Community Development Block Grant Program for States; Community Revitalization Strategy Requirements and Miscellaneous Technical Amendments; Interim Rule

SUMMARY: This interim rule contains changes to the regulations for the

State Community Development Block Grant (CDBG) program and the

Consolidated Plan. These revisions fall into three categories:

implementation of the community revitalization strategies concept into

the State program; technical amendments to correct inaccurate or

obsolete regulatory citations and to reinstate language that was

inadvertently deleted by the publication of the Consolidated Plan

regulations on January 5, 1995; and technical amendments to implement

statutory changes or clarify existing regulatory language affecting

eligibility and compliance with national objectives for certain

activities.

DATES: Effective date: November 21, 1996. The information collection

requirements in Sec. 91.315(e)(2) of this interim rule, however, will

not be effective until the Office of Management and Budget (OMB) has

approved them under the Paperwork Reduction Act of 1995 and assigned

them a control number. Publication of the control numbers notifies the

public that OMB has approved these information collection requirements.

A document announcing the effective date of Sec. 91.315(e)(2) will be

published in the Federal Register at a later date.

Deadline for comments on the interim rule: February 16, 1997.

Deadline for comments on the proposed information collection

requirements: December 23, 1996.

ADDRESSES: HUD invites interested persons to submit comments regarding

this interim rule to the Rules Docket Clerk, Office of General Counsel,

Room 10276, Department of Housing and Urban Development, 451 Seventh

Street, SW., Washington, DC 20410. Communications should refer to the

above docket number and title. Facsimile (FAX) comments are not

acceptable. A copy of each communication submitted will be available

for public inspection and copying between 7:30 a.m. and 5:30 p.m.

weekdays at the above address.

HUD also invites interested persons to submit comments on the

proposed information collection requirements in this interim rule.

Comments should refer to the above docket number and title, and should

be sent to the Office of Information and Regulatory Affairs, Office of

Management and Budget, Attention: Desk Officer for HUD, Washington, DC

20503.

FOR FURTHER INFORMATION CONTACT: Steve Johnson, Assistant Director,

State & Small Cities Division, Room 7184, Department of Housing and

Urban Development, 451 Seventh Street, SW., Washington, DC 20410;

telephone number (202) 708-1322. FAX inquiries (but not comments on the

interim rule) may be sent to Mr. Johnson at (202) 708-2575. (These

numbers are not toll-free.) Hearing- or speech-impaired persons may

access that number via TTY by calling the Federal Information Relay

Service toll free at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

This interim rule revises the regulations for the State Community

Development Block Grant (CDBG) program (24 CFR part 570) and for the

Consolidated Submissions for Community Planning and Development

Programs (24 CFR part 91) to provide additional flexibility to States

in implementing their programs, to correct several inaccurate

regulatory citations, and to correct several other errors that resulted

from previous regulation changes. Specifically, this interim rule

contains: (1) Changes to the consolidated plan action plan regarding

the standard of review; (2) Changes to the consolidated plan action

plan to allow for community revitalization strategies; (3) Changes to

the low and moderate income benefit national objective criteria and

public benefit standards regarding community revitalization strategies;

(4) Additional changes to the low and moderate income benefit national

objective criteria regarding limited clientele activities, removal of

architectural barriers, and housing services; (5) A change regarding

HUD approval of States' grants; and (6) Various technical and

conforming changes to the State CDBG regulations, in association with

the above changes or to correct inaccurate regulatory citations. The

preamble of this interim rule describes each of these changes.

II. Community Revitalization Strategies

In the final rule for the Consolidated Submission for Community

Planning and Development Programs, published in the Federal Register on

January 5, 1995 (60 FR 1878), HUD gave Entitlement communities the

option of developing a strategy for revitalizing particular

neighborhoods. A community that elected to follow this approach, and

whose strategy was approved, would be allowed greater flexibility in

meeting certain national objectives and public benefit requirements.

HUD noted in the preamble to the concurrent CDBG Program Economic

Development Guidelines final rule (January 5, 1995; 60 FR 1922) that

HUD was not incorporating the concept into the State CDBG program at

that time because significant issues remained unresolved regarding how

to apply the concept in non-Entitlement communities (60 FR 1929).

Following additional study of the concept and consultation with

States, this interim rule introduces the community revitalization

strategy concept into the State CDBG program. In the CDBG Entitlement

program, revitalization strategies are called ``neighborhood

revitalization strategies.'' The State CDBG program uses the more

generic term ``community revitalization strategies.'' The essential

concept is very similar for both programs, but the nature of the area

covered may be quite different. HUD has consciously avoided referring

to ``neighborhood'' strategies in the State CDBG program; the concept

of a ``neighborhood'' is not meaningful or definable in many small

communities and rural areas.

This interim rule amends Sec. 91.315 of the Consolidated Plan

regulations by adding a new paragraph (e)(2), which provides that

States may (at their option) allow units of general local government to

develop and implement community revitalization strategies. The State

CDBG regulations allow such communities additional flexibility in

meeting certain national objectives and public benefit requirements.

Responsibility for approving individual revitalization strategies from

units of local government lies with the State. States wishing to take

advantage of this approach will need to ensure that the Method of

Distribution in their consolidated plan action plans reflect the

States' processes and criteria for approving local revitalization

strategies. The normal CDBG requirement that States consult with units

of local government in developing their method of distribution also

applies to States'

[[Page 54915]]

development of their community revitalization strategy implementation

approaches.

HUD has crafted this approach to give States maximum flexibility in

implementing the revitalization strategy concept (including the choice

of whether or not to implement it). Before implementing its approach to

revitalization strategies, a State must submit for HUD approval a

description of its implementation approach; approval of a consolidated

plan action plan will not constitute automatic approval of the State's

approach to revitalization strategies. HUD intends that approval of

States' submissions will occur at the field office level. HUD will

establish the parameters within which States may design approaches that

best meet their communities' needs. HUD will not establish the overall

design parameters and strategy approval process by regulation; instead

HUD will distribute this guidance to both States and HUD field office

staff in the form of a notice.

