[Federal Register Volume 59, Number 178 (Thursday, September 15, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22798]
[[Page Unknown]]
[Federal Register: September 15, 1994]
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Part IV
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; Proposed Rule
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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-P-02]
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: Proposed rule.
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SUMMARY: This proposed rule would revise 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 proposed rule would amend subpart F
to incorporate the statutory changes made to the Small Cities Program
since the subpart F regulations were issued in 1982, and to streamline
the operation and administration of the program. In addition, the
proposed 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.
DATES: Comments Due Date: October 17, 1994.
ADDRESSES: Interested persons are invited to submit comments regarding
this proposed rule to the Rules Docket Clerk, Office of the General
Counsel, Room 10276, Department of Housing and Urban Development, 451
7th Street, SW., Washington, DC 20410-0500. Comments should refer to
the above docket number and title. A copy of each comment submitted
will be available for public inspection during regular business hours
at the above address. Facsimile (FAX) comments are not acceptable.
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. Paperwork Reduction Act Statement
This proposed rule does not propose to add information collection
requirements to the regulations in 24 CFR part 570, subparts F, I, or
M.
II. Background
Title I of the Housing and Community Development Act of 1974 (Title
I) establishes the Community Development Block Grant (CDBG) Program.
Seventy percent of the annual appropriation for the CDBG Program is
awarded as formula-based grants to entitlement jurisdictions with the
remaining thirty percent available for non-entitled units of general
local government, based upon formula allocations by State. CDBG funds
for non-entitled jurisdictions are made available through one of two
methods: the State CDBG Program or the HUD-administered Small Cities
Program (Small Cities Program). These programs both serve smaller
communities, including those located in rural areas.
The regulations governing the CDBG Program are set forth in 24 CFR
part 570. The regulations governing the Small Cities Program are set
forth in 24 CFR part 570, subpart F (Secs. 570.420-570.438).
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 Program for non-entitled units of general
local government within their jurisdiction.
Prior to the enactment of the Omnibus Budget Reconciliation Act
(OBRA) of 1981 (Pub. L. 97-35, approved August 13, 1981), HUD
administered the CDBG Small Cities Program in all States. However, OBRA
contained a provision which afforded States the opportunity to assume
administrative responsibility for the Small Cities Program, thereby
creating the State CDBG Program (i.e., State administration of CDBG
nonentitlement funds). Thirty-eight (38) States elected to administer
the non-entitled CDBG Program in Fiscal Year 1982 with an additional
nine making the election beginning with Fiscal Year 1983. Currently,
forty-nine (49) ``States'' (as defined in Sec. 570.3, which includes
Puerto Rico) administer the CDBG Program for non-entitled units of
general local government.
If a State that currently administers the CDBG Program declines to
continue its administration, under existing law CDBG funds would not be
available to non-entitled units of general local government in that
State during the Fiscal Year for which the State did not administer the
program. Any CDBG funds not allocated in a Fiscal Year for this reason
would be reallocated among all States in the succeeding Fiscal Year.
Only two States, Hawaii and New York, have not exercised their option
to assume administration of the CDBG Program for non-entitled units of
general local government. Accordingly, for some time, the regulations
in subpart F have been applicable only to Hawaii and New York.
The existing subpart F regulations were promulgated in 1982 and
remain essentially unchanged from the original language despite
substantial statutory amendments to Title I, and several changes to the
nature of the Small Cities Program subsequent to 1982.
This proposed rule would amend subpart F to specifically address
HUD's administration of the Small Cities Program in the States of
Hawaii and New York. Additionally, the proposed rule would incorporate
the amendment made by section 902 of the National Affordable Housing
Act (Pub. L. 101-625, approved November 28, 1990) (NAHA) which requires
an overall low- and moderate-income benefit of not less than 70 percent
in the use of grant funds. HUD emphasizes that this requirement applies
to each grant made through the Small Cities Program. Individual
activities are still required to provide at least 51 percent low- and
moderate-income benefit in order to meet the national objective
standard of benefit for low- and moderate-income persons.
