[Federal Register Volume 72, Number 1 (Wednesday, January 3, 2007)]
[Proposed Rules]
[Pages 62-66]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-22502]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR-5013-P-01]
[RIN 2506-AC19]


Community Development Block Grant Program; Small Cities Program; 
Proposed Rule

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would amend HUD's regulations governing the 
Community Development Block Grant (CDBG) program for non-entitlement 
areas in the state of Hawaii. Pursuant to statutory authority, the 
state of Hawaii has elected not to administer funds to units of general 
local governments located in non-entitlement areas within the state. 
The statute provides that if Hawaii opts to not assume responsibility 
for the program, then the Secretary of HUD will make grants to the 
units of general local government located in Hawaii's non-entitlement 
areas, employing the same distribution formula as was used under prior 
regulations. This proposed rule would modify HUD's regulations to 
clarify how the CDBG program will be implemented in the non-entitlement 
areas of Hawaii. HUD has also taken the opportunity afforded by this 
proposed rule to update and streamline the subpart F regulations, 
particularly with regard to the HUD-administered Small Cities program 
in New York, which awarded its last competitive grant in Fiscal Year 
(FY) 1999.

DATES: Comments Due Date: March 5, 2007.

ADDRESSES: Interested persons are invited to submit comments regarding 
this proposed rule to the Office of the General Counsel, Rules Docket 
Clerk, Department of Housing and Urban Development, 451 Seventh Street, 
SW., Room 10276, Washington, DC 20410-0001. Communications should refer 
to the above docket number and title and should contain the information 
specified in the ``Request for Comments'' section.
    Electronic Submission of Comments. Interested persons may submit 
comments electronically through the Federal eRulemaking Portal at 
http://www.regulations.gov. HUD strongly encourages commenters to 
submit comments electronically. Electronic submission of comments 
allows the commenter maximum time to prepare and submit a comment, 
ensures timely receipt by HUD, and enables HUD to make comments 
immediately available to the public. Comments submitted electronically 
through the http://www.regulations.gov Web site can be viewed by other 
commenters and by members of the public. Commenters should follow the 
instructions provided on that site to submit comments electronically.
    No Facsimile Comments. Facsimile (FAX) comments are not acceptable. 
In all cases, communications must refer to the docket number and title.
    Public Inspection of Public Comments. All comments and 
communications submitted to HUD will be available, without charge, for 
public inspection and copying between 8 a.m. and 5 p.m. weekdays at the 
above address. Due to security measures at the HUD Headquarters 
building, an advance appointment to review the public comments must be 
scheduled by calling the Regulations Division at (202) 708-3055 (this 
is not a toll-free number). Individuals with hearing or speech 
impairments may access this telephone number via TTY by calling the 
Federal Information Relay Service at (800) 877-8339. Copies of all 
comments submitted are available for inspection and downloading at 
http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Stephen Rhodeside, Senior Program 
Officer, State and Small Cities Division, Office of Block Grant 
Assistance, Office of Community Planning and Development, Department of 
Housing and Urban Development, 451 Seventh Street, SW., Room 7184, 
Washington, DC 20410-7000; telephone (202) 708-1322 (this is not a 
toll-free number). Individuals with speech or hearing impairments may 
access this telephone number via TTY by calling the toll-free Federal 
Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: 

I. Background

    The CDBG program is authorized under the Housing and Community 
Development Act of 1974 (42 U.S.C. 5301 et seq.) (HCD Act). Under the 
CDBG program, HUD allocates funds by formula among eligible state and 
local governments for activities that principally benefit low- and 
moderate-income persons, aid in the elimination of slums or blighting 
conditions, or meet other community development needs having a 
particular urgency.
    Section 106 of Title I of the HCD Act permits states to elect to 
assume administrative responsibility for the CDBG program for non-
entitlement areas within their jurisdiction. The HCD Act defines a non-
entitlement area as an area that is not a metropolitan city or part of 
an urban county and does not include federally or state-recognized 
Indian tribes. In the event that a state elects not to administer the 
CDBG program, Section 106 provides that HUD will administer the CDBG 
program for non-entitlement areas within the state. HUD's regulations 
at 24 CFR part 570, subpart F describe the policies and procedures for 
HUD's administration of the CDBG program in non-entitlement areas.
    Section 218 of the Consolidated Appropriations Act, 2004, (Pub. L. 
108-199, approved January 23, 2003) required that, by July 31, 2004, 
the state of Hawaii had to elect if it would distribute funds under 
section 106(d)(2) of the HCD Act to units of general local government 
located in its non-entitlement areas. On August 5, 2004, the Governor 
of Hawaii notified HUD that the state had elected not to take over the 
CDBG program in the non-entitlement areas within its jurisdiction. In 
accordance with the Consolidated Appropriations Act, 2004, the 
Secretary of HUD permanently assumed administrative responsibility for 
making grants to the units of general local government located in 
Hawaii's non-entitlement areas (Hawaii, Kauai, and Maui counties) for 
all future fiscal years, beginning in 2005.
    Section 218 of the Consolidated Appropriations Act, 2004, requires 
the Secretary of HUD to allocate CDBG funds to the units of local 
government located in Hawaii's non-entitlement areas based upon the 
same distribution formula currently used to compute their grant funds. 
The formula takes into consideration population, poverty, and housing 
overcrowding in these areas. HUD uses the factors to compute a weighted 
ratio (the extent of poverty is accorded twice as much significance as 
the population and housing overcrowding factors), which then determines 
the allocation of funds.

