**U.S. DEPARTMENT OF HOUSING** **AND URBAN DEVELOPMENT**

Assistant Secretary for Community Planning and Development

Office of Economic Development and Empowerment Service

WASHINGTON, D.C. 20410-7000

Special Attention of: **NOTICE** CPD-99-7

Field CPD Division Directors

Field Environmental Officers Issued: September 20, 1999

Urban Empowerment Zone Grantees Expires: September 20, 2000

Cross Reference: 24 CFR 598.405

Subject: Field Environmental Review Processing for the HUD Urban
Empowerment Zones (EZ) Program (Round II)

**1.** **Introduction**

**A. Purpose**

This notice directs field office CPD Division Directors to perform the
environmental review processing for any EZ projects located within their
HUD field office jurisdiction. These field CPD Division Directors shall
direct their staff to conduct the environmental review in accordance
with 24 CFR Part 50 \-- \"Protection and Enhancement of Environmental
Quality.\" (hereafter Part 50) EZ grantees must supply field CPD
Division Directors with information that would help HUD complete the
environmental review procedure under Part 50. The notice defines the
information to be provided by EZ grantees to HUD (see Protocol
-**Appendix A),** whenever EZ grantees propose to use EZ or non-HUD
funds to acquire, rehabilitate, convert, lease, repair or construct
property.

This Notice uses the terms and thresholds in Part 50 to identify when a
particular type of activity is subject to compliance with environmental
review procedures. This Notice does not address the eligibility of any
activity under the EZ program. EZ activities that are eligible for
funding are set for in 24 CFR Part 598 \-- \"Empowerment Zones: Rule for
Second Round Designations\" (63 FR 19151).

**B. Background**

Section 951 of the Taxpayer Relief Act of 1997 (26 U.S.C. 1391(b))
authorizes HUD to designate 15 Round II Urban Empowerment Zones. The new
Urban Empowerment Zones

DEEC: Distribution: W-3-1

will receive grants. HUD must perform an environmental review [prior
to]{.underline} the grantee\'s use of EZ grants and non-HUD funds to
assist any of the activities not excluded under 50.19(b).

**C. Authority**

The authority for environmental review of HUD-assisted projects and
activities carried out by EZ grantees is the National Environmental
Policy Act (NEPA) (42 U.S. C. 4321 et seq.), the implementing
regulations of the Council on Environmental Quality, and the
Department\'s regulations at Part 50, whenever EZ grantees propose to
use EZ funds and non-HUD funds to acquire, rehabilitate, convert, lease,
repair or construct property. The Taxpayer Relief Act did not provide
for assumption authority to allow States and units of general local
government to perform HUD\'s environmental review responsibility;
therefore the use of 24 CFR Part 58 \-- \"Environmental Review
Procedures for Entities Assuming HUD Environmental Responsibilities\" is
[not]{.underline} authorized for EZ grants.

**II.** **Responsibilities**

**A. Basic environmental requirement**

The environmental review requirements are stated in EZ interim program
regulations, 24 CFR Part 598, published in the Federal Register on April
16, 1998 (63 FR 19151, 19159). Section 598.405 requires:

\"Where an empowerment zone\'s strategic plan or any revision thereof
proposes the use of EZ/EC SSBG funds for activities that are not
excluded from environmental review under 24 CFR 50.19(b), an
environmental review will be performed as required by applicable law.

Selection for award does not constitute approval of any proposed sites.
Following selection for award, HUD will perform an environmental review
of activities proposed for assistance in accordance with Part 50. The
results of the environmental review may require that proposed activities
be modified or that proposed sites be rejected in complying with Federal
environmental laws and authorities.

