[Federal Register Volume 73, Number 200 (Wednesday, October 15, 2008)]
[Notices]
[Pages 61148-61157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-24535]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5254-N-01]


Reconsideration of Waivers Granted to and Alternative 
Requirements for the State of Louisiana's CDBG Disaster Recovery Grant 
Under the Department of Defense Emergency Supplemental Appropriations 
To Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza 
Act, 2006

AGENCY: Office of the Secretary, HUD.

ACTION: Notice of waivers, alternative requirements, and statutory 
program requirements.

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SUMMARY: This notice describes the statutorily required reconsideration 
of additional waivers and alternative requirements applicable to the 
Community Development Block Grant (CDBG) disaster recovery grant 
provided to the State of Louisiana on June 14, 2006, and March 7, 2007, 
for the purpose of assisting in the recovery in the most impacted and 
distressed areas related to the consequences of Hurricanes Katrina and 
Rita in 2005. Although the reconsideration period is normally 2 years 
following grant of the waiver, HUD is reconsidering and altering some 
waivers early at the state's request.

DATES: Effective Date: October 20, 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 Seventh 
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-
8339. FAX 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 Department of Defense, Emergency Supplemental Appropriations to 
Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act, 
2006 (Pub. L. 109-148, approved December 30, 2005) (the 2006 Act) 
appropriated $11.5 billion in Community Development Block Grant funds 
for necessary expenses related to disaster relief, long-term recovery, 
and restoration of infrastructure directly related to the consequences 
of the covered disasters. The State of Louisiana received an allocation 
and grant of $6,200,000,000 from this appropriation. The 2006 Act 
authorized 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. The following waivers, alternative requirements, and 
reconsidered waivers are in response to written requests from the State 
of Louisiana.
    The Secretary finds that the following waivers and alternative 
requirements, as described below, are not inconsistent with the overall 
purpose of 42 U.S.C. 5301 et seq.; Title I of the Housing and Community 
Development Act of 1974, as amended (the 1974 Act); or of 42 U.S.C. 
12704 et seq., the Cranston-Gonzalez National Affordable Housing Act, 
as amended.
    Under the requirements of the Department of Housing and Urban 
Development Act, as amended (42 U.S.C. 3535(q)), regulatory waivers 
must be published in the Federal Register. As in the June 14, 2006, 
notice, the Department is also using this reconsideration notice to 
provide information about other ways in which the requirements for this 
grant vary from regular CDBG program rules. The compilation of this 
information in a single notice has created a helpful resource for 
Louisiana grant administrators and HUD field staff. Note that waivers 
and alternative requirements regarding the common application and 
reporting process for all grantees under this appropriation were 
published in a prior notice (71 FR 7666, published February 13, 2006, 
and updated in 73 FR 46312, published August 8, 2008).
    Except as described in notices regarding this grant, the 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.

Descriptions of Changes

    This section of the notice briefly describes the basis for each 
waiver and provides an explanation of related alternative requirements, 
if additional explanation is necessary. The Description of Changes 
section also highlights some of the statutory items and alternative 
requirements described in the sections that follow.
    Except as provided in the common waiver notice published August 8, 
2008, the waivers, alternative requirements, and statutory changes 
apply only to the CDBG supplemental disaster recovery funds 
appropriated in the 2006 Acts and allocated to the State of Louisiana. 
These actions provide additional flexibility in program design and 
implementation and note statutory requirements unique to this 
appropriation.
    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 permit local governments 
receiving long-term

[[Page 61149]]

