[Federal Register Volume 59, Number 247 (Tuesday, December 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-31663]
[[Page Unknown]]
[Federal Register: December 27, 1994]
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Part II
Department of Housing and Urban Development
_______________________________________________________________________
Office of the Assistant Secretary for Community Planning and
Development
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24 CFR Part 570
Community Development Block Grants: Small Cities Program and Related
Amendments; Final Rule
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of the Assistant Secretary for Community Planning and
Development
24 CFR Part 570
[Docket No. R-94-1591; FR-2879-F-03]
RIN: 2506-AB11
Community Development Block Grants: Small Cities Program and
Related Amendments
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Final rule.
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SUMMARY: This final rule revises the HUD regulations in 24 CFR part
570, subpart F, which govern the administration of the Community
Development Block Grant (CDBG) Small Cities Program. The purpose of
subpart F is to set forth the procedures by which CDBG funds are
provided to non-entitled units of general local government in those
States which have not elected to assume administration of the CDBG
formula allocations for use in non-entitled units of general local
government within such States. The rule amends subpart F to incorporate
the statutory changes made to the Small Cities Program since the
subpart F regulations were issued in 1982, and streamlines the
operation and administration of the program. In addition, the rule
makes additional changes to subpart F, and various changes to subparts
I and M which are necessary to permit use of the section 108 loan
guarantee authority by non-entitled units of general local government
in States which have not elected to assume administration of the CDBG
formula allocations for nonentitlement areas of such States.
EFFECTIVE DATE: January 26, 1995.
FOR FURTHER INFORMATION CONTACT: Stephen M. Rhodeside, State and Small
Cities Division, Office of Community Planning and Development,
Department of Housing and Urban Development, Room 7184, 451 Seventh
Street, SW., Washington, DC 20410. Telephone (202) 708-1322 (voice) or
(202) 708-2565 (TDD). (These are not toll-free numbers.)
SUPPLEMENTARY INFORMATION:
I. Background--September 15, 1994 Proposed Rule
On September 15, 1994 (59 FR 47500), HUD published a proposed rule
that would amend HUD's regulations in 24 CFR part 570, subpart F, which
govern the administration of the Community Development Block Grant
(CDBG) Small Cities Program. The proposed rule provided for a 30-day
public comment period. By the end of the comment period on October 17,
1994, 21 comments had been received. The 21 commenters consisted of 11
units of general local government (7 New York, 3 Hawaii, 1 Arizona), 5
consultants, and 5 public and private non-profits. These commenters
made approximately 75 different comments about the September 15, 1994
proposed rule; many of these comments were made by more than one
commenter. Section II of this preamble describes the changes made to
the proposed rule at the final rule stage, and Section III of the
preamble sets forth the issues and questions raised by the public
commenters, and HUD's responses to these issues and questions.
II. Principal Differences Between Proposed Rule and Final Rule
This final rule is substantially the same as the September 15, 1994
proposed rule. The principal differences are as follows:
1. Multiyear Plans
The final rule provides that HUD may issue notices of funding
availability that provide for a competition for applications that have
multiyear plans (see Sec. 570.421(a)(2)).
2. Economic Development Grants
The final rule also provides that HUD intends to use the section
108 loan guarantee program to the maximum extent feasible to fund
economic development projects in the nonentitlement areas of New York
State (see Sec. 570.421(a)(5)).
3. Counties Applying on Behalf of Units of General Local Government
The final rule provides criteria under which counties may apply on
behalf of units of general local government located within their
jurisdiction when the unit of general local government has authorized
the county to apply.
4. Pre-Agreement Costs
The final rule provides that HUD authorizes a unit of general local
government to incur costs during the same or the prior Federal Fiscal
Year for preparation of a CDBG grant application, planning costs
eligible under Sec. 570.205, environmental assessments, and project
engineering and design costs for eligible activities under
Sec. 570.201-204 before the establishment of a formal grant
relationship between the applicant and HUD. Such costs for the funded
activities may be charged to the grant should it be funded, provided
that the activities are undertaken in accordance with the requirements
of subpart F (see Sec. 570.425(a)(3)). This includes compliance with
selection of contractors under 24 CFR 85.36 if, for example, a
contractor prepares the application or plans and specifications.
5. HUD Action on Final Application
The final rule adds two new paragraphs to Sec. 570.425(b).
Paragraph (b)(3) provides that HUD will not make a Small Cities grant
when it is determined that the grant will only have a minimal or
insignificant impact on the grantee. Paragraph (b)(4) provides that in
determining appropriate grant amounts to be awarded, HUD may take into
account the size of the applicant, the level of demand, the scale of
the activity proposed relative to need and operational capacity, among
others. (See Sec. 570.425(b) (3) and (4).)
6. Streamlined Application Requirements for Previous Applicants
The final rule adds a new paragraph (c) to Sec. 570.425 to provide
for streamlined application requirements for previous applicants. (See
Sec. 570.425(c).)
7. Clarification of ``Publication of Proposed Application''
The final rule adds a new paragraph to Sec. 570.431(c) to explain
what is meant by publication of the proposed application. (See
Sec. 570.431(c)(4).)
8. Hawaii Grantee Amendments
The final rule clarifies the procedures that Hawaii grantees must
follow in making amendments to final applications. (See
Sec. 570.431(f).)
9. Report Submission Date.
The final rule extends the deadline for New York Grantees to submit
their performance and evaluation report on the small cities grant to
October 31 (see Sec. 570.507(a)(2)(ii)(A)) and sets forth the date
Hawaii grantees must submit their performance and evaluation report
(see Sec. 570.507(a)(2)(ii)(B).)
III. Comments on the Proposed Rule and HUD's Responses
This section sets forth the issues and comments made by the public
commenters on the September 15, 1994 proposed rule, and HUD's responses
to these issues and questions.
A. General Comments
Comments Concerning NOFA for Small Cities Program
There were several comments that the application time period to
respond to the Small Cities NOFA should be more than 60 days. The final
rule will not establish the application time period for the Small
Cities NOFA. The request for a longer application time period was taken
into consideration in development of the Federal Fiscal Year (FY) 1995
NOFA.
Ten commenters commented on the number of funding competitions that
should be held for the Small Cities Program during each fiscal year.
Since the optimum number of competitive rounds will vary according to
circumstances, the Small Cities NOFA will state the number of
competitions that will be held in the time period that is covered by
the NOFA.
Four commenters stated that the issue date for the NOFA and the due
date of competitive applications should be established by regulation.
To retain maximum flexibility to address changing conditions, the
Department has decided that these dates should not be established by
regulation.
Five commenters submitted comments on the maximum grant limits. In
order to retain flexibility due to changing conditions such as
inflation, the Small Cities NOFA, rather than the rule, will address
the issue of grant limits.
One commenter requested that the Department establish a set amount
of funding for each funding round. Although the Department agrees with
this comment, the NOFA rather than the rule is a better vehicle to
address this issue.
One commenter said that if it was necessary to expand the
competition beyond housing, public facilities, and economic
development, the final rule should so state this. Since it is
impossible to foresee the types of competition that might benefit small
jurisdictions in the State of New York in the future, the rule provides
in Sec. 570.421(a)(1) that there will be competitive applications.
Three commenters commented on the application page limits. Again,
this is an issue that will be addressed in the NOFA to retain
flexibility to adjust page limit requirements. The Department
acknowledges that reducing the size of grant applications will reduce
paperwork which is a goal shared by the majority of participants at the
meetings held in the State of New York to discuss the proposed
regulation.
A few commenters requested that the Small Cities NOFA remain as
constant as possible from year to year. The Department intends to do
this to the extent possible.
One commenter asked that the Department provide technical
assistance after the issuance of the NOFA. Although this matter is not
one that should be addressed in the final rule, the Department intends
to provide the maximum amount of technical assistance that is permitted
under section 103 of the Department of Housing and Urban Development
Reform Act.
Another commenter requested that the Department provide an even
playing field for small communities. In the history of the program,
small communities have been successful in obtaining grants, and the
Department sees no need to change the final rule in this regard.
Involvement in the Rulemaking Process
Another commenter requested that people with rural backgrounds be
involved in the rulemaking process. This was accomplished by two highly
publicized meetings with that were held in Auburn and Goshen, New York
as well as having the Assistant Secretary for Community Planning and
Development write to each eligible unit of general local government
individually, asking for their comments in helping to shape the final
rule and NOFA.
Administration of Small Cities Program by the State of New York
Two commenters stated that the Small Cities Program should not be
given to New York State to administer. Section 106 (d)(2) of Title I,
gives States the right to elect to administer the State CDBG Program.
The Department cannot administratively amend this provision.
Single Audit and Davis-Bacon Requirements
Commenters asked that the Single Audit and Davis-Bacon Acts be made
inapplicable to the Small Cities Program. To adopt this comment would
require a statutory change.
Rehabilitation
Three commenters asked that the non-targeted rehabilitation program
be continued. Although this issue is too specific to be addressed by
the regulations, there is nothing in the Small Cities regulations that
would preclude a grantee from initiating a non-targeted rehabilitation
program. A request was made by one commenter to fund more HUD staff
travel. Although the Department is sensitive to the need of HUD Field
staff to travel to small cities in New York, the travel budget is
determined by annual appropriations and is not an appropriate issue to
be addressed by the final regulation.
One commenter stated that funds should be allowed to be used to
rehabilitate pre-1976 mobile homes. While the Department is unclear as
to the commenters' reference to pre-1976 mobile homes, manufactured
housing can be rehabilitated in accordance with Sec. 570.202(a)(4),
since the State of New York recognizes manufactured housing as real
property.
One commenter stated that senior citizens on fixed income should be
able to get rehabilitation grants. The major purpose of the CDBG
program is to benefit low- and moderate-income persons. Senior citizens
who are of low- and moderate-income are eligible to receive housing
rehabilitation grants. Senior citizens who have higher incomes cannot
receive grants unless the activity is to aid in the prevention or
elimination of slums or blight. Title I does not give higher income
senior citizens preference over low- and moderate-income non senior
citizens.
Household Incomes
One commenter asked that households with incomes between 80-100
percent of median be eligible to receive rehabilitation assistance in
non-targeted areas. The Department notes that this can be done under
Sec. 570.208(b)(2) as long as the rehabilitation is limited to the
extent necessary to eliminate specific conditions detrimental to public
health and safety.
Multiyear Plans
One commenter said that community facilities should not be funded
on a multiyear basis, but should be funded through a large grant of up
to $900,000. The Department decided not to restrict community
facilities from being part of multiyear plan projects. However, to the
extent a project consisting, for example, of one large building cannot
logically be subdivided into segments that are viable as separate
grants, the project would have to be funded from a single year's grant
funds under Sec. 570.421(a)(1). Larger public facilities projects,
however, can now be funded with Section 108 loan guarantee assistance
under Sec. 570.703(l).
One commenter said that the first year of the multiyear plan should
be fifteen months, and another commenter indicated that there should be
a site visit 9-10 months into the multiyear plan. These comments are
operational in nature and not appropriate to be addressed by the final
rule.
