15228 Federal Register / Vol. 74, No. 63 / Friday, April 3, 2009 / Proposed Rules 

DEPARTMENT OF HOMELAND 

SECURITY 

Federal Emergency Management 

Agency 

[Docket ID FEMA–2005–0051] 

44 CFR Part 206 

RIN 1660–AA44 

Special Community Disaster Loans 

Program 

AGENCY: Federal Emergency 

Management Agency, DHS. 

ACTION: Notice of proposed rulemaking. 

SUMMARY: The Federal Emergency 

Management Agency (FEMA) proposes 

to amend its regulations regarding the 

Special Community Disaster Loans 

Program to implement loan cancellation 

provisions for Special Community 

Disaster Loans provided by FEMA to 

local governments in the Gulf region 

following Hurricanes Katrina and Rita. 

This rule does not propose the 

automatic cancellation of all Special 

Community Disaster Loans. This rule 

proposes procedures and requirements 

for governments who received Special 

Community Disaster Loans to apply for 

cancellation of loan obligations as 

authorized by the U.S. Troop Readiness, 

Veterans’ Care, Katrina Recovery, and 

Iraq Accountability Appropriations Act, 

2007. The proposed procedures are 

intended to provide sufficient 

information to FEMA to determine 

when cancellation of a Special 

Community Disaster Loan, in whole or 

in part, is warranted. This proposed rule 

would not apply to any loans made 

under FEMA’s traditional Community 

Disaster Loan program which is 

governed under separate regulations. 

DATES: Comments on the proposed rule, 

including the Paperwork Reduction Act 

information collection, are due on or 

before June 2, 2009. 

ADDRESSES: You may submit comments, 

identified by Docket ID FEMA–2005– 

0051, by one of the following methods: 

Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

E-mail: FEMA-RULES@dhs.gov. 

Include Docket ID FEMA–2005–0051 in 

the subject line of the message. 

Fax: 703–483–2999. 

Mail/Hand Delivery/Courier: Office of 

Chief Counsel, Federal Emergency 

Management Agency, Room 835, 500 C 

Street, SW., Washington, DC 20472– 

3100. 

FOR FURTHER INFORMATION CONTACT: 

James A. Walke, Disaster Assistance 

Directorate, Federal Emergency 

Management Agency, 500 C Street, SW., 

Washington, DC 20472–3300, or call 

(202) 646–2751, or e-mail 

james.walke@dhs.gov. 

Requests for additional information 

regarding FEMA’s Paperwork Reduction 

Act information collection requirements 

or copies of the information collection 

should be made to Director, Records 

Management and Privacy, FEMA, 1800 

Bell Street, Arlington, VA 20598–3005, 

facsimile number (202) 646–3347, or email address FEMA-InformationCollections@dhs.gov. 

SUPPLEMENTARY INFORMATION: 

Request for Comments on the 

Rulemaking 

FEMA encourages public 

participation in this rulemaking. All 

submissions received must include the 

agency name and docket ID (FEMA2005–0051). Regardless of the method 

used for submitting comments or 

material, all submissions will be posted, 

without change, to the Federal 

eRulemaking Portal at http:// 

www.regulations.gov, and will include 

any personal information you provide. 

Therefore, submitting this information 

makes it public. You may wish to read 

the Privacy Act notice that is available 

on the Privacy and Use Notice link on 

the Administration Navigation Bar of 

http://www.regulations.gov. 

All comments received, as well as this 

document, are available on the public 

docket for this rulemaking. For access to 

the docket, go to the Federal 

eRulemaking Portal at http:// 

www.regulations.gov. Submitted 

comments may also be inspected at 

FEMA, Office of Chief Counsel, Room 

835, 500 C Street, SW., Washington, DC 

20472–3100. 

At this time, FEMA does not 

anticipate it will hold a public meeting 

for this rulemaking project. 

I. Background and Purpose 

The Federal Emergency Management 

Agency’s (FEMA’s) Community Disaster 

Loan (CDL) Program provides funding to 

help local governments that have 

incurred significant loss in revenue due 

to a presidentially declared disaster, 

revenue that is necessary for local 

governments to provide essential 

municipal services, such as public 

schools, fire and police services, and 

sanitation services. The CDL Program 

for local governments began in 1970 as 

a program of community disaster grants. 

In 1974, Congress replaced the grant 

program with a program of community 

disaster loans. Since 1976, FEMA has 

issued 55 Community Disaster Loans 

under this program, totaling 

approximately $233.5 million. FEMA’s 

traditional CDL Program is governed 

under 44 CFR part 206 subpart K. See 

44 CFR 206.360. 

On August 29, 2005, Hurricane 

Katrina hit Louisiana, Mississippi, 

Florida, and Alabama and emergencies 

were declared in each of the 4 States— 

the most for any single disaster in 

FEMA history. Hurricane Rita soon 

followed on September 21, 2005, in an 

area that had already been affected by 

Hurricane Katrina. Federal disaster 

declarations for the storms covered 

90,000 square miles of the United 

States, an area roughly the size of the 

State of Oregon. The hurricanes directly 

affected over 1.5 million people, 

displaced approximately 771,000 

people, and resulted in a peak shelter 

population of over 267,000 people. 

Hurricanes Katrina and Rita 

devastated communities in Louisiana, 

Texas, Mississippi, and Alabama. Tax 

revenue was lost because people no 

longer lived in the area. Residents who 

remained were unable to pay taxes due 

to unemployment. Mass evacuations 

and limited sheltering options in the 

region resulted in fewer households 

purchasing goods and services and, in 

turn, paying sales tax. Although the tax 

base was severely depleted, 

communities still had to provide 

essential services such as police, 

medical personnel, teachers, and 

firefighters. Those costs are not eligible 

for Stafford Act funding from FEMA 

under the Public Assistance Program or 

under any other FEMA grant program. 

Further, the traditional CDL program 

cap of $5 million per individual loan 

was too small for the catastrophic and 

long term nature of these disasters. 

Realizing the catastrophic nature of 

Hurricanes Katrina and Rita, the 

unusual circumstances facing these 

local communities, and the lack of preexisting sources of Federal funding, 

Congress passed the Community 

Disaster Loan Act of 2005, Public Law 

109–88 (Oct. 7, 2005) (2005 Act). The 

2005 Act authorized FEMA to transfer 

funds appropriated in the Second 

Emergency Supplemental 

Appropriations Act To Meet Immediate 

Needs Arising From The Consequences 

Of Hurricane Katrina, 2005, Public Law 

109–62 (Sept. 8, 2005), to support up to 

$1 billion in loan authority to assist 

communities impacted by Hurricanes 

Katrina and Rita. Loans issued by FEMA 

under the 2005 Act are referred to as 

‘‘Special Community Disaster Loans.’’ 

For these Special Community Disaster 

Loans (Special CDLs), the 2005 Act 

added three elements to the traditional 

CDL program under section 417 of the 

Robert T. Stafford Disaster Relief and 


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Emergency Assistance Act (Stafford 

Act), 42 U.S.C. 5184: (1) It removed the 

$5 million limit on individual loans; (2) 

it restricted the loans ‘‘to assist local 

governments in providing essential 

service;’’ and (3) it made the loan 

cancellation provision of section 

417(c)(1) of the Stafford Act 

inapplicable. 

