HUD Disaster Recovery Initiative

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

24 CFR Chapter V

[Docket No. FR-4254-N-01]

HUD Disaster Recovery Initiative

AGENCY: Office of Community Planning and Development, HUD.

ACTION: Notice of disaster recovery funds availability and waivers.

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

SUMMARY: The 1997 Emergency Supplemental Appropriations Act for

Recovery from Natural Disasters, with respect to the HUD Disaster

Recovery Initiative grant funds, requires the publication of a Notice

governing the use of such funds in conjunction with any program

administered by the Federal Emergency Management Agency (FEMA) for

buyouts of structures in disaster areas. This Notice addresses that

requirement and provides other guidance on the use of those funds.

EFFECTIVE DATE: June 12, 1997.

FOR FURTHER INFORMATION CONTACT: Jan C. Opper, Senior Program Officer,

Office of Block Grant Assistance, Department of Housing and Urban

Development, Room 7286, 451 Seventh Street, SW., Washington, DC 20410,

telephone number (202) 708-3587. Persons with hearing or speech

impairments may access this number via TTY by calling the Federal

Information Relay Service at (800) 877-8339. FAX inquiries may be sent

to Mr. Opper at (202) 401-2044. (Except for the ``800'' number, these

telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

I. Empowering Communities for Recovery

A. Purpose

1. This Notice describes policies and procedures applicable to the

HUD Disaster Recovery Initiative.

2. When a community is hit hard by a natural disaster, there is

often a long, difficult process of recovery. Most impacted areas never

fully recover because of limited resources. HUD is uniquely positioned

to assist States and communities with disaster recovery, because of its

mission and experience as the Federal Government's agency for

addressing a broad spectrum of needs related to community viability

(e.g., housing, economic and community development).

3. HUD's Disaster Recovery Initiative helps communities impacted by

disasters receiving Presidential declarations. When other agencies

cannot assist, HUD steps in with gap funding for recovery activities--

providing the glue that holds together the sometimes disconnected

pieces of disaster recovery. Because Federal government resources will

never be sufficient to cover costs of total recovery, HUD's program

requires a partnership of Federal, State and local governments, the

business community and citizens.

4. HUD Disaster Recovery funds are intended to support the

activities of other Federal agencies and cannot be used for activities

reimbursable or for which funds are made available by the Federal

Emergency Management Agency (FEMA), the Small Business Administration

(SBA), or the U.S. Army Corps of Engineers (USACE).

B. Benefiting Persons of Low and Moderate Income

1. An objective of the program is the redevelopment of viable urban

communities, by providing decent housing and a suitable living

environment and expanding economic opportunities, especially for

persons of low and moderate income.

2. A grantee must use at least 50 percent of its HUD Disaster

Recovery funds for activities that benefit persons of low and moderate

income. The Secretary may waive this requirement only on a case-by-case

basis. HUD will consider such a waiver after receiving a request from a

grantee that includes a justification that establishes good cause for

the waiver and reflects a public purpose.

C. Definitions

Regulatory references are in title 24 of the Code of Federal

Regulations (CFR), unless otherwise cited.

Act means Title I of the Housing and Community Development Act of

1974, as amended (42 U.S.C. 5301 et seq.).

Buildings for the general conduct of government means city halls,

county administrative buildings, State capitol or office buildings or

other facilities in which the legislative, judicial or general

administrative affairs of the government are conducted. Such term does

not include such facilities as neighborhood service centers or special

purpose buildings located in low and moderate income areas that house

various nonlegislative functions or services provided by government at

decentralized locations.

Chief Executive Officer of a State or unit of general local

government means the elected official or the legally designated

official, who has the primary responsibility for the conduct of that

entity's governmental affairs. Examples of the ``chief executive

officer'' of a unit of general local government are: the elected mayor

of a municipality; the elected county executive of a county; the

chairperson of a county commission or board in a county that has no

elected county executive; and the official designated pursuant to law

by the governing body of a unit of general local government.

City means the following:

a. Any unit of general local government that is classified as a

municipality by the United States Bureau of the Census, or

b. Any other unit of general local government that is a town or

township and that, in the determination of the Secretary:

i. Possesses powers and performs functions comparable to those

associated with municipalities;

ii. Is closely settled; and

iii. Contains within its boundaries no incorporated places as

defined by the United States Bureau of the Census that have not entered

into cooperation agreements with the town or township for a period

covering at least 3 years to undertake or assist in the undertaking of

essential community development and housing assistance activities. The

determination of eligibility of a town or township to qualify as a city

will be based on information available from the United States Bureau of

the Census and information provided by the town or township and its

included units of general local government.

Grantee means:

a. A City that receives no less than $200,000 under the disaster

formula allocation, has the capacity to carry out this program, and

remaining disaster recovery needs; or that is in a State in which HUD

administers its community development program.

b. A County that receives no less than $200,000 under the disaster

formula allocation, has the capacity to carry out this program, and

remaining disaster recovery needs; or that is in a State in which HUD

administers its community development program. The county may designate

a local government or governments to carry out the program on its

behalf.

c. A State government that receives a HUD Disaster Recovery grant

allocation that includes funds calculated for places that would have

received an allocation below the minimum grant size.

Household means all the persons who occupy a housing unit. The

occupants may be a single family, one person living alone, two or more

families living together, or any other group of related or unrelated

persons who share living arrangements.

[[Page 47345]]

HUD means the Department of Housing and Urban Development.

Income. For the purpose of city and county grantees determining

whether a family or household is low- and moderate-income, grantees may

select any of the three definitions listed below for each activity,

except that integrally related activities of the same type and

qualifying under the same paragraph of Sec. 570.208(a) shall use the

same definition of income. The option to choose a definition does not

apply to activities that qualify under Sec. 570.208(a)(1) (Area benefit

activities), except when the recipient carries out a survey under

Sec. 570.208(a)(1)(vi). Activities qualifying under Sec. 570.208(a)(1)

generally must use the area income data supplied to recipients by HUD.

a. The three definitions are as follows:

i. Annual income as defined under the Section 8 Housing Assistance

Payments program at Sec. 813.106 (except that if the HUD Disaster

Recovery Initiative assistance being provided is homeowner

rehabilitation, the value of the homeowner's primary residence may be

excluded from any calculation of Net Family Assets); or

ii. Annual Income as reported under the Census long-form for the

most recent available decennial Census. This definition includes:

(1) Wages, salaries, tips, commissions, etc.;

(2) Self-employment income from own non-farm business, including

proprietorships and partnerships;

(3) Farm self-employment income;

(4) Interest, dividends, net rental income, or income from estates

or trusts;

(5) Social Security or railroad retirement;

(6) Supplemental Security Income, Aid to Families with Dependent

Children, or other public assistance or public welfare programs;

(7) Retirement, survivor, or disability pensions; and

(8) Any other sources of income received regularly, including

Veterans' (VA) payments, unemployment compensation, and alimony; or

iii. Adjusted gross income as defined for purposes of reporting

under Internal Revenue Service (IRS) Form 1040 for individual Federal

annual income tax purposes.

b. Estimate the annual income of a family or household by

projecting the prevailing rate of income of each person at the time

assistance is provided for the individual, family, or household (as

applicable). Estimated annual income shall include income from all

family or household members, as applicable. Income or asset enhancement

derived from the HUD Disaster Recovery grant-assisted activity shall

not be considered in calculating estimated annual income.

Indian tribe means any Indian tribe, band, group, and nation,

including Alaska Indians, Aleuts, and Eskimos and any Alaska Native

Village, of the United States that is considered an eligible recipient

under the Indian Self-Determination and Education Assistance Act (Pub.

L. 93-638) or under the State and Local Fiscal Assistance Act of 1972

(Pub. L. 92-512).

Low- and moderate-income household means a household having an

income equal to or less than the Section 8 low-income limit established

by HUD.

Low- and moderate-income person means a member of a family having

an income equal to or less than the Section 8 low-income limit

established by HUD. Unrelated individuals will be considered as one-

person families for this purpose.

Low-income household means a household having an income equal to or

less than the Section 8 very low-income limit established by HUD.

Low-income person means a member of a family that has an income

equal to or less than the Section 8 very low-income limit established

by HUD. Unrelated individuals shall be considered as one-person

families for this purpose.

Moderate-income household means a household having an income equal

to or less than the Section 8 low-income limit and greater than the

Section 8 very low-income limit, established by HUD.

Moderate-income person means a member of a family that has an

income equal to or less than the Section 8 low-income limit and greater

than the Section 8 very low-income limit, established by HUD. Unrelated

individuals shall be considered as one-person families for this

purpose.

Secretary means the Secretary of Housing and Urban Development.

Small business means a business that meets the criteria set forth

in section 3(a) of the Small Business Act (15 U.S.C. 631, 636, 637).

State means any State of the United States, or an instrumentality

thereof approved by the Governor; and the Commonwealth of Puerto Rico.

Unit of general local government means any city, county, town,

township, parish, village or other general purpose political

subdivision of a State; Guam, the Northern Mariana Islands, the Virgin

Islands, and American Samoa or a general purpose political subdivision

thereof; a combination of such political subdivisions recognized by the

Secretary; and the District of Columbia.

D. Allocation of Funds

1. $500 million has been appropriated for the HUD Disaster Recovery

Initiative under Title II, Chapter 10 of the 1997 Emergency

Supplemental Appropriations Act for Recovery from Natural Disasters

(Pub. L. 105-18; approved June 12, 1997) (the 1997 Supplemental

Appropriations Act).

2. HUD will generally allocate funds to grantees based on a formula

that reflects disaster recovery needs that are not met by other Federal

programs provided that the grantee has the capacity to carry out this

program, and on remaining needs.

E. Submission Requirements

1. Prerequisites to a grantee's receipt of a HUD Disaster Recovery

grant include a citizen participation plan; publication of Plan

proposals by grantees; notice and comment; and submission of an Action

Plan for Disaster Recovery.

2. Each city or county grantee must submit to HUD, for approval, an

Action Plan for Disaster Recovery that describes:

a. The recovery needs resulting from the covered disaster;

b. The grantee's overall plan for recovery;

c. Expected Federal, non-Federal public, and private resources, and

their relationship, if any, to activities to be funded with HUD

Disaster Recovery funds;

d. The projected uses for the HUD Disaster Recovery funds; and

e. In the case of a new HUD grantee, it should describe how

expenditure of its funds fits within a current local or State recovery

plan.

3. The city or county grantee must describe monitoring standards

and procedures pursuant to Sec. 91.230 and include certifications

pursuant to:

a. Sec. 91.225(a)(1), affirmatively furthering fair housing;

b. Sec. 91.225(a)(3), drug-free workplace;

c. Sec. 91.225(a)(4), anti-lobbying;

d. Sec. 91.225(a)(7), acquisition and relocation, except as waived;

e. Sec. 91.225(b)(1), citizen participation, except as waived;

f. Sec. 91.225(b)(5), excessive force;

g. Sec. 91.225(b)(6), compliance with anti-discrimination laws;

h. Sec. 91.225(b)(7), compliance with lead-based paint procedures;

and

i. Sec. 91.225(b)(8), compliance with applicable laws.

