[Title 24 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2003 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
24
Parts 500 to 699
Revised as of April 1, 2003
Housing and Urban Development
Containing a codification of documents of general
applicability and future effect
As of April 1, 2003
With Ancillaries
Published by
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
[[Page ii]]
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[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 24:
Subtitle B--Regulations Relating to Housing and Urban
Development (Continued)
Chapter V--Office of Assistant Secretary for
Community Planning and Development, Department of
Housing and Urban Development 5
Chapter VI--Office of Assistant Secretary for
Community Planning and Development, Department of
Housing and Urban Development [Reserved]
Finding Aids:
Table of CFR Titles and Chapters........................ 331
Alphabetical List of Agencies Appearing in the CFR...... 349
List of CFR Sections Affected........................... 359
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Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 24 CFR 510.1 refers
to title 24, part 510,
section 1.
----------------------------
[[Page v]]
EXPLANATION
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Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
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[[Page vi]]
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[[Page vii]]
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Office of the Federal Register.
April 1, 2003.
[[Page ix]]
THIS TITLE
Title 24--Housing and Urban Development is composed of five volumes.
The first four volumes containing parts 0-199, parts 200-499, parts 500-
699, parts 700-1699, represent the regulations of the Department of
Housing and Urban Development. The fifth volume, containing part 1700 to
end continues with regulations of the Department of Housing and Urban
Development and also includes regulations of the Neighborhood
Reinvestment Corporation. The contents of these volumes represent all
current regulations codified under this title of the CFR as of April 1,
2003.
[[Page x]]
[[Page 1]]
TITLE 24--HOUSING AND URBAN DEVELOPMENT
(This book contains parts 500 to 699)
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Part
SUBTITLE B--Regulations Relating to Housing and Urban Development
(Continued)
chapter v--Office of Assistant Secretary for Community
Planning and Development, Department of Housing and Urban
Development............................................... 510
chapter vi--Office of Assistant Secretary for Community Planning and
Development, Department of Housing and Urban Development [Reserved]
Cross References: Rural Housing and Community Development Service, Rural
Business and Cooperative Development Service, Rural Utilities Service,
and Consolidated Farm Service Agency, Department of Agriculture: See
Agricultural Credit, 7 CFR chapter XVIII.
Office of Thrift Supervision, Department of the Treasury, 12 CFR
chapter V.
Department of Veterans Affairs regulations on assistance to certain
veterans in acquiring specially adapted housing and guaranty of loans on
homes: See Loan Guaranty, 38 CFR part 36.
[[Page 3]]
Subtitle B--Regulations Relating to Housing and Urban Development
(Continued)
[[Page 5]]
CHAPTER V--OFFICE OF ASSISTANT SECRETARY FOR COMMUNITY PLANNING AND
DEVELOPMENT, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
--------------------------------------------------------------------
Editorial Note: For nomenclature changes to chapter V see 59 FR 14090,
Mar. 25, 1994.
SUBCHAPTER A--SLUM CLEARANCE AND URBAN RENEWAL
Part Page
500-509 [Reserved]
510 Section 312 Rehabilitation Loan Program..... 7
511 Rental Rehabilitation Grant Program......... 7
SUBCHAPTER B [RESERVED]
SUBCHAPTER C--COMMUNITY FACILITIES
570 Community development block grants.......... 31
572 Hope for homeownership of single family
homes program (HOPE 3).................. 171
573 Loan guarantee recovery fund................ 192
574 Housing opportunities for persons with AIDS. 197
576 Emergency Shelter Grants Program: Stewart B.
McKinney Homeless Assistance Act........ 212
581 Use of Federal real property to assist the
homeless................................ 225
582 Shelter Plus Care........................... 234
583 Supportive Housing Program.................. 247
585 Youthbuild Program.......................... 262
586 Revitalizing base closure communities and
community assistance--community
redevelopment and homeless assistance... 278
[[Page 6]]
590 Urban homesteading.......................... 287
594 John Heinz Neighborhood Development Program. 292
597 Urban empowerment zones and enterprise
communities: Round one designations..... 295
598 Urban Empowerment Zones: Round two and three
designations............................ 306
599 Renewal communities......................... 315
600-699 [Reserved]
[[Page 7]]
SUBCHAPTER A--SLUM CLEARANCE AND URBAN RENEWAL
PARTS 500-509 [RESERVED]
PART 510--SECTION 312 REHABILITATION LOAN PROGRAM--Table of Contents
Authority: 42 U.S.C. 1452b and 3535(d).
Sec. 510.1 Multi-family property loans.
(a) In cases in which a corporation is a borrower on a section 312
loan, the Assistant Secretary for CPD or his designee may require an
officer of the corporation or a principal stockholder to personally
guarantee the section 312 loan or to cosign the loan note as a borrower,
where necessary to make the finding of acceptable risk required for
assumption of the loan.
(b) All partners of any partnership which is a borrower on a section
312 loan shall be personally liable for repayment of the section 312
loan. Limited partners shall assume personal liability by co-signing the
loan note as a borrower or by personally guaranteeing the loan.
(c) Any personal guarantee or endorsement shall not relieve the
partnership or corporate borrower from securing the section 312 loan by
a mortgage or deed of trust on the property to be rehabilitated.
[44 FR 21751, Apr. 11, 1979, as amended at 44 FR 47513, Aug. 13, 1979;
44 FR 55562, Sept. 27, 1979. Redesignated and amended at 61 FR 7061,
Feb. 23, 1996]
PART 511--RENTAL REHABILITATON GRANT PROGRAM--Table of Contents
Subpart A--General
Sec.
511.1 Applicability and purpose.
511.2 Definitions.
511.3-511.5 [Reserved]
Subpart B--Program Requirements
511.10 Grant requirements.
511.11 Project requirements.
511.12 Conflicts of interest.
511.13 Nondiscrimination, equal opportunity, and affirmative marketing
requirements.
511.14 Tenant assistance, displacement, relocation, and acquisition.
511.15 Lead-based paint.
511.16 Other Federal requirements.
Subpart C [Reserved]
Subpart D--Allocation Formula and Reallocations
511.30-511.31 [Reserved]
511.33 Deobligation of rental rehabilitation grant amounts.
511.34 [Reserved]
Subpart E [Reserved]
Subpart F--State Program
511.50 State election to administer a rental rehabilitation program.
511.51 State-administered program.
511.52 [Reserved]
Subpart G [Reserved]
Subpart H--Grant Administration
511.70 Responsibility for grant administration.
511.71 Administrative costs.
511.72 Applicability of uniform Federal administrative requirements.
511.73 Grantee records.
511.74 Audit.
511.75 Disbursement of rental rehabilitation grant amounts: Cash and
Management Information System.
511.76 Program income.
511.77 Grant closeout.
Subpart I--Grantee Performance: Review, Reporting and Corrective or
Remedial Actions
511.80 Performance review.
511.81 Grantee reports to HUD.
511.82 Corrective and remedial actions.
Authority: 42 U.S.C. 1437o and 3535(d).
Source: 55 FR 20050, May 14, 1990, unless otherwise noted.
Subpart A--General
Sec. 511.1 Applicability and purpose.
(a) This part implements the Rental Rehabilitation Program (RRP)
contained in section 17 of the United States Housing Act of 1937, as
amended (the ``Act''). As more fully described in this part, the Act
authorizes the Secetary of Housing and Urban Development to make rental
rehabilitation
[[Page 8]]
grants to help support the rehabilitation of eligible real property to
be used for primarily residential rental purposes, and to pay for
eligible administrative costs of grantees (not to exceed 10 percent of a
grantee's initial grant obligation for Fiscal Year 1988 and later
years). Grants are made on a formula basis to cities having populations
of 50,000 or more, urban counties, States, and qualifying consortia of
geographically proximate units of general local government. States may
use all or part of their grants to carry out their own rental
rehabilitation programs or to distribute them to eligible units of
general local government. HUD will administer a State's grant if the
State chooses not to do so.
(b) The purpose of the Program is to help provide affordable,
standard permanent housing for low-income families and to increase the
availability of housing units for use by housing voucher and certificate
holders under section 8 of the United States Housing Act of 1937.
Subject to rules for the tenant-based Certificate Program (24 CFR part
882) and for the Housing Voucher Program (24 CFR part 887), certificates
and housing vouchers must be allocated to ensure that sufficient
resources are available for families in Rental Rehabilitation projects
who are required to move out of their units because of the physical
rehabilitation activities or because of overcrowding; and at the PHA's
discretion, to assist eligible families whose post-rehabilitation rents
would be greater than 30 percent of their adjusted incomes.
Sec. 511.2 Definitions.
The terms HUD and Public Housing Agency (PHA) are defined in 24 CFR
part 5.
Administrative costs means eligible administrative costs as
described in Sec. 511.71.
C/MI System means the Cash and Management Information System for
drawdown of Rental Rehabilitation grant amounts and collection of
program information described in Sec. 511.75.
Certificate means the document issued by a PHA to a family eligible
for participation in the tenant-based Section 8 Certificate Program
under 24 CFR part 882.
Chief executive officer of a governmental entity means the elected
official, or the legally designated official, who has the primary
responsibility for the conduct of that entity's governmental affairs.
Examples of the ``chief executive officer'' are: The elected mayor of a
municipality; the elected county executive of a county; the chairperson
of a county commission or board in a county that has no elected county
executive; the official designated under law by the governing body of
the unit of general local government; and the Governor of a State.
City means a unit of general local government that was classified as
a city under section 102(a)(5) of the Housing and Community Development
Act of 1974 for purposes of the Community Development Block Grant (CDBG)
Entitlement Program for the fiscal year immediately preceding the fiscal
year for which rental rehabilitation grant amounts are made available.
Commit to a specific local project or commitment means:
(a) For a project which is privately owned when the commitment is
made, a written legally binding agreement between a grantee (or in the
case of a State distributing rental rehabilitation grant amounts to
units of general local government, a State recipient) and the project
owner under which the grantee or State recipient agrees to provide
rental rehabilitation grant amounts to the owner for an identifiable
rehabilitation project that can reasonably be expected to start
construction within 90 days of the agreement and in which the owner
agrees to start construction within that period; or
(b) For a project that is publicly owned when the commitment is
made, the Pre-Rehabilitation Report submitted under the C/MI System
which identifies a specific rehabilitation project that will start
rehabilitation within 90 days of receipt of the Pre-Rehabilitation
Report. Under both paragraphs (a) and (b) of this definition, the date
HUD enters into the C/MI System an acceptable Pre-Rehabilitation Report
for a project is deemed to be the date of project commitment.
Completion of rehabilitation means all necessary rehabilitation work
has been performed and the project in HUD's
[[Page 9]]
judgment complies with the requirements of this part (including the
rehabilitation standards adopted under Sec. 511.10(e)); the final
drawdown has been disbursed for the project; for projects that were
publicly owned when commitment occurred, the project has been legally
transferred to a private owner; and a Project Completion Report has been
submitted and processed in the C/MI System as prescribed by HUD.
Family means a ``family'' as defined at 24 CFR 812.2.
Grantee means--
(a) Any city, urban county, or approved consortium receiving a grant
on the basis of the formula contained in subpart D of this part;
(b) Any State administering a rental rehabilitation program, as
provided in Sec. 511.51; and
(c) Any unit of general local government receiving a rental
rehabilitation grant from HUD, as provided in Sec. 511.52.
Housing voucher means the document issued by a PHA to a family
eligible for participation in the Section 8 Housing Voucher Program
under 24 CFR part 887.
Low-income family means a low-income family, as defined in 24 CFR
813.102.
Manufactured housing means a dwelling unit which meets the
requirements of Sec. 511.11(c)(4).
Owner means one or more individuals, corporations, partnerships, or
other privately-controlled legal entities that hold valid legal title to
the project to be rehabilitated.
Project means an entire building (including a manufactured housing
unit), or two or more contiguous buildings under common ownership and
management, to be rehabilitated with a rental rehabilitation grant,
under a commitment by the owner, as a single undertaking under this
part.
Rents affordable to low-income families means that the sum of the
utility allowance and the rent payable monthly to the owner with respect
to a unit is at or below the applicable fair market rent published under
24 CFR part 888 for the Section 8 Certificate Program (24 CFR part 882)
or at or below such higher maximum Gross Rent as approved by HUD for
units of a given size or type under 24 CFR 882.106(a)(3). In the case of
cooperative or mutual housing, rent means the occupancy charges under
the occupancy agreement between the members and the cooperative.
State includes any of the 50 States and the Commonwealth of Puerto
Rico.
State recipient means any unit of general local government to which
a State distributes rental rehabilitation grant amounts, as provided in
Sec. 511.51 (a)(2) and (a)(3).
Unit or dwelling unit means a residential space that qualifies under
the laws of the State and locality and under this part as a place of
permanent habitation or abode for a family, including an apartment or
house that contains a living room, kitchen area, sleeping area, and
bathroom(s), or such other definition as may be proposed by a grantee
and approved by HUD under this part. The HUD Field Office may approve
congregate housing units meeting the requirements of 24 CFR 882.109(m)
or single room occupancy units meeting the requirements of 24 CFR
882.109(p) as zero bedroom units for purposes of this part.
Unit of general local government means any city, county, town,
township, parish, village, or other general purpose political
subdivision of a State.
Urban county means a county that was classified as an urban county
under section 102(a)(6) of the Housing and Community Development Act of
1974, as amended, for the fiscal year immediately preceding the fiscal
year for which rental rehabilitation grant amounts are made available.
Utility allowance means the amount determined by a PHA under 24 CFR
part 882 for the cost of utilities (except telephones) and other housing
services that is not included in the rent payable to the owner, but is
the responsibility of the family occupying the unit.
Very low income family means a very low income family, as defined in
24 CFR 813.102.
[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]
[[Page 10]]
Sec. 511.3-511.5 [Reserved]
Subpart B--Program Requirements
Sec. 511.10 Grant requirements.
A rental rehabilitation program shall comply with the following
requirements:
(a) Lower income benefit--(1) 100 percent benefit standard. Except
as provided in paragraphs (a)(2) and (a)(3) of this section, all rental
rehabilitation grant amounts must be used for the benefit of low-income
families.
(2) Reduction to 70 percent benefit standard. The 100 percent
benefit standard will be reduced to 70 percent if the grantee certifies
in its Program Description under Sec. 511.20 (or thereafter in a written
amendment to its grant agreement) that:
(i) The reduction is necessary to meet one or both of the following
objectives:
(A) To minimize the displacement of tenants in projects to be
rehabilitated; or
(B) To provide a reasonable margin for error due to unforeseen,
sudden changes in neighborhood rent or for other reasonable
contingencies;
(ii) A rental rehabilitation program that meets the 100 percent
benefit standard cannot be developed; and
(iii) The public has been consulted regarding this inability.
(3) Reduction to 50 percent benefit standard. The benefit standard
will be reduced to not less than 50 percent only in extraordinary
circumstances approved by HUD. Approval may be granted at the request of
the grantee before undertaking any project that will have the effect of
reducing the benefit for low-income families for the grantee's program
below 70 percent, only where HUD determines that a reduction is
necessary to meet an important community need and that the net program
impact will strongly favor low-income families. Approval may be granted
thereafter only where HUD determines that the grantee made reasonable
efforts to meet the higher benefit standard, but was unable to do so
because of circumstances beyond its control.
(4) Definition of benefit. For purposes of this paragraph (a),
benefit for low-income families will be considered to occur only where
dwelling units in projects rehabilitated with rental rehabilitation
grants are initially occupied by such families after rehabilitation.
(b) Use of rental rehabilitation grants for housing for families.
(1) Each grantee shall ensure that an equitable share of rental
rehabilitation grant amounts will be used to assist in the provision of
housing designed for occupancy by families with children, particularly
families requiring three or more bedrooms. HUD will assure that on a
national basis at least 15 percent of each year's rental rehabilitation
grant amounts (excluding those grant amounts expended for administrative
costs under Sec. 511.71) are used to rehabilitate units containing three
or more bedrooms. HUD reserves the right prospectively to establish
three or more bedroom unit targets for individual grantees if the
national goal is in danger of not being met, or if HUD finds that a
grantee's production of three or more bedroom units is significantly
below that of grantees in similar circumstances. In addition, at least
70 percent of each grantee's annual rental rehabilitation grant must be
used to rehabilitate units containing two or more bedrooms. HUD may
approve a lower percentage standard submitted by the grantee in its
Program Description under Sec. 511.20, or thereafter, based on HUD's
determination that the lower standard is justified by factors such as a
short waiting list of large families requiring assistance or the nature
of the housing stock available for rehabilitation.
(2) If a unit of general local government has an ordinance which
requires rehabilitation to meet seismic standards, the grantee may use
up to the full amount of its annual rental rehabilitation grant for
Federal Fiscal Year 1988 and later years (including reallocations under
Sec. 511.33(b) of funds for the same fiscal year) without regard to the
requirements of paragraph (b)(1) of this section, but only to the extent
it uses such grant amounts to rehabilitate projects to meet the seismic
standards required by the local ordinance and to the extent these units
in the rehabilitated project are initially occupied after rehabilitation
by very low income
[[Page 11]]
families. The grantee or State recipient shall identify as prescribed by
HUD in reports required under the C/MI System projects which have been
rehabilitated to meet the requirements of a local seismic standards
ordinance and contain units which are initially occupied by very low
income families after rehabilitation. In determining compliance with
paragraph (b)(1) of this section for annual grants under which one or
more projects have been rehabilitated to meet the requirements of a
local seismic standards ordinance, based on the grantee's or State
recipient's reports, HUD will:
(i) Calculate the maximum rental rehabilitation grant amount
permissible under Sec. 511.11(e)(2)(i) for the project(s) rehabilitated
to meet seismic standards;
(ii) Calculate the maximum permissible rental rehabilitation grant
amount for the 0 to 1 bedroom units in such project(s) initially
occupied by very low income families after rehabilitation;
(iii) Divide the amount calculated in Sec. 511.10(b)(2)(ii) by the
amount calculated in Sec. 511.10(b)(2)(i);
(iv) Multiply the quotient in Sec. 511.10(b)(2)(iii) by the actual
rental rehabilitation grant amount expended for the project; and
(v) Deduct the product in Sec. 511.10(b)(iv) from the amount of the
grantee's annual rental rehabilitation grant. The grantee will be
required to meet the 70 percent, or other approved level, under this
Sec. 511.10(b) only as to the amount of its annual grant remaining after
making the foregoing deduction.
(c) Selection of neighborhoods--(1) Neighborhood median income and
area. Rental rehabilitation grants shall only be used to assist the
rehabilitation of projects located in neighborhoods where the median
family income does not exceed 80 percent of the median family income for
the area. For purposes of paragraph (c) of this section, neighborhood
means an area (as determined by the grantee or, as appropriate, the
State recipient) that surrounds a project and tends to determine, along
with the condition and quality of the project and the dwelling units
therein, the rents that are charged for such units. A neighborhood must
have a median family income that does not exceed 80 percent of the
median family income for the Metropolitan Statistical Area (MSA) in
which it is located, or, in the case of a neighborhood not within an
MSA, a median family income that does not exceed 80 percent of the
median family income for the State's non-metropolitan areas, or at the
grantee's option, the non-metropolitan county in which the neighborhood
is located.
(2) Neighborhood rent affordability. Rental rehabilitation grant
amounts shall only be used to assist the rehabilitation of projects
located in neighborhoods in which--
(i) The rents for standard units are generally affordable to low-
income families at the time of the selection of the neighborhood; and
(ii) The character of the neighborhood indicates that the rents are
not likely to increase at a rate significantly greater than the rate for
rent increases that can reasonably be anticipated to occur in the market
area for the 5-year period following the selection of the neighborhood.
(d) [Reserved]
(e) Rehabilitation standards. Each grantee or State recipient shall
adopt written rehabilitation standards with which each assisted project
must comply after rehabilitation. At a minimum, such standards shall
require that after rehabilitation each unit in the entire project must
meet the Section 8 Housing Quality Standards for Existing Housing
contained at 24 CFR 882.109.
(f) Eligible project costs. Eligible project costs include only:
(1) The actual rehabilitation costs necessary to:
(i) Correct substandard conditions, as reasonably defined by the
grantee in its rehabilitation standards adopted under Sec. 511.10(e);
(ii) Make essential improvements, as reasonably defined by the
grantee or State recipient in its rehabilitation standards adopted under
Sec. 511.10(e), including energy-related repairs, improvements necessary
to permit the use of rehabilitated projects by handicapped persons, and
activities of lead
[[Page 12]]
based paint hazards, as required by part 35 of this title;
(iii) Repair major housing systems in danger of failure, as
reasonably defined by the grantee or State recipient in its
rehabilitation standards under Sec. 511.10(e); and
(2) Other costs (soft costs) that are associated with the
rehabilitation or rehabilitation financing; are not for services
provided or costs incurred by the grantee, State recipient, or the PHA;
and are not paid for as administrative costs under Sec. 511.71. Such
costs may include (but are not limited to):
(i) Architectural, engineering or related professional services
required in the preparation of rehabilitation plans and drawings or
writeups;
(ii) Costs of processing and settling the financing for a project,
such as private lender origination fees, credit reports, fees for title
evidence, fees for recordation and filing of legal documents, building
permits, attorneys' fees, private appraisal fees and fees for an
independent rehabilitation cost estimate;
(iii) Relocation payments made to tenants who are displaced by the
rehabilitation activities; and
(iv) Costs for the owner to provide information services to tenants
as required by Secs. 511.13(b), 511.14 (a)(3) and (a)(4), and 511.15(b).
(3)(i) Rehabilitation eligible under Sec. 511.10(f)(1) is limited to
work done after the commitment to the project (as defined in Sec. 511.2)
is made, except to the extent that such costs also meet all of the
following conditions:
(A) Prior to undertaking any rehabilitation before the project is
committed in the C/MI System (hereafter called ``precommitment
rehabilitation''), the owner and grantee or State recipient agree in
writing to include such rehabilitation costs in the project cost, if and
when the payment is approved for assistance under this part;
(B) The precommitment rehabilitation costs meet all other
requirements of this part, including compliance with the other Federal
requirements cited in Sec. 511.16, where applicable. In particular, HUD
approval of the grantee's certification of completion of environmental
responsibilities, when required under 24 CFR part 58, must occur prior
to execution of the written agreements to include the costs; and
(C) The precommitment rehabilitation costs were incurred by the
owner after the date of the Appropriation Act which made available the
grant amounts for the project in question.
(ii) Other project-related costs eligible under Sec. 511.10(f)(2)
are also limited to those costs incurred after the commitment to the
project is made by the grantee or State recipient and the project is set
up in the C/MI System, except to the extent such costs also meet all of
the following conditions:
(A) The grantee or State recipient and the owner agreed in writing
before the costs were incurred that such costs could be included in the
project cost, if and when the project was approved for assistance under
this part, or the grantee specifically agrees in writing to include such
costs in the project cost on or before the date the project is set up in
the C/MI System;
(B) The costs also meet the conditions stated in
Sec. 511.10(f)(3)(i)(B) and Sec. 511.10(f)(3)(i)(C).
(4) For projects where the owner or other individuals are performing
some or all of the rehabilitation work without compensation (to the
extent permitted by Sec. 511.16(a)):
(i) If the owner is not a practicing, licensed contractor,
rehabilitation costs eligible under Sec. 511.10(f)(1) are limited to the
cost of materials purchased by the owner and used on the project and the
cost of other eligible work performed by practicing, licensed
contractors, subcontractors or tradesmen on the project.
(ii) If the owner is a practicing, licensed contractor, then
eligible project costs may include an amount, in addition to that
permitted under paragraph (f)(4)(i) of this section, for the
contractor's paid labor, overhead and profit, similar in amount to what
these items would be if the work were being performed on a project that
was not owned by the contractor.
(iii) Under either paragraph (f)(4)(i) or (f)(4)(ii) of this
section, donated labor or work is not part of eligible project cost.
(g) Project selection priorities--(1) Projects with units occupied
by very low income families. While the program can
[[Page 13]]
be used for rehabilitating both occupied and vacant units, the grantee
shall assure that priority is given to the selection of projects
containing units that do not meet the rehabilitation standards adopted
under Sec. 511.10(e) and which are occupied by very low income families
before rehabilitation.
(2) Units that are accessible to the handicapped. As stated in 24
CFR 8.30, the grantee shall, subject to the priority in
Sec. 511.10(g)(1) and in accordance with other requirements in this
part, give priority to the selection of projects that will result in
dwelling units being made readily accessible to and usable by
individuals with handicaps.
(Approved by the Office of Management and Budget under control numbers
2506-0110, 2506-0078, 2506-0080)
[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61
FR 7061, Feb. 23, 1996; 64 FR 50225, Sept. 15, 1999]
Sec. 511.11 Project requirements.
(a) Rehabilitation. To receive assistance under this part, a project
must require rehabilitation, measured by whether the project before the
assisted rehabilitation does not meet the rehabilitation standards under
Sec. 511.10(e). If a project is terminated before completion of
rehabilitation (as defined in Sec. 511.2), whether voluntarily by the
grantee or otherwise, amounts equal to the rental rehabilitation grant
amounts already dispersed for the project under the C/MI System are not
eligible project costs, whether or not the grantee has already expended
such grant amounts to pay for project costs. If such amount is not
repaid, the grantee may be subject to corrective and remedial actions
under Sec. 511.82.
(b) Primarily residential rental use. Rental rehabilitation grants
shall only be used to rehabilitate projects to be used for ``primarily
residential rental'' use. For purposes of this part, a project is used
for primarily residential rental purposes if at least 51 percent of the
rentable floor space of the project is used for residential rental
purposes after rehabilitation, except that in the case of a two-unit
building, at least 50 percent of the rentable floor space after
rehabilitation must be used for residential rental purposes after
rehabilitation. ``Primarily residential rental'' use also includes
cooperative or mutual housing that has a resale structure that enables
the cooperative to maintain rents affordable to low-income families.
(c) Privately owned real property--(1) General. Rental
rehabilitation grant amounts shall only be used for eligible costs of
projects that are in private ownership at the time the commitment is
made to a specific local project, as defined in Sec. 511.2, or projects
that are publicly owned at commitment which meet the requirements in
Sec. 511.11(c)(2).
(2) Publicly owned project at the time of commitment. Rental
rehabilitation grant amounts may be used to assist publicly owned
projects under the following conditions:
(i)(A) For a publicly owned project where the commitment to a
specific local project occurs on or after December 22, 1989, the grantee
or State recipient--taking into consideration: the size of the project;
the complexity of the rehabilitation; the anticipated time necessary to
identify, and transfer to, an eligible private owner; and other relevant
factors--must determine that it will commence rehabilitation within 90
days of commitment under the C/MI System, and that rehabilitation will
be completed and the project transferred to an eligible private owner
within the two years and 90 days from the date of commitment in the C/MI
system or the time remaining under Sec. 511.33(c) for expenditure of the
rental rehabilitation grant amounts committed to the project, whichever
is shorter. The Project Completion Report under the C/MI system
identifying the private entity to which ownership has been transferred
shall be submitted within 90 days of the final draw, but not later than
two years and 90 days after the date of commitment.
(B) For a publicly owned project where the commitment to a specific
local project occurred before December 22, 1989, the grantee or State
recipient--taking into consideration: the size of the project; the
complexity of the rehabilitation; the anticipated time necessary to
identify, and transfer to, an eligible private owner; and other relevant
factors--must determine
[[Page 14]]
that the rehabilitation will be completed and the project transferred to
an eligible private owner within the time remaining for expenditure of
the rental rehabilitation fiscal year grant amounts proposed to be used
for the project in accordance with Sec. 511.33(c) before drawing down
rental rehabilitation grant amounts for the project. The Project
Completion Report identifying the private entity to which ownership has
been transferred shall be submitted within 90 days of the final draw.
(ii) If the grants or State recipient fails to complete the
rehabilitation, transfer the property to an eligible private owner
(which includes obtaining the agreements from the new owner required by
this part, including Sec. 511.11(d)), and submit the Project Completion
Report within the allowable period, then HUD will suspend the grantee's
and/or the State recipient's authority to set up any new projects in the
C/MI System and may require the grantee to repay to its grant account in
the C/MI System all rental rehabilitation grant amounts drawn down with
respect to the project. If payment is not received, HUD may proceed to
deobligate up to the full amount of the grantee's remaining uncommitted
rental rehabilitation grant amounts, whether or not such grant amounts
otherwise are available for deobligation under Sec. 511.33(c). A
suspension of set-up authority shall terminate when the grantee or State
recipient has transferred the project to private ownership, as required
by this part, and has submitted a Project Completion Report under the C/
MI System identifying the private owner, or repays its grant account as
required by this paragraph, or HUD lifts the suspension at its
discretion.
(iii) After the grantee has repaid the grant amounts to its grant
account as provided in Sec. 511.11(c)(2)(ii), the grant amounts may be
committed and expended by the grantee for new projects within the
periods originally allowed for these grant amounts, or deobligated by
HUD under Sec. 511.33 or Sec. 511.82 to the same extent as any other
grant amounts subject to this part.
(3) Private, non-profit organizations. Non-profit organizations that
are privately controlled are eligible to receive rental rehabilitation
grant amounts under the same terms and conditions as any other private
project owner under this part. For purposes of this requirement, non-
profit organizations must have governing bodies which are controlled 51
percent or more by private individuals who are acting in a private
capacity. For purposes of this provision, an individual is deemed to be
acting in a private capacity if he or she is not legally bound to act on
behalf of a public body (including the grantee), and is not being paid
by a public body (including the grantee) while performing functions in
connection with the non-profit organization.
(4) Manufactured housing units. Notwithstanding whether they are
classified as real or personal property under applicable State law,
manufactured housing units may be assisted under this part under the
following conditions:
(i) The unit is on a permanent foundation;
(ii) The utility hook-ups are permanent;
(iii) The unit is designed for use as a permanent residence;
(iv) The unit also meets the Section 8 Housing Quality Standards for
Manufactured Homes set forth in 24 CFR 882.109(o).
(5) Religious organizations. Rental Rehabilitation grant amounts may
be used to assist the rehabilitation of properties formerly owned by
religious organizations, such as churches, provided that both of the
following conditions are met:
(i) Title to the property to be rehabilitated must be transferred to
a wholly secular entity prior to commitment, and this entity shall
comply with all obligations of a project owner under this part. The
entity may be an existing or newly established entity (which may be an
entity established, but not controlled, by the religious organization);
and
(ii) The completed project must be used exclusively by the owner
entity for secular purposes, available to all persons regardless of
religion, for the period and subject to the obligations described in
Sec. 511.11(d). In particular,
[[Page 15]]
there must be no religious or membership criteria for tenants of the
property.
(d) Long-term owner obligations. (1) Each project assisted under
this part is subject to the following specific obligations for a period
of at least ten years after completion of the rehabilitation:
(i) The project shall remain in private ownership and in primarily
residential rental use for the required period, unless the project is
sold to another private owner who agrees to continue to manage the
property in accordance with Rental Rehabilitation Program requirements
for the remainder of the required period, or a hardship exception is
approved by the grantee for reasons that occur after completion of the
rehabilitation.
(ii) The owner shall not convert the units in the project to
condominium ownership or any form of cooperative ownership not eligible
for assistance under this part for the required period.
(iii) The owner shall not discriminate against prospective tenants
on the basis of their receipt of, or eligibility for, housing assistance
under any Federal, State or local housing assistance program or, except
for a housing project for elderly persons, on the basis that the tenants
have a minor child or children who will be residing with them, for the
required period.
(iv) The owner shall comply with the nondiscrimination and equal
opportunity requirements and with the affirmative marketing requirements
and procedures adopted under Sec. 511.13, for the required period.
(2)(i) With respect to projects which are privately owned when the
commitment to a specific local project is made, the obligations required
under Sec. 511.10 (d)(1) and (d)(3) shall be included in the written,
legally binding commitment or project agreement between the owner and
the grantee or State recipient which is executed on or before the date
the project is committed.
(ii) With respect to projects which are publicly owned when the
commitment is made, these obligations shall be included in a written
agreement between the grantee or State recipient and the private owner,
executed on or before completion of rehabilitation.
(iii) By drawing down rental rehabilitation grant amounts for a
project which is publicly owned when the commitment is made, the public
owner itself accepts the obligations of this part, including
Sec. 511.11(d)(1)(i) (except for private ownership before completion of
rehabilitation), (d)(1)(ii), (d)(1)(iii) and (d)(1)((iv) and agrees to
include these obligations in the agreement with the private owner
required by Sec. 511.11(d)(2)(ii).
(3) The grantee or State recipient shall ensure that the written
agreements with private owners required by Sec. 511.11 (d)(1) and (d)(2)
are legally enforceable, are recorded against the project in the local
land records (or in the case of a manufactured housing unit, against the
unit in the manner appropriate for such real or personal property under
State and local law), and that the agreements contain remedies adequate
to enforce their provisions. A remedy will be deemed adequate for
purposes of this paragraph if it requires the entire amount of the
rental rehabilitation grant assistance for the project to be a secondary
lien secured by the property, repayable by the owner, or any subsequent
transferee, upon a prohibited conversion, sale or use in an amount equal
to the entire amount of such assistance, less 10 percent for each full
year after completion of the project up to the time the prohibited
conversion, sale or use occurs, except in the case of projects of 25
units or more. For projects of 25 units or more the entire amount of
such assistance shall be repaid if the project is converted, sold or
used in violation of this section during the 10-year period. Such lien
may not be subordinate to a lien in favor of the grantee, State
recipient or any person with whom the owner has business or family ties,
except as may be necessary to secure federally tax exempt financing for
the project.
(e) Maximum rental rehabilitation grant amounts for projects. (1)
Rental rehabilitation grant amounts used for any project shall not
exceed 50 percent of the total eligible project costs, as defined in
Sec. 511.10(f). However, where refinancing of existing indebtedness is
involved, the grantee may approve a higher amount for a project where it
[[Page 16]]
determines, and documents in its records, that:
(i)(A) Rehabilitation of the project is important to the overall
stability of the neighborhood (as defined at Sec. 511.10(c)(2)) and for
the provision of housing at rents affordable to low-income families, or
(B) The project has special costs to facilitate use by the elderly
or handicapped; and
(ii) The refinancing and the higher grant amount are necessary to
make the project feasible.
This higher grant amount may not exceed the lesser of 75 percent of the
eligible project costs or 50 percent of the sum of the eligible project
costs and the amount necessary to refinance the existing indebtedness.
(2) Per unit. (i) Except as provided in paragraph (e)(2)(ii) of this
section, the rental rehabilitation grant amounts used for any project
may not exceed the sum of the following dollar amounts for dwelling
units in the project:
(A) $5,000 per unit for units with no bedrooms;
(B) $6,500 per unit for units with one bedroom;
(C) $7,500 per unit for units with two bedrooms; and
(D) $8,500 per unit for units with three or more bedrooms.
(ii) HUD may approve higher rental rehabilitation grant amounts for
projects in areas of high material and labor costs where the grantee
demonstrates to HUD's satisfaction that a higher amount is necessary to
conduct a rental rehabilitation program in the area and that it has
taken every appropriate step to contain the amount of the rental
rehabilitation grant within the dollar limits specified in paragraph
(e)(2)(i) of this section. These higher amounts will be determined as
follows:
(A) HUD may approve higher per unit amounts for a unit of general
local government's entire rental rehabilitation program up to, but not
to exceed, an amount derived by applying the HUD-approved High Cost
Percentage for Base Cities for the area to the applicable per unit
dollar limits;
(B) HUD may, on a project-by-project basis, increase the level
permitted under Sec. 511.11(e)(2)(i) by multiplying the original limits
by up to a maximum of 140 percent and then adding the product to the
original limits. Therefore, the maximum high cost grant amount per
project that may be approved is 240 percent of the original per unit
limits.
(f) Rent or occupancy restrictions. (1) A project rehabilitated with
rental rehabilitation grant amounts under this part is not subject to
State or local rent control unless the rent control requirements or
agreements:
(i) Were entered into under a State law or local ordinance of
general applicability that was enacted and in effect in the jurisdiction
before November 30, 1983 and
(ii) Apply generally to projects not assisted under the Rental
Rehabilitation Program.
(2) State and local rent controls expressly preempted by paragraph
(f) of this section include, but are not limited to, rent laws or
ordinances, rent regulating agreements, rent regulations, low income
occupancy agreements extending beyond one year from the date of
completion of rehabilitation of a project, financial penalties for
failure to achieve certain low income occupancy or rent projections, or
restrictions on return on investment or other similar policies that
prevent an owner, whether for-profit or non-profit, from maximizing
return or setting rent levels as the owner chooses. Grantees or State
recipients shall not include any preempted rent or occupancy
restrictions in any commitments or project agreements with the owners of
Rental Rehabilitation projects.
(g) [Reserved]
(Information collection requirements contained in this section have been
approved by the Office of Management and Budget under control numbers
2506-0080 and 2506-0110)
[55 FR 20050, May 14, 1990, as amended at 61 FR 7061, Feb. 23, 1996]
Sec. 511.12 Conflicts of interest.
(a) No person who is an employee, agent, consultant, officer, or
elected or appointed official of the grantee or State recipient (or of
any public agency that performs administrative functions in the RRP)
that receives rental rehabilitation grant amounts and who exercises or
has exercised any functions or responsibilities with respect to
[[Page 17]]
assisted rehabilitation activities, or who is in a position to
participate in a decision-making process or gain inside information with
regard to such activities, may obtain a personal or financial interest
or benefit from the activity, or have an interest in any contract,
subcontract or agreement with respect thereto, or the proceeds
thereunder, either for themselves or those with whom they have family or
business ties, during their tenure or for one year thereafter.
(b) The appropriate HUD Field Office may grant an exception to the
exclusion in paragraph (a) of the section on a case-by-case basis when
it determines that such an exception will serve to further the purposes
of the Rental Rehabilitation Program and the effective and efficient
administration of the local rental rehabilitation program or the
project. An exception may be considered only after the grantee or State
recipient has provided a disclosure of the nature of the conflict,
accompanied by an assurance that there has been public disclosure of the
conflict and a description of how the public disclosure was made and an
opinion of the grantee's or State recipient's attorney that the interest
for which the exception is sought would not violate State or local laws.
In determining whether to grant a requested exception, HUD shall
consider the cumulative effect of the following factors, where
applicable:
(1) Whether the exception would provide a significant cost benefit
or an essential degree of expertise to the local rental rehabilitation
program or the project that would otherwise not be available;
(2) Whether an opportunity was provided for open competitive bidding
or negotiation;
(3) Whether the person affected is a member of a group or class
intended to be the beneficiaries of the rehabilitation activity, and the
exception will permit such person to receive generally the same
interests or benefits as are being made available or provided to the
group or class;
(4) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking process, with
respect to the specific rehabilitation activity in question;
(5) Whether the interest or benefit was present before the affected
person was in a position as described in this paragraph;
(6) Whether undue hardship will result either to the grantee, State
recipient or the person affected when weighed against the public
interest served by avoiding the prohibited conflict; and
(7) Any other relevant considerations.
Sec. 511.13 Nondiscrimination, equal opportunity, and affirmative marketing requirements.
In addition to the nondiscrimination and equal opportunity
requirements set forth in 24 CFR part 5, the following requirements
apply:
(a) Affirmative marketing. The grantee shall adopt appropriate
procedures and requirements for affirmatively marketing units in
rehabilitated rental rehabilitation projects through the provision of
information regarding the availability of units that are vacant after
rehabilitation or that later become vacant. Affirmative marketing steps
consist of good faith efforts to provide information and otherwise to
attract eligible persons from all racial, ethnic and gender groups in
the housing market area to the available housing. (These affirmative
marketing procedures will not apply to units rented to families with
housing assistance provided by a PHA.) The grantee shall establish
procedures, requirements and assessment criteria for marketing units in
the Rental Rehabilitation Program that are appropriate to accomplish
affirmative marketing objectives. The grantee shall annually assess the
affirmative marketing program to determine: Good faith efforts that have
been made to carry out such procedures and requirements; objectives that
have been met; and corrective actions that are required.
(1) For each grantee, the affirmative marketing requirements and
procedures adopted must include:
(i) Methods for how the grantee will inform the public, owners and
potential tenants about Federal fair housing laws and the grantee's
affirmative marketing policy (such as the use of the Equal Housing
Opportunity logotype or
[[Page 18]]
slogan in press releases and solicitations for owners, and written
communications to fair housing and other groups);
(ii) Requirements and practices each owner (including the grantee or
any other public owner) must adhere to in order to carry out the
grantee's affirmative marketing procedures and requirements (e.g., use
of commercial media, use of community contacts, use of the Equal Housing
Opportunity logotype or slogan, display of fair housing poster);
(iii) Procedures to be used by owners (including the grantee or any
other public owner) to inform and solicit applications from persons in
the housing market area who are not likely to apply for the housing
without special outreach (e.g., use of community organizations,
churches, employment centers, fair housing groups or housing counseling
agencies);
(iv) Records that will be kept describing efforts taken by the
grantee and by the owners (including the grantee or any other public
owner) to affirmatively market units and records to assess the results
of these actions;
(v) A description of how the grantee will assess the affirmative
marketing efforts of owners (including the grantee or any other public
owner), and the results of those efforts, and what corrective actions
will be taken where an owner fails to follow these affirmative marketing
requirements.
(2) For States distributing rental rehabilitation grant amounts to
units of general local government, the affirmative marketing procedures
and requirements shall also set out the actions that State recipients
must take to meet the objectives set out in Sec. 511.13(b), the record
keeping and reporting requirements such State will require of State
recipients, and the procedures that such State will follow to determine
what action has been taken by State recipients to assess the results of
these affirmative marketing efforts.
(3) The grantee or State recipient shall require compliance with the
conditions of its affirmative marketing requirements and procedures
adopted under paragraph (b) of this section by means of an agreement
with the owner that shall be applicable for a period of ten years
beginning on the date of completion of rehabilitation, as defined in
Sec. 511.2.
(b) [Reserved]
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]
Sec. 511.14 Tenant assistance, displacement, relocation, and acquisition.
(a) General policies. The grantee and any State recipient shall:
(1) Ensure that the rehabilitation will not cause the displacement
of any very low income family by a family that is not a very low income
family.
(2) Consistent with the other goals and objectives of this part,
minimize displacement. To the extent feasible, residential occupants
shall be provided a reasonable opportunity to lease and occupy a
suitable, decent, safe, sanitary and affordable dwelling unit in the
project (see paragraph (g)(1)(iii) of this section).
(3) Administer all phases of the RRP, including the selection of
units to be rehabilitated and the provision of notices, counseling,
referrals, other advisory services and relocation payments, in a manner
that does not result in discrimination because of race, color, religion,
sex, age, handicap, familial status or national origin.
(4) Adopt and make public a written tenant assistance policy (TAP)
that describes the assistance that will be provided to tenants who
reside in the project and which includes a statement of
nondiscrimination policy consistent with paragraph (a)(3) of this
section. The TAP shall comply with the provisions of this section. Each
tenant in the project shall be provided a copy of the TAP and advised of
the impact of the project on him or her. For privately owned projects,
such notice shall be given immediately after submission of the
application by the owner of a property, or earlier. For publicly owned
projects, such notice shall be given immediately after the commitment
(defined in Sec. 511.2), or earlier.
(b) Relocation assistance for displaced persons. A displaced person
(defined in paragraph (g) of this section) must be provided relocation
assistance at the
[[Page 19]]
levels described in, and in accordance with the requirements of, 49 CFR
part 24, which contains the government-wide regulations implementing the
Uniform Relocation Assistance and Real Property Acquisition Policies Act
of 1970 (URA) (42 U.S.C. 4601-4655). Tenants shall be advised of their
rights under the Fair Housing Act (42 U.S.C. 3601-19) and of replacement
housing opportunities in such a manner that, to the extent possible,
tenants are provided a choice between relocating within their own
neighborhoods and other neighborhoods consistent with the grantee's or
State recipient's responsibility to affirmatively further fair housing.
As permitted under 49 CFR 24.2(k), for purposes of making replacement
housing payments, the term initiation of negotiations means:
(1) For a privately owned project, execution of the legally binding
agreement between the grantee or State recipient and the project owner
under which the grantee or State recipient agrees to provide rental
rehabilitation grant amounts for the project.
(2) For a publicly owned project, the commitment as defined in
Sec. 511.2 or such earlier notice as the grantee or State recipient
determines to be appropriate.
(c) Real property acquisition requirements. The acquisition of real
property for a project is subject to the URA and the requirements
described in 49 CFR part 24, subpart B.
(d) Application of Community Development Block Grant (CDBG)
requirements. If CDBG funds are used to pay any part of the cost of the
rehabilitation activities, as described in 24 CFR 570.202(b) or similar
eligible activities, the project is subject to the requirements of
section 104(d) of the Housing and Community Development Act of 1974, as
amended, and implementing regulations at 24 CFR 570.606(b) (Entitlement
Program and HUD-administered Small Cities Program) and 24 CFR
570.496a(b) (State CDBG Program).
(e) Appeals. If a person disagrees with the grantee's or State
recipient's determination concerning the person's eligibility for, or
the amount of, relocation assistance, the person may file a written
appeal (request for reconsideration) of that determination with the
grantee or State recipient. The appeal procedures to be followed are
described in 49 CFR 24.10. A low-income person that has been displaced
from a dwelling may submit a further written request for review of the
grantee's decision to the appropriate HUD Field Office. However, a low-
income person's request for review of a State recipient's decision shall
be submitted to the State grantee.
(f) Compliance responsibility. (1) The grantee and any State
recipient are responsible for ensuring compliance with the URA, the
regulations at 49 CFR part 24, and the requirements of this section,
notwithstanding any third party's contractual obligation to the grantee
or State recipient to comply with these provisions.
(2) The cost of required assistance may be paid from local public
funds, funds available under the rules of this part, or funds available
from other sources.
(3) The grantee or State recipient must maintain records in
sufficient detail to demonstrate compliance with the provisions of this
section.
(g) Definition of a displaced person. (1) For purposes of this
section, the term displaced person means any person (family, individual,
business, nonprofit organization or farm) that moves from real property,
or moves personal property from real property, permanently and
involuntarily as a direct result of rehabilitation, demolition or
acquisition for a project assisted under this part. Permanent,
involuntary moves for an assisted project include a permanent move from
the project that is made:
(i) After notice by the property owner, grantee, or State recipient
to move permanently from the property, if the move occurs on or after
the following date:
(A) If the notice is provided by the property owner, the date that
the owner (or person in control of the site) submits a request for
assistance under this part that is later approved and funded.
(B) If the notice is provided by the grantee or State recipient, the
date of the commitment to a specific local project.
[[Page 20]]
(ii) Before the date described in paragraph (g)(1)(i) of this
section, if either the grantee or HUD determines that the displacement
resulted directly from rehabilitation, acquisition or demolition for the
project;
(iii) By a tenant-occupant of a dwelling unit after the initiation
of negotiations, if:
(A) The tenant has not been provided a reasonable opportunity to
lease and occupy a suitable, decent, safe and sanitary dwelling in the
project following the completion of the project at a rent, including
estimated average utility costs, that does not exceed the greater of:
(1) The tenant's rent and estimated average utility costs before the
commitment; or
(2) The total tenant payment, as determined under 24 CFR 813.107, if
the tenant is low-income, or 30 percent of gross household income if the
tenant is not low-income; or
(B) The tenant has been required to relocate temporarily, but:
(1) The tenant is not offered payment for all reasonable out-of-
pocket expenses incurred in connection with the temporary relocation,
including the cost of moving to and from the temporarily occupied
housing and any increase in rent and utility costs, or other conditions
of the temporary relocation are not reasonable, and
(2) The tenant does not return to the project; or
(C) The tenant is required to move to another unit within the
project but is not offered reimbursement for all reasonable out-of-
pocket expenses incurred in connection with the move or other conditions
of the move are not reasonable.
(2) A person does not qualify as a displaced person, if:
(i) The person has been evicted for cause based upon a serious or
repeated violation of material terms of the lease or occupancy
agreement, and the grantee or State recipient determines that the
eviction was not undertaken for the purpose of evading the obligation to
provide relocation assistance; or
(ii) The person moved into the property after the owner's submission
of the request for assistance but, before commencing occupancy, received
written notice of the owner's intent to terminate the person's occupancy
for the project; or
(iii) The person is ineligible under 49 CFR 24.2(g)(2); or
(iv) The grantee or State recipient determines that the person was
not displaced as a direct result of rehabilitation, acquisition or
demolition of the project, and the HUD Field Office concurs in that
determination.
(3) The grantee may, at any time, ask HUD to determine whether a
specific displacement is or would be covered by these rules.
Sec. 511.15 Lead-based paint.
The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846),
the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.
4851-4856), and implementing regulations at part 35, subparts A, B, J,
K, and R of this title apply to activities under these programs.
[64 FR 50225, Sept. 15, 1999]
Sec. 511.16 Other Federal requirements.
In addition to the Federal requirements set forth in 24 CFR part 5,
Grantees and, where applicable, State recipients shall comply with the
following requirements:
(a) Labor standards. All laborers and mechanics (except laborers and
mechanics employed by a State or local government acting as the
principal contractor on the project) employed in the rehabilitation of a
project assisted under the Rental Rehabilitation Program that contains
12 or more dwelling units after rehabilitation shall be paid wages at
rates not less than those prevailing on similar rehabilitation in the
locality, if such a rate category exists, or other appropriate rate as
determined by the Secretary of Labor in accordance with the Davis-Bacon
Act (40 U.S.C. 276a--276a-5), and contracts involving their employment
shall be subject to the provisions, as applicable, of the Contract Work
Hours and Safety Standards Act (40 U.S.C. 327-333). (If CDBG funds are
used to finance certain costs for projects of 8 or more units, these
labor standards may apply (see 24 CFR 570.603).) If a project is subject
to Federal labor standards requirements,
[[Page 21]]
individuals are not permitted to perform work thereon which is covered
by such requirements without compensation in accordance with such
requirements, except that persons who own a project in their own name
may personally perform uncompensated work on their own projects.
Grantees, State recipients, owners, contractors and subcontractors shall
comply with applicable implementing regulations in 29 CFR parts 1, 3,
and 5.
(b) Environment and historic preservation. Section 104(g) of the
Housing and Community Development Act of 1974 and 24 CFR part 58, which
prescribe procedures for compliance with the National Environmental
Policy Act of 1969 (42 U.S.C. 4321-4361), and the additional laws and
authorities listed at 24 CFR 58.5.
(c) Pet ownership in housing for the elderly or handicapped. The
provisions of 24 CFR part 243 apply to any project assisted under this
part for which preference in tenant selection is given for all units in
the project to elderly or handicapped persons or elderly or handicapped
families, as defined in 24 CFR 812.2.
(d) Flood insurance. (1) Under the Flood Disaster Protection Act of
1973 (42 U.S.C. 4001-4128), a grantee may not approve the commitment of
rental rehabilitation grant amounts to a project located in an area
identified by the Federal Emergency Management Agency (FEMA) as having
special flood hazards, unless:
(i) The community in which the area is situated is participating in
the National Flood Insurance Program (see 44 CFR parts 59 through 79),
or less than a year has passed since FEMA notification regarding such
hazards; and
(ii) Flood insurance is obtained as a condition of approval of the
commitment.
(2) Grantees with projects located in an area identified by FEMA as
having special flood hazards are responsible for assuring that flood
insurance under the National Flood Insurance Program is obtained and
maintained.
(3) This paragraph Sec. 511.16(g) does not apply in the case of
allocations administered by a State under Sec. 511.51(a).
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 61 FR 5208, Feb. 9, 1996]
Subpart C [Reserved]
Subpart D--Allocation Formula and Reallocations
Secs. 511.30-511.31 [Reserved]
Sec. 511.33 Deobligation of rental rehabilitation grant amounts.
(a) Before deobligating grant amounts, HUD will consult with the
affected grantee and take into account factors such as timing of the
grantee's program year; the timing of State distributions to State
recipients, if applicable; the timing of expected project approvals for
projects in the grantee's pipeline; climatic or other considerations
affecting rehabilitation work schedules; and other relevant
considerations. In addition to any remedial deobligation under
Sec. 511.82, HUD may deobligate any rental rehabilitation grant amounts
that are not:
(1) Committed to specific local projects within 3 years of the date
of obligation of the grant under Sec. 511.21(d) (4 years in the case of
a State that distributes rental rehabilitation grant amounts to State
recipients); or
(2) Expended for eligible costs within 5 years of such date of
obligation (6 years in the case of a State that distributes rental
rehabilitation grant amounts to State recipients).
(b) After such consultation, the HUD field office may direct the
grantee to proceed with program closeout and may deobligate remaining
unexpended grant amounts if the field office determines that any
uncommitted funds will not be committed within a reasonable time, only
small amounts of funds remain unexpended, or completion of uncompleted
projects appears infeasible within a reasonable time. None of the time
periods referred to in this section are extended by any suspensions of
[[Page 22]]
project set-ups or other remedial action imposed by HUD under this part.
[61 FR 7062, Feb. 23, 1996]
Sec. 511.34 [Reserved]
Subpart E [Reserved]
Subpart F--State Program
Sec. 511.50 State election to administer a rental rehabilitation program.
(a) State allocations may be used to carry out eligible
rehabilitation activities in accordance with the requirements of this
part in units of general local government that do not receive
allocations under subpart D and in cities and urban counties whose
allocations are below the minimum amount specified in Sec. 511.31, but
may not be used in areas that are eligible for assistance under title V
of the Housing Act of 1949, except as specified in paragraph (b) of this
section.
(b) For Fiscal Years 1988 through 1991, uncommitted prior year funds
may be used by State grantees, by units of general local government
receiving funds from State grantees and by units of general local
government participating in a HUD-administered State Program in areas
eligible for assistance under title V of the Housing Act of 1949. This
authority to enter into commitments with owners for projects in title V-
eligible areas expires on September 30, 1991.
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 55 FR 36612, Sept. 6, 1990; 61
FR 7062, Feb. 23, 1996]
Sec. 511.51 State-administered program.
(a) Type of program. A State may, in its discretion, use all or part
of its rental rehabilitation grant amounts either:
(1) To carry out its own Rental Rehabilitation Program without the
active participation of units of general local government;
(2) To distribute grant amounts to State recipients which
independently select, enter into commitments with owners for, and manage
projects; or
(3) To carry out mixed programs in which both the State and all or
some units of general local government each perform specified program
functions.
(b) Sharing grant amounts for administration. In programs under
paragraphs (a)(2) and (a)(3) of this section, a State must share its
grant amounts which are available for administrative costs with units of
general local government administering the program with the State, under
a written agreement as required by Sec. 511.71.
(c) State Program requirements. State grantees shall be responsible
for administering their rental rehabilitation grant amounts in
accordance with all requirements of this part and other applicable laws,
notwithstanding their use of units of general local governments to
perform program functions under paragraph (a)(2) or (a)(3) of this
section. In addition, States that use units of general local government
to perform program functions shall:
(1) Ensure that units of general local government carry out their
Rental Rehabilitation Program in accordance with requirements of this
part and other applicable laws. States shall include in their agreements
with their units of general local government such additional provisions
as may be appropriate to ensure such compliance and to enable the State
to carry out its responsibilities under this part, including the
withdrawal and reallocation of rental rehabilitation grant amounts based
on unit of general local government noncompliance (including State
recipient failure to meet the schedule submitted by the State under
Sec. 511.20(b)(8)); and
(2) Conduct such reviews and audits of their units of general local
government as may be appropriate to determine whether units of general
local government, including State recipients, have carried out their
programs in accordance with the requirements of this part, whether they
have done so in a timely manner, and whether they have a continuing
capacity to do so in a timely manner.
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]
[[Page 23]]
Sec. 511.52 [Reserved]
Subpart G [Reserved]
Subpart H--Grant Administration
Sec. 511.70 Responsibility for grant administration.
Grantees are responsible for ensuring that rental rehabilitation
grants are administered in accordance with the requirements of this part
and other applicable laws. A grantee may enter into a written agreement
with another unit of State or local government or with a non-
governmental entity to administer specified functions under its Rental
Rehabilitation Program to the extent not prohibited by HUD. If the
grantee is contracting with a non-governmental entity to administer its
program or to provide other services, such as cash management
responsibilities, the grantee shall follow the procurement standards of
24 CFR 85.36. The use of other governmental units or private contractors
does not relieve the grantee of its responsibility for ensuring
compliance with this part and other applicable laws.
Sec. 511.71 Administrative costs.
(a) Maximum amount. Any grantee may use not to exceed 10 percent of
the grant amount initially obligated to the grantee for Federal Fiscal
Year 1988 and later fiscal years for administrative costs eligible under
paragraphs (b) and (c) of this section. Eligible grantees may draw down
funds to pay for eligible administrative costs through HUD's C/MI
System.
(b) Eligibility. Eligible administrative costs are reasonable and
necessary costs, as described in OMB Circular A-87, incurred by the
grantee itself, or by a unit of general local government pursuant to a
written cost-sharing agreement with a State grantee (see
Sec. 511.51(b)), in carrying out the Rental Rehabilitation Program in
accordance with this part. Administrative costs do not include costs of
rehabilitation which are incurred by and charged to project owners as
eligible project costs under Sec. 511.10(f)(2).
(c) Written cost-sharing agreement. A State grantee shall determine
the amount of its rental rehabilitation grant that it will permit to be
used for administrative expenses, not to exceed the maximum permitted by
this section. The State grantee shall share the amount of its rental
rehabilitation grant designated for administrative expenses with units
of general local government that incur eligible administrative costs in
carrying out the Rental Rehabilitation Program, whether the unit of
general local government receives a distribution of funds from the State
or selects and manages projects independently as a State recipient or
whether it performs less comprehensive functions by agreement with the
State. Before any eligible administrative expenses are incurred by a
unit of general local government under a State's grant, the cost-sharing
arrangement shall be specified in a written agreement between the State
grantee and each unit of general local government that receives payment
from the State for administrative expenses under this part. This
agreement shall describe (whether very generally or more specifically)
the functions that the unit of general local government shall perform
and the terms and conditions under which the unit of general local
government participates in the program, including the procedures by
which the unit of general local government's compensation for its
administrative expenses incurred in performing the authorized functions
is to be calculated and paid. HUD will not review the relative sharing
of administrative expenses between the State and affected units of
general local government, but pursuant to Secs. 511.74 and 511.80, it
will review and audit the State's program on the eligibility of
administrative expenses paid with program funds.
(d) Allocation of benefit. Rental rehabilitation grant amounts used
for program administration will be deemed to meet program requirements
imposed on a percentage of the annual grant basis, such as lower income
benefit and use of rental rehabilitation grants for housing for families
with children, in the same proportion as the grant amounts for a grant
year which are used for eligible project costs meet the grant
requirements. For example, if 70 percent of the grant amounts used for
[[Page 24]]
project costs for Fiscal Year 1989 benefit low-income families, then 70
percent of the Fiscal Year 1989 grant amounts spent for administrative
costs will be deemed to benefit low-income persons.
Sec. 511.72 Applicability of uniform Federal administrative requirements.
Grantees, State recipients and their contractors shall comply with
the requirements and standards of OMB Circular No. A-87, ``Principles
for Determining Costs Applicable to Grants and Contracts with State,
Local and Federally recognized Indian Tribal Governments,'' \1\ OMB
Circular A-128, ``Audits of State and Local Governments'' (implemented
at 24 CFR part 44), and with 24 CFR part 85, ``Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments,'' except for: Secs. 85.10, 85.11, 85.25, 85.31, 85.40(b),
85.41, and 85.50. In lieu of Secs. 85.25 and 85.50, HUD has adopted
Sec. 511.76 and Sec. 511.77, respectively, of this part.
---------------------------------------------------------------------------
\1\ OMB Circular No. A-87 is available from HUD Field Offices.
---------------------------------------------------------------------------
Sec. 511.73 Grantee records.
(a) Records to be maintained. Each grantee shall maintain records as
specified by HUD that clearly document its performance under each
requirement of this part. States distributing rental rehabilitation
grant amounts to State recipients shall also ensure that their
recipients maintain such records to document each recipient's
performance. The records required by this section shall, at a minimum,
include the following:
(1) Records required to comply with Sec. 511.75;
(2) Data on the racial, ethnic, gender, and income level
characteristics of
(i) Tenants occupying units before rehabilitation;
(ii) Tenants moving from and (initially after rehabilitation) into
projects assisted under this part;
(iii) Applicants for tenancy within 90 days following completion of
rehabilitation assisted under this part; and
(iv) Owners of the projects rehabilitated; and
(3) Data indicating the race and ethnicity of households displaced
as a result of program activities, and, if available, the address and
census tract of the housing units to which each displaced household
relocated.
(b) Retention of records. Records required to be maintained under
paragraph (a) of this section shall be retained for a period of three
years from the date of final closeout of the rental rehabilitation
grant.
(c) Public disclosure. Documents relevant to a grantee's Program
Description shall be made available for public review upon request at
the grantee's office during normal working hours.
(d) Federal access to records. The Secretary, the Inspector General
of HUD, the Comptroller General of the United States, or any of their
duly authorized representatives, shall have access to all books,
accounts, reports, files, and other papers or property of grantees,
State recipients, and their contractors pertaining to rental
rehabilitation grant amounts for the purpose of making surveys, audits,
examinations, excerpts, and transcripts. Grantees or, where applicable,
State recipients shall ensure that their agreements with owners require
the owners to provide similar access to their records pertaining to the
use of rental rehabilitation grant amounts.
(Approved by the Office of Management and Budget under control number
2506-0080)
Sec. 511.74 Audit.
The financial management systems used by grantees and, where
applicable, State recipients shall provide for audits in accordance with
24 CFR part 44.
Sec. 511.75 Disbursement of rental rehabilitation grant amounts: Cash and Management Information System.
(a) General. Rental Rehabilitation grants are managed through HUD's
C/MI System for the Rental Rehabilitation Program. The C/MI System is a
computerized system which manages program funds, disburses grant
amounts, and collects and reports data on properties and tenants
assisted under the Program.
(b) Project set-up. (1) After the grantee executes the Grant
Agreement, complies with the requirements under part
[[Page 25]]
58 of this title for release of funds, and submits the appropriate
security documents, the grantee may identify (set-up) specific local
projects in the C/MI System. State recipients are also granted access to
the C/MI System for projects upon designation by the State and
submission of the appropriate security documents. Within 12 calendar
days of project set-up, grantees and State recipients are required to
submit a Pre-Rehabilitation Report to HUD for each project set-up in the
C/MI System. Until an acceptable Pre-Rehabilitation Report is received
and entered in the C/MI System, grant amounts for the project are not
considered ``committed,'' as defined in Sec. 511.2, and, therefore, are
subject to deobligation to the extent authorized by 24 CFR 511.33(c).
(2) Beginning in Fiscal Year 1991, if Pre-Rehabilitation Reports are
not received within 20 days of the project set-up call, the project will
be cancelled automatically by the C/MI System. In addition, projects
which have been committed in the C/MI System for 6 months without an
initial disbursement of funds will be automatically cancelled by the C/
MI System.
(c) Disbursement of rental rehabilitation grant amounts. After an
acceptable Pre-Rehabilitation Report is entered into the C/MI System,
obligated grant amounts may be drawn down for the project by the grantee
or State recipient by electronic funds transfer to the designated
depository institution of the grantee or State recipient within 48 to 72
hours of the disbursement request. Grant amounts for eligible
administrative costs may be similarly drawn down by grantees by
electronic funds transfer to their designated depository institutions,
but State recipients are not permitted to draw down State grant amounts
for administrative expenses. Any drawdown is conditioned upon the
submission of satisfactory information by the grantee or State recipient
about the project or the administrative expenses and compliance with
other procedures specified by HUD in HUD's forms and issuances
concerning the Rental Rehabilitation Program Cash and Management
Information System. Copies of these forms and issuances may be obtained
from HUD Field Offices. Drawdowns shall be requested by the grantee or
State recipient as closely as possible to the time they are needed by a
grantee or State recipient and the owner to pay eligible project costs
or by a grantee to pay eligible administrative costs. Drawdowns for
project costs shall be requested only for work or services that have
been satisfactorily performed, or materials that are acceptable. After
receipt in the grantee or State recipient's depository account, grant
amounts for project costs shall immediately be disbursed by the grantee
or State recipient and the owner in payment for eligible project costs
and shall not be disbursed at any time, relative to a project's matching
funds, in any greater proportion than the proportion of rental
rehabilitation grant amounts to matching funds for the project.
(d) Payment vouchers. As post-documentation of each drawdown, a
grantee or State recipient must submit to HUD a payment voucher, for
each drawdown made by HUD, in the form required for the C/MI System. If
the drawdown was for eligible project costs and the payment voucher is
not received within ten calendar days of the drawdown, the grantee or
State recipient will be suspended from setting up new projects until the
required payment voucher is received by HUD. If the drawdown was for
administrative costs and the payment voucher is not received within ten
calendar days of the drawdown, the grantee will not be allowed to make
another drawdown for administrative costs until the payment voucher is
received.
(e) Submission of project completion reports. After the final draw
for a project, a Project Completion Report must be submitted to HUD
within 90 days of the drawdown request. However, for projects
rehabilitated pursuant to Sec. 511.11(c)(2) (publicly owned project at
the time of commitment), the Project Completion Report must be submitted
within 90 days of the final draw, but not later than 2 years and 90 days
after the date of commitment. If a satisfactory Project Completion
Report is not submitted by the due date, HUD will suspend further
project set-ups for the grantee or State recipient. Project set-
[[Page 26]]
ups will remain suspended until a satisfactory Project Completion Report
is received and entered into the C/MI System.
(Approved by the Office of Management and Budget under control number
2506-0080)
Sec. 511.76 Program income.
(a) General. Grantees and State recipients are neither encouraged to
earn nor discouraged from earning program income in using rental
rehabilitation grant amounts under this part.
(b) Definition of program income. Program income means gross income
received by the grantee or State recipient (or by another party at the
direction of the grantee or State recipient) which is directly generated
from the use of rental rehabilitation grant amounts. Primarily, it
includes but is not limited to, the following:
(1) Repayments of principal (whether in installments or a lump-sum)
and any interest or penalty assessment, under the terms of the loan
commitment or other project assistance agreement between the owner and
the grantee or State recipient, including repayments, pursuant to
Sec. 511.11(d)(3), of the rental rehabilitation grant assistance by the
owner after completion of rehabilitation; and
(2) Interest earned on program income pending its disposition.
Grantees or State recipients are not authorized to deduct costs incident
to the generation or management of income from gross income for purposes
of determining program income. Governmental fees and taxes, including
income taxes, property taxes, special assessments, transfer taxes,
recording fees and other normal governmental revenues, do not constitute
program income if they are imposed by generally applicable law,
regulation, or ordinance and are not imposed in consideration of the
project's receipt of assistance under this part. Program income also
does not include grant amounts required to be returned to HUD as a
result of cancellation of a project before completion, or interest on
those grant amounts, or any interest earned by the grantee or State
recipient or grant funds after drawdown and before disbursement for
eligible costs. (For disposition of such interest, see 24 CFR 85.21(i).)
(c) Eligible uses. Program income may be used only as prescribed in
paragraphs (c)(1) and (c)(2) of this section.
(1) Program income may be used for any activity which is eligible
under this part, except that program income may not be used to pay for
administrative costs, as described at Sec. 511.71. In particular, the
total of rental rehabilitation grant amounts and Rental Rehabilitation
Program income used for any project (except under Sec. 511.76(c)(2)) may
not exceed the amount per unit allowed under Sec. 511.11(e)(2) or 50
percent of the total eligible project costs (except as noted in
Sec. 511.11(e)(1)).
(2) Program income may also be used to provide rental assistance to
lower income tenants in properties rehabilitated through the RRP. This
includes the use of program income to pay for administrative costs
associated with the provision of rental assistance but not to exceed the
amount allowed for administrative fees in the Housing Voucher Program
authorized under section 8(o) of the United States Housing Act of 1937,
42 U.S.C. 1437f. In order to use program income for rental assistance,
the grantee or State recipient must--
(i) Use the funds to assist low-income tenants who initially occupy
properties rehabilitated with rental rehabilitation grant amounts or
rental rehabilitation program income;
(ii) Have a written policy which is available to the public stating
that program income will be so used and specifying who is eligible to
receive such assistance; and
(iii) Have an agreement with the PHA stating that the PHA will
utilize the program income to provide rental assistance in accordance
with the written policy.
(d) Timing the use of program income. Grantees and State recipients
shall not commit available rental rehabilitation grant amounts to
specific local projects if sufficient program income is on hand and
available to fund the project, or a substantial portion of the project.
In order to avoid possible over commitment of funds, grantees and State
recipients shall not anticipate the receipt of program income and
[[Page 27]]
enter into binding commitments with owners cumulatively exceeding the
total amount of program income on hand plus uncommitted rental
rehabilitation grant amounts.
(e) Accounting for and reporting program income. Program income
shall be accounted for and reported in the grantee's Annual Performance
Report under Sec. 511.81(b) and in the Cash and Management Information
System under Sec. 511.75, in the manner prescribed by HUD.
(f) Authority of State grantees. States administering rental
rehabilitation grants have discretion to choose whether program income
is to be earned at all or is to be paid to or retained by the State or
paid to or retained by the State recipient. The State's determination
should be contained in a written agreement between the State and its
State recipients. However, once earned, program income must be used and
accounted for in accordance with this section by the State or by the
State recipient, as applicable.
(g) Authority of urban counties. Because the configuration of an
urban county may change from time to time, particularly at the time of
requalification of an urban county in the Community Development Block
Grant program, special provisions must be made for urban county program
income. The urban county may determine whether program income generated
by a project located in a unit of general local government which, for
whatever reason, no longer participates in the urban county shall be
retained by the urban county for its RRP or by the unit of general local
government. However, urban county program income must otherwise be used
and accounted for by the urban county and the unit of general local
government in accordance with this section.
(h) Program closeout and disposition of program income. Program
income must be accounted for by the grantee when a Rental Rehabilitation
Program is completely closed out for all years. Program ``closeout''
will occur when the following conditions have been met: All grant funds
from all program years (excluding program income) have been expended;
the grantee and, if applicable, its State recipients do not expect (or
have elected not) to receive any additional rental rehabilitation grant
amounts, and the annual performance report covering the last program
year has been submitted to HUD. Program income shall be treated in the
following manner before and after program closeout:
(1) Before program closeout, program income shall be used for
activities eligible under Sec. 511.76(c); and
(2) Program income on hand at the time of program closeout or earned
after program closeout may be contributed to HOME or HOPE program
grantees as a cash matching contribution in accordance with applicable
HOME or HOPE program rules, or may be used for activities that would be
eligible under other affordable housing activities, as determined by the
recipient.
[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61
FR 7062, Feb. 23, 1996]
Sec. 511.77 Grant closeout.
(a) Each individual fiscal year rental rehabilitation grant will be
closed out when all grant amounts for the grant to be closed out have
been drawn down and expended for completed projects and/or
administrative costs, or grant amounts not drawn down and expended have
been deobligated by HUD.
(b) Project Completion Reports for all projects utilizing grant
amounts from the fiscal year grant(s) to be closed out have been
submitted and entered into the C/MI System.
(c) The required reviews and audits to determine whether grantees
have satisfied the terms of their grant agreement have been made.
Closeout is contingent upon the receipt of the grantee's most recent
audit report and audit reports of State recipients, where applicable.
For closeout of the grant to proceed, the most recent audit report(s)
must be free of any outstanding findings related to the RRP grant to be
closed. The audit(s) of the grantee and State recipients, where
applicable, should cover all grant amounts from all fiscal years which
are to be closed out except as noted in paragraph (c)(2) of this
section.
(1) The Single Audit Act prohibits requiring a grantee or State
recipient to obtain an audit at its expense covering
[[Page 28]]
only the Rental Rehabilitation Program. (HUD still has the authority to
conduct an audit or to contract with an independent public accountant to
conduct an audit of the grant. However, HUD must pay for the audit.)
(2) When the previous audit(s) fail to cover all grant amounts under
the Grant Agreement, the program may still be closed out, provided the
grantee agrees in writing to remit to HUD any costs questioned by a
subsequent audit that are disallowed by HUD. This procedure is expected
to be used in those cases when both the grantee and HUD want to proceed
with the closeout before the next periodic single audit is conducted
covering the remaining grant amounts not already audited.
(d) With respect to monitoring the grantee, either:
(1) The HUD Field Office has conducted an on-site monitoring of the
grantee and has determined that the grantee's performance, with respect
to any grant to be closed out, is satisfactory and is in compliance with
Rental Rehabilitation program statutory and regulatory requirements,
including Sec. 511.10(a) and Sec. 511.10(b); or
(2) A grant may be closed before on-site monitoring has been
conducted, provided:
(i) The Cash and Management Information reports indicate the
grantee's performance is satisfactory and is in compliance with Rental
Rehabilitation program statutory and regulatory requirements;
(ii) There are no outstanding monitoring findings; and
(iii) The grantee agrees in writing to pay back the amount of any
costs that are later found by HUD to be ineligible based on a subsequent
on-site monitoring review or audit.
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 58 FR 52567, Oct. 8, 1993; 61
FR 7062, Feb. 23, 1996]
Subpart I--Grantee Performance: Review, Reporting and Corrective or
Remedial Actions
Sec. 511.80 Performance review.
(a) General. HUD will review the performance of grantees in carrying
out their responsibilities under this part whenever determined necessary
by HUD, but at least annually. In conducting performance reviews, HUD
will rely primarily on information obtained from the grantee's and, as
appropriate, the State recipient's records and reports, findings from
on-site monitoring, audit reports, and information generated from the C/
MI System. Where applicable, HUD may also consider relevant information
pertaining to a grantee's or State recipient's performance gained from
other sources, including citizen comments, complaint determinations and
litigation. Reviews to determine compliance with specific requirements
of this part will be conducted as necessary, with or without prior
notice to the grantee or State recipient. Comprehensive performance
reviews under the standards in Sec. 511.80(b) will be conducted after
prior notice to the grantee.
(b) Standards for comprehensive performance review. Grantee
performance shall be comprehensively reviewed periodically, as
prescribed by HUD, to determine:
(1) For grantees that are units of general local government or
States administering their own rental rehabilitation grant programs,
whether the grantee:
(i) Has carried out its activities in a timely manner, including the
commitment of rental rehabilitation grant amounts to specific local
projects in accordance with the schedule contained in its Program
Description, as provided in Sec. 511.20(b)(8), and the completion of
projects in accordance with Sec. 511.11(a);
(ii) Has carried out its activities in accordance with the
requirements of this part; and
(iii) Has a continuing capacity to carry out its activities in
accordance
[[Page 29]]
with this part and in a timely and cost-effective manner; or
(2) For grantees that are States distributing rental rehabilitation
grant amounts to State recipients, whether the State:
(i) Has distributed these grant amounts in a timely manner and in
accordance with the requirements of this part; and
(ii) Has made such reviews and audits of its recipients as may be
appropriate to determine whether they have satisfied the requirements of
paragraph (b)(1)(i) through (b)(1)(iii) of this section.
[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]
Sec. 511.81 Grantee reports to HUD.
(a) Management reports. Grantees shall submit management reports on
their Rental Rehabilitation Program in such format and at such time as
HUD may prescribe.
(b) [Reserved]
(Approved by the Office of Management and Budget under control number
2506-0080)
[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]
Sec. 511.82 Corrective and remedial actions.
(a) General. HUD will use the procedures in this section in
conducting the performance review as provided in Sec. 511.80(a) and in
taking corrective and remedial actions.
(b) Performance review. (1) If HUD determines preliminarily that the
grantee has not met the performance review standards in Sec. 511.80, the
grantee will be given notice of this determination and an opportunity to
demonstrate, within the time prescribed by HUD and on the basis of
substantial facts and data, that it has done so.
(2) If the grantee fails to demonstrate to HUD's satisfaction that
it has met the performance review standards in Sec. 511.80, HUD will
take appropriate corrective or remedial action in accordance with this
section.
(c) Corrective and remedial actions. In formulating appropriate
corrective or remedial actions for performance deficiencies, HUD will
take one or more of the actions specified in paragraphs (c)(1), (c)(2),
and (c)(3) of this section. The action chosen will be designed to
prevent a continuation of the deficiency; mitigate, to the extent
possible, its adverse effects or consequences; and prevent its
recurrence. In addition to these actions, HUD will take the action
specified in paragraph (c)(4) of this section, when paragraph (c)(4) of
this section is applicable.
