[Federal Register Volume 74, Number 156 (Friday, August 14, 2009)]
[Notices]
[Pages 41146-41156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-19488]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5337-N-01]


Additional Allocations and Waivers Granted to and Alternative 
Requirements for 2008 Community Development Block Grant (CDBG) Disaster 
Recovery Grantees

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of allocations, waivers, and alternative requirements.

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SUMMARY: This Notice advises the public of the second allocation for 
grant funds for CDBG disaster recovery grants for the purpose of 
assisting in the recovery in areas covered by a declaration of major 
disaster under title IV of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5121 et seq.) as a result of recent 
natural disasters. As described in the SUPPLEMENTARY INFORMATION 
section of this Notice, HUD is authorized by statute and regulations to 
waive statutory and regulatory requirements and specify alternative 
requirements for this purpose, upon the request of the state grantees. 
This Notice also describes: (1) How the allocatees may implement the 
common application, eligibility, and administrative waivers and the 
common alternative and statutory requirements for the grants; and (2) 
additional waivers and alternative requirements for certain earlier 
grants.

DATES: Effective Date: August 19, 2009.

FOR FURTHER INFORMATION CONTACT: Scott Davis, Director, Disaster 
Recovery and Special Issues Division, Office of Block Grant Assistance, 
Department of Housing and Urban Development, 451 7th Street, SW., Room 
7286, 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 telephone number 800-877-8339. 
Facsimile inquiries may be sent to Mr. Davis at facsimile number 202-
401-2044. (Except for the ``800'' number, these telephone numbers are 
not toll free.)

SUPPLEMENTARY INFORMATION:

Authority To Grant Waivers

    The Consolidated Security, Disaster Assistance, and Continuing 
Appropriations Act, 2009 (Pub. L. 110-329, approved September 30, 2008) 
(hereinafter, ``Second 2008 Act'' to differentiate it from the earlier 
2008 Supplemental Appropriations Act) (Pub. L. 110-252 approved June 
30, 2008) (hereinafter ``First 2008 Act''), appropriated $6.5 billion, 
to remain available until expended, in CDBG funds for necessary 
expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure, housing, and economic revitalization in 
areas affected by hurricanes, floods, and other natural disasters 
occurring during 2008, for which the President declared a major 
disaster under title IV of the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act (42 U.S.C. 5121 et seq.). To date, 
$377,139,920 has been rescinded, $6,500,000 was set-aside for HUD 
administrative costs, and $2,145,000,000 was allocated by HUD in 
November 2008. This Notice allocates the remaining $3,971,360,080.
    The First 2008 Act also appropriated funds for 2008 disaster 
recovery grantees, although it only provided funds for disasters 
occurring in May and June 2008. Both the First 2008 Act and the Second 
2008 Act authorize 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 of these funds and guarantees by the recipient, except 
for requirements related to fair housing, nondiscrimination, labor 
standards, and the environment (including requirements concerning lead-
based paint), upon a request by the state explaining why such waiver is 
required to facilitate the use of such funds or guarantees, and a 
finding by the Secretary that such a waiver would not be inconsistent 
with the overall purpose of title I of the Housing and Community 
Development Act of 1974 (HCD Act). Additionally, regulatory waiver 
authority is provided by 24 CFR 5.110, 91.600, and 570.5. The following 
application and reporting waivers and alternative requirements are in 
response to requests from the states receiving an allocation under 
today's Federal Register Notice.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are necessary to facilitate use of 
the funds for the statutory purposes and are not inconsistent with the 
overall purpose of title I of the HCD Act or the Cranston-Gonzalez 
National Affordable Housing Act, as amended.
    Under the requirements of the First 2008 Act and the Second 2008 
Act, statutory and regulatory waivers must be published in the Federal 
Register. Except as described in this Notice, statutory and regulatory 
provisions governing the CDBG program for states, including those at 24 
CFR part 570,

[[Page 41147]]

shall apply to the use of these funds. In accordance with the First and 
Second 2008 Acts, HUD will reconsider every waiver in today's Federal 
Register Notice on the 2-year anniversary of the day this Notice is 
published.

Additional Waivers

    Each state receiving an allocation may request additional waivers 
from the Department as needed to address the specific needs related to 
that state's recovery activities. The Department will respond 
separately to the state's requests for waivers of provisions not 
covered in this Notice, after working with the state to tailor the 
program to best meet the unique disaster recovery needs in its impacted 
areas. HUD has included some additional waivers and alternative 
requirements for individual states in this Notice.

Allocations

    Today's Notice makes available the remainder of the Second Act's 
supplemental appropriation, $3,971,360,080 for the CDBG program for 
necessary expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure, housing, and economic revitalization in 
areas affected by hurricanes, floods, and other natural disasters 
occurring in 2008, for which the President declared a major disaster 
under title IV of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act (42 U.S.C. 5121 et seq.).
    The Second 2008 Act notes:

    That funds provided under this heading shall be administered 
through an entity or entities designated by the Governor of each 
state * * * Provided further, that funds allocated under this 
heading shall not adversely affect the amount of any formula 
assistance received by a state under the Community Development Fund: 
Provided further, that each state may use up to five percent of its 
allocation for administrative costs.

    HUD computes allocations based on data that are generally available 
covering all the eligible affected areas. The 11 states receiving an 
allocation in today's Notice are indicated in Table 1, below. Their 
estimated unmet needs represent more than 97 percent of the estimated 
unmet needs across all 76 disasters that occurred in 2008. The 
allocation was based on two factors: (i) The sum of estimated unmet 
housing, infrastructure, and business needs, adjusted by (ii) a HUD 
calculated risk level for recovery challenge. More detailed information 
about the data reviewed, the formula process, and the possible risks 
affecting recovery can be found in Appendix 1 of this Notice. Initial 
allocations made under the Second 2008 Act were announced by HUD on 
November 26, 2008, and published in the Federal Register on February 
13, 2009 (74 FR 7244). Initial allocations are included in Table 1. The 
states of Kentucky, Georgia, and Mississippi, and the Commonwealth of 
Puerto Rico received allocations in the February 13, 2009, Federal 
Register Notice, but are not receiving additional funds under today's 
Notice, bringing to 15 the total number of grantees allocated funding 
from the Second 2008 Act. Table 2 is a reprint from the initial 
allocation notice that shows what the allocations were under the First 
2008 Act. Unlike funds allocated under the Second 2008 Act, which may 
be used for recovery from any disaster occurring during Calendar Year 
2008, funds under the First 2008 Act are available only for use in 
areas covered by specific declarations, so these are also noted.