4. Each State grantee must submit to HUD, for approval, an Action

Plan for Disaster Recovery that describes:

a. The recovery needs resulting from the covered disaster;

[[Page 47346]]

b. The grantee's overall plan for recovery;

c. Expected Federal, non-Federal public, and private resources, and

their relationship, if any, to activities to be funded with HUD

Disaster Recovery funds; and

d. The State's method of distribution.

5. A State grantee may distribute HUD Disaster Recovery funds to

units of general local government, including city and county grantees

that otherwise receive HUD Disaster Recovery funds, and to Indian

tribes.

6. The State grantee must describe monitoring standards and

procedures pursuant to Sec. 91.330 and include certifications pursuant

to:

a. Sec. 91.325(a)(1), affirmatively furthering fair housing;

b. Sec. 91.325(a)(3), drug-free workplace;

c. Sec. 91.325(a)(4), anti-lobbying;

d. Sec. 91.325(a)(5), authority of the State to carry out the

program;

e. Sec. 91.325(a)(7), acquisition and relocation, except as waived;

f. Sec. 91.325(b)(1), citizen participation, except as waived;

g. Sec. 91.325(b)(2), consultation with local governments;

h. Sec. 91.325(b)(5), compliance with antidiscrimination laws;

i. Sec. 91.325(b)(6), excessive force;

j. Sec. 91.325(b)(7), compliance with applicable laws.

7. Citizen participation

a. In order to permit public examination and appraisal of the

Action Plan for Disaster Recovery, to enhance the public accountability

of grantees, and to facilitate coordination of activities with

different levels of government, the grantee (or unit of general local

government receiving a grant from a State) shall in a timely manner--

i. Furnish citizens or, as appropriate, units of general local

government information concerning the amount of funds available for

proposed HUD Disaster Recovery grant activities and the range of

activities that may be undertaken, including the estimated amount

proposed to be used for activities that will benefit persons of low and

moderate income;

ii. Publish a proposed Action Plan for Disaster Recovery in such

manner to afford affected citizens or, as appropriate, units of general

local government an opportunity to examine its content and to submit

comments on the proposed disaster recovery performance and on the

community development performance of the grantee; and

iii. Provide citizens or, as appropriate, units of general local

government with reasonable notice of, and opportunity to comment on,

any substantial change proposed to be made in the use of funds received

under this grant from one eligible activity to another or in the method

of distribution of such funds.

In preparing the Action Plan for Disaster Recovery, the grantee

shall consider any such comments and views and may, if deemed

appropriate by the grantee, modify the proposed Action Plan for

Disaster Recovery. The Action Plan for Disaster Recovery shall be made

available to the public, and a copy shall be furnished to the Secretary

together with the certifications required under sections 3. and 5.

above. Any Action Plan for Disaster Recovery may be modified or amended

from time to time by the grantee in accordance with the same procedures

required in this paragraph for the preparation and submission of such

Action Plan for Disaster Recovery.

b. A HUD Disaster Recovery grant may be made only if the grantee

certifies that it is following a detailed citizen participation plan

that:

i. Provides for and encourages citizen participation, with

particular emphasis on areas in which HUD Disaster Recovery funds are

proposed to be used;

ii. Provides citizens with information and records relating to the

grantee's proposed use of funds, and relating to the actual use of HUD

Disaster Recovery funds; and

iii. Identifies how the needs of non-English speaking residents

will be met in the case of public hearings where a significant number

of non-English speaking residents can be reasonably expected to

participate.

This paragraph may not be construed to restrict the responsibility

or authority of the grantee for the development and execution of its

HUD Disaster Recovery Initiative.

F. Eligible Activities

1. Grantees may not use HUD Disaster Recovery funds for activities

reimbursable or for which funds are made available by the Federal

Emergency Management Agency (FEMA), the Small Business Administration

(SBA), or the U.S. Army Corps of Engineers (USACE).

2. Disaster Recovery funds may be used for activities that are

relevant to disaster recovery, as described in this Notice. Grantees

must use funds appropriated under Title II, Chapter 10 of the 1997

Emergency Supplemental Appropriations Act for Recovery from Natural

Disasters (Pub. L. 105-18) for buyouts, relocation, long-term recovery,

and mitigation related to a covered disaster. These funds will

supplement, not replace, Federal Emergency Management Agency (FEMA) and

other Federal funds. Those activities include:

a. Acquisition of real property (including the buying out of

properties in a flood plain and the acquisition of relocation

property);

b. Relocation payments and assistance for displaced persons,

businesses, organizations, and farm operations;

c. Debris removal, clearance, and demolition;

d. Rehabilitation or reconstruction of residential and non-

residential structures;

e. Acquisition, construction, reconstruction, or installation of

public facilities and improvements, such as water and sewer facilities,

streets, neighborhood centers, and the conversion of school buildings

for eligible purposes;

f. Code enforcement in deteriorated or deteriorating areas, e.g.,

disaster areas;

g. Assistance to facilitate homeownership among low and moderate

income persons, e.g., downpayment assistance, interest rate subsidies,

loan guarantees;

h. Provision of public services, limiting costs to no more than 25

percent of the grant amount;

i. Activities relating to energy conservation and renewable energy

resources, incorporated into recovery;

j. Provision of assistance to profit-motivated businesses to carry

out economic development or recovery activities that benefit the public

through job creation/retention; and

k. Planning and administration costs up to 20 percent of the grant

(e.g., planning, urban environmental design and policy-planning-

management-capacity building activities and payment of reasonable

program administration costs for: general management, oversight and

coordination; public information; fair housing activities; indirect

costs charged to the HUD Disaster Recovery Initiative under a cost

allocation plan prepared in accordance with OMB Circulars A-21, A-87,

or A-122 as applicable; and submission of applications for Federal

programs; as well as,

l. Acquisition, construction, or reconstruction of buildings for

the general conduct of government damaged or destroyed as a direct

result of a Presidentially declared disaster; and

m. Construction of new replacement housing by units of general

local government damaged or destroyed as a direct result of a

Presidentially declared disaster.

3. Determination of eligibility. An activity may be assisted in

whole or in part with HUD Disaster Recovery funds

[[Page 47347]]

only if all of the following requirements are met:

a. Compliance with section F. Each activity must meet the

eligibility requirements of section F of this notice.

b. Compliance with national objectives. Grant recipients under the

HUD Disaster Recovery Initiative must certify that their projected use

of funds has been developed so as to give maximum feasible priority to

activities that will carry out one of the national objectives of

benefit to low- and moderate-income families or aid in the prevention

or elimination of slums or blight; the projected use of funds may also

include activities that the recipient certifies are designed to meet

other community development needs having a particular urgency because

existing conditions pose a serious and immediate threat to the health

or welfare of the community where other financial resources are not

available to meet such needs. Consistent with the foregoing, each

recipient must ensure, and maintain evidence, that each of its

activities assisted with HUD Disaster Recovery funds meets one of the

three national objectives as contained in its certification. Criteria

for determining whether an activity addresses one or more of these

objectives are contained at Sec. 570.208.

c. Compliance with the primary objective. The primary objective of

the HUD Disaster Recovery Initiative is the redevelopment of viable

urban communities, by providing decent housing and a suitable living

environment and expanding economic opportunities, especially for

persons of low and moderate income. In determining the percentage of

funds expended for such activities:

i. Costs of administration and planning eligible under section F.1.

of this notice will be assumed to benefit low- and moderate-income

persons in the same proportion as the remainder of the HUD Disaster

Recovery funds and, accordingly, shall be excluded from the

calculation;

ii. Funds expended for the acquisition, new construction or

rehabilitation of property for housing that qualifies under

Sec. 570.208(a)(3) must be counted for this purpose but shall be

limited to an amount determined by multiplying the total cost

(including HUD Disaster Recovery grant and non-HUD Disaster Recovery

grant costs) of the acquisition, construction or rehabilitation by the

percent of units in such housing to be occupied by low- and moderate-

income persons.

iii. Funds expended for any other activities qualifying under

Sec. 570.208(a) must be counted for this purpose in their entirety.

d. Compliance with environmental review procedures. The

environmental review procedures set forth at 24 CFR part 58 must be

completed for each activity (or project as defined in 24 CFR part 58),

as applicable.

4. Special policies governing facilities. The following special

policies apply to:

a. Facilities containing both eligible and ineligible uses. A

public facility otherwise eligible for assistance under the HUD

Disaster Recovery Initiative may be provided with HUD Disaster Recovery

funds even if it is part of a multiple use building containing

ineligible uses, if:

i. The facility that is otherwise eligible and proposed for

assistance will occupy a designated and discrete area within the larger

facility; and

ii. The recipient can determine the costs attributable to the

facility proposed for assistance as separate and distinct from the

overall costs of the multiple-use building and/or facility.

Allowable costs are limited to those attributable to the eligible

portion of the building or facility.

b. Fees for use of facilities. Reasonable fees may be charged for

the use of the facilities assisted with HUD Disaster Recovery funds,

but charges such as excessive membership fees, which will have the

effect of precluding low- and moderate-income persons from using the

facilities, are not permitted.

5. Special assessments under the HUD Disaster Recovery Initiative.

The following policies relate to special assessments under the HUD

Disaster Recovery Initiative:

a. Definition of special assessment. The term ``special

assessment'' means the recovery of the capital costs of a public

improvement, such as streets, water or sewer lines, curbs, and gutters,

through a fee or charge levied or filed as a lien against a parcel of

real estate as a direct result of benefit derived from the installation

of a public improvement, or a one-time charge made as a condition of

access to a public improvement. This term does not relate to taxes, or

the establishment of the value of real estate for the purpose of

levying real estate, property, or ad valorem taxes, and does not

include periodic charges based on the use of a public improvement, such

as water or sewer user charges, even if such charges include the

recovery of all or some portion of the capital costs of the public

improvement.

b. Special assessments to recover capital costs. Where HUD Disaster

Recovery funds are used to pay all or part of the cost of a public

improvement, special assessments may be imposed as follows:

i. Special assessments to recover the HUD Disaster Recovery funds

may be made only against properties owned and occupied by persons not

of low and moderate income. Such assessments constitute program income.

ii. Special assessments to recover the non-HUD Disaster Recovery

grant portion may be made provided that HUD Disaster Recovery funds are

used to pay the special assessment in behalf of all properties owned

and occupied by low and moderate income persons; except that HUD

Disaster Recovery funds need not be used to pay the special assessments

in behalf of properties owned and occupied by moderate-income persons

if the grant recipient certifies that it does not have sufficient HUD

Disaster Recovery funds to pay the assessments in behalf of all of the

low- and moderate-income owner-occupant persons. Funds collected

through such special assessments are not program income.

c. Public improvements not initially assisted with HUD Disaster

Recovery funds. The payment of special assessments with HUD Disaster

Recovery funds constitutes HUD Disaster Recovery assistance to the

public improvement. Therefore, HUD Disaster Recovery funds may be used

to pay special assessments provided:

i. The installation of the public improvements was carried out in

compliance with requirements applicable to activities assisted under

this initiative, including environmental, citizen participation, and

Davis-Bacon requirements;

ii. The installation of the public improvement meets a criterion

for national objectives in Sec. 570.208 (a)(1), (b), or (c); and

iii. The requirements of Sec. 570.200(c)(2)(ii) are met.

