[Federal Register Volume 69, Number 237 (Friday, December 10, 2004)]
[Notices]
[Pages 72100-72107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27201]



[[Page 72099]]

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Part V





Department of Housing and Urban Development





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Waivers Granted to and Alternative Requirements for CDBG Disaster 
Recovery Grantees Under the Military Construction Appropriations and 
Emergency Hurricane Supplemental Appropriations Act, 2005; Notice

Federal Register / Vol. 69, No. 237 / Friday, December 10, 2004 / 
Notices

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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-4959-N-01]


Waivers Granted to and Alternative Requirements for CDBG Disaster 
Recovery Grantees Under the Military Construction Appropriations and 
Emergency Hurricane Supplemental Appropriations Act, 2005

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of allocation method, waivers granted, alternative 
requirements applied, and statutory program requirements.

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SUMMARY: This notice advises the public of the allocation method for 
grant funds, the list of grantees and proposed grant amounts, and the 
waivers of regulations and statutory provisions granted to CDBG 
disaster recovery grantees for the purpose of assisting in the recovery 
from the federally declared disasters that occurred between August 31, 
2003 and October 1, 2004. As described in the SUPPLEMENTARY INFORMATION 
section of this notice, HUD is authorized by statute to waive statutory 
and regulatory requirements and specify alternative requirements for 
this purpose. This notice describes the fund allocation basis, lists 
the provisions being waived and alternative requirements specified, and 
notes statutory changes affecting program design and implementation.

DATES: Effective Date: December 15, 2004.

FOR FURTHER INFORMATION CONTACT: Jan C. Opper, Director, Disaster 
Recovery and Special Issues, Office of Block Grant Assistance, 
Department of Housing and Urban Development, Room 7286, 451 Seventh 
Street, SW., Washington, DC 20410, telephone number (202) 708-3587. 
Persons with hearing or speech impairments may access this number via 
TTY by calling the Federal Information Relay Service at (800) 877-8339. 
FAX inquiries may be sent to Mr. Opper at (202) 401-2044. (Except for 
the ``800'' number, these telephone numbers are not toll-free.)

SUPPLEMENTARY INFORMATION:

Authority To Grant Waivers

    The Military Construction Appropriations and Emergency Hurricane 
Supplemental Appropriations Act, 2005 (Pub. L. 108-324, approved 
October 13, 2004) appropriates $150 million in Community Development 
Block Grant funds for disaster relief, long-term recovery, and 
mitigation directly related to the effects of the covered disasters. 
The Act authorizes the Secretary to waive, or specify alternative 
requirements for, any provision of any statute or regulation that the 
Secretary administers in connection with the obligation by the 
Secretary or use by the recipient of these funds, except for 
requirements related to fair housing, nondiscrimination, labor 
standards, and the environment, 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.
    The Secretary finds that the following waivers and alternative 
requirements are necessary to facilitate the use of these funds for 
their required purposes. The Secretary also finds that such uses of 
funds, as described below, are not inconsistent with the overall 
purpose of Title I of the Housing and Community Development Act of 
1974, as amended, or the Cranston-Gonzalez National Affordable Housing 
Act, as amended.
    Under the requirements of the HUD Reform Act, regulatory waivers 
must be justified and published in the Federal Register. The Department 
is also using this notice to provide information about other ways in 
which the requirements for this grant vary from regular CDBG program 
rules. Therefore, HUD is using this notice to make public alternative 
requirements and to note the applicability of disaster recovery-related 
statutory provisions. Compiling this information in a single notice 
creates a helpful resource for grant administrators and HUD field 
staff.
    Except as described in this notice for states, statutory and 
regulatory provisions governing the Community Development Block Grant 
program for states, including those at 24 CFR part 570 subpart I, shall 
apply to the use of these funds. Except as described in this notice for 
Indian tribes, the statutory and regulatory provisions governing the 
Indian Community Development Block Grant program for Indian tribes and 
not related to the funding application and selection process will 
apply, including those at 24 CFR 1003 et seq.

Allocations

    Public Law 108-324 (signed October 13, 2004) provides $150 million 
of supplemental appropriation for the CDBG program for:

use only for disaster relief, long-term recovery, and mitigation in 
communities affected by disasters designated by the President 
between August 31, 2003 and October 1, 2004, except those activities 
reimbursable by the Federal Emergency Management Agency or available 
through the Small Business Administration. * * *

The law further notes:

    That all funds under this heading shall be awarded by the 
Secretary to states (including Indian tribes for all purposes under 
this heading) to be administered by each state in conjunction with 
its community development block grants program: Provided further, 
That notwithstanding 42 U.S.C. 5306(d)(2), states are authorized to 
provide such assistance to entitlement communities.

