1998 HUD Disaster Recovery Initiative

SUMMARY: The 1998 Supplemental Appropriations and Rescissions Act

(Public Law 105-174, 112 Stat. 58, et seq., approved May 1, 1998), with

respect to the 1998 HUD Disaster Recovery Initiative grant funds,

requires the publication of a Notice governing the allocation and use

of such funds. This Notice addresses that requirement.

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, S.W., 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 (DRI).

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 support other Federal agencies in assisting 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

natural disasters receiving Presidential declarations in 1998.

4. DRI 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 (Corps of Engineers).

B. Authority

1998 Supplemental Appropriations and Rescissions Act, Public Law

105-174, 112 Stat. 58, at 76-77, approved May 1, 1998.

C. Benefiting Persons of Low and Moderate Income

1. DRI funds are provided by a supplemental appropriation under the

Community Development Block Grant program authority of the Act. The

primary objective of that program is the development 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. States and State grant recipients

should give maximum feasible priority to funding activities that

benefit persons of low and moderate income.

2. A State must use more than 50 percent of its DRI funds for

activities that benefit primarily persons of low and moderate income.

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

and only upon making a finding of a compelling need to do so. HUD will

consider such a waiver only after it receives a request from a State

that includes a justification that establishes a compelling need for

the waiver. The compelling need must reflect a public purpose directly

related to disaster recovery, and the justification must include a

determination by the State, with supporting documentation, that there

is no practicable alternative course of action to otherwise targeting

funds to activities which principally benefit persons of low and

moderate income.

D. Definitions

Regulatory references are in title 24 of the Code of Federal

Regulations (CFR), and will be cited by subsection (Sec. ), 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 non-legislative functions or services provided by government at

decentralized locations.

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.

Director means the Director of the Federal Emergency Management

Agency.

Disaster means a major disaster declared by the President under

title IV of the Robert T. Stafford Disaster Relief and Emergency

Assistance Act, as amended (42 U.S.C. 5121 et seq) in Federal fiscal

year 1998.

Family means all persons living in the same household who are

related by birth, marriage or adoption.

FEMA means the Federal Emergency Management Agency.

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.

HUD means the U.S. Department of Housing and Urban Development.

Income. For the purpose of State grant recipients determining

whether a family or household is of low and moderate income, such

recipients may select any of the three definitions listed below for

each activity. However, integrally related activities of the same type

and qualifying under the same paragraph of Sec. 570.483(b) shall use

the same definition of income. The option to choose a definition does

not apply to activities that qualify under Sec. 570.483(b)(1) (Area

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

under Sec. 570.483(b)(1)(I). Activities qualifying under

Sec. 570.483(b)(1), at the discretion of the State, must use the area

income data

[[Page 56765]]

supplied by HUD or survey data which is methodologically sound.

a. The three definitions are as follows:

i. ``Annual income'' as defined for the Public Housing and Section

8 programs at Sec. 5.609 (except that if the DRI 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 DRI 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) before its repeal.

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.

State grant recipient means:

A unit of general local government that receives a DRI grant

through a State.

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

township, parish, village or other general purpose political

subdivision of a State; a combination of such political subdivisions

recognized by the Secretary; and the District of Columbia.

Unmet need means projects identified by the Director as those which

have not or will not be addressed by other Federal disaster assistance

programs, and need that is not addressed by activities reimbursable by

or for which funds are made available by the Federal Emergency

Management Agency, the Small Business Administration, or the Army Corps

of Engineers.

E. Allocation and Expenditure of Funds

1. $130 million has been appropriated for the 1998 HUD Disaster

Recovery Initiative under title II, Chapter 6 of the 1998 Supplemental

Appropriations and Rescissions Act (Public Law 105-174, 112 Stat. 58,

et seq.; approved May 1, 1998) (the 1998 Supplemental Appropriations

Act). These funds are available for obligation by HUD until October 1,

2001. States are responsible to HUD for the timely expenditure of funds

in accordance with any expenditure deadlines HUD may include as grant

agreement conditions.