FEMA published an interim rule on 

October 18, 2005, to implement the 

provisions of the 2005 Act. See at 70 FR 

60443; also 44 CFR 206.370–206.377. 

The interim rule took effect immediately 

to allow FEMA to provide these loans as 

soon as possible to the local 

governments already impacted by 

Hurricanes Katrina and Rita. Special 

CDLs, and their accompanying 

regulations, only apply to communities 

affected by Katrina and Rita. Further, 

FEMA was only authorized to approve 

loans in either the fiscal year in which 

the disaster occurred (FY 2005) or the 

fiscal year immediately following that 

year (FY 2006). Although FEMA is no 

longer authorized to grant new 

applications for Special CDLs, FEMA 

has chosen not to remove the Special 

CDL regulations at this time, as the 

conditions such as loan administration, 

repayment, terms, and restrictions on 

the use of loan funds may still be 

applicable. 

After FEMA published its interim 

rule, Congress passed the Emergency 

Supplemental Appropriations Act for 

Defense, the Global War on Terror, and 

Hurricane Recovery, 2006, Public Law 

109–234 (June 15, 2006) (2006 Act), 

which appropriated funds to support 

$371,733,000 in loan authority in 

addition to the loans authorized under 

the 2005 Act. However, certain 

eligibility criteria for the 2006 Act 

program were different from those in the 

2005 Act program. The 2006 Act 

included three changes: (1) The 

maximum loan amount was increased to 

50 percent of the applicant’s operating 

budget the fiscal year of the disaster; (2) 

the loan analysis could only consider 

‘‘tax revenue’’ loss and not ‘‘other 

revenues’’ as allowed for in the 2005 

Act; and (3) applicants were required to 

demonstrate actual loss in tax revenues 

of 25 percent or greater. The 2006 Act, 

like the 2005 Act, made the loan 

cancellation provision of section 

417(c)(1) of the Stafford Act 

inapplicable. 

As a result of the 2005 and 2006 Acts, 

FEMA made 152 loans totaling 

$1,270,501,241 to 109 eligible 

applicants in Mississippi and Louisiana. 

Under the 2005 Act, FEMA made 52 

loans totaling $261,135,806 in 

Mississippi and 84 loans totaling 

$738,864,194 in Louisiana. In total, $1 

billion of the $1 billion loan level 

authorized in the 2005 Act was 

provided to eligible applicants 

devastated by Hurricanes Katrina and 

Rita. Under the 2006 Act, FEMA made 

four additional loans totaling $9,485,908 

in Mississippi and twelve additional 

loans totaling $261,015,333 in 

Louisiana. In total, $270,501,241 of the 

$371,733,000 loan level authorized in 

the 2006 Act was provided to eligible 

applicants devastated by Hurricanes 

Katrina and Rita. No additional eligible 

applicants were identified prior to the 

September 30, 2006 deadline for the 

remaining $101,231,759 of the loan 

authority. 

The U.S. Troop Readiness, Veterans’ 

Care, Katrina Recovery, and Iraq 

Accountability Appropriations Act, 

2007, Public Law 110–28, section 

4502(a), 119 Stat. 2061 (May 25, 2007) 

(2007 Act), removed the loan 

cancellation prohibitions contained in 

the 2005 and 2006 Acts. This 

amendment retroactively applies to the 

dates of enactment of both Acts. This 

statutory change now gives FEMA 

discretionary authority, limited by the 

language in section 417(c)(1) of the 

Stafford Act (42 U.S.C. 5184), to cancel 

Special CDLs. 

With this new authority, FEMA shall 

cancel a loan if ‘‘the revenues of the 

local government during the full three 

fiscal year period following the disaster 

are insufficient to meet the operating 

budget for the local government, 

including additional unreimbursed 

disaster-related expenses for a 

municipal operating character.’’ This 

authority is the same as FEMA’s 

authority to cancel loans issued under 

its traditional CDL program, which have 

implementing regulations at 44 CFR 

206.366. This rulemaking proposes 

procedures and requirements for local 

governments to apply for cancellation of 

Special CDLs, that are the same as those 

established for the traditional CDL 

program. FEMA expects to determine 

whether a local government’s revenues 

are insufficient using the same method 

FEMA currently uses to determine loan 

cancellations under the traditional CDL 

program. Currently, if an applicant has 

a three year cumulative operating 

deficit, FEMA analyzes the applicant’s 

revenue during that time to determine if 

the deficit was caused by insufficient 

revenues. FEMA determines this by 

subtracting the applicant’s actual postdisaster revenues from the revenue the 

applicant expected to obtain had the 

disaster not occurred. This net 

difference is the estimated revenue loss. 

If revenue loss does not account for the 

entire deficit, FEMA examines the 

applicant’s disaster-related expenditures 

to determine if an increase in 

expenditures contributed to the deficit. 

Based on the results of this analysis, 

FEMA may cancel all or a part of the 

loan. 

II. This Proposed Rule 

With the passage of the 2007 Act, 

FEMA has been given the discretionary 

ability to cancel Special CDLs issued 

under the 2005 and 2006 Acts subject to 

the limitations of section 417(c) of the 

Stafford Act. Accordingly, FEMA 

proposes to amend its Special CDL 

regulations to include loan cancellation 

procedures and requirements. 

Removing the prohibition against 

cancellation is consistent with FEMA’s 

handling of loans provided to 

communities affected under all other 

disasters. For example, communities 

who receive traditional CDLs may be 

eligible for loan cancellation. Other 

communities who have met the 

cancellation requirements of section 

417(c)(1) of the Stafford Act also have 

had loans cancelled. 

Furthermore, FEMA believes the 

sustained financial long-term recovery 

of the communities affected by 

Hurricanes Katrina and Rita may 

continue to be at risk. For those 

communities that have not exhibited 

reasonable financial recovery after three 

years, cancellation may be appropriate, 

subject to the limitations of section 

417(c) of the Stafford Act. A number of 

the Gulf Coast communities that carry 

Special Community Disaster Loans have 

argued that if they do not have the 

financial strength to repay these loans 

on a timely basis, going into default may 

further impede their ability to recover, 

affecting among other things, a 

municipality’s ability to issue bonds. 

This rule does not propose the 

automatic cancellation of all Special 

Community Disaster Loans. FEMA’s 

authority to provide cancellation is 

limited to those communities whose 

revenues during the three full fiscal year 

period following the major disaster are 

insufficient to meet its operating budget, 

including additional disaster-related 

expenses of a municipal operation 

character. The proposed procedures are 

intended to provide sufficient 

information to FEMA to determine 

when cancellation of a Special 

Community Disaster Loan, in whole or 

in part, is warranted. 

FEMA proposes to treat those affected 

by Hurricanes Katrina and Rita under 

the same terms as traditional CDL 

recipients. Section 417 of the Stafford 

Act provides FEMA with the 

cancellation authority for both the 

Special CDL Program and the traditional 

CDL Program. FEMA implemented 


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cancellation provisions for the 

traditional CDL Program regulations at 

44 CFR 206.366. FEMA has been 

applying these provisions to the 

traditional CDL Program since 1990 and 

has found them to be successful in 

providing the information necessary to 

determine whether cancellation is 

appropriate. Since the statutory 

authority to cancel the loans, as 

provided for in section 417(c)(1) of the 

Stafford Act, is now the same for both 

loan programs, FEMA proposes to use 

the same cancellation requirements and 

procedures for both loan programs to 

reduce confusion for the regulated 

public and reviewing officials. 

