[Federal Register Volume 71, Number 114 (Wednesday, June 14, 2006)]
[Notices]
[Pages 34457-34461]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-5382]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5051-N-03]


Waivers Granted to and Alternative Requirements for the State of 
Mississippi'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 Community Development Block Grants 
(CDBG) disaster recovery grant provided to the State of Mississippi 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 Mississippi 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 CDBG 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 Mississippi received an allocation of 
$5,058,185,000 from this appropriation. The 2006 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,

[[Page 34458]]

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 Mississippi.
    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 Mississippi grant administrators and HUD 
field staff. Waivers and alternative requirements regarding the common 
application and reporting process for all grantees under the 2006 Act 
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 CDBG 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.
    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 Mississippi. 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 down payment 
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 of 
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 accordance with the 
appropriations act must comply with the state CDBG program rules at 24 
CFR 570.483(b)(5) or (c)(3).
    Compensation for disaster-related losses. The state plans to 
provide compensation to homeowners who lived outside the floodplain and 
whose homes were damaged by flooding during the covered disasters, if 
the homeowners agree to meet the stipulations of the published program 
design. The Department is waiving the 1974 Act and associated 
regulations to make this use of grant funds eligible.
    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 regular 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 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 or not 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 may provide additional waivers on a case-by-case basis if the 
grantee chooses to fund a flood buyout program with both HUD and 
Federal Emergency Management Agency (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

[[Page 34459]]

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) of the 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.

Overall Benefit

    The State of Mississippi has asked the Secretary to waive the 
requirement that 50 percent of the CDBG funds received by the state 
under this grant be for activities that benefit persons of low and 
moderate income (see 71 FR 7666, published February 13, 2006, for the 
waiver granted to the original 70 percent requirement) so that the 
state may carry out the activity of compensation for housing loss, the 
costs of which will consume the majority of its grant, in an ``income-
blind'' manner because the disaster affected households without regard 
to income. HUD and the state have examined the available post-disaster 
housing need data, and HUD agrees that one of the state's compelling 
needs for assistance in the disaster-affected area is to help re-
establish homeowners outside the floodplain who suffered major 
uninsured flood damage. (The state has designated this as its ``primary 
need.'') The state has agreed to examine other housing needs and to 
pursue other sources of funding to provide assistance for other 
compelling housing needs, such as for homeless and special needs 
populations, for low-income renters, and for uninsured low-income 
homeowners. HUD considered the data and the state's justification for 
its request. Based on the compelling need presented, HUD is granting 
the state a waiver of the requirement that at least 50 percent of the 
supplemental CDBG grant funds primarily benefit persons of low and 
moderate income, to the extent necessary to permit Mississippi to carry 
out the activities contained in its March 31, 2006, action plan 
submission, provided that the state must give reasonable priority for 
the balance of its funds to activities which will primarily benefit 
persons of low and moderate income. Because the data and HUD experience 
indicate that it is possible that the actual operations of the grant 
may produce a result in conformance with the 50 percent overall benefit 
requirement, HUD expects the grantee to maintain low- and moderate-
income benefit documentation for each activity providing such benefit.

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 its 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 Mississippi 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 waivers and 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:
    (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

[[Page 34460]]

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 that, 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 that 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 down payment (42 U.S.C. 5305(a)(24)(D)) and to allow new 
housing construction.
    3. Compensation for loss of housing. 42 U.S.C. 5305(a) is waived to 
the extent necessary to allow compensation for unreimbursed loss of 
housing caused by the disaster. The grantee must undertake any 
compensation activity in accordance with the state's approved action 
plan and published program design.
    4. Planning requirements. For CDBG disaster-recovery-assisted 
general 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.
    5. 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(h) 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.
    6. 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.
    7. Overall benefit. 42 U.S.C. 5301(c) and 5304(b)(3), and 24 CFR 
570.484 and 24 CFR 91.325(b)(4)(ii) with respect to the overall benefit 
requirement are waived for the CDBG disaster recovery grant covered by 
this notice to the extent necessary to permit Mississippi to carry out 
the activities contained in its March 31, 2006, action plan submission, 
provided that the state must give reasonable priority for the balance 
of its funds to activities which will primarily benefit persons of low 
and moderate income. HUD expects the grantee to maintain low- and 
moderate-income benefit documentation for each activity providing such 
benefit.
    8. Waiver of requirement for timely distribution of funds. 24 CFR 
570.494 regarding timely distribution of funds is waived.
    9. Note on the eligibility of providing funds to Enterprise and 
LISC for certain purposes. The appropriations statute provides that the 
states of Louisiana and Mississippi may each use up to $20,000,000 
(with up to $400,000 each for technical assistance) from funds made 
available under this heading for LISC and the Enterprise Foundation for 
activities authorized by section 4 of the HUD Demonstration Act of 1993 
(Pub. L. 103-120, 42 U.S.C. 9816 note), as in effect immediately before 
June 12, 1997, and for activities authorized under section 11 of the 
Housing Opportunity Program Extension Act of 1996 (Pub. L. 104-120, 42 
U.S.C. 12805 note), including demolition, site clearance and 
remediation, and program administration.
    10. Non-Federal Cost Sharing of Army Corps of Engineers Projects. 
Public Law 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

[[Page 34461]]

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(2)(C)). The Finding of No Significant 
Impact is available for public inspection between 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. Due to security measures at the 
HUD Headquarters building, please schedule an appointment to review the 
finding by calling the Regulations Division at (202) 708-3055 (this is 
not a toll-free number).

    Dated: May 26, 2006.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. 06-5382 Filed 6-9-06; 8:45 am]
BILLING CODE 4210-67-P