**B. Coordinator, EZ/EC Initiative**

The Coordinator, EZ/EC Initiative shall:

\(1\) make certain that the environmental assurance is contained in the
grant agreement;

\(2\) assure that the grant agreement contains or, as appropriate, has
attached to it the following items:

\(a\) the environmental procedures with explicit warning that EZ
grantees are not to acquire, rehabilitate, convert, lease, repair or
construct property, nor commit HUD or nonfederal funds to these EZ
program activities with respect to any eligible property, until HUD
environmental approval of the property is received from the field office
CPD Division Director;

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\(b\) an appendix containing a copy of this Notice;

\(c\) the name, address, phone and FAX numbers of the field office CPD
Division

> Director to whom grantees must supply the environmental information
> and from whom grantees obtain environmental approval of the project;
> and

\(d\) a schedule requirement for the grantee\'s submission of
environmental information to the field office CPD Division Director as
set forth in this Notice;

**C. Grantee\'s environmental responsibility**

Grantees shall:

\(1\) provide an **environmental assurance** with the execution of the
grant agreement;

\(2\) supply HUD with all available, relevant information necessary for
HUD to perform for each property any environmental review required by
Part 50;

\(3\) carry out mitigating measures required by HUD or select an
alternate eligible property;

\(4\) not acquire, rehabilitate, convert, lease, repair or construct
property, nor commit or expend HUD or nonfederal funds for these program
activities with respect to any eligible property until HUD environmental
approval of the property is received from the field office CPD Division
Director within whose field office jurisdiction the EZ project is
located.

In submitting data to HUD, grantees may use the sample format provided
in the **Appendix B,** or develop and use an equivalent format. To the
extent possible, grantees are to aggregate activities for a single
evaluation by the HUD field office in whose jurisdiction the project is
located.

Grantees are to provide a separate format for each property or area. If
available, grantees also may provide HUD with previously issued
environmental reviews prepared by other local, State, or Federal
agencies for the subject property. Grantees are encouraged to obtain
outside information at the earliest possible stage. A grantee\'s failure
to provide all necessary and required information in a timely manner may
delay the environmental review process and thereby the implementation of
the grantee\'s project activities.

A grantee\'s EZ funds may be used to obtain the environmental
information that grantees are responsible for supplying to the HUD Field
Office under this notice. There is no requirement for an environmental
review for the use of these funds for such purpose. Sec. 50.19(b)(1) and
(3) respectively exclude from environmental review procedures both 10
environmental and other studies\" as well as \"administrative and
management costs.\" This exclusion extends to the costs of environmental
consultants engaged by the grantee and/or payments to local governments
for this service.

**D. HUD Field Office CPD Division Director and staff responsibilities**

The field office CPD Division Director shall serve as the \"HUD
approving official\" as defined in 50.2 for the EZ program within the
HUD field office jurisdiction in which the EZ is located. Appendix C
states the responsibilities of the CPD Division Director and staff.

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**III. Activities Not Subject to Environmental Review**

**A.** **Documentation is not required.**

Sec. 50.19(b) lists the activities that do **not** require an
environmental review either under the National Environmental Policy Act
(NIEPA) except in extraordinary circumstances (50.20(b)) or under the
other laws and authorities cited at 50.4. Grantees may commit and expend
funds for these activities, which are not subject to environmental
review (except as noted below):

\(1\) Environmental and other studies, resource identification and the
development of plans and strategies;

\(2\) Information and financial advisory services;

\(3\) Administrative and management expenses;

\(4\) Public services that will not have a physical impact or result in
any physical changes,

including, but not limited to services concerned with employment, crime
prevention, child care, health, drug abuse, education, counseling,
energy conservation and welfare or recreational needs.