HUD is considering aggregating the 70 percent requirement for
grants in the New York Small Cities Program to include grants received
over a one, two, or three year period as well as section 108 loan
guarantees received during the period chosen by the grantee. The
Department is also considering aggregating guaranteed loan funds in
Hawaii with Small Cities Funds received over a one, two or three year
period. The Department specifically requests comments on this proposal,
including specifics on how it would work.
The majority of the other statutory changes since 1982 which affect
the CDBG Program, including the Small Cities Program, are proposed to
be incorporated in subpart F by reference to other subparts within part
570, which already have implemented these statutory changes. These
statutory changes are not specifically addressed in the proposed rule
and, as a result, will not be discussed in this preamble.
The most significant change that is proposed to be made to subpart
F by this rule is the elimination of the sections setting forth the
selection system for Single Purpose and Comprehensive Small Cities
Grants. As a result of this change, the grant process for New York
State will be more flexible for the small communities of New York
State, and the Small Cities Program will be able to more readily
respond to changing priorities. The specific requirements for the
process of awarding grants to particular grantees will be contained in
a Notice of Funding Availability (NOFA) which will be promulgated for
each Fiscal Year's funding. The NOFA will contain the specific
guidelines for all competition(s) that HUD will hold during a fiscal
year. If it is decided to hold a competition among the three eligible
entities in Hawaii, a separate NOFA may be issued for the Hawaii
competition.
In addition, two non-competitive uses of funds are proposed by the
regulation; the use of funds to eliminate imminent threats to health
and safety, and the use of funds to make payments on Section 108 loan
guarantees to non-entitlement units of general local government in New
York or Hawaii. These are more fully described below. Other non-
competitive uses of funds may be added by a NOFA.
HUD specifically invites comments from the public on these changes.
The new program flexibility will allow HUD to consider taking such
actions as having one or several Economic Development set asides with
an emphasis on providing funding for high impact Economic Development
activities that are oriented to helping the very low income families
(families whose income does not exceed 50 percent of median income).
This could possibly include microenterprises. A microenterprise is
defined by section 807(c)(2) of the Housing and Community Development
Act of 1992 as a ``commercial enterprise that has five or fewer
employees, one or more of whom owns the enterprise.''
Other possibilities include providing funding to support
communities that have been designated as being part of an Empowerment
Zone or Enterprise Community, and providing support to communities that
have suffered base closures. HUD is considering having more than one
competition in each fiscal year.
The Department is also considering developing a selection system
for grants to fund projects with multiyear comprehensive strategies and
funding for projects to be done in stages. The Department is trying to
structure this in a manner that will be consistent with the
requirements of the Anti-Deficiency Act (31 U.S.C. 1241(a)(1)). If
actions such as these are to be taken, they will be described in the
NOFA.
The provisions governing the program in the State of Hawaii have
been changed. Unless the NOFA provides otherwise, the three eligible
entities in Hawaii will be treated in these regulations as much like
entitlement grantees as is possible under the statute. This includes
using the Grantee Performance Report for all grants received after FY
1994, and the elimination of the closeout requirement for all grants
received after FY 1994. Starting in FY 1995, the 20 percent planning
and administrative cost limitation will be based on 20 percent of the
grant amount plus the program income received from post FY 1994 grants
during the program year. Starting in FY 1996, the 15 percent public
service limitation will be based on 15 percent of the grant amount plus
15 percent of the program income received in the previous program year.
This is a change from the existing policy which tracks administrative
costs and public service expenditures on a grant by grant basis.
Starting in FY 1996 the counties in Hawaii will be covered by the
requirements of Sec. 570.902(a) which requires grantees to have less
than 1.5 times their grant outstanding 60 days prior to the beginning
of their next program year. If a grantee does not meet this threshold,
it will be up to the Honolulu Office to make a finding and negotiate a
resolution with the Hawaii grantees which could include adjusting the
size of the grant.