                             Table 1--Second 2008 Act Disaster Recovery Allocations
----------------------------------------------------------------------------------------------------------------
                                                           Initial Second
                                        This Notice's         2008 Act                           Minimum amount
                State                  Second 2008 Act       allocation     Total Second 2008    for affordable
                                          allocation       (Notice 74 FR      Act allocation     rental housing
                                                               7244)
----------------------------------------------------------------------------------------------------------------
Texas...............................     $1,743,001,247     $1,314,990,193     $3,057,991,440       $342,521,992
Louisiana...........................        620,467,205        438,223,344      1,058,690,549        118,582,672
Iowa................................        516,713,868        125,297,142        642,011,010         71,910,891
Indiana.............................        253,340,079         95,042,622        348,382,701         39,021,933
Illinois............................        127,207,128         41,984,121        169,191,249         18,950,911
Missouri............................         78,625,549         13,979,941         92,605,490         10,372,631
Wisconsin...........................         75,200,572         25,039,963        100,240,535         11,227,823
Tennessee...........................         71,881,834         20,636,056         92,517,890         10,362,819
Arkansas............................         70,181,041         20,294,857         90,475,898         10,134,098
Florida.............................         63,606,850         17,457,005         81,063,855          9,079,866
California..........................         39,531,784                  0         39,531,784          4,427,908
Kentucky............................                  0          3,217,686          3,217,686            341,943
Georgia.............................                  0          4,570,779          4,570,779            485,736
Mississippi.........................                  0          6,283,404          6,283,404            667,737
Puerto Rico.........................                  0         17,982,887         17,982,887          1,911,040
----------------------------------------------------------------------------------------------------------------


                              Table 2--First 2008 Act Disaster Recovery Allocations
----------------------------------------------------------------------------------------------------------------
                 State                   Disaster No.         Incident date        Declared date    Allocation
----------------------------------------------------------------------------------------------------------------
Mississippi...........................            1753  3/20 to 5/19............          5/8/08      $2,281,287
Maine.................................            1755  4/28 to 5/14............          5/9/08       2,187,114
Oklahoma..............................            1756  5/10 to 5/13............         5/14/08       1,793,876
Arkansas..............................            1758  5/2 to 5/12.............         5/20/08       4,747,501
South Dakota..........................            1759  5/1.....................         5/22/08       1,987,271
Missouri..............................            1760  5/10 to 5/11............         5/23/08       3,519,866
Colorado..............................            1762  5/21....................         5/26/08         589,651
Iowa..................................            1763  5/25 and continuing.....         5/27/08     156,690,815
Indiana...............................            1766  5/30 to 6/27............          6/8/08      67,012,966
Montana...............................            1767  5/1.....................         6/13/08         666,672
Wisconsin.............................            1768  6/5 and continuing......         6/14/08      24,057,378
West Virginia.........................            1769  6/3 to 6/7..............         6/19/08       3,127,935
Nebraska..............................            1770  5/22....................         6/20/08       5,557,736

[[Page 41148]]

 
Illinois..............................            1771  6/1 to 7/22.............         6/24/08      17,341,434
Minnesota.............................            1772  6/7 to 6/12.............         6/25/08         925,926
Missouri..............................            1773  6/1 to 8/13.............         6/25/08       7,512,572
----------------------------------------------------------------------------------------------------------------

    Congress required that states devote ``not less than $650,000,000'' 
of the total Second 2008 Act to support ``repair, rehabilitation, and 
reconstruction (including demolition, site clearance and remediation) 
of the affordable rental housing stock (including public and other HUD-
assisted housing) in the impacted areas where there is a demonstrated 
need as determined by the Secretary.'' Table 1 above shows the minimum 
amount each grantee must spend on affordable rental housing from its 
total combined allocation of first and second round funding under the 
Second 2008 Act.
    Disaster Recovery Enhancement Allocations. As stated above, HUD 
calculates CDBG disaster recovery allocations, including the above 
allocations, to each grantee based on unmet needs data (see Appendix 
1). These data largely represent an estimate of the costs for repairs 
to a pre-disaster condition. Often, this data does not adequately 
reflect the full recovery costs associated with a disaster. Also, 
because of cost considerations, state disaster recovery grantees may 
not always choose recovery activities that are the most advantageous 
for long-term recovery and resilience from a federal perspective. For 
example, relocating a repetitively flooded community from a floodplain 
limits future calls on the National Flood Insurance program and other 
federal recovery programs. From a federal perspective, flood buyouts 
are frequently a good idea; locally, they can be politically difficult 
and somewhat more costly to administer than a traditional 
rehabilitation program.
    Therefore, the Secretary has created a $311,602,923 Disaster 
Recovery Enhancement Fund (DREF) for secondary allocations to grantees 
that anticipate that they will still have unmet disaster recovery needs 
after developing and undertaking forward-thinking recovery strategies 
and activities in a timely manner. To be eligible to receive an 
additional allocation, a grantee must budget its allocated Second 2008 
Act funds for the specific activities listed in this Notice by 
programming the funds in an Action Plan for Disaster Recovery (or an 
amendment thereof) submitted to HUD by June 30, 2010. A state receiving 
an additional allocation may use the funds for any activity eligible 
for assistance under the Second 2008 Act in accordance with this 
Notice.
    Note that the Stafford Act and the Second 2008 Act prohibit use of 
these funds as a substitute or match for Federal Emergency Management 
Agency (FEMA) Hazard Mitigation Grant Program (HMGP) funds. Also note 
that CDBG disaster recovery funds must be used in the counties declared 
in the applicable covered disaster(s) for each state, while HMGP funds 
may generally be used statewide.
    By setting a specific deadline for the Action Plan submissions for 
this DREF allocation, HUD is signaling that the Department intends to 
assist grantees that will implement these forward-thinking approaches 
to long-term recovery in a timely manner. Funds will be allocated 
dollar-for-dollar for the first $15 million budgeted for enhanced 
disaster recovery activities for an individual state and on a pro rata 
basis for amounts budgeted above $15 million as measured by funds 
budgeted by grant recipients by June 30, 2010, on the following 
specific enhanced disaster recovery activities that reduce the risk of 
damage from a future disaster:
    1. Development and adoption of a forward-thinking land-use plan 
that will guide use of long-term recovery efforts and subsequent land-
use decisions throughout the community and that reduces existing or 
future development in disaster-risk areas;
    2. Floodplain or critical fire or seismic hazard area buyouts 
programs under an optional relocation plan that includes incentives so 
that families and private sector employers move out of areas at severe 
risk for a future disaster;
    3. Individual mitigation measures (IMM) to improve residential 
properties and make them less prone to damage. If such activities are 
incorporated into the grantee's rehabilitation or new construction 
programs generally, the cost increment attributed to IMM will be the 
amount considered for the additional allocation, not the total 
construction amount budget; or
    4. Implementation of modern disaster resistant building codes, 
including, but not limited to, training on new standards and code 
enforcement.
    A grantee must include start and end dates for each activity in its 
Action Plan. A grantee must demonstrate in its Action Plan submission 
for any additional allocation that it still has eligible unmet needs to 
receive assistance from the DREF before HUD will add the additional 
allocation to the state's line of credit. Furthermore, the Secretary 
reserves the right to allocate more or less than $311,602,923 under 
this fund, depending on the amount grantees actually budget on such 
activities and any amounts available for reallocation.
    A grantee may reprogram funds from one of the listed enhanced 
disaster recovery activities to another, but if the grantee reprograms 
grant funds to any other activity, HUD may recapture the DREF 
allocation, in whole or in part, in accordance with section 111 of the 
HCD Act, 24 CFR part 570, subpart O, and this Notice.
    The Second 2008 Act requires funds to be used in accordance with 
its specific purposes. The statute directs that each grantee will 
describe in its Action Plan for Disaster Recovery criteria for 
eligibility and how the use of grant funds will address long-term 
recovery and infrastructure restoration, housing, and economic 
revitalization in the affected areas. HUD will monitor compliance with 
this direction and may be compelled to disallow expenditures if it 
finds uses of funds do not meet the statutory purposes, or duplicate 
other benefits. HUD encourages grantees to contact their assigned HUD 
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.
    As provided for in the Second 2008 Act, the funds may not be used 
for activities reimbursable by or for which funds are made available by 
FEMA or the Army Corps of Engineers. Further, none of the funds may be 
used as the required match, share, or contribution for another federal 
program.