community recovery funding to implement mixed-use housing recovery 
programs included in its state-approved long-term recovery plans.
    Compensation for disaster-related losses or housing incentives to 
resettle in Louisiana. The state planned to provide compensation to 
certain homeowners whose homes were damaged during the covered 
disasters, if the homeowners agree to meet the stipulations of the 
published program design. The state has also offered disaster recovery 
or mitigation housing incentives to promote housing development or 
resettlement in particular geographic areas. The Department waived the 
1974 Act and associated regulations to make these uses of grant funds 
eligible. Retention of this waiver is critical since the homeowner 
compensation and incentive program is ongoing.
    Eligibility--tourism. The state plans to continue providing 
disaster recovery grant assistance to support the tourism industry and 
promote travel to communities in the disaster-impacted areas and has 
requested an eligibility waiver for such activities. Tourism industry 
support, such as a national consumer awareness advertising campaign for 
an area in general, is ineligible for CDBG assistance. However, 
Congress did make such support eligible, within limits, for the CDBG 
disaster recovery funds appropriated for recovery of Lower Manhattan 
following the September 11, 2001, terrorist attacks. HUD understands 
that such support can be a useful recovery tool in a damaged regional 
economy that depends on tourism for many of its jobs and tax revenues. 
Similarly, because the State of Louisiana proposed advertising and 
marketing activities, rather than direct assistance to tourism-
dependent businesses, and because the measures of long-term benefit 
from the proposed activities must be derived using regression analysis 
and other indirect means, the original waiver permitted use of no more 
than $30 million for assistance to the tourism industry. This provision 
continues unchanged. Further, the assisted activities must be designed 
to support tourism to the most impacted and distressed areas related to 
the effects of Hurricanes Katrina and Rita, and, on the state's request 
and reconsideration, the waiver will now expire 4 years after the date 
of this notice, after which previously ineligible support for the 
tourism industry, such as marketing a community as a whole, will again 
be ineligible for CDBG disaster recovery funding.
    Eligibility--buildings for the general conduct of government. The 
state asked HUD to reconsider and broaden the waiver of the prohibition 
on funding buildings for the general conduct of government. HUD 
considered the request and agreed that it is consistent with the 
overall purposes of the 1974 Act for the state to be able to use its 
CDBG disaster recovery grant funds to assist projects involving 
rehabilitation, reconstruction, or construction of buildings for the 
general conduct of government that the state has selected in accordance 
with the method described in its Action Plan for Disaster Recovery and 
that the state has determined have substantial value in promoting 
disaster recovery.
    Eligibility--Research Commercialization and Educational 
Enhancement. According to the state's Action Plan amendment, the 
Research Commercialization and Educational Enhancement (RCEE) Program 
is ``intended to restore the economic impact of scientific and 
technology research facilities within higher education institutions in 
the most severely affected areas.'' Activities under this program may 
include, but are not limited to, stipends for students, related 
training, purchase of critical equipment, stipends for research 
professionals, and development of a master strategic plan for meeting 
the program's intent.
    Normally, HUD provides funds to a research institution or a 
university either to increase its capacity to carry out a CDBG activity 
such as rehabilitation of housing, to carry out specific research, or 
to provide training. By contrast, the RCEE program is directed at 
stabilizing and increasing research and education sector employment and 
functions themselves. The state has stated that this sector was a 
significant regional job generator before the covered disasters, that 
Hurricane Katrina and its aftermath critically damaged many aspects of 
the research sector, and that the RCEE program is a critical component 
of the state's long-term economic recovery.
    To accomplish its stated intention, the state is funding strategic 
planning followed by a pilot assistance program for research 
institutions located in the most impacted areas. At HUD's request, the 
state has agreed that this planning process will identify critical 
performance measures for this program, so that all parties involved can 
assess the usefulness of the RCEE model as part of overall disaster 
recovery.
    The RCEE program design does not break down neatly into CDBG 
eligibility categories. Portions of the RCEE program are eligible CDBG 
activities, such as training (public services) and strategic planning. 
Other portions, especially the stipends and other direct support for 
retaining key faculty researchers, are outside the usual CDBG realm, 
although modeled on other government research and endowment grant 
programs. Program staff will be coordinating the various types of 
assistance into a coherent whole, moving between supporting eligible 
and currently ineligible activities.
    In the March 6, 2007, notice (72 FR 10014), HUD provided a waiver 
and alternative requirement to create the eligible activity called 
Louisiana Research Commercialization and Educational Enhancement to 
include all activities carried out in accordance with the RCEE program 
described in the HUD-approved Action Plan, beginning with the amendment 
introducing this program, accepted January 3, 2007. (The allowable cost 
provisions of applicable OMB Circulars still apply, as do statutory 
prohibitions on duplications of benefit with other forms of assistance, 
such as from federal programs.) The state asked HUD to reconsider this 
waiver to include an alternative program income requirement. On 
reconsideration, HUD has also agreed to waive, for the RCEE program 
only, the definition of ``program income'' to allow the state to define 
program income for the purposes of the RCEE program, provided that the 
institution of higher education that is an RCEE CDBG grant subrecipient 
uses any program revenues generated under the program on activities 
that benefit the subrecipient and its research mission, as stabilizing 
this sector and making it one of the drivers of the recovery was a 
purpose of the RCEE program. Finally, the Department is clarifying that 
the state may also, for RCEE subrecipients only, provide for 
alternative policies related to disposition of equipment, so that the 
RCEE subrecipients are allowed to manage their RCEE-assisted equipment 
in accordance with their agreements with the state and their own 
research missions.
    Eligibility--Operating Subsidy for Affordable Rental Housing. The 
state requested and HUD is retaining a waiver to allow a Project-Based 
Rental Subsidy (PBRA) and assistance to establish operating reserves to 
encourage developers to rebuild rental and mixed-income housing in the 
areas that suffered the greatest disaster impact. The subsidy funding, 
which may be ``piggyback'' funding generally designed to be linked to 
the use of housing tax credits or funding under another of the rental 
programs delineated in the state's

[[Page 61150]]