2. The 1998 Supplemental Appropriations Act requires that HUD

allocate funds to States, based on unmet needs identified by the

director of FEMA as those which have not or will not be addressed by

other Federal disaster assistance programs.

a. In calculating allocations, HUD will use data identified by FEMA

from State and Federal sources as unmet needs in four areas: housing,

business recovery, mitigation, and public works and facilities.

b. The allocation calculations will include appropriate weights and

adjustment factors. The weightings of the unmet needs categories are as

follows: housing, 40 percent; business recovery, 20 percent;

mitigation, 20 percent; and public works and facilities, 20 percent.

c. Allocations will reflect the relative value of calculations

among the States having disasters that receive Presidential

declarations during Federal fiscal year 1998.

d. HUD has set minimum grant amounts for the allocation of funds at

the lesser of $1.5 million or the amount of unmet need identified by

FEMA from State sources.

e. HUD may calculate the allocation of funds to States in one or

more groupings of disaster declarations, as it deems appropriate.

3. The appropriation accounting provisions in 31 U.S.C. 1551-1557,

added by section 1405 of the National Defense Authorization Act for

Fiscal Year 1991 (Pub. L. 101-510), limit the availability of certain

appropriations for expenditure. With respect to the funds appropriated

for the 1998 HUD Disaster Recovery Initiative, this statute requires

the withdrawal from the States' lines of credit any DRI funds

appropriated under the 1998 Supplemental Appropriations Act that the

States have not expended before October 1, 2005. This limitation may

not be waived. HUD may place shorter deadlines on the expenditure of

those funds via grant agreement conditions.

4. The 1998 Supplemental Appropriations Act requires that each

State administer the DRI funds ``in conjunction with its Federal

Emergency Management Agency program or its community development block

grants program or by the entity designated by its Chief Executive

Officer to administer the HOME Investment Partnerships program.''

Whichever agency the

[[Page 56766]]

governor designates to administer the DRI funds must have the capacity

to comply with all applicable requirements of this notice in a timely

manner. Whichever State agency administers the DRI funds should

coordinate with the agency or agencies that administer the other two

programs named above.

F. Non-Federal Public Matching Funds Requirement

1. The 1998 Supplemental Appropriations Act (Pub. L. 105-174)

requires that ``each State shall provide not less than 25 percent in

non-Federal public matching funds or its equivalent value (other than

administrative costs)'' for any 1998 HUD Disaster Recovery Initiative

grant funds which it receives.

2. Match contributions must be made to DRI-funded recovery

activities related to covered disasters.

3. Match may be provided by any public entity from non-Federal

cash, real estate, or revenue resources owned or controlled by the

public entity.

4. Match funds must be reasonably valued. For example, base the

value of cash grants on the dollar value of the grant; value below

market interest rate loans on the present discounted cash value of the

amount of subsidy; value taxes forgiven for future years based on the

present discounted cash value of the revenue foregone; and value a

donation of real estate based on a professional appraisal.

5. The State must make match contributions before all DRI funds are

expended. Match contributions must total not less than 25 percent of

the disaster grant funds drawn from the State's line of credit,

excluding funds drawn for administrative and planning costs.

6. States may not count administrative and planning costs toward

the required non-Federal public matching funds or equivalent value.

7. Contributions that have been or will be counted as satisfying a

matching requirement of another Federal grant or award, including any

other DRI grant or Community Development Block Grant, may not count as

satisfying the matching contribution requirement for the HUD Disaster

Recovery Initiative.

8. Match contributions must be contributed permanently to a

disaster-related activity. To receive match credit for the full amount

of a loan made with non-Federal public funds to a DRI funded activity,

all repayment, interest, or other return on the loan must be treated as

CDBG program income.

9. The following are examples that do not count toward meeting a

grantee's matching contribution requirement:

a. Contributions made with or derived from Federal resources of

funds, regardless of when the Federal resources or funds were received

or expended. CDBG funds (defined Sec. 570.3) are Federal funds for this

purpose;

b. Contributions made with or derived from private resources or

funds, regardless of when the private resources or funds were received

or expended;

c. The interest rate subsidy attributable to the Federal tax

exemption on financing or the value attributable to Federal tax

credits;

10. Contributions are credited at time the contribution is made and

reported to HUD quarterly, as follows:

a. Credit a cash contribution when the funds are expended for a

disaster-related activity or at the time the State awards DRI funds if

the activity was completed before the award of DRI funds;

b. Credit the subsidy value of a below-market interest rate loan at

the time of the loan closing;

c. Credit the value of State or local taxes, fees, or other charges

that are normally and customarily imposed but waived, foregone, or

deferred at the time the State or State grant recipient or other public

entity officially waives, forgoes, or defers the taxes, fees, or other

charges;

d. Credit the value of donated land or other real property at the

time ownership of the property is transferred to the public entity

carrying out the DRI-assisted or disaster-related activity;

e. Credit the direct cost of relocation payments and services at

the time that the payments and services are provided.

