[Federal Register Volume 89, Number 7 (Wednesday, January 10, 2024)]
[Proposed Rules]
[Pages 1746-1786]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00039]
[[Page 1745]]
Vol. 89
Wednesday,
No. 7
January 10, 2024
Part III
Department of Housing and Urban Development
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24 CFR Parts 91, 570 and 1003
Submission for Community Development Block Grant Program, Consolidated
Plans, and Indian Community Development Block Grant Program Changes;
Proposed Rule
Federal Register / Vol. 89, No. 7 / Wednesday, January 10, 2024 /
Proposed Rules
[[Page 1746]]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Parts 91, 570, and 1003
[Docket No. FR-6148-P-01]
RIN 2506-AC52
Submission for Community Development Block Grant Program,
Consolidated Plans, and Indian Community Development Block Grant
Program Changes
AGENCY: Office of Assistant Secretary for Community Planning and
Development and Office of Assistant Secretary for Public and Indian
Housing, HUD.
ACTION: Proposed rule.
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SUMMARY: HUD is proposing to revise the Community Development Block
Grant (CDBG) and related Section 108 loan guarantee program regulations
to make it easier for recipients to promote economic development and
recovery in low- and moderate-income communities and support
investments in underserved areas. This proposed rule also would revise
provisions related to Consolidated Plan and citizen participation
requirements for the CDBG program and institute quarterly reporting to
improve performance with respect to timeliness. HUD is also proposing
to make certain corresponding changes to the Indian Community
Development Block Grant (ICDBG) program regulations to align the ICDBG
program with the revisions being made to the CDBG program regulations.
DATES: Comments are due by March 11, 2024.
ADDRESSES: Interested persons are invited to submit comments regarding
this rule. Communications must refer to the above docket number and
title. There are two (2) methods for submitting public comments. All
submissions must refer to the above docket number and title.
1. Submission of Comments by Mail. Comments may be submitted by
mail to the Regulations Division, Office of General Counsel, Department
of Housing and Urban Development, 451 7th Street SW, Room 10276,
Washington, DC 20410-0500.
2. 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 them immediately
available to the public. Comments submitted electronically through the
http://www.regulations.gov website can be viewed by other commenters
and interested members of the public. Commenters should follow the
instructions provided on that website to submit comments
electronically.
Note: To receive consideration as public comments, comments
must be submitted through one of the two methods specified above.
Again, all submissions must refer to the docket number and title of
the rule.
No Facsimile Comments. Facsimile (Fax) comments are not acceptable.
Public Inspection of Public Comments. All comments and
communications properly submitted to HUD will be available 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). HUD welcomes and is prepared to receive calls from
individuals who are deaf or hard of hearing, as well as individuals
with speech or communication disabilities. To learn more about how to
make an accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
Copies of all comments submitted are available for inspection and
downloading at http://www.regulations.gov.
FOR FURTHER INFORMATION CONTACT: Jessie Handforth Kome, Director,
Office of Block Grant Assistance, Room 7282, U.S. Department of Housing
and Urban Development, 451 7th Street SW, Washington, DC 20410;
telephone (202) 708-3587 (this is not a toll-free number) for the CDBG
and Section 108 loan programs. Heidi Frechette, Deputy Assistant
Secretary for Native American Programs, Room 4108 U.S. Department of
Housing and Urban Development, 451 7th Street SW, Washington, DC 20410;
telephone (202) 402-6321 (this is not a toll-free number) for the ICDBG
program. HUD welcomes and is prepared to receive calls from individuals
who are deaf or hard of hearing, as well as individuals with speech or
communication disabilities. To learn more about how to make an
accessible telephone call, please visit https://www.fcc.gov/consumers/guides/telecommunications-relay-service-trs.
SUPPLEMENTARY INFORMATION:
I. Statutory Authority
Title I of the Housing and Community Development Act of 1974 (42
U.S.C. 5301-5320) (hereinafter ``the Act'') establishes the CDBG and
complementary Section 108 loan guarantee (Section 108) programs, and
the ICDBG program. HUD's regulations implementing: (1) the Consolidated
Plan and citizen participation requirements governing the CDBG program
are located at 24 CFR part 91, entitled, ``Consolidated Submissions for
Community Planning and Development Programs;'' (2) the CDBG program are
located at 24 CFR part 570, entitled ``Community Development Block
Grants;'' and (3) the Section 108 program are located at 24 CFR 570
subpart M, entitled ``Loan Guarantees.'' The Consolidated Plan
regulations were promulgated in 1994 and 1995 (60 FR 1878 and 60 FR
1943; January 5, 1994, and January 5, 1995, respectively), and amended
HUD's existing regulations to replace the then-current Comprehensive
Housing Affordability Strategies with a rule that combined into a
single consolidated submission the planning and application aspects of,
among others, the CDBG program. The Consolidated Plan regulations
reflected HUD's view that the purpose of the Consolidated Plan
submission is to enable States and localities to examine their needs
and design ways to address those needs that are appropriate to their
circumstances. The ICDBG program regulations, which are located at 24
CFR part 1003, entitled ``Community Development Block Grants for Indian
Tribes and Alaska Native Villages,'' were promulgated in 1996 (61 FR
40084, July 31, 1996), and set forth the requirements and procedures
for awarding CDBG funds to Indian Tribes.
II. Background
The CDBG and Section 108 Programs
The CDBG program and its loan guarantee component, the Section 108
program, are some of the most potent Federal tools for local
governments to assist community and economic development. State and
local governments nationwide--each State, more than 1,200 cities and
counties, the District of Columbia, Puerto Rico, and four U.S.
territories--rely on annual formula CDBG funds to develop meaningful
projects and provide essential services that create sustainable,
healthy, and prosperous communities for primarily low- and moderate-
income persons. The programs' unique flexibility allows grantees to use
CDBG funds, as well as Section 108 guaranteed loan proceeds
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leveraged from their CDBG allocations, for projects and services that
meet each community's needs. As a grantee develops strategies for
addressing its needs, however, it generally evaluates the viability of
activities that it wishes to include in its program. It may, for
example, decide that it wants to invest in an underserved area that it
has determined to be a food desert. This investment could take the form
of a loan to a business that would agree to construct a food store to
serve residents of that area. Such assistance to a business would be
subject to the CDBG national objectives criteria and public benefit
standards. However, HUD has not substantively updated the national
objectives criteria and public benefit standards for economic
development activities carried out with CDBG, ICDBG, and Section 108
funds for over twenty years. Changes over time in market conditions,
inflation, and evolving community development practices have
effectively limited the types of activities grantees could carry out.
As a consequence, the grantee's plans could be short-circuited by the
inability or unwillingness of a business to comply with the current
requirements.
The limitations under the current regulations have thus deprived
grantees of viable alternatives when developing programs that would
best address their needs, and in some cases prevented communities from
using CDBG funds to stimulate potentially transformative economic
revitalization outcomes. By removing the impediments and disincentives
to the use of CDBG funds for economic development activities, the
proposed changes could result in a greater proportion of available CDBG
funds being used for economic development. It does not follow, however,
that spending more on economic development must result in less spending
on other activities, because the additional economic development
spending could be funded with loans guaranteed under the Section 108
program. For example, if a grantee wants to undertake an economic
development activity but also wishes to carry out another activity,
e.g., housing rehabilitation, it could use Section 108 as the funding
source for the economic development activity and its CDBG allocation
for the other activity. If relatively more CDBG funds are expended for
economic development purposes, however, it must be presumed that such
increase is the result of grantees having determined that the higher
spending level is necessary and prioritized to address their local
community and economic development needs.
The ICDBG Program
Under the ICDBG program, HUD provides competitive grants annually
to Indian Tribes to carry out eligible activities. The program
regulations largely mirror the CDBG program regulations.
Lessons Learned From the COVID-19 Pandemic
HUD and CDBG grantees experienced an unusual opportunity to employ
new program policies before making them part of the CDBG program's
regulatory canon. The COVID-19 pandemic created a historical economic
crisis resulting in the closure of small businesses, significant job
loss, and other economic hardship with notable disparities in
underserved communities. These exposed and exacerbated impacts and
inequities that largely affected underserved persons and communities
across the United States, particularly among low-income and underserved
populations who were already economically marginalized and lacked
housing security. Historically marginalized communities of color,
particularly those in racially or ethnically concentrated areas of
poverty, disproportionately experienced disinvestment and have been
denied economic opportunities. In 2020, HUD oversaw the Community
Development Block Grant CARES Act (CDBG-CV) program to provide grants
to States, insular areas, and local governments to prevent, prepare
for, and respond to the spread of COVID-19. Lessons learned from the
quick deployment of CDBG-CV accelerated the grantees' and HUD's
understanding of needed program improvements.
The insights gleaned from the CDBG-CV Program informed this
important but routine opportunity to update CDBG and ICDBG regulations
to introduce pre-tested flexibilities, mainly related to economic
development activities; is responsive to feedback from HUD communities;
and is informed by the implementation of CDBG and ICDBG over the past
several decades. The new regulatory flexibilities implemented with $5
billion in CDBG-CV for communities revealed longstanding hindrances to
long-term economic growth, particularly for low- and moderate-income
persons.
The flexibilities, waivers and alternative requirements introduced
through CDBG-CV for Economic Development Activities enabled grantees to
move quickly to help small businesses, particularly for underserved
communities while retaining sufficient regulatory controls to ensure
program benefit is planned and delivered compliantly. This Proposed
Rule enables the Federal Government to continue bolstering economic
recovery through job creation while addressing economic inequities, by,
for example, strengthening small businesses and investing in enduring
job opportunities in underserved communities. On January 20, 2021, the
President issued Executive Order 13985, Advancing Racial Equity and
Support for Underserved Communities Through the Federal Government (86
FR 7009), and in February 2023, the President issued Executive Order
14091, Further Advancing Racial Equity and Support for Underserved
Communities Through the Federal Government (88 FR 10825), both which
call for a whole-of-government effort to advance racial equity and
support underserved communities. Further, through Executive Order
14002, Economic Relief Related to the COVID-19 Pandemic (86 FR 7229),
issued on January 22, 2021, the President directed Federal agencies to
use their full resources to address the economic crisis, specifically
to reduce unnecessary barriers and improve coordination among programs
funded by the Federal Government. The approach seeks to create
opportunities for the improvement of communities that have been
historically underserved.
III. This Proposed Rule
Consistent with Executive Orders 13985, 14002, and 14091 and in
response to changed market conditions, HUD seeks to provide authority
that would allow CDBG grantees and Section 108 borrowers (hereinafter
referred to collectively as ``recipients'') to implement funding more
effectively and efficiently in their communities.
The proposed changes also would enhance the CDBG program's goal of
primarily benefitting low- and moderate-income (``LMI'') persons while
removing obstacles that prevent the use of the program in targeted
areas and for economic development activities. The proposed changes
will not have any impact on the allocation of CDBG funds among
recipients. The changes would particularly benefit underserved
communities, including historically marginalized communities of color
experiencing disproportionate disinvestment and denial of economic
opportunities.
The proposed rule also aims to improve data collection to measure
effectiveness and improve program outcomes through more effective use
of CDBG funds, while ensuring CDBG and
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Section 108 recipients use funds efficiently and in a timely manner to
benefit their communities. The proposed rule would change national
objectives criteria to remove impediments to carrying out economic
development activities, update the public benefit standards to allow
CDBG and Section 108 recipients greater flexibility in undertaking
economic development activities, and incorporate several changes to
eligible activities under the CDBG and Section 108 programs. The
proposed rule would also simplify regulations to encourage CDBG and
Section 108 recipients to invest CDBG funds \1\ in underserved
communities.
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\1\ As the term ``CDBG funds'' is defined at Sec. 570.3 to
include Section 108 guaranteed loan funds, references to use of
``CDBG'' funds or ``CDBG''-assisted activities in this preamble also
applies to Section 108 guaranteed loan funds unless otherwise noted.
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Further, the proposed rule would make corresponding changes to the
ICDBG regulations in part 1003, where appropriate, to ensure that the
CDBG and ICDBG regulations continue to [align. Finally, the proposed
rule would remove outdated provisions and make technical corrections.
The proposed rule could result in incentivizing investment in
communities by streamlining and improving mechanisms for greater
flexibility of funds to flow to economically distressed communities
while signaling the Federal Government's willingness to support these
investments. These investments would enable communities to encourage,
build, and expand activities that revitalize communities.
A. Targeting Resources Towards Communities With the Greatest Need
HUD wants CDBG and Section 108 recipients to make greater use of
CDBG funds in economically distressed communities, particularly those
designated through other Federal or State programs. The proposed rule
addresses aspects of 24 CFR part 570 that HUD considers to be
unnecessarily cumbersome to economic development activities and
otherwise proposes to revise or add additional flexibility for CDBG and
Section 108 recipients in facilitating economic development. The
proposed rule would make it easier for CDBG and Section 108 recipients
to carry out job creation and retention activities while reducing
recordkeeping burdens on CDBG and Section 108 recipients and assisted
businesses \2\ alike. HUD has re-envisioned the public benefit standard
and proposes to simultaneously remove disincentives for economic
development, add flexibility in demonstrating public benefit, and
update standards to reflect current and future market conditions. HUD
believes these proposed changes would provide CDBG and Section 108
recipients with a greater ability to support business development and
assist States and local governments in bolstering job creation.
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\2\ An assisted business receives CDBG and/or Section 108
guaranteed loan funds from a recipient to carry out an eligible
activity, and must comply with CDBG and/or Section 108 requirements.
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National Objectives Criteria \3\
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\3\ This preamble divides the discussion of proposed changes to
Sec. 570.208 into multiple sections. In this ``Targeting Resources
Towards Communities with the Greatest Need'' section, the preamble
discusses proposed changes to Sec. Sec. 570.208(a)(4) and (b) and
570.483(b)(4) and (c) because the proposed changes affect primarily
economic development activities.
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HUD's regulations at Sec. Sec. 570.208,\4\ 570.483,\5\ and
1003.208 provide the criteria for determining whether a CDBG-, Section
108-,\6\ or ICDBG-assisted activity complies with one or more of the
national objectives. CDBG recipients must use at least 70 percent of
their CDBG funds for activities that benefit LMI persons. An activity
may meet the LMI national objective through providing benefit to
residents of a particular geographic area, serving a limited clientele,
supporting housing activities, or creating or retaining permanent jobs.
Additionally, CDBG and Section 108 recipients may meet a national
objective by using funds for activities that aid in the prevention or
elimination of slums or blight or that meet an urgent community
development need. However, the current criteria, including
presumptions, are unnecessarily complicated and outdated and can impose
substantial burdens on prospective CDBG and Section 108 recipients and
assisted businesses. Similarly, the regulations for activities that
assist in the prevention or elimination of slums or blight restrict the
ability to use CDBG funds for certain types of activities in such
areas. HUD therefore proposes the following changes.
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\4\ 24 CFR part 570 Subpart C--Eligible Activities (Sec. Sec.
570.200-570.210) applies to CDBG entitlement recipients and Section
108 borrowers.
\5\ 24 CFR part 570 Subpart I--State Community Development Block
Grant Program (Sec. Sec. 570.480-570.497) applies to States,
nonentitlement public entities receiving Section 108 guaranteed loan
funds assistance, and units of general local government in a State's
nonentitlement areas that receive CDBG funds.
\6\ Nonentitlement public entities receiving Section 108
guaranteed loan funds may be subject to 24 CFR 570.480 through 24
CFR 570.497.
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Low- and Moderate-Income Criteria--Creating or Retaining Jobs
The most widely used national objective for economic development
activities under the CDBG program is the creation or retention of
permanent jobs where at least 51 percent of those jobs, computed on a
full-time equivalent basis, involve the employment of LMI persons. To
demonstrate compliance with the LMI job creation/retention national
objective (Sec. Sec. 570.208(a)(4), 570.483(b)(4), and 1003.208(d)),
the activity must be designed to create or retain jobs where at least
51 percent of those jobs are held by or made available to LMI persons.
For the retention of jobs, the recipient must also demonstrate that the
jobs would be lost without CDBG assistance, and the jobs are known to
be held by LMI persons and/or the job(s) can reasonably be expected to
turn over within the following two years and that steps will be taken
to ensure that the job(s) will be filled by or made available to LMI
persons upon turnover. The primary CDBG-assisted activity that uses
these national objectives criteria is a special economic development
activity carried out under Sec. 570.203 for Entitlement Communities
and activities under section 105(a)(17) of the Act by units of general
local government in a State's nonentitlement areas.\7\ These criteria
may also be met by other CDBG-assisted activities, such as assistance
to microenterprises under Sec. 570.201(o) or Sec. 570.483(c)(1).
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\7\ 24 CFR part 570, subpart I--State Community Development
Block Grant Program (Sec. Sec. 570.480-570.497) applies to States,
Section 108 borrowers, and units of general local government that
receive CDBG funds.
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Based on programmatic experience, documenting whether a job is held
by or made available to an LMI person can present a financial and
administrative burden on recipients due to the data that recipients
must gather and collect from assisted businesses. To help alleviate
this burden, HUD is proposing to make changes to the presumptions
provided in current Sec. Sec. 570.208(a)(4)(iv), 570.483(b)(4)(iv),
and 1003.208(d) (with references to, respectively, Sec. Sec.
570.208(a)(4)(v) and 570.483(b)(4)(v)) to add a presumption based on
the location of an assisted business. Revising the criteria for the
presumption would significantly clarify the standards for recipients
and encourage greater use of CDBG and ICDBG funds for job creation and
retention activities in LMI areas.
The proposed revised regulations accomplish these goals by: (1)
standardizing the presumptive poverty
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rate with the same standard as was generally required to designate
areas as economically distressed \8\ (2) requiring recipients to use
poverty rates based on American Community Survey \9\ (ACS) data,
instead of only from the most recently available decennial census; and
(3) removing the higher poverty requirement for central business
districts, which is not required by statute; this will encourage
investments in economically distressed communities, particularly with
central business districts that serve as hubs of economic activity.
Further, other proposed revisions to the LMI jobs national objective
would improve readability and remove references to outdated programs.
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\8\ Census tract poverty rate of 20 percent.
\9\ HUD chooses to use ACS data which provides poverty rates
determined by Census Bureau data provided by HUD. This data set
includes linkages between HUD's administrative records and a range
of information, spanning race to employment status. This enables HUD
to use a more cost-effective approach to match its data assets.
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Question for comment #1: Would the proposed revised presumption
encourage recipients to increase their use of funds for economic
development activities? Would the reduced burden on businesses be a
significant or decisive factor in encouraging them to use CDBG funds
for projects in underserved communities? What is the anticipated effect
of eliminating the higher poverty requirement and the other poverty-
related policies on private business investment in communities that
lack access to opportunity? What are the trade-offs between reaching
more areas and having less targeting if the neighborhood poverty
threshold is reduced from 30 percent to 20 percent? What other
incentives could CDBG recipients establish that would encourage
investment in communities, including historically marginalized
communities of color, that have historically not received CDBG-funded
investment or that experience relatively low private sector investment?
How might HUD better encourage economic development in underserved
communities, including historically marginalized communities of color,
who have had disproportionately experienced disinvestment and have been
denied economic opportunities?
Modifying Prohibition on Assisting Relocation
HUD proposes to revise the definition of labor market area (LMA) to
allow CDBG grantees and Section 108 recipients more flexibility in
providing assistance to relocating businesses. Currently, Sec. Sec.
570.210(a) (for CDBG entitlement recipients) and 570.482(h) (for
States) prohibit grantees from directly assisting businesses that
relocate from one LMA to another if the relocation is likely to result
in a significant loss of employment in the LMA from which the
relocation occurs. Sections 570.210(b)(2) and 570.482(h)(2)(ii) also
prevent communities from combining metropolitan LMAs or metropolitan
LMAs with non-metropolitan LMAs so that they can provide assistance to
a business that relocates within a (combined) LMA. This revision leaves
the prohibition intact but provides CDBG and Section 108 recipients
with greater flexibility (through revisions of Sec. Sec. 570.210(b)(2)
and 570.482(h)(2)(ii) \10\ allowing combination of LMAs) to stay in
compliance with requirements.
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\10\ These regulations implement the anti-pirating provisions in
section 105(h) of the HCDA, added in 1998.
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While the prohibition in Sec. Sec. 570.210(b)(2) and
570.482(h)(2)(ii) is intended to prevent communities from using CDBG
funds to ``shift'' jobs from other communities, it has on balance made
it unnecessarily difficult for grantees to provide assistance to
businesses even when relocation would not necessarily cause job losses
in another community. The definition of LMA (as defined by the Bureau
of Labor Statistics) has changed multiple times since HUD instituted
the prohibition in 2006, the boundaries of LMAs have changed, and some
communities have fallen outside the definitions of both metropolitan
and non-metropolitan LMAs. Further, logistics and supply chain changes
and developmental changes across communities could allow businesses to
retain jobs within a newly defined LMA within commuting distance of the
old location (thus not poaching jobs from another community).
For example, a business with a processing plant in a metropolitan
LMA received a code enforcement violation that required the business to
either expand the plant to remedy the violation or relocate. Since the
business was in a denser metropolitan area, it did not have the space
to expand the plant. The business identified a location within
commuting distance of the plant in an adjacent non-metropolitan LMA.
The State CDBG grantee wanted to provide assistance through the non-
entitlement unit of general local government to the business as part of
the relocation but was prohibited by Sec. 570.482(h)(1) because the
relocation would have resulted in job loss in the metropolitan LMA from
which the relocation would have occurred. The business could not find
other assistance to relocate the plant, and as a result had to close
the plant and terminate the jobs at the plant.
Therefore, HUD proposes to allow grantees to combine a metropolitan
LMA and a non-metropolitan LMA if the relocation is necessary for
business reasons such as code enforcement compliance, or expansion.
This would allow CDBG grantees to provide assistance to businesses for
relocation for valid business reasons while still preventing
communities from poaching jobs from nearby communities.
Prevention or Elimination of Slums or Blight
HUD also proposes to revise the criteria for activities that
address slums and blight on an area basis. Some of the criteria for
activities to address slums or blight on an area basis are subjective
and difficult for HUD to verify and monitor. The proposed revisions to
Sec. Sec. 570.208(b)(1)(ii) and 570.483(c)(1)(ii) would allow the
recipient to determine the type of objectively verifiable data that
demonstrates that the area is experiencing physical or economic
distress, such as abandoned properties and properties with known or
suspected environmental contamination. The proposed rule also would
update recordkeeping requirements for this revision at Sec.
570.506(b)(8)(ii).
For activities that address slums or blight on a spot basis, the
proposed revisions at Sec. Sec. 570.208(b)(2) and 570.483(c)(2) would
remove the requirement that rehabilitation activities be limited to
eliminating conditions detrimental to public health and safety. HUD has
interpreted ``detrimental to public health and safety'' to mean that
the condition must pose a threat to the general public. This
requirement presents a major hurdle for recipients seeking to address
slums and blight in their communities because it limits rehabilitation
activities that recipients can carry out.
For example, a recent Section 108 applicant sought to redevelop a
blighted former hotel into a modern mixed-use commercial and
residential development; the project required extensive environmental
remediation. However, the requirement that rehabilitation activities
eliminate conditions detrimental to public health and safety prevented
the applicant from allocating CDBG funds toward uses of the project
because the conditions were contained within the blighted site and
therefore did not pose a threat to the general public. Although the
applicant was eventually able to allocate CDBG
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funds to meet the criteria, it was unnecessarily difficult, and the
restriction threatened to prevent the applicant from being able to fill
the project's financing gap with Section 108 funds.
Question for comment #2: Relative to current requirements, would
the proposed revision encourage recipients to carry out activities in
underserved and blighted communities and therefore allow recipients to
assist economic development in areas most in need of jobs and economic
revitalization? If the proposed revision does not encourage recipients
to carry out activities in underserved and blighted communities, please
explain why and share possible alternative standards that might more
effectively balance HUD's goal of enabling recipients broader
flexibility with using funds for remediation while still ensuring funds
are allocated in a manner that broadly benefits the general public.
Documentation of National Objectives Criteria Compliance--Creation or
Retention of Jobs Sec. 570.506
Section 570.506 (for entitlement CDBG and Section 108 recipients)
requires each recipient to establish and maintain records sufficient to
enable HUD to determine whether the recipient has met applicable
requirements, including whether activities meet the criteria for
national objectives at Sec. 570.208. Recipients may meet those
criteria by carrying out activities (e.g., economic development
activities) that benefit LMI persons based on the creation or retention
of jobs. The recipient must maintain information on the size and annual
income of the person's family, except for activities presumed to
benefit LMI persons based upon the census tract where the person
resides or in which a business is located. Currently, this information
is gathered primarily by the assisted business from employees and their
family members. HUD does not prescribe methods for documenting LMI
status, so they will vary by grantee (as to the information it requires
the business to collect) and by business (ranging from self-
certification to externally provided information).
The proposed rule would make two changes to the documentation
requirements at Sec. 570.506 to reduce the burden on businesses in
documenting jobs held by or made available to LMI persons. First, HUD
proposes to clarify that the recipient, instead of the assisted
business, may collect information regarding the size and annual income
of the person's family to document compliance with the national
objective for economic development activities (HUD notes that the
recipient may still choose to require that the assisted business
collect the data if it prefers). Second, HUD proposes to allow the
recipient to substitute records (such as, for example, a certification
by the assisted business) showing the annual wages or salary of the job
claimed to be held by an LMI person in lieu of maintaining records of
the person's family size and income to reduce the information
collection burden. Absent evidence to the contrary,\11\ HUD will
consider a job applicant/taker income-qualified if the annual wages or
salary of the job is at or under the HUD-established income limit for a
one-person family. HUD already provides similar options to CDBG-
Disaster Recovery (CDBG-DR) grantees.\12\
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\11\ Such as, for example, evidence that might be brought to
HUD's attention based on audits or HUD monitoring.
\12\ This approach was pioneered in collaboration with the State
of New York after 9/11/2001 and honed further in 2006 after Katrina
with the five Gulf Coast States. It has remained in continuous use
in CDBG-DR and CDBG-CV and reduced burden substantially for
businesses and the grantee while enabling sufficient documentation
to support conclusions that at least 51 percent of jobs created or
retained are LMI. (It is key to note that 100 percent is not the
goal here.) Despite multiple OIG audits reviewing these programs, no
findings have emerged bearing on issues with this approach. Given
the track record, the main program has probably been overly
conservative in not adopting this approach sooner.
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As an example of how this would change how potential LMI jobs are
evaluated, under HUD's current policy if an assisted business employed
an individual at an LMI-eligible wage, but that individual lived in a
family with multiple incomes that, in total, exceeded the LMI-
eligibility threshold, then the recipient would not be able to claim
that the individual was in an LMI-created or retained job. However,
under our proposal, a recipient would now be able to demonstrate
eligibility simply through examining the income provided by the job
instead of the income received by the job-holder's family. As a result,
the assisted business would now be able to claim this individual was in
an LMI-created or retained job. HUD notes that while this may, on the
margins, result in certain jobs being newly identified as LMI, overall
HUD expects this change will substantially reduce burden on documenting
these jobs while broadly still identifying the same set of jobs.
Moreover, working at the business/position level has the added
advantage for auditors of allowing cross checking with State labor
databases, which may allow for improved oversight.
This clarification and alternative method would streamline the
documentation process, reduce the burden on assisted businesses, and
remove a disincentive to use CDBG funds for job creation and retention
activities. Presently, the burden of collecting information on family
income often falls on the businesses assisted with CDBG funds.
Recipients are typically more willing and better equipped than the
assisted businesses to collect information regarding the size and
annual income of the person's family. This burden operates as a
disincentive to many businesses that would otherwise be willing to
partner with recipients to carry out job creation and retention
activities.
Other entities that receive funding from CDBG recipients to carry
out activities, such as non-profit subrecipients, are typically viewed
as ``standing in the shoes of the grantee'' and, as such, are required
to fulfill the responsibilities that would otherwise belong to the
grantee. Businesses, on the other hand, are not subrecipients and
typically are inexperienced in executing the functions required of a
grantee or a subrecipient, such as collecting income data on family
members (i.e., non-employees). Because a business lacks such
experience, it often views itself as ill-equipped to perform those
functions and is more likely to decline participation in economic
development projects. The changes to the documentation requirements for
economic development activities address the unique status of businesses
in the CDBG program's compliance framework and increase the likelihood
that grantees can successfully implement community and economic
development strategies.
Question for comment #3: Are the proposed changes to the
regulations, such as simplifying recordkeeping requirements, enough of
an incentive for recipients to use CDBG funds for economic development
activities? Would the reduced burden on businesses encourage them to
carry out economic development projects with CDBG funds in underserved
communities? Because most grantees provide one-time assistance (such as
a loan or grant) to each assisted business and because the wage for the
job to be filled must be sufficient to allow the business to attract
and retain the employee it needs, HUD does not anticipate this
provision will produce any wage pressures. However, would the proposed
change to substitute wage information for records of family size and
income incentivize employers to keep wages at or below LMI levels in
[[Page 1751]]
order to qualify for assistance? Are there alternative ways that might
HUD better encourage economic development in underserved communities,
including historically marginalized communities of color, particularly
racially or ethnically concentrated areas of poverty, who have
disproportionately experienced disinvestment and have been denied
economic opportunities?