HUD approved Action Plan for Disaster Recovery, targets housing for 
low-income and very low-income families and is limited in amount to the 
difference between the rents that a project is projected to need to 
sustain itself, and a specified lower level that can be reasonably 
afforded by the tenants. With its affordable rental programs, the state 
proposes to address specific barriers unique to the affordable rental 
programs outlined by the state's Action Plan (see the Road Home Housing 
Programs described in the state's Action Plan for Disaster Recovery), 
such as the lack of affordability in the most heavily damaged areas, 
the lack of permanent financing for mixed-income rentals, and the need 
for more risk-tolerant pre-development capital.
    In its Road Home rental programs, the state has set a high priority 
on deep affordability for some rental units and on placing these units 
within mixed-income communities wherever feasible. The state included 
new scoring factors in the piggyback tax credit selection process that 
reflect these priorities and that emphasize long-term viability and 
reduce operating costs. According to the state, the biggest remaining 
challenge in providing rental units affordable to very low-income 
households is the difference between what tenants can afford to pay and 
the projected cost of operating the units.
    The state has researched existing housing models, and concluded 
that the piggyback model and the small rental and homeless programs 
described in the Road Home and its amendments are needed to ensure 
production of affordable units. The state believes it has a critical 
need for income-targeted rental housing production programs. Although 
the state has made financing available for rental housing construction, 
it believes that it will need also to provide operating subsidy options 
for some projects to ensure they are affordable to very low-income 
households.
    HUD agreed and continues to agree that keeping housing affordable 
to very low-income households over time may require additional 
operating subsidy after construction is complete. To allow the state 
flexible options, HUD will allow CDBG assistance for subsidizing 
operating costs using PBRA and funding initial operating reserves in 
the context of the Road Home rental programs as described in the Action 
Plan. The Department encourages the state to avoid using CDBG for 
operating subsidies if other financing is available or if the project 
can reasonably be structured to achieve and maintain its target 
affordability without the operating subsidy.
    HUD recommends that the state establish written requirements for 
income eligibility, maximum rents, utility allowances, structure 
quality, and affirmative marketing of projects. HUD also recommends 
that inflation adjustments set by the state generally not exceed the 
Section 8 allowable adjustments.
    Rental programs of this type can be risky; HUD again reminds the 
state of the regulatory requirement for annual financial audits of its 
programs and of the requirement published in Federal Register notices 
71 FR 7666, 71 FR 73337, and 73 FR 46312, that its entire program be 
under the purview of an internal auditor.
    Eligibility--Homeless Prevention and Rapid Rehousing. The state 
requested, and HUD is retaining, an eligibility waiver to allow it to 
implement a Homeless Prevention and Rapid Rehousing Program using funds 
designated for homeless activities in its Action Plan. The principle of 
this program model is to minimize the time a family is homeless by 
providing re-housing and rental assistance, and by linking the family 
to services designed to help it become stable and self-sufficient. The 
state's request noted that it modeled its program on the rapid 
rehousing program approach that the National Alliance to End 
Homelessness has endorsed as a national best practice. The state also 
noted that as a consequence of Hurricanes Katrina and Rita, ``Thousands 
of families today are doubled up with family and friends, facing 
eviction, in temporary housing conditions affordable only with time 
limited FEMA rental assistance, or living in FEMA trailer villages--
unsure what they are going to do when assistance runs out.''
    To carry out this program, the state needs an eligibility waiver 
for the rental assistance and utility payments that are paid for up to 
2 years on behalf of homeless and at-risk households. The program also 
includes rental and utility deposits and back payments for housing when 
the state determines that such payments are necessary to help prevent a 
family from becoming homeless. To the extent the existing CDBG program 
rules explicitly allow payments for these purposes, the program 
establishes a shorter time limitation (3 months) and generally 
discourages or disallows back payments.
    The state's program could measurably advance the Department's 
priority on supporting forward-thinking solutions to help communities 
that are struggling to house and serve persons and families that are 
homeless or at risk of homelessness because of the effects of 
Hurricanes Katrina and Rita. Therefore, this notice, on 
reconsideration, continues to grant the eligibility waiver as 
requested.
    Documentation of low- and moderate-income benefit and public 
benefit for certain economic development activities. For some of its 
economic development programs, the state requested continuation of one 
waiver to allow it to provide alternate documentation of low- and 
moderate-income benefit, and another waiver to extend the public 
benefit standard waiver granted in Federal Register notice 71 FR 7666 
for the Bridge Loan Program to the economic development activities from 
Action Plan Amendments 2 and 8, and to Federal Emergency Management 
Agency (FEMA) public assistance cost share infrastructure projects 
carried out for the purpose of creating or retaining jobs.
    For the national objective documentation for the business 
assistance activities, the state asked to be able to apply individual 
salaries or wages per job and the income limits for a household of one, 
rather than the usual CDBG standard of total household income and the 
limits-by-total-household size. The state asserted that its proposed 
documentation would be simpler and quicker for its participating 
lenders to administer, easier to verify, and would not misrepresent the 
amount of low- and moderate-income benefit provided.
    Further, for the Bridge Loan Program and for infrastructure 
projects carried out to create or retain jobs or businesses, the state 
argued for this approach because the state considers these critical 
recovery activities to need the most streamlined approach to 
documentation that is consistent with prudent management. On review and 
following several discussions with state staff, HUD accepted the 
state's arguments for the activities and programs cited above and 
granted and is continuing the waiver as requested.
    HUD granted this waiver because of the magnitude of the disaster. 
However, because the validity of this approach has not been verified 
systematically, HUD may not grant similar waivers in the future. The 
public benefit provisions set standards for individual economic 
development activities (such as a single loan to a business) and for 
economic development activities in the annual aggregate. Currently, 
public benefit standards limit the amount of CDBG assistance per job 
retained or created, or the amount of CDBG assistance per low- and 
moderate-income person to which