II. This Proposed Rule

    This proposed rule would implement section 218 of the Consolidated 
Appropriations Act, 2004, by amending HUD's regulations at 24 CFR part 
570 to

[[Page 63]]

set forth the policies and procedures applicable to grants for non-
entitlement areas in states that have not elected to administer the 
CDBG program. On December 27, 1994, the Hawaii Small Cities regulations 
were amended, by a final rule (59 FR 66594) that became effective on 
January 26, 1995, to treat the three non-entitlement counties of Hawaii 
similar to entitlement grantees, to the greatest extent allowable under 
statute. As a result, the regulatory changes that are being made in 
this proposed rule are relatively minor in scope, and are described 
below.
    HUD has also taken the opportunity afforded by this proposed rule 
to update and streamline the subpart F regulations, particularly with 
regard to the HUD-administered Small Cities program in New York. The 
final competitive grants made under this program were awarded in FY 
1999, and almost all New York Small Cities projects expended their 
funds by the close of FY 2006. The subpart F regulations contain 
outdated provisions regarding the New York Small Cities program that 
are no longer necessary and, therefore, would be removed by this rule. 
These regulatory changes are also described below.

A. Proposed Revisions to 24 CFR Part 570, Subpart F

    Title of Subpart F. In order to clarify and differentiate the 
programs contained within the regulations, the title of subpart F would 
be amended to read, ``Small Cities, Non-entitlement CDBG Grants in 
Hawaii and Insular Areas.''
    Section 570.420. Since the three Hawaii non-entitlement counties 
will be treated as entitlement grantees, Sec.  570.420, which 
establishes the general requirements for HUD administration of non-
entitlement grants, would be amended to remove all references to the 
HUD-administered small cities program in Hawaii. Section 570.420 will 
apply only to the Insular Areas program and the HUD-administered Small 
Cities program in New York for grants made prior to FY 2000. Section 
570.420(c), which governs public notification requirements for 
competitive grants under the HUD-administered Small Cities program, 
would also be removed. This provision is obsolete, since the final 
award of such competitive grants were made in FY 1999.
    Section 570.427. Amendments made to New York Small Cities projects 
that involve new activities or alteration of existing activities that 
will significantly change the scope, location, or objectives of 
approved activities or beneficiaries require HUD approval. Section 
570.427(a) of the regulations would be amended to provide that HUD 
approval would be granted if the activity meets all of the applicable 
requirements of the regulations. As noted above, almost all of the New 
York Small Cities projects expended all of their funds by September 30, 
2006. This regulatory change would allow HUD to approve amendments for 
post-closeout activities that will be funded with program income, 
without having to re-rank the amended project against the original 
Small Cities rating criteria. Since the original intent of the projects 
has already been completed, this amendment will allow units of general 
local government the flexibility to target projects funded with program 
income to the needs of their citizens, without burdening the Department 
to re-rate proposed program amendments against criteria that are no 
longer relevant.
    Section 570.429. Section 570.429 governs the general requirements 
and grant requirements pertaining to the state of Hawaii. This section 
will be modified to reflect the changes required by section 218 of the 
Consolidated Appropriation Act, 2004. The proposed revisions also 
stress HUD's policy of treating the non-entitlement areas as 
entitlement areas to the greatest extent that is statutorily 
permissible.
    Section 570.429(a) would be amended to state that the non-
entitlement counties in Hawaii are to be treated as entitlement 
grantees, with the exception of: (1) How allocations are calculated, 
and (2) the source of their CDBG funding. Section 570.429(b) will be 
amended to state that the Hawaii non-entitlement counties will be 
governed by Subpart D of the part 570 regulations in the grant 
submission and approval process. (Subpart D establishes the policies 
and procedures governing entitlement grants.)
    HUD proposes to remove Sec.  570.429(d), entitled ``Adjustment to 
Grants.'' In keeping with the intent of the statutory change, grant 
adjustments for the non-entitlement counties in Hawaii will be handled 
under the procedures for entitlement grantees under 24 CFR part 570, 
subpart O (entitled, ``Performance Reviews''). HUD also proposes to 
remove the following paragraphs of Sec.  570.429 as unnecessary due to 
the treatment of Hawaii's non-entitlement areas under the procedures 
governing entitlement grantees: Paragraph (f) (regarding required 
submissions), paragraph (g) (regarding application approval), paragraph 
(h) (regarding grant agreements), and paragraph (i) (regarding 
conditional grants).
    Section 570.430. The regulation at Sec.  570.430 establishes 
requirements for Hawaii program grants made prior to FY 1995. Because 
all of the funds for pre-1995 grants have been expended, this provision 
will be removed and the non-entitled counties will follow entitlement 
rules for the administration of their existing grants and all future 
grants.
    Section 570.432. Section 570.432, which governs the use of Small 
Cities grants to repay Section 108 loans, will be removed because there 
will be no future competitively awarded Small Cities grants that can be 
used to pay Section 108 debt obligations. The non-entitlement counties 
in Hawaii will follow the requirements of Subpart M of the regulations 
with regard to repayment of Section 108 loan guarantees.