\(5\) Inspections and testing of properties for hazards or defects;

\(6\) Purchase of insurance;

\(7\) Purchase of tools;

\(8\) Engineering or design costs;

\(9\) Technical assistance and training;

\(10\) Assistance for temporary or permanent improvements that do not
alter environmental conditions and are limited to protection, repair or
restoration activities necessary only to control or arrest the effects
from disasters or imminent threats to public safety including those
resulting from physical deterioration;

\(11\) Tenant-based rental assistance;

\(12\) Supportive services including, but not limited to, health care,
housing services, permanent

housing placement, day care, nutritional services, short-term payments
for rent/mortgage/ utility costs, and assistance in gaining access to
local, State, and Federal government benefits and services;

\(13\) Operating costs including maintenance, security, operation,
utilities, furnishings, equipment, supplies, staff training and
recruitment and other incidental costs; however in the case of
equipment, compliance with 50.4(b)(1) is required (see below III, B,
(2));

\(14\) Economic development activities, including but not limited to,
equipment purchase, inventory financing, interest subsidy, operating
expenses and similar costs not associated with construction

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or physical expansion of existing facilities; however, in the case of
equipment purchase, compliance with 50.4(b)(1) is required (see below
III, B, (2));

\(15\) Activities to assist homeownership of existing dwelling units,
including closing costs and down payment assistance to home buyers,
interest buydowns and similar activities that result in the transfer of
title to a property; however, compliance with 50.4(b)(l)and (c)(1) and
51.303(a)(3) is required (see below III, B, (1)); and

\(16\) Housing pre-development costs including legal, consulting,
developer and other costs related to site options, project financing,
administrative costs and fees for loan commitments, zoning approvals,
and other related activities which do not have a physical impact.

**B. Limited documentation is required.**

Limited documentation is required for certain activities. Even though
these activities do not require environmental review, compliance with
certain laws must be documented. Certain affordable housing activities
are categorically excluded from an environmental assessment required by
NEPA (24 CFR 50.19) and these activities are not generally subject to
the compliance requirements of all of the Federal laws and authorities
cited in 24 CFR 50.4, except as noted below. The activities (1) and (2)
listed below require a finding of compliance with some of the laws or
authorities and therefore [HUD approval prior to
implementation]{.underline}.

\(1\) Activities to assist homeownership of existing dwelling units,
including closing costs and downpayment assistance to homebuyers,
interest buydowns and similar activities that result in transfer of
title to the property (referenced in 50.19(b)(15)). These activities are
subject to the requirements of: the Flood Disaster Protection Act of
1973 (42 U.S.C. 4001-4128), the National Flood Insurance Reform Act of
1994 (Pub.L. 103-325, 108 Stat. 2160); the Coastal Barrier Resources Act
as amended by the Coastal Barrier Improvement Act of 1990 (16 U.S.C.
3501 et seq.); and, 24 CFR 51.303(a)(3) Airport Runway Clear Zones and
Clear Zones.

\(2\) Equipment (referenced in 50.19(b)(13) as part of operating costs)
and equipment purchase (referenced in 50.19(b)(14) as part of economic
development) is subject to compliance with the requirements of: the
Flood Disaster Protection Act of 1973 as amended by the National Flood
Insurance Reform Act of 1994. If the equipment is Federally-assisted and
located within the Special Flood Hazard Area, flood insurance is
required.

**IV. Activities Subject to Environmental Review**

**(reference 50.20, 50.31, and 50.42)**

**A. Environmental review is required for the following activities:**

\(1\) Any activity that may have a significant impact to the human
environment including: (a)

new construction, (b) conversion of land use (including demolition) from
non-residential to residential **or** from residential to
non-residential use; and (c) acquisition of undeveloped land for future
development;

\(2\) Major rehabilitation and improvement of existing structures;

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\(3\) Minor rehabilitation and repair of existing structures;

\(4\) Acquisition of existing structures; and

\(5\) Leasing of existing structures.

**B. Qualified data sources**

Grantees are encouraged to obtain outside information at the earliest
possible stage. Appendix B or an equivalent format should be used for
providing HUD with the information pertaining to compliance with the
Federal environmental laws and authorities. Information provided by
grantees must be from a qualified data source.

**Definition:** a qualified data source may include any Federal, State,
local, or tribal agency with expertise or experience in environmental
protection or any other source qualified to provide reliable information
on the particular subject. One letter from a qualified source could
possibly provide threshold information for several of the Federal
environmental laws and authorities.