[[Page 61151]]

goods or services are provided by the activity. Essentially, the public 
benefit standards are a proxy for all the other possible public 
benefits provided by an assisted activity. These dollar thresholds were 
set more than a decade ago and, under disaster recovery conditions 
(which often require a larger investment to achieve a given result), 
can be too low and thus impede recovery by limiting the amount of 
assistance the grantee may provide to a critical activity. The state 
has made public in its Action Plan the disaster recovery needs each 
activity is addressing and the public benefits expected.
    After consideration, this notice retains the waiver of the public 
benefit standards for the cited activities, except that the state shall 
continue to report and maintain documentation on the creation and 
retention of: (a) Total jobs, (b) number of jobs within certain salary 
ranges, (c) the average amount of assistance per job and activity or 
program, and (d) the types of jobs. As a conforming change for the same 
activities or programs, HUD also waived paragraph (g) of 24 CFR 570.482 
to the extent its provisions are related to public benefit.
    Documentation of low- and moderate-income household benefit for 
multi-unit housing projects. Rehabilitation and reconstruction of 
housing is an eligible CDBG activity. Prior to granting this waiver, 
HUD granted the state an eligibility waiver to allow new construction 
of housing. Later, the state requested a related waiver to allow it to 
fund multi-unit projects and to measure benefit to low- and moderate-
income households in such projects in a manner more supportive of 
mixed-income housing than the structure basis required by 24 CFR 
570.483(b)(3). (Under the cited regulation, the general rule is that at 
least 51 percent of the residents of an assisted structure must be 
income eligible.)
    HUD has reviewed other housing assistance programs that measure 
benefit differently: by the housing unit. Under the most basic unit-
based approach, one or more of the units in a structure must house 
income-eligible families, but the remainder of the units may be market 
rate, so long as the proportion of assistance provided compared to the 
overall project budget is no more than the proportion of units that 
will be occupied by income-eligible households compared to the number 
of units in the overall project. In other words, the rule under the 
usual CDBG structure approach is that a dollar of CDBG assistance to a 
structure means that 51 percent of the units must meet income 
requirements. Under the proportional units approach, the number of 
income-eligible units is proportional to the amount of assistance 
provided. Based on HUD experience, the second approach is generally 
more compatible with large-scale development of mixed-income housing.
    There is HUD precedent for using some variation on a proportional 
unit basis in two programs familiar to the state: (1) The CDBG program 
rule has a built-in exception that allows limited use of the unit basis 
for multi-unit non-elderly new construction structures with between 20 
and 50 percent low- and moderate-income occupancy, and (2) the HOME 
Investment Partnerships program, HUD's primary housing production 
program, successfully uses its own variation on the proportional unit 
approach. After review of the state's Action Plan for Disaster Recovery 
and learning more about the state's intention to encourage mixed-income 
housing development, HUD has determined that it is consistent with the 
overall purposes of the 1974 Act to provide the state with the 
requested additional flexibility in measuring program benefit.
    Therefore, the reconsidered waiver and alternative requirements 
continue to allow the state a choice. The state may measure benefit 
within a housing development project (1) according to the existing CDBG 
requirements, (2) according to the HOME program requirements at 24 CFR 
92.205(d), or (3) according to the modified CDBG alternative 
requirements specified in this notice, which extend the CDBG exception 
noted above. The state must select and use just one method for each 
project.
    For these purposes, the term ``project'' will have the same meaning 
as in the HOME program at 24 CFR 92.2. Unlike the HOME program, the 
CDBG program does not regulate the maximum amount of assistance per 
unit, require unit and income reviews in the years following initial 
occupancy, require a specific form of subsidy layering review, or 
define affordability. The state is reminded, however, that CDBG does 
require that costs be necessary and reasonable and that the state must 
develop procedures and documentation to ensure that its housing 
investments meet this requirement. The state must also meet all civil 
rights and fair housing requirements.
    General planning activities use entitlement presumption. The annual 
state CDBG program requires that local government grant recipients for 
planning-only grants must document that the use of funds meets a 
national objective. In the state CDBG program, these planning grants 
are typically used for individual project plans. By contrast, planning 
activities carried out by entitlement communities are more likely to 
include nonproject-specific plans such as functional land use plans, 
historic preservation plans, comprehensive plans, development of 
housing codes, and neighborhood plans related to guiding long-term 
community development efforts comprising multiple activities funded by 
multiple sources. In the annual entitlement program, these more general 
stand-alone planning activities are presumed to meet a national 
objective under the requirements at 24 CFR 570.208(d)(4). The 
Department notes that almost all effective CDBG disaster recoveries in 
the past have relied on some form of area-wide or comprehensive 
planning activity to guide overall redevelopment independent of the 
ultimate source of implementation funds. Therefore, the Department 
waived and is retaining the waiver of the eligibility requirement that 
CDBG disaster recovery-assisted planning-only grants or state directly 
administered planning activities that guide recovery in accordance with 
the appropriations act must comply with the state CDBG program rules at 
24 CFR 570.483(b)(5) or (c)(3).
    Special economic development job retention activities. Under the 
public benefit implementing regulations, CDBG grantees are limited to a 
specified annual amount of CDBG assistance per-job retained or created 
or the amount of CDBG assistance per low- and moderate-income person to 
whom goods or services are provided by the assisted activity. Grantees 
must maintain documentation to show that a job is a retained job or a 
created job and that the job was made available to or taken by a low- 
and moderate-income person. This policy and the specified documentation 
are effective and suitable for relatively small-scale economic 
development programs of hundreds of thousands of dollars or a few 
millions of dollars and of tens or hundreds of businesses. The State of 
Louisiana has undertaken a special economic development portfolio 
valued at over $200 million to potentially serve thousands of 
businesses. The state has requested and received regulatory waivers 
related to public benefit documentation that have helped it to 
implement its economic development programs' large-scale disaster 
recovery special economic development activities in a short time frame. 
HUD is retaining those waivers as several of these programs are 
ongoing.

