[Federal Register Volume 73, Number 177 (Thursday, September 11, 2008)]
[Notices]
[Pages 52870-52881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-21092]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5250-N-01]


Allocations and Common Application and Reporting Waivers Granted 
to and Alternative Requirements for Midwest Flood Community Development 
Block Grant (CDBG) Disaster Recovery Grantees Under the Supplemental 
Appropriations Act, 2008

AGENCY: Office of the Secretary, HUD.

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

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

DATES: Effective Date: September 16, 2008.

FOR FURTHER INFORMATION CONTACT: Jessie Handforth Kome, Director, 
Disaster Recovery and Special Issues Division, Office of Block Grant 
Assistance, Department of Housing and Urban Development, 451 7th 
Street, SW., Room 7286, Washington, DC 20410, telephone number 202-708-
3587. Persons with hearing or speech impairments may access this number 
via TTY by calling the Federal Information Relay Service at 800-877-

[[Page 52871]]

8339. Facsimile inquiries may be sent to Ms. Kome at 202-401-2044. 
(Except for the ``800'' number, these telephone numbers are not toll-
free.)

SUPPLEMENTARY INFORMATION:

Authority To Grant Waivers

    The Supplemental Appropriations Act, 2008 (Pub. L. 110-252, 
approved June 30, 2008) (Supplemental Appropriations Act) appropriates 
$300 million, to remain available until expended, in CDBG funds for 
necessary expenses related to disaster relief, long-term recovery, and 
restoration of infrastructure in areas covered by a declaration of 
major disaster under title IV of the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act (42 U.S.C. 5121 et seq.) as a result of 
recent natural disasters. The Supplemental Appropriations Act 
authorizes the Secretary to waive, or specify alternative requirements 
for, any provision of any statute or regulation that the Secretary 
administers in connection with the obligation by the Secretary or use 
by the recipient of these funds and guarantees, except for requirements 
related to fair housing, nondiscrimination, labor standards, and the 
environment (including requirements concerning lead based paint), upon 
a request by the state and a finding by the Secretary that such a 
waiver would not be inconsistent with the overall purpose of the 
statute. Additionally, regulatory waiver authority is provided by 24 
CFR 5.110, 91.600, and 570.5. The following application and reporting 
waivers and alternative requirements are in response to requests from 
each of the states receiving an allocation under this Notice.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are not inconsistent with the overall 
purpose of Title I of the Housing and Community Development Act of 
1974, as amended (HCD Act), or the Cranston-Gonzalez National 
Affordable Housing Act, as amended.
    Under the requirements of the Department of Housing and Urban 
Development Reform Act of 1989 (the HUD Reform Act), regulatory waivers 
must be justified and published in the Federal Register.
    Except as described in this Notice, statutory and regulatory 
provisions governing the CDBG program for states, including those at 24 
CFR part 570, shall apply to the use of these funds. In accordance with 
the Supplemental Appropriations Act, HUD will reconsider every waiver 
in this Notice on the two-year anniversary of the day this Notice is 
published.

Additional Waivers

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

Allocations

    The Supplemental Appropriations Act provides $300 million of 
supplemental appropriation for the CDBG program for:

    Necessary expenses related to disaster relief, long-term 
recovery, and restoration of infrastructure in areas covered by a 
declaration of major disaster under title IV of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5121 et seq.) as a result of recent natural disasters.

The law further notes:

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

HUD computes allocations based on data that is generally available 
covering all the eligible affected areas. Two challenges arose in 
making this allocation. First, the statute gave very little guidance on 
what states are to receive funding, so HUD had to determine the 
eligible universe of grantees. The appropriation calls for funding 
``recent natural disasters.'' Since this appropriation was enacted on 
June 30, 2008, and was developed while there was significant awareness 
of flooding in the Midwest, the Department's primary assumption was 
that the funds were targeted to the Midwest flooding. However, there 
were also several other severe storms, flooding, and tornado events 
that received major disaster declarations during the same time frame. 
There were no declared disasters in April 2008, which allows for a 
natural break and argues that ``recent disasters'' is most likely to be 
those occurring after this lull. Therefore, HUD is defining ``recent 
natural disasters'' to be all major natural disasters that occurred and 
were declared from May 1, 2008, through June 30, 2008. This would limit 
the eligibility for an allocation to disasters in the states shown 
below.

       Table 1--Federally Declared Disasters in May and June 2008
------------------------------------------------------------------------
      No.         Declared date         State               Title
------------------------------------------------------------------------
1773..........  25-Jun-08.......  Missouri........  Severe Storms and
                                                     Flooding.
1772..........  25-Jun-08.......  Minnesota.......  Severe Storms and
                                                     Flooding.
1771..........  24-Jun-08.......  Illinois........  Severe Storms and
                                                     Flooding.
1770..........  20-Jun-08.......  Nebraska........  Severe Storms,
                                                     Tornadoes, and
                                                     Flooding.
1769..........  19-Jun-08.......  West Virginia...  Severe Storms,
                                                     Tornadoes,
                                                     Flooding,
                                                     Mudslides, and
                                                     Landslides.
1768..........  14-Jun-08.......  Wisconsin.......  Severe Storms,
                                                     Tornadoes, and
                                                     Flooding.
1766..........  8-Jun-08........  Indiana.........  Severe Storms and
                                                     Flooding.
1763..........  27-May-08.......  Iowa............  Severe Storms,
                                                     Tornadoes, and
                                                     Flooding.
1762..........  26-May-08.......  Colorado........  Severe Storms and
                                                     Tornadoes.
1760..........  23-May-08.......  Missouri........  Severe Storms and
                                                     Tornadoes.
1758..........  20-May-08.......  Arkansas........  Severe Storms,
                                                     Flooding, and
                                                     Tornadoes.
1756..........  14-May-08.......  Oklahoma........  Severe Storms,
                                                     Tornadoes, and
                                                     Flooding.
1755..........  9-May-08........  Maine...........  Severe Storms and
                                                     Flooding.
1753..........  8-May-08........  Mississippi.....  Severe Storms and
                                                     Flooding.
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[[Page 52872]]

HUD is aware that other federal programs, such as Federal Emergency 
Management Agency (FEMA) Public Assistance and Small Business 
Administration (SBA) loans, exist to support disaster recovery. 
Compared to the number of major disaster declarations, the number of 
times Congress has appropriated CDBG supplemental disaster recovery 
funds is very small. The Department believes it is reasonable to limit 
the allocations to places experiencing a significant need for 
additional federal assistance to facilitate long-term recovery and 
generally applies a funding threshold, in this case, of $2 million. 
Thus, it is very likely that not all of the eligible universe will be 
funded.
    The second challenge in allocating supplemental disaster 
appropriations is the trade off of a timely allocation versus having 
the most complete data needed to make a fully informed allocation. CDBG 
disaster recovery assistance is intended to fund long-term disaster 
recovery. States need to know relatively quickly how much they are to 
receive so that they can begin developing their recovery plans. 
However, a fair allocation generally depends on having good data 
similarly collected for all eligible states so that the needs of each 
state are fully taken into consideration. In this case, where funds 
were appropriated at a time when some of the disasters were still 
ongoing, the data for most disasters and thus most states is still 
incomplete. Complete data to make a full allocation may not be 
available until mid- to late September at the earliest. However, HUD 
believed it was unreasonable to hold funds that are currently needed as 
the Department waits for more complete data. As such, HUD is making a 
two-stage allocation: $100 million was allocated on August 4, 2008, to 
the three most affected states and the remaining funds will be 
allocated in mid-September or October when more complete data are 
available. Enough data were available from FEMA, SBA, and other sources 
to make reasonable initial allocation to the states with the most 
severe damage due to the incidents noted in the table above. The 
Department was concerned that the first stage of the two-stage 
allocation not over-fund a grantee. Currently, the Department can say 
with confidence that the following grants would not be over-funding the 
disaster recovery needs of the states receiving allocations.

