[Federal Register Volume 71, Number 205 (Tuesday, October 24, 2006)]
[Notices]
[Pages 62372-62374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-8856]



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Part III





Department of Housing and Urban Development





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Additional Waivers Granted to and Alternative Requirements for the 
State of Mississippi Under Public Law 109-148; Notice

  Federal Register / Vol. 71, No. 205 / Tuesday, October 24, 2006 / 
Notices  

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5051-N-07]


Additional Waivers Granted to and Alternative Requirements for 
the State of Mississippi Under Public Law 109-148

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

ACTION: Notice of waivers and alternative requirements.

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SUMMARY: 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 grant, upon 
the request of the state grantee. This Notice describes the additional 
waivers for the disaster recovery grants made to the State of 
Mississippi under the subject appropriations act.

DATES: Effective Date: October 30, 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, Room 7286, 451 Seventh 
Street, SW., Washington, DC 20410, telephone number (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

    A Federal fiscal year 2006 supplemental appropriation for the 
Community Development Block Grant (CDBG) program was in 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), that appropriated $11.5 billion for 
necessary expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure in the most impacted and distressed areas 
related to the consequences of the covered disasters.
    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 
following additional waivers and alternative requirements for funds 
provided under the 2006 Act are in response to 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 Title I of the Housing and Community Development Act of 
1974, as amended (the 1974 Act), or 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.
    Except as described in this and other notices applicable to these 
grants, 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. In accordance with the 
appropriations act cited above, HUD will reconsider every waiver in 
this Notice on the two-year anniversary of the day this Notice is 
published.

Waiver Justification

    In general, waivers already granted to the State of Mississippi and 
alternative requirements already specified for CDBG disaster recovery 
grant funds provided under Public Law 109-148 apply. The notices in 
which these prior waivers and alternative requirements applicable to 
Mississippi appear are 71 FR 7666, published February 13, 2006, and 71 
FR 34457, published June 14, 2006.
    The provisions of this Notice do not apply to funds provided under 
the annual CDBG program. The provisions provide additional flexibility 
in program design and implementation and implement statutory 
requirements unique to this appropriation.
    Eligibility--wind pool reinsurance premium. The state requested 
that HUD grant an eligibility waiver to permit it to pay reinsurance 
costs for two years for the wind pool for insurance maintained by the 
Mississippi Windstorm Underwriting Association (MWUA). HUD was 
initially concerned that allowing this activity would artificially 
depress the costs of insurance in the wind pool area and result in 
people making redevelopment decisions that did not take into account 
the real balance of risks and benefits of living in the impacted areas. 
The state responded by pointing out that even with the reinsurance in 
place insurance rates would still rise substantially, that the state 
would disclose to ratepayers the risk that rates would increase more if 
reinsurance rates remained high after grant assistance ended, and that 
the state was simultaneously working to raise building standards to 
help ameliorate actual risks and possibly lower eventual insurance 
costs. HUD considered the request and the state's response and agreed 
that it is consistent with the overall purposes of the 1974 Act for the 
state to fund, in accordance with the terms described in the state's 
Action Plan, the reinsurance coverage for the wind pool maintained by 
MWUA.
    Low- and moderate-income household benefit for multi-unit housing 
projects. Rehabilitation and reconstruction of housing is an eligible 
CDBG activity. HUD has already granted the state an eligibility waiver 
to allow new construction of housing. Now the state has requested a 
related waiver to allow it to fund multi-unit projects and to measure 
benefit to low- and moderate-income households in such projects in a 
manner more supportive of mixed-income housing than the structure basis 
required by 24 CFR 570.483(b)(3). (Under the cited regulation, the 
general rule is that at least 51 percent of the residents of an 
assisted structure must be income eligible.)
    HUD has reviewed other housing assistance programs that measure 
benefit differently: by the housing unit. Under the unit approach, one 
or more of the units in a structure must house income-eligible 
families, but the remainder of the units may be market-rate, so long as 
the proportion of assistance provided compared to the overall project 
budget is no more than the proportion of units that will be occupied by 
income-eligible households compared to the number of units in the 
overall project. In other words, the rule under the structure approach 
is that a nickel of CDBG assistance to a structure means that 51 
percent of the units must meet income requirements. Under the 
proportional units approach, the number of income-eligible units is 
proportional to the amount of assistance provided. Based on HUD 
experience, the second approach is generally more compatible with 
large-scale development of mixed-income housing.
    There is HUD precedent for using the proportional unit basis in two 
programs familiar to the state: (1) the CDBG program rule has a built-
in exception that allows limited use of the unit basis for multi-unit 
non-elderly new

