62912 Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations

DEPARTMENT OF HOUSING AND

URBAN DEVELOPMENT

24 CFR Part 570

[Docket No. FR–4155–F–02]

RIN 2506–AB91

Community Development Block

Grants: New York Small Cities

Program

AGENCY: Office of the Assistant

Secretary for Community Planning and

Development, HUD.

ACTION: Final rule.

SUMMARY: This rule amends the

regulations for the Community

Development Block Grants (CDBG)

Small Cities Program for the State of

New York. This rule eliminates the use

of multiyear plans in the Small Cities

Program for any NOFA published in

calendar year 1997 or later. This rule

also limits the maximum grant award

under the annual Small Cities NOFA to

any single, eligible unit of general local

government to $400,000, except that

counties may apply for a maximum of

$600,000. HUD will honor grant awards

for multiyear plans approved in

response to NOFAs issued prior to

calendar year 1997. In order to

implement the reduction of grant limits,

HUD intends to restrict competition

under future annual Small Cities

NOFAs to single purpose grants. This

rule also makes minor technical and

clarifying changes to the regulations.

EFFECTIVE DATE: December 26, 1997.

FOR FURTHER INFORMATION CONTACT:

Cornelia Robertson Terry, State and

Small Cities Division, Office of

Community Planning and Development,

Department of Housing and Urban

Development, Room 7184, 451 Seventh

Street, SW., Washington, DC 20410;

telephone (202) 708–1322 (voice). (This

is not a toll-free number.) Persons with

hearing or speech impairments may

access this number via TTY by calling

the Federal Information Relay Service at

(800) 877–8339.

SUPPLEMENTARY INFORMATION: Title I of

the Housing and Community

Development Act of 1974 (42 U.S.C.

5300–5320) permits each State to elect

to administer all aspects of the

Community Development Block Grant

(CDBG) Program annual fund allocation

for the nonentitlement areas within its

jurisdiction. The policies and

procedures for HUD’s CDBG Small

Cities Program in 24 CFR part 570,

subpart F, apply to grants for

nonentitlement areas in States such as

New York that did not elect to

administer the CDBG Program.

Section 226 of the Departments of

Veterans Affairs and Housing and Urban

Development, and Independent

Agencies Appropriations Act, 1996

(Pub. L. 104–134; approved April 26,

1996) (the Act) requires that HUD issue

proposed and final rules for the

requirements of the CDBG program for

the State of New York before issuing a

Notice of Funding Availability for funds

made available for fiscal year (FY) 1997.

In accordance with section 226, HUD

published a proposed rule on June 11,

1997 (62 FR 31944) in order to solicit

public comments on the requirements of

the New York CDBG Small Cities

Program in 24 CFR part 570, subpart F.

(Although §§ 570.429 and 570.430 also

appear in subpart F and are set forth in

this final rule, these sections only apply

to the Small Cities Program in Hawaii.)

HUD also solicited comments on two

proposed changes to the New York

Small Cities Program, as described

below.

New York Small Cities Program Design

On June 11, 1997, HUD proposed to

remove paragraph (a)(3) of § 570.421,

and to add a new paragraph (f), which

would eliminate the use of multiyear

plans in the New York Small Cities

Program for NOFAs published in

calendar year 1997 or later. HUD will,

however, continue to honor multiyear

plans approved in response to NOFAs

published prior to calendar year 1997.

HUD also proposed to add a new

paragraph (g) to the current regulations

to provide that the maximum grant

amount that HUD will award to an

eligible unit of general local government

in response to a NOFA for the annual

Small Cities competition published in

calendar year 1997 or later is $400,000,

except that counties could apply for a

maximum of $600,000 in HUDadministered Small Cities grant funds.

HUD will, however, award larger grants

as necessary to honor the terms of

multiyear plans approved under the

provisions of NOFAs published prior to

calendar year 1997.

Discussion of Public Comments

The deadline for public comments on

the July 11, 1997 proposed rule was July

11, 1997. HUD received only 10

comments.

Grant Limits

Several commenters offered support

for HUD’s proposal to limit maximum

future grant amounts. These

commenters included a private

consultant and public and private

housing and community development

organizations. These commenters

remarked that the grant limits will help

spread the extremely limited funds to

worthwhile projects in small

communities across the State.

Other commenters disagreed,

however, arguing that communities

need larger comprehensive grants in

order to avert infrastructure dilapidation

or to provide substantial housing

assistance or economic development.

These commenters included a United

States Senator, a State senator, and

others that commented on behalf of

local communities.

Although HUD recognizes that there

are certain advantages of higher grant

limits, HUD has determined that the

grant limits contained in the June 11,

1997 proposed rule are appropriate and

has adopted them in this final rule. In

addition, in order to encourage units of

general local government to act

cooperatively to resolve regional

problems that affect more than one

locality, this final rule amends § 570.422

to provide that the grant limit for joint

applications will be the maximum

single purpose grant limit established in

§ 570.421(g) or a NOFA, multiplied by

the number of participating

governments in the cooperation

agreement that was established to

submit the joint application. For the

purpose of determining such a multiple

grant limit, and in order to receive such

amount, this rule clarifies that a

participating joint applicant must

receive a substantial direct benefit from

the activities proposed in the

application and must not be acting

solely on behalf of, or in conjunction

with, another jurisdiction solely to raise

the maximum grant amount that may be

awarded. In addition, this rule provides

that the statistics of each participant

counted for maximum grant limits shall

also be used for purposes of the

selection factors referred to in

§ 570.421(a).

Multiyear Commitments

Some of the commenters agreed with

HUD’s proposal to eliminate the use of

multiyear plans in the Small Cities

Program. These commenters included a

private consultant and public and

private housing and community

development organizations.

In response to previous suggestions

from Small Cities grantees, HUD offered

multiyear grant commitments in FY

1995, along with the increase in grant

limits in FY 1996, to assist communities

with longer term development programs

within the context of a comprehensive

strategy. These multiyear commitments

assure continued funding during the

second and/or third year, provided the

applicant submits an acceptable

application with the required
Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations 62913

certifications and is able to demonstrate

continued administrative capacity for

carrying out grant activities, and

sufficient appropriated funds are

available. Multiyear plans are

particularly beneficial for smaller

communities, which lack full-time staff

and must turn to high-priced

consultants to prepare Small Cities

applications each year.

