Community Development Block Grants: New York Small Cities Program

SUMMARY: This rule amends the regulations for the Community Development

Block Grants (CDBG) Small Cities Program for the State of New York.

This rule eliminates the use of multiyear plans in the Small Cities

Program for any NOFA published in calendar year 1997 or later. This

rule also limits the maximum grant award under the annual Small Cities

NOFA to any single, eligible unit of general local government to

$400,000, except that counties may apply for a maximum of $600,000. HUD

will honor grant awards for multiyear plans approved in response to

NOFAs issued prior to calendar year 1997. In order to implement the

reduction of grant limits, HUD intends to restrict competition under

future annual Small Cities NOFAs to single purpose grants. This rule

also makes minor technical and clarifying changes to the regulations.

EFFECTIVE DATE: December 26, 1997.

FOR FURTHER INFORMATION CONTACT: Cornelia Robertson Terry, State and

Small Cities Division, Office of Community Planning and Development,

Department of Housing and Urban Development, Room 7184, 451 Seventh

Street, SW., Washington, DC 20410; telephone (202) 708-1322 (voice).

(This is not a toll-free number.) Persons with hearing or speech

impairments may access this number via TTY by calling the Federal

Information Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: Title I of the Housing and Community

Development Act of 1974 (42 U.S.C. 5300-5320) permits each State to

elect to administer all aspects of the Community Development Block

Grant (CDBG) Program annual fund allocation for the nonentitlement

areas within its jurisdiction. The policies and procedures for HUD's

CDBG Small Cities Program in 24 CFR part 570, subpart F, apply to

grants for nonentitlement areas in States such as New York that did not

elect to administer the CDBG Program.

Section 226 of the Departments of Veterans Affairs and Housing and

Urban Development, and Independent Agencies Appropriations Act, 1996

(Pub. L. 104-134; approved April 26, 1996) (the Act) requires that HUD

issue proposed and final rules for the requirements of the CDBG program

for the State of New York before issuing a Notice of Funding

Availability for funds made available for fiscal year (FY) 1997. In

accordance with section 226, HUD published a proposed rule on June 11,

1997 (62 FR 31944) in order to solicit public comments on the

requirements of the New York CDBG Small Cities Program in 24 CFR part

570, subpart F. (Although Secs. 570.429 and 570.430 also appear in

subpart F and are set forth in this final rule, these sections only

apply to the Small Cities Program in Hawaii.) HUD also solicited

comments on two proposed changes to the New York Small Cities Program,

as described below.

New York Small Cities Program Design

On June 11, 1997, HUD proposed to remove paragraph (a)(3) of

Sec. 570.421, and to add a new paragraph (f), which would eliminate the

use of multiyear plans in the New York Small Cities Program for NOFAs

published in calendar year 1997 or later. HUD will, however, continue

to honor multiyear plans approved in response to NOFAs published prior

to calendar year 1997. HUD also proposed to add a new paragraph (g) to

the current regulations to provide that the maximum grant amount that

HUD will award to an eligible unit of general local government in

response to a NOFA for the annual Small Cities competition published in

calendar year 1997 or later is $400,000, except that counties could

apply for a maximum of $600,000 in HUD-administered Small Cities grant

funds. HUD will, however, award larger grants as necessary to honor the

terms of multiyear plans approved under the provisions of NOFAs

published prior to calendar year 1997.

Discussion of Public Comments

The deadline for public comments on the July 11, 1997 proposed rule

was July 11, 1997. HUD received only 10 comments.

Grant Limits

Several commenters offered support for HUD's proposal to limit

maximum future grant amounts. These commenters included a private

consultant and public and private housing and community development

organizations. These commenters remarked that the grant limits will

help spread the extremely limited funds to worthwhile projects in small

communities across the State.

Other commenters disagreed, however, arguing that communities need

larger comprehensive grants in order to avert infrastructure

dilapidation or to provide substantial housing assistance or economic

development. These commenters included a United States Senator, a State

senator, and others that commented on behalf of local communities.

Although HUD recognizes that there are certain advantages of higher

grant limits, HUD has determined that the grant limits contained in the

June 11, 1997 proposed rule are appropriate and has adopted them in

this final rule. In addition, in order to encourage units of general

local government to act cooperatively to resolve regional problems that

affect more than one locality, this final rule amends Sec. 570.422 to

provide that the grant limit for joint applications will be the maximum

single purpose grant limit established in Sec. 570.421(g) or a NOFA,

multiplied by the number of participating governments in the

cooperation agreement that was established to submit the joint

application. For the purpose of determining such a multiple grant

limit, and in order to receive such amount, this rule clarifies that a

participating joint applicant must receive a substantial direct benefit

from the activities proposed in the application and must not be acting

solely on behalf of, or in conjunction with, another jurisdiction

solely to raise the maximum grant amount that may be awarded. In

addition, this rule provides that the statistics of each participant

counted for maximum grant limits shall also be used for purposes of the

selection factors referred to in Sec. 570.421(a).

Multiyear Commitments

Some of the commenters agreed with HUD's proposal to eliminate the

use of multiyear plans in the Small Cities Program. These commenters

included a private consultant and public and private housing and

community development organizations.

In response to previous suggestions from Small Cities grantees, HUD

offered multiyear grant commitments in FY 1995, along with the increase

in grant limits in FY 1996, to assist communities with longer term

development programs within the context of a comprehensive strategy.

These multiyear commitments assure continued funding during the second

and/or third year, provided the applicant submits an acceptable

application with the required

[[Page 62913]]

certifications and is able to demonstrate continued administrative

capacity for carrying out grant activities, and sufficient appropriated

funds are available. Multiyear plans are particularly beneficial for

smaller communities, which lack full-time staff and must turn to high-

priced consultants to prepare Small Cities applications each year.