    HUD has developed an allocation method based on data available from 
the Small Business Administration (SBA) and the Federal Emergency 
Management Agency (FEMA) on unmet housing, business, and public 
assistance needs for all designated areas in covered major disaster 
declarations. To receive funding, a state must submit a plan in 
accordance with this notice describing how funds will be used to 
address its greatest unmet need(s) and listing expected 
accomplishments. HUD may reallocate to other funded states any funds 
not used by a state or recaptured from a state.
    The Congressional conference report (H.Rep.108-773) directs HUD to 
provide funds ``to areas facing the greatest need.'' Thus, the 
allocation reflects the relative recovery needs among the grantees 
having disasters that received Presidential declarations between August 
31, 2003 and October 1, 2004. This weighting is designed to direct 
funds to the areas of greatest need, with an emphasis on housing.
    The basic allocation formula is:
    [cir] 50 percent of the funds go toward unmet housing needs;
    [cir] 25 percent of the funds go toward unmet business needs;
    [cir] 25 percent of the funds go toward unmet public assistance 
needs.
    Each state will receive its allocation based on its proportion of 
the unmet need aggregated from all covered disasters in that state 
relative to the sum of the unmet need for all states with declared 
disasters.
    In addition to allocating the funds based on proportion of unmet 
need, HUD has established a minimum grant threshold. The minimum grant 
amount was set to ensure that grantees would receive sufficient funding 
to make significant progress toward the statutory objective of long-
term disaster recovery. If any state would have otherwise been 
allocated less than $1.5 million under the allocation formula described 
above, it will not receive a grant allocation and the remaining funds 
will be reallocated proportionate to need to the grantees receiving 
grants greater or equal to $1.5 million.
    The proposed allocations are as follows:

[[Page 72101]]



------------------------------------------------------------------------
                                                              Amount
           State                    Disaster type            reserved
------------------------------------------------------------------------
Alabama....................  Hurricane Ivan (FEMA-DR-        $10,965,311
                              1549).
California.................  Wildfires (1498). San            10,547,928
                              Simeon earthquake (1505),
                              flooding from levee break
                              (1529).
Florida....................  Hurricane Charley (1539)...  ..............
                             Hurricane Frances (1545)...  ..............
                             Hurricane Ivan (1551)......  ..............
                             Hurricane Jeanne (1561)....  ..............
                             Subtotal Florida...........     100,915,626
Maryland...................  Hurricane Isabel (1492)....       2,737,133
                             Hurricane Isabel (1490),     ..............
                              Tropical Storm Frances
                              (1546),.
North Carolina.............  Hurricane Ivan (1553)......       4,569,982
Ohio.......................  Landslide, mudslides,             1,971,541
                              severe storm, flooding
                              (1507, 1519, 1556).
Pennsylvania...............  Tropical Storms Henri &           2,528,243
                              Isabel (1497), severe
                              storms & flooding (1538),
                              Tropical Depressions
                              Frances & Ivan (1555 &
                              1557).
Puerto Rico................  Severe storms, flooding,          7,998,964
                              mudslides, & landslides
                              (1501), Tropical Storm
                              Jeanne (1552).
Virginia...................  Hurricane Isabel (1491),          5,724,016
                              severe storms and flooding
                              (1502), severe storms,
                              tornadoes & flooding
                              (1525), Tropical
                              Depression Gaston (1544).
West Virginia..............  Hurricane Isabel (1496),          2,041,256
                              severe storms, flooding,
                              landslides (1500, 1522,
                              1536, 1538).
------------------------------------------------------------------------

    HUD will invite each state named above to submit an Action Plan for 
Disaster Recovery in accordance with this notice.
    The Department is compelled to enforce the provision of the 
appropriations statute that requires funds be used only for disaster 
relief, long-term recovery, and mitigation. The Department is also 
compelled to follow the conference report direction that funds be 
directed to areas with greatest need. Each grantee will describe in its 
Action Plan for Disaster Recovery how each use of funds meets these 
requirements. HUD will monitor compliance with this direction and may 
be compelled to consider disallowing expenditures if it finds uses of 
funds are not disaster-related or are clearly not for greatest needs. 
HUD encourages grantees to contact HUD field offices for guidance in 
complying with these requirements during development of their Action 
Plans for Disaster Recovery or if they have any questions regarding 
meeting these requirements.
    The appropriations act treats Indian tribes as states for ``all 
purposes under this heading.'' As a result, the balance of this Notice 
will use the term ``grantee'' to mean a state or Indian tribe receiving 
a disaster recovery grant under this Notice. The terms ``state'' and 
``Indian tribe'' will be used when necessary to distinguish between the 
two.