Priority for EZs/ECs
One commenter stated that Empowerment Zones (EZ) and Enterprise
Communities (EC) should not receive a priority in the final regulation.
The Department agrees that the final regulation is an inappropriate
place to show support for the EZ/EC program and can more appropriately
lend its support in the NOFA.
Public Hearings
A commenter stated that public hearings should be able to be
combined with hearings for other purposes. The Department agrees, and
notes that this is the Department's policy, and therefore, need not be
stated specifically in the final rule.
Abbreviated Consolidated Plan
Several commenters requested that the abbreviated Consolidated Plan
requirements be made as simple as possible. It is the Department's
intention to do this, but the NOFA is a more appropriate vehicle for
doing this since the abbreviated Consolidated Plan may need to be
changed based on ongoing experience in program administration. At this
time the abbreviated Consolidated Plan is not yet required. (The FY
1995 NOFA requires an abbreviated CHAS if the application contains
housing activities.) After the Consolidated Plan final rule is
published, succeeding NOFAs will explain the requirements. The final
rule for the Consolidated Plan will make conforming changes to this
regulation. The final rule will not apply to applications under the FY
1995 NOFA for the State of New York.
B. Specific Comments on Rule Sections
Section 570.420 General
Five commenters call for the abbreviated CHAS requirement to be
eliminated. Section 570.420(d) requires that there be a certification
in the Small Cities application that housing activities proposed to be
funded by the Small Cities Program must be consistent with the
applicant's abbreviated CHAS. This is required by 24 CFR part 91 and
Section 105(b) of the National Affordable Housing Act.
One commenter wanted to lower the requirement that 70 percent of
the grant funds must be used to benefit low-and moderate-income persons
to 51 percent. The Department believes that the commenter
misunderstands the requirement. Under Sec. 570.208(a)(1), if at least
51 percent of the residents of an area are low- and moderate-income
persons, an activity that benefits that area is considered to benefit
low- and moderate-income persons. Section 570.200(a)(3)(v) provides
that area benefit activities are to count as benefitting low- and
moderate-income persons 100 percent. Accordingly, if a water project is
funded for $300,000, which benefits an area that is 57 percent low-and
moderate-income, the entire $300,000 is considered to be benefitting
low- and moderate-income persons.
Three commenters said that the regulations should clearly state
that Sec. 570.200(a)(3)(iii) applies, and that grantees should not
include Section 108 loan repayments in the calculations for meeting the
objective that not less than 70 percent of the total of grant funds
from each grant and Section 108 loan guarantee funds received under 24
CFR part 570, subpart M, within a fiscal year, must be expended for
activities that benefit low-and moderate-income persons. The Department
agrees and paragraph (e)(2) was revised to incorporate this change.
Eight commenters protested the elimination of the rating and
ranking scoring factors from the regulations. As a result of these
comments, Sec. 570.421(a) has been added to the final rule to describe
the selection system.
There were multiple comments recommending that the Department
establish an Economic Development set-aside with an open window, so
that economic development applications could be submitted at any time
during the year. Commenters also suggested that Section 108 loan
guarantees be used to fund economic development projects to the
greatest extent possible. These comments are addressed in
Sec. 570.421(a)(5), which provides that the Department will use the
Section 108 loan guarantee program to the greatest extent possible to
fund Economic Development projects, and that the Department will fund
Economic Development applications as they are determined to be fundable
in a specific amount by HUD. All Economic Development projects that are
funded with Small Cities funds must have a substantial impact on the
needs identified by the applicants.
One commenter stated that only housing and public facilities
applications should be funded during the competitive funding cycles.
Under the new Sec. 570.421(a) (``Selection system''), both competitive
applications and the first year of multiyear plans will be funded on a
competitive basis with the NOFA indicating how that competition will be
held. Since ``Economic Development'' and ``Imminent Threat'' projects
funded on a non-competitive basis, the competition will essentially
include housing, public facilities, and comprehensive applications.
One commenter suggested that the division between comprehensive
projects and single purpose projects be retained with an eye towards
evening the chances of obtaining funding from both types of projects.
Another commenter requested that funding be continued for comprehensive
grants. The nomenclature of single purpose and comprehensive projects
has been removed from the final rule, but the Department may elect to
retain and define such categories in a NOFA. Under the final rule,
there will be competitions for competitive applications and multiyear
plans with the funding divided between the categories fine-tuned by a
NOFA that will be issued each year. The former single purpose projects
will be eligible for funding as competitive applications. The former
comprehensive projects may be funded as either competitive applications
or as multiyear grants.
One commenter requested that the Department allow counties to apply
on behalf of municipalities. This suggestion was incorporated into the
final rule at 24 CFR 570.421(c)(3). Another commenter suggested that
the Department encourage county-wide applications. County-wide
applications are eligible for funding and will receive the same
consideration as all other applications for Small Cities funding.
Six commenters requested that the Department allow multiyear
funding for comprehensive grants. This comment was adopted in
Sec. 570.421(a)(2) of the final rule, which will allow the Department
to fund multiyear plans. After the first year of a multiyear plan is
funded, the Department may fund future years on a non-competitive basis
subject to acceptable performance, submission of an acceptable
application and certifications, and the provision of adequate
appropriations.
One commenter stated that multiyear grantees should not receive
other grants during the time period that the multiyear grant was
ongoing. The Department decided that this issue is more appropriately
addressed in the NOFA rather than the rule.
Another commenter suggested that consideration be given to female
and disabled heads of household in giving fair housing points and
contracts given to female-owned businesses should be taken into account
in reporting minority business enterprise achievements. In order to
retain flexibility to address changing priorities, the Department
decided that the makeup of the fair housing and equal opportunity
points will be disseminated in the NOFA rather than the regulations.
Section 570.424 Grants for Imminent Threats to Public Health and
Safety
Three commenters wanted the imminent threat set-aside retained in
the final rule, and one commenter wanted it deleted. The Department
decided to retain the imminent threat set-aside to give the Department
the flexibility to respond immediately to threats to health and safety
such as flood damage from hurricanes.
Section 570.425
HUD Review and Actions on Applications for New York State Applicants
One commenter said that if there was more than one funding round in
a fiscal year, an unsuccessful application should be able to be
resubmitted in the next round. The Department agrees and paragraph (c)
was added to Sec. 570.425 which authorizes HUD to provide in a NOFA
that unsuccessful applications will be automatically held over for the
succeeding rounds of competition if the applicant so requests in
writing. The applicant will have the option of amending or withdrawing
its application. For FY 1995, applications not funded in FY 1994 will
automatically be reconsidered under the FY 1995 NOFA unless the
applicant notifies HUD otherwise.
Another commenter indicated that HUD should ensure that
applications are funded for the least amount of funds necessary to
implement the proposed activities. As a result of this comment,
paragraph (b)(4) was added to Sec. 570.425 of the final rule. This
paragraph gives the Department the right to take into account the size
of the applicant, the level of demand, the scale of the activity
proposed relative to need and operational capacity, the number of
persons to be served, the amount of funds required to achieve project
objectives and the administrative capacity of the applicant to complete
the activities in a timely manner in determining the appropriate grant
amount to award.
To respond to a commenter's request to even the playing field for
smaller communities, the Department has revised Sec. 570.425(a)(3) in
the final rule to allow units of general local government to incur
costs for certain CDBG grant activities before the establishment of a
formal grant relationship and charge the pre-agreement costs to the
grant, should it be funded. This includes the cost of application
preparation, but does not create an obligation on part of the
Department to fund the application.
Section 570.426 Program Income
One commenter wrote favorably of Sec. 570.426(c) which provides
that if a unit of general local government has no open CDBG grant at
the time of closeout, program income of less than $25,000 per year
after closeout will not be considered program income, and will not be
subject to the requirements of this part. This provision has been
retained in the final regulation.
Section 570.429 Hawaii General and Grant Requirements
Three counties in the State of Hawaii commented that they did not
want the method of distribution of Hawaii Small Cities funds to be
changed by the issuance of a NOFA because that would impinge upon the
ability of the Hawaii grantees to plan for future use of Small Cities
funds. The Department agrees with this comment, and all references to a
NOFA for the Hawaii Small Cities program were removed from
Sec. 570.429.
Two commenters from the State of Hawaii thought that paragraph
(d)(1) of Sec. 570.429 should be revised to better define ``capacity to
utilize the grant amount effectively and efficiently''. This term was
used in the previous regulation at Sec. 570.435(c)(1)(ii)(A), and does
not need to be redefined.
Two commenters from the State of Hawaii requested that Hawaii
grantees follow the application submission requirements in 24 CFR part
570, subpart D. Another commenter said that applications should be
accepted and not approved. Section 570.429 has been revised to treat
the Hawaii grantees as much like entitlement grantees as possible.
Since the program is still discretionary under section 106(d) of Title
I, the Department decided that applications should be required to be
submitted and approved. Paragraph (g) of Sec. 570.429 indicates that
the Department will approve the application unless it is shown that
``one or more of the following requirements (relating to completeness,
timeliness, certifications, and compliance with this part) have not
been met''. This provision gives assurance to Hawaii grantees that
applications that are complete, timely, contain the proper
certifications, and which are otherwise in compliance with this part
will be approved.
Another commenter from the State of Hawaii asked that paragraph
(d)(2) of Sec. 570.429 regarding timely expenditures only consider
grants from FY 1995 onward. Since it is the policy of the Department to
encourage timely expenditures, the Department decided that all
outstanding grants should be used in calculating timely expenditures
under Sec. 570.902(a). The Department notes that Kauai's disaster grant
will not be considered in the calculations.
The final rule on the Consolidated Plan, which will be published
shortly, will change the application, citizen participation, approval
and reporting requirements for the Hawaii grantees. These changes will
be incorporated into subpart F at the time the final consolidated plan
regulation is promulgated. In view of the probable timing of submission
of applications by Hawaii grantees, it is anticipated that these rule
changes will apply to FY 1995 applications by Hawaii grantees.
Section 570.430 Hawaii Program Operation Requirements
One commenter stated that paragraph (a) of Sec. 570.430 should be
clarified to indicate that grants received in FY 1995 and thereafter
are grants made from FY 1995 allocations and thereafter, and that
grants made prior to FY 1995 are grants from allocations prior to FY
1995. This revision has been made in the final rule.
Section 570.431 Citizen Participation
Four comments from the State of Hawaii concerned citizen
participation requirements. One commenter requested that paragraph (e)
of Sec. 570.431 be revised to indicate that the citizen participation
requirements apply to the State of Hawaii, and two commenters requested
that the entitlement citizen participation process be followed, and one
commenter requested that the entitlement amendment process be followed
by Hawaii grantees. The Department has decided to add a new paragraph
(f) to Sec. 570.431 to clarify the requirements that Hawaii Small
Cities grantees must follow. The citizen participation requirements are
being included in the Small Cities final rule for clarity. It is noted
that the citizen participation requirements for Hawaii grantees will be
revised shortly, when the final rule on consolidated planning
requirements is published.