The granting of multiyear commitments does not, however, unfairly

reduce the pool of funds available for competition in future years. In

the 5-year period from FY 1990 to FY 1994, prior to the offering of

multiyear commitments, 46 communities received at least 3 annual

grants. In effect, these 46 communities, based on the depth of their

needs and the rating quality of their applications, had achieved a de

facto multiyear status. In the last 2 fiscal years, the Small Cities

Program has only extended multiyear commitments to 29 grantees

(including 17 3-year commitments and 12 2-year commitments). Most of

these multiyear commitments were awarded in single purpose grants to

the smallest communities. Therefore, the multiyear commitments did not

significantly change the availability of the funds, but reduced the

administrative burden and cost of annual applications.

In response to the support of the commenters, however, this final

rule eliminates the use of multiyear plans in the Small Cities Program

for NOFAs published in calendar year 1997 or later, as provided in the

June 11, 1997 proposed rule.

Small Cities Funds in Entitlement Communities

Two commenters remarked that Small Cities funds should not go to

communities that are eligible for CDBG entitlement funds. Since the

metropolitan areas are generally covered by entitlement funds, these

commenters stressed that these areas should not also be able to make

use of the Small Cities funds.

Under the current regulations, entitlement communities are not

eligible applicants for Small Cities CDBG nonentitlement funds. Section

570.421(e) provides, however, that ``[a]n applicant may conduct

eligible CDBG activities outside its boundaries. These activities must

be demonstrated to be appropriate to meeting the applicant's needs and

objectives, and must be consistent with State and local law.'' This

provision allows a nonentitlement county, for example, to use funds in

a metropolitan city or an urban county. HUD did not propose to change

these requirements in the June 11, 1997 proposed rule.

As some of the commenters noted, the strength of the Small Cities

CDBG Program is that local communities can and should determine how the

funds should be used. HUD supports such local decisionmaking about how

best to meet local needs. Therefore, HUD has decided not to change the

current regulations regarding the use of Small Cities CDBG funds in

entitlement areas in response to the two commenters.

Set-Asides

Two commenters expressed concern regarding the ``set-asides''

provided for in the Small Cities regulations for public service

activities (Sec. 570.421(d)), imminent threats to public health and

safety (Sec. 570.424), and economic development (Sec. 570.421(a)(5) of

this rule; Sec. 570.421(a)(6) of the regulations prior to the

effectiveness of this rule). These commenters argue that such ``set-

asides'' remove funds from the general competition that would otherwise

be available for worthy community development activities.

Although HUD appreciates the comments received on these provisions,

there is no set-aside for public services. The regulations merely

provide that no more than 15 percent of the State's nonentitlement

allocation may be used for public services. This provision is

consistent with the CDBG program as a whole. This is not a new

provision; HUD did not specifically propose changes to this provision

in the June 11, 1997 proposed rule. HUD has never held a separate

competition for ``public service'' grants and has no authority to do so

under the regulations.

Imminent threat grants address health and safety related needs in

communities. Only 15 percent of Small Cities funds may be used for such

grants, and the actual percentage of imminent threat grants is far

lower. This is not a new provision, and HUD proposed no changes to this

provision. Therefore, notwithstanding the two comments received on this

issue, this final rule retains the imminent threat set-aside to enable

quick responses to disasters or emergencies that small cities face.

Section 570.421(a)(5) of this rule, which allows HUD to fund

economic development grants under certain circumstances, is not a new

provision, and HUD proposed no changes to that provision.

Notwithstanding the two comments HUD received, HUD has determined that

it should retain this provision.

Minor Technical Changes and Clarifications

HUD is also taking the opportunity in this final rule to make

several minor technical changes and clarifications to the regulations

for the Small Cities CDBG Program. These changes include correcting an

inconsistency in Sec. 570.430(a) regarding the limitation on planning

and administrative costs in the Hawaii program. This paragraph refers

to Sec. 570.200(g) of the regulations for the Entitlement Program,

under which the planning and administrative costs cap is calculated

based on obligated funds. The Small Cities provision in

Sec. 570.430(a), however, had relied upon expenditures. This final rule

corrects that provision so that it consistently relies upon obligated

funds.

Findings and Certifications

Environmental Impact

A Finding of No Significant Impact with respect to the environment

was made in accordance with HUD regulations in 24 CFR part 50 that

implement section 102(2)(C) of the National Environmental Policy Act of

1969 (42 U.S.C. 4223). The Finding is available for public inspection

between 7:30 a.m. and 5:30 p.m. weekdays in the Office of the Rules

Docket Clerk, Office of General Counsel, Room 10276, Department of

Housing and Urban Development, 451 7th Street, SW, Washington, DC

20410.

Impact on Small Entities

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

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

approving it certifies that this rule would not have a significant

economic impact on a substantial number of small entities. This rule

would make limited changes that would not have a significant impact on

small entities.

Federalism

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

of Executive Order 12612, Federalism, has determined that this rule

would not have substantial direct effects on States or their political

subdivisions, or the relationship between the Federal Government and

the States, or on the distribution of power and responsibilities among

the various levels of government. This rule would make limited changes

that would not have Federalism implications. As a result, this rule is

not subject to review under the Order.

[[Page 62914]]

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L. 104-

4; approved March 22, 1995) (UMRA) establishes requirements for Federal

agencies to assess the effects of their regulatory actions on State,

local, and tribal governments, and on the private sector. This rule

would not impose any Federal mandates on any State, local, or tribal

governments, or on the private sector, within the meaning of the UMRA.

Catalogue of Federal Domestic Assistance

The Catalogue of Federal Domestic Assistance program number is

14.219, Community Development Block Grants--Small Cities Program.