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construction structures with between 20 and 50 percent low- and 
moderate-income occupancy, and (2) the HOME Investment Partnerships 
program, HUD's primary housing production program, successfully uses 
its own variation on the proportional unit approach. After review of 
the state's Action Plan for Disaster Recovery and learning more about 
the state's intention to encourage mixed-income housing development, 
HUD has determined that it is consistent with the overall purposes of 
the 1974 Act to provide the state the requested additional flexibility 
in measuring program benefit.
    Therefore, the waiver and alternative requirements allow the state 
a choice. The state may measure benefit within a housing development 
project (1) according to the existing CDBG requirements, (2) according 
to the HOME program requirements at 24 CFR 92.205(d) or (3) according 
to the modified CDBG alternative requirements specified in this notice, 
which extend the CDBG exception noted above. The state must select and 
use just one method for each project. For these purposes, the term 
``project'' will have the same meaning as in the HOME program at 24 CFR 
92.2.
    Unlike the HOME program, the CDBG program does not regulate the 
maximum amount of assistance per unit, require unit and income reviews 
in the years following initial occupancy, require a specific form of 
subsidy layering review, or define affordability. The state is 
reminded, however, that CDBG does require that costs be necessary and 
reasonable and that the state must develop procedures and documentation 
to ensure that its housing investments meet this requirement. The state 
must also meet all civil rights and fair housing requirements.

Overall Benefit to Low- and Moderate-Income Persons

    The State of Mississippi has repeated its request that the 
Secretary waive the requirement that 50 percent of the CDBG funds 
received by the state under the grant made under Public Law 109-148 be 
for activities that benefit persons of low and moderate income (see 71 
FR 7666, published February 13, 2006, for the waiver granted under 
Public Law 109-148 to the original 70 percent requirement). In a June 
14, 2006, notice (71 FR 34457) the Secretary granted a waiver of the 
overall benefit requirement for the Public Law 109-148 grant to the 
extent that the state could carry out the activity of compensation for 
housing loss, (the costs of which the state believed at the time would 
consume the majority of its grant), in an ``income-blind'' manner 
because the disaster affected households without regard to income. 
Because the current $1.3 billion estimate of demand for this program 
under the eligibility criteria specified by the state is substantially 
less than the approximately $3.255 billion estimated and approved in 
the Action Plan, the state now plans to modify the activity and 
reallocate funds to additional beneficiary groups or to other 
activities through a substantial amendment to its Action Plan. Note 
that the June 14 waiver does not cover activities added or modified 
under such a substantial amendment. To recognize the actual size of the 
program and because the state subsequently repeated its request for an 
overall benefit waiver that covers all activities, HUD is replacing the 
June 14 waiver and alternative requirements with the updated waiver and 
alternative requirements in this notice. (Substantial amendments to the 
state's program after the date of this notice may trigger further 
updates.)
    To grant this waiver, the Secretary must find that it is ``not 
inconsistent'' with the CDBG program's primary purpose. This purpose is 
stated at 42 U.S.C. 5301(c):

    ``The primary objective of this chapter and of the community 
development program of each grantee under this chapter is the 
development of viable urban communities, by providing decent housing 
and a suitable living environment and expanding economic 
opportunities, principally for persons of low and moderate income.''