(1) HUD may request the grantee to submit and comply with proposals
for action to correct, mitigate and prevent performance deficiencies,
including:
(i) Preparing and following a schedule of actions for carrying out
the affected rental rehabilitation activities, consisting of schedules,
timetables and milestones necessary to implement the affected
activities;
(ii) Establishing and following a management plan that assigns
responsibilities for carrying out the remedial actions;
(iii) Cancelling or revising activities likely to be affected by a
performance deficiency, before expending grant amounts for the
activities;
(iv) Reprogramming rental rehabilitation grant amounts that have not
yet been expended from affected activities to other eligible activities;
and
(v) Suspending disbursement of grant amounts for affected activities
for a period of not more than 60 days.
(2) [Reserved]
(3) When HUD determines that a grantee has failed to meet one or
more of the requirements of this part, HUD may reduce or withdraw rental
rehabilitation grant amounts, or take other action as appropriate,
except that rental rehabilitation grant amounts already expended on
eligible activities will not be recaptured from existing grant
allocations or obligations or deducted from future grants made available
to the grantee. For purposes of paragraph (c)(3) of this section--
(i) Grant amounts already expended on eligible activities includes
all grant amounts that have been disbursed under this part for eligible
activities, and
(ii) Other action as appropriate means any remedial action legally
available, including, without limitation, affirmative litigation, such
as suits for declaratory judgment, specific performance,
[[Page 30]]
temporary or permanent injunctions, and any other available remedies
other than those for recovery of money.
(4) Where HUD makes a final determination that it has a judicially
enforceable claim for money against the grantee in a situation where
rental rehabilitation grant amounts have been disbursed to the grantee
or State recipient for ineligible costs under this part, HUD will follow
the procedures described in the Federal Claims Collection Standards (4
CFR parts 101-105) in order to:
(i) Demand in writing that the grantee or State recipient reimburse
HUD in the amount of the ineligible costs, using funds from non-
federally derived sources; and
(ii) Initiate affirmative litigation to recover the amount of the
ineligible costs, if necessary for collection. HUD's final determination
to seek recovery of grant amounts expended on ineligible costs under
paragraph (c)(4) of this section shall constitute a claim within the
meaning of 31 U.S.C. 3711, et seq., and interest shall be charged on
delinquent claims as required by the Federal Claims Collection
Standards.
(d) Amounts recovered under paragraph (c)(4) of this section are not
rental rehabilitation grant amounts and shall be deposited in the U.S.
Treasury's miscellaneous receipts account.
[55 FR 20050, May 14, 1990, as amended at 61 FR 7062, Feb. 23, 1996]
SUBCHAPTER B [RESERVED]
[[Page 31]]
SUBCHAPTER C--COMMUNITY FACILITIES
PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS--Table of Contents
Subpart A--General Provisions
Sec.
570.1 Purpose and primary objective.
570.3 Definitions.
570.4 Allocation of funds.
570.5 Waivers.
Subpart B [Reserved]
Subpart C--Eligible Activities
570.200 General policies.
570.201 Basic eligible activities.
570.202 Eligible rehabilitation and preservation activities.
570.203 Special economic development activities.
570.204 Special activities by Community-Based Development Organizations
(CBDOs).
570.205 Eligible planning, urban environmental design and policy-
planning-management-capacity building activities.
570.206 Program administrative costs.
570.207 Ineligible activities.
570.208 Criteria for national objectives.
570.209 Guidelines for evaluating and selecting economic development
projects.
Subpart D--Entitlement Grants
570.300 General.
570.301 Activity locations and float-funding.
570.302 Submission requirements.
570.303 Certifications.
570.304 Making of grants.
570.307 Urban counties.
570.308 Joint requests.
570.309 Restriction on location of activities.
Subpart E--Special Purpose Grants
570.400 General.
570.401 Community adjustment and economic diversification planning
assistance.
570.402 Technical assistance awards.
570.403 New Communities.
570.404 Historically Black colleges and universities program.
570.405 The insular areas.
570.406 Formula miscalculation grants.
570.410 Special Projects Program.
570.411 Joint Community Development Program.
570.415 Community Development Work Study Program.
570.416 Hispanic-serving institutions work study program.
Subpart F--Small Cities Program
570.420 General.
570.421 New York Small Cities Program design.
570.422 Applications from joint applicants.
570.423 Application for the HUD-administered New York Small Cities
Grants.
570.424 Grants for imminent threats to public health and safety.
570.425 HUD review and actions on applications for New York State
applicants.
570.426 Program income.
570.427 Program amendments.
570.428 Reallocated funds.
570.429 Hawaii general and grant requirements.
570.430 Hawaii program operation requirements.
570.431 Citizen participation.
570.432 Repayment of section 108 loans.
Subpart G--Urban Development Action Grants
570.450 Purpose.
570.456 Ineligible activities and limitations on eligible activities.
570.457 Displacement, relocation, acquisition, and replacement of
housing.
570.461 Post-preliminary approval requirements; lead-based paint.
570.463 Project amendments and revisions.
570.464 Project closeout.
570.465 Applicability of rules and regulations.
570.466 Additional application submission requirements for Pockets of
Poverty--employment opportunities.
Subpart H [Reserved]
Subpart I--State Community Development Block Grant Program
570.480 General.
570.481 Definitions.
570.482 Eligible activities.
570.483 Criteria for national objectives.
570.484 Overall benefit to low and moderate income persons.
570.485 Making of grants.
570.486 Local government requirements.
570.487 Other applicable laws and related program requirements.
570.488 Displacement, relocation, acquisition, and replacement of
housing.
570.489 Program administrative requirements.
570.490 Recordkeeping requirements.
570.491 Performance and evaluation report.
570.492 State's reviews and audits.
570.493 HUD's reviews and audits.
[[Page 32]]
570.494 Timely distribution of funds by states.
570.495 Reviews and audits response.
570.496 Remedies for noncompliance; opportunity for hearing.
570.497 Condition of State election to administer State CDBG Program.
Subpart J--Grant Administration
570.500 Definitions.
570.501 Responsibility for grant administration.
570.502 Applicability of uniform administrative requirements.
570.503 Agreements with subrecipients.
570.504 Program income.
570.505 Use of real property.
570.506 Records to be maintained.
570.507 Reports.
570.508 Public access to program records.
570.509 Grant closeout procedures.
570.510 Transferring projects from urban counties to metropolitan
cities.
570.511 Use of escrow accounts for rehabilitation of privately owned
residential property.
570.512 [Reserved]
570.513 Lump sum drawdown for financing of property rehabilitation
activities.
Subpart K--Other Program Requirements
570.600 General.
570.601 Public Law 88-352 and Public Law 90-284; affirmatively
furthering fair housing; Executive Order 11063.
570.602 Section 109 of the Act.
570.603 Labor standards.
570.604 Environmental standards.
570.605 National Flood Insurance Program.
570.606 Displacement, relocation, acquisition, and replacement of
housing.
570.607 Employment and contracting opportunities.
570.608 Lead-based paint.
570.609 Use of debarred, suspended or ineligible contractors or
subrecipients.
570.610 Uniform administrative requirements and cost principles.
570.611 Conflict of interest.
570.612 Executive Order 12372.
570.613 Eligibility restrictions for certain resident aliens.
570.614 Architectural Barriers Act and the Americans with Disabilities
Act.
Subpart L [Reserved]
Subpart M--Loan Guarantees
570.700 Purpose.
570.701 Definitions.
570.702 Eligible applicants.
570.703 Eligible activities.
570.704 Application requirements.
570.705 Loan requirements.
570.706 Federal guarantee; subrogation.
570.707 Applicability of rules and regulations.
570.708 Sanctions.
570.709 Allocation of loan guarantee assistance.
570.710 State responsibilities.
Subpart N--Urban Renewal Provisions
570.800 Urban renewal regulations.
Subpart O--Performance Reviews
570.900 General.
570.901 Review for compliance with the primary and national objectives
and other program requirements.
570.902 Review to determine if CDBG funded activities are being carried
out in a timely manner.
570.903 Review to determine if the recipient is meeting its
consolidated plan responsibilities.
570.904 Equal opportunity and fair housing review criteria.
570.905 Review of continuing capacity to carry out CDBG funded
activities in a timely manner.
570.906 Review of urban counties.
570.907-570.909 [Reserved]
570.910 Corrective and remedial actions.
570.911 Reduction, withdrawal, or adjustment of a grant or other
appropriate action.
570.912 Nondiscrimination compliance.
570.913 Other remedies for noncompliance.
Appendix A to Part 570--Guidelines and Objectives for Evaluating Project
Costs and Financial Requirements
Authority: 42 U.S.C. 3535(d) and 5301-5320.
Source: 40 FR 24693, June 9, 1975, unless otherwise noted.
Subpart A--General Provisions
Source: 53 FR 34437, Sept. 6, 1988, unless otherwise noted.
Sec. 570.1 Purpose and primary objective.
(a) This part describes policies and procedures applicable to the
following programs authorized under title I of the Housing and Community
Development Act of 1974, as amended:
(1) Entitlement grants program (subpart D);
(2) Small Cities program: HUD administered CDBG nonentitlement funds
(subpart F);
(3) State program: State-administered CDBG nonentitlement funds
(subpart I);
[[Page 33]]
(4) Special Purpose Grants (subpart E);
(5) Urban Development Action Grant program (subpart G); and
(6) Loan Guarantees (subpart M).
(b) Subparts A, C, J, K, and O apply to all programs in paragraph
(a) except as modified or limited under the provisions of these subparts
or the applicable program regulations. In the application of the
subparts to Special Purpose Grants or the Urban Development Action Grant
program, the reference to funds in the form of grants in the term ``CDBG
funds'', as defined in Sec. 570.3, shall mean the grant funds under
those programs. The subparts do not apply to the State program (subpart
I) except to the extent expressly referred to.
(c) The primary objective of the programs authorized under title I
of the Housing and Community Development Act of 1974, as amended, is
described in section 101(c) of the Act (42 U.S.C. 5301(c)).
[53 FR 34437, Sept. 6, 1988, as amended at 56 FR 56126, Oct. 31, 1991;
61 FR 11475, Mar. 20, 1996]
Sec. 570.3 Definitions.
The terms HUD and Secretary are defined in 24 CFR part 5. All of the
following definitions in this section that rely on data from the United
States Bureau of the Census shall rely upon the data available from the
latest decennial census.
Act means title I of the Housing and Community Development Act of
1974 as amended (42 U.S.C. 5301 et seq.).
Age of housing means the number of year-round housing units, as
further defined in section 102(a)(11) of the Act.
Applicant means a State, unit of general local government, or an
Indian tribe which makes application pursuant to the provisions of
subpart E, F, G or M.
Buildings for the general conduct of government shall have the
meaning provided in section 102(a)(21) of the Act.
CDBG funds means Community Development Block Grant funds, including
funds received in the form of grants under subpart D, F, or Sec. 570.405
of this part, funds awarded under section 108(q) of the Housing and
Community Development Act of 1974, loans guaranteed under subpart M of
this part, urban renewal surplus grant funds, and program income as
defined in Sec. 570.500(a).
Chief executive officer of a State or unit of general local
government means the elected official or the legally designated
official, who has the primary responsibility for the conduct of that
entity's governmental affairs. Examples of the ``chief executive
officer'' of a unit of general local government are: the elected mayor
of a municipality; the elected county executive of a county; the
chairperson of a county commission or board in a county that has no
elected county executive; and the official designated pursuant to law by
the governing body of a unit of general local government.
City means the following:
(1) For purposes of Entitlement Community Development Block Grant
and Urban Development Action Grant eligibility:
(i) Any unit of general local government that is classified as a
municipality by the United States Bureau of the Census, or
(ii) Any other unit of general local government that is a town or
township and that, in the determination of the Secretary:
(A) Possesses powers and performs functions comparable to those
associated with municipalities;
(B) Is closely settled (except that the Secretary may reduce or
waive this requirement on a case by case basis for the purposes of the
Action Grant program); and
(C) Contains within its boundaries no incorporated places as defined
by the United States Bureau of the Census that have not entered into
cooperation agreements with the town or township for a period covering
at least 3 years to undertake or assist in the undertaking of essential
community development and housing assistance activities. The
determination of eligibility of a town or township to qualify as a city
will be based on information available from the United States Bureau of
the Census and information provided by the town or township and its
included units of general local government.
(2) For purposes of Urban Development Action Grant eligibility only,
Guam, the Virgin Islands, American
[[Page 34]]
Samoa, the Commonwealth of the Northern Mariana Islands, the counties of
Kauai, Maui, and Hawaii in the State of Hawaii, and Indian tribes that
are eligible recipients under the State and Local Government Fiscal
Assistance Act of 1972 and located on reservations in Oklahoma as
determined by the Secretary of the Interior or in Alaskan Native
Villages.
Community Development Financial Institution has the same meaning as
used in the Community Development Banking and Financial Institutions Act
of 1994 (12 U.S.C. 4701 note).
Consolidated plan. The plan prepared in accordance with 24 CFR part
91, which describes needs, resources, priorities and proposed activities
to be undertaken with respect to HUD programs, including the CDBG
program. An approved consolidated plan means a consolidated plan that
has been approved by HUD in accordance with 24 CFR part 91.
Discretionary grant means a grant made from the various Special
Purpose Grants in accordance with subpart E of this part.
Entitlement amount means the amount of funds which a metropolitan
city is entitled to receive under the Entitlement grant program, as
determined by formula set forth in section 106 of the Act.
Extent of growth lag shall have the meaning provided in section
102(a)(12) of the Act.
Extent of housing overcrowding shall have the meaning provided in
section 102(a)(10) of the Act.
Extent of poverty means the number of persons whose incomes are
below the poverty level based on data compiled and published by the
United States Bureau of the Census available from the latest census
referable to the same point or period in time and the latest reports
from the Office of Management and Budget. For purposes of this part, the
Secretary has determined that it is neither feasible nor appropriate to
make adjustments at this time in the computations of ``extent of
poverty'' for regional or area variations in income and cost of living.
Family means all persons living in the same household who are
related by birth, marriage or adoption.
Household means all the persons who occupy a housing unit. The
occupants may be a single family, one person living alone, two or more
families living together, or any other group of related or unrelated
persons who share living arrangements.
Income. For the purpose of determining whether a family or household
is low- and moderate-income under subpart C of this part, grantees may
select any of the three definitions listed below for each activity,
except that integrally related activities of the same type and
qualifying under the same paragraph of Sec. 570.208(a) shall use the
same definition of income. The option to choose a definition does not
apply to activities that qualify under Sec. 570.208(a)(1) (Area benefit
activities), except when the recipient carries out a survey under
Sec. 570.208(a)(1)(vi). Activities qualifying under Sec. 570.208(a)(1)
generally must use the area income data supplied to recipients by HUD.
The three definitions are as follows:
(1)(i) ``Annual income'' as defined under the Section 8 Housing
Assistance Payments program at 24 CFR 813.106 (except that if the CDBG
assistance being provided is homeowner rehabilitation under
Sec. 570.202, the value of the homeowner's primary residence may be
excluded from any calculation of Net Family Assets); or
(ii) Annual income as reported under the Census long-form for the
most recent available decennial Census. This definition includes:
(A) Wages, salaries, tips, commissions, etc.;
(B) Self-employment income from own nonfarm business, including
proprietorships and partnerships;
(C) Farm self-employment income;
(D) Interest, dividends, net rental income, or income from estates
or trusts;
(E) Social Security or railroad retirement;
(F) Supplemental Security Income, Aid to Families with Dependent
Children, or other public assistance or public welfare programs;
(G) Retirement, survivor, or disability pensions; and
(H) Any other sources of income received regularly, including
Veterans' (VA) payments, unemployment compensation, and alimony; or
[[Page 35]]
(iii) Adjusted gross income as defined for purposes of reporting
under Internal Revenue Service (IRS) Form 1040 for individual Federal
annual income tax purposes.
(2) Estimate the annual income of a family or household by
projecting the prevailing rate of income of each person at the time
assistance is provided for the individual, family, or household (as
applicable). Estimated annual income shall include income from all
family or household members, as applicable. Income or asset enhancement
derived from the CDBG-assisted activity shall not be considered in
calculating estimated annual income.
Indian tribe shall have the meaning provided in section 102(a)(17)
of the Act.
Low- and moderate-income household means a household having an
income equal to or less than the Section 8 low-income limit established
by HUD.
Low- and moderate-income person means a member of a family having an
income equal to or less than the Section 8 low-income limit established
by HUD. Unrelated individuals will be considered as one-person families
for this purpose.
Low-income household means a household having an income equal to or
less than the Section 8 very low-income limit established by HUD.
Low-income person means a member of a family that has an income
equal to or less than the Section 8 very low-income limit established by
HUD. Unrelated individuals shall be considered as one-person families
for this purpose.
Metropolitan area shall have the meaning provided in section
102(a)(3) of the Act.
Metropolitan city shall have the meaning provided in section
102(a)(4) of the Act.
Microenterprise shall have the meaning provided in section
102(a)(22) of the Act.
Moderate-income household means a household having an income equal
to or less than the Section 8 low-income limit and greater than the
Section 8 very low-income limit, established by HUD.
Moderate-income person means a member of a family that has an income
equal to or less than the Section 8 low-income limit and greater than
the Section 8 very low-income limit, established by HUD. Unrelated
individuals shall be considered as one-person families for this purpose.
Nonentitlement amount means the amount of funds which is allocated
for use in a State's nonentitlement areas as determined by formula set
forth in section 106 of the Act.
Nonentitlement area shall have the meaning provided in section
102(a)(7) of the Act.
Population means the total resident population based on data
compiled and published by the United States Bureau of the Census
available from the latest census or which has been upgraded by the
Bureau to reflect the changes resulting from the Boundary and Annexation
Survey, new incorporations and consolidations of governments pursuant to
Sec. 570.4, and which reflects, where applicable, changes resulting from
the Bureau's latest population determination through its estimating
technique using natural changes (birth and death) and net migration, and
is referable to the same point or period in time.
Small business means a business that meets the criteria set forth in
section 3(a) of the Small Business Act (15 U.S.C. 631, 636, 637).
State shall have the meaning provided in section 102(a)(2) of the
Act.
Unit of general local government shall have the meaning provided in
section 102(a)(1) of the Act.
Urban county shall have the meaning provided in section 102(a)(6) of
the Act. For the purposes of this definition, HUD will determine whether
the county's combined population contains the required percentage of
low- and moderate-income persons by identifying the number of persons
that resided in applicable areas and units of general local government
based on data from the most recent decennial census, and using income
limits that would have applied for the year in which that census was
taken.
Urban Development Action Grant (UDAG) means a grant made by the
[[Page 36]]
Secretary pursuant to section 119 of the Act and subpart G of this part.
[53 FR 34437, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
56 FR 56126, Oct. 31, 1991; 60 FR 1915, 1943, Jan. 5, 1995; 60 FR 56909,
Nov. 9, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 11475, Mar. 20, 1996; 61
FR 18674, Apr. 29, 1996]
Sec. 570.4 Allocation of funds.
(a) The determination of eligibility of units of general local
government to receive entitlement grants, the entitlement amounts, the
allocation of appropriated funds to States for use in nonentitlement
areas, the reallocation of funds, and the allocation of appropriated
funds for discretionary grants under the Secretary's Fund shall be
governed by the policies and procedures described in sections 106 and
107 of the Act.
(b) The definitions in Sec. 570.3 shall govern in applying the
policies and procedures described in sections 106 and 107 of the Act.
(c) In determining eligibility for entitlement and in allocating
funds under section 106 of the Act for any Federal fiscal year, HUD will
recognize corporate status and geographical boundaries and the status of
metropolitan areas and central cities effective as of July 1 preceding
such Federal Fiscal Year, subject to the following limitations:
(1) With respect to corporate status as certified by the applicable
State and available for processing by the Census Bureau as of such date;
(2) With respect to boundary changes or annexations, as are used by
the Census Bureau in preparing population estimates for all general
purpose governmental units and are available for processing by the
Census Bureau as of such date, except that any such boundary changes or
annexations which result in the population of a unit of general local
government reaching or exceeding 50,000 shall be recognized for this
purpose whether or not such changes are used by the Census Bureau in
preparing such population estimates; and
(3) With respect to the status of Metropolitan Statistical Areas and
central cities, as officially designated by the Office of Management and
Budget as of such date.
(d) In determining whether a county qualifies as an urban county,
and in computing entitlement amounts for urban counties, the demographic
values of population, poverty, housing overcrowding, and age of housing
of any Indian tribes located within the county shall be excluded. In
allocating amounts to States for use in nonentitlement areas, the
demographic values of population, poverty, housing overcrowding and age
of housing of all Indian tribes located in all nonentitled areas shall
be excluded. It is recognized that all such data on Indian tribes are
not generally available from the United States Bureau of the Census and
that missing portions of data will have to be estimated. In
accomplishing any such estimates the Secretary may use such other
related information available from reputable sources as may seem
appropriate, regardless of the data's point or period of time and shall
use the best judgement possible in adjusting such data to reflect the
same point or period of time as the overall data from which the Indian
tribes are being deducted, so that such deduction shall not create an
imbalance with those overall data.
(e) Amounts remaining after closeout of a grant which are required
to be returned to HUD under the provisions of Sec. 570.509, Grant
closeout procedures, shall be considered as funds available for
reallocation unless the appropriation under which the funds were
provided to the Department has lapsed.
Sec. 570.5 Waivers.
HUD's authority for the waiver of regulations and for the suspension
of requirements to address damage in a Presidentially declared disaster
area is described in 24 CFR part 5 and in section 122 of the Act,
respectively.
[61 FR 11476, Mar. 20, 1996]
Subpart B [Reserved]
Subpart C--Eligible Activities
Source: 53 FR 34439, Sept. 6, 1988, unless otherwise noted.
[[Page 37]]
Sec. 570.200 General policies.
(a) Determination of eligibility. An activity may be assisted in
whole or in part with CDBG funds only if all of the following
requirements are met:
(1) Compliance with section 105 of the Act. Each activity must meet
the eligibility requirements of section 105 of the Act as further
defined in this subpart.
(2) Compliance with national objectives. Grant recipients under the
Entitlement and HUD-administered Small Cities programs must certify that
their projected use of funds has been developed so as to give maximum
feasible priority to activities which will carry out one of the national
objectives of benefit to low and moderate income families or aid in the
prevention or elimination of slums or blight; the projected use of funds
may also include activities which the recipient certifies are designed
to meet other community development needs having a particular urgency
because existing conditions pose a serious and immediate threat to the
health or welfare of the community where other financial resources are
not available to meet such needs. Consistent with the foregoing, each
recipient under the Entitlement and HUD-administered Small Cities
programs must ensure, and maintain evidence, that each of its activities
assisted with CDBG funds meets one of the three national objectives as
contained in its certification. Criteria for determining whether an
activity addresses one or more of these objectives are contained at
Sec. 570.208.
(3) Compliance with the primary objective. The primary objective of
the Act is described in section 101(c) of the Act. Consistent with this
objective, Entitlement recipients and recipients of the HUD-administered
Small Cities program in Hawaii must ensure that over a period of time
specified in their certification not to exceed three years, not less
than 70 percent of the aggregate of CDBG fund expenditures shall be for
activities meeting the criteria under Sec. 570.208(a) or
Sec. 570.208(d)(5) or (6) for benefitting low- and moderate-income
persons; Insular area recipients must meet this requirement for each
separate grant. The requirements for the HUD-administered Small Cities
program in New York are in Sec. 570.420(e)(2). Additional requirements
for the HUD-administered Small Cities program in Hawaii are in
Sec. 570.430(e). In determining the percentage of funds expended for
such activities:
(i) Cost of administration and planning eligible under Sec. 570.205
and Sec. 570.206 will be assumed to benefit low and moderate income
persons in the same proportion as the remainder of the CDBG funds and,
accordingly shall be excluded from the calculation;
(ii) Funds deducted by HUD for repayment of urban renewal temporary
loans pursuant to Sec. 570.802(b) shall be excluded;
(iii) Funds expended for the repayment of loans guaranteed under the
provisions of subpart M shall also be excluded;
(iv) Funds expended for the acquisition, new construction or
rehabilitation of property for housing that qualifies under
Sec. 570.208(a)(3) shall be counted for this purpose but shall be
limited to an amount determined by multiplying the total cost (including
CDBG and non-CDBG costs) of the acquisition, construction or
rehabilitation by the percent of units in such housing to be occupied by
low and moderate income persons.
(v) Funds expended for any other activities qualifying under
Sec. 570.208(a) shall be counted for this purpose in their entirety.
(4) Compliance with environmental review procedures. The
environmental review procedures set forth at 24 CFR part 58 must be
completed for each activity (or project as defined in 24 CFR part 58),
as applicable.
(5) Cost principles. Costs incurred, whether charged on a direct or
an indirect basis, must be in conformance with OMB Circulars A-87,
``Cost Principles for State, Local and Indian Tribal Governments''; A-
122, ``Cost Principles for Non-profit Organizations''; or A-21, ``Cost
Principles for Educational Institutions,'' as applicable.\1\ All items
of cost listed in Attachment B of these Circulars that require prior
Federal
[[Page 38]]
agency approval are allowable without prior approval of HUD to the
extent they comply with the general policies and principles stated in
Attachment A of such circulars and are otherwise eligible under this
subpart C, except for the following:
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\1\ These circulars are available from the American Communities
Center by calling the following toll-free numbers: (800) 998-9999 or
(800) 483-2209 (TDD).
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(i) Depreciation methods for fixed assets shall not be changed
without HUD's specific approval or, if charged through a cost allocation
plan, the Federal cognizant agency.
(ii) Fines and penalties (including punitive damages) are
unallowable costs to the CDBG program.
(iii) Pre-award costs are limited to those authorized under
paragraph (h) of this section.
(b) Special policies governing facilities. The following special
policies apply to:
(1) Facilities containing both eligible and ineligible uses. A
public facility otherwise eligible for assistance under the CDBG program
may be provided with CDBG funds even if it is part of a multiple use
building containing ineligible uses, if:
(i) The facility which is otherwise eligible and proposed for
assistance will occupy a designated and discrete area within the larger
facility; and
(ii) The recipient can determine the costs attributable to the
facility proposed for assistance as separate and distinct from the
overall costs of the multiple-use building and/or facility.
Allowable costs are limited to those attributable to the eligible
portion of the building or facility.
(2) Fees for use of facilities. Reasonable fees may be charged for
the use of the facilities assisted with CDBG funds, but charges such as
excessive membership fees, which will have the effect of precluding low
and moderate income persons from using the facilities, are not
permitted.
(c) Special assessments under the CDBG program. The following
policies relate to special assessments under the CDBG program:
(1) Definition of special assessment. The term ``special
assessment'' means the recovery of the capital costs of a public
improvement, such as streets, water or sewer lines, curbs, and gutters,
through a fee or charge levied or filed as a lien against a parcel of
real estate as a direct result of benefit derived from the installation
of a public improvement, or a one-time charge made as a condition of
access to a public improvement. This term does not relate to taxes, or
the establishment of the value of real estate for the purpose of levying
real estate, property, or ad valorem taxes, and does not include
periodic charges based on the use of a public improvement, such as water
or sewer user charges, even if such charges include the recovery of all
or some portion of the capital costs of the public improvement.
(2) Special assessments to recover capital costs. Where CDBG funds
are used to pay all or part of the cost of a public improvement, special
assessments may be imposed as follows:
(i) Special assessments to recover the CDBG funds may be made only
against properties owned and occupied by persons not of low and moderate
income. Such assessments constitute program income.
(ii) Special assessments to recover the non-CDBG portion may be made
provided that CDBG funds are used to pay the special assessment in
behalf of all properties owned and occupied by low and moderate income
persons; except that CDBG funds need not be used to pay the special
assessments in behalf of properties owned and occupied by moderate
income persons if the grant recipient certifies that it does not have
sufficient CDBG funds to pay the assessments in behalf of all of the low
and moderate income owner-occupant persons. Funds collected through such
special assessments are not program income.
(3) Public improvements not initially assisted with CDBG funds. The
payment of special assessments with CDBG funds constitutes CDBG
assistance to the public improvement. Therefore, CDBG funds may be used
to pay special assessments provided:
(i) The installation of the public improvements was carried out in
compliance with requirements applicable to activities assisted under
this part including environmental, citizen participation and Davis-Bacon
requirements;
(ii) The installation of the public improvement meets a criterion
for national objectives in Sec. 570.208(a)(1), (b), or (c); and
[[Page 39]]
(iii) The requirements of Sec. 570.200(c)(2)(ii) are met.
(d) Consultant activities. Consulting services are eligible for
assistance under this part for professional assistance in program
planning, development of community development objectives, and other
general professional guidance relating to program execution. The use of
consultants is governed by the following:
(1) Employer-employee type of relationship. No person providing
consultant services in an employer-employee type of relationship shall
receive more than a reasonable rate of compensation for personal
services paid with CDBG funds. In no event, however, shall such
compensation exceed the equivalent of the daily rate paid for Level IV
of the Executive Schedule. Such services shall be evidenced by written
agreements between the parties which detail the responsibilities,
standards, and compensation.
(2) Independent contractor relationship. Consultant services
provided under an independent contractor relationship are governed by
the procurement requirements in 24 CFR 85.36, and are not subject to the
compensation limitation of Level IV of the Executive Schedule.
(e) Recipient determinations required as a condition of eligibility.
In several instances under this subpart, the eligibility of an activity
depends on a special local determination. Recipients shall maintain
documentation of all such determinations. A written determination is
required for any activity carried out under the authority of
Secs. 570.201(f), 570.201(i)(2), 570.201(p), 570.201(q), 570.202(b)(3),
570.206(f), 570.209, and 570.309.
(f) Means of carrying out eligible activities. (1) Activities
eligible under this subpart, other than those authorized under
Sec. 570.204(a), may be undertaken, subject to local law:
(i) By the recipient through:
(A) Its employees, or
(B) Procurement contracts governed by the requirements of 24 CFR
85.36; or
(ii) Through loans or grants under agreements with subrecipients, as
defined at Sec. 570.500(c); or
(iii) By one or more public agencies, including existing local
public agencies, that are designated by the chief executive officer of
the recipient.
(2) Activities made eligible under Sec. 570.204(a) may only be
undertaken by entities specified in that section.
(g) Limitation on planning and administrative costs. No more than 20
percent of the sum of any grant, plus program income, shall be expended
for planning and program administrative costs, as defined in
Secs. 570.205 and 507.206, respectively. Recipients of entitlement
grants under subpart D of this part shall conform with this requirement
by limiting the amount of CDBG funds obligated for planning plus
administration during each program year to an amount no greater than 20
percent of the sum of its entitlement grant made for that program year
(if any) plus the program income received by the recipient and its
subrecipients (if any) during that program year.
(h) Reimbursement for pre-award costs. The effective date of the
grant agreement is the program year start date or the date that the
consolidated plan is received by HUD, whichever is later. For a Section
108 loan guarantee, the effective date of the grant agreement is the
date of HUD execution of the grant agreement amendment for the
particular loan guarantee commitment.
(1) Prior to the effective date of the grant agreement, a recipient
may incur costs or may authorize a subrecipient to incur costs, and then
after the effective date of the grant agreement pay for those costs
using its CDBG funds, provided that:
(i) The activity for which the costs are being incurred is included,
prior to the costs being incurred, in a consolidated plan action plan,
an amended consolidated plan action plan, or an application under
subpart M of this part, except that a new entitlement grantee preparing
to receive its first allocation of CDBG funds may incur costs necessary
to develop its consolidated plan and undertake other administrative
actions necessary to receive its first grant, prior to the costs being
included in its consolidated plan;
(ii) Citizens are advised of the extent to which these pre-award
costs will affect future grants;
[[Page 40]]
(iii) The costs and activities funded are in compliance with the
requirements of this part and with the Environmental Review Procedures
stated in 24 CFR part 58;
(iv) The activity for which payment is being made complies with the
statutory and regulatory provisions in effect at the time the costs are
paid for with CDBG funds;
(v) CDBG payment will be made during a time no longer than the next
two program years following the effective date of the grant agreement or
amendment in which the activity is first included; and
(vi) The total amount of pre-award costs to be paid during any
program year pursuant to this provision is no more than the greater of
25 percent of the amount of the grant made for that year or $300,000.
(2) Upon the written request of the recipient, HUD may authorize
payment of pre-award costs for activities that do not meet the criteria
at paragraph (h)(1)(v) or (h)(1)(vi) of this section, if HUD determines,
in writing, that there is good cause for granting an exception upon
consideration of the following factors, as applicable:
(i) Whether granting the authority would result in a significant
contribution to the goals and purposes of the CDBG program;
(ii) Whether failure to grant the authority would result in undue
hardship to the recipient or beneficiaries of the activity;
(iii) Whether granting the authority would not result in a violation
of a statutory provision or any other regulatory provision;
(iv) Whether circumstances are clearly beyond the recipient's
control; or
(v) Any other relevant considerations.
(i) Urban Development Action Grant. Grant assistance may be provided
with Urban Development Action Grant funds, subject to the provisions of
subpart G, for:
(1) Activities eligible for assistance under this subpart; and
(2) Notwithstanding the provisions of Sec. 570.207, such other
activities as the Secretary may determine to be consistent with the
purposes of the Urban Development Action Grant program.
(j) Constitutional prohibition. In accordance with First Amendment
Church/State Principles, as a general rule, CDBG assistance may not be
used for religious activities or provided to primarily religious
entities for any activities, including secular activities. The following
restrictions and limitations therefore apply to the use of CDBG funds.
(1) CDBG funds may not be used for the acquisition of property or
the construction or rehabilitation (including historic preservation and
removal of architectural barriers) of structures to be used for
religious purposes or which will otherwise promote religious interests.
This limitation includes the acquisition of property for ownership by
primarily religious entities and the construction or rehabilitation
(including historic preservation and removal of architectural barriers)
of structures owned by such entities (except as permitted under
paragraph (j)(2) of this section with respect to rehabilitation and
under paragraph (j)(4) of this section with respect to repairs
undertaken in connection with public services) regardless of the use to
be made of the property or structure. Property owned by primarily
religious entities may be acquired with CDBG funds at no more than fair
market value for a non-religious use.
(2) CDBG funds may be used to rehabilitate buildings owned by
primarily religious entities to be used for a wholly secular purpose
under the following conditions:
(i) The building (or portion thereof) that is to be improved with
the CDBG assistance has been leased to an existing or newly established
wholly secular entity (which may be an entity established by the
religious entity);
(ii) The CDBG assistance is provided to the lessee (and not the
lessor) to make the improvements;
(iii) The leased premises will be used exclusively for secular
purposes available to persons regardless of religion;
(iv) The lease payments do not exceed the fair market rent of the
premises as they were before the improvements are made;
(v) The portion of the cost of any improvements that also serve a
non-
[[Page 41]]
leased part of the building will be allocated to and paid for by the
lessor;
(vi) The lessor enters into a binding agreement that unless the
lessee, or a qualified successor lessee, retains the use of the leased
premises for a wholly secular purpose for at least the useful life of
the improvements, the lessor will pay to the lessee an amount equal to
the residual value of the improvements;
(vii) The lessee must remit the amount received from the lessor
under paragraph (j)(2)(vi) of this section to the recipient or
subrecipient from which the CDBG funds were derived.
The lessee can also enter into a management contract authorizing the
lessor religious entity to use the building for its intended secular
purpose, e.g., homeless shelter, provision of public services. In such
case, the religious entity must agree in the management contract to
carry out the secular purpose in a manner free from religious influences
in accordance with the principles set forth in paragraph (j)(3) of this
section.
(3) As a general rule, CDBG funds may be used for eligible public
services to be provided through a primarily religious entity, where the
religious entity enters into an agreement with the recipient or
subrecipient from which the CDBG funds are derived that, in connection
with the provision of such services:
(i) It will not discriminate against any employee or applicant for
employment on the basis of religion and will not limit employment or
give preference in employment to persons on the basis of religion;
(ii) It will not discriminate against any person applying for such
public services on the basis of religion and will not limit such
services or give preference to persons on the basis of religion;
(iii) It will provide no religious instruction or counseling,
conduct no religious worship or services, engage in no religious
proselytizing, and exert no other religious influence in the provision
of such public services;
(4) Where the public services provided under paragraph (j)(3) of
this section are carried out on property owned by the primarily
religious entity, CDBG funds may also be used for minor repairs to such
property which are directly related to carrying out the public services
where the cost constitutes in dollar terms only an incidental portion of
the CDBG expenditure for the public services.
[53 FR 34439, Sept. 6, 1988, as amended at 54 FR 47031, Nov. 8, 1989; 57
FR 27119, June 17, 1992; 60 FR 1943, Jan. 5, 1995; 60 FR 17445, Apr. 6,
1995; 60 FR 56910, Nov. 9, 1995; 61 FR 11476, Mar. 20, 1996; 61 FR
18674, Apr. 29, 1996; 65 FR 70215, Nov. 21, 2000]
Sec. 570.201 Basic eligible activities.
CDBG funds may be used for the following activities:
(a) Acquisition. Acquisition in whole or in part by the recipient,
or other public or private nonprofit entity, by purchase, long-term
lease, donation, or otherwise, of real property (including air rights,
water rights, rights-of-way, easements, and other interests therein) for
any public purpose, subject to the limitations of Sec. 570.207.
(b) Disposition. Disposition, through sale, lease, donation, or
otherwise, of any real property acquired with CDBG funds or its
retention for public purposes, including reasonable costs of temporarily
managing such property or property acquired under urban renewal,
provided that the proceeds from any such disposition shall be program
income subject to the requirements set forth in Sec. 570.504.
(c) Public facilities and improvements. Acquisition, construction,
reconstruction, rehabilitation or installation of public facilities and
improvements, except as provided in Sec. 570.207(a), carried out by the
recipient or other public or private nonprofit entities. (However,
activities under this paragraph may be directed to the removal of
material and architectural barriers that restrict the mobility and
accessibility of elderly or severely disabled persons to public
facilities and improvements, including those provided for in
Sec. 570.207(a)(1).) In undertaking such activities, design features and
improvements which promote energy efficiency may be included. Such
activities may also include the execution of architectural design
features, and similar treatments
[[Page 42]]
intended to enhance the aesthetic quality of facilities and improvements
receiving CDBG assistance, such as decorative pavements, railings,
sculptures, pools of water and fountains, and other works of art.
Facilities designed for use in providing shelter for persons having
special needs are considered public facilities and not subject to the
prohibition of new housing construction described in Sec. 570.207(b)(3).
Such facilities include shelters for the homeless; convalescent homes;
hospitals, nursing homes; battered spouse shelters; halfway houses for
run-away children, drug offenders or parolees; group homes for mentally
retarded persons and temporary housing for disaster victims. In certain
cases, nonprofit entities and subrecipients including those specified in
Sec. 570.204 may acquire title to public facilities. When such
facilities are owned by nonprofit entities or subrecipients, they shall
be operated so as to be open for use by the general public during all
normal hours of operation. Public facilities and improvements eligible
for assistance under this paragraph are subject to the policies in
Sec. 570.200(b).
(d) Clearance activities. Clearance, demolition, and removal of
buildings and improvements, including movement of structures to other
sites. Demolition of HUD-assisted or HUD-owned housing units may be
undertaken only with the prior approval of HUD.
(e) Public services. Provision of public services (including labor,
supplies, and materials) including but not limited to those concerned
with employment, crime prevention, child care, health, drug abuse,
education, fair housing counseling, energy conservation, welfare (but
excluding the provision of income payments identified under
Sec. 570.207(b)(4)), homebuyer downpayment assistance, or recreational
needs. To be eligible for CDBG assistance, a public service must be
either a new service or a quantifiable increase in the level of an
existing service above that which has been provided by or on behalf of
the unit of general local government (through funds raised by the unit
or received by the unit from the State in which it is located) in the 12
calendar months before the submission of the action plan. (An exception
to this requirement may be made if HUD determines that any decrease in
the level of a service was the result of events not within the control
of the unit of general local government.) The amount of CDBG funds used
for public services shall not exceed paragraphs (e) (1) or (2) of this
section, as applicable:
(1) The amount of CDBG funds used for public services shall not
exceed 15 percent of each grant, except that for entitlement grants made
under subpart D of this part, the amount shall not exceed 15 percent of
the grant plus 15 percent of program income, as defined in
Sec. 570.500(a). For entitlement grants under subpart D of this part,
compliance is based on limiting the amount of CDBG funds obligated for
public service activities in each program year to an amount no greater
than 15 percent of the entitlement grant made for that program year plus
15 percent of the program income received during the grantee's
immediately preceding program year.
(2) A recipient which obligated more CDBG funds for public services
than 15 percent of its grant funded from Federal fiscal year 1982 or
1983 appropriations (excluding program income and any assistance
received under Public Law 98-8), may obligate more CDBG funds than
allowable under paragraph (e)(1) of this section, so long as the total
amount obligated in any program year does not exceed:
(i) For an entitlement grantee, 15% of the program income it
received during the preceding program year; plus
(ii) A portion of the grant received for the program year which is
the highest of the following amounts:
(A) The amount determined by applying the percentage of the grant it
obligated for public services in the 1982 program year against the grant
for its current program year;
(B) The amount determined by applying the percentage of the grant it
obligated for public services in the 1983 program year against the grant
for its current program year;
(C) The amount of funds it obligated for public services in the 1982
program year; or,
(D) The amount of funds it obligated for public services in the 1983
program year.
[[Page 43]]
(f) Interim assistance. (1) The following activities may be
undertaken on an interim basis in areas exhibiting objectively
determinable signs of physical deterioration where the recipient has
determined that immediate action is necessary to arrest the
deterioration and that permanent improvements will be carried out as
soon as practicable:
(i) The repairing of streets, sidewalks, parks, playgrounds,
publicly owned utilities, and public buildings; and
(ii) The execution of special garbage, trash, and debris removal,
including neighborhood cleanup campaigns, but not the regular curbside
collection of garbage or trash in an area.
(2) In order to alleviate emergency conditions threatening the
public health and safety in areas where the chief executive officer of
the recipient determines that such an emergency condition exists and
requires immediate resolution, CDBG funds may be used for:
(i) The activities specified in paragraph (f)(1) of this section,
except for the repair of parks and playgrounds;
(ii) The clearance of streets, including snow removal and similar
activities, and
(iii) The improvement of private properties.
(3) All activities authorized under paragraph (f)(2) of this section
are limited to the extent necessary to alleviate emergency conditions.
(g) Payment of non-Federal share. Payment of the non-Federal share
required in connection with a Federal grant-in-aid program undertaken as
part of CDBG activities, provided, that such payment shall be limited to
activities otherwise eligible and in compliance with applicable
requirements under this subpart.
(h) Urban renewal completion. Payment of the cost of completing an
urban renewal project funded under title I of the Housing Act of 1949 as
amended. Further information regarding the eligibility of such costs is
set forth in Sec. 570.801.
(i) Relocation. Relocation payments and other assistance for
permanently and temporarily relocated individuals families, businesses,
nonprofit organizations, and farm operations where the assistance is (1)
required under the provisions of Sec. 570.606 (b) or (c); or (2)
determined by the grantee to be appropriate under the provisions of
Sec. 570.606(d).
(j) Loss of rental income. Payments to housing owners for losses of
rental income incurred in holding, for temporary periods, housing units
to be used for the relocation of individuals and families displaced by
program activities assisted under this part.
(k) Housing services. Housing services, as provided in section
105(a)(21) of the Act (42 U.S.C. 5305(a)(21)).
(l) Privately owned utilities. CDBG funds may be used to acquire,
construct, reconstruct, rehabilitate, or install the distribution lines
and facilities of privately owned utilities, including the placing
underground of new or existing distribution facilities and lines.
(m) Construction of housing. CDBG funds may be used for the
construction of housing assisted under section 17 of the United States
Housing Act of 1937.
(n) Homeownership assistance. CDBG funds may be used to provide
direct homeownership assistance to low- or moderate-income households in
accordance with section 105(a) of the Act.
(o)(1) The provision of assistance either through the recipient
directly or through public and private organizations, agencies, and
other subrecipients (including nonprofit and for-profit subrecipients)
to facilitate economic development by:
(i) Providing credit, including, but not limited to, grants, loans,
loan guarantees, and other forms of financial support, for the
establishment, stabilization, and expansion of microenterprises;
(ii) Providing technical assistance, advice, and business support
services to owners of microenterprises and persons developing
microenterprises; and
(iii) Providing general support, including, but not limited to, peer
support programs, counseling, child care, transportation, and other
similar services, to owners of microenterprises and persons developing
microenterprises.
(2) Services provided this paragraph (o) shall not be subject to the
restrictions on public services contained in paragraph (e) of this
section.
[[Page 44]]
(3) For purposes of this paragraph (o), ``persons developing
microenterprises'' means such persons who have expressed interest and
who are, or after an initial screening process are expected to be,
actively working toward developing businesses, each of which is expected
to be a microenterprise at the time it is formed.
(4) Assistance under this paragraph (o) may also include training,
technical assistance, or other support services to increase the capacity
of the recipient or subrecipient to carry out the activities under this
paragraph (o).
(p) Technical assistance. Provision of technical assistance to
public or nonprofit entities to increase the capacity of such entities
to carry out eligible neighborhood revitalization or economic
development activities. (The recipient must determine, prior to the
provision of the assistance, that the activity for which it is
attempting to build capacity would be eligible for assistance under this
subpart C, and that the national objective claimed by the grantee for
this assistance can reasonably be expected to be met once the entity has
received the technical assistance and undertakes the activity.) Capacity
building for private or public entities (including grantees) for other
purposes may be eligible under Sec. 570.205.
(q) Assistance to institutions of higher education. Provision of
assistance by the recipient to institutions of higher education when the
grantee determines that such an institution has demonstrated a capacity
to carry out eligible activities under this subpart C.
[53 FR 34439, Sept. 6, 1988, as amended at 53 FR 31239, Aug. 17, 1988;
55 FR 29308, July 18, 1990; 57 FR 27119, June 17, 1992; 60 FR 1943, Jan.
5, 1995; 60 FR 56911, Nov. 9, 1995; 61 FR 18674, Apr. 29, 1996; 65 FR
70215, Nov. 21, 2000; 67 FR 47213, July 17, 2002]
Sec. 570.202 Eligible rehabilitation and preservation activities.
(a) Types of buildings and improvements eligible for rehabilitation
assistance. CDBG funds may be used to finance the rehabilitation of:
(1) Privately owned buildings and improvements for residential
purposes; improvements to a single-family residential property which is
also used as a place of business, which are required in order to operate
the business, need not be considered to be rehabilitation of a
commercial or industrial building, if the improvements also provide
general benefit to the residential occupants of the building;
(2) Low-income public housing and other publicly owned residential
buildings and improvements;
(3) Publicly or privately owned commercial or industrial buildings,
except that the rehabilitation of such buildings owned by a private for-
profit business is limited to improvements to the exterior of the
building and the correction of code violations (further improvements to
such buildings may be undertaken pursuant to Sec. 570.203(b));
(4) Nonprofit-owned nonresidential buildings and improvements not
eligible under Sec. 570.201(c); and
(5) Manufactured housing when such housing constitutes part of the
community's permanent housing stock.
(b) Types of assistance. CDBG funds may be used to finance the
following types of rehabilitation activities, and related costs, either
singly, or in combination, through the use of grants, loans, loan
guarantees, interest supplements, or other means for buildings and
improvements described in paragraph (a) of this section, except that
rehabilitation of commercial or industrial buildings is limited as
described in paragraph (a)(3) of this section.
(1) Assistance to private individuals and entities, including profit
making and nonprofit organizations, to acquire for the purpose of
rehabilitation, and to rehabilitate properties, for use or resale for
residential purposes;
(2) Labor, materials, and other costs of rehabilitation of
properties, including repair directed toward an accumulation of deferred
maintenance, replacement of principal fixtures and components of
existing structures, installation of security devices, including smoke
detectors and dead bolt locks, and renovation through alterations,
additions to, or enhancement of existing structures, which may be
undertaken singly, or in combination;
(3) Loans for refinancing existing indebtedness secured by a
property being rehabilitated with CDBG funds if such financing is
determined by the recipient to be necessary or appropriate to
[[Page 45]]
achieve the locality's community development objectives;
(4) Improvements to increase the efficient use of energy in
structures through such means as installation of storm windows and
doors, siding, wall and attic insulation, and conversion, modification,
or replacement of heating and cooling equipment, including the use of
solar energy equipment;
(5) Improvements to increase the efficient use of water through such
means as water savings faucets and shower heads and repair of water
leaks;
(6) Connection of residential structures to water distribution lines
or local sewer collection lines;
(7) For rehabilitation carried out with CDBG funds, costs of:
(i) Initial homeowner warranty premiums;
(ii) Hazard insurance premiums, except where assistance is provided
in the form of a grant; and
(iii) Flood insurance premiums for properties covered by the Flood
Disaster Protection Act of 1973, pursuant to Sec. 570.605.
(iv) Procedures concerning inspection and testing for and abatement
of lead-based paint, pursuant to Sec. 570.608.
(8) Costs of acquiring tools to be lent to owners, tenants, and
others who will use such tools to carry out rehabilitation;
(9) Rehabilitation services, such as rehabilitation counseling,
energy auditing, preparation of work specifications, loan processing,
inspections, and other services related to assisting owners, tenants,
contractors, and other entities, participating or seeking to participate
in rehabilitation activities authorized under this section, under
section 312 of the Housing Act of 1964, as amended, under section 810 of
the Act, or under section 17 of the United States Housing Act of 1937;
(10) Assistance for the rehabilitation of housing under section 17
of the United States Housing Act of 1937; and
(11) Improvements designed to remove material and architectural
barriers that restrict the mobility and accessibility of elderly or
severely disabled persons to buildings and improvements eligible for
assistance under paragraph (a) of this section.
(c) Code enforcement. Costs incurred for inspection for code
violations and enforcement of codes (e.g., salaries and related expenses
of code enforcement inspectors and legal proceedings, but not including
the cost of correcting the violations) in deteriorating or deteriorated
areas when such enforcement together with public or private
improvements, rehabilitation, or services to be provided may be expected
to arrest the decline of the area.
(d) Historic preservation. CDBG funds may be used for the
rehabilitation, preservation or restoration of historic properties,
whether publicly or privately owned. Historic properties are those sites
or structures that are either listed in or eligible to be listed in the
National Register of Historic Places, listed in a State or local
inventory of historic places, or designated as a State or local landmark
or historic district by appropriate law or ordinance. Historic
preservation, however, is not authorized for buildings for the general
conduct of government.
(e) Renovation of closed buildings. CDBG funds may be used to
renovate closed buildings, such as closed school buildings, for use as
an eligible public facility or to rehabilitate such buildings for
housing.
(f) Lead-based paint activities. Lead-based paint activities as set
forth in part 35 of this title.
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
60 FR 1944, Jan. 5, 1995; 60 FR 56911, Nov. 9, 1995; 64 FR 50225, Sept.
15, 1999]
Sec. 570.203 Special economic development activities.
A recipient may use CDBG funds for special economic development
activities in addition to other activities authorized in this subpart
which may be carried out as part of an economic development project.
Guidelines for selecting activities to assist under this paragraph are
provided at Sec. 570.209. The recipient must ensure that the appropriate
level of public benefit will be derived pursuant to those guidelines
before obligating funds under this authority. Special activities
authorized under this section do not include assistance for the
construction of new
[[Page 46]]
housing. Special economic development activities include:
(a) The acquisition, construction, reconstruction, rehabilitation or
installation of commercial or industrial buildings, structures, and
other real property equipment and improvements, including railroad spurs
or similar extensions. Such activities may be carried out by the
recipient or public or private nonprofit subrecipients.
(b) The provision of assistance to a private for-profit business,
including, but not limited to, grants, loans, loan guarantees, interest
supplements, technical assistance, and other forms of support, for any
activity where the assistance is appropriate to carry out an economic
development project, excluding those described as ineligible in
Sec. 570.207(a). In selecting businesses to assist under this authority,
the recipient shall minimize, to the extent practicable, displacement of
existing businesses and jobs in neighborhoods.
(c) Economic development services in connection with activities
eligible under this section, including, but not limited to, outreach
efforts to market available forms of assistance; screening of
applicants; reviewing and underwriting applications for assistance;
preparation of all necessary agreements; management of assisted
activities; and the screening, referral, and placement of applicants for
employment opportunities generated by CDBG-eligible economic development
activities, including the costs of providing necessary training for
persons filling those positions.
[53 FR 34439, Sept. 6, 1988, as amended at 60 FR 1944, Jan. 5, 1995]
Sec. 570.204 Special activities by Community-Based Development Organizations (CBDOs).
(a) Eligible activities. The recipient may provide CDBG funds as
grants or loans to any CBDO qualified under this section to carry out a
neighborhood revitalization, community economic development, or energy
conservation project. The funded project activities may include those
listed as eligible under this subpart, and, except as described in
paragraph (b) of this section, activities not otherwise listed as
eligible under this subpart. For purposes of qualifying as a project
under paragraphs (a)(1), (a)(2), and (a)(3) of this section, the funded
activity or activities may be considered either alone or in concert with
other project activities either being carried out or for which funding
has been committed. For purposes of this section:
(1) Neighborhood revitalization project includes activities of
sufficient size and scope to have an impact on the decline of a
geographic location within the jurisdiction of a unit of general local
government (but not the entire jurisdiction) designated in comprehensive
plans, ordinances, or other local documents as a neighborhood, village,
or similar geographical designation; or the entire jurisdiction of a
unit of general local government which is under 25,000 population;
(2) Community economic development project includes activities that
increase economic opportunity, principally for persons of low- and
moderate-income, or that stimulate or retain businesses or permanent
jobs, including projects that include one or more such activities that
are clearly needed to address a lack of affordable housing accessible to
existing or planned jobs and those activities specified at 24 CFR
91.1(a)(1)(iii);
(3) Energy conservation project includes activities that address
energy conservation, principally for the benefit of the residents of the
recipient's jurisdiction; and
(4) To carry out a project means that the CBDO undertakes the funded
activities directly or through contract with an entity other than the
grantee, or through the provision of financial assistance for activities
in which it retains a direct and controlling involvement and
responsibilities.
(b) Ineligible activities. Notwithstanding that CBDOs may carry out
activities that are not otherwise eligible under this subpart, this
section does not authorize:
(1) Carrying out an activity described as ineligible in
Sec. 570.207(a);
(2) Carrying out public services that do not meet the requirements
of Sec. 570.201(e), except that:
(i) Services carried out under this section that are specifically
designed to increase economic opportunities
[[Page 47]]
through job training and placement and other employment support
services, including, but not limited to, peer support programs,
counseling, child care, transportation, and other similar services; and
(ii) Services of any type carried out under this section pursuant to
a strategy approved by HUD under the provisions of 24 CFR 91.215(e)
shall not be subject to the limitations in Sec. 570.201(e)(1) or (2), as
applicable;
(3) Providing assistance to activities that would otherwise be
eligible under Sec. 570.203 that do not meet the requirements of
Sec. 570.209; or
(4) Carrying out an activity that would otherwise be eligible under
Sec. 570.205 or Sec. 570.206, but that would result in the recipient's
exceeding the spending limitation in Sec. 570.200(g).
(c) Eligible CBDOs. (1) A CBDO qualifying under this section is an
organization which has the following characteristics:
(i) Is an association or corporation organized under State or local
law to engage in community development activities (which may include
housing and economic development activities) primarily within an
identified geographic area of operation within the jurisdiction of the
recipient, or in the case of an urban county, the jurisdiction of the
county; and
(ii) Has as its primary purpose the improvement of the physical,
economic or social environment of its geographic area of operation by
addressing one or more critical problems of the area, with particular
attention to the needs of persons of low and moderate income; and
(iii) May be either non-profit or for-profit, provided any monetary
profits to its shareholders or members must be only incidental to its
operations; and
(iv) Maintains at least 51 percent of its governing body's
membership for low- and moderate-income residents of its geographic area
of operation, owners or senior officers of private establishments and
other institutions located in and serving its geographic area of
operation, or representatives of low- and moderate-income neighborhood
organizations located in its geographic area of operation; and
(v) Is not an agency or instrumentality of the recipient and does
not permit more than one-third of the membership of its governing body
to be appointed by, or to consist of, elected or other public officials
or employees or officials of an ineligible entity (even though such
persons may be otherwise qualified under paragraph (c)(1)(iv) of this
section); and
(vi) Except as otherwise authorized in paragraph (c)(1)(v) of this
section, requires the members of its governing body to be nominated and
approved by the general membership of the organization, or by its
permanent governing body; and
(vii) Is not subject to requirements under which its assets revert
to the recipient upon dissolution; and
(viii) Is free to contract for goods and services from vendors of
its own choosing.
(2) A CBDO that does not meet the criteria in paragraph (c)(1) of
this section may also qualify as an eligible entity under this section
if it meets one of the following requirements:
(i) Is an entity organized pursuant to section 301(d) of the Small
Business Investment Act of 1958 (15 U.S.C. 681(d)), including those
which are profit making; or
(ii) Is an SBA approved Section 501 State Development Company or
Section 502 Local Development Company, or an SBA Certified Section 503
Company under the Small Business Investment Act of 1958, as amended; or
(iii) Is a Community Housing Development Organization (CHDO) under
24 CFR 92.2, designated as a CHDO by the HOME Investment Partnerships
program participating jurisdiction, with a geographic area of operation
of no more than one neighborhood, and has received HOME funds under 24
CFR 92.300 or is expected to receive HOME funds as described in and
documented in accordance with 24 CFR 92.300(e).
(3) A CBDO that does not qualify under paragraph (c)(1) or (2) of
this section may also be determined to qualify as an eligible entity
under this section if the recipient demonstrates to the satisfaction of
HUD, through the provision of information regarding the organization's
charter and by-laws, that the organization is sufficiently similar
[[Page 48]]
in purpose, function, and scope to those entities qualifying under
paragraph (c)(1) or (2) of this section.
[60 FR 1944, Jan. 5, 1995]
Sec. 570.205 Eligible planning, urban environmental design and policy-planning-management-capacity building activities.
(a) Planning activities which consist of all costs of data
gathering, studies, analysis, and preparation of plans and the
identification of actions that will implement such plans, including, but
not limited to:
(1) Comprehensive plans;
(2) Community development plans;
(3) Functional plans, in areas such as:
(i) Housing, including the development of a consolidated plan;
(ii) Land use and urban environmental design;
(iii) Economic development;
(iv) Open space and recreation;
(v) Energy use and conservation;
(vi) Floodplain and wetlands management in accordance with the
requirements of Executive Orders 11988 and 11990;
(vii) Transportation;
(viii) Utilities; and
(ix) Historic preservation.
(4) Other plans and studies such as:
(i) Small area and neighborhood plans;
(ii) Capital improvements programs;
(iii) Individual project plans (but excluding engineering and design
costs related to a specific activity which are eligible as part of the
cost of such activity under Secs. 570.201-570.204);
(iv) The reasonable costs of general environmental, urban
environmental design and historic preservation studies. However, costs
necessary to comply with 24 CFR part 58, including project specific
environmental assessments and clearances for activities eligible for
assistance under this part, are eligible as part of the cost of such
activities under Secs. 570.201-570.204. Costs for such specific
assessments and clearances may also be incurred under this paragraph but
would then be considered planning costs for the purposes of
Sec. 570.200(g);
(v) Strategies and action programs to implement plans, including the
development of codes, ordinances and regulations;
(vi) Support of clearinghouse functions, such as those specified in
Executive Order 12372; and
(vii) Analysis of impediments to fair housing choice.
(6) Policy--planning--management--capacity building activities which
will enable the recipient to:
(1) Determine its needs;
(2) Set long-term goals and short-term objectives, including those
related to urban environmental design;
(3) Devise programs and activities to meet these goals and
objectives;
(4) Evaluate the progress of such programs and activities in
accomplishing these goals and objectives; and
(5) Carry out management, coordination and monitoring of activities
necessary for effective planning implementation, but excluding the costs
necessary to implement such plans.
[53 FR 34439, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991;
60 FR 1915, Jan. 5, 1995]
Sec. 570.206 Program administrative costs.
Payment of reasonable administrative costs and carrying charges
related to the planning and execution of community development
activities assisted in whole or in part with funds provided under this
part and, where applicable, housing activities (described in paragraph
(g) of this section) covered in the recipient's housing assistance plan.
This does not include staff and overhead costs directly related to
carrying out activities eligible under Sec. 570.201 through
Sec. 570.204, since those costs are eligible as part of such activities.
(a) General management, oversight and coordination. Reasonable costs
of overall program management, coordination, monitoring, and evaluation.
Such costs include, but are not necessarily limited to, necessary
expenditures for the following:
(1) Salaries, wages, and related costs of the recipient's staff, the
staff of local public agencies, or other staff engaged in program
administration. In charging costs to this category the recipient may
either include the entire salary, wages, and related costs allocable to
the program of each person
[[Page 49]]
whose primary responsibilities with regard to the program involve
program administration assignments, or the pro rata share of the salary,
wages, and related costs of each person whose job includes any program
administration assignments. The recipient may use only one of these
methods during the program year (or the grant period for grants under
subpart F). Program administration includes the following types of
assignments:
(i) Providing local officials and citizens with information about
the program;
(ii) Preparing program budgets and schedules, and amendments
thereto;
(iii) Developing systems for assuring compliance with program
requirements;
(iv) Developing interagency agreements and agreements with
subrecipients and contractors to carry out program activities;
(v) Monitoring program activities for progress and compliance with
program requirements;
(vi) Preparing reports and other documents related to the program
for submission to HUD;
(vii) Coordinating the resolution of audit and monitoring findings;
(viii) Evaluating program results against stated objectives; and
(ix) Managing or supervising persons whose primary responsibilities
with regard to the program include such assignments as those described
in paragraph (a)(1)(i) through (viii) of this section.
(2) Travel costs incurred for official business in carrying out the
program;
(3) Administrative services performed under third party contracts or
agreements, including such services as general legal services,
accounting services, and audit services; and
(4) Other costs for goods and services required for administration
of the program, including such goods and services as rental or purchase
of equipment, insurance, utilities, office supplies, and rental and
maintenance (but not purchase) of office space.
(b) Public information. The provisions of information and other
resources to residents and citizen organizations participating in the
planning, implementation, or assessment of activities being assisted
with CDBG funds.
(c) Fair housing activities. Provision of fair housing services
designed to further the fair housing objectives of the Fair Housing Act
(42 U.S.C. 3601-20) by making all persons, without regard to race,
color, religion, sex, national origin, familial status or handicap,
aware of the range of housing opportunities available to them; other
fair housing enforcement, education, and outreach activities; and other
activities designed to further the housing objective of avoiding undue
concentrations of assisted persons in areas containing a high proportion
of low and moderate income persons.
(d) [Reserved]
(e) Indirect costs. Indirect costs may be charged to the CDBG
program under a cost allocation plan prepared in accordance with OMB
Circular A-21, A-87, or A-122 as applicable.
(f) Submission of applications for Federal programs. Preparation of
documents required for submission to HUD to receive funds under the CDBG
and UDAG programs, except as limited under subpart F at
Sec. 570.433(a)(3). In addition, CDBG funds may be used to prepare
applications for other Federal programs where the recipient determines
that such activities are necessary or appropriate to achieve its
community development objectives.
(g) Administrative expenses to facilitate housing. CDBG funds may be
used for necessary administrative expenses in planning or obtaining
financing for housing as follows: for entitlement recipients, assistance
authorized by this paragraph is limited to units which are identified in
the recipient's HUD approved housing assistance plan; for HUD-
administered small cities recipients, assistance authorized by the
paragraph is limited to facilitating the purchase or occupancy of
existing units which are to be occupied by low and moderate income
households, or the construction of rental or owner units where at least
20 percent of the units in each project will be occupied at affordable
rents/costs by low and moderate income persons. Examples of eligible
actions are as follows:
[[Page 50]]
(1) The cost of conducting preliminary surveys and analysis of
market needs;
(2) Site and utility plans, narrative descriptions of the proposed
construction, preliminary cost estimates, urban design documentation,
and ``sketch drawings,'' but excluding architectural, engineering, and
other details ordinarily required for construction purposes, such as
structural, electrical, plumbing, and mechanical details;
(3) Reasonable costs associated with development of applications for
mortgage and insured loan commitments, including commitment fees, and of
applications and proposals under the Section 8 Housing Assistance
Payments Program pursuant to 24 CFR parts 880-883;
(4) Fees associated with processing of applications for mortgage or
insured loan commitments under programs including those administered by
HUD, Farmers Home Administration (FmHA), Federal National Mortgage
Association (FNMA), and the Government National Mortgage Association
(GNMA);
(5) The cost of issuance and administration of mortgage revenue
bonds used to finance the acquisition, rehabilitation or construction of
housing, but excluding costs associated with the payment or guarantee of
the principal or interest on such bonds; and
(6) Special outreach activities which result in greater landlord
participation in Section 8 Housing Assistance Payments Program-Existing
Housing or similar programs for low and moderate income persons.
(h) Section 17 of the United States Housing Act of 1937. Reasonable
costs equivalent to those described in paragraphs (a), (b), (e) and (f)
of this section for overall program management of the Rental
Rehabilitation and Housing Development programs authorized under section
17 of the United States Housing Act of 1937, whether or not such
activities are otherwise assisted with funds provided under this part.
(i) Whether or not such activities are otherwise assisted by funds
provided under this part, reasonable costs equivalent to those described
in paragraphs (a), (b), (e), and (f) of this section for overall program
management of:
(1) A Federally designated Empowerment Zone or Enterprise Community;
and
(2) The HOME program under title II of the Cranston-Gonzalez
National Affordable Housing Act (42 U.S.C. 12701 note).
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
54 FR 37411, Sept. 8, 1989; 60 FR 56912, Nov. 9, 1995]
Sec. 570.207 Ineligible activities.
The general rule is that any activity that is not authorized under
the provisions of Secs. 570.201-570.206 is ineligible to be assisted
with CDBG funds. This section identifies specific activities that are
ineligible and provides guidance in determining the eligibility of other
activities frequently associated with housing and community development.
(a) The following activities may not be assisted with CDBG funds:
(1) Buildings or portions thereof, used for the general conduct of
government as defined at Sec. 570.3(d) cannot be assisted with CDBG
funds. This does not include, however, the removal of architectural
barriers under Sec. 570.201(c) involving any such building. Also, where
acquisition of real property includes an existing improvement which is
to be used in the provision of a building for the general conduct of
government, the portion of the acquisition cost attributable to the land
is eligible, provided such acquisition meets a national objective
described in Sec. 570.208.
(2) General government expenses. Except as otherwise specifically
authorized in this subpart or under OMB Circular A-87, expenses required
to carry out the regular responsibilities of the unit of general local
government are not eligible for assistance under this part.
(3) Political activities. CDBG funds shall not be used to finance
the use of facilities or equipment for political purposes or to engage
in other partisan political activities, such as candidate forums, voter
transportation, or voter registration. However, a facility originally
assisted with CDBG funds may be used on an incidental basis to hold
political meetings, candidate forums, or voter registration campaigns,
provided that all parties and organizations have access to the facility
on an equal basis,
[[Page 51]]
and are assessed equal rent or use charges, if any.
(b) The following activites may not be assisted with CDBG funds
unless authorized under provisions of Sec. 570.203 or as otherwise
specifically noted herein or when carried out by a entity under the
provisions of Sec. 570.204.
(1) Purchase of equipment. The purchase of equipment with CDBG funds
is generally ineligible.
(i) Construction equipment. The purchase of construction equipment
is ineligible, but compensation for the use of such equipment through
leasing, depreciation, or use allowances pursuant to OMB Circulars A-21,
A-87 or A-122 as applicable for an otherwise eligible activity is an
eligible use of CDBG funds. However, the purchase of construction
equipment for use as part of a solid waste disposal facility is eligible
under Sec. 570.201(c).
(ii) Fire protection equipment. Fire protection equipment is
considered for this purpose to be an integral part of a public facility
and thus, purchase of such equipment would be eligible under
Sec. 570.201(c).
(iii) Furnishings and personal property. The purchase of equipment,
fixtures, motor vehicles, furnishings, or other personal property not an
integral structural fixture is generally ineligible. CDBG funds may be
used, however, to purchase or to pay depreciation or use allowances (in
accordance with OMB Circular A-21, A-87 or A-122, as applicable) for
such items when necessary for use by a recipient or its subrecipients in
the administration of activities assisted with CDBG funds, or when
eligible as fire fighting equipment, or when such items constitute all
or part of a public service pursuant to Sec. 570.201(e).
(2) Operating and maintenance expenses. The general rule is that any
expense associated with repairing, operating or maintaining public
facilities, improvements and services is ineligible. Specific exceptions
to this general rule are operating and maintenance expenses associated
with public service activities, interim assistance, and office space for
program staff employed in carrying out the CDBG program. For example,
the use of CDBG funds to pay the allocable costs of operating and
maintaining a facility used in providing a public service would be
eligible under Sec. 570.201(e), even if no other costs of providing such
a service are assisted with such funds. Examples of ineligible operating
and maintenance expenses are:
(i) Maintenance and repair of publicly owned streets, parks,
playgrounds, water and sewer facilities, neighborhood facilities, senior
centers, centers for persons with a disabilities, parking and other
public facilities and improvements. Examples of maintenance and repair
activities for which CDBG funds may not be used include the filling of
pot holes in streets, repairing of cracks in sidewalks, the mowing of
recreational areas, and the replacement of expended street light bulbs;
and
(ii) Payment of salaries for staff, utility costs and similar
expenses necessary for the operation of public works and facilities.
(3) New housing construction. For the purpose of this paragraph,
activities in support of the development of low or moderate income
housing including clearance, site assemblage, provision of site
improvements and provision of public improvements and certain housing
pre-construction costs set forth in Sec. 570.206(g), are not considered
as activities to subsidize or assist new residential construction. CDBG
funds may not be used for the construction of new permanent residential
structures or for any program to subsidize or assist such new
construction, except:
(i) As provided under the last resort housing provisions set forth
in 24 CFR part 42;
(ii) As authorized under Sec. 570.201(m) or (n);
(iii) When carried out by an entity pursuant to Sec. 570.204(a);
(4) Income payments. The general rule is that CDBG funds may not be
used for income payments. For purposes of the CDBG program, ``income
payments'' means a series of subsistence-type grant payments made to an
individual or family for items such as food, clothing, housing (rent or
mortgage), or utilities, but excludes emergency grant payments made over
a period of up to
[[Page 52]]
three consecutive months to the provider of such items or services on
behalf of an individual or family.
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
60 FR 1945, Jan. 5, 1995; 60 FR 56912, Nov. 9, 1995; 65 FR 70215, Nov.
21, 2000]
Sec. 570.208 Criteria for national objectives.
The following criteria shall be used to determine whether a CDBG-
assisted activity complies with one or more of the national objectives
as required under Sec. 570.200(a)(2):
(a) Activities benefiting low- and moderate-income persons.
Activities meeting the criteria in paragraph (a) (1), (2), (3), or (4)
of this section as applicable, will be considered to benefit low and
moderate income persons unless there is substantial evidence to the
contrary. In assessing any such evidence, the full range of direct
effects of the assisted activity will be considered. (The recipient
shall appropriately ensure that activities that meet these criteria do
not benefit moderate income persons to the exclusion of low income
persons.)
(1) Area benefit activities. (i) An activity, the benefits of which
are available to all the residents in a particular area, where at least
51 percent of the residents are low and moderate income persons. Such an
area need not be coterminous with census tracts or other officially
recognized boundaries but must be the entire area served by the
activity. An activity that serves an area that is not primarily
residential in character shall not qualify under this criterion.
(ii) For metropolitan cities and urban counties, an activity that
would otherwise qualify under Sec. 570.208(a)(1)(i) except that the area
served contains less than 51 percent low and moderate income residents
will also be considered to meet the objective of benefiting low and
moderate income persons where the proportion of low and moderate income
persons in the area is within the highest quartile of all areas in the
recipient's jurisdiction in terms of the degree of concentration of such
persons. In applying this exception, HUD will determine the lowest
proportion a recipient may use to qualify an area for this purpose as
follows:
(A) All census block groups in the recipient's jurisdiction shall be
rank ordered from the block group of highest proportion of low and
moderate income persons to the block group with the lowest. For urban
counties, the rank ordering shall cover the entire area constituting the
urban county and shall not be done separately for each participating
unit of general local government.
(B) In any case where the total number of a recipient's block groups
does not divide evenly by four, the block group which would be
fractionally divided between the highest and second quartiles shall be
considered to be part of the highest quartile.
(C) The proportion of low and moderate income persons in the last
census block group in the highest quartile shall be identified. Any
service area located within the recipient's jurisdiction and having a
proportion of low and moderate income persons at or above this level
shall be considered to be within the highest quartile.
(D) If block group data are not available for the entire
jurisdiction, other data acceptable to the Secretary may be used in the
above calculations.
(iii) An activity to develop, establish, and operate for up to two
years after the establishment of, a uniform emergency telephone number
system serving an area having less than the percentage of low- and
moderate-income residents required under paragraph (a)(1)(i) of this
section or (as applicable) paragraph (a)(1)(ii) of this section,
provided the recipient obtains prior HUD approval. To obtain such
approval, the recipient must:
(A) Demonstrate that the system will contribute significantly to the
safety of the residents of the area. The request for approval must
include a list of the emergency services that will participate in the
emergency telephone number system;
(B) Submit information that serves as a basis for HUD to determine
whether at least 51 percent of the use of the system will be by low- and
moderate-income persons. As available, the recipient must provide
information that identifies the total number of calls actually received
over the preceding 12-
[[Page 53]]
month period for each of the emergency services to be covered by the
emergency telephone number system and relates those calls to the
geographic segment (expressed as nearly as possible in terms of census
tracts, block numbering areas, block groups, or combinations thereof
that are contained within the segment) of the service area from which
the calls were generated. In analyzing this data to meet the
requirements of this section, HUD will assume that the distribution of
income among the callers generally reflects the income characteristics
of the general population residing in the same geographic area where the
callers reside. If HUD can conclude that the users have primarily
consisted of low- and moderate-income persons, no further submission is
needed by the recipient. If a recipient plans to make other submissions
for this purpose, it may request that HUD review its planned methodology
before expending the effort to acquire the information it expects to use
to make its case;
(C) Demonstrate that other Federal funds received by the recipient
are insufficient or unavailable for a uniform emergency telephone number
system. For this purpose, the recipient must submit a statement
explaining whether the lack of funds is due to the insufficiency of the
amount of the available funds, restrictions on the use of such funds, or
the prior commitment of funds by the recipient for other purposes; and
(D) Demonstrate that the percentage of the total costs of the system
paid for by CDBG funds does not exceed the percentage of low- and
moderate-income persons in the service area of the system. For this
purpose, the recipient must include a description of the boundaries of
the service area of the emergency telephone number system, the census
divisions that fall within the boundaries of the service area (census
tracts or block numbering areas), the total number of persons and the
total number of low- and moderate-income persons within each census
division, the percentage of low- and moderate-income persons within the
service area, and the total cost of the system.
(iv) An activity for which the assistance to a public improvement
that provides benefits to all the residents of an area is limited to
paying special assessments (as defined in Sec. 570.200(c)) levied
against residential properties owned and occupied by persons of low and
moderate income.
(v) For purposes of determining qualification under this criterion,
activities of the same type that serve different areas will be
considered separately on the basis of their individual service area.
(vi) In determining whether there is a sufficiently large percentage
of low- and moderate-income persons residing in the area served by an
activity to qualify under paragraph (a)(1) (i), (ii), or (vii) of this
section, the most recently available decennial census information must
be used to the fullest extent feasible, together with the section 8
income limits that would have applied at the time the income information
was collected by the Census Bureau. Recipients that believe that the
census data does not reflect current relative income levels in an area,
or where census boundaries do not coincide sufficiently well with the
service area of an activity, may conduct (or have conducted) a current
survey of the residents of the area to determine the percent of such
persons that are low and moderate income. HUD will accept information
obtained through such surveys, to be used in lieu of the decennial
census data, where it determines that the survey was conducted in such a
manner that the results meet standards of statistical reliability that
are comparable to that of the decennial census data for areas of similar
size. Where there is substantial evidence that provides a clear basis to
believe that the use of the decennial census data would substantially
overstate the proportion of persons residing there that are low and
moderate income, HUD may require that the recipient rebut such evidence
in order to demonstrate compliance with section 105(c)(2) of the Act.