The granting of multiyear

commitments does not, however,

unfairly reduce the pool of funds

available for competition in future

years. In the 5-year period from FY 1990

to FY 1994, prior to the offering of

multiyear commitments, 46

communities received at least 3 annual

grants. In effect, these 46 communities,

based on the depth of their needs and

the rating quality of their applications,

had achieved a de facto multiyear

status. In the last 2 fiscal years, the

Small Cities Program has only extended

multiyear commitments to 29 grantees

(including 17 3-year commitments and

12 2-year commitments). Most of these

multiyear commitments were awarded

in single purpose grants to the smallest

communities. Therefore, the multiyear

commitments did not significantly

change the availability of the funds, but

reduced the administrative burden and

cost of annual applications.

In response to the support of the

commenters, however, this final rule

eliminates the use of multiyear plans in

the Small Cities Program for NOFAs

published in calendar year 1997 or later,

as provided in the June 11, 1997

proposed rule.

Small Cities Funds in Entitlement

Communities

Two commenters remarked that Small

Cities funds should not go to

communities that are eligible for CDBG

entitlement funds. Since the

metropolitan areas are generally covered

by entitlement funds, these commenters

stressed that these areas should not also

be able to make use of the Small Cities

funds.

Under the current regulations,

entitlement communities are not eligible

applicants for Small Cities CDBG

nonentitlement funds. Section

570.421(e) provides, however, that ‘‘[a]n

applicant may conduct eligible CDBG

activities outside its boundaries. These

activities must be demonstrated to be

appropriate to meeting the applicant’s

needs and objectives, and must be

consistent with State and local law.’’

This provision allows a nonentitlement

county, for example, to use funds in a

metropolitan city or an urban county.

HUD did not propose to change these

requirements in the June 11, 1997

proposed rule.

As some of the commenters noted, the

strength of the Small Cities CDBG

Program is that local communities can

and should determine how the funds

should be used. HUD supports such

local decisionmaking about how best to

meet local needs. Therefore, HUD has

decided not to change the current

regulations regarding the use of Small

Cities CDBG funds in entitlement areas

in response to the two commenters.

Set-Asides

Two commenters expressed concern

regarding the ‘‘set-asides’’ provided for

in the Small Cities regulations for public

service activities (§ 570.421(d)),

imminent threats to public health and

safety (§ 570.424), and economic

development (§ 570.421(a)(5) of this

rule; § 570.421(a)(6) of the regulations

prior to the effectiveness of this rule).

These commenters argue that such ‘‘setasides’’ remove funds from the general

competition that would otherwise be

available for worthy community

development activities.

Although HUD appreciates the

comments received on these provisions,

there is no set-aside for public services.

The regulations merely provide that no

more than 15 percent of the State’s

nonentitlement allocation may be used

for public services. This provision is

consistent with the CDBG program as a

whole. This is not a new provision;

HUD did not specifically propose

changes to this provision in the June 11,

1997 proposed rule. HUD has never

held a separate competition for ‘‘public

service’’ grants and has no authority to

do so under the regulations.

Imminent threat grants address health

and safety related needs in

communities. Only 15 percent of Small

Cities funds may be used for such

grants, and the actual percentage of

imminent threat grants is far lower. This

is not a new provision, and HUD

proposed no changes to this provision.

Therefore, notwithstanding the two

comments received on this issue, this

final rule retains the imminent threat

set-aside to enable quick responses to

disasters or emergencies that small

cities face.

Section 570.421(a)(5) of this rule,

which allows HUD to fund economic

development grants under certain

circumstances, is not a new provision,

and HUD proposed no changes to that

provision. Notwithstanding the two

comments HUD received, HUD has

determined that it should retain this

provision.

Minor Technical Changes and

Clarifications

HUD is also taking the opportunity in

this final rule to make several minor

technical changes and clarifications to

the regulations for the Small Cities

CDBG Program. These changes include

correcting an inconsistency in

§ 570.430(a) regarding the limitation on

planning and administrative costs in the

Hawaii program. This paragraph refers

to § 570.200(g) of the regulations for the

Entitlement Program, under which the

planning and administrative costs cap is

calculated based on obligated funds.

The Small Cities provision in

§ 570.430(a), however, had relied upon

expenditures. This final rule corrects

that provision so that it consistently

relies upon obligated funds.

Findings and Certifications

Environmental Impact

A Finding of No Significant Impact

with respect to the environment was

made in accordance with HUD

regulations in 24 CFR part 50 that

implement section 102(2)(C) of the

National Environmental Policy Act of

1969 (42 U.S.C. 4223). The Finding is

available for public inspection between

7:30 a.m. and 5:30 p.m. weekdays in the

Office of the Rules Docket Clerk, Office

of General Counsel, Room 10276,

Department of Housing and Urban

Development, 451 7th Street, SW,

Washington, DC 20410.

Impact on Small Entities

The Secretary, in accordance with the

Regulatory Flexibility Act (5 U.S.C.

605(b)), has reviewed this rule before

publication, and by approving it

certifies that this rule would not have a

significant economic impact on a

substantial number of small entities.

This rule would make limited changes

that would not have a significant impact

on small entities.

Federalism

The General Counsel, as the

Designated Official under section 6(a) of

Executive Order 12612, Federalism, has

determined that this rule would not

have substantial direct effects on States

or their political subdivisions, or the

relationship between the Federal

Government and the States, or on the

distribution of power and

responsibilities among the various

levels of government. This rule would

make limited changes that would not

have Federalism implications. As a

result, this rule is not subject to review

under the Order.
62914 Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates

Reform Act of 1995 (Pub. L. 104–4;

approved March 22, 1995) (UMRA)

establishes requirements for Federal

agencies to assess the effects of their

regulatory actions on State, local, and

tribal governments, and on the private

sector. This rule would not impose any

Federal mandates on any State, local, or

tribal governments, or on the private

sector, within the meaning of the

UMRA.