6. Limitation on planning and administrative costs.

a. No more than 20 percent of the sum of any grant, plus program

income, shall be expended for planning and program administrative

costs, paragraph F.1.k. HUD will consider requests for waiver and

modification of this limitation under extraordinary disaster recovery

circumstances on a case-by-case basis.

b. State administrative costs. The State is responsible for the

administration of its HUD Disaster Recovery Initiative. The amount of

HUD Disaster Recovery funds used to pay administrative costs incurred

by the State in carrying out its responsibilities under this program

shall not exceed 2 percent of the aggregate of the State's grant.

[[Page 47348]]

7. Reimbursement for pre-award costs. The effective date of the

grant agreement is the program year start date.

a. Prior to the effective date of the grant agreement, a recipient

may incur costs beginning on or after the incident date of the

Presidentially declared disaster, and then after the effective date of

the grant agreement pay for those costs using its HUD Disaster Recovery

funds, provided that for city and county grantees:

i. The activity for which the costs are being incurred is included

in its Action Plan for Disaster Recovery prior to the costs being paid;

ii. Citizens are advised of the extent to which these pre-award

costs will affect the HUD Disaster Recovery funds;

iii. The costs and activities funded are in compliance with the

requirements of this initiative and with the Environmental Review

Procedures stated in 24 CFR part 58;

iv. HUD Disaster Recovery grant payments for pre-award costs will

be made during a time no longer than the next 24 months following the

effective date of the grant agreement or amendment in which the

activity is first included; and

v. The total amount of pre-award costs to be paid during any

program year pursuant to this provision is no more than the greater of

25 percent of the amount of the grant made for that year or $300,000.

b. Upon the written request of the recipient, HUD may authorize

payment of pre-award costs for activities that do not meet the criteria

at paragraphs 7.a.iv or 7.a.v. of this section, if HUD determines, in

writing, that there is good cause for granting an exception upon

consideration of the following factors, as applicable:

i. Whether granting the authority would result in a significant

contribution to the goals and purposes of the HUD Disaster Recovery

Initiative;

ii. Whether failure to grant the authority would result in undue

hardship to the recipient or beneficiaries of the activity;

iii. Whether granting the authority would not result in a violation

of a statutory provision;

iv. Whether circumstances are clearly beyond the recipient's

control; or

v. Any other relevant considerations.

8. Activities outside the jurisdiction of the unit of general local

government. HUD Disaster Recovery funds may assist an activity located

outside the jurisdiction of the unit of general local government that

receives the HUD Disaster Recovery funds, provided the unit of general

local government determines that the activity is meeting its disaster

recovery needs and reasonable benefits accrue to residents of the

jurisdiction.

G. Guidelines for Evaluating and Selecting Economic Development

Projects

HUD provides guidelines to assist the recipient to evaluate and

select activities to be carried out for economic development purposes.

These guidelines are composed of two components: guidelines for

evaluating project costs and financial requirements; and standards for

evaluating public benefit. The standards for evaluating public benefit

are mandatory, but the guidelines for evaluating projects costs and

financial requirements are not. They may be found at Sec. 570.482 (e)

and (f) for States and at Sec. 570.209 for cities and counties. HUD may

consider the waiver of such standards on a case-by-case basis upon

submission of a written justification as to why the recipient cannot

meet the requirement and a proposed alternative that assures at least a

minimum level of public benefit.

H. Ineligible Activities

1. General government expenses. Except as otherwise specifically

authorized in this Notice, or under OMB Circular A-87, expenses

required to carry out the regular responsibilities of the unit of

general local government are not eligible for assistance.

2. The following activities may not be assisted with HUD Disaster

Recovery funds unless authorized under provisions of section 105(a)(15)

of the Act.

a. Purchase of equipment. The purchase of equipment with HUD

Disaster Recovery funds is generally ineligible.

i. Construction equipment. The purchase of construction equipment

is ineligible, but compensation for the use of such equipment through

leasing, depreciation, or use allowances pursuant to OMB Circulars A-

21, A-87 or A-122 as applicable for an otherwise eligible activity is

an eligible use of HUD Disaster Recovery funds. However, the purchase

of construction equipment for use as part of a solid waste disposal

facility is eligible.

ii. Fire protection equipment. Fire protection equipment is

considered for this purpose to be an integral part of a public facility

and thus, purchase of such equipment would be eligible.

iii. Furnishings and personal property. The purchase of equipment,

fixtures, motor vehicles, furnishings, or other personal property not

an integral structural fixture is generally ineligible. HUD Disaster

Recovery funds may be used, however, to purchase or to pay depreciation

or use allowances (in accordance with OMB Circulars A-21, A-87 or A-

122, as applicable) for such items when necessary for use by a

recipient or its subrecipients in the administration of activities

assisted with HUD Disaster Recovery funds, or when eligible as fire

fighting equipment, or when such items constitute all or part of a

public service.

b. Operating and maintenance expenses. The general rule is that any

expense associated with repairing, operating or maintaining public

facilities, improvements and services is ineligible. Specific

exceptions to this general rule are operating and maintenance expenses

associated with public service activities, interim assistance, and

office space for program staff employed in carrying out the HUD

Disaster Recovery Initiative. For example, the use of HUD Disaster

Recovery funds to pay the allocable costs of operating and maintaining

a facility used in providing a public service would be eligible, even

if no other costs of providing such a service are assisted with such

funds. Examples of ineligible operating and maintenance expenses are:

i. Maintenance and repair of publicly owned streets, parks,

playgrounds, water and sewer facilities, neighborhood facilities,

senior centers, centers for persons with disabilities, parking and

other public facilities and improvements. Examples of maintenance and

repair activities for which HUD Disaster Recovery funds may not be used

include the filling of pot holes in streets, repairing of cracks in

sidewalks, the mowing of recreational areas, and the replacement of

expended street light bulbs; and

ii. Payment of salaries for staff, utility costs and similar

expenses necessary for the operation of public works and facilities.

c. Income payments. The general rule is that HUD Disaster Recovery

funds may not be used for income payments. For purposes of the HUD

Disaster Recovery Initiative, ``income payments'' means a series of

subsistence-type grant payments made to an individual or family for

items such as food, clothing, housing (rent or mortgage), or utilities,

but excludes emergency grant payments made over a period of up to three

consecutive months to the provider of such items or services on behalf

of an individual or family. HUD may consider a waiver request for

exceptional circumstances on a case-by-case basis.

[[Page 47349]]

I. Criteria for National Objectives

The criteria at Sec. 570.483 and Sec. 570.208 shall be used for

States and for cities and counties, respectively, to determine whether

a HUD Disaster Recovery Initiative-assisted activity complies with one

or more of the national objectives.

J. Treatment of Program Income

For cities and counties, program income generated by HUD Disaster

Recovery Initiative becomes program income to the grantee's CDBG

program, not to its HUD Disaster Recovery grant. (For new grantees, not

participating in the CDBG program, program income is governed by the

provisions of Sec. 570.426). Therefore, any program income generated by

HUD Disaster Recovery funds is to be included in cost cap calculations

and program requirements for use of the CDBG funds. However, for

States, the program income shall be returned to the State as program

income for the year in which the State redistributes those funds.

K. Acquisition (Buyouts) of Flood-Damaged Properties

1. Payment of Pre-flood Values for Buyouts. HUD Disaster Recovery

Initiative grantees have the discretion to pay pre-flood or post-flood

values for the acquisition of properties located in a flood way or

flood plain. In using HUD Disaster Recovery funds for such

acquisitions, the grantee must uniformly apply whichever valuation

method it chooses.

2. Duplication of Benefits and Optional Relocation Payments with

Buyouts. a. Optional relocation assistance should only be provided to

the extent necessary for displaced persons to relocate in a

``comparable replacement dwelling,'' as defined in 42 U.S.C. 4601(10)

and 49 CFR 24.2(d), except as provided by HUD with prior approval on a

case by case basis when sufficient cause exists due to extraordinary

erosive economic impact of relocation, and shall not exceed the

difference between the housing replacement cost and the sum of:

i. The net proceeds from any flood insurance payment (proceeds net

of the cost of documented repairs of flood damage),

ii. Personal tax savings that result from an owner's tax deduction

of capital loss on displacement property,

iii. FEMA Hazard Mitigation Grant Program acquisition proceeds, and

iv. SBA disaster loan assistance.

3. Buyout of Undamaged Properties. a. Many buyout projects contain

some properties that were undamaged by the floods. Local administrators

sometimes seek to offer buyouts to owners of undamaged properties to

maximize clearance of the floodplain. Purchase of such properties with

HUD Disaster Recovery funding is permitted if the properties are

incidental to the project as a whole.

4. Ownership and Maintenance of Acquired Property. a. Any property

acquired with HUD Disaster Recovery funds being used to match FEMA

Section 404 Hazard Mitigation Grant Program funds is subject to section

404(b)(2) of the Robert T. Stafford Disaster Relief and Emergency

Assistance Act, as amended, which requires that such property will be

dedicated and maintained in perpetuity for a use that is compatible

with open space, recreational, or wetlands management practices. In

addition, with minor exceptions, no new structure may be erected on the

property and no subsequent application for Federal disaster assistance

may be made for any purpose. The acquiring entity may want to lease

such property to adjacent property owners or other parties for

compatible uses in return for a maintenance agreement. Although Federal

policy encourages leasing rather than selling such property, the

property may be sold. In all cases, a deed restriction must require

that the property be dedicated and maintained for compatible uses in

perpetuity.

5. Future Federal Assistance to Owners Remaining in Floodplain.

a. Section 582 of the National Flood Insurance Reform Act of 1994

(in Title V of Pub. L. 103-325) (42 U.S.C. 5154a) prohibits flood

disaster assistance in certain circumstances. In general, it provides

that no Federal disaster relief assistance made available in a flood

disaster area may be used to make a payment (including any loan

assistance payment) to a person for repair, replacement, or restoration

for damage to any personal, residential, or commercial property, if

that person at any time has received flood disaster assistance that was

conditional on the person first having obtained flood insurance under

applicable Federal law and the person has subsequently failed to obtain

and maintain flood insurance as required under applicable Federal law

on such property. (Section 582 is self-implementing without

regulations.) This means that a grantee may not provide disaster

assistance for the above-mentioned repair, replacement, or restoration

to a person that has failed to meet this requirement.

b. Section 582 also implies a responsibility for a grantee that

receives HUD Disaster Recovery funds or that, under section 122 of the

Act, designates annually appropriated CDBG funds for disaster recovery.

That responsibility is to inform property owners receiving disaster

assistance that triggers the flood insurance purchase requirement that

they have a statutory responsibility to notify any transferee of the

requirement to obtain and maintain flood insurance, and that the

transferring owner may be liable if he or she fails to do so. These

requirements are described below.

c. Duty To Notify. In the event of the transfer of any property

described in paragraph e, the transferor shall, not later than the date

on which such transfer occurs, notify the transferee in writing of the

requirements to:

i. Obtain flood insurance in accordance with applicable Federal law

with respect to such property, if the property is not so insured as of

the date on which the property is transferred; and

ii. Maintain flood insurance in accordance with applicable Federal

law with respect to such property.