FEMA may cancel ‘‘* * * all or any 

part of Special Community Disaster 

Loans to the extent that revenues of the 

local government during the three full 

fiscal year period following the major 

disaster are insufficient to meet the 

operating budget of the local 

government, including additional 

disaster-related expenses of a municipal 

operation character.’’ 42 U.S.C. 5184(c). 

For loan cancellation purposes, FEMA 

interprets the term ‘‘operating budget’’ 

to mean actual revenues and 

expenditures of the local government as 

published in the official financial 

statements of the local government. 

Under the proposed cancellation 

procedures, the FEMA Assistant 

Administrator for the Disaster 

Assistance Directorate (Assistant 

Administrator) would review the 

Application for Loan Cancellation and a 

financial evaluation of the applicant to 

evaluate the local government’s 

revenues and determine whether FEMA 

should cancel, in whole or in part, a 

Special CDL issued under the 2005 or 

2006 Acts. FEMA would cancel a part 

of a loan, as opposed to the whole, in 

situations where the community’s 

application for cancellation reflects that 

the community’s revenues are not 

sufficient to repay the entire loan, but 

are sufficient to repay a portion thereof. 

As limited by the Stafford Act, a 

community’s eligibility for cancellation 

is based on a fixed period of time. The 

Assistant Administrator’s decision must 

be based on the revenues of the local 

government during the three full fiscal 

year period following the major disaster. 

This means that since Hurricane Katrina 

occurred in August 2005, eligibility for 

cancellation can only be based on the 

revenues of the local government during 

the following three full fiscal years. The 

typical ‘‘fiscal year,’’ as used by the 

Federal government, runs from October 

1 to September 30. Under this model, 

the three full fiscal year period after 

Hurricanes Rita and Katrina ended on 

September 30, 2008. For governments 

that operate under a different fiscal year, 

however, FEMA would modify the 

three-year period to reflect the 36 

calendar months following the disaster. 

All of the Special CDLs are three-year 

loans that may be drawn upon by the 

local community at its discretion. Once 

an amount is drawn down, interest 

begins to accrue on the loan from the 

date it is dispersed. Although 

communities may voluntarily make 

payments on the loan at any time, 

communities are not required to repay 

the loan or any related interest until five 

years after the date of the promissory 

note, unless otherwise extended by the 

Assistant Administrator. None of the 

loans referenced above will come due 

until October 2010 at the earliest. As of 

January 2009, two communities have 

voluntarily paid their loans in full, 

including accrued interest. 

Communities applying for 

cancellation would be required to 

submit their Application for Loan 

Cancellation before the expiration date 

of their loan. This would allow FEMA 

the opportunity to cancel all or a part 

of the loan and forgive all related 

interest before the loan must be repaid. 

As long as the community applies for 

and is granted cancellation before the 

date its loan expires, then all interest on 

the amount of the loan that is cancelled 

would be forgiven regardless of the date 

that the amount was dispersed or the 

date that cancellation is granted. 

If the Assistant Administrator 

determines that all or part of a 

community’s Special CDL should be 

cancelled, the amount of principal 

would be cancelled, and the related 

interest would be forgiven. The 

Assistant Administrator’s determination 

concerning loan cancellation would 

specify that any uncancelled principal 

and related interest must be repaid in 

accordance with the terms and 

conditions of the promissory note; and 

that, if repayment will constitute a 

financial hardship, the local government 

must submit for FEMA review and 

approval, a repayment schedule for 

settling the indebtedness on timely 

basis. Such repayments would be 

required to be made to the Treasurer of 

the United States and be sent to FEMA, 

Attention: Office of the Chief Financial 

Officer. A loan or cancellation of a loan 

would not reduce or affect other 

disaster-related grants or other disaster 

assistance. However, FEMA will not 

make any cancellation that would result 

in a duplication of benefits to the 

applicant. 

If the tax and other revenue rates or 

the tax assessment valuation of property 

which was not damaged or destroyed by 

the disaster are reduced in the three 

fiscal years subsequent to the major 

disaster, the tax and other revenue rates 

and tax assessment valuation factors 

applicable to such property in effect at 

the time of the major disaster would be 

used without reduction for purposes of 

computing revenues received. This may 

result in decreasing the potential for 

loan cancellations. 

If the local government transfers 

funds from its operating funds accounts 

to its capital funds account, utilizes 

operating funds for other than routine 

maintenance purposes, or significantly 

increases expenditures which are not 

disaster related, except increases due to 

inflation, the annual operating budget or 

operating statement expenditures would 

be reduced accordingly for purposes of 

evaluating any request for loan 

cancellation. 

It is not the purpose of these loan 

programs to underwrite pre-disaster 

budget or actual deficits of the local 

government. Consequently, such deficits 

carried forward would reduce any 

amounts otherwise eligible for loan 

cancellation. 

If FEMA disapproves an Application 

for Loan Cancellation, in whole or in 

part, the local government would be 

allowed to appeal and submit any 

additional information in support of the 

application within 60 days of the date 

of disapproval. The decision of the 

Assistant Administrator or designee 

would be final on the appeal of any 

disapproval of an application for 

cancellation. 

The cancellation provisions would 

retroactively apply to the dates of 

enactment of the 2005 and 2006 Acts, so 

these proposed regulations would apply 

to all of the Special CDLs awarded by 

FEMA. 

III. Regulatory Requirements 

A. Executive Order 12866, Regulatory 

Planning and Review 

Under Executive Order 12866, 

‘‘Regulatory Planning and Review,’’ 58 

FR 51735 (Oct. 4, 1993), a ‘‘significant 

regulatory action’’ is subject to Office of 

Management and Budget (OMB) review 

and the requirements of Executive Order 

12866. Section 3(f) of the Executive 

Order defines ‘‘significant regulatory 

action’’ as one that is likely to result in 

a rule that may: 

(1) Have an annual effect on the 

economy of $100 million or more, or 

may adversely affect in a material way 

the economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

State, local or tribal governments or 

communities; 


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(2) Create a serious inconsistency or 

otherwise interfere with an action taken 

or planned by another agency; 

(3) Materially alter the budgetary 

impact of entitlements, grants, user fees, 

or loan programs, or the rights and 

obligations of recipients thereof; or 

(4) Raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in the Executive Order. 

This rule is an economically 

significant regulatory action under 

section 3(f) of Executive Order 12866 

because it is expected to have an annual 

effect on the economy of more than 

$100 million, and materially alter the 

budgetary impact of the Special 

Community Disaster Loans Program. 

Accordingly, OMB has reviewed this 

rule. 

As previously stated, the 2005 Act 

authorized FEMA to transfer funds 

appropriated in the Second Emergency 

Supplemental Appropriations Act To 

Meet Immediate Needs Arising From 

The Consequences Of Hurricane 

Katrina, 2005, (Pub. L. 109–62), to 

support up to $1 billion in loan 

authority to assist communities 

impacted by Hurricanes Katrina and 

Rita. Loans issued under the 2005 Act 

are referred to as Special Community 

Disaster Loans. The next year, the 2006 

Act appropriated funds to support an 

additional $371,733,000 in loan 

authority in addition to loans 

authorized under the 2005 Act. Both the 

2005 and 2006 Acts made the loan 

cancellation provision of section 

417(c)(1) of the Stafford Act 

inapplicable, meaning FEMA had no 

authority to cancel these loans. 