Special Economic Development Activities Sec. 570.203
Section 570.203 governs the use of CDBG funds for special economic
development activities and includes an illustrative list of eligible
forms of assistance to private for-profit businesses. Section
570.203(b) already lists forms of support by which recipients can
provide assistance to private, for-profit businesses where the
assistance is appropriate to carry out an economic development project.
HUD has previously interpreted this provision to allow CDBG assistance
to New Markets Tax Credit (NMTC) investment vehicles. The proposed
revisions would explicitly allow recipients to provide assistance to an
economic development project through a for-profit entity that passes
the funds through a financing mechanism (e.g., Qualified Opportunity
Funds and NMTC investment vehicles). This clarification would make
clear that such assistance through a financing mechanism is not limited
to NMTC investment vehicles and is eligible under Sec. 570.203(b).
Many economic development activities are carried out in conjunction
with other forms of assistance and Federal tax benefits that provide
additional sources of financing for economic development, particularly
in LMI areas. HUD wants to facilitate the use of CDBG funds by
recipients to fill financing gaps that cannot be met by other sources
and launch critical economic development projects, particularly in
underserved communities with a history of disinvestment, by eliminating
the time to seek additional clarification from HUD on activity
eligibility for individual projects to streamline the process for use
of CDBG funds.
HUD proposes to clarify at Sec. 570.203(c) the types of eligible
job training or employment services. Currently, to be eligible as an
economic development service under Sec. 570.203(c), the job training
or employment support services must be provided to or involve specific
job positions resulting from the assistance being provided. HUD has
discovered numerous situations in which grantees have provided CDBG
funds for general employment readiness programs (such as interviewing
skills or resume-writing classes) and attempted to categorize such
classes as economic development services. To be eligible economic
development services, the beneficiaries must either have been selected
for or be under active consideration for specific job positions. If the
individuals are not receiving training for specific positions at a
specific business, general employment readiness programs or trainings
for individuals in career fields are eligible only as public service
activities or, in limited cases, as part of a Sec. 570.204 community
economic development project carried out by a Community-Based
Development Organization.
HUD notes that it is not proposing any changes that would expand
microenterprise assistance under Sec. 570.203. Section 570.201(o) of
the Code of Federal Regulations and section 105(a)(22) of the Act
provide thorough avenues for CDBG grantees to assist microenterprise
activities; likewise, sufficient authority currently exists for Section
108 borrowers to assist many microenterprise activities through
economic development activities authorized under Sec. 570.203(b).
Public Benefit Standards Sec. 570.209
Section 570.209 contains guidelines and standards for carrying out
economic development activities under Sec. 570.203 and, in some
instances, Sec. 570.204.\13\ The recipient is responsible for ensuring
that at least a minimum level of public benefit is obtained from the
expenditure of CDBG funds. HUD has discretion in identifying and
determining the nature of the public benefit and their standards for
measuring their acceptability. The changes proposed for the public
benefit standards are based on feedback and experiences of recipients
for the past thirty years. The public benefit standards set forth the
types of public benefit that will be recognized and the minimum level
of each that must be obtained for the amount of CDBG funds used. CDBG
recipients must meet standards for their aggregated activities during
the program year as well as for each individual activity. The current
regulations provide two options for meeting the aggregate and
individual standards: creating or retaining permanent jobs or providing
goods or services to LMI residents of the area served by the activity.
For activities addressing public benefit through creation/retention of
jobs, the maximum amount of CDBG/Section 108 assistance per full-time
equivalent (``FTE'') job for activities in the aggregate is $35,000;
for individual activities, the maximum is $50,000. For activities
providing goods or services to residents of an area (e.g., grocery
stores, laundromats, food banks, pantry items, drug stories), the
maximum amount of CDBG/Section 108 assistance per LMI person served for
activities in the aggregate is $350; for individual activities, the
maximum is $1,000.
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\13\ For recipients under subpart I, Sec. 570.482(f) applies to
activities pursuant to sections 105(a)(14), (15), and (17), and
certain activities eligible under section 105(a)(2) of the Act.
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HUD established these standards in 1995 as required by section
806(a) of the Housing and Community Development Act of 1992 (the ``1992
Act'') (Pub. L. 102-550, 106 Stat. 3672). This provision of the 1992
Act required HUD to establish by regulation guidelines to assist CDBG
recipients to evaluate and select economic development activities for
assistance with CDBG funds. Subsequent inflation has resulted in CDBG
funds no longer supporting the same proportion of the costs of creating
and retaining jobs as they did when HUD created the standards. This
precludes recipients from using CDBG funds for some economic
development activities and has made recipients increasingly less able
to feasibly implement economic development activities. For example, in
program year 2012, approximately $238 million in CDBG funds were used
to support almost 2,000 economic development activities, whereas, by
2022, only $69 million in CDBG funds were used to support about 1,100
economic development activities. Further, HUD believes the two options
do not provide recipients enough flexibility in demonstrating a public
benefit.
The proposed changes re-envision the public benefit standards for
economic development activities and would allow recipients to better
support business development, stimulate job growth, and provide needed
goods and services to LMI persons. HUD can facilitate economic
development while simultaneously furthering the purpose of the 1992 Act
through the following proposed reforms to the public benefit standards:
(1) eliminating the aggregate standard; (2) raising the individual
standard to $100,00 per full-time equivalent, permanent job created or
retained and $2,000 per LMI person to whom goods or services are
provided by the activity; (3) adding an alternative standard which HUD
must approve in writing whereby recipients can demonstrate that the
activity would create a significant public benefit despite not meeting
the jobs or services standards (such as being part of a hazard
mitigation and climate change resilience
[[Page 1752]]
strategy for an LMI area, supporting critical infrastructure, or
meeting a community benefit defined or described in the requirements
governing another Federal program); and (4) providing Section 108
applicants the option to allow HUD to calculate the cost of an economic
development activity on a net present value basis to more accurately
reflect the lower cost of an activity funded with a loan (which
generates a return of the original CDBG outlay) versus an activity that
involves a grant or other form of subsidy.
First, HUD's proposal to eliminate the aggregate standard at
Sec. Sec. 570.209(b)(1) and 570.482(f)(2) stems from the disincentive
it has created to use CDBG funds for economic development and because
it is burdensome beyond any observed benefit. (The Public Benefit
Standards are applied to the average of the expenditures for the
activities funded over a 12-month period.) In particular, recipients
with low-volume economic development programs effectively apply the
aggregate standards to individual activities in an effort to reduce the
risk of failing to comply. In other words, the original intention to an
aggregate standard was to give recipients flexibility to occasionally
target activities that were more costly. That flexibility has not
worked out in practice.
For example, a grantee may identify a high-impact project at the
beginning of its program year that would create one job per $50,000 of
CDBG assistance; however, local market conditions could make it
difficult to predict how many other economic development activities
would be assisted and how many jobs would be created. Faced with this
uncertainty, the grantee may hesitate to provide funds to the high-
impact project for fear of not meeting the aggregate standard. This
scenario reflects how the aggregate standard restricts the ability of
recipients to leverage CDBG funds for high-impact investments in their
communities, particularly through Section 108 loan guarantees, because
providing funds at the maximum level of the individual standard for one
activity would require funding other economic development activities at
public benefit levels significantly below the aggregate standard.
Additionally, the number of exceptions from the aggregate standard
creates confusion for borrowers in planning their economic development
programs, making the standard overly burdensome. (See current
Sec. Sec. 570.209(b)(2)(v)(A) through (N) and 570.482(f)(3)(v)(A)
through (N)).
Second, HUD proposes to raise the dollar thresholds at Sec. Sec.
570.209(b)(3)(i)(A) and (B) and 570.482(f)(4)(i)(A) and (B) for the
individual standard. Maintaining the current standards would continue
to hinder recipients' ability to use CDBG funds for future economic
development activities and limit recipients' ability to leverage CDBG
funds through revolving loan funds and Section 108 loan guarantees. The
$100,000 and $2,000 amounts approximate the inflation-adjusted value of
the current standards. HUD believes that updating these standards to
reflect market conditions would allow CDBG funds to be more competitive
for use in economic development activities. By comparison, the Small
Business Administration (SBA) 504 Loan program allows a benefit of up
to $100,000 per job created depending on the type of activity. HUD also
proposes to include a provision at Sec. Sec. 570.209(b)(5) and
570.482(f)(6) that would permit HUD to issue periodic notices to update
those values (and the net present values for Section 108 borrowers, as
described below) to reflect inflation.
Question for comment #4: Would the proposed changes encourage a
recipient to target CDBG projects in underserved communities in their
jurisdiction? Would the proposed individual standards more accurately
reflect the amount of CDBG funds necessary to carry out job creating
activities? What is the likely effect on investment in underserved
areas? How might HUD better encourage economic development in
underserved communities, including historically marginalized
communities of color, particularly racially or ethnically concentrated
areas of poverty, who have disproportionately experienced disinvestment
and have been denied economic opportunities? How frequently should the
standard be updated for inflation, and should HUD update the standard
automatically with a self-executing inflation calculation?
Third, the public benefit standards provide a narrow choice of two
measures for determining a public benefit: amount of assistance per job
created or retained or amount per LMI person served by the activity.
HUD believes these measures provide insufficient options to measure the
public benefit a project may provide. For example, the SBA 504 Loan
program offers recipients who cannot meet the minimum jobs requirement
an alternative of meeting one of eighteen community development, public
policy, or energy reduction measures. While HUD understands the value
of having objective and uniform benchmarks for demonstrating public
benefit, the current standards unduly restrict recipients' ability to
demonstrate public benefit through use of CDBG funds for economic
development activities. Further, CDBG assistance for small businesses
may be used with funding under another Federal program (e.g., SBA) that
has different standards. To provide flexibility to recipients in
demonstrating such an alternative public benefit, proposed provisions
at Sec. Sec. 570.209(b)(3)(iii) and 570.482(f)(4)(iii) would permit
HUD to approve requests by recipients that an applicable activity
demonstrates an acceptable public benefit if the activity would result
in a significant contribution to the goals and purposes of the CDBG
program.
Question for comment #5: How can recipients demonstrate an
alternative public benefit? For example, an increasing number of
communities have either used or explored using CDBG funds for critical
lifeline projects that have received funding from other Federal
agencies, including the U.S. Department of Energy and the Federal
Emergency Management Agency. Would it be appropriate to use objectives
for other Federal programs to satisfy the CDBG program public benefit
standards? Should there be additional criteria for what can be
considered an alternative public benefit, and if so what might they be?
Fourth, HUD proposes to add a new option for Section 108 applicants
at Sec. Sec. 570.209(b)(3)(ii) and 570.482(f)(4)(ii) that would
address the concerns expressed by program participants regarding a
disparity in treatment of economic development assistance in the form
of a loan and other forms of assistance, such as grants, when measuring
public benefit. When a recipient uses CDBG funds for an economic
development activity in the form of a loan to a third party (e.g., a
business), the loan is expected to be repaid over some term. Any
repayment of that loan reduces the ultimate cost of that activity to
the CDBG program. On the other hand, when a recipient uses CDBG funds
to make grants to third parties, the cost to the CDBG program is the
actual amount of the grant. The existing regulations Section 108 treat
activities that involve loans in the same way they treat activities
that involve grants: i.e., the cost of an activity is measured based on
the nominal amount of the assistance provided to the third party. This
treatment distorts the cost per unit of output (e.g., jobs) for an
activity that provides assistance in the form of a loan because the
standard fails to measure the actual cost of the activity accurately.
Although HUD recognized this disparity when it first proposed the
[[Page 1753]]
public benefit regulations, it did not provide an alternative to use of
the nominal amount of the loan for calculation of the public benefit
due to the complexity of implementing an alternative methodology for
use by recipients. Now, however, HUD could use the procedures and
models prescribed by the Office of Management and Budget (OMB) for
determining the ``credit subsidy cost'' to the Federal Government of
making direct Federal loans to determine the cost to a grantee's CDBG
program of carrying out activities that involve loans from Section 108
recipients to third parties. These proposed procedures for determining
the cost of such third-party loans through calculating the cost of the
activity based on the net present value of the activity would address
the concerns expressed to HUD by recipients regarding measuring the
true cost to the CDBG program of an economic development activity that
involves a loan to a third party. HUD can address its original concern
about using an alternative methodology by reserving the use of an
alternative measure of public benefit to Section 108-funded activities
when HUD can determine the cost of a loan to the CDBG program through
using a methodology routinely applied under Federal credit programs.
HUD will describe in a separate notice the procedures it will use in
calculating the cost of a loan.
Question for comment #6: Would the proposed option for measuring
the public benefit for loan activities on a net present value basis
facilitate the use of Section 108 financing for economic development
activities?
B. Improving Data Collection From the CDBG Program To Measure
Effectiveness
Revision of Consolidated Plan Publication Requirements as Identified in
Citizen Participation Plans Sec. Sec. 91.105(b), 91.115(b)
Entitlement and State recipients must identify in their citizen
participation plans how they will publish their Consolidated Plans in a
manner that permits their residents, public agencies, and other
interested parties an opportunity to examine their contents and submit
comments. HUD expects each grantee to undertake a multifaceted approach
to publication after considering the nature of the jurisdiction and its
citizens. The principle for jurisdictions is to create and implement a
citizen participation plan designed to get program-related information
to and from persons who will be affected by the contents of the
Consolidated Plan or who may seek to participate in the grantee's
programs.
HUD proposes to amend Sec. Sec. 91.105(b)(2) and 91.115(b)(2) to
encourage grantees to use additional forms of communication to make
citizens aware of publication of the Consolidated Plan. The proposal
adds methods of making the Consolidated Plan publicly accessible to
persons with disabilities and provide meaningful access to limited
English proficient persons, such as: email; text message (SMS); social
media; media advertisements; public service announcements; notifying
neighborhood organizations; and placement of hard copies of the Plan in
public places such as libraries and neighborhood centers, and
notifications on grocery store bulletin boards. These sections
illustrate new examples of optional publication methods but are not
required. HUD already considers these proposed methods to be valid and
useful methods of publishing Consolidated Plans and encourages grantees
to update citizen participation plans to include these methods.
Recipients are reminded that section 504 of the Rehabilitation Act of
1973, 29 U.S.C. 794, and the implementing regulations at 24 CFR part 8,
which provides rights to persons with disabilities in HUD-funded
programs and activities, continue to require grantees to ensure
effective communication for persons with disabilities, and that Title
VI of the Civil Rights Act of 1964, 42 U.S.C. 2000d et seq., and its
implementing regulations, require a recipient to take reasonable steps
to provide language assistance to ensure meaningful access to programs
and activities for persons who are limited English proficient (LEP).
Adding Substantial Amendment Criterion to the Citizen Participation
Plan Sec. 91.105(c)
Section 91.105(c)(1) requires an entitlement grantee to identify in
its citizen participation plan what it considers to be a substantial
amendment to its Consolidated Plan. This provision also states that a
recipient must consider a change in the use of CDBG funds from one
eligible activity to another as a substantial amendment to its
Consolidated Plan. However, the provision does not state that adding
activities not previously listed in a recipient's Consolidated Plan or
Action Plan is a substantial amendment.
Since a recipient is required to notify the public of all the
activities it intends to carry out with CDBG funds, HUD proposes to
clarify that adding an activity not previously identified in the
Consolidated Plan or Action Plan must be considered a substantial
amendment in the citizen participation plan.
Setting Quantitative, Neighborhood Level Goals in the Consolidated Plan
and Measuring Performance in Reports Sec. Sec. 91.215, 91.520
Section 91.215(a)(1) requires local government recipients to
identify the general priorities for allocating investment
geographically within the jurisdiction. HUD has observed that many
grantees target some or all activities geographically. To the extent
that a local government recipient chooses to target investment (as
opposed to undertaking jurisdiction-wide activities), HUD proposes to
require recipients to set at least one quantitative, neighborhood-level
outcome goal in their Consolidated Plan and to report performance in
the Consolidated Annual Performance and Evaluation Reports (CAPERs).
This would enable HUD to assess local government recipients' progress
in addressing housing, homeless assessment, and other identified needs
on a sub-jurisdiction level and provide a richer understanding of how
grant funds enable grantees to achieve local community development
objectives. HUD proposes to change Sec. 91.520(d) to require an
entitlement grantee to report in the CAPER at least one quantitative,
neighborhood-level outcome goal accomplishment related to one or more
sub-jurisdiction priority, if established pursuant to Sec.
91.215(a)(1).
Section 91.215(g) encourages entitlement recipients, through the
Consolidated Plan, to identify locally designated areas that are being
targeted for neighborhood revitalization efforts that are carried out
through multiple activities in a concentrated or coordinated manner. In
this rule, HUD proposes to add examples of areas that may be targeted
for neighborhood revitalization efforts. These areas can include areas
that were designated as economically distressed areas by the Federal
Government or the State that exhibit significantly high levels of
poverty or low median income, including historically underserved and
marginalized communities. HUD believes that encouraging entitlement
recipients to consider targeting efforts in these areas during the
planning process will result in recipients developing a more holistic
understanding of the needs of these areas and how they can best use
CDBG funds to revitalize such areas.
[[Page 1754]]
C. Improving Program Outcomes
Mixed-Use Properties Sec. Sec. 570.3, 570.200
Mixed-use properties have become increasingly popular as
development trends across the country have encouraged locating
residential units, office space, and/or commercial space on the same
property and often in the same building. Section 570.200(b)(1) contains
special policies governing facilities containing both eligible and
ineligible uses. It allows recipients to provide funds for a public
facility otherwise eligible for assistance under the CDBG program even
if it is part of a multiple-use building containing ineligible uses.
Recipients may also provide funds for an eligible activity in a
multiple-use property (that is not a public facility), but the existing
regulation lacks clarity on the circumstances when such use is
permissible. This lack of clarity limits recipients from using CDBG
funds for eligible activities in mixed-use properties.
HUD proposes to revise Sec. 570.200(b)(1) to clarify that
recipients can assist eligible activities if they are part of mixed-use
properties that also contain ineligible uses, so long as the recipient
expends CDBG funds only on the eligible use. The revised provision
would continue to allow for CDBG and Section 108 guaranteed loan funds
to be involved in such a project so long as there is an eligible
activity that costs can be allocated to cover. While the prohibition on
new housing construction is applicable for both Section 108 borrowers
and CDBG recipients pursuant to Sec. 570.207(b)(3), costs in mixed-use
and mixed finance developments may be allocable under the new draft
regulation and our current interpretation of the requirements. HUD
expects this revision would facilitate economic development by
expanding the scope of activities for which recipients can use CDBG
funds. The proposed rule also would add a definition of ``mixed-use
property'' at Sec. 570.3.
Closeout Sec. 570.509
HUD proposes to amend the CDBG closeout regulations at Sec.
570.509 to conform with 2 CFR 200.344 and with the proposed
modifications to timeliness at Sec. 570.902. Under this proposal, HUD
would have the flexibility to separately cancel a grantee's financial
access to a grant and remove the grant's availability from the line of
credit while allowing some additional time, if needed, for a grantee to
meet certain program requirements, such as meeting a national
objective. HUD expects that each grantee will expend all funds and
close out each grant financially by the end of the eighth program year
of the grant.\14\ Further, the proposed rule would make clear that
certain requirements survive grant closeout, such as but not limited to
record retention responsibilities and property management. Although the
proposed changes would explicitly separate the grant programmatic
closeout procedures from financial account cancellation procedures,
they would not change the requirement that final annual performance
reports are due within 90 days after the close of the jurisdiction's
program year.
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\14\ CDBG grant funds not disbursed from the grantee's line of
credit after eight years will be cancelled and recaptured by the
U.S. Department of Treasury at the end of the eighth Federal fiscal
year due to statutory and regulatory requirements.
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For example, a grantee uses the remainder of one grant's funds to
acquire a school to convert to housing. The grantee uses funds from
other sources for construction costs. Under this proposal, HUD could
cancel the financial account while explicitly retaining the ability to
enforce compliance with all program requirements related to the
activity underway, particularly those bearing on national objectives.
The regulations would continue to govern change of use requirements
(e.g., investments such as community centers or parks).
HUD recognizes that there are many things that could disrupt a
grantee's intended timeline for activity completion: litigation,
disasters, limited construction seasons due to weather, or other
extenuating circumstances. To complete all program activities,
including, but not limited to, meeting national objectives and
satisfying reporting requirements, grantees are permitted to request an
extension of up to two years of the six-year period of performance
proposed in the Continuing Capacity section of this rule.
Question for comment #7: Would other or additional modifications to
the closeout process ease grantee burden and ensure that HUD can
confirm that grantees have met programmatic requirements prior to
closeout?
D. Addressing Poor Performance
Repayment of CDBG Funds for Disallowed Costs Sec. Sec. 570.495,
570.910
Sections 570.495 (for State recipients) and 570.910 (for
entitlement recipients) provide corrective and remedial actions that
HUD may impose on recipients when HUD identifies deficiencies in
recipient performance. HUD may disallow costs if recipients expend CDBG
funds for ineligible activities or for activities that do not meet a
national objective, or do not comply with 2 CFR part 200, subpart E,
cost principles. Currently, HUD advises recipients to reimburse their
CDBG program account or letter of credit with non-Federal funds based
on 2 CFR 200.405(c), which states that any cost allocable to a
particular Federal award (or cost objective) under the principles
provided for in 2 CFR part 200 may not be charged to other Federal
awards to overcome fund deficiencies, to avoid restrictions imposed by
Federal statutes, regulations, or terms and conditions of the Federal
awards, or for other reasons. However, this prohibition would not
preclude the non-Federal entity from shifting costs that are allowable
under two or more Federal awards in accordance with existing Federal
statutes, regulations, or the terms and conditions of the Federal
awards. In addition, 2 CFR 200.441 states that costs resulting from
non-Federal entity violations of, alleged violations of, or failure to
comply with, Federal, State, Tribal, local or foreign laws and
regulations are unallowable, except when incurred as a result of
compliance with specific provisions of the Federal award, or with prior
written approval of the Federal awarding agency.
However, part 570 does not clearly state the source of repayments
as the result of such violations. The proposed rule would explicitly do
so in Sec. Sec. 570.495(a)(4) and 570.910(b)(5) and would also make
clear that recipients must make repayments for disallowed costs with
non-Federal funds. In lieu of such repayments, HUD proposes to revise
Sec. 570.495(a)(4) and add Sec. 570.910(c) to permit a recipient to
request a voluntary grant reduction (VGR) from a current or future
year's allocation of funds. VGRs have long been used in lieu of
repayment, and this proposed rule would codify the policy and the
procedure for requesting a VGR.
Timely Performance Sec. 570.902
This rule proposes to revise Sec. 570.902 to institute regular
quarterly public reporting by HUD on grant progress for entitlement
grantees, with each grant labeled (e.g., ``first year,'' ``on track,''
or ``under target'') based on the pace of expenditure necessary to
achieve grant closeout by the target date at the end of the period of
performance. HUD's increase in frequency of public reports will use
existing grant data to provide grantees with additional time to make
adjustments to their respective programs. The public report may be used
by citizens for information, grantees for management information,
[[Page 1755]]
and HUD for risk assessment, oversight, and as a signal for technical
assistance needs. HUD believes this would improve the current system of
only providing timeliness feedback to grantees and HUD Field offices
annually. With more frequent progress information, grantees should be
able to adjust their programs more nimbly and avoid timeliness issues.
Section 104(e)(1) of the Act requires that HUD annually determine
whether each CDBG grantee has carried out its activities in a timely
manner. HUD must also assess whether each grantee has continuing
capacity to carry out activities in a timely manner. Under the existing
entitlement regulations at Sec. 570.902, HUD measures timely
performance at a single, annual point in time and communicates any
issues to a grantee via letter. In accordance with the existing
regulations, an entitlement grantee must meet an ``all open CDBG
grants'' portfolio standard, requiring it to have a total undisbursed
portfolio balance no greater than 1.5 times its most recent annual
grant amount remaining in the line of credit. HUD conducts this test 60
days prior to the end of the grantee's program year, and in recent
years, HUD has put increased emphasis on enforcing timely expenditure
using this standard.
HUD considers a grantee to have timely performance issues if its
portfolio balance exceeds 1.5 times its most recent annual grant amount
for two years in a row. If this happens, HUD first offers the grantee a
chance for an informal consultation with program officials prior to
determining a corrective action or sanction. A common course of action
for HUD in cases of continued grantee timeliness issues is reducing the
next year's grant allocation of a grantee.
Although the timeliness regulations and procedures comply with the
statutory direction, the combination of the annual 1.5 standard with
the adoption of grant-based accounting and stagnant CDBG grant amounts
appears to have created an unintended--and undesired--consequence. HUD
has observed grantees budget and use more funds for annual ``soft''
expenditures, such as code enforcement, administration, planning,
public services, and salaries for activity delivery, and less funds
directly assisting major brick-and-mortar activities. HUD's
observations and grantee feedback indicate that HUD's enforcement of
the existing timeliness standard has resulted in pressuring grantees'
local funding decisions away from large brick-and-mortar activities,
which characteristically deliver greater benefits but require longer
expenditure timeframes. Grantees are making funding and priority
decisions based less on long-term community needs than on a need to
comply with the portfolio balance requirement. For example, a large
Midwest city recently identified the need to comply with the 1.5
requirement as the reason for its choice to assist an activity
providing sidewalk improvements in low-income neighborhoods even though
it believed a better fit for its community development priorities would
be a significant multi-unit, multi-structure, housing rehabilitation
project. HUD has noted numerous other similar examples during informal
timeliness consultations.
This concerns HUD because the objectives of the CDBG program at
section 101(c) of the Act emphasize development of viable urban
communities by providing suitable living environments. If the
timeliness enforcement standard is causing grantees to shift funding
decisions away from activities generating long-lasting improvements,
the standard undercuts the purposes of the Act.
Further, the current timeliness standard incorrectly captures both
high- and low-capacity grantees. An adjusted line of credit balance in
excess of 1.5 times the grant amount, measured at a point in time in
the grantee's program year, is not always an indicator of poor
performance. Higher-capacity grantees who try to budget substantial
portions of two or more grants for a major local project are identified
incorrectly by the existing standard as low-performing. These grantees
do not typically exhibit non-compliance in other areas of their
portfolio and their HUD Field office grant managers frequently vouch
for their capacity to deliver the expected project benefits. Current
timeliness requirements can discourage activities that if not for these
requirements would otherwise advance statutory program objectives.
Conversely, low-capacity grantees with known problems across a decade
or more, have sometimes not been captured under this current
requirement.
Lessons learned from implementation of other programs incorporating
the CDBG framework, including the Neighborhood Stabilization Program
(NSP) and other CDBG-DR appropriations, helped inform this proposal.
Several versions of obligation, expenditure, and other progress
standards have existed in these programs, with mixed results. For
example, obligation deadlines in the first NSP funding round and some
early CDBG-DR grants caused grantees to select some projects less
aligned with community needs and goals. Recent CDBG-DR rules, which
combine a period of performance based on actual community development
practice with public tracking reports, have provided a simple, workable
standard that enables local choices while enhancing transparency and
accountability. The takeaway from HUD's experience with timeliness is
that the enforcement mechanism influences local choices towards or away
from significant construction activities and may affect the pace of
grant disbursement, and that applying a new standard for CDBG grantees
will better serve the purpose of the Act.
This proposal seeks to enhance oversight of timeliness while
reducing pressure on grantees to fund minor, quickly implementable
activities or soft costs rather than providing assistance for larger
projects with more significant local community development outcomes.
This approach would set a standard for a clear lack of continuing
capacity for timely implementation, comply with the Act, and better
accommodate eligible major construction activities. The rule would also
set, for the first time, a separate standard for grantee continuing
capacity (see below for further detail).
Timeliness and Program Income Sec. Sec. 570.489, 570.504
Note that the rules related to the intersection of timeliness and
program income would not change under this proposal. The Act and the
current regulations provide that program income received by a grant
recipient or subrecipient is additional CDBG funds. The regulations
would continue to require that grantees use available program income
prior to additional drawdown of line of credit funds. However,
revolving funds are a special case. This proposed rule addresses
revolving funds because some grantees have inappropriately used these
accounts to simply hold program income, effectively evading timely
expenditure requirements. The proposed timely expenditure standard for
revolving funds is that grantees use at least one half of a fund's
balance (taken at the beginning of the program year) for eligible
revolving fund activities or re-program the unused amount each year.
The proposed rule seeks to prevent grantees from placing program income
in revolving funds indefinitely with new language at Sec. 570.504(f)
that would permit HUD to take corrective actions against entitlement
grantees with inactive or excessive revolving funds. HUD also
[[Page 1756]]
proposes to hold States accountable for ensuring that revolving funds
remain active adding a new Sec. 570.489(f)(4).