Section 570.432 Repayment of Section 108 Loans
Six commenters stated that Section 108 funds should not be used for
the New York Small Cities Program because repayment will come from the
total allocation of discretionary Small Cities funding for the State of
New York. One commenter said that Section 108 funds must be backed by
the community's own resources. In making non-entitled units of general
local government in the State of New York eligible for the Section 108
program, the Department intends to provide small communities with the
opportunity to fund large economic development projects--projects that
they would not ordinarily be able to fund. Since it is envisioned that
a significant portion of economic development funding will come from
the Section 108 loan guarantee fund rather than the HUD-administered
Small Cities Program, there will be more Small Cities funds available
to fund non-economic development projects, even if a small portion of
funds are used under Sec. 570.432 to repay amounts due on Section 108
loan obligations. All Section 108 loan obligations will be underwritten
to ensure that only high quality projects are funded. In addition, the
Department is considering instituting loan insurance pools to further
ensure that the cost to the Small Cities Program will be minimized.
Section 570.507 Reports
The Department agrees with the three commenters that indicated
fifteen working days is insufficient time for New York grantees to
submit a performance assessment report and has extended the period to
31 calendar days in the final rule. (See Sec. 570.507(a)(2)(ii)(A).)
Three commenters from the State of Hawaii requested that HUD
consider a uniform period of activity for their Small Cities
performance and evaluation report. The Department agrees and
Sec. 570.507(a)(2)(ii)(B) provides for this.
Subpart M--Section 570.702 Eligible Applicants
Two commenters requested that the Department make available the
Section 108 Loan Guarantee Program to non-entitled units of local
governments in the HUD-administered Small Cities Program. The
Department agrees that the non-entitled communities in the States of
New York and Hawaii should have available the use of Section 108 and
Sec. 570.702(c) provides for this.
III. Other Matters
Environmental Impact
A Finding of No Significant Impact with respect to the environment
was 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, at the time of the development of the proposed rule. Because no
substantial programmatic changes have been made, that finding remains
applicable to this final rule. The Finding of No Significant Impact is
available for public inspection during regular business hours in the
Office of the Rules Docket Clerk, Office of the General Counsel,
Department of Housing and Urban Development, Room 10276, 451 Seventh
Street, SW., Washington, DC 20410.
Impact on Small Entities
The Secretary, in accordance with 5 U.S.C. 605(b) (the Regulatory
Flexibility Act), has reviewed this final rule before publication, and
by approving it certifies that this final rule will not have a
significant economic impact on a substantial number of small entities.
The rule proposes to modify, simplify and update the administration and
procedural requirements of the CDBG Small Cities Program to conform
with legislation applicable to this program. Accordingly, the final
rule is anticipated to have some beneficial impact on small entities.
However, the number of small entities that may be affected by this rule
will not be substantial and the economic impact will not be
significant.
Federalism Impact
The General Counsel, as the Designated Official under section 6(a)
of Executive Order 12612, Federalism, has determined that this final
rule does not have Federalism implications and therefore is not subject
to review under the Order. No programmatic or policy changes will
result from this rule's promulgation which will have a substantial
direct effect on the States, or on the relationship between the Federal
government and the States, or on the distribution of power and
responsibility among the various levels of government.
Family Impact
The General Counsel, as the Designated Official under Executive
Order 12606, The Family, has determined that this final rule does not
have the potential for significant impact on family formation,
maintenance and general well-being, and thus is not subject to review
under the Order. No significant changes in existing HUD policies or
programs will result from promulgation of this rule.
Regulatory Agenda
This final rule was listed as sequence number 1834 in the
Department's Semiannual Agenda of Regulations published on November 14,
1994 (59 FR 57632, 57662) pursuant to Executive Order 12866 and the
Regulatory Flexibility Act.
Catalogue of Federal Domestic Assistance
The Catalogue of Federal Domestic Assistance program number is
14.219, Community Development Block Grants--Small Cities Program.
List of Subjects in 24 CFR Part 570
Administrative practice and procedure, American Samoa, Community
development block grants, Grant programs--education, Grant programs--
housing and community development, Grant programs--education, Guam,
Indians, Lead poisoning, Loan programs--housing and community
development, Low and moderate income housing, New communities, Northern
Mariana Islands, Pacific Islands Trust Territory, Pockets of poverty,
Puerto Rico, Reporting and recordkeeping requirements, Small cities,
Student aid, Virgin Islands.
Accordingly, 24 CFR part 570 is amended as follows:
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
1. The authority citation for part 570 is revised to read as
follows:
Authority: 42 U.S.C. 3535(d) and 5301-5320.
2. Subpart F is revised to read as follows:
Subpart F--Small Cities Program
Sec.
570.420 General.
570.421 New York Small Cities Program Design.
570.422 Applications from joint applicants.
570.423 Application for the HUD-administered New York Small Cities
Grants.
570.424 Grants for imminent threats to public health and safety.
570.425 HUD review and actions on applications for New York State
applicants.
570.426 Program income.
570.427 Program amendments.
570.428 Reallocated funds.
570.429 Hawaii general and grant requirements.
570.430 Hawaii program operation requirements.
570.431 Citizen participation.
570.432 Repayment of section 108 loans.
Subpart F--Small Cities Program
Sec. 570.420 General.
(a) HUD administration of nonentitlement CDBG funds. Title I of the
Housing and Community Development Act of 1974 permits each State to
elect to administer all aspects of the Community Development Block
Grant (CDBG) Program annual fund allocation for the nonentitlement
areas within its jurisdiction. This subpart sets forth policies and
procedures applicable to grants for nonentitlement areas in States that
have not elected to administer the CDBG Program. States that elected to
administer the program after the close of fiscal year 1984 cannot
return administration of the program to HUD. A decision by a State to
discontinue administration of the program would result in the loss of
CDBG funds for nonentitled areas in that State and the reallocation of
those funds to all States in the succeeding fiscal year.
(b) Scope and applicability. (1) This subpart describes the
policies and procedures of the Small Cities Program which apply to
nonentitlement areas in States where HUD administers the CDBG Program.
HUD currently administers the Small Cities Program in only two States--
New York and Hawaii. This subpart principally addresses the
requirements for New York, and Sec. 570.429-30 identifies special
procedures applicable to Hawaii.
(2) The allocation of formula CDBG funds for use in nonentitled
areas of Hawaii and New York is as provided in subpart A of this part.
The policies and procedures set forth in the following identified
subparts of this part 570 apply to the HUD-administered Small Cities
Program, except as modified or limited under the provisions thereof or
this subpart:
(i) Subpart A--General Provisions;
(ii) Subpart C--Eligible Activities;
(iii) Subpart J--Grant Administration;
(iv) Subpart K--Other Program Requirements; and
(v) Subpart O--Performance Reviews.
(c) Public notification requirements. (1) Section 102 of the
Department of Housing and Urban Development Reform Act of 1989 (42
U.S.C. 3545) contains a number of provisions that are designed to
ensure greater accountability and integrity in the provision of certain
types of assistance administered by HUD. All competitive grants in the
HUD-administered Small Cities Program in New York are affected by this
legislation, and the requirements identified at 24 CFR part 12 apply to
them. Imminent threat grants under Sec. 570.424 and section 108
repayment grants under Sec. 570.432 are not affected by section 102 as
they are not competitive grants.
(2) The Hawaii HUD-administered Small Cities Program is not subject
to section 102, since the funds are not distributed in a competitive
manner.
(d) Abbreviated CHAS. Applications for the HUD-administered Small
Cities Program which contain housing activities must include a
certification that the proposed housing activities are consistent with
the applicant's Comprehensive Housing Affordability Strategy as
described at 24 CFR part 91.
(e) National and primary objectives. (1) Each activity funded
through the Small Cities Program must meet one of the following
national objectives as defined under the criteria in Sec. 570.208. Each
activity must:
(i) Benefit low- and moderate-income families;
(ii) Aid in the prevention or elimination of slums or blight; or
(iii) Be an activity which the grantee certifies is 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.
(2) In addition to the objectives described in paragraph (e)(1) of
this section, with respect to grants made through the Small Cities
Program, not less than 70 percent of the total of grant funds from each
grant and Section 108 loan guarantee funds received under subpart M of
this part within a fiscal year must be expended for activities which
benefit low- and moderate-income persons under the criteria of
Sec. 570.208(a). In the case of multiyear plans, in New York State, not
less than 70 percent of the total funding for grants approved pursuant
to a multiyear plan for a time period of up to 3 years must be expended
for activities which benefit low- and moderate-income persons. Thus, 70
percent of the grant for year 1 of a multiyear plan must meet the 70
percent requirement, 70 percent of the combined grants from years 1 and
2 must meet the requirement, and 70 percent of the combined grants from
years 1, 2 and 3 must meet the requirement. In determining the
percentage of funds expended for such activity, the provisions of
Sec. 570.200(a)(3)(i), (iii), (iv) and (v) shall apply.
(Approved by the Office of Management and Budget under control
number 2506-0060)
Sec. 570.421 New York Small Cities Program Design.
(a) Selection system. (1) Competitive applications. Each
competitive application will be rated and scored against the following
factors:
(i) Need-absolute number of persons in poverty as further explained
in the NOFA;
(ii) Need-percent of persons in poverty as further explained in the
NOFA;
(iii) Program Impact, and
(iv) Fair Housing and Equal Opportunity which may include
assessment of the applicant's Section 3 plan and implementation
efforts. The NOFA described in paragraph (b) of this section will
contain a more detailed description of these factors, and the relative
weight that each factor will be given.
(2) In addition HUD reserves the right to establish minimal
thresholds for selection factors and otherwise select grants in
accordance with Sec. 570.425 and the applicable NOFA.
(3) Multiyear Plans. The notice of funding availability may provide
for a competition for applications that have multiyear plans. The plans
will be rated and scored against factors in paragraph (a)(1) (i)
through (iv) of this section. The action plan for each year of the
multiyear plan must be a viable project on its own. If the multiyear
plan is selected on a competitive basis, the first year will be funded
and HUD may fund future years on a non-competitive basis subject to
acceptable performance, submission of an acceptable application and
certifications, and the provision of adequate appropriations for the
HUD-administered Small Cities Program.
(4) Imminent threats to public health and safety. The criteria for
these grants are described in Sec. 570.424.
(5) Repayment of section 108 loans. The criteria for these grants
are described in Sec. 570.432.
(6) Economic development grants. HUD intends to use the Section 108
loan guarantee program to the maximum extent feasible to fund economic
development projects in the nonentitlement areas of New York. In the
event that there are not enough Section 108 loan guarantee funds
available to fund viable economic development projects, or if a project
needs a grant in addition to a loan guarantee to make it viable, or if
the project does not meet the requirements of the Section 108 program
but is eligible for a grant under this subpart, HUD will fund Economic
Development applications as they are determined to be fundable in a
specific amount by HUD up to the sum set aside for economic development
projects in the notice of funding availability. HUD also has the option
in a NOFA of funding economic development activities on a competitive
basis, as a competitive application as described in paragraph (a)(1) of
this section. In order for an applicant to receive Small Cities grant
funds, the field office must determine that the economic development
project will have a substantial impact on the needs identified by the
applicant.