List of Subjects in 24 CFR Part 570

Administrative practice and procedure, American Samoa, Community

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

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

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

housing, New communities, Northern Mariana Islands, Pacific Islands

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

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

Accordingly, for the reasons set out in the preamble, 24 CFR part

570 is amended as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

1. The authority citation for 24 CFR part 570 is revised to read as

follows:

Authority: 42 U.S.C. 3535(d) and 5301-5320.

2. Subpart F is revised to read as follows:

Subpart F--Small Cities Program

Sec.

570.420 General.

570.421 New York Small Cities Program design.

570.422 Applications from joint applicants.

570.423 Application for the HUD-administered New York Small Cities

Grants.

570.424 Grants for imminent threats to public health and safety.

570.425 HUD review and actions on applications for New York State

applicants.

570.426 Program income.

570.427 Program amendments.

570.428 Reallocated funds.

570.429 Hawaii general and grant requirements.

570.430 Hawaii program operation requirements.

570.431 Citizen participation.

570.432 Repayment of Section 108 loans.

Subpart F--Small Cities Program

Sec. 570.420 General.

(a) HUD administration of nonentitlement CDBG funds. Title I of the

Housing and Community Development Act of 1974 permits each State to

elect to administer all aspects of the Community Development Block

Grant (CDBG) Program annual fund allocation for the nonentitlement

areas within its jurisdiction. This subpart sets forth policies and

procedures applicable to grants for nonentitlement areas in States that

have not elected, in a manner and time prescribed by the Secretary, to

administer the CDBG Program. States that elected to administer the

program after the close of fiscal year 1984 cannot return

administration of the program to HUD. A decision by a State to

discontinue administration of the program would result in the loss of

CDBG funds for nonentitlement areas in that State and the reallocation

of those funds to all States in the succeeding fiscal year.

(b) Scope and applicability. (1) This subpart describes the

policies and procedures of the Small Cities Program which apply to

nonentitlement areas in States where HUD administers the CDBG Program.

HUD currently administers the Small Cities Program in only two States--

New York and Hawaii. This subpart principally addresses the

requirements for New York, and Secs. 570.429 and 570.430 identify

special procedures applicable to Hawaii.

(2) The allocation of formula CDBG funds for use in nonentitlement

areas of Hawaii and New York is as provided in subpart A of this part.

The policies and procedures set forth in the following identified

subparts of this part 570 apply to the HUD-administered Small Cities

Program, except as modified or limited under the provisions thereof or

this subpart:

(i) Subpart A--General Provisions;

(ii) Subpart C--Eligible Activities;

(iii) Subpart J--Grant Administration;

(iv) Subpart K--Other Program Requirements; and

(v) Subpart O--Performance Reviews.

(c) Public notification requirements. (1) Section 102 of the

Department of Housing and Urban Development Reform Act of 1989 (42

U.S.C. 3545) contains a number of provisions that are designed to

ensure greater accountability and integrity in the provision of certain

types of assistance administered by HUD. All competitive grants in the

HUD-administered Small Cities Program in New York are affected by this

legislation, and the requirements identified at 24 CFR part 4 apply to

them. Imminent threat grants under Sec. 570.424 and section 108

repayment grants under Sec. 570.432 are not affected by section 102 as

they are not competitive grants.

(2) The Hawaii HUD-administered Small Cities Program is not subject

to section 102, since the funds are not distributed in a competitive

manner.

(d) Abbreviated consolidated plan. Applications for the HUD-

administered Small Cities Program which contain housing activities must

include a certification that the proposed housing activities are

consistent with the applicant's consolidated plan as described at 24

CFR part 91.

(e) National and primary objectives. (1) Each activity funded

through the Small Cities Program must meet one of the following

national objectives as defined under the criteria in Sec. 570.208. Each

activity must:

(i) Benefit low- and moderate-income families;

(ii) Aid in the prevention or elimination of slums or blight; or

(iii) Be an activity which the grantee certifies is designed to

meet other community development needs having a particular urgency

because existing conditions pose a serious and immediate threat to the

health or welfare of the community where other financial resources are

not available to meet such needs.

(2) In addition to the objectives described in paragraph (e)(1) of

this section, with respect to grants made through the Small Cities

Program, not less than 70 percent of the total of grant funds from each

grant and Section 108 loan guarantee funds received under subpart M of

this part within a fiscal year must be expended for activities which

benefit low- and moderate-income persons under the criteria of

Secs. 570.208(a), or 570.208(d) (5) or (6). In the case of multiyear

plans in New York State approved in response to NOFAs published prior

to calendar year 1997, not less than 70 percent of the total funding

for grants approved pursuant to a multiyear plan for a time period of

up to 3 years must be expended for activities which benefit low- and

moderate-income persons. Thus, 70 percent of the grant for year 1 of a

multiyear plan approved in response to NOFAs published prior to

calendar year 1997 must meet the 70 percent requirement, 70 percent of

the combined grants from years 1 and 2 must meet the requirement, and

70 percent of the combined grants from years 1, 2, and 3 must meet the

requirement. In determining the percentage of funds expended for such

activity, the provisions of

[[Page 62915]]

Sec. 570.200(a)(3) (i), (iii), (iv), and (v) shall apply.

(Approved by the Office of Management and Budget under control

number 2506-0060).

Sec. 570.421 New York Small Cities Program design.

(a) Selection system--(1) Competitive applications. Each

competitive application will be rated and scored against at least the

following factors:

(i) Need-absolute number of persons in poverty as further explained

in the NOFA;

(ii) Need-percent of persons in poverty as further explained in the

NOFA;

(iii) Program Impact; and

(iv) Fair Housing and Equal Opportunity, which may include the

applicant's Section 3 plan and implementation efforts with respect to

actions to affirmatively further fair housing. The NOFA described in

paragraph (b) of this section will contain a more detailed description

of these factors, and the relative weight that each factor will be

given.