Waiver Justification

    This section of the notice briefly describes the necessary basis 
for each waiver and provides an explanation of related alternative 
requirements, if additional explanation is necessary. This Waiver 
Justification section also highlights some of the statutory items and 
alternative requirements described in the Applicable Rules, Statutes, 
Waivers and Alternative Requirements section that follows.
    Each state eligible for a disaster recovery grant receives annual 
CDBG allocations, has a consolidated plan, a citizen participation 
plan, a monitoring plan, and has made CDBG certifications. Indian 
tribes have regular experience operating within CDBG program 
requirements based on the same statute. HUD encourages each CDBG 
disaster recovery grantee to carry out CDBG disaster recovery 
activities in the context of its ongoing community development program 
to the extent feasible (for example, by selecting activities consistent 
with the consolidated plan, by providing overall benefit to at least 70 
percent low- and moderate-income persons, and by holding hearings or 
meetings to solicit public comment).
    The waivers, alternative requirements, and statutory changes apply 
only to the CDBG supplemental disaster recovery funds appropriated in 
Public Law 108-324. They provide additional flexibility in program 
design and implementation and implement statutory requirements unique 
to this appropriation.

Pre-Grant Process

    The first group of waivers and alternative requirements concerns 
the pre-grant process, including citizen participation, the Action Plan 
for Disaster Recovery, fund distribution, and the overall benefit 
criteria.
    Pursuant to explicit authority in the appropriations act, an 
overall benefit waiver allows for up to 50 percent of the grant to 
assist activities under the urgent need or prevention or elimination of 
slums and blight national objectives, rather than the 30 percent 
allowed in the regulation. The Housing and Community Development Act 
requires grantees to give maximum feasible priority to funding 
activities that benefit persons of low and moderate income, prevent or 
eliminate slums and blight, or meet community needs of particular 
urgency. Because major disaster damage to community development and 
housing is without regard to income, and income-producing jobs are 
often lost for a period of time following a disaster, HUD is waiving 
this requirement to give grantees maximum flexibility to carry out 
recovery activities within the confines of the CDBG program national 
objectives. The requirement that every activity meet one of the three 
national objectives is not waived.
    The regulatory waiver allowing distribution of funds by a state to 
entitlement communities and Indian tribes is consistent with the 
provision of the appropriations law that specifically allows 
distribution of disaster recovery grant funds to entitlement 
communities and is also consistent with waivers granted for previous 
similar disaster recovery cases.
    HUD is waiving the requirement for consistency with the 
consolidated plan because the effects of a major disaster usually alter 
a grantee's priorities for meeting housing, employment, and 
infrastructure needs. HUD is limiting the scope of the waiver for 
consistency with the consolidated plan; it applies only until the 
grantee first updates its consolidated plan following the disaster.
    HUD is waiving the action plans requirements and substituting a 
streamlined Action Plan for Disaster Recovery. These actions will allow 
rapid implementation of disaster recovery grant programs and ensure 
conformance with provisions of the appropriations act. Where possible, 
the streamlined disaster recovery Action Plan, including 
certifications, does not repeat common action plan elements the

[[Page 72102]]

grantee has already committed to carry out as part of its annual CDBG 
submission.
    The citizen participation waiver and alternative requirements will 
permit a speedier public process, but one that still provides for 
public notice, appraisal, examination, and comment on the activities 
proposed for the use of CDBG disaster recovery grant funds. The waiver 
removes the requirement at both the grantee and state grant recipient 
levels for public hearings or meetings as the method for disseminating 
information or collecting citizen comments.

Eligibility and Allowable Costs

    The requirements under this heading in the Applicable Rules, 
Statutes, Waivers, and Alternative Requirements section include 
activity eligibility waivers, alternative requirements, and notes about 
the applicability of grant-related disaster recovery provisions of law. 
Justification for the waivers follows.
    The waiver that allows new housing construction and payment of up 
to 100 percent of a housing down payment is necessary following major 
disasters in which large numbers of affordable housing units have been 
damaged or destroyed, as is the case in many of the disasters eligible 
under this notice, particularly those in Florida.
    The limited waiver of the anti-pirating clause allows the 
flexibility to provide assistance to a business located in another 
state if the business was displaced from the grantee's jurisdiction by 
the disaster and the business wishes to return. This waiver is 
necessary to allow a grantee affected by a major disaster to rebuild 
its employment base.
    The waiver of the state match for program administration 
requirement is provided so that the state has the flexibility to direct 
money to other recovery needs rather than being restricted to using the 
funding for administration.

Relocation Requirements

    HUD is providing a limited waiver of the relocation requirements. 
HUD will consider providing additional waivers on a case-by-case basis 
if a grantee chooses to fund a flood buyout program with both HUD and 
FEMA funds and requires the waivers to develop a workable program 
design.
    HUD is waiving the one-for-one replacement of low- and moderate-
income housing units demolished or converted using CDBG funds 
requirement for housing units damaged by one or more disasters. HUD is 
waiving this requirement because it does not take into account the 
large, sudden changes a major disaster may cause to the local housing 
stock or local economy. Further, the requirement does not take into 
account the threats to public health and safety and to economic 
revitalization that may be caused by the presence of disaster-damaged 
structures that are unsuitable for rehabilitation. As it stands, the 
requirement would impede disaster recovery and discourage grantees from 
acquiring, converting, or demolishing disaster-damaged housing because 
of excessive costs that would result from replacing all such units 
within the specified timeframe.

