[Federal Register Volume 79, Number 59 (Thursday, March 27, 2014)]
[Notices]
[Pages 17173-17177]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-06850]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5696-N-08]


Clarifying Guidance, Waivers, and Alternative Requirements for 
Grantees in Receipt of Community Development Block Grant Disaster 
Recovery Funds Under the Disaster Relief Appropriations Act, 2013

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

ACTION: Notice.

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SUMMARY: This Notice provides clarifying guidance, waivers, and

[[Page 17174]]

alternative requirements for Community Development Block Grant (CDBG) 
disaster recovery grantees in receipt of funds under the Disaster 
Relief Appropriations Act, 2013 (Pub. L. 113-2). To date, the 
Department has allocated $10.6 billion under the Act to assist recovery 
in the most impacted and distressed areas identified in major disaster 
declarations due to Hurricane Sandy and other eligible events in 
calendar years 2011, 2012 and 2013.

DATES: April 1, 2014.

FOR FURTHER INFORMATION CONTACT: Stan Gimont, Director, Office of Block 
Grant Assistance, Department of Housing and Urban Development, 451 7th 
Street SW., Room 7286, Washington, DC 20410, telephone number 202-708-
3587. Persons with hearing or speech impairments may access this number 
via TTY by calling the Federal Relay Service at 800-877-8339. Facsimile 
inquiries may be sent to Mr. Gimont at 202-401-2044. (Except for the 
``800'' number, these telephone numbers are not toll-free.) Email 
inquiries may be sent to [email protected].

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Background
II. Applicable Rules, Statutes, Waivers, and Alternative 
Requirements
III. Catalog of Federal Domestic Assistance
IV. Finding of No Significant Impact

I. Background

    The Disaster Relief Appropriations Act, 2013 (Pub. L. 113-2, 
approved January 29, 2013) (Appropriations Act) made available $16 
billion in Community Development Block Grant (CDBG) funds for necessary 
expenses related to disaster relief, long-term recovery, restoration of 
infrastructure and housing, and economic revitalization in the most 
impacted and distressed areas resulting from a major disaster declared 
pursuant to the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act of 1974 (42 U.S.C. 5121 et seq.) (Stafford Act), due to 
Hurricane Sandy and other eligible events in calendar years 2011, 2012, 
and 2013. As the Appropriations Act requires funds to be awarded 
directly to a State, or unit of general local government (hereinafter, 
local government) at the discretion of the Secretary, the term 
``grantee'' refers to any jurisdiction that has received a direct award 
from HUD under the Appropriations Act.
    On March 1, 2013, the President issued a sequestration order 
pursuant to section 251A of the Balanced Budget and Emergency Deficit 
Control Act, as amended (2 U.S.C. 901a), and reduced funding for CDBG 
disaster recovery (CDBG-DR) grants under the Appropriations Act to 
$15.18 billion. To date, a total of $10.6 billion has been allocated 
for the areas most impacted by Hurricane Sandy and other disasters 
occurring in 2011, 2012, and 2013. To describe these allocations and 
the accompanying requirements, the Department published multiple 
notices (collectively, the ``Prior Notices'') in the Federal Register. 
The requirements of the Prior Notices continue to apply, except as 
modified by this Notice.
    Links to the Prior Notices, the text of the Appropriations Act, and 
additional guidance prepared by the Department for CDBG-DR grants, are 
available on HUD's Web site under the Office of Community Planning and 
Development, Disaster Recovery Assistance: http://portal.hud.gov/hudportal/HUD?src=/program_offices/comm_planning/communitydevelopment/programs/drsi. The same information is also 
available on HUD's OneCPD Web site: https://www.onecpd.info/cdbg-dr/.

II. Applicable Rules, Statutes, Waivers, and Alternative Requirements

    The Appropriations 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 the use by the recipient of these funds 
(except for requirements related to fair housing, nondiscrimination, 
labor standards, and the environment). Waivers and alternative 
requirements are based upon a determination by the Secretary that good 
cause exists and that the waiver or alternative requirement is not 
inconsistent with the overall purposes of title I of the Housing and 
Community Development Act of 1974 (42 U.S.C. 5301 et seq.) (HCD Act). 
Regulatory waiver authority is also provided by 24 CFR 5.110, 91.600, 
and 570.5.
    This Notice clarifies or modifies guidance provided by the Prior 
Notices. For each waiver and alternative requirement described in this 
Notice, the Secretary has determined that good cause exists and the 
action is not inconsistent with the overall purpose of the HCD Act. 
Grantees may request additional waivers and alternative requirements 
from the Department as needed to address specific needs related to 
their recovery activities. Under the requirements of the Appropriations 
Act, waivers must be published in the Federal Register no later than 
five days before the effective date of such waiver.