Catalogue of Federal Domestic Assistance

The Catalogue of Federal Domestic

Assistance program number is 14.219,

Community Development Block Grants—

Small Cities Program.

List of Subjects in 24 CFR Part 570

Administrative practice and

procedure, American Samoa,

Community development block grants,

Grant programs—education, Grant

programs—housing and community

development, Guam, Indians, Lead

poisoning, Loan programs—housing and

community development, Low and

moderate income housing, New

communities, Northern Mariana Islands,

Pacific Islands Trust Territory, Pockets

of poverty, Puerto Rico, Reporting and

recordkeeping requirements, Small

cities, Student aid, Virgin Islands.

Accordingly, for the reasons set out in

the preamble, 24 CFR part 570 is

amended as follows:

PART 570—COMMUNITY

DEVELOPMENT BLOCK GRANTS

1. The authority citation for 24 CFR

part 570 is revised to read as follows:

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

5320.

2. Subpart F is revised to read as

follows:

Subpart F—Small Cities Program

Sec.

570.420 General.

570.421 New York Small Cities Program

design.

570.422 Applications from joint applicants.

570.423 Application for the HUDadministered New York Small Cities

Grants.

570.424 Grants for imminent threats to

public health and safety.

570.425 HUD review and actions on

applications for New York State

applicants.

570.426 Program income.

570.427 Program amendments.

570.428 Reallocated funds.

570.429 Hawaii general and grant

requirements.

570.430 Hawaii program operation

requirements.

570.431 Citizen participation.

570.432 Repayment of Section 108 loans.

Subpart F—Small Cities Program

§ 570.420 General.

(a) HUD administration of

nonentitlement CDBG funds. Title I of

the Housing and Community

Development Act of 1974 permits each

State to elect to administer all aspects of

the Community Development Block

Grant (CDBG) Program annual fund

allocation for the nonentitlement areas

within its jurisdiction. This subpart sets

forth policies and procedures applicable

to grants for nonentitlement areas in

States that have not elected, in a manner

and time prescribed by the Secretary, to

administer the CDBG Program. States

that elected to administer the program

after the close of fiscal year 1984 cannot

return administration of the program to

HUD. A decision by a State to

discontinue administration of the

program would result in the loss of

CDBG funds for nonentitlement areas in

that State and the reallocation of those

funds to all States in the succeeding

fiscal year.

(b) Scope and applicability. (1) This

subpart describes the policies and

procedures of the Small Cities Program

which apply to nonentitlement areas in

States where HUD administers the

CDBG Program. HUD currently

administers the Small Cities Program in

only two States—New York and Hawaii.

This subpart principally addresses the

requirements for New York, and

§§ 570.429 and 570.430 identify special

procedures applicable to Hawaii.

(2) The allocation of formula CDBG

funds for use in nonentitlement areas of

Hawaii and New York is as provided in

subpart A of this part. The policies and

procedures set forth in the following

identified subparts of this part 570

apply to the HUD-administered Small

Cities Program, except as modified or

limited under the provisions thereof or

this subpart:

(i) Subpart A—General Provisions;

(ii) Subpart C—Eligible Activities;

(iii) Subpart J—Grant Administration;

(iv) Subpart K—Other Program

Requirements; and

(v) Subpart O—Performance Reviews.

(c) Public notification requirements.

(1) Section 102 of the Department of

Housing and Urban Development

Reform Act of 1989 (42 U.S.C. 3545)

contains a number of provisions that are

designed to ensure greater

accountability and integrity in the

provision of certain types of assistance

administered by HUD. All competitive

grants in the HUD-administered Small

Cities Program in New York are affected

by this legislation, and the requirements

identified at 24 CFR part 4 apply to

them. Imminent threat grants under

§ 570.424 and section 108 repayment

grants under § 570.432 are not affected

by section 102 as they are not

competitive grants.

(2) The Hawaii HUD-administered

Small Cities Program is not subject to

section 102, since the funds are not

distributed in a competitive manner.

(d) Abbreviated consolidated plan.

Applications for the HUD-administered

Small Cities Program which contain

housing activities must include a

certification that the proposed housing

activities are consistent with the

applicant’s consolidated plan as

described at 24 CFR part 91.

(e) National and primary objectives.

(1) Each activity funded through the

Small Cities Program must meet one of

the following national objectives as

defined under the criteria in § 570.208.

Each activity must:

(i) Benefit low- and moderate-income

families;

(ii) Aid in the prevention or

elimination of slums or blight; or

(iii) Be an activity which the grantee

certifies is designed to meet other

community development needs having a

particular urgency because existing

conditions pose a serious and

immediate threat to the health or

welfare of the community where other

financial resources are not available to

meet such needs.

(2) In addition to the objectives

described in paragraph (e)(1) of this

section, with respect to grants made

through the Small Cities Program, not

less than 70 percent of the total of grant

funds from each grant and Section 108

loan guarantee funds received under

subpart M of this part within a fiscal

year must be expended for activities

which benefit low- and moderateincome persons under the criteria of

§§ 570.208(a), or 570.208(d) (5) or (6). In

the case of multiyear plans in New York

State approved in response to NOFAs

published prior to calendar year 1997,

not less than 70 percent of the total

funding for grants approved pursuant to

a multiyear plan for a time period of up

to 3 years must be expended for

activities which benefit low- and

moderate-income persons. Thus, 70

percent of the grant for year 1 of a

multiyear plan approved in response to

NOFAs published prior to calendar year

1997 must meet the 70 percent

requirement, 70 percent of the

combined grants from years 1 and 2

must meet the requirement, and 70

percent of the combined grants from

years 1, 2, and 3 must meet the

requirement. In determining the

percentage of funds expended for such

activity, the provisions of
Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations 62915

§ 570.200(a)(3) (i), (iii), (iv), and (v) shall

apply.

(Approved by the Office of Management and

Budget under control number 2506–0060).

§ 570.421 New York Small Cities Program

design.