B. Other Proposed Regulatory Changes

    Use of the term ``Non-entitlement CDBG Grants in Hawaii.'' The term 
``Non-entitlement CDBG Grants in Hawaii'' has been inserted into 
various provisions of 24 CFR part 570 to refer to either the HUD-
administered program or to the program's recipients. The provisions 
where the proposed term has either been substituted or added include 
Sec. Sec.  570.200, 570.300, 570.429, and 570.902. By utilizing this 
term, HUD intends to avoid confusion with the competitively awarded 
HUD-administered Small Cities program, which made its last new grant in 
FY 1999, virtually all of which was expended by September 30, 2006, and 
which has operated only in New York state.
    Section 570.208. Section 570.208, which describes the criteria for 
CDBG national objectives, would be revised to state that the three non-
entitled Hawaii counties cannot use the exception criteria, since they 
do not meet the definition of a metropolitan city or urban county in 
Section 102(a) of the HCD Act.
    Section 570.209. Section 570.209(b)(2)(i) will be revised to 
include non-entitlement CDBG grants in Hawaii. Non-entitlement CDBG 
grantees in Hawaii would now apply aggregate standards for evaluating 
public benefit to all applicable activities for which CDBG funds are 
obligated for each program year.
    Section 570.300. (Section 570.300 will be revised to clarify that 
Sec. Sec.  570.307 (Urban Counties) and 570.308 (Joint Requests) do not 
apply to non-entitlement CDBG grants in Hawaii.
    Section 570.901. Section 570.901 will be revised to move the 
compliance requirements for non-entitlement CDBG grants in Hawaii from 
Sec.  570.901(e) to Sec.  570.901(d).

[[Page 64]]

    Section 570.902. Section 570.902 will be changed to treat non-
entitlement CDBG grants in Hawaii in the same manner as entitlements in 
determining if activities are being implemented in a timely manner.
    Section 570.911. Section 570.911 will be revised to treat non-
entitlement CDBG grants in Hawaii in the same manner as entitlements 
with regard to grant reductions.

III. Findings and Certifications

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this proposed 
rule under Executive Order 12866 (entitled ``Regulatory Planning and 
Review''). OMB determined that this rule is a ``significant regulatory 
action,'' as defined in section 3(f) of the Order (although not 
economically significant, as provided in section 3(f)(1) of the Order). 
The docket file is available for public inspection between the hours of 
8 a.m. and 5 p.m. in the Office of Regulations, Department of Housing 
and Urban Development, 451 Seventh Street, SW., Room 10276, Washington, 
DC 20410. Due to security measures at the HUD Headquarters building, an 
advance appointment to review the public comments must be scheduled by 
calling the Regulations Division at (202) 708-3055 (this is not a toll-
free number). Hearing- and speech-impaired persons may access the 
telephone number listed above via TTY by calling the Federal 
Information Relay Service at (800) 877-8339.

