[Federal Register Volume 80, Number 222 (Wednesday, November 18, 2015)]
[Notices]
[Pages 72102-72105]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-29487]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
[Docket No. FR-5696-N-17]
Guidance, Waivers, and Alternative Requirements for Grantees in
Receipt of Community Development Block Grant Disaster Recovery Funds
Under Public Law 113-2: ``Buyout'' and ``Acquisition'' Activities;
Assistance to Agricultural Enterprises; and State of Colorado Waiver
for Tourism Promotion
AGENCY: Office of the Assistant Secretary for Community Planning and
Development, HUD.
ACTION: Notice.
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SUMMARY: This notice provides clarifying guidance for Community
Development Block Grant disaster recovery (CDBG-DR) grantees in receipt
of funds under the Disaster Relief Appropriations Act, 2013 (the
Appropriations Act). It provides clarification regarding the
requirements of ``buyout'' activities authorized in the Department's
March 5, 2013, Federal Register notice and expands the eligibility
criteria for buyout activities to include ``Disaster Risk Reduction
Areas'' as defined by the grantee. It also modifies requirements of the
March 5, 2013, notice on the prohibition of assistance to businesses
that do not meet the Small Business Administration (SBA) definition of
small businesses, permitting assistance also to eligible businesses
engaged in ``farming operations,'' as determined by the U.S. Department
of Agriculture (USDA). This notice also provides a waiver to the State
of Colorado to expend additional CDBG-DR funds and to assist additional
communities impacted by declared disasters in 2011, 2012, and 2013,
through tourism promotion activities previously authorized in the
Department's June 3, 2014, notice.
DATES: Effective Date: November 23, 2015.
FOR FURTHER INFORMATION CONTACT: Stanley Gimont, Director, 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 Relay Service at 800-877-
8339. Facsimiled inquiries may be sent to Mr. Gimont at 202-401-2044.
(Except for the ``800'' number, these telephone numbers are not toll-
free.) Emailed inquiries may be sent to [email protected].
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
II. Applicable Rules, Statutes, Waivers, and Alternative
Requirements
III. Catalog of Federal Domestic Assistance
IV. Finding of No Significant Impact
I. Background
The Appropriations Act (Pub. L. 113-2, approved January 29, 2013)
made available $16 billion in CDBG-DR funds for necessary expenses
related to disaster relief, long-term recovery, restoration of
infrastructure and housing, and economic revitalization in the most
impacted and distressed areas, resulting from a major disaster declared
pursuant to the Robert T. Stafford Disaster Relief and Emergency
Assistance Act of 1974 (42 U.S.C. 5121 et. seq.) (Stafford Act) due to
Hurricane Sandy and other eligible events in calendar years 2011, 2012,
and 2013. On March 1, 2013, the President issued a sequestration order
pursuant to section 251A of the Balanced Budget and Emergency Deficit
Control Act, as amended (2 U.S.C. 901a), and reduced the amount of
funding for CDBG-DR grants under the Appropriations Act to $15.18
billion. To date, a total of $15.18 billion has been allocated or set
aside: $13 billion in response to Hurricane Sandy, $514 million in
response to disasters occurring in 2011 or 2012, $655 million in
response to 2013 disasters, and $1 billion for the National Disaster
Resilience Competition.
This notice applies to grantees in receipt of allocations under the
Appropriations Act, which are described within the Federal Register
notices published by the Department on March 5, 2013 (78 FR 14329);
April 19, 2013 (78 FR 23578); May 29, 2013 (78 FR 32262); August 2,
2013 (78 FR 46999); November 18, 2013 (78 FR 69104); December 16, 2013
(78 FR 76154); March 27, 2014 (79 FR 17173); June 3, 2014 (79 FR
31964); July 11, 2014 (79 FR 40133); October 7, 2014 (79 FR 60490);
October 16, 2014 (79 FR 62182); January 8, 2015 (80 FR 1039); April 2,
2015 (80 FR 17772); May 11, 2015 (80 FR 26942); and August 25, 2015 (80
FR 51589) referred to collectively in this notice as the ``prior
notices.'' The requirements of the prior notices continue to apply,
except as modified by this notice.\1\
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\1\ Links to the prior notices, the text of the Appropriations
Act, and additional guidance prepared by the Department for CDBG-DR
grants are available on the HUD Exchange Web site: https://www.hudexchange.info/cdbg-dr/cdbg-dr-laws-regulations-and-federal-register-notices/.