(vii) Activities meeting the requirements of paragraph (d)(5)(i) of
this section may be considered to qualify under this paragraph, provided
that the area covered by the strategy is either a
[[Page 54]]
Federally-designated Empowerment Zone or Enterprise Community or
primarily residential and contains a percentage of low- and moderate-
income residents that is no less than the percentage computed by HUD
pursuant to paragraph (a)(1)(ii) of this section or 70 percent,
whichever is less, but in no event less than 51 percent. Activities
meeting the requirements of paragraph (d)(6)(i) of this section may also
be considered to qualify under paragraph (a)(1) of this section.
(2) Limited clientele activities. (i) An activity which benefits a
limited clientele, at least 51 percent of whom are low- or moderate-
income persons. (The following kinds of activities may not qualify under
paragraph (a)(2) of this section: activities, the benefits of which are
available to all the residents of an area; activities involving the
acquisition, construction or rehabilitation of property for housing; or
activities where the benefit to low- and moderate-income persons to be
considered is the creation or retention of jobs, except as provided in
paragraph (a)(2)(iv) of this section.) To qualify under paragraph (a)(2)
of this section, the activity must meet one of the following tests:
(A) Benefit a clientele who are generally presumed to be principally
low and moderate income persons. Activities that exclusively serve a
group of persons in any one or a combination of the following categories
may be presumed to benefit persons, 51 percent of whom are low- and
moderate-income: abused children, battered spouses, elderly persons,
adults meeting the Bureau of the Census' Current Population Reports
definition of ``severely disabled,'' homeless persons, illiterate
adults, persons living with AIDS, and migrant farm workers; or
(B) Require information on family size and income so that it is
evident that at least 51 percent of the clientele are persons whose
family income does not exceed the low and moderate income limit; or
(C) Have income eligibility requirements which limit the activity
exclusively to low and moderate income persons; or
(D) Be of such nature and be in such location that it may be
concluded that the activity's clientele will primarily be low and
moderate income persons.
(ii) An activity that serves to remove material or architectural
barriers to the mobility or accessibility of elderly persons or of
adults meeting the Bureau of the Census' Current Population Reports
definition of ``severely disabled'' will be presumed to qualify under
this criterion if it is restricted, to the extent practicable, to the
removal of such barriers by assisting:
(A) The reconstruction of a public facility or improvement, or
portion thereof, that does not qualify under paragraph (a)(1) of this
section;
(B) The rehabilitation of a privately owned nonresidential building
or improvement that does not qualify under paragraph (a)(1) or (4) of
this section; or
(C) The rehabilitation of the common areas of a residential
structure that contains more than one dwelling unit and that does not
qualify under paragraph (a)(3) of this section.
(iii) A microenterprise assistance activity carried out in
accordance with the provisions of Sec. 570.201(o) with respect to those
owners of microenterprises and persons developing microenterprises
assisted under the activity during each program year who are low- and
moderate-income persons. For purposes of this paragraph, persons
determined to be low and moderate income may be presumed to continue to
qualify as such for up to a three-year period.
(iv) An activity designed to provide job training and placement and/
or other employment support services, including, but not limited to,
peer support programs, counseling, child care, transportation, and other
similar services, in which the percentage of low- and moderate-income
persons assisted is less than 51 percent may qualify under this
paragraph in the following limited circumstance:
(A) In such cases where such training or provision of supportive
services assists business(es), the only use of CDBG assistance for the
project is to provide the job training and/or supportive services; and
(B) The proportion of the total cost of the project borne by CDBG
funds is no greater than the proportion of the
[[Page 55]]
total number of persons assisted who are low or moderate income.
(3) Housing activities. An eligible activity carried out for the
purpose of providing or improving permanent residential structures
which, upon completion, will be occupied by low- and moderate-income
households. This would include, but not necessarily be limited to, the
acquisition or rehabilitation of property by the recipient, a
subrecipient, a developer, an individual homebuyer, or an individual
homeowner; conversion of nonresidential structures; and new housing
construction. If the structure contains two dwelling units, at least one
must be so occupied, and if the structure contains more than two
dwelling units, at least 51 percent of the units must be so occupied.
Where two or more rental buildings being assisted are or will be located
on the same or contiguous properties, and the buildings will be under
common ownership and management, the grouped buildings may be considered
for this purpose as a single structure. Where housing activities being
assisted meet the requirements of paragraph Sec. 570.208 (d)(5)(ii) or
(d)(6)(ii) of this section, all such housing may also be considered for
this purpose as a single structure. For rental housing, occupancy by low
and moderate income households must be at affordable rents to qualify
under this criterion. The recipient shall adopt and make public its
standards for determining ``affordable rents'' for this purpose. The
following shall also qualify under this criterion:
(i) When less than 51 percent of the units in a structure will be
occupied by low and moderate income households, CDBG assistance may be
provided in the following limited circumstances:
(A) The assistance is for an eligible activity to reduce the
development cost of the new construction of a multifamily, non-elderly
rental housing project;
(B) Not less than 20 percent of the units will be occupied by low
and moderate income households at affordable rents; and
(C) 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.
(ii) When CDBG funds are used to assist rehabilitation eligible
under Sec. 570.202(b)(9) or (10) in direct support of the recipient's
Rental Rehabilitation program authorized under 24 CFR part 511, such
funds shall be considered to benefit low and moderate income persons
where not less than 51 percent of the units assisted, or to be assisted,
by the recipient's Rental Rehabilitation program overall are for low and
moderate income persons.
(iii) When CDBG funds are used for housing services eligible under
Sec. 570.201(k), such funds shall be considered to benefit low- and
moderate-income persons if the housing units for which the services are
provided are HOME-assisted and the requirements at 24 CFR 92.252 or
92.254 are met.
(4) Job creation or retention activities. An activity designed to
create or retain permanent jobs where at least 51 percent of the jobs,
computed on a full time equivalent basis, involve the employment of low-
and moderate-income persons. To qualify under this paragraph, the
activity must meet the following criteria:
(i) For an activity that creates jobs, the recipient must document
that at least 51 percent of the jobs will be held by, or will be
available to, low- and moderate-income persons.
(ii) For an activity that retains jobs, the recipient must document
that the jobs would actually be lost without the CDBG assistance and
that either or both of the following conditions apply with respect to at
least 51 percent of the jobs at the time the CDBG assistance is
provided:
(A) The job is known to be held by a low- or moderate-income person;
or
(B) The job can reasonably be expected to turn over within the
following two years and that steps will be taken to ensure that it will
be filled by, or made available to, a low- or moderate-income person
upon turnover.
(iii) Jobs that are not held or filled by a low- or moderate-income
person may be considered to be available to low- and moderate-income
persons for these purposes only if:
[[Page 56]]
(A) Special skills that can only be acquired with substantial
training or work experience or education beyond high school are not a
prerequisite to fill such jobs, or the business agrees to hire
unqualified persons and provide training; and
(B) The recipient and the assisted business take actions to ensure
that low- and moderate-income persons receive first consideration for
filling such jobs.
(iv) For purposes of determining whether a job is held by or made
available to a low- or moderate-income person, the person may be
presumed to be a low- or moderate-income person if:
(A) He/she resides within a census tract (or block numbering area)
that either:
(1) Meets the requirements of paragraph (a)(4)(v) of this section;
or
(2) Has at least 70 percent of its residents who are low- and
moderate-income persons; or
(B) The assisted business is located within a census tract (or block
numbering area) that meets the requirements of paragraph (a)(4)(v) of
this section and the job under consideration is to be located within
that census tract.
(v) A census tract (or block numbering area) qualifies for the
presumptions permitted under paragraphs (a)(4)(iv)(A)(1) and (B) of this
section if it is either part of a Federally-designated Empowerment Zone
or Enterprise Community or meets the following criteria:
(A) It has a poverty rate of at least 20 percent as determined by
the most recently available decennial census information;
(B) It does not include any portion of a central business district,
as this term is used in the most recent Census of Retail Trade, unless
the tract has a poverty rate of at least 30 percent as determined by the
most recently available decennial census information; and
(C) It evidences pervasive poverty and general distress by meeting
at least one of the following standards:
(1) All block groups in the census tract have poverty rates of at
least 20 percent;
(2) The specific activity being undertaken is located in a block
group that has a poverty rate of at least 20 percent; or
(3) Upon the written request of the recipient, HUD determines that
the census tract exhibits other objectively determinable signs of
general distress such as high incidence of crime, narcotics use,
homelessness, abandoned housing, and deteriorated infrastructure or
substantial population decline.
(vi) As a general rule, each assisted business shall be considered
to be a separate activity for purposes of determining whether the
activity qualifies under this paragraph, except:
(A) In certain cases such as where CDBG funds are used to acquire,
develop or improve a real property (e.g., a business incubator or an
industrial park) the requirement may be met by measuring jobs in the
aggregate for all the businesses which locate on the property, provided
such businesses are not otherwise assisted by CDBG funds.
(B) Where CDBG funds are used to pay for the staff and overhead
costs of an entity making loans to businesses exclusively from non-CDBG
funds, this requirement may be met by aggregating the jobs created by
all of the businesses receiving loans during each program year.
(C) Where CDBG funds are used by a recipient or subrecipient to
provide technical assistance to businesses, this requirement may be met
by aggregating the jobs created or retained by all of the businesses
receiving technical assistance during each program year.
(D) Where CDBG funds are used for activities meeting the criteria
listed at Sec. 570.209(b)(2)(v), this requirement may be met by
aggregating the jobs created or retained by all businesses for which
CDBG assistance is obligated for such activities during the program
year, except as provided at paragraph (d)(7) of this section.
(E) Where CDBG funds are used by a Community Development Financial
Institution to carry out activities for the purpose of creating or
retaining jobs, this requirement may be met by aggregating the jobs
created or retained by all businesses for which CDBG assistance is
obligated for such activities
[[Page 57]]
during the program year, except as provided at paragraph (d)(7) of this
section.
(F) Where CDBG funds are used for public facilities or improvements
which will result in the creation or retention of jobs by more than one
business, this requirement may be met by aggregating the jobs created or
retained by all such businesses as a result of the public facility or
improvement.
(1) Where the public facility or improvement is undertaken
principally for the benefit of one or more particular businesses, but
where other businesses might also benefit from the assisted activity,
the requirement may be met by aggregating only the jobs created or
retained by those businesses for which the facility/improvement is
principally undertaken, provided that the cost (in CDBG funds) for the
facility/improvement is less than $10,000 per permanent full-time
equivalent job to be created or retained by those businesses.
(2) In any case where the cost per job to be created or retained (as
determined under paragraph (a)(4)(vi)(F)(1) of this section) is $10,000
or more, the requirement must be met by aggregating the jobs created or
retained as a result of the public facility or improvement by all
businesses in the service area of the facility/improvement. This
aggregation must include businesses which, as a result of the public
facility/improvement, locate or expand in the service area of the
facility/improvement between the date the recipient identifies the
activity in its action plan under part 91 of this title and the date one
year after the physical completion of the facility/improvement. In
addition, the assisted activity must comply with the public benefit
standards at Sec. 570.209(b).
(b) Activities which aid in the prevention or elimination of slums
or blight. Activities meeting one or more of the following criteria, in
the absence of substantial evidence to the contrary, will be considered
to aid in the prevention or elimination of slums or blight:
(1) Activities to address slums or blight on an area basis. An
activity will be considered to address prevention or elimination of
slums or blight in an area if:
(i) The area, delineated by the recipient, meets a definition of a
slum, blighted, deteriorated or deteriorating area under State or local
law;
(ii) Throughout the area there is a substantial number of
deteriorated or deteriorating buildings or the public improvements are
in a general state of deterioration;
(iii) Documentation is maintained by the recipient on the boundaries
of the area and the condition which qualified the area at the time of
its designation; and
(iv) The assisted activity addresses one or more of the conditions
which contributed to the deterioration of the area. Rehabilitation of
residential buildings carried out in an area meeting the above
requirements will be considered to address the area's deterioration only
where each such building rehabilitated is considered substandard under
local definition before rehabilitation, and all deficiencies making a
building substandard have been eliminated if less critical work on the
building is undertaken. At a minimum, the local definition for this
purpose must be such that buildings that it would render substandard
would also fail to meet the housing quality standards for the Section 8
Housing Assistance Payments Program-Existing Housing (24 CFR 882.109).
(2) Activities to address slums or blight on a spot basis.
Acquisition, clearance, relocation, historic preservation and building
rehabilitation activities which eliminate specific conditions of blight
or physical decay on a spot basis not located in a slum or blighted area
will meet this objective. Under this criterion, rehabilitation is
limited to the extent necessary to eliminate specific conditions
detrimental to public health and safety.
(3) Activities to address slums or blight in an urban renewal area.
An activity will be considered to address prevention or elimination of
slums or blight in an urban renewal area if the activity is:
(i) Located within an urban renewal project area or Neighborhood
Development Program (NDP) action area; i.e., an area in which funded
activities were
[[Page 58]]
authorized under an urban renewal Loan and Grant Agreement or an annual
NDP Funding Agreement, pursuant to title I of the Housing Act of 1949;
and
(ii) Necessary to complete the urban renewal plan, as then in
effect, including initial land redevelopment permitted by the plan.
Note: Despite the restrictions in (b) (1) and (2) of this section,
any rehabilitation activity which benefits low and moderate income
persons pursuant to paragraph (a)(3) of this section can be undertaken
without regard to the area in which it is located or the extent or
nature of rehabilitation assisted.
(c) Activities designed to meet community development needs having a
particular urgency. In the absence of substantial evidence to the
contrary, an activity will be considered to address this objective if
the recipient certifies that the activity is designed to alleviate
existing conditions which pose a serious and immediate threat to the
health or welfare of the community which are of recent origin or which
recently became urgent, that the recipient is unable to finance the
activity on its own, and that other sources of funding are not
available. A condition will generally be considered to be of recent
origin if it developed or became critical within 18 months preceding the
certification by the recipient.
(d) Additional criteria. (1) Where the assisted activity is
acquisition of real property, a preliminary determination of whether the
activity addresses a national objective may be based on the planned use
of the property after acquisition. A final determination shall be based
on the actual use of the property, excluding any short-term, temporary
use. Where the acquisition is for the purpose of clearance which will
eliminate specific conditions of blight or physical decay, the clearance
activity shall be considered the actual use of the property. However,
any subsequent use or disposition of the cleared property shall be
treated as a ``change of use'' under Sec. 570.505.
(2) Where the assisted activity is relocation assistance that the
recipient is required to provide, such relocation assistance shall be
considered to address the same national objective as is addressed by the
displacing activity. Where the relocation assistance is voluntary on the
part of the grantee the recipient may qualify the assistance either on
the basis of the national objective addressed by the displacing activity
or on the basis that the recipients of the relocation assistance are low
and moderate income persons.
(3) In any case where the activity undertaken for the purpose of
creating or retaining jobs is a public improvement and the area served
is primarily residential, the activity must meet the requirements of
paragraph (a)(1) of this section as well as those of paragraph (a)(4) of
this section in order to qualify as benefiting low and moderate income
persons.
(4) CDBG funds expended for planning and administrative costs under
Sec. 570.205 and Sec. 570.206 will be considered to address the national
objectives.
(5) Where the grantee has elected to prepare an area revitalization
strategy pursuant to the authority of Sec. 91.215(e) of this title and
HUD has approved the strategy, the grantee may also elect the following
options:
(i) Activities undertaken pursuant to the strategy for the purpose
of creating or retaining jobs may, at the option of the grantee, be
considered to meet the requirements of this paragraph under the criteria
at paragraph (a)(1)(vii) of this section in lieu of the criteria at
paragraph (a)(4) of this section; and
(ii) All housing activities in the area for which, pursuant to the
strategy, CDBG assistance is obligated during the program year may be
considered to be a single structure for purposes of applying the
criteria at paragraph (a)(3) of this section.
(6) Where CDBG-assisted activities are carried out by a Community
Development Financial Institution whose charter limits its investment
area to a primarily residential area consisting of at least 51 percent
low- and moderate-income persons, the grantee may also elect the
following options:
(i) Activities carried out by the Community Development Financial
Institution for the purpose of creating or retaining jobs may, at the
option of the grantee, be considered to meet the requirements of this
paragraph under the criteria at paragraph (a)(1)(vii) of this section in
lieu of the criteria at paragraph (a)(4) of this section; and
[[Page 59]]
(ii) All housing activities for which the Community Development
Financial Institution obligates CDBG assistance during the program year
may be considered to be a single structure for purposes of applying the
criteria at paragraph (a)(3) of this section.
(7) Where an activity meeting the criteria at Sec. 570.209(b)(2)(v)
may also meet the requirements of either paragraph (d)(5)(i) or
(d)(6)(i) of this section, the grantee may elect to qualify the activity
under either the area benefit criteria at paragraph (a)(1)(vii) of this
section or the job aggregation criteria at paragraph (a)(4)(vi)(D) of
this section, but not both. Where an activity may meet the job
aggregation criteria at both paragraphs (a)(4)(vi)(D) and (E) of this
section, the grantee may elect to qualify the activity under either
criterion, but not both.
[53 FR 34439, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
60 FR 1945, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56912, Nov.
9, 1995; 61 FR 18674, Apr. 29, 1996]
Sec. 570.209 Guidelines for evaluating and selecting economic development projects.
The following guidelines are provided to assist the recipient to
evaluate and select activities to be carried out for economic
development purposes. Specifically, these guidelines are applicable to
activities that are eligible for CDBG assistance under Sec. 570.203.
These guidelines also apply to activities carried out under the
authority of Sec. 570.204 that would otherwise be eligible under
Sec. 570.203, were it not for the involvement of a Community-Based
Development Organization (CBDO). (This would include activities where a
CBDO makes loans to for-profit businesses.) These guidelines are
composed of two components: guidelines for evaluating project costs and
financial requirements; and standards for evaluating public benefit. The
standards for evaluating public benefit are mandatory, but the
guidelines for evaluating projects costs and financial requirements are
not.
(a) Guidelines and objectives for evaluating project costs and
financial requirements. HUD has developed guidelines that are designed
to provide the recipient with a framework for financially underwriting
and selecting CDBG-assisted economic development projects which are
financially viable and will make the most effective use of the CDBG
funds. These guidelines, also referred to as the underwriting
guidelines, are published as appendix A to this part. The use of the
underwriting guidelines published by HUD is not mandatory. However,
grantees electing not to use these guidelines would be expected to
conduct basic financial underwriting prior to the provision of CDBG
financial assistance to a for-profit business. Where appropriate, HUD's
underwriting guidelines recognize that different levels of review are
appropriate to take into account differences in the size and scope of a
proposed project, and in the case of a microenterprise or other small
business to take into account the differences in the capacity and level
of sophistication among businesses of differing sizes. Recipients are
encouraged, when they develop their own programs and underwriting
criteria, to also take these factors into account. The objectives of the
underwriting guidelines are to ensure:
(1) That project costs are reasonable;
(2) That all sources of project financing are committed;
(3) That to the extent practicable, CDBG funds are not substituted
for non-Federal financial support;
(4) That the project is financially feasible;
(5) That to the extent practicable, the return on the owner's equity
investment will not be unreasonably high; and
(6) That to the extent practicable, CDBG funds are disbursed on a
pro rata basis with other finances provided to the project.
(b) Standards for evaluating public benefit. The grantee is
responsible for making sure that at least a minimum level of public
benefit is obtained from the expenditure of CDBG funds under the
categories of eligibility governed by these guidelines. The standards
set forth below identify the types of public benefit that will be
recognized for this purpose and the minimum level of each that must be
obtained for the amount
[[Page 60]]
of CDBG funds used. Unlike the guidelines for project costs and
financial requirements covered under paragraph (a) of this section, the
use of the standards for public benefit is mandatory. Certain public
facilities and improvements eligible under Sec. 570.201(c) of the
regulations, which are undertaken for economic development purposes, are
also subject to these standards, as specified in
Sec. 570.208(a)(4)(vi)(F)(2).
(1) Standards for activities in the aggregate. Activities covered by
these guidelines must, in the aggregate, either:
(i) Create or retain at least one full-time equivalent, permanent
job per $35,000 of CDBG funds used; or
(ii) Provide goods or services to residents of an area, such that
the number of low- and moderate-income persons residing in the areas
served by the assisted businesses amounts to at least one low- and
moderate-income person per $350 of CDBG funds used.
(2) Applying the aggregate standards. (i) A metropolitan city or an
urban county shall apply the aggregate standards under paragraph (b)(1)
of this section to all applicable activities for which CDBG funds are
first obligated within each single CDBG program year, without regard to
the source year of the funds used for the activities. A grantee under
the HUD-Administered Small Cities or Insular Areas CDBG programs shall
apply the aggregate standards under paragraph (b)(1) of this section to
all funds obligated for applicable activities from a given grant;
program income obligated for applicable activities will, for these
purposes, be aggregated with the most recent open grant. For any time
period in which a community has no open HUD-Administered or Insular
Areas grants, the aggregate standards shall be applied to all applicable
activities for which program income is obligated during that period.
(ii) The grantee shall apply the aggregate standards to the number
of jobs to be created/retained, or to the number of persons residing in
the area served (as applicable), as determined at the time funds are
obligated to activities.
(iii) Where an activity is expected both to create or retain jobs
and to provide goods or services to residents of an area, the grantee
may elect to count the activity under either the jobs standard or the
area residents standard, but not both.
(iv) Where CDBG assistance for an activity is limited to job
training and placement and/or other employment support services, the
jobs assisted with CDBG funds shall be considered to be created or
retained jobs for the purposes of applying the aggregate standards.
(v) Any activity subject to these guidelines which meets one or more
of the following criteria may, at the grantee's option, be excluded from
the aggregate standards described in paragraph (b)(1) of this section:
(A) Provides jobs exclusively for unemployed persons or participants
in one or more of the following programs:
(1) Jobs Training Partnership Act (JTPA);
(2) Jobs Opportunities for Basic Skills (JOBS); or
(3) Aid to Families with Dependent Children (AFDC);
(B) Provides jobs predominantly for residents of Public and Indian
Housing units;
(C) Provides jobs predominantly for homeless persons;
(D) Provides jobs predominantly for low-skilled, low- and moderate-
income persons, where the business agrees to provide clear opportunities
for promotion and economic advancement, such as through the provision of
training;
(E) Provides jobs predominantly for persons residing within a census
tract (or block numbering area) that has at least 20 percent of its
residents who are in poverty;
(F) Provides assistance to business(es) that operate(s) within a
census tract (or block numbering area) that has at least 20 percent of
its residents who are in poverty;
(G) Stabilizes or revitalizes a neighborhood that has at least 70
percent of its residents who are low- and moderate-income;
(H) Provides assistance to a Community Development Financial
Institution that serve an area that is predominantly low- and moderate-
income persons;
[[Page 61]]
(I) Provides assistance to a Community-Based Development
Organization serving a neighborhood that has at least 70 percent of its
residents who are low- and moderate-income;
(J) Provides employment opportunities that are an integral component
of a project designed to promote spatial deconcentration of low- and
moderate-income and minority persons;
(K) With prior HUD approval, provides substantial benefit to low-
income persons through other innovative approaches;
(L) Provides services to the residents of an area pursuant to a
strategy approved by HUD under the provisions of Sec. 91.215(e) of this
title;
(M) Creates or retains jobs through businesses assisted in an area
pursuant to a strategy approved by HUD under the provisions of
Sec. 91.215(e) of this title.
(3) Standards for individual activities. Any activity subject to
these guidelines which falls into one or more of the following
categories will be considered by HUD to provide insufficient public
benefit, and therefore may under no circumstances be assisted with CDBG
funds:
(i) The amount of CDBG assistance exceeds either of the following,
as applicable:
(A) $50,000 per full-time equivalent, permanent job created or
retained; or
(B) $1,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(ii) The activity consists of or includes any of the following:
(A) General promotion of the community as a whole (as opposed to the
promotion of specific areas and programs);
(B) Assistance to professional sports teams;
(C) Assistance to privately-owned recreational facilities that serve
a predominantly higher-income clientele, where the recreational benefit
to users or members clearly outweighs employment or other benefits to
low- and moderate-income persons;
(D) Acquisition of land for which the specific proposed use has not
yet been identified; and
(E) Assistance to a for-profit business while that business or any
other business owned by the same person(s) or entity(ies) is the subject
of unresolved findings of noncompliance relating to previous CDBG
assistance provided by the recipient.
(4) Applying the individual activity standards. (i) Where an
activity is expected both to create or retain jobs and to provide goods
or services to residents of an area, it will be disqualified only if the
amount of CDBG assistance exceeds both of the amounts in paragraph
(b)(3)(i) of this section.
(ii) The individual activity standards in paragraph (b)(3)(i) of
this section shall be applied to the number of jobs to be created or
retained, or to the number of persons residing in the area served (as
applicable), as determined at the time funds are obligated to
activities.
(iii) Where CDBG assistance for an activity is limited to job
training and placement and/or other employment support services, the
jobs assisted with CDBG funds shall be considered to be created or
retained jobs for the purposes of applying the individual activity
standards in paragraph (b)(3)(i) of this section.
(c) Amendments to economic development projects after review
determinations. If, after the grantee enters into a contract to provide
assistance to a project, the scope or financial elements of the project
change to the extent that a significant contract amendment is
appropriate, the project should be reevaluated under these and the
recipient's guidelines. (This would include, for example, situations
where the business requests a change in the amount or terms of
assistance being provided, or an extension to the loan payment period
required in the contract.) If a reevaluation of the project indicates
that the financial elements and public benefit to be derived have also
substantially changed, then the recipient should make appropriate
adjustments in the amount, type, terms or conditions of CDBG assistance
which has been offered, to reflect the impact of the substantial change.
(For example, if a change in the project elements results in a
substantial reduction of the total project costs, it may be appropriate
for the recipient to reduce the amount of total CDBG assistance.) If the
amount of CDBG assistance provided to the project is increased, the
[[Page 62]]
amended project must still comply with the public benefit standards
under paragraph (b) of this section.
(d) Documentation. The grantee must maintain sufficient records to
demonstrate the level of public benefit, based on the above standards,
that is actually achieved upon completion of the CDBG-assisted economic
development activity(ies) and how that compares to the level of such
benefit anticipated when the CDBG assistance was obligated. If the
grantee's actual results show a pattern of substantial variation from
anticipated results, the grantee is expected to take all actions
reasonably within its control to improve the accuracy of its
projections. If the actual results demonstrate that the recipient has
failed the public benefit standards, HUD may require the recipient to
meet more stringent standards in future years as appropriate.
[60 FR 1947, Jan. 5, 1995, as amended at 60 FR 17445, Apr. 6, 1995]
Subpart D--Entitlement Grants
Source: 53 FR 34449, Sept. 6, 1988, unless otherwise noted.
Sec. 570.300 General.
This subpart describes the policies and procedures governing the
making of community development block grants to entitlement communities.
The policies and procedures set forth in subparts A, C, J, K, and O of
this part also apply to entitlement grantees.
Sec. 570.301 Activity locations and float-funding.
The consolidated plan, action plan, and amendment submission
requirements referred to in this section are those in 24 CFR part 91.
(a) For activities for which the grantee has not yet decided on a
specific location, such as when the grantee is allocating an amount of
funds to be used for making loans or grants to businesses or for
residential rehabilitation, the description in the action plan or any
amendment shall identify who may apply for the assistance, the process
by which the grantee expects to select who will receive the assistance
(including selection criteria), and how much and under what terms the
assistance will be provided, or in the case of a planned public facility
or improvement, how it expects to determine its location.
(b) Float-funded activities and guarantees. A recipient may use
undisbursed funds in the line of credit and its CDBG program account
that are budgeted in statements or action plans for one or more other
activities that do not need the funds immediately, subject to the
limitations described below. Such funds shall be referred to as the
``float'' for purposes of this section and the action plan. Each
activity carried out using the float must meet all of the same
requirements that apply to CDBG-assisted activities generally, and must
be expected to produce program income in an amount at least equal to the
amount of the float so used. Whenever the recipient proposes to fund an
activity with the float, it must include the activity in its action plan
or amend the action plan for the current program year. For purposes of
this section, an activity that uses such funds will be called a ``float-
funded activity.''
(1) Each float-funded activity must be individually listed and
described as such in the action plan.
(2)(i) The expected time period between obligation of assistance for
a float-funded activity and receipt of program income in an amount at
least equal to the full amount drawn from the float to fund the activity
may not exceed 2.5 years. An activity from which program income
sufficient to recover the full amount of the float assistance is
expected to be generated more than 2.5 years after obligation may not be
funded from the float, but may be included in an action plan if it is
funded from CDBG funds other than the float (e.g., grant funds or
proceeds from an approved Section 108 loan guarantee).
(ii) Any extension of the repayment period for a float-funded
activity shall be considered to be a new float-funded activity for these
purposes and may be implemented by the grantee only if the extension is
made subject to the same limitations and requirements as apply to a new
float-funded activity.
[[Page 63]]
(3) Unlike other projected program income, the full amount of income
expected to be generated by a float-funded activity must be shown as a
source of program income in the action plan containing the activity,
whether or not some or all of the income is expected to be received in a
future program year (in accordance with 24 CFR 91.220(g)(1)(ii)(D)).
(4) The recipient must also clearly declare in the action plan that
identifies the float-funded activity the recipient's commitment to
undertake one of the following options:
(i) Amend or delete activities in an amount equal to any default or
failure to produce sufficient income in a timely manner. If the
recipient makes this choice, it must include a description of the
process it will use to select the activities to be amended or deleted
and how it will involve citizens in that process; and it must amend the
applicable statement(s) or action plan(s) showing those amendments or
deletions promptly upon determining that the float-funded activity will
not generate sufficient or timely program income;
(ii) Obtain an irrevocable line of credit from a commercial lender
for the full amount of the float-funded activity and describe the lender
and terms of such line of credit in the action plan that identifies the
float-funded activity. To qualify for this purpose, such line of credit
must be unconditionally available to the recipient in the amount of any
shortfall within 30 days of the date that the float-funded activity
fails to generate the projected amount of program income on schedule;
(iii) Transfer general local government funds in the full amount of
any default or shortfall to the CDBG line of credit within 30 days of
the float-funded activity's failure to generate the projected amount of
the program income on schedule; or
(iv) A method approved in writing by HUD for securing timely return
of the amount of the float funding. Such method must ensure that funds
are available to meet any default or shortfall within 30 days of the
float-funded activity's failure to generate the projected amount of the
program income on schedule.
(5) When preparing an action plan for a year in which program income
is expected to be received from a float-funded activity, and such
program income has been shown in a prior statement or action plan, the
current action plan shall identify the expected income and explain that
the planned use of the income has already been described in prior
statements or action plans, and shall identify the statements or action
plans in which such descriptions may be found.
[60 FR 56913, Nov. 9, 1995]
Sec. 570.302 Submission requirements.
In order to receive its annual CDBG entitlement grant, a grantee
must submit a consolidated plan in accordance with 24 CFR part 91. That
part includes requirements for the content of the consolidated plan, for
the process of developing the consolidated plan, including citizen
participation provisions, for the submission date, for HUD approval, and
for the amendment process.
(Approved by the Office of Management and Budget under control number
2506-0117)
[60 FR 1915, Jan. 5, 1995]
Sec. 570.303 Certifications.
The jurisdiction must make the certifications that are set forth in
24 CFR part 91 as part of the consolidated plan.
(Approved by the Office of Management and Budget under control number
2506-0117)
[60 FR 1915, Jan. 5, 1995]
Sec. 570.304 Making of grants.
(a) Approval of grant. HUD will approve a grant if the
jurisdiction's submissions have been made and approved in accordance
with 24 CFR part 91, and the certifications required therein are
satisfactory to the Secretary. The certifications will be satisfactory
to the Secretary for this purpose unless the Secretary has determined
pursuant to subpart O of this part that the grantee has not complied
with the requirements of this part, has failed to carry out its
consolidated plan as provided under Sec. 570.903, or has determined that
there is evidence, not directly involving the grantee's past performance
[[Page 64]]
under this program, that tends to challenge in a substantial manner the
grantee's certification of future performance. If the Secretary makes
any such determination, however, further assurances may be required to
be submitted by the grantee as the Secretary may deem warranted or
necessary to find the grantee's certification satisfactory.
(b) Grant agreement. The grant will be made by means of a grant
agreement executed by both HUD and the grantee.
(c) Grant amount. The Secretary will make a grant in the full
entitlement amount, generally within the last 30 days of the grantee's
current program year, unless:
(1) Either the consolidated plan is not received by August 16 of the
federal fiscal year for which funds are appropriated or the consolidated
plan is not approved under 24 CFR part 91, subpart F--in which case, the
grantee will forfeit the entire entitlement amount; or
(2) The grantee's performance does not meet the performance
requirements or criteria prescribed in subpart O and the grant amount is
reduced.
[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995; 60
FR 16379, Mar. 30, 1995; 60 FR 56913, Nov. 9, 1995]
Sec. 570.307 Urban counties.
(a) Determination of qualification. The Secretary will determine the
qualifications of counties to receive entitlements as urban counties
upon receipt of qualification documentation from counties at such time,
and in such manner and form as prescribed by HUD. The Secretary shall
determine eligibility and applicable portions of each eligible county
for purposes of fund allocation under section 106 of the Act on the
basis of information available from the U.S. Bureau of the Census with
respect to population and other pertinent demographic characteristics,
and based on information provided by the county and its included units
of general local government.
(b) Qualification as an urban county. (1) A county will qualify as
an urban county if such county meets the definition at Sec. 570.3(3). As
necessitated by this definition, the Secretary shall determine which
counties have authority to carry out essential community development and
housing assistance activities in their included units of general local
government without the consent of the local governing body and which
counties must execute cooperation agreements with such units to include
them in the urban county for qualification and grant calculation
purposes.
(2) At the time of urban county qualification, HUD may refuse to
recognize the cooperation agreement of a unit of general local
government in an urban county where, based on past performance and other
available information, there is substantial evidence that such unit does
not cooperate in the implementation of the essential community
development or housing assistance activities or where legal impediments
to such implementation exist, or where participation by a unit of
general local government in noncompliance with the applicable law in
subpart K would constitute noncompliance by the urban county. In such a
case, the unit of general local government will not be permitted to
participate in the urban county, and its population or other needs
characteristics will not be considered in the determination of whether
the county qualifies as an urban county or in determining the amount of
funds to which the urban county may be entitled. HUD will not take this
action unless the unit of general local government and the county have
been given an opportunity to challenge HUD's determination and to
informally consult with HUD concerning the proposed action.
(c) Essential activities. For purposes of this section, the term
``essential community development and housing assistance activities''
means community renewal and lower income housing activities,
specifically urban renewal and publicly assisted housing. In determining
whether a county has the required powers, the Secretary will consider
both its authority and, where applicable, the authority of its
designated agency or agencies.
(d) Period of qualification. (1) The qualification by HUD of an
urban county shall remain effective for three successive Federal fiscal
years regardless of changes in its population during that period, except
as provided under
[[Page 65]]
paragraph (f) of this section and except as provided under Sec. 570.3(3)
where the period of qualification shall be two successive Federal fiscal
years.
(2) During the period of qualification, no included unit of general
local government may withdraw from nor be removed from the urban county
for HUD's grant computation purposes.
(3) If some portion of an urban county's unincorporated area becomes
incorporated during the urban county qualification period, the newly
incorporated unit of general local government shall not be excluded from
the urban county nor shall it be eligible for a separate grant under
subpart D, F, or I until the end of the urban county's current
qualification period, unless the urban county fails to receive a grant
for any year during that qualification period.
(e) Grant ineligibility of included units of general local
government. (1) An included unit of general local government cannot
become eligible for an entitlement grant as a metropolitan city during
the period of qualification of the urban county (even if it becomes a
central city of a metropolitan area or its population surpasses 50,000
during that period). Rather, such a unit of general local government
shall continue to be included as part of the urban county for the
remainder of the urban county's qualification period, and no separate
grant amount shall be calculated for the included unit.
(2) An included unit of general local government which is part of an
urban county shall be ineligible to apply for grants under subpart F, or
to be a recipient of assistance under subpart I, during the entire
period of urban county qualification.
(f) Failure of an urban county to receive a grant. Failure of an
urban county to receive a grant during any year shall terminate the
existing qualification of that urban county, and that county shall
requalify as an urban county before receiving an entitlement grant in
any successive Federal fiscal year. Such termination shall release units
of general local government included in the urban county, in subsequent
years, from the prohibition to receive grants under paragraphs (d)(3),
(e)(1) and (e)(2) of this section. For this purpose an urban county
shall be deemed to have received a grant upon having satisfied the
requirements of sections 104 (a), (b), (c), and (d) of the Act, without
regard to adjustments which may be made to this grant amount under
section 104(e) or 111 of the Act.
(g) Notifications of the opportunity to be excluded. Any county
seeking to qualify for an entitlement grant as an urban county for any
Federal fiscal year shall notify each unit of general local government
which is located, in whole or in part, within the county and which would
otherwise be included in the urban county, but which is eligible to
elect to have its population excluded from that of the urban county,
that it has the opportunity to make such an election, and that such an
election, or the failure to make such an election, shall be effective
for the period for which the county qualifies as an urban county. These
notifications shall be made by a date specified by HUD. A unit of
general local government which elects to be excluded from participation
as a part of the urban county shall notify the county and HUD in writing
by a date specified by HUD. Such a unit of government may subsequently
elect to participate in the urban county for the remaining one or two
year period by notifying HUD and the county, in writing, of such
election by a date specified by HUD.
[53 FR 34449, Sept. 6, 1988, as amended at 56 FR 56127, Oct. 31, 1991]
Sec. 570.308 Joint requests.
(a) Joint requests and cooperation agreements. (1) Any urban county
and any metropolitan city located, in whole or in part, within that
county may submit a joint request to HUD to approve the inclusion of the
metropolitan city as a part of the urban county for purposes of planning
and implementing a joint community development and housing program. Such
a joint request shall only be considered if submitted at the time the
county is seeking a three year qualification or requalification as an
urban county. Such a joint request shall, upon approval by HUD, remain
effective for the period for which the county is qualified as an urban
county. An urban county
[[Page 66]]
may be joined by more than one metropolitan city, but a metropolitan
city located in more than one urban county may only be included in one
urban county for any program year. A joint request shall be deemed
approved by HUD unless HUD notifies the city and the county of its
disapproval and the reasons therefore within 30 days of receipt of the
request by HUD.
(2) Each metropolitan city and urban county submitting a joint
request shall submit an executed cooperation agreement to undertake or
to assist in the undertaking of essential community development and
housing assistance activities, as defined in Sec. 570.307(c).
(b) Joint grant amount. The grant amount for a joint recipient shall
be the sum of the amounts authorized for the individual entitlement
grantees, as described in section 106 of the Act. The urban county shall
be the grant recipient.
(c) Effect of inclusion. Upon urban county qualification and HUD
approval of the joint request and cooperation agreement, the
metropolitan city shall be considered a part of the urban county for
purposes of program planning and implementation for the period of the
urban county qualification, and shall be treated the same as any other
unit of general local government which is part of the urban county.
(d) Submission requirements. In requesting a grant under this part,
the urban county shall make a single submission which meets the
submission requirements of 24 CFR part 91 and covers all members of the
joint recipient.
[53 FR 34449, Sept. 6, 1988, as amended at 60 FR 1915, Jan. 5, 1995]
Sec. 570.309 Restriction on location of activities.
CDBG funds may assist an activity outside the jurisdiction of the
grantee only if the grantee determines that such an activity is
necessary to further the purposes of the Act and the recipient's
community development objectives, and that reasonable benefits from the
activity will accrue to residents within the jurisdiction of the
grantee. The grantee shall document the basis for such determination
prior to providing CDBG funds for the activity.
[60 FR 56914, Nov. 9, 1995]
Subpart E--Special Purpose Grants
Sec. 570.400 General.
(a) Applicability. The policies and procedures set forth in subparts
A, C, J, K, and O of this part shall apply to this subpart, except to
the extent that they are specifically modified or augmented by the
contents of this subpart, including specified exemptions described
herein. The HUD Environmental Review Procedures contained in 24 CFR part
58 also apply to this subpart, unless otherwise specifically provided
herein.
(b) Data. Wherever data are used in this subpart for selecting
applicants for assistance or for determining grant amounts, the source
of such data shall be the most recent information available from the
U.S. Bureau of the Census which is referable to the same point or period
of time.
(c) Review of applications for discretionary assistance--(1) Review
components. An application for assistance under this subpart shall be
reviewed by HUD to ensure that:
(i) The application is postmarked or received on or before any final
date established by HUD;
(ii) The application is complete;
(iii) Required certifications have been included in the application;
and
(iv) The application meets the specific program requirements listed
in the Federal Register Notice published in connection with a
competition for funding, and any other specific requirements listed
under this subpart for each of the programs.
(2) Timing and review. HUD is not required by the Act to review and
approve an application for assistance or a contract proposal within any
specified time period. However, HUD will attempt to complete its review
of any application/proposal within 75 days.
(3) Notification to applicant/proposer. HUD will notify the
applicant/proposer in writing that the applicant/proposal has been
approved, partially approved,
[[Page 67]]
or disapproved. If an application/proposal is partially approved or
disapproved, the applicant/proposer will be informed of the basis for
HUD's decision. HUD may make conditional approvals under
Sec. 570.304(d).
(d) Program amendments. (1) Recipients shall request prior written
HUD approval for all program amendments involving changes in the scope
or the location of approved activities.
(2) Any program amendments, whether or not they require HUD
approval, must be fully documented in the recipient's records.
(e) Performance reports. Any performance report required of a
discretionary assistance recipient shall be submitted in the form
specified in this subpart, in the award document, or (if the report
relates to a specific competition for an assistance award) in a form
specified in a Notice published in the Federal Register.
(f) Performance reviews and findings. HUD may review the recipient's
performance in carrying out the activities for which assistance is
provided in a timely manner and in accordance with its approved
application, all applicable requirements of this part and the terms of
the assistance agreement. Findings of performance deficiencies may be
cause for appropriate corrective and remedial actions under
Sec. 570.910.
(g) Funding sanctions. Following notice and opportunity for informal
consultation, HUD may withhold, reduce or terminate the assistance where
any corrective or remedial actions taken under Sec. 570.910 fail to
remedy a recipient's performance deficiencies, and the deficiencies are
sufficiently substantial, in the judgment of HUD, to warrant sanctions.
(h) Publication of availability of funds. HUD will publish by Notice
in the Federal Register each year the amount of funds available for the
special purpose grants authorized by each section under this subpart.
[50 FR 37525, Sept. 16, 1985, as amended at 56 FR 18968, Apr. 24, 1991]
Sec. 570.401 Community adjustment and economic diversification planning assistance.
(a) General--(1) Purpose. The purpose of this program is to assist
units of general local government in nonentitlement areas to undertake
the planning of community adjustments and economic diversification
activities, in response to physical, social, economic or governmental
impacts on the communities generated by the actions of the Department of
Defense (DoD) defined in paragraph (a)(2) of this section.
(2) Impacts. Funding under this section is available only to
communities affected by one or more of the following DoD-related
impacts:
(i) The proposed or actual establishment, realignment, or closure of
a military installation;
(ii) The cancellation or termination of a DoD contract or the
failure to proceed with an approved major weapon system program;
(iii) A publicly announced planned major reduction in DoD spending
that would directly and adversely affect a unit of general local
government and result in the loss of 1,000 or more full-time DoD and
contractor employee positions over a five-year period in the unit of
general local government and the surrounding area; or
(iv) The Secretary of HUD (in consultation with the Secretary of
DoD) determines that an action described in paragraphs (a)(2)(i)-(iii)
of this section is likely to have a direct and significant adverse
consequence on the unit of general local government.
(3) Form of awards. Planning assistance will be awarded in the form
of grants.
(4) Program administration. HUD will publish in the Federal Register
early in each fiscal year the amount of funds to be available for that
fiscal year for awards under this section. HUD will accept applications
throughout the fiscal year, and will review and consider for funding
each application according to the threshold and qualifying factors in
paragraphs (f) and (g) of this section.
[[Page 68]]
(b) Definitions. In addition to the definitions in Sec. 570.3 of
this part, the following definitions apply to this section:
(1) Adjustment planning. Generally, developing plans and proposals
in direct response to contraction or expansion of the local economy, or
changes in the physical development or the social conditions of the
community, resulting from a DoD-generated impact. Typically, this
planning includes one or more of the following tasks: Collecting,
updating, and analyzing data; identifying problems; formulating
solutions; proposing long- and short-term policies; recommending public-
and private-sector actions to implement community adjustments and
economic diversification activities; securing citizen involvement; and
coordinating with Federal, State, and local entities with respect to the
DoD-related impacts.
(2) Community adjustment. Any proposed action to change the
physical, economic, or social infrastructure within the jurisdiction or
surrounding area, directly and appropriately in response to the DoD-
generated impact.
(3) Contract. (i) Any defense contract in an amount not less than $5
million (without regard to the date on which the contract was awarded);
and
(ii) Any subcontract that is entered into in connection with a
contract (without regard to the effective date of the subcontract) and
involves not less than $500,000.
(4) Defense facility. Any private facility producing goods or
services pursuant to a defense contract.
(5) DoD. The Department of Defense.
(6) Economic diversification activities. Any public or private
sector actions to change the local mix of industrial, commercial, and
service sectors, or the mix of business ventures within a sector, that
are intended to mitigate decline in the local economy resulting from
DoD-generated impacts or, in the case of expansion of a military
installation or a defense facility, that are intended to respond to new
economic growth spawned by that expansion.
(7) Military installation. Any camp, post, station, base, yard, or
other jurisdiction of a military department that is located within any
of the several States, the District of Columbia, the Commonwealth of
Puerto Rico, or Guam.
(8) Realignment. Any action that both reduces and relocates
functions and civilian personnel positions, but does not include a
reduction in force resulting from workload adjustments, reduced
personnel or funding levels, or skill imbalances.
(9) Section 107 means section 107 of the Housing and Community
Development Act of 1974, 42 U.S.C. 5307. Section 107(b)(6) was added by
section 801 of the Housing and Community Development Act of 1992 (Pub.
L. 102-550, approved October 28, 1992).
(10) Section 2391(b). The Department of Defense adjustment planning
program as set out in 10 U.S.C. 2391(b).
(11) Small Cities CDBG Program. The Community Development Block
Grant program for nonentitlement areas in which the States have elected
not to administer available program funds. The regulations governing
this program are set out in subpart F of this part.
(12) Surrounding area. The labor market area as defined by the
Bureau of Labor Statistics that:
(i) Includes all or part of the applicant's jurisdictions; and
(ii) Includes additional areas outside the jurisdiction.
(c) Eligible applicants. Any unit of general local government,
excluding units of general government that are entitlement cities or are
included in an urban county, and which does not include Indian Tribes.
(d) Eligible activities. Activities eligible for adjustment planning
assistance include, generally:
(1) Initial assessments and quick studies of physical, social,
economic, and fiscal impacts on the community;
(2) Preliminary identification of potential public and private
sector actions needed for the community to initiate its response;
(3) If timely, modification of the applicant's current comprehensive
plan or any functional plan, such as for housing, including shelter for
the homeless, or for transportation or other physical infrastructure;
(4) If timely, modification of the applicant's current economic
plans and
[[Page 69]]
programs, such as for business development, job training, or industrial
or commercial development;
(5) Preparation for and conduct of initial community outreach
activities to begin involving local citizens and the private sector in
planning for adjustment and diversification;
(6) Environmental reviews related to DoD-related impacts;
(7) Initial identification of and coordination with Federal, State
and local entities that may be expected to assist in the community's
adjustment and economic development; and with State-designated
enterprise zones, and Federal empowerment zones and enterprise
communities when selected and announced.
(8) Any other planning activity that may enable the community to
organize itself, establish a start-up capacity to plan, propose specific
plans and programs, coordinate with appropriate public or private
entities, or qualify more quickly for the more substantial planning
assistance available from DoD.
(e) Ineligible activities. Activities ineligible for adjustment
planning assistance are:
(1) Base re-use planning.
(2) Site planning, architectural and engineering studies,
feasibility and cost analyses and similar planning for specific projects
to implement community adjustment or economic diversification, unless as
last resort funding for those applicants which are unable to obtain
planning assistance from other sources.
(3) Planning by communities which are encroaching on military
installations.
(4) Demonstration planning activities intended to evolve new
planning techniques for impacted communities.
(5) Any planning activity proposed to supplement or replace planning
that has been or is being assisted by the DoD Sec. 2391(b) adjustment
planning program.
(6) Any other planning activity the purpose of which is not
demonstrably in direct response to a DOD-related impact triggered by one
or more of the four criteria specified in paragraph (a)(2) of this
section.
(f) Threshold requirements. No application will qualify for funding
unless it meets the following requirements:
(1) Verification by HUD that the applicant is a unit of general
government in a nonentitlement area.
(2) Verification by HUD and DoD that a triggering event described in
paragraph (a)(2) of this section has occurred or will occur.
(3) With respect to communities affected by the 49 base closings and
28 realignments listed by the 1991 Base Closure and Realignment
Commission, verification by DoD that it has provided no prior funding
and that the applicant may benefit from start-up planning assistance
from HUD.
(4) Determination by HUD that the proposed planning activities are
eligible.
(5) Determination by HUD that the submission requirements in
paragraph (h) of this section have been satisfied.
(g) Qualifying factors. HUD will make funding decisions on qualified
applications on the basis of the factors listed below, in the order of
such applications received, while program funds remain available. HUD
will also request and consider advise from DoD's Office of Economic
Assistance concerning the relative merits of each application.
(1) The adequacy of the applicant's initial assessment of actual or
probable impacts on the community and the surrounding area;
(2) The adequacy and appropriateness of the start-up planning
envisioned by the applicant in response to the impacts;
(3) The type, extent, and adequacy of coordination that the
applicant has achieved, or plans to achieve, in order to undertake
planning for community adjustment and economic diversification.
(4) The cost-effectiveness of the proposed budget to carry out the
planning work envisioned by the applicant;
(5) The capability of the organization the applicant proposes to do
the planning;
(6) The credentials and experience of the key staff the applicant
proposes to do the planning;
(7) The presence of significant private sector impact, as measured
by the
[[Page 70]]
extent to which the DoD-generated impact is projected to decrease or
increase the employment base by 10% or more;
(8) The presence of significant public sector impact, as measured by
the extent to which the DoD-generated impact is projected to decrease or
increase the applicant's capital and operating budgets for the next
fiscal year by 10% or more;
(9) The degree of urgency, to the extent that a suddenly announced
action, e.g. a plant closing, is officially scheduled to occur within a
year of the date of application.
(h) Submission requirements. Applicants may submit applications at
any time to: Director, Office of Technical Assistance, room 7214, 451
Seventh Street, SW., Washington, DC 20410. Each application (an original
and three copies) shall include the following:
(1) The Standard Form SF-424 as a face sheet, signed and dated by a
person authorized to represent and contractually or otherwise commit the
applicant;
(2) A concise title and brief abstract of the proposed planning
work, including the total cost;
(3) A narrative that:
(i) Documents one or more of the triggering events described in
paragraph (a)(2) of this section that qualifies the applicant to apply
for planning assistance for community adjustments and economic
diversification;
(ii) Provides an initial assessment of actual or probable impacts on
the applicant community and the surrounding area;
(iii) Provides an initial assessment of the type and extent of
start-up planning envisioned by the applicant in response to the DoD-
generated impact; and
(iv) Describes the measures by which the applicant has already
coordinated, or plans to coordinate, with the DoD Office of Economic
Assistance, the Economic Development Administration of the Department of
Commerce, the Department of Labor, any military department, or any other
appropriate Federal agency; appropriate State agencies, specifically
including the agency administering the Small Cities CDBG Program;
appropriate State-designated enterprise zones; appropriate Federal
empowerment zones and enterprise communities, when selected and
announced; appropriate other units of general local government in the
nonentitlement area; appropriate businesses, corporations, and defense
facilities concerned with impacts on the applicant community; and
homeless nonprofit organizations, with respect to title V of the Stewart
B. McKinney Act (42 U.S.C. 11411-11412), requiring the Federal property
be considered for use in assisting the homeless.
(4) A Statement of Work describing the specific project tasks
proposed to be undertaken in order to plan for community adjustment and
economic diversification activities;
(5) A proposed budget showing the estimated costs and person-days of
effort for each task, by cost categories, with supporting documentation
of costs and a justification of the person-days of effort;
(6) A description of the qualifications of the proposed technical
staff, including their names and resumes;
(7) A work plan that describes the schedule for accomplishing the
tasks described in the Statement of Work, the time needed to do each
task, and the elapsed time needed for all the tasks; and
(8) Other materials, as prescribed in the application kit; these
materials will include required certifications dealing with: Drug-Free
Workplace Requirements; Disclosure Regarding Payments to Influence
Certain Federal Transactions; and Prohibition Regarding Excessive Force.
(i) Approval procedures--(1) Acceptance. HUD's acceptance of an
application meeting the threshold requirements of paragraph (f) does not
assure a commitment to provide funding or to provide the full amount
requested. HUD may elect to negotiate both proposed tasks and budgets in
order to promote more cost-effective planning.
(2) Notification. HUD will provide notification about whether a
project will be funded, rejected, or held for further consideration by
HUD and DoD.
(3) Form of award. HUD will award funds in the form of grants.
(4) Administration. Project administration will be governed by the
terms
[[Page 71]]
of individual awards and by the following provisions of this part:
(i) Subpart A, Sec. 570.5;
(ii) Subpart E, Secs. 570.400(d), (e), (f), and (g);
(iii) Subpart J, Secs. 570.500(c), 570.501, 570.502, 570.503, and
570.509;
(iv) Subpart K, Secs. 570.601, 570.602, 570.609, 570.610, and
570.611.
The environmental review requirements of 24 CFR part 58 do not apply.
(Approved by the Office of Management and Budget under control number
2535-0084)
[59 FR 15016, Mar. 30, 1994]
Sec. 570.402 Technical assistance awards.
(a) General. (1) The purpose of the Community Development Technical
Assistance Program is to increase the effectiveness with which States,
units of general local government, and Indian tribes plan, develop, and
administer assistance under title I and section 810 of the Act. Title I
programs are the Entitlement Program (24 CFR part 570, subpart D); the
section 108 Loan Guarantee Program (24 CFR part 570, subpart M); the
Urban Development Action Grant Program (24 CFR part 570, subpart G); the
HUD-administered Small Cities Program (24 CFR part 570, subpart F); the
State-administered Program for Non-Entitlement Communities (24 CFR part
570, subpart I); the grants for Indian Tribes program (24 CFR part 571);
and the Special Purpose Grants for Insular Areas, Community Development
Work Study and Historically Black Colleges and Universities (24 CFR part
570, subpart E). The section 810 program is the Urban Homesteading
Program (24 CFR part 590).
(2) Funding under this section is awarded for the provision of
technical expertise in planning, managing or carrying out such programs
including the activities being or to be assisted thereunder and other
actions being or to be undertaken for the purpose of the program, such
as increasing the effectiveness of public service and other activities
in addressing identified needs, meeting applicable program requirements
(e.g., citizen participation, nondiscrimination, OMB Circulars),
increasing program management or capacity building skills, attracting
business or industry to CDBG assisted economic development sites or
projects, assisting eligible CDBG subrecipients such as neighborhood
nonprofits or small cities in how to obtain CDBG funding from cities and
States. The provision of technical expertise in other areas which may
have some tangential benefit or effect on a program is insufficient to
qualify for funding.
(3) Awards may be made pursuant to HUD solicitations for assistance
applications or procurement contract proposals issued in the form of a
publicly available document which invites the submission of applications
or proposals within a prescribed period of time. HUD may also enter into
agreements with other Federal agencies for awarding the technical
assistance funds:
(i) Where the Secretary determines that such funding procedures will
achieve a particular technical assistance objective more effectively and
the criteria for making the awards will be consistent with this section,
or
(ii) The transfer of funds to the other Federal agency for use under
the terms of the agreement is specifically authorized by law. The
Department will not accept or fund unsolicited proposals.
(b) Definitions. (1) Areawide planning organization (APO) means an
organization authorized by law or local agreement to undertake planning
and other activities for a metropolitan or non-metropolitan area.
(2) Technical assistance means the facilitating of skills and
knowledge in planning, developing and administering activities under
title I and section 810 of the Act in entities that may need but do not
possess such skills and knowledge, and includes assessing programs and
activities under title I.
(c) Eligible applicants. Eligible applicants for award of technical
assistance funding are:
(1) States, units of general local government, APOs, and Indian
Tribes; and
(2) Public and private non-profit or for-profit groups, including
educational institutions, qualified to provide technical assistance to
assist such governmental units to carry out the title I or Urban
Homesteading programs. An applicant group must be designated as a
technical assistance provider to a unit of government's title I program
or
[[Page 72]]
Urban Homesteading program by the chief executive officer of each unit
to be assisted, unless the assistance is limited to conferences/
workshops attended by more than one unit of government.
(d) Eligible activities. Activities eligible for technical
assistance funding include:
(1) The provision of technical or advisory services;
(2) The design and operation of training projects, such as
workshops, seminars, or conferences;
(3) The development and distribution of technical materials and
information; and
(4) Other methods of demonstrating and making available skills,
information and knowledge to assist States, units of general local
government, or Indian Tribes in planning, developing, administering or
assessing assistance under title I and Urban Homesteading programs in
which they are participating or seeking to participate.
(e) Ineligible activities. Activities for which costs are ineligible
under this section include:
(1) In the case of technical assistance for States, the cost of
carrying out the administration of the State CDBG program for non-
entitlement communities;
(2) The cost of carrying out the activities authorized under the
title I and Urban Homesteading programs, such as the provision of public
services, construction, rehabilitation, planning and administration, for
which the technical assistance is to be provided;
(3) The cost of acquiring or developing the specialized skills or
knowledge to be provided by a group funded under this section;
(4) Research activities;
(5) The cost of identifying units of governments needing assistance
(except that the cost of selecting recipients of technical assistance
under the provisions of paragraph (k) is eligible); or
(6) Activities designed primarily to benefit HUD, or to assist HUD
in carrying out the Department's responsibilities; such as research,
policy analysis of proposed legislation, training or travel of HUD
staff, or development and review of reports to the Congress.
(f) Criteria for competitive selection. In determining whether to
fund competitive applications or proposals under this section, the
Department will use the following criteria:
(1) For solicited assistance applications. The Department will use
two types of criteria for reviewing and selecting competitive assistance
applications solicited by HUD:
(i) Evaluation criteria: These criteria will be used to rank
applications according to weights which may vary with each competition:
(A) Probable effectiveness of the application in meeting needs of
localities and accomplishing project objectives;
(B) Soundness and cost-effectiveness of the proposed approach;
(C) Capacity of the applicant to carry out the proposed activities
in a timely and effective fashion;
(D) The extent to which the results may be transferable or
applicable to other title I or Urban Homesteading program participants.
(ii) Program policy criteria: These factors may be used by the
selecting official to select a range of projects that would best serve
program objectives for a particular competition:
(A) Geographic distribution;
(B) Diversity of types and sizes of applicant entities; and
(C) Diversity of methods, approaches, or kinds of projects.
The Department will publish a Notice of Fund Availability (NOFA) in the
Federal Register for each competition indicating the objective of the
technical assistance, the amount of funding available, the application
procedures, including the eligible applicants and activities to be
funded, any special conditions applicable to the solicitation, including
any requirements for a matching share or for commitments for CDBG or
other title I funding to carry out eligible activities for which the
technical assistance is to be provided, the maximum points to be awarded
each evaluation criterion for the purpose of ranking applications, and
any special factors to be considered in assigning the points to each
evaluation criterion. The Notice will also indicate which program policy
factors will be used, the impact of those factors on the selection
process, the
[[Page 73]]
justification for their use and, if appropriate, the relative priority
of each program policy factor.
(2) For competitive procurement contract bids/proposals. The
Department's criteria for review and selection of solicited bids/
proposals for procurement contracts will be described in its public
announcement of the availability of an Invitation for Bids (IFB) or a
Request for Proposals (RFP). The public notice, solicitation and award
of procurement contracts, when used to acquire technical assistance,
shall be procured in accordance with the Federal Acquisition Regulation
(48 CFR chapter 1) and the HUD Acquisition Regulation (48 CFR chapter
24).
(g) Submission procedures. Solicited assistance applications shall
be submitted in accordance with the time and place and content
requirements described in the Department's NOFA. Solicited bids/
proposals for procurement contracts shall be submitted in accordance
with the requirements in the IFB or RFP.
(h) Approval procedures--(1) Acceptance. HUD's acceptance of an
application or proposal for review does not imply a commitment to
provide funding.
(2) Notification. HUD will provide notification of whether a project
will be funded or rejected.
(3) Form of award. (i) HUD will award technical assistance funds as
a grant, cooperative agreement or procurement contract, consistent with
this section, the Federal Grant and Cooperative Agreement Act of 1977,
31 U.S.C. 6301-6308, the HUD Acquisition Regulation, and the Federal
Acquisition Regulation.
(ii) When HUD's primary purpose is the transfer of technical
assistance to assist the recipients in support of the title I or Section
810 programs, an assistance instrument (grant or cooperative agreement)
will be used. A grant instrument will be used when substantial Federal
involvement is not anticipated. A cooperative agreement will be used
when substantial Federal involvement is anticipated. When a cooperative
agreement is selected, the agreement will specify the nature of HUD's
anticipated involvement in the project.
(iii) A contract will be used when HUD's primary purpose is to
obtain a provider of technical assistance to act on the Department's
behalf. In such cases the Department will define the specific tasks to
be performed. However, nothing in this section shall preclude the
Department from awarding a procurement contract in any other case when
it is determined to be in the Department's best interests.
(4) Administration. Project administration will be governed by the
terms of individual awards and relevant regulations. As a general rule,
proposals will be funded to operate for one to two years, and periodic
and final reports will be required.
(i) Environmental and intergovernmental review. The requirements for
Environmental Reviews and Intergovernmental Reviews do not apply to
technical assistance awards.
(j) Selection of recipients of technical assistance. Where under the
terms of the funding award the recipient of the funding is to select the
recipients of the technical assistance to be provided, the funding
recipient shall publish, and publicly make available to potential
technical assistance recipients, the availability of such assistance and
the specific criteria to be used for the selection of the recipients to
be assisted. Selected recipients must be entities participating or
planning to participate in the title I or Urban Homesteading programs or
activities for which the technical assistance is to be provided.
(Approved by the Office of Management and Budget under control numbers
2535-0085 and 2535-0084)
[56 FR 41938, Aug. 26, 1991]
Sec. 570.403 New Communities.
The regulations for New Communities grants in this section, that
were effective immediately before April 19, 1996, will continue to
govern the rights and obligations of recipients and HUD with respect to
grants under the New Communities program.
[61 FR 11476, Mar. 20, 1996]
[[Page 74]]
Sec. 570.404 Historically Black colleges and universities program.
(a) General. Grants under this section will be awarded to
historically Black colleges and universities to expand their role and
effectiveness in addressing community development needs, including
neighborhood revitalization, housing and economic development in their
localities, consistent with the purposes of title I of the Housing and
Community Development Act of 1974.
(b) Eligible applicants. Only historically Black colleges and
universities (as determined by the Department of Education in accordance
with that Department's responsibilities under Executive Order 12677,
dated April 28, 1989) are eligible to submit applications.
(c) Eligible activities. Activities that may be funded under this
section are those eligible under Secs. 570.201 through 570.207, provided
that any activity which is required by State or local law to be carried
out by a governmental entity may not be funded under this section.
Notwithstanding the provisions of Secs. 570.200(g), grants under this
section are not subject to the 20 percent limitation on planning and
program administration costs, as defined in Secs. 570.205 and 570.206,
respectively.
(d) Applications. Applications will only be accepted from eligible
applicants in response to a Request for Applications (RFA) which will be
issued either concurrently with or after the publication of a Notice of
Funding Availability (NOFA) published in the Federal Register. The NOFA
will describe any special objectives sought to be achieved by the
funding to be provided, including any limitations on the type of
activities to be funded to achieve the objectives, points to be awarded
to each of the selection criteria listed in paragraph (e) of this
section, and any special factors to be evaluated in assigning points
under the selection factors to achieve the stated objectives. The NOFA
will also state the deadline for the submission of applications, the
total funding available for the competition, and the maximum amount of
individual grants. The NOFA will include further information and
instructions for the submission of acceptable applications to HUD.
(e) Selection criteria. Each application submitted under this
section will be evaluated by HUD using the following criteria:
(1) The extent to which the applicant addresses the objectives
published in the NOFA and the RFA.
(2) The extent to which the applicant demonstrates to HUD that the
proposed activities will have a substantial impact in achieving the
stated objectives.
(3) The special needs of the applicant or locality to be met in
carrying out the proposed activities, particularly with respect to
benefiting low- and moderate-income persons.
(4) The feasibility of the proposed activities, i.e., their
technical and financial feasibility, for achieving the stated
objectives, including local support for activities proposed to be
carried out in the locality and any matching funds proposed to be
provided from other sources.
(5) The capability of the applicant to carry out satisfactorily the
proposed activities in a timely fashion, including satisfactory
performance in carrying out any previous HUD-assisted projects or
activities.
(6) In the case of proposals/projects of approximately equal merit,
HUD retains the right to exercise discretion in selecting projects in a
manner that would best serve the program objectives, with consideration
given to the needs of localities, types of activities proposed, an
equitable geographical distribution, and program balance.
(f) Certifications. (1) Certifications required to be submitted by
applicants shall be as prescribed in the RFA packages.
(2) In the absence of independent evidence which tends to challenge
in a substantial manner the certifications made by the applicant, the
required certifications will be accepted by HUD. If independent evidence
is available to HUD, however, HUD may require further information or
assurances to be submitted in order to determine whether the applicant's
certifications are satisfactory.
(g) Multiyear funding commitments. (1) HUD may make funding
commitments
[[Page 75]]
of up to five years, subject to the availability of appropriations. In
determining the number of years for which a commitment will be made, HUD
will consider the nature of the activities proposed, the capability of
the recipient to carry out the proposed activities, and year-by-year
funding requirements.
(2) Awards will be made on the basis of a 12-month period of
performance. Once a recipient has been selected for a multi-year award,
that recipient would not be required to compete in a competition for the
subsequent funding years covered by the multi-year funding commitment.
Recipients performing satisfactorily will be invited to submit
applications for subsequent funding years in accordance with
requirements outlined in the Notice of Funding Availability and Request
for Grant Application. Subject to the availability of appropriations,
subsequent-year funding will be determined by the following:
(i) The recipient has submitted all reports required for the
previous year or years in a timely, complete and satisfactory manner in
accordance with the terms and conditions of the grant.
(ii) The recipient has submitted sufficient evidence to demonstrate
successful completion of the tasks and deliverables of the grant. A
determination of satisfactory performance will be made by HUD based upon
evidence of task completions provided by the recipient, along with data
from client feedback and site evaluations.
(iii) The recipient has submitted the next annual application.
(iv) The subsequent year's application is consistent with that
described in the original application.
(3) Recipients participating in multi-year funding projects are not
eligible to apply for additional grants for the same project or activity
subject area for which they are receiving funds. Recipients are,
however, eligible to compete for grants for other project or activity
areas.
(h) Selection and notification. The HUD decision to approve,
disapprove or conditionally approve an application shall be communicated
in writing to the applicant.
(i) Environmental and intergovernmental review. The requirements for
Intergovernmental Reviews do not apply to HBCU awards. HUD will conduct
an environmental review in accordance with 24 CFR part 50 before giving
its approval to a proposal.
[56 FR 18968, Apr. 24, 1991]
Sec. 570.405 The insular areas.
(a) Eligible applicants. Eligible applicants are Guam, the Virgin
Islands, American Samoa, the Trust Territory of the Pacific Islands, and
the Commonwealth of the Northern Mariana Islands.
(b) Threshold requirements. HUD shall review each grantee's progress
on outstanding grants made under this section based on the grantee's
performance report, the timeliness of close-outs and compliance with
fund management requirements and pertinent regulations, taking into
consideration the size of the grant and the degree and complexity of the
program. If HUD determines upon such review that the applicant does not
have the capacity effectively to administer a new grant, or a portion of
a new grant, in addition to grants currently under administration, the
applicant shall not be invited to submit an application for the current
year's funding.
(c) Previous audit findings and outstanding monetary obligations.
HUD shall not accept for review an application from an applicant that
has either an outstanding audit finding for any HUD program, or an
outstanding monetary obligation to HUD that is in arrears, or for which
a repayment schedule has not been established and agreed to. The Field
Office manager may waive this restriction if he or she finds that the
applicant has made a good faith effort to clear the audit. In no
instance, however, shall a waiver be provided when funds are due HUD,
unless a satisfactory arrangement for repayment of the debt has been
made and payments are current.
(d) Criteria for funding. The Secretary shall establish, for each
fiscal year, an amount for which eligible applicants may apply. Grant
amounts will be based on population of the applicant and its performance
in previous years. In determining performance, HUD will
[[Page 76]]
consider program achievements and the applicant's effectiveness in using
program funds. Effectiveness in using program funds shall be measured by
reviewing audit, monitoring and performance reports.
(e) Application and performance reporting. Application and
performance reporting requirements are as follows:
(1) Applicants must submit applications within 90 days of the
notification of the grant amount from HUD.
(2) Applicants shall prepare and publish or post a proposed
application in accordance with the citizen participation requirements of
paragraph (h) of this section.
(3) Applicants shall submit to HUD a final application containing
its community development objectives and activities. This application
shall be submitted to the appropriate HUD office, together with the
required certifications, in a form prescribed by HUD.
(4) Grant recipients must submit to HUD an annual performance report
on progress achieved on previously funded grants. Grant recipients must
submit the report at a time and in a format determined by HUD. The
report should be made available to citizens in accordance with the
requirements of paragraph (h)(1)(iv) of this section.
(f) Costs incurred by the applicant. (1) Notwithstanding any other
provision of this part, HUD will not reimburse or recognize any costs
incurred by an applicant before submission of the application to HUD.
(2) Normally, HUD will not reimburse or recognize costs incurred
before HUD approval of the application for funding. However, under
unusual circumstances, the Field office manager may consider and
conditionally approve written requests to recognize and reimburse costs
that will be incurred after submission of the application but before it
is approved where failure to do so would impose undue or unreasonable
hardship on the applicant. Conditional approvals will be made only
before the costs are incurred and where the conditions for release of
funds have been met in accordance with 24 CFR 58.22, and with the
understanding that HUD has no obligation whatsoever to approve the
application or to reimburse the applicant should the application be
disapproved.
(g) Criteria for conditional approval. HUD may approve a grant
subject to specified conditions. In any such case, the obligation and
utilization of funds may be restricted. The reasons for the conditional
appproval and the actions necessary to remove the conditions shall be
specified. Failure of the applicant to satisfy the conditions may result
in a termination of the grant. A conditional approval may be granted
under any of the following circumstances:
(1) When local environmental reviews under 24 CFR part 58 have not
yet been completed;
(2) To ensure that actual provision of other resources required to
complete the proposed activities will be available within a reasonable
period of time;
(3) To ensure that a project can be completed within its estimated
costs;
(4) Where the grantee is required to satisfy an outstanding debt due
to HUD under a payment plan executed between the grantee and the
Department;
(5) Pending resolution of problems related to specific projects or
the capability of the grantee to obtain resources needed to carry out,
operate or maintain the project; or
(6) Pending approval of site and neighborhood standards for proposed
housing projects.
(h) Citizen participation. (1) The applicant shall provide for
appropriate citizen participation in the application and amendment
process. The applicant must, at least, do each of the following:
(i) Furnish citizens with information concerning the amount of funds
available for community development and housing activities and the range
of activities that may be undertaken, including the estimated amount
proposed to be used for activities that will benefit persons of low and
moderate income, and the plans of the grantee for minimizing
displacement of persons as a result of activities assisted with such
funds and to assist persons actually displaced;
(ii) Hold one or more public hearings (scheduled at convenient times
and places) to obtain the views of citizens on community development and
housing needs;
(iii) Develop and publish or post the community development
statement in
[[Page 77]]
such a manner as to afford affected citizens an opportunity to examine
its contents and to submit comments;
(iv) Afford citizens an opportunity to review and comment on the
applicant's performance under any community development block grant.
(2) Before submitting the application to HUD, the applicant shall
certify that it has:
(i) Met the requirements of paragraph (h)(1) of this section;
(ii) Considered any comments and views expressed by citizens; and
(iii) If appropriate, modified the application accordingly and made
the modified application available to citizens.
[50 FR 37526, Sept. 16, 1985, as amended at 60 FR 56914, Nov. 9, 1995;
61 FR 32269, June 21, 1996]
Effective Date Note: At 61 FR 32269, June 21, 1996,
Sec. 570.405(e)(4) was revised. This section contains information
collection and recordkeeping requirements and will not become effective
until approval has been given by the Office of Management and Budget.
Sec. 570.406 Formula miscalculation grants.
(a) General. Grants under this section will be made to States and
units of general local government determined by the Secretary to have
received insufficient amounts under section 106 of the Act as a result
of a miscalculation of its share of funds under such section.
(b) Application. Since the grant is to correct a technical error in
the formula amount which should have been awarded under section 106, no
application is required.
(c) Use of funds. The use of funds shall be subject to the
requirements, certifications and Final Statement otherwise applicable to
the grantee's section 106 grant funds provided for the fiscal year in
which the grant under this section is made.
(d) Unavailability of funds. If sufficient funds are not available
to make the grant in the fiscal year in which the Secretary makes the
determination required in paragraph (a) of this section, the grant will
be made, subject to the availability of appropriations for this subpart,
in the next fiscal year.
[56 FR 41940, Aug. 26, 1991]
Sec. 570.410 Special Projects Program.
(a) Program objectives. The Community Development Special Projects
Program enables HUD to award grants to States and units of general local
government, subject to availability of funds, for special projects that
address community development activities or techniques consistent with
the purposes of title I of the Housing and Community Development Act of
1974, as amended.
(b) Eligible applicants. Only States and units of general local
government (as defined in Sec. 570.3) are eligible to submit proposals
or applications for Special Projects grants. Proposals or applications
may be submitted by eligible applicants on behalf of themselves, on
behalf of other eligible applicants, or jointly by more than one
eligible applicant.
(c) Eligible activities. (1) Project activities that may be funded
under this section are those eligible under 24 CFR part 570--Community
Development Block Grants, subpart C--Eligible Activities. No more than
twenty (20) percent of the funds awarded under this section may be used
for overall program administration or planning activities eligible under
Secs. 570.205 and 570.206.
(2) The amount of funds awarded to a unit of general local
government under this section that may be used for public service
activities is limited. The applicant may use whichever of the following
methods of calculation yields the highest amount:
(i) Fifteen percent of the special projects grant;
(ii) An amount equal to 15 percent of the sum of special project
grant funds plus grant funds received for the same federal fiscal year
under the Entitlement or State program, less the amount of the
Entitlement or State program grant funds which will be used for other
public service activities; or
(iii) In the case of an applicant that is an Entitlement grantee
subject to the exception in Sec. 570.201(e)(3), an amount equal to the
amount of the Entitlement grant funds received for the same federal
fiscal year that may be used for public service activities, less the
amount of the Entitlement grant
[[Page 78]]
funds which will be used for other public service activities.
(d) Proposals. Eligible applicants may submit unsolicited proposals.
HUD may ask proposers to submit additional information if necessary for
evaluation. There is no HUD commitment to fund any unsolicited proposal
regardless of its merit. If HUD elects to fund a proposal, it will
request that the proposer submit a formal application.
(1) Three (3) copies of a proposal must be sent to the address
stated in (3), below. Each proposal submitted pursuant to this section
shall be evaluated by HUD using the following criteria:
(i) The extent to which the proposal satisfies purposes of this
title and addresses a special community development need.
(ii) The eligibility of proposed activities.
(iii) The feasibility of the project; i.e., its technical and
financial feasibility for achieving the goals stated in the proposal.
(iv) The capacity of the proposer to carry out satisfactorily the
proposed project activities.
(2) If the proposal is submitted jointly by, or on behalf of, more
than one eligible applicant, the proposal must:
(i) Contain a cooperation agreement signed by the Chief Executive
Officer of each participating jurisdiction which specifies concurrence
with the purpose and intent of the proposal and intent to comply with
grant requirements;
(ii) Address problems faced by all jurisdictions listed in the
proposal; and,
(iii) Be submitted by the lead jurisdiction. The lead jurisdiction
shall be responsible for overall coordination and administration of the
project.
(3) Unsolicited proposals may be submitted any time during the year.
