[Federal Register Volume 71, Number 114 (Wednesday, June 14, 2006)]
[Notices]
[Pages 34448-34451]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5381]



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Part III





Department of Housing and Urban Development





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Community Development Block Program--Notices of Waivers, Alternative 
Requirements, and Statutory Program Requirements; Notices

  Federal Register / Vol. 71, No. 114 / Wednesday, June 14, 2006 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5051-N-02]


Waivers Granted to and Alternative Requirements for the State of 
Alabama's CDBG Disaster Recovery Grant Under the Department of Defense 
Emergency Supplemental Appropriations To Address Hurricanes in the Gulf 
of Mexico, and Pandemic Influenza Act, 2006

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of waivers, alternative requirements, and statutory 
program requirements.

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SUMMARY: This notice describes additional waivers and alternative 
requirements applicable to the CDBG disaster recovery grant provided to 
the State of Alabama for the purpose of assisting in the recovery in 
the most impacted and distressed areas related to the consequences of 
Hurricane Katrina in 2005. HUD previously published an allocation and 
application notice on February 13, 2006, applicable to this grant and 
four others under the same appropriation. As described in the 
Supplementary Information section of this notice, HUD is authorized by 
statute to waive statutory and regulatory requirements and specify 
alternative requirements for this purpose, upon the request of the 
state grantee. This notice for the State of Alabama also notes 
statutory provisions affecting program design and implementation.

DATES: Effective Date: June 14, 2006.

FOR FURTHER INFORMATION CONTACT: Jan C. Opper, Director, Disaster 
Recovery and Special Issues Division, 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. Persons 
with hearing or speech impairments may access this number via TTY by 
calling the Federal Information Relay Service at (800) 877-8339. FAX 
inquiries may be sent to Mr. Opper at (202) 401-2044. (Except for the 
``800'' number, these telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION: 

Authority to Grant Waivers

    The Department of Defense, Emergency Supplemental Appropriations to 
Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 
2006 (Pub. L. 109-148, approved December 30, 2005) (the 2006 Act) 
appropriates $11.5 billion in Community Development Block Grant funds 
for necessary expenses related to disaster relief, long-term recovery, 
and restoration of infrastructure directly related to the consequences 
of the covered disasters. The State of Alabama received an allocation 
of $74,388,000 from this appropriation. The Act authorizes the 
Secretary to waive, or specify alternative requirements for, any 
provision of any statute or regulation that the Secretary administers 
in connection with the obligation by the Secretary or use by the 
recipient of these funds and guarantees, except for requirements 
related to fair housing, nondiscrimination, labor standards, and the 
environment, upon a request by the state and a finding by the Secretary 
that such a waiver would not be inconsistent with the overall purpose 
of the statute. The law further provides that the Secretary may waive 
the requirement that activities benefit persons of low and moderate 
income, except that at least 50 percent of the funds granted must 
benefit primarily persons of low and moderate income unless the 
Secretary otherwise makes a finding of compelling need. The following 
waivers and alternative requirements are in response to written 
requests from the State of Alabama.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are not inconsistent with the overall 
purpose of 42 U.S.C. 5301 et seq., Title I of the Housing and Community 
Development Act of 1974, as amended, (the 1974 Act); or of 42 U.S.C. 
12704 et seq., the Cranston-Gonzalez National Affordable Housing Act, 
as amended.
    Under the requirements of the Department of Housing and Urban 
Development Act, as amended (42 U.S.C. 3535(q)), regulatory waivers 
must be published in the Federal Register. The Department is also using 
this notice to provide information about other ways in which the 
requirements for this grant vary from regular CDBG program rules. 
Therefore, HUD is using this notice to make public alternative 
requirements and to note the applicability of disaster recovery-related 
statutory provisions. Compiling this information in a single notice 
creates a helpful resource for Alabama grant administrators and HUD 
field staff. Waivers and alternative requirements regarding the common 
application and reporting process for all grantees under this 
appropriation were published in a prior notice (71 FR 7666, published 
February 13, 2006).
    Except as described in notices regarding this grant, the statutory 
and regulatory provisions governing the Community Development Block 
Grant program for states, including those at 24 CFR part 570, shall 
apply to the use of these funds.