(2) In addition HUD reserves the right to establish minimal

thresholds for selection factors and otherwise select grants in

accordance with Sec. 570.425 and the applicable NOFA.

(3) Imminent threats to public health and safety. The criteria for

these grants are described in Sec. 570.424.

(4) Repayment of Section 108 loans. The criteria for these grants

are described in Sec. 570.432.

(5) Economic development grants. HUD intends to use the Section 108

loan guarantee program to the maximum extent feasible to fund economic

development projects in the nonentitlement areas of New York. In the

event that there are not enough Section 108 loan guarantee funds

available to fund viable economic development projects, if a project

needs a grant in addition to a loan guarantee to make it viable, or if

the project does not meet the requirements of the Section 108 program

but is eligible for a grant under this subpart, HUD may fund Economic

Development applications as they are determined to be fundable in a

specific amount by HUD up to the sum set aside for economic development

projects in a notice of funding availability, notwithstanding paragraph

(g) of this section. HUD also has the option in a NOFA of funding

economic development activities on a competitive basis, as a

competitive application as described in paragraph (a)(1) of this

section. In order for an applicant to receive Small Cities grant funds

on a noncompetitive basis, the field office must determine that the

economic development project will have a substantial impact on the

needs identified by the applicant.

(b) Notice of funding availability. HUD will issue one or more

Notice(s) of Funding Availability (NOFA) each fiscal year which will

indicate the amount of funds available, the annual grant limits per

grantee, type of grants available, the application requirements, and

the rating factors that will be used for those grants which are

competitive. A NOFA may set forth, subject to the requirements of this

subpart, additional selection criteria for all grants.

(c) Eligible applicants. (1) Eligible applicants in New York are

units of general local government, excluding: Metropolitan cities,

urban counties, units of general local government which are

participating in urban counties or metropolitan cities, even if only

part of the participating unit of government is located in the urban

county or metropolitan city. Indian tribes are also ineligible for

assistance under this subpart. An application may be submitted

individually or jointly by eligible applicants.

(2) Counties, cities, towns, and villages may apply and receive

funding for separate projects to be done in the same jurisdiction. Only

one grant will be made under each funding round for the same type of

project to be located within the jurisdiction of a unit of general

local government (e.g., both the county and village cannot receive

funding for a sewer system to be located in the same village, but the

county can receive funding for a sewer system that is located in the

same village as a rehabilitation project for which the village receives

funding). The NOFA will contain additional information on applicant

eligibility.

(3) Counties may apply on behalf of units of general local

government located within their jurisdiction when the unit of general

local government has authorized the county to apply. At the time that

the county submits its application for funding, it must submit a

resolution by the governing body of the unit of local government that

authorizes the county to submit an application on behalf of the unit of

general local government. The county will be considered the grantee and

will be responsible for executing all grant documents. The county is

responsible for ensuring compliance with all laws, regulations, and

Executive Orders applicable to the CDBG Program. HUD will deal

exclusively with the county with respect to issues of program

administration and performance, including remedial actions. The unit of

general local government will be considered the grantee for the purpose

of determining grant limits. The unit of general local government's

statistics will be used for purposes of the selection factors referred

to in Sec. 570.421(a).

(d) Public service activities cap. Public service activities may be

funded up to a maximum of fifteen (15) percent of a State's

nonentitlement allocation for any fiscal year. HUD may award a grant to

a unit of general local government for public service activities with

up to 100 percent of the funds intended for public service activities.

HUD will apply the 15 percent statewide cap to public service

activities by funding public service activities in the highest rated

applications in each NOFA until the cap is reached.

(e) Activities outside an applicant's boundaries. An applicant may

conduct eligible CDBG activities outside its boundaries. These

activities must be demonstrated to be appropriate to meeting the

applicant's needs and objectives, and must be consistent with State and

local law. This provision includes using funds provided under this

subpart in a metropolitan city or an urban county.

(f) Multiyear plans. HUD will not make any new multiyear

commitments for NOFAs published in calendar year 1997 or later. HUD

will continue to honor the terms of the multiyear plans that were

approved under the provisions of NOFAs published prior to calendar year

1997.

(g) Maximum grant amount. The maximum grant amount that will be

awarded to a single unit of general local government in response to the

annual Small Cities NOFA published in calendar year 1997 or later is

$400,000, except that counties may apply for up to $600,000 in HUD-

administered Small Cities funds. HUD may specify lower grant limits in

the NOFA, which may include different limits for different types of

grants available or different types of applicants. This paragraph (g)

does not apply to multiyear plans that were approved under the

provisions of NOFAs published prior to calendar year 1997, nor does it

apply to grants awarded in connection with paragraphs (a)(3) through

(a)(5) of this section. The maximum limits in this paragraph (g) apply

to grants for economic development projects awarded under NOFAs in

which there is no set-aside of funds for such projects.

Sec. 570.422 Applications from joint applicants.

Units of general local government may submit a joint application

which addresses common problems faced by the jurisdictions, to the

extent permitted

[[Page 62916]]

by the NOFA. A joint application must be pursuant to a written

cooperation agreement submitted with the application. The cooperation

agreement must authorize one of the participating units of government

to act as the lead applicant which will submit the application to HUD,

and must delineate the responsibilities of each participating unit of

government with respect to the Small Cities Program. The lead applicant

is responsible for executing the application, certifications, and grant

agreement, and ensuring compliance with all laws, regulations, and

Executive Orders applicable to the CDBG Program. HUD reserves the right

to deal exclusively with the lead applicant with respect to issues of

program administration and performance, including remedial actions. In

the event of poor performance, HUD reserves the right to deny and/or

restrict future funding to all units of general local government that

are parties to the cooperation agreement. The maximum amount that may

be awarded pursuant to a joint application is the maximum single grant

limit established in a NOFA or pursuant to Sec. 570.421(g) multiplied

by the number of participants in the cooperation agreement, provided

that for the purpose of determining such a multiple grant limit, and in

order to receive such amount, a participating joint applicant must

receive a substantial direct benefit from the activities proposed in

the application, and must not be acting solely on behalf of, or in

conjunction with, another jurisdiction for the sole purpose of raising

the maximum grant amount that may be awarded. In addition, the

statistics of each participant counted for maximum grant limits

purposes shall also be used for purposes of the selection factors

referred to in Sec. 570.421(a).

