[Federal Register Volume 71, Number 136 (Monday, July 17, 2006)]
[Notices]
[Pages 40633-40636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6258]



[[Page 40633]]

-----------------------------------------------------------------------

Part IV





Department of Housing and Urban Development





-----------------------------------------------------------------------



Statutory Prohibition on Use of HUD Fiscal Year (FY) 2006 Funds for 
Eminent Domain-Related Activities; Notice

Federal Register / Vol. 71, No. 136 / Monday, July 17, 2006 / 
Notices

[[Page 40634]]


-----------------------------------------------------------------------

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5077-N-01]


Statutory Prohibition on Use of HUD Fiscal Year (FY) 2006 Funds 
for Eminent Domain-Related Activities

AGENCY: Office of the General Counsel, HUD.

ACTION: Notice.

-----------------------------------------------------------------------

SUMMARY: The statute appropriating FY2006 funds for HUD and certain 
other executive departments and agencies includes an administrative 
provision that prohibits the use of FY2006 funds to support any 
Federal, state or local project that seeks to use the power of eminent 
domain, unless that power is sought for certain public uses. With the 
commencement of allocation of FY2006 funds under HUD's formula funded 
programs such as the Community Development Block Grant (CDBG) program 
and publication of HUD's FY2006 Super Notice of Funding Availability 
(SuperNOFA) on March 8, 2006, this notice advises that this provision 
may be applicable to certain activities funded by FY2006 HUD 
appropriations.

FOR FURTHER INFORMATION CONTACT: For further information concerning 
applicability of the eminent domain provision to HUD's Community 
Development Block Grant program, contact Stanley Gimont, Director, 
Entitlement Communities Division, Office of Community Planning and 
Development, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 7282, Washington, DC 20410, telephone (202) 708-1577 
(this is not a toll free number). For information concerning the 
applicability of the eminent domain provision to other HUD programs or 
for legal questions about the provision, contact Elton Lester, 
Assistant General Counsel for Community Development, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW, Room 8158, Washington, DC 20410, telephone (202) 708-2027 
(this is not a toll free number). Persons with hearing or speech 
impairments may access these numbers by calling the toll free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    On November 30, 2005, President Bush signed into law the 
Transportation, Treasury, Housing and Urban Development, the Judiciary, 
the District of Columbia, and Independent Agencies Appropriations Act 
for FY2006 (Pub. L. 109-115) (TTHUD FY2006 Appropriations Act). The 
TTHUD FY2006 Appropriations Act includes an administrative provision in 
Title VII (General Provisions of the Act), section 726, which restricts 
the use of funds appropriated under the act to support any federal, 
state, or local project that seeks to use the power of eminent domain 
unless eminent domain is employed only for a public use that does not 
involve economic development which primarily benefits private entities.
    Senator Christopher S. Bond introduced the amendment in response to 
the June 23, 2005 decision of the U.S. Supreme Court in the case of 
Kelo v. City of New London (125 S.Ct. 2655 (2005)). (Section 726 is 
also commonly referred to as the Bond Amendment.) The Kelo case 
involved the exercise of eminent domain authority by the City of New 
London, Connecticut, to condemn privately owned real property 
(privately owned homes) so that the property could be used as part of a 
comprehensive development plan that the city submitted would help 
revitalize its ailing economy. In this case, the Supreme Court held 
that the power of eminent domain can be used to transfer private 
property to new private owners in furtherance of an economic 
development plan without violating the ``public use'' requirement of 
the Fifth Amendment.\1\
---------------------------------------------------------------------------

    \1\ Previous decisions of the Court in Berman v. Parker, 348 
U.S. 26 (1954), and Hawaii Housing Authority v. Midkiff, 467 U.S. 
229 (1984), had held that a private re-use of property taken by 
eminent domain constitutes a public use when it is for the public 
purpose of redeveloping a blighted area, or reducing extreme 
concentrations of land ownership, respectively.
---------------------------------------------------------------------------

    In response to this Supreme Court decision, Senator Bond, Chairman 
of the Senate Appropriations Subcommittee that appropriates funds for 
the Departments of HUD, Transportation, Treasury, and certain other 
executive agencies, introduced an amendment to be included in the TTHUD 
FY2006 Appropriations Act that prohibits the use of federal funds for 
certain activities that involve the exercise of the power of eminent 
domain. The Senator stated ``This amendment seeks to put some 
guidelines in place when it comes to the use of federal funds on 
projects where eminent domain is used. We need to take a closer look at 
how the use of eminent domain is effecting our communities.'' (See 
http://bond.senate.gov/press_section/record.cfm?id=247420.)