    Further, Public Law 109-148 stipulates that, to decrease or 
eliminate the overall benefit requirement below 50 percent, the 
Secretary of HUD must also make a finding of ``compelling need'' for 
the waiver.
    The Secretaries of HUD have granted very few overall benefit 
waivers for past disaster recoveries. The Secretary reset the 
percentage requirement for Grand Forks, North Dakota, to the actual 
pre-storm percentage of income-eligible residents in the affected area, 
and included the proviso that the City serve low- and moderate-income 
persons first, whenever feasible. HUD also allowed the State of Maine, 
following severe ice storms, an overall benefit waiver that permitted 
the state to use its entire grant to assist private utilities with 
uninsured service restoration costs. Logically, a utility grid or 
service area cannot be restored for one income group alone, and this 
type of disaster affects everyone in an area, regardless of income. 
There was no practical methodology in this example for allocating costs 
among income groups. In these two cases, the waiver supported some 
area-wide activity such as buyouts or infrastructure that arguably 
resulted in a larger total number of assisted low- and moderate-income 
households than if more targeted and measurable assistance had been 
provided.
    The case in Mississippi is more complicated than those in Maine and 
Grand Forks, because of the large number of political sub-
jurisdictions, choice of possible activities, the effects of the mix of 
activities, population movement, and the catastrophic scale of the 
disaster. As in Maine, whole areas of Mississippi were impacted 
regardless of income (and far more severely in Mississippi than in 
Maine), so many of the state's proposed activities are area-or sector-
wide. As in Grand Forks, the majority of Mississippians in the most 
impacted areas were not income-eligible prior to the storm so the 
state's recovery strategy must necessarily address the needs of a range 
of income groups.
    Mississippi has a much larger CDBG grant than either Maine or Grand 
Forks. Although the state plans to use the homeowner assistance funds 
very rapidly, it will take somewhat longer to budget and to use the 
remainder of the grant, and to determine the final benefit figures for 
the programs it plans to undertake.
    In considering the waiver request, HUD again examined the available 
post-disaster data on unmet recovery needs and the percentages of low- 
and moderate-income populations residing in the most impacted areas at 
the time of the disaster (Hancock County: 43 percent, Harrison County: 
41 percent, Jackson County: 37 percent, Pearl River County: 41 
percent.). HUD accepts the position of the state 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 designated this as its 
``primary need.'')
    HUD also considered the other CDBG disaster recovery activities the 
state is undertaking. After the June 14 waiver, the state made Action 
Plan amendments including some additional CDBG disaster recovery 
activities that do not qualify under the low- and moderate-income 
national objective, such as assistance to private utilities, wind pool 
re-insurance (mentioned elsewhere in this notice) and regional 
infrastructure development. In its Action Plan, the state described how 
these activities would address its disaster recovery needs. However, 
the state has not yet published Action Plan amendments describing the 
uses of all grant funds.
    HUD considered the data and the state's justification for its 
request.

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Considering that the state has not yet budgeted all of its grant funds 
in the Action Plan, it has a large amount of unbudgeted funds, it will 
be reallocating previously budgeted funds, and a substantial number of 
low- and moderate-income persons were impacted by the disaster, HUD 
decided that the Department does not have enough information to 
conclude that the state has compelling need for a waiver of overall 
benefit for the entire grant at this time.
    Based on the compelling need presented for the activities already 
included in the Action Plan for Disaster Recovery for the grant made 
under Public Law 109-148, HUD is granting the state a waiver of the 
requirement that at least 50 percent of the supplemental CDBG grant 
funds provided under Public Law 109-148 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, June 28, and 
July 12, 2006, Action Plan submissions, provided that the state must 
give reasonable priority for the balance of its funds to activities 
that 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. This waiver of 
overall benefit does not cover activities that may be added or modified 
under a substantial amendment to the activities mentioned in the Action 
Plan submissions listed above.
    Previously, the state 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 expects the state to continue these efforts.
    HUD is not granting the state's request that all of its activities 
be carried out under the national objective of ``urgent need'' because 
such a waiver would effectively grant an overall benefit waiver for the 
entire grant. HUD expects the state to principally benefit low- and 
moderate-income persons in activities where such design is feasible and 
reasonable, and to design its activities to meet the ``slum-blight'' or 
urgent need national objective otherwise. Consistent with the 
principles discussed above, HUD will be open to considering a further 
extension of the waiver when the uses of the balance of the available 
funds are proposed by the state.
    HUD also reminds the state that, pursuant to the instruction in 
Public Law 109-148, all waivers in this notice must be reconsidered on 
the two-year anniversary date of this notice.