Descriptions of Changes

    This section of the notice briefly describes the basis for each 
waiver and provides an explanation of related alternative requirements, 
if additional explanation is necessary. This Descriptions section also 
highlights some of the statutory items and alternative requirements 
described in the sections that follow.
    The waivers, alternative requirements, and statutory changes apply 
only to the CDBG supplemental disaster recovery funds appropriated in 
the 2006 Act and allocated to the State of Alabama. These actions 
provide additional flexibility in program design and implementation and 
note statutory requirements unique to this appropriation.

Eligibility

    Eligibility--housing related. The waiver that allows new housing 
construction and payment of up to 100 percent of a housing downpayment 
is necessary following major disasters in which large numbers of 
affordable housing units have been damaged or destroyed, as is the case 
in the disasters eligible under this notice.
    General planning activities use entitlement presumption. The annual 
state CDBG program requires that local government grant recipients for 
planning-only grants must document that the use of funds meets a 
national objective. In the state CDBG program, these planning grants 
are typically used for individual project plans. By contrast, planning 
activities carried out by entitlement communities are more likely to 
include non-project specific plans such as functional land use plans, 
historic preservation plans, comprehensive plans, development of 
housing codes, and neighborhood plans related to guiding long-term 
community development efforts comprising multiple activities funded by 
multiple sources. In the annual entitlement program, these more general 
stand-alone planning activities are presumed to meet a national 
objective under the requirements at 24 CFR 570.208(d)(4). The 
Department notes that almost all effective CDBG disaster recoveries in 
the past have relied on some form of area-wide or comprehensive 
planning activity to guide overall redevelopment independent of the 
ultimate source of implementation funds. Therefore the Department is 
removing the eligibility requirement that CDBG disaster recovery 
assisted planning only grants or state directly administered planning 
activities that will guide recovery in

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accordance with the appropriations act must comply with the state CDBG 
program rules at 24 CFR 570.483(b)(5) or (c)(3).
    Anti-pirating. The limited waiver of the anti-pirating requirements 
allows the flexibility to provide assistance to a business located in 
another state or market area within the same state if the business was 
displaced from a declared area within the state by the disaster and the 
business wishes to return. This waiver is necessary to allow a grantee 
affected by a major disaster to rebuild its employment base.

Program Income

    A combination of CDBG provisions limits the flexibility available 
to the state for the use of program income. Prior to 2002, program 
income earned on disaster grants has usually been program income in 
accordance with the rules of the CDBG program of the applicable state 
and has lost its disaster grant identity, thus losing use of the 
waivers and streamlined alternative requirements. Also, the state CDBG 
program rule and law are designed for a program in which the state 
distributes all funds rather than carrying out activities directly. The 
1974 Act, as amended, specifically provides for a local government 
receiving CDBG grants from a state to retain program income if it uses 
the funds for additional eligible activities under the annual CDBG 
program. The 1974 Act allows the state to require return of the program 
income to the state under certain circumstances. This notice waives the 
existing statute and regulations to give the state, in all 
circumstances, the choice of whether a local government receiving a 
distribution of CDBG disaster recovery funds and using program income 
for activities in the Action Plan may retain this income and use it for 
additional disaster recovery activities. In addition, this notice 
allows program income to the disaster grant generated by activities 
undertaken directly by the state or its agent(s) to retain the original 
disaster recovery grant's alternative requirements and waivers and to 
remain under the state's discretion until grant closeout, at which 
point any program income on hand or received subsequently will become 
program income to the state's annual CDBG program. The alternative 
requirements provide all the necessary conforming changes to the 
program income regulations.

Relocation Requirements

    HUD is providing a limited waiver of the relocation requirements. 
HUD will work with the state to provide additional waivers if the 
grantee moves forward to fund a flood buyout program with both HUD and 
FEMA funds and requires the waivers to develop a workable program 
design.
    HUD is waiving the one-for-one replacement of low- and moderate-
income housing units demolished or converted using CDBG funds 
requirement for housing units damaged by one or more disasters. HUD is 
waiving this requirement because it does not take into account the 
large, sudden changes a major disaster may cause to the local housing 
stock, population, or local economy. Further, the requirement does not 
take into account the threats to public health and safety and to 
economic revitalization that may be caused by the presence of disaster-
damaged structures that are unsuitable for rehabilitation. As it 
stands, the requirement would impede disaster recovery and discourage 
grantees from acquiring, converting, or demolishing disaster-damaged 
housing because of excessive costs that would result from replacing all 
such units within the specified timeframe.
    HUD is also waiving the relocation benefits requirements contained 
in Section 104(d) 1974 Act to the extent they differ from those of the 
Uniform Relocation Assistance and Real Properties Acquisition Act of 
1970 (42 U.S.C. 4601 et seq.). This change will simplify implementation 
while preserving statutory protections for persons displaced by federal 
projects.