However, if there are no funds available for such proposals, they will
be returned without review. Proposals shall contain a Standard Form 424
signed by the Chief Executive Officer of the State or unit of general
local government. They shall be sent to: Department of Housing and Urban
Development, Office of Community Planning and Development, 451 Seventh
Street, SW., Washington, DC 20410, Attention: Director, Office of
Program Policy Development, CPP.
(e) Applications. Applications are accepted only from eligible
applicants in response to letters of solicitations, or to competition
announcements published in Notices in the Federal Register. Submission
requirements and criteria to be used by HUD to evaluate solicited
applications and instructions regarding their submission shall be stated
in each Notice or letter.
(f) Certifications. Applications shall contain the certifications
required by 24 CFR 570.303, except that regarding citizen participation:
The applicant must certify that citizens likely to be affected by the
project, particularly low- and moderate-income persons, have been
provided an opportunity to comment on the proposal or application. If
the application is submitted jointly, or on behalf of more than one
jurisdiction, each jurisdiction shall submit the required
certifications.
(g) Selection and notification. The HUD decision to approve,
disapprove or conditionally approve a proposal or application shall be
communicated in writing to the applicant.
[47 FR 30054, July 12, 1982, as amended at 54 FR 31672, Aug. 1, 1989; 55
FR 29309, July 18, 1990; 56 FR 56127, Oct. 31, 1991]
Sec. 570.411 Joint Community Development Program.
(a) General. Grants under this section will be awarded to
institutions of higher education or to States and local governments
applying jointly with institutions of higher education. Institutions of
higher education must demonstrate the capacity to carry out activities
under title I of the Housing and Community Development Act of 1974. For
ease of reference, this program may be called the Joint CD Program.
(b) Definitions.
Demonstrated capacity to carry out eligible activities under title I
means recent satisfactory activity by the institution of higher
education's staff designated to work on the program, including
subcontractors and consultants firmly committed to work on the proposed
activities, in title I programs or similar programs without the need for
oversight by a State or unit of general local government.
Institution of higher education means a college or university
granting 4-year
[[Page 79]]
degrees and accredited by a national or regional accrediting agency
recognized by the U.S. Department of Education.
(c) Eligible applicants. Institutions of higher education or States
and units of general local government jointly with institutions of
higher education may apply. Institutions of higher education with
demonstrated capacity to carry out eligible activities under title I may
apply on their own, without the joint participation of a State or unit
of general local government. States or unit of general local governments
must file jointly with an institution of higher education. For these
approved joint applications, the grant will be made to the State or unit
of general local government and the institution of higher education
jointly. If an eligible applicant is an institution of higher education,
it will not be funded more than once for the same kinds of activities.
These grantees may not receive funding under a subsequent NOFA if it has
the same program objectives as the one under which the grantee
previously received funding. However, a State or unit of general local
government is eligible to apply if it files jointly with a different
institution of higher education in each NOFA cycle. HUD may further
limit the type of eligible applicant to be funded. Any such limitations
will be contained in the Notice of Funding Availability described below
in paragraph (h) of this section.
(d) Role of participants in joint applications. An institution of
higher education and a State or unit of general local government may
carry out eligible activities approved in joint applications. Where
there are joint applicants, the grant will be made to both and both will
be responsible for oversight, compliance, and performance. The
application will have to clearly delineate the role of each applicant in
the joint application. Any funding sanctions or other remedial actions
by HUD for noncompliance or nonperformance, whether by the State or unit
of general local government or by the institution of higher education,
shall be taken against both grantees.
(e) Eligible activities. Activities that may be funded under this
section are those eligible under 24 CFR part 570--Community Development
Block Grants, subpart C--Eligible Activities. These activities may be
designed to assist residents of colonias, as defined in section 916(d)
of the Cranston-Gonzalez National Affordable Housing Act (42 U.S.C. 5306
note), to improve living conditions and standards within colonias. HUD
may limit the activities to be funded. Any such limitations will be
contained in the Notice of Funding Availability described in paragraph
(h) of this section.
(f) Applications. Applications will only be accepted from eligible
applicants in response to a publication of a Notice of Funding
Availability (NOFA) published by HUD in the Federal Register.
(g) Local approval. (1) Where an institution of higher education is
the applicant, each unit of general local government that is an
entitlement jurisdiction where an activity is to take place must approve
the activity and certify that the activity is consistent with its
Consolidated Plan.
(2) Where a State is the joint applicant and it proposes to carry
out an activity within the jurisdiction of one or more units of general
local government, then each such unit must approve the activity and
state that the activity is consistent with its Consolidated Plan.
(3) These approvals and findings must accompany each application and
may take the form of a letter by the chief executive officer of each
unit of general local government affected or a resolution of the
legislative body of each such unit of general local government.
(h) NOFA contents. The NOFA will describe any special objectives
sought to be achieved by the funding to be provided, including any
limitations on the type of activities to be funded to achieve the
objectives, any limitations on the type of eligible applicants, and
points to be awarded to each of the selection criteria and any special
factors to be evaluated in assigning points under the selection criteria
to achieve the stated objectives. The NOFA will also state the deadline
for the submission of applications, the total funding available for the
competition, the period of performance and the maximum and minimum
amount of individual grants. The NOFA will also state which
[[Page 80]]
of the various possible levels of competition HUD will use: national
and/or regional or entitlement areas vs. non-entitlement areas; and
States or units of general local government vs. institutions of higher
education vs. institutions of higher education with a demonstrated
capacity. The NOFA will include further information and instructions for
the submission of acceptable applications to HUD.
(i) Selection criteria. Each application submitted under this
section will be evaluated by HUD using the following criteria:
(1) The extent to which the applicant addresses the objectives
published in the NOFA and demonstrates how the proposed activities will
have a substantial impact in achieving the objectives.
(2) The extent of the needs to be addressed by the proposed
activities, particularly with respect to benefiting low- and moderate-
income persons and residents of colonias, where applicable.
(3) The feasibility of the proposed activities, i.e., their
technical and financial feasibility, for achieving the stated
objectives.
(4) The capability of the applicant to carry out satisfactorily the
proposed activities in a timely fashion, including satisfactory
performance in carrying out any previous HUD-assisted projects or
activities.
(5) The extent of commitment to fair housing and equal opportunity,
as indicated by such factors as previous HUD monitoring/compliance
activity, actions to promote minority- and women-owned business
enterprise, affirmatively furthering fair housing issues, and
nondiscriminatory delivery of services.
(j) Selection discretion. HUD retains the right to exercise
discretion in selecting projects in a manner that would best serve the
program objectives, with consideration given to the needs of States and
units of general local government and institutions of higher education,
types of activities proposed, an equitable geographical distribution,
and program balance. The NOFA will state whether HUD will use this
discretion in any specific competition.
(k) Certifications. (1) Certifications, including those indicating
that applicants have adhered to all civil rights requirements under
subpart K of this part and the Americans with Disabilities Act of 1990,
required to be submitted by applicants shall be as prescribed in the
NOFA.
(2) In the absence of independent evidence which tends to challenge
in a substantial manner the certifications made by the applicant, the
required certifications will be accepted by HUD. However, if independent
evidence is available, HUD may require further information or assurances
to be submitted in order to determine whether the applicant's
certifications are satisfactory.
(l) Consolidated plan. An applicant that proposes any housing
activities as part of its application will be required to submit a
certification that these activities are consistent with the Consolidated
Plan of the jurisdiction to be served.
(m) Citizen participation. The citizen participation requirements of
Secs. 570.301, 570.431, 570.485(c) and 570.486(a) are modified to
require the following: The applicant must certify that citizens likely
to be affected by the project regardless of race, color, creed, sex,
national origin, familial status, or handicap, particularly low- and
moderate-income persons, have been provided an opportunity to comment on
the proposal or application.
(n) Environmental and Intergovernmental Review. The requirements for
Intergovernmental Reviews do not apply to these awards. When required,
an environmental review in accordance with 24 CFR part 58 must be
carried out by the State or unit of general local government when it is
the applicant. HUD will conduct any required environmental review when
an institution of higher education is the applicant.
(Approved by the Office of Management and Budget under control number
2535-0084)
[60 FR 15837, Mar. 27, 1995]
Sec. 570.415 Community Development Work Study Program.
(a) Applicability and objectives. HUD makes grants under CDWSP to
institutions of higher education, either directly or through areawide
planning
[[Page 81]]
organizations or States, for the purpose of providing assistance to
economically disadvantaged and minority students who participate in a
work study program while enrolled in full-time graduate programs in
community and economic development, community planning, and community
management. The primary objectives of the program are to attract
economically disadvantaged and minority students to careers in community
and economic development, community planning, and community management,
and to provide a cadre of well-qualified professionals to plan,
implement and administer local community development programs.
(b) Definitions. The following definitions apply to CDWSP:
Applicant means an institution of higher education, a State, or an
areawide planning organization that submits an application for
assistance under CDWSP.
Areawide planning organization (APO) means an organization
authorized by law or by interlocal agreement to undertake planning and
other activities for a metropolitan or nonmetropolitan area. For an
organization operating in a nonmetropolitan area to be considered an
APO, its jurisdiction must cover at least one county.
CDWSP means the Community Development Work Study Program.
Community building means community and economic development,
community planning, community management, land use and housing
activities.
Community building academic program or academic program means a
graduate degree program whose purpose and focus is to educate students
in community building. ``Community building academic program'' or
``academic program'' includes but is not limited to graduate degree
programs in community and economic development, community planning,
community management, public administration, public policy, urban
economics, urban management, and urban planning. ``Community building
academic program'' or ``academic program'' excludes social and
humanistic fields such as law, economics (except for urban economics),
education and history. ``Community building academic program'' or
``academic program'' excludes joint degree programs except where both
joint degree fields have the purpose and focus of educating students in
community building.
Economically disadvantaged and minority students means students who
satisfy all applicable guidelines established at the participating
institution of higher education to measure financial need for academic
scholarship or loan assistance, including, but not limited to, students
who are Black, American Indian/Alaskan Native, Hispanic, or Asian/
Pacific Island, and including students with disabilities.
Institution of higher education means a public or private
educational institution that offers a community building academic
program and that is accredited by an accrediting agency or association
recognized by the Secretary of Education under 34 CFR part 602.
Recipient means an approved applicant that executes a grant
agreement with HUD.
Student means a student enrolled in an eligible full-time academic
program. He/she must be a first-year student in a two-year graduate
program. Students enrolled in Ph.D. programs are ineligible.
Student with disabilities means a student who meets the definition
of ``person with disabilities'' in the Americans with Disabilities Act
of 1990.
(c) Assistance provided--(1) Types of assistance available. HUD
provides funding in the form of grants to recipients who make assistance
available to eligible students. Grants are provided to cover the costs
of student assistance and for an administrative allowance.
(i) Student assistance. Grants are made to recipients to cover the
costs of assistance provided to eligible students in the form of student
stipends, tuition support, and additional support.
(A) Student stipend. The amount of the student stipend is based upon
the prevailing hourly rate for initial entry positions in community
building and the number of hours worked by the student at the work
placement assignment, except that the hourly rate used should be
sufficiently high to allow a student to earn the full stipend without
working over 20 hours per week during the school year and 40 hours per
[[Page 82]]
week during the summer. The amount of the stipend the student receives
may not exceed the actual amount earned, up to $9,000 per year.
(B) Tuition support and additional support. The amount of support
for tuition, fees, books, and travel related to the academic program,
workplace assignment or conferences may not exceed actual costs incurred
or $5,000 per year, whichever is higher. The conferences are limited to
those dealing with community building, sponsored by professional
organizations.
(ii) Administrative allowance. HUD provides an allowance to
recipients to cover the administrative costs of the program. The
administrative allowance is $1,000 per year for each student
participating in the program.
(2) Number of students assisted. The minimum number of students that
may be assisted is three students per participating institution of
higher education. If an APO or State receives assistance for a program
that is conducted by two or more institutions of higher education, each
participating institution must have a minimum of three students in the
program. The maximum number of students that may be assisted under CDWSP
is five students per participating institution of higher education.
(d) Recipient eligibility and responsibilities--(1) Recipient
eligibility. (i) The following organizations are eligible to apply for
assistance under the program:
(A) Institutions of higher education. Institutions of higher
education offering a community building academic program are eligible
for assistance under CDWSP.
(B) Areawide planning organizations and States. An APO or a State
may apply for assistance for a program to be conducted by two or more
institutions of higher education. Institutions participating in an APO
program must be located within the particular area that is served by the
APO and is identified by the State law or interlocal agreement creating
the APO. Institutions of higher education participating in a State
program must be located within the State.
(ii) To be eligible in future funding competitions for CDWSP,
recipients are required to maintain a 50-percent rate of graduation from
a CDWSP-funded academic program.
(iii) If an institution of higher education that submits an
individual application is also included in the application of an APO or
State, then the separate individual application of the institution of
higher education will be disregarded. Additionally, if an institution of
higher education is included in the application of both an APO and a
State, then the references to the institution in the application of the
State will be stricken. The State's application will then be ineligible
if fewer than two institutions of higher education remain as
participants in the State's application.
(2) Recipient responsibilities. (i) The recipient is responsible for
the administration of the program, for compliance with all program
requirements, and for the coordination of program activities carried out
by the work placement agencies and (if the recipient is an APO or
State), by the participating institutions of higher education. The
recipient must:
(A) Recruit and select students for participation in CDWSP. The
recipient shall establish recruitment procedures that identify
economically disadvantaged and minority students pursuing careers in
community building, and make such students aware of the availability of
assistance opportunities. Students must be selected before the beginning
of the semester for which funding has been provided.
(B) Recruit and select work placement agencies, and negotiate and
execute agreements covering each work placement assignment.
(C) Refer participating students to work placement agencies and
assist students in the selection of work placement assignments.
(D) Assign sufficient staff to administer and supervise the program
on a day-to-day basis, and, where the recipient is an APO or State, to
monitor the activities of the work study coordinating committee.
(E) Encourage participating students to obtain employment for a
minimum of two years after graduation with a
[[Page 83]]
unit of State or local government, Indian tribe or nonprofit
organization engaged in community building.
(F) Maintain records by racial and ethnic categories for each
economically disadvantaged student enrolled in the CDWSP.
(G) Keep records and make such reports as HUD may require.
(H) Comply with all other applicable Federal requirements.
(ii) If the recipient is an APO or State, the recipient must also:
(A) Establish a committee to coordinate activities between program
participants, to advise the recipient on policy matters, to assist the
recipient in ranking and selection of participating students, and to
review disputes concerning compliance with program agreements and
performance. The committee shall be chaired by a representative of the
recipient, and shall include representatives of the participating
institutions of higher education, work placement agencies, students, and
HUD.
(B) Allocate the assistance awarded under the program to the
participating institutions of higher education. APOs and States may not
make fractional awards to institutions. (E.g., awards to institutions
must assist a fixed number of students and not, for example, 6.5
students.)
(e) Institutions of higher education. Institutions of higher
education participating in a program are responsible for providing its
educational component. Where the recipient is an APO or State, the
institution of higher education shall assist the APO or State in the
administration and operation of the program. Responsibilities include
assisting the recipient in the selection of students by determining the
eligibility of students for the academic program, and by making the
analysis of students under the financial need guidelines established by
the institution. All institutions of higher education must comply with
other applicable Federal requirements.
(f) Work placement agencies eligibility and responsibilities--(1)
Eligibility. To be eligible to participate in the CDWSP, the work
placement agencies must be involved in community building and must be an
agency of a State or unit of local government, an APO, an Indian tribe,
or a nonprofit organization.
(2) Responsibilities. Work placement agencies must:
(i) Provide practical experience and training in community building.
(ii) Consult with the institution of higher education (and the APO
or State, where an APO or State is the recipient) to ensure that the
student's work placement assignment provides the requisite experience
and training to meet the required number of work hours specified in the
student work placement agreement.
(iii) Provide a sufficient number of work placement assignments to
provide participating students with a wide choice of work experience.
(iv) Require each student to devote 12-20 hours per week during the
regular school year, or 35-40 hours a week during the summer, to the
work placement assignment. Work placement agencies may provide
flexibility in the work period, if such a schedule is consistent with
the requirements of the student's academic program. However, a
participating student may receive stipend payment only during the period
that the student is placed with the work placement agency.
(v) Comply with all other applicable Federal requirements.
(vi) Maintain such records as HUD may require.
(g) Student eligibility and responsibilities. Students apply
directly to recipients receiving grants under CDWSP. Students shall be
selected in accordance with the following eligibility requirements and
selection procedures.
(1) Eligibility. To be eligible for CDWSP, the student:
(i) Must satisfy all applicable guidelines established at the
participating institution of higher education to measure financial need
for academic scholarship or loan assistance.
(ii) Must be a full-time student enrolled in the first year of
graduate study in a community building academic program at the
participating institution of higher education. Individuals enrolled in
doctoral programs are ineligible.
(iii) Must demonstrate an ability to maintain a satisfactory level
of performance in the community building
[[Page 84]]
academic program and in work placement assignments, and to comply with
the professional standards set by the recipient and the work placement
agencies.
(iv) May not have previously participated in CDWSP.
(v) Must provide appropriate written evidence that he or she is
lawfully admitted for permanent residence in the United States, if the
individual is not a citizen.
(2) Selection. In selecting among eligible students, the recipient
must consider the extent to which each student has demonstrated:
(i) Financial need under the applicable financial need guidelines
established at the institution of higher education;
(ii) An interest in, and commitment to, a professional career in
community building;
(iii) The ability satisfactorily to complete academic and work
placement responsibilities under CDWSP.
(3) Student responsibilities. Participating students must:
(i) Enroll in a two-year program. A student's academic and work
placement responsibilities include: Full-time enrollment in an approved
academic program; maintenance of a satisfactory level of performance in
the community building academic program and in work placement
assignments; and compliance with the professional conduct standards set
by the recipient and the work placement agency. A satisfactory level of
academic performance consists of maintaining a B average. A student's
participation in CDWSP shall be terminated for failure to meet these
responsibilities and standards. If a student's participation is
terminated, the student is ineligible for further CDWSP assistance.
(ii) Agree to make a good-faith effort to obtain employment in
community building with a unit of State or local government, an Indian
tribe, or a nonprofit organization. The term of employment should be for
at least two consecutive years following graduation from the academic
program. If the student does not obtain such employment, the student is
not required to repay the assistance received.
(h) Notice of fund availability. HUD will solicit grant applications
from institutions of higher education, APO's and States by publishing a
notice of fund availability in the Federal Register. The notice will:
(1) Explain how application packages (requests for grant
applications) providing specific application requirements and guidance
may be obtained;
(2) Specify the place for filing completed applications, and the
date by which the applications must be physically received at that
location;
(3) State the amount of funding available under the notice;
(4) Provide other appropriate program information and guidance.
(i) Recipient selection process. The selection process for
applications under CDWSP consists of a threshold review, ranking of
eligible applications and final selection.
(1) Threshold. To be eligible for ranking, applicants must meet each
of the following threshold requirements:
(i) The application must be filed in the application form prescribed
by HUD, and within the required time periods;
(ii) The applicant must demonstrate that it is eligible to
participate;
(iii) The applicant must demonstrate that each institution of higher
education participating in the program as a recipient has the required
academic programs and faculty to carry out its activities under CDWSP.
Each work placement agency must have the required staff and community
building work study program to carry out its activities under CDWSP.
(2) Rating. All applications that meet the threshold requirements
for applicant eligibility will be rated based on the following selection
criteria:
(i) Quality of academic program. The quality of the academic program
offered by the institution of higher education, including without
limitation the:
(A) Quality of course offerings;
(B) Appropriateness of course offerings for preparing students for
careers in community building; and
(C) Qualifications of faculty and percentage of their time devoted
to teaching and research in community building.
[[Page 85]]
(ii) Rates of graduation. The rates of graduation of students
previously enrolled in a community building academic program at the
institution of higher education, specifically including (where
applicable) graduation rates from any previously funded CDWSP academic
programs or similar programs.
(iii) Extent of financial commitment. The commitment and ability of
the institution of higher education to assure that CDWSP students will
receive sufficient financial assistance (including loans, where
necessary) above and beyond the CDWSP funding to complete their academic
program in a timely manner and without working in excess of 20 hours per
week during the school year.
(iv) Quality of work placement assignments. The extent to which the
participating students will receive a sufficient number and variety of
work placement assignments, the assignments will provide practical and
useful experience to students participating in the program, and the
assignments will further the participating students' preparation for
professional careers in community building.
(v) Likelihood of fostering students' permanent employment in
community building. The extent to which the proposed program will lead
participating students directly and immediately to permanent employment
in community building, as indicated by, without limitation:
(A) The past success of the institution of higher education in
placing its graduates (particularly CDWSP-funded and similar program
graduates where applicable) in permanent employment in community
building; and
(B) The amount of faculty and staff time and institutional resources
devoted to assisting students (particularly students in CDWSP-funded and
similar programs where applicable) in finding permanent employment in
community building.
(vi) Effectiveness of program administration. The degree to which an
applicant will be able effectively to coordinate and administer the
program. HUD will allocate the maximum points available under this
criterion equally among the following considerations set forth in
paragraphs (i)(2)(vi) (A), (B), and (C) of this section, except that the
maximum points available under this criterion will be allocated equally
between the considerations set forth in paragraphs (i)(2)(vi) (A) and
(B) of this section only where the applicant has not previously
administered a CDWSP-funded program.
(A) The strength and clarity of the applicant's plan for placing
CDWSP students on rotating work placement assignments and monitoring
CDWSP students' progress both academically and in their work placement
assignments;
(B) The degree to which the individual who will coordinate and
administer the program has clear responsibility, ample available time,
and sufficient authority to do so; and
(C) The effectiveness of the applicant's prior coordination and
administration of a CDWSP-funded program, where applicable (including
the timeliness and completeness of the applicant's compliance with CDWSP
reporting requirements).
(vii) Commitment to meeting economically disadvantaged and minority
students' needs. The applicant's commitment to meeting the needs of
economically disadvantaged and minority students as demonstrated by
policies and plans regarding, and past effort and success in,
recruiting, enrolling and financially assisting economically
disadvantaged and minority students. If the applicant is an APO or
State, then HUD will consider the demonstrated commitment of each
institution of higher education on whose behalf the APO or State is
applying; HUD will then also consider the demonstrated commitment of the
APO or State to recruit and hire economically disadvantaged and minority
students.
(3) Final selection. Eligible applications will be considered for
selection in their rank order. HUD may make awards out of rank order to
achieve geographic diversity, and may provide assistance to support a
number of students that is less than the number requested under
applications in order to provide assistance to as many highly ranked
applications as possible.
(j) Agreements--(1) Grant agreement. The responsibilities of the
recipient
[[Page 86]]
under CDWSP will be incorporated in a grant agreement executed by HUD
and the recipient.
(2) Student agreement. The recipient and each participating student
must execute a written agreement incorporating their mutual
responsibilities under CDWSP. The agreement must be executed before the
student can be enrolled in the program. A student's participation in
CDWSP shall be terminated for failure to meet the responsibilities and
standards in the agreement.
(3) Work placement assignment agreement. The institution of higher
education, the APO or state (if an APO or State is the grant recipient),
the participating student, and the work placement agency must execute a
written agreement covering each work placement assignment. The agreement
must address the responsibilities of each of the parties, the
educational objectives, the nature of supervision, the standards of
evaluation, and the student's time commitments under the work placement
assignment.
(4) APO (or state) and institution of higher education. Where the
recipient is an APO (or a State), the recipient and each participating
institution of higher education must execute a written agreement
incorporating their mutual responsibilities under CDWSP.
(k) Grant administration--(1) Initial obligation of funds. When HUD
selects an application for funding, and notifies the recipient, HUD will
obligate funds to cover the amount of the approved grant. The initial
obligation of funds will provide for student grants for two years.
(2) Disbursement. Recipients will receive grant payments by direct
deposit on a reimbursement basis. If that is not possible, grant
payments will be made by U.S. Treasury checks.
(3) Deobligation and recipient repayment. (i) HUD may deobligate
amounts for grants if proposed activities are not begun or completed
within a reasonable time after selection.
(ii) If a student's participation in CDWSP is terminated before the
completion of the two-year term of the student's program, the recipient
may substitute another student to complete the two-year term of a
student whose participation has terminated. The substituted student must
have a sufficient number of academic credits to complete the degree
program within the remaining portion of the terminated student's two-
year term. With respect to any CDWSP grant, there is no requirement,
regardless of the date of grant award, for students who are terminated
from the CDWSP to repay tuition and additional assistance or for the
grant recipient to repay such funds to HUD. Funds must still be
otherwise expended consistent with CDWSP regulations and the grant
agreement, or repayment may be required under paragraph (k)(3)(iii) of
this section.
(iii) Consistent with OMB Circulars No. A-101 and A-110, HUD, in the
grant agreement, will set forth in detail other circumstances under
which funds may be deobligated, recipients may be liable for repayment,
or other sanctions may be imposed.
(l) Other Federal requirements--(1) Handicap provision. Recipients
must provide a statement certifying that no otherwise qualified
handicapped person shall, solely by reason of handicap, be excluded from
participation in, be denied the benefits of, or otherwise be subjected
to discrimination under the CDWSP.
(2) Nondiscrimination. The recipient must adhere to the following
nondiscrimination provisions: The requirements of title VIII of the
Civil Rights Act of 1968, 42 U.S.C. 3600-20 (Fair Housing Act) and
implementing regulations issued at subchapter A of title 24 of the Code
of Federal Regulations; title VI of the Civil Rights Act of 1964 (42
U.S.C. 2000d-4) (Nondiscrimination in Federally Assisted Programs) and
implementing regulations issued at 24 CFR part 1; section 504 of the
Rehabilitation Act of 1973 (29 U.S.C. 794) and implementing regulations
at 24 CFR part 8; Executive Order 11063 and implementing regulations at
24 CFR part 107; and the Age Discrimination Act of 1975 and implementing
regulations at 24 CFR part 146.
[54 FR 27131, June 27, 1989, as amended at 61 FR 36458, July 10, 1996;
63 FR 31869, June 10, 1998]
[[Page 87]]
Sec. 570.416 Hispanic-serving institutions work study program.
(a) Applicability and objectives. HUD makes grants under the
Hispanic-serving Institutions Work Study Program (HSI-WSP) to public and
private non-profit Hispanic-serving Institutions (HSI's) of higher
education for the purpose of providing assistance to economically
disadvantaged and minority students who participate in a work study
program while enrolled in full-time community college programs in
community building, and to provide entry to pre-professional careers in
these fields.
(b) Definitions. The following definitions apply to HSI-WSP:
Applicant means a public or private non-profit Hispanic-serving
institution of higher education that offers only two-year degree
programs, including at least one community building academic degree
program, and that applies for funding under HSI-WSP.
Community building means community and economic development,
community planning, community management, public policy, urban
economics, urban management, urban planning, land use planning, housing,
and related fields. Related fields include, but are not limited to,
administration of justice, child development, and human services.
Community building academic program or academic program means an
undergraduate associate degree program whose purpose and focus is to
educate students in community building. The terms ``community building
academic program'' or ``academic program'' refer to the types of
academic programs encompassed in the statutory phrase ``community or
economic development, community planning or community management.'' For
purposes of HSI-WSP, such programs include, but are not limited to,
associate degree programs in community and economic development,
community planning, community management, public administration, public
policy, urban economics, urban management, urban planning, land use
planning, housing, and related fields of study. Related fields of study
that promote community building, such as administration of justice,
child development, and human services are eligible, while fields such as
natural sciences, computer sciences, mathematics, accounting,
electronics, engineering, and the humanities (such as English or
history) would not be eligible. A transfer program (i.e., one that leads
to transfer to a four-year institution of higher education for the
student's junior year) in a community building academic discipline is
eligible only if the student is required to declare his/her major in
this discipline while at the community college.
Community building field means any of the fields of study eligible
under a community building academic program.
Economically disadvantaged and minority students means students who
satisfy all the applicable guidelines established at the participating
institution of higher education to measure financial need for academic
scholarship or loan assistance, including, but not limited to, students
with disabilities and students who are Black, American Indian/Alaska
Native, Hispanic, Asian/Pacific Islanders, where such students satisfy
the financial needs guidelines defined above.
Hispanic-serving institution is an institution of higher education
that certifies to the satisfaction of the Secretary that it meets the
criteria set out at 20 U.S.C. 1059c(b)(1), including the following: An
institution that has an enrollment of undergraduate full-time students
that is at least 25 percent Hispanic; in which not less than 50 percent
of the Hispanic students are low-income individuals (i.e., their
families' taxable income for the preceding year did not exceed 150
percent of the poverty level) who are first generation college students;
and in which another 25 percent are either low-income individuals or
first generation college students.
HSI-WSP or HSI-WSP program means the Hispanic-serving Institutions
Work Study program.
Institution of higher education means a public or private
educational institution that offers two-year associate degrees in a
community building academic program and that is accredited by an
accrediting agency or association recognized by the Secretary of
Education. Institutions offering BOTH
[[Page 88]]
four-year and two-year degrees are not eligible for HSI-WSP.
Recipient means an approved applicant that executes a grant
agreement with HUD.
Student means a person attending the institution of higher education
on a full-time basis, as defined by that institution and pursuing an
eligible community building degree. Students must have attained no more
than half of the credits required for their degree at the time they
first receive assistance under HSI-WSP.
Student with disabilities means a student who meets the definition
of a ``person with disabilities'' in the Americans with Disabilities Act
of 1990.
(c) Assistance provided--(1) Types of assistance available. HUD
provides funding in the form of grants to recipients who make assistance
available to eligible students. Grants are provided to cover the costs
of student assistance and for an administrative allowance.
(2) Maximum amount of assistance. The maximum amount that can be
provided to a student is $13,200 a year, including $1,000 for an
administrative allowance, subject to the 20% limitation described at
570.416(c)(4) below. HUD will not set maximums on how much should be
spent to each eligible expenditure, other than for administrative costs.
The institution must be able to document that the amounts paid are
customary for that institution and that it has actually paid that amount
to the students. If a student is receiving a Pell grant, he/she may not
receive funding for the same educational support through HSI-WSP.
However, HSI-WSP can substitute for all or part of the Pell grant.
(3) Student assistance. Grants are provided in the form of student
stipends, tuition support, and additional support.
(i) Student stipend. The amount of the student stipend should be
based on the hourly rate for initial entry positions in the community
building field and the number of hours worked by the student at the work
placement assignment. The stipend should be sufficiently high to allow
the student to earn the full stipend, as determined by the recipient,
without working over 20 hours per week during the school year and 40
hours per week during the summer.
(ii) Tuition support. The amount of tuition support may not exceed
the tuition and required fees charged at the participating institution
of higher education.
(iii) Additional support. The recipient may provide additional
support for books, tutoring, and travel related to the academic program
or work placement assignment. Costs associated with reasonable
accommodations for students with disabilities including, but not limited
to, interpreters for the deaf/hard of hearing, special equipment, and
braille materials are eligible under this category.
(4) Administrative allowance. HUD provides an allowance to
recipients to cover the administrative costs of the program. The
administrative allowance is $1,000 per year for each student
participating in the program; however, no more than 20 percent of the
grant may be used for planning and program administrative costs.
(5) Number of students assisted. The minimum number of students that
may be assisted is three students per participating institution of
higher education. The maximum number of students that may be assisted is
ten students per participating institution of higher education; however,
a lower maximum or higher minimum may be established for a particular
funding round by the NOFA announcing the availability of the funds.
(d) Recipient eligibility and responsibilities--(1) Recipient
eligibility. Public or private Hispanic-serving institutions of higher
education offering only undergraduate two-year degrees, including
degrees in at least one community building academic program, are
eligible for assistance under HSI-WSP. HSIs that offer BOTH two-year and
four-year degrees are not eligible for HSI-WSP assistance.
(2) Recipient responsibilities. The recipient is responsible for
administering the program, for compliance with all program requirements,
and for coordination of program activities carried out by the work
placement agencies. The recipient must:
[[Page 89]]
(i) Recruit students for participation in HSI-WSP. The recipient
shall establish recruitment procedures that identify eligible
economically disadvantaged and minority students pursuing careers in
community building, and make them aware of the availability of
assistance opportunities. While the program is restricted to HSIs, the
recipient may neither restrict the program to any particular minority
group or groups, nor provide any preferential treatment in the selection
process based on race or ethnicity. Only economically disadvantaged
students, as defined herein, may be assisted.
(ii) Select students for participation in HSI-WSP. In selecting
among the eligible students, the recipient must consider the extent to
which each student has demonstrated financial need under the applicable
guidelines established at the institution of higher education; an
interest in, and commitment to, a career in community building; and the
ability to satisfactorily complete the academic and work placement
responsibilities under HSI-WSP. Students must be selected before the
beginning of the semester for which funding is being provided. If a
student's participation terminates, the student may not be replaced; the
grant will be reduced by the amount of unused funds allotted for that
student.
(iii) Provide the educational component for participating students.
(iv) Recruit and select work placement agencies, and negotiate and
execute an agreement covering each work placement assignment.
(v) Refer participating students to work placement agencies and
assist students in the selection of work placement assignments.
(vi) Assign sufficient staff to administer and supervise the program
on a day-to-day basis.
(vii) Encourage participating students to either: obtain post-
graduation employment with a unit of State or local government, an
areawide planning organization (APO), Indian tribe or nonprofit
organization engaged in community building; or transfer to a four-year
institution of higher education to obtain a bachelor's degree in a
community building academic discipline.
(viii) Maintain records by racial and ethnic categories for each
economically disadvantaged and minority student participating in HSI-
WSP.
(ix) Keep records and make such reports as HUD may require.
(x) Comply with all other applicable Federal requirements.
(e) Work placement agencies eligibility and responsibilities--(1)
Eligibility. To be eligible to participate in HSI-WSP, the work
placement agency must be an agency of a State or local government, an
APO, an Indian tribe, or a private nonprofit organization involved in
community building activities. A work placement site that is part of the
institution of higher education (e.g., a child care center) can only be
an eligible site if the services provided by that site are offered to
people in the broader community outside the institution.
(2) Responsibilities. Work placement agencies must:
(i) Provide practical experience and training in the community
building field to participating students through work placement
assignments.
(ii) Consult with the institution of higher education to ensure that
the student's work placement assignment provides the requisite
experience and training to meet the required number of work hours
specified in the student work placement agreement.
(iii) Provide a sufficient number and variety of work assignments to
provide participating students with a wide choice of work experience.
(iv) Require each student to devote 12-20 hours per week during the
regular school year, and 35-40 hours a week during the summer, to the
work placement assignment. Work placement agencies may provide
flexibility in the work period, if such a schedule is consistent with
the requirements of the student's academic program. However, a
participating student may receive a stipend payment only during the
period when the student is placed with the work placement agency.
(v) Comply with all other applicable Federal requirements.
(vi) Maintain such records as HUD may require.
(f) Student eligibility and responsibilities. Students apply
directly to recipients receiving grants under HSI-WSP.
[[Page 90]]
(1) Eligibility. To be eligible for HSI-WSP, the student:
(i) Must satisfy all applicable guidelines established at the
participating institution of higher education to measure financial need
for academic scholarship or loan assistance.
(ii) Must be a full-time student enrolled in a community building
associate degree program at the participating institution of higher
education. The student must have attained no more than 50 percent of the
credits required for his/her degree at the time the student first
receives assistance under this program.
(iii) Must demonstrate an ability to maintain a satisfactory level
of performance in community building academic program (i.e., maintain a
B average, as defined by the institution) and in work placement
assignments, and comply with the professional standards set by the
recipient and the work placement agencies.
(iv) May not have previously participated in HSI-WSP.
(2) Student responsibilities. Participating students must:
(i) Enroll or be enrolled in a two-year community building associate
degree program. A student's academic and work placement responsibilities
include: Full-time enrollment in an approved academic program;
maintenance of a satisfactory level of performance in the community
building academic program and in work placement assignments; and
compliance with the professional conduct standards set by the recipient
and by the work placement agency. A satisfactory level of academic
performance consists of maintaining a B average, as defined by the
institution. A student's participation in HSI-WSP shall be terminated
for failure to meet these responsibilities and standards. If the
student's participation is terminated, the student is ineligible for
further HSI-WSP assistance.
(ii) Devote 12-20 hours per week during the regular school year, and
35-40 hours a week during the summer, to the work placement assignment.
Work placement agencies may provide flexibility in the work period, if
such a schedule is consistent with the requirements of the student's
academic program. However, a participating student may receive a stipend
payment only during the period when the student is placed with the work
placement agency.
(iii) Agree to make a good-faith effort to either: obtain employment
in community building with a unit of State or local government, an APO,
an Indian tribe, or a non-profit organization; or to transfer to a four-
year institution of higher education to obtain a bachelor's degree in a
community building academic discipline. However, if the student does not
obtain such employment or transfer to a four-year institution, the
student is not required to repay the assistance received.
(g) Notice of funding availability. HUD will solicit grant
applications from eligible institutions of higher education by
publishing a notice of funding availability in the Federal Register. The
notice will:
(1) Explain how application kits providing specific application
requirements and guidance may be obtained;
(2) Specify the place for filing completed applications, and the
date by which applications must be physically received at that location;
(3) State the amount of funding available under the notice, which
may include funds recaptured from previously awarded grants;
(4) Provide other appropriate program information and guidance.
(h) Agreements.--(1) Grant agreement. The responsibilities of the
recipient under HSI-WSP will be incorporated in a grant agreement
executed by HUD and the recipient.
(2) Student agreement. The recipient and each participating student
must execute a written agreement incorporating their mutual
responsibilities under HSI-WSP. The agreement must be executed before
the student can be enrolled in the program. The Recipient shall
terminate a student's participation in HSI-WSP for failure to meet the
responsibilities and standards in the agreement.
(3) Work placement assignment agreement. The recipient, the student,
and the work placement agency must execute a written agreement covering
each work placement assignment. The
[[Page 91]]
agreement must address the responsibilities of each of the parties, the
educational objectives, the nature of the supervision, the standards of
evaluation, and the student's time commitments under the work placement
assignment.
(i) Grant administration--(1) Initial obligation of funds. When HUD
selects an application for funding, HUD will obligate funds to cover the
amount of the approved grant. The term of the award will be for two
calendar years, unless subsequently altered by HUD at its discretion for
good cause.
(2) Disbursement. Recipients will receive grant payments by direct
deposit on a reimbursement basis. If that is not possible, grant
payments will be made by U.S. Treasury checks.
(3) Deobligation. HUD may deobligate amounts for grants if proposed
activities are not begun or completed within a reasonable period of time
after selection.
(j) Other Federal requirements--(1) Applicability of part 570. HSI-
WSP shall be subject to the policies and procedures set forth in
subparts A, K, and O of 24 CFR part 570, as applicable, except as
modified or limited under the provisions of this Notice. The provisions
of subparts C and J of part 570 shall not apply to HSI-WSP.
(2) Uniform Administrative requirements. Recipients under HSI-WSP
shall comply with the requirements and standards of OMB Circular No. A-
22, ``Cost Principles for Educational Institutions.'' Recipients that
are private institutions of higher education shall comply with OMB
Circular A-133, ``Non-Federal Audit Requirements for Institutions of
Higher Education and Other Nonprofit Institutions,'' which is
implemented at 24 CFR part 45. Recipients that are public institutions
of higher education shall comply with OMB Circular A-128, ``Non-Federal
Audit Requirements for State and Local Governments,'' which is
implemented at 24 CFR part 44. Audits shall be conducted annually. In
addition, all recipients under HSI-WSP shall comply with the provisions
of OMB Circular A-110, ``Uniform Administrative Requirements for Grants
and Agreements With Institutions of Higher Education, Hospitals and
Other Non-Profit Organizations,'' which is implemented at 24 CFR part
84. OMB Circular A-110 shall apply to recipients in its entirety.
[62 FR 17493, Apr. 9, 1997, as amended at 63 FR 9683, Feb. 25, 1998]
Subpart F--Small Cities Program
Source: 62 FR 62914, Nov. 25, 1997, unless otherwise noted.
Sec. 570.420 General.
(a) HUD administration of nonentitlement CDBG funds. Title I of the
Housing and Community Development Act of 1974 permits each State to
elect to administer all aspects of the Community Development Block Grant
(CDBG) Program annual fund allocation for the nonentitlement areas
within its jurisdiction. This subpart sets forth policies and procedures
applicable to grants for nonentitlement areas in States that have not
elected, in a manner and time prescribed by the Secretary, to administer
the CDBG Program. States that elected to administer the program after
the close of fiscal year 1984 cannot return administration of the
program to HUD. A decision by a State to discontinue administration of
the program would result in the loss of CDBG funds for nonentitlement
areas in that State and the reallocation of those funds to all States in
the succeeding fiscal year.
(b) Scope and applicability. (1) This subpart describes the policies
and procedures of the Small Cities Program which apply to nonentitlement
areas in States where HUD administers the CDBG Program. HUD currently
administers the Small Cities Program in only two States--New York and
Hawaii. This subpart principally addresses the requirements for New
York, and Secs. 570.429 and 570.430 identify special procedures
applicable to Hawaii.
(2) The allocation of formula CDBG funds for use in nonentitlement
areas of Hawaii and New York is as provided in subpart A of this part.
The policies and procedures set forth in the following identified
subparts of this part 570 apply to the HUD-administered Small Cities
Program, except as modified or limited under the provisions thereof or
this subpart:
[[Page 92]]
(i) Subpart A--General Provisions;
(ii) Subpart C--Eligible Activities;
(iii) Subpart J--Grant Administration;
(iv) Subpart K--Other Program Requirements; and
(v) Subpart O--Performance Reviews.
(c) Public notification requirements. (1) Section 102 of the
Department of Housing and Urban Development Reform Act of 1989 (42
U.S.C. 3545) contains a number of provisions that are designed to ensure
greater accountability and integrity in the provision of certain types
of assistance administered by HUD. All competitive grants in the HUD-
administered Small Cities Program in New York are affected by this
legislation, and the requirements identified at 24 CFR part 4 apply to
them. Imminent threat grants under Sec. 570.424 and section 108
repayment grants under Sec. 570.432 are not affected by section 102 as
they are not competitive grants.
(2) The Hawaii HUD-administered Small Cities Program is not subject
to section 102, since the funds are not distributed in a competitive
manner.
(d) Abbreviated consolidated plan. Applications for the HUD-
administered Small Cities Program which contain housing activities must
include a certification that the proposed housing activities are
consistent with the applicant's consolidated plan as described at 24 CFR
part 91.
(e) National and primary objectives. (1) Each activity funded
through the Small Cities Program must meet one of the following national
objectives as defined under the criteria in Sec. 570.208. Each activity
must:
(i) Benefit low- and moderate-income families;
(ii) Aid in the prevention or elimination of slums or blight; or
(iii) Be an activity which the grantee certifies is designed to meet
other community development needs having a particular urgency because
existing conditions pose a serious and immediate threat to the health or
welfare of the community where other financial resources are not
available to meet such needs.
(2) In addition to the objectives described in paragraph (e)(1) of
this section, with respect to grants made through the Small Cities
Program, not less than 70 percent of the total of grant funds from each
grant and Section 108 loan guarantee funds received under subpart M of
this part within a fiscal year must be expended for activities which
benefit low- and moderate-income persons under the criteria of
Secs. 570.208(a), or 570.208(d) (5) or (6). In the case of multiyear
plans in New York State approved in response to NOFAs published prior to
calendar year 1997, not less than 70 percent of the total funding for
grants approved pursuant to a multiyear plan for a time period of up to
3 years must be expended for activities which benefit low- and moderate-
income persons. Thus, 70 percent of the grant for year 1 of a multiyear
plan approved in response to NOFAs published prior to calendar year 1997
must meet the 70 percent requirement, 70 percent of the combined grants
from years 1 and 2 must meet the requirement, and 70 percent of the
combined grants from years 1, 2, and 3 must meet the requirement. In
determining the percentage of funds expended for such activity, the
provisions of Sec. 570.200(a)(3) (i), (iii), (iv), and (v) shall apply.
(Approved by the Office of Management and Budget under control number
2506-0060)
Sec. 570.421 New York Small Cities Program design.
(a) Selection system--(1) Competitive applications. Each competitive
application will be rated and scored against at least the following
factors:
(i) Need-absolute number of persons in poverty as further explained
in the NOFA;
(ii) Need-percent of persons in poverty as further explained in the
NOFA;
(iii) Program Impact; and
(iv) Fair Housing and Equal Opportunity, which may include the
applicant's Section 3 plan and implementation efforts with respect to
actions to affirmatively further fair housing. The NOFA described in
paragraph (b) of this section will contain a more detailed description
of these factors, and the relative weight that each factor will be
given.
(2) In addition HUD reserves the right to establish minimal
thresholds
[[Page 93]]
for selection factors and otherwise select grants in accordance with
Sec. 570.425 and the applicable NOFA.
(3) Imminent threats to public health and safety. The criteria for
these grants are described in Sec. 570.424.
(4) Repayment of Section 108 loans. The criteria for these grants
are described in Sec. 570.432.
(5) Economic development grants. HUD intends to use the Section 108
loan guarantee program to the maximum extent feasible to fund economic
development projects in the nonentitlement areas of New York. In the
event that there are not enough Section 108 loan guarantee funds
available to fund viable economic development projects, if a project
needs a grant in addition to a loan guarantee to make it viable, or if
the project does not meet the requirements of the Section 108 program
but is eligible for a grant under this subpart, HUD may fund Economic
Development applications as they are determined to be fundable in a
specific amount by HUD up to the sum set aside for economic development
projects in a notice of funding availability, notwithstanding paragraph
(g) of this section. HUD also has the option in a NOFA of funding
economic development activities on a competitive basis, as a competitive
application as described in paragraph (a)(1) of this section. In order
for an applicant to receive Small Cities grant funds on a noncompetitive
basis, the field office must determine that the economic development
project will have a substantial impact on the needs identified by the
applicant.
(b) Notice of funding availability. HUD will issue one or more
Notice(s) of Funding Availability (NOFA) each fiscal year which will
indicate the amount of funds available, the annual grant limits per
grantee, type of grants available, the application requirements, and the
rating factors that will be used for those grants which are competitive.
A NOFA may set forth, subject to the requirements of this subpart,
additional selection criteria for all grants.
(c) Eligible applicants. (1) Eligible applicants in New York are
units of general local government, excluding: Metropolitan cities, urban
counties, units of general local government which are participating in
urban counties or metropolitan cities, even if only part of the
participating unit of government is located in the urban county or
metropolitan city. Indian tribes are also ineligible for assistance
under this subpart. An application may be submitted individually or
jointly by eligible applicants.
(2) Counties, cities, towns, and villages may apply and receive
funding for separate projects to be done in the same jurisdiction. Only
one grant will be made under each funding round for the same type of
project to be located within the jurisdiction of a unit of general local
government (e.g., both the county and village cannot receive funding for
a sewer system to be located in the same village, but the county can
receive funding for a sewer system that is located in the same village
as a rehabilitation project for which the village receives funding). The
NOFA will contain additional information on applicant eligibility.
(3) Counties may apply on behalf of units of general local
government located within their jurisdiction when the unit of general
local government has authorized the county to apply. At the time that
the county submits its application for funding, it must submit a
resolution by the governing body of the unit of local government that
authorizes the county to submit an application on behalf of the unit of
general local government. The county will be considered the grantee and
will be responsible for executing all grant documents. The county is
responsible for ensuring compliance with all laws, regulations, and
Executive Orders applicable to the CDBG Program. HUD will deal
exclusively with the county with respect to issues of program
administration and performance, including remedial actions. The unit of
general local government will be considered the grantee for the purpose
of determining grant limits. The unit of general local government's
statistics will be used for purposes of the selection factors referred
to in Sec. 570.421(a).
(d) Public service activities cap. Public service activities may be
funded up to a maximum of fifteen (15) percent of a State's
nonentitlement allocation for any fiscal year. HUD may award a
[[Page 94]]
grant to a unit of general local government for public service
activities with up to 100 percent of the funds intended for public
service activities. HUD will apply the 15 percent statewide cap to
public service activities by funding public service activities in the
highest rated applications in each NOFA until the cap is reached.
(e) Activities outside an applicant's boundaries. An applicant may
conduct eligible CDBG activities outside its boundaries. These
activities must be demonstrated to be appropriate to meeting the
applicant's needs and objectives, and must be consistent with State and
local law. This provision includes using funds provided under this
subpart in a metropolitan city or an urban county.
(f) Multiyear plans. HUD will not make any new multiyear commitments
for NOFAs published in calendar year 1997 or later. HUD will continue to
honor the terms of the multiyear plans that were approved under the
provisions of NOFAs published prior to calendar year 1997.
(g) Maximum grant amount. The maximum grant amount that will be
awarded to a single unit of general local government in response to the
annual Small Cities NOFA published in calendar year 1997 or later is
$400,000, except that counties may apply for up to $600,000 in HUD-
administered Small Cities funds. HUD may specify lower grant limits in
the NOFA, which may include different limits for different types of
grants available or different types of applicants. This paragraph (g)
does not apply to multiyear plans that were approved under the
provisions of NOFAs published prior to calendar year 1997, nor does it
apply to grants awarded in connection with paragraphs (a)(3) through
(a)(5) of this section. The maximum limits in this paragraph (g) apply
to grants for economic development projects awarded under NOFAs in which
there is no set-aside of funds for such projects.
Sec. 570.422 Applications from joint applicants.
Units of general local government may submit a joint application
which addresses common problems faced by the jurisdictions, to the
extent permitted by the NOFA. A joint application must be pursuant to a
written cooperation agreement submitted with the application. The
cooperation agreement must authorize one of the participating units of
government to act as the lead applicant which will submit the
application to HUD, and must delineate the responsibilities of each
participating unit of government with respect to the Small Cities
Program. The lead applicant is responsible for executing the
application, certifications, and grant agreement, and ensuring
compliance with all laws, regulations, and Executive Orders applicable
to the CDBG Program. HUD reserves the right to deal exclusively with the
lead applicant with respect to issues of program administration and
performance, including remedial actions. In the event of poor
performance, HUD reserves the right to deny and/or restrict future
funding to all units of general local government that are parties to the
cooperation agreement. The maximum amount that may be awarded pursuant
to a joint application is the maximum single grant limit established in
a NOFA or pursuant to Sec. 570.421(g) multiplied by the number of
participants in the cooperation agreement, provided that for the purpose
of determining such a multiple grant limit, and in order to receive such
amount, a participating joint applicant must receive a substantial
direct benefit from the activities proposed in the application, and must
not be acting solely on behalf of, or in conjunction with, another
jurisdiction for the sole purpose of raising the maximum grant amount
that may be awarded. In addition, the statistics of each participant
counted for maximum grant limits purposes shall also be used for
purposes of the selection factors referred to in Sec. 570.421(a).
Sec. 570.423 Application for the HUD-administered New York Small Cities Grants.
(a) Proposed application. The applicant shall prepare and publish a
proposed application and comply with citizen participation requirements
as described in Sec. 570.431. The applicant should follow the citizen
participation requirements of 24 CFR part 91 if it submits a complete
consolidated plan.
[[Page 95]]
(b) Final application. The applicant shall submit to HUD a final
application containing its community development objectives and
activities. This final application shall be submitted, in a form
prescribed by HUD, to the appropriate HUD office. The application also
must contain a priority nonhousing community development plan, in
accordance with 24 CFR 91.235.
(c) Certifications. (1) Certifications shall be submitted in a form
prescribed by HUD. If the application contains any housing activities,
the applicant shall certify that the proposed housing activities are
consistent with its abbreviated consolidated plan, as described at 24
CFR part 91.
(2) In the absence of evidence (which may, but need not, be derived
from performance reviews or other sources) which tends to challenge in a
substantial manner the certifications made by the applicant, the
certifications will be accepted by HUD. However, if HUD does have
available such evidence, HUD may require the submission of additional
information or assurances before determining whether an applicant's
certifications are satisfactory.
(d) Thresholds. The HUD Office may use any information available to
it to make the threshold judgments required by the applicable NOFA,
including information related to the applicant's performance with
respect to any previous assistance under this subpart. The annual
performance and evaluation report required under Sec. 570.507(a) is the
primary source of this information. The HUD Office may request
additional information in cases where it is essential to make the
required performance judgments.
(Approved by the Office of Management and Budget under control number
2506-0060)
Sec. 570.424 Grants for imminent threats to public health and safety.
(a) Criteria. The following criteria apply for an imminent threat to
public health or safety:
(1) The Director of Community Planning and Development of the HUD
office may, at any time, invite an application for funds available under
this subpart in response to a request for assistance to alleviate an
imminent threat to public health or safety that requires immediate
resolution. HUD shall verify the urgency and the immediacy of the threat
with an appropriate authority other than the applicant prior to
acceptance of the application, and the Director of Community Planning
and Development of the HUD Office shall review the claim to determine
if, in fact, an imminent threat to public health or safety does exist.
For example, an applicant with documented cases of disease resulting
from a contaminated drinking water supply has an imminent threat to
public health, while an applicant ordered to improve the quality of its
drinking water supply over the next 2 years does not have an imminent
threat within the definition of this paragraph (a). A natural disaster
is prima facie evidence of an imminent threat to public health or
safety. These funds are to be used to deal with those threats that
represent a unique and unusual circumstance, not for the type of threat
that occurs with frequency in a number of communities within the State
of New York.
(2) The applicant does not have sufficient local resources, and
other Federal or State resources are unavailable to alleviate the
imminent threat.
(3) All imminent threat projects must meet the requirement of
Sec. 570.420(e).
(b) HUD action. (1) Fifteen percent of the funds allocated to New
York State in the Small Cities Program may be reserved to alleviate
imminent threats to the public health or safety unless a lesser amount
is specified in a NOFA. Applications shall be submitted in accordance
with Sec. 570.423.
(2) Applications which meet the requirements of this section may be
approved by the Director of Community Planning and Development of the
HUD Office without competition.
(3) The only funds reserved for imminent threats to the public
health or safety are those specified by this section as modified by the
NOFA. After the funds have been depleted, HUD shall not consider further
requests for grants relating to imminent threats during that fiscal
year.
(c) Letter to proceed. Notwithstanding Sec. 570.425(a)(3), after a
determination has been made that an imminent threat exists, HUD may
issue the applicant a
[[Page 96]]
letter to proceed to incur costs to alleviate the imminent threat.
Reimbursement of such costs is dependent upon HUD approval of the final
application.
(d) Environmental review. Pursuant to 24 CFR 58.34(a)(10), grants
for imminent threats to public health or safety are excluded from some
or all of the environmental review requirements of 24 CFR part 58, to
the extent provided therein.
Sec. 570.425 HUD review and actions on applications for New York State applicants.
(a) Final application submission--(1) Submission deadline. HUD will
establish a time period during which final applications must be
submitted to the appropriate office. The dates for this period will be
published in a notice in the Federal Register.
(2) Incomplete applications. Applications must contain the
information required by HUD. Information relative to the application
will not be accepted or considered if received after the submission
deadline, unless the information is specifically requested in writing by
HUD.
(3) Pre-agreement costs. HUD authorizes a unit of general local
government to incur costs during a Federal fiscal year in which a grant
is made or the prior fiscal year for preparation of a CDBG grant
application, planning costs eligible under Sec. 570.205, environmental
assessments, and project engineering and design costs for eligible
activities under Secs. 570.201 through 570.204 before the establishment
of a formal grant relationship between the applicant and HUD. Costs of
such activities for the funded application may be charged to the grant
should it be funded, provided that the activities are undertaken in
accordance with the requirements of this subpart, and 24 CFR part 58. It
is understood that the incurring of costs described in this paragraph
creates no obligation on HUD to approve the application.
(b) HUD action on final application--(1) Review and notification.
Following the review of the applications, HUD will promptly notify each
applicant of the action taken with regard to its application.
Documentation which supports HUD's decisions on applications will be
available to the public.
(2) Conditional approval. HUD may make a conditional approval, in
which case the grant will be approved but the obligation and utilization
of funds will be restricted. The reasons for the conditional approval
and the actions necessary to remove the condition will be specified.
Failure to satisfy the condition may result in a termination of the
grant.
(3) HUD will not make a Small Cities grant when it is determined
that the grant will only have a minimal or insignificant impact on the
grantee.
(4) Individual grant amounts. In determining appropriate grant
amounts to be awarded, HUD may take into account the size of the
applicant, the level of demand, the scale of the activity proposed
relative to need and operational capacity, the number of persons to be
served, the amount of funds required to achieve project objectives and
the administrative capacity of the applicant to complete the activities
in a timely manner.
(c) Streamlined application requirement for previous applicants. HUD
may provide pursuant to a NOFA that if an applicant notifies HUD in
writing within the application period specified in a NOFA that it wishes
to be so considered, HUD will consider unfunded applications from the
prior round or competition that meet the threshold requirements of the
NOFA. The applicant will have the option of withdrawing its application,
or amending or supplementing the application for succeeding rounds of
competition. If there is no significant change in the application
involving new activities or alteration of proposed activities that will
significantly change the scope, location or objectives of the proposed
activities or beneficiaries, there will be no further citizen
participation requirement to keep the application active for succeeding
rounds of competition. Applicants availing themselves of the option to
have an application from the previous round or competition reconsidered
by HUD must submit a new abbreviated or full consolidated plan, if the
new competitive funding round is
[[Page 97]]
in a different fiscal year than the funding round or competition for
which the application was originally submitted.
Sec. 570.426 Program income.
(a) The provisions of Sec. 570.504(b) apply to all program income
generated by a specific grant and received prior to grant closeout.
(b) If the unit of general local government has another ongoing CDBG
grant at the time of closeout, the program income will be considered to
be program income of the ongoing grant. The grantee can choose which
grant to credit the program income to if it has multiple open CDBG
grants.
(c) If the unit of general local government has no open ongoing CDBG
grant at the time of closeout, program income of the unit of general
local government or its subrecipients which amounts to less than $25,000
per year will not be considered to be program income unless needed to
repay a Section 108 guaranteed loan. When more than $25,000 of program
income is generated from one or more closed out grants in a year after
closeout, the entire amount of the program income is subject to the
requirements of this part. This will be a subject of the closeout
agreement described in Sec. 570.509(c).
Sec. 570.427 Program amendments.
(a) HUD approval of certain program amendments. Grantees shall
request prior HUD approval for all program amendments involving new
activities or alteration of existing activities that will significantly
change the scope, location, or objectives of the approved activities or
beneficiaries. Approval is subject to the following:
(1) Programs or projects that include new or significantly altered
activities are rated in accordance with the criteria for selection
applicable at the time the original preapplication or application
(whichever is applicable) was rated. The rating of the program or
projects proposed which include the new or altered activities proposed
by the amendment must be equal to or greater than the lowest rating
received by a funded project or program during that cycle of ratings.
(2) Consideration shall be given to whether any new activity
proposed can be completed promptly.
(3) If the grant was received on a noncompetitive basis, the
proposed amended project must be able to be completed promptly, and must
meet all of the threshold requirements that were required for the
original project. If the proposal is to amend the project to a type of
project that was rated competitively in the fiscal year that the
noncompetitive project was funded, the new or altered activities
proposed by the amendment must receive a rating equal to or greater than
the lowest rating received by a funded project or program during that
cycle of ratings.
(b) Documentation of program amendments. Any program amendments that
do not require HUD approval must be fully documented in the grantee's
records.
(c) Citizen participation requirements. Whenever an amendment
requires HUD approval, the requirements for citizen participation in
Sec. 570.431 must be met.
Sec. 570.428 Reallocated funds.
(a) General. This section governs reallocated funds originally
allocated for use under 24 CFR part 570, subpart F (Small Cities
Program).
(b) Assignment of funds to be reallocated. Reallocated funds may be:
(1) Used at any time necessary for a Section 108 repayment grant
under Sec. 570.432;
(2) Added to the next Small Cities Program competition;
(3) Used to fund any application not selected for funding in the
most recent Small Cities competition, because of a procedural error made
by HUD; or
(4) Used to fund the most highly ranked unfunded application or
applications from the most recent Small Cities Program competition.
(c) Timing. Funds which become available shall be used as soon as
practicable.
Sec. 570.429 Hawaii general and grant requirements.
(a) General. This section applies to the HUD-administered Small
Cities Program in the State of Hawaii.
(b) Scope and applicability. Except as otherwise provided in this
section, the
[[Page 98]]
policies and procedures outlined in subparts A, C, J, K, O of this part,
and in Secs. 570.420, 570.430, and 570.432, apply to the HUD-
administered Small Cities Program in the State of Hawaii.
(c) Grant amounts. (1) For each eligible unit of general local
government, a formula grant amount will be determined which bears the
same ratio to the total amount available for the nonentitlement area of
the State as the weighted average of the ratios between:
(i) The population of that eligible unit of general local government
and the population of all eligible units of general local government in
the nonentitlement areas of the State;
(ii) The extent of poverty in that eligible unit of general local
government and the extent of poverty in all the eligible units of
general local government in the nonentitlement areas of the State; and
(iii) The extent of housing overcrowding in that eligible unit of
general local government and the extent of housing overcrowding in all
the eligible units of general local government in the nonentitlement
areas of the State.
(2) In determining the average of the ratios under this paragraph
(c), the ratio involving the extent of poverty shall be counted twice
and each of the other ratios shall be counted once. (0.25 + 0.50 + 0.25
= 1.00).
(d) Adjustments to grants. Grant amounts under this section may be
adjusted where an applicant's performance is judged inadequate,
considering:
(1) Capacity to utilize the grant amount effectively and
efficiently;
(2) Compliance with the requirements of Sec. 570.902(a) for timely
expenditure of funds beginning with grants made in FY 1996. In making
this calculation, all outstanding grants will be considered. For the FY
1995 grant the requirement is substantial compliance with the
applicant's schedule or schedules submitted in each previously funded
application;
(3) Compliance with other program requirements based on monitoring
visits and audits.
(e) Reallocation. (1) Any amounts that become available as a result
of adjustments under paragraph (d) of this section, or any reductions
under subpart O of this part, shall be reallocated in the same fiscal
year to any remaining eligible applicants on a pro rata basis.
(2) Any formula grant amounts reserved for an applicant that chooses
not to submit an application shall be reallocated to any remaining
eligible applicants on a pro rata basis.
(3) No amounts shall be reallocated under paragraph (e) of this
section in any fiscal year to any applicant whose grant amount was
adjusted under paragraph (d) of this section or reduced under subpart O
of this part.
(f) Required submissions. In order to receive its formula grant
under this subpart, the applicant must submit a consolidated plan in
accordance with 24 CFR part 91. That part includes requirements for the
content of the consolidated plan, for the process of developing the
plan, including citizen participation provisions, for the submission
date, for HUD approval, and for the amendment process.
(g) Application approval. HUD will approve an application if the
jurisdiction's submissions have been made and approved in accordance
with 24 CFR part 91 and the certifications required therein are
satisfactory to the Secretary. The certifications will be satisfactory
to the Secretary for this purpose unless the Secretary has determined
pursuant to subpart O of this part that the grantee has not complied
with the requirements of this part, has failed to carry out its
consolidated plan as provided under Sec. 570.903, or has determined that
there is evidence, not directly involving the grantee's past performance
under this program, that tends to challenge in a substantial manner the
grantee's certification of future performance. If the Secretary makes
any such determination, however, further assurances may be required to
be submitted by the grantee as the Secretary may deem warranted or
necessary to find the grantee's certification satisfactory.
(h) Grant agreement. The grant will be made by means of a grant
agreement executed by both HUD and the grantee.
(i) Conditional grant. The Secretary may make a conditional grant in
which case the obligation and use of grant funds for activities may be
restricted. Conditional grants may be made where
[[Page 99]]
there is substantial evidence that there has been, or there will be, a
failure to meet the performance requirements or criteria described in
subpart O of this part. In such case, the conditional grant will be made
by means of a grant agreement, executed by HUD, which includes the terms
of the condition specifying the reason for the conditional grant, the
actions necessary to remove the condition and the deadline for taking
those actions. The grantee shall execute and return such an agreement to
HUD within 60 days of the date of its transmittal. Failure of the
grantee to execute and return the grant agreement within 60 days may be
deemed by HUD to constitute rejection of the grant by the grantee and
shall be cause for HUD to determine that the funds provided in the grant
agreement are available for reallocation in accordance with section
106(c) of the Act. Failure to satisfy the condition may result in a
reduction in the grant amount pursuant to Sec. 570.911.
(Approved by the Office of Management and Budget under control number
2506-0060)
Sec. 570.430 Hawaii program operation requirements.
(a) Limitation on planning and administrative costs. For grants made
with allocations prior to FY 1995, no more than 20 percent of the sum of
the grant plus program income received during the grant period shall be
expended for planning and program administrative costs. For grants
received from allocations in FY 1995 and thereafter, a grantee will be
considered to be in conformance with the requirements of Sec. 570.200(g)
if funds obligated for planning and administration during the most
recently completed program year do not exceed 20 percent of the sum of
the grant made for that program year and the program income received
from post FY 1994 grants during that program year.
(b) Performance and evaluation reports. Grantees will follow the
requirements of Sec. 570.507(a) for entitlement grant recipients for all
grants received in FY 1995 and thereafter. Grantees will continue
following the requirements of Sec. 570.507(a) for HUD-administered small
cities grants for grants received prior to FY 1995 until those grants
are closed out.
(c) Grant closeouts. Grants received prior to FY 1995 shall be
closed out in accordance with the procedures in Sec. 570.509. Grants
received in FY 1995 and thereafter shall not be closed out individually.
A grantee's entire program shall be closed upon program completion if a
grantee ceases its participation in the Small Cities Program.
(d) Public Services. Starting with the FY 1996 grant, grantees may
follow the provisions of Sec. 570.201(e)(1) that refer to entitlement
grantees, allowing grantees to use 15 percent of the program income
received in the previous program year in addition to 15 percent of the
grant amount for public services.
(e) Compliance with the primary objective. Starting with the FY 1995
grant, grantees may select a time period of one, two or three program
years in which to meet the requirement that not less than 70 percent of
the aggregate of CDBG fund expenditures be for activities benefitting
low- and moderate- income persons. Grants made from allocations prior to
FY 1995 will be considered individually for meeting the primary
objective, and expenditures for grants from pre-FY 1995 allocations made
during and after FY 1995 will not be considered in determining whether
the primary objective has been met for post-1994 allocations. If the
State of Hawaii decides to administer the Community Development Block
Grant Program for nonentitlement units of general local government in
Hawaii, the State will be bound by the time period for meeting the
primary objective that was chosen by each nonentitlement grantee within
the State until those time periods have expired.
(f) Program amendments for grants received prior to FY 1995.
Grantees must follow the requirements of 24 CFR 91.505 when amending
their program with regard to grants received prior to FY 1995. For
purposes of this paragraph (f), the term consolidated plan as used in 24
CFR 91.505 means an application submitted under the Hawaii program for
pre-FY 1995 funds. Also for purposes of this paragraph (f), to comply
with the requirements of 24 CFR 91.505, grantees must refer to their
current
[[Page 100]]
citizen participation plans (adopted in accordance with 24 CFR 91.505)
to determine the criteria for substantial amendment and the citizen
participation process to be followed.
(Approved by the Office of Management and Budget under control number
2506-0020)
Sec. 570.431 Citizen participation.
(a) General. An applicant that is located in a nonentitlement area
of a State that has not elected to distribute funds shall comply with
the citizen participation requirements described in this section,
including requirements for the preparation of the proposed application
and the final application. The requirements for citizen participation do
not restrict the responsibility or authority of the applicant for the
development and execution of its community development program.
(b) Citizen participation plan. The applicant must develop and
follow a detailed citizen participation plan and must make the plan
public. The plan must be completed and available before the application
for assistance is submitted to HUD, and the applicant must certify that
it is following the plan. The plan must set forth the applicant's
policies and procedures for:
(1) Giving citizens timely notice of local meetings and reasonable
and timely access to local meetings, information, and records relating
to the grantee's proposed and actual use of CDBG funds including, but
not limited to:
(i) The amount of CDBG funds expected to be made available for the
coming year, including the grant and anticipated program income;
(ii) The range of activities that may be undertaken with those
funds;
(iii) The estimated amount of those funds proposed to be used for
activities that will benefit low- and moderate-income persons;
(iv) The proposed CDBG activities likely to result in displacement
and the applicant's plans, consistent with the policies developed under
Sec. 570.606(b), for minimizing displacement of persons as a result of
its proposed activities; and
(v) The types and levels of assistance the applicant plans to make
available (or to require others to make available) to persons displaced
by CDBG-funded activities, even if the applicant expects no displacement
to occur;
(2) Providing technical assistance to groups representative of
persons of low- and moderate-income that request assistance in
developing proposals. The level and type of assistance to be provided is
at the discretion of the applicant. The assistance need not include the
provision of funds to the groups;
(3) Holding a minimum of two public hearings, for the purpose of
obtaining citizens' views and formulating or responding to proposals and
questions. Each public hearing must be conducted at a different stage of
the CDBG program. Together, the hearings must address community
development and housing needs, development of proposed activities and
review of program performance. There must be reasonable notice of the
hearings and the hearings must be held at times and accessible locations
convenient to potential or actual beneficiaries, with reasonable
accommodations including material in accessible formats for persons with
disabilities. The applicant must specify in its plan how it will meet
the requirement for hearings at times and locations convenient to
potential or actual beneficiaries;
(4) Meeting the needs of non-English speaking residents in the case
of public hearings where a significant number of non-English speaking
residents can reasonably be expected to participate;
(5) Responding to citizen complaints and grievances, including the
procedures that citizens must follow when submitting complaints and
grievances. The applicant's policies and procedures must provide for
timely written answers to written complaints and grievances within 15
working days of the receipt of the complaint, where practicable; and
(6) Encouraging citizen participation, particularly by low- and
moderate-income persons who reside in slum or blighted areas, and in
other areas in which CDBG funds are proposed to be used.
[[Page 101]]
(c) Publication of proposed application. (1) The applicant shall
publish a proposed application consisting of the proposed community
development activities and community development objectives in order to
afford affected citizens an opportunity to:
(i) Examine the application's contents to determine the degree to
which they may be affected;
(ii) Submit comments on the proposed application; and
(iii) Submit comments on the performance of the applicant.
(2) The requirement for publishing in paragraph (c)(1) of this
section may be met by publishing a summary of the proposed application
in one or more newspapers of general circulation, and by making copies
of the proposed application available at libraries, government offices,
and public places. The summary must describe the contents and purpose of
the proposed application, and must include a list of the locations where
copies of the entire proposed application may be examined.
(d) Preparation of a final application. An applicant must prepare a
final application. In the preparation of the final application, the
applicant shall consider comments and views received related to the
proposed application and may, if appropriate, modify the final
application. The final application shall be made available to the public
and shall include the community development objectives and projected use
of funds, and the community development activities.
(e) New York grantee amendments. To assure citizen participation on
program amendments to final applications that require HUD approval under
Sec. 570.427, the grantee shall:
(1) Furnish citizens information concerning the amendment;
(2) Hold one or more public hearings to obtain the views of citizens
on the proposed amendment;
(3) Develop and publish the proposed amendment in such a manner as
to afford affected citizens an opportunity to examine the contents, and
to submit comments on the proposed amendment;
(4) Consider any comments and views expressed by citizens on the
proposed amendment and, if the grantee finds it appropriate, modify the
final amendment accordingly; and
(5) Make the final amendment to the community development program
available to the public before its submission to HUD.
Sec. 570.432 Repayment of section 108 loans.
Notwithstanding any other provision of this subpart, a unit of
general local government in a nonentitlement area where the State has
not elected to administer the CDBG program shall be eligible for Small
Cities Grant assistance hereunder for the sole purpose of paying any
amounts due on debt obligations issued by such unit of general local
government (or its designated public agency) and guaranteed by the
Secretary pursuant to section 108 of the Act (see subpart M of this
part). The award of grant assistance for such purpose shall be
consistent with section 106(d)(3)(B) of the Act, in such amount, and
subject to such conditions as the Secretary may determine. Since
guaranteed loan funds (as defined in Sec. 570.701) are required to be
used in accordance with national and primary objective requirements, and
other applicable requirements of this part, any grant made to make
payments on the debt obligations evidencing the guaranteed loan shall be
presumed to meet such requirements, unless HUD determines that the
guaranteed loan funds were not used in accordance with such
requirements. Any such determination by HUD shall not prevent the making
of the grant in the amount of the payment due, but it may be grounds for
HUD to take appropriate action under subpart O of this part based on the
original noncompliance.
Subpart G--Urban Development Action Grants
Source: 47 FR 7983, Feb. 23, 1982, unless otherwise noted.
Sec. 570.450 Purpose.
The purpose of urban development action grants is to assist cities
and urban counties that are experiencing severe economic distress to
help stimulate economic development activity needed to aid in economic
recovery.
[[Page 102]]
This subpart G contains those regulations that are essential for the
continued operation of this grant program.
[61 FR 11476, Mar. 20, 1996]
Sec. 570.456 Ineligible activities and limitations on eligible activities.
(a) Large cities and urban counties may not use assistance under
this subpart for planning the project or developing the application.
However, they may use entitlement community development block grant
funds for this purpose, provided that the UDAG project meets the
eligibility test of this part. Any small city which submits a project
application which is selected for preliminary approval and for which
legally binding grant agreement and for which a release of funds
pursuant to 24 CFR part 58 has been issued may devote up to three (3)
percent of the approved amount of its action grant to defray its actual
costs in planning the project and preparing its application.
(b) Assistance under this subpart may not be used for public
services as described in Sec. 570.201(e).
(c)(1) No assistance may be provided under this subpart for
speculative projects intended to facilitate the relocation of industrial
or commercial plants or facilities from one area to another. The
provisions of this paragraph (c)(1) shall not apply to a relocation of
any such plant or facility within a metropolitan area.
(i) HUD will presume that a proposed project which includes
speculative commercial or industrial space is intended to facilitate the
relocation of a plant or facility from one area to another, if it is
demonstrated to HUD's satisfaction that:
(A) The proposed project is reasonably proximate (i.e., within 50
miles) to an area from which there has been a significant current
pattern of movement, to areas reasonably proximate, of jobs of the
category for which such space is appropriate; and
(B) There is a likelihood of continuation of the pattern, based on
measurable comparisons between the area from which the movement has been
occurring and the area of the proposed project in terms of tax rates,
energy costs, and similar relevant factors.
(ii) The restrictions established in this paragraph (c)(1) shall not
apply if the Secretary determines that the relocation does not
significantly and adversely affect the employment or economic base of
the area from which the industrial or commercial plant or facility is to
be relocated. However, the Secretary will not be required to make a
determination whether there is a significant and adverse effect. If such
a determination is undertaken, the Secretary will presume that there is
a significant and adverse effect where the significant pattern of job
movement and the likelihood of continuation of such a pattern has been
from a distressed community.
(iii) The presumptions established in accordance with this paragraph
(c)(1) are rebuttable by the applicant. However, the burden of
overcoming the presumptions will be on the applicant.
(iv) The presumptions established in this paragraph (c)(1) will not
apply if the speculative space contained in a commercial or industrial
plant or facility included in a project constitutes a lesser percentage
of the total space contained in that plant or facility than the
threshold amounts specified below:
------------------------------------------------------------------------
Size of plant or facility Amount of speculative space
------------------------------------------------------------------------
0 to 50,000 sq. ft........................ 10 percent.
50,001 to 250,000 sq. ft.................. 5,000 sq. ft. or 8 percent,
whichever is greater.
250,001 to 1,000,000 sq. ft............... 20,000 sq. ft. or 5 percent,
whichever is greater.
1,000,001 or more sq. ft.................. 50,000 sq. ft. or 3 percent,
whichever is greater.
------------------------------------------------------------------------
(2) Projects with identified intended occupants. No assistance may
be provided or utilized under this subpart for any project with
identified intended occupants that is likely to facilitate:
(i) A relocation of any operation of an industrial or commercial
plant or facility or other business establishment from any UDAG eligible
jurisdiction; or
(ii) An expansion of any operation of an industrial or commercial
plant or facility or other business establishment that results in a
substantial reduction of any such operation in any UDAG eligible
jurisdiction. The provisions of this paragraph (c)(2) shall not apply to
a relocation of an operation or to an expansion of an operation within
[[Page 103]]
a metropolitan area. The provisions of this paragraph (c)(2) shall apply
only to projects that do not have speculative space, or to projects that
include both identified intended occupant space and speculative space.