(a) Selection system—(1) Competitive

applications. Each competitive

application will be rated and scored

against at least the following factors:

(i) Need-absolute number of persons

in poverty as further explained in the

NOFA;

(ii) Need-percent of persons in

poverty as further explained in the

NOFA;

(iii) Program Impact; and

(iv) Fair Housing and Equal

Opportunity, which may include the

applicant’s Section 3 plan and

implementation efforts with respect to

actions to affirmatively further fair

housing. The NOFA described in

paragraph (b) of this section will contain

a more detailed description of these

factors, and the relative weight that each

factor will be given.

(2) In addition HUD reserves the right

to establish minimal thresholds for

selection factors and otherwise select

grants in accordance with § 570.425 and

the applicable NOFA.

(3) Imminent threats to public health

and safety. The criteria for these grants

are described in § 570.424.

(4) Repayment of Section 108 loans.

The criteria for these grants are

described in § 570.432.

(5) Economic development grants.

HUD intends to use the Section 108 loan

guarantee program to the maximum

extent feasible to fund economic

development projects in the

nonentitlement areas of New York. In

the event that there are not enough

Section 108 loan guarantee funds

available to fund viable economic

development projects, if a project needs

a grant in addition to a loan guarantee

to make it viable, or if the project does

not meet the requirements of the Section

108 program but is eligible for a grant

under this subpart, HUD may fund

Economic Development applications as

they are determined to be fundable in a

specific amount by HUD up to the sum

set aside for economic development

projects in a notice of funding

availability, notwithstanding paragraph

(g) of this section. HUD also has the

option in a NOFA of funding economic

development activities on a competitive

basis, as a competitive application as

described in paragraph (a)(1) of this

section. In order for an applicant to

receive Small Cities grant funds on a

noncompetitive basis, the field office

must determine that the economic

development project will have a

substantial impact on the needs

identified by the applicant.

(b) Notice of funding availability.

HUD will issue one or more Notice(s) of

Funding Availability (NOFA) each fiscal

year which will indicate the amount of

funds available, the annual grant limits

per grantee, type of grants available, the

application requirements, and the rating

factors that will be used for those grants

which are competitive. A NOFA may set

forth, subject to the requirements of this

subpart, additional selection criteria for

all grants.

(c) Eligible applicants. (1) Eligible

applicants in New York are units of

general local government, excluding:

Metropolitan cities, urban counties,

units of general local government which

are participating in urban counties or

metropolitan cities, even if only part of

the participating unit of government is

located in the urban county or

metropolitan city. Indian tribes are also

ineligible for assistance under this

subpart. An application may be

submitted individually or jointly by

eligible applicants.

(2) Counties, cities, towns, and

villages may apply and receive funding

for separate projects to be done in the

same jurisdiction. Only one grant will

be made under each funding round for

the same type of project to be located

within the jurisdiction of a unit of

general local government (e.g., both the

county and village cannot receive

funding for a sewer system to be located

in the same village, but the county can

receive funding for a sewer system that

is located in the same village as a

rehabilitation project for which the

village receives funding). The NOFA

will contain additional information on

applicant eligibility.

(3) Counties may apply on behalf of

units of general local government

located within their jurisdiction when

the unit of general local government has

authorized the county to apply. At the

time that the county submits its

application for funding, it must submit

a resolution by the governing body of

the unit of local government that

authorizes the county to submit an

application on behalf of the unit of

general local government. The county

will be considered the grantee and will

be responsible for executing all grant

documents. The county is responsible

for ensuring compliance with all laws,

regulations, and Executive Orders

applicable to the CDBG Program. HUD

will deal exclusively with the county

with respect to issues of program

administration and performance,

including remedial actions. The unit of

general local government will be

considered the grantee for the purpose

of determining grant limits. The unit of

general local government’s statistics will

be used for purposes of the selection

factors referred to in § 570.421(a).

(d) Public service activities cap.

Public service activities may be funded

up to a maximum of fifteen (15) percent

of a State’s nonentitlement allocation for

any fiscal year. HUD may award a grant

to a unit of general local government for

public service activities with up to 100

percent of the funds intended for public

service activities. HUD will apply the 15

percent statewide cap to public service

activities by funding public service

activities in the highest rated

applications in each NOFA until the cap

is reached.

(e) Activities outside an applicant’s

boundaries. An applicant may conduct

eligible CDBG activities outside its

boundaries. These activities must be

demonstrated to be appropriate to

meeting the applicant’s needs and

objectives, and must be consistent with

State and local law. This provision

includes using funds provided under

this subpart in a metropolitan city or an

urban county.

(f) Multiyear plans. HUD will not

make any new multiyear commitments

for NOFAs published in calendar year

1997 or later. HUD will continue to

honor the terms of the multiyear plans

that were approved under the

provisions of NOFAs published prior to

calendar year 1997.

(g) Maximum grant amount. The

maximum grant amount that will be

awarded to a single unit of general local

government in response to the annual

Small Cities NOFA published in

calendar year 1997 or later is $400,000,

except that counties may apply for up

to $600,000 in HUD-administered Small

Cities funds. HUD may specify lower

grant limits in the NOFA, which may

include different limits for different

types of grants available or different

types of applicants. This paragraph (g)

does not apply to multiyear plans that

were approved under the provisions of

NOFAs published prior to calendar year

1997, nor does it apply to grants

awarded in connection with paragraphs

(a)(3) through (a)(5) of this section. The

maximum limits in this paragraph (g)

apply to grants for economic

development projects awarded under

NOFAs in which there is no set-aside of

funds for such projects.

§ 570.422 Applications from joint

applicants.

Units of general local government

may submit a joint application which

addresses common problems faced by

the jurisdictions, to the extent permitted
62916 Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations

by the NOFA. A joint application must

be pursuant to a written cooperation

agreement submitted with the

application. The cooperation agreement

must authorize one of the participating

units of government to act as the lead

applicant which will submit the

application to HUD, and must delineate

the responsibilities of each participating

unit of government with respect to the

Small Cities Program. The lead

applicant is responsible for executing

the application, certifications, and grant

agreement, and ensuring compliance

with all laws, regulations, and Executive

Orders applicable to the CDBG Program.