1. Action Plan for Disaster Recovery Waiver and Alternative 
Requirement--Infrastructure Programs and Projects (Only Applicable to 
Hurricane Sandy Grantees)

    a. Definition of ``Benefits Multiple Counties''. The Notice 
published November 18, 2013, describes additional requirements that 
apply to major infrastructure projects (see paragraph 2g, under section 
VI, Applicable Rules, Statutes, Waivers, and Alternative Requirements, 
at 78 FR 69107). Specifically, the Notice states: ``HUD approval is 
required for each major infrastructure project with such projects 
defined as having a total cost of $50 million or more (including at 
least $10 million of CDBG-DR funds), or benefits multiple counties.'' 
For purposes of the identifying major infrastructure projects under the 
November 18, 2013 Notice, HUD defines ``benefits multiple counties'' to 
mean that a major infrastructure project is physically located in more 
than one county.
    b. Obligated Public Assistance Grant Program Projects. Oftentimes, 
CDBG-DR grantees are awarded recovery funds under FEMA's Public 
Assistance (PA) Grant Program. Through the PA Program, FEMA provides 
grant assistance to states, tribal and local governments, and certain 
types of private nonprofit organizations for: Debris removal; emergency 
protective measures; and the repair, replacement, or restoration of 
disaster-damaged, publicly-owned facilities, and the facilities of 
certain private, nonprofit organizations. The PA Program also 
encourages protection of these damaged facilities from future events by 
providing assistance for hazard mitigation measures during the recovery 
process. The PA Program requires grantees to contribute a non-federal 
share to a project--typically, 25 percent of the total project cost. 
For example, if the repair of a public facility costs $1 million, FEMA 
provides $750,000 while the grantee provides $250,000. However, in the 
states of New York and New Jersey, due to the amount of damage caused 
by the storm, FEMA has reduced the non-federal share for Hurricane 
Sandy PA projects to 10 percent of the project's total cost (FEMA will 
provide the remaining 90 percent). This reduction is allowed under FEMA 
regulations.
    Per the HCD Act (42 U.S.C. 5305(a)(9)), CDBG funds (including CDBG-
DR funds) may be used for the payment of the non-federal share required 
in connection with a federal grant-in-aid program (e.g., the FEMA PA

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Program) that provides funding for a CDBG-eligible activity. Prior to 
HUD's Notice allocating a second round of funding for grantees in 
response to Hurricane Sandy (78 FR 69104, published November 18, 2013), 
many of these grantees had coordinated with FEMA to secure PA funding 
for critical infrastructure projects. Thus, the infrastructure 
requirements described in paragraph 2 at 78 FR 69107 will not apply to 
Hurricane Sandy grantees with PA projects where funds have been 
obligated by FEMA on or before November 25, 2013. The infrastructure 
requirements described in paragraph 2 at 78 FR 69107 apply in full to 
PA projects where funds have been obligated by FEMA after November 25, 
2013.
    c. Comprehensive Planning Process Required by Another Federal 
Agency. Paragraph 2d, under section VI, Applicable Rules, Statutes, 
Waivers, and Alternative Requirements (at 78 FR 69107) of the Notice 
published November 18, 2013, is amended as necessary to allow the 
following: Where a grantee provides a local match (using CDBG-DR funds) 
for an infrastructure project that is covered by a comprehensive 
planning process required by another Federal agency (e.g., FEMA, the 
Department of Transportation, U.S. Army Corps of Engineers, 
Environmental Protection Agency, etc.), HUD does not require the 
grantee to repeat the analysis completed during that planning process 
as part of its comprehensive risk analysis. Rather, that process may be 
referenced and/or adopted to assist the grantee in meeting its 
responsibility to conduct the comprehensive risk analysis required by 
the November 18, 2013 Notice.