Prevention of Fraud, Abuse, and Duplication of Benefits

    Additionally, the Second 2008 Act directs the Secretary to:
    Establish procedures to prevent recipients from receiving any 
duplication of benefits and report quarterly to the Committees on

[[Page 41149]]

Appropriations with regard to all steps taken to prevent fraud and 
abuse of funds made available under this heading, including duplication 
of benefits.
    To meet this directive, HUD is pursuing four courses of action. 
First, the Federal Register Notice published February 13, 2009 (74 FR 
7244), includes specific reporting, written procedures, monitoring, and 
internal audit requirements for grantees. Second, to the extent its 
resources allow, HUD will institute risk analysis and on-site 
monitoring of grantee management of the grants and of the specific uses 
of funds. Third, HUD will be extremely cautious in considering any 
waiver related to basic financial management requirements. The 
standard, time-tested CDBG financial requirements will continue to 
apply. Fourth, HUD is collaborating with the HUD Office of Inspector 
General to plan and implement oversight of these funds.

Waiver Justification

    The waivers, alternative requirements, and statutory changes 
described in the February 13, 2009, Federal Register Notice (74 FR 
7244) apply to all of the CDBG supplemental disaster recovery funds 
appropriated in the Second 2008 Act (Pub. L. 110-329), but not to funds 
provided under the regular CDBG program. Similarly, the waivers, 
alternative requirements, and statutory changes described in the 
September 11, 2008, Federal Register Notice (73 FR 52870) apply to the 
CDBG supplemental disaster recovery funds appropriated in the First 
2008 Act, not to funds provided under the regular CDBG program. These 
actions, below, provide additional flexibility in program design and 
implementation and implement statutory requirements. The previous 
notices, referenced above, provide further justification for the 
waivers.

Common Waivers

    Previously published waivers to streamline application and program 
launch. Funds allocated by today's Federal Register Notice will be 
subject to the waivers, alternative requirements, and statutory changes 
described in this Notice and those previously published in the February 
13, 2009, Federal Register Notice (74 FR 7244).
    General planning activities use entitlement presumption, all 
grantees. Today's Federal Register Notice notifies Congress and the 
public that the states receiving funds under the First 2008 Act and/or 
the Second 2008 Act have requested this waiver and HUD is granting the 
waiver. The annual State CDBG program requires that local government 
grant recipients for planning-only grants must document that the use of 
funds meets a national objective. In the State CDBG program, these 
planning grants are typically used for individual project plans. By 
contrast, planning activities carried out by entitlement communities 
are more likely to include nonproject specific plans such as functional 
land-use plans, historic preservation plans, comprehensive plans, 
development of housing codes, and neighborhood plans related to guiding 
long-term community development efforts comprising multiple activities 
funded by multiple sources. In the annual entitlement program, these 
more general stand-alone planning activities are presumed to meet a 
national objective under the requirements at 24 CFR 570.208(d)(4). The 
Department notes that almost all effective CDBG disaster recoveries in 
the past have relied on some form of area-wide or comprehensive 
planning activity to guide overall redevelopment independent of the 
ultimate source of implementation funds. Therefore, the Department is 
removing the eligibility requirement that CDBG disaster recovery-
assisted planning-only grants or state directly administered planning 
activities that will guide recovery in accordance with the 
appropriations act must comply with the State CDBG program rules at 24 
CFR 570.483(b)(5) or (c)(3). Instead, 24 CFR 570.208(d)(4) will apply.

State-Specific Waivers

    National Objective Documentation for Economic Development 
Activities--States of Iowa, Louisiana, and Texas. For the national 
objective documentation for business assistance activities, the states 
of Iowa, Louisiana and Texas, which have received funds under the First 
2008 Act and Second 2008 Act, have asked to apply individual salaries 
or wages-per-job and the income limits for a household of one, rather 
than the usual CDBG standard of total household income and the limits 
by total household size. The states have asserted that this proposed 
documentation would be simpler and quicker for participating lenders to 
administer, easier to verify, and would not misrepresent the amount of 
low- and moderate-income benefit provided. Upon consideration, HUD is 
granting this waiver, which also was granted for recovery in lower 
Manhattan following September 11, 2001, and in certain states following 
the Gulf Coast hurricanes of 2005. Due to the significant breadth of 
many states' economic development programs, this waiver will play a key 
role in streamlining the documentation process because it allows 
collection of wage data for each position created or retained from the 
assisted businesses, rather than from each individual household.
    Section 414 of the Stafford Act--States of Louisiana and Texas. In 
addition to the above, the states of Louisiana and Texas have also 
requested a waiver of section 414 of the Robert T. Stafford Disaster 
Relief and Emergency Assistance Act, as amended, for their disaster 
recovery programs. Section 414 directs that persons who were displaced 
by a disaster be considered to be displaced by a federal action, as 
defined under the Uniform Relocation Act (URA), if the property in 
which they were living prior to the disaster is assisted with certain 
federal funds. Today's Federal Register Notice grants, in part, the 
request that the Secretary waive that section and provides alternative 
requirements more consistent with the purpose of the Second 2008 Act, 
which is to assist and support disaster recovery in the areas most 
affected by the effects of the disasters in 2008.
    Several states suffered significant destruction in the wake of 
Hurricanes Ike and Gustav, and the reconstruction will likely last for 
many years to come--much like in the Gulf Coast states affected by the 
hurricanes in 2005. For programs or projects covered by this waiver 
(``covered programs or projects'') that are initiated within 3 years 
after the applicable disaster, each state receiving this wavier must 
comply with one of the two alternative requirements (for programs or 
projects initiated after the 3-year period, the alternative 
requirements would not apply; only the waiver would be applicable):
Alternative One
    The state may provide relocation assistance to a former residential 
occupant whose former dwelling is acquired, rehabilitated, or 
demolished for a covered program or project initiated within 3 years 
after the disaster, even though the actual displacements were caused by 
the effects of the disaster. To the extent practicable, such relocation 
assistance should be offered in a manner consistent with the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970 (URA), as amended, and its implementing regulations, except as 
modified by applicable waivers and alternative requirements.
Alternative Two
    If the state determines that the first alternative would 
substantially conflict