Information Collection Requirements

    The information collection requirements contained in this proposed 
rule have been approved by OMB under the Paperwork Reduction Act of 
1995 (44 U.S.C. 3501-3520) and assigned OMB Control Number 2506-0020. 
The amendments proposed by this rule do not revise the information 
collection requirements as originally approved by OMB. In accordance 
with the Paperwork Reduction Act, HUD may not conduct or sponsor, and a 
person is not required to respond to, a collection of information 
unless the collection displays a currently valid OMB control number.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) (UMRA) establishes requirements for federal agencies to 
assess the effects of their regulatory actions on state, local, and 
tribal governments and the private sector. This proposed rule does not 
impose any federal mandates on any state, local, or tribal government 
or the private sector within the meaning of UMRA.

Executive Order 13132, Federalism

    Executive Order 13132 (entitled ``Federalism'') prohibits, to the 
extent practicable and permitted by law, an agency from promulgating a 
regulation that has federalism implications and either imposes 
substantial direct compliance costs on state and local governments and 
is not required by statute, or preempts state law, unless the relevant 
requirements of section 6 of the executive order are met. This rule 
does not have federalism implications and does not impose substantial 
direct compliance costs on state and local governments or preempt state 
law within the meaning of the executive order.

Impact on Small Entities

    The Secretary, in accordance with the Regulatory Flexibility Act (5 
U.S.C. 605(b)), has reviewed and approved this proposed rule and in so 
doing certifies that this rule will not have a significant economic 
impact on a substantial number of small entities for the following 
reasons. This rule only codifies, in HUD's regulations, procedures that 
will enable the Department to treat the three non-entitled Hawaii 
counties as entitlement grantees. Since the non-entitled counties 
previously were funded annually by formula and were treated as 
entitlement grantees as much as statutorily possible, the rule does not 
significantly differ from the current status in terms of the impact on 
the number of entities, the amount of funding, or the governing 
requirements applicable.
    Notwithstanding HUD's determination that this rule will not have a 
significant economic impact on a substantial number of small entities, 
HUD specifically invites comments regarding any less burdensome 
alternatives to this rule that will meet HUD's objectives as described 
in this preamble.

Environmental 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 the hours of 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, an advance appointment to 
review the finding must be scheduled by calling the Regulations 
Divisions at (202) 708-3055 (this is not a toll-free number). Hearing- 
and speech-impaired persons may access the telephone number listed 
above via TTY by calling the Federal Information Relay Service at (800) 
877-8339.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the CDBG 
Small Cities program is 14.219, and the number for the CDBG Entitlement 
program is 14.218.

List of Subjects in 24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
development block grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Lead poisoning, Loan 
programs--housing and community development, Low- and moderate-income 
housing, New communities, Northern Mariana Islands, Pacific Islands 
Trust Territory, Pockets of poverty, Puerto Rico, Reporting and 
recordkeeping requirements, Small cities, Student aid, Virgin Islands.
    Accordingly, for the reasons described in the preamble, HUD 
proposes to amend 24 CFR parts 570 as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

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

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

    2. Revise Sec.  570.200(a)(3) introductory text to read as follows:


Sec.  570.200  General Policies.

    (a) * * *
    (3) Compliance with the primary objective. The primary objective of 
the Act is described in section 101(c) of the Act. Consistent with this 
objective, entitlement recipients, non-entitlement CDBG grantees in 
Hawaii, and recipients of insular area funds under section 106 of the 
Act must ensure that over a period of time specified in their 
certification not to exceed three years, not less than 70 percent of 
the aggregate of CDBG fund expenditures shall be for activities meeting 
the criteria under Sec.  570.208(a) or under Sec.  570.208(d)(5) or (6) 
for benefiting low- and moderate-income persons. For grants under 
section 107 of the Act, insular area recipients must meet this 
requirement

[[Page 65]]

for each separate grant. See Sec.  570.420(d)(3) for additional 
discussion of the primary objective requirement for insular areas 
funded under section 106 of the Act. The requirements for the HUD-
administered Small Cities program in New York are at Sec.  
570.420(d)(2). In determining the percentage of funds expended for such 
activities:
* * * * *
    3. Revise Sec.  570.208(a)(1)(ii) introductory text to read as 
follows:


Sec.  570.208  Criteria for national objectives.