The 2007 Act removes the loan 

cancellation prohibitions contained in 

the 2005 and 2006 Acts. The 

amendment retroactively applies to the 

date of enactment of both the 2005 and 

2006 Acts. This statutory change now 

gives FEMA discretionary authority, 

limited by the language in section 

417(c)(1) of the Stafford Act, to cancel 

Special Community Disaster Loans 

issued pursuant to either the 2005 or 

2006 Acts. 

Under the 2005 Act, FEMA made 52 

loans totaling $261,135,806 in 

Mississippi and 84 loans totaling 

$738,864,194 in Louisiana. In total, $1 

billion of the $1 billion loan level 

authorized in the 2005 Act was 

provided to eligible applicants 

devastated by Hurricanes Katrina and 

Rita. Under the 2006 Act, FEMA made 

four additional loans totaling $9,485,908 

in Mississippi and twelve additional 

loans totaling $261,015,333 in 

Louisiana. In total, $270,501,241 of the 

$371,733,000 loan level authorized in 

the 2006 Act was provided to eligible 

applicants devastated by Hurricanes 

Katrina and Rita. No additional eligible 

applicants were identified prior to the 

September 30, 2006 deadline for the 

remaining $101,231,759 of the loan 

authority. 

As a result of the 2005 and 2006 Acts, 

FEMA made 152 Special Community 

Disaster Loans totaling $1,270,501,241 

to 109 eligible applicants in Mississippi 

and Louisiana. The application period 

for these loans has closed, so no 

additional local governments can be 

granted loans under these programs. If 

all 152 loan recipients applied for and 

were found eligible for full cancellation 

under these proposed procedures, up to 

$1,270,501,241, plus any applicable 

interest and costs, could be cancelled. 

However, because the Special 

Community Disaster Loans operate as 

lines of credit from which applicants 

justifying need draw down, not all of 

the loan funds obligated have been 

distributed. As of March 16, 2009, only 

$831 million (approximately 65% of the 

total amount awarded) has been drawn 

down by applicants. FEMA expects that 

all communities with Special 

Community Disaster Loans will apply 

for cancellation because of the benefits 

cancellation could have assisting in the 

recovery of communities. Because 

FEMA cannot evaluate the individual 

financial situations of the communities 

without reviewing the data that would 

be submitted in the applications for 

cancellation, FEMA cannot predict at 

this time how many of those 

communities will be eligible for 

cancellation. FEMA solicits public input 

on this issue. 

The purpose of this rule is to 

implement the cancellation provisions 

outlined in the 2007 Act which allow 

for the cancellation of Special 

Community Disaster Loans for those 

communities whose revenues during the 

full three-fiscal-year period following 

the major disaster are insufficient to 

meet the operating budget of the local 

government. The cancellation 

provisions apply only to Special 

Community Disaster Loans issued under 

the 2005 and 2006 Acts. Community 

Disaster Loans issued prior to the 

enactment of the 2005 or 2006 Acts, or 

other loans not issued under the 

authority of those Acts, are not affected 

by this rule. Consequently, this rule will 

have no impact on local governments 

that do not have a Special Community 

Disaster Loan. 

FEMA proposes to use the 

cancellation procedures already familiar 

to communities who received 

traditional Community Disaster Loans. 

These procedures are located at 44 CFR 

206.366 and have been used by loan 

recipients since 1990. In assessing the 

budgetary impact of using an alternative 

procedure, FEMA considered the effect 

of possible changes to these wellestablished cancellation procedures. 

In considering alternatives, FEMA 

first considered the automatic 

cancellation of all Special Community 

Disaster Loans. However, the text of the 

statute and the legislative history show 

that Congress did not automatically 

forgive these loans, but allows for 

partial or full forgiveness of community 

disaster loan repayments if, after three 

years, local revenue remains insufficient 

to meet operating expenses. Next, FEMA 

considered revising the documents 

submitted by the local communities to 

prove that local revenue is insufficient 

to meet operating expenses. FEMA 

opted to retain the requirements used 

for the traditional Community Disaster 

Loan program that have proven accurate 

and efficient in determining whether 

local communities meet the 

requirements for cancellation of 

traditional Community Disaster Loans. 

Furthermore, the alternatives 

considered did not have a measurable 

effect on Federal costs and did not 

simplify program administration or 

consolidate or clarify existing 

definitions, procedures, or processes. 

Finally, the creation of additional or 

revised regulatory requirements would 

not be in concert with the intention of 

providing forgiveness consistent with 

previous disasters. 

FEMA has found during the past 19 

years that the cancellation provisions 

for the traditional Community Disaster 

Loan program work—they provide 

sufficient and accurate information on 

which FEMA can base its decision to 

cancel loans—and compliance on the 

part of the borrower is relatively easy. 

There are no significant issues with 

these existing procedures that require 

revision; however, those affected by 

these regulations are encouraged to 

identify problems and suggest solutions 

to those problems during the public 

comment period for this rule. 

Communities affected by these 

regulations have already received the 

Special Community Disaster Loans. 

Therefore, these communities already 

have established systems and 

procedures in place to meet the loan 

maintenance and servicing requirements 

in 44 CFR 206.375(c). The documents 

already required under that paragraph 

meet some of the proposed financial 

information submission requirements 

for cancellation. The proposed 

administrative requirements for loan 

cancellation should not be too 

burdensome for either the loan 


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applicant or FEMA. The documents that 

must be provided in an Application for 

Loan Cancellation would include: (1) 

Annual operating budgets for the fiscal 

year of the disaster and the three 

subsequent fiscal years (States and local 

governments should already have 

annual operating budgets as a matter of 

practice; therefore, this element should 

create no new burden on the 

applicants); (2) annual financial reports 

for the fiscal year of the disaster and the 

three subsequent fiscal years (these 

annual financial reports are already 

required to be submitted by 44 CFR 

206.375(c), and should create no new 

burden on the applicants); (3) the 

following information concerning 

annual real estate property taxes 

pertaining to the community for the 

fiscal year of the disaster and the three 

subsequent fiscal years: the market 

value of the tax base, the assessment 

ratio, the assessed valuation, the tax 

levy rate and the taxes levied and 

collected (pursuant to pertinent State 

statutes, ordinances, regulations which 

prescribe the local government’s system 

of budgeting, accounting and financial 

reporting in 44 CFR 206.374(b)(1)(ii)(B), 

and revised OMB Circular A–133, 

‘‘Audits of States, Local Governments, 

and Non-Profit Organizations,’’ 44 CFR 

13.26, local governments receiving loans 

must be audited annually; the 

information required to be submitted 

with the Application for Loan 

Cancellation is standard information 

contained in the annual financial 

reports resulting from these annual 

audits); (4) audit reports for the fiscal 

year of the disaster and the 3 subsequent 

fiscal years certifying to the validity of 

the operating statements (this is a 

standard element of the annual audit 

report and the requirement to provide 

this information should create no new 

burden on the applicant); and (5) other 

financial information specified in the 

Application for Loan Cancellation, 

which includes information such as 

unreimbursed disaster-related expenses. 