------------------------------------------------------------------------
                         State                          Amount allocated
------------------------------------------------------------------------
Indiana...............................................       $10,000,000
Iowa..................................................        85,000,000
Wisconsin.............................................         5,000,000
------------------------------------------------------------------------

As soon as better data are available, HUD will compute allocations for 
the remaining $200 million and announce them. A state included in that 
announcement may immediately proceed to prepare and submit an Action 
Plan for disaster recovery in accordance with this Notice, although HUD 
will not be able to make the grant until the allocations are published 
in the Federal Register. Therefore, HUD commits to determining, 
announcing, and publishing the additional allocations swiftly once the 
data are available.
    HUD will invite each grantee receiving an allocation under the 
Supplemental Appropriations Act to submit an Action Plan for Disaster 
Recovery in accordance with this Notice.
    The Supplemental Appropriations Act requires funds be used only for 
disaster relief, long-term recovery, and restoration of infrastructure 
in areas covered by a declaration of major disaster under title IV of 
the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 
U.S.C. 5121 et seq.) as a result of recent natural disasters. The 
statute directs that each grantee will describe in its Action Plan for 
Disaster Recovery how the use of the grant funds will address long-term 
recovery and infrastructure restoration. HUD will monitor compliance 
with this direction and may be compelled to disallow expenditures if it 
finds uses of funds are not disaster-related, or funds allocated 
duplicate other benefits. HUD encourages grantees to contact their 
assigned HUD offices for guidance in complying with these requirements 
during development of their Action Plans for Disaster Recovery or if 
they have any questions regarding meeting these requirements.
    As provided for in the Supplemental Appropriations Act, the funds 
may not be used for activities reimbursable by or for which funds are 
made available by the Federal Emergency Management Agency or the Army 
Corps of Engineers.

Prevention of Fraud, Abuse, and Duplication of Benefits

    The Supplemental Appropriations Act also directs the Secretary to:

    Establish procedures to prevent recipients from receiving any 
duplication of benefits and report quarterly to the Committees on 
Appropriations with regard to all steps taken to prevent fraud and 
abuse of funds made available under this heading including 
duplication of benefits.

To meet this directive, HUD is pursuing four courses of action. First, 
this Notice includes specific reporting, written procedures, 
monitoring, and internal audit requirements for grantees. Second, to 
the extent its resources allow, HUD will institute risk analysis and 
on-site monitoring of grantee management of the grants and of the 
specific uses of funds. Third, HUD will be extremely cautious in 
considering any waiver related to basic financial management 
requirements. The standard, time-tested CDBG financial requirements 
will continue to apply. Fourth, HUD is collaborating with the HUD 
Office of Inspector General to plan and implement oversight of these 
funds.

Waiver Justification

    This section of the Notice briefly describes the basis for each 
waiver and related alternative requirements, if any.
    Each state eligible for a disaster recovery grant receives annual 
CDBG allocations, has a consolidated plan, a citizen participation 
plan, a monitoring plan, and has made CDBG certifications. HUD 
encourages each CDBG disaster recovery grantee to carry out CDBG 
disaster recovery activities in the context of its ongoing community 
development program to the extent feasible (for example, by selecting 
activities consistent with the consolidated plan, by providing overall 
benefit to at least 70 percent low- and moderate-income persons, and by 
holding hearings or meetings to solicit public comment).
    The waivers, alternative requirements, and statutory changes 
described in this Notice apply only to the CDBG supplemental disaster 
recovery funds appropriated in the Supplemental Appropriations Act, not 
to funds provided under the regular CDBG program. These actions provide 
additional flexibility in program design and implementation and 
implement statutory requirements unique to this appropriation.

Application for Allocations Under the Supplemental Appropriations Act

    These waivers and alternative requirements streamline the pre-grant 
process and set the guidelines for states' applications for their 
allocations. HUD encourages each grantee that receives an allocation to 
submit an Action Plan for Disaster Recovery to HUD as soon as 
practicable following an allocation announcement.

Overall Benefit to Low- and Moderate-Income Persons

    Pursuant to explicit authority in the Supplemental Appropriations 
Act, HUD

[[Page 52873]]

is granting an overall benefit waiver that allows for up to 50 percent 
of the grant to assist activities under the urgent need or prevention 
or elimination of slums and blight national objectives, rather than the 
30 percent allowed in the annual state CDBG program. The primary 
objective of Title I of the Housing and Community Development Act and 
of the funding program of each grantee is ``development of viable urban 
communities, by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income.'' The statute goes on to set the 
standard of performance for this primary objective at 70 percent of the 
aggregate of the funds used for support of activities producing benefit 
to low- and moderate-income persons. Since extensive damage to 
community structures and housing affected those with varying incomes, 
and income-producing jobs are often lost for a period of time following 
a disaster, HUD is waiving the 70 percent overall benefit requirement, 
leaving the 50 percent requirement, to give grantees even greater 
flexibility to carry out recovery activities within the confines of the 
CDBG program national objectives. HUD may only provide additional 
waivers of this requirement if it makes a finding of compelling need. 
The requirement that each activity meet one of the three national 
objectives is not waived.

Expanded Distribution and Direct Action

    The waivers and alternative requirements allowing distribution of 
funds by a state to entitlement communities and Indian tribes, and to 
allow a state to carry out activities directly rather than distribute 
all funds to units of local government are consistent with waivers 
granted for previous, similar disaster recovery cases. HUD believes 
that, in using very similar statutory language to that used for the 
CDBG supplemental appropriations for Hurricane Katrina, Rita, and Wilma 
recovery, Congress is signaling its intent that the states under this 
appropriation also be able to carry out activities directly. Therefore, 
HUD is waiving program requirements to support this. HUD is also 
including in this Notice the necessary complementary waivers and 
alternative requirements related to subrecipients to ensure proper 
management and disposition of funds during the grant execution and at 
closeout.

Consistency With the Consolidated Plan

    HUD is waiving the requirement for consistency with the 
consolidated plan because the effects of a major disaster usually alter 
a grantee's priorities for meeting housing, employment, and 
infrastructure needs. To emphasize that uses of grant funds must be 
consistent with the overall purposes of the HCD Act, HUD is limiting 
the scope of the waiver for consistency with the consolidated plan; it 
applies only until the grantee first updates its consolidated plan 
priorities following the disaster.

Action Plan for Disaster Recovery

    HUD is waiving the CDBG action plan requirements and substituting 
an Action Plan for Disaster Recovery. This will allow rapid 
implementation of disaster recovery grant programs and ensure 
conformance with provisions of the Supplemental Appropriations Act. 
Where possible, the Action Plan for Disaster Recovery, including 
certifications, does not repeat common action plan elements the grantee 
has already committed to carry out as part of its annual CDBG 
submission. Although a state as the grantee may designate an entity or 
entities to administer the funds, the state is responsible for 
compliance with federal requirements. During the course of the grant, 
HUD will monitor the state's use of funds and its actions for 
consistency with the Action Plan. The state may submit an initial 
partial Action Plan and amend it one or more times subsequently until 
the Action Plan describes uses for the total grant amount. The state 
may also amend activities in its Action Plan.

Citizen Participation

    The citizen participation waiver and alternative requirements will 
permit a more streamlined public process, but one that still provides 
for reasonable public notice, appraisal, examination, and comment on 
the activities proposed for the use of CDBG disaster recovery grant 
funds. The waiver removes the requirement at both the grantee and state 
grant recipient levels for public hearings or meetings as the method 
for disseminating information or collecting citizen comments. Instead, 
grantees are encouraged to employ innovative methods to communicate 
with citizens and solicit their views on proposed uses of disaster 
recovery funds, and then to indicate in the Action Plan how it has 
addressed these views.