Sec. 570.423 Application for the HUD-administered New York Small

Cities Grants.

(a) Proposed application. The applicant shall prepare and publish a

proposed application and comply with citizen participation requirements

as described in Sec. 570.431. The applicant should follow the citizen

participation requirements of 24 CFR part 91 if it submits a complete

consolidated plan.

(b) Final application. The applicant shall submit to HUD a final

application containing its community development objectives and

activities. This final application shall be submitted, in a form

prescribed by HUD, to the appropriate HUD office. The application also

must contain a priority nonhousing community development plan, in

accordance with 24 CFR 91.235.

(c) Certifications. (1) Certifications shall be submitted in a form

prescribed by HUD. If the application contains any housing activities,

the applicant shall certify that the proposed housing activities are

consistent with its abbreviated consolidated plan, as described at 24

CFR part 91.

(2) In the absence of evidence (which may, but need not, be derived

from performance reviews or other sources) which tends to challenge in

a substantial manner the certifications made by the applicant, the

certifications will be accepted by HUD. However, if HUD does have

available such evidence, HUD may require the submission of additional

information or assurances before determining whether an applicant's

certifications are satisfactory.

(d) Thresholds. The HUD Office may use any information available to

it to make the threshold judgments required by the applicable NOFA,

including information related to the applicant's performance with

respect to any previous assistance under this subpart. The annual

performance and evaluation report required under Sec. 570.507(a) is the

primary source of this information. The HUD Office may request

additional information in cases where it is essential to make the

required performance judgments.

(Approved by the Office of Management and Budget under control

number 2506-0060).

Sec. 570.424 Grants for imminent threats to public health and safety.

(a) Criteria. The following criteria apply for an imminent threat

to public health or safety:

(1) The Director of Community Planning and Development of the HUD

office may, at any time, invite an application for funds available

under this subpart in response to a request for assistance to alleviate

an imminent threat to public health or safety that requires immediate

resolution. HUD shall verify the urgency and the immediacy of the

threat with an appropriate authority other than the applicant prior to

acceptance of the application, and the Director of Community Planning

and Development of the HUD Office shall review the claim to determine

if, in fact, an imminent threat to public health or safety does exist.

For example, an applicant with documented cases of disease resulting

from a contaminated drinking water supply has an imminent threat to

public health, while an applicant ordered to improve the quality of its

drinking water supply over the next 2 years does not have an imminent

threat within the definition of this paragraph (a). A natural disaster

is prima facie evidence of an imminent threat to public health or

safety. These funds are to be used to deal with those threats that

represent a unique and unusual circumstance, not for the type of threat

that occurs with frequency in a number of communities within the State

of New York.

(2) The applicant does not have sufficient local resources, and

other Federal or State resources are unavailable to alleviate the

imminent threat.

(3) All imminent threat projects must meet the requirement of

Sec. 570.420(e).

(b) HUD action. (1) Fifteen percent of the funds allocated to New

York State in the Small Cities Program may be reserved to alleviate

imminent threats to the public health or safety unless a lesser amount

is specified in a NOFA. Applications shall be submitted in accordance

with Sec. 570.423.

(2) Applications which meet the requirements of this section may be

approved by the Director of Community Planning and Development of the

HUD Office without competition.

(3) The only funds reserved for imminent threats to the public

health or safety are those specified by this section as modified by the

NOFA. After the funds have been depleted, HUD shall not consider

further requests for grants relating to imminent threats during that

fiscal year.

(c) Letter to proceed. Notwithstanding Sec. 570.425(a)(3), after a

determination has been made that an imminent threat exists, HUD may

issue the applicant a letter to proceed to incur costs to alleviate the

imminent threat. Reimbursement of such costs is dependent upon HUD

approval of the final application.

(d) Environmental review. Pursuant to 24 CFR 58.34(a)(10), grants

for imminent threats to public health or safety are excluded from some

or all of the environmental review requirements of 24 CFR part 58, to

the extent provided therein.

Sec. 570.425 HUD review and actions on applications for New York State

applicants.

(a) Final application submission--(1) Submission deadline. HUD will

establish a time period during which final applications must be

submitted to the appropriate office. The dates for this period will be

published in a notice in the Federal Register.

(2) Incomplete applications. Applications must contain the

information required by HUD. Information relative to the application

will not be accepted or considered if received after the submission

deadline,

[[Page 62917]]

unless the information is specifically requested in writing by HUD.

(3) Pre-agreement costs. HUD authorizes a unit of general local

government to incur costs during a Federal fiscal year in which a grant

is made or the prior fiscal year for preparation of a CDBG grant

application, planning costs eligible under Sec. 570.205, environmental

assessments, and project engineering and design costs for eligible

activities under Secs. 570.201 through 570.204 before the establishment

of a formal grant relationship between the applicant and HUD. Costs of

such activities for the funded application may be charged to the grant

should it be funded, provided that the activities are undertaken in

accordance with the requirements of this subpart, and 24 CFR part 58.

It is understood that the incurring of costs described in this

paragraph creates no obligation on HUD to approve the application.

(b) HUD action on final application--(1) Review and notification.

Following the review of the applications, HUD will promptly notify each

applicant of the action taken with regard to its application.

Documentation which supports HUD's decisions on applications will be

available to the public.