Such written notification shall be contained in documents

evidencing the transfer of ownership of the property.

d. Failure To Notify. If a transferor fails to make notification

and, subsequent to the transfer of the property:

i. The transferee fails to obtain or maintain flood insurance, in

accordance with applicable Federal law, with respect to the property;

ii. The property is damaged by a flood disaster; and

iii. Federal disaster relief assistance is provided for the repair,

replacement, or restoration of the property as a result of such damage,

the transferor must reimburse the Federal Government in an amount

equal to the amount of the Federal disaster relief assistance provided

with respect to the property.

e. The notification requirements apply to personal, commercial, or

residential property for which Federal disaster relief assistance made

available in a flood disaster area has been provided, prior to the date

on which the property is transferred, for repair, replacement, or

restoration of the property, if such assistance was conditioned upon

obtaining flood insurance in accordance with applicable Federal law

with respect to such property.

f. The term ``Federal disaster relief assistance'' applies to HUD

or other Federal assistance for disaster relief in ``flood disaster

areas.'' This prohibition applies only to when the new disaster relief

assistance was given for a loss caused by flooding. It does not apply

to disaster assistance caused by other sources (i.e., earthquakes,

fire, wind,

[[Page 47350]]

etc.). The term ``flood disaster area'' is defined in section 582(d)(2)

to mean an area receiving a Presidential declaration of a major

disaster or emergency as a result of flood conditions.

L. Other Program Requirements

1. General. This section L. enumerates laws that the Secretary will

treat as applicable to the HUD Disaster Recovery Initiative grants to

cities and counties, including statutes expressly made applicable by

the Act and certain other statutes and Executive Orders for which the

Secretary has enforcement responsibility. The absence of mention herein

of any other statute for which the Secretary does not have direct

enforcement responsibility is not intended to be taken as an indication

that, in the Secretary's opinion, such statute or Executive Order is

not applicable to activities assisted under the Act. States are

governed by applicable laws.

2. Labor standards.

In part because Davis-Bacon requirements are not applicable to

Federal Emergency Management Agency (FEMA) disaster grants, it is

necessary to clarify the applicability of Davis-Bacon requirements in

relationship to the use of HUD Disaster Recovery funds in disaster

recovery efforts. This section of this Notice addresses Davis-Bacon

applicability to use of HUD Disaster Recovery funds to reimburse

property owners for construction work either completed or in process at

the time use of those funds is contemplated.

In accordance with Section 110(a) of the Act, construction work

financed in whole or in part with HUD Disaster Recovery funds is

subject to Federal labor standards provisions including the payment of

Davis-Bacon Act prevailing wage rates. Additionally, such work is

subject to the requirements of the Copeland Act governing the

certification and submission of weekly payroll reports and prohibiting

kick-backs and other impermissible deductions from wages, and the

overtime requirements of the Contract Work Hours and Safety Standards

Act. The requirements found in Department of Labor (DOL) regulations

for Davis-Bacon administration and enforcement (29 CFR parts 1, 3, 5,

6, and 7) also apply.

a. Applicability. HUD Disaster Recovery activities are subject to

program policies and parameters for Federal labor standards

applicability at Sec. 570.603. The labor provisions apply to

rehabilitation of residential property only if such property contains 8

or more units.

b. Volunteers. Section 110(b) of the Act provides for the use of

volunteer labor on construction work subject to Federal labor

standards. Volunteers may be utilized to the extent permitted under the

regulations in 24 CFR part 70.

c. Work in progress. In accordance with 29 CFR 1.6(g), if HUD

Disaster Recovery funds are approved after start of construction (e.g.,

rehabilitation), Davis-Bacon requirements apply to the construction

work. In such cases, the appropriate Davis-Bacon wage decision and

contract standards must be incorporated into the contract

specifications retroactively to the date of award or start of

construction, whichever was first. However, HUD may request and the DOL

may approve a wage determination effective on the date the Disaster

Recovery funding is approved (i.e., not retroactively to the start of

construction), provided that HUD considers and DOL agrees that it is

necessary and proper in the public interest to prevent injustice or

undue hardship, and provided further that there is no evidence of

intent to apply for Federal funding or assistance prior to contract

award or start of construction, as appropriate.

d. Reimbursement for completed construction work. When HUD Disaster

Recovery funds are proposed to reimburse property owners for

construction work performed and fully completed as disaster damage

rehabilitation, Federal labor standards provisions (i.e., Davis-Bacon

wage rates and related requirements) are not applicable to the

completed work provided that:

i. Neither the owner nor the city or county grantee, or for States,

the unit of general local government, contemplated use of or

reimbursement by HUD Disaster Recovery funds for the rehabilitation(s)

before or during the time construction work was underway; and

ii. No other Federal funding requiring the payment of Davis-Bacon

wage rates was used to carry out the work.

In these cases, the use of HUD Disaster Recovery funds to reimburse

owners for completed rehabilitation does not constitute financing of

construction work within the meaning of the labor standards provisions

of Section 110 of the Act.

e. Davis-Bacon Streamlining. The HUD Office of Labor Relations has

instituted a number of streamlining measures that significantly reduce

the paperwork/recordkeeping burdens commonly attributed to Davis-Bacon

projects. In addition, Labor Relations headquarters and field staff are

committed to providing expedited processing on all matters related to

HUD Disaster Recovery activities.

Note that most forms of HUD Disaster Recovery assistance to

homeowners would not trigger Davis-Bacon requirements. Grantees should

contact Richard S. Allan, Assistant to the Secretary for Labor

Relations (Acting), or Jade M. Banks at (202)708-0370 for assistance in

determining whether and to what extent Davis-Bacon requirements apply

to specific activities undertaken with HUD Disaster Recovery funds.

Information about Federal labor standards provisions and HUD programs

is also available on the HUD Homepage at: http://www.hud.gov/olr/

olr__int2.html.

3. National Flood Insurance Program. a. Cities and counties may not

use HUD Disaster Recovery Initiative funding in flood hazard areas for

acquisition or construction projects in communities that have been

identified by FEMA as nonparticipating, noncompliant communities under

the National Flood Insurance Program. Specific guidance can be found in

the references in paragraph 3.b. for cities and counties. Though State-

administered formula programs are statutorily exempt from flood

insurance purchase requirements, HUD strongly encourages States to

adopt a similar policy if they have the authority to do so. Listings of

participating, nonparticipating, and suspended communities are in the

FEMA Federal Insurance Administration's ``National Flood Insurance

Program Community Status Book,'' available on the World Wide Web at

http://www.fema.gov/home/fema/csb.htm for viewing or downloading.

FEMA's revised publication, ``Mandatory Purchase of Flood Insurance

Guidelines,'' reflecting new provisions of the National Flood Insurance

Reform Act of 1994 is also available on the World Wide Web at http://

www/fema.gov/nfip/mpurfi.htm.

b. Section 202(a) of the Flood Disaster Protection Act of 1973 (42

U.S.C. 4106) provides that no Federal officer or agency shall approve

any financial assistance for acquisition or construction purposes (as

defined under section 3(a) of said Act (42 U.S.C. 4003(a)), one year

after a community has been formally notified of its identification as a

community containing an area of special flood hazard, for use in any

area that has been identified by the Director of the Federal Emergency

Management Agency as an area having special flood hazards unless the

community in which such area is situated is then participating in the

National Flood Insurance Program. Notwithstanding the date of HUD

approval of a city's or county's Action Plan for Disaster Recovery

funds shall

[[Page 47351]]

not be expended for acquisition or construction purposes in an area

that has been identified by the Federal Emergency Management Agency

(FEMA) as having special flood hazards unless the community in which

the area is situated is participating in the National Flood Insurance

Program in accordance with 44 CFR parts 59-79, or less than a year has

passed since FEMA notification to the community regarding such hazards;

and, where the community is participating, flood insurance is obtained

in accordance with section 102(a) of the Flood Disaster Protection Act

of 1973 (42 U.S.C. 4012(a).)

M. Waiver of Statutory and Regulatory Requirements That Would Otherwise

Apply to the HUD Disaster Recovery Initiative

1. Title II, Chapter 10 of the 1997 Supplemental Appropriations Act

provides that in administering these amounts, the Secretary may waive,

or specify alternative requirements for, any provision of any statute

or regulation that the Secretary administers in connection with the

obligation by the Secretary or the use by the recipient of these funds,

except for statutory requirements related to civil rights, fair housing

and nondiscrimination, the environment, and labor standards, upon a

finding that such waiver is required to facilitate the use of such

funds, and would not be inconsistent with the overall purpose of the

statute. As noted, the Secretary may not waive statutory requirements

related to civil rights, fair housing and nondiscrimination, the

environment, or labor standards. The procedures set forth in this

notice reflect the waiver of the statutory and regulatory requirements

that the Secretary considered necessary for the implementation of the

HUD Disaster Recovery Initiative, and that are authorized to be waived

under Title II, Chapter 10 of the 1997 Supplemental Appropriations Act.

The statutory and regulatory requirements that have been waived pertain

to requirements governing consolidated planning submissions, CDBG

program requirements, acquisition and relocation requirements, and

other program related requirements. Appendix A to this notice lists the

specific statutory and regulatory requirements that have been waived

and sets forth the reasons for the waivers. With respect to the waivers

of these statutory and regulatory requirements, no further action need

be taken by the grantees.

2. HUD may issue additional waivers (beyond those already waived by

the Secretary in the implementation of this initiative) deemed

appropriate under this authority. HUD will consider additional waivers

on a case-by-case basis, as requested by grantees. Such waivers will

receive expedited review.

3. Grantees should give priority to projects that benefit low-and

moderate-income individuals to the maximum extent possible.

II. Ensuring the Public Trust

A. Program Administrative, Recordkeeping and Reporting Requirements

The program administrative requirements at Secs. 570.489-570.492

for States and at Secs. 570.500-570.513 for cities and counties, which

are not otherwise waived, shall apply, except that, with respect to

reporting:

1. States must submit a Performance Evaluation Report (PER)

pursuant to 24 CFR 91.520, separately for the HUD Disaster Recovery

Initiative, similar in all other respects to that which is required for

the CDBG program regulated at 24 CFR part 570. The first PER for the

HUD Disaster Recovery Initiative will be due ninety (90) days after the

12-month period following the effective date of the grant and each 12-

month period thereafter until all funds are spent. The PER must include

a special narrative that discusses how the State assured that

activities met the requirements of this Notice with respect to the

buyout of structures in a disaster area.

2. Cities and counties must submit a Performance Report for the HUD

Disaster Recovery Initiative in accordance with 24 CFR 91.520. The

Performance Report will be due ninety (90) days after each 12-month

period following the effective date of the grant each year until all

funds are spent. The final Performance Report will be due ninety (90)

days after all funds are spent. It also must include a special

narrative that discusses how the city or county assured that activities

met the requirements of this Notice with respect to the buyout of

structures in a disaster area.

3. In addition, Congress has required that quarterly reports be

submitted on all disbursements and use of funds for or associated with

buyouts. Therefore, each grantee must submit a quarterly report, as HUD

will prescribe, no later than 30 days following each calendar quarter,

beginning after the first full calendar quarter after grant award. That

report will include information on the project name, activity,

location, national objective, funds budgeted and expended, non-HUD

Disaster Recovery Initiative Federal source and funds, numbers of

properties and housing units, and numbers of low- and moderate-income

households. HUD will seek approval from OMB for any new information

collection requirements in accordance with the Paperwork Reduction Act

of 1995 (44 U.S.C. 3501-3520).

