Denver (located in 
the Denver-Aurora, CO, MSA) to Adams County, CO (also located in the 
Denver-Aurora, CO, MSA) would not be subject to the anti-pirating 
provisions of this interim rule since both Denver and Adams County are 
located in the same LMA.
    5. Determining ``significant job loss.'' As noted above, section 
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 interim rule requires that a 
CDBG entitlement, small city, insular grantee, or a unit of general 
local government receiving funding from a state, 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 
stated in this rule, the CDBG grantee also would be required to 
document the number of jobs that the business plans to relocate to the 
new LMA.
    The example in the chart below illustrates the factors that a CDBG 
grantee would be required to consider in determining whether the 
relocation of a business 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.

                                   Example of Calculating Significant Job Loss
----------------------------------------------------------------------------------------------------------------
                                   Number of
                                  persons in
                                labor force in
                                  area where
                                  business is
                                   currently                                          Number of jobs leaving the
CDBG grantee/name of LMA  Area      located       One-tenth percent of labor force     area  Must be fewer than
  where business is currently     (April 2003       Multiply column (B) by .001       number in column (C) to be
            located                   for                                              eligible for assistance
                                  Chattanooga
                                 and Jefferson
                                 County, 2002
                                  average for
                                    Logan)
(A)                                        (B)  (C)                                  (D)
-------------------------------
Chattanooga, TN...............         234,900  234,900 x .001 = 234                 50
Chattanooga, TN-GA MSA........                                                       NOT PROHIBITED
Logan, NE.....................          18,250  18,250 x .001 = 18.250               50
Lincoln-Logan-McPherson SLMA..                                                       PROHIBITED
Jefferson County, CO..........       1,238,600  1,238,600 x .001 = 1,238.6           50
Denver, CO, Metropolitan                                                             NOT PROHIBITED
 Division.
----------------------------------------------------------------------------------------------------------------
(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/lau/home.htm. CDBG grantees also may write to their state 
employment statistics contact person to receive local employment data. 
A list of state employment statistics contact names is provided on the 
Internet at http://www.bls.gov/bls/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) 691-6392 (this is not a toll-free number) or e-mail the Division 
at [email protected].
    In large LMAs, one-tenth of a percent job loss of the total labor 
market may constitute a large number of employees. Therefore, this 
interim rule provides that in all cases a loss of 500 or more jobs will 
be considered to constitute a significant job loss. To prevent the rule 
from having an effect in situations where the relocation of a business 
causes an insignificant loss of jobs, the interim rule provides that a 
loss of 25 or fewer jobs from an area, as a result of a CDBG-funded 
economic development project, does not constitute a significant loss of 
jobs. In summary:
    (1) A loss of 25 or fewer jobs as a result of a single activity 
will not constitute a significant job loss,
    (2) Any loss greater than 500 will continue to be counted as 
significant,
    (3) Job losses between 25-500 must be less than 0.1 percent of the 
areas labor force to avoid being counted as significant.

B. Activities and Businesses Exempt From the Job Piracy Prohibition

    1. General. This interim rule will not apply to any of the 
following:
    (a) Relocation assistance required by the Uniform Relocation 
Assistance and Real Property Acquisition Policies Act of 1970 (42 
U.S.C. 4601-4655) (implemented at 24 CFR part 42) (URA) and with 
respect to the CDBG regulations, at 24 CFR 570.488 and 570.606;
    (b) Microenterprises; and
    (c) Assistance to businesses that buy equipment and/or inventory in 
arms-length transactions and move the equipment and/or inventory to 
another area.

[[Page 76367]]

    2. Relocation assistance. HUD will 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. In addition, optional relocation assistance 
under section 105(a)(11), as implemented at 570.201(i) and 570.606(d), 
should be excluded for the same reasons. 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.
    3. Microenterprises. HUD considered whether microenterprises should 
be subject to the job pirating restrictions, but has determined that 
this type of business was not the intended target of the statutory 
prohibition. Microenterprises generally have five or fewer employees 
and typically do not seek resources to relocate jobs to other areas.
    4. CDBG-assisted arms-length transactions. The exemption for 
businesses that buy equipment, inventory, or other physical assets 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 interim rule applies 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-arms-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 interim rule does 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 section 105(h).
    The examples below illustrate the applicability of this interim 
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 
operations of the entire product line to another area.
    In both cases, HUD would examine:
    (1) Will the CDBG assistance directly assist in the relocation 
of the business?; and
    (2) Will the relocation result in significant job loss?
    In Example 1, 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 is not prohibited under this interim 
rule.
    In Example 2, the CDBG assistance would directly assist the move 
of an operation from one LMA to another. The interim rule prohibits 
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.