(2) Conditional approval. HUD may make a conditional approval, in

which case the grant will be approved but the obligation and

utilization of funds will be restricted. The reasons for the

conditional approval and the actions necessary to remove the condition

will be specified. Failure to satisfy the condition may result in a

termination of the grant.

(3) HUD will not make a Small Cities grant when it is determined

that the grant will only have a minimal or insignificant impact on the

grantee.

(4) Individual grant amounts. In determining appropriate grant

amounts to be awarded, HUD may take into account the size of the

applicant, the level of demand, the scale of the activity proposed

relative to need and operational capacity, the number of persons to be

served, the amount of funds required to achieve project objectives and

the administrative capacity of the applicant to complete the activities

in a timely manner.

(c) Streamlined application requirement for previous applicants.

HUD may provide pursuant to a NOFA that if an applicant notifies HUD in

writing within the application period specified in a NOFA that it

wishes to be so considered, HUD will consider unfunded applications

from the prior round or competition that meet the threshold

requirements of the NOFA. The applicant will have the option of

withdrawing its application, or amending or supplementing the

application for succeeding rounds of competition. If there is no

significant change in the application involving new activities or

alteration of proposed activities that will significantly change the

scope, location or objectives of the proposed activities or

beneficiaries, there will be no further citizen participation

requirement to keep the application active for succeeding rounds of

competition. Applicants availing themselves of the option to have an

application from the previous round or competition reconsidered by HUD

must submit a new abbreviated or full consolidated plan, if the new

competitive funding round is in a different fiscal year than the

funding round or competition for which the application was originally

submitted.

Sec. 570.426 Program income.

(a) The provisions of Sec. 570.504(b) apply to all program income

generated by a specific grant and received prior to grant closeout.

(b) If the unit of general local government has another ongoing

CDBG grant at the time of closeout, the program income will be

considered to be program income of the ongoing grant. The grantee can

choose which grant to credit the program income to if it has multiple

open CDBG grants.

(c) If the unit of general local government has no open ongoing

CDBG grant at the time of closeout, program income of the unit of

general local government or its subrecipients which amounts to less

than $25,000 per year will not be considered to be program income

unless needed to repay a Section 108 guaranteed loan. When more than

$25,000 of program income is generated from one or more closed out

grants in a year after closeout, the entire amount of the program

income is subject to the requirements of this part. This will be a

subject of the closeout agreement described in Sec. 570.509(c).

Sec. 570.427 Program amendments.

(a) HUD approval of certain program amendments. Grantees shall

request prior HUD approval for all program amendments involving new

activities or alteration of existing activities that will significantly

change the scope, location, or objectives of the approved activities or

beneficiaries. Approval is subject to the following:

(1) Programs or projects that include new or significantly altered

activities are rated in accordance with the criteria for selection

applicable at the time the original preapplication or application

(whichever is applicable) was rated. The rating of the program or

projects proposed which include the new or altered activities proposed

by the amendment must be equal to or greater than the lowest rating

received by a funded project or program during that cycle of ratings.

(2) Consideration shall be given to whether any new activity

proposed can be completed promptly.

(3) If the grant was received on a noncompetitive basis, the

proposed amended project must be able to be completed promptly, and

must meet all of the threshold requirements that were required for the

original project. If the proposal is to amend the project to a type of

project that was rated competitively in the fiscal year that the

noncompetitive project was funded, the new or altered activities

proposed by the amendment must receive a rating equal to or greater

than the lowest rating received by a funded project or program during

that cycle of ratings.

(b) Documentation of program amendments. Any program amendments

that do not require HUD approval must be fully documented in the

grantee's records.

(c) Citizen participation requirements. Whenever an amendment

requires HUD approval, the requirements for citizen participation in

Sec. 570.431 must be met.

Sec. 570.428 Reallocated funds.

(a) General. This section governs reallocated funds originally

allocated for use under 24 CFR part 570, subpart F (Small Cities

Program).

(b) Assignment of funds to be reallocated. Reallocated funds may

be:

(1) Used at any time necessary for a Section 108 repayment grant

under Sec. 570.432;

(2) Added to the next Small Cities Program competition;

(3) Used to fund any application not selected for funding in the

most recent Small Cities competition, because of a procedural error

made by HUD; or

(4) Used to fund the most highly ranked unfunded application or

applications from the most recent Small Cities Program competition.

(c) Timing. Funds which become available shall be used as soon as

practicable.

Sec. 570.429 Hawaii general and grant requirements.

(a) General. This section applies to the HUD-administered Small

Cities Program in the State of Hawaii.

(b) Scope and applicability. Except as otherwise provided in this

section, the policies and procedures outlined in

[[Page 62918]]

subparts A, C, J, K, O of this part, and in Secs. 570.420, 570.430, and

570.432, apply to the HUD-administered Small Cities Program in the

State of Hawaii.

(c) Grant amounts. (1) For each eligible unit of general local

government, a formula grant amount will be determined which bears the

same ratio to the total amount available for the nonentitlement area of

the State as the weighted average of the ratios between:

(i) The population of that eligible unit of general local

government and the population of all eligible units of general local

government in the nonentitlement areas of the State;

(ii) The extent of poverty in that eligible unit of general local

government and the extent of poverty in all the eligible units of

general local government in the nonentitlement areas of the State; and

(iii) The extent of housing overcrowding in that eligible unit of

general local government and the extent of housing overcrowding in all

the eligible units of general local government in the nonentitlement

areas of the State.

(2) In determining the average of the ratios under this paragraph

(c), the ratio involving the extent of poverty shall be counted twice

and each of the other ratios shall be counted once. (0.25 + 0.50 + 0.25

= 1.00).