Continuing Capacity Sec. 570.902
The current regulations do not provide a standard for determining
that a grantee no longer has the continuing capacity to carry out
activities in a timely manner. Although this proposed rule does not
change HUD's ability to assess capacity on a case-by-case basis to
determine capacity, it would add a data-driven measure of lack of
capacity: a portfolio consideration of a grantee's continuing capacity
to deliver activities in a timely manner based on overall progress
under multiple grants over a rolling four-quarter period rather than by
a single annual snapshot of the aggregate balance. At any given time,
each grantee will have up to six grants (or up to eight if a period of
performance waiver is provided) available in its CDBG line of credit.
Proposed Sec. 570.902(a)(4) would provide that if any three or more of
those grants are simultaneously identified as Slow Spenders for four or
more consecutive quarters, HUD would determine that the grantee lacks
the continuing capacity to undertake timely program activities, will
provide an opportunity for an informal consultation meeting, and will
then take appropriate action, including corrective action or sanction
up to and including a reduction to the grant amount for the succeeding
program year.
Question for comment #8: In proposing this shift, HUD is aware that
the overall balance of funds in CDBG lines of credit may increase.
Given the commitment to quarterly public status reports at the grant
level, is this problematic? If yes, how? Also, if yes, suggest an
alternate approach. If you are a grantee, will the timeliness proposal
affect your local activity choices in favor of transformative or major
construction projects? Additionally, the Department seeks feedback from
the public, including from States, on whether it would be appropriate
to apply the proposed new timeliness requirements for entitlements to
States.
Criteria for National Objectives--Meeting a National Objective,
Appropriate Data Source Sec. Sec. 570.200, 570.208, 570.483
The proposed rule would add a time period for CDBG-assisted
activities to meet one of the three national objectives of the CDBG
program. Currently, there is no time period in which CDBG-assisted
activities must meet a national objective. This lack of a defined
period of time for an activity to meet a national objective undercuts
the primary purpose of the Act because recipients cannot demonstrate
that they are using CDBG-funded activities to develop viable urban
communities by providing decent housing, a suitable living environment,
and expanding economic opportunities, principally for LMI persons.
To ensure that recipients fulfill the purpose of the Act and that
CDBG-assisted activities benefit LMI persons and households, HUD
proposes that activities be given six years from the initial drawdown
of CDBG funds to meet a national objective or the length of the period
of performance and any extension permitted under Sec. 570.509,
whichever is shorter. HUD believes that six years is an adequate time
period for recipients to demonstrate that an activity will meet a
national objective. HUD proposes to revise Sec. 570.200(a)(2)
requiring recipients to demonstrate that activities carried out under
Subpart C meet a national objective within six years of the initial
drawdown of CDBG funds for an activity.
HUD also proposes to remove multiple references in Sec. Sec.
570.208(a) (for entitlement recipients) and 570.483 (for State
recipients) to sources of data recipients should use in determining
income characteristics, such as poverty and income levels, of potential
beneficiaries or areas served. Notice CPD-19-02, published February 14,
2019 (https://www.hud.gov/sites/dfiles/OCHCO/documents/19-02cpdn.pdf),
provides recipients guidance on using data for compliance with CDBG,
CDBG-DR, and NSP grant requirements.\15\ The proposed rule would direct
recipients to use information provided by HUD to the fullest extent
feasible as opposed to the most recently available decennial census
data, which may have become outdated and difficult to locate.
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\15\ This data is based on the American Community Survey 2011-
2015 5-year estimates and may be found at https://www.hudexchange.info/programs/acs-low-mod-summary-data/.
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Question for comment #9: Is six years from the initial drawdown of
CDBG funds an adequate time period to demonstrate that activities have
met a national objective?
E. Clarifying the Eligible Uses of CDBG
Definitions Sec. Sec. 570.3, 570.206, 570.481
Activity Delivery Costs
Recipients and subrecipients may incur costs related to carrying
out specific activities eligible under Sec. Sec. 570.201-570.204 and
570.703, which are typically referred to as ``activity delivery
costs.'' Unlike program administrative costs that are eligible under
Sec. 570.206 for overall program management, coordination, monitoring,
and evaluation, a recipient incurs activity delivery costs on an
activity-by-activity basis. The regulations do not specifically define
this term; therefore, HUD proposes to add a definition at Sec. 570.3.
HUD proposes to define activity delivery costs as the allowable costs
of work performed by a recipient, subrecipient, or contractor in
carrying out specific activities eligible under Sec. Sec. 570.201-
570.204 (for CDBG entitlement recipients) and 570.703 (for Section 108
borrowers). For example, under this proposal, a grantee could charge 20
percent of an employee's salary and related expenses (e.g., fringe
benefits) to an activity provided it maintains records that support the
allocation of costs to the activity. Some grantees would choose to
maintain such records to ensure they do not exceed the cap on program
administrative costs.
Recipients, subrecipients, and contractors must use the cost
principles at 2 CFR part 200, subpart E in determining the allowability
of the costs. In particular, recipients, subrecipients, and contractors
must ensure that activity delivery costs consisting of staff salaries
are allocable to the specific activity and adequately documented. HUD
proposes a new reference in the introductions to Sec. 570.206 to
emphasize that activity delivery costs for CDBG entitlement recipients
are separate from program administrative costs.
Elderly
CDBG recipients and subrecipients carry out public services that
specifically benefit elderly persons. Recipients across the United
States have widely varying definitions of ``elderly'' that they use for
CDBG-assisted activities that specifically target this population.
Because part 570 does not define the term ``elderly,'' HUD has received
requests for guidance regarding the definition of elderly. Although
``elderly person'' is defined at Sec. 5.100, HUD believes including
the definition at Sec. 570.3 would make clear the definition of
``elderly'' for certain CDBG-assisted activities. HUD proposes to add
the definition of elderly at Sec. 570.3 that states that for
activities pursuant to Sec. 570.202, ``elderly'' means a person 62
years of age or older. This definition would align CDBG-assisted
housing activities with other HUD programs. However, HUD would continue
to permit CDBG recipients and subrecipients to define ``elderly''
consistent with State law to permit recipients the flexibility to carry
out non-housing activities that benefit elderly persons.
[[Page 1757]]
Entitlement Amount
The definition of entitlement amount contains a reference to ``a
metropolitan city and an urban county.'' Periodically, OMB issues
bulletins that contain revised delineations of metropolitan statistical
areas, micropolitan statistical areas, and combined statistical areas.
These bulletins update OMB's designations of metropolitan areas,
counties included in metropolitan areas, and principal cities of those
metropolitan areas. These principal cities usually have populations
below the statutory threshold of 50,000 to become a metropolitan city
but are considered principal cities of the metropolitan areas in which
they are located. Therefore, HUD proposes to add the term ``principal
cities'' as designated by OMB in the definition of ``entitlement
amount'' at Sec. 570.3 because HUD considers principal cities
entitlement recipients that will receive a CDBG grant if they accept
entitlement status.
Period of Performance
HUD proposes to add a definition of ``period of performance'' in
Sec. Sec. 570.3 and 570.481(a)(4) that would provide recipients a six-
year time period to expend a grant's funds or the length of the origin
year grant's period of availability for expenditure in accordance with
Sec. Sec. 570.200(k) or 570.480(h), whichever is shorter, beginning on
HUD's approval of a grant agreement for a given grant. The proposed
definition would apply to the proposed closeout procedures at Sec.
570.509 and timeliness requirements at Sec. 570.902. For Section 108
loan guarantees, the period of performance begins on the date of HUD's
guarantee of a promissory note or other obligation and confers the same
six-year time limit.
Under the Federal financial rules at 2 CFR 200.211(b)(5) every
Federal grant must have a designated period of performance. For CDBG
grants, HUD began adopting these rules in 2015. Under CDBG
appropriations, HUD has allowed the period of performance to be the
statutory availability of grant funds. In general, HUD has up to three
years to obligate grants, and there are five additional years of
funding availability. For example, grants from the 2014 appropriation
are no longer available for expenditure after September 30, 2021.
Drawing from lessons learned, HUD looked to CDBG-DR grantees' fund
expenditure patterns. In developing the CDBG-DR timely expenditure
expectations, HUD reviewed the spending performance of CDBG-DR grants
awarded in response to disasters in 2006 and 2008. In May 2013, HUD
reviewed historical data on quarterly disbursements of funds from these
appropriations. This analysis concluded that most CDBG-DR-funded
recovery activity is completed within three to four years, and the
recovery of CDBG-DR grantees is largely complete after six years. For
an average grant, the third year following grant agreement execution
typically shows the peak amount of expenditures. Program experience
with annual CDBG grantees, who generally have fewer challenging
programs than do CDBG-DR grantees, indicates that a six-year period of
performance would be generous for both entitlements and State grantees.
Question for comment #10: Is the proposed six-year period of
performance an appropriate period of time to expend funds for
activities under a given grant?
Overall Benefit Requirement Sec. 570.200
Section Sec. 570.200(a)(3) currently states that entitlement
recipients, non-entitlement CDBG recipients in Hawaii, and recipients
of insular area funds 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), (d)(5), or (6)
for benefiting LMI persons. These recipients must ensure that during
their chosen period of certification not less than 70 percent of the
aggregate of CDBG funds expended during that period benefit LMI
persons. This requirement is identified in the Act at section 101(c)
and cannot be waived. Therefore, HUD proposes to revise Sec.
570.200(a)(3) to reinforce that recipients may not expend more CDBG
funds in a subsequent certification period to meet the statutory
requirement.
Eligible and Ineligible Activities Sec. Sec. 570.200, 570.201,
570.202, 570.206, 570.207, 570.703
Applicable Environmental Review Procedures in Part 58
HUD proposes to make a slight revision to Sec. 570.200(h)(1)(iii),
which requires that costs and activities funded are in compliance with
the environmental review procedures stated in 24 CFR part 58. There has
been some confusion whether the intent of this provision is just to
apply whatever part 58 requirements would otherwise apply, or to
actually extend applicability of part 58 choice-limiting prohibitions
even to pre-application activities that aren't prohibited under Part 58
itself. In order to clarify that this provision is not meant to add a
prohibition on reimbursement of expenses for activities that began
before application for CDBG, where the pre-application activities
commenced prior to a completed environmental review and Release of
Funds, the revision would refer to compliance with ``applicable''
environmental review procedures in 24 CFR part 58.
Acquisition of Real Property
Section 570.201(a) currently permits grantees to use CDBG funds to
acquire real property by long-term lease. However, it does not specify
the length of time that constitutes a long-term lease for the purpose
of compliance with Sec. 570.201(a). ``Long-term lease'' has been
interpreted in various ways. The 1998 Guide to National Objectives and
Eligible Activities for Entitlement Communities defines a long-term
lease as 15 years or more. Consistent with this guidance, HUD proposes
to add a parenthetical statement to Sec. 570.201(a) that would clearly
define a ``long-term lease'' as 15 years or more.\16\
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\16\ Under the CDBG program, long-term leases of 15 years are
considered acquisition for URA purposes and subject the URA's 49 CFR
part 24, subpart B, real property acquisition requirements. See HUD
Handbook 1378 Chapter 1-4.I.7 page 1-8 for more details.
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Tornado Safe Shelters
Section 2 of the Tornado Shelters Act (Pub. L. 108-146; 117 Stat.
1883, enacted December 3, 2003) amended section 105(a) of the Act to
permit the construction or improvement of tornado shelters for
residents of manufactured housing in certain neighborhoods as an
eligible activity under the CDBG program. The Tornado Shelters Act
permits tornado shelters as an eligible activity if they are located in
a neighborhood that (1) contains at least 20 manufactured housing units
within such proximity to the shelter that the shelter is available to
the resident in the event of a tornado, (2) consists predominantly of
persons of low and moderate income (i.e., recipients must be able to
document that at least 51 percent of the residents of the service area
of the tornado shelter are of low and moderate income); and (3) is
located within a State in which a tornado has occurred during the
fiscal year for which with amounts to be used were made available or
the preceding 3 fiscal years, as determined by the Secretary in
consultation with the Administrator of the Federal Emergency Management
Agency. HUD has not codified this use of CDBG funds in the regulations,
but recipients may use such funds for the construction of tornado-
[[Page 1758]]
safe shelters under the authority provided by statute. HUD proposes to
add a provision at Sec. 570.201(r) that would codify the use of CDBG
funds for tornado safe shelters as an eligible activity in accordance
with the statute. Since the statute requires that neighborhoods where
tornado shelters are constructed or improved with CDBG funds be
predominantly LMI, recipients must be able to document that at least 51
percent of the residents of the service area of the tornado shelter are
of low and moderate income.
Ineligible Activities
HUD proposes at Sec. 570.207(a)(4) to explicitly list general
administrative and operating expenses of public or nonprofit entities
as an ineligible activity. HUD's experience is that these entities
believe that general administrative costs and operating expenses are
eligible activities under Sec. Sec. 570.201-570.206. However, while
recipients may use CDBG funds for program administrative costs, the
regulations do not allow public or nonprofit entities to do so. HUD
believes that the proposed addition of this ineligible activity, in
addition to the proposed addition of the definition of ``activity
delivery costs'' in Sec. 570.3, would provide greater clarity to
public and nonprofit entities and encourage them to use CDBG funds
directly for activities (as well as for activity delivery costs).
Public and nonprofit entities also cannot categorize these ineligible
expenses as providing technical assistance; the proposed rule would
revise the definition of ``technical assistance'' at Sec. 570.201(p)
to reflect that prohibition.
Use of CDBG Grant Funds for Section 108 Activities
HUD proposes to clarify eligible uses of CDBG funds for loan
repayment, issuance, underwriting, servicing, and other cost associated
with Section 108 activities. Although already described at Sec.
570.705(c), HUD believes that adding a cross-reference in subpart C
(with a new Sec. 570.201(s)) may provide potential borrowers a better
understanding of their ability to finance Section 108 activities with
CDBG funds.
Reconstruction Under Sec. 570.202
Reconstruction of buildings or structures has been eligible for
CDBG assistance since 1996. Section 105(a)(4) of the Act states that
clearance, removal, reconstruction, and rehabilitation of buildings and
improvements (including interim assistance and financing public or
private acquisition for reconstruction or rehabilitation, and
reconstruction or rehabilitation of privately owned properties, and
including the renovation of closed school buildings) is an eligible
CDBG-assisted activity. Buildings reconstructed with CDBG funds may be
publicly or privately owned and residential or non-residential.
Unlike other parts of the CDBG regulations that explicitly state
that recipients and subrecipients may use CDBG funds to reconstruct
public facilities and improvements (Sec. 570.201(c)), privately owned
utilities (Sec. 570.201(l)), and commercial/industrial structures as
part of a special economic development activity (Sec. 570.203(a)),
Sec. 570.202 does not clearly identify reconstruction as an eligible
activity related to housing. To make clear that reconstruction is an
eligible activity under Sec. 570.202, HUD proposes to add the words
``and reconstruction'' to the introductory language at Sec.
570.202(a).
Administrative Expenses To Facilitate Housing
The provision at Sec. 570.206(g), Administrative expenses to
facilitate housing, is no longer an eligible activity in the CDBG
program because the provision applied only to units identified in a
grantee's Housing Assistance Plan (HAP). HUD discontinued use of the
HAP by CDBG grant recipients in the mid-1990s. Section 570.206(g)
cannot be read to just substitute costs related to the Consolidated
Plan for costs formerly eligible in connection with the HAP. Therefore,
HUD proposes to remove Sec. 570.206(g) and replace it with a provision
addressing how CDBG funds may be used to support eligible
administrative and planning costs for the HOME Investment Partnerships
Program (HOME).
Section 17 of the United States Housing Act of 1937
Section 570.206(h) refers to the Rental Rehabilitation and the
Housing Development programs that were authorized by Section 17 of the
United States Housing Act of 1937 (``the 1937 Act''), Public Law 75-
412, 50 Stat. 888. Congress repealed Section 17 in Section 289 of the
Cranston-Gonzalez National Affordable Housing Act of 1990 (42 U.S.C.
12839) and terminated assistance to these programs. HUD therefore
proposes to remove and reserve Sec. 570.206(h). HUD similarly proposes
to remove and reserve Sec. 570.201(m), which allowed CDBG funds to be
used for construction of housing under Section 17 of the 1937 Act, as
well as to remove a corresponding cross-reference to Sec. 570.201(m)
at Sec. 570.207(b)(3)(ii).
Section 108 Eligible Activities
Section 108 borrowers can undertake site preparation activities
related to redeveloping real property that borrowers have acquired or
rehabilitated with Section 108 funds or that is for an economic
development purpose. The wording of Sec. 570.703(f) makes it unclear
that all such site preparation activities must relate to either of
those two purposes. This proposed rule would clarify this requirement.
Finally, the proposed rule would remove and reserve an eligible
activity, Sec. 570.703(j), related to activities authorized under
section 17(d) of the 1937 Act (42 U.S.C. 1437o(d)); such authorized
activities are no longer carried out since the repeal of the statute in
1991.
Criteria for National Objectives Sec. Sec. 570.208, 570.483
Timeline To Meet a National Objective
HUD seeks to ensure that the recipients use CDBG-funded activities
to develop viable urban communities by providing decent housing, a
suitable living environment, and expanding economic opportunities,
principally for LMI persons. CDBG-funded activities that fail to meet a
national objective within a reasonable timeframe undercut the purpose
of the Act. HUD proposes to require at Sec. 570.200(a)(2) that
recipients demonstrate that the acquisition meets a national objective
within six years of the date of the initial drawdown of CDBG funds for
the activity or the length of the period of performance and any
extension permitted under 24 CFR 570.509, whichever is shorter. To
reinforce this requirement in the national objectives criteria sections
of part 570, HUD proposes to insert the six-year timeframe to meet a
national objective at Sec. Sec. 570.208(e) and 570.483(g).
For example, recipients may acquire real property but fail or
struggle to meet a national objective based on unforeseen
circumstances. The recipient or subrecipient may acquire property with
the intention of constructing a public facility such as a recreation
center on the site or making infrastructure improvements where
affordable housing will later be developed, but unforeseen
circumstances prevent the proposed activity from occurring as planned.
Rather than change the use of the real property for a purpose that will
meet the planned or other national objective, the recipient or
subrecipient may simply hold the property indefinitely. In this
circumstance, Office of Inspector General audits have documented that
the length of time between acquiring
[[Page 1759]]
property and meeting a national objective will be excessively long.\17\
The proposed change would ensure that activities meet a national
objective in a timely manner to meet the purpose of the Act.
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\17\ In 2014, the HUD OIG sampled CDBG projects and audited
corresponding activities. OIG found the possibility that stalled
activities did not meet a national objective compliance due to
reporting problems or delayed implementation (resulting in stalled
status). For reference, this is an example report: https://www.hudoig.gov/sites/default/files/documents/2014-LA-1007_0.pdf.
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Low and Moderate Income--Area Benefit
To demonstrate compliance with the national objective of benefit to
LMI persons on an area basis (Sec. Sec. 570.208(a)(1) and
570.483(b)(1)), a CDBG-assisted activity must have a defined service
area. The service area must be primarily residential, and at least 51
percent of the residents in this service area must be LMI persons.
Certain exception requirements at Sec. 570.208(a)(1)(ii) allow a
threshold of lower than 51 percent in limited circumstances. When
designating the service area for a CDBG-assisted activity, the service
area should be accurately described and proportionate to the size of
the CDBG-assisted activity. For example, a recipient cannot
automatically presume a large park serves just the neighborhood in
which it is located; it may serve the entire jurisdiction of the
recipient. To meet the criteria at Sec. 570.208(a)(1) or Sec.
570.483(b)(1), the recipient must use the most recent Census Bureau
data provided by HUD or conduct a survey to determine if a minimum of
51 percent of the residents in the defined service area are LMI.\18\
CDBG-assisted activities that often use this national objective include
water/sewer installation and/or improvements, rehabilitation or
construction of public facilities and improvements, acquisition and/or
disposition of real property, clearance and remediation activities, and
some public service activities.
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\18\ HUD issued technical assistance for conducting local income
surveys. For more information, please visit https://www.hudexchange.info/programs/cdbg/cdbg-income-survey-toolkit/.
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Low- and Moderate-Income--Limited Clientele
To demonstrate compliance with the national objective of benefit to
LMI persons-limited clientele (Sec. Sec. 570.208(a)(2) and
570.483(b)(2)), a CDBG-assisted activity must: (1) benefit members of a
group presumed to be LMI, as such groups are described in Sec.
570.208(a)(2)(i)(A) and Sec. 570.483(b)(2)(ii)(A); (2) require
information on family size and income to demonstrate that not less than
51 percent of the beneficiaries are LMI; (3) be restricted to low- and
moderate-income persons; or (4) be of such nature and be in such
location that it may be concluded that the beneficiaries of the CDBG-
assisted activity are low and moderate income, as such nature and
locations are described in Sec. Sec. 570.208(a)(2)(i)(D) and
570.483(b)(2)(ii)(D). The LMI limited clientele national objective is
often met by CDBG-assisted activities that are: restricted to children,
such as tutoring and recreation programs; senior services, such as
Meals on Wheels; the removal of architectural barriers; and public
facilities for special populations such as the homeless and domestic
violence shelters.
HUD proposes revisions to the limited clientele provision that
would state the requirements more clearly and that would provide better
guidance to recipients. In addition to the proposed definition of
``elderly'' at Sec. 570.3, HUD proposes references to that definition
at Sec. Sec. 570.208(a)(2)(i)(A) and 570.483(b)(2)(ii)(A) with
parenthetical statements after ``elderly persons.''
Further, HUD proposes to clarify the presumed LMI group of
``illiterate adults.'' Some CDBG recipients have interpreted the term
``illiterate adults'' to mean illiterate in a person's native language,
while other recipients have interpreted it to mean adults that are
illiterate in English. Neither the Act nor part 570 define illiteracy.
HUD's position at one time was that, for the CDBG program, an
illiterate adult is one who is unable to read or write in any language.
However, HUD has reconsidered that definition and proposes to codify
HUD's current interpretation at Sec. Sec. 570.208(a)(2)(i)(A) and
570.483(b)(2)(ii)(A) that illiterate adults are adults unable to read
and write in English and in their first language, if the adult's first
language is not English.
Question for comment #11: Would the proposed definition for adult
illiteracy accurately reflect the presumed LMI group of ``illiterate
adults''?
HUD also proposes to broaden the application of the presumed LMI
group of ``battered spouses'' to cover all survivors of domestic
violence. Survivors of dating violence, sexual assault, and stalking
are categories included in survivors of domestic violence. The current
category of ``battered spouses'' limits the presumption to spouses.
However, unmarried survivors of violence may be presumed to be LMI.
Therefore, HUD proposes to remove ``battered spouses'' from the
presumed categories of LMI persons and replace it with ``survivors of
domestic violence'' at Sec. Sec. 570.208(a)(2)(i)(A) and
570.483(b)(2)(ii)(A). HUD interprets ``battered spouses'' to be a
subcategory of ``survivors of domestic violence'' still presumed to be
LMI under those provisions.
Furthermore, HUD proposes to interpret survivors of human
trafficking to be a subcategory of homeless persons, which is presumed
to be LMI under these provisions. HUD considers human trafficking,
including both labor and sex trafficking, to be ``other dangerous or
life-threatening conditions that relate to violence against the
individual or family member'' under paragraph 4 of the definition of
``homeless'' at Sec. 578.3. Where an individual or family is fleeing,
or is attempting to flee human trafficking, that has either taken place
within the individual's or family's primary nighttime residence or has
made the individual or family afraid to return to their primary
nighttime residence; and the individual or family has no other
residence; and the individual or family lacks the resources or support
networks to obtain other permanent housing; HUD would consider that
individual or family to qualify as ``homeless'' under the definition.
By including survivors of human trafficking as a subcategory of
homeless, HUD would be better able to ensure that they have access to
the benefits and services necessary for their safety, protection, and
basic well-being.
Finally, HUD proposes to add categories of groups of persons at
Sec. Sec. 570.208(a)(2)(i)(A) and 570.483(b)(2)(ii)(A) that, when
served exclusively or in combination with groups of persons in other
listed categories, may be presumed to benefit persons, 51 percent of
whom are LMI, barring any evidence to the contrary: persons who meet
the Federal poverty guidelines and persons who are insured by Medicaid.
The Federal poverty guidelines, established by the Department of Health
and Human Services based on poverty thresholds published by the Census
Bureau, estimate the minimum amount of income needed to cover basic
needs. Medicaid coverage varies by State and other eligibility
requirements, but income qualification is generally less than four
times the Federal poverty guidelines. Further, while nearly all
jurisdictions in the U.S. have more LMI persons than persons in
poverty, in a small number of jurisdictions more persons are in poverty
than are LMI. Allowing grantees to presume that persons in poverty are
LMI will address
[[Page 1760]]
such anomalies and simplify requirements across other Federal programs
that also provide benefits to persons who meet the Federal poverty
guidelines.
Low and Moderate Income--Housing Activities
To demonstrate compliance with the LMI housing national objective
(Sec. Sec. 570.208(a)(3) and 570.483(b)(3)), a CDBG-assisted
residential structure must be occupied by predominantly LMI households.
Unlike the other LMI national objectives, meeting the LMI housing
national objective is based on households rather than individuals or
families. A household is all the persons that occupy a housing unit,
whether related or unrelated. Meeting the LMI housing national
objectives criteria is also based on the number of housing units. Each
single-unit structure must be occupied by an LMI household. In a two-
unit structure, one unit must be so occupied. Where there are three or
more units in a structure, a minimum of 51 percent of the households
must be occupied by LMI households. CDBG-assisted activities that may
meet this national objective include homeownership assistance, housing
rehabilitation (single and multifamily), and acquisition of real
property where a recipient or subrecipient will construct housing units
using another funding source. Pursuant to Sec. 570.207(b)(3),
recipients or subrecipients may not use CDBG or Section 108 funds for
new housing construction unless it is provided under the last resort
housing provisions of the Uniform Relocation Assistance and Real
Property Acquisition Policies Act of 1970 (42 U.S.C. 4601 et seq.)
(URA) regulations at 49 CFR part 24, it is authorized as part of direct
homeownership assistance for LMI households under Sec. 570.201(n), or
a qualified Community-Based Development Organization is carrying out
the activity under Sec. 570.204.
Some exceptions permit eligible activities to meet the LMI housing
national objective where less than 51 percent of multifamily units are
occupied by LMI households. Such activities include assistance for an
eligible activity to reduce the development cost of the new
construction of a multifamily, non-elderly rental housing project where
not less than 20 percent of the units will be occupied by LMI
households at affordable rents. In addition, the proportion of the
total cost of developing the project to be paid with CDBG funds must be
no more than the proportion of units in the project that will be
occupied by LMI households (Sec. Sec. 570.208(a)(3)(i) and
570.483(b)(3)(i)). The proposed rule would add as additional exceptions
substantial rehabilitation (as defined at Sec. 5.100) and conversion
of a nonresidential structure to a multifamily, non-elderly rental
housing project. This change would align treatment of substantial
rehabilitation with new construction for purposes of meeting the
national objectives criteria for housing activities.
HUD Review of Consolidated Plan Sec. 91.500
Some recipients believe that a Consolidated Plan that is not
disapproved by HUD pursuant to Sec. 91.500(a) constitutes an approval
of the eligibility of the activities for the applicable programs
identified in the plan. Because the Consolidated Plan is a planning
document, HUD is unable to determine that a grantee will carry out the
activity in compliance with program requirements, including eligible
activity requirements. Grantees may amend plans, including planned
activities, at any time and amendments are not subject to HUD review.
However, because the Plan describes a substantial number of activities
for many different CPD programs; reviewing each individual activity
within the plan for compliance would be burdensome for CPD field
offices and significantly lengthen review of the Consolidated Plan and
delay grantees' ability to carry out activities. CPD seeks to ensure
the eligibility of activities through risk analysis and monitoring
after grantees have carried out activities. Therefore, HUD proposes to
add language to Sec. 91.500(a) stating that the fact that HUD has not
disapproved the Consolidated Plan does not constitute approval of the
activities identified in the Plan as being compliant with relevant
program requirements and does not confer a determination of the
eligibility of the activities in the Consolidated Plan.
Urban County Qualification/Requalification Process Sec. 570.307
Currently, Sec. 570.307 requires the Secretary to determine, after
reviewing qualification documentation from an urban county, whether the
county is qualified to receive CDBG funds. Each year, HUD publishes a
notice, Instructions for Urban County Qualification for Participation
in the Community Development Block Grant (CDBG) Program,\19\ setting
forth the qualification process, which generally runs from May to
September. Once urban counties complete the qualification/
requalification process, they remain qualified for three successive
Federal fiscal years, as stated in Sec. 570.307(d). However, the CDBG
urban county qualification process does not have a statutory or
regulatory completion date. Therefore, HUD proposes to insert a
provision at Sec. 570.307(h) that would require urban counties to
complete the urban county qualification or requalification process no
later than September 30 of the year of qualification or
requalification.
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\19\ Available at: https://www.hud.gov/sites/dfiles/OCHCO/documents/2023-02cpdn.pdf.