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II. Applicable Rules (Including Clarifying Guidance), Statutes,
Waivers, and Alternative Requirements
The 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 HUD's
obligation or use by the recipient of these funds (except for
requirements related to fair housing, nondiscrimination, labor
standards, and the environment). Waivers and alternative requirements
are based upon a determination by the Secretary that good cause exists
and that the waiver or alternative requirement is not inconsistent with
the overall purposes of Title I of the Housing and Community
Development Act of 1974 (42 U.S.C. 5301 et seq.) (HCD Act). Regulatory
waiver authority is also provided by 24 CFR 5.110, 91.600, and 570.5.
For the waiver and alternative requirements described in this
notice, the Secretary has determined that good cause exists and that
the waiver and alternative requirements are not inconsistent with the
overall purpose of the HCD Act. Grantees may request waivers and
alternative requirements from the Department as needed to address
specific needs related to their recovery activities. Under the
requirements of the Appropriations Act, waivers must be published in
the Federal Register no later than 5 days before the effective date of
such waiver.
1. Acquisition of Real Property and Buyouts Outside of Floodplains
In response to a request from the State of Colorado, HUD is
authorizing grantees in receipt of CDBG-DR funds under the
Appropriations Act to acquire property for an amount equal to either
the property's pre-disaster or post-disaster value (formerly referenced
in the prior notices as pre- and post-flood values), for the buyout of
properties in ``Disaster Risk Reduction Areas'' as defined by criteria
established by the grantee, subject to the limitations of this notice.
The Department has previously authorized CDBG-DR grantees to carry
out buyout programs in floodways or floodplains, by allowing grantees
to offer to acquire properties in hazardous
[[Page 72103]]
flood areas at pre-flood or post-flood value. The Secretary authorized
this type of acquisition to: (1) Reduce the risk to homeowners from the
effects of subsequent disasters; (2) assist in the recovery of low- and
moderate-income households; and (3) protect taxpayer resources that
might otherwise be needed after future disasters in the same area.
In previous notices, HUD referred to ``flood buyouts'' and
recognized that grantees frequently used CDBG-DR funds to match funds
for buyouts provided under section 404 of the Stafford Act, as amended.
Section 404 empowers the Director of the Federal Emergency Management
Agency (FEMA) to provide property acquisition and relocation assistance
``in providing hazard mitigation assistance under this section in
connection with flooding . . . .'' Since flooding is by far the most
prevalent and predictable source of widespread destruction in a
Presidentially declared disaster, the Department did not address the
potential need to include other types of hazards. Large scale disasters
have the potential to create or exacerbate hazards in areas located
outside of a floodplain or floodway. For example, the wildfires that
swept through Colorado in 2013 destroyed vegetation in many areas,
creating erosion and affecting soil stability in a manner that now
places many homes at risk for mudslides in future disasters, although
those homes are not located in a floodplain or floodway.
For the same reasons that buyouts in floodways and floodplains are
permitted, HUD is amending its alternative requirement to expand the
scope of authorized buyouts in the prior notices for grantees receiving
CDBG-DR funds under the Appropriations Act. Accordingly, the definition
of ``buyout'' in all prior notices is amended to mean ``acquisition of
properties located in a floodway or floodplain that is intended to
reduce risk from future flooding, or the acquisition of properties in
`Disaster Risk Reduction Areas' located outside of floodways and
floodplains for the purpose of reducing risks from the hazard that was
the basis of the Disaster Risk Reduction Area designation. `Disaster
Risk Reduction Areas' must be designated in accordance with the buyout
requirements of applicable Federal Register Notices.''