2. Documentation of Low- and Moderate-Income National Objective for 
Multi-Unit Housing Projects (New York City Only)

    Per the HCD Act and the Prior Notices, Hurricane Sandy CDBG-DR 
grantees may fund the rehabilitation, reconstruction, and new 
construction of housing. To further address its housing needs, New York 
City has requested to measure the benefit to low- and moderate-income 
households, in multi-unit residential projects, in a manner more 
supportive of mixed income housing. In general, the applicable 
regulation, 24 CFR 570.208(a)(3), requires at least 51 percent of the 
units in an assisted multi-unit structure to be occupied by residents 
that are income eligible. This method of calculating the benefit to 
low- and moderate-income households is often referred to as the 
structure basis.
    HUD has reviewed other housing assistance programs that measure 
benefit differently--only those units in a multi-unit structure 
occupied by income eligible residents are used to calculate the benefit 
to low- and moderate-income households. Under this ``unit'' approach, 
when units are alike, the proportion of CDBG funds contributed to the 
project may be no more than the proportion of units in the project that 
will be occupied by income-eligible households. For this reason, this 
approach is sometimes called the proportional units approach. In other 
words, the rule under the structure approach is that a dollar of CDBG 
assistance to a structure means that 51 percent of the units must meet 
income requirements. Under the unit approach, the amount of assistance 
provided is equal to the cost of units occupied by low- and moderate-
income households.
    Based on HUD experience, the unit approach can be more compatible 
with large-scale development of mixed-income housing. For example, in 
response to the widespread devastation caused by Hurricanes Katrina and 
Rita, HUD allowed the states of Louisiana and Mississippi to use this 
approach under their respective CDBG-DR programs. Additionally--(1) the 
CDBG program rule has a built-in exception that allows limited use of 
the unit basis for multi-unit non-elderly new construction structures 
with between 20 and 50 percent low- and moderate income occupancy, (2) 
in the HOME Investment Partnerships program, HUD's primary housing 
production program, HUD grantees use funds to pay for the cost of 
affordable units, and (3) the Neighborhood Stabilization Program 
permitted grantees to use a unit basis approach to meet the CDBG low- 
and moderate-income benefit requirement.
    After review of the city's Action Plan for Disaster Recovery, and 
discussions with the city regarding its intent to encourage mixed-
income housing development, HUD has determined that it is consistent 
with the overall purposes of the HCD Act to provide the city the 
requested additional flexibility in measuring program benefit. 
Therefore, the waiver and alternative requirements allow the city to 
measure benefit within a housing development project: (1) According to 
the existing CDBG requirements, or (2) according to the unit approach 
described above for multi-unit housing projects involving 
rehabilitation and/or reconstruction. However, the second option may 
only be used if the units are generally comparable in size and 
finishes. The city must select and use 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. The city is reminded that per 2 CFR 
part 225, CDBG-DR costs must be necessary and reasonable. To meet this 
requirement, the city must develop policies and procedures to document 
its costs for housing investments are necessary and reasonable. The 
city must also meet all civil rights and fair housing requirements.

3. Limited Purpose Modification of Overall Benefit Requirement (City of 
Minot Only)

    The primary objective of the HCD Act 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.'' 42 U.S.C. 5301(c). To carry out 
this objective, the statute requires that 70 percent of the aggregate 
of the grantee's CDBG program's funds be used to support activities 
benefitting low- and moderate-income persons.
    This target can be difficult, if not impossible, for many CDBG-DR 
grantees to reach as a disaster impacts entire communities--regardless 
of income. Further, it may prevent grantees from providing assistance 
to the most damaged areas of need. Therefore, as described by the Prior 
Notices, the city of Minot, in addition to the other grantees under the 
Appropriations Act, received a waiver and alternative requirement--only 
50 percent of funds must be used for activities that benefit low- and 
moderate-income persons. Additional flexibility was provided in the 
March 5, 2013 Notice (78 FR 14329). It allowed a grantee to request to 
further reduce its overall benefit requirement if it submitted a 
justification that, at a minimum: (a) Identifies the planned activities 
that meet the needs of its low- and moderate-income population; (b) 
describes proposed activity(ies) and/or program(s) that will be 
affected by the alternative requirement, including their proposed 
location(s) and role(s) in the grantee's long-term disaster recovery 
plan; (c) describes how the activities/programs identified in (b) 
prevent the grantee from meeting the 50 percent requirement; and (d) 
demonstrates that the needs of non-low and moderate-income persons or 
areas are disproportionately greater, and that the jurisdiction lacks 
other resources to serve them. Upon HUD's review of the justification, 
the request can be granted only if the Secretary found a compelling 
need to reduce the overall benefit below 50 percent.