(b) Notice of funding availability. HUD will issue one or more
Notice(s) of Funding Availability (NOFA) each fiscal year which will
indicate the amount of funds available, the annual grant limits per
grantee, type of grants available, the application requirements, and
the rating factors that will be used for those grants which are
competitive. A NOFA may set forth, subject to the requirements of this
subpart, additional selection criteria for all grants.
(c) Eligible applicants. (1) Eligible applicants in New York are
units of general local government, excluding: Metropolitan cities,
urban counties, units of general local government which are
participating in urban counties or metropolitan cities, even if only
part of the participating unit of government is located in the urban
county or metropolitan city. Indian tribes are also ineligible for
assistance under this subpart. An application may be submitted
individually or jointly by eligible applicants.
(2) Counties, cities, towns, and villages may apply and receive
funding for separate projects to be done in the same jurisdiction. Only
one grant will be made under each funding round for the same type of
project to be located within the jurisdiction of a unit of general
local government (e.g. both the county and village cannot receive
funding for a sewer system to be located in the same village, but the
county can receive funding for a sewer system that is located in the
same village as a rehabilitation project for which the village receives
funding). The NOFA will contain additional information on applicant
eligibility.
(3) Counties may apply on behalf of units of general local
government located within their jurisdiction when the unit of general
local government has authorized the county to apply. At the time that
the county submits its application for funding, it must submit a
resolution by the governing body of the unit of local government that
authorizes the county to submit an application on behalf of the unit of
general local government. The county will be considered the grantee and
will be responsible for executing all grant documents. The county is
responsible for ensuring compliance with all laws, regulations, and
Executive Orders applicable to the CDBG Program. HUD will deal
exclusively with the county with respect to issues of program
administration and performance, including remedial actions. The unit of
general local government will be considered the grantee for the purpose
of determining grant limits. The unit of general local government's
statistics will be used for purposes of the selection factors referred
to in Sec. 570.421(a).
(d) Public service activities cap. Public service activities may be
funded up to a maximum of fifteen (15) percent of a State's
nonentitlement allocation for any fiscal year. HUD may award a grant to
a unit of general local government for public service activities with
up to 100 percent of the funds intended for public service activities.
HUD will apply the 15 percent statewide cap to public service
activities by funding public service activities in the highest rated
applications in each NOFA until the cap is reached.
(e) Activities outside an applicant's boundaries. An applicant may
conduct eligible CDBG activities outside its boundaries. These
activities must be demonstrated to be appropriate to meeting the
applicant's needs and objectives, and must be consistent with State and
local law. This provision includes using funds provided under this
subpart in a metropolitan city or an urban county.
Sec. 570.422 Applications from joint applicants.
Units of general local government may submit a joint application
which addresses common problems faced by the jurisdictions, to the
extent permitted by the NOFA. A joint application must be pursuant to a
written cooperation agreement submitted with the application. The
cooperation agreement must authorize one of the participating units of
government to act as the lead applicant which will submit the
application to HUD, and must delineate the responsibilities of each
participating unit of government with respect to the Small Cities
Program. The lead applicant is responsible for executing the
application, certifications, and grant agreement, and ensuring
compliance with all laws, regulations, and Executive Orders applicable
to the CDBG Program. HUD will deal exclusively with the lead applicant
with respect to issues of program administration and performance,
including remedial actions. In the event of poor performance, HUD
reserves the right to deny and/or restrict future funding to all units
of general local government which are parties to the cooperation
agreement.
Sec. 570.423 Application for the HUD-administered New York Small
Cities Grants.
(a) Proposed application. The applicant shall prepare and publish a
proposed application, and comply with citizen participation
requirements as described in Sec. 570.431.
(b) Final application. The applicant shall submit to HUD a final
application containing its community development objectives and
activities. This final application shall be submitted, in a form
prescribed by HUD, to the appropriate HUD Office.
(c) Certifications. (1) Certifications shall be submitted in a form
prescribed by HUD. If the application contains any housing activities,
the applicant shall certify that the proposed housing activities are
consistent with its Abbreviated Comprehensive Housing Affordability
Strategy as described at 24 CFR part 91.
(2) In the absence of evidence (which may, but need not, be derived
from performance reviews or other sources) which tends to challenge in
a substantial manner the certifications made by the applicant, the
certifications will be accepted by HUD. However, if HUD does have
available such evidence, HUD may require the submission of additional
information or assurances before determining whether an applicant's
certifications are satisfactory.
(d) Thresholds. The HUD Office may use any information available to
it to make the threshold judgments required by the applicable NOFA,
including information related to the applicant's performance with
respect to any previous assistance under this subpart. The annual
performance and evaluation report required under Sec. 570.507(a) is the
primary source of this information. The HUD Office may request
additional information in cases where it is essential to make the
required performance judgments.
(Approved by the Office of Management and Budget under control
number 2506-0060)
Sec. 570.424 Grants for imminent threats to public health and safety.
(a) Criteria. The following criteria apply for an imminent threat
to public health or safety:
(1) The Director of Community Planning and Development of the HUD
office may, at any time, invite an application for funds available
under this subpart in response to a request for assistance to alleviate
an imminent threat to public health or safety that requires immediate
resolution. HUD shall verify the urgency and the immediacy of the
threat with an appropriate authority other than the applicant prior to
acceptance of the application, and the Director of Community Planning
and Development of the HUD Office shall review the claim to determine
if, in fact, an imminent threat to public health or safety does exist.
For example, an applicant with documented cases of disease resulting
from a contaminated drinking water supply has an imminent threat to
public health, while an applicant ordered to improve the quality of its
drinking water supply over the next two years does not have an imminent
threat within the definition of paragraph (a) of this section. These
funds are to be used to deal with those threats which represent a
unique and unusual circumstance, not for the type of threat that occurs
with frequency in a number of communities within the State of New York.
(2) The applicant does not have sufficient local resources, and
other Federal or State resources are unavailable to alleviate the
imminent threat.
(3) All imminent threat projects must meet the requirement of
Sec. 570.420(e).
(b) HUD action. (1) Fifteen percent of the funds allocated to New
York State in the Small Cities Program may be reserved to alleviate
imminent threats to the public health or safety unless a lesser amount
is specified in a NOFA. Applications shall be submitted in accordance
with Sec. 570.423.
(2) Applications which meet the requirements of this section may be
approved by the Director of Community Planning and Development of the
HUD Office without competition.
(3) The only funds reserved for imminent threats to the public
health or safety are those specified by this section as modified by the
NOFA. After the funds have been depleted, HUD shall not consider
further requests for grants relating to imminent threats during that
fiscal year.
(c) Letter to proceed. Notwithstanding Sec. 570.425(a)(3), after a
determination has been made that an imminent threat exists, HUD may
issue the applicant a letter to proceed to incur costs to alleviate the
imminent threat. Reimbursement of such costs is dependent upon HUD
approval of the final application.
(d) Environmental review. Pursuant to 24 CFR 58.34(a)(8), grants
for imminent threat to public health or safety are excluded from some
or all of the environmental review requirements of 24 CFR part 58, to
the extent provided therein.
Sec. 570.425 HUD review and actions on applications for New York State
applicants.
(a) Final application submission. (1) Submission deadline. HUD will
establish a time period during which final applications must be
submitted to the appropriate office. The dates for this period will be
published in a notice in the Federal Register.
(2) Incomplete applications. Applications must contain the
information required by HUD. Information relative to the application
will not be accepted or considered if received after the submission
deadline, unless the information is specifically requested in writing
by HUD.
(3) Pre-agreement costs. HUD authorizes a unit of general local
government to incur costs during a Federal fiscal year in which a grant
is made or the prior fiscal year for preparation of a CDBG grant
application, planning costs eligible under Sec. 570.205, environmental
assessments, and project engineering and design costs for eligible
activities under Sec. 570.201 through 570.204 before the establishment
of a formal grant relationship between the applicant and HUD. Costs of
such activities for the funded application may be charged to the grant
should it be funded, provided that the activities are undertaken in
accordance with the requirements of this subpart, and 24 CFR part 58.
It is understood that the incurring of costs described in this
paragraph creates no obligation on HUD to approve the application.
(b) HUD action on final application. (1) Review and notification.
Following the review of the applications, HUD will promptly notify each
applicant of the action taken with regard to its application.
Documentation which supports HUD's decisions on applications will be
available to the public.
(2) Conditional approval. HUD may make a conditional approval, in
which case the grant will be approved but the obligation and
utilization of funds will be restricted. The reasons for the
conditional approval and the actions necessary to remove the condition
will be specified. Failure to satisfy the condition may result in a
termination of the grant.
(3) HUD will not make a Small Cities grant when it is determined
that the grant will only have a minimal or insignificant impact on the
grantee.
(4) Individual grant amounts. In determining appropriate grant
amounts to be awarded, HUD may take into account the size of the
applicant, the level of demand, the scale of the activity proposed
relative to need and operational capacity, the number of persons to be
served, the amount of funds required to achieve project objectives and
the administrative capacity of the applicant to complete the activities
in a timely manner.
(c) Streamlined application requirement for previous applicants.
HUD may provide pursuant to a NOFA that if an applicant notifies HUD in
writing within the application period specified in a NOFA that it
wishes to be so considered, HUD will consider unfunded applications
from the prior round or competition that meet the threshold
requirements of the NOFA. For FY 1995 only, unfunded applications from
the FY 1994 competition will be automatically reactivated for
consideration unless the applicant notifies the Department in writing
by the date specified in the FY 1995 NOFA that it does not wish to have
the FY 1994 application considered in the FY 1995 competition. The
applicant will have the option of withdrawing its application, or
amending or supplementing the application for succeeding rounds of
competition. If there is no significant change in the application
involving new activities or alteration of proposed activities that will
significantly change the scope, location or objectives of the proposed
activities or beneficiaries, there will be no further citizen
participation requirement to keep the application active for succeeding
rounds of competition.
Sec. 570.426 Program income.
(a) The provisions of Sec. 570.504(b) apply to all program income
generated by a specific grant and received prior to grant closeout.
(b) If the unit of general local government has another ongoing
CDBG grant at the time of closeout, the program income will be
considered to be program income of the ongoing grant. The grantee can
choose which grant to credit the program income to if it has multiple
open CDBG grants.
(c) If the unit of general local government has no open ongoing
CDBG grant at the time of closeout, program income of the unit of
general local government or its subrecipients which amounts to less
than $25,000 per year will not be considered to be program income. When
more than $25,000 of program income is generated from one or more
closed out grants in a year after closeout, the entire amount of the
program income is subject to the requirements of this part. This will
be a subject of the closeout agreement described in Sec. 570.509(c).