Administration Limitation

    State program administration requirements must be modified to be 
consistent with the Supplemental Appropriations Act, which allows up to 
five percent of the grant to be used for the state's administrative 
costs. The provisions at 42 U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i) 
and (iii) will not apply to the extent that they cap state 
administration expenditures and require a dollar for dollar match of 
state funds for administrative costs exceeding $100,000. HUD does not 
waive 24 CFR 570.489(a)(3) to allow the state to exceed the overall 
planning, management and administrative cap of 20 percent.

Use of Subrecipients

    The State CDBG program rule does not make specific provision for 
the treatment of the entities called ``subrecipients'' in the CDBG 
entitlement program. The waiver allowing the state to carry out 
activities directly creates a situation in which the state may use 
subrecipients to carry out activities in a manner similar to 
entitlement communities rather than using a method of distributing 
funds to local governments. HUD and its Office of Inspector General 
have long identified the use of subrecipients as a practice that 
increases the risk of abuse of funds. HUD's experience is that this 
risk can be successfully managed by following the CDBG entitlement 
requirements and related guidance. Therefore, HUD is requiring that a 
state taking advantage of the waiver allowing it to carry out 
activities directly must follow the alternative requirements drawn from 
the CDBG entitlement rule and specified in this Notice when using 
subrecipients.

Reporting

    HUD is waiving the annual reporting requirement because the 
Congress requires quarterly reports from the grantees and from HUD on 
various aspects of the uses of funds and of the activities funded with 
these grants. Many of the data elements the grantees will report to 
Congress quarterly are the same as those that HUD will use to exercise 
oversight for compliance with the requirements of this Notice and for 
prevention of fraud, abuse of funds, and duplication of benefits. To 
collect these data elements and to meet its reporting requirements, HUD 
is requiring each grantee to report to HUD quarterly using the online 
Disaster Recovery Grant Reporting (DRGR) system, which uses a 
streamlined, Internet-based format. HUD will use grantee reports to 
monitor for anomalies or performance problems that suggest fraud, abuse 
of funds, and duplication of benefits; to reconcile budgets, 
obligations, fund draws, and expenditures; and to calculate

[[Page 52874]]

applicable administrative and public service limitations and the 
overall percent of benefit to low- and moderate-income persons, and as 
a basis for risk analysis in determining a monitoring plan.
    The grantee must post the report on a Web site for its citizens 
within 3 days of the report's submission to HUD. If a grantee chooses, 
it may use this report, together with a statement regarding any sole 
source procurements, as its required quarterly submission to the 
Committees on Appropriations. Each quarter, HUD will submit to the 
Committees a summary description of its report reviews, other HUD 
monitoring and technical assistance activities undertaken during the 
quarter, and any significant conclusions related to fraud or abuse of 
funds or duplication of benefits.

Eligibility--Housing Related

    The waiver of Section 105(a) of the 1974 Act that allows new 
housing construction and of Section 105(a)(24), to allow homeownership 
assistance for families whose income is up to 120 percent of median 
income and payment of up to 100 percent of a housing down payment is 
necessary following major disasters in which large numbers of 
affordable housing units have been damaged or destroyed, as is the case 
in the disaster eligible under this notice. The broadening of the 
Section 105(a)(24) waiver, in accordance with the state's request, will 
allow the state to implement mixed-use housing recovery programs 
included in its HUD-accepted action plan.

Anti-Pirating

    The limited waiver of the anti-pirating requirements allows the 
flexibility to provide assistance to a business located in another 
state or market area within the same state if the business was 
displaced from a declared area within the state by the disaster and the 
business wishes to return. This waiver is necessary to allow a grantee 
affected by a major disaster to rebuild its employment base.

Relocation Requirements

    The states' plan to engage in voluntary acquisition and optional 
relocation activities (in a form often called ``buyouts'') by using 
waivers related to acquisition and relocation requirements under the 
Uniform Relocation Assistance and Real Property Acquisition Policies 
Act of 1970, as amended, (42 U.S.C. 4601 et seq.) (URA) and the 
replacement of housing and relocation assistance provisions under 
section 104(d) of the HCD Act. The states asked for waivers to help 
promote the acquisition of property and the replacement of housing in a 
timely and efficient manner.
    CDBG funds are federal financial assistance so their use in 
projects that involve acquisition of property necessary for a federally 
assisted project, or that involve acquisition, demolition, or 
rehabilitation that force a person to move permanently, are subject to 
the URA and the government-wide implementing regulations found at 49 
CFR part 24. The URA provides assistance and protections to individuals 
and businesses affected by Federal or federally assisted projects. HUD 
is waiving the following URA requirements to help promote accessibility 
to suitable decent, safe, and sanitary housing for Midwest flooding 
victims.
    The acquisition requirements of the URA and implementing 
regulations are waived so that they do not apply to an arm's length 
voluntary purchase carried out by a person that does not have the power 
of eminent domain, in connection with the purchase and occupancy of a 
principal residence by that person. The failure to suspend these 
requirements would impede disaster recovery and may result in windfall 
payments.
    A limited waiver of the URA implementing regulations to the extent 
that they require grantees to provide URA financial assistance 
sufficient to reduce the displaced person's post-displacement rent/
utility cost to 30 percent of household income. The failure to suspend 
these one-size-fits-all requirements could impede disaster recovery. To 
the extent that a tenant has been paying rents in excess of 30 percent 
of household income without demonstrable hardship, rental assistance 
payments to reduce tenant costs to 30 percent would not be required.
    The URA and implementing regulations to the extent necessary to 
permit a grantee to meet all or a portion of a grantee's replacement 
housing financial assistance obligation to a displaced renter by 
offering rental housing through a tenant-based rental assistance (TBRA) 
housing program subsidy (e.g., Section 8 rental voucher or certificate) 
provided that the renter is also provided referrals to suitable, 
available rental replacement dwellings where the owner is willing to 
participate in the TBRA program, and the period of authorized 
assistance is at least 42 months. Failure to grant the waiver would 
impede disaster recovery whenever TBRA program subsidies are available 
but funds for cash relocation assistance are limited. The change 
provides access to an additional relocation resource option.
    The URA and implementing regulations to the extent that they 
require a grantee to offer a person displaced from a dwelling unit the 
option to receive a ``moving expense and dislocation allowance'' based 
on the current schedule of allowances prepared by the Federal Highway 
Administration, provided that the grantee establishes and offers the 
person a moving expense and dislocation allowance under a schedule of 
allowances that is reasonable for the jurisdiction and takes into 
account the number of rooms in the displacement dwelling, whether the 
person owns and must move the furniture, and, at a minimum, the kinds 
of expenses described in 49 CFR 24.301. Failure to suspend this 
provision would impede disaster recovery by requiring grantees to offer 
allowances that do not reflect current local labor and transportation 
costs. Persons displaced from a dwelling remain entitled to choose a 
payment for actual reasonable moving and related expenses if they find 
that approach preferable to the locally established moving expense and 
dislocation allowance.
    In addition to the URA waivers, HUD is waiving requirements of 
section 104(d) of the HCD Act dealing with one-for-one replacement of 
low- and moderate-income housing units demolished or converted in 
connection with a CDBG-assisted development project for housing units 
damaged by one or more disasters. HUD is waiving this requirement 
because it does not take into account the large, sudden changes a major 
disaster may cause to the local housing stock, population, or local 
economy. Further, the requirement does not take into account the 
threats to public health and safety and to economic revitalization that 
may be caused by the presence of disaster-damaged structures that are 
unsuitable for rehabilitation. As it stands, the requirement would 
impede disaster recovery and discourage grantees from acquiring, 
converting, or demolishing disaster-damaged housing because of 
excessive costs that would result from replacing all such units within 
the specified timeframe. HUD is also waiving the relocation assistance 
requirements contained in section 104(d) of the HCD Act to the extent 
they differ from those of the URA (42 U.S.C. 4601 et seq.). This change 
will simplify implementation while preserving statutory protections for 
persons displaced by projects assisted with CDBG disaster recovery 
grant funds.