* * * * *
    (a) * * *
    (1) * * *
    (ii) For metropolitan cities and urban counties, an activity that 
would otherwise qualify under Sec.  570.208(a)(1)(i), except that the 
area served contains less than 51 percent low- and moderate-income 
residents, will also be considered to meet the objective of benefiting 
low- and moderate-income persons where the proportion of such persons 
in the area is within the highest quartile of all areas in the 
recipient's jurisdiction in terms of the degree of concentration of 
such persons. This exception is inapplicable to non-entitlement CDBG 
grants in Hawaii. In applying this exception, HUD will determine the 
lowest proportion a recipient may use to qualify an area for this 
purpose, as follows:
* * * * *
    4. Sec.  570.209(b)(2)(i) is to be revised to read as follows:


Sec.  570.209  Guidelines for evaluating and selecting economic 
development projects.

* * * * *
    (b) * * *
    (2) Applying the aggregate standards. (i) A metropolitan city, an 
urban county, or a non-entitlement CDBG grantee in Hawaii shall apply 
the aggregate standards under paragraph (b)(1) of this section to all 
applicable activities for which CDBG funds are first obligated within 
each single CDBG program year, without regard to the source year of the 
funds used for the activities. A grantee under the HUD-administered 
Small Cities or Insular Areas CDBG programs shall apply the aggregate 
standards under paragraph (b)(1) of this section to all funds obligated 
for applicable activities from a given grant; program income obligated 
for applicable activities will, for these purposes, be aggregated with 
the most recent open grant. For any time period in which a community 
has no open HUD-administered or Insular Areas grants, the aggregate 
standards shall be applied to all applicable activities for which 
program income is obligated during that period.
* * * * *
    5. Revise Sec.  570.300 to read as follows:


Sec.  570.300  General.

    This subpart describes the policies and procedures governing the 
making of community development block grants to entitlement communities 
and to non-entitlement counties in the state of Hawaii. The policies 
and procedures set forth in subparts A, C, J, K, and O of this part 
also apply to entitlement grantees and to non-entitlement grantees in 
the state of Hawaii. Sections 570.307 and 570.308 of this subpart do 
not apply to the Hawaii non-entitlement grantees.
    6. Revise the heading of Subpart F to read as follows:

Subpart F--Small Cities, Non-Entitlement CDBG Grants in Hawaii and 
Insular Areas Programs

    7. In Sec.  570.420:
    a. Revise paragraphs (a)(1) and (b)(1);
    b. Remove Sec.  570.420(c);
    c. Redesignate paragraphs (d), (e), and (f) as paragraphs 
Sec. Sec.  570.420 (c), (d), and (e), respectively; and
    d. Revise the newly designated paragraph (e) to read as follows:


Sec.  570.420  General.

    (a) Administration of Non-entitlement CDBG funds by HUD or Insular 
Areas--(1) Small cities. The Act permits each state to elect to 
administer all aspects of the CDBG program annual fund allocation for 
the non-entitlement areas within its jurisdiction. All states except 
Hawaii have elected to administer the CDBG program for non-entitlement 
areas within their jurisdiction. This section is applicable to active 
HUD-administered small cities grants in New York. The requirements for 
the non-entitlement CDBG grants in Hawaii are set forth in Sec.  
570.429 of this subpart. States that elected to administer the program 
after the close of Fiscal Year 1984 cannot return administration of the 
program to HUD. A decision by a state to discontinue administration of 
the program would result in the loss of CDBG funds for non-entitlement 
areas in that state and the reallocation of those funds to all states 
in the succeeding fiscal year.
* * * * *
    (b) Scope and applicability. (1) This subpart describes the 
policies and procedures of the Small Cities program that apply to non-
entitlement areas in states where HUD administers the CDBG program. HUD 
currently administers the Small Cities program in only two states--New 
York (for grants prior to FY 2000) and Hawaii. The Small Cities portion 
of this subpart addresses the requirements for New York Small Cities 
grants in Sec. Sec.  570.421, 570.426, 570.427, and 570.431. Section 
570.429 identifies special procedures applicable to Hawaii.
* * * * *
    (e) Allocation of funds--The allocation of appropriated funds for 
insular areas under section 106 of the Act shall be governed by the 
policies and procedures described in section 106(a)(2) of the Act and 
Sec. Sec.  570.440 and 570.441 of this subpart. The annual 
appropriations described in this section shall be distributed to 
insular areas on the basis of the ratio of the population of each 
insular area to the population of all insular areas.
    8. Revise Sec.  570.427(a) to read as follows:


Sec.  570.427  Program Amendments.