Sec. 570.427 Program amendments.
(a) HUD approval of certain program amendments. Grantees shall
request prior HUD approval for all program amendments involving new
activities or alteration of existing activities that will significantly
change the scope, location, or objectives of the approved activities or
beneficiaries. Approval is subject to the following:
(1) Programs or projects that include new or significantly altered
activities are rated in accordance with the criteria for selection
applicable at the time the original preapplication or application
(whichever is applicable) was rated. The rating of the program or
projects proposed which include the new or altered activities proposed
by the amendment must be equal to or greater than the lowest rating
received by a funded project or program during that cycle of ratings.
(2) Consideration shall be given to whether any new activity
proposed can be completed promptly.
(3) If the grant was received on a non-competitive basis, the
proposed amended project must be able to be completed promptly, and
must meet all of the threshold requirements that were required for the
original project. If the proposal is to amend the project to a type of
project that was rated competitively in the Fiscal Year that the non-
competitive project was funded, the new or altered activities proposed
by the amendment must receive a rating equal to or greater than the
lowest rating received by a funded project or program during that cycle
of ratings.
(b) Documentation of program amendments. Any program amendments
that do not require HUD approval must be fully documented in the
grantee's records.
(c) Citizen participation requirements. Whenever an amendment
requires HUD approval, the requirements for citizen participation in
Sec. 570.431 must be met.
Sec. 570.428 Reallocated funds.
(a) General. This section governs reallocated funds originally
allocated for use under 24 CFR part 570, subpart F (Small Cities
Program).
(b) Assignment of funds to be reallocated. Reallocated funds may
be:
(1) Used at any time necessary for a section 108 repayment grant
under Sec. 570.432;
(2) Added to the next Small Cities Program competition;
(3) Used to fund any application not selected for funding in the
most recent Small Cities competition, because of a procedural error
made by HUD; or
(4) Used to fund the most highly ranked unfunded application or
applications from the most recent Small Cities Program competition.
(c) Timing. Funds which become available shall be used as soon as
practicable.
Sec. 570.429 Hawaii general and grant requirements.
(a) General. This section shall apply to the HUD-administered Small
Cities Program in the State of Hawaii.
(b) Scope and applicability. Except as otherwise provided in this
section, the policies and procedures outlined in subparts A, C, J, K, O
of this part, and in Secs. 570.420 and 570.430 through 570.432, shall
apply to the HUD-administered Small Cities Program in the State of
Hawaii.
(c) Grant amounts. (1) For each eligible unit of general local
government, a formula grant amount will be determined which bears the
same ratio to the total amount available for the nonentitlement area of
the State as the weighted average of the ratios between:
(i) The population of that eligible unit of general local
government and the population of all eligible units of general local
government in the nonentitlement areas of the State;
(ii) The extent of poverty in that eligible unit of general local
government and the extent of poverty in all the eligible units of
general local government in the nonentitled areas of the State; and
(iii) The extent of housing overcrowding in that eligible unit of
general local government and the extent of housing overcrowding in all
the eligible units of general local government in the nonentitled areas
of the State.
(2) In determining the average of the ratios under this paragraph
(c), the ratio involving the extent of poverty shall be counted twice
and each of the other ratios shall be counted once. (0.25 + 0.50 + 0.25
= 1.00).
(d) Adjustments to grants. Grant amounts under this section may be
adjusted where an applicant's performance is judged inadequate,
considering:
(1) Capacity to utilize the grant amount effectively and
efficiently;
(2) Compliance with the requirements of Sec. 570.902(a) for timely
expenditure of funds beginning with grants made in FY 1996. In making
this calculation, all outstanding grants will be considered. For the FY
1995 grant the requirement is substantial compliance with the
applicant's schedule or schedules submitted in each previously funded
application;
(3) Compliance with other program requirements based on monitoring
visits and audits.
(e) Reallocation. (1) Any amounts that become available as a result
of adjustments under paragraph (d) of this section, or any reductions
under subpart O of this part, shall be reallocated in the same fiscal
year to any remaining eligible applicants on a pro rata basis.
(2) Any formula grant amounts reserved for an applicant that
chooses not to submit an application shall be reallocated to any
remaining eligible applicants on a pro rata basis.
(3) No amounts shall be reallocated under paragraph (e) of this
section in any fiscal year to any applicant whose grant amount was
adjusted under paragraph (d) of this section or reduced under subpart O
of this part.
(f) Applications. (1) Presubmission. The applicant will follow the
requirements of Sec. 570.301(a) and (c), as well as the requirements of
this section.
(2) Submission. (i) HUD will require all applicants to submit an
application for the amount established under paragraphs (c) through (e)
of this section by a date established by HUD, and to follow the
requirements of Sec. 570.302(a)(1) and (2).
(ii) Certifications. Certifications shall be submitted in a form
prescribed by HUD. If the application contains any housing activities,
the applicant shall certify that the proposed housing activities are
consistent with its Comprehensive Housing Affordability Strategy as
described at 24 CFR part 91.
(g) Application Approval. HUD will approve the application and
certifications unless it is determined that one or more of the
following requirements have not been met.
(1) Completeness. The submission shall include all of the
components required in paragraph (f) of this section.
(2) Timeliness. The submission must be received within the time
period established in paragraph (f) of this section.
(3) Certifications. The certifications made by the grantee will be
satisfactory to the Secretary if made in conformance with the
requirements of paragraph (f) of this section, unless the Secretary has
determined pursuant to subpart O of this part that the grantee has not
complied with the requirements of this part or has failed to carry out
its Comprehensive Housing Affordability Strategy in a timely manner, or
determined that there is evidence, not directly involving the grantee's
past performance under this program, which tends to challenge in a
substantial manner the grantee's certification of future performance.
If the Secretary makes any such determination, however, further
assurances may be required to be submitted by the grantee as the
Secretary may deem warranted or necessary to find the grantee's
certification satisfactory.
(h) Grant agreement. The grant will be made by means of a grant
agreement executed by both HUD and the grantee.
(i) Conditional grant. The Secretary may make a conditional grant
in which case the obligation and use of grant funds for activities may
be restricted. Conditional grants may be made where there is
substantial evidence that there has been, or there will be, a failure
to meet the performance requirements or criteria described in subpart O
of this part. In such case, the conditional grant will be made by means
of a grant agreement, executed by HUD, which includes the terms of the
condition specifying the reason for the conditional grant, the actions
necessary to remove the condition and the deadline for taking those
actions. The grantee shall execute and return such an agreement to HUD
within 60 days of the date of its transmittal. Failure of the grantee
to execute and return the grant agreement within 60 days may be deemed
by HUD to constitute rejection of the grant by the grantee and shall be
cause for HUD to determine that the funds provided in the grant
agreement are available for reallocation in accordance with section
106(c) of the Act. Failure to satisfy the condition may result in a
reduction in the grant amount pursuant to Sec. 570.911.
(Approved by the Office of Management and Budget under control
number 2506-0060)
Sec. 570.430 Hawaii program operation requirements.
(a) Limitation on planning and administrative costs. For grants
made with allocations prior to FY 1995, no more than 20 percent of the
sum of the grant plus program income received during the grant period
shall be expended for planning and program administrative costs. For
grants received from allocations in FY 1995 and thereafter, a grantee
will be considered to be in conformance with the requirements of
Sec. 570.200(g) if expenditures for planning and administration during
the most recently completed program year do not exceed 20 percent of
the sum of the grant made for that program year and the program income
received from post FY 1994 grants during that program year.
(b) Performance and evaluation reports. Grantees will follow the
requirements of Sec. 570.507(a) for entitlement grant recipients for
all grants received in FY 1995 and thereafter. Grantees will continue
following the requirements of Sec. 570.507(a) for HUD-administered
small cities grants for grants received prior to FY 1995 until those
grants are closed out.
(c) Grant closeouts. Grants received prior to FY 1995 shall be
closed out in accordance with the procedures in Sec. 570.509. Grants
received in FY 1995 and thereafter shall not be closed out
individually. A grantee's entire program shall be closed upon program
completion if a grantee ceases its participation in the Small Cities
Program.
(d) Public Services. Starting with the FY 1996 grant, grantees may
follow the provisions of Sec. 570.201(e)(1) that refer to entitlement
grantees, allowing grantees to use 15 percent of the program income
received in the previous program year in addition to 15 percent of the
grant amount for public services.
(e) Compliance with the primary objective. Starting with the FY
1995 grant, grantees may select a time period of one, two or three
program years in which to meet the requirement that not less than 70
percent of the aggregate of CDBG fund expenditures be for activities
benefitting low- and moderate-income persons. Grants made from
allocations prior to FY 1995 will be considered individually for
meeting the primary objective, and expenditures for grants from pre FY
1995 allocations made during and after FY 1995 will not be considered
in determining whether the primary objective has been met for post 1994
allocations. If the State of Hawaii decides to administer the Community
Development Block Grant Program for non-entitled units of general local
government in Hawaii, the State will be bound by the time period for
meeting the primary objective that was chosen by each non-entitled
grantee within the State until those time periods have expired.
(f) Amendments. (1) The grantee shall amend its application
whenever it decides not to carry out an activity described in its
application, to carry out an activity not previously described, or to
substantially change the purpose, scope, location, or beneficiaries of
an activity. Prior to the submission of its FY 1995 application, each
grantee shall develop and make public its criteria for what constitutes
a substantial change for this purpose.
(2) Prior to amending its application, a grantee shall follow the
citizen participation requirements of Sec. 570.431 except that HUD is
not required to approve the amendment.
Sec. 570.431 Citizen participation.
(a) General. An applicant that is located in a nonentitlement area
of a State that has not elected to distribute funds shall comply with
the citizen participation requirements described in this section,
including requirements for the preparation of the proposed application
and the final application. The requirements for citizen participation
do not restrict the responsibility or authority of the applicant for
the development and execution of its community development program.