[[Page 52875]]

    Iowa has indicated that an additional reason for these waivers is 
related to its decision to administer some buyouts that will include in 
the same project funds under this notice and FEMA mitigation funding. 
The statutory requirements of the URA are also applicable to the 
administration of FEMA assistance, and disparities in rental assistance 
payments for activities funded by HUD and that agency will thus be 
eliminated. FEMA is subject to the requirements of the URA. Pursuant to 
this authority, FEMA requires that rental assistance payments be 
calculated on the basis of the amount necessary to lease or rent 
comparable housing for a period of 42 months. HUD is also subject to 
these requirements, but is also covered by alternative relocation 
provisions authorized under 42 U.S.C. 5304(d)(2)(A)(iii) and (iv) and 
implementing regulations at 24 CFR 42.350. These alternative relocation 
benefits, available to low- and moderate-income displacees opting to 
receive them in certain HUD programs, require the calculation of 
similar rental assistance payments on the basis of 60 months, rather 
than 42 months, thereby creating a disparity between the available 
benefits offered by HUD and FEMA (although not always an actual cash 
difference). The waiver assures uniform and equitable treatment by 
allowing the URA benefits requirements to be the standard for 
assistance under this notice.

Program Income

    A combination of CDBG provisions limits the flexibility available 
to the states for the use of program income. Prior to 2002, program 
income earned on disaster recovery grants has usually been program 
income in accordance with the rules of the regular CDBG program of the 
applicable state and has lost its disaster grant identity, thus losing 
use of the waivers and streamlined alternative requirements. Also, the 
State CDBG program rule and law are designed for a program in which the 
state distributes all funds rather than carrying out activities 
directly. The HCD Act specifically provides for a local government 
receiving CDBG grants from a state to retain program income if it uses 
the funds for additional eligible activities under the annual CDBG 
program. The HCD Act allows the state to require return of the program 
income to the state under certain circumstances. This notice waives the 
existing statute and regulations to give the states, in all 
circumstances, the choice of whether a local government receiving a 
distribution of CDBG disaster recovery funds and using program income 
for activities in the Action Plan may retain this income and use it for 
additional disaster recovery activities. In addition, this notice 
allows program income to the disaster recovery grant generated by 
activities undertaken directly by the state or its agent(s) to retain 
the original disaster recovery grant's alternative requirements and 
waivers and to remain under the state's discretion until grant 
closeout, at which point any program income on hand or received 
subsequently will become program income to the state's annual CDBG 
program. The alternative requirements provide all the necessary 
conforming changes to the program income regulations.

Certifications

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

Applicable Rules, Statutes, Waivers, and Alternative Requirements

Pre-Grant Process

    1. General note. Prerequisites to a grantee's receipt of CDBG 
disaster recovery assistance include adoption of a citizen 
participation plan; publication of its proposed Action Plan for 
Disaster Recovery; public notice and comment; and submission to HUD of 
an Action Plan for Disaster Recovery, including certifications. Except 
as described in this Notice, statutory and regulatory provisions 
governing the Community Development Block Grant program for states, 
including those at 42 U.S.C. 5301 et seq. and 24 CFR part 570, shall 
apply to the use of these funds.
    2. Overall benefit waiver and alternative requirement. The 
requirements at 42 U.S.C. 5301(c), 42 U.S.C. 5304(b)(3)(A), and 24 CFR 
570.484 that 70 percent of funds are for activities that benefit low- 
and moderate-income persons are waived to stipulate that at least 50 
percent of disaster recovery grant funds are for activities that 
principally benefit low- and moderate-income persons.
    3. Direct grant administration by states and means of carrying out 
eligible activities. Requirements at 42 U.S.C. 5306 are waived to the 
extent necessary to allow a state to use its disaster recovery grant 
allocation directly to carry out state-administered activities eligible 
under this Notice. Activities eligible under this Notice may be 
undertaken, subject to state law, by the recipient through its 
employees, or through procurement contracts, or through loans or grants 
under agreements with subrecipients, or by one or more entities that 
are designated by the chief executive officer of the state. Unless a 
waiver provides otherwise, activities made eligible under section 
105(a)(15) of the HCD Act, as amended, may only be undertaken by 
entities specified in that section, whether the assistance is provided 
to such an entity from the state or from a unit of general local 
government.
    4. Consolidated Plan waiver. Requirements at 42 U.S.C. 12706 and 24 
CFR 91.325(a)(6), that housing activities undertaken with CDBG funds be 
consistent with the strategic plan, are waived. Further, 42 U.S.C. 
5304(e), to the extent that it would require HUD to annually review 
grantee performance under the consistency criteria, is also waived. 
These waivers apply only until the time that the grantee first updates 
the consolidated plan priorities following the disaster.
    5. Citizen participation waiver and alternative requirement. 
Provisions of 42 U.S.C. 5304(a)(2) and (3), 42 U.S.C. 12707, 24 CFR 
570.486, and 24 CFR 91.115(b) with respect to citizen participation 
requirements are waived and replaced by the requirements below. The 
streamlined requirements do not mandate public hearings at either the 
state or local government level, but do require providing a reasonable 
opportunity (at least 7 days) for citizen comment and ongoing citizen 
access to information about the use of grant funds. The streamlined 
citizen participation requirements for this grant are:
    a. Before the grantee adopts the action plan for this grant or any 
substantial amendment to this grant, the grantee will publish the 
proposed plan or amendment (including the information required in this 
Notice for an Action Plan for Disaster Recovery). The manner of 
publication (including prominent posting on the state, local, or other 
relevant Web site) must afford citizens, affected local governments and 
other interested parties a reasonable opportunity to examine the plan 
or amendment's contents. Subsequent to publication, the grantee must 
provide a reasonable time period and method(s) (including electronic 
submission) for receiving comments on the plan or substantial 
amendment. The grantee's plans to minimize displacement of persons or 
entities and to assist any persons or entities displaced must be 
published with the action plan.
    b. In the action plan, each grantee will specify its criteria for 
determining what

[[Page 52876]]