The extent to which a State will need to alter its method of

distribution depends on how the State intends to implement the

revitalization strategy concept and on the nature of its present method

of distribution. A State may choose to establish a separate funding

category for revitalization strategy projects; alternatively, a State

might retain its existing funding categories and award bonus points to

an applicant whose application was developed pursuant to a strategy. In

such cases, a State would need to describe explicitly in the method of

distribution its criteria and process for approving local strategies.

In contrast, a State may decide that its existing funding process can

incorporate the revitalization strategy concept without altering the

method of distribution.

HUD believes that an essential component of the revitalization

strategy concept is the provision of economic opportunities to

residents of revitalization strategy areas. Revitalization strategies

are a means for holistically addressing the identified needs of a

targeted area. A number of States presently have funding categories

such that localities may apply for a combination of activities to be

carried out in a defined target area. States' methods of distribution

often refer to these as ``comprehensive'' applications. HUD cautions

States, however, that the community revitalization strategy concept, as

HUD envisions it, may be more geographically focused and encompass a

wider variety of activities (particularly concerning economic

empowerment) than is presently provided for in typical

``comprehensive'' funding categories.

Several corresponding changes to the CDBG eligibility and national

objectives requirements (discussed below) further implement the

revitalization concept.

A. Public Services

This interim rule expands the list of activities that may be

excluded from the limitations on public services. Section 570.482(d)

currently excludes those public service activities specifically

designed to increase economic opportunities by supporting the

development of permanent jobs. This interim rule amends Sec. 570.482 by

adding a new paragraph (d)(3), which excludes services of any type

carried out pursuant to a community revitalization strategy approved by

a State.

B. Public Benefit Standards

This interim rule amends Sec. 570.482(f)(3)(v) by adding two

additional types of activities to the list of ``important national

interest'' activities for which the public benefit standards allow

extra flexibility. Certain economic development activities that provide

services to residents of a revitalization strategy area, or that create

or retain jobs in such an area, may now be excluded from the aggregate

public benefit standards for economic development activities in

Sec. 570.482(f)(2).

C. Low and Moderate Income Benefit National Objective

The State CDBG regulations prior to this interim rule provided

additional flexibility to certain job creation/retention and housing

activities undertaken by Community Development Financial Institutions.

In certain circumstances, jobs created or retained and housing units

assisted may be aggregated to demonstrate compliance with the national

objectives, as required under 104(b)(3) of the Housing and Community

Development Act of 1974, as amended (the Act), and as provided in

Sec. 570.483 of the regulations. This interim rule provides similar

flexibility to activities carried out pursuant to an approved

revitalization strategy. Job creation or retention activities

undertaken in an area pursuant to an approved revitalization strategy

may be treated as meeting the national objective of benefiting a low

and moderate income area. Provision or improvement of multiple housing

units pursuant to an approved revitalization strategy may be treated as

one structure in demonstrating low and moderate income benefit.

To ensure targeting of CDBG resources through community

revitalization strategy areas to the most needy areas, the area benefit

presumption is limited to areas that meet certain need indicators.

Therefore, this interim rule provides in Sec. 570.483(b)(1)(v) that

strategy areas must be in one of the following areas:

(1) A Federally-designated Empowerment Zone or Enterprise

Community; or

(2) A primarily residential area that contains at least 70 percent

low and moderate income residents; or

(3) A primarily residential area where all the census tracts (or

block numbering areas) have poverty rates of at least 20 percent and at

least 90 percent of all the census tracts/block numbering areas have

poverty rates of at least 25 percent.

The 70 percent low and moderate income threshold applies to the

entire area. The 20 and 25 percent poverty rates thresholds are adopted

from the Empowerment Zone/Enterprise Community legislation (section

13301 of the Omnibus Budget Reconciliation Act of 1993, 26 U.S.C.

1392(a)(4)). Consistent with that program, the poverty criteria are

applied on a census-tract-by-census-tract basis. This does not mean

that the boundaries of the community revitalization strategy areas must

coincide with census tract/block numbering area boundaries. If only

part of a census tract/block numbering area will be included in a

strategy area, the poverty rate for those block groups within the

strategy area should be calculated and used instead of the poverty rate

for the entire census tract/block numbering area.

For individual strategy areas, a State may request an exception to

either the 70 percent low and moderate income threshold or the 25

percent poverty threshold. In no case, however, will HUD approve a

revitalization strategy for an area that has neither a 20 percent

poverty rate for all census tracts nor 51 percent of its residents

qualifying as low and moderate income. HUD field offices will review

and approve exceptions on a case-by-case basis only. HUD envisions that

it will grant exceptions only for unusual circumstances, in which

strong targeting of benefits to low and moderate income purposes can

still be shown. HUD will not entertain requests for ``blanket''

exceptions covering all proposed strategy areas in a State.

[[Page 54916]]

III. Technical Amendments to State CDBG and Consolidated Plan

Regulations

A. State CDBG Waiver Provisions

On February 9, 1996 (61 FR 5198), HUD published a final rule

entitled ``General HUD Program Requirements; Cross-Cutting

Requirements,'' which created a new 24 CFR part 5. This final rule

consolidates in part 5 various definitions and cross-cutting

requirements that are common to many HUD programs. Consolidating these

requirements eliminated the redundancy of repeating requirements or

definitions that apply to more than one program. Section 5.110 contains

HUD's provision for granting waivers of regulations. The February 9,

1996 final rule, however, inadvertently failed to revise the existing

State CDBG Program waiver provision at Sec. 570.480(b). This interim

rule revises Sec. 570.480(b) to refer to HUD's waiver authority in part

5 and HUD's statutory authority (under section 122 of the Act) to

suspend requirements in Presidentially-declared disaster areas.

B. Low and Moderate Income National Objective Criteria

This interim rule changes several of the criteria for demonstrating

compliance with the national objective of benefitting low and moderate

income persons. HUD made similar changes to the CDBG Entitlement

regulations in a final rule published on November 9, 1995 (60 FR

56892). Making similar changes to the State CDBG regulations will

provide States the same flexibility and maintain consistency between

the requirements of the State program and the Entitlement program.