HUD reserves the right to deal

exclusively with the lead applicant with

respect to issues of program

administration and performance,

including remedial actions. In the event

of poor performance, HUD reserves the

right to deny and/or restrict future

funding to all units of general local

government that are parties to the

cooperation agreement. The maximum

amount that may be awarded pursuant

to a joint application is the maximum

single grant limit established in a NOFA

or pursuant to § 570.421(g) multiplied

by the number of participants in the

cooperation agreement, provided that

for the purpose of determining such a

multiple grant limit, and in order to

receive such amount, a participating

joint applicant must receive a

substantial direct benefit from the

activities proposed in the application,

and must not be acting solely on behalf

of, or in conjunction with, another

jurisdiction for the sole purpose of

raising the maximum grant amount that

may be awarded. In addition, the

statistics of each participant counted for

maximum grant limits purposes shall

also be used for purposes of the

selection factors referred to in

§ 570.421(a).

§ 570.423 Application for the HUDadministered New York Small Cities Grants.

(a) Proposed application. The

applicant shall prepare and publish a

proposed application and comply with

citizen participation requirements as

described in § 570.431. The applicant

should follow the citizen participation

requirements of 24 CFR part 91 if it

submits a complete consolidated plan.

(b) Final application. The applicant

shall submit to HUD a final application

containing its community development

objectives and activities. This final

application shall be submitted, in a form

prescribed by HUD, to the appropriate

HUD office. The application also must

contain a priority nonhousing

community development plan, in

accordance with 24 CFR 91.235.

(c) Certifications. (1) Certifications

shall be submitted in a form prescribed

by HUD. If the application contains any

housing activities, the applicant shall

certify that the proposed housing

activities are consistent with its

abbreviated consolidated plan, as

described at 24 CFR part 91.

(2) In the absence of evidence (which

may, but need not, be derived from

performance reviews or other sources)

which tends to challenge in a

substantial manner the certifications

made by the applicant, the certifications

will be accepted by HUD. However, if

HUD does have available such evidence,

HUD may require the submission of

additional information or assurances

before determining whether an

applicant’s certifications are

satisfactory.

(d) Thresholds. The HUD Office may

use any information available to it to

make the threshold judgments required

by the applicable NOFA, including

information related to the applicant’s

performance with respect to any

previous assistance under this subpart.

The annual performance and evaluation

report required under § 570.507(a) is the

primary source of this information. The

HUD Office may request additional

information in cases where it is

essential to make the required

performance judgments.

(Approved by the Office of Management and

Budget under control number 2506–0060).

§ 570.424 Grants for imminent threats to

public health and safety.

(a) Criteria. The following criteria

apply for an imminent threat to public

health or safety:

(1) The Director of Community

Planning and Development of the HUD

office may, at any time, invite an

application for funds available under

this subpart in response to a request for

assistance to alleviate an imminent

threat to public health or safety that

requires immediate resolution. HUD

shall verify the urgency and the

immediacy of the threat with an

appropriate authority other than the

applicant prior to acceptance of the

application, and the Director of

Community Planning and Development

of the HUD Office shall review the claim

to determine if, in fact, an imminent

threat to public health or safety does

exist. For example, an applicant with

documented cases of disease resulting

from a contaminated drinking water

supply has an imminent threat to public

health, while an applicant ordered to

improve the quality of its drinking water

supply over the next 2 years does not

have an imminent threat within the

definition of this paragraph (a). A

natural disaster is prima facie evidence

of an imminent threat to public health

or safety. These funds are to be used to

deal with those threats that represent a

unique and unusual circumstance, not

for the type of threat that occurs with

frequency in a number of communities

within the State of New York.

(2) The applicant does not have

sufficient local resources, and other

Federal or State resources are

unavailable to alleviate the imminent

threat.

(3) All imminent threat projects must

meet the requirement of § 570.420(e).

(b) HUD action. (1) Fifteen percent of

the funds allocated to New York State

in the Small Cities Program may be

reserved to alleviate imminent threats to

the public health or safety unless a

lesser amount is specified in a NOFA.

Applications shall be submitted in

accordance with § 570.423.

(2) Applications which meet the

requirements of this section may be

approved by the Director of Community

Planning and Development of the HUD

Office without competition.

(3) The only funds reserved for

imminent threats to the public health or

safety are those specified by this section

as modified by the NOFA. After the

funds have been depleted, HUD shall

not consider further requests for grants

relating to imminent threats during that

fiscal year.

(c) Letter to proceed. Notwithstanding

§ 570.425(a)(3), after a determination

has been made that an imminent threat

exists, HUD may issue the applicant a

letter to proceed to incur costs to

alleviate the imminent threat.

Reimbursement of such costs is

dependent upon HUD approval of the

final application.

(d) Environmental review. Pursuant to

24 CFR 58.34(a)(10), grants for

imminent threats to public health or

safety are excluded from some or all of

the environmental review requirements

of 24 CFR part 58, to the extent

provided therein.

§ 570.425 HUD review and actions on

applications for New York State applicants.

(a) Final application submission—(1)

Submission deadline. HUD will

establish a time period during which

final applications must be submitted to

the appropriate office. The dates for this

period will be published in a notice in

the Federal Register.

(2) Incomplete applications.

Applications must contain the

information required by HUD.

Information relative to the application

will not be accepted or considered if

received after the submission deadline,
Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations 62917

unless the information is specifically

requested in writing by HUD.

(3) Pre-agreement costs. HUD

authorizes a unit of general local

government to incur costs during a

Federal fiscal year in which a grant is

made or the prior fiscal year for

preparation of a CDBG grant

application, planning costs eligible

under § 570.205, environmental

assessments, and project engineering

and design costs for eligible activities

under §§ 570.201 through 570.204

before the establishment of a formal

grant relationship between the applicant

and HUD. Costs of such activities for the

funded application may be charged to

the grant should it be funded, provided

that the activities are undertaken in

accordance with the requirements of

this subpart, and 24 CFR part 58. It is

understood that the incurring of costs

described in this paragraph creates no

obligation on HUD to approve the

application.