[[Page 41150]]

with meeting the disaster recovery purposes of the Second 2008 Act, the 
state may establish a re-housing plan for a covered program or project 
initiated within 3 years after the disaster. Such determinations must 
be made on a program or project basis (not person or household). The 
re-housing plan must include, at minimum, the following:
    1. A description of the class(es) of persons eligible for 
assistance, including all persons displaced from their residences by 
particular, enumerated, or by all, effects of the disaster, and 
including all persons still receiving temporary housing assistance from 
FEMA for the covered disaster(s);
    2. A description of the types and amount of financial assistance to 
be offered, if any;
    3. A description of other services to be made available, including, 
at minimum, outreach efforts to eligible persons and housing counseling 
providing information about available housing resources. Outreach 
efforts and housing counseling information should be provided in 
languages other than English to persons with limited English 
proficiency; and
    4. Contact information and a description of any applicable 
application process, including any deadlines.
    5. If the program or project involves rental housing, the re-
housing plan must also include the following:
    (i) Placement services for former and prospective tenants;
    (ii) A public registry of available rental units assisted with CDBG 
disaster recovery and/or other funds; and
    (iii) Application materials, award letters, and operating 
procedures requiring property owners to make reasonable attempts to 
contact their former residential tenants and offer a unit, upon 
completion, to those tenants meeting the program's eligibility 
requirements.
    (iv) Persons in physical occupancy who are displaced by a HUD-
assisted disaster recovery project will continue to be eligible for URA 
assistance.
Justification for Waiver
    The reasons for granting this waiver are several, and are ably 
represented by the states in their requests. The principal reasons are 
highlighted here:
    <bullet> Hurricanes Ike and Gustav caused significant destruction 
that resulted in massive displacements and decimated the region's 
affordable housing stock. Continued ambiguity on section 414's 
applicability may cause substantial delays in long-term recovery, 
particularly in Texas and Louisiana; and
    <bullet> Simplify the administration of disaster recovery projects 
or programs initiated years following the disaster.
    Persons displaced by the effects of the disaster may continue to 
apply for assistance under the states' approved disaster recovery 
programs, which are designed to bring affordable housing to the 
affected areas. This waiver does not address programs or projects 
receiving other HUD funding, or funding from other federal sources.
    A state may already be performing some elements of a re-housing 
plan, such as providing a public rental registry or undertaking 
outreach and placement services to those former residents still 
receiving FEMA housing assistance. A description in the re-housing plan 
of how those existing efforts will be available for covered programs or 
projects may be used in satisfying the requirements of this Notice.
    Eligibility--buildings for the general conduct of government--
States of Indiana, Louisiana, and Texas. The states of Indiana, 
Louisiana, and Texas requested a limited waiver of the prohibition on 
funding buildings for the general conduct of government. HUD has 
considered the request and agrees that it is consistent with the 
overall purposes of the 1974 Act for requesting states to be able to 
use the grant funds under this notice to repair or reconstruct 
buildings used for the general conduct of government and that the 
states have selected in accordance with the method described in their 
Action Plans for Disaster Recovery and that they have determined have 
substantial value in promoting disaster recovery. However, as stated by 
the Second 2008 Act, funds allocated under today's Federal Register 
Notice, or the February 13, 2009, Federal Register Notice (74 FR 7244), 
may not be used for activities reimbursable by or for which funds are 
made available by FEMA or the Army Corps of Engineers. Further, none of 
the funds may be used as the required match, share, or contribution for 
another federal program.
    Public benefit for certain economic development activities--States 
of Iowa, Louisiana, and Texas. The states of Iowa, Louisiana, and Texas 
have requested a waiver of the public benefit standards for their 
economic development activities. The public benefit provisions set 
standards for individual economic development activities (such as a 
single loan to a business) and for economic development activities in 
the annual aggregate. Currently, public benefit standards limit the 
amount of CDBG assistance per job retained or created, or the amount of 
CDBG assistance per low- and moderate-income person to which goods or 
services are provided by the activity. Essentially, the public benefit 
standards are a proxy for all the other possible public benefits 
provided by an assisted activity. These dollar thresholds were set more 
than a decade ago and, under disaster recovery conditions (which often 
require a larger investment to achieve a given result), can be too low 
and, thus, impede recovery by limiting the amount of assistance the 
grantee may provide to a critical activity. States requesting this 
waiver have made public in their Action Plans the disaster recovery 
needs each activity is addressing and the public benefits expected.
    After consideration, today's Federal Register Notice waives the 
public benefit standards for the cited activities, except that each 
requesting state shall report and maintain documentation on the 
creation and retention of: (a) Total jobs, (b) number of jobs within 
certain salary ranges, (c) the average amount of assistance per job and 
activity or program, and (d) the types of jobs. As a conforming change 
for the same activities or programs, HUD is also waiving paragraph (g) 
of 24 CFR 570.482 to the extent its provisions are related to public 
benefit.
    Housing incentives to encourage housing resettlement consistent 
with local recovery plans; States of Louisiana and Texas. The states of 
Louisiana and Texas may offer disaster recovery or mitigation housing 
incentives to promote suitable housing development or resettlement in 
particular geographic areas. By ``resettlement,'' HUD is referring to 
resettling the community as a whole, which may include buyouts and 
relocation, as well as repopulation initiatives if part of a recovery 
plan. In the past, the state of New York successfully used an incentive 
program to induce rapid and stable resettlement of lower Manhattan 
following September 11, 2001. Also, the city of Grand Forks, North 
Dakota, provided a very affordable soft-second loan as an incentive to 
help induce households to resettle within the city during its recovery. 
Any state choosing to provide incentives must maintain documentation, 
at least at a programmatic level, describing how the amount of 
assistance was determined to be necessary and reasonable. Generally, 
incentives are offered in addition to other programs or funding (such 
as insurance), to try to influence individual residential location 
decisions, when these decisions are in doubt. For example, a grantee 
may offer an incentive payment (possibly in