The burden on the public is low with 

respect to new administrative 

requirements associated with submitting 

the Application for Loan Cancellation. 

FEMA estimates that the annual 

estimated cost to submit the Application 

for Loan Cancellation to be $4,850.32. 

FEMA made 152 Special Community 

Disaster Loans to 109 eligible applicants 

in Mississippi and Louisiana. Because 

the documents required to be submitted 

with an Application for Loan 

Cancellation are documents that each 

local government should already 

possess, FEMA estimates that it would 

take an average of 1 hour for local 

governments to prepare the Application 

for Loan Cancellation. Using wage rates 

from the U.S. Department of Labor, 

Bureau of Labor Statistics (BLS), 

Standard Occupation Classification 

(SOC) System, the median hourly wage 

for Emergency Management Specialists 

in Business and Financial Operations 

(SOC Code Number 13.1061) is $22.79 

per hour. Adding 40 percent to the BLS 

figure to account for benefits, FEMA has 

calculated the burden using a wage rate 

of $31.91 per hour. Since there are a 

total of 152 Special Community Disaster 

Loans, it is estimated that the one time 

cost of compliance to submit the 

Application for Loan Cancellation for all 

loans is $4,850.32. This figure is 

calculated as follows: ((152 × 1) × 

$31.91). 

If all 152 loan recipients applied, and 

were found eligible, for full cancellation 

under these proposed procedures, up to 

$1,270,501,241, plus any applicable 

interest and costs, could be cancelled, 

although as of March 16, 2009 only $831 

million of that amount had been drawn 

down. Any funds cancelled will have a 

positive effect on the State and local 

economy by reducing on-going 

operating expenses related to the loan, 

as well as the debt for the loan. 

Although not a grant, the cancellation of 

these loans would affect the Federal 

government’s budget much like a grant. 

The loans were originally provided out 

of the Federal Treasury. If the local 

governments’ revenues are found to be 

insufficient to meet its operating budget, 

the principal amount of the loan and the 

related interest would be forgiven. The 

economic impact would be a transfer 

payment from the Federal government 

to the local government whose loan was 

cancelled. 

The overall impact of this rule is, 

therefore, the cost to the applicant to 

apply for the cancellation, as well as the 

impact on the economy of potentially 

forgiving all Special Community 

Disaster Loans and any related interest 

and costs. The maximum total economic 

impact of this rule is approximately $1.3 

billion (conservatively assuming that all 

funds awarded will be drawn down, and 

exclusive of any interest that may also 

be forgiven). However, without knowing 

the dollar amounts or even the number 

of loans that will be cancelled, it is 

impossible to predict the amount of the 

economic impact of this rule with any 

precision. Although the impact of the 

rule could be spread over multiple years 

as applications are received, processed, 

and loans cancelled, the total economic 

effect of a specific loan cancellation 

would only occur once, rather than 

annually. 

B. Regulatory Flexibility Act 

Under the Regulatory Flexibility Act 

(5 U.S.C. 601–612), we have considered 

whether this proposed rule would have 

a significant economic impact on a 

substantial number of small entities. 

The term ‘‘small entities’’ comprises 

small businesses, not-for-profit 

organizations that are independently 

owned and operated and are not 

dominant in their fields, and 

governmental jurisdictions with 

populations of less than 50,000. 

FEMA certifies under 5 U.S.C. 605(b) 

that this proposed rule would not have 

a significant economic impact on a 

substantial number of small entities. 

Section 601(5) defines small 

governmental jurisdictions as 

governments of cities, counties, towns, 

townships, villages, school districts, or 

special districts with a population of 

less than 50,000. This proposed rule 

would affect the following entities, 

some of which might be small entities: 

The 109 eligible applicants devastated 

by Hurricanes Katrina and Rita located 

in Mississippi and Louisiana that 

received Special Community Disaster 

Loans authorized in the 2005 and 2006 

Acts. This proposed rule will not 

impose any additional requirements on 

local governments that do not have a 

Special Community Disaster Loan. 

As stated previously, the potential for 

loan cancellation under the proposed 

procedures would not have a negative 

impact on any loan applicant as any 

funds cancelled will have a positive 

beneficial effect on the State and local 

governments by reducing on-going 

operating expenses and debt related to 

the loan. We have previously explained 

that State and local governments that 

choose to seek loan cancellation 

consideration will need to spend a 

minimal amount of staff time preparing 

the required application. Such a 

minimal staffing burden is not 

considered to be a significant economic 

impact. Consequently, this proposed 

rule would not have a significant 

economic impact on a substantial 

number of small entities. 

If you think that your business, 

organization, or governmental 

jurisdiction qualifies as a small entity 

and that this rule would have a 

significant economic impact on it, 

please submit a comment (See 

ADDRESSES) explaining why you think it 

qualifies and how and to what degree 

this rule would economically affect it. 

C. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995 (2 U.S.C. 1531–1538) requires 


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Federal agencies to assess the effects of 

their discretionary regulatory actions. In 

particular, the Unfunded Mandates 

Reform Act addresses actions that may 

result in the expenditure by a State, 

local, or tribal government, in the 

aggregate, or by the private sector, of 

$100,000,000 or more in any one year. 

FEMA does not expect this rule to result 

in such expenditure since loan 

recipients applying for potential 

cancellation of a Special Community 

Disaster Loan will not result in any 

expenditure not already assumed. 

Additionally, this rule is expected to 

provide a benefit to the local 

governments by allowing for the 

cancellation of Special Community 

Disaster Loans for those communities 

whose revenues during the full threefiscal-year period following the major 

disaster are insufficient to meet the 

operating budget of the local 

government. FEMA discusses this rule’s 

effects elsewhere in this preamble. 

D. Executive Order 13132, Federalism 

This rule will not have substantial 

direct effects on the States, on the 

relationship between the National 

Government and the States, or on the 

distribution of power and 

responsibilities among the various 

levels of government. It will not 

preempt any State laws. Eligible 

applicants who may apply for loan 

cancellation under these proposed 

procedures do so voluntarily and State 

policy making discretion is not affected. 

In accordance with section 6 of 

Executive Order 13132, FEMA 

determines that this rule will not have 

Federalism implications sufficient to 

warrant the preparation of a Federalism 

impact statement. 

E. National Environmental Policy Act 

FEMA’s regulations implementing the 

National Environmental Policy Act of 

1969 (42 U.S.C. 4321 et seq.) at 44 CFR 

10.8(d)(2)(ii) categorically exclude the 

preparation, revision, adoption of 

regulations, directives, manuals, and 

other guidance documents related to 

actions that qualify for categorical 

exclusions. Moreover, the changes being 

proposed in this rule constitute actions 

that enforce existing Federal 

regulations, (44 CFR 10.8(d)(2)(iv)), and 

involve emergency and disaster 

response and recovery activities under 

section 417 of the Stafford Act (44 CFR 

10.8(d)(2)(xix)(K)). This rulemaking will 

not have a significant effect on the 

human environment and, therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

F. Paperwork Reduction Act of 1995 

In the October 19, 2005 interim rule 

(at 70 FR 60442; also 44 CFR 206.370– 

206.377), FEMA determined that 

implementation of the interim rule 

would be subject to the Paperwork 

Reduction Act of 1995 (PRA) (44 U.S.C. 