    (a) HUD approval of certain program amendments. Grantees shall 
request prior HUD approval for all program amendments involving new 
activities or alteration of existing activities that will significantly 
change the scope, location, or objectives of the approved activities or 
beneficiaries. Approval is subject to the amended activities meeting 
the requirements of this part, and being able to be completed promptly.
* * * * *
    9. In Sec.  570.429:
    a. Revise paragraphs (a) and (b);
    b. Remove paragraphs (d), (f), (g), (h), and (i);
    c. Redesignate paragraph (e) as a new paragraph (d); and
    d. Revise newly designated paragraph (d) to read as follows:


Sec.  570.429  Hawaii general and grant requirements.

    (a) General. This section applies to non-entitlement CDBG grants in 
Hawaii. The non-entitlement counties in the state of Hawaii will be 
treated as entitlement grantees except for the calculation of 
allocations, and the source of their funding, which will be from 
Section 106(d) of the Act.
    (b) Scope and applicability. Except as modified or limited under 
the provisions thereof or this subpart, the policies and procedures 
outlined in subparts A, C, D, J, K, and O of this part apply to non-
entitlement CDBG grants in Hawaii.
* * * * *
    (d) Reallocation. (1) Any amounts that become available as a result 
of any reductions under subpart O of this part shall be reallocated in 
the same or future fiscal year to any remaining eligible applicants on 
a pro rata basis.

[[Page 66]]

    (2) Any formula grant amounts reserved for an applicant that 
chooses not to submit an application shall be reallocated to any 
remaining eligible applicants on a pro rata basis.
    (3) No amounts shall be reallocated under paragraph (d) of this 
section in any fiscal year to any applicant whose grant amount was 
reduced under subpart O of this part.


Sec. Sec.  570.430 and 570.432  [Removed]

    10. Remove Sec. Sec.  570.430 and 570.432.
    11. In Sec.  570.901, revise paragraphs (d) and (e) to read as 
follows:


Sec.  570.901  Review for compliance with the primary and national 
objectives and other program requirements.

* * * * *
    (d) For entitlement grants and non-entitlement CDBG grants in 
Hawaii, the submission requirements of 24 CFR part 91 and the 
displacement policy requirements at Sec.  570.606;
    (e) For HUD-administered Small Cities grants in New York, the 
citizen participation requirements at Sec.  570.431, the amendment 
requirements at Sec.  570.427, and the displacement policy requirements 
of Sec.  570.606;
* * * * *
    12. In Sec.  570.902:
    a. Revise the heading of paragraph (a);
    b. Revise the introductory paragraph of paragraph (a)(1); and
    c. Revise paragraph (b) to read as follows:


Sec.  570.902  Review to determine if CDBG--funded activities are being 
carried out in a timely manner.

* * * * *
    (a) Entitlement recipients and Non-entitlement CDBG Grantees in 
Hawaii. (1) Before the funding of the next annual grant and absent 
contrary evidence satisfactory to HUD, HUD will consider an entitlement 
recipient or a non-entitlement CDBG grantee in Hawaii to be failing to 
carry out its CDBG activities in a timely manner if:
* * * * *
    (b) HUD-administered Small Cities program in New York. The 
Department will, absent substantial evidence to the contrary, deem a 
HUD-administered Small Cities recipient in New York to be carrying out 
its CDBG-funded activities in a timely manner if the schedule for 
carrying out its activities, as contained in the approved application 
(including any subsequent amendment(s), is being substantially met.
    13. Revise Sec.  570.911(b) to read as follows:


Sec.  570.911  Reduction, withdrawal, or adjustment of a grant or other 
appropriate action.

* * * * *
    (b) Entitlement grants and Non-entitlement CDBG Grantees in Hawaii. 
Consistent with the procedures described in Sec.  570.900(b), the 
Secretary may make a reduction in the CDBG grant amount either for the 
succeeding program year or, if the grant had been conditioned, up to 
the amount that had been conditioned. The amount of the reduction shall 
be based on the severity of the deficiency and may be for the entire 
grant amount.
* * * * *

    Dated: November 13, 2006.
Nelson R. Breg[oacute]n,
General Deputy Assistant Secretary for Community Planning and 
Development.
 [FR Doc. E6-22502 Filed 12-29-06; 8:45 am]
BILLING CODE 4210-67-P