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Section 217(b)(3) of title II of the Cranston-Gonzalez National
Affordable Housing Act, as amended (NAHA) (42 U.S.C. 12747(b)(3)), and
Sec. Sec. 92.50(a) and 92.101(a)(1) require that, in order to receive
a HOME formula allocation for a fiscal year as a consortium, units of
general local government be qualified/requalified as consortia in
accordance with HOME requirements by the last day of the prior fiscal
year, which is September 30 of each year. Most urban counties and HOME
consortia select the same three-year qualification period to simplify
the qualification process for both entities, and HOME consortia may
change their three-year qualification cycles so that they coincide with
the urban county's three-year qualification period. Because the CDBG
program does not currently have a deadline to complete the process,
however, an urban county that is also a HOME consortium may not
complete the qualification process for the consortium by September 30
because of an issue that arises with a participating unit of local
government with regard to its participation in the urban county's CDBG
program. While this will not affect a consortium's CDBG funding, such
an action may result in a loss of its HOME funding for that fiscal
year. Therefore, a September 30 deadline for the urban county
qualification process may help align the programs and eliminate
problems that arise regarding a consortium's timely completion of its
qualification or requalification as a HOME consortium under the
requirements in 24 CFR part 92.
Exclusion of Section 108-Generated Revenue From Program Income Sec.
570.500
HUD proposes to remove language from Sec. 570.500(a)(4)(ii) that
excludes from the definition of ``program income'' revenues generated
by certain activities financed by a Section 108 loan guarantee. HUD
adopted Sec. 570.500(a)(4)(ii) to promote the use of Section 108
financing for economic development activities. However, the regulations
are confusing to recipients
[[Page 1761]]
who want to use Section 108-generated revenue for other eligible
activities because the recipients may infer that such revenue is not
subject to any restrictions. That inference would be incorrect,
however, because significant restrictions on the use of the program
income do exist. Access to the revenue is restricted because it is by
default pledged as security for repayment of the guaranteed loan for
the term of the loan, which may be up to 20 years. Further, some
recipients have noted that the requirement to use miscellaneous revenue
for activities located in a HUD-approved Neighborhood Revitalization
Strategy Area (NRSA) limits the provision's utility when implementing
an NRSA would not be practicable for them. Given these problems and
given that this exclusion has not provided any apparent benefits to
Section 108 borrowers, HUD proposes to remove this provision. HUD
believes that other proposed changes to the regulations will promote
the increased use of CDBG and Section 108 funding for economic
development more effectively and efficiently than maintaining the
program income exclusion.
Treatment of Excess Program Income Sec. 570.504
Currently, Sec. 570.504(b)(2)(iii) requires each recipient to
calculate the amount of program income cash balances on hand at the end
of each program year (except those needed for immediate cash needs,
cash balances of a revolving loan fund, cash balances in lump sum
drawdown accounts, and cash and investments held for Section 108 loan
guarantee security needs). After all deductions, the recipient must
determine if the cash balances as of the end of the program year exceed
\1/12\ of the most recent annual grant. The recipient must remit any
excess amount to HUD as soon as practicable after the end of the
program year. The regulations provide for the excess amount to be
placed in the recipient's line of credit. HUD has determined that it
cannot place the excess program income in a line of credit. Therefore,
HUD proposes to require that the recipient send such excess program
income to the United States Treasury. Note that the amount to be
remitted to HUD does not include program income cash balances needed
for various program purposes, e.g., amount pledged as security for a
Section 108 loan.
Definition of Program Income--State CDBG Program Sec. 570.489
In the definition of program income for the State CDBG program at
Sec. 570.489(e)(2)(iv)(C), an exclusion allows a unit of general local
government funded by a State to retain up to $100 per year in interest
on deposit of grant funds before disbursement of the funds for
activities for CDBG administrative expenses. The amount of $100
previously aligned with Sec. 85.21(h)(2)(i), which has been replaced
by 2 CFR 200.305(b)(9), and which currently allows a unit of general
local government funded by a State to retain up to $500 per year.
Therefore, HUD proposes to update Sec. 570.489(e)(2)(iv)(C) by
replacing the dollar amount with a reference to 2 CFR 200.305(b)(9).
Reporting Data on Use of CDBG Funds Sec. 570.507
HUD proposes to add a requirement at Sec. 570.507(d) to require a
recipient to collect and report data on its use of CDBG funds in the
Integrated Disbursement and Information System (IDIS). HUD has required
recipients to report program activity and expenditure data in IDIS
since 1996, but part 570 requires only that recipients must generally
``submit such other reports and information as HUD determines are
necessary.'' The revision would make it clear to recipients that they
must use IDIS to submit such reports as required by Sec. 570.507.
Conflict of Interest Public Disclosure Requirements Sec. Sec. 570.489,
570.611
Currently, Sec. Sec. 570.489(h)(4)(i) (for State recipients) and
570.611(d)(1)(i) (for entitlement recipients) require that when
recipients request that HUD consider an exception to the conflict-of-
interest requirements, recipients must have documentation of disclosure
of the nature of the conflict accompanied by an assurance that there
has been a public disclosure of the conflict and a description of how
the public disclosure was made. The regulations do not make clear what
``public disclosure'' means. Some recipients define public disclosure
as public hearings or publication in a newspaper of general local
circulation; others believe that posting it on the recipient's website
is sufficient. To clarify and make standard what public disclosure
means, HUD proposes to add language to Sec. Sec. 570.489(h)(4)(i) and
570.611(d)(1)(i) that would define public disclosure as disclosure
through any of the following media: publication on the recipient's
website, including social media; electronic mailings; media
advertisements; public service announcements; and display in public
areas such as libraries, grocery store bulletin boards, and
neighborhood centers. HUD also clarifies the existing requirement to
make it explicit that grantees must provide HUD evidence of the public
disclosure.
Section 108 Loan Guarantees Sec. Sec. 570.704, 570.705
Application Requirements
The Section 108 application submission requirements at Sec.
570.704(b) state that an applicant should provide the application ``to
the appropriate HUD Office,'' but do not distinguish whether the
application should go to the applicant's local HUD Field office or
Headquarters. The proposed rule would explicitly state that applicants
should submit applications for Section 108 loan guarantee assistance to
HUD Headquarters, ensuring that HUD Headquarters can promptly review
such applications concurrently with HUD Field office staff.
Prior to 2015, the regulations implied, but did not clearly state,
that HUD Field offices reviewed applications first and then forwarded
the application together with its recommendation for approval or
disapproval to HUD Headquarters. HUD removed this provision in a 2015
rulemaking, leaving the rule silent as to which HUD office(s)
applicants should submit an application. In concert with the 2015
rulemaking, CPD's Financial Management Division (FMD) at HUD
Headquarters (which administers the Section 108 program) implemented a
concurrent review process with CPD Field office staff. However, some
applicants have continued to submit applications only to HUD Field
offices. HUD Field office staff are responsible for many CPD programs
and may not review a submitted application as promptly as FMD or notify
FMD that they have received a new application. Applications submitted
only to HUD Field offices may therefore result in a delay in the start
of the concurrent review process.
The submission requirements also do not clearly reiterate the basic
information an applicant needs to include in an application:
specifically, the proposed eligible activity under Sec. 570.703 and
the source of the payment of fees under Sec. 570.712 (in addition to
the national objectives criteria at Sec. 570.208, which is already
identified in the current program regulation at Sec. 570.704(b)(1)).
Other parts of subpart M include these requirements, but the proposed
rule would reiterate those requirements to clearly identify what
information the Section 108 application must contain. HUD proposes to
add these references to Sec. 570.704(b)(1) and (2), respectively.
Finally, HUD proposes to better organize the submission
requirements at
[[Page 1762]]
Sec. 570.704(b) pertaining to necessary certifications. The proposed
revisions would reorganize the required certifications in a format
better suited for applicants to understand. HUD believes such clarity
will help applicants prepare an application correctly and ensure that
requests for missing certifications do not delay HUD's review. Another
revision would correct an error in the current regulation and would
require Section 108 applicants to certify that they must impose
assessments on properties owned and occupied by moderate-income
persons, to recover the non-guaranteed loan funded portion of the
capital cost without paying such assessments on their behalf from
guaranteed loan funds, instead of the current language which discusses
only the ``guaranteed'' loan funded portion of the capital cost.
Loan Requirements
The limitations on commitments at Sec. 570.705(a)(1)(iii) permit
HUD to place a higher priority on applications containing activities to
be carried out in areas designated as empowerment zones/enterprise
communities by the Federal Government or a State. Statutory
authorization for such activities has lapsed, removing the need to
place a higher priority on activities carried out in such areas.
Therefore, HUD proposes to delete the language in Sec.
570.705(a)(1)(iii) referring to empowerment zones/enterprise
communities and replace it with language describing areas designated as
economically distressed by the Federal Government or by any State.
Security Requirements
Security requirements outlined in Sec. 570.705(b) list examples of
acceptable forms of additional security (other than CDBG funds) for
loan guarantees that the loan guarantee contract between HUD and a
borrower will specify. However, the limited examples of security may
mislead potential applicants into believing that the regulations limit
the security pledged for loan guarantees to the listed types of
security. Publishing such information through guidance documents and
marketing materials and engaging in direct outreach to potential
applicants are clearer and more effective ways to communicate the types
of security that a borrower may pledge. Therefore, HUD proposes to
remove and reserve the examples of security HUD may accept at Sec.
570.705(b)(3)(i) through (iv).
Additionally, HUD proposes to delete subsections that are
unnecessary or inconsistent with other provisions. Section
570.705(a)(2)(iii)(A) through (C) appear to provide three methods of
calculating limitations on commitments to guarantee loans for
recipients that receive grants under subpart F. However, paragraph
(a)(2)(iii)(A) is duplicative of 570.705(a)(2)(iii), and paragraphs
(a)(2)(iii)(B) and (C), which allow for using an average of the three
most recent grants, are inconsistent with Sec. 570.705(a)(2)(iii).
F. ICDBG Program
HUD also proposes certain corresponding changes to Part 1003, where
appropriate, that are intended to align the ICDBG program with the CDBG
program.
Definitions Sec. 1003.4
HUD proposes amending the Definitions section to include ``activity
delivery costs.'' Similar to CDBG recipients and subrecipients, ICDBG
recipients and subrecipients may incur costs typically referred to as
``activity delivery costs'' related to carrying out specific ICDBG
eligible activities. The ICDBG regulations do not specifically define
this term; therefore, HUD proposes to add a definition at Sec. 1003.4.
This addition makes clear that recipients and subrecipients must use
the cost principles at 2 CFR part 200, subpart E, in determining the
allowability of the costs. In particular, recipients and subrecipients
must ensure that activity delivery costs consisting of staff salaries
are allocable to the specific activity and adequately documented.
Eligible Activities Sec. Sec. 1003.201, 1003.202, 1003.203
Basic Eligible Activities
HUD proposes to add a new Sec. 1003.201(r) to clarify that
recipients can assist eligible activities if they are part of mixed-use
properties that also contain ineligible uses, so long as the recipient
expends ICDBG funds only on the eligible use. The proposed rule also
would add a definition of ``mixed-use property'' to the new Sec.
1003.201(r). This is a conforming change to the ICDBG regulations to
align them with the proposed changes to the CDBG regulations in this
proposed rule.
Additionally, the Tornado Shelters Act (Pub. L. 108-146; 117 Stat.
1883, enacted December 3, 2003) (42 U.S.C. 5301, note), authorized the
construction or improvement of tornado shelters in certain
neighborhoods and manufactured housing communities as an eligible
activity under the CDBG program. Consistent with the change to Sec.
570.201, HUD proposes to insert a provision at Sec. 1003.201(p) that
would codify the use of ICDBG funds for tornado safe shelters as an
eligible activity under certain conditions. As discussed above with
respect to CDBG, this activity is already eligible under ICDBG. HUD is
simply codifying in regulations a statutory change that has been
codified in law for many years.
Finally, consistent with CDBG, HUD proposes to add a new paragraph
(q) to clarify that essential repairs and operating expenses necessary
to maintain the habitability of housing units acquired through tax
foreclosures is also an eligible activity.
Eligible Rehabilitation and Preservation Activities
HUD proposes to amend Sec. 1003.202(a) to clarify that
reconstruction of housing is an eligible ICDBG activity. Reconstruction
of buildings or structures, including housing, has been an eligible
ICDBG activity since 1996. However, the program regulations do not
clearly and expressly identify reconstruction as an eligible activity
related to housing. To make clear that reconstruction is an eligible
activity under Sec. 1003.202(a), HUD proposes to add the words ``and
reconstruction'' to the introductory language at Sec. 1003.202(a).
This update will be a conforming change for the ICDBG regulations to
align them with the same proposed changes to the CDBG regulations in
this proposed rule.
Special Economic Development Activities
HUD proposes to amend Sec. 1003.203(b) governing special economic
development activities. Section 1003.203 governs the use of ICDBG funds
for special economic development activities and includes an
illustrative list of eligible forms of assistance to private for-profit
businesses. The ICDBG regulations already list forms of support by
which recipients can provide assistance to private, for-profit
businesses where the assistance is appropriate to carry out an economic
development project. HUD has previously interpreted this provision to
allow ICDBG assistance to New Markets Tax Credit (NMTC) investment
vehicles. The proposed revisions would explicitly indicate that ICDBG
recipients are allowed to provide assistance to an economic development
project through a for-profit entity that passes the funds through a
financing mechanism (e.g., Qualified Opportunity Funds and NMTC
investment vehicles). This update is a conforming change to the ICDBG
regulations to align them with the same proposed changes to the CDBG
regulations in this proposed rule.
[[Page 1763]]
Program Administration Costs Sec. 1003.206
HUD proposes to amend Sec. 1003.206 to add a reference to the new
proposed definition of ``activity delivery costs'' in Sec. 1003.4 to
help ICDBG recipients distinguish between administrative costs and
activity delivery costs. This update is a conforming change to the
ICDBG regulations to align them with the proposed changes to the CDBG
regulations in this proposed rule.
Criteria for Compliance With the Primary Objective Sec. 1003.208
HUD's regulation at Sec. 1003.208 provides the criteria for
determining whether an ICDBG-assisted activity complies with one or
more of the national objectives. HUD proposes conforming changes to
paragraphs (b), (c), and (d) Limited Clientele activities, Low- and
Moderate-Income Housing Activities, and Job creation or retention
activities. This update is a conforming change to the ICDBG regulations
to align them with the proposed changes to the CDBG regulations in this
proposed rule.
With respect to Limited Clientele activities, HUD proposes
revisions to paragraph (b) to clarify requirements and provide better
guidance to recipients. Consistent with the reasons stated above in
section III.E with respect to the CDBG program, HUD proposes to clarify
in the ICDBG program that the presumed LMI group of ``illiterate
adults'' means adults unable to read and write in English and in their
first language, if the adult's first language is not English. HUD also
proposes to broaden the application of the presumed LMI group of
``battered spouses'' to cover all survivors of domestic violence. The
current category of ``battered spouses'' limits the presumption to
spouses. However, unmarried survivors of violence may be presumed to be
LMI. Therefore, HUD proposes to remove ``battered spouses'' from the
presumed categories of LMI persons and replace it with ``survivors of
domestic violence.'' HUD interprets ``battered spouses'' to be a
subcategory of ``survivors of domestic violence'' still presumed to be
LMI under the ICDBG regulations. As stated earlier, HUD also proposes
to interpret survivors of human trafficking to be a subcategory of
homeless persons, which is presumed to be LMI under these provisions,
in order to ensure that they have access to the benefits and services
necessary for their safety, protection, and basic wellbeing.
Finally, HUD proposes to add categories of groups of persons at
Sec. 1003.208(b)(1)(i) that, when served exclusively or in combination
with groups of persons in other listed categories, may be presumed to
benefit persons, 51 percent of whom are LMI, barring any evidence to
the contrary: persons who meet the Federal poverty guidelines and
persons who are insured by Medicaid. As stated in reference to the same
changes being proposed in CDBG in Sec. Sec. 570.208(a)(2) and
570.483(b)(2), the Federal poverty guidelines, established by the
Department of Health and Human Services based on poverty thresholds
published by the Census Bureau, estimate the minimum amount of income
needed to cover basic needs. Medicaid coverage varies by State and
other eligibility requirements, but income qualification is generally
less than four times the Federal poverty guidelines. Further, while
nearly all jurisdictions in the U.S. have more LMI persons than persons
in poverty, in a small number of jurisdictions more persons are in
poverty than are LMI. Allowing ICDBG grantees to presume that persons
in poverty are LMI will address such anomalies and simplify
requirements across other Federal programs that also provide benefits
to persons who meet the Federal poverty guidelines.
With respect to the Low- and Moderate-Income Housing activities in
paragraph (c), to demonstrate compliance with the LMI housing national
objective, an ICDBG-assisted residential structure must be occupied by
LMI households. Meeting the LMI housing national objective is based on
households rather than individuals or families. A household is all the
persons that occupy a housing unit, whether related or unrelated.
Meeting the LMI housing national objectives criteria is also based on
the number of housing units. Generally, ICDBG funds may only be used to
assist housing units occupied by LMI households. Accordingly, in order
for an activity to meet the LMI housing national objective, each
single-unit structure that is assisted with ICDBG funds must be
occupied by an LMI household. When ICDBG funds are used to assist a
two-unit structure, to meet the LMI housing national objective, at
least one unit must be so occupied. Where there are three or more units
in a structure, a minimum of 51 percent of the units must be occupied
by LMI households. ICDBG-assisted activities that may meet this
national objective include homeownership assistance, housing
rehabilitation (single and multifamily), and acquisition of real
property where a recipient or subrecipient will construct housing units
using another funding source.
Some exceptions permit eligible activities to meet the LMI housing
national objective where less than 51 percent of multifamily units are
occupied by LMI households. Such activities include assistance for an
eligible activity to reduce the development cost of the new
construction of a multifamily, non-elderly rental housing project where
not less than 20 percent of the units will be occupied by LMI
households at affordable rents. In addition, the proportion of the
total cost of developing the project to be paid with ICDBG funds must
be no more than the proportion of units in the project that will be
occupied by LMI households. The proposed rule would add as additional
exceptions substantial rehabilitation and conversion of a
nonresidential structure to a multifamily, non-elderly rental housing
project. This change would align treatment of substantial
rehabilitation with new construction, as is also proposed in the CDBG
section 24 CFR 570.208(a)(3)(i) and 570.483(b)(3) of this rule for
purposes of meeting the national objectives criteria for housing
activities.
Finally, with respect to job creation or retention activities in
paragraph (d), documenting whether a job is held by or made available
to an LMI person can present a financial and administrative burden on
ICDBG recipients due to the data that recipients must gather and
collect from assisted businesses. This aligns with changes proposed in
CDBG regulations at 24 CFR 570.208(a)(4) and 570.483(b)(4) above. As
noted there, to help alleviate this burden, HUD is proposing to revise
the regulations to add a presumption based on the location of an
assisted business and based on where the person holding the job
resides. The revised regulation would provide that, for purposes of
determining whether a job is held by or made available to a low or
moderate income person, the person may be presumed to be a low or
moderate income person if: he/she resides within a census tract where
not less than 70 percent of the residents have incomes at or below 80
percent of the area median; or, if he/she resides in a census tract
designated as economically distressed by the Federal Government; or, if
the assisted business is located in and the job under consideration is
to be located in such a tract or area. Revising the criteria for the
presumption would significantly clarify the standards for recipients
and encourage greater use of ICDBG funds for job creation and
[[Page 1764]]
retention activities in many Tribal communities.
Reports Sec. 1003.506
HUD is proposing to amend the due dates for annual status and
evaluation reports (ASERs) in Sec. 1003.506(a) to accommodate ICDBG
grantees that have a Tribal program year different than the Federal
Fiscal year. The term ``Tribal program year'' is defined in the Indian
Housing Block Grant (IHBG) regulations at Sec. 1000.10 as the fiscal
year of the IHBG recipient. Under the proposed rule, ASERs would be due
90, rather than 45 days, after the end of the grantee's Tribal program
year, or after the end of the Federal fiscal year if the grantee has a
Tribal program year that ends on the same date the Federal fiscal year
ends. The amendment would align the ASER due dates with the due dates
for Annual Performance Reports under the IHBG program to assist
grantees of both programs to more easily track and schedule submission
of reports due to HUD. ASERs would also continue to be required at
grant close-out in accordance with the requirements of Sec. 1003.508.
HUD also proposes to revise the language in Sec. 1003.506(a) with
respect to the form of ASER reports. The current regulation requires a
narrative for the ASER which has resulted in significant variations in
the reports submitted as well as difficulty in capturing relevant and
useful data. HUD intends in the future, through the PRA process, to
develop and promulgate a standardized ASER form with drop down boxes
and set data points to assist recipients in meeting the reporting
requirements in a consistent manner, which will both improve the
usefulness of the data received and facilitate data retention and
analysis. The proposed revision to the current language will make it
easier for HUD to implement such a form in the future.
Conflict of Interest Sec. 1003.606
To clarify and standardize the meaning of the term ``public
disclosure,'' HUD proposes to add language to Sec. 1003.606 that would
define public disclosure as disclosure through any of the following
media: publication on the recipient's website, including social media;
electronic mailings; media advertisements; public service
announcements; and display in public areas such as libraries, grocery
store bulletin boards, and neighborhood centers. Currently, Sec.
1003.606 requires that when recipients request that HUD consider an
exception to the conflict-of-interest requirements, recipients must
have documentation of disclosure of the nature of the conflict
accompanied by an assurance that there has been a public disclosure of
the conflict and a description of how the public disclosure was made.
The regulations do not make clear what ``public disclosure'' means.
Some recipients define public disclosure as public hearings or
publication in a newspaper of general local circulation; others believe
that posting it on the recipient's website is sufficient. This update
will clarify the meaning of the term and is a conforming change for the
ICDBG regulations to align them with the proposed changes to the CDBG
regulations in this proposed rule. HUD also clarifies the existing
requirement to make it explicit that grantees must provide HUD evidence
of the public disclosure.
G. Technical Corrections and Outdated Provisions
HUD proposes the following technical corrections:
Sections 91.225(b)(2) (for entitlement recipients) and 91.325(b)(3)
(for State recipients) refer to Sec. 570.2 in certifying the
consolidated housing and community development plan; however, Sec.
570.2 was removed from the regulations in 1996. The provisions should
instead refer to implementing the primary objective of the Act at Sec.
570.200(a)(3). Therefore, HUD proposes to replace the citation to Sec.
570.2 with a citation to Sec. 570.200(a)(3).
HUD proposes to correct a typographical error in Sec. 570.201(k),
which refers to section 105(a)(21) of the Act concerning assistance to
institutions of higher education but should instead refer to housing
services activities under section 105(a)(20) of the Act.
HUD proposes to redesignate Sec. 570.205(a)(6) as Sec.
570.205(b), as HUD originally intended policy, planning, management,
and capacity building activities to be a subheader for the activities
below and separate from paragraph (a).
HUD proposes to correct a reference in Sec. 570.207 to a non-
existent section of Sec. 570.3. The definitions in section 570.3 are
undesignated; however, Sec. 570.207(a)(1) contains a reference to
Sec. 570.3(d), which does not exist.
HUD proposes to correct Sec. 570.208(d)(5), which refers to Sec.
91.215(e) in discussing area revitalization strategy areas, but should
refer to Sec. 91.215(g), which discusses neighborhood revitalization.
HUD proposes to correct references in Sec. 570.307 to non-existent
sections of Sec. 570.3. The definitions in section 570.3 are
undesignated; however, Sec. 570.307(b)(1) and (d)(1) both contain
references to Sec. 570.3(3), which does not exist.
HUD proposes to correct Sec. Sec. 570.482(c)(1) and
570.482(c)(2)(i), which cite to section 105(a)(23) of the Act, which
concerns treatment of property acquired in tax foreclosure proceedings;
but should instead cite to section 105(a)(22) of the Act, which
discusses microenterprise assistance activities.
HUD proposes to restore Sec. 570.489(e)(3)(ii)(C), which was
mistakenly omitted from the Code of Federal Regulations in 2015.
HUD proposes to correct the citation in Sec. 570.490(a)(2) to
Sec. 91.320(j)(1), which should instead be to CDBG requirements in the
action plan at Sec. 91.320(k)(1).
HUD proposes to correct Sec. 570.504(c) regarding the disposition
of program income by subrecipients, which states that subrecipients
holding program income after the expiration of a subrecipient agreement
shall pay such funds to the recipient as required by Sec.
570.503(b)(8). However, the correct citation is to Sec. 570.503(b)(7).
The proposed rule would delete subparts E and G of part 570.
Subpart E governs a variety of special purpose grants that no longer
exist. Subpart G governs Urban Development Action Grants, which
likewise no longer exist. In concert, HUD proposes revisions to remove
references to subparts E and G in the definition of ``CDBG funds'' at
Sec. 570.3; the conflict-of-interest requirements at Sec.
570.611(a)(2); and subpart K applicability at Sec. 570.600(a).
The proposed rule would also remove Sec. 570.613, ``Eligibility
restrictions for certain resident aliens.'' This section provides
restrictions for ``certain newly legalized aliens'' as they were
described in 24 CFR part 49, which no longer exists. The rule was
intended to address the 1986 amendments to the Immigration and
Naturalization Act of 1952, which prohibited certain noncitizens from
receiving Federal financial assistance furnished on the basis of
financial need for a period of five years. (Section 245A(h) of the
Immigration and Nationality Act, 8 U.S.C. 1255a(h)). As this provision
applied to newly legalized aliens that entered the country before
January 1, 1982, and admitted for lawful residence in accordance with
the 1986 amendments, HUD has removed 24 CFR part 49, which described
this population, and is now removing the regulation that referenced
this statutory requirement.
HUD proposes to revise Uniform Relocation Act (URA) citations in
the CDBG and ICDBG program regulations
[[Page 1765]]
(Sec. Sec. 570.606 and 1003.602) to update an outdated URA regulatory
citation (49 CFR 24.2(g)(2)). The URA regulatory citation changed to 49
CFR 24.2(a)(9)(ii) in the 2005 URA final rule but was never updated in
the CDBG and ICDBG program regulations.
H. Interaction of This Proposed Rule With HUD's Proposed Rule on
Affirmatively Furthering Fair Housing
HUD acknowledges that this proposed rule proposes to amend sections
of the Code of Federal Regulations that HUD has also previously
proposed to amend in its Affirmatively Furthering Fair Housing (AFFH
NPRM), published February 9, 2023 (88 FR 8516). Both rules propose
amendments to Sec. Sec. 91.105(b)(2) and (c) and 91.115(b)(2). The
AFFH NPRM and this NPRM propose to amend these provisions in different
ways that do not conflict with each other.
HUD will consider public comments received on each proposed rule.
The public comment period on the AFFH NPRM closed on April 24, 2023,
and HUD is considering the public comments received on the AFFH NPRM's
proposed changes to the referenced provisions as part of that
rulemaking. HUD invites the public to comment on the revisions and
additions proposed as part of this rulemaking.
Although the proposed regulatory amendments in this NPRM do not
reflect the amendments proposed in the AFFH NPRM, HUD intends this rule
to ultimately be consistent with a final AFFH rule. HUD will consider
all relevant comments received on the AFFH NPRM, as well as on this
NPRM. HUD will reconcile the regulatory language in its final rules,
ensuring that the final version of this rule, if published after a
final AFFH rule is codified, is consistent with all changes made in
that published final AFFH rule.
For example, both NPRMs propose to add new language to 24 CFR
91.115(b)(2). The AFFH NPRM proposes to apply certain requirements of
this provision to the Equity Plans that could be established by an AFFH
final rule. The proposed language in this NPRM does not account for
such Equity Plan requirements since that is not the subject of this
rulemaking. However, if HUD adds Equity Plan requirements to 24 CFR
91.115(b)(2) in its AFFH final rule, a subsequent final rule published
as part of this rulemaking will include that change, and appropriately
reconcile the additions made in each rule.
IV. Findings and Certifications
Regulatory Review (Executive Orders 12866, 13563, and 14094)
Pursuant to Executive Order 12866 (Regulatory Planning and Review),
a determination must be made whether a regulatory action is
significant, and therefore, subject to review by OMB in accordance with
the requirements of the order. Executive Order 13563 (Improving
Regulations and Regulatory Review) directs executive agencies to
analyze regulations that are ``outmoded, ineffective, insufficient, or
excessively burdensome, and to modify, streamline, expand, or repeal
them in accordance with what has been learned.'' Executive Order 13563
also directs that, where relevant, feasible, and consistent with
regulatory objectives, and to the extent permitted by law, agencies are
to identify and consider regulatory approaches that reduce burdens and
maintain flexibility and freedom of choice for the public. Executive
Order 14094 entitled ``Modernizing Regulatory Review'' (hereinafter
referred to as the ``Modernizing E.O.'') amends section 3(f) of
Executive Order 12866 (Regulatory Planning and Review), among other
things.
HUD believes that this proposed rule, by revising the Community
Development Block Grant (CDBG) and related Section 108 loan guarantee
program regulations to make it easier for recipients to promote
economic development and recovery in low- and moderate-income
communities and support investments in underserved areas, together with
corresponding changes in the ICDBG program, will increase the
effectiveness of these grant programs. The proposed rule has been
determined to be a ``significant regulatory action,'' as defined in
section 3(f) of Executive Order 12866, but not economically significant
under section 3(f)(1) of the Order. The docket file is available for
public inspection online at www.regulations.gov.