(d) Adjustments to grants. Grant amounts under this section may be

adjusted where an applicant's performance is judged inadequate,

considering:

(1) Capacity to utilize the grant amount effectively and

efficiently;

(2) Compliance with the requirements of Sec. 570.902(a) for timely

expenditure of funds beginning with grants made in FY 1996. In making

this calculation, all outstanding grants will be considered. For the FY

1995 grant the requirement is substantial compliance with the

applicant's schedule or schedules submitted in each previously funded

application;

(3) Compliance with other program requirements based on monitoring

visits and audits.

(e) Reallocation. (1) Any amounts that become available as a result

of adjustments under paragraph (d) of this section, or any reductions

under subpart O of this part, shall be reallocated in the same fiscal

year to any remaining eligible applicants on a pro rata basis.

(2) Any formula grant amounts reserved for an applicant that

chooses not to submit an application shall be reallocated to any

remaining eligible applicants on a pro rata basis.

(3) No amounts shall be reallocated under paragraph (e) of this

section in any fiscal year to any applicant whose grant amount was

adjusted under paragraph (d) of this section or reduced under subpart O

of this part.

(f) Required submissions. In order to receive its formula grant

under this subpart, the applicant must submit a consolidated plan in

accordance with 24 CFR part 91. That part includes requirements for the

content of the consolidated plan, for the process of developing the

plan, including citizen participation provisions, for the submission

date, for HUD approval, and for the amendment process.

(g) Application approval. HUD will approve an application if the

jurisdiction's submissions have been made and approved in accordance

with 24 CFR part 91 and the certifications required therein are

satisfactory to the Secretary. The certifications will be satisfactory

to the Secretary for this purpose unless the Secretary has determined

pursuant to subpart O of this part that the grantee has not complied

with the requirements of this part, has failed to carry out its

consolidated plan as provided under Sec. 570.903, or has determined

that there is evidence, not directly involving the grantee's past

performance under this program, that tends to challenge in a

substantial manner the grantee's certification of future performance.

If the Secretary makes any such determination, however, further

assurances may be required to be submitted by the grantee as the

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

certification satisfactory.

(h) Grant agreement. The grant will be made by means of a grant

agreement executed by both HUD and the grantee.

(i) Conditional grant. The Secretary may make a conditional grant

in which case the obligation and use of grant funds for activities may

be restricted. Conditional grants may be made where there is

substantial evidence that there has been, or there will be, a failure

to meet the performance requirements or criteria described in subpart O

of this part. In such case, the conditional grant will be made by means

of a grant agreement, executed by HUD, which includes the terms of the

condition specifying the reason for the conditional grant, the actions

necessary to remove the condition and the deadline for taking those

actions. The grantee shall execute and return such an agreement to HUD

within 60 days of the date of its transmittal. Failure of the grantee

to execute and return the grant agreement within 60 days may be deemed

by HUD to constitute rejection of the grant by the grantee and shall be

cause for HUD to determine that the funds provided in the grant

agreement are available for reallocation in accordance with section

106(c) of the Act. Failure to satisfy the condition may result in a

reduction in the grant amount pursuant to Sec. 570.911.

(Approved by the Office of Management and Budget under control

number 2506-0060)

Sec. 570.430 Hawaii program operation requirements.

(a) Limitation on planning and administrative costs. For grants

made with allocations prior to FY 1995, no more than 20 percent of the

sum of the grant plus program income received during the grant period

shall be expended for planning and program administrative costs. For

grants received from allocations in FY 1995 and thereafter, a grantee

will be considered to be in conformance with the requirements of

Sec. 570.200(g) if funds obligated for planning and administration

during the most recently completed program year do not exceed 20

percent of the sum of the grant made for that program year and the

program income received from post FY 1994 grants during that program

year.

(b) Performance and evaluation reports. Grantees will follow the

requirements of Sec. 570.507(a) for entitlement grant recipients for

all grants received in FY 1995 and thereafter. Grantees will continue

following the requirements of Sec. 570.507(a) for HUD-administered

small cities grants for grants received prior to FY 1995 until those

grants are closed out.

(c) Grant closeouts. Grants received prior to FY 1995 shall be

closed out in accordance with the procedures in Sec. 570.509. Grants

received in FY 1995 and thereafter shall not be closed out

individually. A grantee's entire program shall be closed upon program

completion if a grantee ceases its participation in the Small Cities

Program.

(d) Public Services. Starting with the FY 1996 grant, grantees may

follow the provisions of Sec. 570.201(e)(1) that refer to entitlement

grantees, allowing grantees to use 15 percent of the program income

received in the previous program year in addition to 15 percent of the

grant amount for public services.

(e) Compliance with the primary objective. Starting with the FY

1995 grant, grantees may select a time period of one, two or three

program years in which to meet the requirement that not less than 70

percent of the aggregate of CDBG fund expenditures be for activities

benefitting low- and moderate-

[[Page 62919]]

income persons. Grants made from allocations prior to FY 1995 will be

considered individually for meeting the primary objective, and

expenditures for grants from pre-FY 1995 allocations made during and

after FY 1995 will not be considered in determining whether the primary

objective has been met for post-1994 allocations. If the State of

Hawaii decides to administer the Community Development Block Grant

Program for nonentitlement units of general local government in Hawaii,

the State will be bound by the time period for meeting the primary

objective that was chosen by each nonentitlement grantee within the

State until those time periods have expired.

(f) Program amendments for grants received prior to FY 1995.

Grantees must follow the requirements of 24 CFR 91.505 when amending

their program with regard to grants received prior to FY 1995. For

purposes of this paragraph (f), the term consolidated plan as used in

24 CFR 91.505 means an application submitted under the Hawaii program

for pre-FY 1995 funds. Also for purposes of this paragraph (f), to

comply with the requirements of 24 CFR 91.505, grantees must refer to

their current citizen participation plans (adopted in accordance with

24 CFR 91.505) to determine the criteria for substantial amendment and

the citizen participation process to be followed.