1. Limited clientele activities. This interim rule changes the list

of clientele groups in Sec. 570.483(b)(2)(ii)(A) that HUD presumes to

be principally of low and moderate income. This interim rule adds the

term ``persons living with AIDS'' to the list of ``presumed'' low/

moderate income groups. Reliable national data from the Center for

Disease Control in Atlanta, Georgia supports a reasonable presumption

that at least 51 percent of such persons in a given geographic area are

low and moderate income.

This interim rule also replaces the term ``handicapped'' with terms

compatible with available income data on persons with a disability

provided by the Bureau of the Census' Current Population Reports. The

data, issued in 1993 from the Survey of Income and Program

Participation, justify a national presumption that adults meeting the

Census criteria for ``severe disability'' meet the low and moderate

income national objective under the CDBG program. The Census definition

of ``severe disability'' only applies in the CDBG program for purposes

of making presumptions about income levels for groups of disabled

persons; it does not apply for purposes of meeting responsibilities

under section 504 of the Rehabilitation Act of 1973, the Americans With

Disabilities Act, or the Architectural Barriers Act. Therefore, HUD is

changing the terminology in this interim rule to clarify the

distinction between the income presumption provision and the civil

rights requirements.

2. Architectural Barriers Removal. This change clarifies provisions

under which the use of CDBG funds is authorized for the removal of

barriers to accessibility for elderly and disabled persons. Section

105(a)(5) of the Act (42 U.S.C. 5305(a)(5)) makes eligible the use of

program funds for special projects directed to the removal of material

and architectural barriers that restrict the mobility and accessibility

of elderly and handicapped persons. Under current law and regulation,

this provision has very limited usefulness and has caused confusion. It

is important that the regulations clearly state how CDBG funds may be

used for barrier removal. The real questions arise with respect to

compliance with the national objectives. Virtually all public

facilities and improvements serve an area generally and are thus

subject to the limitations imposed by section 105(c)(2) of the Act.

Section 105(c)(2) states that activities that serve an area generally

may be considered to address the national objective of benefit to low

and moderate income persons only if the percentage of residents in the

service area who are of such income meets certain minimum levels. The

present regulations implement this limitation in Sec. 570.483(b)(1).

Where accessibility barriers exist in a facility or improvement that

serves an area that does not meet this requirement, the use of CDBG

funds to remove such barriers can be problematic. This interim rule

revises Sec. 570.483(b)(2)(iii) to clarify the circumstances in which

the limited clientele presumption may be applied to such activities.

3. Housing activities. This interim rule makes two amendments to

Sec. 570.483(b)(3). First, this interim rule amendment clarifies the

housing activities that may qualify as benefitting low and moderate

income persons. The present regulations include ``the acquisition or

rehabilitation of property.'' This interim rule expands the list to

indicate that such acquisition or rehabilitation may be undertaken by

units of general local government, subrecipients, developers,

homeowners or homebuyers, and nonprofit entities qualifying under

section 105(a)(15) of the Act.

Second, this interim rule reflects two statutory changes to

eligible activities, and it further clarifies HUD's policy regarding

these changes. Section 105(a)(25) of the Act makes downpayment

assistance to homebuyers an eligible activity. Section 105(a)(15) of

the Act makes nonprofit organizations serving the community development

needs of non-Entitlement communities eligible to receive assistance to

carry out neighborhood revitalization, community economic development

and energy conservation projects.

This interim rule also responds to another statutory change.

Section 207 of the Multifamily Housing Property Disposition Reform Act

of 1994 (Pub. L. 103-233; approved April 11, 1994) amended section

105(a)(21) of the Housing and Community Development Act of 1974.

Section 105(a)(21) now authorizes housing services, such as housing

counseling in connection with tenant-based rental assistance and

affordable housing projects assisted under the HOME Program (title II

of the Cranston-Gonzalez National Affordable Housing Act (Pub. L. 101-

625, approved November 28, 1990) (NAHA)), energy auditing, preparation

of work specifications, loan processing, inspections, tenant selection,

management of tenant-based rental assistance, and other services

related to assisting owners, tenants, contractors, and other entities

participating or seeking to participate in housing activities assisted

under title II of the NAHA. Any costs of delivering the housing

services made eligible under the amended section 105(a)(21) are also

eligible.

HUD reminds States and localities using HOME and CDBG funds

together that the eligibility and benefit requirements of the two

programs differ; the HOME term ``project'' and the CDBG term

``activity'' are not synonymous, and States and localities should

exercise care in managing and documenting jointly-funded activities. To

simplify this process, this interim rule creates a new

Sec. 570.483(b)(3)(iii), stating that when CDBG funds are used for

housing services eligible under section 105(a)(21) of the Act, such

funds shall be considered to benefit low and moderate income persons

when the housing for which the services are provided is to be occupied

by low and moderate income households. Documentation demonstrating that

the

[[Page 54917]]

HOME project (or projects) supported by the CDBG housing services

activity meets the HOME income targeting criteria at 24 CFR 92.252 and

92.254 are sufficient to demonstrate compliance with this provision.

C. Program Income Requirements

This interim rule corrects the program income requirements

contained in Sec. 570.489. The final rule for CDBG Program Economic

Development Guidelines (January 5, 1995; 60 FR 1922) renumbered

paragraph (e)(2) of this section as paragraph (e)(3). Within that

section, however, the final rule did not similarly renumber a reference

to paragraph (e)(2)(ii) as paragraph (e)(3)(ii). This interim rule

makes the correction. HUD will soon issue a proposed rule that would

substantially revise all of paragraph (e). HUD will finalize the

technical change described above when it finalizes those new program

income requirements.

D. HUD Actions in Approving Plans and Making Grants

The CDBG Entitlement program final rule that HUD published on

November 9, 1995 (60 FR 56892) restored language in the Entitlement

program regulations that was inadvertently deleted by the Consolidated

Plan final rule (January 5, 1995; 60 FR 1878). That final rule

clarified that HUD retains the authority to require additional

assurances from grantees when substantial evidence exists that a

certification of future performance is not valid. This authority is in

addition to the current Consolidated Plan regulations (based on the

Comprehensive Housing Affordability Strategy statutory language), which

simply provide for certifications to be wholly accepted or wholly

rejected. Requiring additional assurances and potentially delaying or

limiting the grantee's access to funds may trigger CDBG due process

hearing requirements. Therefore, HUD will coordinate such actions

between HUD field offices and Headquarters.