    The full text of Section 726 states as follows:

    SEC. 726. No funds in this Act may be used to support any 
Federal, State, or local projects that seek to use the power of 
eminent domain, unless eminent domain is employed only for a public 
use: Provided, That for purposes of this section, public use shall 
not be construed to include economic development that primarily 
benefits private entities: Provided further, That any use of funds 
for mass transit, railroad, airport, seaport or highway projects as 
well as utility projects which benefit or serve the general public 
(including energy-related, communication-related, water-related and 
wastewater-related infrastructure), other structures designated for 
use by the general public or which have other common-carrier or 
public-utility functions that serve the general public and are 
subject to regulation and oversight by the government, and projects 
for the removal of an immediate threat to public health and safety 
or brownsfield as defined in the Small Business Liability Relief and 
Brownsfield Revitalization Act (Public Law 107-118) shall be 
considered a public use for purposes of eminent domain: Provided 
further, That the Government Accountability Office, in consultation 
with the National Academy of Public Administration, organizations 
representing State and local governments, and property rights 
organizations, shall conduct a study to be submitted to the Congress 
within 12 months of the enactment of this Act on the nationwide use 
of eminent domain, including the procedures used and the results 
accomplished on a state-by-state basis as well as the impact on 
individual property owners and on the affected communities.

II. Applicability of Section 726

A. Applicability of Section 726 Generally

    1. Applicable Only to Certain Federal Departments and Agencies. 
Section 726 is not a governmentwide prohibition. Section 726's 
prohibition on the use of FY2006 federal funds to support projects that 
involve the exercise of eminent domain authority applies only to the 
Departments of Transportation, Treasury, HUD and the other executive 
agencies for which funds are appropriated under the TTHUD FY2006 
Appropriations Act.
    2. Applicable Only to Use of FY2006 Appropriated Funds. Section 726 
is limited to the use of FY2006 funds appropriated under the TTHUD 
FY2006 Appropriations Act. Section 726 does not apply to prior year 
funds; that is, it is not applicable to funds appropriated prior to 
FY2006. Section 726 is not permanent law; that is, it does not apply to 
all fiscal years after FY2006. The restrictions of the section 726, 
however, will continue to follow and apply to FY2006 funds regardless 
of the year in which the funds are reserved, obligated or expended.

[[Page 40635]]

    3. Certain Projects Categorized as Public Use Projects. Section 726 
categorizes certain projects as serving an otherwise eligible public 
use and these projects, therefore, are eligible for federal funding 
even though their development may involve property taken by eminent 
domain. Section 726 categorizes the following projects as serving a 
public use: Mass transit, railroad, airport, seaport or highway 
projects, utility projects which benefit or serve the general public 
(including energy-related, communication-related, water-related and 
wastewater-related infrastructure), structures for use by the general 
public or which have other common-carrier or public-utility functions 
that serve the general public and are subject to regulation and 
oversight by the government, and projects that involve the removal of 
an immediate threat to public health and safety or the removal of 
brownfields.
    4. Applicability to Eminent Domain Actions. Section 726 applies to 
the use of the power of eminent domain after the effective date of the 
TTHUD FY2006 Appropriations Act, which is November 30, 2005, and only 
in those cases where funds appropriated under the FY2006 Appropriations 
Act would, in some nature, be involved in supporting a project that 
seeks to use the power of eminent domain to acquire real property. This 
would not include any transfer of title before November 30, 2005, 
resulting from use of eminent domain authority. It would include any 
action involving the use of FY2006 funds, on or after November 30, 
2005, to initiate condemnation proceedings, permit the continuation of 
condemnation proceedings (regardless of when they were initiated), or 
threaten the use of eminent domain, whether or not such action results 
in a transfer of title.
    5. Self-Implementing Amendment. HUD considers section 726 to be a 
``self-implementing'' provision. This means that recipients of funds 
under the TTHUD FY2006 Appropriations Act are expected to comply with 
the prohibitions of the amendment in the development and execution of 
activities assisted with HUD FY2006 funds. This Notice is the 
Department's implementation guidance with respect to section 726 and 
HUD does not intend to issue any regulations with respect to the 
provision.

B. Applicability of Section 726 to HUD

    1. Primarily Applicable to HUD's Community Planning and Development 
Programs, Particularly Community Development Block Grant Program. Given 
the very specific and non-economic development activities funded under 
the majority of HUD programs, the applicability of section 726 will 
largely impact programs administered by HUD's Office of Community 
Planning and Development (CPD), particularly, the Community Development 
Block Grant (CDBG) program. CDBG funds are allocated annually by 
formula to states and local governments that have eminent domain 
authority. CDBG, in this context, also encompasses the section 108 loan 
guarantee program, Brownfields Economic Development Initiative (BEDI), 
Indian CDBG program, and the Insular Area CDBG program.
    Eligible uses of CDBG, as defined in section 105 of the Housing and 
Community Development Act of 1974, as amended, include:
     Section 105(a)(1) which authorizes the acquisition of real 
property;
     Section 105(a)(17) which authorizes the provision of CDBG 
assistance to for-profit entities to carry out an economic development 
project;
     Section 105(a)(14) which authorizes the provision of 
assistance to public or private nonprofit entities for activities 
including acquisition of real property; and acquisition, construction, 
or installation of commercial or industrial real property improvements;
     Section 105(a)(11) which authorizes relocation payments 
and assistance; and
     Section 105(a)(15) which authorizes assistance to 
community-based development organizations carrying out activities 
including community economic development projects.