B. Cost Principles

1. Direct and Indirect Cost principles. Costs incurred, whether

charged on a direct or an indirect basis, must be in conformance with

OMB Circulars A-87, ``Cost Principles for State, Local and Indian

Tribal Governments''; A-122, ``Cost Principles for Non-profit

Organizations''; or A-21, ``Cost Principles for Educational

Institutions,'' as applicable. 1 All items of cost listed in

Attachment B of these Circulars that require prior Federal agency

approval are allowable without prior approval of HUD to the extent they

comply with the general policies and principles stated in Attachment A

of such circulars and are otherwise eligible under the HUD Disaster

Recovery Initiative, except for the following:

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

\1\ These circulars are available from the American Communities

Center by calling the following toll-free numbers: (800) 998-9999 or

(800) 483-2209 (TTY).

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

i. Depreciation methods for fixed assets shall not be changed

without HUD's specific approval or, if charged through a cost

allocation plan, the Federal cognizant agency.

ii. Fines and penalties (including punitive damages) are

unallowable costs to the HUD Disaster Recovery Initiative.

iii. Pre-award costs for city and county grantees are limited to

those authorized under Sec. 570.200(h).

2. Uniform administrative requirements and cost principles. The

city or county grantee, its agencies or instrumentalities, and

subrecipients shall comply with the policies, guidelines, and

requirements of 24 CFR part 85 and OMB Circulars A-87, A-110

(implemented at 24 CFR part 84), A-122, A-133 (implemented at 24 CFR

part 45), as applicable, as they relate to the acceptance and use of

Federal funds, HUD Disaster Recovery grants. The applicable sections of

24 CFR parts 84 and 85 are set forth at Sec. 570.502. States shall

comply with the applicable requirements of Sec. 570.489 that are not

otherwise waived.

3. Consultant activities. Consulting services are eligible for

assistance for professional assistance in program planning, development

of community development objectives, and other general professional

guidance relating to program execution. The use of

[[Page 47352]]

consultants is governed by the following:

a. Employer-employee type of relationship. No person providing

consultant services in an employer-employee type of relationship shall

receive more than a reasonable rate of compensation for personal

services paid with HUD Disaster Recovery funds. In no event, however,

shall such compensation exceed the equivalent of the daily rate paid

for Level IV of the Executive Schedule. Such services shall be

evidenced by written agreements between the parties that detail the

responsibilities, standards, and compensation.

b. Independent contractor relationship. Consultant services

provided under an independent contractor relationship are governed by

the procurement requirements in 24 CFR 85.36 and are not subject to the

Level IV limitation.

C. Public Law 88-352 and Public Law 90-284; Affirmatively Furthering

Fair Housing; Executive Order 11063

1. The following requirements apply to HUD Disaster Recovery

Initiative:

a. Public Law 88-352, which is title VI of the Civil Rights Act of

1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24 CFR

part 1.

b. Public Law 90-284, which is the Fair Housing Act (42 U.S.C.

3601-3620). In accordance with the Fair Housing Act, the Secretary

requires that grantees administer all programs and activities related

to housing and community development in a manner to affirmatively

further the policies of the Fair Housing Act. Furthermore, for each

grantee receiving a HUD Disaster Recovery grant, the certification that

the grantee will affirmatively further fair housing shall specifically

require the grantee to assume the responsibility of fair housing

planning by conducting an analysis to identify impediments to fair

housing choice within its jurisdiction, taking appropriate actions to

overcome the effects of any impediments identified through that

analysis, and maintaining records reflecting the analysis and actions

in this regard.

2. Executive Order 11063, as amended by Executive Order 12259 (3

CFR, 1959-1963 Comp., p. 652; 3 CFR, 1980 Comp., p. 307)(Equal

Opportunity in Housing), and implementing regulations in 24 CFR part

107, also apply.

D. Section 109 of the Act

1. No person in the United States shall on the ground of race,

color, religion, national origin or sex, be excluded from participation

in, be denied the benefits of, or be subjected to discrimination under,

any program or activity funded in whole or in part with HUD Disaster

Recovery funds made available pursuant to the Act. For purposes of this

requirement, ``program or activity'' is defined as any function

conducted by an identifiable administrative unit of the recipient, or

by any unit of government, subrecipient, or private contractor

receiving HUD Disaster Recovery grant funds or loans from the

recipient. ``Funded in whole or in part with HUD community development

funds'' means that HUD Disaster Recovery funds have been transferred by

the recipient or a subrecipient to an identifiable administrative unit

and disbursed in a program or activity. The term ``recipient'' means

recipient as defined in Sec. 1.2(f).

2. Specific discriminatory actions prohibited and corrective

actions. a. A recipient may not, under any program or activity,

directly or through contractual or other arrangements, on the ground of

race, color, religion, national origin, or sex:

i. Deny any individual any facilities, services, financial aid or

other benefits provided under the program or activity.

ii. Provide any facilities, services, financial aid or other

benefits that are different, or are provided in a different form, from

that provided to others under the program or activity.

iii. Subject an individual to segregated or separate treatment in

any facility in, or in any matter of process related to receipt of any

service or benefit under the program or activity.

iv. Restrict an individual in any way in access to, or in the

enjoyment of, any advantage or privilege enjoyed by others in

connection with facilities, services, financial aid or other benefits

under the program or activity.

v. Treat an individual differently from others in determining

whether the individual satisfies any admission, enrollment,

eligibility, membership, or other requirement or condition that the

individual must meet in order to be provided any facilities, services

or other benefit provided under the program or activity.

vi. Deny an individual an opportunity to participate in a program

or activity as an employee.

b. A recipient may not use criteria or methods of administration

that have the effect of subjecting persons to discrimination on the

basis of race, color, religion, national origin, or sex, or have the

effect of defeating or substantially impairing accomplishment of the

objectives of the program or activity with respect to persons of a

particular race, color, religion, national origin, or sex.

c. A recipient, in determining the site or location of housing or

facilities provided in whole or in part with funds, may not make

selections of such site or location that have the effect of excluding

persons from, denying them the benefits of, or subjecting them to

discrimination on the ground of race, color, religion, national origin,

or sex; or that have the purpose or effect of defeating or

substantially impairing the accomplishment of the objectives of the

Act.

d. i. In administering a program or activity funded in whole or in

part with HUD Disaster Recovery funds regarding which the recipient has

previously discriminated against persons on the ground of race, color,

religion, national origin or sex, or if there is sufficient evidence to

conclude that such discrimination existed, the recipient must take

remedial affirmative action to overcome the effects of prior

discrimination. The word ``previously'' does not exclude current

discriminatory practices.

ii. In the absence of discrimination, a recipient, in administering

a program or activity funded in whole or in part with HUD Disaster

Recovery funds, may take any nondiscriminatory affirmative action

necessary to ensure that the program or activity is open to all without

regard to race, color, religion, national origin or sex.

iii. After a finding of noncompliance or after a recipient has a

firm basis to conclude that discrimination has occurred, a recipient

shall not be prohibited from taking any eligible action to ameliorate

an imbalance in services or facilities provided to any geographic area

or specific group of persons within its jurisdiction, where the purpose

of such action is to remedy prior discriminatory practice or usage.

e. Notwithstanding anything to the contrary, nothing contained

herein shall be construed to prohibit any recipient from maintaining or

constructing separate living facilities or rest room facilities for the

different sexes. Furthermore, selectivity on the basis of sex is not

prohibited when institutional or custodial services can properly be

performed only by a member of the same sex as the recipients of the

services.

3. Any prohibition against discrimination on the basis of age under

the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.) or with

respect to an otherwise qualified handicapped person as provided in

section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794) shall

also apply to any program or

[[Page 47353]]

activity funded in whole or in part with HUD Disaster Recovery funds.

HUD regulations implementing the Age Discrimination Act are contained

in 24 CFR part 146 and the regulations implementing section 504 are

contained in 24 CFR part 8.

E. Environmental Review Requirements

1. Prior to the commitment of any HUD Disaster Recovery funds,

grantees must comply with the regulations in 24 CFR part 58. These

regulations require: the analysis of potential environmental impacts;

consultation with interested parties; and public notification of the

results of the analysis and intent to request release of funds from

HUD. Also, they require that the State or local government assume

compliance with these rules by execution of the grant agreement with

HUD, and a State or local government certification that it will comply

with all the applicable Federal environmental rules.

2. Disaster Recovery Assistance in a Flood Plain. a. Grantees must

follow the eight-step decision-making process required by Executive

Order 11988, Flood Plain Management, codified for HUD programs at

Sec. 55.20. The Order covers the proposed acquisition, construction,

improvement, disposition, financing, and use of property in a flood

plain. Other related Federal environmental laws and authorities noted

at Sec. 58.5 may also apply.

b. The Office of Management and Budget (OMB) and the Council on

Environmental Quality (CEQ) jointly issued a memorandum on February 18,

1997 entitled ``Floodplain Management and Procedures For Evaluation and

Review of Levee and Associated Restoration Projects,'' which emphasizes

the need to consider nonstructural alternatives, e.g., ``buyouts,'' in

flood disaster recovery activities and the need for coordination among

all levels of government.

3. Environmental assessments and reviews may be tiered to eliminate

duplication and to save time and resources. For other Federal programs,

environmental assessments and reviews are not carried out by grantees

as they are for the HUD Disaster Recovery Initiative, but are usually

undertaken by Federal staff or contractors. Therefore, grantees must

coordinate with other Federal agencies, e.g., FEMA, to tier

environmental assessments and reviews for activities funded by programs

of both Federal agencies.

4. Joint Environmental Assessments between HUD and Other Federal

Agencies. a. In addition to the provisions of Sec. 58.33, the following

special procedures may be employed when a project related to recovery

from a covered disaster is jointly funded by HUD and other Federal

agencies.

b. A State or local government administering Federal environmental

requirements for the HUD Disaster Recovery Initiative may enter into

cooperating agreements with other Federal agencies to prepare an

environmental assessment for a HUD Disaster Recovery Initiative-funded

project. The cooperating agreement will identify the project, all

Federal agencies party to the agreement (including State and local

governments acting for HUD under the provisions of 24 CFR part 58),

which agency will be the lead agency and prepare the environment

assessment, and the scope of the assessment, including the size and

area of potential impact. The lead agency will prepare the assessment,

using its own CEQ-approved procedures, and conduct all required

reviews, consultations and public notifications under applicable

related laws and authorities.

c. The provisions of 24 CFR part 58 would apply if a State or local

government administering a HUD-funded program that is subject to part

58 (e.g., the HUD Disaster Recovery Initiative) is the lead agency.

d. If the State or local government that assumes the HUD

environmental review responsibilities is not the lead agency, then that

government must review the completed environmental assessment that was

prepared by a lead agency under the cooperating agreement. If the

review of the document determines that the information is not accurate

or complete or does not meet the requirements of 24 CFR part 58, a

State or local government administering the provisions of 24 CFR part

58 must reject the assessment and prepare its own independent

assessment as required in 24 CFR part 58. A State or local government

acting as a cooperating agency remains responsible for review under

authorities that may be unique to HUD-assisted projects under part 58,

i.e., HUD environmental standards in 24 CFR part 51 and HUD policy

regarding toxic or hazardous materials. However, if a lead agency's

assessment meets the requirements of part 58, except for a lack of

coverage of these particular areas, the cooperating agency need not

reject the assessment. In these cases, the cooperating agency may add

its own review of these areas and its own findings regarding the

overall environmental impact of the project.

e. If an assessment showing no significant environmental impact is

adopted by a State or local government administering the provisions of

24 CFR part 58, it must formally record its adoption pursuant to

Sec. 58.38, prepare a statement that the proposed HUD funding of the

proposed project produces no significant environmental impact (FONSI),

and follow the provisions for release of funds as stated in subpart H

of 24 CFR part 58, including notice to the public and the statutory

waiting period.