Paperwork Reduction Act
The information collection requirements contained in this rule are
currently approved by OMB and have been given OMB Control Numbers 2506-
0077, 2506-0085, and 2577-0191. In accordance with the Paperwork
Reduction Act, an agency 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.
Regulatory Flexibility Act
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.), generally
requires an agency to conduct a regulatory flexibility analysis of any
rule subject to notice and comment rulemaking requirements unless the
agency certifies that the rule will not have a significant economic
impact on a substantial number of small entities. This analysis also
considers the potential impact on Indian Tribes.
As discussed in the preamble, the proposed rule would update CDBG's
and ICDBG's economic development regulations to make it easier for
recipients to promote economic development and recovery in low- and
moderate-income communities and support investments in underserved
areas. Because the CDBG economic development regulations and standards
have not been updated since 1995, the proposed rule would provide a
much-needed update to ease the expenditure of funds for economic
development activities. The proposed rule would lessen the economic
impact on grantees, small entities and recipients by reducing
eligibility and recordkeeping burdens. This would likely result in
increased economic development activities and the associated creation
of economic opportunities principally for low- and moderate-income
persons.
The proposed rule would primarily impact CDBG, Section 108
borrowers, and ICDBG grantees. CDBG grantees and section 108 borrowers
are State and local governments, some of which are small government
entities, and ICDBG grantees are Indian Tribes and Tribal organizations
which are eligible under Title I of the Indian Self-Determination and
Education Assistance Act. These grantees administer the CDBG, section
108, and ICDBG programs, are familiar with the regulatory requirements,
and are ultimately responsible for program compliance. While some
impacts may filter down to smaller governmental and non-governmental
entities, the expected impact would be a decrease in economic burden,
as discussed above. As such, the proposed rule would likely have a
positive impact on small businesses and entities. The purpose of the
proposed rule would be to make more funding available for all types of
economic development projects. For small entities, including small
governments, the lessening of regulatory burden would likely benefit
those that receive CDBG, ICDBG, and section 108 funds.
Accordingly, it is HUD's determination that this proposed rule will
not have a significant economic impact on a substantial number of small
[[Page 1766]]
entities. Notwithstanding HUD's determination that this proposed rule
will not have a significant effect on a substantial number of small
entities, HUD specifically invites comments regarding any less
burdensome alternatives to this proposed rule that will meet HUD's
objectives as described in this preamble.
Environmental Review
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, Room 10276, Department of Housing and Urban Development, 451
Seventh Street SW, Washington, DC 20410-0500. The FONSI is also
available through the Federal eRulemaking Portal at http://www.regulations.gov.
Federalism (Executive Order 13132)
Executive Order 13132 (entitled ``Federalism'') prohibits an agency
from publishing any rule that has federalism implications if the rule
either: imposes substantial direct compliance costs on State and local
governments and the Act does not require those costs; or the rule
preempts State law, unless the agency meets the consultation and
funding requirements of section 6 of the Executive Order. This proposed
rule does not have federalism implications and does not impose
substantial direct compliance costs on State and local governments nor
preempt State law within the meaning of the Executive Order.
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 on the private sector. This proposed rule does
not impose any Federal mandates on any State, local, or Tribal
governments, or on the private sector, within the meaning of UMRA.
Consultation With Indian Tribes (Executive Order 13175)
HUD strives to strengthen its government-to-government relationship
with Indian Tribes through a commitment to consultation with Indian
Tribes and recognition of their right to self-governance and Tribal
sovereignty. HUD has evaluated this proposed rule under the
Department's consultation policy and under the criteria in Executive
Order 13175 and has determined that Tribal consultation is necessary
regarding the proposed changes. A Dear Tribal Leader was sent out to
Indian Tribes on November 15, 2021, seeking comments on the proposed
changes to the ICDBG regulations in this proposed rule. HUD received
comments from two Tribes and one grant writer with experience providing
grant writing services to Tribes under the ICDBG program. The three
Tribal commenters were generally supportive of the proposed rule. Two
of the three commenters did suggest additional areas for expansion of
the proposed rule and/or areas that may be appropriate for separate
rulemaking. Among the suggestions were clarification of the term
``economically distressed'' as it relates to census tracts and overall
improvements to the ICDBG application process. One Tribal commenter
expressed general agreement with the proposed changes but went on to
comment that the entire ICDBG regulation is overdue for an overhaul.
Among this commenter's specific concerns were rules governing the use
of ICDBG funds for new housing construction and rehabilitation, as well
as HUD's weighting of criteria in Notices of Funding Opportunity. In
developing this proposed rule, HUD considered all Tribal feedback
provided and HUD will conduct additional consultation before issuing a
final rule.
List of Subjects
24 CFR Part 91
Aged, Grant programs--housing and community development, Homeless,
Individuals with disabilities, Low- and moderate-income housing,
Reporting and recordkeeping requirements.
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; Loan programs--
housing and community development; Low- and moderate-income housing;
Northern Mariana Islands; Pacific Islands Trust Territory; Puerto Rico;
Reporting and recordkeeping requirements; Student aid; Virgin Islands.
24 CFR Part 1003
Alaska; Community development block grants; Grant programs--housing
and community development; Grant programs--Indians; Indians; Reporting
and recordkeeping requirements.
Accordingly, for the reasons described in the preamble, HUD
proposes to amend 24 CFR parts 91, 570, and 1003 as follows:
PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND
DEVELOPMENT PROGRAMS
0
1. The authority citation for part 91 continues to read as follows:
Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-
11388, 12701-12711, 12741-12756, and 12901-12912.
0
2. Amend Sec. 91.105 by revising paragraphs (b)(2) and (c)(1) to read
as follows:
Sec. 91.105 Citizen participation plan; local governments.
* * * * *
(b) * * *
(2) The citizen participation plan must require the jurisdiction to
publish the proposed consolidated plan in a manner that affords its
residents, public agencies, and other interested parties a reasonable
opportunity to examine its content and to submit comments. The citizen
participation plan must set forth how the jurisdiction will publish the
proposed consolidated plan and give reasonable opportunity to examine
the document's content. The requirement for publishing may be met by
publication of a summary of the document in one or more newspapers of
general circulation or on the jurisdiction's official government
website. The summary must describe the content and purpose of the
consolidated plan and must include a list of the locations where copies
of the entire proposed document may be examined. Such listings of
locations shall include libraries and government offices. A
jurisdiction is encouraged to use all available social media and
electronic communication at its disposal to make citizens and residents
aware of the availability of the proposed consolidated plan for comment
and to include such methods in its citizen participation plan, as
appropriate. This includes but is not limited to: emails; text
messaging (SMS); media advertisements; public service announcements
made through broadcast media or through a pre-recorded message
delivered by using an automatic telephone dialing system; and
electronic notifications to public and private agencies identified in
accordance with Sec. 91.100. A jurisdiction may also make citizens and
residents
[[Page 1767]]
aware of the availability of the proposed consolidated plan for comment
through postings in public places, such as grocery store bulletin
boards and neighborhood centers. Publications must be accessible to
persons with disabilities. Publications must also provide meaningful
access to limited English proficient persons as more fully described in
paragraph (a)(4) of this section. In addition, the jurisdiction must
provide a reasonable number of free hardcopies of the plan to residents
and groups that request it.
* * * * *
(c) * * *
(1) The citizen participation plan must specify the criteria the
jurisdiction will use for determining what changes in the
jurisdiction's planned or actual activities constitute a substantial
amendment to the consolidated plan. (See Sec. 91.505.) The citizen
participation plan must include, among the criteria for a substantial
amendment, changes in the use of CDBG funds from one eligible activity
to another and adding an activity not previously identified in the
Consolidated Plan or Action Plan.
* * * * *
0
3. Amend Sec. 91.115 by revising paragraph (b)(2) to read as follows:
Sec. 91.115 Citizen participation plan; States.
* * * * *
(b) * * *
(2) The citizen participation plan must require the State to
publish the proposed consolidated plan in a manner that affords
residents, units of general local governments, public agencies, and
other interested parties a reasonable opportunity to examine the
document's content and to submit comments. The citizen participation
plan must set forth how the State will make publicly available the
proposed consolidated plan and give reasonable opportunity to examine
the document's content. To ensure that the consolidated plan and the
PHA plan are informed by meaningful community participation, program
participants should employ communications means designed to reach the
broadest audience. The requirement for publishing may be met by
publication of a summary of the document in one or more newspapers of
general circulation or on the State's official government website. The
summary must describe the content and purpose of the consolidated plan
and must include a list of the locations where copies of the entire
proposed document may be examined. Such listings of locations shall
include libraries and government offices. A State is encouraged to use
all available social media and electronic communication at its disposal
to make citizens and residents aware of the availability of the
proposed consolidated plan for comment and to include such methods in
its citizen participation plan, as appropriate. This includes but is
not limited to, emails, text messaging (SMS); media advertisements,
public service announcements made through broadcast media or through a
pre-recorded message delivered by using an automatic telephone dialing
system, and electronic notifications to public and private agencies
identified in accordance with Sec. 91.100. A State may also make
citizens and residents aware of the availability of the proposed
consolidated plan for comment through postings in public places such as
grocery store bulletin boards and neighborhood centers. Publications
must be accessible to persons with disabilities. Publications must also
provide meaningful access to limited English proficient persons as more
fully described in paragraph (a)(4) of this section. In addition, the
State must provide a reasonable number of free copies of the plan to
its residents and groups that request a copy of the plan.
* * * * *
0
4. Amend Sec. 91.205 by revising paragraph (a) to read as follows:
Sec. 91.205 Housing and homeless needs assessment.
(a) General. The consolidated plan must provide a concise summary
of the jurisdiction's estimated housing needs (including manufactured
housing) projected for the ensuing five-year period. Housing data
included in this portion of the plan shall be based on U.S. Census
data, as provided by HUD, as updated by any properly conducted local
study, or any other reliable source that the jurisdiction clearly
identifies and should reflect the consultation with social service
agencies and other entities conducted in accordance with Sec. 91.100
and the citizen participation process conducted in accordance with
Sec. 91.105. For a jurisdiction seeking funding on behalf of an
eligible metropolitan statistical area under the HOPWA program, the
needs described for housing and supportive services must address the
unmet needs of low-income persons with HIV/AIDS and their families
throughout the eligible metropolitan statistical area.
* * * * *
0
5. Amend Sec. 91.210 by revising paragraph (a)(1) to read as follows:
Sec. 91.210 Housing market analysis.
(a) * * *
(1) Based on information available to the jurisdiction, the plan
must describe the significant characteristics of the jurisdiction's
housing market, including the supply, demand, and condition and cost of
housing and the housing stock (including manufactured housing)
available to serve persons with disabilities, and to serve other low-
income persons with special needs, including persons with HIV/AIDS and
their families.
* * * * *
0
6. Amend Sec. 91.215 by revising paragraphs (a)(1) and (g) to read as
follows:
Sec. 91.215 Strategic plan.
(a) * * *
(1) Indicate the general priorities for allocating investment
geographically within the jurisdiction and among different eligible
activities and needs. Also provide quantitative, neighborhood-level
outcome goal accomplishments in the performance report as required at
Sec. 91.520.
* * * * *
(g) Neighborhood revitalization. Jurisdictions are encouraged to
identify locally designated areas where geographically targeted
revitalization efforts are carried out through multiple activities in a
concentrated and coordinated manner. Such areas may include those
designated as economically distressed by the Federal Government or by
the State that exhibit significantly high levels of poverty or low
median income. In addition, a jurisdiction may elect to carry out a
HUD-approved neighborhood revitalization strategy that includes the
economic empowerment of low-income residents with respect to one or
more of its areas. If HUD approves such a strategy, the jurisdiction
can obtain greater flexibility in the use of the CDBG funds in the
revitalization area(s) as described in 24 CFR part 570, subpart C. This
strategy must identify long-term and short-term objectives (e.g.,
physical improvements, social initiatives and economic empowerment),
expressing them in terms of measures of outputs and outcomes the
jurisdiction expects to achieve in the neighborhood through the use of
HUD programs.
* * * * *
Sec. 91.225 [Amended]
0
7. Amend Sec. 91.225 in paragraph (b)(2) by removing ``24 CFR 570.2''
and adding in its place ``24 CFR 570.200(a)(3)''.
0
8. Amend Sec. 91.305 by revising paragraph (a) to read as follows:
[[Page 1768]]
Sec. 91.305 Housing and homeless needs assessment.
(a) General. The consolidated plan must provide a concise summary
of the State's estimated housing needs (including manufactured housing)
projected for the ensuing five-year period. Housing data included in
this portion of the plan shall be based on U.S. Census data, as
provided by HUD, as updated by any properly conducted local study, or
any other reliable source that the State clearly identifies and should
reflect the consultation with social service agencies and other
entities conducted in accordance with Sec. 91.110 and the citizen
participation process conducted in accordance with Sec. 91.115. For a
State seeking funding under the HOPWA program, the needs described for
housing and supportive services must address the unmet needs of low-
income persons with HIV/AIDS and their families in areas outside of
eligible metropolitan statistical areas.
* * * * *
0
9. Amend Sec. 91.310 by revising paragraph (a)(1) to read as follows:
Sec. 91.310 Housing market analysis.
(a) * * *
(1) Based on data available to the State, the plan must describe
the significant characteristics of the State's housing markets
(including such aspects as the supply, demand, condition, cost, and
type of housing, including manufactured housing).
* * * * *
Sec. 91.325 [Amended]
0
10. Amend Sec. 91.325 in paragraph (b)(3) by removing ``24 CFR 570.2''
and adding in its place ``24 CFR 570.200(a)(3)''.
0
11. Amend Sec. 91.500 by revising the section heading and adding a
sentence at the end of paragraph (a) to read as follows:
Sec. 91.500 HUD Review of consolidated plan.
(a) * * * The fact that HUD has not disapproved the plan does not
constitute approval of the activities identified therein as meeting the
applicable statutory and regulatory requirements.
* * * * *
0
12. Amend Sec. 91.520 by adding a sentence at the end of paragraph (d)
to read as follows:
Sec. 91.520 Performance reports.
* * * * *
(d) * * * Except for States, the report shall also identify
quantitative, neighborhood-level outcome goal accomplishments related
to one or more non-jurisdiction-wide activities.
* * * * *
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
0
13. The authority citation for part 570 continues to read as follows:
Authority: 12 U.S.C. 1701x, 1701 x-1; 42 U.S.C. 3535(d) and
5301-5320.
0
14. Amend Sec. 570.3 as follows:
0
a. Add in alphabetical order a definition for ``Activity delivery
costs'';
0
b. Revise the definition of ``CDBG funds'';
0
c. Add in alphabetical order a definition for ``Elderly'';
0
d. Revise the definition for ``Entitlement amount''; and
0
e. Add in alphabetical order definitions for ``Mixed-use property'' and
``Period of performance''.
The additions and revisions read as follows:
Sec. 570.3 Definitions.
* * * * *
Activity delivery costs means the allowable costs of work performed
by a recipient or subrecipient in carrying out specific activities
eligible under Sec. Sec. 570.201 through 570.204 and 570.703. The cost
principles at 2 CFR part 200, subpart E, must be used in determining
the allowability of the costs.
* * * * *
CDBG funds means Community Development Block Grant funds, including
funds received in the form of grants under subpart D or F of this part,
funds awarded under section 108(q) of the Housing and Community
Development Act of 1974, guaranteed loan funds under subpart M of this
part, urban renewal surplus grant funds, and program income as defined
in Sec. 570.500(a).
* * * * *
Elderly means, for activities pursuant to Sec. 570.202, a person
62 years of age or older. For all other activities, CDBG recipients and
subrecipients are permitted to define ``elderly'' consistent with State
law.
Entitlement amount means the amount of funds which a metropolitan
city, urban county, or principal city as designated by OMB is entitled
to receive under the Entitlement grant program, as determined by
formula set forth in section 106 of the Act.
* * * * *
Mixed-use property means a property containing multiple uses, at
least one of which must be eligible to be assisted with CDBG funds.
* * * * *
Period of performance means the time period beginning on HUD's
approval of a grant agreement for a given grant and ending six years
from that date. For loan guarantees issued pursuant to subpart M of
this part, the period of performance means the time period beginning on
the date of HUD's guarantee of a promissory note or other obligation
and ending six years from that date.
* * * * *
0
15. Amend Sec. 570.200 by revising paragraphs (a)(2) and (3), (b)(1),
and (h)(1)(iii) to read as follows:
Sec. 570.200 General policies.
(a) * * *
(2) Compliance with national objectives. Grant recipients under the
Entitlement and HUD-administered Small Cities programs and recipients
of insular area funds under section 106 of the Act must certify that
their projected use of funds has been developed so as to give maximum
feasible priority to activities which will carry out one of the
national objectives of benefit to low- and moderate-income families or
aid in the prevention or elimination of slums or blight. The projected
use of funds may also include activities that the recipient certifies
are designed to meet other community development needs having a
particular urgency because existing conditions pose a serious and
immediate threat to the health or welfare of the community where other
financial resources are not available to meet such needs. Consistent
with the foregoing, each recipient under the Entitlement or HUD-
administered Small Cities programs, and each recipient of insular area
funds under section 106 of the Act must ensure and maintain evidence
that each of its activities assisted with CDBG funds meets one of the
three national objectives contained in its certification. A recipient
must demonstrate that each activity meets a national objective within
six years of the date of the initial drawdown of CDBG funds for that
activity or the length of the period of performance and any extension
permitted under Sec. 570.509, whichever is shorter. Criteria for
determining whether an activity addresses one or more of these
objectives are found in Sec. 570.208.
(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
[[Page 1769]]
of CDBG fund expenditures shall be for activities meeting the criteria
under Sec. 570.208(a) or (d)(5) or (6) for benefiting low- and
moderate-income persons. Grantees are not permitted to expend more CDBG
funds for activities that benefit low- and moderate-income persons
during the following certification period to meet this requirement. For
grants under section 107 of the Act, insular area recipients must meet
this requirement 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:
* * * * *
(b) * * *
(1) Mixed-use properties containing both eligible and ineligible
uses. CDBG funds may be used to assist eligible activities even if the
assisted activity is part of a multiple-use property containing one or
more ineligible uses, if:
(i) The assisted activity is eligible and will occupy a designated
and discrete area within the larger property; and
(ii) The recipient can determine the costs attributable to the
eligible activity as separate and distinct from the overall costs of
the multiple-use property.
(iii) Allowable costs are limited to those allocable to the
eligible activity.
* * * * *
(h) * * *
(1) * * *
(iii) The costs and activities funded are in compliance with the
requirements of this part and with applicable Environmental Review
Procedures in 24 CFR part 58.
* * * * *
0
16. Amend Sec. 570.201 as follows:
0
a. Revise paragraph (a) and paragraph (e) introductory text;
0
b. Redesignate paragraphs (e)(1) and (2) as (e)(2)(i) and (ii),
paragraphs (e)(2)(i) and (ii) as (e)(2)(ii)(A) and (B); and paragraphs
(e)(2)(ii)(A) through (D) as (e)(2)(ii)(B)(1) through (4);
0
c. Add new paragraph (e)(1) and new paragraph (e)(2) introductory text;
0
d. Remove the ``(a)(21)'' and add in its place ``(a)(20)'' in paragraph
(k);
0
e. Remove and reserve paragraph (m);
0
f. Revise paragraph (p); and
0
g. Add paragraphs (r) and (s);
The revisions and additions to read as follows:
Sec. 570.201 Basic eligible activities.
* * * * *
(a) Acquisition. Acquisition in whole or in part by the recipient,
or other public or private nonprofit entity, by purchase, long-term
lease (defined as a lease with a term of 15 years or more), donation,
or otherwise, of real property (including air rights, water rights,
rights-of-way, easements, and other interests therein) for any public
purpose, subject to the limitations of Sec. 570.207.
* * * * *
(e) Public services. Provision of public services (including labor,
supplies, and materials) including but not limited to those concerned
with employment, crime prevention, child care, health, drug abuse,
education, fair housing counseling, energy conservation, welfare (but
excluding the provision of income payments identified under Sec.
570.207(b)(4)), homebuyer downpayment assistance, or recreational
needs. If housing counseling, as defined in 24 CFR 5.100, is provided,
it must be carried out in accordance with 24 CFR 5.111.
(1) To be eligible for CDBG assistance, a public service must
either be a new service or provide a quantifiable increase in the level
of an existing service above that which has been provided by or on
behalf of the unit of general local government (through funds raised by
the unit or received by the unit from the State in which it is located)
in the 12 calendar months before the submission of the action plan. (An
exception to this requirement may be made if HUD determines that any
decrease in the level of a service was the result of events not within
the control of the unit of general local government.)
(2) The amount of CDBG funds used for public services shall not
exceed the amounts outlined in paragraph (e)(2)(i) or (ii) of this
section, as applicable:
* * * * *
(p) Technical assistance. Provision of technical assistance to
public or nonprofit entities to increase the capacity of such entities
to carry out specific eligible neighborhood revitalization or economic
development activities. (The recipient must determine, prior to the
provision of the assistance, that the activity for which it is
attempting to build capacity would be eligible for assistance under
this subpart C, and that the national objective claimed by the grantee
for this assistance can reasonably be expected to be met within six
years of the date of the initial drawdown of CDBG funds for the purpose
of the entity receiving the technical assistance and undertaking the
activity.) General administrative and operating costs of a public or
nonprofit entity are not eligible under this paragraph. Capacity
building for private or public entities (including grantees) for other
purposes may be eligible under Sec. 570.205.
* * * * *
(r) Tornado-safe shelters. CDBG funds may be used by the recipient
or provided as loans or grants to non-profit and for-profit entities,
including owners of manufactured housing communities, for the
construction or improvement of tornado-safe shelters for manufactured
housing residents in accordance with section 105(a) of the Act.
Activities pursuant to this paragraph may be located only in a
neighborhood (including a manufactured housing community) that--
(1) Contains at least 20 manufactured housing units within such
proximity to the shelter that the shelter is available to the resident
in the event of a tornado,
(2) Consists predominantly of persons of low and moderate income
(3) Is located within a State in which a tornado has occurred
during the fiscal year for which with amounts to be used were made
available or the preceding 3 fiscal years, as determined by the
Secretary in consultation with the Administrator of the Federal
Emergency Management Agency.
(s) Use of grants for loan repayment, issuance, underwriting,
servicing, and other costs. CDBG funds may be used for payment of costs
pursuant to Sec. 570.705(c), including the payment of fees in
accordance with Sec. 570.712, for loan guarantees issued pursuant to
subpart M of this part.
0
17. Amend Sec. 570.202 by revising paragraph (a) introductory text to
read as follows:
Sec. 570.202 Eligible rehabilitation and preservation activities.
(a) Types of buildings and improvements eligible for rehabilitation
and reconstruction assistance. CDBG funds may be used to finance the
rehabilitation and reconstruction of:
* * * * *
0
18. Amend Sec. 570.203 by revising paragraphs (b) and (c) to read as
follows:
Sec. 570.203 Special economic development activities.
* * * * *
(b) The provision of assistance to a private for-profit business,
including, but not limited to, grants, loans, loan guarantees, interest
supplements, loan participations, technical assistance, and other forms
of support (including use of pass-through financing structures), for
any activity where the assistance is appropriate to carry out an
economic development project, excluding those described as ineligible
in Sec. 570.207(a).
[[Page 1770]]
In selecting businesses to assist under this authority, the recipient
shall minimize, to the extent practicable, displacement of existing
housing, community amenities, businesses, and jobs in neighborhoods.
(c) Economic development services in connection with activities
eligible under this section, including, but not limited to, outreach
efforts to market available forms of assistance; screening of
applicants; reviewing and underwriting applications for assistance;
preparation of all necessary agreements; management of assisted
activities; the screening, referral, and placement of applicants for
employment opportunities generated by CDBG-eligible economic
development activities and the costs of providing necessary training
for persons filling those specific positions. Training connected with
job placement in specific businesses is considered an economic
development activity and not a public service under Sec. 570.201(e).
If individuals are not receiving training for specific positions at a
specific business, general employment readiness programs or trainings
for individuals in career fields are only eligible as public service
activities under Sec. 570.201(e) or, in limited cases, as part of a
community economic development project under Sec. 570.204.
Sec. 570.205 [Amended]
0
19. Amend Sec. 570.205 by redesignating paragraph (a)(6) as paragraph
(b) introductory text.
0
20. Amend Sec. 570.206 by revising the introductory text and paragraph
(g) introductory text and removing paragraphs (h) and (i).
The revisions read as follows:
Sec. 570.206 Program administrative costs.
Payment of reasonable program administrative costs and carrying
charges related to the planning and execution of community development
activities assisted in whole or in part with funds provided under this
part. This does not include activity delivery costs as defined at Sec.
570.3.
* * * * *
(g) HOME Program. Whether or not such activities are otherwise
assisted by funds provided under this part, reasonable costs equivalent
to those described in paragraphs (a), (b), (e), and (f) of this section
for overall program management of the HOME program under title II of
the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 12701,
et seq.) if those costs are allowable costs under 24 CFR part 92.
* * * * *
0
17. Amend Sec. 570.207 as follows:
0
a. Remove in paragraph (a)(1) ``Sec. 570.3(d)'' and add in its place
``Sec. 570.3'';
0
b. Add paragraph (a)(4); and
0
c. Remove in paragraph (b)(3)(ii) ``Sec. 570.201 (m) or (n)'' and add
in its place ``Sec. 570.201(n)''.
The addition reads as follows:
Sec. 570.207 Ineligible activities.
* * * * *
(a) * * *
(4) Operating expenses. General administrative costs and operating
expenses of public or nonprofit entities are ineligible except where
such costs represent general administrative costs pursuant to Sec.
570.206 or activity delivery costs of carrying out specific eligible
activities under Sec. Sec. 570.201 through 570.204.
* * * * *
0
18. Revise and republish Sec. 570.208 to read as follows:
Sec. 570.208 Criteria for national objectives.
The following criteria shall be used to determine whether a CDBG-
assisted activity complies with one or more of the national objectives
as required under Sec. 570.200(a)(2):
(a) Activities benefiting low- and moderate-income persons.
Activities meeting the criteria in this paragraph (a) will be
considered to benefit low-and moderate-income persons unless there is
substantial evidence to the contrary. In assessing any such evidence,
the full range of direct effects of the assisted activity will be
considered. (The recipient shall appropriately ensure that activities
that meet these criteria do not benefit moderate-income persons to the
exclusion of low-income persons.)
(1) Area benefit activities. (i) An activity, the benefits of which
are available to all the residents in a primarily residential area,
where at least 51 percent of the residents are low- and moderate-income
persons. The activity must serve the entire area, but the area served
need not be coterminous with census tracts or other officially
recognized boundaries.
(ii) For metropolitan cities and urban counties, an activity, the
benefits of which are available to all the residents in a primarily
residential area, where less than 51 percent of the residents are low-
and moderate-income persons, but where the proportion of such low- and
moderate-income persons residing in the area is within the highest
quartile of all areas in the recipient's jurisdiction in terms of the
degree of concentration of residents who are low- and moderate-income
persons. In applying this exception, HUD will determine the lowest
proportion a recipient may use to qualify an area for this purpose, as
follows:
(A) All census block groups in the recipient's jurisdiction shall
be rank ordered from the block group of highest proportion of low and
moderate income persons to the block group with the lowest. For urban
counties, the rank ordering shall cover the entire area constituting
the urban county and shall not be done separately for each
participating unit of general local government.
(B) In any case where the total number of a recipient's block
groups does not divide evenly by four, the block group which would be
fractionally divided between the highest and second quartiles shall be
considered to be part of the highest quartile.
(C) The proportion of low- and moderate-income persons in the last
census block group in the highest quartile shall be identified. Any
service area located within the recipient's jurisdiction and having a
proportion of low- and moderate-income persons at or above this level
shall be considered to be within the highest quartile.
(D) If block group data are not available for the entire
jurisdiction, other data acceptable to the Secretary may be used in the
above calculations.