(b) Citizen participation plan. The applicant must develop and
follow a detailed citizen participation plan and must make the plan
public. The plan must be completed and available before the application
for assistance is submitted to HUD, and the applicant must certify that
it is following the plan. The plan must set forth the applicant's
policies and procedures for:
(1) Giving citizens timely notice of local meetings and reasonable
and timely access to local meetings, information, and records relating
to the grantee's proposed and actual use of CDBG funds including, but
not limited to:
(i) The amount of CDBG funds expected to be made available for the
coming year, including the grant and anticipated program income;
(ii) The range of activities that may be undertaken with those
funds;
(iii) The estimated amount of those funds proposed to be used for
activities that will benefit low and moderate income persons;
(iv) The proposed CDBG activities likely to result in displacement
and the applicant's plans, consistent with the policies developed under
Sec. 570.606(b), for minimizing displacement of persons as a result of
its proposed activities; and
(v) The types and levels of assistance the applicant plans to make
available (or to require others to make available) to persons displaced
by CDBG-funded activities, even if the applicant expects no
displacement to occur;
(2) Providing technical assistance to groups representative of
persons of low and moderate income that request assistance in
developing proposals. The level and type of assistance to be provided
is at the discretion of the applicant. The assistance need not include
the provision of funds to the groups;
(3) Holding a minimum of two public hearings, for the purpose of
obtaining citizen's views and formulating or responding to proposals
and questions. Each public hearing must be conducted at a different
stage of the CDBG program. Together, the hearings must address
community development and housing needs, development of proposed
activities and review of program performance. There must be reasonable
notice of the hearings and the hearings must be held at times and
accessible locations convenient to potential or actual beneficiaries,
with reasonable accommodations including material in accessible formats
for persons with disabilities. The applicant must specify in its plan
how it will meet the requirement for hearings at times and locations
convenient to potential or actual beneficiaries;
(4) Meeting the needs of non-English speaking residents in the case
of public hearings where a significant number of non-English speaking
residents can reasonably be expected to participate;
(5) Responding to citizen complaints and grievances, including the
procedures that citizens must follow when submitting complaints and
grievances. The applicant's policies and procedures must provide for
timely written answers to written complaints and grievances within 15
working days of the receipt of the complaint, where practicable; and
(6) Encouraging citizen participation, particularly by low- and
moderate-income persons who reside in slum or blighted areas, and in
other areas in which CDBG funds are proposed to be used.
(c) Publication of proposed application. The applicant shall
publish a proposed application consisting of the proposed community
development activities and community development objectives in order to
afford affected citizens an opportunity to:
(1) Examine the application's contents to determine the degree to
which they may be affected;
(2) Submit comments on the proposed application; and
(3) Submit comments on the performance of the applicant.
(4) The requirement for publishing may be met by publishing a
summary of the proposed application in one or more newspapers of
general circulation, and by making copies of the proposed application
available at libraries, government offices, and public places. The
summary must describe the contents and purpose of the proposed
application, and must include a list of the locations where copies of
the entire proposed application may be examined.
(d) Preparation of a final application. An applicant must prepare a
final application. In the preparation of the final application, the
applicant shall consider comments and views received related to the
proposed application and may, if appropriate, modify the final
application. The final application shall be made available to the
public and shall include the community development objectives and
projected use of funds, and the community development activities.
(e) New York Grantee Amendments. To assure citizen participation on
program amendments to final applications that require HUD approval
under Sec. 570.427, the grantee shall:
(1) Furnish citizens information concerning the amendment;
(2) Hold one or more public hearings to obtain the views of
citizens on the proposed amendment;
(3) Develop and publish the proposed amendment in such a manner as
to afford affected citizens an opportunity to examine the contents, and
to submit comments on the proposed amendment;
(4) Consider any comments and views expressed by citizens on the
proposed amendment and, if the grantee finds it appropriate, modify the
final amendment accordingly; and
(5) Make the final amendment to the community development program
available to the public before its submission to HUD.
(f) Hawaii Grantee amendments. Hawaii grantees shall follow the
requirements of paragraph (e) of this section except that the amendment
does not need HUD approval, and does not have to be submitted to HUD.
Sec. 570.432 Repayment of section 108 loans.
Notwithstanding any other provision of this subpart, a unit of
general local government in a nonentitlement area where the State has
not elected to administer the CDBG program shall be eligible for Small
Cities Grant assistance hereunder for the sole purpose of paying any
amounts due on debt obligations issued by such unit of general local
government (or its designated public agency) and guaranteed by the
Secretary pursuant to section 108 of the Act (see subpart M of this
part). The award of grant assistance for such purpose shall be
consistent with section 106(d)(3)(B) of the Act, in such amount, and
subject to such conditions as the Secretary may determine. Since
guaranteed loan funds (as defined in Sec. 570.701) are required to be
used in accordance with national and primary objective requirements,
and other applicable requirements of this part, any grant made to make
payments on the debt obligations evidencing the guaranteed loan shall
be presumed to meet such requirements, unless HUD determines that the
guaranteed loan funds were not used in accordance with such
requirements. Any such determination by HUD shall not prevent the
making of the grant in the amount of the payment due, but it may be
grounds for HUD to take appropriate action under subpart O based on the
original noncompliance.
3. In 24 CFR part 570, subpart I, a new Sec. 570.497 is added to
read as follows:
Sec. 570.497 Condition of State election to administer State CDBG
Program.
Pursuant to section 106(d)(2)(A)(i) of the Act, a State has the
right to elect, in such manner and at such time as the Secretary may
prescribe, to administer funds allocated under subpart A of this part
for use in nonentitlement areas of the State. After January 26, 1995,
any State which elects to administer the allocation of CDBG funds for
use in nonentitlement areas of the State in any year must, in addition
to all other requirements of this subpart, submit a pledge by the State
in accordance with section 108(d)(2) of the Act, and in a form
acceptable to HUD, of any future CDBG grants it may receive under
subpart A and this subpart. Such pledge shall be for the purpose of
assuring repayment of any debt obligations (as defined in
Sec. 570.701), in accordance with their terms, that HUD may have
guaranteed in the respective State on behalf of any nonentitlement
public entity (as defined in Sec. 570.701) or its designated public
agency prior to the State's election.
4. In Sec. 570.507, paragraph (a)(2)(ii)(A) is revised to read as
follows:
Sec. 570.507 Reports.
(a) * * *
(2) * * *
(ii) * * *
(A) The first report on a small cities grant for a New York grantee
should be submitted no later than October 31 for all grants executed
prior to April 1 of the same calendar year. The first report should
cover the period from the execution of the grant until September 30.
Reports on grants made after March 31 of a calendar year will be due
October 31 of the following calendar year and the reports will cover
the period of time from the execution of the grant until September 30
of the calendar year following grant execution. After the initial
submission, the performance and evaluation report will be submitted
annually on October 31 until completion of the activities funded under
the grant;
(B) Hawaii grantees will submit their small cities performance and
evaluation report for each pre-FY 1995 grant no later than 90 days
after the completion of their most recent program year. After the
initial submission, the performance and evaluation report will be
submitted annually until completion of the activities funded under the
grant; and
(C) No later than 90 days after the criteria for grant closeout, as
described in Sec. 570.509(a), have been met.
* * * * *
5. In 24 part 570, subpart M, consisting of Secs. 570.700 through
570.710 is revised to read as follows:
Subpart M--Loan Guarantees
Sec.
570.700 Purpose.
570.701 Definitions.
570.702 Eligible applicants.
570.703 Eligible activities.
570.704 Application requirements.
570.705 Loan requirements.
570.706 Federal guarantee; subrogation.
570.707 Applicability of rules and regulations.
570.708 Sanctions.
570.709 Allocation of loan guarantee assistance.
570.710 State responsibilities.
Subpart M--Loan Guarantees
Sec. 570.700 Purpose.
This subpart contains requirements governing the guarantee under
section 108 of the Act of debt obligations as defined in Sec. 570.701.
Sec. 570.701 Definitions.
Borrower means the public entity or its designated public agency
that issues debt obligations under this subpart.
Debt obligation means a promissory note or other obligation issued
by a public entity or its designated public agency and guaranteed by
HUD under this subpart, or a trust certificate or other obligation
offered by HUD or by a trust or other offeror approved for purposes of
this subpart by HUD which is guaranteed by HUD under this subpart and
is based on and backed by a trust or pool composed of notes or other
obligations issued by public entities or their designated public
agencies and guaranteed or eligible for guarantee by HUD under this
subpart.
Designated public agency means a public agency designated by a
public entity to issue debt obligations as borrower under this subpart.
Entitlement public entity means a metropolitan city or an urban
county receiving a grant under subpart D of this part.
Guaranteed loan funds means the proceeds payable to the borrower
from the issuance of debt obligations under this subpart.
Nonentitlement public entity means any unit of general local
government in a nonentitlement area.
Public entity means any unit of general local government, including
units of general local government in a nonentitlement area.
State-assisted public entity means a unit of general local
government in a nonentitlement area which is assisted by a State as
required in Sec. 570.704(b)(9) and Sec. 570.705(b)(2).
Sec. 570.702 Eligible applicants.
The following public entities may apply for loan guarantee
assistance under this subpart.
(a) Entitlement public entities.
(b) Nonentitlement public entities that are assisted in the
submission of applications by States that administer the CDBG program
(under subpart I of this part). Such assistance shall consist, at a
minimum, of the certifications required under Sec. 570.704(b)(9) (and
actions pursuant thereto).
(c) Nonentitlement public entities eligible to apply for grant
assistance under subpart F of this part.
Sec. 570.703 Eligible activities.
Guaranteed loan funds may be used for the following activities,
provided such activities meet the requirements of Sec. 570.200.
However, guaranteed loan funds may not be used to reimburse the CDBG
program account or line of credit for costs incurred by the public
entity or designated public agency and paid with CDBG grant funds or
program income.
(a) Acquisition of improved or unimproved real property in fee or
by long-term lease, including acquisition for economic development
purposes.
(b) Rehabilitation of real property owned or acquired by the public
entity or its designated public agency.
(c) Payment of interest on obligations guaranteed under this
subpart.
(d) Relocation payments and other relocation assistance for
individuals, families, businesses, nonprofit organizations, and farm
operations who must relocate permanently or temporarily as a result of
an activity financed with guaranteed loan funds, where the assistance
is:
(1) Required under the provisions of Sec. 570.488 (b) or (c) or
Sec. 570.606 (b) or (c); or
(2) Determined by the public entity to be appropriate under the
provisions of Sec. 570.488(d) or Sec. 570.606(d).
(e) Clearance, demolition and removal, including movement of
structures to other sites, of buildings and improvements on real
property acquired or rehabilitated pursuant to paragraphs (a) and (b)
of this section.
(f) Site preparation, including construction, reconstruction, or
installation of public and other site improvements, utilities, or
facilities (other than buildings), which is:
(1) Related to the redevelopment or use of the real property
acquired or rehabilitated pursuant to paragraphs (a) and (b) of this
section, or
(2) For an economic development purpose.
(g) Payment of issuance, underwriting, servicing, trust
administration and other costs associated with private sector financing
of debt obligations under this subpart.
(h) Housing rehabilitation eligible under Sec. 570.202.
(i) The following economic development activities:
(1) Activities eligible under Sec. 570.203; and
(2) Community economic development projects eligible under
Sec. 570.204.
(j) Construction of housing by nonprofit organizations for
homeownership under section 17(d) of the United States Housing Act of
1937 (Housing Development Grants Program, 24 CFR part 850) or title VI
of the Housing and Community Development Act of 1987 (Nehemiah Housing
Opportunity Grants Program, 24 CFR part 280).
(k) A debt service reserve to be used in accordance with
requirements specified in the contract entered into pursuant to
Sec. 570.705(b)(1).
(l) Acquisition, construction, reconstruction, rehabilitation, or
installation of public facilities (except for buildings for the general
conduct of government), public streets, sidewalks, and other site
improvements and public utilities.