**C. Federal environmental laws and authorities that apply to various EZ
activities**

**(1) Leasing of existing structures:**

Leasing of existing housing and non-residential properties is generally
subject only to applicable authorities for properties located within
coastal barrier resources, contaminated sites, or, for project-based
leasing activities, in flood prone or wetland locations. Report these
activities in section G(l) of Appendix B or equivalent.

**(2) Acquisition of existing structures:**

Acquisition of existing structures is subject to the same authorities as
lease activities as well as generally to the applicable authorities for
properties requiring flood insurance protection, or located within clear
or accident potential zones of airports and airfields. Report these
activities in section G(2) of Appendix B or equivalent.

**(3) Minor rehabilitation[1]{.underline}/ and repair of existing
structures:**

Minor rehabilitation or repair activities are subject to the same
authorities as lease and acquisition of existing structures as well as
to the applicable authority for properties that are historic or affect a
historic property. This also includes archeological and cultural
resources. Report these activities in section G(3) of Appendix B or
equivalent.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[1]{.underline}/ Minor rehabilitation means proposed fixing and building
repair: (i) where the estimated cost of the work is less than 75 percent
of the total estimated cost of replacement after rehabilitation, (ii)
that does not involve changes in land use from residential to
nonresidential, or from nonresidential to residential, and (iii) that
does not increase unit density by more than 20 percent.

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**(4) For new construction, conversion, acquisition of vacant land for
future development,**

**and for major rehabilitation and improvement of existing structures:**

\(a\) **Individual actions under 50.20(a)(3):** Individual actions cover
new construction or

acquisition of land for development of up to four housing units
[or]{.underline} for five or more units of housing developed on
scattered sites where the housing sites are more than 2,000 feet apart
with not more than four units on any one site. Report these activities
in section G(4) of Appendix B or equivalent. Except in extraordinary
circumstances, an environmental assessment for compliance with the
National Environmental Policy Act ( NEPA) is **not** required for
\"individual actions,\" however \"individual actions\" are subject to
compliance with other environmental reviews under the applicable the
Federal laws and authorities cited in 50.4.

\(b\) **Other Actions:** For all other new construction (other than for
\"individual actions\"), for conversion of land use (including
demolition) from nonresidential to residential (or from residential to
nonresidential), or for the acquisition of vacant land for future
development, or for major rehabilitation and improvement of existing
structures,\-- an **environmental assessment** is required for
compliance with the National Environmental Policy Act (NEPA) and all
applicable Federal laws and environmental authorities cited in 50.4. In
addition, any activity that may have a significant impact to the human
environment may require an **environmental impact statement**. Report
these activities in section G(5) of Appendix B or equivalent.

**V. Other**

**A. Use of prior environmental assessments**

When other Federal, State, or local agencies have prepared an
environmental assessment or other environmental analysis for a property
(or neighborhood) which the grantee had selected for use in its EZ
program, these documents should be requested and used to the extent
possible (see 50.35). Council on Environmental Quality (CEQ) regulations
at 40 CFR 1506.5(a) require HUD to independently evaluate environmental
information submitted by the grantee and be responsible for its
accuracy, as well as to verify (but not redo) acceptable work.

**B. Environmental consultant and administrative costs**

EZ grantee\'s administrative funds may be used to obtain the information
that the grantees are responsible for supplying to the HUD Field Office
under this notice. There is no requirement for an environmental
compliance review for the use of these funds for such purpose. Section
50.19(b)(1) and (3) respectively exclude from environmental review
procedures both \"environmental and other studies\" as well as
\"administrative and management costs.\" This exclusion extends to the
costs of environmental consultants engaged by the grantee and/or
payments to local governments for this service.

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**C.** **Suggested \"time-savers\"**

To save time and effectively deliver information to HUD, EZ grantees are
encouraged to use e-mail or FAX in communicating with the HUD Field
Office staff responsible for performing the environmental processing
under this notice.

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