3501–3520). With the interim rule, 

FEMA submitted two information 

collection requests to OMB for review 

and clearance in accordance with the 

review procedures of the PRA. OMB 

approved the requested revision of the 

collection entitled ‘‘Application for 

Community Disaster Loan (CDL) 

Program and the Special Community 

Disaster Loan (SCDL) Program,’’ which 

was assigned OMB Control Number 

1660–0083 and expires on June 30, 

2009. This proposed rule does not 

contain any changes that would affect 

that currently approved collection. 

OMB also approved the collection 

entitled ‘‘Application for Community 

Disaster Loan Cancellation’’ which was 

assigned OMB Control Number 1660– 

0082 and expires on January 31, 2010. 

That collection uses FEMA Form 90–5, 

Application for Loan Cancellation, 

which has an annual number of 

respondents of 1 (the number of 

communities who apply for cancellation 

of a Community Disaster Loan under the 

existing procedures in 44 CFR 206.366). 

It is intended that applicants seeking 

cancellation of a Special Community 

Disaster Loan will use the same form 

submitted for Community Disaster 

Loans. Because FEMA proposes to 

implement the same cancellation 

procedures for Special Community 

Disaster Loans as already exist for the 

Community Disaster Loan program, 

FEMA proposes to amend that existing 

collection to increase the number of 

respondents to 153. This number 

reflects the 1 Community Disaster Loan 

cancellation application already 

received annually under the Community 

Disaster Loan program, and the 

potential 152 applications for 

cancellation of Special Community 

Disaster Loans as proposed in this rule. 

Accordingly, in this proposed rule, 

FEMA is seeking a revision to the 

already existing collection of 

information OMB Control Number 

1660–0082, to include the cancellation 

of Special Community Disaster Loans. 

This proposed rule serves as the 60 day 

comment period for this proposed 

change pursuant to 5 CFR 1320.12. 

FEMA invites the general public to 

comment on the proposed collection of 

information. 

Collection of Information 

Title: Application for Community 

Disaster Loan Cancellation. 

Type of Information Collection: 

Revision of a currently approved 

collection. 

OMB Number: 1660–0082. 

Form Numbers: FEMA Form 90–5. 

Abstract: Local governments may 

submit an Application for Loan 

Cancellation through the Governor’s 

Authorized Representative to the FEMA 

Regional Administrator prior to the 

expiration date of the loan. FEMA has 

the authority to cancel repayment of all 

or part of a Community Disaster Loan or 

a Special Community Disaster Loan to 

the extent that a determination is made 

that revenues of the local government 

during the three fiscal years following 

the disaster are insufficient to meet the 

operating budget of that local 

government because of disaster-related 

revenue losses and additional 

unreimbursed disaster-related 

municipal operating expenses. 

Operating budget means actual revenues 

and expenditures of the local 

government as published in the official 

financial statements of the local 

government. 

Affected Public: State, local or tribal 

governments. 

Number of Respondents: 153. 

Frequency of Response: 1 per year. 

Hour Burden per Response: 1 hour. 

Estimated Total Annual Burden 

Hours: 153 hours. 

TABLE A.12—ESTIMATED ANNUALIZED BURDEN HOURS AND COSTS

Type of 

respondent Form name/form number Number of respondents 

Number of responses per 

respondent 

Avg. burden 

per response 

(in hours) 

Total annual 

burden 

(in hours) 

Avg. hourly 

wage rate 

Total annual 

respondent 

cost 

State, local 

and Tribal 

Government.

Application for Loan Cancellation/FEMA Form 

90–5 (under 44 CFR 

206.366 as currently 

approved by OMB).

1 1 1 1 $31.91 $31.91 


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TABLE A.12—ESTIMATED ANNUALIZED BURDEN HOURS AND COSTS—Continued 

Type of 

respondent Form name/form number Number of respondents 

Number of responses per 

respondent 

Avg. burden 

per response 

(in hours) 

Total annual 

burden 

(in hours) 

Avg. hourly 

wage rate 

Total annual 

respondent 

cost 

State, local 

and Tribal 

Government.

Application for Loan Cancellation/FEMA Form 

90–5 (under 44 CFR 

206.376 the change 

associated with this 

rule).

152 1 1 152 $31.91 $4,850.32 

Total ............ ......................................... 153 ........................ ........................ 153 ........................ $4,882.23 

Estimated Cost: $0. There are no startup, operational or other costs associated 

with this information collection in 

addition to the burden hour cost noted 

in the table above. 

Comments: Written comments are 

solicited to (a) evaluate whether the 

proposed data collection is necessary for 

the proper performance of the agency, 

including whether the information shall 

have practical utility; (b) evaluate the 

accuracy of the agency’s estimate of the 

burden of the proposed collection of 

information, including the validity of 

the methodology and assumptions used; 

(c) enhance the quality, utility, and 

clarity of the information to be 

collected; and (d) minimize the burden 

of the collection of information on those 

who are to respond, including through 

the use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Interested persons are invited to 

submit written comments on the 

information collection through one of 

the methods listed in ADDRESSES above 

on or before June 2, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Contact Gerald Connelly, (202) 646– 

3638 for additional information 

regarding this information collection. 

You may contact the Records 

Management Branch for copies of the 

proposed collection of information at 

facsimile number (202) 646–3347 or 

e-mail address: FEMAInformationCollections@dhs.gov. 

G. Executive Order 12630, Taking of 

Private Property 

This rule will not affect a taking of 

private property or otherwise have 

taking implications under Executive 

Order 12630, Governmental Actions and 

Interference with Constitutionally 

Protected Property Rights. 

H. Executive Order 12988, Civil Justice 

Reform 

This rule meets applicable standards 

in sections 3(a) and 3(b)(2) of Executive 

Order 12988, Civil Justice Reform, to 

minimize litigation, eliminate 

ambiguity, and reduce burden. 

I. Executive Order 13175, Consultation 

and Coordination With Indian Tribal 

Governments 

Because no Special Community 

Disaster Loans were made to Indian 

Tribal Governments, this rule does not 

have tribal implications under 

Executive Order 13175, Consultation 

and Coordination with Indian Tribal 

Governments. This rule would not have 

a substantial direct effect on one or 

more Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

List of Subjects in 44 CFR Part 206 

Administrative practice and 

procedure, Coastal zone, Community 

facilities, Disaster assistance, Fire 

prevention, Grant programs—housing 

and community development, Housing, 

Insurance, Intergovernmental relations, 

Loan programs—housing and 

community development, Natural 

resources, Penalties, Reporting and 

recordkeeping requirements. 

For the reasons discussed in the 

preamble, FEMA proposes to amend 44 

CFR part 206 as follows: 

PART 206—FEDERAL DISASTER 

ASSISTANCE 

1. The authority citation for part 206 

continues to read as follows: 

Authority: Robert T. Stafford Disaster 

Relief and Emergency Assistance Act, 42 

U.S.C. 5121 through 5207; 119 Stat. 2061; 

Reorganization Plan No. 3 of 1978, 43 FR 

41943, 3 CFR, 1978 Comp., p. 329; Homeland 

Security Act of 2002, 6 U.S.C. 101; E.O. 

12127, 44 FR 19367, 3 CFR, 1979 Comp., p. 