[[Page 41151]]

addition to buyouts) for households that volunteer to relocate within a 
particular period of time, or who choose to resettle outside a 100- or 
500-year floodplain. Note, however, that if the grantee requires the 
funds to be used for a particular purpose by the household receiving 
the assistance, then the activity will be that required use, not an 
eligible incentive. The Department is waiving 42 U.S.C. 5305(a) and 
associated regulations to make these uses of grant funds eligible.
    Compensation for disaster-related losses. The states of Louisiana 
and Texas plan to provide compensation to certain homeowners whose 
homes were affected during the covered disasters, if the homeowners 
agree to meet the stipulations of the state's or subawardee's published 
program design. Such stipulations may not include requirements related 
to how the homeowner may use the funds, because then the assisted 
activity would be that required use, not compensation. Such programs 
were carried out by the states of Louisiana and Mississippi following 
the 2005 hurricanes. A strength of these compensation programs is that 
they may be able to disburse funding more quickly than traditional CDBG 
rehabilitation programs. However, a major weakness is the lack of 
certainty about whether an assisted homeowner will use the granted 
assistance in a way that supports the community's long-term recovery 
goals. Very little data exists to verify the degree to which 
compensation funds have been used for reconstruction or rehabilitation. 
Existing data suggest that a certain percentage of those receiving 
assistance fail to comply with the program stipulations. By contrast, a 
rehabilitation program is typically able to demonstrate that all or 
nearly all of its assisted households reside (after receiving 
assistance) in reconstructed or rehabilitated homes, according to the 
grantee's standards. Therefore, HUD is granting this compensation 
waiver together with alternative requirements. HUD will disapprove an 
action plan if a compensation program is not adequately justified in 
accordance with these alternative requirements. Any state deciding to 
assist a compensation activity must address in its action plan and 
program design:
    (1) How the state will ensure that compensation payments will 
result in disaster recovery or economic revitalization;
    (2) Why a housing rehabilitation or reconstruction or buyouts 
program is not a more appropriate choice; and
    (3) How the state determined the appropriate compensation 
amount(s). Further, any state choosing to provide compensation 
assistance must also carry out an evaluation of outcomes of the 
program, for a statistically valid sample of the program participants, 
within a year of providing the final payment.
    Three-month limitation on emergency grant payments. In response to 
the state of Iowa's request, HUD is waiving 42 U.S.C. 5305(a) to allow 
it to extend interim mortgage assistance to qualified individuals for 
up to 20 months. The state is currently operating an Interim Mortgage 
Assistance Program, limited to a maximum of 3 months and a maximum of 
$1,000 per month. It has now been almost 12 months since the original 
flooding event occurred but many families still require this 
assistance. Furthermore, it will still be several months before FEMA 
buyout decisions will be made and implemented. Therefore, to permit the 
state of Iowa to adequately assist households through this period, and 
to be consistent with the state funding that has been supplied 
separately for this purpose, HUD will waive the normal 3-month 
limitation, to provide a total of 20 months of Interim Mortgage 
Assistance to qualified individuals.

Summary of States Receiving Waivers

    Texas. Texas has requested and HUD has approved the following 
waivers and alternative requirements for funds provided to the state 
under the Second 2008 Act (Pub. L. 110-329): (1) Documentation of job 
retention, (2) section 414 of the Stafford Act, (3) eligibility of 
buildings for the general conduct of government, (4) public benefit for 
certain economic development activities, and (5) compensation for 
disaster-related losses or housing incentives to resettle in disaster-
affected communities. Texas has justified each request and documented 
the need for each waiver.
    Iowa. Iowa has requested and HUD has approved the following waivers 
and alternative requirements: (1) Documentation of job retention, (2) 
public benefit for certain economic development activities, and (3) 
three-month limitation on emergency grant payments. Iowa has justified 
each request and documented the need for each waiver. The waivers 
granted by this Notice will apply to funds received under the First 
2008 Act (Pub. L. 110-252), and to all funds received under the Second 
2008 Act (Pub. L. 110-329).
    Louisiana. Louisiana has requested and HUD has approved the 
following waivers and alternative requirements for funds provided to 
the state under the Second 2008 Act: (1) Documentation of job 
retention, (2) section 414 of the Stafford Act, (3) eligibility of 
buildings for the general conduct of government, (4) public benefit for 
certain economic development activities, and (5) compensation for 
disaster-related losses or housing incentives to resettle in disaster-
affected communities. Louisiana has justified each request and 
documented the need for each waiver.
    Indiana. Indiana has requested and HUD has approved a waiver 
regarding the eligibility of buildings for the general conduct of 
government for all funds received under the First 2008 Act, 2008 (Pub. 
L. 110-252). Note, this waiver has been neither requested nor approved 
for funds received under the Second 2008 Act (Pub. L. 110-329).

Application for Allocations Under the Second 2008 Act

    The waivers and alternative requirements streamline the pre-grant 
process and set the guidelines for states' applications for their 
allocations. Each grantee receiving an allocation under the Second 2008 
Act (which includes allocations made under this Notice, as well as 
those made under the February 13, 2009, Notice) is required, with the 
exception of California, to submit and/or amend its Action Plan for 
Disaster Recovery to program all of each state's allocations by 
September 30, 2009. The state of California (which did not receive an 
allocation under the February 13, 2009, Notice) is required to submit 
an Action Plan for Disaster Recovery by December 30, 2009. Any 
allocation not applied for by these dates may be added to the funds 
available under the DREF and reallocated. If any grantee fails to meet 
the requirement to program its allocations within the relevant 
timelines, HUD, on the first business day after that deadline, will 
commence an action to recapture the funds.

Applicable Rules, Statutes, Waivers, and Alternative Requirements

    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, statutory and regulatory provisions 
governing the CDGB program for states, including those at 42 U.S.C. 
5301 et seq. and 24 CFR part 570, shall apply to the use of these 
funds.
    2. The waivers provided in the February 13, 2009, Federal Register 
Notice (74 FR 7244) are granted and the alternative requirements of 
that Notice apply to all the states receiving an

[[Page 41152]]