(iii) An activity to develop, establish, and operate for up to two
years after the establishment of, a uniform emergency telephone number
system serving an area having less than the percentage of low- and
moderate-income residents required under paragraph (a)(1)(i) or (as
applicable) paragraph (a)(1)(ii) of this section, provided the
recipient obtains prior HUD approval. To obtain such approval, the
recipient must:
(A) Demonstrate that the system will contribute significantly to
the safety of the residents of the area. The request for approval must
include a list of the emergency services that will participate in the
emergency telephone number system;
(B) Submit information that serves as a basis for HUD to determine
whether at least 51 percent of the use of the system will be by
residents who are low- and moderate-income persons. As available, the
recipient must provide information that identifies the total number of
calls actually received over the preceding 12-month period for each of
the emergency services to be covered by the emergency telephone number
system and relates those calls to the geographic segment (expressed as
nearly as possible in terms of census tracts, block groups, or
combinations thereof that are contained within the segment) of the
service area from which the calls were generated. In analyzing this
data to meet the
[[Page 1771]]
requirements of this section, HUD will assume that the distribution of
income among the callers generally reflects the income characteristics
of the general population residing in the same geographic area where
the callers reside. If HUD can conclude that the users have primarily
consisted of low- and moderate-income persons, no further submission is
needed by the recipient. If a recipient plans to make other submissions
for this purpose, it may request that HUD review its planned
methodology before expending the effort to acquire the information it
expects to use to make its case;
(C) Demonstrate that other Federal funds received by the recipient
are insufficient or unavailable for a uniform emergency telephone
number system. For this purpose, the recipient must submit a statement
explaining whether the lack of funds is due to the insufficiency of the
amount of the available funds, restrictions on the use of such funds,
or the prior commitment of funds by the recipient for other purposes;
and
(D) Demonstrate that the percentage of the total costs of the
system paid for by CDBG funds does not exceed the percentage of low-
and moderate-income persons residing in the service area of the system.
For this purpose, the recipient must include a description of the
boundaries of the service area of the emergency telephone number
system, the census divisions that fall within the boundaries of the
service area (census tracts or block groups), the total number of
persons and the total number of low- and moderate-income persons
residing within each census division, the percentage of low- and
moderate-income persons residing within the service area, and the total
cost of the system.
(iv) An activity for which the assistance to a public improvement
that provides benefits to all the residents of an area is limited to
paying special assessments (as defined in Sec. 570.200(c)) levied
against residential properties owned and occupied by persons of low-
and moderate-income.
(v) For purposes of determining qualification under this criterion,
activities of the same type that serve different areas will be
considered separately on the basis of their individual service area.
(vi) In determining whether there is a sufficiently large
percentage of low- and moderate-income persons residing in the area
served by an activity to qualify under paragraph (a)(1)(i), (ii), or
(vii) of this section, the most recently available Census Bureau data
provided by HUD must be used to the fullest extent feasible, together
with the section 8 income limits that would have applied at the time
the income information was collected by the Census Bureau. Recipients
that believe that the census data does not reflect current relative
income levels in an area, or where census boundaries do not coincide
sufficiently well with the service area of an activity, may conduct (or
have conducted) a current survey of the residents of the area to
determine the percent of such persons that are low- and moderate-
income. HUD will accept information obtained through such surveys, to
be used in lieu of the census data, where it determines that the survey
was conducted in such a manner that the results meet standards of
statistical reliability that are comparable to that of census data for
areas of similar size. Where there is substantial evidence that
provides a clear basis to believe that the use of the census data would
substantially overstate the proportion of persons residing there that
are low and moderate income, HUD may require that the recipient rebut
such evidence in order to demonstrate compliance with section 105(c)(2)
of the Act.
(vii) Activities meeting the requirements of paragraph (d)(5)(i) of
this section may be considered to qualify under this paragraph,
provided that the area covered by the strategy is either a Federally-
designated Empowerment Zone or Enterprise Community or primarily
residential and contains a percentage of low- and moderate-income
residents that is no less than the percentage computed by HUD pursuant
to paragraph (a)(1)(ii) of this section or 70 percent, whichever is
less, but in no event less than 51 percent. Activities meeting the
requirements of paragraph (d)(6)(i) of this section may also be
considered to qualify under this paragraph (a)(1).
(2) Limited clientele activities. (i) An activity which benefits a
limited clientele, at least 51 percent of whom are low- or moderate-
income persons. The activity must meet one of the following tests:
(A) Benefit at least one of the following clientele, which are
presumed to be low- and moderate-income persons: abused children;
survivors of domestic violence; elderly persons (see 570.3 for
definition of elderly); adults meeting the Bureau of the Census'
Current Population Reports definition of ``severely disabled;''
homeless persons; illiterate adults (adults unable to read and write in
English and in their first language, if their first language is not
English); persons living with AIDS; migrant farm workers; persons who
meet the Federal poverty guidelines; persons insured by Medicaid; or
(B) Require information on family size and income that demonstrates
that at least 51 percent of the clientele are persons whose family
income does not exceed the low- and moderate-income limit; or
(C) Have income eligibility requirements which limit the activity
exclusively to low- and moderate-income persons; or
(D) Be of such nature and be in such location that it may be
concluded that the activity's clientele will primarily be low- and
moderate-income persons.
(ii) An activity that serves to remove material or architectural
barriers to the mobility or accessibility of elderly persons or of
adults meeting the Bureau of the Census' Current Population Reports
definition of ``severely disabled'' will be presumed to qualify under
this criterion if it is restricted, to the extent practicable, to the
removal of such barriers by assisting:
(A) The reconstruction of a public facility or improvement, or
portion thereof, that does not qualify under paragraph (a)(1) of this
section;
(B) The rehabilitation of a privately owned nonresidential building
or improvement that does not qualify under paragraph (a)(1) or (4) of
this section; or
(C) The rehabilitation of the common areas of a residential
structure that contains more than one dwelling unit and that does not
qualify under paragraph (a)(3) of this section.
(iii) A microenterprise assistance activity carried out in
accordance with the provisions of Sec. 570.201(o) with respect to
those owners of microenterprises and persons developing
microenterprises assisted under the activity during each program year
who are low- and moderate-income persons. For purposes of this
paragraph, persons determined to be low and moderate income may be
presumed to continue to qualify as such for up to a three-year period.
(iv) An activity designed to provide job training and placement
and/or other employment support services, including, but not limited
to, peer support programs, counseling, child care, transportation, and
other similar services, in which the percentage of low- and moderate-
income persons assisted is less than 51 percent may qualify under this
paragraph in the following limited circumstance:
(A) In such cases where such training or provision of supportive
services assists business(es), the only use of CDBG assistance for the
project is to
[[Page 1772]]
provide the job training and/or supportive services; and
(B) The proportion of the total cost of the project borne by CDBG
funds is no greater than the proportion of the total number of persons
assisted who are low or moderate income.
(v) The following kinds of activities may not qualify under this
paragraph (a)(2): activities that provide benefits to all the residents
of an area; activities involving the acquisition, construction or
rehabilitation of property for housing; or activities where the benefit
to low- and moderate-income persons to be considered is the creation or
retention of jobs, except as provided in paragraph (a)(2)(iv) of this
section.
(3) Housing activities. An eligible activity carried out for the
purpose of providing or improving permanent residential structures
which will be occupied by low- and moderate-income households. This
would include, but not necessarily be limited to, the acquisition or
rehabilitation of property by the recipient, a subrecipient, a
developer, an individual homebuyer, or an individual homeowner;
conversion of nonresidential structures; and new housing construction.
If the structure contains two dwelling units, at least one must be so
occupied, and if the structure contains more than two dwelling units,
at least 51 percent of the units must be so occupied. Where two or more
rental buildings being assisted are or will be located on the same or
contiguous properties, and the buildings will be under common ownership
and management, the grouped buildings may be considered for this
purpose as a single structure. Where housing activities being assisted
meet the requirements of paragraph (d)(5)(ii) or (d)(6)(ii) of this
section, all such housing may also be considered for this purpose as a
single structure. For rental housing, occupancy by low- and moderate-
income households must be at affordable rents to qualify under this
criterion. The recipient shall adopt and make public its standards for
determining ``affordable rents'' for this purpose. The following shall
also qualify under this criterion:
(i) When less than 51 percent of the units in a structure will be
occupied by low- and moderate- income households:
(A) The assistance is for an eligible activity to reduce the
development cost of the substantial rehabilitation or conversion of a
nonresidential structure to a multifamily, non-elderly rental housing
project, or the new construction of a multifamily, non-elderly rental
housing project;
(B) At least 20 percent of the units will be occupied by low- and
moderate-income households at affordable rents; and
(C) 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.
(ii) When CDBG funds are used to assist rehabilitation eligible
under Sec. 570.202(b)(9) or (10) in direct support of the recipient's
Rental Rehabilitation program authorized under 24 CFR part 511, such
funds shall be considered to benefit low and moderate income persons
where not less than 51 percent of the units assisted, or to be
assisted, by the recipient's Rental Rehabilitation program overall are
for low and moderate income persons.
(iii) When CDBG funds are used for housing services eligible under
Sec. 570.201(k), such funds shall be considered to benefit low- and
moderate-income persons if the housing units for which the services are
provided are HOME-assisted and the requirements at 24 CFR 92.252 or
92.254 are met.
(4) Job creation or retention activities. An activity designed to
create or retain permanent jobs where at least 51 percent of the full-
time equivalent jobs involve the employment of low- and moderate-income
persons. Poverty rates used in this paragraph shall be determined by
Census Bureau data provided by HUD. To qualify under this paragraph,
the activity must meet the following criteria:
(i) For an activity that creates jobs, the recipient must document
that at least 51 percent of the jobs will be held by, or will be
available to, low- and moderate-income persons.
(ii) For an activity that retains jobs, the recipient must document
that the jobs would actually be lost without the CDBG assistance and
that either or both of the following conditions apply with respect to
at least 51 percent of the jobs at the time the CDBG assistance is
provided:
(A) The job is known to be held by a low- or moderate-income
person; or
(B) The job can reasonably be expected to turn over within the
following two years and that steps will be taken to ensure that it will
be filled by, or made available to, a low- or moderate-income person
upon turnover.
(iii) Jobs that are not held or filled by a low- or moderate-income
person may be considered to be available to low- and moderate-income
persons if:
(A) The assisted business does not require as a prerequisite
special skill that can only be acquired with substantial training or
work experience or education beyond high school, or the business agrees
to hire unqualified persons and provide training; and
(B) The recipient and the assisted business take actions to ensure
that low- and moderate-income persons receive first consideration for
filling such jobs.
(iv) For purposes of determining whether a job is held by or made
available to a low- or moderate-income person, the person may be
presumed to be a low- or moderate-income person if:
(A) The person resides, or the assisted business through which the
person is employed is located, within a census tract that meets the
requirements of paragraph (a)(4)(v) of this section; or
(B) The person resides within a census tract that has at least 70
percent of its population who are low- and moderate-income persons.
(v) A census tract qualifies for the presumptions permitted under
paragraph (a)(4)(iv)(A) of this section if it has a poverty rate of at
least 20 percent and meets at least one of the following standards:
(A) The specific activity being undertaken is located in a block
group that has a poverty rate of at least 20 percent; or
(B) Upon the written request by the recipient, HUD determines that
the census tract exhibits other objectively determinable signs of
general distress such as high incidence of crime, narcotics use,
homelessness, abandoned housing, deteriorated infrastructure, or
substantial population decline.
(vi) Each assisted business shall be considered to be a separate
activity for purposes of determining whether the activity qualifies
under this paragraph, except:
(A) In certain cases such as where CDBG funds are used to acquire,
develop or improve a real property (e.g., a business incubator or an
industrial park) the requirement may be met by measuring jobs in the
aggregate for all the businesses which locate on the property, provided
such businesses are not otherwise assisted by CDBG funds.
(B) Where CDBG funds are used to pay for the staff and overhead
costs of an entity making loans to businesses exclusively from non-CDBG
funds, this requirement may be met by aggregating the jobs created by
all of the businesses receiving loans during each program year.
(C) Where CDBG funds are used by a recipient or subrecipient to
provide technical assistance to businesses, this requirement may be met
by aggregating the jobs created or retained by all of the businesses
receiving technical assistance during each program year.
[[Page 1773]]
(D) Where CDBG funds are used for activities meeting the criteria
listed at Sec. 570.209(b)(2)(v), this requirement may be met by
aggregating the jobs created or retained by all businesses for which
CDBG assistance is obligated for such activities during the program
year, except as provided at paragraph (d)(7) of this section.
(E) Where CDBG funds are used by a Community Development Financial
Institution to carry out activities for the purpose of creating or
retaining jobs, this requirement may be met by aggregating the jobs
created or retained by all businesses for which CDBG assistance is
obligated for such activities during the program year, except as
provided at paragraph (d)(7) of this section.
(F) Where CDBG funds are used for public facilities or improvements
which will result in the creation or retention of jobs by more than one
business, this requirement may be met by aggregating the jobs created
or retained by all such businesses as a result of the public facility
or improvement.
(1) Where the public facility or improvement is undertaken
principally for the benefit of one or more particular businesses, but
where other businesses might also benefit from the assisted activity,
the requirement may be met by aggregating only the jobs created or
retained by those businesses for which the facility/improvement is
principally undertaken, provided that the cost (in CDBG funds) for the
facility/improvement is less than $10,000 per permanent full-time
equivalent job to be created or retained by those businesses.
(2) In any case where the cost per job to be created or retained
(as determined under paragraph (a)(4)(vi)(F)(1) of this section) is
$10,000 or more, the requirement must be met by aggregating the jobs
created or retained as a result of the public facility or improvement
by all businesses in the service area of the facility/improvement. This
aggregation must include businesses which, as a result of the public
facility/improvement, locate or expand in the service area of the
facility/improvement between the date the recipient identifies the
activity in its action plan under part 91 of this title and the date
one year after the physical completion of the facility/improvement. In
addition, the assisted activity must comply with the public benefit
standards at Sec. 570.209(b).
(b) Activities which aid in the prevention or elimination of slums
or blight. Activities meeting one or more of the following criteria, in
the absence of substantial evidence to the contrary, will be considered
to aid in the prevention or elimination of slums or blight:
(1) Activities to address slums or blight on an area basis. An
activity will be considered to address prevention or elimination of
slums or blight in an area if:
(i) The area, delineated by the recipient, meets a definition of a
slum, blighted, deteriorated or deteriorating area under State or local
law;
(ii) The recipient demonstrates, supported by quantifiable data,
that at least 25 percent of properties throughout the area experience a
condition relating to physical or economic distress, such as abandoned
or vacant properties, and/or known or suspected environmental
contamination.
(iii) The assisted activity addresses one or more of the conditions
which contributed to the deterioration of the area. Rehabilitation of
residential buildings carried out in an area meeting the above
requirements will be considered to address the area's deterioration
only where each such building rehabilitated is considered substandard
under local definition before rehabilitation, and all deficiencies
making a building substandard have been eliminated if less critical
work on the building is undertaken. At a minimum, the local definition
for this purpose must be such that buildings that it would render
substandard would also fail to meet the Housing Quality Standards (24
CFR 982.401).
(2) Activities to address slums or blight on a spot basis. The
following activities may be undertaken on a spot basis to eliminate
specific conditions of blight, physical decay, or environmental
contamination that are not located in a slum or blighted area:
acquisition; clearance; relocation; historic preservation; remediation
of environmentally contaminated properties; or rehabilitation of
buildings or improvements. If acquisition or relocation is undertaken,
it must be a precursor to another eligible activity (funded with CDBG
or other resources) that directly eliminates the specific conditions of
blight or physical decay, or environmental contamination.
Note 1 to paragraph (b). Activities which aid in the prevention
or elimination of slums or blight: Despite the restrictions in
paragraphs (b)(1) and (2) of this section, any rehabilitation
activity which benefits low- and moderate-income persons pursuant to
paragraph (a)(3) of this section can be undertaken without regard to
the area in which it is located or the extent or nature of
rehabilitation assisted.
(c) Activities designed to meet community development needs having
a particular urgency. In the absence of substantial evidence to the
contrary, an activity will be considered to address this objective if
the recipient certifies that the activity is designed to alleviate
existing conditions which pose a serious and immediate threat to the
health or welfare of the community which are of recent origin or which
recently became urgent, that the recipient is unable to finance the
activity on its own, and that other sources of funding are not
available. A condition will generally be considered to be of recent
origin if it developed or became critical within 18 months preceding
the certification by the recipient.
(d) Additional criteria. (1) Where the assisted activity is
acquisition of real property, a preliminary determination of whether
the activity addresses a national objective may be based on the planned
use of the property after acquisition. A final determination shall be
based on the actual use of the property, excluding any short-term,
temporary use. Where the acquisition is for the purpose of clearance
which will eliminate specific conditions of blight or physical decay,
the clearance activity shall be considered the actual use of the
property. However, any subsequent use or disposition of the cleared
property shall be treated as a ``change of use'' under Sec. 570.505.
(2) Where the assisted activity is relocation assistance that the
recipient is required to provide, such relocation assistance shall be
considered to address the same national objective as is addressed by
the displacing activity. Where the relocation assistance is voluntary
on the part of the grantee the recipient may qualify the assistance
either on the basis of the national objective addressed by the
displacing activity or on the basis that the recipients of the
relocation assistance are low and moderate income persons.
(3) In any case where the activity undertaken for the purpose of
creating or retaining jobs is a public improvement and the area served
is primarily residential, the activity must meet the requirements of
paragraph (a)(1) of this section as well as those of paragraph (a)(4)
of this section in order to qualify as benefiting low and moderate
income persons.
(4) CDBG funds expended for planning and administrative costs under
Sec. 570.205 and Sec. 570.206 will be considered to address the
national objectives.
(5) Where the grantee has elected to prepare an area revitalization
strategy pursuant to the authority of 24 CFR
[[Page 1774]]
91.215(g) and HUD has approved the strategy, the grantee may also elect
the following options:
(i) Activities undertaken pursuant to the strategy for the purpose
of creating or retaining jobs may, at the option of the grantee, be
considered to meet the requirements of this paragraph under the
criteria at paragraph (a)(1)(vii) of this section in lieu of the
criteria at paragraph (a)(4) of this section; and
(ii) All housing activities in the area for which, pursuant to the
strategy, CDBG assistance is obligated during the program year may be
considered to be a single structure for purposes of applying the
criteria at paragraph (a)(3) of this section.
(6) Where CDBG-assisted activities are carried out by a Community
Development Financial Institution whose charter limits its investment
area to a primarily residential area consisting of at least 51 percent
low- and moderate-income persons, the grantee may also elect the
following options:
(i) Activities carried out by the Community Development Financial
Institution for the purpose of creating or retaining jobs may, at the
option of the grantee, be considered to meet the requirements of this
paragraph under the criteria at paragraph (a)(1)(vii) of this section
in lieu of the criteria at paragraph (a)(4) of this section; and
(ii) All housing activities for which the Community Development
Financial Institution obligates CDBG assistance during the program year
may be considered to be a single structure for purposes of applying the
criteria at paragraph (a)(3) of this section.
(7) Where an activity meeting the criteria at Sec.
570.209(b)(2)(v) may also meet the requirements of either paragraph
(d)(5)(i) or (d)(6)(i) of this section, the grantee may elect to
qualify the activity under either the area benefit criteria at
paragraph (a)(1)(vii) of this section or the job aggregation criteria
at paragraph (a)(4)(vi)(D) of this section, but not both. Where an
activity may meet the job aggregation criteria at both paragraphs
(a)(4)(vi)(D) and (E) of this section, the grantee may elect to qualify
the activity under either criterion, but not both.
(e) Timeframe to meet a national objective. Recipients are required
to demonstrate that activities carried out under this subpart meet a
national objective within six years of the date of the initial drawdown
of CDBG funds for that activity or the length of the period of
performance and any extension permitted under Sec. 570.509, whichever
is shorter.
0
19. Amend Sec. 570.209 as follows:
0
a. Remove and reserve paragraphs (b)(1) and (2);
0
b. Revise paragraph (b)(3);
0
c. Remove in paragraph (b)(4) wherever it appears the reference
``(b)(3)(i)'' and add in its place ``(b)(3)(i) or (ii)''; and
0
d. Add paragraphs (b)(4)(iv) and (b)(5);
The revision and additions read as follows:
Sec. 570.209 Guidelines for evaluating and selecting economic
development projects.
* * * * *
(b) * * *
(3) Standards for individual activities. (i) Any activity subject
to these guidelines which falls into one or more of the following
categories may be assisted with CDBG funds if the amount of CDBG
assistance is equal to or less than either of the following:
(A) $100,000 per full-time equivalent, permanent job created or
retained; or
(B) $2,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(ii) Any activity subject to these guidelines carried out pursuant
to subpart M may be assisted with CDBG funds if HUD, through written
approval, calculates that the cost of the activity on a net present
value basis does not exceed the following amount of CDBG assistance:
(A) $50,000 per full-time equivalent, permanent job created or
retained; or
(B) $1,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(iii) An activity subject to these guidelines may be assisted with
CDBG funds, if HUD determines in writing, based upon the written
request of the recipient, that the recipient has demonstrated that the
activity would result in a significant contribution to the goals and
purposes of the CDBG program and the activity:
(A) Would not result in a violation of a statutory provision or any
other regulatory provision; and
(B) Would not result in undue hardship to the recipient or
beneficiaries of the activity.
(iv) Any activity which consists of or includes any of the
following will be considered by HUD to provide insufficient public
benefit and may not be assisted with CDBG funds:
(A) General promotion of the community as a whole (as opposed to
the promotion of specific areas and programs);
(B) Assistance to professional sports teams;
(C) Assistance to privately-owned recreational facilities that
serve a predominantly higher-income clientele, where the recreational
benefit to users or members clearly outweighs employment or other
benefits to low- and moderate-income persons;
(D) Acquisition of land for which the specific proposed use has not
yet been identified; and
(E) Assistance to a for-profit business while that business or any
other business owned by the same person(s) or entity(ies) is the
subject of unresolved findings of noncompliance relating to previous
CDBG assistance provided by the recipient.
* * * * *
(4) * * *
(iv) The cost of an activity pursuant to (b)(3)(ii) of this section
shall be determined by applying the procedures described in a notice
issued by HUD.
(5) Updating the individual activity standards. The standards in
paragraphs (b)(3)(i) and (ii) of this section may be updated by
issuance of a document in the Federal Register specifying the revised
standards.
* * * * *
0
20. Amend Sec. 570.210 by revising paragraph (b)(2) to read as
follows:
Sec. 570.210 Prohibition on use of assistance for employment
relocation activities.
* * * * *
(b) * * *
(2) Labor market area (LMA). For metropolitan areas, an LMA is an
area defined as such by the BLS. An LMA is an economically integrated
geographic area within which individuals can live and find employment
within a reasonable distance or can readily change employment without
changing their place of residence. In addition, LMAs are nonoverlapping
and geographically exhaustive. For metropolitan areas, grantees must
use employment data, as defined by the BLS, for the LMA in which the
affected business is currently located and from which current jobs may
be lost. For non-metropolitan areas, an LMA is either an area defined
by the BLS as an LMA, or a State may choose to combine non-metropolitan
LMAs. States are required to define or reaffirm prior definitions of
their LMAs on an annual basis and retain records to substantiate such
areas prior to any business relocation that would be impacted by this
rule. Metropolitan LMAs cannot be combined. However, a non-metropolitan
LMA can be combined with a metropolitan LMA if it is for business
reasons such as code enforcement compliance, necessary for expansion,
necessary for transportation or supply chain access. Grantees must
document the business reason for the combination
[[Page 1775]]
of a non-metropolitan LMA with a metropolitan LMA. For the HUD-
administered Small Cities Program, each of the three participating
counties in Hawaii will be considered to be its own LMA. Recipients of
Fiscal Year 1999 Small Cities Program funding in New York will follow
the requirements for State CDBG recipients.
* * * * *
0
21. Amend Sec. 570.307 as follows:
0
a. Remove in paragraphs (b)(1) and (d)(1) ``Sec. 570.3(3)'' and add in
its place ``Sec. 570.3''; and
0
b. Add paragraph (h);
The addition reads as follows:
Sec. 570.307 Urban counties.
* * * * *
(h) Timeline. Urban counties are required to complete the
qualification or requalification process to qualify as an urban county
no later than September 30 of the year of qualification or
requalification.
Subpart E [Removed and Reserved]
0
22. Remove and reserve subpart E, consisting of Sec. Sec. 570.400
through 570.416.
Subpart G [Removed and Reserved]
0
23. Remove and reserve subpart G, consisting of Sec. Sec. 570.450
through 570.466.
0
24. Amend Sec. 570.481 by adding paragraph (a)(4) to read as follows:
Sec. 570.481 Definitions.
(a) * * *
(4) Period of performance means the time period beginning on HUD's
approval of a grant agreement for a given grant and ending six years
from that date. For loan guarantees issued pursuant to subpart M of
this part, the period of performance means the time period beginning on
the date of HUD's guarantee of a promissory note or other obligation
and ending six years from that date.
* * * * *
0
25. Amend Sec. 570.482 as follows:
0
a. Remove in paragraphs (c)(1) and (c)(2)(i) the text ``section
105(a)(23)'' and add in their places ``section 105(a)(22)'';
0
b. Remove and reserve paragraphs (f)(2) and (3);
0
c. Revise paragraph (f)(4);
0
d. Remove in paragraph (f)(5)(i) the reference ``(f)(4)(i)'' and add in
its place ``(f)(4)(i) or (ii)'';
0
e. Remove in paragraphs (f)(5)(ii) and (iii) the reference
``(f)(4)(i)'' and adding in their places ``(f)(4)(i) and (ii)'';
0
f. Add paragraph (f)(5)(iv);
0
g. Redesignate paragraph (f)(6) as paragraph (f)(7);
0
h. Add new paragraph (f)(6); and
0
i. Revise paragraph (h)(2)(ii);
The revisions and additions read as follows:
Sec. 570.482 Eligible activities.
* * * * *
(f) * * *
(4) Standards for individual activities. (i) Any activity subject
to these standards which falls into one or more of the following
categories may be assisted with CDBG funds if the amount of CDBG
assistance is equal to or less than either of the following:
(A) $100,000 per full-time equivalent, permanent job created or
retained; or
(B) $2,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(ii) Any activity subject to these standards carried out pursuant
to subpart M may be assisted with CDBG funds if HUD, through written
approval, calculates that the cost of the activity on a net present
value basis does not exceed the following amount of CDBG assistance:
(A) $50,000 per full-time equivalent, permanent job created or
retained; or
(B) $1,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(iii) An activity subject to these standards may be assisted with
CDBG funds, if HUD determines in writing, based upon the written
request of the recipient, that the recipient has demonstrated that the
activity would result in a significant contribution to the goals and
purposes of the CDBG program and the activity:
(A) Would not result in a violation of a statutory provision or any
other regulatory provision; and
(B) Would not result in undue hardship to the recipient or
beneficiaries of the activity.
(iv) Any activity which consists of or includes any of the
following will be considered by HUD to provide insufficient public
benefit and may not be assisted with CDBG funds:
(A) General promotion of the community as a whole (as opposed to
the promotion of specific areas and programs);
(B) Assistance to professional sports teams;
(C) Assistance to privately-owned recreational facilities that
serve a predominantly higher-income clientele, where the recreational
benefit to users or members clearly outweighs employment or other
benefits to low- and moderate-income persons;
(D) Acquisition of land for which the specific proposed use has not
yet been identified; and
(E) Assistance to a for-profit business while that business or any
other business owned by the same person(s) or entity(ies) is the
subject of unresolved findings of noncompliance relating to previous
CDBG assistance provided by the recipient.
* * * * *
(5) * * *
(iv) The cost of an activity pursuant to paragraph (b)(3)(ii) of
this section shall be determined by applying the procedures described
in a notice issued by HUD.
(6) Updating the individual activity standards. The standards in
paragraphs (b)(3)(i) and (ii) of this subsection may be updated by
issuance of a document in the Federal Register specifying the revised
standards.
* * * * *
(h) * * *
(2) * * *
(ii) Labor market area (LMA). For metropolitan areas, an LMA is an
area defined as such by the U.S. Bureau of Labor Statistics (BLS). An
LMA is an economically integrated geographic area within which
individuals can live and find employment within a reasonable distance
or can readily change employment without changing their place of
residence. In addition, LMAs are nonoverlapping and geographically
exhaustive. For metropolitan areas, grantees must use employment data,
as defined by the BLS, for the LMA in which the affected business is
currently located and from which current jobs may be lost. For non-
metropolitan areas, grantees must use employment data, as defined by
the BLS, for the LMA in which the assisted business is currently
located and from which current jobs may be lost. For non-metropolitan
areas, a LMA is either an area defined by the BLS as an LMA, or a State
may choose to combine non-metropolitan LMAs. States are required to
define or reaffirm prior definitions of their LMAs on an annual basis
and retain records to substantiate such areas prior to any business
relocation that would be impacted by this rule. Metropolitan LMAs
cannot be combined. However, a non-metropolitan LMA can be combined
with a metropolitan LMA if it is for business reasons such as code
enforcement compliance, necessary for expansion, necessary for
transportation or supply chain access. Grantees must document the
business reason for the combination of a non-metropolitan LMA with a
metropolitan LMA. For the Insular Areas, each jurisdiction will be
considered to be an LMA. For the HUD-administered Small Cities Program,
each of the three participating counties in
[[Page 1776]]
Hawaii will be considered to be its own LMA. Recipients of Fiscal Year
1999 Small Cities Program funding in New York will follow the
requirements for State CDBG recipients.
* * * * *
0
26. Revise and republish Sec. 570.483 to read as follows:
Sec. 570.483 Criteria for national objectives.
(a) General. The following criteria shall be used to determine
whether a CDBG assisted activity complies with one or more of the
national objectives as required to section 104(b)(3) of the Act. (HUD
is willing to consider a waiver of these requirements in accordance
with Sec. 570.480(b)).