(iii) Significant and adverse effect. The restrictions established
in this paragraph (c)(2) shall not apply if the Secretary determines
that the relocation or expansion does not significantly and adversely
affect the employment or economic base of the UDAG eligible jurisdiction
from which the relocation or expansion occurs. However, the Secretary
will not be required to make a determination whether there is a
significant and adverse effect. If such a determination is undertaken,
among the factors which the Secretary will consider are:
(A) Whether it is reasonable to anticipate that there will be a
significant net loss of jobs in the plant or facility being abandoned;
and
(B) Whether an equivalent productive use will be made of the plant
or facility being abandoned by the relocating or expanding operation,
thus creating no deterioration of economic base.
(3) Within 90 days following notice of intent to withhold, deny or
cancel assistance under paragraph (c) (1) or (2) of this section, the
applicant may appeal in writing to the Secretary the withholding, denial
or cancellation of assistance. The applicant will be notified and given
an opportunity within a prescribed time for an informal consultation
regarding the action.
(4) Assistance for individuals adversely affected by prohibited
relocations. (i) Any amount withdrawn by, recaptured by, or paid to the
Secretary because of a violation (or a settlement of an alleged
violation) of this section (or any regulation issued or contractual
provision entered into to carry out this section) by a project with
identified intended occupants will be made available by the Secretary as
a grant to the UDAG eligible jurisdiction from which the operation of an
industrial or commercial plant or facility or other business
establishment was relocated, or in which the operation was reduced.
(ii)(A) Any amount made available under this paragraph shall be used
by the grantee to assist individuals who were employed by the operation
involved before the relocation or reduction and whose employment or
terms of employment were adversely affected by the relocation or
reduction. The assistance shall include job training, job retraining,
and job placement.
(B) If any amount made available to a grantee under this paragraph
(c)(4) is more than is required to provide the assistance described in
paragraph (c)(4)(ii)(A) of this section, the grantee shall use the
excess amount to carry out community development activities eligible
under section 105(a) of the Housing and Community Development Act of
1974.
(iii)(A) The provisions of this paragraph (c)(4) shall be applicable
to any amount withdrawn by, recaptured by, or paid to the Secretary
under this section, including any amount withdrawn, recaptured, or paid
before the effective date of this paragraph.
(B) Grants may be made under this paragraph (c)(4) only to the
extent of amounts provided in appropriation Acts.
(5) For purposes of this section, the following definitions apply:
(i) ``Operation'' means any plant, equipment, facility, substantial
number of positions, substantial employment opportunities, production
capacity, or product line.
(ii) ``Metropolitan area'' means a metropolitan area as defined in
Sec. 570.3 and which consists of either a freestanding metropolitan area
or a primary metropolitan statistical area where both primary and
consolidated areas exist.
(iii) ``Likely'' means probably or reasonably to be expected, as
determined by firm evidence such as resolutions of a corporation to
close a plant or facility, notifications of closure to collective
bargaining units, correspondence and notifications of corporate
officials relative to a closure, and supportive evidence, such as
newspaper articles and notices to employees regarding closure of a plant
or facility. Consultant studies and marketing studies may be submitted
as supportive evidence, but by themselves are not firm evidence.
[[Page 104]]
(iv) ``UDAG eligible jurisdiction'' means a distressed community, a
Pocket of Poverty, a Pocket of Poverty community, or an identifiable
community described in section 119(p) of the Housing and Community
Development Act of 1974.
(6) Notwithstanding any other provision of this subpart, nothing in
this subpart may be construed to permit an inference or conclusion that
the policy of the urban development action grant program is to
facilitate the relocation of businesses from one area to another.
[47 FR 7983, Feb. 23, 1982, as amended at 53 FR 33028, Aug. 29, 1988; 54
FR 21169, May 16, 1989; 56 FR 56128, Oct. 31, 1991]
Sec. 570.457 Displacement, relocation, acquisition, and replacement of housing.
The displacement, relocation, acquisition, and replacement of
housing requirements of Sec. 570.606 apply to applicants under this
subpart G.
[55 FR 29309, July 18, 1990]
Sec. 570.461 Post-preliminary approval requirements; lead-based paint.
The recipient may receive preliminary approval prior to the
accomplishment of lead-based paint activities conducted pursuant to part
35, subparts A, B, J, K, and R of this title, but no funds will be
released until such actions are complete and evidence of compliance is
submitted to HUD.
[64 FR 50225, Sept. 15, 1999]
Sec. 570.463 Project amendments and revisions.
(a) Pre-approval revisions to the application. Applicants must
submit to the HUD Area Office and to Central Office all revisions to the
application. A revision is considered significant if it alters the
scope, location, or scale of the project or changes the beneficiaries'
population.
The applicant must hold at least one public hearing prior to making a
significant revision to the application.
(b) Post preliminary approval amendments. Applicants receiving
preliminary approval must submit to the HUD Central Office, a request
for approval of any significant amendment. A copy of the request must
also be submitted to the Area Office. A significant amendment involves
new activities or alterations thereof which will change the scope,
location, scale, or beneficiaries of such activities or which, as a
result of a number of smaller changes, add up to an amount that exceeds
ten percent of the grant. HUD approval of amendments may be granted to
those requests which meet all of the following criteria:
(1) New or significantly altered activities must meet the criteria
for selection applicable at the time of receipt of the program
amendment.
(2) The recipient must have complied with all requirements of this
subpart.
(3) The recipient may make amendments other than those requiring
prior HUD approval as defined in paragraph (b) of this section but each
recipient must notify both the Area and Central Offices of such changes.
[47 FR 7983, Feb. 23, 1982, as amended at 61 FR 11476, Mar. 20, 1996]
Sec. 570.464 Project closeout.
HUD will advise the recipient to initiate closeout procedures when
HUD determines, in consultation with the recipient, that there are not
impediments to closeout. Closeout shall be carried out in accordance
with Sec. 570.509 and applicable HUD guidelines.
[53 FR 8058, Mar. 11, 1988]
Sec. 570.465 Applicability of rules and regulations.
The provisions of subparts A, B, C, J, K, and O of this part 570
shall apply to this subpart except to the extent that they are modified
or augmented by this subpart.
Sec. 570.466 Additional application submission requirements for Pockets of Poverty--employment opportunities.
Applicants for Action Grants under the Pockets of Poverty provision
must describe the number and, to the extent possible, the types of new
jobs (construction and permanent) that will be provided to the low- and
moderate-income residents of the Pocket of Poverty as a direct result of
the proposed project. If the application calls for job
[[Page 105]]
training programs (such as those related to the CETA program) or job
recruiting services for the pocket's residents, then such proposed
activities must be clearly and fully explained. HUD requires applicants
to ensure that at least 75 percent of whatever permanent jobs initially
result from the project are provided to low- and moderate-income persons
and that at least 51 percent of whatever permanent jobs initially result
from the project are provided to low- and moderate-income residents from
the pocket. HUD encourages applicants to ensure that at least 20 percent
of all permanent jobs are filled by persons from the pocket qualified to
participate in the CETA program on a continuous basis. HUD requires all
applicants to continuously use best efforts to ensure that at least 75
percent of all permanent jobs resulting from any Action Grant-assisted
project are provided to low- and moderate-income persons and that at
least 51 percent of all permanent jobs resulting from any Action Grant-
assisted project are provided to low- and moderate-income residents from
the pocket. The application should clearly describe how the applicant
intends to meet initial and continuous job requirements. Private
participating parties must meet these employment requirements in the
aggregate. To enable the private participants to do so, lease agreements
executed by a private participating party shall include:
(a) Provisions requiring lessees to follow hiring practices that the
private participating party has determined will enable it to meet these
requirements in the aggregate; and
(b) Provisions that will enable the private participating party to
declare a default under the lease agreement if the lessees do not follow
such practices.
[61 FR 11476, Mar. 20, 1996]
Subpart H [Reserved]
Subpart I--State Community Development Block Grant Program
Source: 57 FR 53397, Nov. 9, 1992, unless otherwise noted.
Sec. 570.480 General.
(a) This subpart describes policies and procedures applicable to
states that elect to receive Community Development Block Grant funds for
distribution to units of general local government in the state's
nonentitlement areas under the Housing and Community Development Act of
1974. Other subparts of part 570 are not applicable to the State CDBG
Program, except as expressly provided otherwise.
(b) HUD's authority for the waiver of regulations and for the
suspension of requirements to address damage in a Presidentially-
declared disaster area is described in 24 CFR part 5 and in section 122
of the Act, respectively.
(c) In exercising the Secretary's obligation and responsibility to
review a state's performance, the Secretary will give maximum feasible
deference to the state's interpretation of the statutory requirements
and the requirements of this regulation, provided that these
interpretations are not plainly inconsistent with the Act and the
Secretary's obligation to enforce compliance with the intent of the
Congress as declared in the Act. The Secretary will not determine that a
state has failed to carry out its certifications in compliance with
requirements of the Act (and this regulation) unless the Secretary finds
that procedures and requirements adopted by the state are insufficient
to afford reasonable assurance that activities undertaken by units of
general local government were not plainly inappropriate to meeting the
primary objectives of the Act, this regulation, and the state's
community development objectives.
(d) Administrative action taken by the Secretary that is not
explicitly and fully part of this regulation shall only
[[Page 106]]
apply to a specific case or issue at a specific time, and shall not be
generally applicable to the state-administered CDBG program.
[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 11477, Mar. 20, 1996; 61
FR 54921, Oct. 22, 1996]
Sec. 570.481 Definitions.
(a) Except for terms defined in applicable statutes or this subpart,
the Secretary will defer to a state's definitions, provided that these
definitions are explicit, reasonable and not plainly inconsistent with
the Act. As used in this subpart, the following terms shall have the
meaning indicated:
(1) Act means title I of the Housing and Community Development Act
of 1974 (42 U.S.C. 5301 et seq.).
(2) CDBG funds means Community Development Block Grant funds, in the
form of grants under this subpart and program income, and loans
guaranteed by the state under section 108 of the Act.
(b) [Reserved]
[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 5209, Feb. 9, 1996]
Sec. 570.482 Eligible activities.
(a) General. The choice of activities on which block grant funds are
expended represents the determination by state and local participants,
developed in accordance with the state's program design and procedures,
as to which approach or approaches will best serve these interests. The
eligible activities are listed at section 105(a) of the Act.
(b) Special assessments under the CDBG program. The following
policies relate to special assessments under the CDBG program:
(1) Public improvements initially assisted with CDBG funds. Where
CDBG funds are used to pay all or part of the cost of a public
improvement, special assessments may be imposed as follows:
(i) Special assessments to recover the CDBG funds may be made only
against properties owned and occupied by persons not of low and moderate
income. These assessments constitute program income.
(ii) Special assessments to recover the non-CDBG portion may be
made, provided that CDBG funds are used to pay the special assessment in
behalf of all properties owned and occupied by low and moderate income
persons; except that CDBG funds need not be used to pay the special
assessments in behalf of properties owned and occupied by moderate
income persons if, when permitted by the state, the unit of general
local government certifies that it does not have sufficient CDBG funds
to pay the assessments in behalf of all of the low and moderate income
owner-occupant persons. Funds collected through such special assessments
are not program income.
(2) Public improvements not initially assisted with CDBG funds. CDBG
funds may be used to pay special assessments levied against property
when this form of assessment is used to recover the capital cost of
eligible public improvements initially financed solely from sources
other than CDBG funds. The payment of special assessments with CDBG
funds constitutes CDBG assistance to the public improvement. Therefore,
CDBG funds may be used to pay special assessments, provided that:
(i) The installation of the public improvements was carried out in
compliance with requirements applicable to activities assisted under
this subpart, including labor, environmental and citizen participation
requirements;
(ii) The installation of the public improvement meets a criterion
for national objectives. (See Sec. 570.483(b)(1), (c), and (d).)
(iii) The requirements of Sec. 570.482(b)(1)(ii) are met.
(c) Provision of assistance for microenterprise development.
Microenterprise development activities eligible under section 105(a)(23)
of the Housing and Community Development Act of 1974 (the Act), as
amended, (42 U.S.C. 5301 et seq.) may be carried out either through the
recipient directly or through public and private organizations,
agencies, and other subrecipients (including nonprofit and for-profit
subrecipients).
(d) Provision of public services. The following activities shall not
be subject to the restrictions on public services under section
105(a)(8) of the Housing
[[Page 107]]
and Community Development Act of 1974, as amended:
(1) Support services provided under section 105(a)(23) of the
Housing and Community Development Act of 1974, as amended, and paragraph
(c) of this section;
(2) Services carried out under the provisions of section 105(a)(15)
of the Housing and Community Development Act of 1974, as amended, that
are specifically designed to increase economic opportunities through job
training and placement and other employment support services, including,
but not limited to, peer support programs, counseling, child care,
transportation, and other similar services; and
(3) Services of any type carried out under the provisions of section
105(a)(15) of the Act, pursuant to a strategy approved by a State under
the provisions of Sec. 91.315(e)(2) of this title.
(e) Guidelines and objectives for evaluating project costs and
financial requirements--(1) Applicability. The following guidelines,
also referred to as the underwriting guidelines, are provided to assist
the recipient to evaluate and select activities to be carried out for
economic development purposes. Specifically, these guidelines are
applicable to activities that are eligible for CDBG assistance under
section 105(a)(17) of the Act, economic development activities eligible
under section 105(a)(14) of the Act, and activities that are part of a
community economic development project eligible under section 105(a)(15)
of the Act. The use of the underwriting guidelines published by HUD is
not mandatory. However, states electing not to use these guidelines
would be expected to ensure that the state or units of general local
government conduct basic financial underwriting prior to the provision
of CDBG financial assistance to a for-profit business.
(2) Objectives. The underwriting guidelines are designed to provide
the recipient with a framework for financially underwriting and
selecting CDBG-assisted economic development projects which are
financially viable and will make the most effective use of the CDBG
funds. Where appropriate, HUD's underwriting guidelines recognize that
different levels of review are appropriate to take into account
differences in the size and scope of a proposed project, and in the case
of a microenterprise or other small business to take into account the
differences in the capacity and level of sophistication among businesses
of differing sizes. Recipients are encouraged, when they develop their
own programs and underwriting criteria, to also take these factors into
account. These underwriting guidelines are published as appendix A to
this part. The objectives of the underwriting guidelines are to ensure:
(i) That project costs are reasonable;
(ii) That all sources of project financing are committed;
(iii) That to the extent practicable, CDBG funds are not substituted
for non-Federal financial support;
(iv) That the project is financially feasible;
(v) That to the extent practicable, the return on the owner's equity
investment will not be unreasonably high; and
(vi) That to the extent practicable, CDBG funds are disbursed on a
pro rata basis with other finances provided to the project.
(f) Standards for evaluating public benefit--(1) Purpose and
applicability. The grantee is responsible for making sure that at least
a minimum level of public benefit is obtained from the expenditure of
CDBG funds under the categories of eligibility governed by these
standards. The standards set forth below identify the types of public
benefit that will be recognized for this purpose and the minimum level
of each that must be obtained for the amount of CDBG funds used. These
standards are applicable to activities that are eligible for CDBG
assistance under section 105(a)(17) of the Act, economic development
activities eligible under section 105(a)(14) of the Act, and activities
that are part of a community economic development project eligible under
section 105(a)(15) of the Act. Certain public facilities and
improvements eligible under section 105(a)(2) of the Act, which are
undertaken for economic development purposes, are also subject to these
standards, as specified in Sec. 570.483(b)(4)(vi)(F)(2). Unlike the
[[Page 108]]
guidelines for project costs and financial requirements covered under
paragraph (a) of this section, the use of the standards for public
benefit is mandatory.
(2) Standards for activities in the aggregate. Activities covered by
these standards must, in the aggregate, either:
(i) Create or retain at least one full-time equivalent, permanent
job per $35,000 of CDBG funds used; or
(ii) Provide goods or services to residents of an area, such that
the number of low- and moderate-income persons residing in the areas
served by the assisted businesses amounts to at least one low- and
moderate-income person per $350 of CDBG funds used.
(3) Applying the aggregate standards. (i) A state shall apply the
aggregate standards under paragraph (e)(2) of this section to all funds
distributed for applicable activities from each annual grant. This
includes the amount of the annual grant, any funds reallocated by HUD to
the state, any program income distributed by the state and any
guaranteed loan funds made under the provisions of subpart M of this
part covered in the method of distribution in the final statement for a
given annual grant year.
(ii) The grantee shall apply the aggregate standards to the number
of jobs to be created/retained, or to the number of persons residing in
the area served (as applicable), as determined at the time funds are
obligated to activities.
(iii) Where an activity is expected both to create or retain jobs
and to provide goods or services to residents of an area, the grantee
may elect to count the activity under either the jobs standard or the
area residents standard, but not both.
(iv) Where CDBG assistance for an activity is limited to job
training and placement and/or other employment support services, the
jobs assisted with CDBG funds shall be considered to be created or
retained jobs for the purposes of applying the aggregate standards.
(v) Any activity subject to these standards which meets one or more
of the following criteria may, at the grantee's option, be excluded from
the aggregate standards described in paragraph (f)(2) of this section:
(A) Provides jobs exclusively for unemployed persons or participants
in one or more of the following programs:
(1) Jobs Training Partnership Act (JTPA);
(2) Jobs Opportunities for Basic Skills (JOBS); or
(3) Aid to Families with Dependent Children (AFDC);
(B) Provides jobs predominantly for residents of Public and Indian
Housing units;
(C) Provides jobs predominantly for homeless persons;
(D) Provides jobs predominantly for low-skilled, low- and moderate-
income persons, where the business agrees to provide clear opportunities
for promotion and economic advancement, such as through the provision of
training;
(E) Provides jobs predominantly for persons residing within a census
tract (or block numbering area) that has at least 20 percent of its
residents who are in poverty;
(F) Provides assistance to business(es) that operate(s) within a
census tract (or block numbering area) that has at least 20 percent of
its residents who are in poverty;
(G) Stabilizes or revitalizes a neighborhood income that has at
least 70 percent of its residents who are low- and moderate-income;
(H) Provides assistance to a Community Development Financial
Institution (as defined in the Community Development Banking and
Financial Institutions Act of 1994, (12 U.S.C. 4701 note)) serving an
area that has at least 70 percent of its residents who are low- and
moderate-income;
(I) Provides assistance to an organization eligible to carry out
activities under section 105(a)(15) of the Act serving an area that has
at least 70 percent of its residents who are low- and moderate-income;
(J) Provides employment opportunities that are an integral component
of a project designed to promote spatial deconcentration of low- and
moderate-income and minority persons;
(K) With prior HUD approval, provides substantial benefit to low-
income
[[Page 109]]
persons through other innovative approaches;
(L) Provides services to the residents of an area pursuant to a
strategy approved by the State under the provisions of Sec. 91.315(e)(2)
of this title;
(M) Creates or retains jobs through businesses assisted in an area
pursuant to a strategy approved by the State under the provisions of
Sec. 91.315(e)(2) of this title.
(4) Standards for individual activities. Any activity subject to
these standards which falls into one or more of the following categories
will be considered by HUD to provide insufficient public benefit, and
therefore may under no circumstances be assisted with CDBG funds:
(i) The amount of CDBG assistance exceeds either of the following,
as applicable:
(A) $50,000 per full-time equivalent, permanent job created or
retained; or
(B) $1,000 per low- and moderate-income person to which goods or
services are provided by the activity.
(ii) The activity consists of or includes any of the following:
(A) General promotion of the community as a whole (as opposed to the
promotion of specific areas and programs);
(B) Assistance to professional sports teams;
(C) Assistance to privately-owned recreational facilities that serve
a predominantly higher-income clientele, where the recreational benefit
to users or members clearly outweighs employment or other benefits to
low- and moderate-income persons;
(D) Acquisition of land for which the specific proposed use has not
yet been identified; and
(E) Assistance to a for-profit business while that business or any
other business owned by the same person(s) or entity(ies) is the subject
of unresolved findings of noncompliance relating to previous CDBG
assistance provided by the recipient.
(5) Applying the individual activity standards. (i) Where an
activity is expected both to create or retain jobs and to provide goods
or services to residents of an area, it will be disqualified only if the
amount of CDBG assistance exceeds both of the amounts in paragraph
(f)(4)(i) of this section.
(ii) The individual activity tests in paragraph (f)(4)(i) of this
section shall be applied to the number of jobs to be created or
retained, or to the number of persons residing in the area served (as
applicable), as determined at the time funds are obligated to
activities.
(iii) Where CDBG assistance for an activity is limited to job
training and placement and/or other employment support services, the
jobs assisted with CDBG funds shall be considered to be created or
retained jobs for the purposes of applying the individual activity
standards in paragraph (f)(4)(i) of this section.
(6) Documentation. The state and its grant recipients must maintain
sufficient records to demonstrate the level of public benefit, based on
the above standards, that is actually achieved upon completion of the
CDBG-assisted economic development activity(ies) and how that compares
to the level of such benefit anticipated when the CDBG assistance was
obligated. If a state grant recipient's actual results show a pattern of
substantial variation from anticipated results, the state and its
recipient are expected to take those actions reasonably within their
respective control to improve the accuracy of the projections. If the
actual results demonstrate that the state has failed the public benefit
standards, HUD may require the state to meet more stringent standards in
future years as appropriate.
(g) Amendments to economic development projects after review
determinations. If, after the grantee enters into a contract to provide
assistance to a project, the scope or financial elements of the project
change to the extent that a significant contract amendment is
appropriate, the project should be reevaluated under these and the
recipient's guidelines. (This would include, for example, situations
where the business requests a change in the amount or terms of
assistance being provided, or an extension to the loan payment period
required in the contract.) If a reevaluation of the project indicates
that the financial elements and public benefit to be derived have also
substantially changed, then the recipient should make appropriate
adjustments
[[Page 110]]
in the amount, type, terms or conditions of CDBG assistance which has
been offered, to reflect the impact of the substantial change. (For
example, if a change in the project elements results in a substantial
reduction of the total project costs, it may be appropriate for the
recipient to reduce the amount of total CDBG assistance.) If the amount
of CDBG assistance provided to the project is increased, the amended
project must still comply with the public benefit standards under
paragraph (f) of this section.
[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1949, Jan. 5, 1995; 61
FR 54921, Oct. 22, 1996]
Sec. 570.483 Criteria for national objectives.
(a) General. The following criteria shall be used to determine
whether a CDBG assisted activity complies with one or more of the
national objectives as required to section 104(b)(3) of the Act. (HUD is
willing to consider a waiver of these requirements in accordance with
Sec. 570.480(b)).
(b) Activities benefiting low and moderate income persons. An
activity will be considered to address the objective of benefiting low
and moderate income persons if it meets one of the criteria in paragraph
(b) of this section, unless there is substantial evidence to the
contrary. In assessing any such evidence, the full range of direct
effects of the assisted activity will be considered. The activities,
when taken as a whole, must not benefit moderate income persons to the
exclusion of low income persons:
(1) Area benefit activities. (i) An activity, the benefits of which
are available to all the residents in a particular area, where at least
51 percent of the residents are low and moderate income persons. Such an
area need not be coterminous with census tracts or other officially
recognized boundaries but must be the entire area served by the
activity. Units of general local government may, at the discretion of
the state, use either HUD-provided data comparing census data with
appropriate low and moderate income levels or survey data that is
methodologically sound. An activity that serves an area that is not
primarily residential in character shall not qualify under this
criterion.
(ii) An activity, where the assistance is to a public improvement
that provides benefits to all the residents of an area, that is limited
to paying special assessments levied against residential properties
owned and occupied by persons of low and moderate income.
(iii)(A) An activity to develop, establish and operate (not to
exceed two years after establishment), a uniform emergency telephone
number system serving an area having less than 51 percent of low and
moderate income residents, when the system has not been made operational
before the receipt of CDBG funds, provided a prior written determination
is obtained from HUD. HUD's determination will be based upon
certifications by the State that:
(1) The system will contribute significantly to the safety of the
residents of the area. The unit of general local government must provide
the state a list of jurisdictions and unincorporated areas to be served
by the system and a list of the emergency services that will participate
in the emergency telephone number system;
(2) At least 51 percent of the use of the system will be by low and
moderate income persons. The state's certification may be based upon
information which identifies the total number of calls actually received
over the preceding twelve-month period for each of the emergency
services to be covered by the emergency telephone number system and
relates those calls to the geographic segment (expressed as nearly as
possible in terms of census tracts, enumeration districts, block groups,
or combinations thereof that are contained within the segment) of the
service area from which the calls were generated. In analyzing this data
to meet the requirements of this section, the state will assume that the
distribution of income among callers generally reflects the income
characteristics of the general population residing in the same
geographic area where the callers reside. Alternatively, the state's
certification may be based upon other data, agreed to by HUD and the
state, which shows that over the preceding twelve-month period the users
of all the services to be included in the emergency
[[Page 111]]
telephone number system consisted of at least 51 percent low and
moderate income persons.
(3) Other federal funds received by the unit of general local
government are insufficient or unavailable for a uniform emergency
telephone number system. The unit of general local government must
submit a statement explaining whether the problem is caused by the
insufficiency of the amount of such funds, the restrictions on the use
of such funds, or the prior commitment of such funds for other purposes
by the unit of general local government.
(4) The percentage of the total costs of the system paid for by CDBG
funds does not exceed the percentage of low and moderate income persons
in the service area of the system. The unit of general local government
must include a description of the boundaries of the service area of the
system; the census tracts or enumeration districts within the
boundaries; the total number of persons and the total number of low and
moderate income persons in each census tract or enumeration district,
and the percentage of low and moderate income persons in the service
area; and the total cost of the system.
(B) The certifications of the state must be submitted along with a
brief statement describing the factual basis upon which the
certifications were made.
(iv) Activities meeting the requirements of paragraph (e)(4)(i) of
this section may be considered to qualify under paragraph (b)(1) of this
section.
(v) HUD will consider activities meeting the requirements of
paragraph (e)(5)(i) of this section to qualify under paragraph (b)(1) of
this section, provided that the area covered by the strategy meets one
of the following criteria:
(A) The area is in a Federally-designated Empowerment Zone or
Enterprise Community;
(B) The area is primarily residential and contains a percentage of
low and moderate income residents that is no less than 70 percent;
(C) All of the census tracts (or block numbering areas) in the area
have poverty rates of at least 20 percent, at least 90 percent of the
census tracts (or block numbering areas) in the area have poverty rates
of at least 25 percent, and the area is primarily residential. (If only
part of a census tract or block numbering area is included in a strategy
area, the poverty rate shall be computed for those block groups (or any
part thereof) which are included in the strategy area.)
(D) Upon request by the State, HUD may grant exceptions to the 70
percent low and moderate income or 25 percent poverty minimum thresholds
on a case-by-case basis. In no case, however, may a strategy area have
both a percentage of low and moderate income residents less than 51
percent and a poverty rate less than 20 percent.
(2) Limited clientele activities. (i) An activity which benefits a
limited clientele, at least 51 percent of whom are low and moderate
income persons. The following kinds of activities may not qualify under
paragraph (b)(2) of this section:
(A) Activities, the benefits of which are available to all the
residents of an area;
(B) Activities involving the acquisition, construction or
rehabilitation of property for housing; or
(C) Activities where the benefit to low- and moderate-income persons
to be considered is the creation or retention of jobs, except as
provided in paragraph (b)(2)(v) of this section.
(ii) To qualify under paragraph (b)(2) of this section, the activity
must meet one or the following tests:
(A) It must benefit a clientele who are generally presumed to be
principally low and moderate income persons. Activities that exclusively
serve a group of persons in any one or a combination of the following
categories may be presumed to benefit persons, 51 percent of whom are
low and moderate income: abused children, battered spouses, elderly
persons, adults meeting the Bureau of the Census' Current Population
Reports definition of ``severely disabled,'' homeless persons,
illiterate adults, persons living with AIDS, and migrant farm workers;
or
(B) It must require information on family size and income so that it
is evident that at least 51 percent of the clientele are persons whose
family income does not exceed the low and moderate income limit; or
[[Page 112]]
(C) It must have income eligibility requirements which limit the
activity exclusively to low and moderate income persons; or
(D) It must be of such a nature, and be in such a location, that it
may be concluded that the activity's clientele will primarily be low and
moderate income persons.
(iii) An activity that serves to remove material or architectural
barriers to the mobility or accessibility of elderly persons or of
adults meeting the Bureau of the Census' Current Population Reports
definition of ``severely disabled'' will be presumed to qualify under
this criterion if it is restricted, to the extent practicable, to the
removal of such barriers by assisting:
(A) The reconstruction of a public facility or improvement, or
portion thereof, that does not qualify under Sec. 570.483(b)(1);
(B) The rehabilitation of a privately owned nonresidential building
or improvement that does not qualify under Sec. 570.483(b) (1) or (4);
or
(C) The rehabilitation of the common areas of a residential
structure that contains more than one dwelling unit and that does not
qualify under Sec. 570.483(b)(3).
(iv) A microenterprise assistance activity (carried out in
accordance with the provisions of section 105(a)(23) of the Act or
Sec. 570.482(c) and limited to microenterprises) with respect to those
owners of microenterprises and persons developing microenterprises
assisted under the activity who are low- and moderate-income persons.
For purposes of this paragraph, persons determined to be low and
moderate income may be presumed to continue to qualify as such for up to
a three-year period.
(v) An activity designed to provide job training and placement and/
or other employment support services, including, but not limited to,
peer support programs, counseling, child care, transportation, and other
similar services, in which the percentage of low- and moderate-income
persons assisted is less than 51 percent may qualify under this
paragraph in the following limited circumstances:
(A) In such cases where such training or provision of supportive
services is an integrally-related component of a larger project, the
only use of CDBG assistance for the project is to provide the job
training and/or supportive services; and
(B) The proportion of the total cost of the project borne by CDBG
funds is no greater than the proportion of the total number of persons
assisted who are low or moderate income.
(3) Housing activities. 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.
This would include, but not necessarily be limited to, the acquisition
or rehabilitation of property by the unit of general local government, a
subrecipient, an entity eligible to receive assistance under section
105(a)(15) of the Act, a developer, an individual homebuyer, or an
individual homeowner; conversion of nonresidential structures; and new
housing construction. If the structure contains two dwelling units, at
least one must be so occupied, and if the structure contains more than
two dwelling units, at least 51 percent of the units must be so
occupied. If two or more rental buildings being assisted are or will be
located on the same or contiguous properties, and the buildings will be
under common ownership and management, the grouped buildings may be
considered for this purpose as a single structure. If housing activities
being assisted meet the requirements of paragraph (e)(4)(ii) or
(e)(5)(ii) of this section, all such housing may also be considered for
this purpose as a single structure. For rental housing, occupancy by low
and moderate income households must be at affordable rents to qualify
under this criterion. The unit of general local government shall adopt
and make public its standards for determining ``affordable rents'' for
this purpose. The following shall also qualify under this criterion:
(i) When less than 51 percent of the units in a structure will be
occupied by low and moderate income households, CDBG assistance may be
provided in the following limited circumstances:
(A) The assistance is for an eligible activity to reduce the
development
[[Page 113]]
cost of the new construction of a multifamily, non-elderly rental
housing project; and
(B) Not less than 20 percent of the units will be occupied by low
and moderate income households at affordable rents; and
(C) 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.
(ii) Where CDBG funds are used to assist rehabilitation delivery
services or in direct support of the unit of general local government's
Rental Rehabilitation Program authorized under 24 CFR part 511, the
funds shall be considered to benefit low and moderate income persons
where not less than 51 percent of the units assisted, or to be assisted,
by the Rental Rehabilitation Program overall are for low and moderate
income persons.
(iii) When CDBG funds are used for housing services eligible under
section 105(a)(21) of the Act, such funds shall be considered to benefit
low and moderate income persons if the housing units for which the
services are provided are HOME-assisted and the requirements of
Sec. 92.252 or Sec. 92.254 of this title are met.
(4) Job creation or retention activities. (i) An activity designed
to create permanent jobs where at least 51 percent of the jobs, computed
on a full time equivalent basis, involve the employment of low and
moderate income persons. For an activity that creates jobs, the unit of
general local government must document that at least 51 percent of the
jobs will be held by, or will be made available to low and moderate
income persons.
(ii) For an activity that retains jobs, the unit of general local
government must document that the jobs would actually be lost without
the CDBG assistance and that either or both of the following conditions
apply with respect to at least 51 percent of the jobs at the time the
CDBG assistance is provided: The job is known to be held by a low or
moderate income person; or the job can reasonably be expected to turn
over within the following two years and that it will be filled by, or
that steps will be taken to ensure that it is made available to, a low
or moderate income person upon turnover.
(iii) Jobs will be considered to be available to low and moderate
income persons for these purposes only if:
(A) Special skills that can only be acquired with substantial
training or work experience or education beyond high school are not a
prerequisite to fill such jobs, or the business agrees to hire
unqualified persons and provide training; and
(B) The unit of general local government and the assisted business
take actions to ensure that low and moderate income persons receive
first consideration for filling such jobs.
(iv) For purposes of determining whether a job is held by or made
available to a low- or moderate-income person, the person may be
presumed to be a low- or moderate-income person if:
(A) He/she resides within a census tract (or block numbering area)
that either:
(1) Meets the requirements of paragraph (b)(4)(v) of this section;
or
(2) Has at least 70 percent of its residents who are low- and
moderate-income persons; or
(B) The assisted business is located within a census tract (or block
numbering area) that meets the requirements of paragraph (b)(4)(v) of
this section and the job under consideration is to be located within
that census tract.
(v) A census tract (or block numbering area) qualifies for the
presumptions permitted under paragraphs (b)(4)(iv) (A)(1) and (B) of
this section if it is either part of a Federally-designated Empowerment
Zone or Enterprise Community or meets the following criteria:
(A) It has a poverty rate of at least 20 percent as determined by
the most recently available decennial census information;
(B) It does not include any portion of a central business district,
as this term is used in the most recent Census of Retail Trade, unless
the tract has a poverty rate of at least 30 percent as determined by the
most recently available decennial census information; and
(C) It evidences pervasive poverty and general distress by meeting
at least one of the following standards:
[[Page 114]]
(1) All block groups in the census tract have poverty rates of at
least 20 percent;
(2) The specific activity being undertaken is located in a block
group that has a poverty rate of at least 20 percent; or
(3) Upon the written request of the recipient, HUD determines that
the census tract exhibits other objectively determinable signs of
general distress such as high incidence of crime, narcotics use,
homelessness, abandoned housing, and deteriorated infrastructure or
substantial population decline.
(vi) As a general rule, each assisted business shall be considered
to be a separate activity for purposes of determining whether the
activity qualifies under this paragraph, except:
(A) In certain cases such as where CDBG funds are used to acquire,
develop or improve a real property (e.g., a business incubator or an
industrial park) the requirement may be met by measuring jobs in the
aggregate for all the businesses that locate on the property, provided
the businesses are not otherwise assisted by CDBG funds.
(B) Where CDBG funds are used to pay for the staff and overhead
costs of an entity specified in section 105(a)(15) of the Act making
loans to businesses exclusively from non-CDBG funds, this requirement
may be met by aggregating the jobs created by all of the businesses
receiving loans during any one-year period.
(C) Where CDBG funds are used by a recipient or subrecipient to
provide technical assistance to businesses, this requirement may be met
by aggregating the jobs created or retained by all of the businesses
receiving technical assistance during any one-year period.
(D) Where CDBG funds are used for activities meeting the criteria
listed at Sec. 570.482(f)(3)(v), this requirement may be met by
aggregating the jobs created or retained by all businesses for which
CDBG assistance is obligated for such activities during any one-year
period, except as provided at paragraph (e)(6) of this section.
(E) Where CDBG funds are used by a Community Development Financial
Institution to carry out activities for the purpose of creating or
retaining jobs, this requirement may be met by aggregating the jobs
created or retained by all businesses for which CDBG assistance is
obligated for such activities during any one-year period, except as
provided at paragraph (e)(6) of this section.
(F) Where CDBG funds are used for public facilities or improvements
which will result in the creation or retention of jobs by more than one
business, this requirement may be met by aggregating the jobs created or
retained by all such businesses as a result of the public facility or
improvement.
(1) Where the public facility or improvement is undertaken
principally for the benefit of one or more particular businesses, but
where other businesses might also benefit from the assisted activity,
the requirement may be met by aggregating only the jobs created or
retained by those businesses for which the facility/improvement is
principally undertaken, provided that the cost (in CDBG funds) for the
facility/improvement is less than $10,000 per permanent full-time
equivalent job to be created or retained by those businesses.
(2) In any case where the cost per job to be created or retained (as
determined under paragraph (b)(4)(vi)(F)(1) of this section) is $10,000
or more, the requirement must be met by aggregating the jobs created or
retained as a result of the public facility or improvement by all
businesses in the service area of the facility/improvement. This
aggregation must include businesses which, as a result of the public
facility/improvement, locate or expand in the service area of the public
facility/improvement between the date the state awards the CDBG funds to
the recipient and the date one year after the physical completion of the
public facility/improvement. In addition, the assisted activity must
comply with the public benefit standards at Sec. 570.482(f).
(5) Planning-only activities. An activity involving planning (when
such activity is the only activity for which the grant to the unit of
general local government is given, or if the planning activity is
unrelated to any other activity assisted by the grant) if it can be
documented that at least 51 percent of
[[Page 115]]
the persons who would benefit from implementation of the plan are low
and moderate income persons. Any such planning activity for an area or a
community composed of persons of whom at least 51 percent are low and
moderate income shall be considered to meet this national objective.
(c) Activities which aid in the prevention or elimination of slums
or blight. Activities meeting one or more of the following criteria, in
the absence of substantial evidence to the contrary, will be considered
to aid in the prevention or elimination of slums or blight:
(1) Activities to address slums or blight on an area basis. An
activity will be considered to address prevention or elimination of
slums or blight in an area if the state can determine that:
(i) The area, delineated by the unit of general local government,
meets a definition of a slum, blighted, deteriorated or deteriorating
area under state or local law;
(ii) Throughout the area there is a substantial number of
deteriorated or deteriorating buildings or the public improvements are
in a general state of deterioration;
(iii) The assisted activity addresses one or more of the conditions
which contributed to the deterioration of the area. Rehabilitation of
residential buildings carried out in an area meeting the above
requirements will be considered to address the area's deterioration only
where each such building rehabilitated is considered substandard before
rehabilitation, and all deficiencies making a building substandard have
been eliminated if less critical work on the building is also
undertaken. The State shall ensure that the unit of general local
government has developed minimum standards for building quality which
may take into account local conditions.
(iv) The state keeps records sufficient to document its findings
that a project meets the national objective of prevention or elimination
of slums and blight.
(2) Activities to address slums or blight on a spot basis.
Acquisition, clearance, relocation, historic preservation and building
rehabilitation activities which eliminate specific conditions of blight
or physical decay on a spot basis not located in a slum or blighted area
will meet this objective. Under this criterion, rehabilitation is
limited to the extent necessary to eliminate specific conditions
detrimental to public health and safety.
(3) Planning only activities. An activity involving planning (when
the activity is the only activity for which the grant to the unit of
general local government is given, or the planning activity is unrelated
to any other activity assisted by the grant) if the plans are for a slum
or blighted area, or if all elements of the planning are necessary for
and related to an activity which, if funded, would meet one of the other
criteria of elimination of slums or blight.
(d) Activities designed to meet community development needs having a
particular urgency. In the absence of substantial evidence to the
contrary, an activity will be considered to address this objective if
the unit of general local government certifies, and the state
determines, that the activity is designed to alleviate existing
conditions which pose a serious and immediate threat to the health or
welfare of the community which are of recent origin or which recently
became urgent, that the unit of general local government is unable to
finance the activity on its own, and that other sources of funding are
not available. A condition will generally be considered to be of recent
origin if it developed or became urgent within 18 months preceding the
certification by the unit of general local government.
(e) Additional criteria. (1) In any case where the activity
undertaken is a public improvement and the activity is clearly designed
to serve a primarily residential area, the activity must meet the
requirements of paragraph (b)(1) of this section whether or not the
requirements of paragraph (b)(4) of this section are met in order to
qualify as benefiting low and moderate income persons.
(2) Where the assisted activity is acquisition of real property, a
preliminary determination of whether the activity addresses a national
objective may be based on the planned use of the
[[Page 116]]
property after acquisition. A final determination shall be based on the
actual use of the property, excluding any short-term, temporary use.
Where the acquisition is for the purpose of clearance which will
eliminate specific conditions of blight or physical decay, the clearance
activity shall be considered the actual use of the property. However,
any subsequent use or disposition of the cleared property shall be
treated as a ``change of use'' under Sec. 570.489(j).
(3) Where the assisted activity is relocation assistance that the
unit of general local government is required to provide, the relocation
assistance shall be considered to address the same national objective as
is addressed by the displacing activity. Where the relocation assistance
is voluntary, the unit of general local government may qualify the
assistance either on the basis of the national objective addressed by
the displacing activity or, if the relocation assistance is to low and
moderate income persons, on the basis of the national objective of
benefiting low and moderate income persons.
(4) Where CDBG-assisted activities are carried out by a Community
Development Financial Institution whose charter limits its investment
area to a primarily residential area consisting of at least 51 percent
low- and moderate-income persons, the unit of general local government
may also elect the following options:
(i) Activities carried out by the Community Development Financial
Institution for the purpose of creating or retaining jobs may, at the
option of the unit of general local government, be considered to meet
the requirements of this paragraph under the criteria at paragraph
(b)(1)(iv) of this section in lieu of the criteria at paragraph (b)(4)
of this section; and
(ii) All housing activities for which the Community Development
Financial Institution obligates CDBG assistance during any one-year
period may be considered to be a single structure for purposes of
applying the criteria at paragraph (b)(3) of this section.
(5) If the unit of general local government has elected to prepare a
community revitalization strategy pursuant to the authority of
Sec. 91.315(e)(2) of this title, and the State has approved the
strategy, the unit of general local government may also elect the
following options:
(i) Activities undertaken pursuant to the strategy for the purpose
of creating or retaining jobs may, at the option of the grantee, be
considered to meet the requirements of paragraph (b) of this section
under the criteria at Sec. 570.483(b)(1)(v) instead of the criteria at
Sec. 570.483(b)(4); and
(ii) All housing activities in the area undertaken pursuant to the
strategy may be considered to be a single structure for purposes of
applying the criteria at paragraph (b)(3) of this section.
(6) If an activity meeting the criteria in Sec. 570.482(f)(3)(v)
also meets the requirements of either paragraph (e)(4)(i) or (e)(5)(i)
of this section, the unit of general local government may elect to
qualify the activity either under the area benefit criteria at paragraph
(b)(1)(iv) or (v) of this section or under the job aggregation criteria
at paragraph (b)(4)(vi)(D) of this section, but not under both. Where an
activity may meet the job aggregation criteria at both paragraphs
(b)(4)(vi)(D) and (E) of this section, the unit of general local
government may elect to qualify the activity under either criterion, but
not both.
(f) Planning and administrative costs. CDBG funds expended for
eligible planning and administrative costs by units of general local
government in conjunction with other CDBG assisted activities will be
considered to address the national objectives.
[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1951, Jan. 5, 1995; 60
FR 17445, Apr. 6, 1995; 61 FR 54921, Oct. 22, 1996]
Sec. 570.484 Overall benefit to low and moderate income persons.
(a) General. The State must certify that, in the aggregate, not less
than 70 percent of the CDBG funds received by the state during a period
specified by the state, not to exceed three years, will be used for
activities that benefit persons of low and moderate income. The period
selected and certified to by the state shall be designated by fiscal
year of annual grants, and shall be for one, two or three consecutive
annual grants. The period shall be in effect until all included funds
are expended.
[[Page 117]]
No CDBG funds may be included in more than one period selected, and all
CDBG funds received must be included in a selected period.
(b) Computation of 70 percent benefit. Determination that a state
has carried out its certification under paragraph (a) of this section
requires evidence that not less than 70 percent of the aggregate of the
designated annual grant(s), any funds reallocated by HUD to the state,
any distributed program income and any guaranteed loan funds under the
provisions of subpart M of this part covered in the method of
distribution in the final statement or statements for the designated
annual grant year or years have been expended for activities meeting
criteria as provided in Sec. 570.483(b) for activities benefiting low
and moderate income persons. In calculating the percentage of funds
expended for such activities:
(1) All CDBG funds included in the period selected and certified to
by the state shall be accounted for, except for funds used by the State,
or by the units of general local government, for program administration,
or for planning activities other than those which must meet a national
objective under Sec. 570.483 (b)(5) or (c)(3).
(2) Any funds expended by a state for the purpose of repayment of
loans guaranteed under the provisions of subpart M of this part shall be
excepted from inclusion in this calculation.
(3) Except as provided in paragraph (b)(4) of this section, CDBG
funds expended for an eligible activity meeting the criteria for
activities benefiting low and moderate income persons shall count in
their entirety towards meeting the 70 percent benefit to persons of low
and moderate income requirement.
(4) Funds expended for the acquisition, new construction or
rehabilitation of property for housing that qualifies under
Sec. 570.483(b)(3) shall be counted for this purpose, but shall be
limited to an amount determined by multiplying the total cost (including
CDBG and non-CDBG costs) of the acquisition, construction or
rehabilitation by the percent of units in such housing to be occupied by
low and moderate income persons, except that the amount counted shall
not exceed the amount of CDBG funds provided.
Sec. 570.485 Making of grants.
(a) Required submissions. In order to receive its annual CDBG grant
under this subpart, a State must submit a consolidated plan in
accordance with 24 CFR part 91. That part includes requirements for the
content of the consolidated plan, for the process of developing the
plan, including citizen participation provisions, for the submission
date, for HUD approval, and for the amendment process.
(b) Failure to make submission. The state's failure to make the
submission required by paragraph (a) of this section within the
prescribed deadline constitutes the state's election not to receive and
distribute amounts allocated for its nonentitlement areas for the
applicable fiscal year. Funds will be either:
(1) Administered by HUD pursuant to subpart F of this part if the
state has not administered the program in any previous fiscal year; or
(2) Reallocated to all states in the succeeding fiscal year
according to the formula of section 106(d) of the Act, if the state
administered the program in any previous year.
(c) Approval of grant. HUD will approve a grant if the State's
submissions have been made and approved in accordance with 24 CFR part
91, and the certifications required therein are satisfactory to the
Secretary. The certifications will be satisfactory to the Secretary for
this purpose unless the Secretary has determined pursuant to
Sec. 570.493 that the State has not complied with the requirements of
this subpart, or has determined that there is evidence, not directly
involving the State's past performance under this program, that tends to
challenge in a substantial manner the State's certification of future
performance. If the Secretary makes any such determination, however, the
State may be required to submit further assurances as the Secretary may
deem warranted or necessary to find the grantee's certification
satisfactory.
[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1916, Jan. 5, 1995; 61
FR 54922, Oct. 22, 1996]
[[Page 118]]
Sec. 570.486 Local government requirements.
(a) Citizen participation requirements of a unit of general local
government. Each unit of general local government shall meet the
following requirements as required by the state at Sec. 91.115(e) of
this title.
(1) Provide for and encourage citizen participation, particularly by
low and moderate income persons who reside in slum or blighted areas and
areas in which CDBG funds are proposed to be used;
(2) Ensure that citizens will be given reasonable and timely access
to local meetings, information, and records relating to the unit of
local government's proposed and actual use of CDBG funds;
(3) Furnish citizens information, including but not limited to:
(i) The amount of CDBG funds expected to be made available for the
current fiscal year (including the grant and anticipated program
income);
(ii) The range of activities that may be undertaken with the CDBG
funds;
(iii) The estimated amount of the CDBG funds proposed to be used for
activities that will meet the national objective of benefit to low and
moderate income persons; and
(iv) The proposed CDBG activities likely to result in displacement
and the unit of general local government's antidisplacement and
relocation plans required under Sec. 570.488.
(4) Provide technical assistance to groups representative of persons
of low and moderate income that request assistance in developing
proposals in accordance with the procedures developed by the state. Such
assistance need not include providing funds to such groups;
(5) Provide for a minimum of two public hearings, each at a
different stage of the program, for the purpose of obtaining citizens'
views and responding to proposals and questions. Together the hearings
must cover community development and housing needs, development of
proposed activities and a review of program performance. The public
hearings to cover community development and housing needs must be held
before submission of an application to the state. There must be
reasonable notice of the hearings and they must be held at times and
locations convenient to potential or actual beneficiaries, with
accommodations for the handicapped. Public hearings shall be conducted
in a manner to meet the needs of non-English speaking residents where a
significant number of non-English speaking residents can reasonably be
expected to participate;
(6) Provide citizens with reasonable advance notice of, and
opportunity to comment on, proposed activities in an application to the
state and, for grants already made, activities which are proposed to be
added, deleted or substantially changed from the unit of general local
government's application to the state. Substantially changed means
changes made in terms of purpose, scope, location or beneficiaries as
defined by criteria established by the state.
(7) Provide citizens the address, phone number, and times for
submitting complaints and grievances, and provide timely written answers
to written complaints and grievances, within 15 working days where
practicable.
(b) Activities serving beneficiaries outside the jurisdiction of the
unit of general local government. CDBG-funded activities may serve
beneficiaries outside the jurisdiction of the unit of general local
government that receives the grant, provided the unit of general local
government determines that the activity is meeting its needs in
accordance with section 106(d)(2)(D) of the Act.
[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996]
Sec. 570.487 Other applicable laws and related program requirements.
(a) General. Certain statutes are expressly made applicable to
activities assisted under the Act by the Act itself, while other laws
not referred to in the Act may be applicable to such activities by their
own terms. Certain statutes or executive orders that may be applicable
to activities assisted under the Act by their own terms are administered
or enforced by governmental officials, departments or agencies other
than HUD. Paragraphs (d) and (c) of this section contain two of
[[Page 119]]
the requirements expressly made applicable to CDBG activities by the Act
itself.
(b) Affirmatively furthering fair housing. The Act requires the
state to certify to the satisfaction of HUD that it will affirmatively
further fair housing. The act also requires each unit of general local
government to certify that it will affirmatively further fair housing.
The certification that the State will affirmatively further fair housing
shall specifically require the State to assume the responsibility of
fair housing planning by:
(1) Conducting an analysis to identify impediments to fair housing
choice within the State;
(2) Taking appropriate actions to overcome the effects of any
impediments identified through that analysis;
(3) Maintaining records reflecting the analysis and actions in this
regard; and
(4) Assuring that units of local government funded by the State
comply with their certifications to affirmatively further fair housing.
(c) Lead-Based Paint Poisoning Prevention Act. States shall devise,
adopt and carry out procedures with respect to CDBG assistance that
fulfill the objectives and requirements of the Lead-Based Paint
Poisoning Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-
Based Paint Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and
implementing regulations at part 35, subparts A, B, J, K, and R of this
title.
(d) States shall comply with section 3 of the Housing and Urban
Development Act of 1968 (12 U.S.C. 1701u) and the implementing
regulations in 24 CFR part 135. Section 3 requires that employment and
other economic opportunities arising in connection with housing
rehabilitation, housing construction, or other public construction
projects shall, to the greatest extent feasible, and consistent with
existing Federal, State, and local laws and regulations, be given to
low- and very low-income persons.
(e) Architectural Barriers Act and the Americans with Disabilities
Act. The Architectural Barriers Act of 1968 (42 U.S.C. 4151--4157)
requires certain Federal and Federally-funded buildings and other
facilities to be designed, constructed, or altered in accordance with
standards that ensure accessibility to, and use by, physically
handicapped people. A building or facility designed, constructed, or
altered with funds allocated or reallocated under this subpart after
November 21, 1996 and that meets the definition of residential structure
as defined in 24 CFR 40.2, or the definition of building as defined in
41 CFR 101-19.602(a), is subject to the requirements of the
Architectural Barriers Act of 1968 and shall comply with the Uniform
Federal Accessibility Standards. For general type buildings, these
standards are in appendix A to 41 CFR part 101-19.6. For residential
structures, these standards are available from the Department of Housing
and Urban Development, Office of Fair Housing and Equal Opportunity,
Disability Rights Division, Room 5240, 451 Seventh Street, SW,
Washington, DC 20410; telephone (202) 708-2333 (voice) or (202) 708-1734
(TTY) (these are not toll-free numbers).
[57 FR 53397, Nov. 9, 1992, as amended at 59 FR 33894, June 30, 1994; 60
FR 1916, Jan. 5, 1995; 61 FR 54922, Oct. 22, 1996; 64 FR 50225, Sept.
15, 1999]
Sec. 570.488 Displacement, relocation, acquisition, and replacement of housing.
The requirements for States and state recipients with regard to the
displacement, relocation, acquisition, and replacement of housing are in
Sec. 570.606 and 24 CFR part 42.
[61 FR 11477, Mar. 20, 1996]
Sec. 570.489 Program administrative requirements.
(a) Administrative and planning costs--(1) State administrative
costs. (i) The state is responsible for the administration of all CDBG
funds. The state shall pay from its own resources all administrative
costs incurred by the state in carrying out its responsibilities under
this subpart, except that the state may use CDBG funds to pay such costs
in an amount not to exceed $100,000 plus 50 percent of such costs in
excess of $100,000. States are therefore required to match such costs in
excess of $100,000 on a dollar for dollar basis. The amount of CDBG
funds used to pay such costs in excess of $100,000 shall not exceed 2
percent of the aggregate of the
[[Page 120]]
state's annual grant, program income received by units of general local
government (whether retained by the unit of general local government or
paid to the State) and funds reallocated by HUD to the state.
(ii) For determining the amount of CDBG funds available in past
years for administrative costs incurred by the state, the following
schedule applies:
(A) $100,000 per annual grant beginning with FY 1984 allocations;
(B) Two percent of program income returned by units of general local
government to the State after August 21, 1985; and
(C) Two percent of program income received by units of general local
government after February 11, 1991.
(iii) The state has the option of selecting its approach for
demonstrating compliance with this requirement. Regardless of the
approach selected by the state, the state will be required to pay its 50
percent of administrative costs in excess of $100,000 in the same amount
and at the same time at which it draws CDBG funds for such costs after
the expenditure of the $100,000. Any state for which it is determined
that matching costs contributions are in arrears on the use of CDBG
funds for administrative costs will be required to bring matching cost
expenditures up to the level of CDBG expenditures for such costs within
one year of the effective date of this subpart. A state grant may not be
closed out if the state's matching cost contribution is not at least
equal to the amount of CDBG funds in excess of $100,000 expended for
administration. Funds from any year's grant may be used to pay
administrative costs associated with any other year's grant. The two
approaches are:
(A) Cumulative accounting of administrative costs incurred by the
state since its assumption of the Program. Under this approach, the
state will identify, for each grant it has received, the CDBG funds
eligible to be used for administrative costs as well as the maximum
amount of matching funds which the state is required to pay. The amounts
will then be aggregated for all grants received. The state must keep
records demonstrating the actual amount of CDBG funds from each grant
received which was used for administrative costs as well as matching
amounts paid by the state. These amounts will also be aggregated for all
grants received. The state will be considered to be in compliance with
the requirement if the aggregate of actual amounts spent for
administrative costs does not exceed the maximum amount allowable and
the amount which the state has paid in matching funds is at least equal
to the amount of CDBG funds in excess of $100,000 (for each applicable
allocation) drawn for administrative purposes. Any administrative
amounts associated with a particular state grant shall be deducted from
the aggregate totals upon closeout of that state grant.
(B) An accounting process developed and implemented by the state
which provides sufficient information to demonstrate that the
requirements of this subsection are met.
(2) The state may not charge fees of any entity for processing or
considering any application for CDBG fund, or for carrying out its
responsibilities under this subpart.
(3) The state and its funded units of general local government shall
not expend for planning, management and administrative costs more than
20 percent of the aggregate amount of the annual grant, plus program
income and funds reallocated by HUD to the State which are distributed
during the time the final Statement for the annual grant is in effect.
Administrative costs are those described at Sec. 570.489(a)(1) for
states, and for units of general local government those described at
sections 105(a)(12) and (a)(13) of the Act.
(b) Reimbursement of pre-agreement costs. The state may permit, in
accordance with such procedures as the State may establish, a unit of
local government to incur costs for CDBG activities before the
establishment of a formal grant relationship between the State and the
unit of general local government and to charge these pre-agreement costs
to the grant, provided that the activities are eligible and undertaken
in accordance with the requirements of this subpart and 24 CFR part 58.
[[Page 121]]
(c) Federal grant payments. (1) Payments. The state shall be paid in
advance in accordance with Treasury Circular 1075 (31 CFR part 205). The
State shall use procedures to minimize the time elapsing between the
transfer of grant funds and disbursement of funds by the State to units
of general local government. Units of general local government shall
also use procedures to minimize the time elapsing between the transfer
of funds by the State and disbursement for CDBG activities.
(2) Interest on advances. Interest earned by units of general local
government on grant funds before disbursement of the funds for
activities is not program income and must be returned to the Treasury,
except that the unit of general local government may keep interest
amounts of up $100 per year for administrative expenses. However, the
state shall not be held accountable for interest earned on grants for
which payments are made in accordance with paragraph (c)(1) of this
section pending disbursement for CDBG activities.
(d) Fiscal controls and accounting procedures. (1) A state shall
have fiscal and administrative requirements for expending and accounting
for all funds received under this subpart. These requirements must be
available for Federal inspection and must:
(i) Be sufficiently specific to ensure that funds received under
this subpart are used in compliance with all applicable statutory and
regulatory provisions:
(ii) Ensure that funds received under this subpart are only spent
for reasonable and necessary costs of operating programs under this
subpart; and
(iii) Ensure that funds received under this subpart are not used for
general expenses required to carry out other responsibilities of state
and local governments.
(2) A state may satisfy this requirement by:
(i) Using fiscal and administrative requirements applicable to the
use of its own funds;
(ii) Adopting new fiscal and administrative requirements; or
(iii) Applying the provisions in 24 CFR part 85 ``Uniform
Administrative Requirements for Grants and Cooperative Agreements to
State and Local Governments.''
(e) 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 or a subrecipient of a unit of general local
government that was generated from the use of CDBG funds, except as
provided in paragraph (e)(2) of this section. When income is generated
by an activity that is only partially assisted with CDBG funds, the
income shall be prorated to reflect the percentage of CDBG funds used
(e.g., a single loan supported by CDBG funds and other funds; a single
parcel of land purchased with CDBG funds and other funds). Program
income includes, but is not limited to, the following:
(i) Proceeds from the disposition by sale or long term lease of real
property purchased or improved with CDBG funds;
(ii) Proceeds from the disposition of equipment purchased with CDBG
funds;
(iii) Gross income from the use or rental of real or personal
property acquired by the unit of general local government or a
subrecipient of 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
the unit of general local government or a subrecipient of a 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 funds held in a revolving fund account;
(ix) Interest earned on program income pending disposition of the
income;
(x) Funds collected through special assessments made against
properties owned and occupied by households not of low and moderate
income, where the special assessments are used to recover
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all or part of the CDBG portion of a public improvement; and
(xi) Gross income paid to a unit of general local government or
subrecipient from the ownership interest in a for-profit entity acquired
in return for the provision of CDBG assistance.
(2) ``Program income'' does not include the following:
(i) The total amount of funds which is less than $25,000 received in
a single year that is retained by a unit of general local government and
its subrecipients;
(ii) Amounts generated by activities eligible under section
105(a)(15) of the Act and carried out by an entity under the authority
of section 105(a)(15) of the Act;
(iii) Amounts generated by activities that are financed by a loan
guaranteed under section 108 of the Act and meet one or more of the
public benefit criteria specified at Sec. 570.482(f)(3)(v) or are
carried out in conjunction with a grant under section 108(q) of the Act
in an area determined by HUD to meet the eligibility requirements for
designation as an Urban Empowerment Zone pursuant to 24 CFR part 597,
subpart B. Such exclusion shall not apply if CDBG funds are used to
repay the guaranteed loan. When such a guaranteed loan is partially
repaid with CDBG funds, the amount generated shall be prorated to
reflect the percentage of CDBG funds used. Amounts generated by
activities financed with loans guaranteed under section 108 of the Act
which are not defined as program income shall be treated as
miscellaneous revenue and shall not be subject to any of the
requirements of this part. However, such treatment shall not affect the
right of the Secretary to require the section 108 borrower to pledge
such amounts as security for the guaranteed loan. The determination
whether such amounts shall constitute program income shall be governed
by the provisions of the contract required at Sec. 570.705(b)(1).
(3) The state may permit the unit of general local government which
receives or will receive program income to retain the program income,
subject to the requirements of paragraph (e)(3)(ii) of this section, or
the state may require the unit of general local government to pay the
program income to the state. The state, however, must permit the unit of
general local government to retain the program income if the program
income will be used to continue the activity from which the program
income was derived. The state will determine when an activity will be
considered to be continued.
(i) Program income paid to the state. Program income that is paid to
the state is treated as additional CDBG funds subject to the
requirements of this subpart and must be distributed to units of general
local government in accordance with the method of distribution in the
state's final Statement. To the maximum extent feasible, program income
shall be distributed before the state makes additional withdrawals from
the Treasury, except as provided in paragraph (f) of this section.
(ii) Program income retained by a unit of general local government.
(A) Program income that is received and retained by the unit of general
local government before closeout of the grant that generated the program
income is treated as additional CDBG funds and is subject to all
applicable requirements of this subpart.
(B) Program income that is received and retained by the unit of
general local government after closeout of the grant that generated the
program income is not subject to the requirements of this subpart,
except:
(1) If the unit of general local government has another ongoing CDBG
grant from the state at the time of closeout, the program income
continues to be subject to the requirements of this subpart as long as
there is an ongoing grant; and
(2) If program income is used to continue the activity that
generated the program income, the requirements of this subpart apply to
the program income as long as the unit of general local government uses
the program income to continue the activity;
(3) The state may extend the period of applicability of the
requirements of this subpart.
[[Page 123]]
(C) The state shall require units of general local government, to
the maximum extent feasible, to disburse program income that is subject
to the requirements of this subpart before requesting additional funds
from the state for activities, except as provided in paragraph (f) of
this section.
(f) Revolving funds. (1) The state may permit units of general local
government 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 non-revolving fund
activities.
(2) The state may establish a revolving fund to distribute funds to
units of general local government 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.
(g) Procurement. When procuring property or services to be paid for
in whole or in part with CDBG funds, the state shall follow its
procurement policies and procedures. The state shall establish
requirements for procurement policies and procedures for units of
general local government, based on full and open competition. Methods of
procurement (e.g., small purchase, sealed bids/formal advertising,
competitive proposals, and noncompetitive proposals) and their
applicability shall be specified by the state. Cost plus a percentage of
cost and percentage of construction costs methods of contracting shall
not be used. The policies and procedures shall also include standards of
conduct governing employees engaged in the award or administration of
contracts. (Other conflicts of interest are covered by Sec. 570.489(h).)
The state shall ensure that all purchase orders and contracts include
any clauses required by Federal statutes, executive orders and
implementing regulations.
(h) Conflict of interest--(1) Applicability. (i) In the procurement
of supplies, equipment, construction, and services by the States, units
of local general governments, and subrecipients, the conflict of
interest provisions in paragraph (g) of this section shall apply.
(ii) In all cases not governed by paragraph (g) of this section,
this paragraph (h) shall apply. Such cases include the acquisition and
disposition of real property and the provision of assistance with CDBG
funds by the unit of general local government or its subrecipients, to
individuals, businesses and other private entities.
(2) Conflicts prohibited. Except for eligible administrative or
personnel costs, the general rule is that no persons described in
paragraph (h)(3) of this section who exercise or have exercised any
functions or responsibilities with respect to CDBG activities assisted
under this subpart or who are in a position to participate in a
decisionmaking process or gain inside information with regard to such
activities, may obtain a financial interest or benefit from the
activity, or have an interest or benefit from the activity, or have an
interest in any contract, subcontract or agreement with respect thereto,
or the proceeds thereunder, either for themselves or those with whom
they have family or business ties, during their tenure or for one year
thereafter.
(3) Persons covered. The conflict of interest provisions for
paragraph (h)(2) of this section apply to any person who is
[[Page 124]]
an employee, agent, consultant, officer, or elected official or
appointed official of the state, or of a unit of general local
government, or of any designated public agencies, or subrecipients which
are receiving CDBG funds.
(4) Exceptions: Thresholds requirements. Upon written request by the
State, an exception to the provisions of paragraph (h)(2) of this
section involving an employee, agent, consultant, officer, or elected
official or appointed official of the state may be granted by HUD on a
case-by-case basis. In all other cases, the state may grant such an
exception upon written request of the unit of general local government
provided the state shall fully document its determination in compliance
with all requirements of paragraph (h)(4) of this section including the
state's position with respect to each factor at paragraph (h)(5) of this
section and such documentation shall be available for review by the
public and by HUD. An exception may be granted after it is determined
that such an exception will serve to further the purpose of the Act and
the effective and efficient administration of the program or project of
the state or unit of general local government as appropriate. An
exception may be considered only after the state or unit of general
local government, as appropriate, has provided the following:
(i) A disclosure of the nature of the conflict, accompanied by an
assurance that there has been public disclosure of the conflict and a
description of how the public disclosure was made; and
(ii) An opinion of the attorney for the state or the unit of general
local government, as appropriate, that the interest for which the
exception is sought would not violate state or local law.
(5) Factors to be considered for exceptions. In determining whether
to grant a requested exception after the requirements of paragraph
(h)(4) of this section have been satisfactorily met, the cumulative
effect of the following factors, where applicable, shall be considered:
(i) Whether the exception would provide a significant cost benefit
or an essential degree of expertise to the program or project which
would otherwise not be available;
(ii) Whether an opportunity was provided for open competitive
bidding or negotiation;
(iii) Whether the person affected is a member of a group or class of
low or moderate income persons intended to be the beneficiaries of the
assisted activity, and the exception will permit such person to receive
generally the same interests or benefits as are being made available or
provided to the group or class;
(iv) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking process with
respect to the specific assisted activity in question;
(v) Whether the interest or benefit was present before the affected
person was in a position as described in paragraph (h)(3) of this
section;
(vi) Whether undue hardship will result either to the State or the
unit of general local government or the person affected when weighed
against the public interest served by avoiding the prohibited conflict;
and
(vii) Any other relevant considerations.
(i) Closeout of grants to units of general local government. The
State shall establish requirements for timely closeout of grants to
units of general local government and shall take action to ensure the
timely closeout of such grants.
(j) Change of use of real property. The standards described in this
section apply to real property within the unit of general local
government's control (including activities undertaken by subrecipients)
which was acquired or improved in whole or in part using CDBG funds in
excess of the threshold for small purchase procurement (24 CFR 85.36,
``Administrative Requirements for Grants and Cooperative Agreements to
State, Local and Federally Recognized Indian Tribal Governments'').
These standards shall apply from the date CDBG funds are first spent for
the property until five years after closeout of the unit of general
local government's grant.
(1) A unit of general local governments may not change the use or
[[Page 125]]
planned use of any such property (including the beneficiaries of such
use) from that for which the acquisition or improvement was made, unless
the unit of general local government provides affected citizens with
reasonable notice of and opportunity to comment on any proposed change,
and either:
(i) The new use of the property qualifies as meeting one of the
national objectives and is not a building for the general conduct of
government; or
(ii) The requirements in paragraph (j)(2) of this section are met.
(2) If the unit of general local government determines, after
consultation with affected citizens, that it is appropriate to change
the use of the property to a use which does not qualify under paragraph
(j)(1) of this section, it may retain or dispose of the property for the
changed use if the unit of general local government's CDBG program is
reimbursed or the state's CDBG program is reimbursed, at the discretion
of the state. The reimbursement shall be in the amount of the current
fair market value of the property, less any portion of the value
attributable to expenditures of non-CDBG funds for acquisition of, and
improvements to, the property, except that if the change in use occurs
after grant closeout but within 5 years of such closeout, the unit of
general local government shall make the reimbursement to the State's
CDBG program account.
(3) Following the reimbursement of the CDBG program in accordance
with paragraph (j)(2) of this section, the property no longer will be
subject to any CDBG requirements.
(k) Accountability for real and personal property. The State shall
establish and implement requirements, consistent with State law and the
purposes and requirements of this subpart (including paragraph (j) of
this section) governing the use, management, and disposition of real and
personal property acquired with CDBG funds.
(l) Debarment and suspension. As required by 24 CFR part 24, each
CDBG participant shall require participants in lower tier covered
transactions to include a certification that neither it nor its
principals are currently debarred, suspended, proposed for debarment,
declared ineligible, or voluntarily excluded from participation in the
covered transaction, in any proposal submitted in connection with the
lower tier covered transactions. A participant may rely on the
certification, unless it knows the certification is erroneous.
(m) Audits. Audits of the state and units of general local
government shall be conducted in accordance with 24 CFR part 44 which
implements the Single Audit Act (31 U.S.C. 7501-07). States shall
develop and administer an audits management system to ensure that audits
of units of general local government are conducted in accordance with 24
CFR part 44.
[57 FR 53397, Nov. 9, 1992, as amended at 60 FR 1952, Jan. 5, 1995; 61
FR 54922, Oct. 22, 1996; 67 FR 15112, Mar. 29, 2002]
Sec. 570.490 Recordkeeping requirements.
(a) State records. The state shall establish and maintain such
records as may be necessary to facilitate review and audit by HUD of the
state's administration of CDBG funds under Sec. 570.493. The content of
records maintained by the state shall be as jointly agreed upon by HUD
and the states and sufficient to enable HUD to make the determinations
described at Sec. 570.493. For fair housing and equal opportunity
purposes, and as applicable, such records shall include data on the
racial, ethnic, and gender characteristics of persons who are applicants
for, participants in, or beneficiaries of the program. The records shall
also permit audit of the states in accordance with 24 CFR part 44.
(b) Unit of general local government's record. The State shall
establish recordkeeping requirements for units of general local
government receiving CDBG funds that are sufficient to facilitate
reviews and audits of such units of general local government under
Secs. 570.492 and 570.493. For fair housing and equal opportunity
purposes, and as applicable, such records shall include data on the
racial, ethnic, and gender characteristics of persons who are applicants
for, participants in, or beneficiaries of the program.
(c) Access to records. (1) Representatives of HUD, the Inspector
General, and the General Accounting Office
[[Page 126]]
shall have access to all books, accounts, records, reports, files, and
other papers, or property pertaining to the administration, receipt and
use of CDBG funds and necessary to facilitate such reviews and audits.
(2) The State shall provide citizens with reasonable access to
records regarding the past use of CDBG funds and ensure that units of
general local government provide citizens with reasonable access to
records regarding the past use of CDBG funds consistent with State or
local requirements concerning the privacy of personal records.
(d) Record retention. Records of the State and units of general
local government, including supporting documentation, shall be retained
for the greater of three years from closeout of the grant to the state,
or the period required by other applicable laws and regulations as
described in Sec. 570.487 and Sec. 570.488.
Sec. 570.491 Performance and evaluation report.
The annual performance and evaluation report shall be submitted in
accordance with 24 CFR part 91.
(Approved by the Office of Management and Budget under control number
2506-0117)
[60 FR 1916, Jan. 5, 1995]
Sec. 570.492 State's reviews and audits.
(a) The state shall make reviews and audits including on-site
reviews, of units of general local government as may be necessary or
appropriate to meet the requirements of section 104(e)(2) of the Act.
(b) In the case of noncompliance with these requirements, the State
shall take such actions as may be appropriate to prevent a continuance
of the deficiency, mitigate any adverse effects or consequences and
prevent a recurrence. The state shall establish remedies for units of
general local government noncompliance.
Sec. 570.493 HUD's reviews and audits.
(a) General. At least on an annual basis, HUD shall make such
reviews and audits as may be necessary or appropriate to determine:
(1) Whether the state has distributed CDBG funds to units of general
local government in a timely manner in conformance to the method of
distribution described in its action plan under part 91 of this title;
(2) Whether the state has carried out its certifications in
compliance with the requirements of the Act and this subpart and other
applicable laws; and
(3) Whether the state has made reviews and audits of the units of
general local government required by Sec. 570.492.
(b) Information considered. In conducting performance reviews and
audits, HUD will rely primarily on information obtained from the state's
performance report, records maintained by the state, findings from on-
site monitoring, audit reports, and the status of the state's unexpended
grant funds. HUD may also consider relevant information on the state's
performance gained from other sources, including litigation, citizens'
comments, and other information provided by the state. A State's failure
to maintain records in accordance with Sec. 570.490 may result in a
finding that the State has failed to meet the applicable requirement to
which the record pertains.
[57 FR 53397, Nov. 9, 1992, as amended at 61 FR 54922, Oct. 22, 1996]
Sec. 570.494 Timely distribution of funds by states.
(a) States are encouraged to adopt and achieve a goal of obligating
and announcing 95 percent of funds to units of general local government
within 12 months of the state signing its grant agreement with HUD.
(b) HUD will review each state to determine if the state has
distributed CDBG funds in a timely manner. The state's distribution of
CDBG funds is timely if:
(1) All of the state's annual grant (excluding state administration)
has been obligated and announced to units of general local government
within 15 months of the state signing its grant agreement with HUD; and
(2) Recaptured funds and program income received by the state are
expeditiously obligated and announced to units of general local
government.
(c) HUD may collect necessary information from states to determine
[[Page 127]]
whether CDBG funds have been distributed in a timely manner.
Sec. 570.495 Reviews and audits response.
(a) If HUD's review and audit under Sec. 570.493 results in a
negative determination, or if HUD otherwise determines that a state or
unit of general local government has failed to comply with any
requirement of this subpart, the state will be given an opportunity to
contest the finding and will be requested to submit a plan for
corrective action. If the state is unsuccessful in contesting the
validity of the finding to the satisfaction of HUD, or if the state's
plan for corrective action is not satisfactory to HUD, HUD may take one
or more of the following actions to prevent a continuation of the
deficiency; mitigate, to the extent possible, the adverse effects or
consequence of the deficiency; or prevent a recurrence of the
deficiency:
(1) Issue a letter of warning that advises the State of the
deficiency and puts the state on notice that additional action will be
taken if the deficiency is not corrected or is repeated;
(2) Advise the state that additional information or assurances will
be required before acceptance of one or more of the certifications
required for the succeeding year grant;
(3) Advise the state to suspend or terminate disbursement of funds
for a deficient activity or grant;
(4) Advise the state to reimburse its grant in any amounts
improperly expended;
(5) Change the method of payment to the state from an advance basis
to a reimbursement basis;
(6) Based on the state's current failure to comply with a
requirement of this subpart which will affect the use of the succeeding
year grant, condition the use of the succeeding fiscal years grant funds
upon appropriate corrective action by the state. When the use of funds
is conditioned, HUD shall specify the reasons for the conditions and the
actions necessary to satisfy the conditions.
(b)(1) Whenever HUD determines that a state or unit of general local
government which is a recipient of CDBG funds has failed to comply with
section 109 of the Act (nondiscrimination requirements), HUD shall
notify the governor of the State or chief executive officer of the unit
of general local government of the noncompliance and shall request the
governor or the chief executive officer to secure compliance. If within
a reasonable time, not to exceed sixty days, the governor or chief
executive officer fails or refuses to secure compliance, HUD may take
the following action:
(i) Refer the matter to the Attorney General with a recommendation
that an appropriate civil action be instituted;
(ii) Exercise the powers and functions provided by title VI of the
Civil Rights Act of 1964 (42 U.S.C. 2000d-2000d-7);
(iii) Exercise the powers and functions provided for in
Sec. 570.496; or
(iv) Take such other action as may be provided by law.
(2) When a matter is referred to the Attorney General pursuant to
paragraph (b)(1)(i) of this section, or whenever HUD has reason to
believe that a State or unit of general local government is engaged in a
pattern or practice in violation of the provisions of section 109 of the
Act, the Attorney General may bring a civil action in any appropriate
United States district court for such relief as may be appropriate,
including injunctive relief.
Sec. 570.496 Remedies for noncompliance; opportunity for hearing.
(a) General. Action pursuant to this section will be taken only
after at least one of the corrective or remedial actions specified in
Sec. 570.495 has been taken, and only then if the State or unit of
general local government has not made an appropriate or timely response.
(b) Remedies. (1) If HUD finds after reasonable notice and
opportunity for hearing that a State or unit of general local government
has failed to comply with any provision of this subpart, until HUD is
satisfied that there is no longer failure to comply, HUD shall:
(i) Terminate payments to the state;
(ii) Reduce payments for current or future grants to the state by an
amount equal to the amount of CDBG funds distributed or used without
compliance with the requirements of this subpart;
[[Page 128]]
(iii) Limit the availability of payments to the state to activities
not affected by the failure to comply or to activities designed to
overcome the failure to comply;
(iv) Based on the state's failure to comply with a requirement of
this subpart (other than the state's current failure to comply which
will affect the use of the succeeding year grant), condition the use of
the grant funds upon appropriate corrective action by the state
specified by HUD; or
(v) With respect to a CDBG grant awarded by the state to a unit of
general local government, withhold, reduce, or withdraw the grant,
require the state to withhold, reduce, or withdraw the grant, or take
other action as appropriate, except that CDBG funds expended on eligible
activities shall not be recaptured or deducted from future CDBG grants
to such unit of general local government.