allocation of grant funds under this Notice. Each of the states has 
requested, in writing, that HUD grant it the waivers and alternative 
requirements of that Notice.
    3. Planning activities. For CDBG disaster recovery-assisted general 
planning activities that will guide recovery in accordance with the 
First 2008 Act (Pub. L. 110-252) and the Second 2008 Act (Pub. L. 110-
329), the State CDBG program rules at 24 CFR 570.483(b)(5) and (c)(3) 
are waived and the presumption at 24 CFR 570.208(d)(4) applies for all 
First 2008 Act and Second 2008 Act grantees.
    4. National Objective Documentation for Economic Development 
Activities. 24 CFR 570.483(b)(4)(i) is waived to allow the states of 
Texas, Iowa, and Louisiana to establish low- and moderate-income jobs 
benefit by documenting, for each person employed, the name of the 
business, type of job, and the annual wages or salary of the job. HUD 
will consider the person income-qualified if the annual wages or salary 
of the job is at or under the HUD-established income limit for a one-
person family.
    5. Section 414 of the Stafford Act. Section 414 of the Stafford 
Act, 42 U.S.C. 5181 (including its implementing regulation at 49 CFR 
24.403(d)), is waived to the extent that it would apply to CDBG 
disaster recovery-funded programs or projects initiated within 3 years 
of the incident-date of Hurricane Ike or Hurricane Gustav (as 
applicable) by the states of Texas and Louisiana under an approved 
Action Plan for Disaster Recovery for its grants under the Second 2008 
Act, provided that such program or project was not planned, approved, 
or otherwise under way prior to the disaster.
    a. For all programs or projects covered by this waiver (``covered 
programs or projects'') that are within 3 years after the applicable 
disaster, the states of Texas and Louisiana must comply with one of the 
following two alternative requirements (for programs or projects 
initiated after the 3-year period, the alternative requirements would 
not apply; only the waiver would be applicable): (1) Relocation 
Assistance. The state may provide relocation assistance to a former 
residential occupant whose former dwelling is acquired, rehabilitated, 
or demolished for a covered program or project initiated within 3 years 
after the disaster, even though the actual displacements were caused by 
the effects of the disaster. To the extent practicable, such relocation 
assistance must be offered in a manner consistent with the URA, as 
amended, and its implementing regulations, except as modified by prior 
waivers and alternative requirements granted to the states. (2) Re-
housing Plan. If the state determines that the first alternative would 
substantially conflict with meeting the disaster recovery purposes of 
the Second 2008 Act, the grantee may establish a re-housing plan for a 
covered program or project initiated within 3 years after the disaster. 
Such a determination must be made on a program or project basis (not 
person or household). The re-housing plan must include, at minimum, the 
following:
    (i) A description of the class(es) of persons eligible for 
assistance, including all residents displaced from their residences by 
either certain enumerated or all effects of the covered disaster, and 
including all disaster-displaced residents still receiving temporary 
housing assistance from FEMA for the covered disasters;
    (ii) A description of the types and amount of financial assistance 
to be provided, if any;
    (iii) A description of other services to be made available, 
including, at a minimum, outreach efforts to eligible persons and 
housing counseling, that provide information about available housing 
resources;
    (iv) Contact information for additional program information;
    (v) A description of any applicable application process, including 
any deadlines; and
    (vi) If the program or project covered by this waiver involves 
rental housing, the grantee shall establish procedures for the 
following:
    A. Application materials, award letters, and operating procedures 
that require property owners to make reasonable attempts to contact 
their former tenants and to offer a unit, upon completion, to those 
tenants meeting the program's eligibility requirements;
    B. Placement services for former and prospective tenants; and
    C. A public registry of available rental units assisted with CDBG 
disaster recovery and/or other funds.
    b. Eligible Project Costs. The costs of relocation assistance and 
the reoccupancy plan are eligible project costs in the same manner and 
to the same extent as other project costs authorized under the Second 
2008 Act. For covered programs or projects involving affordable rental 
housing, the relocation and planning costs required by this Notice may 
be paid from funds reserved for the affordable rental housing stock in 
the impacted areas under the Second 2008 Act.
    c. Persons in physical occupancy who are displaced by a HUD-
assisted disaster recovery project will continue to be eligible for URA 
assistance.
    6. Buildings for the general conduct of government. 42 U.S.C. 
5305(a) is waived to the extent necessary to allow the states of Texas 
and Louisiana to fund the rehabilitation or reconstruction of public 
buildings that are otherwise ineligible and that the state selects in 
accordance with its approved Action Plan for Disaster Recovery and that 
the state has determined have substantial value in promoting disaster 
recovery. The state of Indiana may use funds allocated under the 
September 11, 2008, Federal Register Notice (73 FR 52870) or December 
19, 2008, Federal Register Notice (73 FR 77818) to fund the 
rehabilitation or reconstruction of public buildings that are otherwise 
ineligible.
    7. Public benefit for certain economic development activities. For 
economic development activities designed to create or retain jobs or 
businesses (including, but not limited to, long-term, short-term, and 
infrastructure projects), the public benefit standards at 42 U.S.C. 
5305(e)(3) and 24 CFR 570.482(f)(1), (2), (3), (4)(i), (5), and (6) are 
waived for the states of Texas, Louisiana, and Iowa, except that these 
states shall report and maintain documentation on the creation and 
retention of total jobs; the number of jobs within certain salary 
ranges; the average amount of assistance provided per job, by activity 
or program; and the types of jobs. Paragraph (g) of 24 CFR 570.482 is 
also waived for these states to the extent its provisions are related 
to public benefit.
    8. Compensation for disaster-related losses. HUD is granting a 
compensation waiver together with alternative requirements for the 
states of Louisiana and Texas. Either state deciding to assist a 
compensation activity must address the following in its action plan and 
program design:
    a. How the state will ensure that compensation payments will result 
in disaster recovery or economic revitalization;
    b. Why a housing rehabilitation or reconstruction or buyouts 
program is not a more appropriate choice than providing housing 
compensation. The state must compare and contrast schedules, delivery 
costs, and projected recovery resulting from each type of activity; and
    c. How the state determined the appropriate compensation amount(s). 
Further, any state choosing to provide compensation assistance must 
also carry out and publish an evaluation of outcomes of the program for 
a statistically valid sample of the program participants within a year 
of providing

[[Page 41153]]

the final compensation payment. If the state also provides 
rehabilitation assistance, it must include in its evaluation a 
comparison of the results of the compensation and rehabilitation 
activities.
    9. Housing incentives to encourage housing resettlement consistent 
with local recovery plans. The states of Louisiana and Texas may offer 
disaster recovery or mitigation housing incentives to promote suitable 
housing development or resettlement in particular geographic areas. Any 
state choosing to provide incentives must maintain documentation at 
least at a programmatic level describing how the amount of assistance 
was determined to be necessary and reasonable. Note that if the grantee 
requires the funds to be used for a particular purpose by the household 
receiving the assistance, then the activity will be that required use, 
not an eligible incentive. The Department is waiving 42 U.S.C. 5305(a) 
and associated regulations to make these uses of grant funds eligible.
    10. Three-month limitation on emergency grant payments. 42 U.S.C. 
5305(a) is waived so that Iowa may extend interim mortgage assistance 
to qualified individuals for up to 20 months. This waiver applies to 
funds received under the First 2008 Act (Pub. L. 110-252), and to funds 
received under the Second 2008 Act (Pub. L. 110-329).

Duration of Funding

    Availability of funds 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. This limitation may not be waived. 
However, the Second 2008 Act directs that these funds be available 
until expended unless, in accordance with 31 U.S.C. 1555, the 
Department determines that the purposes for which the appropriation has 
been made have been carried out and no disbursement has been made 
against the appropriation for 2 consecutive fiscal years. In such a 
case, the Department shall close out the grant prior to expenditure of 
all funds.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the 
disaster recovery grants under this Notice are as follows: 14.219; 
14.228.

Finding of No Significant Impact

    A Finding of No Significant Impact (FONSI) 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 FONSI is 
available for public inspection between 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, 451 7th Street, SW., Room 10276, 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at telephone 
number 202-708-3055 (this is not a toll-free number). Hearing- or 
speech-impaired individuals may access this number through TTY by 
calling the toll-free Federal Information Relay Service at 800-877-
8339.

    Dated: July 20, 2009.
Mercedes M[aacute]rquez,
Assistant Secretary for Community Planning and Development.