Reporting

    HUD is waiving the annual reporting requirement because the 
Congressional conferees requested quarterly reports from HUD on 
activities funded with these grants. To ensure that HUD can comply with 
this request, HUD is requiring each grantee to report quarterly to HUD 
using the online Disaster Recovery Grant Reporting system.

Match

    There are no waivers in this section.

Certifications

    HUD is waiving the standard certifications and substituting 
alternative certifications. The alternative certifications are tailored 
to CDBG disaster recovery grants and remove certifications and 
references that are redundant or appropriate to the annual CDBG formula 
program.

Applicable Rules, Statutes, Waivers, and Alternative Requirements

Pre-grant Process

    1. General note. Prerequisites to a grantee's receipt of CDBG 
disaster recovery assistance include adoption of a citizen 
participation plan; publication of its proposed Action Plan for 
Disaster Recovery; public notice and comment; and submission to HUD of 
an Action Plan for Disaster Recovery, including certifications. Except 
as described in this notice for states, statutory and regulatory 
provisions governing the Community Development Block Grant program for 
states, including those at 24 CFR 570 subpart I, shall apply to the use 
of these funds. Except as described in this notice for Indian tribes, 
the statutory and regulatory provisions governing the Indian Community 
Development Block Grant program for Indian tribes and not related to 
the funding application and selection process will apply, including 
those at 24 CFR 1003 et seq.
    2. Overall Benefit waiver and alternative requirement. The 
requirements at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A), 24 CFR 
570.484 (for states), and 24 CFR 1003.208 (for tribes) that 70 percent 
of funds are for activities that benefit low- and moderate-income 
persons are waived to stipulate that at least 50 percent of disaster 
recovery grant funds are for activities that benefit low and moderate 
income persons.
    3. Consolidated Plan waiver. Requirements at 42 U.S.C. 12706 and 24 
CFR 91.325(a)(6), that housing activities undertaken with CDBG funds be 
consistent with the strategic plan, are waived. Further, 24 CFR 
570.903, which requires HUD to annually review grantee performance 
under the consistency criteria, is also waived. The waiver of 
consistency with the consolidated plan applies only until the grantee 
first updates the consolidated plan priorities following the disaster 
or until the completion of all grant activities, whichever comes first.
    4. Citizen participation waiver and alternative requirement. 
Provisions of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C. 12707, 24 CFR 
570.486, 24 CFR 1003.604, and 24 CFR 91.115(b) with respect to citizen 
participation requirements are waived and replaced by the requirements 
below. The streamlined requirements do not mandate public hearings at 
either the state or local government level, but do require providing a 
reasonable opportunity for citizen comment and ongoing citizen access 
to information about the use of grant funds. The streamlined citizen 
participation requirements for this grant are:
    a. Before the grantee adopts the action plan (or a part of an 
action plan) for this grant or any substantial amendment to this grant, 
the grantee will publish the proposed plan or amendment (including the 
information required in this notice for an Action Plan for Disaster 
Recovery). The manner of publication (including prominent posting on 
the state, local, or other relevant Web site) must afford citizens, 
affected local governments and other interested parties a reasonable 
opportunity to examine the plan or amendment's contents. Subsequent to 
publication, the grantee must provide a reasonable time period and 
method(s) (including electronic submission) for receiving comments on 
the plan or substantial amendment. The grantee's plans to minimize 
displacement of persons or entities and to assist any persons or 
entities displaced must be published with the action plan.

[[Page 72103]]