changes in the grantee's activities constitute a substantial amendment 
to the plan. At a minimum, adding or deleting an activity or changing 
the planned beneficiaries of an activity will constitute a substantial 
change. The grantee may modify or substantially amend the action plan 
if it follows the same procedures required in this Notice for the 
preparation and submission of an Action Plan for Disaster Recovery. The 
grantee must notify HUD, but is not required to notify the public, when 
it makes any plan amendment that is not substantial.
    c. The grantee must consider all comments received on the action 
plan or any substantial amendment and submit to HUD a summary of those 
comments and the grantee's response with the action plan or substantial 
amendment.
    d. The grantee must make the action plan, any substantial 
amendments, and all performance reports available to the public. HUD 
recommends posting them on the Internet. In addition, the grantee must 
make these documents available in a form accessible to persons with 
disabilities and non-English-speaking persons. During the term of this 
grant, the grantee will provide citizens, affected local governments, 
and other interested parties reasonable and timely access to 
information and records relating to the action plan and the grantee's 
use of this grant.
    e. The grantee will provide a timely written response to every 
citizen complaint. Such response will be provided within 15 working 
days of the receipt of the complaint, if practicable.
    6. Modify requirement for consultation with local governments. 
Currently, the statute and regulations require consultation with 
affected units of local government in the non-entitlement area of the 
state regarding the state's proposed method of distribution. HUD is 
waiving 42 U.S.C. 5306(d)(2)(C)(iv), 24 CFR 91.325(b), and 24 CFR 
91.110, with the alternative requirement that the state consult with 
all disaster-affected units of general local government, including any 
CDBG entitlement communities, in determining the use of funds.
    7. Action Plan waiver and alternative requirement. The requirements 
at 42 U.S.C. 12705(a)(2), 42 U.S.C. 5304(a)(1), 42 U.S.C. 5304(m), 42 
U.S.C. 5306(d)(2)(C)(iii), 24 CFR 1003.604, and 24 CFR 91.320 are 
waived for these disaster recovery grants. Each state must submit to 
HUD an Action Plan for Disaster Recovery that describes:
    a. The effects of the covered disasters, especially in the most 
impacted areas and populations, and the greatest recovery needs 
resulting from the covered disasters that have not been addressed by 
insurance proceeds, other federal assistance or any other funding 
source;
    b. The grantee's overall plan for disaster recovery including:
    (1) How the state will promote sound short- and long-term recovery 
planning at the state and local levels, especially land use decisions 
that reflect responsible flood plain management, removal of regulatory 
barriers to reconstruction, and prior coordination with planning 
requirements of other state and Federal programs and entities;
    (2) How the state will encourage construction methods that 
emphasize high quality, durability, energy efficiency, sustainability, 
and mold resistance, including how the state will promote enactment and 
enforcement of modern building codes and mitigation of flood risk where 
appropriate; and
    (3) How the state will provide or encourage provision of adequate, 
flood-resistant housing for all income groups that lived in the 
disaster affected areas prior to the incident date(s) of the applicable 
disaster(s), including a description of the activities it plans to 
undertake to address emergency shelter and transitional housing needs 
of homeless individuals and families (including subpopulations), to 
prevent low-income individuals and families with children (especially 
those with incomes below 30 percent of median) from becoming homeless, 
to help homeless persons make the transition to permanent housing and 
independent living, and to address the special needs of persons who are 
not homeless identified in accordance with 24 CFR 91.315(d);
    c. Monitoring standards and procedures that are sufficient to 
ensure program requirements, including non-duplication of benefits, are 
met and that provide for continual quality assurance, investigation, 
and internal audit functions, with responsible staff reporting 
independently to the Governor of the state or, at a minimum, to the 
chief officer of the governing body of any designated administering 
entity;
    d. A description of the steps the state will take to avoid or 
mitigate occurrences of fraud, abuse, and mismanagement, especially 
with respect to accounting, procurement, and accountability, with a 
description of how the state will provide for increasing the capacity 
for implementation and compliance of local government grant recipients, 
subrecipients, subgrantees, contractors, and any other entity 
responsible for administering activities under this grant; and
    e. Method of distribution. The state's method of distribution shall 
include descriptions of the method of allocating funds to units of 
local government and of specific projects the state will carry out 
directly, as applicable. The descriptions will include:
    (1) When funds are to be allocated to units of local government, 
all criteria used to select applications from local governments for 
funding, including the relative importance of each criterion, and 
including a description of how the disaster recovery grant resources 
will be allocated among all funding categories and the threshold 
factors and grant size limits that are to be applied; and
    (2) When the state will carry out activities directly, the 
projected uses for the CDBG disaster recovery funds by responsible 
entity, activity, and geographic area;
    (3) How the method of distribution to local governments or use of 
funds described in accordance with the above subparagraphs will result 
in eligible uses of grant funds related to long-term recovery from 
specific effects of the disaster(s) or restoration of infrastructure; 
and
    (4) Sufficient information so that citizens, units of general local 
government and other eligible subgrantees or subrecipients will be able 
to understand and comment on the action plan and, if applicable, be 
able to prepare responsive applications to the state.
    f. Required certifications (see the applicable Certifications 
section of this Notice); and
    g. A completed and executed Federal form SF-424.
    8. Allow reimbursement for pre-agreement costs. The provisions of 
24 CFR 570.489(b) are applied to permit a grantee to reimburse itself 
for otherwise allowable costs incurred on or after the incident date of 
the covered disaster.
    9. Clarifying note on the process for environmental release of 
funds when a state carries out activities directly. Usually, a state 
distributes CDBG funds to units of local government and takes on HUD's 
role in receiving environmental certifications from the grant 
recipients and approving releases of funds. For this grant, HUD will 
allow a state grantee to also carry out activities directly instead of 
distributing them to other governments. According to the environmental 
regulations at 24 CFR 58.4, when a state carries out activities 
directly, the state must submit the certification and request for 
release of funds to HUD for approval.
    10. Duplication of benefits. In general, 42 U.S.C. 5155 (section 
312 of the Robert T. Stafford Disaster Assistance

[[Page 52877]]

and Emergency Relief Act, as amended) prohibits any person, business 
concern, or other entity from receiving financial assistance with 
respect to any part of a loss resulting from a major disaster as to 
which he has received financial assistance under any other program or 
from insurance or any other source. The Supplemental Appropriations Act 
stipulates that funds may not be used for activities reimbursable by or 
for which funds have been made available by the Federal Emergency 
Management Agency or by the Army Corps of Engineers.
    11. Waiver and alternative requirement for distribution to CDBG 
metropolitan cities and urban counties.
    a. Section 5302(a)(7) of title 42, U.S.C. (definition of 
``nonentitlement area'') and provisions of 24 CFR part 570 that would 
prohibit a state from distributing CDBG funds to units of general local 
government regardless of their status in the entitlement CDBG program 
and to Indian tribes, are waived, including 24 CFR 570.480(a), to the 
extent that such provisions limit the distribution of funds to units of 
general local government located in entitlement areas and to state or 
Federally recognized Indian tribes. The state is required instead to 
distribute funds to the most affected and impacted areas related to the 
consequences of the covered disaster(s) without regard to a local 
government or Indian tribe status under any other CDBG program.
    b. Additionally, because a state grantee under this appropriation 
may carry out activities directly, HUD is applying the regulations at 
24 CFR 570.480(c) with respect to the basis for HUD determining whether 
the state has failed to carry out its certifications so that such basis 
shall be that the state has failed to carry out its certifications in 
compliance with applicable program requirements. Also, 24 CFR 570.494 
regarding timely distribution of funds is waived. However, HUD expects 
each state grantee to expeditiously obligate and expend all funds, 
including any recaptured funds or program income, and to carry out 
activities in a timely manner.
    12. Program income alternative requirement. 42 U.S.C. 5304(j) and 
24 CFR 570.489(e) are waived to the extent necessary to allow 
additional flexibility in the administration of program income. The 
requirements that are retained are republished here for the convenience 
of the grantees.
    a. Program income.
    (1) For the purposes of this subpart, ``program income'' is defined 
as gross income received by a state, a unit of general local 
government, a tribe or a subrecipient of a state, a unit of general 
local government or a tribe that was generated from the use of CDBG 
funds, except as provided in paragraph (a)(2) of this section. When 
income is generated by an activity that is only partially assisted with 
CDBG funds, the income shall be prorated to reflect the percentage of 
CDBG funds used (e.g., a single loan supported by CDBG funds and other 
funds; a single parcel of land purchased with CDBG funds and other 
funds). Program income includes, but is not limited to, the following:
    (i) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with CDBG funds;
    (ii) Proceeds from the disposition of equipment purchased with CDBG 
funds;
    (iii) Gross income from the use or rental of real or personal 
property acquired by the unit of general local government or tribe or 
subrecipient of a state, a tribe or a unit of general local government 
with CDBG funds; less the costs incidental to the generation of the 
income;
    (iv) Gross income from the use or rental of real property owned by 
a state, tribe or the unit of general local government or a 
subrecipient of a state, tribe or unit of general local government, 
that was constructed or improved with CDBG funds, less the costs 
incidental to the generation of the income;
    (v) Payments of principal and interest on loans made using CDBG 
funds;
    (vi) Proceeds from the sale of loans made with CDBG funds;
    (vii) Proceeds from the sale of obligations secured by loans made 
with CDBG funds;
    (viii) Interest earned on program income pending disposition of the 
income, but excluding interest earned on funds held in a revolving fund 
account;
    (ix) Funds collected through special assessments made against 
properties owned and occupied by households not of low and moderate 
income, where the special assessments are used to recover all or part 
of the CDBG portion of a public improvement; and
    (x) Gross income paid to a state, tribe or a unit of general local 
government or subrecipient from the ownership interest in a for-profit 
entity acquired in return for the provision of CDBG assistance.
    (2) ``Program income'' does not include the following:
    (i) The total amount of funds which is less than $25,000 received 
in a single year that is retained by a unit of general local 
government, tribe or subrecipient;
    (ii) Amounts generated by activities eligible under section 
105(a)(15) of the HCD Act and carried out by an entity under the 
authority of section 105(a)(15) of the HCD Act;
    (3) The state may permit the unit of general local government or 
tribe which receives or will receive program income to retain the 
program income, subject to the requirements of paragraph (a)(3)(ii) of 
this section, or the state may require the unit of general local 
government or tribe to pay the program income to the state.
    (i) Program income paid to the state. Program income that is paid 
to the state or received by the state is treated as additional disaster 
recovery CDBG funds subject to the requirements of this notice and must 
be used by the state or distributed to units of general local 
government in accordance with the state's Action Plan for Disaster 
Recovery. To the maximum extent feasible, program income shall be used 
or distributed before the state makes additional withdrawals from the 
Treasury, except as provided in paragraph (b) of this section.
    (ii) Program income retained by a unit of general local government 
or tribe.
    (A) Program income that is received and retained by the unit of 
general local government or tribe before closeout of the grant that 
generated the program income is treated as additional disaster recovery 
CDBG funds and is subject to the requirements of this notice.
    (B) Program income that is received and retained by the unit of 
general local government or tribe after closeout of the grant that 
generated the program income, but that is used to continue the disaster 
recovery activity that generated the program income, is subject to the 
waivers and alternative requirements of this notice.
    (C) All other program income is subject to the requirements of 42 
U.S.C. 5304(j) and subpart I of 24 CFR part 570.
    (D) The state shall require units of general local government or 
tribes, to the maximum extent feasible, to disburse program income that 
is subject to the requirements of this notice before requesting 
additional funds from the state for activities, except as provided in 
paragraph (b) of this section.
    (b) Revolving funds.
    (1) The state may establish or permit units of general local 
government or tribes to establish revolving funds to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to carry out specific activities which, 
in turn, generate payments to the fund for use in