Recognizing that States and units of general local government
(UGLGs) are best positioned to determine what constitutes an
unacceptable risk to their communities in exercising this additional
authority, grantees will need to establish criteria to designate a ''
Disaster Risk Reduction Area,'' subject to the following requirements:
(1) The hazard must have been caused or exacerbated by the
Presidentially declared disaster for which the grantee received its
CDBG-DR allocation; (2) The hazard must be a predictable environmental
threat to the safety and well-being of program beneficiaries, as
evidenced by the best available data and science; and (3) The Disaster
Risk Reduction Area must be clearly delineated so that HUD and the
public may easily determine which properties are located within the
Disaster Risk Reduction Area.
Once grantees have established criteria to designate a ``Disaster
Risk Reduction Area,'' and designated a Disaster Risk Reduction Area in
accordance with the established criteria, the grantee may conduct
buyouts in the Disaster Risk Reduction Area only if the grantee's
approved action plan contains a description of the buyouts to be
conducted in the identified Disaster Risk Reduction Areas and the
national objective that the buyouts will meet. Any buyouts conducted
within the Disaster Risk Reduction Area will be subject to the
requirements applicable to buyouts in the March 5, 2013, notice. These
requirements include restrictions on redevelopment and the discretion
to determine the appropriate valuation method (including the use of
pre- or post-disaster fair market value (FMV)), so long as the
valuation method is uniformly applied.
2. Clarification of ``Buyout'' and ``Real Property Acquisition''
Activities
CDBG-DR grantees under Public Law 113-2 that choose to undertake a
buyout program have the discretion to determine the appropriate
valuation method, including paying either pre-disaster or post-disaster
FMV. In most cases, a program that provides pre-disaster FMV to buyout
applicants provides compensation at an amount greater than the post-
disaster FMV. When the purchase price exceeds the current FMV, any
CDBG-DR funds in excess of FMV are considered assistance to the seller,
thus making the seller a beneficiary of CDBG-DR assistance. If the
seller receives assistance as part of the purchase price, this may have
implications for duplication of benefits calculations or for
demonstrating national objective criteria, as discussed below. However,
a program that provides post-disaster FMV to buyout applicants merely
provides the actual value of the property; thus, the seller is not
considered a beneficiary of CDBG-DR assistance.
Regardless of purchase price, all buyout activities are a type of
acquisition of real property (as permitted by section 105(a)(1) of the
HCD Act). However, only acquisitions that meet the definition of a
``buyout'' are subject to the post-acquisition land use restrictions
imposed by the applicable prior notices. The key factor in determining
whether the acquisition is a buyout is whether the intent of the
purchase is to reduce risk from future flooding or to reduce the risk
from the hazard that lead to the property's Disaster Risk Reduction
Area designation. The distinction between buyouts and other types of
acquisitions is important, because grantees may only redevelop an
acquired property if the property is not acquired through a buyout
program (i.e., the purpose of acquisition was something other than risk
reduction). When acquisitions are not acquired through a buyout
program, the purchase price must be consistent with applicable uniform
cost principles (the pre-disaster FMV may not be used).
3. Clarification of Ownership and Maintenance Requirements for Property
Acquired Through a Buyout Program
Any property acquired with CDBG-DR funds through a buyout program
is subject to the requirement made applicable by the prior notices that
property acquired through a buyout program be dedicated and maintained
in perpetuity for a use that is compatible with open space,
recreational, or wetlands management practices. In addition, no new
structure may be erected on the property other than exceptions
identified in the March 5, 2013, notice, and no subsequent application
for Federal disaster assistance may be made for any purpose for the
property. The acquiring entity may 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 also be sold. In
all cases, a deed restriction or covenant running with the property
must require that the buyout property be dedicated and maintained for
compatible uses in perpetuity.
4. Use of Low- and Moderate-Income Housing National Objective When
Undertaking Buyout Activities
In order to demonstrate that a buyout meets the Low- and Moderate-
Income (LMI) Housing National Objective (LMH), grantees must meet all
requirements of the HCD Act and applicable regulatory criteria
described below. Grantees are encouraged to
[[Page 72104]]
consult with HUD prior to undertaking a buyout program with the intent
of using the LMH national objective.