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    In response to the above, the city of Minot submitted a 
justification addressing the required criteria. As described in that 
letter, the city has received two awards of CDBG-DR funds (appropriated 
by two separate laws) in response to the severe flooding of the city in 
the summer of 2011. Early in the recovery process, the city identified 
housing as the largest unmet need for the low- and moderate-income 
population. Funding from the first allocation was used to fund housing 
rehabilitation and reconstruction only for low- and moderate-income 
households. In addition, the city obligated $2.2 million for 
infrastructure and acquisition activities to support two affordable 
rental housing projects (one will create 42 units of workforce housing, 
the other will result in 40 units of senior housing), and $5.1 million 
for infrastructure to support home development, as well as to provide 
pads for mobile homes for low- and moderate-income families. Further, 
the city is exploring the development of a homeless shelter, and 
projects to provide 60 affordable rental units for Minot's low- and 
moderate-income residents through a small rental rehabilitation and 
reconstruction program. In sum, the city's first appropriation of CDBG-
DR funds, under Section 239 of the Department of Housing and Urban 
Development Appropriations Act, 2012 (Pub. L. 112-55, approved November 
18, 2011), was $67,575,964; over 52 percent of that allocation is 
anticipated to benefit low- and moderate-income persons.
    As the city moves forward with funding received under a second 
appropriation law, the Appropriations Act, the focus of the recovery 
has narrowed to the long-term needs of the city's Flood Inundation 
Area. This area is four square miles and includes the downtown area and 
the oldest and most heavily developed portion of the city. It was 
inundated with two to fifteen feet of water during the 2011 flood and 
sustained the most severe damage. According to the city, two types of 
long-term activities, both located within the Flood Inundation Area, 
are most urgent: Acquisition/buyout of properties and street repair and 
improvements. In regards to acquisition/buyouts, the city has allocated 
$14.8 million. These funds will act as a 25 percent match to funding 
provided by the North Dakota State Water Commission, for a total 
project cost of over $51 million. Additionally, $9.7 million has been 
allocated for street repair and improvements. The balance of the city's 
second allocation, $10.6 million, will be used for reimbursement of 
home repairs, street repairs in an area located outside the Flood 
Inundation Area, and planning and administrative costs.
    HUD has reviewed the flood inundation data and maps, and the census 
tract information provided by the city. Of the 14 block groups that 
comprise the Flood Inundation Area, only four have low- and moderate-
income populations of at least 51 percent. An average of the 14 groups 
demonstrates that the total low- and moderate income population of the 
Flood Inundation Area is approximately 45.2 percent. According to the 
HUD FY14 data, the median family income in Ward County, where Minot is 
located, is $65,700. To be considered a low- and moderate-income 
household, a family with four persons has an income equal to, or less 
than, $53,200.
    Thus, to enable the city to undertake the activities it has deemed 
most critical for its recovery, and to ensure that low- and moderate-
income households are adequately served and/or assisted, HUD is 
granting a limited waiver and alternative requirement to reduce the 
overall benefit from 50 percent to not less than 23 percent. Based on 
the city's justification, the Secretary has found a compelling need for 
this reduction due to the unique circumstances related to Minot's 
request. In particular, HUD notes that the City has already prioritized 
the needs of low- and moderate-income populations with its first 
allocation; the low- and moderate-income population in the Flood 
Inundation Area is close enough to 50 percent that it nearly qualifies 
under the overall benefit waiver in the March 5, 2013 Notice; given 
that the Flood Inundation Area is likely to flood again, the City has 
identified getting people out of harm's way as a top priority and this 
waiver will allow low- and moderate-income families to take advantage 
of Minot's program for this purpose; and finally, the waiver will 
enable the City to leverage non-Federal funds for its buyout program. 
This is a limited waiver modifying 42 U.S.C. 5301(c), 42 U.S.C. 
5304(b)(3)(A), 24 CFR 570.484, and 570.200(a)(3) only to the extent 
necessary to permit the City to use funds appropriated by Public Law 
113-2 for flood buyout and street repair programs in the 14 block 
groups of the Flood Inundation Area with a low- and moderate-income 
population of approximately 45.2 percent, as described in its Action 
Plan.