376; E.O. 12148, 44 FR 43239, 3 CFR, 1979 

Comp., p. 412; and E.O. 13286, 68 FR 10619, 

3 CFR, 2003 Comp., p. 166. 

2. Revise § 206.370 to read as follows: 

§ 206.370 Purpose and scope. 

(a) Purpose. Sections 206.370 through 

206.377 provide procedures for local 

governments and State and Federal 

officials concerning the Special 

Community Disaster Loans program 

under section 417 of the Stafford Act (42 

U.S.C. 5184), the Community Disaster 

Loan Act of 2005, Public Law 109–88, 

and the Emergency Supplemental 

Appropriations Act for Defense, the 

Global War on Terror, and Hurricane 

Recovery, 2006, Public Law 109–234. 

(b) Scope. Sections 206.370 through 

206.377 apply only to Special 

Community Disaster Loans issued under 

the Community Disaster Loan Act of 

2005, Public Law 109–88, and the 

Emergency Supplemental 

Appropriations Act for Defense, the 

Global War on Terror, and Hurricane 

Recovery, 2006, Public Law 109–234. 

3. In § 206.371, revise the last 

sentence of paragraph (f), paragraph (g) 

and add new paragraph (h) to read as 

follows: 

§ 206.371 Loan program. 

* * * * * 

(f) * * * Neither the loan nor any 

cancelled portion of the loans may be 

used as the non-Federal share of any 

Federal program, including those under 

the Stafford Act. 

(g) Relation to other assistance. Any 

Special Community Disaster Loans 

including cancellations of loans made 

under this subpart shall not reduce or 

otherwise affect any commitments, 

grants, or other assistance provided 

under the authority of the Stafford Act 

or this part. 

(h) Cancellation. The Assistant 

Administrator for the Disaster 

Assistance Directorate shall cancel 

repayment of all or part of a Special 

Community Disaster Loan to the extent 

that he/she determines that revenues of 

the local government during the 3 fiscal 

years following the disaster are 

insufficient to meet the operating budget 

of that local government because of 


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disaster-related revenue losses and 

additional unreimbursed disasterrelated municipal operating expenses. 

4. In § 206.372 revise paragraphs (a), 

(c), (d) and (e) to read as follows: 

§ 206.372 Responsibilities. 

(a) The local government shall submit 

the financial information required by 

FEMA in the application for a 

Community Disaster Loan or other 

format specified by FEMA and comply 

with the assurances on the application, 

the terms and conditions of the 

Promissory Note in the application for 

loan cancellation, if submitted, and 

§§ 206.370 through 206.377. The local 

government shall send all loan 

application, loan administration, loan 

cancellation, and loan settlement 

correspondence through the Governor’s 

Authorized Representative (GAR) and 

the FEMA Regional Office to the FEMA 

Assistant Administrator for the Disaster 

Assistance Directorate. 

* * * * * 

(c) The Regional Administrator or 

designee shall review each loan 

application or loan cancellation request 

received from a local government to 

ensure that it contains the required 

documents and transmit the application 

to the Assistant Administrator for the 

Disaster Assistance Directorate. He/she 

may submit appropriate 

recommendations to the Assistant 

Administrator for the Disaster 

Assistance Directorate. 

(d) The Assistant Administrator for 

the Disaster Assistance Directorate or a 

designee, shall execute a Promissory 

Note with the local government and 

shall administer the loan until 

repayment or cancellation is completed 

and the Promissory Note is discharged. 

(e) The Assistant Administrator for 

the Disaster Assistance Directorate or 

designee shall approve or disapprove 

each loan request, taking into 

consideration the information provided 

in the local government’s request and 

the recommendations of the GAR and 

the Assistant Administrator for the 

Disaster Assistance Directorate. The 

Assistant Administrator for the Disaster 

Assistance Directorate or designee shall 

approve or disapprove a request for loan 

cancellation in accordance with the 

criteria for cancellation in these 

regulations. 

* * * * * 

5. In § 206.374, add a sentence at the 

end of paragraph (b)(2) to read as 

follows: 

§ 206.374 Loan application. 

* * * * * 

(b) * * * 

(2) * * * For loan cancellation 

purposes, FEMA interprets the term 

‘‘operating budget’’ to mean actual 

revenues and expenditures of the local 

government as published in the official 

financial statements of the local 

government. 

* * * * * 

6. Add § 206.376 to read as follows: 

§ 206.376 Loan cancellation. 

(a) General. (1) FEMA shall cancel 

repayment of all or part of a Special 

Community Disaster Loan to the extent 

that the Assistant Administrator for the 

Disaster Assistance Directorate 

determines that revenues of the local 

government during the full three fiscal 

year period following the disaster are 

insufficient, as a result of the disaster, 

to meet the operating budget for the 

local government, including additional 

unreimbursed disaster-related expenses 

for a municipal operating character. For 

loan cancellation purposes, FEMA 

interprets the term operating budget to 

mean actual revenues and expenditures 

of the local government as published in 

the official financial statements of the 

local government. 

(2) If the tax and other revenues rates 

or the tax assessment valuation of 

property which was not damaged or 

destroyed by the disaster are reduced 

during the 3 fiscal years subsequent to 

the major disaster, the tax and other 

revenue rates and tax assessment 

valuation factors applicable to such 

property in effect at the time of the 

major disaster shall be used without 

reduction for purposes of computing 

revenues received. 

(3) If the local government’s fiscal 

year is changed during the ‘‘full 3 year 

period following the disaster’’ the actual 

period will be modified so that the 

required financial data submitted covers 

an inclusive 36-month period. 

(4) If the local government transfers 

funds from its operating funds accounts 

to its capital funds account, utilizes 

operating funds for other than routine 

maintenance purposes, or significantly 

increases expenditures which are not 

disaster related, except increases due to 

inflation, the annual operating budget or 

operating statement expenditures will 

be reduced accordingly for purposes of 

evaluating any request for loan 

cancellation. 

(5) It is not the purpose of this loan 

program to underwrite predisaster 

budget or actual deficits of the local 

government. Consequently, such deficits 

carried forward will reduce any 

amounts otherwise eligible for loan 

cancellation. 

(6) The provisions of this section 

apply to all Special Community Disaster 

loans issued from the dates of 

enactment of Public Law 109–88 and 

Public Law 109–234. 

(b) Disaster-related expenses of a 

municipal operation character. (1) For 

purposes of this loan, unreimbursed 

expenses of a municipal operating 

character are those incurred for general 

government purposes, including but not 

limited to police and fire protection, 

trash collection, collection of revenues, 

maintenance of public facilities, flood 

and other hazard insurance. 

(2) Disaster-related expenses do not 

include expenditures associated with 

debt service, any major repairs, 

rebuilding, replacement or 

reconstruction of public facilities or 

other capital projects, intragovernmental 

services, special assessments, and trust 

and agency fund operations. Disaster 

expenses which are eligible for 

reimbursement under project 

applications or other Federal programs 

are not eligible for loan cancellation. 

(3) Each applicant shall maintain 

records including documentation 

necessary to identify expenditures for 

unreimbursable disaster-related 

expenses. Examples of such expenses 

include but are not limited to: 

(i) Interest paid on money borrowed 

to pay amounts FEMA does not advance 

toward completion of approved Project 

Applications. 