(Approved by the Office of Management and Budget under control

number 2506-0020.)

Sec. 570.431 Citizen participation.

(a) General. An applicant that is located in a nonentitlement area

of a State that has not elected to distribute funds shall comply with

the citizen participation requirements described in this section,

including requirements for the preparation of the proposed application

and the final application. The requirements for citizen participation

do not restrict the responsibility or authority of the applicant for

the development and execution of its community development program.

(b) Citizen participation plan. The applicant must develop and

follow a detailed citizen participation plan and must make the plan

public. The plan must be completed and available before the application

for assistance is submitted to HUD, and the applicant must certify that

it is following the plan. The plan must set forth the applicant's

policies and procedures for:

(1) Giving citizens timely notice of local meetings and reasonable

and timely access to local meetings, information, and records relating

to the grantee's proposed and actual use of CDBG funds including, but

not limited to:

(i) The amount of CDBG funds expected to be made available for the

coming year, including the grant and anticipated program income;

(ii) The range of activities that may be undertaken with those

funds;

(iii) The estimated amount of those funds proposed to be used for

activities that will benefit low- and moderate-income persons;

(iv) The proposed CDBG activities likely to result in displacement

and the applicant's plans, consistent with the policies developed under

Sec. 570.606(b), for minimizing displacement of persons as a result of

its proposed activities; and

(v) The types and levels of assistance the applicant plans to make

available (or to require others to make available) to persons displaced

by CDBG-funded activities, even if the applicant expects no

displacement to occur;

(2) Providing technical assistance to groups representative of

persons of low- and moderate-income that request assistance in

developing proposals. The level and type of assistance to be provided

is at the discretion of the applicant. The assistance need not include

the provision of funds to the groups;

(3) Holding a minimum of two public hearings, for the purpose of

obtaining citizens' views and formulating or responding to proposals

and questions. Each public hearing must be conducted at a different

stage of the CDBG program. Together, the hearings must address

community development and housing needs, development of proposed

activities and review of program performance. There must be reasonable

notice of the hearings and the hearings must be held at times and

accessible locations convenient to potential or actual beneficiaries,

with reasonable accommodations including material in accessible formats

for persons with disabilities. The applicant must specify in its plan

how it will meet the requirement for hearings at times and locations

convenient to potential or actual beneficiaries;

(4) Meeting the needs of non-English speaking residents in the case

of public hearings where a significant number of non-English speaking

residents can reasonably be expected to participate;

(5) Responding to citizen complaints and grievances, including the

procedures that citizens must follow when submitting complaints and

grievances. The applicant's policies and procedures must provide for

timely written answers to written complaints and grievances within 15

working days of the receipt of the complaint, where practicable; and

(6) Encouraging citizen participation, particularly by low- and

moderate-income persons who reside in slum or blighted areas, and in

other areas in which CDBG funds are proposed to be used.

(c) Publication of proposed application. (1) The applicant shall

publish a proposed application consisting of the proposed community

development activities and community development objectives in order to

afford affected citizens an opportunity to:

(i) Examine the application's contents to determine the degree to

which they may be affected;

(ii) Submit comments on the proposed application; and

(iii) Submit comments on the performance of the applicant.

(2) The requirement for publishing in paragraph (c)(1) of this

section may be met by publishing a summary of the proposed application

in one or more newspapers of general circulation, and by making copies

of the proposed application available at libraries, government offices,

and public places. The summary must describe the contents and purpose

of the proposed application, and must include a list of the locations

where copies of the entire proposed application may be examined.

(d) Preparation of a final application. An applicant must prepare a

final application. In the preparation of the final application, the

applicant shall consider comments and views received related to the

proposed application and may, if appropriate, modify the final

application. The final application shall be made available to the

public and shall include the community development objectives and

projected use of funds, and the community development activities.

(e) New York grantee amendments. To assure citizen participation on

program amendments to final applications that require HUD approval

under Sec. 570.427, the grantee shall:

(1) Furnish citizens information concerning the amendment;

(2) Hold one or more public hearings to obtain the views of

citizens on the proposed amendment;

(3) Develop and publish the proposed amendment in such a manner as

to afford affected citizens an opportunity to examine the contents, and

to submit comments on the proposed amendment;

(4) Consider any comments and views expressed by citizens on the

proposed amendment and, if the grantee finds it appropriate, modify the

final amendment accordingly; and

[[Page 62920]]

(5) Make the final amendment to the community development program

available to the public before its submission to HUD.

Sec. 570.432 Repayment of section 108 loans.

Notwithstanding any other provision of this subpart, a unit of

general local government in a nonentitlement area where the State has

not elected to administer the CDBG program shall be eligible for Small

Cities Grant assistance hereunder for the sole purpose of paying any

amounts due on debt obligations issued by such unit of general local

government (or its designated public agency) and guaranteed by the

Secretary pursuant to section 108 of the Act (see subpart M of this

part). The award of grant assistance for such purpose shall be

consistent with section 106(d)(3)(B) of the Act, in such amount, and

subject to such conditions as the Secretary may determine. Since

guaranteed loan funds (as defined in Sec. 570.701) are required to be

used in accordance with national and primary objective requirements,

and other applicable requirements of this part, any grant made to make

payments on the debt obligations evidencing the guaranteed loan shall

be presumed to meet such requirements, unless HUD determines that the

guaranteed loan funds were not used in accordance with such

requirements. Any such determination by HUD shall not prevent the

making of the grant in the amount of the payment due, but it may be

grounds for HUD to take appropriate action under subpart O of this part

based on the original noncompliance.

Dated: November 19, 1997.

Jacquie Lawing,

General Deputy Assistant Secretary for Community Planning and

Development.

[FR Doc. 97-30940 Filed 11-21-97; 10:06 am]

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