Applicable Rules, Statutes, Waivers, and Alternative Requirements

    1. General note. Except as described in this Notice, the statutory, 
regulatory, and notice provisions that shall apply to the use of these 
funds are:
    a. Those governing the funds appropriated under Public Law 109-148 
and already published in the Federal Register, including those in 
Notices 71 FR 7666, published February 13, 2006; and 71 FR 34457, 
published June 14, 2006; and
    b. Those governing the Community Development Block Grant program 
for states, including those at 42 U.S.C. 5301 et seq. and 24 CFR part 
570.
    2. Low- and moderate-income benefit for multi-unit housing 
projects. HUD will consider assistance for a multi-unit housing project 
to benefit low- and moderate-income households in the following 
circumstances:
    (a)(i) The CDBG assistance defrays the development costs of a 
housing project providing eligible permanent residential units that, 
upon completion, will be occupied by low- and moderate-income 
households; and
    (ii) If the project is rental, the units occupied by low- and 
moderate-income households will be leased at affordable rents. The 
grantee or unit of general local government shall adopt and make public 
its standards for determining ``affordable rents'' for this purpose; 
and
    (iii) The proportion of the total cost of developing the project to 
be borne by CDBG funds is no greater than the proportion of units in 
the project that will be occupied by low- and moderate-income 
households; or
    (b) When CDBG funds defray the development costs of eligible 
permanent residential units, such funds shall be considered to benefit 
low and moderate income persons if the grantee follows the provisions 
of 24 CFR 92.205(d); or
    (c) The requirements of 24 CFR 570.483(b)(3) are met.
    (d) The state must select and use just one method for each project.
    (e) The term ``project'' will have the same meaning as in the HOME 
program at 24 CFR 92.2.
    (f) If the state applies option (a) or (b) above to a housing 
project, 24 CFR 570.483(b)(3) is waived for that project.
    3. Eligibility--wind pool reinsurance premium. 42 U.S.C. 5305(a) is 
waived to the extent necessary to make eligible payment of wind pool 
reinsurance premiums in accordance with the state's approved Action 
Plan and published program design.
    4. 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 to the extent necessary to permit Mississippi to 
carry out the activities contained in its March 31, June 28, and July 
12, 2006, Action Plan submissions, provided that:
    a. The state must give reasonable priority for the balance of its 
funds to activities which will primarily benefit persons of low and 
moderate income; and
    b. The State will maintain documentation of the low- and moderate-
income benefit attributable to each assisted activity, if feasible, and 
report on such benefit to HUD as part of the regular quarterly reports.
    5. Information collection approval note. HUD has approval for 
information collection requirements in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3520) under OMB control number 
2506-0165, which expires August 31, 2007. In accordance with the 
Paperwork Reduction Act, HUD may not conduct or sponsor, nor is a 
person required to respond to, a collection of information unless the 
collection displays a valid control number.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the disaster 
recovery grants under this Notice are as follows: 14.219; 14.228.

Finding of No Significant Impact

    A Finding of No Significant Impact (FONSI) 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. 4321(2)(C)). The FONSI 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: October 19, 2006.
Roy A. Bernardi,
Deputy Secretary.
[FR Doc. 06-8856 Filed 10-19-06; 3:19 pm]
BILLING CODE 4210-67-P