Section 570.432 of the proposed rule permits the Secretary to make
grants to pay the amounts due on Section 108 obligations, if necessary
to prevent default. This proposed change would support the proposed
change to the regulations in 24 CFR part 570, subpart M, which would
expand the Section 108 program to non-entitled units of general local
government in New York and Hawaii.
Making grants under Sec. 570.432 would be the first priority use of
funds during any fiscal year, and would be demand-based rather than
competitive. The Department expects that most loan guarantees for non-
entitled units of local government in New York and Hawaii will be for
economic development activities which will generate program income
sufficient to repay the section 108-guaranteed loan. However, if a
default were about to occur because the economic development activity
did not generate the anticipated program income, or in those limited
instances in which the applicant's repayment plan anticipates the use
of CDBG grant funds to make repayments, the noncompetitive authority in
Sec. 570.432 is necessary to permit HUD to make a grant to the unit of
local government to cover the payment due, since non-entitled units of
local government do not receive a continuing stream of grants that are
available to make payments on section 108 loan guarantees as
entitlement CDBG recipients do. The related changes to subpart M and
subpart I are discussed in Section V of this preamble.
Section 570.424 would replace current Sec. 570.432 to provide
grants for imminent threats. Under the proposed section, fifteen
percent of the funds allocated to New York State would be reserved to
alleviate imminent threats to public health and safety unless a lower
amount was specified in a NOFA. These funds would be made available on
a non-competitive basis to alleviate imminent threats to public health
and safety that require an immediate resolution. HUD shall verify the
urgency and immediacy of the threat with an authority other than the
grantee.
Section 570.426 would be added to the regulations to address the
subject of program income. This section would state that if a unit of
local government has no open CDBG grants at the time of project
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 program income.
For clarity during review of this rule by the public, the rule sets
out all the regulations in subpart F, including those that are not
proposed to be revised by this rule. The following highlights the most
significant of the changes that are proposed to be made to subpart F by
this rule.
III. Summary of Significant Changes Proposed to Subpart F
Section 570.420 General
Paragraphs (c) Eligible applicants, (d) Types of grants, (e)
Distribution of funds between Comprehensive Grants and Single Purpose
Grants, (f) Size of grants, (g) Restrictions on applying for grants,
(h) Method of selecting grantees, (i) Data used for the needs factors.,
and (j) Previous audit findings and outstanding monetary obligations
are proposed to be removed from Sec. 570.420.
Section 570.421 New York Small Cities Program Design
A new Sec. 570.421 would replace existing Sec. 570.421 (existing
Sec. 570.421 would become Sec. 570.422, as discussed below). Section
570.421 would be titled ``New York Small Cities Program Design.''
Paragraph (a) would set forth who has responsibility for administration
of the program. Paragraph (b) would provide that a NOFA, which will be
issued at least once per Federal Fiscal Year, will indicate the
selection criteria, rating factors for competitive grants, amount of
funds available, grants limits, and application requirements. Paragraph
(c) would define eligible applicants. Paragraph (d) would allow 100
percent public service grants to be made as long as the 15 percent
statewide cap is not exceeded.
Section 570.422 Applications from Joint Applicants
New section Sec. 570.422 (currently a reserved section) would
contain the provisions currently in existing section Sec. 570.421, as
noted above, with the exception that existing paragraph (b) of
Sec. 570.421, which addresses data requirements, would be removed. Data
requirements will be addressed in the NOFA to be issued each Fiscal
Year.
Section 570.423 Application for the HUD-administered New York Small
Cities Grants
New Sec. 570.423 would replace existing Sec. 570.423
(``Comprehensive Grant Program, General Requirements'') and would
address the application requirements for the New York Small Cities
Program, and indicate that threshold requirements will be stated in the
NOFA that governs the distribution of funds.
Section 570.424 Grants for Imminent Threats to Public Health and
Safety
New Sec. 570.424 would replace existing Sec. 570.424 (``Selection
System for Comprehensive Grants''), and would address grants for
imminent threats to public health and safety as discussed in Section II
of this preamble.