Timely Distribution of Funds

    The state CDBG program regulation regarding timely distribution of 
funds is at 24 CFR 570.494. This provision is designed to work in the 
context of an annual program in which almost all grant funds are 
distributed to units of general local government. Because the state may 
use disaster recovery grant funds to carry out activities directly, and 
because Congress expressly allowed this grant to be available until 
expended, HUD is waiving this requirement. However, HUD expects the 
State of Alabama to expeditiously obligate and expend all funds, 
including any recaptured funds or program income, in carrying out 
activities in a timely manner.

Waivers and Alternative Requirements

    1. Program income alternative requirement. 42 U.S.C. 5304(j) and 24 
CFR 570.489(e) are waived to the extent that they conflict with the 
rules stated in the program income alternative requirement below. The 
following alternative requirement applies instead.
    (a) Program income. (1) For the purposes of this subpart, ``program 
income'' is defined as gross income received by a state, a unit of 
general local government, a tribe or a subrecipient of a unit of 
general local government or a tribe that was generated from the use of 
CDBG funds, except as provided in paragraph (a)(2) of this section. 
When income is generated by an activity that is only partially assisted 
with CDBG funds, the income shall be prorated to reflect the percentage 
of CDBG funds used (e.g., a single loan supported by CDBG funds and 
other funds; a single parcel of land purchased with CDBG funds and 
other funds). Program income includes, but is not limited to, the 
following:
    (i) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with CDBG funds;
    (ii) Proceeds from the disposition of equipment purchased with CDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the unit of general local government or tribe or 
subrecipient of a state, a tribe or a unit of general local government 
with CDBG funds; less the costs incidental to the generation of the 
income;
    (iv) Gross income from the use or rental of real property owned by 
a state, tribe or the unit of general local government or a 
subrecipient of a state, tribe or unit of general local government, 
that was constructed or improved with CDBG funds, less the costs 
incidental to the generation of the income;
    (v) Payments of principal and interest on loans made using CDBG 
funds;
    (vi) Proceeds from the sale of loans made with CDBG funds;
    (vii) Proceeds from the sale of obligations secured by loans made 
with CDBG funds;
    (viii) Interest earned on program income pending disposition of the 
income, but excluding interest earned on funds held in a revolving fund 
account;
    (ix) Funds collected through special assessments made against 
properties owned and occupied by households not of low and moderate 
income, where the special assessments are used to recover all or part 
of the CDBG portion of a public improvement; and
    (x) Gross income paid to a state, tribe or a unit of general local 
government or subrecipient from the ownership interest in a for-profit 
entity acquired in return for the provision of CDBG assistance.
    (2) ``Program income'' does not include the following:

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    (i) The total amount of funds which is less than $25,000 received 
in a single year that is retained by a unit of general local 
government, tribe or subrecipient;
    (ii) Amounts generated by activities eligible under section 
105(a)(15) of the Act and carried out by an entity under the authority 
of section 105(a)(15) of the Act.
    (3) The state may permit the unit of general local government or 
tribe that receives or will receive program income to retain the 
program income, subject to the requirements of paragraph (a)(3)(ii) of 
this section, or the state may require the unit of general local 
government or tribe to pay the program income to the state.
    (i) Program income paid to the state. Program income that is paid 
to the state or received by the state is treated as additional disaster 
recovery CDBG funds subject to the requirements of this notice and must 
be used by the state or distributed to units of general local 
government in accordance with the state's Action Plan for Disaster 
Recovery. To the maximum extent feasible, program income shall be used 
or distributed before the state makes additional withdrawals from the 
Treasury, except as provided in paragraph (b) of this section.
    (ii) Program income retained by a unit of general local government 
or tribe.
    (A) Program income that is received and retained by the unit of 
general local government or tribe before closeout of the grant that 
generated the program income is treated as additional disaster recovery 
CDBG funds and is subject to the requirements of this notice.
    (B) Program income that is received and retained by the unit of 
general local government or tribe after closeout of the grant that 
generated the program income, but that is used to continue the disaster 
recovery activity that generated the program income, is subject to the 
waivers and alternative requirements of this notice.
    (C) All other program income is subject to the requirements of 42 
U.S.C. 5304(j) and subpart I of 24 CFR part 570.
    (D) The state shall require units of general local government or 
tribes, to the maximum extent feasible, to disburse program income that 
is subject to the requirements of this notice before requesting 
additional funds from the state for activities, except as provided in 
paragraph (b) of this section.
    (b) Revolving funds.
    (1) The state may establish or permit units of general local 
government or tribes to establish revolving funds to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to carry out specific activities which, 
in turn, generate payments to the fund for use in carrying out such 
activities. These payments to the revolving fund are program income and 
must be substantially disbursed from the revolving fund before 
additional grant funds are drawn from the Treasury for revolving fund 
activities. Such program income is not required to be disbursed for 
non-revolving fund activities.
    (2) The state may also establish a revolving fund to distribute 
funds to units of general local government or tribes to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to fund grants to units of general local 
government to carry out specific activities which, in turn, generate 
payments to the fund for additional grants to units of general local 
government to carry out such activities. Program income in the 
revolving fund must be disbursed from the fund before additional grant 
funds are drawn from the Treasury for payments to units of general 
local government which could be funded from the revolving fund.
    (3) A revolving fund established by either the state or unit of 
general local government shall not be directly funded or capitalized 
with grant funds.
    (c) Transfer of program income. Notwithstanding other provisions of 
this notice, the state may transfer program income before closeout of 
the grant that generated the program income to its own annual CDBG 
program or to any annual CDBG-funded activities administered by a unit 
of general local government or Indian tribe within the state.
    (d) Program income on hand at the state or its subrecipients at the 
time of grant closeout by HUD and program income received by the state 
after such grant closeout shall be program income to the most recent 
annual CDBG program grant of the state.
    2. Housing-related eligibility waivers. 42 U.S.C. 5305(a) is waived 
to the extent necessary to allow down payment assistance for up to 100 
percent of the downpayment (42 U.S.C. 5305(a)(24)(D)) and to allow new 
housing construction.
    3. Planning requirements. For CDBG disaster recovery assisted 
planning activities that will guide recovery in accordance with the 
2006 Act, the state CDBG program rules at 24 CFR 570.483(b)(5) and 
(c)(3) are waived and the presumption at 24 CFR 570.208(d)(4) applies.
    4. Waiver and modification of the anti-pirating clause to permit 
assistance to help a business return. 42 U.S.C 5305(h) and 24 CFR 
570.482 are hereby waived only to allow the grantee to provide 
assistance under this grant to any business that was operating in the 
covered disaster area before the incident date of Hurricane Katrina and 
has since moved in whole or in part from the affected area to another 
state or to a labor market area within the same state to continue 
business.
    5. Waiver of one-for-one replacement of units damaged by disaster. 
42 U.S.C. 5301(d)(2) and (d)(3) are waived to remove the one-for-one 
replacement requirements for occupied and vacant occupiable lower-
income dwelling units that may be demolished or converted to a use 
other than for housing; and to remove the relocation benefits 
requirements contained at 42 U.S.C. 5304(d) to the extent they differ 
from those of the Uniform Relocation Act. Also, 24 CFR 42.375 is waived 
to remove the requirements implementing the above-mentioned statutory 
requirements regarding replacement of housing, and 24 CFR 42.350, to 
the extent that these regulations differ from the regulations contained 
in 49 CFR part 24. These requirements are waived provided the grantee 
assures HUD it will use all resources at its disposal to ensure no 
displaced homeowner will be denied access to decent, safe and sanitary 
suitable replacement housing because he or she has not received 
sufficient financial assistance.
    6. Waiver of requirement for timely distribution of funds. 24 CFR 
570.494 regarding timely distribution of funds is waived.

Notes on Applicable Statutory Requirements

    7. Note Notes on flood buyouts:
    a. Payment of pre-flood values for buyouts. HUD disaster recovery 
entitlement communities, state grant recipients, and Indian tribes have 
the discretion to pay pre-flood or post-flood values for the 
acquisition of properties located in a flood way or floodplain. In 
using CDBG disaster recovery funds for such acquisitions, the grantee 
must uniformly apply whichever valuation method it chooses.
    b. Ownership and maintenance of acquired property. Any property 
acquired with disaster recovery grants funds being used to match FEMA 
Section 404 Hazard Mitigation Grant Program funds is subject to section 
404(b)(2) of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, as amended, which requires that such property be 
dedicated