(b) HUD action on final application—

(1) Review and notification. Following

the review of the applications, HUD will

promptly notify each applicant of the

action taken with regard to its

application. Documentation which

supports HUD’s decisions on

applications will be available to the

public.

(2) Conditional approval. HUD may

make a conditional approval, in which

case the grant will be approved but the

obligation and utilization of funds will

be restricted. The reasons for the

conditional approval and the actions

necessary to remove the condition will

be specified. Failure to satisfy the

condition may result in a termination of

the grant.

(3) HUD will not make a Small Cities

grant when it is determined that the

grant will only have a minimal or

insignificant impact on the grantee.

(4) Individual grant amounts. In

determining appropriate grant amounts

to be awarded, HUD may take into

account the size of the applicant, the

level of demand, the scale of the activity

proposed relative to need and

operational capacity, the number of

persons to be served, the amount of

funds required to achieve project

objectives and the administrative

capacity of the applicant to complete

the activities in a timely manner.

(c) Streamlined application

requirement for previous applicants.

HUD may provide pursuant to a NOFA

that if an applicant notifies HUD in

writing within the application period

specified in a NOFA that it wishes to be

so considered, HUD will consider

unfunded applications from the prior

round or competition that meet the

threshold requirements of the NOFA.

The applicant will have the option of

withdrawing its application, or

amending or supplementing the

application for succeeding rounds of

competition. If there is no significant

change in the application involving new

activities or alteration of proposed

activities that will significantly change

the scope, location or objectives of the

proposed activities or beneficiaries,

there will be no further citizen

participation requirement to keep the

application active for succeeding rounds

of competition. Applicants availing

themselves of the option to have an

application from the previous round or

competition reconsidered by HUD must

submit a new abbreviated or full

consolidated plan, if the new

competitive funding round is in a

different fiscal year than the funding

round or competition for which the

application was originally submitted.

§ 570.426 Program income.

(a) The provisions of § 570.504(b)

apply to all program income generated

by a specific grant and received prior to

grant closeout.

(b) If the unit of general local

government has another ongoing CDBG

grant at the time of closeout, the

program income will be considered to

be program income of the ongoing grant.

The grantee can choose which grant to

credit the program income to if it has

multiple open CDBG grants.

(c) If the unit of general local

government has no open ongoing CDBG

grant at the time of closeout, program

income of the unit of general local

government or its subrecipients which

amounts to less than $25,000 per year

will not be considered to be program

income unless needed to repay a

Section 108 guaranteed loan. When

more than $25,000 of program income is

generated from one or more closed out

grants in a year after closeout, the entire

amount of the program income is

subject to the requirements of this part.

This will be a subject of the closeout

agreement described in § 570.509(c).

§ 570.427 Program amendments.

(a) HUD approval of certain program

amendments. Grantees shall request

prior HUD approval for all program

amendments involving new activities or

alteration of existing activities that will

significantly change the scope, location,

or objectives of the approved activities

or beneficiaries. Approval is subject to

the following:

(1) Programs or projects that include

new or significantly altered activities

are rated in accordance with the criteria

for selection applicable at the time the

original preapplication or application

(whichever is applicable) was rated. The

rating of the program or projects

proposed which include the new or

altered activities proposed by the

amendment must be equal to or greater

than the lowest rating received by a

funded project or program during that

cycle of ratings.

(2) Consideration shall be given to

whether any new activity proposed can

be completed promptly.

(3) If the grant was received on a

noncompetitive basis, the proposed

amended project must be able to be

completed promptly, and must meet all

of the threshold requirements that were

required for the original project. If the

proposal is to amend the project to a

type of project that was rated

competitively in the fiscal year that the

noncompetitive project was funded, the

new or altered activities proposed by

the amendment must receive a rating

equal to or greater than the lowest rating

received by a funded project or program

during that cycle of ratings.

(b) Documentation of program

amendments. Any program

amendments that do not require HUD

approval must be fully documented in

the grantee’s records.

(c) Citizen participation requirements.

Whenever an amendment requires HUD

approval, the requirements for citizen

participation in § 570.431 must be met.

§ 570.428 Reallocated funds.

(a) General. This section governs

reallocated funds originally allocated for

use under 24 CFR part 570, subpart F

(Small Cities Program).

(b) Assignment of funds to be

reallocated. Reallocated funds may be:

(1) Used at any time necessary for a

Section 108 repayment grant under

§ 570.432;

(2) Added to the next Small Cities

Program competition;

(3) Used to fund any application not

selected for funding in the most recent

Small Cities competition, because of a

procedural error made by HUD; or

(4) Used to fund the most highly

ranked unfunded application or

applications from the most recent Small

Cities Program competition.

(c) Timing. Funds which become

available shall be used as soon as

practicable.

§ 570.429 Hawaii general and grant

requirements.

(a) General. This section applies to the

HUD-administered Small Cities Program

in the State of Hawaii.

(b) Scope and applicability. Except as

otherwise provided in this section, the

policies and procedures outlined in
62918 Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations

subparts A, C, J, K, O of this part, and

in §§ 570.420, 570.430, and 570.432,

apply to the HUD-administered Small

Cities Program in the State of Hawaii.

(c) Grant amounts. (1) For each

eligible unit of general local

government, a formula grant amount

will be determined which bears the

same ratio to the total amount available

for the nonentitlement area of the State

as the weighted average of the ratios

between:

(i) The population of that eligible unit

of general local government and the

population of all eligible units of

general local government in the

nonentitlement areas of the State;

(ii) The extent of poverty in that

eligible unit of general local government

and the extent of poverty in all the

eligible units of general local

government in the nonentitlement areas

of the State; and

(iii) The extent of housing

overcrowding in that eligible unit of

general local government and the extent

of housing overcrowding in all the

eligible units of general local

government in the nonentitlement areas

of the State.

(2) In determining the average of the

ratios under this paragraph (c), the ratio

involving the extent of poverty shall be

counted twice and each of the other

ratios shall be counted once. (0.25 +

0.50 + 0.25 = 1.00).