Section 570.425 HUD Review and Actions on Applications for New York
State Applicants
New Sec. 570.425 (currently a reserved section) would incorporate
the requirements of existing Sec. 570.433 (``HUD Review and Actions on
Final Applications for Single Purpose and Comprehensive Applicants''),
with the exception that paragraphs (b)(2) Fundable applications, and
(b)(4) Non-fundable applications of existing Sec. 570.433 would be
removed. Additionally, the enumerated criteria for conditional grants
in paragraph (b)(3) of existing Sec. 570.433 also would be removed.
Section 570.426 Program Income
New Sec. 570.426 would replace existing Sec. 570.426 (``Application
for Comprehensive Grants'') and address program income, as discussed in
Section II of this preamble.
Section 570.427 Program Amendments
New Sec. 570.427 would replace existing Sec. 570.427 (Single
Purpose Grant Program General Requirements) and incorporate the
requirements of existing Sec. 570.434 which addresses program
amendments. Section 570.427 (a)(3) would address amendments for grants
received on a non-competitive basis.
Section 570.428 Reallocated Funds
New Sec. 570.428 would replace existing Sec. 570.428 (Selection
System for Single Purpose Grants) and would incorporate the
requirements of existingSec. 570.438 which addresses reallocated funds.
Section 570.429 Hawaii General and Grant Requirements
New Sec. 570.429 (currently a reserved section) would address the
general and grant requirements applicable to the State of Hawaii Small
Cities Program as discussed in Section II of the preamble.
Section 570.430 Hawaii Program Operation Requirements
New Sec. 570.430 would replace existing Sec. 570.430 (Application
for Single Purpose Grants) and address program operation requirements
for the State of Hawaii as discussed in Section II of the preamble.
Section 570.431 Citizen Participation
Existing Sec. 570.431 which pertains to citizen participation would
be revised to incorporate statutory changes made to the citizen
participation requirements by the Housing and Community Development Act
of 1988.
Section 570.432 Repayment of Section 108 Loans
New Sec. 570.432 would replace existing Sec. 570.432 (Single
Purpose Grants for Imminent Threat to Public Health or Safety), and
would address the repayment of Section 108 loans as discussed in
Sections II and V of the preamble.
IV. Conforming Amendments Proposed by this Rule
In addition to the changes to be made to 24 CFR part 570, subpart
F, this proposed rule would make a conforming amendment to 24 CFR
570.507(a)(2)(ii)(A). Section 570.507(a)(2)(ii)(A) sets forth the
submission dates for the performance and evaluation report for the
Small Cities Program. Currently grantees are required to submit reports
12 months after grant award and annually thereafter. This requirement
means that reports are submitted over a wide time frame, and that one
community could be required to submit its reports for multiple projects
at different times. Standardizing the reporting date will ease the
burden on grantees by allowing them to do all of their reports at the
same time. Standardized submission dates will help the field office
complete its annual performance review at one time for all of a
grantee's projects.
V. Summary of Significant Changes Proposed to Subpart M and Subpart I
Because there are numerous small clarifying changes to subpart M in
the proposed rule, it is also being repeated in its entirety for the
convenience of the reader. Only the substantive changes are described
in this Section V of the preamble.
The most important change proposed to subpart M would allow non-
entitled jurisdictions in New York and Hawaii (3 counties) to
participate in the section 108 program for the first time. With the
increasing emphasis on the use of section 108 loan guarantees in
general and for economic development activities in particular, the
Department believes it would be unfair to continue to deny the use of
section 108 to non-entitled communities in New York and Hawaii. This
decision necessitates a series of related changes in subpart F, subpart
I and subpart M of the CDBG regulations in 24 CFR 570.