[[Page 52878]]

carrying out such activities. These payments to the revolving fund are 
program income and must be substantially disbursed from the revolving 
fund before additional grant funds are drawn from the Treasury for 
revolving fund activities. Such program income is not required to be 
disbursed for non-revolving fund activities.
    (2) The state may also establish a revolving fund to distribute 
funds to units of general local government or tribes to carry out 
specific, identified activities. A revolving fund, for this purpose, is 
a separate fund (with a set of accounts that are independent of other 
program accounts) established to fund grants to units of general local 
government to carry out specific activities which, in turn, generate 
payments to the fund for additional grants to units of general local 
government to carry out such activities. Program income in the 
revolving fund must be disbursed from the fund before additional grant 
funds are drawn from the Treasury for payments to units of general 
local government which could be funded from the revolving fund.
    (3) A revolving fund established by either the state or unit of 
general local government shall not be directly funded or capitalized 
with grant funds.
    (c) Transfer of program income. Notwithstanding other provisions of 
this notice, the state may transfer program income before closeout of 
the grant that generated the program income to its own annual CDBG 
program or to any annual CDBG-funded activities administered by a unit 
of general local government or Indian tribe within the state.
    (d) Program income on hand at the state or its subrecipients at the 
time of grant closeout by HUD and program income received by the state 
after such grant closeout shall be program income to the most recent 
annual CDBG program grant of the state.
    13. Note that use of grant funds must relate to the covered 
disaster(s). In addition to being eligible under 42 U.S.C. 5305(a) or 
this Notice and meeting a CDBG national objective, the Supplemental 
Appropriations Act requires that activities funded under this Notice 
must also be for necessary expenses related to disaster relief, long-
term recovery, and restoration of infrastructure in areas covered by a 
declaration of major disaster under title IV of the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et seq.) 
as a result of the recent natural disaster or disasters listed in this 
Notice for which the state received a funding allocation.
    13a. Note on change to administration limitation. Up to five 
percent of the grant amount may be used for the state's administrative 
costs. The provisions of 42 U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i) 
and (iii) will not apply to the extent that they cap state 
administration expenditures, limit a state's ability to charge a de 
minimis application fee for grant applications for activities the state 
carries out directly, and require a dollar for dollar match of state 
funds for administrative costs exceeding $100,000. HUD does not waive 
24 CFR 570.489(a)(3) to allow the state to exceed the overall planning, 
management and administrative cap of 20 percent.

Reporting

    14. Waiver of performance report and alternative requirement. The 
requirements for submission of a Performance Evaluation Report (PER) 
pursuant to 42 U.S.C. 12708 and 24 CFR 91.520 are waived. The 
alternative requirement is that--
    a. Each grantee must submit its Action Plan for Disaster Recovery, 
including performance measures, into HUD's Web-based Disaster Recovery 
Grant Reporting (DRGR) system. (The signed certifications and the SF-
424 must be submitted in hard copy.) As additional detail about uses of 
funds becomes available to the grantee, the grantee must enter this 
detail into DRGR, in sufficient detail to serve as the basis for 
acceptable performance reports.
    b. Each grantee must submit a quarterly performance report, as HUD 
prescribes, no later than 30 days following each calendar quarter, 
beginning after the first full calendar quarter after grant award and 
continuing until all funds have been expended and all expenditures 
reported. Each quarterly report will include information about the uses 
of funds during the applicable quarter including (but not limited to) 
the project name, activity, location, and national objective, funds 
budgeted, obligated, drawn down, and expended; the funding source and 
total amount of any non-CDBG disaster funds; beginning and ending dates 
of activities; and performance measures such as numbers of low- and 
moderate-income persons or households benefiting. Quarterly reports to 
HUD must be submitted using HUD's Web-based DRGR system and, within 3 
days of submission, posted on the grantee's official Internet site open 
to the public.
    15. Use of subrecipients. The following alternative requirement 
applies for any activity that a state carries out directly by funding a 
subrecipient:
    a. 24 CFR 570.503, except that specific references to 24 CFR parts 
84 and 85 need not be included in subrecipient agreements.
    b. 24 CFR 570.502(b), except that HUD recommends but does not 
require application of the requirements of 24 CFR part 84.
    16. Recordkeeping. Recognizing that the state may carry out 
activities directly, 24 CFR 570.490(b) is waived in such a case and the 
following alternative provision shall apply: state records. The state 
shall establish and maintain such records as may be necessary to 
facilitate review and audit by HUD of the state's administration of 
CDBG disaster recovery funds under 24 CFR 570.493. Consistent with 
applicable statutes, regulations, waivers and alternative requirements, 
and other federal requirements, the content of records maintained by 
the state shall be sufficient to: enable HUD to make the applicable 
determinations described at 24 CFR 570.493; make compliance 
determinations for activities carried out directly by the state; and 
show how activities funded are consistent with the descriptions of 
activities proposed for funding in the action plan. For fair housing 
and equal opportunity purposes, and as applicable, such records shall 
include data on the racial, ethnic, and gender characteristics of 
persons who are applicants for, participants in, or beneficiaries of 
the program.
    17. Change of use of real property. This waiver conforms the change 
of use of real property rule to the waiver allowing a state to carry 
out activities directly. For purposes of this program, in 24 CFR 
570.489(j), (j)(1), and the last sentence of (j)(2), ``unit of general 
local government'' shall be read as ``unit of general local government 
or state.''
    18. Responsibility for state review and handling of noncompliance. 
This change conforms the rule with the waiver allowing the state to 
carry out activities directly. 24 CFR 570.492 is waived and the 
following alternative requirement applies: The state shall make reviews 
and audits including on-site reviews of any subrecipients, designated 
public agencies, and units of general local government as may be 
necessary or appropriate to meet the requirements of section 104(e)(2) 
of the HCD Act, as amended, as modified by this Notice. In the case of 
noncompliance with these requirements, the state shall take such 
actions as may be appropriate to prevent a continuance of the 
deficiency, mitigate any adverse effects or consequences and