[[Page 61152]]

    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.
    Voluntary acquisition under the Piggyback Program. In connection 
with the state's Low Income Housing Tax Credit Piggyback Program, 
various developers obtained options for the acquisition of specific 
properties to create mixed-income rental housing and workforce housing 
projects to replace rental housing lost during the hurricanes. The 
options were obtained on a voluntary basis by developers without the 
use or threat of eminent domain and prior to the availability of 
federal funding. However, since these projects will now be receiving 
CDBG disaster funding assistance, the requirements of the Uniform 
Relocation Assistance and Real Property Acquisition Policies Act of 
1970, as amended, (42 U.S.C. 4601 et seq.) (the URA) will apply where 
the property acquisition has not been completed. The state requested 
and HUD is retaining a waiver related to acquisition requirements under 
the URA for specific projects with existing options. The state has 
asked that HUD permit the waivers to help complete the acquisition of 
property and promote the replacement of housing in a timely and 
efficient manner. The state believes that these waivers will have 
little impact on those persons who voluntarily entered into these 
option agreements prior to the availability of federal funding. Because 
CDBG funds are federal financial assistance, their use in projects that 
involve acquisition of property 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 
governmentwide 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 waived the 
following URA requirements to help promote accessibility to suitable 
decent, safe, and sanitary housing for victims of Hurricanes Katrina 
and Rita:

    The acquisition requirements of the URA and implementing 
regulations, 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 of properties for 
the projects listed in the waiver below. According to the state, the 
failure to suspend these requirements would impede disaster 
recovery. This waiver would not affect any lawful occupants of the 
affected projects, in terms of relocation assistance and payments, 
and would only waive certain transaction-related requirements vis a 
vis the project owners.

    Uniform Relocation Act Requirements. The state has engaged in 
voluntary acquisition and optional relocation activities (partly in a 
form sometimes called ``buyouts'') by using waivers related to 
acquisition and relocation requirements under the URA and the 
replacement of housing and relocation assistance provisions under 
section 104(d) of the 1974 Act. The state asked and received HUD's 
permission to grant the waivers to help promote the acquisition of 
property and the replacement of housing in a timely and efficient 
manner. To date, the state believes that these waivers have had little 
impact on those persons whose property is voluntarily acquired or who 
are required to move permanently for a federally assisted project. 
Because CDBG funds are federal financial assistance, 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 governmentwide 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 has 
waived the following URA requirements to help promote accessibility to 
suitable decent, safe, and sanitary housing for victims of Hurricanes 
Katrina and Rita:
    <bullet> The acquisition requirements of the URA and implementing 
regulations, so that they do not apply to an arm's length voluntary 
purchase carried out by a person who does not have the power of eminent 
domain, in connection with the purchase and occupancy of a principal 
residence by that person. According to the state, the failure to 
suspend these requirements would impede disaster recovery and may 
result in windfall payments.
    <bullet> 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.
    <bullet> 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 when funds for cash relocation assistance are 
limited. The change provides access to an additional relocation 
resource option.
    <bullet> 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 such persons find that approach preferable to the locally 
established moving expense and dislocation allowance.
    In addition to the URA waivers, HUD waived requirements of section 
104(d) of the 1974 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 waived this requirement because it does not 
take into account the large, sudden changes a major disaster