Each of these activities may, in some way, involve the exercise of 
eminent domain authority at the state or local level. CDBG grantees 
will have to carefully evaluate the facts of any project proposed to 
receive FY2006 CDBG funds where the exercise of eminent domain is 
involved. Grantees are encouraged to consult with HUD field staff on 
any such project. It will also be important for HUD field staff to be 
conversant with any changes in state or local laws that may impact the 
use of CDBG funds for property acquisition pursuant to the exercise of 
eminent domain authority and in support of economic development 
projects. To ensure proper implementation of section 726, it is 
critical that HUD and its grantees have a strong dialogue about these 
situations and develop and apply common sense solutions where CDBG 
funding and the exercise of eminent domain and economic development 
intersect.
    2. Low- and Moderate-Income Housing Development Generally Not 
Economic Development under section 726. Among the eligible uses of 
funds under the CDBG program are certain activities that support 
housing development for low-to moderate-income families. It is 
generally anticipated that such housing development will not constitute 
economic development within the meaning of section 726. Therefore, it 
is anticipated that CDBG funds, as well as HUD's housing assistance 
programs, could be used to support projects in which the sole use of 
eminent domain is to acquire land exclusively for the development of 
housing for low-to moderate-income families. Housing developments, 
however, that are ``mixed use'' development may raise section 726 
concerns. These concerns are heightened where the amount of retail or 
commercial space is more than incidental in relation to the amount of 
housing. However, mixed-used housing developments that involve the 
exercise of eminent domain, even those with a relatively small amount 
of retail or commercial space, will require careful evaluation.
    3. Limited Applicability to Other HUD Programs. Funds appropriated 
for the majority of HUD programs are appropriated for very specific 
uses that typically do not involve economic development activities, 
and, therefore, these funds are not likely to be subject to section 
726. For example, annual appropriations for HUD include funding for 
public housing agencies (PHAs) for tenant-based rental assistance, 
project-based rental assistance, and to meet capital and operating 
needs for public housing; for commitments to insure loans under the 
Federal Housing Administration (FHA); and for expenditures pending the 
receipt of collections under the Manufactured Housing Fees Trust fund, 
to name a few.
    4. Permissible Activities to Remove Threats to Public Health and 
Safety or Remove Brownfields. As noted in section II.A.3 of this 
notice, several specific types of projects that are expressly 
identified in the second proviso of section 726 as public uses for 
which eminent domain may be used without triggering the funding 
prohibition. Within this listing of permissible public uses, two 
provisions warrant the attention of CDBG grantees. The first is the 
reference to projects for the removal of an immediate threat to public 
health and safety. The second is the inclusion of projects intended to 
remove brownfields, as they are defined in the Small Business Liability 
Relief

[[Page 40636]]

and Brownfields Revitalization Act.\2\ As CDBG-funded projects are 
often directed to such purposes, grantees may find that many projects 
qualify under one or both of these provisions, and are therefore 
eligible for federal funding.
---------------------------------------------------------------------------

    \2\ Section 211(a) of the Small Business Liability Relief and 
Brownfields Revitalization Act established a definition for 
``brownfield site'' (not ``brownsfield''). The definition, now 
codified at 42 U.S.C. 9601(39)(A), states that a brownfield site is 
``real property, the expansion, redevelopment or reuse of which may 
be complicated by the presence or potential presence of a hazardous 
substance, pollutant or contaminant.''
---------------------------------------------------------------------------

    5. Staff Salaries and Expenses. Where a project is determined to be 
subject to the funding prohibition of section 726, grantees may not use 
FY2006 funds to pay for staff time expended on the project. This will 
require grantees to carefully allocate time in accordance with OMB 
Circular A-87 (``Cost Principles for State, Local, and Indian Tribal 
Governments'').
    6. Program Income. Any program income generated by the use of CDBG 
funds appropriated for FY2006 is not covered by the restrictions of 
section 726.

III. Summary

    With the publication of HUD's FY2006 SuperNOFA on March 8, 2006, 
and with the commencement of allocation of FY2006 funds under HUD's 
formula programs, grantees of these funds, particularly CDBG grantees, 
are encouraged to carefully evaluate the facts of any project or 
activity proposed to receive FY2006 HUD funds where eminent domain 
acquisition is involved, and to consult with HUD staff, as may be 
appropriate.

    Dated: July 6, 2006.
Keith E. Gottfried,
General Counsel.
[FR Doc. 06-6258 Filed 7-14-06; 8:45 am]
BILLING CODE 4210-67-P