(ii) Unreimbursed costs to local 

governments for providing usable sites 

with utilities for mobile homes used to 

meet disaster temporary housing 

requirements. 

(iii) Unreimbursed costs required for 

police and fire protection and other 

community services for mobile home 

parks established as the result of or for 

use following a disaster. 

(iv) The cost to the applicant of flood 

insurance required under Public Law 

93–234, as amended, and other hazard 

insurance required under section 311, 

Public Law 93–288, as amended, as a 

condition of Federal disaster assistance 

for the disaster under which the loan is 

authorized. 

(4) The following expenses are not 

considered to be disaster-related for 

Special Community Disaster Loan 

purposes: 

(i) The local government’s share for 

assistance provided under the Stafford 

Act including flexible funding under 

section 406(c)(1) of the Act (42 U.S.C. 

5172). 

(ii) Improvements related to the repair 

or restoration of disaster public facilities 

approved on Project Applications. 

(iii) Otherwise eligible costs for which 

no Federal reimbursement is requested 

as a part of the applicant’s disaster 

response commitment, or cost sharing as 


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specified in the FEMA–State Agreement 

for the disaster. 

(iv) Expenses incurred by the local 

government which are reimbursed on 

the applicant’s project application. 

(c) Cancellation application. A local 

government which has drawn loan 

funds from the U.S. Treasury may 

request cancellation of the principal and 

related interest by submitting an 

Application for Loan Cancellation 

through the Governor’s Authorized 

Representative to the Regional 

Administrator prior to the expiration 

date of the loan. 

(1) Financial information submitted 

with the application shall include the 

following: 

(i) Annual Operating Budgets for the 

fiscal year of the disaster and the 3 

subsequent fiscal years; 

(ii) Annual Financial Reports 

(Revenue and Expense and Balance 

Sheet) for each of the above fiscal years. 

Such financial records must include 

copies of the local government’s annual 

financial reports, including operating 

statements balance sheets and related 

consolidated and individual 

presentations for each fund account. In 

addition, the local government must 

include an explanatory statement when 

figures in the Application for Loan 

Cancellation form differ from those in 

the supporting financial reports. 

(iii) The following additional 

information concerning annual real 

estate property taxes pertaining to the 

community for each of the above fiscal 

years: 

(A) The market value of the tax base 

(dollars); 

(B) The assessment ratio (percent); 

(C) The assessed valuation (dollars); 

(D) The tax levy rate (mils); 

(E) Taxes levied and collected 

(dollars). 

(iv) Audit reports for each of the 

above fiscal years certifying to the 

validity of the Operating Statements. 

The financial statements of the local 

government shall be examined in 

accordance with generally accepted 

auditing standards by independent 

certified public accountants. The report 

should not include recommendations 

concerning loan cancellation or 

repayment. 

(v) Other financial information 

specified in the Application for Loan 

Cancellation. 

(2) Narrative justification. The 

application may include a narrative 

presentation to supplement the financial 

material accompanying the application 

and to present any extenuating 

circumstances which the local 

government wants the Assistant 

Administrator for the Disaster 

Assistance Directorate to consider in 

rendering a decision on the cancellation 

request. 

(d) Determination. (1) If, based on a 

review of the Application for Loan 

Cancellation and FEMA audit, the 

Assistant Administrator for the Disaster 

Assistance Directorate or a designee 

determines that all or part of the Special 

Community Disaster Loan funds should 

be canceled, the amount of principal 

canceled and the related interest will be 

forgiven. The Assistant Administrator 

for the Disaster Assistance Directorate, 

or a designee’s determination 

concerning loan cancellation will 

specify that any uncancelled principal 

and related interest must be repaid in 

accordance with the terms and 

conditions of the Promissory Note, and 

that, if repayment will constitute a 

financial hardship, the local government 

must submit for FEMA review and 

approval, a repayment schedule for 

settling the indebtedness on timely 

basis. Such repayments must be made to 

the Treasurer of the United States and 

be sent to FEMA, Attention: Office of 

the Chief Financial Officer. 

(2) A loan or cancellation of a loan 

does not reduce or affect other disasterrelated grants or other disaster 

assistance. However, no cancellation 

may be made that would result in a 

duplication of benefits to the applicant. 

(3) The uncancelled portion of the 

loan must be repaid in accordance with 

§ 206.377. 

(4) Appeals. If an Application for 

Loan Cancellation is disapproved, in 

whole or in part, by the Assistant 

Administrator for the Disaster 

Assistance Directorate or designee, the 

local government may submit any 

additional information in support of the 

application within 60 days of the date 

of disapproval. The decision by the 

Assistant Administrator for the Disaster 

Assistance Directorate or designee on 

the additional information is final. 

7. Amend § 206.377 by revising the 

first sentence of paragraph (b) 

introductory text, the last sentence of 

paragraph (b)(2), paragraph (b)(4) and 

(c)(2) to read as follows: 

§ 206.377 Loan repayment. 

* * * * * 

(b) Repayment. To the extent not 

otherwise cancelled, loan funds become 

due and payable in accordance with the 

terms and conditions of the Promissory 

Note. * * * 

* * * * * 

(2) * * * If any portion of the loan is 

cancelled, the interest amount due will 

be computed on the remaining principal 

with the shortest outstanding term. 

* * * * * 

(4) The Assistant Administrator for 

the Disaster Assistance Directorate may 

defer payments of principal and interest 

until FEMA makes its final 

determination with respect to any 

Application for Loan Cancellation 

which the borrower may submit.* * * 

* * * * * 

(c) * * * 

* * * * * 

(2) The principal amount shall be the 

original uncancelled principal plus 

related interest less any payments made. 

* * * * * 

Dated: March 26, 2009. 

Nancy Ward, 

Acting Administrator, Federal Emergency 

Management Agency. 

[FR Doc. E9–7286 Filed 4–2–09; 8:45 am] 

BILLING CODE 9110–23–P 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Part 36 

[CC Docket No. 80–286; FCC 09–24] 

Jurisdictional Separations and Referral 

to the Federal-State Joint Board 

AGENCY: Federal Communications 

Commission. 

ACTION: Proposed rule. 

SUMMARY: Jurisdictional separations is 

the process by which incumbent local 

exchange carriers (incumbent LECs) 

apportion regulated costs between the 

intrastate and interstate jurisdictions. In 

this document, the Commission seeks 

comment on extending until June 30, 

2010 the current freeze of part 36 

category relationships and jurisdictional 

cost allocation factors used in 

jurisdictional separations, which freeze 

would otherwise expire on June 30, 

2009. Extending the freeze would allow 

the Commission to provide stability for, 

and avoid imposing undue burdens on, 

carriers that must comply with the 

Commission’s separations rules while 

the Commission considers issues 

relating to comprehensive reform of the 

jurisdictional separations process. 

DATES: Comments are due on or before 

April 17, 2009. Reply comments are due 

on or before April 24, 2009. 

ADDRESSES: You may submit comments, 

identified by WC Docket No. 80–286, by 

any of the following methods: 

• Federal eRulemaking Portal: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Federal Communications 

Commission’s Web Site: http:// 

www.fcc.gov/cgb/ecfs/. Follow the 

instructions for submitting comments. 


tjames on PRODPC75 with PROPOSALS