In subpart M, a new section 570.702(c) is added to expressly make
nonentitlement ``public entities'' (the term used in subpart M to refer
to units of general local government) eligible to apply for assistance
under subpart F (Small Cities Program, now covering only New York and
Hawaii) also eligible to apply for section 108 assistance under subpart
M. To simplify reference in the rest of subpart M to nonentitlement
public entities in the States' Program, a new definition of ``State-
assisted public entity'' is added in Sec. 570.702(c). Generally,
nonentitlement public entities in New York and Hawaii are referred to
in proposed subpart M as ``nonentitlement public entities eligible
under subpart F.'' Most related changes in subpart M amount to nothing
more than use of these new terms and will not be further discussed
here.
The other principal change in subpart M which affects
nonentitlement public entities in New York and Hawaii is the limitation
on loan guarantee amounts in Sec. 570.705(a)(2)(iii). The limit for
nonentitlement public entities in Hawaii is five times the most recent
grant made to the public entity, similar to that for entitlement public
entities. For non-entitlement public entities in New York the limit on
loan guarantee amounts is five times the larger of (i) the most recent
grant made to the public entity, (ii) the average of the most recent
three grants made to the public entity, or (iii) the average of all the
grants made in New York State in the previous fiscal year.
It should be noted that two other changes are being made that
affect State-assisted public entities. In Sec. 570.704(b)(3), all
public entities will now be required to certify that they possess the
legal authority necessary to pledge their CDBG grants as required by
Sec. 570.705(b)(2). Since all public entities are statutorily required
to make this pledge as a condition of receiving a section 108 loan
guarantee, there is little reason to limit this certification to
entitlement recipients only. Also, in Sec. 570.710 misleading language
requiring the State to administer ``guaranteed loan funds in the same
manner as it administers'' CDBG grants is being deleted, since the
State is not initially required to receive guaranteed loan proceeds at
all, and may or may not have a direct role in supervising the carrying
out of the guaranteed loan activity. The extent of the State's role in
handling the guaranteed loan proceeds is a matter for negotiation
between the State and the public entity involved in a particular
guarantee, although the State can deny the public entity the necessary
pledge of its grants in support of the guarantee if it is not satisfied
with the arrangements for handling the proceeds and carrying out the
activity.
The related change in subpart F, adding a new section Sec. 570.432
to permit HUD to make grants in accordance with section 106(d)(3)(B) of
Title I to nonentitlement units of general local government where
necessary to make payments on section 108 guaranteed loans, has already
been alluded to in Sections II and III of this preamble.
Finally, the last change to part 570 necessary to make section 108
loan guarantees available in New York and Hawaii is to provide that
should such States later elect to administer the CDBG formula
allocations for use in nonentitlement areas of such States, they must
agree (pledge) to use such allocations to make any necessary payments
on loan guarantees previously approved in such States. Since HUD will
no longer be administering the CDBG allocations for non-entitlement
areas of such a State if the State elects to do so itself, HUD will no
longer have the ability to assure that CDBG grant funds are available
to make the necessary payments, and the applicable State must do so.
The regulatory change necessary to accomplish this is in new
Sec. 570.497 of subpart I, as set forth in the text of the proposed
rule below.
In addition, the proposed rule would clarify subpart M by expressly
including two new eligibility provisions added by the 1994 Act. Section
231 of the 1994 Act expanded the activities eligible for loan guarantee
assistance under section 108 to make acquisition, construction,
reconstruction, rehabilitation and installation of public facilities
eligible for all applicants, and in the case of activities benefitting
colonias, such activities with respect to public works and site or
other improvements were made eligible. Although HUD views these
statutory eligibility amendments as self-executing and is implementing
them in advance of publication of this rule, conforming changes are
included in Secs. 570.703(l) and (m) of the proposed rule. As an
editorial change, Sec. 570.703(h)(3) has been deleted and
Sec. 570.703(f)(2) modified to retain eligibility of site preparation,
as further described therein, which is undertaken for an economic
development purpose.