[[Page 61153]]

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 time frame. HUD also waived the relocation assistance 
requirements contained in section 104(d) of the 1974 Act to the extent 
they differ from those of the URA. This change will simplify 
implementation, while preserving statutory protections for persons 
displaced by federal projects.
    The state has provided the following additional reason for these 
waivers related to its decision to administer policy for the funds 
under this notice and for Federal Emergency Management Agency (FEMA) 
mitigation funding through the same agencies. 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 by FEMA 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 state 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 1974 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 1974 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 
state, 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 can 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.
    Timely Distribution of Funds. The state CDBG program regulation 
regarding timely distribution of funds is at 24 CFR 570.494. This 
provision is designed to work in the context of an annual program in 
which almost all grant funds are distributed to units of general local 
government. Because the state may use disaster recovery grant funds to 
carry out activities directly, and because Congress expressly allowed 
this grant to be available until expended, HUD has waived this 
requirement. However, HUD expects the State of Louisiana to 
expeditiously obligate and expend all funds, including any recaptured 
funds or program income, in carrying out activities in a timely manner.

Waivers and Alternative Requirements

    1. 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.
    2. Compensation for loss of housing or incentives to resettle in 
Louisiana. 42 U.S.C. 5305(a) is waived to the extent necessary to make 
eligible incentives to resettle in Louisiana or compensation for loss 
of housing caused by the disaster and in accordance with the state's 
approved Action Plan and published program design.
    3. Waiver to permit some activities in support of the tourism 
industry. 42 U.S.C. 5305(a) and 24 CFR 570.489(f) are waived to the 
extent necessary to make eligible use of no more than $30 million for 
assistance for the tourism industry, including promotion of a community 
or communities in general, provided that the assisted activities are 
designed to support tourism to the most impacted and distressed areas 
related to the effects of Hurricanes Katrina and Rita. This waiver will 
expire 4 years after the effective date of this notice, after which 
previously ineligible support for the tourism industry, such as 
promotion of a community in general, will again be ineligible for CDBG 
funding.
    4. Buildings for the general conduct of government. 42 U.S.C. 
5305(a) and 24 CFR 507.207(a)(1) are waived to the extent necessary to 
allow the state to use the grant funds under this notice to assist 
projects involving rehabilitation, reconstruction, or construction of 
buildings for the general conduct of government that the state has 
selected in accordance with the method described in its Action Plan for 
Disaster Recovery and that the state has determined have substantial 
value in promoting disaster recovery.
    5. Eligibility--Louisiana Research Commercialization and 
Educational Enhancement program (RCEE). Activities carried out in 
accordance with the HUD-approved Action Plan for the RCEE program 
approved January 3, 2007, are eligible. Further, for the RCEE program 
only, the definition of ``program income'' may be defined by the state, 
provided that the institution of higher education that is an RCEE CDBG 
grant subrecipient uses any program revenues generated under the 
program on activities that benefit the RCEE subrecipient's research 
mission. The state may also, for RCEE activities only, provide for 
alternative policies related to disposition of equipment, to allow 
management of RCEE-assisted equipment, in accordance with subrecipient 
agreements with the state and to the benefit of the assisted research 
mission.
    6. Waiver to permit operating subsidies for affordable rental 
housing.

[[Page 61154]]