11. For DRI-assisted projects involving more than one State, the

State that makes the match contribution may decide to retain the match

credit or permit the other State to claim the credit.

G. Submission Requirements

1. Prerequisites to a State's receipt of a DRI grant include a

citizen participation plan; publication of its proposed Action Plan;

notice and comment; and submission of an Action Plan for Disaster

Recovery.

2. Each State 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 State'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 DRI funds;

d. The State's method of distribution;

e. Units of general local government receiving State distributions;

f. The projected uses for the DRI funds for each unit of general

local government and Indian tribe receiving State distributions; and

g. The specific sources from which the match requirement will be

achieved.

3. A State must only distribute DRI funds to units of general local

government, including cities (both CDBG metropolitan cities and non-

metropolitan cities) and counties (including CDBG urban counties), and

to Indian tribes that have the capability to carry out disaster

recovery activities.

4. The State must describe monitoring standards and procedures

pursuant to Sec. 91.330 and include certifications pursuant to:

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

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

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

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

program;

e. Section 91.325(a)(7), acquisition and relocation, except as

waived;

f. Section I.G.5.b. of this notice, citizen participation;

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

h. Section 91.325(b)(5), compliance with anti-discrimination laws;

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

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

5. 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 State and State

grant recipients 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 DRI 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 and 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 and 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

[[Page 56767]]

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 State shall

consider any such comments and views and may, if it deems appropriate,

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 HUD together with the certifications required

under section I.G.4., above. Any Action Plan for Disaster Recovery may

be modified or amended from time to time by the State in accordance

with the same procedures required in this paragraph for the preparation

and submission of such Action Plan for Disaster Recovery.

b. A DRI grant may be made only if the State certifies that it is

following, and that it will require its State grant recipients to

follow, a detailed citizen participation plan that:

i. Provides for and encourages citizen participation, with

particular emphasis on areas in which DRI 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 DRI

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 State for the development and execution of its DRI

Action Plan.

H. Determining Eligibility of Activities

An activity may be assisted in whole or in part with DRI funds only

if all of the following requirements are met:

1. Neither the State nor its State grant recipients may use DRI

funds for activities reimbursable or for which funds are made available

by FEMA, SBA, or the Corps of Engineers.

2. Compliance with national objectives. States receiving

allocations 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:

a. Will benefit to low- and moderate-income families;

b. Will aid in the prevention or elimination of slums or blight; or

c. May also include activities that the State and its State grant

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.

d. Consistent with the foregoing, each State and State grant

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

activities assisted with DRI funds meets one of the three above

national objectives as contained in its certification. Criteria for

determining whether an activity addresses one or more of these

objectives are contained at Sec. 570.483.

3. Compliance with the primary objective. In using HUD Disaster

Recovery Initiative funds under the authority of the Act, the State

must meet the primary objective of the development 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. To meet the primary objective, more

than 50 percent of the funds in each grant must be used for activities

that principally benefit persons of low and moderate income as

determined by the criteria under Sec. 570.483(b), unless waived under

section I.C.2. When calculating the percentage of funds expended for

such activities:

a. Costs of administration and planning eligible under section

I.H.1. of this notice will be assumed to benefit low- and moderate-

income persons in the same proportion as the remainder of the DRI funds

and, accordingly, shall be excluded from the calculation;

b. Funds expended for the acquisition, new construction,

reconstruction, or rehabilitation of property for housing that

qualifies under Sec. 570.483(b)(3) must be counted for this purpose but

shall be limited to an amount determined by multiplying the total cost

(including DRI grant and non-DRI 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.

c. Funds expended for any other activities qualifying under

Sec. 570.483(b) must be counted for this purpose in their entirety.

4. 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.