F. Displacement, Relocation, Acquisition, and Replacement of Housing

1. General policy for minimizing displacement. Consistent with the

other goals and objectives of the HUD Disaster Recovery Initiative,

grantees (or States or State recipients, as applicable) shall assure

that they have taken all reasonable steps to minimize the displacement

of persons (families, individuals, businesses, nonprofit organizations,

and farms) as a result of activities assisted under this program.

2. Relocation assistance for displaced persons at URA levels. a. A

displaced person shall be provided with relocation assistance at the

levels described in, and in accordance with the requirements of, 49 CFR

part 24, which contains the government-wide regulations implementing

the Uniform Relocation Assistance and Real Property Acquisition

Policies Act of 1970 (URA) (42 U.S.C. 4601-4655).

b. Displaced person. i. For purposes of paragraph 2. of this

section, the term ``displaced person'' means any person (family,

individual, business, nonprofit organization, or farm) that moves from

real property, or moves his or her personal property from real

property, permanently and involuntarily, as a direct result of

rehabilitation, demolition, or acquisition for an activity assisted

under this initiative. A permanent, involuntary move for an assisted

activity includes a permanent move from real property that is made:

(1) After notice by the grantee (or the State recipient, if

applicable) to move permanently from the property, if the move occurs

after the initial official submission to HUD (or the State, as

applicable) for grant, loan, or loan guarantee funds under this

initiative that are later provided or granted.

(2) After notice by the property owner to move permanently from the

property, if the move occurs after the date of the submission of a

request for financial assistance by the property owner (or person in

control of the site) that is later approved for the requested activity.

(3) Before the date described in paragraph 2.b.i.(1) or (2), if

either HUD or the grantee (or State, as applicable) determines that the

displacement

[[Page 47354]]

directly resulted from acquisition, rehabilitation, or demolition for

the requested activity.

(4) If the person is the tenant-occupant of a dwelling unit and any

one of the following two situations occurs:

(a) The tenant is required to relocate temporarily for the activity

but the tenant is not offered payment for all reasonable out-of-pocket

expenses incurred in connection with the temporary relocation,

including the cost of moving to and from the temporary location and any

increased housing costs, or other conditions of the temporary

relocation are not reasonable; and the tenant does not return to the

building/complex; or

(b) The tenant is required to move to another unit in the building/

complex, but is not offered reimbursement for all reasonable out-of-

pocket expenses incurred in connection with the move.

ii. Notwithstanding the provisions of paragraph 2.b.i., the term

``displaced person'' does not include:

(1) A person who is evicted for cause based upon serious or

repeated violations of material terms of the lease or occupancy

agreement. To exclude a person on this basis, the grantee (or State or

State recipient, as applicable) must determine that the eviction was

not undertaken for the purpose of evading the obligation to provide

relocation assistance under this section;

(2) A person who moves into the property after the date of the

notice described in paragraph 2.b.i. (1) or (2) of this section, but

who received a written notice of the expected displacement before

occupancy.

(3) A person who is not displaced as described in 49 CFR

24.2(g)(2).

(4) A person who the grantee (or State, as applicable) determines

is not displaced as a direct result of the acquisition, rehabilitation,

or demolition for an assisted activity. To exclude a person on this

basis, HUD must concur in that determination.

iii. A grantee (or State or State recipient, as applicable) may, at

any time, request HUD to determine whether a person is a displaced

person under this section.

3. Optional relocation assistance. In connection with the use of

HUD Disaster Recovery funds for buyouts, a grantee may provide (or the

State may permit the State recipient to provide, as applicable)

relocation payments and other relocation assistance to persons

displaced by activities that are not subject to paragraphs 2. or 3. The

grantee may also provide (or the State may also permit the State

recipient to provide, as applicable) relocation assistance to persons

receiving assistance under paragraphs 2. or 3. of this section at

levels in excess of those required by these paragraphs. Unless such

assistance is provided under State or local law, the grantee (or State

recipient, as applicable) shall provide such assistance only upon the

basis of a written determination that the assistance is appropriate.

The grantee (or State recipient, as applicable) must adopt a written

policy available to the public that describes the relocation assistance

that the grantee (or State recipient, as applicable) has elected to

provide and that provides for equal relocation assistance within each

class of displaced persons.

4. Acquisition of real property. The acquisition of real property

for an assisted activity is subject to 49 CFR part 24, subpart B.

5. Appeals. If a person disagrees with the determination of the

grantee (or the State recipient, as applicable) concerning the person's

eligibility for, or the amount of, a relocation payment under this

section, the person may file a written appeal of that determination

with the grantee (or the State recipient, as applicable). The appeal

procedures to be followed are described in 49 CFR 24.10. In addition, a

low- or moderate-income household that has been displaced from a

dwelling may file a written request for review of the grantee's

decision to the HUD Field Office. For purposes of State HUD Disaster

Recovery funds, a low- or moderate-income household may file a written

request for review of the State recipient's decision with the State.

6. Responsibility of grantee or State. a. The grantee (or State, if

applicable) is responsible for ensuring compliance with these

requirements, notwithstanding any third party's contractual obligation

to the grantee to comply with the provisions of this section. For

purposes of State HUD Disaster Recovery funds, the State shall require

State recipients to certify that they will comply with the requirements

of this section.

b. The cost of assistance required under this section may be paid

from local public funds, funds provided under this initiative, or funds

available from other sources.

c. The grantee (or State and State recipient, as applicable) must

maintain records in sufficient detail to demonstrate compliance with

the provisions of this section.

G. Employment and Contracting Opportunities

1. Grantees shall comply with Executive Order 11246, as amended by

Executive Orders 11375, 11478, 12086, and 12107 (3 CFR, 1964-1965

Comp., p. 339; 3 CFR, 1966-1970 Comp., p. 684; 3 CFR, 1966-1970 Comp.,

p. 803; 3 CFR, 1978 Comp., p. 230; and 3 CFR, 1978 Comp., p. 264)

(Equal Employment Opportunity) and the implementing regulations at 41

CFR chapter 60; and

2. Though requirements of Section 3 of the Housing and Urban

Development Act of 1968 (12 U.S.C. 1701u) and implementing regulations

at 24 CFR part 135, are waived, HUD encourages each grantee to give

priority to the hiring of local low and moderate income persons and

contractors in carrying out its disaster recovery activities.

3. Contracting with small and minority firms, women's business

enterprises and labor surplus area firms. a. The grantee and subgrantee

must take all necessary affirmative steps to assure that minority

firms, women's business enterprises, and labor surplus area firms are

used when possible.

b. Affirmative steps include:

i. Placing qualified small and minority businesses and women's

business enterprises on solicitation lists;

ii. Assuring that small and minority businesses and women's

business enterprises are solicited whenever they are potential sources;

iii. Dividing total requirements, when economically feasible, into

smaller tasks or quantities to permit maximum participation by small

and minority businesses, and women's business enterprises;

iv. Establishing delivery schedules, where the requirement permits,

which encourage participation by small and minority businesses, and

women's business enterprises;

v. Using the services and assistance of SBA and the Minority

Business Development Agency of the U.S. Department of Commerce; and

vi. Requiring the prime contractor, if subcontracts are to be let,

to take the affirmative steps listed in subparagraphs (1) through (5)

above.

Lead-Based Paint

1. Requirements for city and county grantees. City and county

grantees shall comply with the requirements of Sec. 570.608.

2. Requirements for State grantees. States shall comply with the

provisions of Sec. 570.487(c).

Architectural Barriers Act and the Americans With Disabilities Act

1. 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 insure

[[Page 47355]]

accessibility to, and use by, physically handicapped people. A building

or facility designed, constructed, or altered with funds allocated or

reallocated under this initiative after December 11, 1995, 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 (42 U.S.C. 4151-4157) and shall comply with the Uniform

Federal Accessibility Standards (Appendix A to 24 CFR part 40 for

residential structures, and Appendix A to 41 CFR part 101-19, subpart

101-19.6, for general type buildings).

2. The Americans with Disabilities Act (42 U.S.C. 12131; 47 U.S.C.

155, 201, 218 and 225) (ADA) provides comprehensive civil rights to

individuals with disabilities in the areas of employment, public

accommodations, State and local government services, and

telecommunications. It further 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 in existing facilities, where such removal is readily

achievable--that is, easily accomplishable and able to be carried out

without much difficulty or expense.

J. Constitutional Prohibition

1. In accordance with First Amendment church/state principles, as a

general rule, HUD Disaster Recovery Grant assistance may not be used

for religious activities or provided to primarily religious entities

for any activities, including secular activities.

2. The following restrictions and limitations therefore apply to

the use of HUD Disaster Recovery funds.

a. HUD Disaster Recovery funds may not be used for the acquisition

of property or the construction or rehabilitation (including historic

preservation and removal of architectural barriers) of structures to be

used for religious purposes or purposes that will otherwise promote

religious interests. This limitation includes the acquisition of

property for ownership by primarily religious entities and the

construction or rehabilitation (including historic preservation and

removal of architectural barriers) of structures owned by such entities

(except as permitted under paragraph 2.b. of this section with respect

to rehabilitation and under paragraph 2.d. of this section with respect

to repairs undertaken in connection with public services) regardless of

the use to be made of the property or structure. Property owned by

primarily religious entities may be acquired with HUD Disaster Recovery

funds at no more than fair market value for a non-religious use.

b. HUD Disaster Recovery funds may be used to rehabilitate

buildings owned by primarily religious entities to be used for a wholly

secular purpose under the following conditions:

i. The building (or portion thereof) that is to be improved with

the HUD Disaster Recovery Initiative assistance has been leased to an

existing or newly established wholly secular entity (which may be an

entity established by the religious entity);

ii. The HUD Disaster Recovery Initiative assistance is provided to

the lessee (and not the lessor) to make the improvements;

iii. The leased premises will be used exclusively for secular

purposes available to persons regardless of religion;

iv. The lease payments do not exceed the fair market rent of the

premises as they were before the improvements are made;

v. The portion of the cost of any improvements that also serve a

non-leased part of the building will be allocated to and paid for by

the lessor;

vi. The lessor enters into a binding agreement that unless the

lessee, or a qualified successor lessee, retains the use of the leased

premises for a wholly secular purpose for at least the useful life of

the improvements, the lessor will pay to the lessee an amount equal to

the residual value of the improvements;

vii. The lessee must remit the amount received from the lessor

under paragraph b.vi. of this section to the recipient or subrecipient

from which the HUD Disaster Recovery funds were derived.

viii. The lessee can also enter into a management contract

authorizing the lessor religious entity to use the building for its

intended secular purpose, e.g., homeless shelter, provision of public

services. In such case, the religious entity must agree in the

management contract to carry out the secular purpose in a manner free

from religious influences in accordance with the principles set forth

in paragraph c.

c. As a general rule, HUD Disaster Recovery funds may be used for

eligible public services to be provided through a primarily religious

entity, where the religious entity enters into an agreement with the

recipient or subrecipient from which the HUD Disaster Recovery funds

are derived that, in connection with the provision of such services:

i. It will not discriminate against any employee or applicant for

employment on the basis of religion and will not limit employment or

give preference in employment to persons on the basis of religion;

ii. It will not discriminate against any person applying for such

public services on the basis of religion and will not limit such

services or give preference to persons on the basis of religion;

iii. It will provide no religious instruction or counseling,

conduct no religious worship or services, engage in no religious

proselytizing, and exert no other religious influence in the provision

of such public services;

iv. Where the public services provided under paragraph 2.c. are

carried out on property owned by the primarily religious entity, HUD

Disaster Recovery funds may also be used for minor repairs to such

property that are directly related to carrying out the public services

where the cost constitutes in dollar terms only an incidental portion

of the HUD Disaster Recovery grant expenditure for the public services.