Appendix 1--Allocation Methodology Detail

    The Consolidated Security, Disaster Assistance, and Continuing 
Appropriations Act, 2009 (Pub. L. 110-329), enacted on September 30, 
2008, appropriated $6.5 billion through the CDBG program for 
``necessary expenses related to disaster relief, long-term recovery, 
and restoration of infrastructure, housing, and economic revitalization 
in areas affected by hurricanes, floods, and other natural disasters 
occurring during 2008 for which the President declared a major 
disaster.''
    It went on to say that ``such funds may not be used for activities 
reimbursable by, or for which funds are made available by, the Federal 
Emergency Management Agency or the Army Corps of Engineers'' and that 
``none of the funds * * * may be used * * * as a matching requirement, 
share, or contribution for any other Federal program.'' It also stated 
that ``not less than $650,000,000 from funds made available on a pro-
rata basis according to the allocation made to each State'' shall be 
used for affordable rental housing.
    Finally, the statute called for ``not less'' than 33 percent of the 
funds to be allocated within 60 days of enactment (that is, by November 
28th) based ``on the best estimates available of relative damage and 
anticipated assistance from other Federal sources.''

Schedule for Allocations

    While Congress appropriated $6.5 billion, $377,139,920 has been 
rescinded, $6.5 million has been set aside for HUD administrative 
costs, and $2,145,000,000 was allocated in November 2008. This 
allocation distributes the remaining $3,971,360,080, with a 
$311,603,923 set-aside to the Disaster Recovery Enhancement Fund.

Disasters in 2008

    There were 76 major disasters that occurred in 2008 in 35 states, 
Puerto Rico, and the Virgin Islands. Data on damaged housing are 
available for 36 disasters from FEMA and Small Business Administration 
(SBA); business loss data are available for 39 disasters from SBA; and 
72 disasters have data on the cost FEMA and states are estimated to 
spend on infrastructure and other Public Assistance costs.

Available Data

    The data HUD staff have identified as being available to calculate 
``relative damage and anticipated assistance from Federal sources'' at 
this time for the targeted disasters come from the following data 
sources:
    <bullet> FEMA Individual Assistance program data concerning housing 
unit damage;
    <bullet> SBA for management of its disaster assistance loan program 
for housing repair and replacement;
    <bullet> SBA for management of its disaster assistance loan program 
for business real estate repair and replacement, as well as content 
loss; and
    <bullet> FEMA estimated and obligated amounts under its Public 
Assistance program, including the federal and state cost share.

Formula

    This formula ``allocates'' the full $6,116,360,080 available for 
allocation under this appropriation and then subtracts out the 
$2,145,000,000 that was previously allocated and the $311,602,923 set-
aside reserve fund (on a pro-rata basis). HUD has adopted this practice 
to adjust grants to reflect better data than were available at the time 
of the November 2008 allocation and to treat disasters occurring after 
November equally with disasters that occurred earlier in the year.

    The formula mechanics are as follows:

$6,116,360,080

[[Page 41154]]

[GRAPHIC] [TIFF OMITTED] TN14AU09.012

--State total: November $2.145 billion allocation
* Pro-rata adjustment after minimum grant threshold and reserve 
grant set-aside

    \a\ No state can have its grant adjusted up or down by more than 
10 percent using this factor.
    \b\ Mathematically, each state's challenge factor is divided by 
the weighted national rate (14.7) and multiplied by 0.2 (that is, if 
a state's ratio was above 1; for example, 1.5 would become 1.10, [1 
+ ((1 - 0.5) * 0.2)]; if the ratio was below 1, for example, 0.5 
would become 0.9 [1 - ((1 - 0.5) * 0.2)].

    This allocation does not duplicate funding already provided under 
the Supplemental Appropriations Act of 2008 (Pub. L. 110-252, 122 Stat. 
2323), enacted on June 30, 2008, which appropriated $300 million for 
disasters that were declared and occurred in May and June of 2008. This 
current allocation subtracts out of the unmet housing and business need 
estimates the amount of funds allocated for housing and business under 
the 2008 June appropriation.

Calculating Unmet Housing Needs

    The core data on housing damage for both the unmet housing needs 
calculation and the concentrated damage are based on home inspection 
data for FEMA's Individual Assistance program. For unmet housing needs, 
the FEMA data are supplemented by SBA data from its Disaster Loan 
Program. HUD calculates ``unmet housing needs'' as the number of 
housing units with unmet needs, multiplied by the estimated cost to 
repair those units, minus the amount of repair funding already provided 
by FEMA, where:
    <bullet> The number of owner-occupied units with unmet needs are 
units FEMA housing inspectors determined would require more than $3,000 
to become habitable and were determined by FEMA to be eligible for a 
repair or replacement grant (now up to $30,300, earlier disasters in 
the year had a cap of $28,800). In general, when HUD refers to units 
``seriously damaged,'' it is referring to units with a FEMA damage 
assessment of $3,000 or greater.
    <bullet> The number of rental units with unmet needs are units FEMA 
housing inspectors determined would require more than $3,000 to become 
habitable AND are occupied by households with an income reported to 
FEMA of less than $20,000. The use of the $20,000 income cut-off for 
calculating rental unmet needs is in response to the statutory language 
that emphasized the use of the funds for affordable rental housing.
    <bullet> Each of the FEMA inspected units are categorized by HUD 
into one of five categories:
    [cir] Minor-Low: Less than $3,000 of FEMA-inspected damage
    [cir] Minor-High: $3,000 to $7,999 of FEMA-inspected damage
    [cir] Major-Low: $8,000 to $14,999 of FEMA-inspected damage
    [cir] Major-High: $15,000 to $28,800 of FEMA-inspected damage
    [cir] Severe: Greater than $28,800 of FEMA-inspected damage or -
determined destroyed.

    Note: FEMA has recently raised its maximum grant to $30,300. For 
this first round allocation, HUD continues to use the $28,800 as the 
threshold, because it applied for most of the declared disasters.

    <bullet> The average cost to fully repair a home for a specific 
disaster within each of the damage categories noted above is calculated 
using the average real property damage repair costs determined by the 
SBA for its disaster loan program for the subset of homes inspected by 
both SBA and FEMA. Because SBA is inspecting for full repair costs, it 
is presumed to reflect the full cost to repair the home, which is 
generally more than FEMA estimates on the cost to make the home 
habitable. If fewer than 100 SBA inspections are made for homes within 
a FEMA damage category, the estimated damage amount in the category for 
that disaster has a cap applied at the 75th percentile of all damaged 
units for that category for all disasters and has a floor applied at 
the 25th percentile.
    <bullet> The base amount of unmet housing needs is then increased 
by 20 percent to reflect an assumed premium associated with the 
additional costs needed to run a repair program with CDBG funding.

Calculating Infrastructure Needs

    As noted above, the statute for this allocation states that ``such 
funds may not be used for activities reimbursable by, or for which 
funds are made available by, the Federal Emergency Management Agency or 
the Army Corps of Engineers'' and that ``none of the funds * * * may be 
used * * * as a matching requirement, share, or contribution for any 
other Federal program.'' In past disasters, unmet infrastructure need 
has been calculated at the required match portion for the public 
assistance program. Because these funds cannot be used as match, we 
must identify a proxy for what infrastructure activities are likely to 
require funding beyond FEMA's Public Assistance funding and the state 
match requirement. To best proxy unmet needs that would exceed what 
FEMA and state match will pay for under the Public Assistance program, 
this allocation uses only a subset of the Public Assistance damage 
estimates reflecting the categories of activities most likely to 
require CDBG funding above the Public Assistance and State Match 
requirement. Those activities are the following categories: C--Roads 
and Bridges; D--Water Control Facilities; E--Public Buildings; F--
Public Utilities; and G--Recreational--Other. Categories A (Debris 
Removal) and B (Protective Measures) are largely expended immediately 
after a disaster and reflect interim recovery measures, rather than the 
long-term recovery measures the CDBG funds are generally used for. 
``Unmet'' infrastructure needs assume that the subset categories of 
Public Assistance needs will have state aggregate costs 25 percent 
higher than that covered by FEMA or the state match requirement.