Section 105(c)(3) of the HCD Act (42 U.S.C. 5305(c)(3)) provides
that ``[a]ny assisted activity under this chapter that involves the
acquisition or rehabilitation of property to provide housing shall be
considered to benefit persons of low- and moderate-income only to the
extent such housing will, upon completion, be occupied by such
persons.'' In addition, the State CDBG regulations at 24 CFR
570.483(b)(3) and entitlement CDBG regulations at 24 CFR 570.208(a)(3)
apply the LMH national objective to an eligible activity carried out
for the purpose of providing or improving permanent residential
structures that, upon completion, will be occupied by low- and
moderate-income households. Therefore, a buyout program that merely
pays homeowners to leave their existing homes does not result in an LMI
household occupying a residential structure and thus cannot meet the
requirements of the LMH national objective.
Buyout programs that assist LMI persons can be structured in one of
the following ways: (1) The buyout program combines the acquisition of
properties with another direct benefit, LMI housing activity, such as
down payment assistance,\2\ that results in occupancy and otherwise
meets the applicable LMH housing national objective criteria in 24 CFR
part 570 (e.g., if the structure contains more than two dwelling units,
at least 51 percent of the units must be occupied by LMI households);
(2) The program meets the low- and moderate-income area benefit
criteria to demonstrate national objective compliance, provided that
the grantee can document that the properties acquired through buyouts
will be used in a way that benefits all of the residents in a
particular area where at least 51 percent of the residents are low- and
moderate-income persons. When using the area benefit approach, grantees
must define the service area based on the end use of the buyout
properties; or (3) The program meets the criteria for the limited
clientele national objective, including the prohibition on the use of
the limited clientele national objective when an activity's benefits
are available to all residents of the area. A buyout program could meet
the national objective criteria for the limited clientele national
objective if it restricts buyout program eligibility to exclusively
low- and moderate-income persons, and the buyout provides an actual
benefit to the low- and moderate-income sellers by providing pre-
disaster valuation uniformly to those who participate in the program.
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\2\ The Uniform Relocation Assistance and Real Property
Acquisition Policies Act of 1970, as amended, (URA) applies to the
use of CDBG funds for down payment assistance. If down payment
assistance is provided with CDBG funds awarded under the
Appropriations Act (Pub. L. 113-2), URA requirements apply as
modified by the March 5, 2013, notice (78 FR 14329). The use of
other CDBG funds for down payment assistance is subject to the URA
and regulatory requirements at 24 CFR 570.606. Other direct benefit
LMI housing activities may also be subject to the URA.
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5. Clarification of Definition of Small Business for Agricultural
Enterprises
The March 5, 2013, notice (78 FR 14329) instituted an alternative
requirement to the provisions at 42 U.S.C. 5305(a), prohibiting
grantees in receipt of funds under the Appropriations Act from
assisting businesses, including privately owned utilities, that do not
meet the definition of a small business as defined by SBA at 13 CFR
part 121. The objective of this alternative requirement is to ensure
that grantees target disaster recovery resources to the unmet needs of
small businesses. HUD is now modifying these criteria to better enable
assistance for agricultural businesses. Businesses and entities engaged
in agricultural enterprises may now be assisted if they meet the
alternative eligibility criteria employed by USDA assistance programs.
The SBA small business definition establishes a much lower income
threshold for agricultural enterprises than for other businesses. The
SBA criteria provides a gross income limit of $750,000 for most
agricultural businesses, while the gross income limit for businesses in
other sectors is $7.5 million or higher. These gross income limitations
for agricultural enterprises may prevent CDBG-DR grantees from
addressing unmet recovery needs of many agricultural businesses that
would otherwise be considered small enterprises that meet the intent of
HUD's requirements.