42 U.S.C. 5305(a) is waived to the extent necessary to make eligible 
the Road Home project-based rental assistance program included in the 
state's HUD-approved Action Plan for Disaster Recovery, provided that 
the assisted activities are designed to ensure that CDBG funds will be 
invested only to the extent of reasonably anticipated need. Also in 
conjunction with the Road Home rental program, the grantee may provide 
assistance to establish an initial operating reserve account for a 
project receiving other Road Home assistance.
    7. Eligibility of certain activities to support homeless prevention 
and rapid rehousing programs. 42 U.S.C. 5305(a) is waived to the extent 
necessary to make eligible rental assistance and utility payments paid 
for up to 2 years on behalf of homeless and at-risk households when 
such assistance or payments are part of a homeless prevention or rapid 
rehousing program. Eligible assistance in these programs may also 
include rental and utility deposits and back payments for housing when 
the State of Louisiana determines that such payments are necessary to 
help prevent a family from being homeless.
    8. Documentation of low- and moderate-income benefit for multi-unit 
housing projects. Under the following circumstances, HUD will consider 
assistance for a multi-unit housing project involving new construction, 
acquisition, reconstruction, or rehabilitation to benefit low- and 
moderate income households:
    a.(1) The CDBG assistance defrays the development costs of a 
housing project providing eligible permanent residential units that, 
upon completion, will be occupied by low- and moderate-income 
households; and
    (2) If the project is rental, the units occupied by low- and 
moderate-income households will be leased at affordable rents. The 
grantee or unit of general local government shall adopt and make public 
its standards for determining ``affordable rents'' for this purpose; 
and
    (3) The proportion of the total cost of developing the project to 
be borne by CDBG funds is no greater than the proportion of units in 
the project that will be occupied by low- and moderate income 
households; or
    b. When CDBG funds defray the development costs of eligible 
permanent residential units, such funds shall be considered to benefit 
low- and moderate-income persons if the grantee follows the provisions 
of 24 CFR 92.205(d); or
    c. The requirements of 24 CFR 570.483(b)(3) are met.
    d. The state must select and use just one method for each project.
    e. The term ``project'' will be defined as in the HOME program at 
24 CFR 92.2.
    f. If the state applies option (a) or (b) above to a housing 
project, 24 CFR 570.483(b)(3) is waived for that project.
    9. Planning requirements. For CDBG disaster recovery-assisted 
planning activities that will guide recovery in accordance with the 
2006 Act, the state CDBG program rules at 24 CFR 570.483(b)(5) and 
(c)(3) are waived and the presumption at 24 CFR 570.208(d)(4) applies.
    10. National objective documentation for certain economic 
development activities. 24 CFR 570.483(b)(4)(i) is waived to allow the 
grantee to establish low- and moderate-income jobs benefit by 
documenting for each person employed the name of the business, type of 
job, and the annual wages or salary of the job. HUD will consider the 
person income-qualified if the annual wages or salary of the job is at 
or under the HUD-established income limit for a one-person family.
    11. Public benefit standards for economic development activities. 
For economic development activities designed to create or retain jobs 
or businesses (including but not limited to BRIDGE, long-term, short-
term, infrastructure projects), the public benefit standards at 42 
U.S.C. 5305(e)(3) and 24 CFR 570.482(f)(1), (2), (3), (4)(i), (5), and 
(6) are waived, except that the grantee shall report and maintain 
documentation on the creation and retention of total jobs, the number 
of jobs within certain salary ranges, the average amount of assistance 
provided per job by activity or program, and the types of jobs. 
Paragraph (g) of 24 CFR 570.482 is also waived to the extent its 
provisions are related to public benefit.
    12. 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 Hurricane Katrina or 
Rita, as applicable, 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.
    13. 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 at 24 CFR 42.359 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.
    14. Uniform Relocation Act requirements.
    a. 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 who does not have the power of eminent domain, 
in connection with the purchase and occupancy of a principal residence 
by that person.
    b. The requirements at 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.''
    c. The requirements of sections 204 and 205 of the URA, and of 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.
    d. The requirements of section 202(b) of the URA and of 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

[[Page 61155]]

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.
    15. Voluntary acquisition under the Piggyback program. The 
requirements at 49 CFR 24.101(b)(2)(i)-(ii) are waived to the extent 
that they apply to an existing option for the arm's length voluntary 
purchase carried out by a person that does not have the power of 
eminent domain, in connection with the purchase of property for the 
projects listed below, so long as the initial option pre-dates December 
22, 2006.

----------------------------------------------------------------------------------------------------------------
                                                                                                    Est. total
            LHFA project ID                      Project name                    Parish                units
----------------------------------------------------------------------------------------------------------------
0708FA37..............................  The Meadows...................  Calcasieu...............             180
0708FA43..............................  Renoir Acres Estates II.......  Calcasieu...............              60
0708FA44..............................  Monet Acres Estates II........  Calcasieu...............              60
0708FA48..............................  Sulphur Retirement Community..  Calcasieu...............              60
0708FA52..............................  Grand Lake Elderly............  Cameron.................              30
0708FA01..............................  Timberlane Apartments.........  Jefferson...............             164
0708FA22..............................  Beechgrove Homes..............  Jefferson...............             100
0708FA28..............................  Wellswood Manor...............  Jefferson...............              84
0708FA49..............................  Oak Villa.....................  Jefferson...............              80
0708FA30..............................  Lafitte Redevelopment.........  Orleans.................             568
0708FA26..............................  St. Bernard I.................  Orleans.................             465
0708FA24..............................  BW Cooper I...................  Orleans.................             410
0708FA25..............................  CJ Peete III..................  Orleans.................             410
0708FA42..............................  Rivergarden CSII..............  Orleans.................             310
0708FA57..............................  Canterbury House Apts--New      Orleans.................             276
                                         Orleans East.
0708FA47..............................  The Marquis Apartments........  Orleans.................             250
0708FA08..............................  The Villas at Lake Forest.....  Orleans.................             230
0708FA11..............................  The Crescent Club.............  Orleans.................             226
0708FA41..............................  Walnut Square Apartments......  Orleans.................             209
0708FA13..............................  200 Carondelet................  Orleans.................             190
0708FA10..............................  The Preserve..................  Orleans.................             183
0708FA38..............................  Crescent Garden Homes.........  Orleans.................             143
0708FA36..............................  Levey Gardens.................  Orleans.................             100
0708FA40..............................  Nine 27.......................  Orleans.................              76
0708FA09..............................  Jefferson Davis Apartments....  Orleans.................              72
0708FA61..............................  Indiana Homes.................  Orleans.................              60
0708FA64..............................  Orleans Place.................  Orleans.................              60
0708FA27..............................  Classic Construction of New     Orleans.................              56
                                         Orleans Venture II.
0708FA29..............................  Constance Lofts...............  Orleans.................              47
0708FA23..............................  Delta Oaks Homes..............  Orleans.................              40
0708FA63..............................  Old Morrison Homes............  Orleans.................              38
0708FA07..............................  Lakeside Apartments...........  St. Tammany.............             250
0708FA06..............................  Tiffany Apartments............  Vermilion...............             250
                                                                                                 ---------------
    Totals............................  ..............................  ........................           5,737
----------------------------------------------------------------------------------------------------------------