C. Documentation Requirements for CDBG Recipients and Businesses

    This interim rule would require that, for each CDBG assisted 
business covered by this interim rule, the recipient's (entitlement, 
small city, insular grantee, state, or the state grant recipient) CDBG 
project file must document: Whether the business has a plant, facility, 
or operation in an area outside of the recipient's area; and, if the 
business has one or more plants, facilities, or operations located in 
other LMAs, whether the business plans to relocate jobs from other 
locations to the site being assisted with CDBG funds. 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 jobs relocated by the business at each of the 
locations that are losing jobs to the new facility would constitute a 
significant job loss as defined in this rule. If the recipient decides 
to commit CDBG assistance to a business, then it 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 that would 
result in a significant job loss as defined in this rule. The business 
must provide this certification to the recipient 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 interim rule, the business 
will reimburse the CDBG recipient for any assistance 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 within 
a three-year period (or the length of time for creating jobs in the 
agreement between the business and the recipient if it is longer than 
three years) from the date of the certification. If the business plans 
to relocate jobs, then it would be required to certify as to the number 
of jobs at the current facility that would be lost, 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 cannot be 
provided.
    States are required to define and certify their LMAs and retain 
records to substantiate such areas prior to any business relocation 
that is impacted by this rule. It should be noted that metropolitan 
LMAs cannot be combined, nor can a non-metropolitan LMA be combined 
with a metropolitan LMA. In those situations where a particular state 
decides not to define its LMAs in non-metropolitan areas, then the 
area(s) defined by the U.S. Department of Labor for that particular 
non-metropolitan area shall be used.

VI. Findings and Certifications

Paperwork Reduction Act

    The information collection requirements contained in this interim 
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 State CDBG 
program is 2506-0085. These information collection numbers will be 
revised to include the information collection requirements contained in 
this interim rule.
    The burden of the information collections in this interim rule is 
estimated below:

[[Page 76368]]



                                       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
Sec.   570.210(c) (Statement):                    ..............  ..............  ..............  ..............
Local...........................................             337               1               2             674
Sec.   570.482(h)(3) (Statement):                 ..............  ..............  ..............  ..............
    Local.......................................              50               1               2             100
----------------------------------------------------------------------------------------------------------------

    Total Local Reporting and Recordkeeping Burden (Hours): 886.
    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 required 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 required 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 rule. Comments must be 
received within 60 days from the date of this interim rule. Comments 
must refer to the interim rule by name and docket number (FR-4556) and 
must be sent to:
    HUD Desk Officer, Office of Management and Budget, New Executive 
Office Building, Washington, DC 20503. Fax number: (202) 395-6974 (this 
is not a toll-free number.)

and

    Shelia Jones, Reports Liaison Officer, Office of the Assistant 
Secretary for Community Planning and Development, Department of Housing 
and Urban Development, 451 7th Street, SW., Room 7232, Washington, DC 
20410-7000.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
was made at the proposed rule stage and is applicable to this interim 
rule 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). 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, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 10276, Washington, DC 20410-0500.

Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.), 
generally requires an agency to conduct a regulatory flexibility 
analysis of any rule subject to notice and comment rulemaking 
requirements unless the agency certifies that the rule will not have a 
significant economic impact on a substantial number of small entities. 
There are no anticompetitive 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 did not receive any comments on this issue in its 
October 24, 2000, proposed rule. HUD is again soliciting alternatives 
for compliance from small entities as to how these small entities might 
comply in a way that is less burdensome to them. The de minimis 
threshold (25 jobs) for applicability of this rule will, by itself, 
minimize any burden on small businesses. Therefore, the undersigned 
certifies that this interim rule will not have a significant economic 
impact on a substantial number of small entities.
    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 
by this preamble.