K. Political Activities

HUD Disaster Recovery funds may not be used to finance the use of

facilities or equipment for political purposes or to engage in other

partisan political activities, such as candidate forums, voter

transportation, or voter registration. However, a facility originally

assisted with HUD Disaster Recovery funds may be used on an incidental

basis to hold political meetings, candidate forums, or voter

registration campaigns, provided that all parties and organizations

have access to the facility on an equal basis, and are assessed equal

rent or use charges, if any.

L. Use of Debarred, Suspended, or Ineligible Contractors or

Subrecipients

The requirements set forth in 24 CFR part 24 apply to this program.

M. Conflict of Interest

1. In the procurement of supplies, equipment, construction, and

services by city and county grantees and by their subrecipients, the

conflict of interest provisions in Secs. 85.36 and 84.42, respectively,

shall apply. States and their recipients shall be governed by the

provisions of Sec. 570.489(g).

2. In all cases not governed by 24 CFR 85.36 and 84.42, the

following provisions shall apply. Such cases include the acquisition

and disposition

[[Page 47356]]

of real property and the provision of assistance by the recipient or by

its subrecipients to individuals, businesses, and other private

entities under eligible activities that authorize such assistance

(e.g., rehabilitation, preservation, and other improvements of private

properties or facilities pursuant to Sec. 570.202; or grants, loans,

and other assistance to businesses, individuals, and other private

entities pursuant to Secs. 570.203, 570.204, or 570.703(i)).

3. Conflicts prohibited. The general rule is that no persons

described in paragraph 4. who exercise or have exercised any functions

or responsibilities with respect to HUD Disaster Recovery Initiative

activities, or who are in a position to participate in a decisionmaking

process or gain inside information with regard to such activities, may

obtain a financial interest or benefit from a HUD Disaster Recovery

grant, or have a financial interest in any contract, subcontract, or

agreement with respect to a HUD Disaster Recovery grant, or with

respect to the proceeds of the HUD Disaster Recovery Initiative-

assisted activity, either for themselves or those with whom they have

business or immediate family ties, during their tenure or for one year

thereafter.

4. Persons covered. The conflict of interest provisions of

paragraph 2. of this section apply to any person who is an employee,

agent, consultant, officer, or elected official or appointed official

of the recipient, or of any designated public agencies, or of

subrecipients that are receiving HUD Disaster Recovery funds.

5. Exceptions. Upon the written request of a city or county

grantee, HUD may grant an exception to the provisions of paragraph 2.

of this section on a case-by-case basis when it has satisfactorily met

the threshold requirements of paragraph 5.a., taking into account the

cumulative effects of paragraph 5.b. State grantees shall follow the

provisions of Sec. 570.489(h) covering exceptions to the provisions of

paragraph 2.

a. Threshold requirements. HUD will consider an exception only

after the recipient has provided the following documentation:

i. A disclosure of the nature of the conflict, accompanied by an

assurance that there has been public disclosure of the conflict and a

description of how the public disclosure was made; and

ii. An opinion of the recipient's attorney that the interest for

which the exception is sought would not violate State or local law.

b. Factors to be considered for exceptions. In determining whether

to grant a requested exception after the recipient has satisfactorily

met the requirements of paragraph 5.a., HUD shall conclude that such an

exception will serve to further the purposes of the HUD Disaster

Recovery Initiative and the effective and efficient administration of

the recipient's program or project, taking into account the cumulative

effect of the following factors, as applicable:

i. Whether the exception would provide a significant cost benefit

or an essential degree of expertise to the program or project that

would otherwise not be available;

ii. Whether an opportunity was provided for open competitive

bidding or negotiation;

iii. Whether the person affected is a member of a group or class of

low-or moderate-income persons intended to be the beneficiaries of the

assisted activity, and the exception will permit such person to receive

generally the same interests or benefits as are being made available or

provided to the group or class;

iv. Whether the affected person has withdrawn from his or her

functions or responsibilities, or the decisionmaking process with

respect to the specific assisted activity in question;

v. Whether the interest or benefit was present before the affected

person was in a position as described in paragraph b. of this section;

vi. Whether undue hardship will result either to the recipient or

the person affected when weighed against the public interest served by

avoiding the prohibited conflict; and

vii. Any other relevant considerations.

N. Performance Reviews and Dispute Resolution and Enforcement Actions

The provisions of 24 CFR subparts I and O apply to States and to

cities and counties, respectively, regarding HUD's review of grantee

performance, resolution of disputes regarding grantee performance, and

adjudicative, remedial and enforcement actions that HUD may take to

resolve noncompliance matters.

Catalog of Federal Domestic Assistance

The Catalog of Federal Domestic Assistance numbers for the HUD

Disaster Recovery Initiative are as follows: 14.218; 14.219; 14.228.

Dated: September 3, 1997.

Jacquie M. Lawing,

General Deputy Assistant Secretary for Community Planning and

Development.

Appendix A--Waiver of Requirements for Community Development Block

Grant Funds Under the 1997 Emergency Supplemental Appropriations Act

for Recovery From Natural Disasters (Public Law 105-18)

Title II, Chapter 10 of the 1997 Emergency Supplemental

Appropriations Act for Recovery from Natural Disasters (the Act),

appropriates $500 million in Community Development Block Grant

(CDBG) funds to use for buyouts, relocation, long-term recovery, and

mitigation in communities affected by the flooding in the upper

Midwest and other covered natural disasters.

With respect to these supplemental funds, the Act authorizes the

Secretary of HUD to ``waive, or specify alternative requirements

for, any provision of any statute or regulation that the Secretary

administers in connection with the obligation by the Secretary or

the use by the recipient of these funds, except for statutory

requirements related to civil rights, fair housing and

nondiscrimination, the environment, and labor standards, upon a

finding that such waiver is required to facilitate the use of such

funds, and would not be inconsistent with the overall purpose of the

statute.''

In conjunction with this statutory provision and pursuant to 24

CFR 5.110, the Department has determined that it has good cause to

waive certain regulatory provisions governing the use of Disaster

Recovery Initiative funds. Therefore, to facilitate the use of the

Disaster Recovery Initiative funds appropriated under Chapter 10 of

the Act, the following provisions have been waived for the reasons

set forth below. These waivers apply to activities funded under the

Act with Disaster Recovery Initiative funds.

Consolidated Submissions for Community Planning and Development

Programs

Description of Requirements Waived

Citizen participation requirements at 42 U.S.C.

5304(a), 42 U.S.C. 5306(d)(5)(C), 24 CFR 91.105(c) and 91.115(c), to

the extent that expedited amendment of the grantee's Consolidated

Plan is necessary to ensure timely delivery of assistance, except

that grantees must provide alternative procedures for public notice

of funding availability, as approved by HUD.

Justification: To provide the flexibility to expedite the

availability of disaster recovery assistance, if necessary.

The requirements at 42 U.S.C. 12705(a)(2), 42 U.S.C.

5304(a)(1), 42 U.S.C. 5304(m), 24 CFR 91.220, 24 CFR 91.235, 24 CFR

31.320 and 24 CFR 570.420(d).

Justification: To provide the flexibility to expedite the

availability of disaster recovery assistance, if necessary. These

requirements concern the submission of an Annual Action Plan (for

cities, counties and states receiving annual allocations of regular

CDBG funding); 24 CFR 91.235 contains the requirements for

Abbreviated Consolidated Plans (for non-entitled units of general

local government not receiving CDBG funding through a state). 42

[[Page 47357]]

U.S.C. 5304(m) contains the requirement for submission of a

Community Development Plan describing a grantee's priority non-

housing community development needs. Paragraph I. E. of the Federal

Register Notice implementing the Disaster Recovery Initiative

establishes streamlined, alternative planning and submission

requirements for Disaster Recovery Initiative funding which meet the

intent of the National Affordable Housing Act and the Housing and

Community Development Act. All city, county and state grantees which

receive formula allocations of CDBG funding have already met the

statutory and regulatory requirements for the five-year strategic

plan in the Consolidated Plan.

Citizen participation requirements at 42 U.S.C.

5304(a)(2) and (a)(3) (A) through (E), 24 CFR 91.100 through 91.115,

24 CFR 570.405(h), 24 CFR 570.431 and 24 CFR 570.486(a).

Justification: To provide the flexibility to expedite the

availability of disaster recovery assistance, if necessary.

Paragraph I. E. of the Federal Register Notice implementing the

Disaster Recovery Initiative establishes streamlined, alternative

citizen participation requirements for Disaster Recovery Initiative

funding which meet the intent of the National Affordable Housing Act

and the Housing and Community Development Act.

Community Development Block Grant Program

Description of Requirements Waived

The definition of a ``unit of general local

government'' at 42 U.S.C. 5302(a)(1) and 24 CFR 570.3.

Justification: The statutory and regulatory definitions of a

unit of general local government have, over time, become outdated.

The definition includes the Trust Territory of the Pacific Islands.

Since this definition was first enacted, all jurisdictions within

the Trust Territory of the Pacific have become independent nations.

The definition of a unit of general local government included in the

Federal Register Notice implementing the Disaster Recovery

Initiative excludes the Trust Territory of the Pacific.

Requirements at 42 U.S.C. 5301(c), 42 U.S.C.

5304(b)(3)(A), 24 CFR 570.200(a)(3) (for cities and counties) and 24

CFR 570.484 (for States) that 70 percent of funds, over a period not

to exceed three years, are for activities that benefit low and

moderate income persons.

Justification: Because the damage to community

development and housing is without regard to income, it is important

to give grantees maximum flexibility to carrying activities within

the confines of the CDBG program national objectives. Paragraph

I.B.2 of the Federal Register Notice implementing the Disaster

Recovery Initiative establishes alternative requirements for

complying with the statutory mandate that each grantee's program

principally (at least 50%) benefit low- and moderate-income persons.

Requirements at 42 U.S.C. 5301(c), 42 U.S.C.

5304(b)(3)(A), 24 CFR 570.200(a)(3) for the CDBG entitlement program

and 570.484 for the State CDBG program that 70 percent of funds,

over a period not to exceed three years, are for activities that

benefit low and moderate income persons.

Justification: Because the damage to community development and

housing is without regard to income, it is important to give

grantees maximum flexibility to carrying activities within the

confines of the CDBG program national objectives.

Requirements at 42 U.S.C. 5305(a), 24 CFR 570.200

(a)(1) and (e) through (h), 24 CFR 570.201 through 570.207, and 24

CFR 570.482 (a) through (d), concerning activities eligible for

funding under the Disaster Recovery Initiative.