Section 233 of the 1994 Act also permitted HUD to guarantee trust
certificates or other obligations backed by section 108-guaranteed
obligations, a technical change which should simplify the section 108
public offering process and slightly lower interest rates. While the
new authority in section 233 will be implemented internally by HUD, by
changes in the section 108 loan documents and other revisions to the
public offering process without the need for new regulations, the
proposed rule contains a new, expanded definition of ``debt
obligation'' and other limited revisions which will clarify the
regulations and incorporate new statutory language in Secs. 570.705(h)
and 570.706.
Additional Note Concerning Review of Proposed Rule
In the proposed rule that follows, the term ``Act'' in the rule
refers to Title I of the Housing and Community Development Act of 1974.
The term ``Act'' is defined in 24 CFR 570.3, and is not redefined in
subparts F or M.
VI. Justification for Reduced Comment Period
It is the Department's general policy to provide a 60-day public
comment period on proposed rules. For this proposed rule, however, the
Department is providing a 30-day period. The purpose of the reduced
public comment period is to expedite the publication of updated and
streamlined regulations for the Small Cities Program.
Non-entitled units of general local government in the States of New
York and Hawaii are well familiar with the unwieldy notice of funding
availability (NOFA) that is issued each year for the Small Cities
Program. Each fiscal year's NOFA for the Small Cities Program becomes
lengthier and lengthier because the NOFA, for all intents and purposes,
serves as the revised rule. As stated earlier in this preamble, the
regulations for the Small Cities Program have not been revised since
1982 even though several statutory changes and administrative changes
have been made to the program since that date. Thus, each fiscal year's
NOFA must incorporate all the statutory and administrative changes to
the program that the existing regulations fail to include. Accordingly,
by having updated and streamlined Small Cities Program regulations
issued as quickly as possible, the Department anticipates that one
significant benefit to non-entitled units of general local government
in the States of New York and Hawaii is that the FY 95 funding round
for the Small Cities Program will produce a considerably less
cumbersome NOFA process.
Additionally, because each fiscal year's NOFA has incorporated the
statutory and administrative changes to the Small Cities Program, many
of the revisions proposed to be made by this rule are well familiar to
the non-entitled units of general local government in the States of New
York and Hawaii, and thus, extensive review is not necessary. However,
to ensure that these affected entities have sufficient opportunity to
review the proposed rule, the Department's New York, Buffalo and
Honolulu Offices will have copies of the proposed rule available on the
date of publication and ready to be distributed to these entities.
The Department believes that it is in the interest of the non-
entitled units of general local government in the States of New York
and Hawaii to have revised final regulations in place as quickly as
possible.
VII. Other Matters
Environmental Impact
A Finding of No Significant Impact with respect to the environment
has been made in accordance with HUD regulations at 24 CFR part 50,
which implement section 102(2)(C) of the National Environmental Policy
Act of 1969. 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 proposed rule before publication,
and by approving it certifies that this proposed rule would 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 proposed
rule is anticipated to have some beneficial impact on small entities.
However, the number of small entities that may be affected by this rule
would not be substantial and the economic impact would 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 proposed
rule does not have Federalism implications and therefore is not subject
to review under the Order. No programmatic or policy changes would
result from this rule's promulgation which would 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 proposed 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 proposed rule was listed as sequence number 1635 in the
Department's Semiannual Agenda of Regulations published on April 25,
1994 (59 FR 20424, 20458) 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 would be amended as follows:
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS
1. The authority citation for part 570 would be revised to read as
follows:
Authority: 42 U.S.C. 3535(d) and 5301-5320.
2. Subpart F would be 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
elect not 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 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 non-entitled
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 the Department. 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) Unless a NOFA provides for competition, the Hawaii HUD-
administered Small Cities Program is not subject to section 102, since
the funds are not distributed in a competitive manner.