Executive Order 13132, Federalism

    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 Order. This interim rule would not have federalism 
implications and would not impose substantial direct compliance costs 
on state and local governments nor preempt state law within the meaning 
of the Order.

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 governments 
or the private sector within the meaning of the UMRA.

Executive Order 12866, Regulatory Planning and Review

    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 under 
the Order). The docket file is available for public inspection between 
the hours of 8 a.m. and 5 p.m. weekdays in the Regulations Division, 
Office of the General Counsel, Department of Housing and Urban 
Development, 451 Seventh Street, SW., Room 10276, Washington, DC 20410-
0500. Due to security measures at the HUD Headquarters building, please 
schedule an appointment to review the docket by calling the Regulations 
Division at (202)

[[Page 76369]]

708-3055 (this is not a toll-free number).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) program numbers 
for the programs covered by this interim 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 and Brownfields Economic 
Development Initiative programs--14.246;
    --Section 108 Loan Guarantee program--14.248; and
    --Insular Areas--14.225.

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, Loan programs--
housing and community development, Low and moderate income housing, 
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, 
Reporting and recordkeeping requirements, Student aid, Virgin Islands.

0
Accordingly, for the reasons discussed in the preamble, HUD amends 24 
CFR part 570 to read as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

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

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


0
2. Revise Sec.  570.200(e) to read as follows:


Sec.  570.200  General policies.

* * * * *
    (e) Recipient determinations required as a condition of 
eligibility. In several instances under this subpart, the eligibility 
of an activity depends on a special local determination. Recipients 
shall maintain documentation of all such determinations. A written 
determination is required for any activity carried out under the 
authority of Sec. Sec.  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.
* * * * *

0
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 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); or
    (ii) Sec. Sec.  570.201(a)--(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 (CDBO) 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. Provision of public facilities and indirect assistance that will 
provide benefit to multiple businesses does not fall under the 
definition of ``directly assist,'' unless it includes the provision of 
infrastructure to aid a specific business that is the subject of an 
agreement with the specific assisted business.
    (2) Labor market area (LMA). For metropolitan areas, an LMA is an 
area defined as such by the BLS. 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. In addition, LMAs are nonoverlapping 
and geographically exhaustive. For metropolitan areas, grantees must 
use employment data, as defined by the BLS, for the LMA in which the 
affected business is currently located and from which current jobs may 
be lost. For non-metropolitan areas, an LMA is either an area defined 
by the BLS as an LMA, or a state may choose to combine non-metropolitan 
LMAs. States are required to define or reaffirm prior definitions of 
their LMAs on an annual basis and retain records to substantiate such 
areas prior to any business relocation that would be impacted by this 
rule. Metropolitan LMAs cannot be combined, nor can a non-metropolitan 
LMA be combined with a metropolitan LMA. For the HUD-administered Small 
Cities Program, each of the three participating counties in Hawaii will 
be considered to be its own LMA. Recipients of Fiscal Year 1999 Small 
Cities Program funding in New York will follow the requirements for 
State CDBG recipients.
    (3) Operation. A business operation includes, but is not limited 
to, any equipment, employment opportunity, production capacity or 
product line of the business.
    (4) Significant loss of jobs. (i) 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 of the total number of persons in the labor force of that LMA; 
or in all cases, a loss of 500 or more jobs. Notwithstanding the 
aforementioned, a loss of 25 jobs or fewer does not constitute a 
significant loss of jobs.
    (ii) A job is considered to be lost due to the provision of CDBG 
assistance if the job is relocated within three years of the provision 
of assistance to the business; or the time period within which jobs are 
to be created as specified by the agreement between the business and 
the recipient if it is longer than three years.
    (c) Written agreement. Before directly assisting a business with 
CDBG funds, the recipient, subrecipient, or a CDBO (in the case of an 
activity carried out pursuant to Sec.  570.204) shall sign a written 
agreement with the assisted business. The written agreement shall 
include:
    (1) Statement. A statement from the assisted business 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, 
and, if so, the number of jobs that will be relocated from each LMA;
    (2) Required information. If the assistance will not result in a 
relocation covered by this section, 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 that would result in 
a significant job loss as defined in this rule; and
    (3) Reimbursement of assistance. The agreement shall provide for 
reimbursement of any assistance provided to, or expended on behalf of, 
the business in the event that assistance results in a relocation 
prohibited under this section.
    (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 of 1970, 
(URA) (42 U.S.C. 4601-4655);
    (2) Microenterprises. Assistance to microenterprises as defined by 
Section 102(a)(22) of the Housing and

[[Page 76370]]

Community Development Act of 1974; and
    (3) 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 does not 
produce a significant loss of jobs in the LMA from which the relocation 
occurs.