4. Tenant-Based Rental Assistance (Applicable to the State of New York 
and the City of Joplin)

    The State of New York and the city of Joplin have requested a 
waiver of 42 U.S.C. 5305(a) in order to provide tenant-based rental 
assistance to households impacted by disasters eligible under the 
Appropriations Act. After reviewing each grantee's request, HUD is 
waiving 42 U.S.C. 5305(a), to the extent necessary, to make eligible 
rental assistance and utility payments paid for up to 2 years on behalf 
of homeless and at-risk households when such assistance or payments are 
part of a homeless prevention or rapid rehousing program or activity. 
Eligible assistance may also include rental (i.e., security) deposits 
and utility deposits when the grantee determines that such payments are 
necessary to help prevent a family from being homeless. While existing 
CDBG regulations may allow payments for these purposes, grantees under 
the annual CDBG programs are subject to a much shorter time limitation 
(3 months).
    The goal of this waiver is to minimize the time households are 
homeless by providing re-housing and rental assistance, and by linking 
the individual or family with services that can help them become stable 
and self-sufficient. Both grantees' use of CDBG-DR funds for this 
purpose could measurably advance the Department's priority on 
supporting forward-thinking solutions to help communities that are 
struggling to house and serve persons and families that are homeless or 
at risk of homelessness. In addition, HUD has previously granted the 
State of Louisiana a similar waiver for its recovery in response to 
Hurricanes Katrina and Rita. Further justification for granting the 
waiver to both grantees, and the specifics of how the waiver will apply 
to each grantee, are detailed below. Either grantee using these funds 
in combination with an existing Section 8 Housing Choice Voucher (HCV) 
program must coordinate with HUD's Office of Public and Indian Housing; 
however, as this waiver is limited to two years from the effective date 
of this Notice, grantees are strongly encouraged to ensure households 
assisted in whole or in part with CDBG-DR funds are transitioned to an 
alternate source of assistance, if necessary. Unless noted otherwise, 
the term ``Section 8'' refers to the Section 8 HCV program.
    a. State of New York. The State of New York anticipates up to $10 
million of CDBG-DR funds will be used to support an emergency rehousing 
program designed to assist households

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that are homeless, or in imminent danger of becoming homeless, as 
result of Hurricane Sandy, Hurricane Irene or Tropical Storm Lee. The 
State anticipates the funds will be used in conjunction with the 
State's Social Service Block Grant, which will support an intensive 
case management system to help locate housing and stabilize the 
household through a range of services.
    Prior to seeking a waiver, the State explored all options available 
to those most in need of housing assistance. To date, FEMA has approved 
over $1 billion of assistance to more than 115,000 households located 
in the State of New York. The State has launched significant housing 
programs to address rehabilitation and reconstruction, however, these 
programs are not specifically targeted to address the urgent needs of 
the homeless--many of whom are still housed in shelters or other non-
permanent accommodations as a result of Sandy, Irene and Lee. For 
example, it is estimated that Long Island's current homeless population 
in shelters exceeds 2,000; approximately 1,000 of these individuals 
were forced to the shelter as a result of Sandy. Meanwhile, the Section 
8 rental assistance program is experiencing a tremendous demand and has 
a limited supply of available housing, while HOME resources have been 
reduced by sequestration. The State is aware of individuals being 
served by the FEMA Temporary Rental Assistance Program, the 
Transitional Sheltering Assistance, and the Disaster Housing Assistance 
Program; however, many of these programs have reached funding limits, 
or are not eligible sources of assistance for the majority of the 
homeless.
    Thus, for the State of New York, the Department is waiving 42 
U.S.C. 5305(a), to the extent necessary, to make eligible tenant-based 
rental assistance for the homeless population, or those at risk of 
becoming homeless, due to the effects of Hurricane Sandy, Hurricane 
Irene, or Tropical Storm Lee. Households will not be eligible for 
tenant-based rental assistance if they have rejected public housing 
assistance or declined a Section 8 voucher.
    b. City of Joplin. As a result of the May 2011 tornado, Joplin's 
housing stock, including its Section 8 voucher program, was severely 
impacted. In regards to the Section 8 program, 85 voucher-holders were 
displaced. Since the tornado, new housing units have gradually been 
added to Joplin's inventory; however, many of these are more costly as 
Joplin's rental market evolves. Compounding the issue, during its 
recovery, the Joplin housing authority experienced a decrease in its 
``fundable'' voucher population due to a lack of available units. As a 
result of this decrease, the voucher budget provided to the city also 
decreased, despite the needs of additional households that were 
displaced. Thus, the city seeks the use of CDBG-DR funds to assist 
Joplin's housing authority restore its program to reach pre-disaster 
voucher levels. After reviewing the city's request, the Department is 
waiving 42 U.S.C. 5305(a), to the extent necessary, to make eligible 
tenant-based rental assistance so that the city may restore its Section 
8 program to pre-disaster levels. Households will not be eligible for 
tenant-based rental assistance if they have rejected public housing 
assistance, or declined a Section 8 voucher. A maximum of $290,000 may 
be provided by the city for this use.
    Going forward, the city and the housing authority are strongly 
encouraged to continue to assess the voucher program to ensure 
households in need will have adequate resources available at the 
expiration of this waiver.

III. Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance number for the 
disaster recovery grants under this Notice is as follows: 14.269.

IV. 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. 4332(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 7th Street SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Hearing or speech-impaired 
individuals may access this number through TTY by calling the toll-free 
Federal Relay Service at 800-877-8339.

    Date: March 24, 2014.
Mark Johnston,
Deputy Assistant Secretary for Special Needs Programs.
[FR Doc. 2014-06850 Filed 3-26-14; 8:45 am]
BILLING CODE 4210-67-P