The Consolidated Plan final rule inadvertently deleted a similar

provision in Sec. 570.485(c) of the State CDBG regulations. This

interim rule restores this language, which is similar to that found in

Sec. 570.485(b), except that Sec. 570.485(c) includes references to the

Consolidated Plan regulations in part 91. This interim rule also makes

a conforming change to Sec. 91.500(b) of the Consolidated Plan

regulations by adding a cross-reference to the restored

Sec. 570.485(c).

This interim rule makes another technical correction also resulting

from the Consolidated Plan final rule. Section 570.486(a) requires

units of general local government to follow the citizen participation

requirements imposed by the State. The associated requirement for State

citizen participation processes originally appeared at

Sec. 570.485(c)(1)(i). The Consolidated Plan final rule moved those

requirements to Sec. 91.115(e). This interim rule replaces the old

regulatory citation with the correct one.

E. Other Applicable Laws

This interim rule applies the requirements of the Architectural

Barriers Act of 1968 (42 U.S.C. 4151-4157) (the ABA) to the State CDBG

program. The ABA requires certain Federal and Federally-funded

buildings and other facilities to be designed, constructed, or altered

in accordance with standards that ensure accessibility to, and use by,

persons with physical disabilities. HUD's original CDBG regulations

required compliance with accessibility standards issued pursuant to the

ABA (see former 24 CFR 570.606, as issued on November 13, 1974 (39 FR

40148); and amended on June 28, 1977 (42 FR 33020)). In 1983, HUD

eliminated the requirement that the Entitlement and HUD-Administered

Small Cities programs comply with the ABA accessibility standards. HUD

did not apply the ABA to the State CDBG program when it became

operational in 1982 (47 FR 15290; April 8, 1982). HUD stated that the

CDBG program was not statutorily subject to the accessibility standards

of the ABA, because the CDBG statute does not provide authority for

imposing design, construction, or alteration standards on CDBG-funded

facilities, as required by section 4151(3) of the ABA. HUD further

stated that it had imposed the ABA standards on the CDBG Entitlement

and Small Cities programs as a regulatory requirement (47 FR 43909).

HUD noted, however, that some facilities constructed or altered with

CDBG assistance would remain subject to accessibility standards through

section 504 of the Rehabilitation Act of 1973.

Since HUD's decision in 1983 not to require compliance with the ABA

in the CDBG program, two significant events have caused HUD to

reconsider this decision. The first event was the passage of the Fair

Housing Amendments Act of 1988 (Pub. L. 100-430; approved September 13,

1988) (the Amendments Act), which amended title VIII of the Civil

Rights Act of 1968 to prohibit discrimination in housing on the basis

of handicap and familial status. The Amendments Act also makes it

unlawful to design and construct certain multifamily dwellings for

first occupancy after March 13, 1991 in a manner that makes them

inaccessible to persons with disabilities. Further, the Amendments Act

makes it unlawful to refuse to permit, at the expense of the person

with a disability, reasonable modifications to existing premises

occupied or to be occupied by such person if such modifications are

necessary to afford such person full enjoyment of the premises.

The second event was the passage of the Americans with Disabilities

Act (Pub. L. 101-336; approved July 26, 1990) (the ADA), which provides

comprehensive civil rights to individuals with disabilities in the

areas of employment, public accommodations, State and local government

services, and telecommunications. The ADA provides that discrimination

includes a failure to design and construct facilities for first

occupancy no later than January 26, 1993 that are readily accessible to

and usable by individuals with disabilities. Further, the ADA requires

the removal of architectural barriers and communication barriers that

are structural in nature from existing facilities, where such removal

is readily achievable--that is, easily accomplishable and able to be

carried out without much difficulty or expense. (See the final rule

implementing the ADA published by the Department of Justice on July 26,

1991 (56 FR 35544, 35568).)

The Amendments Act and the ADA indicate a clear policy that

housing, commercial facilities, and public accommodations should be

``readily accessible and usable by'' individuals with disabilities. In

light of these developments and to foster consistency in the

administration of HUD's programs, this interim rule requires compliance

with the ABA in the State CDBG program. (HUD has already required such

compliance in the Entitlement program in the November 9, 1995 final

rule (60 FR 56892).) Assisted facilities would have to meet the

requirements of the Uniform Federal Accessibility Standards for

alterations if the alterations are financed in whole or in part by CDBG

funds made available after the effective date of a final rule. Although

alterations made without the use of Federal funds would not have to

comply with the accessibility requirements of the ABA, alterations made

to these facilities, in most instances, would have to comply with the

accessibility requirements of the public accommodations provisions of

the ADA. This interim rule establishes this requirement in a new

Sec. 570.487(e).

[[Page 54918]]

F. HUD's Reviews and Audits

To clarify the relationship between HUD's review procedures and

HUD's expectations for States regarding recordkeeping, this interim

rule amends Sec. 570.493(b) by adding an additional sentence. The

additional sentence provides that a State's failure to maintain records

may result in a finding of noncompliance with the requirement to which

the record pertains. This provision does not represent a change in

HUD's overall policy (a comparable provision already exists in the

Entitlement program); it is just a clearer expression of this

relationship. This interim rule also updates Sec. 570.493(a) by

replacing the reference to a ``final statement'' with a reference to

the consolidated plan action plan.

Justification for Interim Rulemaking

HUD generally publishes a rule for public comment before issuing a

rule for effect, in accordance with it's regulations on rulemaking in

24 CFR part 10. Part 10 provides exceptions, however, if HUD finds good

cause to omit advance notice and public participation. The good cause

requirement is satisfied when prior public procedure is

``impracticable, unnecessary, or contrary to the public interest'' (24

CFR 10.1). HUD finds that good cause exists to publish this interim

rule for effect without first soliciting public comment, since prior

public procedure would be unnecessary.