(m) In the case of applications by public entities which are, or
which contain, ``colonias'' as defined in section 916 of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 5306 note), as
amended by section 810 of the Housing and Community Development Act of
1992, acquisition, construction, reconstruction, rehabilitation or
installation of public works and site or other improvements which serve
the colonia.
Sec. 570.704 Application requirements.
(a) Presubmission and citizen participation requirements.
(1) Before submission of an application for loan guarantee
assistance to HUD, the public entity must:
(i) Develop a proposed application that includes the following
items:
(A) The community development objectives the public entity proposes
to pursue with the guaranteed loan funds.
(B) The activities the public entity proposes to carry out with the
guaranteed loan funds. Each activity must be described in sufficient
detail, including the specific provision of Sec. 570.703 under which it
is eligible and the national objective to be met, amount of guaranteed
loan funds expected to be used, and location, to allow citizens to
determine the degree to which they will be affected. The proposed
application must indicate which activities are expected to generate
program income. The application must also describe where citizens may
obtain additional information about proposed activities.
(C) A description of the pledge of grants required under
Sec. 570.705(b)(2). In the case of applications by State-assisted
public entities, the description shall note that pledges of grants will
be made by the State and by the public entity.
(ii) Fulfill the applicable requirements in its citizen
participation plan developed in accordance with Sec. 570.704(a)(2).
(iii) Publish community-wide its proposed application so as to
afford affected citizens an opportunity to examine the application's
contents and to provide comments on the proposed application.
(iv) Prepare its final application. Once the public entity has held
the public hearing and published the proposed application as required
by paragraphs (a)(1)(ii) and (iii) of this section, respectively, the
public entity must consider any such comments and views received and,
if the public entity deems appropriate, modify the proposed
application. Upon completion, the public entity must make the final
application available to the public. The final application must
describe each activity in sufficient detail to permit a clear
understanding of the nature of each activity, as well as identify the
specific provision of Sec. 570.703 under which it is eligible, the
national objective to be met, and the amount of guaranteed loan funds
to be used. The final application must also indicate which activities
are expected to generate program income.
(v) If an application for loan guarantee assistance is to be
submitted by an entitlement public entity simultaneously with the
public entity's submission for its entitlement grant, the public entity
shall include and identify in its proposed and final statements of
community development objectives and projected use of funds prepared
for its annual grant pursuant to Sec. 570.301 the activities to be
undertaken with the guaranteed loan funds, the national objective to be
met by each of these activities, the amount of any program income
expected to be received during the program year, and the amount of
guaranteed loan funds to be used; the public entity shall also include
in these statements a description of the pledge of grants required
under Sec. 570.705(b)(2). In such cases the proposed and final
application requirements of paragraphs (a)(1) (i), (iii), and (iv) of
this section will be deemed to have been met.
(2) Citizen participation plan. The public entity must develop and
follow a detailed citizen participation plan and make the plan public.
The plan must be completed and available before the application is
submitted to HUD. The plan may be the plan required for the CDBG
program, modified to include guaranteed loan funds. The public entity
is not required to hold a separate public hearing for its CDBG program
and for the guaranteed loan funds to obtain citizens' views on
community development and housing needs. The plan must set forth the
public entity's policies and procedures for:
(i) Giving citizens timely notice of local meetings and reasonable
and timely access to local meetings, information, and records relating
to the public entity's proposed and actual use of guaranteed loan
funds, including, but not limited to:
(A) The amount of guaranteed loan funds expected to be made
available for the coming year, including program income anticipated to
be generated by the activities carried out with guaranteed loan funds;
(B) The range of activities that may be undertaken with guaranteed
loan funds;
(C) The estimated amount of guaranteed loan funds (including
program income derived therefrom) proposed to be used for activities
that will benefit low and moderate income persons;
(D) The proposed activities likely to result in displacement and
the public entity's plans, consistent with the policies developed under
Sec. 570.606 or Sec. 570.488 for minimizing displacement of persons as
a result of its proposed activities.
(ii) Providing technical assistance to groups representative of
persons of low and moderate income that request assistance in
developing proposals. The level and type of assistance to be provided
is at the discretion of the public entity. Such assistance need not
include the provision of funds to such groups.
(iii) Holding a minimum of two public hearings, each at a different
stage of the public entity's program, for the purpose of obtaining the
views of citizens and formulating or responding to proposals and
questions. Together the hearings must address community development and
housing needs, development of proposed activities and review of program
performance. At least one of these hearings must be held before
submission of the application to obtain the views of citizens on
community development and housing needs. Reasonable notice of the
hearing must be provided and the hearing must be held at times and
locations convenient to potential or actual beneficiaries, with
accommodation for the handicapped. The public entity must specify in
its plan how it will meet the requirement for a hearing at times and
locations convenient to potential or actual beneficiaries.
(iv) Meeting the needs of non-English speaking residents in the
case of public hearings where a significant number of non-English
speaking residents can reasonably be expected to participate.
(v) Providing affected citizens with reasonable advance notice of,
and opportunity to comment on, proposed activities not previously
included in an application and activities which are proposed to be
deleted or substantially changed in terms of purpose, scope, location,
or beneficiaries. The criteria the public entity will use to determine
what constitutes a substantial change for this purpose must be
described in the citizen participation plan.
(vi) Responding to citizens' complaints and grievances, including
the procedures that citizens must follow when submitting complaints and
grievances. The public entity's policies and procedures must provide
for timely written answers to written complaints and grievances within
15 working days of the receipt of the complaint, where practicable.
(vii) Encouraging citizen participation, particularly by low and
moderate income persons who reside in slum or blighted areas, and other
areas in which guaranteed loan funds are proposed to be used.
(b) Submission requirements. An application for loan guarantee
assistance may be submitted at any time. The application (or final
statement) shall be submitted to the appropriate HUD Office and shall
be accompanied by the following:
(1) A description of how each of the activities to be carried out
with the guaranteed loan funds meets one of the criteria in
Sec. 570.208.
(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.
(3) A certification providing assurance that the public entity
possesses the legal authority to make the pledge of grants required
under Sec. 570.705(b)(2).
(4) A certification providing assurance that the public entity 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.
(5) The drug-free workplace certification required under 24 CFR
part 24 (Appendix C).
(6) The certification regarding debarment and suspension required
under 24 CFR part 24 (Appendix A).
(7) The anti-lobbying statement required under 24 CFR part 87
(Appendix A).
(8) Certifications by the public entity that:
(i) It possesses the legal authority to submit the application for
assistance under this subpart and to use the guaranteed loan funds in
accordance with the requirements of this subpart.
(ii) Its governing body has duly adopted or passed as an official
act a resolution, motion or similar official action:
(A) authorizing the person identified as the official
representative of the public entity to submit the application and
amendments thereto and all understandings and assurances contained
therein, and directing and authorizing the person identified as the
official representative of the public entity to act in connection with
the application to provide such additional information as may be
required; and
(B) authorizing such official representative to execute such
documents as may be required in order to implement the application and
issue debt obligations pursuant thereto (provided that the
authorization required by this paragraph (B) may be given by the local
governing body after submission of the application but prior to
execution of the contract required by Sec. 570.705(b);
(iii) Before submission of its application to HUD, the public
entity has:
(A) Furnished citizens with information required by
Sec. 570.704(a)(2)(i);
(B) Held at least one public hearing to obtain the views of
citizens on community development and housing needs; and
(C) Prepared its application in accordance with
Sec. 570.704(a)(1)(iv) and made the application available to the
public.
(iv) It is following a detailed citizen participation plan which
meets the requirements described in Sec. 570.704(a)(2).
(v) The public entity will affirmatively further fair housing, and
the guaranteed loan funds will be administered in compliance with:
(A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et
seq.); and
(B) The Fair Housing Act (42 U.S.C. 3601-3619).
(vi) (A) (For entitlement public entities only.) In the aggregate,
at least 70 percent of all CDBG funds, as defined at Sec. 570.3, to be
expended during the one, two, or three consecutive years specified by
the public entity for its CDBG program will be for activities which
benefit low and moderate income persons, as described in criteria at
Sec. 570.208(a).
(B) (For nonentitlement public entities eligible under subpart F of
this part only.) It will comply with primary and national objectives
requirements, as applicable under subpart F of this part.
(vii) It will comply with the requirements governing displacement,
relocation, real property acquisition, and the replacement of low and
moderate income housing described in Sec. 570.488 or Sec. 570.606.
(viii) It will comply with the requirements of Sec. 570.200(c)(2)
with regard to the use of special assessments to recover the capital
costs of activities assisted with guaranteed loan funds.
(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 guaranteed loan funded portion of the capital cost without
paying such assessments in their behalf from guaranteed loan funds.
(x) It will comply with the other provisions of the Act and with
other applicable laws.
(9) In the case of an application submitted by a State-assisted
public entity, certifications by the State that:
(i) It agrees to make the pledge of grants required under
Sec. 570.705(b)(2).
(ii) It possesses the legal authority to make such pledge.
(iii) At least 70 percent of the aggregate use of CDBG grant funds
received by the State, guaranteed loan funds, and program income during
the one, two, or three consecutive years specified by the State for its
CDBG program will be for activities that benefit low and moderate
income persons.
(iv) It agrees to assume the responsibilities described in
Sec. 570.710.
(c) HUD review and approval of applications. (1) HUD will normally
accept the certifications submitted with the application. HUD may,
however, consider relevant information which challenges the
certifications and require additional information or assurances from
the public entity or State as warranted by such information.
(2) The HUD Office shall review the application for compliance with
requirements specified in this subpart and forward the application
together with its recommendation for approval or disapproval of the
requested loan guarantee to HUD Headquarters.
(3) HUD may disapprove an application, or may approve loan
guarantee assistance for an amount less than requested, for any of the
following reasons:
(i) HUD determines that the guarantee constitutes an unacceptable
financial risk. Factors that will be considered in assessing financial
risk shall include, but not be limited to, the following:
(A) The length of the proposed repayment period;
(B) The ratio of expected annual debt service requirements to
expected annual grant amount;
(C) The likelihood that the public entity or State will continue to
receive grant assistance under this part during the proposed repayment
period;
(D) The public entity's ability to furnish adequate security
pursuant to Sec. 570.705(b), and
(E) The amount of program income the proposed activities are
reasonably estimated to contribute toward repayment of the guaranteed
loan.
(ii) The requested loan amount exceeds any of the limitations
specified under Sec. 570.705(a).
(iii) Funds are not available in the amount requested.
(iv) The performance of the public entity, its designated public
agency or State under this part is unacceptable.
(v) Activities to be undertaken with the guaranteed loan funds are
not eligible under Sec. 570.703.
(vi) Activities to be undertaken with the guaranteed loan funds do
not meet the criteria in Sec. 570.208 for compliance with one of the
national objectives of the Act.
(4) HUD will notify the public entity in writing that the loan
guarantee request has either been approved, reduced or disapproved. If
the request is reduced or disapproved, the public entity shall be
informed of the specific reasons for reduction or disapproval. If the
request is approved, 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.