(d) Adjustments to grants. Grant

amounts under this section may be

adjusted where an applicant’s

performance is judged inadequate,

considering:

(1) Capacity to utilize the grant

amount effectively and efficiently;

(2) Compliance with the requirements

of § 570.902(a) for timely expenditure of

funds beginning with grants made in FY

1996. In making this calculation, all

outstanding grants will be considered.

For the FY 1995 grant the requirement

is substantial compliance with the

applicant’s schedule or schedules

submitted in each previously funded

application;

(3) Compliance with other program

requirements based on monitoring visits

and audits.

(e) Reallocation. (1) Any amounts that

become available as a result of

adjustments under paragraph (d) of this

section, or any reductions under subpart

O of this part, shall be reallocated in the

same fiscal year to any remaining

eligible applicants on a pro rata basis.

(2) Any formula grant amounts

reserved for an applicant that chooses

not to submit an application shall be

reallocated to any remaining eligible

applicants on a pro rata basis.

(3) No amounts shall be reallocated

under paragraph (e) of this section in

any fiscal year to any applicant whose

grant amount was adjusted under

paragraph (d) of this section or reduced

under subpart O of this part.

(f) Required submissions. In order to

receive its formula grant under this

subpart, the applicant must submit a

consolidated plan in accordance with 24

CFR part 91. That part includes

requirements for the content of the

consolidated plan, for the process of

developing the plan, including citizen

participation provisions, for the

submission date, for HUD approval, and

for the amendment process.

(g) Application approval. HUD will

approve an application if the

jurisdiction’s submissions have been

made and approved in accordance with

24 CFR part 91 and the certifications

required therein are satisfactory to the

Secretary. The certifications will be

satisfactory to the Secretary for this

purpose unless the Secretary has

determined pursuant to subpart O of

this part that the grantee has not

complied with the requirements of this

part, has failed to carry out its

consolidated plan as provided under

§ 570.903, or has determined that there

is evidence, not directly involving the

grantee’s past performance under this

program, that tends to challenge in a

substantial manner the grantee’s

certification of future performance. If

the Secretary makes any such

determination, however, further

assurances may be required to be

submitted by the grantee as the

Secretary may deem warranted or

necessary to find the grantee’s

certification satisfactory.

(h) Grant agreement. The grant will be

made by means of a grant agreement

executed by both HUD and the grantee.

(i) Conditional grant. The Secretary

may make a conditional grant in which

case the obligation and use of grant

funds for activities may be restricted.

Conditional grants may be made where

there is substantial evidence that there

has been, or there will be, a failure to

meet the performance requirements or

criteria described in subpart O of this

part. In such case, the conditional grant

will be made by means of a grant

agreement, executed by HUD, which

includes the terms of the condition

specifying the reason for the conditional

grant, the actions necessary to remove

the condition and the deadline for

taking those actions. The grantee shall

execute and return such an agreement to

HUD within 60 days of the date of its

transmittal. Failure of the grantee to

execute and return the grant agreement

within 60 days may be deemed by HUD

to constitute rejection of the grant by the

grantee and shall be cause for HUD to

determine that the funds provided in

the grant agreement are available for

reallocation in accordance with section

106(c) of the Act. Failure to satisfy the

condition may result in a reduction in

the grant amount pursuant to § 570.911.

(Approved by the Office of Management and

Budget under control number 2506–0060)

§ 570.430 Hawaii program operation

requirements.

(a) Limitation on planning and

administrative costs. For grants made

with allocations prior to FY 1995, no

more than 20 percent of the sum of the

grant plus program income received

during the grant period shall be

expended for planning and program

administrative costs. For grants received

from allocations in FY 1995 and

thereafter, a grantee will be considered

to be in conformance with the

requirements of § 570.200(g) if funds

obligated for planning and

administration during the most recently

completed program year do not exceed

20 percent of the sum of the grant made

for that program year and the program

income received from post FY 1994

grants during that program year.

(b) Performance and evaluation

reports. Grantees will follow the

requirements of § 570.507(a) for

entitlement grant recipients for all

grants received in FY 1995 and

thereafter. Grantees will continue

following the requirements of

§ 570.507(a) for HUD-administered

small cities grants for grants received

prior to FY 1995 until those grants are

closed out.

(c) Grant closeouts. Grants received

prior to FY 1995 shall be closed out in

accordance with the procedures in

§ 570.509. Grants received in FY 1995

and thereafter shall not be closed out

individually. A grantee’s entire program

shall be closed upon program

completion if a grantee ceases its

participation in the Small Cities

Program.

(d) Public Services. Starting with the

FY 1996 grant, grantees may follow the

provisions of § 570.201(e)(1) that refer to

entitlement grantees, allowing grantees

to use 15 percent of the program income

received in the previous program year in

addition to 15 percent of the grant

amount for public services.

(e) Compliance with the primary

objective. Starting with the FY 1995

grant, grantees may select a time period

of one, two or three program years in

which to meet the requirement that not

less than 70 percent of the aggregate of

CDBG fund expenditures be for

activities benefitting low- and moderate-
Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations 62919

income persons. Grants made from

allocations prior to FY 1995 will be

considered individually for meeting the

primary objective, and expenditures for

grants from pre-FY 1995 allocations

made during and after FY 1995 will not

be considered in determining whether

the primary objective has been met for

post-1994 allocations. If the State of

Hawaii decides to administer the

Community Development Block Grant

Program for nonentitlement units of

general local government in Hawaii, the

State will be bound by the time period

for meeting the primary objective that

was chosen by each nonentitlement

grantee within the State until those time

periods have expired.

(f) Program amendments for grants

received prior to FY 1995. Grantees

must follow the requirements of 24 CFR

91.505 when amending their program

with regard to grants received prior to

FY 1995. For purposes of this paragraph

(f), the term consolidated plan as used

in 24 CFR 91.505 means an application

submitted under the Hawaii program for

pre-FY 1995 funds. Also for purposes of

this paragraph (f), to comply with the

requirements of 24 CFR 91.505, grantees

must refer to their current citizen

participation plans (adopted in

accordance with 24 CFR 91.505) to

determine the criteria for substantial

amendment and the citizen

participation process to be followed.