HUD has already implemented the community revitalization strategy

approach in the Entitlement CDBG program through the Consolidated Plan

final rule published on January 5, 1995 (60 FR 1878). HUD has decided

that it is unnecessary to solicit comments prior to implementing this

flexible initiative in the State CDBG program for the following

reasons: (1) States have been generally aware of the community

revitalization strategy concept since the publication of the CDBG

Economic Development Guidelines final rule for the Entitlement program

on January 5, 1995 (60 FR 1922, 1929), in which HUD solicited comments

on the development of the concept for States; (2) HUD has consulted

with a representational cross section of States on the specific content

of this interim rule; (3) A number of States have asked HUD to

institute the revitalization strategy concept in the State program as

quickly as possible, so that they may take advantage of this flexible

new approach; and (4) Adoption of the concept is optional for States,

and so imposes no involuntary burden on them.

This interim rule allows States to implement the revitalization

concept promptly, while still providing for public comment on the

regulations before they are finalized. HUD is providing an extended

comment period (120 days rather than 60 days) so that respondents may

base their comments on their actual experience in implementing the

revitalization strategy concept. During the extended comment period,

HUD also plans to publish a notice in the Federal Register describing

the parameters within which States may design their approach and

explaining HUD's process for approval of States' process descriptions.

HUD has also determined that it is unnecessary to solicit prior

comment before implementing the other changes in this interim rule. The

changes to the national objectives criteria concerning architectural

barriers removal, housing activities, and ``presumed benefit'' groups

provide increased flexibility to States and State grantees. HUD has

previously adopted the changes in the Entitlement program after

soliciting and considering comments. The changes regarding housing

activities merely provide clarification in light of statutory changes.

HUD has also solicited and considered public comments before clarifying

HUD's policy regarding reviews and audits in the Entitlement program.

It is also unnecessary to solicit prior public comment regarding

the application of the Architectural Barriers Act (ABA) to the State

CDBG program, because this application is necessitated by other

statutory changes. In adding this requirement to Sec. 570.487, HUD does

not provide further regulatory interpretation of the ABA, but refers to

other applicable Federal regulations. HUD issued those regulations

through previous rulemaking actions. HUD also recently solicited and

considered public comments before applying the ABA to the Entitlement

CDBG program.

This interim rule also corrects regulatory citations and reinstates

unintentionally-deleted language. It is unnecessary to solicit prior

public comment on these minor technical corrections and clarifications,

because they do not represent substantive changes to the regulations.

The interim rulemaking process allows interested parties an

opportunity to comment on all of the changes included in this interim

rule. HUD will consider all comments received in developing a final

rule concerning these changes.

Findings and Certifications

Paperwork Reduction Act of 1995

The information collection requirements contained in

Sec. 91.315(e)(2) of this interim rule have been submitted to the

Office of Management and Budget (OMB) for review in accordance with the

Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). An agency may

not conduct or sponsor, and a person is not required to respond to, a

collection of information unless the collection displays a valid

control number. The OMB control number, when assigned, will be

announced by separate notice in the Federal Register.

As required under 5 CFR 1320.8(d)(1), HUD and OMB are seeking

comments from members of the public and affected agencies concerning

the proposed collection of information to:

(1) Evaluate whether the proposed collection of information is

necessary for the proper performance of the functions of the agency,

including whether the information will have practical utility;

(2) Evaluate the accuracy of the agency's estimate of the burden of

the proposed collection of information;

(3) Enhance the quality, utility, and clarity of the information to

be collected; and

(4) Minimize the burden of the collection of information on those

who are to respond; including through the use of appropriate automated

collection techniques or other forms of information technology, e.g.,

permitting electronic submission of responses. Interested persons are

invited to submit comments according to the instructions in the

``Dates'' and ``Addresses'' sections in the preamble of this interim

rule.

This document also provides the following information:

Title of Proposal: Community Revitalization Strategies: submission

of implementation process description statement by States; submission

of Community Revitalization Strategy by units of general local

government to States.

OMB Control Number: OMB has previously approved the information

collection requirements for the State CDBG Program under control number

2506-0117. This proposed information collection would be in addition to

the information collection requirements presently covered under control

number 2506-0117.

Description of the Need for the Information and Proposed Use: This

interim rule will, among other changes, allow States the option of

implementing a community revitalization strategy approach to community

development.

[[Page 54919]]

States that wish to adopt this approach will develop a process for

implementing community revitalization strategies in their State CDBG

program, including the specific process and criteria to be used in

approving local strategies. This process description, which will be

part of the State's consolidated plan action plan, must be submitted to

and approved by HUD. Units of local government applying for or

receiving State CDBG funds may then prepare a community revitalization

strategy and submit it to the State for approval. If the strategy is

approved, the locality will be allowed greater flexibility in meeting

certain national objectives and public benefit criteria.

Form Numbers: Not applicable. Process descriptions will be

submitted by States to HUD in narrative format; no forms will be

required. States will determine the format for submission of community

revitalization strategies by units of general local government.

Members of Affected Public: States, units of general local

government. Units of local government will be expected to consult with

citizens and involve citizens in the development of community

revitalization strategies.

Estimation of the Total Number of Hours Needed to Prepare the

Information Collection including Number of Respondents, Frequency of

Response, and Hours of Response: Both State and local governments, as

well as HUD staff, will expend time in implementing the community

revitalization strategy approach. States' time will be spent in

designing their process and in reviewing and approving local

governments' strategies; local governments' time will be spent in

developing strategies and in reporting to states on the progress and

outcomes of strategy implementation. HUD's time will be spent in

reviewing States' implementation process descriptions.

The exact number of hours needed to prepare the information

collection cannot be estimated with great certainty. The actual time

spent may vary greatly, depending on a number of variable factors:

Whether or not a particular State chooses to adopt the

community revitalization strategy approach in its program;

The number of communities in which a particular State

chooses to authorize the community revitalization strategy approach;

The scope and nature of States' existing application and

funding distribution processes for units of local government;

The design of a particular State's approach to implement

community revitalization strategies;

The process a State uses to develop its implementation

approach;

The process a unit of local government uses to develop its

revitalization strategy.

The Department anticipates that under some States' processes, the

preparation of a community revitalization strategy will entail

additional work by a local government beyond that normally required to

prepare an application for funding. Some States may only slightly alter

their existing application requirements to incorporate the

revitalization strategy concept; under those programs, the

incorporation of a community revitalization strategy may involve little

or no additional preparation time. Some communities may have, for their

own purposes, previously prepared a document that meets their State's

requirements for a community revitalization strategy; no additional

work may be necessary in those cases.