Justification: To give maximum flexibility to grantees in

addressing the wide variety of needs resulting from natural

disasters, the Department has established alternative requirements

for eligible activities at paragraph I.F.1 of the Federal Register

Notice implementing the Disaster Recovery Initiative. These

requirements will ensure compliance with the eligibility

requirements of Title II, Chapter 10 of Public Law 105-18, and will

ensure accountability in the use of funds.

Prohibitions on new housing construction at 24 CFR

570.207(b)(3) and modifying 42 U.S.C. 5305(a) to provide for the use

of such designated funds for new housing construction.

24 CFR 570.207(b)(3) prohibits use of funds for new housing

construction except for assisted housing under section 17 of the

United States Housing Act of 1937, housing constructed by a special

subrecipient, pursuant to Sec. 570.204(a), and last resort housing

under the Uniform Relocation Act pursuant to 49 CFR Part 24.

Justification: If a large number of housing units are destroyed

as a result of the disaster, the flexibility to permit grantees to

directly provide new construction assistance would be essential in

furthering the purposes of disaster recovery.

Restrictions on the repair or reconstruction of

buildings used for the general conduct of government at 42 U.S.C.

5305 (a)(2) and (a)(14), and 24 CFR 570.207(a)(1).

Justification: Required if there is significant damage to public

buildings. Waiver of this provision would permit repair and

reconstruction.

The 50 percent of downpayment limitation on direct

homeownership assistance for low or moderate income homebuyers at 42

U.S.C. 5305(a)(24)(D).

Justification: Required to provide additional assistance to low/

moderate income disaster victims in instances in which direct

homeownership assistance with 50 percent of a downpayment is

insufficient.

The limitation on the amount of funds used for public

services at 42 U.S.C. 5305(a)(8) and 24 CFR 570.201 (e)(1) or (2),

as applicable to the affected grantee, to hereby modify those

provisions to allow an increase of 10 percent above the previous

limitation.

Justification: Disaster response may require additional level of

public services and public services not previously provided by

grantees during emergency and recovery periods, e.g., day care,

housing counseling, legal services, health services, safety

services.

Provisions of 42 U.S.C. Chapter 69--Community

Development and 24 CFR part 570 that would prohibit States electing

to receive CDBG funds from distributing such funds to units of

general local government in entitlement communities and to Indian

tribes, including 42 U.S.C. 5306(d) (1) and (2)(A) and 24 CFR

570.480(a), to the extent that such provisions limit the

distribution of funds to units of general local government located

in nonentitlement areas and to Indian tribes.

Justification: This provides the State the flexibility necessary

to meet a wide range of recovery needs in any areas of the State,

including those in entitlement communities and on Indian

reservations, that have been affected by the disaster.

Requirements that the State grantees must match the

amount of CDBG funds used for the administration of the State's CDBG

program at 42 U.S.C. 5306(d)(3)(A) and 24 CFR 570.489(a)(1) with

respect to funds designated for disaster recovery under 42 U.S.C.

5321.

Justification: Waiving these provisions would prevent undue

hardship on the State and further the purposes of disaster recovery.

Requirements at 24 CFR 570.480(a), 570.481(a) and

570.486(b).

Justification: These provisions describe requirements which are

specific to States' administration of CDBG funding for non-

entitlement areas. 24 CFR 570.480(a) indicates that other subparts

of Part 570 are generally not applicable to the State CDBG program;

24 CFR 570.481(a) indicates that HUD will defer to States'

interpretations of the definitions of terms contained in 42 U.S.C.

5300 et. seq.; 24 CFR 570.486(b) governs activities serving

beneficiaries outside the jurisdiction of the unit of general local

government. HUD is waiving a number of statutory definitions for

purposes of the Disaster Recovery Initiative. HUD has determined

that it is necessary to apply certain program requirements of the

Disaster Recovery Initiative uniformly to city, county and State

grantees. Where possible, the Federal Register Notice implementing

the Disaster Recovery Initiative retains the administrative

flexibility provided to States in the State CDBG program.

Requirements of 42 U.S.C. 5306(d)(3)(A) and 24 CFR

570.489(a) concerning the use of Disaster Recovery Initiative funds

for State administrative costs, including matching funds

requirements.

Justification: Waiving these provisions would prevent undue

hardship on States and would further the purposes of disaster

recovery, by eliminating the requirement that Disaster Recovery

Initiative funds spent on State administrative costs be matched with

State funding. Paragraph I.F.6.b of the Federal Register Notice

implementing the Disaster Recovery Initiative establishes

alternative requirements for States' use of funds for costs incurred

in administering this funding.

The provisions at 42 U.S.C. 5304(j) and 24 CFR

570.489(e), for the State CDBG program, that require States to allow

units of local government to retain program income. All program

income will be returned to the State and will become program income

for

[[Page 47358]]

the year in which the State redistributes those funds.

Justification: Waiver of this provision will also allow States

to quickly utilize all program income for other eligible activities.

Requirements of 42 U.S.C. 5306(d)(2)(C)(iii) concerning

restrictions on a State's ability to limit activities eligible for

funding.

Justification: Waiving these requirements will increase State

grantees' flexibility in prioritizing and responding to disaster

recovery needs.

Acquisition and Relocation Requirements for CDBG Disaster Supplemental

Funds

Description of Requirements Waived

One-for-one replacement requirements at 42 U.S.C.

5304(d)(2) and 24 CFR 570.606(c)(1), for low and moderate income

dwelling units (1) damaged by the disaster, (2) for which CDBG funds

are used for demolition, and (3) which are not suitable for

rehabilitation.

Requires that all occupied and vacant occupiable low/moderate

income dwelling units that are demolished or converted to a use

other than as low/moderate income dwelling units in connection with

a CDBG activity must be replaced with low/moderate income dwelling

units.

Justification: Not waiving this provision would discourage

grantees from demolition and clearance of dwelling units that would

otherwise be appropriate for CDBG assistance. Such inaction would

inhibit recovery efforts and add to health and safety problems.

Relocation requirements at 42 U.S.C. 5304(d)(2)(iii)

and (iv) and 24 CFR 570.606(c)(2), in order to permit a grantee to

meet all or part of its obligation to provide relocation benefits to

displaced persons under sections 204 and 205 of the Uniform

Relocation Assistance and Real Property Acquisition Policies Act of

1970, as amended (42 U.S.C. 4601 et. seq) (URA).

The statutory requirements of the URA are also applicable to the

administration of FEMA's assistance, and disparities in rental

assistance payments for activities funds by HUD and that agency will

thus be eliminated.

Justification: FEMA is subject to the requirements of the URA.

Pursuant to this authority, FEMA requires that rental assistance

payments be calculated on the basis of the amount necessary to lease

or rent comparable housing for a period of 42 months. HUD is also

subject to these requirements, but is also covered by alternative

relocation provisions authorized under 42 U.S.C. 5304(d)(2)(iii) and

(iv) and implementing regulations at 24 CFR 570.606(c)(2). These

alternative relocation benefits, available to low- and moderate-

income displacees opting to receive them in certain HUD programs,

require the calculation of similar rental assistance payments on the

basis of 60 months, rather than 42 months, thereby creating a

disparity between the available benefits offered by HUD and FEMA,

respectively. The waiver assures uniform and equitable treatment for

all such tenants under the URA, as qualified by this waiver.

Requirements at 49 CFR 24.2(d)(8)(ii), 24.402(b)(2) and

24.404, to the extent that they require grantees to provide URA

financial assistance sufficient to reduce the displaced person's

post-displacement rent/utility cost to 30 percent of household

income.

Justification: The failure to suspend these requirements would

impede disaster recovery. To the extent that a tenant has been

paying rents in excess of 30 percent of household income without

demonstrable hardship, rental assistance payments to reduce tenant

costs to 30 percent would not be required.

Requirements of Sections 204 and 205 of the URA, and 49

CFR Part 24, to the extent necessary to permit a grantee to meet all

or a portion of a grantee's replacement housing financial assistance

obligation to a displaced renter who elects to relocate to rental

housing through a tenant-based rental assistance (TBRA) housing

program subsidy (e.g., Section 8 rental voucher or certificate)

provided that the renter is also provided referrals to suitable,

available rental replacement dwellings where the owner is willing to

participate in the TBRA program, and the period of authorized

assistance is at least 42 months.

Justification: Failure to grant the waiver would impede disaster

recovery whenever TBRA program subsidies are available but funds for

cash relocation assistance are limited. The change conforms URA

policy with Section 104(d) relocation assistance.

Requirements of Section 202(b) of the URA and 49 CFR

24.302, to the extent that they require a grantee to offer a person

displaced from a dwelling unit the option to receive a ``moving

expense and dislocation allowance'' based on the current schedule of

allowances prepared by the Federal Highway Administration, provided

that the grantee establishes and offers the person a moving expense

and dislocation allowance under a schedule of allowances that are

reasonable for the jurisdiction and take into account the number of

rooms in the displacement dwelling, whether the person owns and must

move the furniture, and, at a minimum, the kinds of expenses

described in 49 CFR 24.303(a)(1).

Justification: Failure to suspend this provision would impede

disaster recovery by requiring grantees to offer allowances that do

not reflect local labor and transportation costs. Persons displaced

from a dwelling remain entitled to choose a payment for actual

reasonable moving and related expenses if they find that approach

preferable to the locally established moving expense and dislocation

allowance.

Requirements of Section 414 of the Stafford Disaster

Relief and Emergency Assistance Act (42 U.S.C. 5181) so that Uniform

Relocation Act provisions do not apply when a homeowner displaced by

the disaster is assisted.

Section 414 states: ``Notwithstanding any other provision of

law, no person otherwise eligible for any kind of replacement

housing payment under the Uniform Relocation Assistance and Real

Property Acquisition Policies Act of 1970 (P.L. 91-646) shall be

denied such eligibility as a result of his being unable, because of

a major disaster as determined by the President, to meet the

occupancy requirements set by such Act.''

Justification: Failure to waive Section 414 would impede

disaster recovery, discouraging grantees from the acquisition,

demolition or rehabilitation of disaster-damaged housing because of

excessive costs that would result from replacement housing payments

made to former homeowners displaced by the disaster. Homeowners

actually displaced by a HUD-assisted disaster recovery project will

continue to receive URA assistance. Homeowners displaced by the

disaster may apply for assistance under available disaster recovery

programs.

Other Applicable Requirements

Requirements of 12 U.S.C. 1701u, 24 CFR 570.607(b) and

24 CFR part 135, concerning the requirements of Section 3 of the

Housing and Urban Development Act of 1968.

Justification: Waiving these requirements will increase

grantees' flexibility in responding to disaster recovery needs and

will increase the efficiency with which activities may be

implemented to meet those needs. However, in the Federal Register

Notice implementing the Disaster Recovery Initiative funding, HUD

encourages grantees to give priority to the hiring of local low-and

moderate-income persons and contractors in carrying out its

activities.

Requirements of 24 CFR 570.612 and 24 CFR part 52,

concerning applicability of Executive Order 12372 regarding

intergovernmental consultation and review of activities proposed for

Federal funding.

Justification: Waiving these requirements will increase

grantees' flexibility in responding to disaster recovery needs and

will increase the efficiency with which activities may be

implemented to meet those needs.

[FR Doc. 97-23752 Filed 9-4-97; 11:50 am]

BILLING CODE 4210-29-P