    b. In the action plan, each grantee will specify the criteria for 
determining what changes in the grantee's activities constitute a 
substantial amendment to the plan. At a minimum, adding or deleting an 
activity or changing the planned beneficiaries of an activity will 
constitute a substantial change. Any action plan may be modified or 
amended by the grantee in accordance with the same procedures required 
in this notice for the preparation and submission of an Action Plan for 
Disaster Recovery.
    c. The grantee must consider all comments received on the action 
plan or any substantial amendment and submit to HUD a summary of those 
comments and the grantee's response with the action plan or substantial 
amendment.
    d. The grantee must make the action plan, any substantial 
amendments, and all performance reports available to the public. In 
addition, the grantee must make these documents available in a form 
accessible to persons with disabilities. During the term of this grant, 
the grantee will provide citizens, affected local governments, and 
other interested parties reasonable and timely access to information 
and records relating to the action plan and the grantee's use of this 
grant, including posting such information to the Internet.
    e. The grantee will provide a timely written response to every 
citizen complaint. Such response will be provided within 15 working 
days of the complaint, if practicable.
    5. Action Plan waiver and alternative requirement. The requirements 
at 42 U.S.C. 12705(a)(2), 42 U.S.C. 5304(a)(1), 42 U.S.C. 5304(m), 42 
U.S.C. 5306(d)(2)(C)(iii), 24 CFR 1003.604, and 24 CFR 91.320 are 
waived for these disaster recovery grants. Each grantee must submit to 
HUD an Action Plan for Disaster Recovery that describes:
    a. The greatest recovery needs resulting from the covered disaster 
that have not been addressed by insurance proceeds, federal assistance 
or any other funding source;
    b. The grantee's overall plan for disaster recovery;
    c. Expected Federal, non-Federal public, and private resources, and 
their relationship, if any, to activities to be funded with CDBG 
disaster recovery assistance; and
    d. The state's method of distribution. The method of distribution 
shall include a description of:
    (1) All criteria used to select applications from local governments 
for funding, including the relative importance of the criteria (does 
not apply to tribal grantees), and including a description of how the 
disaster recovery grant resources will be allocated to areas of 
greatest need among all funding categories and the threshold factors 
and grant size limits that are to be applied, or
    (2) The projected uses for the CDBG disaster recovery funds by 
project, program or activity and geographic area, and
    (3) How the allocation method or use of funds (project, program or 
activity) described in accordance with subparagraphs (A) or (B) above 
will result in uses of grant funds related to disaster relief or 
recovery from specific effects of the disaster(s); and
    (4) Sufficient information so that units of general local 
government will be able to understand and comment on the action plan 
and be able to prepare responsive applications (does not apply to 
tribal grantees).
    e. Monitoring standards and procedures (if a state will apply those 
already developed for the consolidated plan under section 24 CFR 
91.330, so affirm);
    f. Required certifications (see the applicable Certifications 
section of this notice);
    g. The specific sources from which the match requirement (see the 
Non-Federal Public Matching Funds Requirement section of this notice) 
will be achieved; and
    h. A completed and executed Federal form SF-424.
    6. Waiver and alternative requirement for distribution to CDBG 
metropolitan cities and urban counties. The appropriations law allows a 
grantee to distribute disaster recovery grant funds to metropolitan 
cities and urban counties (i.e., ``entitlement communities''). Section 
5302(a)(7) of title 42, United States Code (definition of 
``nonentitlement area'') and provisions of 24 CFR part 570 that would 
prohibit states electing to receive CDBG funds from distributing such 
funds to units of general local government in entitlement communities 
and to Indian tribes, are waived, including 24 CFR 570.480(a), to the 
extent that such provisions limit the distribution of funds to units of 
general local government located in entitlement areas and to Indian 
tribes. The appropriations law supersedes the statutory distribution 
prohibition at 42 U.S.C. 5306(d)(1) and (2)(A). Alternatively, the 
state is required to distribute funds without regard to a local 
government or Indian tribe status under any other CDBG program.

Eligibility and Allowable Costs

    7. Note that use of grant funds must relate to the covered 
disaster. In addition to being eligible under 42 U.S.C. 5305(a) or this 
notice and meeting a CDBG national objective, activities funded under 
this notice must also be related to disaster relief, long-term 
recovery, and mitigation in communities affected by Presidentially 
declared disasters occurring between August 31, 2003, and September 30, 
2004.
    8. Note on duplication of benefits and disaster impact. Pursuant to 
the appropriations act and the Robert T. Stafford Disaster Assistance 
and Emergency Relief Act (42 U.S.C. 5155), no entity may receive 
disaster recovery grant assistance with respect to any part of a 
disaster loss that is reimbursable by FEMA or eligible for Small 
Business Administration (SBA) assistance or as to which it has received 
financial assistance under any other program or from insurance or any 
other source. For example, a grantee may not use funds under this 
notice for activity costs that are reimbursable or for which funds are 
made available by FEMA or SBA. Further, the grantee may not provide 
CDBG disaster recovery grant assistance to a project or activity 
underway prior to a Presidential disaster declaration during the time 
period specified in the appropriations act unless the disaster directly 
impacted the project.
    9. Program income alternative requirement. If, under 24 CFR 
570.489(e)(3) a state determines that a state grant recipient is 
continuing a disaster recovery grant assisted activity from which 
program income is derived, it must permit the recipient to retain the 
program income. For such continuing activities, the program income will 
retain its CDBG disaster recovery grant identity and be covered by this 
notice. However, if the state does not make such a determination, then 
program income earned by the activity will be regular CDBG program 
income under the provisions of 24 CFR 570.489(e) and disaster recovery 
grant requirements and waivers will no longer apply.
    For Indian tribes that are state grant recipients or HUD grantees, 
the regulations at 24 CFR 1003.503 will govern program income generated 
by a disaster recovery grant activity. Program income generated by 
disaster recovery grant activities will retain its CDBG disaster 
recovery grant identity and be covered by this notice until the state 
or HUD, as applicable, closes out its grant with the tribe.
    If a grantee receives disaster recovery grant program income (e.g., 
if a state