----------------------------------------------------------------------------------------------------------------
                                                           Disasters with
                                                             project(s)       Total estimate        Percent
----------------------------------------------------------------------------------------------------------------
Public Assistance Total................................                 75     $5,322,992,430
A--Debris--Removal.....................................                 71      1,185,035,209                 22

[[Page 41155]]

 
B--Protective--Measures................................                 75        995,171,090                 19
C--Roads--Bridges......................................                 73        494,369,300                  9
D--Water--Control--Facilities..........................                 43         57,455,582                  1
E--Public--Buildings...................................                 69      1,509,980,683                 28
F--Public--Utilities...................................                 74        837,448,078                 16
G--Recreational--Other.................................                 64        243,532,488                  5
----------------------------------------------------------------------------------------------------------------

    FEMA Extract: April 14, 2009.

Calculating Economic Revitalization Needs

    Based on SBA disaster loans to businesses, HUD used the sum of real 
property and real content loss of small businesses not receiving an SBA 
disaster loan. This is adjusted upward by the proportion of 
applications that were received for a disaster for which content and 
real property loss were not calculated because the applicant had 
inadequate credit or income. For example, if a state had 160 
applications for assistance, and if 150 had calculated needs and 10 
were denied in the pre-processing stage for not enough income or poor 
credit, the estimated unmet need calculation would be increased as (1 + 
10/160), multiplied by the calculated unmet real content loss.
    SBA business loan data shows that verified real estate damage and 
content loss not approved for an SBA loan equaled $972 million. Across 
all of the disasters there were 17,157 applications for a business 
disaster loan from SBA. No inspections were done (and loss calculated) 
for 14 percent of those applications. SBA maintains information on why 
an application was denied. There are dozens of reasons for such 
denials, but the most common relate to income and credit. Of those 
denied at the pre-processing stage 59 percent were denied because of a 
low credit score and 10 percent for not being able to establish 
repayment ability. The remaining applications denied in pre-processing 
are largely denied for being ineligible for the program or similar 
reasons. For the applications that get processed and a loss determined 
but are subsequently not approved, the reasons for not being approved 
are 38 percent for inability to repay, 2 percent for poor credit, and 
dozens of other reasons, but mostly because the applications are 
withdrawn by the applicant.
    Because applications denied for poor credit or inadequate income 
are the most likely measure of requiring the type of assistance 
available with CDBG recovery funds, the calculated unmet business needs 
for each state are adjusted upwards by the proportion of total 
applications that were denied at the pre-process stage because of poor 
credit or inability to show repayment ability.

Calculating Challenge To Recover

    The 2005 hurricanes damaged more than 1.2 million homes. One year 
after the disaster, 90 percent of those homes were occupied. It is in 
the areas that homes were vacant a year after the storms that the 
recovery has been especially slow, and a large number of those homes 
vacant a year after the storms continue to remain vacant. As described 
in more detail below, two variables are very strong predictors of 
whether a home becomes vacant and remains vacant over an extended 
period of time. Those variables are the percent of homes with serious 
damage within the neighborhood (Census Tract is the proxy) and if a 
home received very severe damage.
    The vast majority of households impacted by a disaster are able to 
return to their homes within a relatively short time frame. For those 
households displaced longer than a year and for the neighborhoods where 
that displacement occurs, the recovery challenges are much more 
pronounced. For example, areas may decide not to build back and to 
build elsewhere, using buyout programs and other strategies. 
Alternatively, homes built back might need to be built to a higher 
standard of construction to better resist future disasters. These are 
factors not accounted for in the basic repair costs calculated in the 
needs calculations for housing, infrastructure, and economic 
revitalization. To account for these above normal recovery needs that 
are associated with only the most severe of disasters, HUD has used 
data from Hurricanes Katrina, Rita, and Wilma to develop a model for 
estimating if a home is at a high or low risk for overcoming these 
recovery challenges. There are many reasons why a recovery might not 
happen for a particular house, but just two factors can predict 34 
percent of the variance between homes. According to the model, any home 
with serious damage (FEMA-estimated damage of greater than $5,200 in a 
2005 disaster) had about a one percent risk for being vacant for some 
period during the 43 months following the disaster. A home with severe 
damage (more than 50 percent damaged) had an additional 20 percent 
risk, and if that home was in a Census Tract where many other homes had 
major or severe damage, it had an additional risk of that proportion of 
homes affected, multiplied by 34 percent. Such a risk factor can be a 
useful tool for adjusting grants so that states with a higher per-
damaged home risk score get relatively more than states with a 
relatively lower per-damaged home risk score.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                 Unstandardized                       Standardized
                                                                  coefficients                        coefficients
                                                               ------------------     Std. Error   ------------------         t               Sig.
                                                                        B                                 Beta
--------------------------------------------------------------------------------------------------------------------------------------------------------
(Constant)....................................................          0.010695          0.000909  ................          11.76848          5.77E-32
Percent of homes in Census Tract with serious damage..........          0.347154          0.001615          0.375916          214.9506                 0
Home with severe damage.......................................          0.195913          0.001158          0.295827          169.1555                 0
--------------------------------------------------------------------------------------------------------------------------------------------------------

Dependent Variable: A time weighted average vacancy risk due to the 
2005 Hurricanes =
[16 * (1 - ratio of 12-2006 active address rate to 2005 pre-storm 
active address rate)
14 * (1 - ratio of 2-2008 active address rate to 2005 pre-storm active 
address rate)

[[Page 41156]]

10 * (1 - ratio of 12-2008 active address rate to 2005 pre-storm active 
address rate)
3 * (1 - ratio of 3-2009 active address rate to 2005 pre-storm active 
address rate)]
Divided by 43 months. (the longer the vacancy the higher the average 
score)

R-square: 0.340
N: 287,190

    To adjust for this greater recovery challenge, the results of the 
analysis above are used in the following model for 2008:

Vacancy Risk Score =
    0.010695 (Constant)
    + 0.347154 Percent of homes in Census Tract with serious damage
    + 0.195913 Home with major-high or severe damage

    The risk score is then aggregated for each disaster and divided by 
the total number of housing units with more than very minor damage. 
That is, we determine a per-damaged home recovery challenge risk score. 
Such a risk factor can be a useful tool for adjusting grants so that 
states with a higher risk for long-term recovery challenges get a 
somewhat higher grant because of this risk.

[FR Doc. E9-19488 Filed 8-13-09; 8:45 am]
BILLING CODE 4210-67-P