    16. Program income alternative requirement. 42 U.S.C. 5304(j) and 
24 CFR 570.489(e) are waived to the extent that they conflict with the 
rules stated in the program income alternative requirement below. The 
following alternative requirement applies instead.
    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 unit of general local 
government or of 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, or 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 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 a subrecipient from the ownership interest in a for-
profit entity acquired in return for the provision of CDBG assistance.

[[Page 61156]]

    (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 1974 Act and carried out by an entity under the 
authority of section 105(a)(15) of the 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 
United States 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 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 
nonrevolving 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 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.
    17. Waiver of state CDBG requirement for timely distribution of 
funds. 24 CFR 570.494 regarding timely distribution of funds is waived.

Notes on Applicable Statutory Requirements

    18. Note on the eligibility of providing funds to Enterprise and 
Local Initiatives Support Corporation (LISC) for certain purposes. The 
appropriations statute provides that the States of Louisiana and 
Mississippi may each use up to $20,000,000 (with up to $400,000 each 
for technical assistance) from funds made available under this heading 
for LISC and the Enterprise Foundation for activities authorized by 
section 4 of the HUD Demonstration Act of 1993 (Pub. L. 103-120, 42 
U.S.C. 9816 note), as in effect immediately before June 12, 1997, and 
for activities authorized under section 11 of the Housing Opportunity 
Program Extension Act of 1996 (Pub. L. 104-120, 42 U.S.C. 12805 note), 
including demolition, site clearance and remediation, and program 
administration.
    19. Notes on rules applicable to flood buyouts activities.
    a. Payment of pre-flood values for buyouts. HUD disaster recovery 
entitlement communities, state grant recipients, and 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 the leasing rather than the sale of 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. 5154a) (Section 582) prohibits 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 of

[[Page 61157]]

damage to any personal, residential, or commercial property, if that 
person at any time has received flood disaster assistance that was 
conditional on the person first having obtained flood insurance under 
applicable federal law and the person has subsequently failed to obtain 
and maintain flood insurance as required under applicable federal law 
on such property. (Section 582 is self-implementing without 
regulations.) This means that a grantee may not provide disaster 
assistance for the above-mentioned repair, replacement, or restoration 
to a person who 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 below, 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 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) to include an area receiving a presidential declaration of a 
major disaster or emergency as a result of flood conditions.
    19. Non-Federal Cost Sharing of Army Corps of Engineers Projects. 
Public Law 105-276, Title II, October 21, 1998, 112 Stat. 2478, 
provided in part that: ``For any fiscal year, of the amounts made 
available as emergency funds under the heading `Community Development 
Block Grants Fund' and notwithstanding any other provision of law, not 
more than $250,000 may be used for the non-Federal cost-share of any 
project funded by the Secretary of the Army through the Corps of 
Engineers.''

Finding of No Significant Impact

    A new Finding of No Significant Impact with respect to the 
environment has been made in accordance with HUD regulations at 24 CFR 
part 50, which implement section 102(2)(C) of the National 
Environmental Policy Act of 1969 (42 U.S.C. 4332(2)(C)). The Finding of 
No Significant Impact is available for public inspection between 8 a.m. 
and 5 p.m. weekdays in the Regulations Division, Office of General 
Counsel, Department of Housing and Urban Development, 451 Seventh 
Street, SW, Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, please schedule an 
appointment to review the finding by calling the Regulations Division 
at 202-708-3055 (this is not a toll-free number).

    Dated: October 6, 2008.
Roy A. Bernardi,
Deputy Secretary.
[FR Doc. E8-24535 Filed 10-14-08; 8:45 am]
BILLING CODE 4210-67-P