(b) Activities benefiting low- and moderate-income persons.
Activities meeting the criteria in this paragraph (b) will be
considered to benefit low- and moderate-income persons unless there is
substantial evidence to the contrary. In assessing any such evidence,
the full range of direct effects of the assisted activity will be
considered. (The recipient shall appropriately ensure that activities
that meet these criteria do not benefit moderate-income persons to the
exclusion of low-income persons.)
(1) Area benefit activities. (i) An activity, the benefits of which
are available to all the residents in a primarily residential area,
where at least 51 percent of the residents are low- and moderate-income
persons. The activity must serve the entire area, but the area served
need not be coterminous with census tracts or other officially
recognized boundaries.
(ii) An activity, where the assistance is to a public improvement
that provides benefits to all the residents of an area, that is limited
to paying special assessments levied against residential properties
owned and occupied by persons of low and moderate income.
(iii)(A) An activity to develop, establish and operate (not to
exceed two years after establishment), a uniform emergency telephone
number system serving an area having less than 51 percent of low and
moderate income residents, when the system has not been made
operational before the receipt of CDBG funds, provided a prior written
determination is obtained from HUD. HUD's determination will be based
upon certifications by the State that:
(1) The system will contribute significantly to the safety of the
residents of the area. The unit of general local government must
provide the State a list of jurisdictions and unincorporated areas to
be served by the system and a list of the emergency services that will
participate in the emergency telephone number system;
(2) At least 51 percent of the use of the system will be by low-
and moderate-income persons. The State's certification may be based
upon information which identifies the total number of calls actually
received over the preceding twelve-month period for each of the
emergency services to be covered by the emergency telephone number
system and relates those calls to the geographic segment (expressed as
nearly as possible in terms of census tracts, enumeration districts,
block groups, or combinations thereof that are contained within the
segment) of the service area from which the calls were generated. In
analyzing this data to meet the requirements of this section, the State
will assume that the distribution of income among callers generally
reflects the income characteristics of the general population residing
in the same geographic area where the callers reside. Alternatively,
the State's certification may be based upon other data, agreed to by
HUD and the State, which shows that over the preceding twelve-month
period the users of all the services to be included in the emergency
telephone number system consisted of at least 51 percent low- and
moderate-income persons.
(3) Other Federal funds received by the unit of general local
government are insufficient or unavailable for a uniform emergency
telephone number system. The unit of general local government must
submit a statement explaining whether the problem is caused by the
insufficiency of the amount of such funds, the restrictions on the use
of such funds, or the prior commitment of such funds for other purposes
by the unit of general local government.
(4) Demonstrate that the percentage of the total costs of the
system paid for by CDBG funds does not exceed the percentage of low-
and moderate-income persons residing in the service area of the system.
For this purpose, the recipient must include a description of the
boundaries of the service area of the emergency telephone number
system, the census divisions that fall within the boundaries of the
service area (census tracts or block groups), the total number of
persons and the total number of low- and moderate-income persons
residing within each census division, the percentage of low- and
moderate-income persons residing within the service area, and the total
cost of the system.
(B) The certifications of the State must be submitted along with a
brief statement describing the factual basis upon which the
certifications were made.
(iv) Activities meeting the requirements of paragraph (e)(4)(i) of
this section may be considered to qualify under this paragraph (b)(1).
(v) HUD will consider activities meeting the requirements of
paragraph (e)(5)(i) of this section to qualify under paragraph (b)(1)
of this section, provided that the area covered by the strategy meets
one of the following criteria:
(A) The area is in a federally designated Empowerment Zone or
Enterprise Community;
(B) The area is primarily residential and contains a percentage of
low and moderate income residents that is no less than 70 percent;
(C) All of the census tracts (or block numbering areas) in the area
have poverty rates of at least 20 percent, at least 90 percent of the
census tracts (or block numbering areas) in the area have poverty rates
of at least 25 percent, and the area is primarily residential. (If only
part of a census tract or block numbering area is included in a
strategy area, the poverty rate shall be computed for those block
groups (or any part thereof) which are included in the strategy area.)
(D) Upon request by the State, HUD may grant exceptions to the 70
percent low and moderate income or 25 percent poverty minimum
thresholds on a case-by-case basis. In no case, however, may a strategy
area have both a percentage of low and moderate income residents less
than 51 percent and a poverty rate less than 20 percent.
(2) Limited clientele activities. (i) An activity which benefits a
limited clientele, at least 51 percent of whom are low- or moderate-
income persons.
(ii) To qualify under this paragraph (b)(2), the activity must meet
one or the following tests:
(A) Benefit at least one of the following clientele, which are
presumed to be low- and moderate-income persons: abused children;
survivors of domestic violence; elderly persons (see 570.3 for
definition of elderly); adults meeting the Bureau of the Census'
Current Population Reports definition of ``severely disabled;''
homeless persons; illiterate adults (adults unable to read and write in
English and in their first languages if their first language is not
English); persons living with AIDS; migrant farm workers; persons who
meet the Federal poverty guidelines; persons insured by Medicaid; or
(B) Require information on family size and income that demonstrates
that at least 51 percent of the clientele are persons whose family
income does not exceed the low- and moderate-income limit; or
[[Page 1777]]
(C) It must have income eligibility requirements which limit the
activity exclusively to low and moderate income persons; or
(D) It must be of such a nature, and be in such a location, that it
may be concluded that the activity's clientele will primarily be low
and moderate income persons.
(iii) An activity that serves to remove material or architectural
barriers to the mobility or accessibility of elderly persons or of
adults meeting the Bureau of the Census' Current Population Reports
definition of ``severely disabled'' will be presumed to qualify under
this criterion if it is restricted, to the extent practicable, to the
removal of such barriers by assisting:
(A) The reconstruction of a public facility or improvement, or
portion thereof, that does not qualify under paragraph (b)(1) of this
section;
(B) The rehabilitation of a privately owned nonresidential building
or improvement that does not qualify under paragraph (b)(1) or (4) of
this section; or
(C) The rehabilitation of the common areas of a residential
structure that contains more than one dwelling unit and that does not
qualify under paragraph (b)(3) of this section.
(iv) A microenterprise assistance activity (carried out in
accordance with the provisions of section 105(a)(23) of the Act or
Sec. 570.482(c) and limited to microenterprises) with respect to those
owners of microenterprises and persons developing microenterprises
assisted under the activity who are low- and moderate-income persons.
For purposes of this paragraph, persons determined to be low and
moderate income may be presumed to continue to qualify as such for up
to a three-year period.
(v) An activity designed to provide job training and placement and/
or other employment support services, including, but not limited to,
peer support programs, counseling, child care, transportation, and
other similar services, in which the percentage of low- and moderate-
income persons assisted is less than 51 percent may qualify under this
paragraph in the following limited circumstances:
(A) In such cases where such training or provision of supportive
services is an integrally-related component of a larger project, the
only use of CDBG assistance for the project is to provide the job
training and/or supportive services; and
(B) The proportion of the total cost of the project borne by CDBG
funds is no greater than the proportion of the total number of persons
assisted who are low or moderate income.
(vi) The following kinds of activities may not qualify under
paragraph this (b)(2): activities that provide benefits to all the
residents of an area; activities involving the acquisition,
construction or rehabilitation of property for housing; or activities
where the benefit to low- and moderate-income persons to be considered
is the creation or retention of jobs, except as provided in paragraph
(b)(2)(iv) of this section.
(3) Housing activities. An eligible activity carried out for the
purpose of providing or improving permanent residential structures
that, upon completion, will be occupied by low and moderate income
households. This would include, but not necessarily be limited to, the
acquisition or rehabilitation of property by the unit of general local
government, a subrecipient, an entity eligible to receive assistance
under section 105(a)(15) of the Act, a developer, an individual
homebuyer, or an individual homeowner; conversion of nonresidential
structures; and new housing construction. If the structure contains two
dwelling units, at least one must be so occupied, and if the structure
contains more than two dwelling units, at least 51 percent of the units
must be so occupied. If two or more rental buildings being assisted are
or will be located on the same or contiguous properties, and the
buildings will be under common ownership and management, the grouped
buildings may be considered for this purpose as a single structure. If
housing activities being assisted meet the requirements of paragraph
(e)(4)(ii) or (e)(5)(ii) of this section, all such housing may also be
considered for this purpose as a single structure. For rental housing,
occupancy by low and moderate income households must be at affordable
rents to qualify under this criterion. The unit of general local
government shall adopt and make public its standards for determining
``affordable rents'' for this purpose. The following shall also qualify
under this criterion:
(i) When less than 51 percent of the units in a structure will be
occupied by low- and moderate-income households, CDBG assistance may be
provided in the following limited circumstances:
(A) The assistance is for an eligible activity to reduce the
development cost of the substantial rehabilitation or conversion of a
nonresidential structure to a multifamily, non-elderly rental housing
project, or the new construction of a multifamily, non-elderly rental
housing project;
(B) At least 20 percent of the units will be occupied by low- and
moderate-income households at affordable rents; and
(C) 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.
(ii) Where CDBG funds are used to assist rehabilitation delivery
services or in direct support of the unit of general local government's
Rental Rehabilitation Program authorized under 24 CFR part 511, the
funds shall be considered to benefit low and moderate income persons
where not less than 51 percent of the units assisted, or to be
assisted, by the Rental Rehabilitation Program overall are for low and
moderate income persons.
(iii) When CDBG funds are used for housing services eligible under
section 105(a)(21) of the Act, if the housing units for which the
services are provided are HOME-assisted and the requirements at 24 CFR
92.252 or 92.254 are met.
(4) Job creation or retention activities. (i) An activity designed
to create or retain permanent jobs where at least 51 percent of the
full-time equivalent jobs involve the employment of low- and moderate-
income persons. Poverty rates used in this paragraph shall be
determined by Census Bureau data provided by HUD.
(ii) For an activity that retains jobs, the unit of general local
government must document that the jobs would actually be lost without
the CDBG assistance and that either or both of the following conditions
apply with respect to at least 51 percent of the jobs at the time the
CDBG assistance is provided: The job is known to be held by a low or
moderate income person; or the job can reasonably be expected to turn
over within the following two years and that it will be filled by, or
that steps will be taken to ensure that it is made available to, a low
or moderate income person upon turnover.
(iii) Jobs that are not held or filled by a low- or moderate-income
persons may be considered to be available to low- and moderate-income
persons if:
(A) The assisted business does not require as a prerequisite
special skills that can only be acquired with substantial training or
work experience or education beyond high school, or the business agrees
to hire unqualified persons and provide training; and
(B) The unit of general local government and the assisted business
take actions to ensure that low and moderate income persons receive
first consideration for filling such jobs.
[[Page 1778]]
(iv) For purposes of determining whether a job is held by or made
available to a low- or moderate-income person, the person may be
presumed to be a low- or moderate-income person if:
(A) The person resides, or the assisted business through which the
person is employed is located, within a census tract that meets the
requirements of paragraph (b)(4)(v) of this section; or
(B) The person resides within a census tract that has a population
of low- and moderate-income persons of at least 70 percent of the block
group.
(v) A census tract qualifies for the presumptions permitted under
paragraph (b)(4)(iv)(A) of this section if it has a poverty rate of at
least 20 percent and meets at least one of the following standards:
(A) The specific activity being undertaken is located in a block
group that has a poverty rate of at least 20 percent; or
(B) Upon the written request by the recipient, HUD determines that
the census tract exhibits other objectively determinable signs of
general distress such as high incidence of crime, narcotics use,
homelessness, abandoned housing, deteriorated infrastructure, or
substantial population decline.
(vi) Each assisted business shall be considered to be a separate
activity for purposes of determining whether the activity qualifies
under this paragraph, except:
(A) In certain cases such as where CDBG funds are used to acquire,
develop or improve a real property (e.g., a business incubator or an
industrial park) the requirement may be met by measuring jobs in the
aggregate for all the businesses that locate on the property, provided
the businesses are not otherwise assisted by CDBG funds.
(B) Where CDBG funds are used to pay for the staff and overhead
costs of an entity specified in section 105(a)(15) of the Act making
loans to businesses exclusively from non-CDBG funds, this requirement
may be met by aggregating the jobs created by all of the businesses
receiving loans during any one-year period.
(C) Where CDBG funds are used by a recipient or subrecipient to
provide technical assistance to businesses, this requirement may be met
by aggregating the jobs created or retained by all of the businesses
receiving technical assistance during any one-year period.
(D) Where CDBG funds are used for activities meeting the criteria
listed at Sec. 570.482(f)(3)(v), this requirement may be met by
aggregating the jobs created or retained by all businesses for which
CDBG assistance is obligated for such activities during any one-year
period, except as provided at paragraph (e)(6) of this section.
(E) Where CDBG funds are used by a Community Development Financial
Institution to carry out activities for the purpose of creating or
retaining jobs, this requirement may be met by aggregating the jobs
created or retained by all businesses for which CDBG assistance is
obligated for such activities during any one-year period, except as
provided at paragraph (e)(6) of this section.
(F) Where CDBG funds are used for public facilities or improvements
which will result in the creation or retention of jobs by more than one
business, this requirement may be met by aggregating the jobs created
or retained by all such businesses as a result of the public facility
or improvement.
(1) Where the public facility or improvement is undertaken
principally for the benefit of one or more particular businesses, but
where other businesses might also benefit from the assisted activity,
the requirement may be met by aggregating only the jobs created or
retained by those businesses for which the facility/improvement is
principally undertaken, provided that the cost (in CDBG funds) for the
facility/improvement is less than $10,000 per permanent full-time
equivalent job to be created or retained by those businesses.
(2) In any case where the cost per job to be created or retained
(as determined under paragraph (b)(4)(vi)(F)(1) of this section) is
$10,000 or more, the requirement must be met by aggregating the jobs
created or retained as a result of the public facility or improvement
by all businesses in the service area of the facility/improvement. This
aggregation must include businesses which, as a result of the public
facility/improvement, locate or expand in the service area of the
public facility/improvement between the date the State awards the CDBG
funds to the recipient and the date one year after the physical
completion of the public facility/improvement. In addition, the
assisted activity must comply with the public benefit standards at
Sec. 570.482(f).
(5) Planning-only activities. An activity involving planning (when
such activity is the only activity for which the grant to the unit of
general local government is given, or if the planning activity is
unrelated to any other activity assisted by the grant) if it can be
documented that at least 51 percent of the persons who would benefit
from implementation of the plan are low and moderate income persons.
Any such planning activity for an area or a community composed of
persons of whom at least 51 percent are low and moderate income shall
be considered to meet this national objective.
(c) Activities which aid in the prevention or elimination of slums
or blight. Activities meeting one or more of the following criteria, in
the absence of substantial evidence to the contrary, will be considered
to aid in the prevention or elimination of slums or blight:
(1) Activities to address slums or blight on an area basis. An
activity will be considered to address prevention or elimination of
slums or blight in an area if the State can determine that:
(i) The area, delineated by the unit of general local government,
meets a definition of a slum, blighted, deteriorated or deteriorating
area under State or local law;
(ii) The unit of general local government demonstrates, supported
by quantifiable data, that at least 25 percent of properties throughout
the area experience a condition relating to physical or economic
distress, such as abandoned or vacant properties, and/or known or
suspected environmental contamination.
(iii) The assisted activity addresses one or more of the conditions
which contributed to the deterioration of the area. Rehabilitation of
residential buildings carried out in an area meeting the above
requirements will be considered to address the area's deterioration
only where each such building rehabilitated is considered substandard
under local definition before rehabilitation, and all deficiencies
making a building substandard have been eliminated if less critical
work on the building is undertaken. At a minimum, the local definition
for this purpose must be such that buildings that it would render
substandard would also fail to meet the Housing Quality Standards (24
CFR 982.401).
Note 1 to paragraph (c)(1). Documentation is to be maintained by
the unit of general local government on the boundaries of the area
and the conditions and standards used that qualified the area at the
time of its designation. The unit of general local government shall
maintain records to substantiate how the area met the slums or
blighted criteria. The designation of an area as slum or blighted
under this section is required to have been determined within the
last 10 years. Documentation must be retained pursuant to the
recordkeeping requirements contained at Sec. 570.506(b)(8)(ii).
(2) Activities to address slums or blight on a spot basis. The
following activities may be undertaken on a spot basis to eliminate
specific conditions of blight, physical decay, or environmental
contamination that are not located in a
[[Page 1779]]
slum or blighted area: acquisition; clearance; relocation; historic
preservation; remediation of environmentally contaminated properties;
or rehabilitation of buildings or improvements. If acquisition or
relocation is undertaken, it must be a precursor to another eligible
activity (funded with CDBG or other resources) that directly eliminates
the specific conditions of blight or physical decay, or environmental
contamination.
Note 2 to paragraph (c): Activities which aid in the prevention
or elimination of slums or blight: Despite the restrictions in
paragraphs (c)(1) and (2) of this section, any rehabilitation
activity which benefits low and moderate income persons pursuant to
paragraph (a)(3) of this section can be undertaken without regard to
the area in which it is located or the extent or nature of
rehabilitation assisted.
(d) Activities designed to meet community development needs having
a particular urgency. In the absence of substantial evidence to the
contrary, an activity will be considered to address this objective if
the unit of general local government certifies, and the State
determines, that the activity is designed to alleviate existing
conditions which pose a serious and immediate threat to the health or
welfare of the community which are of recent origin or which recently
became urgent, that the unit of general local government is unable to
finance the activity on its own, and that other sources of funding are
not available. A condition will generally be considered to be of recent
origin if it developed or became urgent within 18 months preceding the
certification by the unit of general local government.
(e) Additional criteria. (1) In any case where the activity
undertaken is a public improvement and the activity is clearly designed
to serve a primarily residential area, the activity must meet the
requirements of paragraph (b)(1) of this section whether or not the
requirements of paragraph (b)(4) of this section are met in order to
qualify as benefiting low- and moderate-income persons.
(2) Where the assisted activity is acquisition of real property, a
preliminary determination of whether the activity addresses a national
objective may be based on the planned use of the property after
acquisition. A final determination shall be based on the actual use of
the property, excluding any short-term, temporary use. Where the
acquisition is for the purpose of clearance which will eliminate
specific conditions of blight or physical decay, the clearance activity
shall be considered the actual use of the property. However, any
subsequent use or disposition of the cleared property shall be treated
as a ``change of use'' under Sec. 570.489(j).
(3) Where the assisted activity is relocation assistance that the
unit of general local government is required to provide, the relocation
assistance shall be considered to address the same national objective
as is addressed by the displacing activity. Where the relocation
assistance is voluntary, the unit of general local government may
qualify the assistance either on the basis of the national objective
addressed by the displacing activity or, if the relocation assistance
is to low and moderate income persons, on the basis of the national
objective of benefiting low and moderate income persons.
(4) Where CDBG-assisted activities are carried out by a Community
Development Financial Institution whose charter limits its investment
area to a primarily residential area consisting of at least 51 percent
low- and moderate-income persons, the unit of general local government
may also elect the following options:
(i) Activities carried out by the Community Development Financial
Institution for the purpose of creating or retaining jobs may, at the
option of the unit of general local government, be considered to meet
the requirements of this paragraph under the criteria at paragraph
(b)(1)(iv) of this section in lieu of the criteria at paragraph (b)(4)
of this section; and
(ii) All housing activities for which the Community Development
Financial Institution obligates CDBG assistance during any one-year
period may be considered to be a single structure for purposes of
applying the criteria at paragraph (b)(3) of this section.
(5) If the unit of general local government has elected to prepare
a community revitalization strategy pursuant to the authority of 24 CFR
91.315(e)(2), and the State has approved the strategy, the unit of
general local government may also elect the following options:
(i) Activities undertaken pursuant to the strategy for the purpose
of creating or retaining jobs may, at the option of the grantee, be
considered to meet the requirements of paragraph (b) of this section
under the criteria at paragraph (b)(1)(v) of this section instead of
the criteria at paragraph (b)(4) of this section; and
(ii) All housing activities in the area undertaken pursuant to the
strategy may be considered to be a single structure for purposes of
applying the criteria at paragraph (b)(3) of this section.
(6) If an activity meeting the criteria in Sec. 570.482(f)(3)(v)
also meets the requirements of either paragraph (e)(4)(i) or (e)(5)(i)
of this section, the unit of general local government may elect to
qualify the activity either under the area benefit criteria at
paragraph (b)(1)(iv) or (v) of this section or under the job
aggregation criteria at paragraph (b)(4)(vi)(D) of this section, but
not under both. Where an activity may meet the job aggregation criteria
at both paragraphs (b)(4)(vi)(D) and (E) of this section, the unit of
general local government may elect to qualify the activity under either
criterion, but not both.
(f) Planning and administrative costs. CDBG funds expended for
eligible planning and administrative costs by units of general local
government in conjunction with other CDBG assisted activities will be
considered to address the national objectives.
(g) Timeline to meet a national objective. Recipients are required
to demonstrate that activities carried out under section 105(a) of the
Act meet a national objective within six years of the date of the
initial drawdown of CDBG funds for that activity or the length of the
period of performance and any extension permitted, whichever is
shorter.
0
27. Amend Sec. 570.489 as follows:
0
a. Revise paragraph (e)(2)(iv)(C);
0
b. Add paragraphs (e)(3)(ii)(C) and (f)(4); and
0
c. Revise paragraph (h)(4)(i);
The revisions and additions read as follows:
Sec. 570.489 Program administrative requirements.
* * * * *
(e) * * *
(2) * * *
(iv) * * *
(C) Interest income received by units of general local government
on deposits of grant funds before disbursement of the funds for
activities, except that the unit of general local government may keep
interest payments in an amount not to exceed the amount provided by 2
CFR 200.305(b)(9) per year for administrative expenses otherwise
permitted to be paid with CDBG funds.
* * * * *
(3) * * *
(ii) * * *
(C) The State must require units of general local government, to
the maximum extent feasible, to disburse program income that is subject
to the requirements of this subpart before requesting additional funds
from the State for activities, except as provided in paragraph (f) of
this section.
* * * * *
(f) * * *
[[Page 1780]]
(4) A State is responsible for ensuring that funds in a revolving
loan fund are being used to continue the activity which generated the
program income.
* * * * *
(h) * * *
(4) * * *
(i) A disclosure of the nature of the conflict, accompanied by an
assurance that there has been public disclosure of the conflict (public
disclosure is considered a combination of any of the following:
publication on the recipient's website, including social media;
electronic mailings; media advertisements; public service
announcements; and display in public areas such as libraries, grocery
store bulletin boards, and neighborhood centers), evidence of the
public disclosure, and a description of how the public disclosure was
made;
* * * * *
Sec. 570.490 [Amended]
0
28. Amend Sec. 570.490 in paragraph (a)(2) by removing ``24 CFR
91.320(j)(1)'' and adding in its place ``24 CFR 91.320(k)(1)''.
0
29. Amend Sec. 570.495 by revising paragraph (a)(4) to read as
follows:
Sec. 570.495 Reviews and audits response.
(a) * * *
(4) Advise the State to reimburse its grant in any amounts
improperly expended, using non-Federal funds. In lieu of reimbursing
its grant, the State may elect to request a voluntary grant reduction
from a current or future year's allocation of funds. A request for a
voluntary grant reduction must be signed by the State's chief elected
official. In its request, the State must waive its right to a hearing
pursuant to Sec. 570.496;
* * * * *
Sec. 570.500 [Amended]
0
30. Amend Sec. 570.500 by removing and reserving paragraph (a)(4)(ii).
0
31. Amend Sec. 570.503 by revising paragraph (b)(7)(i) to read as
follows:
Sec. 570.503 Agreements with subrecipients.
* * * * *
(b) * * *
(7) * * *
(i) Used to meet one of the national objectives in Sec. 570.208
until six years after expiration of the agreement, or for such longer
period of time as determined to be appropriate by the recipient; or
* * * * *
0
32. Amend Sec. 570.504 as follows:
0
a. Revise paragraph (b)(2)(iii);
0
b. Remove in paragraph (c) ``Sec. 570.503(b)(8)'' and add in its place
``Sec. 570.503(b)(7)''; and
0
c. Add paragraph (f).
The revision and addition read as follows:
Sec. 570.504 Program income.
* * * * *
(b) * * *
(2) * * *
(iii) At the end of each program year, the aggregate amount of
program income cash balances and any investment thereof (except those
needed for immediate cash needs, cash balances of a revolving loan
fund, cash balances from a lump-sum drawdown, or cash or investments
held for section 108 loan guarantee security needs) that, as of the
last day of the program year, exceeds one-twelfth of the most recent
grant made pursuant to Sec. 570.304 shall be remitted to HUD as soon
as practicable thereafter and sent to the United States Treasury FRB
New York, New York, NY, U.S. Department of Housing and Urban
Development, ABA Routing Number 021030004, Account Number 86010300. The
memorandum section should read: Recipient Name (e.g., city of Apple),
Attention: HUD CPD/CDBG, Account Code 86X6760, $(dollar amount),
``Returning Excess Program Income.'' This provision applies to program
income cash balances and investments thereof held by the grantee and
its subrecipients. (This provision shall be applied for the first time
at the end of the program year for which Federal Fiscal Year 1996 funds
are provided.)
* * * * *
(f) Transfer of revolving loan funds. A grantee may elect to
terminate or to reduce the balance of an existing revolving loan fund
and reprogram some or all of the remaining funds to other activities.
The process of reprogramming funds out of a revolving loan fund shall
be governed by 24 CFR 91.505; once transferred out of the revolving
loan fund, the program income is subject to the requirements of
paragraphs (a) through (d) of this section. If HUD determines that a
revolving loan fund no longer meets the definition of a revolving loan
fund under Sec. 570.500(b) because of a lack of loan activity or
because loan fund balances significantly exceed the amount necessary to
support loan activity, HUD may take corrective actions.
0
33. Amend Sec. 570.506 by adding a sentence to the end of paragraph
(b)(5)(ii)(C) and revising paragraphs (b)(7) and (8), (c)(1), (d), and
(e) to read as follows:
Sec. 570.506 Records to be maintained.
* * * * *
(b) * * *
(5) * * *
(ii) * * *
(C) * * * For each such low- and moderate-income person hired, the
size and annual income of the person's family prior to the person being
hired for the job. In lieu of businesses obtaining information
regarding the size and annual income of the person's family, the
recipient may obtain and maintain such information.
* * * * *
(7) For purposes of documenting, pursuant to paragraph
(b)(5)(i)(B), (b)(5)(ii)(C), or (b)(6)(iii) or (v) of this section that
the person for whom a job was either filled by or made available to a
low- or moderate-income person:
(i) In lieu of maintaining records showing the person's family size
and income, the recipient may substitute records showing for each
person employed, the name of the business, type of job, and the annual
wages or salary of the job. HUD will consider the person income-
qualified if the annual wages or salary of the job is at or under the
HUD-established income limit for a one-person family.
(ii) Based upon the census tract where the person resides or in
which the business is located, the recipient, in lieu of maintaining
records showing the person's family size and income, may substitute
records showing either the person's address at the time the
determination of income status was made or the address of the business
providing the job, as applicable, the census tract in which that
address was located, the percent of persons residing in that tract who
either are in poverty or who are low- and moderate-income, as
applicable, the data source used for determining the percentage, and a
description of the pervasive poverty and general distress in the census
tract in sufficient detail to demonstrate how the census tract met the
criteria in Sec. 570.208(a)(4)(v), as applicable.
(8) For each activity determined to aid in the prevention or
elimination of slums or blight based on addressing one or more of the
conditions which qualified an area as a slum or blighted area:
(i) The boundaries of the area;
(ii) A designation, within the last 10 years, of the area as slum
or blighted; and
(iii) Quantifiable data substantiating the conditions and standards
that qualified the area at the time of its designation.
* * * * *
[[Page 1781]]
(c) * * *
(1) Records that demonstrate that the recipient has made the
determinations required as a condition of eligibility of certain
activities, as prescribed in Sec. Sec. 570.201(e)(1), (f), (i)(2),
(p), and (q), 570.202(b)(3), 570.206(f), 570.209, 570.210, and 570.309.
* * * * *
(d) Records which demonstrate compliance with Sec. 570.503(b)(7)
and (8) or Sec. 570.505 regarding maintenance of property condition
and change of use of real property acquired or improved with CDBG
assistance.
(e) Records that demonstrate compliance with the citizen
participation requirements prescribed in 24 CFR part 91, subpart B, for
entitlement recipients, or in 24 CFR part 91, subpart C, for HUD-
administered small cities recipients, and subpart F for all recipients.
* * * * *
0
34. Amend Sec. 570.507 by revising paragraph (d) to read as follows:
Sec. 570.507 Reports.
* * * * *
(d) Reports--(1) Reporting of CDBG funds. Recipients must collect
and report data on their use of CDBG funds in the Integrated
Disbursement and Information System (IDIS), or any successor reporting
system, as specified by HUD.
(2) Other reports. Recipients may be required to submit such other
reports and information as HUD determines are necessary to carry out
its responsibilities under the Act or other applicable laws.
0
35. Revise Sec. 570.509 to read as follows:
Sec. 570.509 Grant closeout procedures.