(2) HUD may on due notice suspend payments at any time after the
issuance of a notice of opportunity for hearing pursuant to paragraph
(d) of this section, pending such hearing and a final decision, to the
extent HUD determines such action necessary to prevent a continuation of
the noncompliance.
(c) In lieu of, or in addition to, the action authorized by
paragraph (b) of this section, if HUD has reason to believe that the
state or unit of general local government has failed to comply
substantially with any provision of this subpart, HUD may:
(1) Refer the matter to the Attorney General of the United States
with a recommendation that an appropriate civil action be instituted;
and
(2) Upon such a referral, the Attorney General may bring a civil
action in any United States district court having venue thereof for such
relief as may be appropriate, including an action to recover the amount
of the CDBG funds which was not expended in accordance with this
subpart, or for mandatory or injunctive relief.
(d) Proceedings. When HUD proposes to take action pursuant to this
section, the respondent in the proceedings will be the state. At the
option of HUD, a unit of general local government may also be a
respondent. These procedures are to be followed before imposition of a
sanction described in paragraph (b)(1) of this section:
(1) Notice of opportunity for hearing. HUD shall notify the
respondent in writing of the proposed action and of the opportunity for
a hearing. The notice shall be sent to the respondent by first class
mail and shall provide notice:
(i) In a manner which is adequate to allow the respondent to prepare
its response, the basis upon which HUD determined that the respondent
failed to comply with a provision of this subpart;
(ii) That the hearing procedures are governed by these rules;
(iii) That the respondent has 14 days from receipt of the notice
within which to provide a written request for a hearing to the Chief
Docket Clerk, Office of Administrative Law Judges, and the address and
telephone number of the Chief Docket Clerk;
(iv) Of the action which HUD proposes to take and that the authority
for this action is Sec. 570.496 of this subpart;
(v) That if the respondent fails to request a hearing within the
time specified, HUD's determination that the respondent failed to comply
with a provision of this subpart shall be final and HUD may proceed to
take the proposed action.
(2) Initiation of hearing. The respondent shall be allowed 14 days
from receipt of the notice within which to notify HUD in writing of its
request for a hearing. If no request is received within the time
specified, HUD's determination that the respondent failed to comply with
a provision of this subpart shall be final and HUD may proceed to take
the proposed action.
(3) Administrative Law Judge. Proceedings conducted under these
rules shall be presided over by an Administrative Law Judge (ALJ),
appointed as provided by section 11 of the Administrative Procedure Act
(5 U.S.C. 3105). The case shall be referred to the ALJ by HUD at the
time a hearing is requested. The ALJ shall promptly notify the parties
of the time and place at which the hearing will be held. The ALJ shall
conduct a fair and impartial hearing and take all action necessary
[[Page 129]]
to avoid delay in the disposition of proceedings and to maintain order.
The ALJ shall have all powers necessary to those ends, including but not
limited to the power:
(i) To administer oaths and affirmations;
(ii) To issue subpoenas as authorized by law;
(iii) To rule upon offers of proof and receive relevant evidence;
(iv) To order or limit discovery before the hearing as the interests
of justice may require;
(v) To regulate the course of the hearing and the conduct of the
parties and their counsel;
(vi) To hold conferences for the settlement or simplification of the
issues by consent of the parties;
(vii) To consider and rule upon all procedural and other motions
appropriate in adjudicative proceedings; and
(viii) To make and file initial determinations.
(4) Ex parte communications. An ex parte communication is any
communication with an ALJ, direct or indirect, oral or written,
concerning the merits or procedures of any pending proceeding which is
made by a party in the absence of any other party. Ex parte
communications are prohibited except where the purpose and content of
the communication have been disclosed in advance or simultaneously to
all parties, or the communication is a request for information
concerning the status of the case. Any ALJ who receives an ex parte
communication which the ALJ knows or has reason to believe is
unauthorized shall promptly place the communication, or its substance,
in all files and shall furnish copies to all parties. Unauthorized ex
parte communications shall not be taken into consideration in deciding
any matter in issue.
(5) The hearing. All parties shall have the right to be represented
at the hearing by counsel. The ALJ shall conduct the proceedings in an
expeditious manner while allowing the parties to present all oral and
written evidence which tends to support their respective positions, but
the ALJ shall exclude irrelevant, immaterial or unduly repetitious
evidence. HUD has the burden of proof in showing by a preponderance of
evidence that the respondent failed to comply with a provision of this
subpart. Each party shall be allowed to cross-examine adverse witnesses
and to rebut and comment upon evidence presented by the other party.
Hearings shall be open to the public. So far as the orderly conduct of
the hearing permits, interested persons other than the parties may
appear and participate in the hearing.
(6) Transcripts. Hearings shall be recorded and transcribed only by
a reporter under the supervision of the ALJ. The original transcript
shall be a part of the record and shall constitute the sole official
transcript. Respondents and the public, at their own expense, shall
obtain copies of the transcript.
(7) The ALJ's decisions. At the conclusion of the hearing, the ALJ
shall give the parties a reasonable opportunity to submit proposed
findings and conclusions and supporting reasons therefor. Generally,
within 60 days after the conclusion of the hearing, the ALJ shall
prepare a written decision which includes a Statement of findings and
conclusions, and the reasons or basis therefor, on all the material
issues of fact, law or discretion presented on the record and the
appropriate sanction or denial thereof. The decision shall be based on
consideration of the whole record or those parts thereof cited by a
party and supported by and in accordance with the reliable, probative,
and substantial evidence. A copy of the decision shall be furnished to
the parties immediately by first class mail and shall include a notice
that any requests for review by the Secretary must be made in writing to
the Secretary within 30 days of the receipt of the decision.
(8) Record. The transcript of testimony and exhibits, together with
the decision of the ALJ and all papers and requests filed in the
proceeding, constitutes the exclusive record for decision and, on
payment of its reasonable cost, shall be made available to the parties.
After reaching the initial decision, the ALJ shall certify to the
complete record and forward the record to the Secretary.
(9) Review by the Secretary. The decision by the ALJ shall
constitute the final decision of HUD unless, within 30
[[Page 130]]
days after the receipt of the decision, either the respondent or the
Assistant Secretary for Community Planning and Development files an
exception and request for review by the Secretary. The excepting party
must transmit simultaneously to the Secretary and the other party the
request for review and the bases of the party's exceptions to the
findings of the ALJ. The other party shall be allowed 30 days from
receipt of the exception to provide the Secretary and the excepting
party with a written reply. The Secretary shall then review the record
of the case, including the exceptions and the reply. On the basis of
such review, the Secretary shall issue a written determination,
including a Statement of the rationale therefor, affirming, modifying or
revoking the decision of the ALJ. The Secretary's decision shall be made
and transmitted to the parties within 60 days after the decision of the
ALJ was furnished to the parties.
(10) Judicial review. The respondent may seek judicial review of
HUD's decision pursuant to section 111(c) of the Act.
Sec. 570.497 Condition of State election to administer State CDBG Program.
Pursuant to section 106(d)(2)(A)(i) of the Act, a State has the
right to elect, in such manner and at such time as the Secretary may
prescribe, to administer funds allocated under subpart A of this part
for use in nonentitlement areas of the State. After January 26, 1995,
any State which elects to administer the allocation of CDBG funds for
use in nonentitlement areas of the State in any year must, in addition
to all other requirements of this subpart, submit a pledge by the State
in accordance with section 108(d)(2) of the Act, and in a form
acceptable to HUD, of any future CDBG grants it may receive under
subpart A and this subpart. Such pledge shall be for the purpose of
assuring repayment of any debt obligations (as defined in Sec. 570.701),
in accordance with their terms, that HUD may have guaranteed in the
respective State on behalf of any nonentitlement public entity (as
defined in Sec. 570.701) or its designated public agency prior to the
State's election.
[59 FR 66604, Dec. 27, 1994]
Subpart J--Grant Administration
Source: 53 FR 8058, Mar. 11, 1988, unless otherwise noted.
Sec. 570.500 Definitions.
For the purposes of this subpart, the following terms shall apply:
(a) Program income means gross income received by the recipient or a
subrecipient directly generated from the use of CDBG funds, except as
provided in paragraph (a)(4) of this section.
(1) 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 recipient or by a subrecipient with CDBG funds,
less costs incidental to generation of the income;
(iv) Gross income from the use or rental of real property, owned by
the recipient or by a subrecipient, that was constructed or improved
with CDBG funds, less costs incidental to generation of the income;
(v) Payments of principal and interest on loans made using CDBG
funds, except as provided in paragraph (a)(3) of this section;
(vi) Proceeds from the sale of loans made with CDBG funds;
(vii) Proceeds from sale of obligations secured by loans made with
CDBG funds;
(viii) [Reserved]
(ix) Interest earned on program income pending its disposition; and
(x) Funds collected through special assessments made against
properties owned and occupied by households not of low and moderate
income, where the assessments are used to recover all or part of the
CDBG portion of a public improvement.
(2) Program income does not include income earned (except for
interest described in Sec. 570.513) on grant advances from the U.S.
Treasury. The following items of income earned on grant advances must be
remitted to HUD for transmittal to the U.S. Treasury, and
[[Page 131]]
will not be reallocated under section 106(c) or (d) of the Act:
(i) Interest earned from the investment of the initial proceeds of a
grant advance by the U.S. Treasury;
(ii) Interest earned on loans or other forms of assistance provided
with CDBG funds that are used for activities determined by HUD either to
be ineligible or to fail to meet a national objective in accordance with
the requirements of subpart C of this part, or that fail substantially
to meet any other requirement of this part; and
(iii) Interest earned on the investment of amounts reimbursed to the
CDBG program account prior to the use of the reimbursed funds for
eligible purposes.
(3) The calculation of the amount of program income for the
recipient's CDBG program as a whole (i.e., comprising activities carried
out by a grantee and its subrecipients) shall exclude payments made by
subrecipients of principal and/or interest on CDBG-funded loans received
from grantees if such payments are made using program income received by
the subrecipient. (By making such payments, the subrecipient shall be
deemed to have transferred program income to the grantee.) The amount of
program income derived from this calculation shall be used for reporting
purposes, for purposes of applying the requirement under
Sec. 570.504(b)(2)(iii), and in determining limitations on planning and
administration and public services activities to be paid for with CDBG
funds.
(4) Program income does not include:
(i) Any income received in a single program year by the recipient
and all its subrecipients if the total amount of such income does not
exceed $25,000; and
(ii) Amounts generated by activities that are financed by a loan
guaranteed under section 108 of the Act and meet one or more of the
public benefit criteria specified at Sec. 570.209(b)(2)(v) or are
carried out in conjunction with a grant under section 108(q) in an area
determined by HUD to meet the eligibility requirements for designation
as an Urban Empowerment Zone pursuant to 24 CFR part 597, subpart B.
Such exclusion shall not apply if CDBG funds are used to repay the
guaranteed loan. When such a guaranteed loan is partially repaid with
CDBG funds, the amount generated shall be prorated to reflect the
percentage of CDBG funds used. Amounts generated by activities financed
with loans guaranteed under section 108 which are not defined as program
income shall be treated as miscellaneous revenue and shall not be
subject to any of the requirements of this part, except that the use of
such funds shall be limited to activities that are located in a
revitalization strategy area and implement a HUD approved area
revitalization strategy pursuant to Sec. 91.215(e) of this title.
However, such treatment shall not affect the right of the Secretary to
require the section 108 borrower to pledge such amounts as security for
the guaranteed loan. The determination whether such amounts shall
constitute program income shall be governed by the provisions of the
contract required at Sec. 570.705(b)(1).
(5) Examples of other receipts that are not considered program
income are proceeds from fund raising activities carried out by
subrecipients receiving CDBG assistance (the costs of fundraising are
generally unallowable under the applicable OMB circulars referenced in
24 CFR 84.27), funds collected through special assessments used to
recover the non-CDBG portion of a public improvement, and proceeds from
the disposition of real property acquired or improved with CDBG funds
when the disposition occurs after the applicable time period specified
in Sec. 570.503(b)(8) for subrecipient-controlled property, or in
Sec. 570.505 for recipient-controlled property.
(b) Revolving fund means a separate fund (with a set of accounts
that are independent of other program accounts) established for the
purpose of carrying out specific activities which, in turn, generate
payments to the fund for use in carrying out the same activities. Each
revolving loan fund's cash balance must be held in an interest-bearing
account, and any interest paid on CDBG funds held in this account shall
be considered interest earned on grant advances and must be remitted to
HUD for transmittal to the U.S. Treasury no less frequently than
annually. (Interest paid by borrowers on eligible loans made from the
revolving
[[Page 132]]
loan fund shall be program income and treated accordingly.)
(c) Subrecipient means a public or private nonprofit agency,
authority, or organization, or a for-profit entity authorized under
Sec. 570.201(o), receiving CDBG funds from the recipient or another
subrecipient to undertake activities eligible for such assistance under
subpart C of this part. The term excludes an entity receiving CDBG funds
from the recipient under the authority of Sec. 570.204, unless the
grantee explicitly designates it as a subrecipient. The term includes a
public agency designated by a unit of general local government to
receive a loan guarantee under subpart M of this part, but does not
include contractors providing supplies, equipment, construction, or
services subject to the procurement requirements in 24 CFR 85.36 or
84.40, as applicable.
[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992; 60
FR 1952, Jan. 5, 1995; 60 FR 17445, Apr. 6, 1995; 60 FR 56914, Nov. 9,
1995]
Sec. 570.501 Responsibility for grant administration.
(a) One or more public agencies, including existing local public
agencies, may be designated by the chief executive officer of the
recipient to undertake activities assisted by this part. A public agency
so designated shall be subject to the same requirements as are
applicable to subrecipients.
(b) The recipient is responsible for ensuring that CDBG funds are
used in accordance with all program requirements. The use of designated
public agencies, subrecipients, or contractors does not relieve the
recipient of this responsibility. The recipient is also responsible for
determining the adequacy of performance under subrecipient agreements
and procurement contracts, and for taking appropriate action when
performance problems arise, such as the actions described in
Sec. 570.910. Where a unit of general local government is participating
with, or as part of, an urban county, or as part of a metropolitan city,
the recipient is responsible for applying to the unit of general local
government the same requirements as are applicable to subrecipients,
except that the five-year period identified under Sec. 570.503(b)(8)(i)
shall begin with the date that the unit of general local government is
no longer considered by HUD to be a part of the metropolitan city or
urban county, as applicable, instead of the date that the subrecipient
agreement expires.
[53 FR 8058, Mar. 11, 1988, as amended at 57 FR 27120, June 17, 1992]
Sec. 570.502 Applicability of uniform administrative requirements.
(a) Recipients and subrecipients that are governmental entities
(including public agencies) shall comply with the requirements and
standards of OMB Circular No. A-87, ``Cost Principles for State, Local,
and Indian Tribal Governments''; OMB Circular A-128, ``Audits of State
and Local Governments'' (implemented at 24 CFR part 44); and with the
following sections of 24 CFR part 85 ``Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments'' or the related CDBG provision, as specified in this
paragraph:
(1) Section 85.3, ``Definitions'';
(2) Section 85.6, ``Exceptions'';
(3) Section 85.12, ``Special grant or subgrant conditions for `high-
risk' grantees'';
(4) Section 85.20, ``Standards for financial management systems,''
except paragraph (a);
(5) Section 85.21, ``Payment,'' except as modified by Sec. 570.513;
(6) Section 85.22, ``Allowable costs'';
(7) Section 85.26, ``Non-federal audits'';
(8) Section 85.32, ``Equipment,'' except in all cases in which the
equipment is sold, the proceeds shall be program income;
(9) Section 85.33, ``Supplies'';
(10) Section 85.34, ``Copyrights'';
(11) Section 85.35, ``Subawards to debarred and suspended parties'';
(12) Section 85.36, ``Procurement,'' except paragraph (a);
(13) Section 85.37, ``Subgrants'';
(14) Section 85.40, ``Monitoring and reporting program
performance,'' except paragraphs (b) through (d) and paragraph (f);
(15) Section 85.41, ``Financial reporting,'' except paragraphs (a),
(b), and (e);
[[Page 133]]
(16) Section 85.42, ``Retention and access requirements for
records,'' except that the period shall be four years;
(17) Section 85.43, ``Enforcement'';
(18) Section 85.44, ``Termination for convenience'';
(19) Section 85.51 ``Later disallowances and adjustments'' and
(20) Section 85.52, ``Collection of amounts due.''
(b) Subrecipients, except subrecipients that are governmental
entities, shall comply with the requirements and standards of OMB
Circular No. A-122, ``Cost Principles for Non-profit Organizations,'' or
OMB Circular No. A-21, ``Cost Principles for Educational Institutions,''
as applicable, and OMB Circular A-133, ``Audits of Institutions of
Higher Education and Other Nonprofit Institutions'' (as set forth in 24
CFR part 45). Audits shall be conducted annually. Such subrecipients
shall also comply with the following provisions of the Uniform
Administrative requirements of OMB Circular A-110 (implemented at 24 CFR
part 84, ``Uniform Administrative Requirements for Grants and Agreements
With Institutions of Higher Education, Hospitals and Other Non-Profit
Organizations'') or the related CDBG provision, as specified in this
paragraph:
(1) Subpart A--``General'';
(2) Subpart B--``Pre-Award Requirements,'' except for Sec. 84.12,
``Forms for Applying for Federal Assistance'';
(3) Subpart C--``Post-Award Requirements,'' except for:
(i) Section 84.22, ``Payment Requirements.'' Grantees shall follow
the standards of Secs. 85.20(b)(7) and 85.21 in making payments to
subrecipients;
(ii) Section 84.23, ``Cost Sharing and Matching'';
(iii) Section 84.24, ``Program Income.'' In lieu of Sec. 84.24, CDBG
subrecipients shall follow Sec. 570.504;
(iv) Section 84.25, ``Revision of Budget and Program Plans'';
(v) Section 84.32, ``Real Property.'' In lieu of Sec. 84.32, CDBG
subrecipients shall follow Sec. 570.505;
(vi) Section 84.34(g), ``Equipment.'' In lieu of the disposition
provisions of Sec. 84.34(g), the following applies:
(A) In all cases in which equipment is sold, the proceeds shall be
program income (prorated to reflect the extent to which CDBG funds were
used to acquire the equipment); and
(B) Equipment not needed by the subrecipient for CDBG activities
shall be transferred to the recipient for the CDBG program or shall be
retained after compensating the recipient;
(vii) Section 84.51 (b), (c), (d), (e), (f), (g), and (h),
``Monitoring and Reporting Program Performance'';
(viii) Section 84.52, ``Financial Reporting'';
(ix) Section 84.53(b), ``Retention and access requirements for
records.'' Section 84.53(b) applies with the following exceptions:
(A) The retention period referenced in Sec. 84.53(b) pertaining to
individual CDBG activities shall be four years; and
(B) The retention period starts from the date of submission of the
annual performance and evaluation report, as prescribed in 24 CFR
91.520, in which the specific activity is reported on for the final time
rather than from the date of submission of the final expenditure report
for the award;
(x) Section 84.61, ``Termination.'' In lieu of the provisions of
Sec. 84.61, CDBG subrecipients shall comply with Sec. 570.503(b)(7); and
(4) Subpart D--``After-the-Award Requirements,'' except for
Sec. 84.71, ``Closeout Procedures.''
[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 60
FR 56915, Nov. 9, 1995]
Sec. 570.503 Agreements with subrecipients.
(a) Before disbursing any CDBG funds to a subrecipient, the
recipient shall sign a written agreement with the subrecipient. The
agreement shall remain in effect during any period that the subrecipient
has control over CDBG funds, including program income.
(b) At a minimum, the written agreement with the subrecipient shall
include provisions concerning the following following items:
(1) Statement of work. The agreement shall include a description of
the work to be performed, a schedule for completing the work, and a
budget. These items shall be in sufficient detail to provide a sound
basis for the recipient effectively to monitor performance under the
agreement.
[[Page 134]]
(2) Records and reports. The recipient shall specify in the
agreement the particular records the subrecipient must maintain and the
particular reports the subrecipient must submit in order to assist the
recipient in meeting its recordkeeping and reporting requirements.
(3) Program income. The agreement shall include the program income
requirements set forth in Sec. 570.504(c). The agreement shall also
specify that, at the end of the program year, the grantee may require
remittance of all or part of any program income balances (including
investments thereof) held by the subrecipient (except those needed for
immediate cash needs, cash balances of a revolving loan fund, cash
balances from a lump sum drawdown, or cash or investments held for
section 108 security needs).
(4) Uniform administrative requirements. The agreement shall require
the subrecipient to comply with applicable uniform administrative
requirements, as described in Sec. 570.502.
(5) Other program requirements. The agreement shall require the
subrecipient to carry out each activity in compliance with all Federal
laws and regulations described in subpart K of these regulations, except
that:
(i) The subrecipient does not assume the recipient's environmental
responsibilities described at Sec. 570.604; and
(ii) The subrecipient does not assume the recipient's responsibility
for initiating the review process under the provisions of 24 CFR part
52.
(6) Conditions for religious organizations. Where applicable, the
conditions prescribed by HUD for the use of CDBG funds by religious
organizations shall be included in the agreement.
(7) Suspension and termination. The agreement shall specify that, in
accordance with 24 CFR 85.43, suspension or termination may occur if the
subrecipient materially fails to comply with any term of the award, and
that the award may be terminated for convenience in accordance with 24
CFR 85.44.
(8) Reversion of assets. The agreement shall specify that upon its
expiration the subrecipient shall transfer to the recipient any CDBG
funds on hand at the time of expiration and any accounts receivable
attributable to the use of CDBG funds. It shall also include provisions
designed to ensure that any real property under the subrecipient's
control that was acquired or improved in whole or in part with CDBG
funds (including CDBG funds provided to the subrecipient in the form of
a loan) in excess of $25,000 is either:
(i) Used to meet one of the national objectives in Sec. 570.208
(formerly Sec. 570.901) until five years after expiration of the
agreement, or for such longer period of time as determined to be
appropriate by the recipient; or
(ii) Not used in accordance with paragraph (b)(8)(i) of this
section, in which event the subrecipient shall pay to the recipient an
amount equal to the current market value of the property less any
portion of the value attributable to expenditures of non-CDBG funds for
the acquisition of, or improvement to, the property. The payment is
program income to the recipient. (No payment is required after the
period of time specified in paragraph (b)(8)(i) of this section.)
[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988; 57
FR 27120, June 17, 1992; 60 FR 56915, Nov. 9, 1995]
Sec. 570.504 Program income.
(a) Recording program income. The receipt and expenditure of program
income as defined in Sec. 570.500(a) shall be recorded as part of the
financial transactions of the grant program.
(b) Disposition of program income received by recipients. (1)
Program income received before grant closeout may be retained by the
recipient if the income is treated as additional CDBG funds subject to
all applicable requirements governing the use of CDBG funds.
(2) If the recipient chooses to retain program income, that program
income shall be disposed of as follows:
(i) Program income in the form of repayments to, or interest earned
on, a revolving fund as defined in Sec. 570.500(b) shall be
substantially disbursed from the fund before additional cash withdrawals
are made from the U.S. Treasury for the same activity. (This rule does
not prevent a lump sum disbursement to finance the rehabilitation of
privately owned properties as provided for in Sec. 570.513.)
[[Page 135]]
(ii) Substantially all other program income shall be disbursed for
eligible activities before additional cash withdrawals are made from the
U.S. Treasury.
(iii) At the end of each program year, the aggregate amount of
program income cash balances and any investment thereof (except those
needed for immediate cash needs, cash balances of a revolving loan fund,
cash balances from a lump-sum drawdown, or cash or investments held for
section 108 loan guarantee security needs) that, as of the last day of
the program year, exceeds one-twelfth of the most recent grant made
pursuant to Sec. 570.304 shall be remitted to HUD as soon as practicable
thereafter, to be placed in the recipient's line of credit. This
provision applies to program income cash balances and investments
thereof held by the grantee and its subrecipients. (This provision shall
be applied for the first time at the end of the program year for which
Federal Fiscal Year 1996 funds are provided.)
(3) Program income on hand at the time of closeout shall continue to
be subject to the eligibility requirements in subpart C and all other
applicable provisions of this part until it is expended.
(4) Unless otherwise provided in any grant closeout agreement, and
subject to the requirements of paragraph (b)(5) of this section, income
received after closeout shall not be governed by the provisions of this
part, except that, if at the time of closeout the recipient has another
ongoing CDBG grant received directly from HUD, funds received after
closeout shall be treated as program income of the ongoing grant
program.
(5) If the recipient does not have another ongoing grant received
directly from HUD at the time of closeout, income received after
closeout from the disposition of real property or from loans outstanding
at the time of closeout shall not be governed by the provisions of this
part, except that such income shall be used for activities that meet one
of the national objectives in Sec. 570.901 and the eligibility
requirements described in section 105 of the Act.
(c) Disposition of program income received by subrecipients. The
written agreement between the recipient and the subrecipient, as
required by Sec. 570.503, shall specify whether program income received
is to be returned to the recipient or retained by the subrecipient.
Where program income is to be retained by the subrecipient, the
agreement shall specify the activities that will be undertaken with the
program income and that all provisions of the written agreement shall
apply to the specified activities. When the subrecipient retains program
income, transfers of grant funds by the recipient to the subrecipient
shall be adjusted according to the principles described in paragraphs
(b)(2) (i) and (ii) of this section. Any program income on hand when the
agreement expires, or received after the agreement's expiration, shall
be paid to the recipient as required by Sec. 570.503(b)(8).
(d) Disposition of certain program income received by urban
counties. Program income derived from urban county program activities
undertaken by or within the jurisdiction of a unit of general local
government which thereafter terminates its participation in the urban
county shall continue to be program income of the urban county. The
urban county may transfer the program income to the unit of general
local government, upon its termination of urban county participation,
provided that the unit of general local government has become an
entitlement grantee and agrees to use the program income in its own CDBG
entitlement program.
[53 FR 8058, Mar. 11, 1988, as amended at 60 FR 56915, Nov. 9, 1995]
Sec. 570.505 Use of real property.
The standards described in this section apply to real property
within the recipient's control which was acquired or improved in whole
or in part using CDBG funds in excess of $25,000. These standards shall
apply from the date CDBG funds are first spent for the property until
five years after closeout of an entitlement recipient's participation in
the entitlement CDBG program or, with respect to other recipients, until
five years after the closeout of
[[Page 136]]
the grant from which the assistance to the property was provided.
(a) A recipient may not change the use or planned use of any such
property (including the beneficiaries of such use) from that for which
the acquisition or improvement was made unless the recipient provides
affected citizens with reasonable notice of, and opportunity to comment
on, any proposed change, and either:
(1) The new use of such property qualifies as meeting one of the
national objectives in Sec. 570.208 (formerly Sec. 570.901) and is not a
building for the general conduct of government; or
(2) The requirements in paragraph (b) of this section are met.
(b) If the recipient determines, after consultation with affected
citizens, that it is appropriate to change the use of the property to a
use which does not qualify under paragraph (a)(1) of this section, it
may retain or dispose of the property for the changed use if the
recipient's CDBG program is reimbursed in the amount of the current fair
market value of the property, less any portion of the value attributable
to expenditures of non-CDBG funds for acquisition of, and improvements
to, the property.
(c) If the change of use occurs after closeout, the provisions
governing income from the disposition of the real property in
Sec. 570.504(b)(4) or (5), as applicable, shall apply to the use of
funds reimbursed.
(d) Following the reimbursement of the CDBG program in accordance
with paragraph (b) of this section, the property no longer will be
subject to any CDBG requirements.
[53 FR 8058, Mar. 11, 1988, as amended at 53 FR 41331, Oct. 21, 1988]
Sec. 570.506 Records to be maintained.
Each recipient shall establish and maintain sufficient records to
enable the Secretary to determine whether the recipient has met the
requirements of this part. At a minimum, the following records are
needed:
(a) Records providing a full description of each activity assisted
(or being assisted) with CDBG funds, including its location (if the
activity has a geographical locus), the amount of CDBG funds budgeted,
obligated and expended for the activity, and the provision in subpart C
under which it is eligible.
(b) Records demonstrating that each activity undertaken meets one of
the criteria set forth in Sec. 570.208. (Where information on income by
family size is required, the recipient may substitute evidence
establishing that the person assisted qualifies under another program
having income qualification criteria at least as restrictive as that
used in the definitions of ``low and moderate income person'' and ``low
and moderate income household'' (as applicable) at Sec. 570.3, such as
Job Training Partnership Act (JTPA) and welfare programs; or the
recipient may substitute evidence that the assisted person is homeless;
or the recipient may substitute a copy of a verifiable certification
from the assisted person that his or her family income does not exceed
the applicable income limit established in accordance with Sec. 570.3;
or the recipient may substitute a notice that the assisted person is a
referral from a state, county or local employment agency or other entity
that agrees to refer individuals it determines to be low and moderate
income persons based on HUD's criteria and agrees to maintain
documentation supporting these determinations.) Such records shall
include the following information:
(1) For each activity determined to benefit low and moderate income
persons, the income limits applied and the point in time when the
benefit was determined.
(2) For each activity determined to benefit low and moderate income
persons based on the area served by the activity:
(i) The boundaries of the service area;
(ii) The income characteristics of families and unrelated
individuals in the service area; and
(iii) If the percent of low and moderate income persons in the
service area is less than 51 percent, data showing that the area
qualifies under the exception criteria set forth at
Sec. 570.208(a)(1)(ii).
(3) For each activity determined to benefit low and moderate income
persons because the activity involves a facility or service designed for
use by a limited clientele consisting exclusively
[[Page 137]]
or predominantly of low and moderate income persons:
(i) Documentation establishing that the facility or service is
designed for the particular needs of or used exclusively by senior
citizens, adults meeting the Bureau of the Census' Current Population
Reports definition of ``severely disabled,'' persons living with AIDS,
battered spouses, abused children, the homeless, illiterate adults, or
migrant farm workers, for which the regulations provide a presumption
concerning the extent to which low- and moderate-income persons benefit;
or
(ii) Documentation describing how the nature and, if applicable, the
location of the facility or service establishes that it is used
predominantly by low and moderate income persons; or
(iii) Data showing the size and annual income of the family of each
person receiving the benefit.
(4) For each activity carried out for the purpose of providing or
improving housing which is determined to benefit low and moderate income
persons:
(i) A copy of a written agreement with each landlord or developer
receiving CDBG assistance indicating the total number of dwelling units
in each multifamily structure assisted and the number of those units
which will be occupied by low and moderate income households after
assistance;
(ii) The total cost of the activity, including both CDBG and non-
CDBG funds.
(iii) For each unit occupied by a low and moderate income household,
the size and income of the household;
(iv) For rental housing only:
(A) The rent charged (or to be charged) after assistance for each
dwelling unit in each structure assisted; and
(B) Such information as necessary to show the affordability of units
occupied (or to be occupied) by low and moderate income households
pursuant to criteria established and made public by the recipient;
(v) For each property acquired on which there are no structures,
evidence of commitments ensuring that the criteria in Sec. 570.208(a)(3)
will be met when the structures are built;
(vi) Where applicable, records demonstrating that the activity
qualifies under the special conditions at Sec. 570.208(a)(3)(i);
(vii) For any homebuyer assistance activity qualifying under
Sec. 570.201(e), 570.201(n), or 570.204, identification of the
applicable eligibility paragraph and evidence that the activity meets
the eligibility criteria for that provision; for any such activity
qualifying under Sec. 570.208(a), the size and income of each
homebuyer's household; and
(viii) For a Sec. 570.201(k) housing services activity,
identification of the HOME project(s) or assistance that the housing
services activity supports, and evidence that project(s) or assistance
meet the HOME program income targeting requirements at 24 CFR 92.252 or
92.254.
(5) For each activity determined to benefit low and moderate income
persons based on the creation of jobs, the recipient shall provide the
documentation described in either paragraph (b)(5)(i) or (ii) of this
section.
(i) Where the recipient chooses to document that at least 51 percent
of the jobs will be available to low and moderate income persons,
documentation for each assisted business shall include:
(A) A copy of a written agreement containing:
(1) A commitment by the business that it will make at least 51
percent of the jobs available to low and moderate income persons and
will provide training for any of those jobs requiring special skills or
education;
(2) A listing by job title of the permanent jobs to be created
indicating which jobs will be available to low and moderate income
persons, which jobs require special skills or education, and which jobs
are part-time, if any; and
(3) A description of actions to be taken by the recipient and
business to ensure that low and moderate income persons receive first
consideration for those jobs; and
(B) A listing by job title of the permanent jobs filled, and which
jobs of those were available to low and moderate income persons, and a
description of how first consideration was given to such persons for
those jobs. The description shall include what hiring process was used;
which low and moderate income persons were interviewed
[[Page 138]]
for a particular job; and which low and moderate income persons were
hired.
(ii) Where the recipient chooses to document that at least 51
percent of the jobs will be held by low and moderate income persons,
documentation for each assisted business shall include:
(A) A copy of a written agreement containing:
(1) A commitment by the business that at least 51 percent of the
jobs, on a full-time equivalent basis, will be held by low and moderate
income persons; and
(2) A listing by job title of the permanent jobs to be created,
identifying which are part-time, if any;
(B) A listing by job title of the permanent jobs filled and which
jobs were initially held by low and moderate income persons; and
(C) For each such low and moderate income person hired, the size and
annual income of the person's family prior to the person being hired for
the job.
(6) For each activity determined to benefit low and moderate income
persons based on the retention of jobs:
(i) Evidence that in the absence of CDBG assistance jobs would be
lost;
(ii) For each business assisted, a listing by job title of permanent
jobs retained, indicating which of those jobs are part-time and (where
it is known) which are held by low and moderate income persons at the
time the CDBG assistance is provided. Where applicable, identification
of any of the retained jobs (other than those known to be held by low
and moderate income persons) which are projected to become available to
low and moderate income persons through job turnover within two years of
the time CDBG assistance is provided. Information upon which the job
turnover projections were based shall also be included in the record;
(iii) For each retained job claimed to be held by a low and moderate
income person, information on the size and annual income of the person's
family;
(iv) For jobs claimed to be available to low and moderate income
persons based on job turnover, a description covering the items required
for ``available to'' jobs in paragraph (b)(5) of this section; and
(v) Where jobs were claimed to be available to low and moderate
income persons through turnover, a listing of each job which has turned
over to date, indicating which of those jobs were either taken by, or
available to, low and moderate income persons. For jobs made available,
a description of how first consideration was given to such persons for
those jobs shall also be included in the record.
(7) For purposes of documenting, pursuant to paragraph (b)(5)(i)(B),
(b)(5)(ii)(C), (b)(6)(iii) or (b)(6)(v) of this section, that the person
for whom a job was either filled by or made available to a low- or
moderate-income person based upon the census tract where the person
resides or in which the business is located, the recipient, in lieu of
maintaining records showing the person's family size and income, may
substitute records showing either the person's address at the time the
determination of income status was made or the address of the business
providing the job, as applicable, the census tract in which that address
was located, the percent of persons residing in that tract who either
are in poverty or who are low- and moderate-income, as applicable, the
data source used for determining the percentage, and a description of
the pervasive poverty and general distress in the census tract in
sufficient detail to demonstrate how the census tract met the criteria
in Sec. 570.208(a)(4)(v), as applicable.
(8) For each activity determined to aid in the prevention or
elimination of slums or blight based on addressing one or more of the
conditions which qualified an area as a slum or blighted area:
(i) The boundaries of the area; and
(ii) A description of the conditions which qualified the area at the
time of its designation in sufficient detail to demonstrate how the area
met the criteria in Sec. 570.208(b)(1).
(9) For each residential rehabilitation activity determined to aid
in the prevention or elimination of slums or blight in a slum or
blighted area:
(i) The local definition of ``substandard'';
(ii) A pre-rehabilitation inspection report describing the
deficiencies in each structure to be rehabilitated; and
[[Page 139]]
(iii) Details and scope of CDBG assisted rehabilitation, by
structure.
(10) For each activity determined to aid in the prevention or
elimination of slums or blight based on the elimination of specific
conditions of blight or physical decay not located in a slum or blighted
area:
(i) A description of the specific condition of blight or physical
decay treated; and
(ii) For rehabilitation carried out under this category, a
description of the specific conditions detrimental to public health and
safety which were identified and the details and scope of the CDBG
assisted rehabilitation by structure.
(11) For each activity determined to aid in the prevention or
elimination of slums or blight based on addressing slums or blight in an
urban renewal area, a copy of the Urban Renewal Plan, as in effect at
the time the activity is carried out, including maps and supporting
documentation.
(12) For each activity determined to meet a community development
need having a particular urgency:
(i) Documentation concerning the nature and degree of seriousness of
the condition requiring assistance;
(ii) Evidence that the recipient certified that the CDBG activity
was designed to address the urgent need;
(iii) Information on the timing of the development of the serious
condition; and
(iv) Evidence confirming that other financial resources to alleviate
the need were not available.
(c) Records that demonstrate that the recipient has made the
determinations required as a condition of eligibility of certain
activities, as prescribed in Secs. 570.201(f), 570.201(i)(2),
570.201(p), 570.201(q), 570.202(b)(3), 570.206(f), 570.209, and 570.309.
(d) Records which demonstrate compliance with Sec. 570.505 regarding
any change of use of real property acquired or improved with CDBG
assistance.
(e) Records that demonstrate compliance with the citizen
participation requirements prescribed in 24 CFR part 91, subpart B, for
entitlement recipients, or in 24 CFR part 91, subpart C, for HUD-
administered small cities recipients.
(f) Records which demonstrate compliance with the requirements in
Sec. 570.606 regarding acquisition, displacement, relocation, and
replacement housing.
(g) Fair housing and equal opportunity records containing:
(1) Documentation of the analysis of impediments and the actions the
recipient has carried out with its housing and community development and
other resources to remedy or ameliorate any impediments to fair housing
choice in the recipient's community.
(2) Data on the extent to which each racial and ethnic group and
single-headed households (by gender of household head) have applied for,
participated in, or benefited from, any program or activity funded in
whole or in part with CDBG funds. Such information shall be used only as
a basis for further investigation as to compliance with
nondiscrimination requirements. No recipient is required to attain or
maintain any particular statistical measure by race, ethnicity, or
gender in covered programs.
(3) Data on employment in each of the recipient's operating units
funded in whole or in part with CDBG funds, with such data maintained in
the categories prescribed on the Equal Employment Opportunity
Commission's EEO-4 form; and documentation of any actions undertaken to
assure equal employment opportunities to all persons regardless of race,
color, national origin, sex or handicap in operating units funded in
whole or in part under this part.
(4) Data indicating the race and ethnicity of households (and gender
of single heads of households) displaced as a result of CDBG funded
activities, together with the address and census tract of the housing
units to which each displaced household relocated. Such information
shall be used only as a basis for further investigation as to compliance
with nondiscrimination requirements. No recipient is required to attain
or maintain any particular statistical measure by race, ethnicity, or
gender in covered programs.
(5) Documentation of actions undertaken to meet the requirements of
Sec. 570.607(b) which implements section 3 of the Housing Development
Act of
[[Page 140]]
1968, as amended (12 U.S.C. 1701U) relative to the hiring and training
of low and moderate income persons and the use of local businesses.
(6) Data indicating the racial/ethnic character of each business
entity receiving a contract or subcontract of $25,000 or more paid, or
to be paid, with CDBG funds, data indicating which of those entities are
women's business enterprises as defined in Executive Order 12138, the
amount of the contract or subcontract, and documentation of recipient's
affirmative steps to assure that minority business and women's business
enterprises have an equal opportunity to obtain or compete for contracts
and subcontracts as sources of supplies, equipment, construction and
services. Such affirmative steps may include, but are not limited to,
technical assistance open to all businesses but designed to enhance
opportunities for these enterprises and special outreach efforts to
inform them of contract opportunities. Such steps shall not include
preferring any business in the award of any contract or subcontract
solely or in part on the basis of race or gender.
(7) Documentation of the affirmative action measures the recipient
has taken to overcome prior discrimination, where the courts or HUD have
found that the recipient has previously discriminated against persons on
the ground of race, color, national origin or sex in administering a
program or activity funded in whole or in part with CDBG funds.
(h) Financial records, in accordance with the applicable
requirements listed in Sec. 570.502, including source documentation for
entities not subject to parts 84 and 85 of this title. Grantees shall
maintain evidence to support how the CDBG funds provided to such
entities are expended. Such documentation must include, to the extent
applicable, invoices, schedules containing comparisons of budgeted
amounts and actual expenditures, construction progress schedules signed
by appropriate parties (e.g., general contractor and/or a project
architect), and/or other documentation appropriate to the nature of the
activity.
(i) Agreements and other records related to lump sum disbursements
to private financial institutions for financing rehabilitation as
prescribed in Sec. 570.513; and
(j) Records required to be maintained in accordance with other
applicable laws and regulations set forth in subpart K of this part.
(Approved by the Office of Management and Budget under control number
2506-0077)
[53 FR 34454, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
60 FR 1916, 1953, Jan. 5, 1995; 60 FR 56915, Nov. 9, 1995; 61 FR 18674,
Apr. 29, 1996; 64 FR 38813, July 19, 1999]
Sec. 570.507 Reports.
(a) Performance and evaluation report--(1) Entitlement grant
recipients and HUD-administered small cities recipients in Hawaii. The
annual performance and evaluation report shall be submitted in
accordance with 24 CFR part 91.
(2) HUD-administered Small Cities recipients in New York, and Hawaii
recipients for pre-FY 1995 grants--(i) Content. Each performance and
evaluation report must contain completed copies of all forms and
narratives prescribed by HUD, including a summary of the citizen
comments received on the report.
(ii) Timing. The performance and evaluation report on each grant
shall be submitted:
(A) No later than October 31 for all grants executed before April 1
of the same calendar year. The first report should cover the period from
the execution of the grant until September 30. Reports on grants made
after March 31 of a calendar year will be due October 31 of the
following calendar year, and the reports will cover the period of time
from the execution of the grant until September 30 of the calendar year
following grant execution. After the initial submission, the performance
and evaluation report will be submitted annually on October 31 until
completion of the activities funded under the grant;
(B) Hawaii grantees will submit their small cities performance and
evaluation report for each pre-FY 1995 grant no later than 90 days after
the completion of their most recent program year. After the initial
submission, the performance and evaluation report will be submitted
annually until completion of
[[Page 141]]
the activities funded under the grant; and
(C) No later than 90 days after the criteria for grant closeout, as
described in Sec. 570.509(a), have been met.
(iii) Citizen comments on the report. Each recipient shall make
copies of the performance and evaluation report available to its
citizens in sufficient time to permit the citizens to comment on the
report before its submission to HUD. Each recipient may determine the
specific manner and times the report will be made available to citizens
consistent with the preceding sentence.
(b) Equal employment opportunity reports. Recipients of entitlement
grants or HUD-administered small cities grants shall submit to HUD each
year a report (HUD/EEO-4) on recipient employment containing data as of
June 30.
(c) Minority business enterprise reports. Recipients of entitlement
grants, HUD-administered small cities grants or Urban Development Action
Grants shall submit to HUD, by April 30, a report on contracts and
subcontract activity during the first half of the fiscal year and by
October 31 a report on such activity during the second half of the year.
(d) Other reports. Recipients may be required to submit such other
reports and information as HUD determines are necessary to carry out its
responsibilities under the Act or other applicable laws.
(Approved by the Office of Management and Budget under control numbers
2506-0077 for paragraph (a) and 2529-0008 for paragraph (b) and 2506-
0066 for paragraph (c))
[53 FR 34456, Sept. 6, 1988, as amended at 60 FR 1916, Jan. 5, 1995; 61
FR 32269, June 21, 1996]
Sec. 570.508 Public access to program records.
Notwithstanding 24 CFR 85.42(f), recipients shall provide citizens
with reasonable access to records regarding the past use of CDBG funds,
consistent with applicable State and local laws regarding privacy and
obligations of confidentiality.
Sec. 570.509 Grant closeout procedures.
(a) Criteria for closeout. A grant will be closed out when HUD
determines, in consultation with the recipient, that the following
criteria have been met:
(1) All costs to be paid with CDBG funds have been incurred, with
the exception of closeout costs (e.g., audit costs) and costs resulting
from contingent liabilities described in the closeout agreement pursuant
to paragraph (c) of this section. Contingent liabilities include, but
are not limited to, third-party claims against the recipient, as well as
related administrative costs.
(2) With respect to activities (such as rehabilitation of privately
owned properties) which are financed by means of escrow accounts, loan
guarantees, or similar mechanisms, the work to be assisted with CDBG
funds (but excluding program income) has actually been completed.
(3) Other responsibilities of the recipient under the grant
agreement and applicable laws and regulations appear to have been
carried out satisfactorily or there is no further Federal interest in
keeping the grant agreement open for the purpose of securing
performance.
(b) Closeout actions. (1) Within 90 days of the date it is
determined that the criteria for closeout have been met, the recipient
shall submit to HUD a copy of the final performance and evaluation
report described in 24 CFR part 91. If an acceptable report is not
submitted, an audit of the recipient's grant activities may be conducted
by HUD.
(2) Based on the information provided in the performance report and
other relevant information, HUD, in consultation with the recipient,
will prepare a closeout agreement in accordance with paragraph (c) of
this section.
(3) HUD will cancel any unused portion of the awarded grant, as
shown in the signed grant closeout agreement. Any unused grant funds
disbursed from the U.S. Treasury which are in the possession of the
recipient shall be refunded to HUD.
(4) Any costs paid with CDBG funds which were not audited previously
shall be subject to coverage in the recipient's next single audit
performed in
[[Page 142]]
accordance with 24 CFR part 44. The recipient may be required to repay
HUD any disallowed costs based on the results of the audit, or on
additional HUD reviews provided for in the closeout agreement.
(c) Closeout agreement. Any obligations remaining as of the date of
the closeout shall be covered by the terms of a closeout agreement. The
agreement shall be prepared by the HUD field office in consultation with
the recipient. The agreement shall identify the grant being closed out,
and include provisions with respect to the following:
(1) Identification of any closeout costs or contingent liabilities
subject to payment with CDBG funds after the closeout agreement is
signed;
(2) Identification of any unused grant funds to be canceled by HUD;
(3) Identification of any program income on deposit in financial
institutions at the time the closeout agreement is signed:
(4) Description of the recipient's responsibility after closeout
for:
(i) Compliance with all program requirements, certifications and
assurances in using program income on deposit at the time the closeout
agreement is signed and in using any other remaining CDBG funds
available for closeout costs and contingent liabilities;
(ii) Use of real property assisted with CDBG funds in accordance
with the principles described in Sec. 570.505;
(iii) Compliance with requirements governing program income received
subsequent to grant closeout, as described in Sec. 570.504(b)(4) and
(5); and
(iv) Ensuring that flood insurance coverage for affected property
owners is maintained for the mandatory period;
(5) Other provisions appropriate to any special circumstances of the
grant closeout, in modification of or in addition to the obligations in
paragraphs (c)(1) through (4) of this section. The agreement shall
authorize monitoring by HUD, and shall provide that findings of
noncompliance may be taken into account by HUD, as unsatisfactory
performance of the recipient, in the consideration of any future grant
award under this part.
(d) Status of consolidated plan after closeout. Unless otherwise
provided in a closeout agreement, the Consolidated Plan will remain in
effect after closeout until the expiration of the program year covered
by the last approved consolidated plan.
(e) Termination of grant for convenience. Grant assistance provided
under this part may be terminated for convenience in whole or in part
before the completion of the assisted activities, in accordance with the
provisions of 24 CFR 85.44. The recipient shall not incur new
obligations for the terminated portions after the effective date, and
shall cancel as many outstanding obligations as possible. HUD shall
allow full credit to the recipient for those portions of obligations
which could not be canceled and which had been properly incurred by the
recipient in carrying out the activities before the termination. The
closeout policies contained in this section shall apply in such cases,
except where the approved grant is terminated in its entirety.
Responsibility for the environmental review to be performed under 24 CFR
part 50 or 24 CFR part 58, as applicable, shall be determined as part of
the closeout process.
(f) Termination for cause. In cases in which the Secretary
terminates the recipient's grant under the authority of subpart O of
this part, or under the terms of the grant agreement, the closeout
policies contained in this section shall apply, except where the
approved grant is cancelled in its entirety. The provisions in 24 CFR
85.43(c) on the effects of termination shall also apply. HUD shall
determine whether an environmental assessment or finding of
inapplicability is required, and if such review is required, HUD shall
perform it in accordance with 24 CFR part 50.
[53 FR 8058, Mar. 11, 1988, as amended at 56 FR 56128, Oct. 31, 1991; 60
FR 1916, Jan. 5, 1995; 60 FR 16379, Mar. 30, 1995]
Sec. 570.510 Transferring projects from urban counties to metropolitan cities.
Section 106(c)(3) of the Act authorizes the Secretary to transfer
unobligated grant funds from an urban county to a new metropolitan city,
provided: the city was an included unit of general
[[Page 143]]
local government in the urban county immediately before its
qualification as a metropolitan city; the funds to be transferred were
received by the county before the qualification of the city as a
metropolitan city; the funds to be transferred had been programmed by
the urban county for use in the city before such qualification; and the
city and county agree to transfer responsibility for the administration
of the funds being transferred from the county's letter of credit to the
city's letter of credit. The following rules apply to the transfer of
responsibility for an activity from an urban county to the new
metropolitan city.
(a) The urban county and the metropolitan city must execute a
legally binding agreement which shall specify:
(1) The amount of funds to be transferred from the urban county's
letter of credit to the metropolitan city's letter of credit;
(2) The activities to be carried out by the city with the funds
being transferred;
(3) The county's responsibility for all expenditures and
unliquidated obligations associated with the activities before the time
of transfer, including a statement that responsibility for all audit and
monitoring findings associated with those expenditures and obligations
shall remain with the county;
(4) The responsibility of the metropolitan city for all other audit
and monitoring findings;
(5) How program income (if any) from the activities specified shall
be divided between the metropolitan city and the urban county; and
(6) Such other provisions as may be required by HUD.
(b) Upon receipt of a request for the transfer of funds from an
urban county to a metropolitan city and a copy of the executed
agreement, HUD, in consultation with the Department of the Treasury,
shall establish a date upon which the funds shall be transferred from
the letter of credit of the urban county to the letter of credit of the
metropolitan city, and shall take all necessary actions to effect the
requested transfer of funds.
(c) HUD shall notify the metropolitan city and urban county of any
special audit and monitoring rules which apply to the transferred funds
when the date of the transfer is communicated to the city and the
county.
Sec. 570.511 Use of escrow accounts for rehabilitation of privately owned residential property.
(a) Limitations. A recipient may withdraw funds from its letter of
credit for immediate deposit into an escrow account for use in funding
loans and grants for the rehabilitation of privately owned residential
property under Sec. 570.202(a)(1). The following additional limitations
apply to the use of escrow accounts for residential rehabilitation loans
and grants closed after September 7, 1990:
(1) The use of escrow accounts under this section is limited to
loans and grants for the rehabilitation of primarily residential
properties containing no more than four dwelling units (and accessory
neighborhood-scale non-residential space within the same structure, if
any, e.g., a store front below a dwelling unit).
(2) An escrow account shall not be used unless the contract between
the property owner and the contractor selected to do the rehabilitation
work specifically provides that payment to the contractor shall be made
through an escrow account maintained by the recipient, by a subrecipient
as defined in Sec. 570.500(c), by a public agency designated under
Sec. 570.501(a), or by an agent under a procurement contact governed by
the requirements of 24 CFR 85.36. No deposit to the escrow account shall
be made until after the contract has been executed between the property
owner and the rehabilitation contractor.
(3) All funds withdrawn under this section shall be deposited into
one interest earning account with a financial institution. Separate bank
accounts shall not be established for individual loans and grants.
(4) The amount of funds deposited into an escrow account shall be
limited to the amount expected to be disbursed within 10 working days
from the date of deposit. If the escrow account, for whatever reason, at
any time contains funds exceeding 10 days cash needs, the grantee
immediately shall transfer the excess funds to its program account. In
[[Page 144]]
the program account, the excess funds shall be treated as funds
erroneously drawn in accordance with the requirements of U.S. Treasury
Financial Manual, paragraph 6-2075.30.
(5) Funds deposited into an escrow account shall be used only to pay
the actual costs of rehabilitation incurred by the owner under the
contract with a private contractor. Other eligible costs related to the
rehabilitation loan or grant, e.g., the recipient's administrative costs
under Sec. 570.206 or rehabilitation services costs under
Sec. 570.202(b)(9), are not permissible uses of escrowed funds. Such
other eligible rehabilitation costs shall be paid under normal CDBG
payment procedures (e.g., from withdrawals of grant funds under the
recipient's letter of credit with the Treasury).
(b) Interest. Interest earned on escrow accounts established in
accordance with this section, less any service charges for the account,
shall be remitted to HUD at least quarterly but not more frequently than
monthly. Interest earned on escrow accounts is not required to be
remitted to HUD to the extent the interest is attributable to the
investment of program income.
(c) Remedies for noncompliance. If HUD determines that a recipient
has failed to use an escrow account in accordance with this section, HUD
may, in addition to imposing any other sanctions provided for under this
part, require the recipient to discontinue the use of escrow accounts,
in whole or in part.
[55 FR 32369, Aug. 8, 1990]
Sec. 570.512 [Reserved]
Sec. 570.513 Lump sum drawdown for financing of property rehabilitation activities.
Subject to the conditions prescribed in this section, recipients may
draw funds from the letter of credit in a lump sum to establish a
rehabilitation fund in one or more private financial institutions for
the purpose of financing the rehabilitation of privately owned
properties. The fund may be used in conjunction with various
rehabilitation financing techniques, including loans, interest
subsidies, loan guarantees, loan reserves, or such other uses as may be
approved by HUD consistent with the objectives of this section. The fund
may also be used for making grants, but only for the purpose of
leveraging non-CDBG funds for the rehabilitaton of the same property.
(a) Limitation on drawdown of grant funds. (1) The funds that a
recipient deposits to a rehabilitation fund shall not exceed the grant
amount that the recipient reasonably expects will be required, together
with anticipated program income from interest and loan repayments, for
the rehabilitation activities during the period specified in the
agreement to undertake activities, based on either:
(i) Prior level of rehabilitation activity; or
(ii) Rehabilitation staffing and management capacity during the
period specified in the agreement to undertake activities.
(2) No grant funds may be deposited under this section solely for
the purpose of investment, notwithstanding that the interest or other
income is to be used for the rehabilitation activities.
(3) The recipient's rehabilitation program administrative costs and
the administrative costs of the financial institution may not be funded
through lump sum drawdown. Such costs must be paid from periodic letter
of credit withdrawals in accordance with standard procedures or from
program income, other than program income generated by the lump sum
distribution.
(b) Standards to be met. The following standards shall apply to all
lump sum drawdowns of CDBG funds for rehabilitation:
(1) Eligible rehabilitation activities. The rehabilitation fund
shall be used to finance the rehabilitation of privately owned
properties eligible under the general policies in Sec. 570.200 and the
specific provisions of either Sec. 570.202, including the acquisition of
properties for rehabilitation, or Sec. 570.203.
(2) Requirements for agreement. The recipient shall execute a
written agreement with one or more private financial institutions for
the operation of the rehabilitation fund. The agreement shall specify
the obligations and responsibilities of the parties, the terms and
conditions on which CDBG funds
[[Page 145]]
are to be deposited and used or returned, the anticipated level of
rehabilitation activities by the financial institution, the rate of
interest and other benefits to be provided by the financial institution
in return for the lump sum deposit, and such other terms as are
necessary for compliance with the provisions of this section. Upon
execution of the agreement, a copy must be provided to the HUD field
office for its record and use in monitoring. Any modifications made
during the term of the agreement must also be provided to HUD.
(3) Period to undertake activities. The agreement must provide that
the rehabilitation fund may only be used for authorized activities
during a period of no more than two years. The lump sum deposit shall be
made only after the agreement is fully executed.
(4) Time limit on use of deposited funds. Use of the deposited funds
for rehabilitation financing assistance must start (e.g., first loan
must be made, subsidized or guaranteed) within 45 days of the deposit.
In addition, substantial disbursements from the fund must occur within
180 days of the receipt of the deposit. (Where CDBG funds are used as a
guarantee, the funds that must be substantially disbursed are the
guaranteed funds.) For a recipient with an agreement specifying two
years to undertake activities, the disbursement of 25 percent of the
fund (deposit plus any interest earned) within 180 days will be regarded
as meeting this requirement. If a recipient with an agreement specifying
two years to undertake activities determines that it has had substantial
disbursement from the fund within the 180 days although it had not met
this 25 percent threshold, the justification for the recipient's
determination shall be included in the program file. Should use of
deposited funds not start within 45 days, or substantial disbursement
from such fund not occur within 180 days, the recipient may be required
by HUD to return all or part of the deposited funds to the recipient's
letter of credit.
(5) Progam activity. Recipients shall review the level of program
activity on a yearly basis. Where activity is substantially below that
anticipated, program funds shall be returned to the recipient's letter
of credit.
(6) Termination of agreement. In the case of substantial failure by
a private financial institution to comply with the terms of a lump sum
drawdown agreement, the recipient shall terminate its agreement, provide
written justification for the action, withdraw all unobligated deposited
funds from the private financial institution, and return the funds to
the recipient's letter of credit.
(7) Return of unused deposits. At the end of the period specified in
the agreement for undertaking activities, all unobligated deposited
funds shall be returned to the recipient's letter of credit unless the
recipient enters into a new agreement conforming to the requirements of
this section. In addition, the recipient shall reserve the right to
withdraw any unobligated deposited funds required by HUD in the exercise
of corrective or remedial actions authorized under Sec. 570.910(b),
Sec. 570.911, Sec. 570.912 or Sec. 570.913.
(8) Rehabilitation loans made with non-CDBG funds. If the deposited
funds or program income derived from deposited funds are used to
subsidize or guarantee repayment of rehabilitation loans made with non-
CDBG funds, or to provide a supplemental loan or grant to the borrower
of the non-CDBG funds, the rehabilitation activities are considered to
be CDBG-assisted activities subject to the requirements applicable to
such activities, except that repayment of non-CDBG funds shall not be
treated as program income.
(9) Provision of consideration. In consideration for the lump sum
deposit by the recipient in a private financial institution, the deposit
must result in appropriate benefits in support of the recipient's local
rehabilitation program. Minimum requirements for such benefits are:
(i) Grantees shall require the financial institution to pay interest
on the lump sum deposit.
(A) The interest rate paid by the financial institution shall be no
more than three points below the rate on one year Treasury obligations
at constant maturity.
(B) When an agreement sets a fixed interest rate for the entire term
of the
[[Page 146]]
agreement, the rate should be based on the rate at the time the
agreement is excuted.
(C) The agreement may provide for an interest rate that would
fluctuate periodically during the term of the agreement, but at no time
shall the rate be established at more than three points below the rate
on one year Treasury obligations at constant maturity.
(ii) In addition to the payment of interest, at least one of the
following benefits must be provided by the financial institution:
(A) Leverage of the deposited funds so that the financial
institution commits private funds for loans in the rehabilitation
program in an amount substantially in excess of the amount of the lump
sum deposit;
(B) Commitment of private funds by the financial institution for
rehabilitation loans at below market interest rates, at higher than
normal risk, or with longer than normal repayment periods; or
(C) Provision of administrative services in support of the
rehabilitation program by the participating financial institution at no
cost or at lower than actual cost.
(c) Program income. Interest earned on lump sum deposits and
payments on loans made from such deposits are program income and, during
the period of the agreement, shall be used for rehabilitation activities
under the provisions of this section.
(d) Outstanding findings. Notwithstanding any other provision of
this section, no recipient shall enter into a new agreement during any
period of time in which an audit or monitoring finding on a previous
lump sum drawdown agreement remains unresolved.
(e) Prior notification. The recipient shall provide the HUD field
office with written notification of the amount of funds to be
distributed to a private financial institution before distribution under
the provisions of this section.
(f) Recordkeeping requirements. The recipient shall maintain in its
files a copy of the written agreement and related documents establishing
conformance with this section and concerning performance by a financial
institution in accordance with the agreement.
Subpart K--Other Program Requirements
Source: 53 FR 34456, Sept. 6, 1988, unless otherwise noted.
Sec. 570.600 General.
(a) This subpart K enumerates laws that the Secretary will treat as
applicable to grants made under section 106 of the Act, other than
grants to States made pursuant to section 106(d) of the Act, for
purposes of the Secretary's determinations under section 104(e)(1) of
the Act, including statutes expressly made applicable by the Act and
certain other statutes and Executive Orders for which the Secretary has
enforcement responsibility. This subpart K applies to grants made under
the Insular areas program in Sec. 570.405, with the exception of
Sec. 570.612. The absence of mention herein of any other statute for
which the Secretary does not have direct enforcement responsibility is
not intended to be taken as an indication that, in the Secretary's
opinion, such statute or Executive Order is not applicable to activities
assisted under the Act. For laws that the Secretary will treat as
applicable to grants made to States under section 106(d) of the Act for
purposes of the determination required to be made by the Secretary
pursuant to section 104(e)(2) of the Act, see Sec. 570.487.
(b) This subpart also sets forth certain additional program
requirements which the Secretary has determined to be applicable to
grants provided under the Act as a matter of administrative discretion.
(c) In addition to grants made pursuant to section 106(b) and
106(d)(2)(B) of the Act (subparts D and F, respectively), the
requirements of this subpart K are applicable to grants made pursuant to
sections 107 and 119 of the Act (subparts E and G, respectively), and to
loans guaranteed pursuant to subpart M.
[53 FR 34456, Sept. 6, 1988, as amended at 61 FR 11477, Mar. 20, 1996]
[[Page 147]]
Sec. 570.601 Public Law 88-352 and Public Law 90-284; affirmatively furthering fair housing; Executive Order 11063.
(a) The following requirements apply according to sections 104(b)
and 107 of the Act:
(1) Public Law 88-352, which is title VI of the Civil Rights Act of
1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24 CFR
part 1.
(2) Public Law 90-284, which is the Fair Housing Act (42 U.S.C.
3601-3620). In accordance with the Fair Housing Act, the Secretary
requires that grantees administer all programs and activities related to
housing and community development in a manner to affirmatively further
the policies of the Fair Housing Act. Furthermore, in accordance with
section 104(b)(2) of the Act, for each community receiving a grant under
subpart D of this part, the certification that the grantee will
affirmatively further fair housing shall specifically require the
grantee to assume the responsibility of fair housing planning by
conducting an analysis to identify impediments to fair housing choice
within its jurisdiction, taking appropriate actions to overcome the
effects of any impediments identified through that analysis, and
maintaining records reflecting the analysis and actions in this regard.
(b) Executive Order 11063, as amended by Executive Order 12259 (3
CFR, 1959-1963 Comp., p. 652; 3 CFR, 1980 Comp., p. 307) (Equal
Opportunity in Housing), and implementing regulations in 24 CFR part
107, also apply.
[61 FR 11477, Mar. 20, 1996]
Sec. 570.602 Section 109 of the Act.
Section 109 of the Act requires that no person in the United States
shall on the grounds of race, color, national origin, religion, or sex
be excluded from participation in, be denied the benefits of, or be
subjected to discrimination under any program or activity receiving
Federal financial assistance made available pursuant to the Act. Section
109 also directs that the prohibitions against discrimination on the
basis of age under the Age Discrimination Act and the prohibitions
against discrimination on the basis of disability under Section 504
shall apply to programs or activities receiving Federal financial
assistance under Title I programs. The policies and procedures necessary
to ensure enforcement of section 109 are codified in 24 CFR part 6.
[64 FR 3802, Jan. 25, 1999]
Sec. 570.603 Labor standards.
(a) Section 110(a) of the Act contains labor standards that apply to
nonvolunteer labor financed in whole or in part with assistance received
under the Act. In accordance with section 110(a) of the Act, the
Contract Work Hours and Safety Standards Act (40 U.S.C. 327 et seq.)
also applies. However, these requirements apply to the rehabilitation of
residential property only if such property contains not less than 8
units.
(b) The regulations in 24 CFR part 70 apply to the use of
volunteers.
[61 FR 11477, Mar. 20, 1996]
Sec. 570.604 Environmental standards.
For purposes of section 104(g) of the Act, the regulations in 24 CFR
part 58 specify the other provisions of law which further the purposes
of the National Environmental Policy Act of 1969, and the procedures by
which grantees must fulfill their environmental responsibilities. In
certain cases, grantees assume these environmental review,
decisionmaking, and action responsibilities by execution of grant
agreements with the Secretary.
[61 FR 11477, Mar. 20, 1996]
Sec. 570.605 National Flood Insurance Program.
Notwithstanding the date of HUD approval of the recipient's
application (or, in the case of grants made under subpart D of this part
or HUD-administered small cities recipients in Hawaii, the date of
submission of the grantee's consolidated plan, in accordance with 24 CFR
part 91), section 202(a) of the Flood Disaster Protection Act of 1973
(42 U.S.C. 4106) and the regulations in 44 CFR parts 59 through 79 apply
to funds provided under this part 570.
[61 FR 11477, Mar. 20, 1996]
[[Page 148]]
Sec. 570.606 Displacement, relocation, acquisition, and replacement of housing.
(a) General policy for minimizing displacement. Consistent with the
other goals and objectives of this part, grantees (or States or state
recipients, as applicable) shall assure that they have taken all
reasonable steps to minimize the displacement of persons (families,
individuals, businesses, nonprofit organizations, and farms) as a result
of activities assisted under this part.
(b) Relocation assistance for displaced persons at URA levels. (1) A
displaced person shall be provided with relocation assistance at the
levels described in, and in accordance with the requirements of 49 CFR
part 24, which contains the government-wide regulations implementing the
Uniform Relocation Assistance and Real Property Acquisition Policies Act
of 1970 (URA) (42 U.S.C. 4601-4655).
(2) Displaced person. (i) For purposes of paragraph (b) of this
section, the term ``displaced person'' means any person (family,
individual, business, nonprofit organization, or farm) that moves from
real property, or moves his or her personal property from real property,
permanently and involuntarily, as a direct result of rehabilitation,
demolition, or acquisition for an activity assisted under this part. A
permanent, involuntary move for an assisted activity includes a
permanent move from real property that is made:
(A) After notice by the grantee (or the state recipient, if
applicable) to move permanently from the property, if the move occurs
after the initial official submission to HUD (or the State, as
applicable) for grant, loan, or loan guarantee funds under this part
that are later provided or granted.
(B) After notice by the property owner to move permanently from the
property, if the move occurs after the date of the submission of a
request for financial assistance by the property owner (or person in
control of the site) that is later approved for the requested activity.
(C) Before the date described in paragraph (b)(2)(i)(A) or (B) of
this section, if either HUD or the grantee (or State, as applicable)
determines that the displacement directly resulted from acquisition,
rehabilitation, or demolition for the requested activity.
(D) After the ``initiation of negotiations'' if the person is the
tenant-occupant of a dwelling unit and any one of the following three
situations occurs:
(1) The tenant has not been provided with a reasonable opportunity
to lease and occupy a suitable decent, safe, and sanitary dwelling in
the same building/complex upon the completion of the project, including
a monthly rent that does not exceed the greater of the tenant's monthly
rent and estimated average utility costs before the initiation of
negotiations or 30 percent of the household's average monthly gross
income; or
(2) The tenant is required to relocate temporarily for the activity
but the tenant is not offered payment for all reasonable out-of-pocket
expenses incurred in connection with the temporary relocation, including
the cost of moving to and from the temporary location and any increased
housing costs, or other conditions of the temporary relocation are not
reasonable; and the tenant does not return to the building/complex; or
(3) The tenant is required to move to another unit in the building/
complex, but is not offered reimbursement for all reasonable out-of-
pocket expenses incurred in connection with the move.
(ii) Notwithstanding the provisions of paragraph (b)(2)(i) of this
section, the term ``displaced person-'' does not include:
(A) A person who is evicted for cause based upon serious or repeated
violations of material terms of the lease or occupancy agreement. To
exclude a person on this basis, the grantee (or State or state
recipient, as applicable) must determine that the eviction was not
undertaken for the purpose of evading the obligation to provide
relocation assistance under this section;
(B) A person who moves into the property after the date of the
notice described in paragraph (b)(2)(i)(A) or (B) of this section, but
who received a written notice of the expected displacement before
occupancy.
(C) A person who is not displaced as described in 49 CFR 24.2(g)(2).
(D) A person who the grantee (or State, as applicable) determines is
not
[[Page 149]]
displaced as a direct result of the acquisition, rehabilitation, or
demolition for an assisted activity. To exclude a person on this basis,
HUD must concur in that determination.
(iii) A grantee (or State or state recipient, as applicable) may, at
any time, request HUD to determine whether a person is a displaced
person under this section.
(3) Initiation of negotiations. For purposes of determining the type
of replacement housing assistance to be provided under paragraph (b) of
this section, if the displacement is the direct result of privately
undertaken rehabilitation, demolition, or acquisition of real property,
the term ``initiation of negotiations'' means the execution of the grant
or loan agreement between the grantee (or State or state recipient, as
applicable) and the person owning or controlling the real property.
(c) Residential antidisplacement and relocation assistance plan. The
grantee shall comply with the requirements of 24 CFR part 42, subpart B.
(d) Optional relocation assistance. Under section 105(a)(11) of the
Act, the grantee may provide (or the State may permit the state
recipient to provide, as applicable) relocation payments and other
relocation assistance to persons displaced by activities that are not
subject to paragraph (b) or (c) of this section. The grantee may also
provide (or the State may also permit the state recipient to provide, as
applicable) relocation assistance to persons receiving assistance under
paragraphs (b) or (c) of this section at levels in excess of those
required by these paragraphs. Unless such assistance is provided under
State or local law, the grantee (or state recipient, as applicable)
shall provide such assistance only upon the basis of a written
determination that the assistance is appropriate (see, e.g., 24 CFR
570.201(i), as applicable). The grantee (or state recipient, as
applicable) must adopt a written policy available to the public that
describes the relocation assistance that the grantee (or state
recipient, as applicable) has elected to provide and that provides for
equal relocation assistance within each class of displaced persons.
(e) Acquisition of real property. The acquisition of real property
for an assisted activity is subject to 49 CFR part 24, subpart B.
(f) Appeals. If a person disagrees with the determination of the
grantee (or the state recipient, as applicable) concerning the person's
eligibility for, or the amount of, a relocation payment under this
section, the person may file a written appeal of that determination with
the grantee (or state recipient, as applicable). The appeal procedures
to be followed are described in 49 CFR 24.10. In addition, a low- or
moderate-income household that has been displaced from a dwelling may
file a written request for review of the grantee's decision to the HUD
Field Office. For purposes of the State CDBG program, a low- or
moderate-income household may file a written request for review of the
state recipient's decision with the State.
(g) Responsibility of grantee or State. (1) The grantee (or State,
if applicable) is responsible for ensuring compliance with the
requirements of this section, notwithstanding any third party's
contractual obligation to the grantee to comply with the provisions of
this section. For purposes of the State CDBG program, the State shall
require state recipients to certify that they will comply with the
requirements of this section.
(2) The cost of assistance required under this section may be paid
from local public funds, funds provided under this part, or funds
available from other sources.
(3) The grantee (or State and state recipient, as applicable) must
maintain records in sufficient detail to demonstrate compliance with the
provisions of this section.
(Approved by the Office of Management and Budget under OMB control
number 2506-0102)
[61 FR 11477, Mar. 20, 1996, as amended at 61 FR 51760, Oct. 3, 1996]
Sec. 570.607 Employment and contracting opportunities.
Grantees shall comply with:
(a) Executive Order 11246, as amended by Executive Orders 11375,
11478, 12086, and 12107 (3 CFR, 1964-1965 Comp., p.339; 3 CFR, 1966-1970
Comp., p. 684; 3 CFR, 1966-1970 Comp., p. 803; 3 CFR, 1978 Comp., p.
230; and 3 CFR, 1978 Comp., p. 264) (Equal Employment Opportunity)
[[Page 150]]
and the implementing regulations at 41 CFR chapter 60; and
(b) Section 3 of the Housing and Urban Development Act of 1968 (12
U.S.C. 1701u) and implementing regulations at 24 CFR part 135.
[61 FR 5209, Feb. 9, 1996]
Sec. 570.608 Lead-based paint.
The Lead-Based Paint Poisoning Prevention Act (42 U.S.C. 4821-4846),
the Residential Lead-Based Paint Hazard Reduction Act of 1992 (42 U.S.C.
4851-4856), and implementing regulations at part 35, subparts A, B, J,
K, and R of this part apply to activities under this program.
[64 FR 50226, Sept. 15, 1999]
Sec. 570.609 Use of debarred, suspended or ineligible contractors or subrecipients.
The requirements set forth in 24 CFR part 5 apply to this program.
[61 FR 5209, Feb. 9, 1996]
Sec. 570.610 Uniform administrative requirements and cost principles.
The recipient, its agencies or instrumentalities, and subrecipients
shall comply with the policies, guidelines, and requirements of 24 CFR
part 85 and OMB Circulars A-87, A-110 (implemented at 24 CFR part 84),
A-122, A-133 (implemented at 24 CFR part 45), and A-128 2
(implemented at 24 CFR part 44), as applicable, as they relate to the
acceptance and use of Federal funds under this part. The applicable
sections of 24 CFR parts 84 and 85 are set forth at Sec. 570.502.
---------------------------------------------------------------------------
\2\ See footnote 1 at Sec. 570.200(a)(5).
[60 FR 56916, Nov. 9, 1995]
Sec. 570.611 Conflict of interest.
(a) Applicability. (1) In the procurement of supplies, equipment,
construction, and services by recipients and by subrecipients, the
conflict of interest provisions in 24 CFR 85.36 and 24 CFR 84.42,
respectively, shall apply.
(2) In all cases not governed by 24 CFR 85.36 and 84.42, the
provisions of this section shall apply. Such cases include the
acquisition and disposition of real property and the provision of
assistance by the recipient or by its subrecipients to individuals,
businesses, and other private entities under eligible activities that
authorize such assistance (e.g., rehabilitation, preservation, and other
improvements of private properties or facilities pursuant to
Sec. 570.202; or grants, loans, and other assistance to businesses,
individuals, and other private entities pursuant to Sec. 570.203,
570.204, 570.455, or 570.703(i)).
(b) Conflicts prohibited. The general rule is that no persons
described in paragraph (c) of this section who exercise or have
exercised any functions or responsibilities with respect to CDBG
activities assisted under this part, or who are in a position to
participate in a decisionmaking process or gain inside information with
regard to such activities, may obtain a financial interest or benefit
from a CDBG-assisted activity, or have a financial interest in any
contract, subcontract, or agreement with respect to a CDBG-assisted
activity, or with respect to the proceeds of the CDBG-assisted activity,
either for themselves or those with whom they have business or immediate
family ties, during their tenure or for one year thereafter. For the
UDAG program, the above restrictions shall apply to all activities that
are a part of the UDAG project, and shall cover any such financial
interest or benefit during, or at any time after, such person's tenure.
(c) Persons covered. The conflict of interest provisions of
paragraph (b) of this section apply to any person who is an employee,
agent, consultant, officer, or elected official or appointed official of
the recipient, or of any designated public agencies, or of subrecipients
that are receiving funds under this part.
(d) Exceptions. Upon the written request of the recipient, HUD may
grant an exception to the provisions of paragraph (b) of this section on
a case-by-case basis when it has satisfactorily met the threshold
requirements of (d)(1) of this section, taking into account the
cumulative effects of paragraph (d)(2) of this section.
(1) Threshold requirements. HUD will consider an exception only
after the recipient has provided the following documentation:
[[Page 151]]
(i) A disclosure of the nature of the conflict, accompanied by an
assurance that there has been public disclosure of the conflict and a
description of how the public disclosure was made; and
(ii) An opinion of the recipient's attorney that the interest for
which the exception is sought would not violate State or local law.