The burden of any additional work entailed in development of a

strategy will be offset by a reduced documentation burden for certain

activities undertaken pursuant to an approved strategy. For example,

certain economic development activities may be shown to meet the low-

and moderate-income benefit national objective on the basis of serving

a principally low- and moderate-income area rather than on the basis of

creating (or retaining) jobs for persons of low and moderate incomes.

In such cases, communities would not need to collect information on the

household income of each employee hired or retained; this would

substantially reduce the amount of time spent by communities in

demonstrating compliance with program requirements.

The following figures represent estimates of the additional

information collection burden resulting from implementation of

community revitalization strategies. These figures represent additional

increments of time beyond those normally involved in the State CDBG

program. In developing these estimates of time and cost, the Department

has melded its own estimations with averaged figures provided by

several States that have expressed interest in implementing community

revitalization strategies. To the extent that States minimize or

streamline the process for submission of strategies, the actual burden

per unit of local government may be less than these estimates. The

amount of time for States to review communities' strategies is

anticipated to be minimal; it is anticipated that, in many States, the

format for submitting a strategy will subsume much of the documentation

that States presently request in applications.

----------------------------------------------------------------------------------------------------------------

Total

Burden of collection Frequency Number of hours per Total

respondents response hours

----------------------------------------------------------------------------------------------------------------

State process description:

State......................................................... 1 25 120 3,000

Federal....................................................... 1 25 2 50

Community revitalization strategy:

Local......................................................... 1 300 120 36,000

State......................................................... 1 300 1 300

Federal....................................................... 0 0 0 0

Local recordkeeping on approved strategies:

Local......................................................... Ongoing 300 -80 -24,000

State......................................................... 0 0 0 0

Federal....................................................... 0 0 0 0

Local reporting to State on approved strategies:

Local......................................................... Ongoing 300 8 2,400

State......................................................... 0 0 0 0

Federal....................................................... 0 0 0 0

---------------------------------------------

[[Page 54920]]

Total....................................................... 325 17,750

----------------------------------------------------------------------------------------------------------------

Status of the Proposed Information Collection: New collection.

Authority: Section 3506 of the Paperwork Reduction Act of 1995,

44 U.S.C. Chapter 35, as amended.

Regulatory Flexibility Act

The Secretary, in accordance with the Regulatory Flexibility Act (5

U.S.C. 605(b)), has reviewed this interim rule before publication and

by approving it certifies that this interim rule does not have a

significant economic impact on a substantial number of small entities.

Specifically, this interim rule makes technical amendments and provides

States and communities the same flexibility of the community

revitalization strategies concept that HUD previously provided for

recipients in the Entitlement program.

Environmental Impact

At the time of the development of the regulations in part 570, and

when the regulations were substantively amended by the rules described

in this preamble, HUD made Findings of No Significant Impact with

respect to the environment in accordance with the regulations in 24 CFR

part 50 that implement section 102(2)(C) of the National Environmental

Policy Act of 1969 (42 U.S.C. 4332). This interim rule does not make

significant changes to those regulations in terms of environmental

impact. Accordingly, those findings remain applicable to this interim

rule, and are available for public inspection between 7:30 a.m. and

5:30 p.m. weekdays in the Office of the Rules Docket Clerk, Office of

General Counsel, Room 10276, Department of Housing and Urban

Development, 451 Seventh Street, SW., Washington, DC.

Executive Order 12612, Federalism

The General Counsel, as the Designated Official under section 6(a)

of Executive Order 12612, Federalism, has determined that the policies

contained in this interim rule will not have substantial direct effects

on States or their political subdivisions, on the relationship between

the Federal Government and the States, or on the distribution of power

and responsibilities among the various levels of government. This

interim rule will benefit States and communities by providing them with

additional flexibility in meeting certain national objectives and

public benefit requirements of the CDBG program. As a result, the

interim rule is not subject to review under the order.

Executive Order 12606, The Family

The General Counsel, as the Designated Official under Executive

Order 12606, The Family, has determined that this interim rule does not

have potential for significant impact on family formation, maintenance,

and general well-being, and thus is not subject to review under the

order. No significant change in existing HUD policies or programs will

result from promulgation of this interim rule, as those policies and

programs relate to family concerns.

List of Subjects

24 CFR Part 91

Aged, Grant programs--housing and community development, Homeless,

Individuals with disabilities, Low and moderate income housing,

Reporting and recordkeeping requirements.

24 CFR Part 570

Administrative practice and procedure, American Samoa, Community

development block grants, Grant programs--education, Grant programs--

housing and community development, Guam, Indians, Lead poisoning, Loan

programs--housing and community development, Low and moderate income

housing, New communities, Northern Mariana Islands, Pacific Islands

Trust Territory, Pockets of poverty, Puerto Rico, Reporting and

recordkeeping requirements, Small cities, Student aid, Virgin Islands.

Accordingly, for the reasons described in this preamble, 24 CFR

parts 91 and 570 are amended, as follows:

PART 91--CONSOLIDATED SUBMISSIONS FOR COMMUNITY PLANNING AND

DEVELOPMENT PROGRAMS

1. The authority citation for part 91 continues to read as follows:

Authority: 42 U.S.C. 3535(d), 3601-3619, 5301-5315, 11331-11388,

12701-12711, 12741-12756, and 12901-12912.

2. Section 91.315 is amended by redesignating the text of paragraph

(e) as paragraph (e)(1), and by adding a new paragraph (e)(2), to read

as follows:

Sec. 91.315 Strategic plan.

* * * * *

(e) * * *

(2) A State may elect to allow units of general local government to

carry out a community revitalization strategy that includes the

economic empowerment of low income residents, in order to obtain the

additional flexibility available as provided in 24 CFR part 570,

subpart I. A State must approve a local government's revitalization

strategy before it may be implemented. If a State elects to allow

revitalization strategies in its program, the method of distribution

contained in a State's action plan pursuant to Sec. 91.320(g)(1) must

reflect the State's process and criteria for approving local

governments' revitalization strategies. The State's process and

criteria are subject to HUD approval.