Legislation enacted in 1986 withdrew SBA's authority to provide
disaster assistance loans to agricultural enterprises to ensure
cooperation between USDA and SBA in the use of each agency's respective
loan making authorities and to improve the delivery of disaster
assistance to the agricultural segment of the country. SBA also
decreased the gross income limits for the agricultural sector in its
small business criteria, as described above, to further ensure that
agricultural businesses would apply to USDA for other types of
financial assistance. Consequently, HUD's use of the SBA definition in
its March 5, 2013, notice may inadvertently limit small agricultural
enterprises from accessing financial assistance through grantees' CDBG-
DR programs under the Appropriations Act.
As HUD's intent to address the unmet recovery needs of small
agricultural enterprises does not conflict with the goal of directing
these businesses to USDA for other types of assistance, HUD is
modifying its criteria for businesses engaged in agricultural
enterprises to enable them to access CDBG-DR funds necessary for their
recovery.
Accordingly, paragraph VI.D.41, of the March 5, 2013, notice is
amended to read: ``To target assistance to small businesses, the
Department is instituting an alternative requirement to the provisions
at 42 U.S.C. 5305(a) to prohibit grantees from assisting businesses,
including privately owned utilities, that do not meet the definition of
a small business as defined by SBA at 13 CFR part 121. Grantees may
also assist businesses that are engaged in ``farming operations,'' as
defined at 7 CFR 1400.3, and that meet the USDA Farm Service Agency
(FSA) criteria that are described at 7 CFR 1400.500 which are used by
the FSA to determine eligibility for certain assistance programs.''
Grantees are also reminded that this modification may allow them to
add new beneficiaries or programs described within their CDBG-DR action
plans for disaster recovery. These changes would constitute a
substantial amendment to the CDBG-DR action plan as described in the
March 5, 2013, notice (78 FR 14329) at paragraph VI.A.3.a. If
applicable, grantees must submit a Substantial Action Plan Amendment
revising the description of their business assistance program to
include potential beneficiaries, and this amendment will be subject to
the citizen participation requirements of the March 5, 2013, notice at
VI.A.3, which requires no less than 7 calendar days to solicit public
comment.
6. Waiver To Permit Some Activities in Support of the Tourism Industry
(State of Colorado Only)
In the Federal Register notice published on June 3, 2014 (79 FR
31964), the Department granted the State of Colorado a waiver of 42
U.S.C. 5305(a) to make eligible the use of up to $500,000 in CDBG-DR
funds to support the State's tourism industry and to promote travel to
the most impacted and distressed areas related to the 2013 floods. This
notice replaces the previous waiver and authorizes the State to provide
an additional $768,300 in
[[Page 72105]]
CDBG-DR funds to support tourism promotion activities, increasing the
amount covered by the waiver from $500,000 to $1,268,300. In addition,
this revised waiver permits the State to support its tourism industry
and promote travel to the most impacted and distressed counties that
had a declared major disaster in 2011, 2012, or 2013, including those
impacted by disasters other than flooding.
Using the funds provided under the initial waiver, the State
established its first CDBG-DR Tourism Marketing Grant Program and
received applications requesting a total of $787,927. Through this
program, the State awarded eight grants totaling $500,000 in CDBG-DR
funding to support a variety of activities such as advertising,
marketing campaigns, promotion of community and spectator events, and
Web site improvements in targeted areas that had experienced a
reduction in tourism revenues following the 2013 floods in Colorado.
This funding fell short of meeting the tourism promotion priorities
identified through the initial round of State funding by $287,927. The
State has also subsequently identified $480,373 in additional funding
opportunities for the original applicants who were constrained by the
initial grant size limitation, as well as for potential new applicants
made eligible through the inclusion of areas impacted by disasters
other than flooding.
In support of this request, the State has conducted an analysis of
retail sales that indicates that the flooding and wildfire disasters
continue to negatively affect local tourism revenues. Tourism is the
primary economic contributor to the State of Colorado's economy and
provides a valuable source of business revenue, taxes, and employment.