(2) Factors to be considered for exceptions. In determining whether
to grant a requested exception after the recipient has satisfactorily
met the requirements of paragraph (d)(1) of this section, HUD shall
conclude that such an exception will serve to further the purposes of
the Act and the effective and efficient administration of the
recipient's program or project, taking into account the cumulative
effect of the following factors, as applicable:
(i) Whether the exception would provide a significant cost benefit
or an essential degree of expertise to the program or project that would
otherwise not be available;
(ii) Whether an opportunity was provided for open competitive
bidding or negotiation;
(iii) Whether the person affected is a member of a group or class of
low- or moderate-income persons intended to be the beneficiaries of the
assisted activity, and the exception will permit such person to receive
generally the same interests or benefits as are being made available or
provided to the group or class;
(iv) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking process with
respect to the specific assisted activity in question;
(v) Whether the interest or benefit was present before the affected
person was in a position as described in paragraph (b) of this section;
(vi) Whether undue hardship will result either to the recipient or
the person affected when weighed against the public interest served by
avoiding the prohibited conflict; and
(vii) Any other relevant considerations.
[60 FR 56916, Nov. 9, 1995]
Sec. 570.612 Executive Order 12372.
(a) General. Executive Order 12372, Intergovernmental Review of
Federal Programs, and the Department's implementing regulations at 24
CFR part 52, allow each State to establish its own process for review
and comment on proposed Federal financial assistance programs.
(b) Applicability. Executive Order 12372 applies to the CDBG
Entitlement program and the UDAG program. The Executive Order applies to
all activities proposed to be assisted under UDAG, but it applies to the
Entitlement program only where a grantee proposes to use funds for the
planning or construction (reconstruction or installation) of water or
sewer facilities. Such facilities include storm sewers as well as all
sanitary sewers, but do not include water and sewer lines connecting a
structure to the lines in the public right-of-way or easement. It is the
responsibility of the grantee to initiate the Executive Order review
process if it proposes to use its CDBG or UDAG funds for activities
subject to review.
Sec. 570.613 Eligibility restrictions for certain resident aliens.
(a) Restriction. Certain newly legalized aliens, as described in 24
CFR part 49, are not eligible to apply for benefits under covered
activities funded by the programs listed in paragraph (e) of this
section. ``Benefits'' under this section means financial assistance,
public services, jobs and access to new or rehabilitated housing and
other facilities made available under covered activities funded by
programs listed in paragraph (e) of this section. ``Benefits'' do not
include relocation services and payments to which displacees are
entitled by law.
(b) Covered activities. ``Covered activities'' under this section
means activities meeting the requirements of Sec. 570.208(a) that
either:
(1) Have income eligibility requirements limiting the benefits
exclusively to low and moderate income persons; or
(2) Are targeted geographically or otherwise to primarily benefit
low and moderate income persons (excluding activities serving the public
at large, such as sewers, roads, sidewalks, and parks), and that provide
benefits to persons on the basis of an application.
[[Page 152]]
(c) Limitation on coverage. The restrictions under this section
apply only to applicants for new benefits not being received by covered
resident aliens as of the effective date of this section.
(d) Compliance. Compliance can be accomplished by obtaining
certification as provided in 24 CFR 49.20.
(e) Programs affected. (1) The Community Development Block Grant
program for small cities, administered under subpart F of part 570 of
this title until closeout of the recipient's grant.
(2) The Community Development Block Grant program for entitlement
grants, administered under subpart D of part 570 of this title.
(3) The Community Development Block Grant program for States,
administered under subpart I of part 570 of this title until closeout of
the unit of general local government's grant by the State.
(4) The Urban Development Action Grants program, administered under
subpart G of part 570 of this title until closeout of the recipient's
grant.
[55 FR 18494, May 2, 1990]
Sec. 570.614 Architectural Barriers Act and the Americans with Disabilities Act.
(a) The Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157)
requires certain Federal and Federally funded buildings and other
facilities to be designed, constructed, or altered in accordance with
standards that insure accessibility to, and use by, physically
handicapped people. A building or facility designed, constructed, or
altered with funds allocated or reallocated under this part after
December 11, 1995, and that meets the definition of ``residential
structure'' as defined in 24 CFR 40.2 or the definition of ``building''
as defined in 41 CFR 101-19.602(a) is subject to the requirements of the
Architectural Barriers Act of 1968 (42 U.S.C. 4151-4157) and shall
comply with the Uniform Federal Accessibility Standards (appendix A to
24 CFR part 40 for residential structures, and appendix A to 41 CFR part
101-19, subpart 101-19.6, for general type buildings).
(b) The Americans with Disabilities Act (42 U.S.C. 12131; 47 U.S.C.
155, 201, 218 and 225) (ADA) provides comprehensive civil rights to
individuals with disabilities in the areas of employment, public
accommodations, State and local government services, and
telecommunications. It further provides that discrimination includes a
failure to design and construct facilities for first occupancy no later
than January 26, 1993, that are readily accessible to and usable by
individuals with disabilities. Further, the ADA requires the removal of
architectural barriers and communication barriers that are structural in
nature in existing facilities, where such removal is readily achievable-
-that is, easily accomplishable and able to be carried out without much
difficulty or expense.
[60 FR 56917, Nov. 9, 1995]
Subpart L [Reserved]
Subpart M--Loan Guarantees
Source: 59 FR 66604, Dec. 27, 1994, unless otherwise noted.
Sec. 570.700 Purpose.
This subpart contains requirements governing the guarantee under
section 108 of the Act of debt obligations as defined in Sec. 570.701.
Sec. 570.701 Definitions.
Borrower means the public entity or its designated public agency
that issues debt obligations under this subpart.
Debt obligation means a promissory note or other obligation issued
by a public entity or its designated public agency and guaranteed by HUD
under this subpart, or a trust certificate or other obligation offered
by HUD or by a trust or other offeror approved for purposes of this
subpart by HUD which is guaranteed by HUD under this subpart and is
based on and backed by a trust or pool composed of notes or other
obligations issued by public entities or their designated public
agencies and guaranteed or eligible for guarantee by HUD under this
subpart.
Designated public agency means a public agency designated by a
public entity to issue debt obligations as borrower under this subpart.
[[Page 153]]
Entitlement public entity means a metropolitan city or an urban
county receiving a grant under subpart D of this part.
Guaranteed loan funds means the proceeds payable to the borrower
from the issuance of debt obligations under this subpart.
Nonentitlement public entity means any unit of general local
government in a nonentitlement area.
Public entity shall have the meaning provided for the term
``Eligible public entity'' in section 108(o) of the Act.
State-assisted public entity means a unit of general local
government in a nonentitlement area which is assisted by a State as
required in Sec. 570.704(b)(9) and Sec. 570.705(b)(2).
[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996]
Sec. 570.702 Eligible applicants.
The following public entities may apply for loan guarantee
assistance under this subpart.
(a) Entitlement public entities.
(b) Nonentitlement public entities that are assisted in the
submission of applications by States that administer the CDBG program
(under subpart I of this part). Such assistance shall consist, at a
minimum, of the certifications required under Sec. 570.704(b)(9) (and
actions pursuant thereto).
(c) Nonentitlement public entities eligible to apply for grant
assistance under subpart F of this part.
Sec. 570.703 Eligible activities.
Guaranteed loan funds may be used for the following activities,
provided such activities meet the requirements of Sec. 570.200. However,
guaranteed loan funds may not be used to reimburse the CDBG program
account or line of credit for costs incurred by the public entity or
designated public agency and paid with CDBG grant funds or program
income.
(a) Acquisition of improved or unimproved real property in fee or by
long-term lease, including acquisition for economic development
purposes.
(b) Rehabilitation of real property owned or acquired by the public
entity or its designated public agency.
(c) Payment of interest on obligations guaranteed under this
subpart.
(d) Relocation payments and other relocation assistance for
individuals, families, businesses, nonprofit organizations, and farm
operations who must relocate permanently or temporarily as a result of
an activity financed with guaranteed loan funds, where the assistance
is:
(1) Required under the provisions of Sec. 570.606(b) or (c); or
(2) Determined by the public entity to be appropriate under the
provisions of Sec. 570.606(d).
(e) Clearance, demolition and removal, including movement of
structures to other sites, of buildings and improvements on real
property acquired or rehabilitated pursuant to paragraphs (a) and (b) of
this section.
(f) Site preparation, including construction, reconstruction, or
installation of public and other site improvements, utilities, or
facilities (other than buildings), which is:
(1) Related to the redevelopment or use of the real property
acquired or rehabilitated pursuant to paragraphs (a) and (b) of this
section, or
(2) For an economic development purpose.
(g) Payment of issuance, underwriting, servicing, trust
administration and other costs associated with private sector financing
of debt obligations under this subpart.
(h) Housing rehabilitation eligible under Sec. 570.202.
(i) The following economic development activities:
(1) Activities eligible under Sec. 570.203; and
(2) Community economic development projects eligible under
Sec. 570.204.
(j) Construction of housing by nonprofit organizations for
homeownership under section 17(d) of the United States Housing Act of
1937 (Housing Development Grants Program, 24 CFR part 850) or title VI
of the Housing and Community Development Act of 1987 (Nehemiah Housing
Opportunity Grants Program, 24 CFR part 280).
(k) A debt service reserve to be used in accordance with
requirements specified in the contract entered into pursuant to
Sec. 570.705(b)(1).
(l) Acquisition, construction, reconstruction, rehabilitation, or
installation of public facilities (except for
[[Page 154]]
buildings for the general conduct of government), public streets,
sidewalks, and other site improvements and public utilities.
(m) In the case of applications by public entities which are, or
which contain, ``colonias'' as defined in section 916 of the Cranston-
Gonzalez National Affordable Housing Act (42 U.S.C. 5306 note), as
amended by section 810 of the Housing and Community Development Act of
1992, acquisition, construction, reconstruction, rehabilitation or
installation of public works and site or other improvements which serve
the colonia.
[59 FR 66604, Dec. 27, 1994, as amended at 61 FR 11481, Mar. 20, 1996]
Sec. 570.704 Application requirements.
(a) Presubmission and citizen participation requirements. (1) Before
submission of an application for loan guarantee assistance to HUD, the
public entity must:
(i) Develop a proposed application that includes the following
items:
(A) The community development objectives the public entity proposes
to pursue with the guaranteed loan funds.
(B) The activities the public entity proposes to carry out with the
guaranteed loan funds. Each activity must be described in sufficient
detail, including the specific provision of Sec. 570.703 under which it
is eligible and the national objective to be met, amount of guaranteed
loan funds expected to be used, and location, to allow citizens to
determine the degree to which they will be affected. The proposed
application must indicate which activities are expected to generate
program income. The application must also describe where citizens may
obtain additional information about proposed activities.
(C) A description of the pledge of grants required under
Sec. 570.705(b)(2). In the case of applications by State-assisted public
entities, the description shall note that pledges of grants will be made
by the State and by the public entity.
(ii) Fulfill the applicable requirements in its citizen
participation plan developed in accordance with Sec. 570.704(a)(2).
(iii) Publish community-wide its proposed application so as to
afford affected citizens an opportunity to examine the application's
contents and to provide comments on the proposed application.
(iv) Prepare its final application. Once the public entity has held
the public hearing and published the proposed application as required by
paragraphs (a)(1)(ii) and (iii) of this section, respectively, the
public entity must consider any such comments and views received and, if
the public entity deems appropriate, modify the proposed application.
Upon completion, the public entity must make the final application
available to the public. The final application must describe each
activity in sufficient detail to permit a clear understanding of the
nature of each activity, as well as identify the specific provision of
Sec. 570.703 under which it is eligible, the national objective to be
met, and the amount of guaranteed loan funds to be used. The final
application must also indicate which activities are expected to generate
program income.
(v) If an application for loan guarantee assistance is to be
submitted by an entitlement public entity simultaneously with the public
entity's submission for its entitlement grant, the public entity shall
include and identify in its proposed and final consolidated plan the
activities to be undertaken with the guaranteed loan funds, the national
objective to be met by each of these activities, the amount of any
program income expected to be received during the program year, and the
amount of guaranteed loan funds to be used; the public entity shall also
include in the consolidated plan a description of the pledge of grants
required under Sec. 570.705(b)(2). In such cases the proposed and final
application requirements of paragraphs (a)(1) (i), (iii), and (iv) of
this section will be deemed to have been met.
(2) Citizen participation plan. The public entity must develop and
follow a detailed citizen participation plan and make the plan public.
The plan must be completed and available before the application is
submitted to HUD. The plan may be the citizen plan required for the
consolidated plan, modified to include guaranteed loan funds. The public
entity is not required to hold a
[[Page 155]]
separate public hearing for its consolidated plan and for the guaranteed
loan funds to obtain citizens' views on community development and
housing needs. The plan must set forth the public entity's policies and
procedures for:
(i) Giving citizens timely notice of local meetings and reasonable
and timely access to local meetings, information, and records relating
to the public entity's proposed and actual use of guaranteed loan funds,
including, but not limited to:
(A) The amount of guaranteed loan funds expected to be made
available for the coming year, including program income anticipated to
be generated by the activities carried out with guaranteed loan funds;
(B) The range of activities that may be undertaken with guaranteed
loan funds;
(C) The estimated amount of guaranteed loan funds (including program
income derived therefrom) proposed to be used for activities that will
benefit low and moderate income persons;
(D) The proposed activities likely to result in displacement and the
public entity's plans, consistent with the policies developed under
Sec. 570.606 for minimizing displacement of persons as a result of its
proposed activities.
(ii) Providing technical assistance to groups representative of
persons of low and moderate income that request assistance in developing
proposals. The level and type of assistance to be provided is at the
discretion of the public entity. Such assistance need not include the
provision of funds to such groups.
(iii) Holding a minimum of two public hearings, each at a different
stage of the public entity's program, for the purpose of obtaining the
views of citizens and formulating or responding to proposals and
questions. Together the hearings must address community development and
housing needs, development of proposed activities and review of program
performance. At least one of these hearings must be held before
submission of the application to obtain the views of citizens on
community development and housing needs. Reasonable notice of the
hearing must be provided and the hearing must be held at times and
locations convenient to potential or actual beneficiaries, with
accommodation for the handicapped. The public entity must specify in its
plan how it will meet the requirement for a hearing at times and
locations convenient to potential or actual beneficiaries.
(iv) Meeting the needs of non-English speaking residents in the case
of public hearings where a significant number of non-English speaking
residents can reasonably be expected to participate.
(v) Providing affected citizens with reasonable advance notice of,
and opportunity to comment on, proposed activities not previously
included in an application and activities which are proposed to be
deleted or substantially changed in terms of purpose, scope, location,
or beneficiaries. The criteria the public entity will use to determine
what constitutes a substantial change for this purpose must be described
in the citizen participation plan.
(vi) Responding to citizens' complaints and grievances, including
the procedures that citizens must follow when submitting complaints and
grievances. The public entity's policies and procedures must provide for
timely written answers to written complaints and grievances within 15
working days of the receipt of the complaint, where practicable.
(vii) Encouraging citizen participation, particularly by low and
moderate income persons who reside in slum or blighted areas, and other
areas in which guaranteed loan funds are proposed to be used.
(b) Submission requirements. An application for loan guarantee
assistance may be submitted at any time. The application (or
consolidated plan) shall be submitted to the appropriate HUD Office and
shall be accompanied by the following:
(1) A description of how each of the activities to be carried out
with the guaranteed loan funds meets one of the criteria in
Sec. 570.208.
(2) A schedule for repayment of the loan which identifies the
sources of repayment, together with a statement identifying the entity
that will act as borrower and issue the debt obligations.
(3) A certification providing assurance that the public entity
possesses
[[Page 156]]
the legal authority to make the pledge of grants required under
Sec. 570.705(b)(2).
(4) A certification providing assurance that the public entity has
made efforts to obtain financing for activities described in the
application without the use of the loan guarantee, the public entity
will maintain documentation of such efforts for the term of the loan
guarantee, and the public entity cannot complete such financing
consistent with the timely execution of the program plans without such
guarantee.
(5) The drug-free workplace certification required under 24 CFR part
24 (appendix C).
(6) The certification regarding debarment and suspension required
under 24 CFR part 24 (appendix A).
(7) The anti-lobbying statement required under 24 CFR part 87
(appendix A).
(8) Certifications by the public entity that:
(i) It possesses the legal authority to submit the application for
assistance under this subpart and to use the guaranteed loan funds in
accordance with the requirements of this subpart.
(ii) Its governing body has duly adopted or passed as an official
act a resolution, motion or similar official action:
(A) Authorizing the person identified as the official representative
of the public entity to submit the application and amendments thereto
and all understandings and assurances contained therein, and directing
and authorizing the person identified as the official representative of
the public entity to act in connection with the application to provide
such additional information as may be required; and
(B) Authorizing such official representative to execute such
documents as may be required in order to implement the application and
issue debt obligations pursuant thereto (provided that the authorization
required by this paragraph (B) may be given by the local governing body
after submission of the application but prior to execution of the
contract required by Sec. 570.705(b);
(iii) Before submission of its application to HUD, the public entity
has:
(A) Furnished citizens with information required by
Sec. 570.704(a)(2)(i);
(B) Held at least one public hearing to obtain the views of citizens
on community development and housing needs; and
(C) Prepared its application in accordance with
Sec. 570.704(a)(1)(iv) and made the application available to the public.
(iv) It is following a detailed citizen participation plan which
meets the requirements described in Sec. 570.704(a)(2).
(v) The public entity will affirmatively further fair housing, and
the guaranteed loan funds will be administered in compliance with:
(A) Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et
seq.); and
(B) The Fair Housing Act (42 U.S.C. 3601-3619).
(vi)(A) (For entitlement public entities only.) In the aggregate, at
least 70 percent of all CDBG funds, as defined at Sec. 570.3, to be
expended during the one, two, or three consecutive years specified by
the public entity for its CDBG program will be for activities which
benefit low and moderate income persons, as described in criteria at
Sec. 570.208(a).
(B) (For nonentitlement public entities eligible under subpart F of
this part only.) It will comply with primary and national objectives
requirements, as applicable under subpart F of this part.
(vii) It will comply with the requirements governing displacement,
relocation, real property acquisition, and the replacement of low and
moderate income housing described in Sec. 570.606.
(viii) It will comply with the requirements of Sec. 570.200(c)(2)
with regard to the use of special assessments to recover the capital
costs of activities assisted with guaranteed loan funds.
(ix) (Where applicable, the public entity may also include the
following additional certification.) It lacks sufficient resources from
funds provided under this subpart or program income to allow it to
comply with the provisions of Sec. 570.200(c)(2), and it must therefore
assess properties owned and occupied by moderate income persons, to
recover the guaranteed loan funded
[[Page 157]]
portion of the capital cost without paying such assessments in their
behalf from guaranteed loan funds.
(x) It will comply with the other provisions of the Act and with
other applicable laws.
(9) In the case of an application submitted by a State-assisted
public entity, certifications by the State that:
(i) It agrees to make the pledge of grants required under
Sec. 570.705(b)(2).
(ii) It possesses the legal authority to make such pledge.
(iii) At least 70 percent of the aggregate use of CDBG grant funds
received by the State, guaranteed loan funds, and program income during
the one, two, or three consecutive years specified by the State for its
CDBG program will be for activities that benefit low and moderate income
persons.
(iv) It agrees to assume the responsibilities described in
Sec. 570.710.
(c) HUD review and approval of applications. (1) HUD will normally
accept the certifications submitted with the application. HUD may,
however, consider relevant information which challenges the
certifications and require additional information or assurances from the
public entity or State as warranted by such information.
(2) The HUD Office shall review the application for compliance with
requirements specified in this subpart and forward the application
together with its recommendation for approval or disapproval of the
requested loan guarantee to HUD Headquarters.
(3) HUD may disapprove an application, or may approve loan guarantee
assistance for an amount less than requested, for any of the following
reasons:
(i) HUD determines that the guarantee constitutes an unacceptable
financial risk. Factors that will be considered in assessing financial
risk shall include, but not be limited to, the following:
(A) The length of the proposed repayment period;
(B) The ratio of expected annual debt service requirements to
expected annual grant amount;
(C) The likelihood that the public entity or State will continue to
receive grant assistance under this part during the proposed repayment
period;
(D) The public entity's ability to furnish adequate security
pursuant to Sec. 570.705(b), and
(E) The amount of program income the proposed activities are
reasonably estimated to contribute toward repayment of the guaranteed
loan.
(ii) The requested loan amount exceeds any of the limitations
specified under Sec. 570.705(a).
(iii) Funds are not available in the amount requested.
(iv) The performance of the public entity, its designated public
agency or State under this part is unacceptable.
(v) Activities to be undertaken with the guaranteed loan funds are
not eligible under Sec. 570.703.
(vi) Activities to be undertaken with the guaranteed loan funds do
not meet the criteria in Sec. 570.208 for compliance with one of the
national objectives of the Act.
(4) HUD will notify the public entity in writing that the loan
guarantee request has either been approved, reduced or disapproved. If
the request is reduced or disapproved, the public entity shall be
informed of the specific reasons for reduction or disapproval. If the
request is approved, HUD shall issue an offer of commitment to guarantee
debt obligations of the borrower identified in the application subject
to compliance with this part, including the requirements under
Sec. 570.705(b), (d), (g) and (h) for securing and issuing debt
obligations, the conditions for release of funds described in paragraph
(d) of this section, and such other conditions as HUD may specify in the
commitment documents in a particular case.
(5) Amendments. If the public entity wishes to carry out an activity
not previously described in its application or to substantially change
the purpose, scope, location, or beneficiaries of an activity, the
amendment must be approved by HUD. Amendments by State-assisted public
entities must also be approved by the State. The public entity shall
follow the citizen participation requirements for amendments in
Sec. 570.704(a)(2).
(d) Environmental review. The public entity shall comply with HUD
environmental review procedures (24 CFR part 58) for the release of
funds for each project carried out with loan guarantee
[[Page 158]]
assistance. These procedures set forth the regulations, policies,
responsibilities and procedures governing the carrying out of
environmental review responsibilities of public entities. All public
entities, including nonentitlement public entities, shall submit the
request for release of funds and related certification for each project
to be assisted with guaranteed loan funds to the appropriate HUD Field
Office.
(e) Displacement, relocation, acquisition, and replacement of
housing. The public entity (or the designated public agency) shall
comply with the displacement, relocation, acquisition, and replacement
of low/moderate-income housing requirements in Sec. 570.606 in
connection with any activity financed in whole or in part with
guaranteed loan funds.
[59 FR 66604, Dec. 27, 1994, as amended at 60 FR 1917, Jan. 5, 1995; 61
FR 11481, Mar. 20, 1996]
Sec. 570.705 Loan requirements.
(a) Limitations on commitments. (1) If loan guarantee commitments
have been issued in any fiscal year in an aggregate amount equal to 50
percent of the amount approved in an appropriation act for that fiscal
year, HUD may limit the amount of commitments any one public entity may
receive during such fiscal year as follows (except that HUD will not
decrease commitments already issued):
(i) The amount any one entitlement public entity may receive may be
limited to $35,000,000.
(ii) The amount any one nonentitlement public entity may receive may
be limited to $7,000,000.
(iii) The amount any one public entity may receive may be limited to
such amount as is necessary to allow HUD to give priority to
applications containing activities to be carried out in areas designated
as empowerment zones/enterprise communities by the Federal Government or
by any State.
(2) In addition to the limitations specified in paragraph (a)(1) of
this section, the following limitations shall apply.
(i) Entitlement public entities. No commitment to guarantee shall be
made if the total unpaid balance of debt obligations guaranteed under
this subpart (excluding any amount defeased under the contract entered
into under Sec. 570.705(b)(1)) on behalf of the public entity would
thereby exceed an amount equal to five times the amount of the most
recent grant made pursuant to Sec. 570.304 to the public entity.
(ii) State-assisted public entities. No commitment to guarantee
shall be made if the total unpaid balance of debt obligations guaranteed
under this subpart (excluding any amount defeased under the contract
entered into under Sec. 570.705(b)(1)) on behalf of the public entity
and all other State-assisted public entities in the State would thereby
exceed an amount equal to five times the amount of the most recent grant
received by such State under subpart I.
(iii) Nonentitlement public entities eligible under subpart F of
this part. No commitment to guarantee shall be made with respect to a
nonentitlement public entity in the State of Hawaii if the total unpaid
balance of debt obligations guaranteed under this subpart (excluding any
amount defeased under the contract entered into under
Sec. 570.705(b)(1)) on behalf of the public entity would thereby exceed
an amount equal to five times the amount of the most recent grant made
pursuant to Sec. 570.429 to the public entity. No commitment to
guarantee shall be made with respect to a nonentitlement public entity
in the State of New York if the total unpaid balance of debt obligations
guaranteed under this subpart (excluding any amount defeased under the
contract entered into under Sec. 570.705(b)(1)) on behalf of the public
entity would thereby exceed the greater of five times:
(A) The most recent grant approved for the public entity pursuant to
subpart F of this part,
(B) The average of the most recent three grants approved for the
public entity pursuant to subpart F of this part, excluding any grant in
the same fiscal year as the commitment, or
(C) The average amount of grants made under subpart F of this part
to units of general local government in New York State in the previous
fiscal year.
(b) Security requirements. To assure the repayment of debt
obligations and
[[Page 159]]
the charges incurred under paragraph (g) of this section and as a
condition for receiving loan guarantee assistance, the public entity
(and State and designated public agency, as applicable) shall:
(1) Enter into a contract for loan guarantee assistance with HUD, in
a form acceptable to HUD, including provisions for repayment of debt
obligations guaranteed hereunder;
(2) Pledge all grants made or for which the public entity or State
may become eligible under this part; and
(3) Furnish, at the discretion of HUD, such other security as may be
deemed appropriate by HUD in making such guarantees. Other security
shall be required for all loans with repayment periods of ten years or
longer. Such other security shall be specified in the contract entered
into pursuant to Sec. 570.705(b)(1). Examples of other security HUD may
require are:
(i) Program income as defined in Sec. 570.500(a);
(ii) Liens on real and personal property;
(iii) Debt service reserves; and
(iv) Increments in local tax receipts generated by activities
carried out with the guaranteed loan funds.
(c) Use of grants for loan repayment. Notwithstanding any other
provision of this part:
(1) Community Development Block Grants allocated pursuant to section
106 of the Act (including program income derived therefrom) may be used
for:
(i) Paying principal and interest due (including such issuance,
servicing, underwriting, or other costs as may be incurred under
paragraph (g) of this section) on the debt obligations guaranteed under
this subpart;
(ii) Defeasing such debt obligations; and
(iii) Establishing debt service reserves as additional security
pursuant to paragraph (b)(3) of this section.
(2) HUD may apply grants pledged pursuant to paragraph (b)(2) of
this section to any amounts due under the debt obligations, the payment
of costs incurred under paragraph (g) of this section, or to the
purchase or defeasance of such debt obligations, in accordance with the
terms of the contract required by paragraph (b)(l) of this section.
(d) Debt obligations. Debt obligations guaranteed under this subpart
shall be in the form and denominations prescribed by HUD. Such debt
obligations may be issued and sold only under such terms and conditions
as may be prescribed by HUD. HUD may prescribe the terms and conditions
of debt obligations, or of their issuance and sale, by regulation or by
contractual arrangements authorized by section 108(r)(4) of the Act and
paragraph (h) of this section. Unless specifically provided otherwise in
the contract for loan guarantee assistance required under paragraph (b)
of this section, debt obligations shall not constitute general
obligations of any public entity or State secured by its full faith and
credit.
(e) Taxable obligations. Interest earned on debt obligations under
this subpart shall be subject to Federal taxation as provided in section
108(j) of the Act.
(f) Loan repayment period. The term of debt obligations under this
subpart shall not exceed twenty years.
(g) Issuance, underwriting, servicing, and other costs. Each public
entity or its designated public agency issuing debt obligations under
this subpart must pay the issuance, underwriting, servicing, trust
administration and other costs associated with the private sector
financing of the debt obligations. Such costs are payable out of the
guaranteed loan funds and shall be secured under paragraph (b) of this
section.
(h) Contracting with respect to issuance and sale of debt
obligations; effect of other laws. No State or local law, and no Federal
law, shall preclude or limit HUD's exercise of:
(1) The power to contract with respect to public offerings and other
sales of debt obligations under this subpart upon such terms and
conditions as HUD deems appropriate;
(2) The right to enforce any such contract by any means deemed
appropriate by HUD;
(3) Any ownership rights of HUD, as applicable, in debt obligations
under this subpart.
[[Page 160]]
Sec. 570.706 Federal guarantee; subrogation.
Section 108(f) of the Act provides for the incontestability of
guarantees by HUD under subpart M of this part in the hands of a holder
of such guaranteed obligations. If HUD pays a claim under a guarantee
made under section 108 of the Act, HUD shall be fully subrogated for all
the rights of the holder of the guaranteed debt obligation with respect
to such obligation.
[61 FR 11481, Mar. 20, 1996]
Sec. 570.707 Applicability of rules and regulations.
(a) Entitlement public entities. The provisions of subparts A, C, J,
K and O of this part applicable to entitlement grants shall apply
equally to guaranteed loan funds and other CDBG funds, except to the
extent they are specifically modified or augmented by the provisions of
this subpart.
(b) State-assisted public entities. The provisions of subpart I of
this part, and the requirements the State imposes on units of general
local government receiving Community Development Block Grants or program
income to the extent applicable, shall apply equally to guaranteed loan
funds and Community Development Block Grants (including program income
derived therefrom) administered by the State under the CDBG program,
except to the extent they are specifically modified or augmented by the
provisions of this subpart.
(c) Nonentitlement public entities eligible under subpart F of this
part. The provisions of subpart F of this part shall apply equally to
guaranteed loan funds and other CDBG funds, except to the extent they
are specifically modified or augmented by the provisions of this
subpart.
Sec. 570.708 Sanctions.
(a) Non-State assisted public entities. The performance review
procedures described in subpart O of this part apply to all public
entities receiving guaranteed loan funds other than State-assisted
public entities. Performance deficiencies in the use of guaranteed loan
funds made available to such public entities (or program income derived
therefrom) or violations of the contract entered into pursuant to
Sec. 570.705(b)(1) may result in the imposition of a sanction authorized
pursuant to Sec. 570.900(b)(7) against pledged CDBG grants. In addition,
upon a finding by HUD that the public entity has failed to comply
substantially with any provision of the Act with respect to either the
pledged grants or the guaranteed loan funds or program income, HUD may
take action against the pledged grants as provided in Sec. 570.913 and/
or may take action as provided in the contract for loan guarantee
assistance.
(b) State-assisted public entities. Performance deficiencies in the
use of guaranteed loan funds (or program income derived therefrom) or
violations of the contract entered into pursuant to Sec. 570.705(b)(1)
may result in an action authorized pursuant to Sec. 570.495 or
Sec. 570.496. In addition, upon a finding by HUD that the State or
public entity has failed to comply substantially with any provision of
the Act with respect to the pledged CDBG nonentitlement funds, the
guaranteed loan funds, or program income, HUD may take action against
the pledged funds as provided in Sec. 570.496 and/or may take action as
provided in the contract.
Sec. 570.709 Allocation of loan guarantee assistance.
Of the amount approved in any appropriation act for guarantees under
this subpart in any fiscal year, 70 percent shall be allocated for
entitlement public entities and 30 percent shall be allocated for
nonentitlement public entities. HUD need not comply with these
percentage requirements in any fiscal year to the extent that there is
an absence of applications approvable under this subpart from
entitlement or nonentitlement public entities.
Sec. 570.710 State responsibilities.
The State is responsible for choosing public entities that it will
assist under this subpart. States are free to develop procedures and
requirements for determining which activities will be assisted, subject
to the requirements of this subpart. Upon approval by HUD of an
application from a State-assisted public entity, the State will be
principally responsible, subject to HUD
[[Page 161]]
oversight under subpart I of this part, for ensuring that the public
entity complies with all applicable requirements governing the use of
the guaranteed loan funds. Notwithstanding the State's responsibilities
described in this section, HUD may take any action necessary for
ensuring compliance with requirements affecting the security interests
of HUD with respect to the guaranteed loan.
Subpart N--Urban Renewal Provisions
Source: 41 FR 20524, May 18, 1976, unless otherwise noted.
Sec. 570.800 Urban renewal regulations.
The regulations governing urban renewal projects and neighborhood
development programs in subpart N of this part, that were effective
immediately before April 19, 1996, will continue to govern the rights
and obligations of recipients and HUD with respect to such projects and
programs.
[61 FR 11481, Mar. 20, 1996]
Subpart O--Performance Reviews
Source: 53 FR 34466, Sept. 6, 1988, unless otherwise noted.
Sec. 570.900 General.
(a) Performance review authorities--(1) Entitlement and HUD-
administered Small Cities performance reviews. Section 104(e)(1) of the
Act requires that the Secretary shall, at least on an annual basis, make
such reviews and audits as may be necessary or appropriate to determine
whether the recipient has carried out its activities, and where
applicable, its housing assistance plan in a timely manner, whether the
recipient has carried out those activities and its certifications in
accordance with the requirements and the primary objectives of the Act
and with other applicable laws, and whether the recipient has a
continuing capacity to carry out those activities in a timely manner.
(2) Urban Development Action Grant (UDAG) performance reviews.
Section 119(g) of the Act requires the Secretary, at least on an annual
basis, to make such reviews and audits of recipients of Urban
Development Action Grants as necessary to determine whether the
recipient's progress in carrying out the approved activities is
substantially in accordance with the recipient's approved plans and
timetables.
(b) Performance review procedures. This paragraph describes the
review procedures the Department will use in conducting the performance
reviews required by sections 104(e) and 119(g) of the Act:
(1) The Department will determine the performance of each
entitlement and HUD-administered small cities recipient in accordance
with section 104(e)(1) of the Act by reviewing for compliance with the
requirements described in Sec. 570.901 and by applying the performance
criteria described in Secs. 570.902 and 570.903 relative to carrying out
activities and, where applicable, the housing assistance plan in a
timely manner. The review criteria in Sec. 570.904 will be used to
assist in determining if the recipient's program is being carried out in
compliance with civil rights requirements.
(2) The Department will review UDAG projects and activities to
determine whether such projects and activities are being carried out
substantially in accordance with the recipient's approved plans and
schedules. The Department will also review to determine if the recipient
has carried out its UDAG program in accordance with all other
requirements of the Grant Agreement and with all applicable requirements
of this part.
(3) In conducting performance reviews, HUD will primarily rely on
information obtained from the recipient's performance report, records
maintained, findings from monitoring, grantee and subrecipient audits,
audits and surveys conducted by the HUD Inspector General, and financial
data regarding the amount of funds remaining in the line of credit plus
program income. HUD may also consider relevant information pertaining to
a recipient's performance gained from other sources, including
litigation, citizen comments, and other information provided by or
concerning the recipient. A recipient's failure to maintain records in
the prescribed manner may result in a finding
[[Page 162]]
that the recipient has failed to meet the applicable requirement to
which the record pertains.
(4) If HUD determines that a recipient has not met a civil rights
review criterion in Sec. 570.904, the recipient will be provided an
opportunity to demonstrate that it has nonetheless met the applicable
civil rights requirement.
(5) If HUD finds that a recipient has failed to comply with a
program requirement or has failed to meet a performance criterion in
Sec. 570.902 or Sec. 570.903, HUD will give the recipient an opportunity
to provide additional information concerning the finding.
(6) If, after considering any additional information submitted by a
recipient, HUD determines to uphold the finding, HUD may advise the
recipient to undertake appropriate corrective or remedial actions as
specified in Sec. 570.910. HUD will consider the recipient's capacity as
described in Sec. 570.905 prior to selecting the corrective or remedial
actions.
(7) If the recipient fails to undertake appropriate corrective or
remedial actions which resolve the deficiency to the satisfaction of the
Secretary, the Secretary may impose a sanction pursuant to Sec. 570.911,
570,912, or 570.913, as applicable.
[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995]
Sec. 570.901 Review for compliance with the primary and national objectives and other program requirements.
HUD will review each entitlement and HUD-administered small cities
recipient's program to determine if the recipient has carried out its
activities and certifications in compliance with:
(a) The requirement described at Sec. 570.200(a)(3) that, consistent
with the primary objective of the Act, not less than 70 percent of the
aggregate amount of CDBG funds received by the recipient shall be used
over the period specified in its certification for activities that
benefit low and moderate income persons;
(b) The requirement described at Sec. 570.200(a)(2) that each CDBG
assisted activity meets the criteria for one or more of the national
objectives described at Sec. 570.208;
(c) All other activity eligibility requirements defined in subpart C
of this part;
(d) For entitlement grants only, the submission requirements of 24
CFR part 91 and the displacement policy requirements at Sec. 570.606;
(e) For HUD-administered small cities grants only, the citizen
participation requirements at Sec. 570.431, the amendment requirements
at Sec. 570.427 (New York HUD-administered small cities) or
Sec. 570.430(f) (Hawaii HUD-administered small cities), and the
displacement policy requirements of Sec. 570.606;
(f) The grant administration requirements described in subpart J;
(g) Other applicable laws and program requirements described in
subpart K; and
(h) Where applicable, the requirements pertaining to loan guarantees
(subpart M) and urban renewal completions (subpart N).
[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995; 60
FR 56917, Nov. 9, 1995]
Sec. 570.902 Review to determine if CDBG funded activities are being carried out in a timely manner.
HUD will review the performance of each entitlement and HUD-
administered small cities recipient to determine whether each recipient
is carrying out its CDBG assisted activities in a timely manner.
(a) Entitlement recipients. (1) Before the funding of the next
annual grant and absent contrary evidence satisfactory to HUD, HUD will
consider an entitlement recipient to be failing to carry out its CDBG
activities in a timely manner if:
(i) Sixty days prior to the end of the grantee's current program
year, the amount of entitlement grant funds available to the recipient
under grant agreements but undisbursed by the U.S. Treasury is more than
1.5 times the entitlement grant amount for its current program year; and
(ii) The grantee fails to demonstrate to HUD's satisfaction that the
lack of timeliness has resulted from factors beyond the grantee's
reasonable control.
(2) Notwithstanding that the amount of funds in the line of credit
indicates
[[Page 163]]
that the recipient is carrying out its activities in a timely manner
pursuant to paragraph (a)(1) of this section, HUD may determine that the
recipient is not carrying out its activities in a timely manner if:
(i) The amount of CDBG program income the recipient has on hand 60
days prior to the end of its current program year, together with the
amount of funds in its CDBG line of credit, exceeds 1.5 times the
entitlement grant amount for its current program year; and
(ii) The grantee fails to demonstrate to HUD's satisfaction that the
lack of timeliness has resulted from factors beyond the grantee's
reasonable control.
(3) In determining the appropriate corrective action to take with
respect to a HUD determination that a recipient is not carrying out its
activities in a timely manner pursuant to paragraphs (a)(1) or (a)(2) of
this section, HUD will consider the likelihood that the recipient will
expend a sufficient amount of funds over the next program year to reduce
the amount of unexpended funds to a level that will fall within the
standard described in paragraph (a)(1) of this section when HUD next
measures the grantee's timeliness performance. For these purposes, HUD
will take into account the extent to which funds on hand have been
obligated by the recipient and its subrecipients for specific activities
at the time the finding is made and other relevant information.
(b) HUD-administered Small Cities program. The Department will,
absent substantial evidence to the contrary, consider that a HUD-
administered small cities recipient is carrying out its CDBG funded
activities in a timely manner if the schedule for carrying out its
activities as contained in the approved application, or subsequent
amendment, is being substantially met.
[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 56917, Nov. 9, 1995]
Sec. 570.903 Review to determine if the recipient is meeting its consolidated plan responsibilities.
The consolidated plan, action plan, and amendment submission
requirements referred to in this section are in 24 CFR part 91.
(a) Review timing and purpose. HUD will review the consolidated plan
performance of each entitlement and Hawaii HUD-administered small cities
grant recipient prior to acceptance of a grant recipient's annual
certification under 24 CFR 91.225(b)(3) to determine whether the
recipient followed its HUD-approved consolidated plan for the most
recently completed program year, and whether activities assisted with
CDBG funds during that period were consistent with that consolidated
plan, except that grantees are not bound by the consolidated plan with
respect to the use or distribution of CDBG funds to meet nonhousing
community development needs.
(b) Following a consolidated plan. The recipient will be considered
to be following its consolidated plan if it has taken all of the planned
actions described in its action plan. This includes, but is not limited
to:
(1) Pursuing all resources that the grantee indicated it would
pursue;
(2) Providing certifications of consistency, when requested to do so
by applicants for HUD programs for which the grantee indicated that it
would support application by other entities, in a fair and impartial
manner; and
(3) Not hindering implementation of the consolidated plan by action
or willful inaction.
(c) Disapproval. If HUD determines that a recipient has not met the
criteria outlined in paragraph (b) of this section, HUD will notify the
recipient and provide the recipient up to 45 days to demonstrate to the
satisfaction of the Secretary that it has followed its consolidated
plan. HUD will consider all relevant circumstances and the recipient's
actions and lack of actions affecting the provision of assistance
covered by the consolidated plan within its jurisdiction. Failure to so
demonstrate in a timely manner will be cause for HUD to find that the
recipient has failed to meet its certification. A complete and specific
response by the recipient shall describe:
(1) Any factors beyond the control of the recipient that prevented
it from following its consolidated plan, and any actions the recipient
has taken or
[[Page 164]]
plans to take to alleviate such factors; and
(2) Actions taken by the recipient, if any, beyond those described
in the consolidated plan performance report to facilitate following the
consolidated plan, including the effects of such actions.
(d) New York HUD-administered Small Cities. New York HUD-
administered grantees shall follow the provisions of paragraph (b) of
this section for their abbreviated or full consolidated plan to the
extent that the provisions of paragraph (b) of this section are
applicable. If the grantee does not comply with the requirements of
paragraph (b) of this section, and does not provide HUD with an
acceptable explanation, HUD may decide, in accordance with the
requirements of the notice of fund availability, that the grantee does
not meet threshold requirements to apply for a new small cities grant.
[60 FR 56918, Nov. 9, 1995]
Sec. 570.904 Equal opportunity and fair housing review criteria.
(a) General. (1) Where the criteria in this section are met, the
Department will presume that the recipient has carried out its CDBG-
funded program in accordance with civil rights certifications and civil
rights requirements of the Act relating to equal employment opportunity,
equal opportunity in services, benefits and participation, and is
affirmatively furthering fair housing unless:
(i) There is evidence which shows, or from which it is reasonable to
infer, that the recipient, motivated by considerations of race, color,
religion where applicable, sex, national origin, age or handicap, has
treated some persons less favorably than others, or
(ii) There is evidence that a policy, practice, standard or method
of administration, although neutral on its face, operates to deny or
affect adversely in a significantly disparate way the provision of
employment or services, benefits or participation to persons of a
particular race, color, religion where applicable, sex, national origin,
age or handicap, or fair housing to persons of a particular race, color,
religion, sex, or national origin, or
(iii) Where the Secretary required a further assurance pursuant to
Sec. 570.304 in order to accept the recipient's prior civil rights
certification, the recipient has failed to meet any such assurance.
(2) In such instances, or where the review criteria in this section
are not met, the recipient will be afforded an opportunity to present
evidence that it has not failed to carry out the civil rights
certifications and fair housing requirements of the Act. The Secretary's
determination of whether there has been compliance with the applicable
requirements will be made based on a review of the recipient's
performance, evidence submitted by the recipient, and all other
available evidence. The Department may also initiate separate compliance
reviews under title VI of the Civil Rights Act of 1964 or section 109 of
the Act.
(b) Review for equal opportunity. Title VI of the Civil Rights Act
of 1964 (42 U.S.C. 2000d et seq.), and implementing regulations in 24
CFR part 1, together with section 109 of the Act (see Sec. 570.602),
prohibit discrimination in any program or activity funded in whole or in
part with funds made available under this part.
(1) Review for equal employment opportunity. The Department will
presume that a recipient's hiring and employment practices have been
carried out in compliance with its equal opportunity certifications and
requirements of the Act. This presumption may be rebutted where, based
on the totality of circumstances, there has been a deprivation of
employment, promotion, or training opportunities by a recipient to any
person within the meaning of section 109. The extent to which persons of
a particular race, gender, or ethnic background are represented in the
workforce may in certain circumstances be considered, together with
complaints, performance reviews, and other information.
(2) Review of equal opportunity in services, benefits and
participation. The Department will presume a recipient is carrying out
its programs and activities in accordance with the civil rights
certifications and requirements of the Act. This presumption may be
rebutted
[[Page 165]]
where, based on the totality of circumstances, there has been a
deprivation of services, benefits, or participation in any program or
activity funded in whole or in part with block grant funds by a
recipient to any person within the meaning of section 109. The extent to
which persons of a particular race, gender, or ethnic background
participate in a program or activity may in certain circumstances be
considered, together with complaints, performance reviews, and other
information.
(c) Fair housing review criteria. See the requirements in the Fair
Housing Act (42 U.S.C. 3601-20), as well as Sec. 570.601(a), which sets
forth the grantee's responsibility to certify that it will affirmatively
further fair housing.
(d) Actions to use minority and women's business firms. The
Department will review a recipient's performance to determine if it has
administered its activities funded with assistance under this part in a
manner to encourage use of minority and women's business enterprises
described in Executive Orders 11625, 12432 and 12138, and 24 CFR
85.36(e). In making this review, the Department will determine if the
grantee has taken actions required under Sec. 85.36(e) of this chapter,
and will review the effectiveness of those actions in accomplishing the
objectives of Sec. 85.36(e) of this chapter and the Executive Orders. No
recipient is required by this part to attain or maintain any particular
statistical level of participation in its contracting activities by
race, ethnicity, or gender of the contractor's owners or managers.
[53 FR 34466, Sept. 6, 1988; 53 FR 41330, Oct. 21, 1988, as amended at
54 FR 37411, Sept. 9, 1989; 60 FR 1917, Jan. 5, 1995; 61 FR 11482, Mar.
20, 1996]
Sec. 570.905 Review of continuing capacity to carry out CDBG funded activities in a timely manner.
If HUD determines that the recipient has not carried out its CDBG
activities and certifications in accordance with the requirements and
criteria described in Sec. 570.901 or 570.902, HUD will undertake a
further review to determine whether or not the recipient has the
continuing capacity to carry out its activities in a timely manner. In
making the determination, the Department will consider the nature and
extent of the recipient's performance deficiencies, types of corrective
actions the recipient has undertaken and the success or likely success
of such actions.
Sec. 570.906 Review of urban counties.
In reviewing the performance of an urban county, HUD will hold the
county accountable for the actions or failures to act of any of the
units of general local government participating in the urban county.
Where the Department finds that a participating unit of government has
failed to cooperate with the county to undertake or assist in
undertaking an essential community development or assisted housing
activity and that such failure results, or is likely to result, in a
failure of the urban county to meet any requirement of the program or
other applicable laws, the Department may prohibit the county's use of
funds made available under this part for that unit of government. HUD
will also consider any such failure to cooperate in its review of a
future cooperation agreement between the county and such included unit
of government described at Sec. 570.307(b)(2).
Secs. 570.907-570.909 [Reserved]
Sec. 570.910 Corrective and remedial actions.
(a) General. Consistent with the procedures described in
Sec. 570.900(b), the Secretary may take one or more of the actions
described in paragraph (b) of this section. Such actions shall be
designed to prevent a continuation of the performance deficiency;
mitigate, to the extent possible, the adverse effects or consequences of
the deficiency; and prevent a recurrence of the deficiency.
(b) Actions authorized. The following lists the actions that HUD may
take in response to a deficiency identified during the review of a
recipient's performance:
(1) Issue a letter of warning advising the recipient of the
deficiency and putting the recipient on notice that additional action
will be taken if the deficiency is not corrected or is repeated;
(2) Recommend, or request the recipient to submit, proposals for
corrective
[[Page 166]]
actions, including the correction or removal of the causes of the
deficiency, through such actions as:
(i) Preparing and following a schedule of actions for carrying out
the affected CDBG activities, consisting of schedules, timetables and
milestones necessary to implement the affected CDBG activities;
(ii) Establishing and following a management plan which assigns
responsibilities for carrying out the actions identified in paragraph
(b)(2)(i) of this section;
(iii) For entitlement recipients, canceling or revising affected
activities which are no longer feasible to implement due to the
deficiency and reprogramming funds from such affected activities to
other eligible activities (pursuant to the citizen participation
requirements in 24 CFR part 91); or
(iv) Other actions which will serve to prevent a continuation of the
deficiency, mitigate (to the extent possible) the adverse effects or
consequences of the deficiency, and prevent a recurrence of the
deficiency;
(3) Advise the recipient that a certification will no longer be
acceptable and that additional assurances will be required;
(4) Advise the recipient to suspend disbursement of funds for the
deficient activity;
(5) Advise the recipient to reimburse its program account or letter
of credit in any amounts improperly expended and reprogram the use of
the funds in accordance with applicable requirements;
(6) Change the method of payment to the recipient from a letter of
credit basis to a reimbursement basis;
(7) In the case of claims payable to HUD or the U.S. Treasury,
institute collection procedures pursuant to subpart B of 24 CFR part 17;
and
(8) In the case of an entitlement recipient, condition the use of
funds from a succeeding fiscal year's allocation upon appropriate
corrective action by the recipient pursuant to Sec. 570.304(d). The
failure of the recipient to undertake the actions specified in the
condition may result in a reduction, pursuant to Sec. 570.911, of the
entitlement recipient's annual grant by up to the amount conditionally
granted.
[53 FR 34466, Sept. 6, 1988, as amended at 60 FR 1917, Jan. 5, 1995]
Sec. 570.911 Reduction, withdrawal, or adjustment of a grant or other appropriate action.
(a) Opportunity for an informal consultation. Prior to a reduction,
withdrawal, or adjustment of a grant or other appropriate action, taken
pursuant to paragraph (b), (c), or (d) of this section, the recipient
shall be notified of such proposed action and given an opportunity
within a prescribed time period for an informal consultation.
(b) Entitlement grants. Consistent with the procedures described in
Sec. 570.900(b), the Secretary may make a reduction in the entitlement
grant amount either for the succeeding program year or, if the grant had
been conditioned, up to the amount that had been conditioned. The amount
of the reduction shall be based on the severity of the deficiency and
may be for the entire grant amount.
(c) HUD-administered small cities grants. Consistent with the
procedures described in Sec. 570.900(b), the Secretary may adjust,
reduce or withdraw the grant or take other actions as appropriate,
except that funds already expended on eligible approved activities shall
not be recaptured or deducted from future grants.
(d) Urban Development Action Grants. Consistent with the procedures
described in Sec. 570.900(b), the Secretary may adjust, reduce or
withdraw the grant or take other actions as appropriate, except that
funds already expended on eligible approved activities shall not be
recaptured or deducted from future grants made to the recipient.
Sec. 570.912 Nondiscrimination compliance.
(a) Whenever the Secretary determines that a unit of general local
government which is a recipient of assistance under this part has failed
to comply with Sec. 570.602, the Secretary shall notify the governor of
such State or chief executive officer of such unit of
[[Page 167]]
general local government of the noncompliance and shall request the
governor or the chief executive officer to secure compliance. If within
a reasonable period of time, not to exceed sixty days, the governor or
chief executive officer fails or refuses to secure compliance, the
Secretary is authorized to:
(1) Refer the matter to the Attorney General with a recommendation
that an appropriate civil action be instituted;
(2) Exercise the powers and functions provided by title VI of the
Civil Rights Act of 1964 (42 U.S.C. 2000d);
(3) Exercise the powers and functions provided for in Sec. 570.913;
or
(4) Take such other action as may be provided by law.
(b) When a matter is referred to the Attorney General pursuant to
paragraph (a)(1) of this section, or whenever the Secretary has reason
to believe that a State or a unit of general local government is engaged
in a pattern or practice in violation of the provisions of Sec. 570.602,
the Attorney General may bring a civil action in any appropriate United
States district court for such relief as may be appropriate, including
injunctive relief.
Sec. 570.913 Other remedies for noncompliance.
(a) Action to enforce compliance. When the Secretary acts to enforce
the civil rights provisions of Section 109, as described in Sec. 570.602
and 24 CFR part 6, the procedures described in 24 CFR parts 6 and 180
apply. If the Secretary finds, after reasonable notice and opportunity
for hearing, that a recipient has failed to comply substantially with
any other provisions of this part, the provisions of this section apply.
The Secretary, until he/she is satisfied that there is no longer any
such failure to comply, shall:
(1) Terminate payments to the recipient;
(2) Reduce payments to the recipient by an amount equal to the
amount of such payments which were not expended in accordance with this
part; or
(3) Limit the availability of payments to programs or activities not
affected by such failure to comply.
Provided, however, that the Secretary may on due notice suspend
payments at any time after the issuance of a notice of opportunity for
hearing pursuant to paragraph (c)(1) of this section, pending such
hearing and a final decision, to the extent the Secretary determines
such action necessary to preclude the further expenditure of funds for
activities affected by such failure to comply.
(b) In lieu of, or in addition to, any action authorized by
paragraph (a) of this section, the Secretary may, if he/she has reason
to believe that a recipient has failed to comply substantially with any
provision of this part;
(1) Refer the matter to the Attorney General of the United States
with a recommendation that an appropriate civil action be instituted;
and
(2) Upon such a referral, the Attorney General may bring a civil
action in any United States district court having venue thereof for such
relief as may be appropriate, including an action to recover the amount
of the assistance furnished under this part which was not expended in
accordance with it, or for mandatory or injunctive relief;
(c) Proceedings. When the Secretary proposes to take action pursuant
to this section, the respondent is the unit of general local government
or State receiving assistance under this part. These procedures are to
be followed prior to imposition of a sanction described in paragraph (a)
of this section:
(1) Notice of opportunity for hearing: The Secretary shall notify
the respondent in writing of the proposed action and of the opportunity
for a hearing. The notice shall:
(i) Specify, in a manner which is adequate to allow the respondent
to prepare its response, allegations with respect to a failure to comply
substantially with a provision of this part;
(ii) State that the hearing procedures are governed by these rules;
(iii) State that a hearing may be requested within 10 days from
receipt of the notice and the name, address and telephone number of the
person to whom any request for hearing is to be addressed:
(iv) Specify the action which the Secretary proposes to take and
that the authority for this action is section 111(a) of the Act;
[[Page 168]]
(v) State that if the respondent fails to request a hearing within
the time specified a decision by default will be rendered against the
respondent; and
(vi) Be sent to the respondent by certified mail, return receipt
requested.
(2) Initiation of hearing. The respondent shall be allowed at least
10 days from receipt of the notice within which to notify HUD of its
request for a hearing. If no request is received within the time
specified, the Secretary may proceed to make a finding on the issue of
compliance with this part and to take the proposed action.
(3) Administrative Law Judge. Proceedings conducted under these
rules shall be presided over by an Administrative Law Judge (ALJ),
appointed as provided by section 11 of the Administrative Procedures Act
(5 U.S.C. 3105). The case shall be referred to the ALJ by the Secretary
at the time a hearing is requested. The ALJ shall promptly notify the
parties of the time and place at which the hearing will be held. The ALJ
shall conduct a fair and impartial hearing and take all action necessary
to avoid delay in the disposition of proceedings and to maintain order.
The ALJ shall have all powers necessary to those ends, including but not
limited to the power to:
(i) Administer oaths and affirmations;
(ii) Issue subpoenas as authorized by law;
(iii) Rule upon offers of proof and receive relevant evidence;
(iv) Order or limit discovery prior to the hearing as the interests
of justice may require;
(v) Regulate the course of the hearing and the conduct of the
parties and their counsel;
(vi) Hold conferences for the settlement or simplification of the
issues by consent of the parties;
(vii) Consider and rule upon all procedural and other motions
appropriate in adjudicative proceedings; and
(viii) Make and file initial determinations.
(4) Ex parte communications. An ex parte communication is any
communication with an ALJ, direct or indirect, oral or written,
concerning the merits or procedures of any pending proceeding which is
made by a party in the absence of any other party. Ex parte
communications are prohibited except where the purpose and content of
the communication have been disclosed in advance or simultaneously to
all parties, or the communication is a request for information
concerning the status of the case. Any ALJ who receives an ex parte
communication which the ALJ knows or has reason to believe is
unauthorized shall promptly place the communication, or its substance,
in all files and shall furnish copies to all parties. Unauthorized ex
parte communications shall not be taken into consideration in deciding
any matter in issue.
(5) The hearing. All parties shall have the right to be represented
at the hearing by counsel. The ALJ shall conduct the proceedings in an
expeditious manner while allowing the parties to present all oral and
written evidence which tends to support their respective positions, but
the ALJ shall exclude irrelevant, immaterial or unduly repetitious
evidence. The Department has the burden of proof in showing by a
preponderance of the evidence that the respondent failed to comply
substantially with a provision of this part. Each party shall be allowed
to cross-examine adverse witnesses and to rebut and comment upon
evidence presented by the other party. Hearings shall be open to the
public. So far as the orderly conduct of the hearing permits, interested
persons other than the parties may appear and participate in the
hearing.
(6) Transcripts. Hearing shall be recorded and transcribed only by a
reporter under the supervision of the ALJ. The orginal transcript shall
be a part of the record and shall constitute the sole official
transcript. Respondents and the public, at their own expense, may obtain
copies of the transcript.
(7) The ALJ's decision. At the conclusion of the hearing, the ALJ
shall give the parties a reasonable opportunity to submit proposed
findings and conclusions and supporting reasons therefor. Within 25 days
after the conclusion of the hearing, the ALJ shall prepare a written
decision which includes a statement of findings and conclusions, and the
reasons or basis therefor, on all
[[Page 169]]
the material issues of fact, law or discretion presented on the record
and the appropriate sanction or denial thereof. The decision shall be
based on consideration of the whole record or those parts thereof cited
by a party and supported by and in accordance with the reliable,
probative, and substantial evidence. A copy of the decision shall be
furnished to the parties immediately by certified mail, return receipt
requested, and shall include a notice that any requests for review by
the Secretary must be made in writing to the Secretary within 30 days of
the receipt of the decision.
(8) The record. The transcript of testimony and exhibits, together
with the decision of the ALJ and all papers and requests filed in the
proceeding, constitutes the exclusive record for decision and, on
payment of its reasonable cost, shall be made available to the parties.
After reaching his/her initial decision, the ALJ shall certify to the
complete record and forward the record to the Secretary.
(9) Review by the Secretary. The decision by the ALJ shall
constitute the final decision of the Secretary unless, within 30 days
after the receipt of the decision, either the respondent or the
Assistant Secretary for Community Planning and Development files an
exception and request for review by the Secretary. The excepting party
must transmit simultaneously to the Secretary and the other party the
request for review and the basis of the party's exceptions to the
findings of the ALJ. The other party shall be allowed 30 days from
receipt of the exception to provide the Secretary and the excepting
party with a written reply. The Secretary shall then review the record
of the case, including the exceptions and the reply. On the basis of
such review, the Secretary shall issue a written determination,
including a statement of the reasons or basis therefor, affirming,
modifying or revoking the decision of the ALJ. The Secretary's decision
shall be made and transmitted to the parties within 80 days after the
decision of the ALJ was furnished to the parties.
(10) Judicial review. The respondent may seek judicial review of the
Secretary's decision pursuant to section 111(c) of the Act.
[53 FR 34466, Sept. 6, 1988, as amended at 64 FR 3802, Jan. 25, 1999]
Appendix A to Part 570--Guidelines and Objectives for Evaluating Project
Costs and Financial Requirements
I. Guidelines and Objectives for Evaluating Project Costs and
Financial Requirements. HUD has developed the following guidelines that
are designed to provide the recipient with a framework for financially
underwriting and selecting CDBG-assisted economic development projects
which are financially viable and will make the most effective use of the
CDBG funds. The use of these underwriting guidelines as published by HUD
is not mandatory. However, grantees electing not to use these
underwriting guidelines would be expected to conduct basic financial
underwriting prior to the provision of CDBG financial assistance to a
for-profit business. States electing not to use these underwriting
guidelines would be expected to ensure that the state or units of
general local government conduct basic financial underwriting prior to
the provision of CDBG financial assistance to a for-profit business.
II. Where appropriate, HUD's underwriting guidelines recognize that
different levels of review are appropriate to take into account
differences in the size and scope of a proposed project, and in the case
of a microenterprise or other small business to take into account the
differences in the capacity and level of sophistication among businesses
of differing sizes.
III. Recipients are encouraged, when they develop their own programs
and underwriting criteria, to also take these factors into account. For
example, a recipient administering a program providing only technical
assistance to small businesses might choose to apply underwriting
guidelines to the technical assistance program as a whole, rather than
to each instance of assistance to a business. Given the nature and
dollar value of such a program, a recipient might choose to limit its
evaluation to factors such as the extent of need for this type of
assistance by the target group of businesses and the extent to which
this type of assistance is already available.
IV. The objectives of the underwriting guidelines are to ensure:
(1) that project costs are reasonable;
(2) that all sources of project financing are committed;
(3) that to the extent practicable, CDBG funds are not substituted
for non-Federal financial support;
(4) that the project is financially feasible;
[[Page 170]]
(5) that to the extent practicable, the return on the owner's equity
investment will not be unreasonably high; and
(6) that to the extent practicable, CDBG funds are disbursed on a
pro rata basis with other finances provided to the project.
i. Project costs are reasonable. i. Reviewing costs for
reasonableness is important. It will help the recipient avoid providing
either too much or too little CDBG assistance for the proposed project.
Therefore, it is suggested that the grantee obtain a breakdown of all
project costs and that each cost element making up the project be
reviewed for reasonableness. The amount of time and resources the
recipient expends evaluating the reasonableness of a cost element should
be commensurate with its cost. For example, it would be appropriate for
an experienced reviewer looking at a cost element of less than $10,000
to judge the reasonableness of that cost based upon his or her knowledge
and common sense. For a cost element in excess of $10,000, it would be
more appropriate for the reviewer to compare the cost element with a
third-party, fair-market price quotation for that cost element. Third-
party price quotations may also be used by a reviewer to help determine
the reasonableness of cost elements below $10,000 when the reviewer
evaluates projects infrequently or if the reviewer is less experienced
in cost estimations. If a recipient does not use third-party price
quotations to verify cost elements, then the recipient would need to
conduct its own cost analysis using appropriate cost estimating manuals
or services.
ii. The recipient should pay particular attention to any cost
element of the project that will be carried out through a non-arms-
length transaction. A non-arms-length transaction occurs when the entity
implementing the CDBG assisted activity procures goods or services from
itself or from another party with whom there is a financial interest or
family relationship. If abused, non-arms-length transactions
misrepresent the true cost of the project.
2. Commitment of all project sources of financing. The recipient
should review all projected sources of financing necessary to carry out
the economic development project. This is to ensure that time and effort
is not wasted on assessing a proposal that is not able to proceed. To
the extent practicable, prior to the commitment of CDBG funds to the
project, the recipient should verify that: sufficient sources of funds
have been identified to finance the project; all participating parties
providing those funds have affirmed their intention to make the funds
available; and the participating parties have the financial capacity to
provide the funds.
3. Avoid substitution of CDBG funds for non-Federal financial
support. i. The recipient should review the economic development project
to ensure that, to the extent practicable, CDBG funds will not be used
to substantially reduce the amount of non-Federal financial support for
the activity. This will help the recipient to make the most efficient
use of its CDBG funds for economic development. To reach this
determination, the recipient's reviewer would conduct a financial
underwriting analysis of the project, including reviews of appropriate
projections of revenues, expenses, debt service and returns on equity
investments in the project. The extent of this review should be
appropriate for the size and complexity of the project and should use
industry standards for similar projects, taking into account the unique
factors of the project such as risk and location.
ii. Because of the high cost of underwriting and processing loans,
many private financial lenders do not finance commercial projects that
are less than $100,000. A recipient should familiarize itself with the
lending practices of the financial institutions in its community. If the
project's total cost is one that would normally fall within the range
that financial institutions participate, then the recipient should
normally determine the following:
A. Private debt financing--whether or not the participating private,
for-profit business (or other entity having an equity interest) has
applied for private debt financing from a commercial lending institution
and whether that institution has completed all of its financial
underwriting and loan approval actions resulting in either a firm
commitment of its funds or a decision not to participate in the project;
and
B. Equity participation--whether or not the degree of equity
participation is reasonable given general industry standards for rates
of return on equity for similar projects with similar risks and given
the financial capacity of the entrepreneur(s) to make additional
financial investments.
iii. If the recipient is assisting a microenterprise owned by a low-
or moderate-income person(s), in conducting its review under this
paragraph, the recipient might only need to determine that non-Federal
sources of financing are not available (at terms appropriate for such
financing) in the community to serve the low- or moderate-income
entrepreneur.
4. Financial feasibility of the project. i. The public benefit a
grantee expects to derive from the CDBG assisted project (the subject of
separate regulatory standards) will not materialize if the project is
not financially feasible. To determine if there is a reasonable chance
for the project's success, the recipient should evaluate the financial
viability of the project. A project would be considered financially
viable if all of the assumptions about the project's market share, sales
levels, growth potential, projections of revenue, project expenses and
debt service (including repayment of the CDBG assistance if
[[Page 171]]
appropriate) were determined to be realistic and met the project's
break-even point (which is generally the point at which all revenues are
equal to all expenses). Generally speaking, an economic development
project that does not reach this break-even point over time is not
financially feasible. The following should be noted in this regard:
A. some projects make provisions for a negative cash flow in the
early years of the project while space is being leased up or sales
volume built up, but the project's projections should take these factors
into account and provide sources of financing for such negative cash
flow; and
B. it is expected that a financially viable project will also
project sufficient revenues to provide a reasonable return on equity
investment. The recipient should carefully examine any project that is
not economically able to provide a reasonable return on equity
investment. Under such circumstances, a business may be overstating its
real equity investment (actual costs of the project may be overstated as
well), or it may be overstating some of the project's operating expenses
in the expectation that the difference will be taken out as profits, or
the business may be overly pessimistic in its market share and revenue
projections and has downplayed its profits.
ii. In addition to the financial underwriting reviews carried out
earlier, the recipient should evaluate the experience and capacity of
the assisted business owners to manage an assisted business to achieve
the projections. Based upon its analysis of these factors, the recipient
should identify those elements, if any, that pose the greatest risks
contributing to the project's lack of financial feasibility.
5. Return on equity investment. To the extent practicable, the CDBG
assisted activity should provide not more than a reasonable return on
investment to the owner of the assisted activity. This will help ensure
that the grantee is able to maximize the use of its CDBG funds for its
economic development objectives. However, care should also be taken to
avoid the situation where the owner is likely to receive too small a
return on his/her investment, so that his/her motivation remains high to
pursue the business with vigor. The amount, type and terms of the CDBG
assistance should be adjusted to allow the owner a reasonable return on
his/her investment given industry rates of return for that investment,
local conditions and the risk of the project.
6. Disbursement of CDBG funds on a pro rata basis. To the extent
practicable, CDBG funds used to finance economic development activities
should be disbursed on a pro rata basis with other funding sources.
Recipients should be guided by the principle of not placing CDBG funds
at significantly greater risk than non-CDBG funds. This will help avoid
the situation where it is learned that a problem has developed that will
block the completion of the project, even though all or most of the CDBG
funds going in to the project have already been expended. When this
happens, a recipient may be put in a position of having to provide
additional financing to complete the project or watch the potential loss
of its funds if the project is not able to be completed. When the
recipient determines that it is not practicable to disburse CDBG funds
on a pro rata basis, the recipient should consider taking other steps to
safeguard CDBG funds in the event of a default, such as insisting on
securitizing assets of the project.
[60 FR 1953, Jan. 5, 1995]
PART 572--HOPE FOR HOMEOWNERSHIP OF SINGLE FAMILY HOMES PROGRAM (HOPE 3)--Table of Contents
Subpart A--General
Sec.
572.1 Overview of HOPE 3.
572.5 Definitions.
572.10 Section 8 assistance.
Subpart B--Homeownership Program Requirements--Implementation Grants
572.100 Acquisition and rehabilitation of eligible properties;
rehabilitation standards.
572.105 Financing the purchase of properties by eligible families.
572.110 Identifying and selecting eligible families for homeownership.
572.115 Transfer of homeownership interests.
572.120 Affordability standards.
572.125 Replacement reserves.
572.130 Restrictions on resale by initial homeowners.
572.135 Use of proceeds from sales to eligible families, resale
proceeds, and program income.
572.140 Third party rights.
572.145 Displacement prohibited; protection of nonpurchasing residents.
Subpart C--Grants
572.200 Planning grants.
572.205 Planning grants--eligible activities.
572.210 Implementation grants.
572.215 Implementation grants--eligible activities.
572.220 Implementation grants--matching requirements.
572.225 Grant agreements; corrective and remedial actions.
572.230 Cash and Management Information (C/MI) System.
572.235 Amendments.
[[Page 172]]
Subpart D--Selection Process
572.300 Notices of funding availability (NOFAs); grant applications.
572.315 Rating criteria for planning grants.
Subpart E--Other Federal Requirements
572.400 Consolidated plan.
572.405 Nondiscrimination and equal opportunity requirements.
572.410 Environmental procedures and standards.
572.415 Conflict of interest.
572.420 Miscellaneous requirements.
572.425 Recordkeeping and reports; audit of recipients.
Authority: 42 U.S.C. 3535(d) and 12891.
Source: 58 FR 36526, July 7, 1993, unless otherwise noted.
Subpart A--General
Sec. 572.1 Overview of HOPE 3.
The purpose of the HOPE for Homeownership of Single Family Homes
program (HOPE 3) is to provide homeownership opportunities for eligible
families to purchase Federal, State, and local government-owned single
family properties. HOPE 3 provides grants to eligible applicants to plan
and implement homeownership programs designed to meet the needs of low-
income first-time homebuyers.
[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]
Sec. 572.5 Definitions.
The terms HUD, Indian Housing Authority (IHA), NAHA, 1937 Act, NOFA,
and Public Housing Agency (PHA) are defined in 24 CFR part 5.
Administrative costs means reasonable and necessary costs, as
described and valued in accordance with OMB Circular No. A-87 or A-122
\1\ as applicable, incurred by a recipient in carrying out a
homeownership program under this part. For purposes of complying with
the 15 percent limitation in Sec. 572.215(o), administrative costs do
not include the costs of activities that are separately eligible under
Sec. 572.215.
---------------------------------------------------------------------------
\1\ See Sec. 572.420(a) concerning the availability of OMB
Circulars.
---------------------------------------------------------------------------
Applicant means a private nonprofit organization; a cooperative
association; or a public body in cooperation with a private nonprofit
organization that applies for a HOPE 3 grant under this part. A
cooperative association is an eligible applicant only for eligible
property it proposes to acquire and transfer ownership interests to
eligible families under a homeownership program.
Consolidated plan means the document that is submitted to HUD that
serves as the planning document of the jurisdiction, in accordance with
24 CFR part 91.
Cooperating entity means a private nonprofit organization or public
body that the lead applicant has designed in its application to carry
out certain functions in the HOPE 3 program. The responsibilities of a
cooperating entity must be specified in a memorandum of agreement signed
by the lead applicant and the cooperating entity.
Cooperative association means an association organized and existing
under applicable State, local, territorial, or tribal law primarily for
the purpose of acquiring, owning, and operating housing for its members
or shareholders, as applicable.
Displaced homemaker means as the term is defined in 42 U.S.C. 12704.
The individual must not have worked full-time, full-year in the labor
force for at least 2 years.
Eligible family means a low-income family who is a first-time
homebuyer.
Eligible property means a single residential property, containing no
more than four units, that is owned or held by HUD, the Secretary of
Veterans Affairs, the Secretary of Agriculture, the Secretary of
Defense, the Secretary of Transportation, the Resolution Trust
Corporation, the Federal Deposit Insurance Corporation, the General
Services Administration, or any other Federal agency; a State or local
government (including any in rem property); or a PHA/IHA (excluding
public or Indian housing under the 1937 Act). This definition includes
individual condominium units located in multifamily structures owned or
held by an eligible source and properties held by institutions within
the jurisdiction of the Resolution Trust Corporation. All cooperative
units acquired under HOPE 3 must be located in properties containing no
more than four units to
[[Page 173]]
qualify as eligible property under this part. In the case of two- to
four-unit property, only property that may be divided so each unit may
be acquired by an eligible family is eligible, except as provided in
Sec. 572.115(c). For purposes of this definition, the term State or
local government means any entity included in the first sentence of the
definition of public body.
First-time homebuyer means as the term is defined in 42 U.S.C.
12704.
Homeownership program means a program for homeownership meeting the
requirements under this part. The program must provide for acquisition
by eligible families of ownership interests in the units in an eligible
property under an ownership arrangement approved by HUD under this part.
All eligible properties assisted under the program must be initially
acquired by eligible families.
Lead applicant means an eligible applicant designated in a HOPE 3
application to assume legal responsibility as the recipient and execute
the grant agreement.
Lease-purchase means
(1) An agreement, enforceable under State (or territorial) and local
law, between the recipient or its designee and an eligible family under
which the family:
(i) Obtains the right to occupy a unit in an eligible property,
subject to the payment of rent and other reasonable lease conditions,
for a period of not more than two years, except as provided in
Sec. 572.115(a)(2); and
(ii) At the end of such two years has the right to purchase the unit
under the terms stated in the lease-purchase agreement, including the
completion of any additional rehabilitation required during the lease-
purchase period.
(2) A lease-purchase agreement qualifies as a transfer of the unit
to the eligible family for purposes of the deadline for transfer in
Sec. 572.115(a), but it is not otherwise an ``ownership interest'' under
this part. The interest that the family acquires at the end of the two-
year lease-purchase period must be an ownership interest under this
part, and the terms and conditions of the purchase of such interest must
meet the affordability requirements of this part.
Low-income family means a family or individual qualifying as a low-
income family under 24 CFR part 813 (where the recipient is not a PHA/
IHA), part 913 (where the recipient is a PHA), or part 905 (where the
recipient is an Indian tribe or IHA). A low-income family is generally
defined as a family whose annual income does not exceed 80 percent of
median income for the area, as determined by HUD with adjustment for
family size. HUD may establish income limits higher or lower than 80
percent of median income for the area on the basis of its finding that
such variations are necessary because of prevailing construction costs
or unusually high or low family incomes.
Ownership interest means ownership by an eligible family by fee
simple title to a unit in an eligible property (including a condominium
unit), ownership of shares of or membership in a cooperative, or another
form of ownership proposed and justified by the applicant and approved
by HUD pursuant to Sec. 572.115(b).
Private nonprofit organization means any nonprofit organization that
(1) Is organized and exists under applicable Federal, State,
territorial, local, or tribal law;
(2) Has no part of its net earnings inuring to the benefit of any
individual, corporation, or other entity;
(3) Has a voluntary board;
(4) Has an accounting system or has designated a fiscal agent in
accordance with requirements established by HUD;
(5) Practices nondiscrimination in the provision of assistance;
(6) Is a tax exempt entity under section 501(c) of the Internal
Revenue Code of 1986 (26 U.S.C. 501(c)), or for a private nonprofit
organization in the Commonwealth of Puerto Rico, is a tax-exempt entity
under Puerto Rico law;
(7) Is privately controlled and has a governing body that is
controlled 51 percent or more by private individuals acting in a private
capacity. An individual is considered to be acting in a private capacity
if the individual is not an employee of a public body, is not appointed
by or acting as the representative of a public body (including the
applicant or recipient), and is not being
[[Page 174]]
paid by a public body (including the applicant or recipient) while
performing functions in connection with the nonprofit organization.
Program income means income earned from the program as described in
parts 84 and 85 of this title, as applicable, except that program income
does not include proceeds from the sale and resale of properties. Such
sale and resale proceeds, and interest earned by the recipient or its
designee on those proceeds, are governed by Sec. 572.135(a) through (c).
Public body means any State of the United States; any city, county,
town, township, parish, village, or other general purpose political
subdivision of a State; the Commonwealth of Puerto Rico, the District of
Columbia, Guam, the Northern Mariana Islands, the Virgin Islands,
American Samoa, or a general purpose political subdivision thereof; any
Indian tribe, as defined in title I of the Housing and Community
Development Act of 1974; any public agency or instrumentality of any of
the foregoing jurisdictions that is created by or pursuant to State,
territorial, local, or tribal law, including a State or local Housing
Finance Agency; and any PHA or IHA. For purposes of this definition, an
organization that meets the requirements of paragraphs (1) and (2) of
the definition of private nonprofit organization, but is controlled 51
percent or more by public officials acting in their official capacities,
may qualify as a public body.
Recipient means the lead applicant that is approved by HUD to
receive a HOPE 3 grant and is legally responsible for the grant.