5. Eligible activities. DRI funds may be used for activities

carried out by a State grant recipient that are relevant to disaster

recovery, as described in this Notice. States and State grant

recipients must use funds appropriated under the 1998 Supplemental

Appropriations Act only for disaster relief, long-term recovery, and

mitigation activities related to a covered disaster in communities

affected by a Presidentially declared disaster that is designated

during Federal fiscal year 1998. Such communities must be in areas

included in such declarations. These funds will supplement, not

replace, FEMA and other Federal funds. To the extent the use of funds

does not violate the restriction at section I.H.1., eligible activities

include:

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

prone properties 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 to the extent that

these activities are not eligible under FEMA's Public Assistance

program;

d. Rehabilitation or reconstruction of residential and non-

residential buildings and improvements;

e. Acquisition, construction, reconstruction, or installation of

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

facilities, streets, neighborhood centers, and the conversion of school

buildings for eligible purposes, to the extent that these activities

are not eligible under FEMA's Public Assistance program;

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, if such services are new or an

increased level of services, limiting costs to no more than 15 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 recovery activities that benefit the public

by:

i. Creating or retaining jobs for low-and moderate-income persons;

ii. Preventing or eliminating slums and blight;

iii. Meeting urgent needs;

iv. Creating or retaining community-owned businesses;

v. Assisting businesses that provide goods or services needed by,

and affordable to, low- and moderate-income residents; or

vi. Providing related technical assistance;

[[Page 56768]]

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. Any other activity authorized under section 105(a) of the

Housing and Community Development Act of 1974, as amended, not waived

by this notice or subsequently, provided that it relates to recovery

from a covered Presidentially declared disaster. The Department may

grant waivers permitting States and State grant recipients to undertake

additional activities with DRI funds if they are consistent with the

requirements of title II, chapter 6 of Public Law 105-1 after a full

consideration of a waiver request.

6. 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 DRI 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 DRI 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.

7. 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 DRI 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 DRI 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-DRI grant portion may be

made provided that DRI funds are used to pay the special assessment in

behalf of all properties owned and occupied by low- and moderate-income

persons. However, DRI funds need not be used to pay the special

assessments in behalf of properties owned and occupied by moderate-

income persons if the State certifies that it does not have sufficient

DRI funds to pay the assessments in behalf of all of the low- and

moderate-income persons who are owner-occupants. Funds collected

through such special assessments are not program income.

c. Public improvements not initially assisted with DRI funds. The

payment of special assessments with DRI funds constitutes HUD Disaster

Recovery assistance to the public improvement. Therefore, DRI 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 paragraph I.H.2.a., b. or c.; and

iii. The requirements of paragraph I.H.7.b.ii. are met.

8. Limitation on planning and administrative costs.

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

program income, shall be expended for planning and program

administrative costs under section I.H.5.k.

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

administration of its HUD Disaster Recovery Initiative. The amount of

DRI 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.

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

grant agreement is the program year start date. Prior to the effective

date of the grant agreement, a State grant recipient may incur costs

beginning on or after the incident date of the Presidentially declared

disaster, and then charge those costs to DRI grant funds, provided

that:

a. The State permits such use;

b. Such funds do not reimburse costs paid with other Federal grant

funds; and

c. 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.

10. Activities outside the jurisdiction of the unit of general

local government. DRI funds may assist an activity located outside the

jurisdiction of the unit of general local government that receives the

DRI funds, provided the unit of general local government determines

that the activity is meeting its disaster recovery needs.

I. 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 recovery

purposes under paragraph H.5.j. 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 State

recipients. 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.

[[Page 56769]]

J. 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 State or unit

of general local government are not eligible for assistance.

2. The following activities may not be assisted with DRI funds

unless authorized under provisions of section 105(a)(15) of the Act.

a. Purchase of equipment. The purchase of equipment with DRI 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 DRI 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. DRI 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 State grant recipient or its

subrecipients in the administration of activities assisted with DRI

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 DRI 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 DRI 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 DRI 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.

3. Use of DRI funds as a non-Federal cost-share. The use of DRI

funds as a non-Federal cost-share to meet the requirements of a Federal

grant-in-aid program is ineligible, except in the case of such use with

respect to FEMA's Hazard Mitigation grant program (HMGP) under section

404 of the Robert T. Stafford Disaster Assistance and Emergency Relief

Act, as amended.

K. Treatment of Program Income

Any program income generated by HUD Disaster Recovery Initiative

becomes program income to the State's CDBG program, not to its DRI

grant. Such program income shall be returned to the State as program

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

Therefore, any program income generated by DRI funds is to be included

in cost cap calculations and program requirements for use of the CDBG

funds. For States not participating in the CDBG program, program income

received by the State after closeout of its grant is not subject to any

Federal requirement.