(Approved by the Office of Management and

Budget under control number 2506–0020.)

§ 570.431 Citizen participation.

(a) General. An applicant that is

located in a nonentitlement area of a

State that has not elected to distribute

funds shall comply with the citizen

participation requirements described in

this section, including requirements for

the preparation of the proposed

application and the final application.

The requirements for citizen

participation do not restrict the

responsibility or authority of the

applicant for the development and

execution of its community

development program.

(b) Citizen participation plan. The

applicant must develop and follow a

detailed citizen participation plan and

must make the plan public. The plan

must be completed and available before

the application for assistance is

submitted to HUD, and the applicant

must certify that it is following the plan.

The plan must set forth the applicant’s

policies and procedures for:

(1) Giving citizens timely notice of

local meetings and reasonable and

timely access to local meetings,

information, and records relating to the

grantee’s proposed and actual use of

CDBG funds including, but not limited

to:

(i) The amount of CDBG funds

expected to be made available for the

coming year, including the grant and

anticipated program income;

(ii) The range of activities that may be

undertaken with those funds;

(iii) The estimated amount of those

funds proposed to be used for activities

that will benefit low- and moderateincome persons;

(iv) The proposed CDBG activities

likely to result in displacement and the

applicant’s plans, consistent with the

policies developed under § 570.606(b),

for minimizing displacement of persons

as a result of its proposed activities; and

(v) The types and levels of assistance

the applicant plans to make available (or

to require others to make available) to

persons displaced by CDBG-funded

activities, even if the applicant expects

no displacement to occur;

(2) Providing technical assistance to

groups representative of persons of lowand moderate-income that request

assistance in developing proposals. The

level and type of assistance to be

provided is at the discretion of the

applicant. The assistance need not

include the provision of funds to the

groups;

(3) Holding a minimum of two public

hearings, for the purpose of obtaining

citizens’ views and formulating or

responding to proposals and questions.

Each public hearing must be conducted

at a different stage of the CDBG

program. Together, the hearings must

address community development and

housing needs, development of

proposed activities and review of

program performance. There must be

reasonable notice of the hearings and

the hearings must be held at times and

accessible locations convenient to

potential or actual beneficiaries, with

reasonable accommodations including

material in accessible formats for

persons with disabilities. The applicant

must specify in its plan how it will meet

the requirement for hearings at times

and locations convenient to potential or

actual beneficiaries;

(4) Meeting the needs of non-English

speaking residents in the case of public

hearings where a significant number of

non-English speaking residents can

reasonably be expected to participate;

(5) Responding to citizen complaints

and grievances, including the

procedures that citizens must follow

when submitting complaints and

grievances. The applicant’s policies and

procedures must provide for timely

written answers to written complaints

and grievances within 15 working days

of the receipt of the complaint, where

practicable; and

(6) Encouraging citizen participation,

particularly by low- and moderateincome persons who reside in slum or

blighted areas, and in other areas in

which CDBG funds are proposed to be

used.

(c) Publication of proposed

application. (1) The applicant shall

publish a proposed application

consisting of the proposed community

development activities and community

development objectives in order to

afford affected citizens an opportunity

to:

(i) Examine the application’s contents

to determine the degree to which they

may be affected;

(ii) Submit comments on the proposed

application; and

(iii) Submit comments on the

performance of the applicant.

(2) The requirement for publishing in

paragraph (c)(1) of this section may be

met by publishing a summary of the

proposed application in one or more

newspapers of general circulation, and

by making copies of the proposed

application available at libraries,

government offices, and public places.

The summary must describe the

contents and purpose of the proposed

application, and must include a list of

the locations where copies of the entire

proposed application may be examined.

(d) Preparation of a final application.

An applicant must prepare a final

application. In the preparation of the

final application, the applicant shall

consider comments and views received

related to the proposed application and

may, if appropriate, modify the final

application. The final application shall

be made available to the public and

shall include the community

development objectives and projected

use of funds, and the community

development activities.

(e) New York grantee amendments. To

assure citizen participation on program

amendments to final applications that

require HUD approval under § 570.427,

the grantee shall:

(1) Furnish citizens information

concerning the amendment;

(2) Hold one or more public hearings

to obtain the views of citizens on the

proposed amendment;

(3) Develop and publish the proposed

amendment in such a manner as to

afford affected citizens an opportunity

to examine the contents, and to submit

comments on the proposed amendment;

(4) Consider any comments and views

expressed by citizens on the proposed

amendment and, if the grantee finds it

appropriate, modify the final

amendment accordingly; and
62920 Federal Register / Vol. 62, No. 227 / Tuesday, November 25, 1997 / Rules and Regulations

(5) Make the final amendment to the

community development program

available to the public before its

submission to HUD.

§ 570.432 Repayment of section 108 loans.

Notwithstanding any other provision

of this subpart, a unit of general local

government in a nonentitlement area

where the State has not elected to

administer the CDBG program shall be

eligible for Small Cities Grant assistance

hereunder for the sole purpose of paying

any amounts due on debt obligations

issued by such unit of general local

government (or its designated public

agency) and guaranteed by the Secretary

pursuant to section 108 of the Act (see

subpart M of this part). The award of

grant assistance for such purpose shall

be consistent with section 106(d)(3)(B)

of the Act, in such amount, and subject

to such conditions as the Secretary may

determine. Since guaranteed loan funds

(as defined in § 570.701) are required to

be used in accordance with national and

primary objective requirements, and

other applicable requirements of this

part, any grant made to make payments

on the debt obligations evidencing the

guaranteed loan shall be presumed to

meet such requirements, unless HUD

determines that the guaranteed loan

funds were not used in accordance with

such requirements. Any such

determination by HUD shall not prevent

the making of the grant in the amount

of the payment due, but it may be

grounds for HUD to take appropriate

action under subpart O of this part

based on the original noncompliance.

Dated: November 19, 1997.

Jacquie Lawing,

General Deputy Assistant Secretary for

Community Planning and Development.

[FR Doc. 97–30940 Filed 11–21–97; 10:06

am]

BILLING CODE 4210–29–P