[[Page 52879]]

prevent a recurrence. The state shall establish remedies for 
noncompliance by any designated public agencies or units of general 
local governments and for its subrecipients.
    19. Housing-related eligibility waivers. 42 U.S.C. 5305(a) is 
waived to the extent necessary to allow homeownership assistance for 
households with up to 120 percent of area median income and downpayment 
assistance for up to 100 percent of the down payment (42 U.S.C. 
5305(a)(24)(D)) and to allow new housing construction.
    20. Waiver and modification of the anti-pirating clause to permit 
assistance to help a business return. 42 U.S.C. 5305(h) and 24 CFR 
570.482 are hereby waived only to allow the grantee to provide 
assistance under this grant to any business that was operating in the 
covered disaster area before the incident date of the applicable 
disaster, and has since moved in whole or in part from the affected 
area to another state or to a labor market area within the same state 
to continue business.

Relocation Requirements

    21. Waiver of one-for-one replacement of units damaged by disaster.
    a. One-for-one replacement requirements at 42 U.S.C. 5304(d)(2) and 
(d)(3), and 24 CFR 42.375(a) are waived for low- and moderate-income 
dwelling units (1) damaged by the disaster, (2) for which CDBG funds 
are used for demolition, and (3) which are not suitable for 
rehabilitation.
    b. Relocation assistance requirements at 42 U.S.C. 5304(d)(2)(A), 
and 24 CFR 42.350 are waived to the extent they differ from those of 
the URA and its implementing regulations at 49 CFR part 24 following 
waivers to activities involving buyouts and other activities covered by 
the URA and related to disaster recovery housing activities assisted by 
the funds covered by this notice and included in an approved Action 
Plan.
    c. The requirements at 49 CFR 24.101(b)(2)(i)-(ii) are waived to 
the extent that they apply to an arm's length voluntary purchase 
carried out by a person that does not have the power of eminent domain, 
in connection with the purchase and occupancy of a principal residence 
by that person.
    d. The requirements at sections 204(a) and 206 of the URA, 49 CFR 
24.2, 24.402(b)(2) and 24.404 are waived to the extent that they 
require the state to provide URA financial assistance sufficient to 
reduce the displaced person's post-displacement rent/utility cost to 30 
percent of household income. To the extent that a tenant has been 
paying rents in excess of 30 percent of household income without 
demonstrable hardship, rental assistance payments to reduce tenant 
costs to 30 percent would not be required. Before using this waiver, 
the state must establish a definition of ``demonstrable hardship.''
    e. The requirements of sections 204 and 205 of the URA, and 49 CFR 
24.402(b) are waived to the extent necessary to permit a grantee to 
meet all or a portion of a grantee's replacement housing financial 
assistance obligation to a displaced renter by offering rental housing 
through a tenant-based rental assistance (TBRA) housing program subsidy 
(e.g., Section 8 rental voucher or certificate) provided that the 
renter is also provided referrals to suitable, available rental 
replacement dwellings where the owner is willing to participate in the 
TBRA program, and the period of authorized assistance is at least 42 
months.
    f. The requirements of section 202(b) of the URA and 49 CFR 24.302 
are waived to the extent that they require a grantee to offer a person 
displaced from a dwelling unit the option to receive a ``moving expense 
and dislocation allowance'' based on the current schedule of allowances 
prepared by the Federal Highway Administration, provided that the 
grantee establishes and offers the person a moving expense and 
dislocation allowance under a schedule of allowances that is reasonable 
for the jurisdiction and takes into account the number of rooms in the 
displacement dwelling, whether the person owns and must move the 
furniture, and, at a minimum, the kinds of expenses described in 49 CFR 
24.301.
    22. Notes on flood buyouts: a. Payment of pre-flood values for 
buyouts. HUD disaster recovery state grant recipients and Indian tribes 
have the discretion to pay pre-flood or post-flood values for the 
acquisition of properties located in a flood way or floodplain. In 
using CDBG disaster recovery funds for such acquisitions, the grantee 
must uniformly apply whichever valuation method it chooses.
    b. Ownership and maintenance of acquired property. Any property 
acquired with disaster recovery grants funds being used to match FEMA 
Section 404 Hazard Mitigation Grant Program funds is subject to section 
404(b)(2) of the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act, as amended, which requires that such property be 
dedicated and maintained in perpetuity for a use that is compatible 
with open space, recreational, or wetlands management practices. In 
addition, with minor exceptions, no new structure may be erected on the 
property and no subsequent application for Federal disaster assistance 
may be made for any purpose. The acquiring entity may want to lease 
such property to adjacent property owners or other parties for 
compatible uses in return for a maintenance agreement. Although Federal 
policy encourages leasing rather than selling such property, the 
property may be sold. In all cases, a deed restriction or covenant 
running with the land must require that the property be dedicated and 
maintained for compatible uses in perpetuity.
    c. Future Federal assistance to owners remaining in floodplain.
    (1) Section 582 of the National Flood Insurance Reform Act of 1994, 
as amended, (42 U.S.C. 5154(a)) prohibits flood disaster assistance in 
certain circumstances. In general, it provides that no Federal disaster 
relief assistance made available in a flood disaster area may be used 
to make a payment (including any loan assistance payment) to a person 
for repair, replacement, or restoration for damage to any personal, 
residential, or commercial property, if that person at any time has 
received Federal flood disaster assistance that was conditional on the 
person first having obtained flood insurance under applicable Federal 
law and the person has subsequently failed to obtain and maintain flood 
insurance as required under applicable Federal law on such property. 
(Section 582 is self-implementing without regulations.) This means that 
a grantee may not provide disaster assistance for the above-mentioned 
repair, replacement, or restoration to a person that has failed to meet 
this requirement.
    (2) Section 582 also implies a responsibility for a grantee that 
receives CDBG disaster recovery funds or that, under 42 U.S.C. 5321, 
designates annually appropriated CDBG funds for disaster recovery. That 
responsibility is to inform property owners receiving disaster 
assistance that triggers the flood insurance purchase requirement that 
they have a statutory responsibility to notify any transferee of the 
requirement to obtain and maintain flood insurance, and that the 
transferring owner may be liable if he or she fails to do so. These 
requirements are described below.
    (3) Duty to notify. In the event of the transfer of any property 
described in paragraph d., the transferor shall, not later than the 
date on which such transfer occurs, notify the transferee in writing of 
the requirements to:
    (i) Obtain flood insurance in accordance with applicable Federal 
law with respect to such property, if the