L. Acquisition (Buyouts) of Flood-damaged Properties

1. Payment of pre-flood values for buyouts.

HUD Disaster Recovery Initiative State grant recipients have the

discretion to pay pre-flood or post-flood values for the acquisition of

properties located in a flood way or floodplain. In using DRI 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 an amount equal to

the housing replacement cost minus:

i. 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.

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 DRI funding is permitted if the

properties are incidental to the project as a whole.

4. Ownership and maintenance of acquired property.

Any property acquired with DRI 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 or covenant

running with the land must require that the property be

[[Page 56770]]

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 DRI 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,

iv. 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 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, etc.). The term ``flood disaster area'' is defined in

section 582(d)(2) to include an area receiving a Presidential

declaration of a major disaster or emergency as a result of flood

conditions.

M. Other Program Requirements

1. General. This section II.M. enumerates laws that HUD will treat

as applicable to the HUD Disaster Recovery Initiative grants to States

and State grant recipients, including statutes expressly made

applicable by the Act and certain other statutes and Executive Orders

for which HUD has enforcement responsibility. The absence of mention

herein of any other statute for which HUD does not have direct

enforcement responsibility is not intended to be taken as an indication

that, in HUD's opinion, such statute or Executive Order is not

applicable to activities assisted with DRI funds. States are governed

by applicable laws.

2. Labor standards. In part because Davis-Bacon requirements are

not applicable to FEMA disaster grants, it is necessary to clarify the

applicability of Davis-Bacon requirements in relationship to the use of

DRI funds in disaster recovery efforts. This section of this Notice

addresses Davis-Bacon applicability to use of DRI 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 DRI 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. DRI 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 DRI 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 to the start of construction, if there is no contract

award. However, HUD may request, and the DOL may approve, a wage

determination effective on the date the DRI 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 DRI 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

[[Page 56771]]

applicable to the completed work provided that:

i. Neither the owner nor the unit of general local government

contemplated use of or reimbursement by DRI 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 DRI 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

DRI activities.

Note that most forms of DRI 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 DRI 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. State DRI grants are subject

to sections 102(a) and 202(a) of the Flood Disaster Protection Act,

respectively for the requirements for assisted property owners to

purchase flood insurance and the effect of nonparticipation of the

community in the flood insurance program. These requirements cannot be

waived.

a. State grant recipients 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

section I.M.3.b. 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(a)) 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 or more 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 FEMA 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 State's Action Plan for Disaster Recovery, funds shall

not be expended for acquisition or construction purposes in an area

that has been identified by 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. 4012a(a).)

N. Waiver of statutory and regulatory requirements that would otherwise

apply to the HUD Disaster Recovery Initiative

1. Title II, Chapter 6 of the 1998 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. Also, as provided in implementing

language in section I.C.2. in this notice, the statute requires that

more than 50 percent of the funds must benefit primarily persons of low

and moderate income unless HUD makes a finding, based on a State's

request, that there is a compelling need to waive such requirement. 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 6 of the 1998

Supplemental Appropriations. 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.

Elsewhere in today's Federal Register, HUD has published a notice

listing the specific statutory and regulatory requirements that have

been waived and setting 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. States and State grant recipients should give priority to

projects that benefit low- and moderate-income individuals to the

maximum extent practicable.

II. Ensuring the Public Trust

A. Program Administrative, Recordkeeping and Reporting Requirements

The program administrative requirements at Secs. 570.489-570.492,

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. HUD will compile this

PER for the HUD Disaster Recovery Initiative from the quarterly reports

submitted under paragraph 2. below, except that, with the final

quarterly report submitted prior to grant closeout, States must also

include with

[[Page 56772]]

the PER 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. Congress has required that quarterly reports be submitted

regarding the actual projects, localities and needs for which funds

have been provided. HUD must also receive reporting information for

program management purposes. Therefore, each State must submit a

quarterly report, as HUD prescribes, no later than 30 days following

each calendar quarter, beginning after the first full calendar quarter

after grant award and continuing until all funds have been expended and

that expenditure reported. Each quarterly 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. Quarterly

reports must be submitted using HUD's web-based Disaster Recovery

Initiative Grant Reporting system. Annually (i.e., with every fourth

submission), the report shall include a financial reconciliation of

funds budgeted and expended, and calculation of the overall percent of

benefit to low- and moderate-income persons . HUD has sought approval

from OMB for new information collection requirements in accordance with

the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3520). OMB approval

is under OMB control number 2506-0165, which expires on May 31, 2001.