[[Page 72104]]

requires a state grant recipient to remit the funds to the state), the 
program income will retain its CDBG disaster recovery grant identity 
and be covered by this notice until the HUD closes out the disaster 
recovery grant to the state.
    10. Housing-related eligibility waivers. Section 5305(a) of title 
42, United States Code and 24 CFR 570.482(a) through (d) are waived to 
the extent necessary to allow down payment assistance for up to 100% of 
the down payment (42 U.S.C. 5305(a)(24)(D)) and to allow new housing 
construction.
    11. Waiver and modification of the anti-pirating clause to permit 
assistance to help a business return. Section 5305(h) of title 42 
United States Code is hereby waived only to allow the grantee to 
provide assistance under this grant to any business that was operating 
in the covered disaster area before the incident date of a 
Presidentially declared disaster between August 31, 2003, and September 
30, 2004, and has since moved in whole or in part from the affected 
area to continue business.
    12. Note on reimbursement of CDBG formula funds. The appropriations 
law authorizes the use of CDBG disaster recovery grant funds to 
reimburse expenditures incurred from the regular CDBG program 
allocation used to achieve the same purposes as the disaster recovery 
grant appropriation.
    13. Waiver of the limitation on planning and administrative costs 
and alternative requirement. Section 5306(d)(3)(A) of title 42 United 
States Code and 24 CFR 570.489(a)(1) concerning the use of disaster 
recovery grant funds for state administrative costs, including the 
matching funds requirements are waived. The amount of grant funds used 
to pay administrative costs incurred by a state in carrying out its 
responsibilities under this notice shall not exceed 2 percent of the 
aggregate of the state's disaster recovery grant. The grantee may use 
no more than 20 percent of the sum of any CDBG disaster recovery grant, 
plus program income, for planning and program administrative costs, 
including administration and planning by state grant recipients.

Relocation Requirements

    15. Waiver of one-for-one replacement of units damaged by disaster. 
One-for-one replacement requirements at 42 U.S.C. 5304(d)(2) and 24 CFR 
570.488, 570.606(c) and 42.375(a) are waived for low- and moderate-
income dwelling units (1) damaged by the disaster, (2) for which CDBG 
funds are used for demolition, and (3) which are not suitable for 
rehabilitation. These requirements are waived provided the grantee 
assures HUD it will use all resources at its disposal to ensure no 
displaced homeowner will be denied access to decent, safe and sanitary 
suitable replacement housing because he or she has not received 
sufficient financial assistance. Also, state grant recipients must 
provide such assurances to the state.
    16. Notes on flood buyouts:
    a. Payment of pre-flood values for buyouts. HUD disaster recovery 
state grant recipients and Indian tribes 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 CDBG disaster recovery 
funds for such acquisitions, the grantee must uniformly apply whichever 
valuation method it chooses.
    b. Ownership and maintenance of acquired property. Any property 
acquired with disaster recovery grants 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 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 dedicated and 
maintained for compatible uses in perpetuity.
    c. Future Federal assistance to owners remaining in floodplain.
    (1) Section 582 of the National Flood Insurance Reform Act of 1994, 
as amended, (42 U.S.C. 5154(a)) 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.
    (2) Section 582 also implies a responsibility for a grantee that 
receives CDBG disaster recovery funds or that, under 42 U.S.C. 5321, 
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.
    (3) 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:
    (a) 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
    (b) 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.
    (4) Failure to notify. If a transferor fails to provide notice as 
described above and, subsequent to the transfer of the property:
    (a) The transferee fails to obtain or maintain flood insurance, in 
accordance with applicable Federal law, with respect to the property;
    (b) The property is damaged by a flood disaster; and
    (c) Federal disaster relief assistance is provided for the repair, 
replacement, or restoration of the property as a result of such damage, 
the transferor must reimburse the Federal Government in an amount equal 
to the amount of the Federal disaster relief assistance provided with 
respect to the property.
    d. 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

[[Page 72105]]

property, if such assistance was conditioned upon obtaining flood 
insurance in accordance with applicable Federal law with respect to 
such property.
    e. The term ``Federal disaster relief assistance'' applies to HUD 
or other Federal assistance for disaster relief in ``flood disaster 
areas.'' The prohibition in subparagraph (1) above 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.

Reporting

    17. Waiver of performance evaluation report and alternative 
requirement. The requirements for submission of a Performance 
Evaluation Report (PER) pursuant to 42 U.S.C. 12708 and 24 CFR 91.520 
are waived.
    The alternative requirement is that
    a. Each grantee must enter its Action Plan for Disaster Recovery 
into HUD's Web-based Disaster Recovery Grant Reporting (DRGR) system. 
As additional detail about uses of funds becomes available to the 
grantee, the grantee must enter this detail into DRGR, in sufficient 
detail to serve as the basis for acceptable performance reports.
    b. Each grantee must submit a quarterly performance 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 about the uses 
of funds including (but not limited to) the project name, activity, 
location, national objective, funds budgeted and expended, the funding 
source and total amount of any non-CDBG disaster funds (including 
matching funds), numbers of properties and housing units, beginning and 
ending dates of activities, and numbers of low- and moderate-income 
persons or households benefiting. Quarterly reports must be submitted 
using HUD's Web-based Disaster Recovery Grant Reporting (DRGR) system. 
At least annually (i.e., with every fourth submission), the report 
shall include a financial reconciliation of funds budgeted and 
expended, calculation of administrative and public service limitations, 
and of the overall percent of benefit to low- and moderate-income 
persons.
    18. Information collection approval note. HUD has approval from OMB 
for 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 August 31, 2007. 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.