According to analyses provided by the State, businesses supported by
tourism, including hotels, lodges, restaurants, and grocery stores, are
still experiencing weakened sales revenue. Tax revenue from these
businesses benefits the State's economy and provides funding for other
State activities and services. In addition, this industry employs many
individuals who are of low- and moderate-income; thus, this population
has been inordinately affected by the decrease in tourism revenue. Some
of these jobs have been lost as a result of the disasters.
Because communities are diverting disposable tax revenue to
physical recovery projects, funding for tourism marketing is scarce and
communities face a worsening economic cycle from which the areas cannot
recover without the injection of supplemental assistance. Therefore,
the State has requested that an additional $768,300 of its total CDBG-
DR award be made eligible for such tourism promotion activities. HUD
continues to support the use of CDBG-DR funds in this scenario as a
recovery tool in a damaged regional economy that depends on tourism for
many of its jobs and tax revenue.
As the State of Colorado is proposing to use these additional funds
for advertising and marketing activities that broadly support its
tourism industry, rather than direct assistance to tourism-dependent
businesses, and because long-term benefit from the proposed activities
must be derived using indirect means, 42 U.S.C. 5305(a) is waived only
to the extent necessary to make eligible an additional $768,300 to
support tourism promotion activities. The State must award the
additional $768,300 in CDBG-DR funds competitively through its existing
CDBG-DR Tourism Marketing Grant Program to public or nonprofit entities
that promote travel to or within a community or communities in general,
provided the assisted activities are designed to support tourism to
areas most impacted and distressed by a major disaster declared in
2011, 2012, or 2013.
As an additional condition of expanding this waiver, the State must
demonstrate that funds will supplement and not replace State and local
funding sources for this purpose. In its request for this waiver, the
State indicated that entities selected for an award also pledged nearly
a one-for-one match for their projects. The State may demonstrate that
CDBG-DR funds will supplement, but not replace, local funding by
requiring a match, including provision for in-kind contributions,
similar to the existing competitive grant program offered by the
Colorado Tourism Office. However, if the State does not require a
match, the State must identify another means to adequately demonstrate
that funds will supplement, but not supplant, State and local resources
typically dedicated to promote tourism in these impacted areas.
The additional funds provided through this waiver for the State's
CDBG-DR Tourism Marketing Grant Program are subject to all requirements
in the notice published on June 3, 2014 (79 FR 31964), unless otherwise
modified through this notice. The funds permitted under this waiver are
subject to the same obligation and expenditure deadline applicable to
all funds under the Appropriations Act. Therefore, this waiver remains
in effect until 2 years following HUD's obligation of the funds
permitted under this waiver.
The State is reminded that this expanded waiver will allow them to
add new beneficiaries described within their CDBG-DR action plans for
disaster recovery. These changes would constitute substantial
amendments as described in the March 5, 2013 notice (78 FR 14329), at
paragraph VI.A.3.a. If applicable, the State must submit a Substantial
Action Plan Amendment revising its description of its CDBG-DR Tourism
Marketing Grant Program to include potential beneficiaries, and this
amendment will be subject to the citizen participation requirements of
the March 5, 2013, notice at VI.A.3, which requires no less than 7
calendar days to solicit public comment.
III. Catalog of Federal Domestic Assistance
The Catalog of Federal Domestic Assistance number for the disaster
recovery grants under this notice is 14.269.
IV. 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(2)(C)). The FONSI is
available for public inspection between 8 a.m. and 5 p.m. weekdays in
the Regulations Division, Office of General Counsel, Department of
Housing and Urban Development, 451 7th Street SW., Room 10276,
Washington, DC 20410-0500. Due to security measures at the HUD
Headquarters building, an advance appointment to review the docket file
must be scheduled by calling the Regulations Division at 202-708-3055
(this is not a toll-free number). Hearing- or speech-impaired
individuals may access this number through TTY by calling the Federal
Relay Service, toll-free, at 800-877-8339.
Dated: November 10, 2015.
Nani Coloretti,
Deputy Secretary.
[FR Doc. 2015-29487 Filed 11-17-15; 8:45 am]
BILLING CODE 4210-67-P