In accordance with the Paperwork Reduction Act, HUD may not conduct or

sponsor and a person is not required to respond to, a collection of

information unless the collection displays a valid control number.

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) or on the Internet at ``www.whitehouse.gov/WH/

EOP/omb#doc''.

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

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 State grant recipients are limited to

those authorized under Sec. 570.489(b).

2. Uniform administrative requirements and cost principles. The

State and State grant recipients, their agencies or instrumentalities,

and subrecipients shall comply with the policies, guidelines, and

requirements of OMB Circulars A-87 and A-133 (implemented at 24 CFR

part 45), as applicable. States shall also comply with the applicable

requirements of Sec. 570.489 that are not otherwise waived or modified

by this notice.

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 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 DRI 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 Sec. 570.489(g) 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 DRI 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 the State, 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 and assuring

that State grant recipients comply with their certifications to

affirmatively further fair housing.

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 DRI funds made

available pursuant to the Act. ``Funded in whole or in part with HUD

community development funds'' means that DRI funds have been

transferred by the State grant recipient or a subrecipient to an

identifiable administrative unit and disbursed in a program or

activity. The term ``State grant recipient'' means recipient as defined

in section I.D.

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

[[Page 56773]]

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 DRI 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 DRI 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 activity funded in whole or in part with

DRI 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 DRI 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. State grant

recipients must assume the responsibility for environmental reviews

under the Disaster Recovery Initiative. States administering DRI funds

must assume the responsibilities set forth in Sec. 58.18 for overseeing

the State grant recipients' compliance with environmental review

requirements, including receiving requests for release of funds (RROF)

and environmental certifications form State grant recipients and

objections from government agencies and the public in accordance with

subject H of 24 CFR part 58. The State must forward to the responsible

HUD field office the environmental certification, the RROF and any

objections received, and must recommend to HUD whether to approve or

disapprove the certification and RROF.

2. Disaster recovery assistance in a floodplain.

a. The State grant recipient must follow the eight-step decision-

making process required by Executive Order 11988, Floodplain

Management, as codified for HUD programs at Sec. 55.20. The Order

covers the proposed acquisition, construction, improvement,

disposition, financing, and use of property in a floodplain. 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 the State

grant recipients as they are for the HUD Disaster Recovery Initiative,

but are usually undertaken by Federal staff or contractors. Therefore,

the State grant recipients 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 HUD and other Federal agencies

jointly fund a project related to recovery from a covered disaster.

b. A State grant recipient 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 the State grant

recipient 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

[[Page 56774]]

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 grant

recipient 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 grant recipient 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 grant

recipient 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 grant recipient 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 grant recipient 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, and

the Executive Order on Floodplain Management, a State shall assure that

it has 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 State grant recipient 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 the

State grant recipient determines that the displacement 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 State grant recipient

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 State grant recipient 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

DRI funds for buyouts, a State may permit a State grant recipient to

provide relocation payments and other relocation assistance to persons

displaced by activities that are not subject to paragraph 2. The State

may also permit the State grant recipient to provide relocation

assistance to persons receiving assistance under paragraph 2. of this

section at levels in excess of those required by this paragraph. Unless

such assistance is provided under State or local law, the State grant

recipient shall provide such assistance only upon the basis of a

written determination that the assistance is appropriate. The State

grant recipient must adopt a written policy available to the public

that describes the relocation assistance that the State grant recipient

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

State grant recipient concerning the person's eligibility for, or the

amount of, a relocation payment under this section,

[[Page 56775]]

the person may file a written appeal of that determination with that

government. 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, where grant, loan or guarantee funds

are provided by a State, may file a written request for further review

of the State grant recipient's decision to the State.

6. Responsibility of the State.

a. The State is responsible for ensuring compliance with these

requirements, notwithstanding any third party's contractual obligation

to the State grant recipient to comply with the provisions of this

section. For purposes of State DRI funds, the State shall require State

grant 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 State and State grant recipient 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 State and State grant recipient 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.

H. Lead-Based Paint

States shall comply with the provisions of Sec. 570.487(c).

I. 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 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, DRI 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 DRI funds.

a. DRI 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 DRI funds at no more

than fair market value for a non-religious use.

b. DRI 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;

[[Page 56776]]

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 DRI 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, DRI 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 State grant

recipient or subrecipient from which the DRI 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, DRI

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 DRI grant

expenditure for the public services.