(5) Amendments. If the public entity wishes to carry out an
activity not previously described in its application or to
substantially change the purpose, scope, location, or beneficiaries of
an activity, the amendment must be approved by HUD. Amendments by
State-assisted public entities must also be approved by the State. The
public entity shall follow the citizen participation requirements for
amendments in Sec. 570.704(a)(2).
(d) Environmental review. The public entity shall comply with HUD
environmental review procedures (24 CFR part 58) for the release of
funds for each project carried out with loan guarantee assistance.
These procedures set forth the regulations, policies, responsibilities
and procedures governing the carrying out of environmental review
responsibilities of public entities. All public entities, including
nonentitlement public entities, shall submit the request for release of
funds and related certification for each project to be assisted with
guaranteed loan funds to the appropriate HUD Field Office.
(e) Displacement, relocation, acquisition, and replacement of
housing. The public entity (or the designated public agency) shall
comply with the displacement, relocation, acquisition and replacement
of low/moderate-income housing requirements in Sec. 570.488 or
Sec. 570.606 in connection with any activity financed in whole or in
part with guaranteed loan funds.
Sec. 570.705 Loan requirements.
(a) Limitations on commitments. (1) If loan guarantee commitments
have been issued in any fiscal year in an aggregate amount equal to 50
percent of the amount approved in an appropriation act for that fiscal
year, HUD may limit the amount of commitments any one public entity may
receive during such fiscal year as follows (except that HUD will not
decrease commitments already issued):
(i) The amount any one entitlement public entity may receive may be
limited to $35,000,000.
(ii) The amount any one nonentitlement public entity may receive
may be limited to $7,000,000.
(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 empowerment zones/enterprise communities by the Federal
Government or by any State.
(2) In addition to the limitations specified in paragraph (a)(1) of
this section, the following limitations shall apply.
(i) Entitlement public entities. No commitment to guarantee shall
be made if the total unpaid balance of debt obligations guaranteed
under this subpart (excluding any amount defeased under the contract
entered into under Sec. 570.705(b)(1)) on behalf of the public entity
would thereby exceed an amount equal to five times the amount of the
most recent grant made pursuant to Sec. 570.304 to the public entity.
(ii) State-assisted public entities. No commitment to guarantee
shall be made if the total unpaid balance of debt obligations
guaranteed under this subpart (excluding any amount defeased under the
contract entered into under Sec. 570.705(b)(1)) on behalf of the public
entity and all other State-assisted public entities in the State would
thereby exceed an amount equal to five times the amount of the most
recent grant received by such State under subpart I.
(iii) Nonentitlement public entities eligible under subpart F of
this part. No commitment to guarantee shall be made with respect to a
nonentitlement public entity in the State of Hawaii if the total unpaid
balance of debt obligations guaranteed under this subpart (excluding
any amount defeased under the contract entered into under
Sec. 570.705(b)(1)) on behalf of the public entity would thereby exceed
an amount equal to five times the amount of the most recent grant made
pursuant to Sec. 570.429 to the public entity. No commitment to
guarantee shall be made with respect to a nonentitlement public entity
in the State of New York if the total unpaid balance of debt
obligations guaranteed under this subpart (excluding any amount
defeased under the contract entered into under Sec. 570.705(b)(1)) on
behalf of the public entity would thereby exceed the greater of five
times:
(A) The most recent grant approved for the public entity pursuant
to subpart F of this part,
(B) The average of the most recent three grants approved for the
public entity pursuant to subpart F of this part, excluding any grant
in the same fiscal year as the commitment, or
(C) The average amount of grants made under subpart F of this part
to units of general local government in New York State in the previous
fiscal year.
(b) Security requirements. To assure the repayment of debt
obligations and the charges incurred under paragraph (g) of this
section and as a condition for receiving loan guarantee assistance, the
public entity (and State and designated public agency, as applicable)
shall:
(1) Enter into a contract for loan guarantee assistance with HUD,
in a form acceptable to HUD, including provisions for repayment of debt
obligations guaranteed hereunder;
(2) Pledge all grants made or for which the public entity or State
may become eligible under this part; and
(3) Furnish, at the discretion of HUD, such other security as may
be deemed appropriate by HUD in making such guarantees. Other security
shall be required for all loans with repayment periods of ten years or
longer. Such other security shall be specified in the contract entered
into pursuant to Sec. 570.705(b)(1). Examples of other security HUD may
require are:
(i) Program income as defined in Sec. 570.500(a);
(ii) Liens on real and personal property;
(iii) Debt service reserves; and
(iv) Increments in local tax receipts generated by activities
carried out with the guaranteed loan funds.
(c) Use of grants for loan repayment. Notwithstanding any other
provision of this part:
(1) Community Development Block Grants allocated pursuant to
section 106 of the Act (including program income derived therefrom) may
be used for:
(i) Paying principal and interest due (including such issuance,
servicing, underwriting, or other costs as may be incurred under
paragraph (g) of this section) on the debt obligations guaranteed under
this subpart;
(ii) Defeasing such debt obligations; and
(iii) Establishing debt service reserves as additional security
pursuant to paragraph (b)(3) of this section.
(2) HUD may apply grants pledged pursuant to paragraph (b)(2) of
this section to any amounts due under the debt obligations, the payment
of costs incurred under paragraph (g) of this section, or to the
purchase or defeasance of such debt obligations, in accordance with the
terms of the contract required by paragraph (b)(l) of this section.
(d) Debt obligations. Debt obligations guaranteed under this
subpart shall be in the form and denominations prescribed by HUD. Such
debt obligations may be issued and sold only under such terms and
conditions as may be prescribed by HUD. HUD may prescribe the terms and
conditions of debt obligations, or of their issuance and sale, by
regulation or by contractual arrangements authorized by section
108(r)(4) of the Act and paragraph (h) of this section. Unless
specifically provided otherwise in the contract for loan guarantee
assistance required under paragraph (b) of this section, debt
obligations shall not constitute general obligations of any public
entity or State secured by its full faith and credit.
(e) Taxable obligations. Interest earned on debt obligations under
this subpart shall be subject to Federal taxation as provided in
section 108(j) of the Act.
(f) Loan repayment period. The term of debt obligations under this
subpart shall not exceed twenty years.
(g) Issuance, underwriting, servicing, and other costs. Each public
entity or its designated public agency issuing debt obligations under
this subpart must pay the issuance, underwriting, servicing, trust
administration and other costs associated with the private sector
financing of the debt obligations. Such costs are payable out of the
guaranteed loan funds and shall be secured under paragraph (b) of this
section.
(h) Contracting with respect to issuance and sale of debt
obligations; effect of other laws. No State or local law, and no
Federal law, shall preclude or limit HUD's exercise of:
(1) The power to contract with respect to public offerings and
other sales of debt obligations under this subpart upon such terms and
conditions as HUD deems appropriate;
(2) The right to enforce any such contract by any means deemed
appropriate by HUD;
(3) Any ownership rights of HUD, as applicable, in debt obligations
under this subpart.
Sec. 570.706 Federal guarantee; subrogation.
The full faith and credit of the United States is pledged to the
payment of all guarantees made under this subpart. Any such guarantee
made by HUD shall be conclusive evidence of the eligibility of the debt
obligations for such guarantee with respect to principal and interest,
and the validity of such guarantee so made shall be incontestable in
the hands of a holder of the guaranteed debt obligations. If HUD pays a
claim under a guarantee made under section 108 of the Act, HUD shall be
fully subrogated for all the rights of the holder of the guaranteed
debt obligation with respect to such obligation.
Sec. 570.707 Applicability of rules and regulations.
(a) Entitlement public entities. The provisions of subparts A, C,
J, K and O of this part applicable to entitlement grants shall apply
equally to guaranteed loan funds and other CDBG funds, except to the
extent they are specifically modified or augmented by the provisions of
this subpart.
(b) State-assisted public entities. The provisions of subpart I of
this part, and the requirements the State imposes on units of general
local government receiving Community Development Block Grants or
program income to the extent applicable, shall apply equally to
guaranteed loan funds and Community Development Block Grants (including
program income derived therefrom) administered by the State under the
CDBG program, except to the extent they are specifically modified or
augmented by the provisions of this subpart.
(c) Nonentitlement public entities eligible under subpart F of this
part. The provisions of subpart F of this part shall apply equally to
guaranteed loan funds and other CDBG funds, except to the extent they
are specifically modified or augmented by the provisions of this
subpart.
Sec. 570.708 Sanctions.
(a) Non-State Assisted Public Entities. The performance review
procedures described in subpart O of this part apply to all public
entities receiving guaranteed loan funds other than State-assisted
public entities. Performance deficiencies in the use of guaranteed loan
funds made available to such public entities (or program income derived
therefrom) or violations of the contract entered into pursuant to
Sec. 570.705(b)(1) may result in the imposition of a sanction
authorized pursuant to Sec. 570.900(b)(7) against pledged CDBG grants.
In addition, upon a finding by HUD that the public entity has failed to
comply substantially with any provision of the Act with respect to
either the pledged grants or the guaranteed loan funds or program
income, HUD may take action against the pledged grants as provided in
Sec. 570.913 and/or may take action as provided in the contract for
loan guarantee assistance.
(b) State-assisted public entities. Performance deficiencies in the
use of guaranteed loan funds (or program income derived therefrom) or
violations of the contract entered into pursuant to Sec. 570.705(b)(1)
may result in an action authorized pursuant to Sec. 570.495 or
Sec. 570.496. In addition, upon a finding by HUD that the State or
public entity has failed to comply substantially with any provision of
the Act with respect to the pledged CDBG nonentitlement funds, the
guaranteed loan funds, or program income, HUD may take action against
the pledged funds as provided in Sec. 570.496 and/or may take action as
provided in the contract.
Sec. 570.709 Allocation of loan guarantee assistance.
Of the amount approved in any appropriation act for guarantees
under this subpart in any fiscal year, 70 percent shall be allocated
for entitlement public entities and 30 percent shall be allocated for
nonentitlement public entities. HUD need not comply with these
percentage requirements in any fiscal year to the extent that there is
an absence of applications approvable under this subpart from
entitlement or nonentitlement public entities.
Sec. 570.710 State responsibilities.
The State is responsible for choosing public entities that it will
assist under this subpart. States are free to develop procedures and
requirements for determining which activities will be assisted, subject
to the requirements of this subpart. Upon approval by HUD of an
application from a State-assisted public entity, the State will be
principally responsible, subject to HUD oversight under subpart I of
this part, for ensuring that the public entity complies with all
applicable requirements governing the use of the guaranteed loan funds.
Notwithstanding the State's responsibilities described in this section,
HUD may take any action necessary for ensuring compliance with
requirements affecting the security interests of HUD with respect to
the guaranteed loan.
Dated: December 20, 1994.
Andrew Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 94-31663 Filed 12-21-94; 10:20 am]
BILLING CODE 4210-29-P