[[Page 52880]]

property is not so insured as of the date on which the property is 
transferred; and
    (ii) Maintain flood insurance in accordance with applicable Federal 
law with respect to such property. Such written notification shall be 
contained in documents evidencing the transfer of ownership of the 
property.
    (4) Failure to notify. If a transferor fails to provide notice as 
described above and, subsequent to the transfer of the property:
    (i) The transferee fails to obtain or maintain flood insurance, in 
accordance with applicable Federal law, with respect to the property;
    (ii) The property is damaged by a flood disaster; and
    (iii) Federal disaster relief assistance is provided for the 
repair, replacement, or restoration of the property as a result of such 
damage, the transferor shall be required to reimburse the Federal 
Government in an amount equal to the amount of the Federal disaster 
relief assistance provided with respect to the property.
    d. The notification requirements apply to personal, commercial, or 
residential property for which Federal disaster relief assistance made 
available in a flood disaster area has been provided, prior to the date 
on which the property is transferred, for repair, replacement, or 
restoration of the property, if such assistance was conditioned upon 
obtaining flood insurance in accordance with applicable Federal law 
with respect to such property.
    e. The term ''Federal disaster relief assistance'' applies to HUD 
or other Federal assistance for disaster relief in ``flood disaster 
areas.'' The term ``flood disaster area'' is defined in section 
582(d)(2) of the National Flood Insurance Reform Act of 1994, as 
amended, to include an area receiving a Presidential declaration of a 
major disaster or emergency as a result of flood conditions.
    23. Information collection approval note. HUD has approval for 
information collection requirements in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-3520) under OMB control number 
2506-0165. In accordance with the Paperwork Reduction Act, HUD may not 
conduct or sponsor, nor is a person required to respond to, a 
collection of information unless the collection displays a valid 
control number.

Certifications

    24. Certifications for state governments, waiver and alternative 
requirement. Section 91.325 of title 24 of the Code of Federal 
Regulations is waived. Each state must make the following 
certifications prior to receiving a CDBG disaster recovery grant:
    a. The state certifies that it will affirmatively further fair 
housing, which means that it will conduct an analysis to identify 
impediments to fair housing choice within the state, take appropriate 
actions to overcome the effects of any impediments identified through 
that analysis, and maintain records reflecting the analysis and actions 
in this regard. (See 24 CFR 570.487(b)(2).)
    b. The state certifies that it has in effect and is following a 
residential anti-displacement and relocation assistance plan in 
connection with any activity assisted with funding under the CDBG 
program.
    c. The state certifies its compliance with restrictions on lobbying 
required by 24 CFR part 87, together with disclosure forms, if required 
by part 87.
    d. The state certifies that the Action Plan for Disaster Recovery 
is authorized under state law and that the state, and any entity or 
entities designated by the state, possesses the legal authority to 
carry out the program for which it is seeking funding, in accordance 
with applicable HUD regulations and this Notice.
    e. The state certifies that it will comply with the acquisition and 
relocation requirements of the Uniform Relocation Assistance and Real 
Property Acquisition Policies Act of 1970, as amended, and implementing 
regulations at 49 CFR part 24, except where waivers or alternative 
requirements are provided for this grant.
    f. The state certifies that it will comply with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), and 
implementing regulations at 24 CFR part 135.
    g. The state certifies that it is following a detailed citizen 
participation plan that satisfies the requirements of 24 CFR 91.115 
(except as provided for in notices providing waivers and alternative 
requirements for this grant), and that each unit of general local 
government that is receiving assistance from the state is following a 
detailed citizen participation plan that satisfies the requirements of 
24 CFR 570.486 (except as provided for in notices providing waivers and 
alternative requirements for this grant).
    h. The state certifies that it has consulted with affected units of 
local government in counties designated in covered major disaster 
declarations in the nonentitlement, entitlement and tribal areas of the 
state in determining the method of distribution of funding;
    i. The state certifies that it is complying with each of the 
following criteria:
    (1) Funds will be used solely for necessary expenses related to 
disaster relief, long-term recovery, and restoration of infrastructure 
in areas covered by a declaration of major disaster under title IV of 
the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 
U.S.C. 5121 et seq.) as a result of recent natural disasters.
    (2) With respect to activities expected to be assisted with CDBG 
disaster recovery funds, the action plan has been developed so as to 
give the maximum feasible priority to activities that will benefit low- 
and moderate-income families.
    (3) The aggregate use of CDBG disaster recovery funds shall 
principally benefit low- and moderate-income families in a manner that 
ensures that at least 50 percent of the amount is expended for 
activities that benefit such persons during the designated period.
    (4) The state will not attempt to recover any capital costs of 
public improvements assisted with CDBG disaster recovery grant funds, 
by assessing any amount against properties owned and occupied by 
persons of low- and moderate-income, including any fee charged or 
assessment made as a condition of obtaining access to such public 
improvements, unless (A) disaster recovery grant funds are used to pay 
the proportion of such fee or assessment that relates to the capital 
costs of such public improvements that are financed from revenue 
sources other than under this title; or (B) for purposes of assessing 
any amount against properties owned and occupied by persons of moderate 
income, the grantee certifies to the Secretary that it lacks sufficient 
CDBG funds (in any form) to comply with the requirements of clause (A).
    j. The state certifies that the grant will be conducted and 
administered in conformity with title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d) and the Fair Housing Act (42 U.S.C. 3601-3619) 
and implementing regulations.
    k. The state certifies that it has and that it will require units 
of general local government that receive grant funds to certify that 
they have adopted and are enforcing:
    (1) A policy prohibiting the use of excessive force by law 
enforcement agencies within its jurisdiction against any individuals 
engaged in non-violent civil rights demonstrations; and
    (2) A policy of enforcing applicable state and local laws against 
physically barring entrance to or exit from a facility

[[Page 52881]]

or location that is the subject of such non-violent civil rights 
demonstrations within its jurisdiction.
    l. The state certifies that each state grant recipient or 
administering entity has the capacity to carry out disaster recovery 
activities in a timely manner, or the state has a plan to increase the 
capacity of any state grant recipient or administering entity who lacks 
such capacity.
    m. The state certifies that it will not use CDBG disaster recovery 
funds for any activity in an area delineated as a special flood hazard 
area in FEMA's most current flood advisory maps unless it also ensures 
that the action is designed or modified to minimize harm to or within 
the floodplain in accordance with Executive Order 11988 and 24 CFR part 
55.
    n. The state certifies that it will comply with applicable laws.

Duration of Funding

    Availability of funds provisions in 31 U.S.C. 1551-1557, added by 
section 1405 of the National Defense Authorization Act for Fiscal Year 
1991 (Pub. L. 101-510), limit the availability of certain 
appropriations for expenditure. This limitation may not be waived. 
However, the Supplemental Appropriations Act for these grants directs 
that these funds be available until expended unless, in accordance with 
31 U.S.C. 1555, the Department determines that the purposes for which 
the appropriation has been made have been carried out and no 
disbursement has been made against the appropriation for two 
consecutive fiscal years. In such case, the Department shall close out 
the grant prior to expenditure of all funds.

Catalog of Federal Domestic Assistance

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

Finding of No Significant Impact

    A Finding of No Significant Impact (FONSI) with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332). The FONSI is 
available for public inspection between 8 a.m. and 5 p.m. weekdays in 
the Regulations Division, Office of General Counsel, Department of 
Housing and Urban Development, Room 10276, 451 7th Street, SW., 
Washington, DC 20410-0500. Due to security measures at the HUD 
Headquarters building, an advance appointment to review the docket file 
must be scheduled by calling the Regulations Division at 202-708-3055 
(this is not a toll-free number). Hearing- or speech-impaired 
individuals may access this number through TTY by calling the toll-free 
Federal Information Relay Service at 800-877-8339.

    Dated: September 8, 2008.
Roy A Bernardi,
Deputy Secretary.
[FR Doc. E8-21092 Filed 9-10-08; 8:45 am]
BILLING CODE 4210-67-P