0
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 section:
    (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 (42 U.S.C. 5301 et seq). 
Direct assistance also includes assistance under section 105(a)(1), 
(2), (4), (7), and (14) of the Housing and Community Development Act of 
1974, when the state's grantee, subrecipient, or nonprofit entity 
eligible under section 105(a)(15) 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 LMA. 
Provision of public facilities and indirect assistance that will 
provide benefit to multiple businesses does not fall under the 
definition of ``directly assist,'' unless it includes the provision of 
infrastructure to aid a specific business that is the subject of an 
agreement with the specific assisted business.
    (ii) Labor market area (LMA). For metropolitan areas, an LMA is an 
area defined as such by the U.S. Bureau of Labor Statistics (BLS). 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. In addition, LMAs are nonoverlapping and geographically 
exhaustive. For metropolitan areas, grantees must use employment data, 
as defined by the BLS, for the LMA in which the affected business is 
currently located and from which current jobs may be lost. For non-
metropolitan areas, grantees must use employment data, as defined by 
the BLS, for the LMA in which the assisted business is currently 
located and from which current jobs may be lost. For non-metropolitan 
areas, a LMA is either an area defined by the BLS as an LMA, or a state 
may choose to combine non-metropolitan LMAs. States are required to 
define or reaffirm prior definitions of their LMAs on an annual basis 
and retain records to substantiate such areas prior to any business 
relocation that would be impacted by this rule. Metropolitan LMAs 
cannot be combined, nor can a non-metropolitan LMA be combined with a 
metropolitan LMA. For the Insular Areas, each jurisdiction will be 
considered to be an LMA. For the HUD-administered Small Cities Program, 
each of the three participating counties in Hawaii will be considered 
to be its own LMA. Recipients of Fiscal Year 1999 Small Cities Program 
funding in New York will follow the requirements for State CDBG 
recipients.
    (iii) Operation. A business operation includes, but is not limited 
to, any equipment, employment opportunity, production capacity, or 
product line of the business.
    (iv) Significant loss of jobs. (A) 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 of the total number of persons in the labor force of that 
LMA; or in all cases, a loss of 500 or more jobs. Notwithstanding the 
aforementioned, a loss of 25 jobs or fewer does not constitute a 
significant loss of jobs.
    (B) A job is considered to be lost due to the provision of CDBG 
assistance if the job is relocated within three years from the date the 
assistance is provided to the business or the time period within which 
jobs are to be created as specified by the agreement among the 
business, the recipient, and the state (as applicable) if it is longer 
than three years.
    (3) Written agreement. Before directly assisting a business with 
CDBG funds, the recipient, subrecipient, or (in the case of any 
activity carried out pursuant to 105(a)(15)) nonprofit entity shall 
sign a written agreement with the assisted business. The written 
agreement shall include:
    (i) Statement. A statement from the assisted business 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 
and, if so, the number of jobs that will be relocated from each LMA;
    (ii) Required certification. If the assistance will not result in a 
relocation covered by this section, 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 that would result in 
a significant job loss as defined in this rule; and
    (iii) Reimbursement of assistance. The agreement shall provide for 
reimbursement to the recipient of any assistance provided to, or 
expended on behalf of, the business in the event that assistance 
results in a relocation prohibited under this section.
    (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 of 1970 
(URA), (42 U.S.C. 4601-4655); optional relocation assistance under 
section 105(a)(11), as implemented at 570.606(d);
    (ii) Microenterprises. Assistance to microenterprises as defined by 
section 102(a)(22) of the Housing and Community Development Act of 
1974; and
    (iii) 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 does not 
produce a significant loss of jobs in the LMA from which the relocation 
occurs.

0
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 Sec. Sec.  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.
* * * * *


[[Page 76371]]


    Dated: November 30, 2005.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. 05-24428 Filed 12-22-05; 8:45 am]
BILLING CODE 4210-29-P