* * * * *

3. In Sec. 91.320, paragraph (g)(1) is amended by adding a new

sentence after the third sentence and before the parenthetical sentence

at the end of the paragraph, to read as follows:

Sec. 91.320 Action plan.

* * * * *

(g) * * *

(1) * * * If a State elects to allow units of general local

government to carry out community revitalization strategies, the method

of distribution shall reflect the State's process and criteria for

approving local governments' revitalization strategies. * * *

* * * * *

4. Section 91.500 is amended by revising the introductory text of

paragraph (b) to read as follows:

Sec. 91.500 HUD approval action.

* * * * *

(b) Standard of review. HUD may disapprove a plan or a portion of a

plan if it is inconsistent with the purposes of the Cranston-Gonzalez

National Affordable Housing Act (42 U.S.C. 12703), if it is

substantially incomplete, or, in the case of certifications applicable

to the CDBG program under Secs. 91.225 (a) and (b) or 91.325 (a) and

(b), if it is not satisfactory to the Secretary in accordance with

[[Page 54921]]

Sec. Sec. 570.304, 570.429(g), or 570.485(c) of this title, as

applicable. The following are examples of consolidated plans that are

substantially incomplete:

* * * * *

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

5. The authority citation for part 570 continues to read as

follows:

Authority: 42 U.S.C. 3535(d) and 5300-5320.

6. Section 570.480 is amended by revising paragraph (b) to read as

follows:

Sec. 570.480 General.

* * * * *

(b) HUD's authority for the waiver of regulations and for the

suspension of requirements to address damage in a Presidentially-

declared disaster area is described in 24 CFR part 5 and in section 122

of the Act, respectively.

* * * * *

7. Section 570.482 is amended by:

a. Amending paragraph (d)(1) by removing the word ``and'' at the

end of the paragraph;

b. Amending paragraph (d)(2) by removing the period at the end of

the paragraph and adding in it's place the phrase ``; and'';

c. Adding a new paragraph (d)(3); and

d. Amending paragraph (f)(3)(v) by adding new paragraphs

(f)(3)(v)(L) and (f)(3)(v)(M), to read as follows:

Sec. 570.482 Eligible activities.

* * * * *

(d) * * *

(3) Services of any type carried out under the provisions of

section 105(a)(15) of the Act, pursuant to a strategy approved by a

State under the provisions of Sec. 91.315(e)(2) of this title.

* * * * *

(f) * * *

(3) * * *

(v) * * *

(L) Provides services to the residents of an area pursuant to a

strategy approved by the State under the provisions of

Sec. 91.315(e)(2) of this title;

(M) Creates or retains jobs through businesses assisted in an area

pursuant to a strategy approved by the State under the provisions of

Sec. 91.315(e)(2) of this title.

* * * * *

8. Section 570.483 is amended by:

a. Revising paragraph (b)(1)(iv);

b. Adding a new paragraph (b)(1)(v);

c. Revising the second sentence of paragraph (b)(2)(ii)(A);

d. Revising paragraph (b)(2)(iii);

e. Revising the introductory text of paragraph (b)(3);

f. Adding a new paragraph (b)(3)(iii);

g. Amending the last sentence of paragraph (b)(4)(vi)(D) by

removing the reference to ``paragraph (e)(5)'' and by adding in its

place a reference to ``paragraph (e)(6)'';

h. Amending the last sentence of paragraph (b)(4)(vi)(E) by

removing the reference to ``paragraph (e)(5)'' and by adding in its

place a reference to ``paragraph (e)(6)'';

i. Amending paragraph (b)(4)(vi)(F)(2) by removing the citation

``Sec. 570.482(e)'' and by adding in its place the citation

``Sec. 570.482(f)'';

j. Redesignating paragraph (e)(5) as (e)(6), and by revising the

first sentence of newly redesignated paragraph (e)(6); and

k. Adding a new paragraph (e)(5); to read as follows:

Sec. 570.483 Criteria for national objectives.

* * * * *

(b) * * *

(1) * * *

(iv) Activities meeting the requirements of paragraph (e)(4)(i) of

this section may be considered to qualify under paragraph (b)(1) of

this section.

(v) HUD will consider activities meeting the requirements of

paragraph (e)(5)(i) of this section to qualify under paragraph (b)(1)

of this section, provided that the area covered by the strategy meets

one of the following criteria:

(A) The area is in a Federally-designated Empowerment Zone or

Enterprise Community;

(B) The area is primarily residential and contains a percentage of

low and moderate income residents that is no less than 70 percent;

(C) All of the census tracts (or block numbering areas) in the area

have poverty rates of at least 20 percent, at least 90 percent of the

census tracts (or block numbering areas) in the area have poverty rates

of at least 25 percent, and the area is primarily residential. (If only

part of a census tract or block numbering area is included in a

strategy area, the poverty rate shall be computed for those block

groups (or any part thereof) which are included in the strategy area.)

(D) Upon request by the State, HUD may grant exceptions to the 70

percent low and moderate income or 25 percent poverty minimum

thresholds on a case-by-case basis. In no case, however, may a strategy

area have both a percentage of low and moderate income residents less

than 51 percent and a poverty rate less than 20 percent.

(2) * * *

(ii) * * *

(A) * * * Activities that exclusively serve a group of persons in

any one or a combination of the following categories may be presumed to

benefit persons, 51 percent of whom are low and moderate income: abused

children, battered spouses, elderly persons, adults meeting the Bureau

of the Census' Current Population Reports definition of ``severely

disabled,'' homeless persons, illiterate adults, persons living with

AIDS, and migrant farm workers; or

* * * * *

(iii) An activity that serves to remove material or architectural

barriers to the mobility or accessibility of elderly persons or of

adults meeting the Bureau of the Census' Current Population Reports

definition of ``severely disabled'' will be presumed to qualify under

this criterion if it is restricted, to the extent practicable, to the

removal of such barriers by assisting:

(A) The reconstruction of a public facility or improvement, or

portion thereof, that does not qualify under Sec. 570.483(b)(1);

(B) The rehabilitation of a privately owned nonresidential building

or improvement that does not qualify under Sec. 570.483(b) (1) or (4);

or

(C) The rehabilitation of the common areas of a residential

structure that contains more than one dwelling unit and that does not

qualify under Sec. 570.483(b)(3).