K. Political Activities

DRI 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 DRI

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. Procurement

When procuring property or services to be paid for in whole or in

part with DRI funds, the State shall follow its procurement policies

and procedures. The State shall establish requirements for procurement

policies and procedures for State grant recipients, based on full and

open competition. Methods of procurement (e.g., small purchase, sealed

bids/formal advertising, competitive proposals, and noncompetitive

proposals) and their applicability shall be specified by the State.

Cost plus a percentage of cost and percentage of construction costs

methods of contracting shall not be used. The policies and procedures

shall also include standards of conduct governing employees engaged in

the award or administration of contracts. (Other conflicts of interest

are covered by section II.N. of this notice and Sec. 570.489(h).) The

State shall ensure that all purchase orders and contracts include any

clauses required by Federal statutes, executive orders and implementing

regulations. The State may adopt procurement standards in Sec. 85.36,

and may adopt procurement standards in Sec. 85.36 for its State grant

recipients that are also CDBG entitlement communities regardless of

whether the State adopts such standards for other State grant

recipients.

N. Conflict of Interest

1. Applicability. In the procurement of supplies, equipment,

construction, and services by the States, State grant recipients, and

subrecipients, the conflict of interest provisions in section II.M.

shall apply. In all cases not governed by section II.M., this section

II.N. shall apply. Such cases include the acquisition and disposition

of real property and the provision of assistance with DRI funds by the

unit of general local government or its subrecipients, to individuals,

businesses and other private entities.

2. Conflicts prohibited. Except for eligible administrative or

personnel costs, the general rule is that no persons described in

paragraph 3. of this section who exercise or have exercised any

functions or responsibilities with respect to HUD Disaster Recovery

Initiative-assisted activities or who are in a position to participate

in a decision-making process or gain inside information with regard to

such activities, may obtain a financial interest or benefit from the

activity, or have an interest or benefit from the activity, or have an

interest in any contract, subcontract or agreement with respect

thereto, or the proceeds thereunder, either for themselves or those

with whom they have family or business ties, during their tenure or for

one year thereafter.

3. Persons covered. The conflict of interest provisions for

paragraph 2. apply to any person who is an employee, agent, consultant,

officer, or elected official or appointed official of the State, or of

a State grant recipient, or of any designated public agencies, or

subrecipients which are receiving DRI funds.

4. Exceptions: Threshold requirements. Upon written request by the

State, an exception to the provisions of paragraph 2. of this section

involving an employee, agent, consultant, officer, or elected official

or appointed official of the State may be granted by HUD on a case-by-

case basis. In all other cases, the State may grant such an exception

upon written request of the State grant recipient provided the State

shall fully document its determination in compliance with all

requirements of paragraph 4.a., including the State's position with

respect to each factor at paragraph 5., and such documentation shall be

available for review by the public and by HUD. An exception may be

granted after it is determined that such an exception will serve to

further the purpose of the Act and the effective and efficient

administration of the program or project of the State or State grant

recipient, as appropriate. An exception may be considered only after

the State or State grant recipient, as appropriate, has provided the

following:

a. 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

b. An opinion of the attorney for the State or the State grant

recipient, as appropriate, that the interest for which the exception is

sought would not violate State or local law.

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

to grant a requested exception after the requirements of paragraph 4.

have been satisfactorily met, the cumulative effect

[[Page 56777]]

of the following factors, where applicable, shall be considered:

a. Whether the exception would provide a significant cost benefit

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

would otherwise not be available;

b. Whether an opportunity was provided for open competitive bidding

or negotiation;

c. 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;

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

functions or responsibilities, or the decision-making process with

respect to the specific assisted activity in question;

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

person was in a position as described in this paragraph 5.;

f. Whether undue hardship will result either to the State or the

unit of general local government or the person affected when weighed

against the public interest served by avoiding the prohibited conflict;

and

g. Any other relevant considerations.

O. Performance Reviews and Dispute Resolution and Enforcement Actions

The provisions of 24 CFR subpart I apply to States, regarding HUD

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 1998 HUD

Disaster Recovery Initiative are as follows: 14.219; 14.228.

Dated: October 19, 1998.

Saul N. Ramirez, Jr.,

Assistant Secretary for Community Planning and Development.

[FR Doc. 98-28436 Filed 10-21-98; 8:45 am]

BILLING CODE 4210-29-P