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and maintained in perpetuity for a use that is compatible with open 
space, recreational, or wetlands management practices. In addition, 
with minor exceptions, no new structure may be erected on the property 
and no subsequent application for federal disaster assistance may be 
made for any purpose. The acquiring entity may want to lease such 
property to adjacent property owners or other parties for compatible 
uses in return for a maintenance agreement. Although federal policy 
encourages leasing rather than selling such property, the property may 
be sold. In all cases, a deed restriction or covenant running with the 
land must require that the property be dedicated and maintained for 
compatible uses in perpetuity.
    c. Future federal assistance to owners remaining in floodplain.
    (1) Section 582 of the National Flood Insurance Reform Act of 1994, 
as amended, (42 U.S.C. 5154(a)) prohibits flood disaster assistance in 
certain circumstances. In general, it provides that no federal disaster 
relief assistance made available in a flood disaster area may be used 
to make a payment (including any loan assistance payment) to a person 
for repair, replacement, or restoration for damage to any personal, 
residential, or commercial property, if that person at any time has 
received flood disaster assistance that was conditional on the person 
first having obtained flood insurance under applicable federal law and 
the person has subsequently failed to obtain and maintain flood 
insurance as required under applicable federal law on such property. 
(Section 582 is self-implementing without regulations.) This means that 
a grantee may not provide disaster assistance for the above-mentioned 
repair, replacement, or restoration to a person that has failed to meet 
this requirement.
    (2) Section 582 also implies a responsibility for a grantee that 
receives CDBG disaster recovery funds or that, under 42 U.S.C. 5321, 
designates annually appropriated CDBG funds for disaster recovery. That 
responsibility is to inform property owners receiving disaster 
assistance that triggers the flood insurance purchase requirement that 
they have a statutory responsibility to notify any transferee of the 
requirement to obtain and maintain flood insurance, and that the 
transferring owner may be liable if he or she fails to do so. These 
requirements are described below.
    (3) Duty to notify. In the event of the transfer of any property 
described in paragraph d below, the transferor shall, not later than 
the date on which such transfer occurs, notify the transferee in 
writing of the requirements to:
    (a) Obtain flood insurance in accordance with applicable federal 
law with respect to such property, if the property is not so insured as 
of the date on which the property is transferred; and
    (b) Maintain flood insurance in accordance with applicable federal 
law with respect to such property.
    (c) Such written notification shall be contained in documents 
evidencing the transfer of ownership of the property.
    (4) Failure to notify. If a transferor fails to provide notice as 
described above and, subsequent to the transfer of the property:
    (a) The transferee fails to obtain or maintain flood insurance, in 
accordance with applicable federal law, with respect to the property;
    (b) The property is damaged by a flood disaster; and
    (c) Federal disaster relief assistance is provided for the repair, 
replacement, or restoration of the property as a result of such damage, 
the transferor must reimburse the federal government in an amount equal 
to the amount of the federal disaster relief assistance provided with 
respect to the property.
    d. The notification requirements apply to personal, commercial, or 
residential property for which federal disaster relief assistance made 
available in a flood disaster area has been provided, prior to the date 
on which the property is transferred, for repair, replacement, or 
restoration of the property, if such assistance was conditioned upon 
obtaining flood insurance in accordance with applicable federal law 
with respect to such property.
    e. The term ``Federal disaster relief assistance'' applies to HUD 
or other Federal assistance for disaster relief in ``flood disaster 
areas.'' The prohibition in subparagraph (1) above applies only when 
the new disaster relief assistance was given for a loss caused by 
flooding. It does not apply to disaster assistance caused by other 
sources (i.e., earthquakes, fire, wind, etc.). The term ``flood 
disaster area'' is defined in section 582(d)(2) to include an area 
receiving a presidential declaration of a major disaster or emergency 
as a result of flood conditions.
    8. Non-Federal Cost Sharing of Army Corps of Engineers Projects. 
Pub. L. 105-276, title II, Oct. 21, 1998, 112 Stat. 2478, provided in 
part that: ``For any fiscal year, of the amounts made available as 
emergency funds under the heading `Community Development Block Grants 
Fund' and notwithstanding any other provision of law, not more than 
$250,000 may be used for the non-Federal cost-share of any project 
funded by the Secretary of the Army through the Corps of Engineers.''

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

    Dated: May 26, 2006.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. 06-5381 Filed 6-9-06; 9:06 am]
BILLING CODE 4210-67-P