(d) Comprehensive Housing Affordability Strategy. 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 either:
(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 each grant made through the Small Cities
Program, not less than 70 percent of the grant funds must be expended
for activities which benefit low- and moderate-income persons under the
criteria of Sec. 570.208(a). In determining the percentage of funds
expended for such activity, the provisions of Sec. 570.200(a)(3)(i),
(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) Program administration. Administrative responsibility for the
HUD-administered Small Cities Program in New York is divided between
HUD's New York City and Buffalo Offices. For purposes of this subpart,
the term ``HUD Office'' refers to both the New York City and Buffalo
Offices.
(b) Notice of funding availability. The Department will issue one
or more Notice(s) of Funding Availability (NOFA) each fiscal year which
will indicate the amount of funds available and set forth the grant
limits, type of grants available and the application requirements. The
NOFA will set forth the selection criteria for all grants, as well as
the rating factors that will be used for those grants which are
competitive.
(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, and Indian tribes eligible for assistance
under section 106 of the Act. 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 that the village receives
funding for.) The NOFA will contain additional information on applicant
eligibility.
(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 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.
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) The 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.
(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 independent 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)(2)(ii)
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 this paragraph (a). 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 will 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) Costs incurred by the applicant. (i) HUD will not reimburse or
recognize any costs incurred before submission of the final
application.
(ii) HUD will not normally reimburse or recognize costs incurred
before HUD approval of the final application. However, under unusual
circumstances, the Director of Community Planning and Development of
the HUD office may consider and approve written requests to recognize
and reimburse costs otherwise incurred in accordance with this part,
after the submission of the application, where failure to do so would
impose undue or unreasonable hardship on the applicant. The described
authorization will be made only where the conditions for the release of
funds under the provisions for environmental review have been met to
HUD's satisfaction, in accordance with 24 CFR part 58, and with the
understanding that HUD has no obligation 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.
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.
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 of this
subpart, shall apply to the HUD-administered Small Cities Program in
the State of Hawaii.
(c) Grant amounts. (1) Unless a NOFA for a specific fiscal year
provides for a different method of distribution for eligible Hawaii
units of general local government, which could include competition, or
a set aside, grants will be distributed as follows: 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.
(4) This section may be superseded by requirements promulgated in a
NOFA.
(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, unless these requirements are superseded by instructions
in a published NOFA.
(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) unless these requirements
are superseded by instructions in a published NOFA.
(ii) Certifications. The 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, or unless this process is
superseded by instructions in a published NOFA.
(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 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 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
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 prior to FY 1995 will be
considered individually for meeting the primary objective, and
expenditures for pre FY 1995 grants made during and after FY 1995 will
not be considered in determining whether the primary objective has been
met for post 1994 grants. 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.
(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 use
of funds, and the community development activities.
(e) Amendments. To assure citizen participation on 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.
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 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 would be 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 [insert effective
date of final rule], 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 of this part), 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) would be revised to
read as follows:
Sec. 570.507 Reports.
(a) * * *
(2) * * *
(ii) * * *
(A) The first report on a small cities grant should be submitted no
later than fifteen working days after September 30 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 fifteen working days after September 30 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 the fifteenth working day after
September 30 until completion of the activities funded under the grant;
and
* * * * *
5. In 24 part 570, subpart M, consisting of Secs. 570.700 through
570.710, would be revised in its entirety, 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.
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 any other offeror approved for purpose 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 Secs. 570.488 (b) or (c) or
570.606 (b) or (c); or
(2) Determined by the public entity to be appropriate under the
provisions of Secs. 570.488(d) or 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, 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).
(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 (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 action 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.
(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. 3601-20).
(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 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 the requirements authorized by
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 Secs. 570.488 or 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 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/or 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)(1) 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, and other
costs associated with the private sector financing of the debt
obligations. Such costs are payable out of the guaranteed loan funds.
(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. 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 Secs. 570.495 or
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 above, HUD may
take any action necessary for ensuring compliance with requirements
affecting the security interests of HUD with respect to the guaranteed
loan.
Dated: September 12, 1994.
Andrew Cuomo,
Assistant Secretary for Community Planning and Development.
[FR Doc. 94-22798 Filed 9-14-94; 8:45 am]
BILLING CODE 4210-29-P