Non-Federal Public Matching Funds Requirement

    19. Match note. In accordance with the appropriations act (Pub. L. 
108-324) each grantee shall provide not less than 10 percent in non-
Federal public matching funds or its equivalent value (other than 
administrative costs) for any HUD disaster recovery grant funds it 
receives from that appropriation. Each grantee will provide match 
payments that meet the following criteria.
    a. Match contributions must be made to disaster recovery activities 
related to covered disasters.
    b. Match may be provided by any public entity from non-Federal cash 
(e.g., general or dedicated revenues), real estate, or other similar 
assets owned or controlled by the public entity or the value of public 
improvements and public facilities activities, or force account 
undertaken.
    c. 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.
    d. The grantee must make match contributions before all CDBG 
disaster recovery grant funds are expended. Match contributions must 
total not less than 10 percent of the disaster recovery grant funds 
drawn from the grantee's line of credit, excluding funds drawn for 
administrative and planning costs.
    e. Grantees may not count administrative and planning costs toward 
the required non-Federal public matching funds or equivalent value.
    f. Contributions that have been or will be counted as satisfying a 
matching requirement of another Federal grant or award, including any 
other disaster recovery grant, may not count as satisfying the matching 
contribution requirement for a HUD Disaster Recovery grant.
    g. 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 disaster recovery 
funded activity, all repayment, interest, or other return on the loan 
must be treated as CDBG program income.
    h. The following are examples that do not count toward meeting a 
grantee's matching contribution requirement:
    (1) 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 at 24 CFR 570.3) are Federal funds for 
this purpose;
    (2) Contributions made with private resources or funds, regardless 
of when the private resources or funds were received or expended;
    (3) The interest rate subsidy attributable to the Federal tax 
exemption on financing or the value attributable to Federal tax 
credits;
    i. Contributions are credited at time the contribution is made and 
reported to HUD quarterly, as follows:
    (1) Credit a cash contribution when the funds are expended for a 
disaster-related activity or at the time the grantee awards disaster 
recovery grant funds if the activity was completed before the award of 
CDBG disaster recovery funds.
    (2) Credit the subsidy value of a below-market interest rate loan 
at the time of the loan closing.
    (3) 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 grantee or state grant recipient or other 
public entity officially waives, forgoes, or defers the taxes, fees, or 
other charges.
    (4) 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 disaster-recovery-grant-assisted or disaster-related 
activity.
    (5) Credit the direct cost of relocation payments and services at 
the time that the payments and services are provided.
    j. For projects involving more than one grantee, the grantee that 
makes the match contribution may decide to retain the match credit or 
permit the other grantee to claim the credit.

Certifications

    20. Certifications for state governments, waiver and alternative 
requirement. Section 91.325 of title 24 Code of Federal Regulations is 
waived. Each state must make the following certifications prior to 
receiving a CDBG disaster recovery grant:

[[Page 72106]]