This section implements 2 CFR 200.344 as applicable in the context
of the CDBG program. This section specifies the actions a grantee and
HUD must take to complete the closeout process.
(a) Final financial, performance and other reports. In general, no
later than 90 days after the end of the period of performance or no
later than 90 days after the end of the program year in which the
grantee expends all funds from the origin year grant (whichever comes
first), the grantee must submit all financial, performance, and other
reports as required by 24 CFR 91.520.
(b) Liquidation of obligations. In general, a grantee must
liquidate all obligations incurred under the origin year grant not
later than 90 calendar days after the end date of the period of
performance as specified in Sec. 570.3.
(c) Closeout phases. Closeout of an origin year grant may occur in
two phases if the Grant funds were expended to assist an activity(ies)
that is incomplete at the time the final report is due to HUD. The two
phases are:
(1) Account closeout, in which HUD removes the recipient's access
to grant funds and removes the grant from the grantee's line of credit.
(2) Programmatic closeout, which marks completion of all
programmatic requirements associated with a grant. Programmatic
requirements include but are not limited to: physical completion of all
activities for which funds were expended from the original year grant;
all activities have met a national objective under Sec. 570.208; and
the grantee has reported on all accomplishments resulting from the
activities.
(d) Extensions. (1) Extension to allow for programmatic closeout
for activities for which funds have been disbursed but which have not
been completed:
(i) If the grantee has expended all grant funds at the time the
final reports are due to HUD, but has not yet completed one or more
activities to meet programmatic requirements, as defined in paragraph
(c)(2) of this section, HUD may authorize an extension of the end date
of the period of performance by up to two years for completion of an
activity(ies) and up to the time period allowed at Sec. 570.208 to
meet a national objective.
(ii) However, this extension does not apply to the availability of
any funds remaining in a grant's line of credit and HUD will initiate
account closeout.
(iii) The recipient must submit an interim version of the final
reports in accordance with and as required in paragraph (a) of this
section, specifically noting any incomplete assisted activity. At the
end of the extension period, or when the activity(ies) is completed,
whichever is earlier, the grantee must submit the final reports
including any required information regarding that activity(ies).
(2) Specific extensions for good cause. A grantee may request, and
HUD may provide, an extension of the period of performance, deadlines
for reporting, or deadline for obligation liquidation for a grant
provided good cause is demonstrated.
(e) Refund of unobligated balances. At account closeout, the
grantee must promptly refund any balances of unobligated cash paid in
advance or paid and that is not authorized to be retained by the
grantee. All such refunds must be completed prior to submission of the
reports required in paragraph (a) of this section.
(f) Accounting for real property. In the reports required under
paragraph (a) of this section, the grantee must account for any real
property acquired with grant funds.
(g) Closeout actions. In general, HUD will complete all closeout
actions for a grant no later than one year after receipt and acceptance
of all required final reports. In completing closeout actions, HUD will
review the responsibilities and performance of the recipient under the
grant agreement, applicable laws and regulations. HUD may delay
programmatic closeout if it finds a further Federal interest in keeping
the grant agreement open for the purpose of securing performance.
(1) HUD will cancel any unused portion of the awarded grant, as
shown in the executed grant closeout agreement. Any unused grant funds
disbursed from the U.S. Treasury which are in the possession of the
recipient shall be refunded to HUD. Any funds which have exceeded the
statutory time limit on the use of funds will be recaptured by the U.S.
Treasury pursuant to 24 CFR 570.200(k).
(2) Any costs paid with CDBG funds which were not audited
previously shall be subject to coverage in the recipient's next single
audit performed in accordance with HUD regulations implementing the
Single Audit Act requirements at 2 CFR part 200. The recipient may be
required to repay HUD any disallowed costs based on the results of the
audit, or on additional HUD reviews provided for in the closeout
agreement.
(3) Prior to completing account closeout, HUD will identify for the
grant recipient any unused grant funds to be canceled by HUD and
provide the grant recipient an opportunity to respond.
(h) After closeout. (1) HUD may monitor the recipient's compliance
and performance after the closeout of the award with respect to the
following actions, and HUD may take findings of noncompliance into
account, as unsatisfactory performance of the recipient, in the
consideration of any future grant award under this part:
(i) Closeout costs (e.g., audit costs) and costs resulting from
contingent liabilities described in the closeout agreement pursuant to
paragraph (g)(1) of this section. Contingent liabilities include, but
are not limited to, third-party claims against the recipient, as well
as related administrative costs;
(ii) Use of real property assisted with CDBG funds in accordance
with the principles described in Sec. Sec. 570.503(b)(7) and 570.505;
(iii) Compliance with requirements governing future program income
or
[[Page 1782]]
receivables generated from activities funded from the origin year
grant, as described in Sec. 570.504(b)(4) and (5);
(iv) Ensuring that flood insurance coverage for affected property
owners is maintained for the mandatory period; and
(v) Other provisions appropriate to any special circumstances of
the grant closeout, in modification of or in addition to the
obligations of this section.
(2) The recipient is responsible for:
(i) Compliance with all program requirements, certifications, and
assurances in using any remaining CDBG funds available for closeout
costs and contingent liabilities;
(ii) Use of real property assisted with CDBG funds in accordance
with the principles described in Sec. Sec. 570.503(b)(7) and 570.505;
(iii) Compliance with requirements governing future program income
or receivables generated from activities funded from the origin year
grant, as described in Sec. 570.504(b)(4) and (5);
(iv) Ensuring that flood insurance coverage for affected property
owners is maintained for the mandatory period; and
(v) Other provisions appropriate to any special circumstances of
the grant closeout, in modification of or in addition to the
obligations of this section.
(i) Status of consolidated plan after closeout. The Consolidated
Plan will remain in effect after closeout until the expiration of the
program year covered by the last approved consolidated plan pursuant to
24 CFR 91.520.
(j) Termination of grant--(1) For convenience. Grant assistance
provided under this part may be terminated for convenience in whole or
in part before the completion of the assisted activities, in accordance
with the provisions of 2 CFR 200.340. The recipient shall not incur new
obligations for the terminated portions after the effective date and
shall cancel as many outstanding obligations as possible. HUD shall
allow full credit to the recipient for those portions of obligations
which could not be canceled and which had been properly incurred by the
recipient in carrying out the activities before the termination. The
closeout policies contained in this section shall apply in such cases,
except where the approved grant is terminated in its entirety.
Responsibility for the environmental review to be performed under 24
CFR part 50 or 24 CFR part 58, as applicable, shall be determined as
part of the closeout process.
(2) For cause. In cases in which the Secretary terminates the
recipient's grant under the authority of subpart O of this part, or
under the terms of the grant agreement, the closeout policies contained
in this section shall apply, except where the approved grant is
cancelled in its entirety. The provisions in 2 CFR 200.343 on the
effects of termination shall also apply. HUD shall determine whether an
environmental review is required, and if so, HUD shall perform it in
accordance with 24 CFR part 50.
Sec. 570.600 [Amended]
0
36. Amend Sec. 570.600 in paragraph (a) by removing ``Sec. 570.405
and''.
Sec. 570.606 [Amended]
0
37. Amend Sec. 570.606 in paragraph (b)(2)(ii)(C) by removing ``49 CFR
24.2(g)(2)'' and adding in its place ``49 CFR 24.2(a)(9)(ii)''.
0
38. Amend Sec. 570.611 by revising paragraphs (a)(2) and (d)(1)(i) to
read as follows:
Sec. 570.611 Conflict of interest.
(a) * * *
(2) In all cases not governed by 2 CFR 200.317 and 200.318, the
provisions of this section shall apply. Such cases include the
acquisition and disposition of real property and the provision of
assistance by the recipient or by its subrecipients to individuals,
businesses, and other private entities under eligible activities that
authorize such assistance (e.g., rehabilitation, preservation, and
other improvements of private properties or facilities pursuant to
Sec. 570.202; or grants, loans, and other assistance to businesses,
individuals, and other private entities pursuant to Sec. 570.203,
Sec. 570.204, or Sec. 570.703(i)).
* * * * *
(d) * * *
(1) * * *
(i) A disclosure of the nature of the conflict, accompanied by an
assurance that there has been public disclosure of the conflict (public
disclosure is considered a combination of any of the following:
publication on the recipient's website, including social media;
electronic mailings; media advertisements; public service
announcements; and display in public areas such as libraries, grocery
store bulletin boards, and neighborhood centers), evidence of the
public disclosure, and a description of how the public disclosure was
made; and
* * * * *
Sec. 570.613 [Removed and Reserved]
0
39. Remove and reserve Sec. 570.613.
0
40. Amend Sec. 570.703 by revising paragraph (f) and removing and
reserving paragraph (j).
The revision reads as follows:
Sec. 570.703 Eligible activities.
* * * * *
(f) Site preparation either related to the redevelopment or use of
the real property acquired or rehabilitated pursuant to paragraphs (a)
and (b) of this section, or for an economic development purpose,
including:
(1) Construction, reconstruction, installation of public and other
site improvements, utilities or facilities (other than buildings); or
(2) Remediation of properties (remediation can include project-
specific environmental assessment costs not otherwise eligible under
Sec. 570.205) with known or suspected environmental contamination.
* * * * *
0
41. Amend Sec. 570.704 as follows:
0
a. Revise paragraphs (a)(2)(i)(B), (b) introductory text, and (b)(1)
and (2);
0
b. Remove and reserve paragraphs (b)(3) and (4);
0
c. Revise paragraphs (b)(8)(iii), (v), and (ix);
0
d. Add paragraphs (b)(8)(xi) and (xii) and (c)(3)(vii); and
0
e. Revise paragraph (c)(4).
The revisions and additions read as follows:
Sec. 570.704 Application requirements.
(a) * * *
(2) * * *
(i) * * *
(B) Activities that may be undertaken with guaranteed loan funds;
* * * * *
(b) Submission requirements. An application for loan guarantee
assistance may be submitted at any time. The application (or plan
submission described in paragraph (a)(1)(v) of this section) shall be
submitted to the HUD headquarters office that administers loan
guarantees under this subpart and shall include the following:
(1) A description of how each of the activities to be carried out
with the guaranteed loan funds meets the eligible activity criteria in
Sec. 570.703 and the national objectives criteria in Sec. 570.208 or
Sec. 570.483, as applicable.
(2) A schedule for repayment of the loan which identifies the
sources of repayment, together with a statement identifying the entity
that will act as borrower and issue the debt obligations, and the
source of the payment of fees required by Sec. 570.712.
* * * * *
(8) * * *
(iii) It has, prior to submission of its application to HUD:
furnished citizens with information required by paragraph
[[Page 1783]]
(a)(2)(i) of this section; held at least one public hearing to obtain
the views of citizens on community development needs; and prepared its
application in accordance with paragraph (a)(1)(iv) or (v) of this
section, as applicable, and made the application available to the
public;
* * * * *
(v) It will affirmatively further fair housing, and the guaranteed
loan funds will be administered in compliance with Title VI of the
Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.) and the Fair Housing
Act (42 U.S.C. 3601-3619), and implementing regulations;
* * * * *
(ix) (Where applicable, the public entity may also include the
following additional certification.) It lacks sufficient resources from
funds provided under this subpart or program income to allow it to
comply with the provisions of Sec. 570.200(c)(2), and it must
therefore assess properties owned and occupied by moderate income
persons, to recover the non-guaranteed loan funded portion of the
capital cost without paying such assessments on their behalf from
guaranteed loan funds;
* * * * *
(xi) It possesses the legal authority to make the pledge of grants
required under Sec. 570.705(b)(2).
(xii) It has made efforts to obtain financing for activities
described in the application without the use of the loan guarantee, the
public entity will maintain documentation of such efforts for the term
of the loan guarantee, and the public entity cannot complete such
financing consistent with the timely execution of the program plans
without such guarantee.
* * * * *
(c) * * *
(3) * * *
(vii) Activities to be undertaken with the guaranteed loan funds do
not meet the public benefit standards under Sec. 570.209.
(4) HUD will notify the public entity or State in writing that the
loan guarantee request has either been approved (in the requested
amount or a portion thereof) or disapproved. If the request is approved
in an amount less than requested or disapproved, the public entity or
State shall be informed of the specific reasons for disapproval or
partial approval. If the request is approved, either in full or in
part, HUD shall issue an offer of commitment to guarantee debt
obligations of the borrower identified in the application subject to
compliance with this part, including the requirements under Sec.
570.705(b), (d), (g) and (h) for securing and issuing debt obligations,
the conditions for release of funds described in paragraph (d) of this
section, and such other conditions as HUD may specify in the commitment
documents in a particular case.
* * * * *
0
42. Amend Sec. 570.705 as follows:
0
a. Revise paragraph (a)(1)(iii);
0
b. Remove paragraphs (a)(2)(iii)(A) through (C); and
0
c. Revise paragraph (b)(3).
The revisions read as follows:
Sec. 570.705 Loan requirements.
(a) * * *
(1) * * *
(iii) The amount any one public entity may receive may be limited
to such amount as is necessary to allow HUD to give priority to
applications containing activities to be carried out in areas
designated as economically distressed by the Federal Government or by
any State.
* * * * *
(b) * * *
(3) Furnish, at the discretion of HUD, such other security as may
be deemed appropriate by HUD in making such guarantees. Such other
security shall be specified in the contract entered into pursuant to
paragraph (b)(1) of this section.
* * * * *
0
43. Amend Sec. 570.902 as follows:
0
a. Revise the section heading, the introductory text, and paragraph
(a); and
0
b. Remove and reserve paragraph (b) and remove paragraph (c);
The revisions read as follows:
Sec. 570.902 Review for timely performance and continuing capacity
for timely performance.
HUD will review the rate of disbursement of each entitlement, HUD-
administered small cities, non-entitlement counties in the State of
Hawaii, and Insular Areas grant quarterly to determine whether each
recipient is carrying out its CDBG-assisted activities in a timely
manner and whether it has the continuing capacity to do so.
(a) Entitlement recipients, Insular Areas, and Non-entitlement CDBG
grantees in Hawaii. (1) The period of performance is defined at Sec.
570.3.
(2) Based on the sum of draw vouchers both submitted and completed
in the designated online system during the reporting quarter, HUD will
identify each grant as:
(i) Slow Spender. Slow Spender means the grantee is disbursing ten
percent less than the monthly pace required to fully expend the grant
during the period of performance.
(ii) On Pace. On Pace means the grant's disbursement rate exceeds
Slow Spender and may be a sufficient rate to fully disburse the grant
during the period of performance.
(iii) Ready to Close. The grant has reached the end of the period
of performance (phase 1).
(iv) First Year. This is a new grant and HUD will not report
performance publicly for the origin year of a grant.
(3) If a grantee is not spending at a pace to disburse an entire
grant during the period of performance (phase 1), HUD will evaluate the
grantee's capacity and will provide technical assistance to improve
timely performance.
(4) Absent contrary evidence satisfactory to HUD, HUD will consider
an insular area, an entitlement recipient, or a non-entitlement CDBG
grantee in Hawaii to be failing to carry out its CDBG activities in a
timely manner and to lack continuing capacity to carry out activities
in a timely manner if three or more of its grants are designated Slow
Spender in each quarter during four consecutive calendar quarters.
(5) In determining appropriate corrective actions or sanctions, HUD
will consider:
(i) A grantee's demonstration, to HUD's satisfaction, that the lack
of timeliness or capacity has resulted from factors beyond the
grantee's reasonable control.
(ii) The likelihood that the recipient will improve its
disbursement rate for the majority of its non-First-Year open grants to
On Pace within 120 days. For these purposes, HUD will take into account
the extent to which funds on hand have been obligated by the recipient
and its subrecipients for specific activities at the time the finding
is made and other relevant information.
* * * * *
0
44. Amend Sec. 570.910 by revising paragraph (b)(5) and adding a
paragraph (c) to read as follows:
Sec. 570.910 Corrective and remedial actions.
* * * * *
(b) * * *
(5) Advise the recipient to reimburse with non-Federal funds its
program account or letter of credit in any amounts improperly expended
and reprogram the use of the funds in accordance with applicable
requirements;
* * * * *
(c) Voluntary grant reductions. A recipient may elect to request a
voluntary grant reduction from a current or future year's allocation of
funds in lieu of reimbursing its grant under paragraph (b)(5) of this
section. A
[[Page 1784]]
request for a voluntary grant reduction must be signed by the
jurisdiction's chief elected official. In its request, the recipient
must waive its right to a hearing pursuant to Sec. 570.913.
PART 1003--COMMUNITY DEVELOPMENT BLOCK GRANTS FOR INDIAN TRIBES AND
ALASKA NATIVE VILLAGES
0
45. The authority citation for part 1003 continues to read as follows:
Authority: 42 U.S.C. 3535(d) and 5301 et seq.
0
46. Amend Sec. 1003.4 by adding in alphabetical order a definition for
``Activity delivery costs'' to read as follows:
Sec. 1003.4 Definitions.
* * * * *
Activity delivery costs means the allowable costs of work performed
by a recipient or subrecipient in carrying out specific activities
eligible under Sec. Sec. 1003.201 through 1003.204. The cost
principles at 2 CFR part 200, subpart E, must be used in determining
the allowability of the costs.
* * * * *
0
47. Amend Sec. 1003.201 by revising the section heading and paragraphs
(a), (c) introductory text, and (m) and adding paragraphs (p), (q), and
(r) to read as follows:
Sec. 1003.201 Eligible activities.
* * * * *
(a) Acquisition. Acquisition in whole or in part by the grantee, or
other public or private nonprofit entity, by purchase, long-term lease
(defined as 15 years or more), donation, or otherwise, of real property
(including air rights, water rights, rights-of-way, easements, and
other interests therein) for any public purpose, subject to the
limitations of Sec. 1003.207.
* * * * *
(c) Public facilities and improvements. Acquisition, construction,
reconstruction, rehabilitation or installation of public facilities and
improvements, except as provided in Sec. 1003.207(a), carried out by
the grantee or other public or private nonprofit entities. In
undertaking such activities, design features and improvements which
promote energy efficiency may be included. [However, activities under
this paragraph may be directed to the removal of material and
architectural barriers that restrict the mobility and accessibility of
elderly or disabled persons to publicly owned and privately owned
buildings, facilities, and improvements including those provided for in
Sec. 1003.207(a)(1).] Such activities may also include the execution
of architectural design features, and similar treatments intended to
enhance the aesthetic quality of facilities and improvements receiving
ICDBG assistance. Facilities designed for use in providing shelter for
persons having special needs are considered public facilities and not
subject to the prohibition of new housing construction described in
Sec. 1003.207(b)(3). Such facilities include shelters for the
homeless; convalescent homes; hospitals, nursing homes; domestic
violence shelters; halfway houses for run-away children, drug offenders
or parolees; group homes for individuals with intellectual disabilities
and temporary housing for disaster survivors, including those impacted
by climate-related events. In certain cases, nonprofit entities and
subrecipients including those specified in Sec. 1003.204 may acquire
title to public facilities. When such facilities are owned by nonprofit
entities or subrecipients, they shall be operated so as to be open for
use by the general public during all normal hours of operation. Public
facilities and improvements eligible for assistance under this
paragraph (c) are subject to the following policies in paragraphs
(c)(1) through (3) of this section:
* * * * *
(m) Technical assistance. Provision of technical assistance to
public or nonprofit entities to increase the capacity of such entities
to carry out specific eligible neighborhood revitalization or economic
development activities. General administrative and operating costs of a
public or nonprofit entity are not eligible under this paragraph.
Capacity building for private or public entities (including grantees)
for other purposes may be eligible as a planning cost under Sec.
1003.205.
* * * * *
(p) Tornado safe shelters. ICDBG funds may be used by the recipient
or provided as loans or grants to non-profit and for-profit entities,
including owners of manufactured housing communities, for the
construction or improvement of tornado-safe shelters for manufactured
housing residents in accordance with section 105(a) of the Act.
Activities pursuant to this paragraph may be located only in a
neighborhood (including a manufactured housing community) that-
(1) Contains at least 20 manufactured housing units within such
proximity to the shelter that the shelter is available to the resident
in the event of a tornado,
(2) Consists predominantly of persons of low and moderate income
(3) Is located within a State in which a tornado has occurred
during the fiscal year for which with amounts to be used were made
available or the preceding 3 fiscal years, as determined by the
Secretary in consultation with the Administrator of the Federal
Emergency Management Agency.
(q) Essential repairs and operating expenses. ICDBG funds may be
used for activities necessary to make essential repairs and pay
operating expenses necessary to maintain the habitability of housing
units (including abandoned or blighted properties) acquired through tax
foreclosure proceedings (also known as In Rem) for up to five years to
prevent abandonment or deterioration of housing units located in
primarily low- and moderate-income neighborhoods.
(r) Assistance to mixed-use property. ICDBG funds may be used to
carry out eligible activities in mixed-use properties so long as the
ICDBG recipient expends funds only on the eligible use in that
property. For purposes of this section, the term ``Mixed-use property''
means a property containing multiple uses, at least one of which must
be eligible to be assisted with ICDBG funds.
0
48. Amend Sec. 1003.202 by revising paragraph (a) introductory text to
read as follows:
Sec. 1003.202 Eligible rehabilitation and preservation activities.
(a) Types of buildings and improvements eligible for rehabilitation
or reconstruction assistance. ICDBG funds may be used to finance the
rehabilitation and reconstruction of:
* * * * *
0
49. Amend Sec. 1003.203 by revising paragraph (b) to read as follows:
Sec. 1003.203 Special economic development activities.
* * * * *
(b) The provision of assistance to a private for-profit business,
including, but not limited to, grants, loans, loan guarantees, interest
supplements, loan participations, technical assistance, and other forms
of support (including use of pass-through financing structures), for
any activity where the assistance is necessary or appropriate to carry
out an economic development project, excluding those described as
ineligible in Sec. 1003.207(a). In order to ensure that any such
assistance does not unduly enrich the for-profit business, the grantee
shall conduct an analysis to determine that the amount of any financial
assistance to be provided is not excessive, considering the actual
needs of the business in making the project financially feasible and
the
[[Page 1785]]
extent of public benefit expected to be derived from the economic
development project. The grantee shall document the analysis as well as
any factors it considered in making its determination that the
assistance is necessary or appropriate to carry out the project. The
requirement for making such a determination applies whether the
business is to receive assistance from the grantee or through a
subrecipient.
* * * * *
0
50. Amend Sec. 1003.206 by revising the section heading and the
introductory text to read as follows:
Sec. 1003.206 Program administrative costs.
ICDBG funds may be used for the payment of reasonable
administrative costs and carrying charges related to the planning and
execution of community development activities assisted in whole or in
part with funds provided under this part. No more than 20 percent of
the sum of any grant plus program income received shall be expended for
activities described in this section and in Sec. 1003.205. This does
not include staff and overhead costs directly related to carrying out
activities eligible under Sec. Sec. 1003.201 through 1003.204, since
those costs are eligible as part of such activities. These costs are
activity delivery costs as defined in Sec. 1003.4. In addition,
technical assistance costs associated with developing the capacity to
undertake a specific funded activity are also not considered program
administration costs. These costs must not, however, exceed 10 percent
of the total grant award.
* * * * *
0
51. Amend Sec. 1003.208 as follows:
0
a. Revise paragraphs (b)(1) introductory text and (b)(1)(i) and (ii);
0
b. Remove the text ``Bureau of the Census'' and add in its place
``Census Bureau's'' in paragraph (b)(2) introductory text;
0
c. Add paragraph (b)(5);
0
d. Remove ``, upon completion,'' from the first sentence of paragraph
(c) introductory text; and
0
e. Revise paragraphs (c)(1)(i) and (ii), (c)(2), and (d).
The revisions and addition read as follows:
Sec. 1003.208 Criteria for compliance with the primary objective.
* * * * *
(b) * * *
(1) An activity which benefits a limited clientele, at least 51
percent of whom are low or moderate income persons. The activity must
meet one of the following tests:
(i) Benefit at least one of the following clientele who are
generally presumed to be principally low and moderate income persons:
abused children, survivors of domestic violence, elderly persons,
adults meeting the Census Bureau's Current Population Reports
definition of ``severely disabled,'' homeless persons, illiterate
adults (adults unable to read and write in English and in their first
language, if their first language is not English), persons living with
AIDS, migrant farm workers, persons who meet the Federal poverty
guidelines, persons insured by Medicaid; or
(ii) Require information on family size and income that
demonstrates that at least 51 percent of the clientele are persons
whose family income does not exceed the low- and moderate-income limit;
or
* * * * *
(5) The following kinds of activities may not qualify under this
paragraph (b): activities that provide benefits to all the residents of
an area; activities involving the acquisition, construction or
rehabilitation of property for housing; or activities where the benefit
to low- and moderate-income persons to be considered is the creation or
retention of jobs, except as provided in paragraph (b)(4) of this
section.
(c) * * *
(1) * * *
(i) The assistance is for an eligible activity to reduce the
development cost of the substantial rehabilitation of (as defined at 24
CFR 5.100), conversion of a nonresidential structure to, or new
construction of, a multifamily, non-elderly rental housing project;
(ii) At least 20 percent of the units will be occupied by low- and
moderate-income households at affordable rents; and
* * * * *
(2) When ICDBG funds are used for housing services eligible under
Sec. 1003.201(j), if the housing for which the services are provided
is to be occupied by low-and moderate-income households.
(d) Job creation or retention activities. An activity designed to
create or retain permanent jobs where at least 51 percent of the full-
time equivalent jobs will be held by, or made available to, low- and
moderate-income persons. For purposes of determining whether a job is
held by or made available to a low or moderate income person, the
person may be presumed to be a low or moderate income person if: he/she
resides within a census tract where not less than 70 percent of the
residents have incomes at or below 80 percent of the area median; or,
if he/she resides in a census tract designated as economically
distressed by the Federal Government; or, if the assisted business is
located in and the job under consideration is to be located in such a
tract or area. As a general rule, each assisted business shall be
considered to be a separate activity for purposes of determining
whether the activity qualifies under this paragraph. However, in
certain cases such as where ICDBG funds are used to acquire, develop or
improve a real property (e.g., a business incubator or an industrial
park) the requirement may be met by measuring jobs in the aggregate for
all the businesses which locate on the property, provided such
businesses are not otherwise assisted by ICDBG funds. Where ICDBG funds
are used to pay for the staff and overhead costs of a CBDO under the
provisions of Sec. 1003.204 making loans to businesses from non-ICDBG
funds, this requirement may be met by aggregating the jobs created by
all of the businesses receiving loans during any one-year period.
(1) For an activity that creates jobs, the grantee must document
that at least 51 percent of the jobs will be held by, or made available
to, low- and moderate-income persons.
(2) For an activity that retains jobs, the grantee must document
that the jobs would be lost without the ICDBG assistance and that at
least one of the following conditions applies with respect to at least
51 percent of the jobs at the time the ICDBG assistance is provided:
(i) The job is known to be held by a low- or moderate-income
person; or
(ii) The job can reasonably be expected to turn over within the
following two years and that steps will be taken to ensure that it will
be filled by, or made available to, a low- or moderate-income person
upon turnover.
(3) Jobs will be considered to be available to low- and moderate-
income persons only if:
(i) The assisted business does not require as a prerequisite
special skills that can only be acquired with substantial training or
work experience or education beyond high school or the business agrees
to hire unqualified persons and provide training; and
(ii) The grantee and the assisted business take actions to ensure
that low- and moderate-income persons receive first consideration for
filling such jobs.
* * * * *
0
52. Amend Sec. 1003.506 by revising paragraph (a) introductory text to
read as follows:
Sec. 1003.506 Reports.
(a) Status and evaluation report. Grantees shall submit a status
and evaluation report on previously funded
[[Page 1786]]
open grants 90 days after the end of the grantee's Tribal program year,
or 90 days after the end of the Federal fiscal year if a grantee's
Tribal program year is the same as the Federal fiscal year, and at the
time of grant close-out. The report shall address the following areas:
* * * * *
Sec. 1003.602 [Amended]
0
53. Amend Sec. 1003.602 in paragraph (h)(2)(ii) by removing ``49 CFR
24.2(g)(2)'' and adding in its place ``49 CFR 24.2(a)(9)(ii)''.
0
54. Amend Sec. 1003.606 by revising paragraph (d)(1)(i) to read as
follows:
Sec. 1003.606 Conflict of interest.
* * * * *
(d) * * *
(1) * * *
(i) A disclosure of the nature of the possible conflict,
accompanied by an assurance that there has been public disclosure of
the conflict (public disclosure is considered a combination of any of
the following: publication on the grantee's website, including social
media; electronic mailings; media advertisements; public service
announcements; and display in public areas such as libraries, grocery
store bulletin boards, and neighborhood centers), evidence of the
public disclosure, and a description of how the public disclosure was
made; and
* * * * *
Marion M. McFadden,
Principal Deputy Assistant Secretary for Community Planning and
Development.
Dominique Blom,
General Deputy Assistant Secretary for Public and Indian Housing.
[FR Doc. 2024-00039 Filed 1-9-24; 8:45 am]
BILLING CODE 4210-67-P