* * * * *

(3) Housing activities. An eligible activity carried out for the

purpose of providing or improving permanent residential structures

that, upon completion, will be occupied by low and moderate income

households. This would include, but not necessarily be limited to, the

acquisition or rehabilitation of property by the unit of general local

government, a subrecipient, an entity eligible to receive assistance

under section 105(a)(15) of the Act, a developer, an individual

homebuyer, or an individual homeowner; conversion of nonresidential

structures; and new housing construction. If the structure contains two

dwelling units, at least one must be so occupied, and if the structure

contains more than two dwelling units, at least 51 percent of the units

must be so occupied. If two or more rental buildings being assisted are

or will be located on the same or contiguous properties, and the

buildings will be under common ownership and management, the grouped

buildings may be considered for this purpose as a single structure. If

housing activities being assisted meet the requirements of paragraph

(e)(4)(ii) or (e)(5)(ii) of this

[[Page 54922]]

section, all such housing may also be considered for this purpose as a

single structure. For rental housing, occupancy by low and moderate

income households must be at affordable rents to qualify under this

criterion. The unit of general local government shall adopt and make

public its standards for determining ``affordable rents'' for this

purpose. The following shall also qualify under this criterion:

* * * * *

(iii) When CDBG funds are used for housing services eligible under

section 105(a)(21) of the Act, such funds shall be considered to

benefit low and moderate income persons if the housing units for which

the services are provided are HOME-assisted and the requirements of

Sec. 92.252 or Sec. 92.254 of this title are met.

* * * * *

(e) * * *

(5) If the unit of general local government has elected to prepare

a community revitalization strategy pursuant to the authority of

Sec. 91.315(e)(2) of this title, and the State has approved the

strategy, the unit of general local government may also elect the

following options:

(i) Activities undertaken pursuant to the strategy for the purpose

of creating or retaining jobs may, at the option of the grantee, be

considered to meet the requirements of paragraph (b) of this section

under the criteria at Sec. 570.483(b)(1)(v) instead of the criteria at

Sec. 570.483(b)(4); and

(ii) All housing activities in the area undertaken pursuant to the

strategy may be considered to be a single structure for purposes of

applying the criteria at paragraph (b)(3) of this section.

(6) If an activity meeting the criteria in Sec. 570.482(f)(3)(v)

also meets the requirements of either paragraph (e)(4)(i) or (e)(5)(i)

of this section, the unit of general local government may elect to

qualify the activity either under the area benefit criteria at

paragraph (b)(1) (iv) or (v) of this section or under the job

aggregation criteria at paragraph (b)(4)(vi)(D) of this section, but

not under both. * * *

* * * * *

9. Section 570.485 is amended by revising the section heading, and

by adding a new paragraph (c), to read as follows:

Sec. 570.485 Making of grants.

* * * * *

(c) Approval of grant. HUD will approve a grant if the State's

submissions have been made and approved in accordance with 24 CFR part

91, and the certifications required therein are satisfactory to the

Secretary. The certifications will be satisfactory to the Secretary for

this purpose unless the Secretary has determined pursuant to

Sec. 570.493 that the State has not complied with the requirements of

this subpart, or has determined that there is evidence, not directly

involving the State's past performance under this program, that tends

to challenge in a substantial manner the State's certification of

future performance. If the Secretary makes any such determination,

however, the State may be required to submit further assurances as the

Secretary may deem warranted or necessary to find the grantee's

certification satisfactory.

Sec. 570.486 [Amended]

10. In Sec. 570.486, paragraph (a) introductory text is amended by

removing the reference to ``Sec. 570.485(c)(1)(i)'', and by adding in

its place a reference to ``Sec. 91.115(e) of this title''.

11. Section 570.487 is amended by adding a new paragraph (e) to

read as follows:

Sec. 570.487 Other applicable laws and related program requirements.

* * * * *

(e) Architectural Barriers Act and the Americans with Disabilities

Act. The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157)

requires certain Federal and Federally-funded buildings and other

facilities to be designed, constructed, or altered in accordance with

standards that ensure accessibility to, and use by, physically

handicapped people. A building or facility designed, constructed, or

altered with funds allocated or reallocated under this subpart after

November 21, 1996 and that meets the definition of residential

structure as defined in 24 CFR 40.2, or the definition of building as

defined in 41 CFR 101-19.602(a), is subject to the requirements of the

Architectural Barriers Act of 1968 and shall comply with the Uniform

Federal Accessibility Standards. For general type buildings, these

standards are in Appendix A to 41 CFR part 101-19.6. For residential

structures, these standards are available from the Department of

Housing and Urban Development, Office of Fair Housing and Equal

Opportunity, Disability Rights Division, Room 5240, 451 Seventh Street,

SW, Washington, DC 20410; telephone (202) 708-2333 (voice) or (203)

708-1734 (TTY) (these are not toll-free numbers).

Sec. 570.489 [Amended]

12. Section 570.489 is amended by:

a. Amending the first sentence of the introductory text of

paragraph (e)(3) by removing the phrase ``paragraph (e)(2)(ii)'', and

by adding in its place the phrase ``paragraph (e)(3)(ii)'';

b. Removing paragraph (k)(2); and

c. Redesignating paragraph (k)(1) as paragraph (l).

13. Section 570.493 is amended by:

a. Amending paragraph (a)(1) by removing the phrase ``final

Statement'', and by adding in its place the phrase ``action plan under

part 91 of this title''; and

b. Amending paragraph (b) by adding a sentence at the end to read

as follows:

Sec. 570.493 HUD's reviews and audits.

* * * * *

(b) * * * A State's failure to maintain records in accordance with

Sec. 570.490 may result in a finding that the State has failed to meet

the applicable requirement to which the record pertains.

Dated: August 28, 1996.

Andrew M. Cuomo,

Assistant Secretary for Community Planning and Development.

[FR Doc. 96-26957 Filed 10-21-96; 8:45 am]

BILLING CODE 4210-29-P