    a. The state certifies that it will affirmatively further fair 
housing, which means that it will conduct an analysis to identify 
impediments to fair housing choice within the state, take appropriate 
actions to overcome the effects of any impediments identified through 
that analysis, and maintain records reflecting the analysis and actions 
in this regard. (See 24 CFR 570.487(b)(2)(ii).)
    b. The state certifies that it has in effect and is following a 
residential anti-displacement and relocation assistance plan in 
connection with any activity assisted with funding under the CDBG 
program.
    c. The state certifies that it is complying with requirements 
regarding drug-free workplace required by 24 CFR part 24, subpart F, 
together with the appropriate forms.
    d. The state certifies its compliance with restrictions on lobbying 
required by 24 CFR part 87, together with disclosure forms, if required 
by that part.
    e. The state certifies that the Action Plan for Disaster Recovery 
is authorized under state law and that the state possesses the legal 
authority to carry out the program for which it is seeking funding, in 
accordance with applicable HUD regulations and this notice.
    f. The state certifies that it will comply with the acquisition and 
relocation requirements of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended, and implementing 
regulations at 49 CFR part 24, except where waivers or alternative 
requirements are provided for this grant.
    g. The state certifies that it will comply with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), and 
implementing regulations at 24 CFR part 135.
    h. The state certifies that it is following a detailed citizen 
participation plan that satisfies the requirements of 24 CFR 91.115 
(except as provided for in notices providing waivers and alternative 
requirements for this grant), and that each unit of general local 
government that is receiving assistance from the state is following a 
detailed citizen participation plan that satisfies the requirements of 
Sec. 570.486 (except as provided for in notices providing waivers and 
alternative requirements for this grant).
    i. The state certifies that:
    (1) It has consulted with affected units of local government in 
counties designated in covered major disaster declarations in the 
nonentitlement, entitlement and tribal areas of the state in 
determining the method of distribution of funding; and
    (2) Each unit of general local government to be distributed funds 
will be required to identify its disaster recovery needs, including the 
needs of low-income and moderate-income families, and the disaster 
recovery activities to be undertaken to meet these needs.
    j. The state certifies that it has complied with each of the 
following criteria:
    (1) Funds will be used solely for disaster relief, long-term 
recovery, and mitigation related to a major disaster declared by the 
President between August 31, 2003, and October 1, 2004.
    (2) Funds will be provided to areas facing the greatest need.
    (3) With respect to activities expected to be assisted with CDBG 
disaster recovery funds, the action plan has been developed so as to 
give the maximum feasible priority to activities that will benefit low- 
and moderate-income families.
    (4) The aggregate use of CDBG disaster recovery funds shall 
principally benefit low- and moderate-income families in a manner that 
ensures that at least 50 percent of the amount is expended for 
activities that benefit such persons during the designated period.
    (5) The state will not attempt to recover any capital costs of 
public improvements assisted with CDBG disaster recovery grant funds, 
by assessing any amount against properties owned and occupied by 
persons of low- and moderate-income, including any fee charged or 
assessment made as a condition of obtaining access to such public 
improvements, unless (A) disaster recovery grant funds are used to pay 
the proportion of such fee or assessment that relates to the capital 
costs of such public improvements that are financed from revenue 
sources other that under this title; or (B) for purposes of assessing 
any amount against properties owned and occupied by persons of moderate 
income, the grantee certifies to the Secretary that it lacks sufficient 
CDBG funds (in any form) to comply with the requirements of clause (A).
    k. The state certifies that the grant will be conducted and 
administered in conformity with title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d) and the Fair Housing Act (42 U.S.C. 3601-3619) 
and implementing regulations.
    l. The state certifies that it will require units of general local 
government that receive grant funds to certify that they have adopted 
and are enforcing:
    (1) A policy prohibiting the use of excessive force by law 
enforcement agencies within its jurisdiction against any individuals 
engaged in non-violent civil rights demonstrations; and
    (2) A policy of enforcing applicable state and local laws against 
physically barring entrance to or exit from a facility or location that 
is the subject of such non-violent civil rights demonstrations within 
its jurisdiction.
    m. The state certifies that each state grant recipient has the 
capacity to carry out disaster recovery activities in a timely manner, 
or the state has a plan to increase the capacity of any state grant 
recipient(s) who lacks such capacity.
    n. The state certifies that it will comply with applicable laws.
    21. Certifications for Indian tribes, waiver and alternative 
requirement. Instead of following paragraph 20, above, each Indian 
tribe will make the following certifications.
    a. The tribe certifies that it will comply with the requirements of 
Title II of Public Law 90-284 (25 U.S.C. 1301) (the Indian Civil Rights 
Act) and any applicable anti-discrimination laws.
    b. The tribe certifies that it will provide the drug-free workplace 
required by 24 CFR part 24, subpart F.
    c. The tribe certifies that it will comply with restrictions on 
lobbying required by 24 CFR part 87, together with disclosure forms, if 
required by that part.
    d. The tribe certifies that it possesses the legal authority to 
apply for the disaster recovery grant and execute the proposed program.
    e. Except as waived, that it will comply with the acquisition and 
relocation requirements of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended, and implementing 
regulations at 49 CFR part 24.
    f. Prior to submission of its application to HUD, that it has met 
the citizen participation requirements of this notice.
    g. The Action Plan for Disaster Recovery has been developed so that 
more than 50 percent of the funds received under this grant will be 
used for activities that benefit low- and moderate-income persons (as 
the term ``'activities benefiting low- and moderate-income persons''' 
is used at 24 CFR 570.483(b)).
    h. The tribe certifies that it will comply with all applicable 
laws.

Duration of Funding

    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

[[Page 72107]]

expenditure. This limitation may not be waived. HUD may place shorter 
deadlines on the expenditure of those funds by grant agreement 
conditions.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the 1999 HUD 
Disaster Recovery Initiative are as follows: 14.219; 14.228.

Finding of No Significant Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4332). The Finding of No Significant Impact is 
available for public inspection between 8 a.m. and 5 p.m. weekdays in 
the Office of the Rules Docket Clerk, Office of General Counsel, 
Department of Housing and Urban Development, Room 10276, 451 Seventh 
Street, SW., Washington, DC 20410-0500.

    Dated: December 6, 2004.
Roy A. Bernardi,
Deputy Secretary.
[FR Doc. 04-27201 Filed 12-8-04; 10:18 am]
BILLING CODE 4210-32-P