Single parent means as the term is defined in 42 U.S.C. 12896.
[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61
FR 5209, Feb. 9, 1996; 61 FR 48797, Sept. 16, 1996; 62 FR 34145, June
24, 1997]
Sec. 572.10 Section 8 assistance.
Assistance under section 8 of the 1937 Act and other rental
assistance to the homebuyer will be terminated not later than the date
an eligible family acquires an ownership interest in an eligible
property or executes a lease-purchase agreement for the property.
Subpart B--Homeownership Program Requirements--Implementation Grants
Sec. 572.100 Acquisition and rehabilitation of eligible properties; rehabilitation standards.
(a) Minimum number of properties. (1) Each homeownership program
must involve acquisition of at least ten units in eligible properties by
eligible families.
(2) A homeownership program may not result in appreciably reducing
in the locality the number of affordable rental housing units of the
type to be assisted that would be available to residents currently
residing in the types of properties proposed for use under the program
or to families who would be eligible to reside in the properties.
(b) Maximum acquisition costs. The cost of acquiring an eligible
property (by a recipient or other entity for transfer to eligible
families or by an eligible family from a recipient or directly from an
eligible source) may not exceed the as-is fair market value of the
property, plus reasonable and customary closing costs charged for
comparable transactions in the market area. The as-is fair market value
of a property must be determined in accordance with a recent appraisal
conducted under procedures consistent with appraisal standards published
by The Appraisal Foundation in the current edition of ``Uniform
Standards of Professional Appraisal Practice.''
(c) Maximum cost of acquisition and rehabilitation. The cost of
acquisition and rehabilitation paid for from grant funds or credited as
match may not exceed 80 percent of the maximum amount that may be
insured in the area under section 203(b) of the National Housing Act,
plus reasonable and customary closing costs charged for comparable
transactions in the market area.
(d) Rehabilitation standards. (1) The recipient is responsible to
assure that rehabilitation of eligible property meets local codes
applicable to rehabilitation of work in the jurisdiction (but not less
than the housing quality
[[Page 175]]
standards established under the Section 8 rental voucher program,
described in Sec. 982.401 of this title). Rehabilitation must also
include work necessary to meet applicable federal requirements,
including lead-based paint requirements set forth at part 35, subparts
A, B, J, K, and R of this title.
(2) The property must be rehabilitated to a level that makes it
marketable for homeownership in the market area to families with incomes
at or below 80 percent of the median for the area. Luxury items
(fixtures, equipment, and landscaping of a type or quality that
substantially exceeds that customarily used in the locality for
properties of the same general type as that being rehabilitated) are not
eligible expenses. HUD reserves the right to disapprove improvements or
amenities to be paid for from nonprogram funds that it determines are
unsuitable for the HOPE 3 program.
(3) Rehabilitation costs must comply with the cost standards
established by HUD (see paragraph (c) of this section for applicable
cost limitations covering both acquisition and rehabilitation). If
improvements are made to an eligible property beyond those that qualify
as eligible costs, the applicant must assure that the entire cost of the
excess improvements will be covered by funds other than the HOPE 3 grant
and any amounts contributed toward the match, and that the affordability
of the property will not be impaired.
(4) Higher standards may be proposed by the applicant or required by
lenders.
(5) The applicant must adopt written rehabilitation standards.
(e) Rehabilitation and transfer of units. (1) The unit must be free
from any defects that pose a danger to life, health, or safety before
transfer of an ownership interest in the unit to the family or occupancy
of a unit by an eligible family under a lease-purchase agreement. The
recipient must inspect, or ensure inspection of, each unit to determine
that it does not pose an imminent threat to the life, health, or safety
of residents and that the property has passed recent fire and other
applicable safety inspections conducted by appropriate local officials.
(2) The unit must, not later than 2 years after transfer of an
ownership interest in the unit to an eligible family, or execution of a
lease-purchase agreement for the unit, meet minimum rehabilitation
standards under paragraph (d)(1) of this section. The recipient must
inspect, or ensure inspection of, each unit to determine that it meets
the rehabilitation standards required under paragraph (d)(1) of this
section.
[58 FR 36526, July 7, 1993, as amended at 62 FR 34145, June 24, 1997; 64
FR 50226, Sept. 15, 1999]
Sec. 572.105 Financing the purchase of properties by eligible families.
(a) Types of financing. (1) Financing may include use of the
implementation grant to permit transfer of an ownership interest in a
unit to an eligible family for less than fair market value or with
assisted financing; or other sources of financing (subject to
requirements that apply to those sources), including, but not limited
to, conventional mortgage loans, mortgage loans insured under title II
of the National Housing Act, and mortgage loans under other available
programs, such as Veterans Administration (VA), Farmers Home
Administration (FmHA), and Resolution Trust Corporation (RTC) seller-
assisted financing.
(2) FHA single family mortgage insurance requirements. All
regulatory requirements and underwriting procedures established for FHA
single family mortgage insurance apply to mortgages insured by FHA on
properties assisted under the HOPE 3 program. Exceptions in the
regulations specifically for homebuyers under the HOPE 3 program are:
(i) The eligible family/mortgagor may obtain a loan for the down
payment from a corporation or another person under conditions
satisfactory to HUD (24 CFR 203.19(b) and 234.28(c));
(ii) A second mortgage may be placed against the property even
though the entity holding a second mortgage is not a Federal, State, or
local government agency, if the entity is designated in the
homeownership plan of an applicant for an implementation grant (24 CFR
203.32(b) and 234.55(b)); and
(iii) Certain restrictions on conveyance may be permissible.
Property
[[Page 176]]
with restrictions that do not comply with FHA regulations will be
ineligible for FHA mortgage insurance, notwithstanding HUD approval
under Sec. 572.130(e).
(b) Financial assistance to homebuyers. Recipients may provide
assistance to, or on behalf of, eligible families to make acquisition
and rehabilitation of eligible properties affordable. This may include
interest rate reductions (``interest rate buy-downs''), payment of all
or a portion of closing costs, down payments, mortgage insurance
premiums, and other expenses, and other forms of assistance approved by
HUD. No mechanisms to financially assist homebuyers that would require
grant recipients to make lump sum deposits of HOPE 3 grant funds will be
permitted.
Sec. 572.110 Identifying and selecting eligible families for homeownership.
(a) Selection procedures. (1) Recipients must establish written
equitable procedures for identifying and selecting eligible families to
participate in the homeownership program, consistent with the
affordability standards in Sec. 572.120. Except for Indian tribes and
IHAs as described in Sec. 572.405(a)(2), the recipient must have a
procedure to carry out its affirmative fair marketing responsibilities,
described in Sec. 572.405(e), that apply whenever homeownership
opportunities are made available to other than current residents of the
property. These procedures must include specific steps to inform
potential applicants and solicit applications from eligible families in
the housing market area who are least likely to apply for the program
without special outreach.
(2) The written selection procedures must provide for selection only
of families that are creditworthy and have the financial capacity to
handle the anticipated costs of homeownership. Any family determined not
to have paid the appropriate amount of tenant contribution under a HUD
housing assistance program must be required to resolve any deficiency
before being selected for homeownership.
(b) Preferences. (1) In making selections for the program, each
recipient must give first preference to qualified residents who legally
occupied units on the date the recipient's application for the
implementation grant was submitted to HUD and to persons residing in the
units at the time the properties are selected. If the unit occupied by a
former resident on the date the implementation grant application was
submitted to HUD is occupied by a different resident at the time of
property selection, a vacant unit under this program must be offered to
the former resident at the earliest possible time.
(2) In the case of vacant properties for which the preferences in
paragraph (b)(1) of this section do not apply, recipients must give a
first preference to otherwise qualified eligible families who reside in
public or Indian housing under the 1937 Act. Recipients must use
whatever measures are considered appropriate to inform residents of
public and Indian housing developments within the housing market area of
the preference, such as informing resident councils, PHAs, and IHAs, or
other appropriate measures.
(3) Recipients must give a second preference to otherwise qualified
eligible families who have completed participation in one of the
following economic self-sufficiency programs: Project Self-Sufficiency,
Operation Bootstrap, Family Self-Sufficiency, JOBS, and any other
Federal, State, territorial, or local program approved by HUD as
equivalent.
(c) Responsibilities of selected families. (1) Each eligible family
selected for homeownership must certify at the time it acquires an
ownership interest in the unit (or enters into a lease-purchase
agreement for the unit) that it intends to occupy the unit as its
principal residence during the six-year period from the date it acquires
ownership interest in the unit, unless the recipient determines that the
family is required to move outside the market area due to a change in
employment or an emergency situation or the family sells its ownership
interest. The family may permit others to rent space (such as a basement
area or a spare bedroom) in the unit occupied by the family as its
principal residence. (See Sec. 572.115(c) concerning the rental of units
in a multi-unit property purchased by a homebuyer under this part.)
[[Page 177]]
(2) Any homebuyer that violates the agreement made under paragraph
(c)(1) of this section shall be subject to penalties as provided in the
transfer documents, as prescribed by HUD.
(3) Each eligible family selected for the program must participate
in counseling and training of homebuyers and homeowners regarding the
general rights and responsibilities of homeownership.
(d) Social security numbers; wage and claims information. As a
condition of eligibility for homeownership under this part, at the time
a family applies for howeownership, the recipient (or other appropriate
entity) must:
(1) Require the family to meet the requirements for the disclosure
and verification of social security numbers, as provided by part 5,
subpart B, of this title; and
(2) Require the family to sign and submit consent forms for the
obtaining of wage and claim information from State Wage Information
Collection Agencies, as provided by part 5, subpart B, of this title.
(e) Notification of rejected applicant families. Recipients or
another appropriate entity must promptly notify in writing any rejected
applicant family of the grounds for any rejection.
[58 FR 36526, July 7, 1993, as amended at 61 FR 11118, Mar. 18, 1996; 61
FR 48797, Sept. 16, 1996]
Sec. 572.115 Transfer of homeownership interests.
(a) Deadline for transfer. (1) All units in eligible properties
(including in rem properties) must be transferred to eligible families
within two years of the effective date of the implementation grant
agreement, except as otherwise provided for multi-unit properties in
paragraph (c) of this section. The transfer must involve either:
(i) Acquisition by an eligible family of an ownership interest in a
unit; or
(ii) Execution of a lease-purchase agreement for a unit.
(2) The HUD Field Office may approve a request for an extension of
the deadline in paragraph (a)(1) of this section on a per-program or
per-unit basis if the Field Office determines that all program
activities will be completed in accordance with the timing requirements
of Sec. 572.210(f) (including any extension granted under
Sec. 572.210(f)).
(b) Form of ownership. (1) Forms of ownership interests acquired by
eligible families under this part may include fee simple ownership
(including condominium ownership), cooperative ownership, or another
form of ownership interest proposed and justified by the applicant and
approved by HUD. HUD will not approve other forms of ownership that
would substantially limit the ability of homeowners to realize financial
appreciation in the value of their homes as determined by HUD. The type
of ownership interest must be consistent with any applicable State (or
territorial), local, or tribal law.
(2) The ownership interest may be subject only to:
(i) The restrictions on resale required or approved under
Sec. 572.130;
(ii) Mortgages, deeds of trust, or other liens or instruments
securing the eligible family's purchase money financing as approved by
the recipient; or
(iii) Any other restrictions or encumbrances that do not impair the
good and marketable nature of title to the ownership interest except as
otherwise approved by the recipient. In approving the terms of an
eligible family's purchase money financing or any other encumbrances on
the property under paragraphs (b)(2)(ii) and (iii) of this section, the
recipient shall not approve financing terms that do not comply with the
affordability standards in Sec. 572.120, or mortgage terms and
conditions or other encumbrances that in effect constitute resale
restrictions that would not be approved by HUD under this part.
(3) Mutual housing is eligible only to the extent it provides for
the transfer of ownership interests to eligible families.
(c) Transfer of multi-unit properties. (1) In the case of a two-to-
four unit property, only property that may be divided so that an
ownership interest in each unit may be acquired by an eligible family is
eligible. HUD may grant an exception to this requirement on a program-
by-program basis when it determines that such an exception will
[[Page 178]]
serve to further the purposes of the HOPE 3 program.
(2) HUD Headquarters will consider and may approve an exception
under the following circumstances:
(i) The reasonably projected net rental income will be included in
the determination of the appraised value of the property at the time of
the homebuyer's purchase;
(ii) The rent charged by the owner will not exceed the Fair Market
Rent established by HUD for the area;
(iii) The recipient will provide the homebuyer with counseling and
training in property management, and will approve the form of lease used
by the homebuyer; and
(iv) The recipient will include the family's potential net rental
income in calculating the family's initial affordability in accordance
with Sec. 572.120 of this part.
[58 FR 36526, July 7, 1993, as amended at 61 FR 48797, Sept. 16, 1996]
Sec. 572.120 Affordability standards.
(a) Initial affordability. (1) The monthly expenditure for
principal, interest, taxes, and insurance by an eligible family that is
required under the financing both for the acquisition and for the
rehabilitation in accordance with Sec. 572.100(d) of a unit (whether the
required rehabilitation occurs before or after the family takes title)
must be not less than 20 percent and not more than 30 percent of one-
twelfth of the annual income of the family used for the purpose of
determining eligibility under Sec. 572.110(a). (For the purpose of
determining affordability of the family, the recipient may, at its
option, adjust downward the annual incomes of eligible families using
reasonable standards and procedures consistently applied.) HUD may
approve a justified request for a floor lower than 20 percent to avoid
undue hardship to families, such as where the cost of utilities is high.
(2) The 30 percent cap on monthly payments includes closing costs
only if closing costs are included in the costs of principal and
interest, or are otherwise required to be paid by the homeowner over
time after acquisition.
(3) Applicants are encouraged to consider the additional monthly
costs of utilities and other monthly housing costs, such as condominium
and cooperative fees, in determining whether the family can afford to
purchase a unit.
(b) Continued affordability. The recipient must develop a plan
demonstrating reasonable efforts to ensure continued affordability by
homeowners in the eligible property. Financing that would impair the
continued affordability of the property for homebuyers, such as a
mortgage that is not fully amortizing (e.g., a ``balloon'' mortgage) may
not be used. The plan should take into account such program features as
long-term financing at reasonable terms, energy conservation, and
improvements that will entail low-cost maintenance.
[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995]
Sec. 572.125 Replacement reserves.
(a) Purpose. A single replacement reserve may be established for the
homeownership program only if HUD determines it is necessary to prevent
severe financial hardship to families caused by the failure of a major
system or component of the property that would render the unit
substandard. Initially, the reserve must be justified by the applicant
and approved by HUD as part of the program budget in the application or
an amended application.
(b) Need for reserve account. In determining the need for a
replacement reserve, the applicant or recipient must demonstrate that
the financial status of eligible families is insufficient to meet the
needs for which the reserve is established, and that the amount proposed
for the reserve is reasonable, taking into account the following
factors:
(1) The size of the implementation grant and the amount of matching
contributions;
(2) The availability of insurance, and the home maintenance and
repair capabilities of the families; and
(3) The condition and age of the properties and each of their major
systems and components (including at least the heating, plumbing, and
electrical systems, the roof, foundation, windows, exterior walls, and
common area, if any).
[[Page 179]]
(c) Drawdown of reserve funds. Replacement reserve funds may only be
drawn down under the Cash and Management Information System when
specifically needed to assist a homeowner. At time of program closeout,
all funds approved for a replacement reserve may be drawn down to fund a
reserve account. The account may not exceed six years estimated
replacement cost needs for the properties transferred under the
homeownership program.
(d) Administration of the reserve account. The recipient must
identify the entity that will administer the replacement reserve account
at time of program closeout. The entity responsible for administering
the account must be bonded and approved by HUD. The account must be
interest bearing, if possible, and interest earned thereon must be used
for the purposes for which the account is established. Unused funds at
the end of the term of the account must be treated as program income in
accordance with Sec. 572.135(d).
Sec. 572.130 Restrictions on resale by initial homeowners.
(a) Right to transfer. A homeowner may transfer the homeowner's
ownership interest in the unit, subject only to the right to purchase
under paragraph (b) of this section; the requirement for the purchaser
to execute a promissory note, if required under paragraph (d) of this
section; and the limitation on the amount of sales proceeds a family may
retain upon sale within the first six years, as required under paragraph
(c) of this section.
(b) Right to purchase. (1) Where a cooperative has jurisdiction over
the unit, it has the prior right to purchase the ownership interest in
the unit from the initial homeowner for the amount and on the terms
specified in a firm contract between the homeowner and a prospective
buyer. The cooperative association has 10 days after receiving notice of
the firm contract to decide whether to exercise its right and 60
additional days to complete closing of the purchase.
(2) If no cooperative has jurisdiction over the unit and if the
prospective buyer is not a low-income family, the recipient or a PHA/IHA
with jurisdiction for the area in which the unit is located, whichever
is specified in the documents under which the initial family acquires an
ownership interest in the unit, has the prior right to purchase the
ownership interest in the unit for the amount and on the terms specified
in a firm contract between the homeowner and a prospective buyer. The
recipient or PHA/IHA has 10 days after receiving notice of the firm
contract to decide whether to exercise its right and 60 additional days
to complete closing of the purchase.
(3) Where a recipient, cooperative, or PHA/IHA exercises a right to
purchase, it must resell the unit to an eligible family promptly.
(4) Unless otherwise provided in the property transfer documents,
none of the provisions of paragraph (b) of this section apply in the
case of liquidation of a security interest in the property. If FHA has
insured a mortgage on the property, the provisions of paragraph (b) of
this section shall not apply upon occurrence of an event requiring
termination under 24 CFR 203.41(c)(2) or 234.66(c)(2).
(c) Limitation on equity interest an initial homeowner may retain
from sale during first six years. (1) The HOPE program is designed to
assure that an initial or subsequent homeowner does not receive any
undue profit from acquiring a unit under the program and that, to the
extent the sales price is sufficient, an initial homeowner recovers the
equity interest in the property. With respect to any sale by an initial
homeowner during the first six years after acquisition, the family may
retain only the amount computed under this paragraph. Any excess must be
distributed as provided in Sec. 572.135(b). The amount of equity an
initial homeowner has in the property is determined by computing the sum
of the following:
(i) The contribution to equity paid by the family (such as any
downpayment (in the form of cash or the value of sweat equity) and any
amount paid towards principal on a mortgage loan during the period of
ownership);
(ii) The value of any improvements (not including normal or routine
maintenance) installed at the expense of the family during the family's
tenure as owner (including improvements made
[[Page 180]]
through sweat equity), as determined by the recipient or other entity
specified in the approved application based on evidence of amounts spent
on the improvements, including the cost of material and labor (or the
value of the sweat equity); and
(iii) The appreciated value, determined by applying the Consumer
Price Index (Urban Consumers) or other HUD approved index against the
contribution to equity under paragraphs (d)(i) and (ii) of this section.
(2) The recipient (or other entity) may, at the time of initial
sale, enter into an agreement with the family to set a maximum amount
which this appreciation may not exceed.
(3) Amounts that count towards a family's equity may not also count
towards the match.
(d) Promissory note. (1) If the purchase price of the unit
(adjusted, if applicable as described in this paragraph) paid by the
initial homebuyer is less than the fair market value of the property
(based on an appraisal of the value of the unit after rehabilitation to
applicable program standards conducted in accordance with the appraisal
requirements in Sec. 572.100(b)), the initial homeowner must, at
closing, execute a nonamortizing, nonrecourse, noninterest-bearing
promissory note, in a form acceptable to HUD, equal to the difference
between such fair market value of the unit and the adjusted purchase
price, together with a security instrument securing the obligation of
the note and recorded in local land records or other applicable system
of recordation appropriate to the type of security interest being
recorded. The note must be payable to the recipient or other entity
designated in the approved homeownership plan. In determining the amount
of the promissory note and for that purpose only, the purchase price
must be adjusted by deducting all substantial amounts of financial
assistance with respect to the family's acquisition or rehabilitation of
the unit that would result in an undue profit to the family if it were
to sell the unit at the beginning of the 7th year of homeownership. (See
paragraph (c) of this section for an additional restriction on return to
the homeowner on reasales during the first six years.) For this purpose,
``substantial financial assistance'' includes all forms of assistance or
subsidy from HOPE 3 resources that reduce the cash return (sales
proceeds) received by the recipient for the unit below its appraised
after-rehabilitation fair market value by more than a total of $4,000,
including (without limitation) discounted purchase prices, downpayment
assistance, and rehabilitation or purchase money grants or loans that
are not repayable on an amortizing basis. Financing to homeowners
provided from HOPE 3 resources may not be assumed by subsequent
homebuyers.
(2) With respect to a sale by an initial homeowner, the note must
require payment upon sale by the initial homeowner, to the extent
proceeds of the sale remain after paying off other outstanding debt
secured by the property that was incurred for the purpose of acquisition
or property improvement, paying any other amounts due in connection with
the sale (such as closing costs and transfer taxes), and paying the
family the amount of its equity in the property, computed in accordance
with paragraph (c) of this section.
(3) With respect to a sale by an initial homeowner after the first
six years after acquisition, through the 20th year, the amount payable
under the note must be reduced by \1/168\ of the original principal
amount of the note for each full month of ownership by the family after
the end of the sixth year. The homeowner may retain all other proceeds
of the sale.
(4) Where a subsequent purchaser during the 20-year period, measured
by the term of the initial promissory note, purchases the property for
less than the then current fair market value (determined in accordance
with the appraisal requirements in Sec. 572.100(b)), the purchaser must
also execute at closing a promissory note and mortgage (to be recorded
as stated in paragraph (d)(1) of this section) payable to the recipient
or its designee, for the amount of the discount (but no more than the
amount payable at the time of the sale on the promissory note by the
seller). The term of the promissory note must be the period remaining of
the original 20-year period. The note must require payment upon sale by
the subsequent homeowner, to the extent proceeds of
[[Page 181]]
the sale remain after covering costs of the sale, paying off other
outstanding debt secured by the property that was incurred for the
purpose of acquisition or property improvement, and paying any other
amounts due in connection with the sale. The amount payable on the note
must be reduced by a percentage of the original principal amount of the
note for each full month of ownership by the subsequent homeowner. The
percentage must be computed by determining the percentage of the term of
the promissory note the homeowner has owned the property. The remainder
may be retained by the subsequent homeowner selling the property.
(e) Additional restrictions. Notwithstanding paragraph (a) of this
section, an applicant may propose in its application, and HUD may
approve, additional reasonable restrictions on the resale of units under
the program. HUD does not encourage additional restrictions, but HUD
approval will be based on a review of the individual circumstances.
However, HUD will not approve restrictions that it determines will
substantially limit the ability of homeowners to realize financial
appreciation in the value of their homes.
[58 FR 36526, July 7, 1993, as amended at 61 FR 48798, Sept. 16, 1996]
Sec. 572.135 Use of proceeds from sales to eligible families, resale proceeds, and program income.
(a) Proceeds from sales. The recipient or another entity approved by
HUD must use the proceeds, if any, from the initial sale for costs of
their HOPE 3 program, including additional homeownership opportunities
eligible under the HOPE 3 program, improvements to properties under the
HOPE 3 program, business opportunities for low-income families
participating in the HOPE 3 program, supportive services related to the
HOPE 3 program, and other activities approved by HUD, either as part of
the approved application or later on request. Such proceeds include the
full consideration received by the recipient or other entity for the
property, including principal and interest on purchase money loans from
HOPE 3 funds or match.
(b) Resale proceeds. Fifty percent of any portion of the net sales
proceeds that may not be retained by the homeowner under
Sec. 572.130(c), (d), and (e) must be paid to the recipient, or another
entity approved by HUD, for use for additional homeownership
opportunities eligible under the HOPE 3 program, improvements to
properties under the HOPE 3 program, business opportunities for
homeowners under the HOPE 3 program, supportive services related to the
HOPE 3 program, and other activities approved by HUD in the approved
homeownership program or later on request. The remaining 50 percent must
be collected by the recipient and returned to HUD within 15 days of the
sale for use under the HOPE 3 program, subject to any limitations
contained in appropriations Acts.
(c) Requirements for use of sale and resale proceeds. Sale and
resale proceeds must be committed for approved activities within one
year of receipt. All sale and resale proceeds must be accounted for by
the recipient, and 50 percent of all resale proceeds received by the
recipient must be returned to HUD, as described in paragraph (b) of this
section. Recipients may use up to 15 percent of their sale and resale
proceeds for administrative expenses to expand their HOPE 3 program and
provide additional homeownership opportunities. Recipients must retain
records on the use of these funds to the same level of detail as
required of grant funds under the HOPE 3 system or whatever records HUD
otherwise prescribes. The recipient, and any other entity approved by
HUD to administer the sale and resale proceeds, remain responsible to
comply with the requirements of this part, or such other requirements as
HUD may prescribe (consistent with then applicable law) in closeout
procedures or agreements.
(d) Program income. Any program income, as defined in Sec. 572.5,
received by the recipient may be added to the funds committed to the
grant agreement by HUD and the recipient, in accordance with the
requirements of parts 84 and 85 of this title, as applicable.
[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 62
FR 34145, June 24, 1997]
[[Page 182]]
Sec. 572.140 Third party rights.
The rights of third parties are governed by 42 U.S.C. 12895(d) and
apply to the requirements of this part.
[61 FR 48798, Sept. 16, 1996]
Sec. 572.145 Displacement prohibited; protection of nonpurchasing residents.
(a) Displacement prohibited. (1) No person may be displaced from his
or her dwelling as a direct result of a homeownership program under this
part. This does not preclude terminations of tenancy for violation of
the terms of occupancy of the unit. Each resident of an eligible
property on the date the application for an implementation grant was
submitted to HUD and each resident at the time the property is selected
must be given an opportunity to become a homeowner under this program if
the resident qualifies as an eligible family and meets other program
requirements. If the resident does not qualify or does not elect to
move, the property is not eligible. The protections provided to
residents under this section do not apply to the former owner of the
property if the property is acquired from him or her as a result of a
tax or mortgage foreclosure.
(2) In addition to any applicable sanctions under the grant
agreement, a violation of paragraph (a)(1) of this section may trigger a
requirement to provide relocation assistance in accordance with the
Uniform Relocation Assistance and Real Property Acquisition Policies Act
of 1970 and governmentwide implementing regulations at 49 CFR part 24.
(b) Relocation assistance for residents who elect to move. The
recipient must offer each nonpurchasing resident who elects to move
relocation assistance in accordance with the approved homeownership
program. The program must provide, at least, the following assistance:
(1) Advisory services, including timely information, counseling
(including the provision of information on a resident's rights under the
Fair Housing Act), and referrals to suitable, affordable, decent, safe,
and sanitary alternative housing;
(2) Payment for actual, reasonable moving expenses; and
(3) Financial assistance sufficient to permit relocation to
suitable, affordable, decent, safe, and sanitary housing. This
requirement is met if the family is provided the opportunity to relocate
to suitable, decent, safe, and sanitary housing for which the monthly
rent and estimated average utility costs do not exceed the greater of 30
percent of the person's income or the person's monthly rent before
relocation and the estimated average monthly utility costs. The
homeownership program must specify the period for which replacement
housing assistance will be provided to persons who do not receive
assistance through a Section 8 rental certificate or voucher or other
housing program subsidy.
(c) Temporary relocation. The recipient must provide each resident
of an eligible property, who is required to relocate temporarily to
permit work to be carried out, with suitable, decent, safe, and sanitary
housing for the temporary period and must reimburse the resident for all
reasonable out-of-pocket expenses incurred in connection with the
temporary relocation, including the costs of moving to and from the
temporarily occupied housing and any increase in monthly costs of rent
and utilities.
(d) Notice of relocation assistance. As soon as feasible, each
recipient must give each resident of an eligible property a written
description of the applicable provisions of this section.
Subpart C--Grants
Sec. 572.200 Planning grants.
Any planning grants made by HUD under the HOPE 3 program will
continue to be governed by the provisions in this section in effect
immediately before October 16, 1996. When or before HUD announces the
availability of funds for planning grants under this part, these
provisions will be recodified.
[61 FR 48798, Sept. 16, 1996]
[[Page 183]]
Sec. 572.205 Planning grants--eligible activities.
Any planning grants made by HUD under the HOPE 3 program will
continue to be governed by the provisions in this section in effect
immediately before October 16, 1996. When or before HUD announces the
availability of funds for planning grants under this part, these
provisions will be recodified.
[61 FR 48798, Sept. 16, 1996]
Sec. 572.210 Implementation grants.
(a) General authority. Any implementation grants for the purpose of
carrying out homeownership programs approved under this part will be
awarded using a selection process and selection criteria to be published
in a NOFA.
(b) Deadline for completion. A recipient must spend all
implementation grant amounts within 4 years from the effective date of
the grant agreement. The appropriate HUD field office may approve a
request to extend the deadline when it determines that an extension is
warranted. A previously approved grant amount may not be amended to
increase the grant amount.
(c) Program closeout. Recipients will comply with closeout
procedures as issued by HUD.
[62 FR 34145, June 24, 1997]
Sec. 572.215 Implementation grants--eligible activities.
Implementation grants may be used for the reasonable costs of
eligible activities necessary to carry out a homeownership program under
this part. Only costs incurred on or after the effective date of an
implementation grant agreement qualify for funding under this part.
Eligible activities include:
(a) Acquisition of eligible properties by the recipient. Acquisition
of eligible properties for the purpose of transferring ownership
interests to eligible families in a homeownership program under this
part, in accordance with Sec. 572.100. (Where the applicant owns the
eligible property or where HUD otherwise determines that an ``arms
length'' relationship for acquisition does not exist, program funds may
not be used for acquisition of the property for the program. However, if
the property is owned by an eligible source, it may be donated as match
in accordance with Sec. 572.220(b)(4).)
(b) Recipient closing costs. Customary and reasonable closing costs
of the buyer associated with the purchase of eligible properties under
the program.
(c) Financial assistance to homebuyers. Provision of assistance to
families to make acquisition and rehabilitation of eligible properties
affordable, in accordance with Sec. 572.105(b).
(d) Rehabilitation. Rehabilitation of the eligible property covered
by the homeownership program, in accordance with standards and cost
limitations established by HUD in Sec. 572.100.
(e) Architectural and engineering work. Architectural and
engineering work, and related professional services required to prepare
architectural plans or drawings, write-ups, specifications or
inspections, including lead-based paint evaluation.
(f) Relocation. Relocation of residents in eligible properties who
elect to move, in accordance with Sec. 572.145(b).
(g) Temporary relocation of homebuyers. Temporary relocation of
residents during rehabilitation, in accordance with Sec. 572.145(c).
(h) Legal fees. Customary and reasonable costs of professional legal
services.
(i) Replacement reserves. A single replacement reserve for the
properties under the program if necessary, in accordance with
Sec. 572.125.
(j) Homebuyer outreach and selection. Reasonable and necessary costs
of marketing the program to potential homebuyers and of identifying and
selecting homebuyers under the program. These costs may include costs
related to implementing the affirmative fair housing marketing strategy
required under Sec. 572.110.
(k) Counseling and training. Counseling and training of only those
homebuyers (and their alternates) and homeowners selected under the
homeownership program. This may include such subjects as personal
financial management, home maintenance, home repair, construction skills
(especially where the eligible family will do some of the
rehabilitation), property management for owners of multi-unit
[[Page 184]]
properties, and the general rights and responsibilities of
homeownership.
(l) Property management and holding costs. Reasonable and necessary
costs related to properly maintaining and securing eligible properties
after acquisition or donation and before sale to an eligible homebuyer.
These costs may include property insurance expenses, security costs,
property taxes, utility charges, and other costs related to sound
property management of recipient-owned properties before sale under the
program. These costs may not be charged relative to eligible properties
donated to the program by the recipient or another entity that HUD
determines does not have an ``arm's length'' relationship with the
recipient.
(m) Recipient training needs. Defraying costs for ongoing training
needs of the recipient for courses of instruction that are directly
related to developing and carrying out the homeownership program.
(n) Economic development. Economic development activities that
promote economic self-sufficiency of homebuyers and homeowners under the
homeownership program. The economic development activities must be
directly related to the homeownership program, and may only benefit
families and individuals who are homeowners or who have been selected as
homebuyers under the program. These costs are limited to job training or
retraining and day care costs of those participating in job training and
retraining activities approved under the HOPE 3 program. The recipient
must enter into written agreements with the providers of economic
development services specifying the services to be provided, including
estimates of the numbers of homebuyers and homeowners to be assisted.
The aggregate amount of planning and implementation grants that may be
used for economic development activities related to any one program may
not exceed $250,000.
(o) Administrative costs. Reasonable and necessary costs, as
described and valued in accordance with the OMB Circular Nos. A-87 or A-
122, as applicable, incurred by a recipient in carrying out the HOPE 3
program. The total amount that may be spent on administrative activities
from the implementation grant and any contribution toward the match may
not exceed 15 percent of the amount of the grant. For purposes of
complying with the 15 percent limitation, administrative costs do not
include the cost of activities that are separately eligible under this
section.
(p) Other activities. Other activities proposed by the applicant, to
the extent the applicant justifies them as necessary for the proposed
homeownership program and HUD approves them.
[58 FR 36526, July 7, 1993, as amended at 64 FR 50226, Sept. 15, 1999]
Sec. 572.220 Implementation grants--matching requirements.
(a) General requirements. (1) Except as provided in paragraph (a)(3)
of this section, each recipient must assure that matching contributions
equal to not less than 33 percent (or 25 percent for grants awarded
after April 11, 1994) of the amount of the implementation grant shall be
provided from non-Federal sources to carry out the homeownership
program. Amounts contributed to the match must be used for eligible
activities or in accordance with the requirements of this section.
(2) All contributions toward eligible activities to be counted
toward the match must be provided no later than the deadline for
completion of program activities established in accordance with
Sec. 572.210(f), except as permitted under paragraphs (b)(1)(iv) and
(b)(3) of this section.
(3) When the recipient is an IHA, and the IHA (acting in that
capacity) has not received, and will not receive, amounts under title I
of the Housing and Community Development Act of 1974 for the fiscal year
in which HUD obligates HOPE grant funds, the match requirements under
this section will not apply.
(b) Form. Contributions may only be in the form of:
(1) Cash contributions. (i) Cash contributions from non-Federal
resources contributed permanently for uses under the HOPE 3 program by
the applicant, non-Federal public entities, private entities, or
individuals, except that a cash contribution in the form of a down
payment made by an eligible family may not count as a matching
[[Page 185]]
contribution. Funds will be considered permanently contributed if all
principal, interest, and any other return on the contribution are used
for eligible activities in accordance with program requirements.
(ii) Non-Federal resources may include:
(A) Contribution of trust funds held by Federal agencies for Indian
tribes;
(B) PHA section 8 operating reserve funds, where approved by HUD;
(C) Income from a Federal grant earned after the end of the award
period, if no Federal programmatic requirements govern the disposition
of the program income.
(D) Amounts, determined in accordance with paragraph (b)(1)(iv)(B)
of this section, that have been requested by the applicant in an
application submitted to the Federal Housing Finance Board for
assistance under its affordable housing program, so long as the
application is approved within 30 days of HUD's conditional approval of
the HOPE 3 application.
(iii) Non-Federal resources may not include:
(A) Funds from a Community Development Block Grant under section
106(b) or section 106(d), respectively, of the Housing and Community
Development Act of 1974, except to the extent permitted for
administrative expenses under paragraph (b)(2) of this section;
(B) Federal tax expenditures, including low-income housing tax
credits.
(iv) The grant equivalent of a below-market interest rate loan to
the homebuyer from non-Federal resources, where all repayments,
interest, and other return will not be permanently contributed to the
HOPE 3 program, may be counted as a cash contribution. The grant
equivalent of a below market interest rate loan must be calculated in
accordance with paragraphs (b)(1)(iv) (A) and (B) of this section--
(A) If the loan is made from proceeds of obligations issued by or on
behalf of a public body that are exempt from taxation by the United
States, the contribution is the present discounted cash value of the
difference between payments to be made on the borrowed funds and
payments to be received on the loan to the homebuyer, based on a
discount rate equal to the interest rate on the borrowed funds;
(B) If the loan is made from funds other than under paragraph
(b)(1)(iv)(A) of this section, the contribution is the present
discounted cash value of the yield forgone, calculated based on a
discount rate approved or prescribed by HUD. In determining the yield
forgone, the recipient must use as a measure of a market yield one of
the following, as appropriate:
(1) With respect to housing financed with a fixed interest rate
mortgage, a rate equal to the 10-year Treasury note rate plus 200 basis
points; or
(2) With respect to housing financed with an adjustable interest
rate mortgage, a rate equal to the one-year Treasury bill rate plus 250
basis points.
(v) Cash contributions may also be made from sales proceeds from the
Turnkey III Homeownership and Mutual Help programs, as approved by HUD,
or an approved homeownership program under section 5(h) of the 1937 Act.
(2) Administrative costs. (i) Contributions of eligible
administrative services up to a value equal to 7 percent of the amount
of the implementation grant. This limitation is in addition to the 15
percent limitation on administrative costs (see Sec. 572.215(o)).
(ii) If an applicant proposes to contribute administrative services,
HUD will automatically approve an applicant's assurances for matching
purposes that it will pay eligible administrative costs from non-Federal
sources in an amount up to 7 percent of the implementation grant, and
will not require further documentation of those expenditures for
purposes of the HOPE 3 program. If a recipient uses more than 8 percent
of its implementation grant to pay administrative costs, the amount
credited toward the match will be reduced to less than 7 percent to stay
within the 15 percent limitation.
(iii) Non-Federal resources, for the purposes of counting
contributions for administrative costs, may include funds from a
Community Development Block Grant under section 106(b) or section 106(d)
of the Housing and Community Development Act of 1974 and are subject to
the recordkeeping and
[[Page 186]]
documentation requirements of that program.
(3) Taxes, fees, and other charges. (i) The present value of taxes,
fees, or other charges that are normally and customarily imposed but are
waived, forgone, or deferred in a manner that facilitates the
implementation of a homeownership program assisted under this part. Only
amounts that would have been imposed after the date a property is
acquired by a recipient or other entity for transfer to eligible
families, the effective date of the implementation grant agreement if
the recipient already owns the property, or the date after an eligible
property is acquired directly from an eligible source by an eligible
family, as applicable, may be counted towards the match.
(ii) Amounts that would be waived, forgone, or deferred for longer
than 20 years from the date a family acquires homeownership interests in
the unit may not be counted towards the match.
(iii) The present value of taxes, fees, or other charges waived,
forgone, or deferred must be computed by discounting the estimated
amount that would be otherwise payable over the time period (up to 20
years) based on a discount rate approved or prescribed by HUD.
(iv) Where the match includes amounts under paragraph (b)(3) of this
section, the documents transferring the homeownership interest to the
family must evidence the contribution, to the extent the contribution
has not already been received.
(4) Real property. Real property contributed for use under an
approved homeownership program. To the extent properties were acquired
with Federal resources or are donated directly to the program from
Federal sources, their value is not an eligible match contribution.
(i) The as-is fair market value of eligible property may be counted
as a contribution toward the match, determined in accordance with a
recent appraisal conducted under procedures established or approved by
HUD. The maximum value contributed will be limited as provided in
Sec. 572.100.
(ii) When eligible real property is sold to the recipient or its
designee from non-Federal sources at a price below fair market value,
the differential between the fair market value and the discounted sales
price may be counted toward the match.
(iii) Vacant land from any non-Federal source located on existing
streets with available utilities (which need not include laterals) may
be contributed for use under the program, but only if a structure
acquired or donated from an eligible HOPE 3 source will be moved onto
it. The total amount of the contribution and any amount paid from HOPE 3
funds for acquisition of the structure, moving, and rehabilitation costs
must be within the limits provided in Sec. 572.100.
(5) Infrastructure. The fair market value of investment (as approved
by HUD), not made with Federal resources, in on-site and off-site
infrastructure that directly contributes to a homeownership program. The
infrastructure investment may be counted toward the match only if it was
completed no earlier than 12 months before the deadline date set by HUD
in the NOFA for receipt of implementation grant applications. Investment
in infrastructure may include such activities as new or repaired utility
laterals connecting eligible property to the main line and new or
rebuilt walkways, sidewalks, or curbs on or contiguous to the eligible
property. If the investment in infrastructure also benefits other
properties, only the share of the costs directly benefiting the eligible
property under the homeownership program may be counted toward the
match.
(6) Donated labor. All donated labor, including sweat equity
provided by a homebuyer or homeowner, to be valued at $10 an hour or at
a rate promulgated by HUD in the NOFA, except for donated professional
labor, as approved by HUD, including professional labor by homebuyers
and homeowners. The donated professional labor will be valued at the
fair market value of the work completed. Professional labor is work
ordinarily performed by the donor for payment, such as work by
attorneys, electricians, carpenters, and architects that is equivalent
to work
[[Page 187]]
they do in their occupations. Sweat equity may be counted towards the
match only if it is not also counted toward a family's equity.
(7) Donated materials and supplies. Donated materials and supplies
may be counted toward the match contribution at their fair market value.
The recipient must maintain a written enumeration of what donated
materials and supplies are being used in the program, as well as
documentation of their cost or value.
(8) Other in-kind contributions. The reasonable value of in-kind
contributions proposed by the applicant in the application and approved
by HUD. In reviewing proposed in-kind contributions, HUD will review to
ensure:
(i) The proposed contribution is to be used for an eligible activity
under the proposed homeownership program;
(ii) The application demonstrates that the proposed in-kind
contribution will actually be provided; and
(iii) The proposed value of the contribution is reasonable. In
determining whether the value is reasonable, HUD will generally consider
the amount such contribution would otherwise cost the program.
[58 FR 36526, July 7, 1993, as amended at 60 FR 36018, July 12, 1995; 61
FR 48798, Sept. 16, 1996]
Sec. 572.225 Grant agreements; corrective and remedial actions.
(a) Terms and conditions. After HUD approves an application for a
planning grant or an implementation grant under this part, it will enter
into a grant agreement with the recipient setting forth the amount of
the grant and applicable terms and conditions. The grant agreement will
be effective for purposes of this part and funds may be disbursed under
the Cash and Management Information (C/MI) System, described in
Sec. 572.230, after the grant agreement has been executed by the
authorized official of the recipient and HUD. Among other things, the
grant agreement will provide that the recipient agrees:
(1) To carry out the program in accordance with the provisions of
this part, applicable law, the approved application, and all other
applicable requirements; and
(2) To comply with such other terms and conditions, including
recordkeeping and reports, as HUD may establish for the purposes of
administering, monitoring, and evaluating the program in an effective
and efficient manner.
(b) Corrective and remedial actions. (1) HUD may withhold, withdraw,
or recapture any portion of a grant, terminate the grant agreement, or
take other appropriate action authorized under the grant agreement, if
HUD determines that the recipient is failing to carry out the approved
homeownership program in accordance with the terms of the approved
application and this part, including failure to provide the
contributions toward the match. Corrective or remedial actions that HUD
may instruct the recipient to undertake include;
(i) Preparing and following a schedule of actions or a management
plan for properly completing the approved activities;
(ii) Cancelling or revising the affected activities before expending
grant funds for them, revising the grant budget as necessary, and
substituting other eligible activities;
(iii) Discontinuing draws under the C/MI System, and not incurring
further costs for the affected activities;
(iv) Reimbursing its HOPE 3 program account in the amount not used
in accordance with this part and the grant agreement; and
(v) In the case of implementation grants, making additional matching
contributions in substitution for contributions not in compliance with
this part and the grant agreement or submitting to HUD acceptable
evidence that matching contributions sufficient to meet the total match
required under this part and the grant agreement will be made, before
additional draws are made.
(2) If HUD determines that the recipient is not complying with the
corrective or remedial actions agreed upon with the recipient, or as
otherwise authorized in the grant agreement, HUD may implement the
following additional corrective and remedial actions:
(i) Changing the method of payment under the C/MI System to a
reimbursement basis;
[[Page 188]]
(ii) Suspending the recipient's authority to make draws under the C/
MI System for affected activities;
(iii) Reducing (deobligating) the grant in the amount affected by
the performance deficiency, including, in the case of implementation
grants, failure to furnish matching contributions in the required
amount;
(iv) Terminating the grant for all further activities and initiating
close-out procedures;
(v) Taking action against the recipient under 24 CFR part 24 and
Executive Order 12549 (3 CFR, 1986 Comp., p. 189) with respect to future
HOPE 3, HUD, or Federal grant awards; and
(vi) Taking any other remedial action legally available.
(3) If the amount of grant funds that has been disbursed under the
C/MI System exceeds the amount finally determined by HUD to be
authorized (including any authorized deobligation), the recipient must
repay such excess amount to HUD, and will have no right to reclaim or
reuse such excess amount.
(c) Failure to complete and transfer a property to a homebuyer. If a
property assisted under this part or credited as match is not completed
and transferred to homebuyers as required under this part, whether
voluntarily by the recipient or otherwise, grant expenditures on the
property are considered ineligible, and HOPE 3 funds for acquisition and
rehabilitation must be repaid to the program account. Preliminary costs
(such as architectural and engineering, inspection, and appraisal fees)
expended before acquisition are considered general program expenses and
need not be repaid.
(d) Failure to provide homeownership opportunities under an
implementation grant. Failure to provide at least 70 percent of the
number of homeownership opportunities proposed in the application for an
implementation grant within the timeframe specified in Sec. 572.210(f)
may result in remedial actions, as described in paragraph (b) of this
section, being taken by HUD, including requiring repayment of all or
part of the grant.
Sec. 572.230 Cash and Management Information (C/MI) System.
Disbursement of HOPE 3 grant funds is managed through HUD's Cash and
Management Information (C/MI) System for the HOPE 3 program. Funds that
may be disbursed through the C/MI System include funds awarded to the
recipient and obligated through the grant approval letter issued by HUD.
HOPE 3 funds are drawn down by the recipient or its authorized designee
from a United States Treasury account for the program, using the
Treasury Automated Clearinghouse (ACH) System. Any drawdown of HOPE 3
funds from the United States Treasury account is conditioned upon the
submission of satisfactory information about the program and compliance
with other procedures specified by HUD in HUD's forms and issuances
concerning the C/MI System.
[62 FR 34145, June 24, 1997]
Sec. 572.235 Amendments.
Amendments to the approved program must be documented or approved by
HUD in accordance with instructions provided by HUD.
Subpart D--Selection Process
Sec. 572.300 Notices of funding availability (NOFAs); grant applications.
When funds are made available for planning grants or implementation
grants under this part, HUD will publish a NOFA in the Federal Register,
in accordance with the requirements of part 4 of this title, and will
select applications for funding on a competitive basis as provided in
the applicable NOFA.
[62 FR 34145, June 24, 1997]
Sec. 572.315 Rating criteria for planning grants.
Any planning grants made by HUD under the HOPE 3 program will
continue to be governed by the provisions in this section in effect
immediately before October 16, 1996. When or before HUD announces the
availability of funds for planning grants under this
[[Page 189]]
part, these provisions will be recodified.
[61 FR 48798, Sept. 16, 1996]
Subpart E--Other Federal Requirements
Sec. 572.400 Consolidated plan.
Applicants must provide a certification of consistency with the
approved consolidated plan, in accordance with 24 CFR 91.510.
[60 FR 36018, July 12, 1995]
Sec. 572.405 Nondiscrimination and equal opportunity requirements.
In addition to the nondiscrimination and equal opportunity
requirements set forth in 24 CFR part 5, the following requirements
apply to homeownership programs under this part:
(a) Modification of fair housing and nondiscrimination requirements
for Indian tribes and IHAs. (1) The Indian Civil Rights Act (25 U.S.C.
1301 et seq.) applies to tribes when they exercise their powers of self-
government. Thus, it is applicable in all cases when an IHA has been
established by exercise of such powers. In the case of the IHA
established pursuant to State law, the applicability of the Indian Civil
Rights Act shall be determined on a case-by-case basis. Development
subject to the Indian Civil Rights Act must be developed and operated in
compliance with its provisions and all implementing HUD requirements,
instead of title VI and the Fair Housing Act and their implementing
regulations.
(2) In the case of Indian tribes and IHAs, compliance with the
requirements of this section shall be to the maximum extent consistent,
but not in derogation of, the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 450e(b)).
(b) Affirmative fair housing marketing. The recipient must adopt a
strategy for informing and soliciting applications from people who are
least likely to apply, because of race, color, religion, sex,
disability, familial status, or national origin, for the program without
special outreach, consistent with the affirmative fair housing marketing
requirements. (See 24 CFR 92.351 for an example of an affirmative
strategy.) Paragraph (b) of this section does not apply to Indian tribes
and IHAs, as described in paragraph (a)(1) of this section.
(c) Authority for collection of racial, ethnic, and gender data. HUD
requires submission of racial, ethnic, and gender data under this part
under the authority of section 562 of the Housing and Community
Development Act of 1987 and section 808(e)(6) of the Fair Housing Act.
(d) Requirements applicable to religious organizations. Where the
applicant is, or proposes to contract with, a primarily religious
organization, or a wholly secular organization established by a
primarily religious organization, to provide, manage, or operate housing
under the program, the organization must undertake its responsibilities
under the homeownership program in accordance with the following
principles:
(1) It will not discriminate against any employee or applicant for
employment under the program on the basis of religion and will not limit
employment or give preference in employment to persons on the basis of
religion;
(2) It will not discriminate against any person applying for housing
or other assistance under the program on the basis of religion and will
not limit such assistance or give preference to persons on the basis of
religion;
(3) It will provide no religious instruction or counseling, conduct
no religious services or worship (which term does not include voluntary,
non-denominational prayer before meetings), engage in no religious
proselytizing, and exert no other religious influence in the provision
of assistance under the homeownership program.
[58 FR 36526, July 7, 1993, as amended at 59 FR 33894, June 30, 1994; 61
FR 5209, Feb. 9, 1996]
Sec. 572.410 Environmental procedures and standards.
(a) Planning grants. HUD has determined that its approval of
applications for planning grants under this part is categorically
excluded from environmental review and compliance requirements of the
National Environmental Policy Act of 1969 (NEPA) and that other Federal
environmental laws and
[[Page 190]]
authorities listed in 24 CFR 50.4 are not applicable.
(b) Implementation grants. (1) Recipients of implementation grants
must comply with the applicable environmental laws and authorities at 24
CFR 50.4 and must:
(i) Supply HUD with information necessary for it to perform any
necessary environmental review of the property (or neighborhood);
(ii) Carry out mitigating measures required by HUD or select
alternate eligible property; and
(iii) Not acquire or otherwise carry out program activities with
respect to any eligible property until HUD approval for the property (or
neighborhood) is received.
(2) Before any amounts under this part are used to acquire or
rehabilitate an eligible property, HUD must determine whether the
proposed activities trigger applicability thresholds for the applicable
Federal environmental laws and authorities. These may apply when the
property is:
(i) Located within designated coastal barriers;
(ii) Listed on, or eligible for listing on, the National Register of
Historic Places; or is located within, or adjacent to, an historic
district;
(iii) Located near hazardous operations handling fuels or chemicals
of an explosive or flammable nature;
(iv) Contaminated by toxic chemicals or radioactive materials;
(v) Located within a runway clear zone at a civil airport or within
a clear zone or accident potential zone at a military airfield; or
(vi) Located within a special flood hazard area or within a location
requiring flood insurance protection.
(3) A recipient may choose to make the threshold reviews itself or
with assistance from State or local governments or qualified persons or
to refer the property to HUD for threshold review. Where the recipient
makes the threshold review itself, it must submit the result to HUD.
(4) If a recipient chooses not to make the threshold reviews, it
must submit information to HUD to permit HUD to make the review.
(5) If HUD determines on the basis of the recipient's threshold
review or HUD's threshold review that one or more of the thresholds are
exceeded, HUD will conduct an environmental review of that issue and, if
appropriate, establish mitigating measures that the recipient must carry
out for the property unless it decides to select an alternate property.
Sec. 572.415 Conflict of interest.
(a) Conflict of interest. In addition to the conflict of interest
requirements in OMB Circular A-110 \1\ and 24 CFR part 85, no person who
is an employee, agent, consultant, officer, or elected or appointed
official of the recipient or cooperating entity named in the application
and who exercises or has exercised any functions or responsibilities
with respect to assisted activities, or who is in a position to
participate in a decision-making process or gain inside information with
regard to such activities, may obtain a financial interest or benefit
from the activity, or have an interest in any contract, subcontract, or
agreement with respect thereto, or the proceeds thereunder, either for
himself or herself or for those with whom he or she has family or
business ties, during his or her tenure or for one year thereafter,
except that a resident of an eligible property may acquire an ownership
interest.
---------------------------------------------------------------------------
\1\ See Sec. 572.425(b) concerning availability of OMB Circulars.
---------------------------------------------------------------------------
(b) Exception. HUD may grant an exception to the exclusion in
paragraph (a) of this section on a case-by-case basis when it determines
that such an exception will serve to further the purposes of the HOPE 3
program and the effective and efficient administration of the local
homeownership program. An exception may be considered only after the
applicant or recipient has provided a disclosure of the nature of the
conflict, accompanied by an assurance that there has been public
disclosure of the conflict, a description of how the public disclosure
was made, and an opinion of the applicant's or recipient's attorney that
the interest for which the exception is sought would not violate State
or local law. In determining whether to grant a requested
[[Page 191]]
exception, HUD will consider the cumulative effect of the following
factors, where applicable:
(1) Whether the exception would provide a significant cost benefit
or an essential degree of expertise to the local homeownership program
that would otherwise not be available;
(2) Whether an opportunity was provided for open competitive bidding
or negotiation;
(3) Whether the person affected is a member of a group or class
intended to be the beneficiaries of the activity and the exception will
permit such person to receive generally the same interests or benefits
as are being made available or provided to the group or class;
(4) Whether the affected person has withdrawn from his or her
functions or responsibilities, or the decisionmaking process, with
respect to the specific activity in question;
(5) Whether the interest or benefit was present before the affected
person was in a position as described in paragraph (b) of this section;
(6) Whether undue hardship will result either to the applicant,
recipient, or the person affected when weighed against the public
interest served by avoiding the prohibited conflict; and
(7) Any other relevant considerations.
Sec. 572.420 Miscellaneous requirements.
(a) Application of OMB Circulars. (1) The policies, guidelines, and
requirements of OMB Circular Nos. A-87 (Cost Principles Applicable to
Grants, Contracts and Other Agreements with State and Local Governments)
and 24 CFR part 85 (Administrative Requirements for Grants and
Cooperative Agreements to State, Local and Federally Recognized Indian
Tribal Governments) apply to the award, acceptance, and use of
assistance under this part by applicable entities, and to the remedies
for non-compliance, except where inconsistent with the provisions of
NAHA, other Federal statutes, or this part. Part 84 of this title
(Grants and Agreements with Institutions of Higher Education, Hospitals,
and Other Nonprofit Organizations) and OMB Circular Nos. A-122 (Cost
Principles Applicable to Grants, Contract and Other Agreements with
Nonprofit Institutions) and, as applicable, A-21 (Cost Principles for
Educational Institutions) apply to the acceptance and use of assistance
under this part by covered organizations, except where inconsistent with
the provisions of Federal statutes or this part. Recipients are also
subject to the audit requirements of OMB Circular A-128 (Audits of State
and Local Governments) implemented at 24 CFR part 44, and OMB Circular
A-133 (Audits of Institutions of Higher Learning and Other Nonprofit
Institutions), implemented at 24 CFR part 45, as applicable.
(2) Copies of OMB Circulars may be obtained from E.O.P.
Publications, room 2200, New Executive Office Building, Washington, DC
20503, telephone (202) 395-7332 (this is not a toll-free number). There
is a limit of two free copies.
(b) Requirements in 24 CFR part 5. The Disclosure requirements;
provisions on Debarred, suspended or ineligible contractors; and Drug-
Free Workplace requirements, as identified in Sec. 5.105 (b), (c), and
(d) of this title, apply to this program.
(c)-(d) [Reserved]
(e) Labor standards. If other Federal programs are used in
connection with the HOPE 3 homeownership program, labor standards
requirements apply to the extent required by such other Federal
programs.
(f) Flood insurance. Pursuant to the Flood Disaster Protection Act
of 1973 (42 U.S.C. 4001-4128), the recipient may not provide financial
assistance for acquisition or rehabilitation of properties located in an
area identified by the Federal Emergency Management Agency (FEMA) as
having special flood hazards, unless:
(1) The community in which the area is situated is participating in
the National Flood Insurance program (see 44 CFR parts 59 through 79),
or less than one year has passed since FEMA notification regarding such
hazards; and
(2) Flood insurance is obtained as a condition of the acquisition or
rehabilitation of the property.
(g) Coastal Barrier Resources Act. Pursuant to the Coastal Barrier
Resources Act (16 U.S.C. 3601), HUD will not approve use of properties
in the Coastal Barrier Resources System.
[[Page 192]]
(h) Lead-based paint activities. The Lead-Based Paint Poisoning
Prevention Act (42 U.S.C. 4821-4846), the Residential Lead-Based Paint
Hazard Reduction Act of 1992 (42 U.S.C. 4851-4856), and implementing
regulations at part 35, subparts A, B, J, K and R of this title apply to
activities under these programs.
[58 FR 36526, July 7, 1993, as amended at 59 FR 2738, Jan. 19, 1994; 61
FR 48798, Sept. 16, 1996; 62 FR 34145, June 24, 1997; 64 FR 50226, Sept.
15, 1999]
Sec. 572.425 Recordkeeping and reports; audit of recipients.
(a) General records. Each recipient must keep records that will
facilitate an effective audit to determine compliance with program
requirements and that fully disclose:
(1) The amount and disposition by the recipient of the planning and
implementation grants received under this part, including sufficient
records that document the reasonableness and necessity of each
expenditure;
(2) The amount and disposition of proceeds from financing obtained
in connection with the program, sales to eligible families, and any
funds recaptured upon sale by the homeowner;
(3) The total cost of the homeownership program;
(4) The amount and nature of any other assistance, including cash,
property, services, or other items contributed as a condition of
receiving an implementation grant;
(5) The cost or other value of all in-kind contributions towards the
match required by Sec. 572.220; and
(6) Any other proceeds received for, or otherwise used in connection
with, the homeownership program under this part.
(b) Family size and income; racial, ethnic, and gender data. The
recipient must maintain records on the family size and income, and
racial, ethnic, and gender characteristics of families who apply for
homeownership and families who become homeowners.
(c) Selection procedures. The recipient must maintain a copy of its
procedures for identifying and selecting eligible families in accordance
with Sec. 572.110, and records documenting the eligibility of each
family selected for homeownership.
(d) Rehabilitation standards. The recipient must maintain written
rehabilitation standards required by Sec. 572.100(d)(5).
(e) Cooperative and condominium agreements. The recipient must
maintain a copy of any condominium and cooperative association
agreements for properties under a homeownership program approved under
this part.
(f) Amounts available for reuse. The recipient must keep and make
available to HUD all records necessary to calculate accurately payments
due to HUD under Sec. 572.135(b) and (c).
(g) Access by HUD and the Comptroller General. For purposes of
audit, examination, monitoring, and evaluation, each recipient must give
HUD (including any duly authorized representatives and the Inspector
General) and the Comptroller General of the United States (and any duly
authorized representatives) access to any books, documents, papers, and
records of the recipient that are pertinent to assistance received under
this part, including all records required to be kept under this section.
(h) Reports. The recipient must submit reports required by HUD.
(Approved by the Office of Management and Budget, with respect to
implementation grants, under control number 2506-0128)
PART 573--LOAN GUARANTEE RECOVERY FUND--Table of Contents
Sec.
573.1 Authority and purpose.
573.2 Definitions.
573.3 Eligible activities.
573.4 Loan term.
573.5 Underwriting standards and availability of loan guarantee
assistance.
573.6 Submission requirements.
573.7 Loan guarantee agreement.
573.8 Environmental procedures and standards.
573.9 Other requirements.
573.10 Fees for guaranteed loans.
573.11 Record access and recordkeeping.
Authority: Pub. L. 104-155, 110 Stat. 1392, 18 U.S.C. 241 note; 42
U.S.C. 3535(d).
Source: 61 FR 47405, Sept. 6, 1996, unless otherwise noted.
[[Page 193]]
Sec. 573.1 Authority and purpose.
Section 4 of the Church Arson Prevention Act of 1996 (Pub. L. 104-
155, approved July 3, 1996) authorizes HUD to guarantee loans made by
financial institutions to certain nonprofit organizations to finance
activities designed to remedy the damage and destruction to real and
personal property caused by acts of arson or terrorism. This part
establishes the general procedures and requirements that apply to HUD's
guarantee of these loans.
Sec. 573.2 Definitions.
The following definitions are only applicable to loan guarantees
under this part, and are not criminal definitions.
Act means ``The Church Arson Prevention Act of 1996'' (Pub. L. 104-
155, approved July 3, 1996).
Arson means a fire or explosion causing damage to (or destruction
of) real or personal property that a Qualified Certification Official
determines, or reasonably believes, to be deliberately set.
Borrower means an organization described in section 501(c)(3) of the
Internal Revenue Code of 1986, as amended, whose property has been
damaged or destroyed as a result of an act of arson or terrorism and
that incurs a debt obligation to a financial institution for the purpose
of carrying out activities eligible under his part.
Financial Institution means a lender which may be a bank, trust
company, savings and loan association, credit union, mortgage company,
or other issuer regulated by the Federal Deposit Insurance Corporation,
the Office of Thrift Supervision, the Credit Union Administration, or
the U.S. Comptroller of the Currency. A Financial Institution may also
be a Pension Fund.
Guarantee means an obligation of the United States Government
guaranteeing payment of the outstanding principal loan amount, in whole
or in part, plus interest thereon, on a debt obligation of the Borrower
to a Financial Institution upon failure of the Borrower to repay the
debt.
Guaranteed Loan Funds means funds received by the borrower from the
Financial Institution to finance eligible activities under this part,
the repayment of which is guaranteed by HUD.
Loan Guarantee Agreement means an agreement between a Financial
Institution and the Secretary detailing the rights, responsibilities,
procedures, terms, and conditions under which a loan provided by a
Financial Institution to a Borrower may be guaranteed under section 4 of
the Act.
Qualified Certification Official (QCO)-- (1) For the purpose of
certifying an act of arson. A State or local official authorized to
investigate possible acts of arson. For the purposes of this definition,
such an official is authorized to execute an Official Incident Report or
its equivalent and may be an official or employee of such agencies as
the local fire department, the local police department, or the State
Fire Marshall Office or its equivalent. The term ``Qualified
Certification Official'' also includes HUD, which will consult with the
Bureau of Alcohol, Tobacco, and Firearms of the Department of the
Treasury in making its determinations.
(2) For the purpose of certifying an act of terrorism. The Secretary
or his designee, in consultation with the Federal Bureau of
Investigation, shall determine whether an act of violence is a terrorist
act or is reasonably believed to be a terrorist act.
Section 4 Guaranteed Loan means a HUD guaranteed loan made by a
Financial Institution to a Borrower for the purpose of carrying out
eligible activities to address damage or destruction caused by acts of
arson or terrorism.
Terrorism means an act of violence causing damage to (or destruction
of) real or personal property that the Secretary or his designee, in
consultation with the Federal Bureau of Investigation, determines to be,
or reasonably believes to be, a terrorist act, as defined by applicable
Federal law or guidelines.
Sec. 573.3 Eligible activities.
Guaranteed Loan Funds may be used by a Borrower for the following
activities when it is certified in accordance with Sec. 573.6(e) that
the activity is necessary to address damage caused by an act or acts of
arson or terrorism as certified in accordance with Sec. 573.6(f):
[[Page 194]]
(a) Acquisition of improved or unimproved real property in fee or
under long term lease.
(b) Acquisition and installation of personal property.
(c) Rehabilitation of real property owner, acquired, or leased by
the Borrower.
(d) Construction, reconstruction, or replacement of real property
improvement.
(e) Clearance, demolition, and removal, including movement of
structures to other sites, of buildings, fixtures and improvements on
real property.
(f) Site preparation, including construction, reconstruction, or
installation of site improvements, utilities, or facilities, which is
related to the activities described in paragraph (a), (c), or (d) of
this section.
(g) Architectural, engineering, and similar services necessary to
develop plans in connection with activities financed under paragraph
(a), (b), (c), or (d) of this section.
(h) Acquisition, installation and restoration of security systems.
(i) Loans for refinancing existing indebtedness secured by a
property which has been or will be acquired, constructed, rehabilitated
or reconstructed, if such financing is determined to be appropriate to
achieve the objectives of the Act and this part.
(j) Other necessary project costs such as insurance, bonding, legal
fees, appraisals, surveys, relocation, closing costs, etc., paid or
incurred by the Borrower in connection with the completion of the above
activities.
[61 FR 47405, Sept. 6, 1996, as amended at 62 FR 24574, May 6, 1997]
Sec. 573.4 Loan term.
The term of the loan to be guaranteed by HUD under this part may not
exceed 20 years.
Sec. 573.5 Underwriting standards and availability of loan guarantee assistance.
(a) HUD may, in its discretion, accept the underwriting standards of
the Financial Institution making a loan to a Borrower.
(b) HUD will not make the loan guarantee unless it determines that
the guaranteed loan is an acceptable financial risk under HUD's
generally applicable loan underwriting standards based on the following:
(1) The Borrower's ability to pay debt service; and
(2) The value of the collateral assigned or pledged as security for
the repayment of the loan.
(c) The provision of a loan guarantee to a Financial Institution and
the amount of the guarantee do not depend in any way on the purpose,
function, or identity of the organization to which the Financial
Institution has made, or intends to make, a Section 4 Guaranteed Loan.
(d) HUD may disapprove a request for loan guarantee assistance based
on the availability of funding.
(e) HUD may decline any Financial Institution's participation if its
underwriting criteria are insufficient to make the guarantee an
acceptable financial risk, or if the proposed interest rates or fees are
unacceptable. HUD expects the proposed interest rates to take into
account the value of the Federal guarantee.
(f) HUD may limit the availability of Guaranteed Loan Funds to
geographic areas having the greatest need, as determined by a needs
analysis of the most current available date conducted by HUD.
(g) Other requirements associated with the underwriting standards
and guidelines shall be contained in the Loan Guarantee Agreement.
Sec. 573.6 Submission requirements.
A Financial Institution seeking a Section 4 Guaranteed Loan must
submit to HUD the following documentation:
(a) A statement that the institution is a Financial Institution as
defined at Sec. 573.2.
(b) A statement that the Borrower is eligible as defined at
Sec. 573.2.
(c) A description of each eligible activity for which the loan is
requested.
(d) A statement of other available funds to be used to finance the
eligible activities (e.g., insurance proceeds).
[[Page 195]]
(e) A certification by the Borrower that the activities to be
assisted resulted from an act of arson or terrorism which is the subject
of the certification described in paragraph (f) of this section.
(f) A certification by a QCO that the damage or destruction to be
remedied by the use of the Guaranteed Loan Funds resulted from an act of
arson or terrorism.
(g) The environmental documentation required by Sec. 573.8.
(h) A narrative of the institution's underwriting standards used in
reviewing the Borrower's loan request.
(i) The interest rate on the loan and fees the lender intends to use
in connection with the loan; and
(j) The percentage of the loan for which a guarantee is requested.
Sec. 573.7 Loan guarantee agreement.
(a) The rights and responsibilities with respect to the guaranteed
loan shall be substantially described in an agreement entered into
between the Financial Institution, as the lender, and the Secretary, as
the guarantor, which agreement shall provide that:
(1) The lender has submitted or will submit a request for loan
guarantee assistance that is accompanied by the Borrower's request for a
loan to carry out eligible activities described in Sec. 573.3;
(2) The lender will require the Borrower to execute a promissory
note promising to repay the guaranteed loan in accordance with the terms
thereof;
(3) The lender will require the Borrower to provide collateral
security, to an extent and in a form, acceptable to HUD;
(4) HUD reserves the right to limit loan guarantees to loans
financing the replacement of damaged property with comparable new
property;
(5) The lender will follow certain claim procedures to be specified
by HUD in connection with any defaults, including appropriate
notification of default as required by HUD;
(6) The lender will follow procedures for payment under the
guarantee whereby the lender will be paid (up to the amount of
guarantee) the amount owed to the lender less any amount recovered from
the underlying collateral security for the loan; and
(7) The lender will act as the fiscal agent for the loan, servicing
the guaranteed loan, maintaining loan documents, and receiving the
Borrower's payments of principal and interest. The Borrower and the
lender may be required to execute a fiscal agency agreement.
(b) In addition, the agreement shall contain other requirements,
terms, and conditions required or approved by HUD.
Sec. 573.8 Environmental procedures and standards.
The environmental review requirements at 24 CFR part 50 are
applicable to this part.
(a) Environmental procedures. Before any lender's submission
requesting a loan guarantee for the acquisition, rehabilitation, or
construction of real property can be selected for a loan guarantee, HUD
shall determine whether any environmental thresholds are exceeded in
accordance with 24 CFR part 50, which implements the National
Environmental Policy Act (NEPA) and the related Federal environmental
laws and authorities listed under 24 CFR 50.4. To assist in complying
with environmental requirements, Borrowers are encouraged to select
sites that are free of environmental hazards and are to provide HUD with
environmental data needed to make a determination of compliance. For
successful Borrowers, the costs for preparing the environmental data are
eligible as project costs.
(1) If HUD determines that one or more of the thresholds are
exceeded, HUD shall conduct a compliance review of the issue and, if
appropriate, establish mitigating measures that the applicant shall
carry out for the property.
(2) The lender's submissions under Sec. 573.6 shall provide HUD
with:
(i) Documentation for environmental threshold review; and
(ii) Any previously issued environmental reviews prepared by local,
State, or other Federal agencies for the proposed property.
(3) In providing the above information, the Borrower is encouraged
to
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contact the local community development agency to obtain any previously
issued environmental reviews for the proposed property as well as for
other relevant information that can be used in the applicant
documentation for the environmental threshold review.
(4) HUD reserves the right to disqualify any request where one or
more environmental thresholds are exceeded if HUD determines that the
compliance review cannot be satisfactorily completed.
(5) If Guaranteed Loan Funds are requested for acquisition,
rehabilitation, or construction, Borrowers and Financial Institutions
are prohibited from committing or expending State, local, or other funds
to undertake property acquisition, rehabilitation or construction under
this part until HUD issues a letter of commitment notifying the lender
of HUD approval of the loan guarantee.
(b) Environmental thresholds. HUD shall determine whether a NEPA
environmental assessment is required. Also, HUD shall determine whether
the proposed property triggers thresholds for the applicable Federal
environmental laws and authorities listed under 24 CFR 50.4 as follows:
(1) For minor rehabilitation of a building and acquisition of any
property, Federal environmental laws and authorities may apply when the
property is:
(i) Located within designated coastal barrier resources;
(ii) Contaminated by toxic chemicals or radioactive materials;
(iii) Located within a floodplain;
(iv) A building for which flood insurance protection is required;
(v) Located within a runway clear zone at a civil airport or within
a clear zone or accident potential zone at a military airfield; or
(vi) Listed on, or eligible for listing on, the National Register of
Historic Places; located within, or adjacent to, an historic district,
or is a property whose area of potential effects includes a historic
district or property.
(2) For major rehabilitation of a building or for new construction
or rebuilding, and environmental assessment under NEPA is required and,
in addition to paragraph (b)(1)(i) through (vi) of this section, other
Federal environmental laws and authorities may apply when the property:
(i) Affects coastal zone management;
(ii) Is located near hazardous industrial operations handling fuels
or chemicals of an explosive or flammable nature;
(iii) Affects a sole source aquifer;
(iv) Affects endangered species;
(v) Is located within a designated wetland; or
(vi) Is located in a high noise area.
(c) Qualified data sources. The environmental threshold information
provided by applicants mut be from qualified data sources. A qualified
data source means any Federal, State, or local agency with expertise or
experience in environmental protection (e.g., the local community
development agency; the local planning agency; the State environmental
protection agency; or the State Historic Preservation Officer) or any
other source qualified to provide reliable information on the particular
property.
(d) Definition. Minor rehabilitation means proposed fixing and
repairs:
(1) Whose estimated cost is less than 75 percent of the estimated
cost of replacement after completion;
(2) That does not involve changes in land use from residential to
nonresidential, or from nonresidential to residential; and
(3) In the case of residential properties, that does not increase
density more than 20 percent.
(e) Project consultants. In achieving compliance with these
procedures, Borrower's architectural and engineering consultants shall
consider these environmental factors and provide information in their
plan narratives as to how their construction plans conform with the
above environmental factors. To facilitate HUD's compliance with part
50, the Borrower is required to submit the consultant's information and
plan narrative discussing the pertinent environmental factors under this
section.
Sec. 573.9 Other requirements.
(a) Nondiscrimination and equal opportunity. The nondiscrimination
and equal opportunity requirements described in 24 CFR part 5, subpart A
apply to this part.
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(b) 24 CFR part 84. The provisions of 24 CFR part 84 apply to
guaranteed loans under this part.
(c) Lead-based paint. Housing assisted under this part is subject to
the lead-based paint requirements described in part 35, subparts A, B,
E, G, and R of this title.
(d) Labor standards--(1) Davis-Bacon. All laborers and mechanics
employed by contractors or subcontractors in the performance of
construction work financed in whole or in part with Guaranteed Loan
Funds under this part shall be paid wages at rates not less than those
prevailing on similar construction in the locality as determined by the
Secretary of Labor in accordance with the Davis-Bacon Act, as amended
(40 U.S.C. 276a-276a-5). This paragraph shall apply to the
rehabilitation of residential property only if such property contains
not less than 8 units.
(2) Volunteers. The provisions of paragraph (d)(1) of this section
shall not apply to volunteers under the conditions set forth in 24 CFR
part 70. In applying part 70, loan guarantees under this part shall be
treated as a program for which there is a statutory exemption for
volunteers.
(3) Labor standards. Any contract, subcontract, or building loan
agreement executed for a project subject to Davis-Bacon wage rates under
paragraph (d)(1) of this section shall comply with all labor standards
and provisions of 29 CFR parts 1, 3 and 5 that would be applicable to a
loan guarantee program to which Davis-Bacon wage rates are made
applicable by statute.
[61 FR 47405, Sept. 6, 1996, as amended at 64 FR 50226, Sept. 15, 1999]
Sec. 573.10 Fees for guaranteed loans.
(a) No fees will be assessed by HUD for its guaranty of a loan under
this part.
(b) The lender may assess the Borrower loan origination fees or
other charges provided that such fees and charges are those charged by
the lender to its other customers for similar transactions, and are no
higher than those charged by the lender for similar transactions.
Sec. 573.11 Record access and recordkeeping.
Records pertaining to the loans made by the Financial Institution
shall be held for the life of the loan. A lender with a Section 4
Guaranteed Loan shall allow HUD, the Comptroller General of the United
States, and their authorized representatives access from time to time to
any documents, papers or files which are pertinent to the guaranteed
loan, and to inspect and make copies of such records which relate to any
Section 4 Loan. Any inspection will be made during the lender's regular
business hours or any other mutually convenient time.
PART 574--HOUSING OPPORTUNITIES FOR PERSONS WITH AIDS--Table of Contents
Subpart A--General
Sec.
574.3 Definitions.
Subpart B--Formula Entitlements
574.100 Eligible applicants.
574.110 Overview of formula allocations.
574.120 Responsibility of applicant to serve EMSA.
574.130 Formula allocations.
574.190 Reallocation of grant amounts.
Subpart C--Competitive Grants
574.200 Amounts available for competitive grants.
574.210 Eligible applicants.
574.240 Application requirements.
574.260 Amendments.
Subpart D--Uses of Grant Funds
574.300 Eligible activities.
574.310 General standards for eligible housing activities.
574.320 Additional standards for rental assistance.
574.330 Additional standards for short-term supported housing.
574.340 Additional standards for community residences.
Subpart E--Special Responsibilities of Grantees and Project Sponsors
574.400 Prohibition of substitution of funds.
574.410 Capacity.
574.420 Cooperation.
574.430 Fee prohibitions.
574.440 Confidentiality.
574.450 Financial records.
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Subpart F--Grant Administration
574.500 Responsibility for grant administration.
574.510 Environmental procedures and standards.
574.520 Performance reports.
574.530 Recordkeeping.
574.540 Deobligation of funds.
Subpart G--Other Federal Requirements
574.600 Cross-reference.
574.603 Nondiscrimination and equal opportunity.
574.605 Applicability of OMB circulars.
574.625 Conflict of interest.
574.630 Displacement, relocation and real property acquisition.
574.635 Lead-based paint.
574.640 Flood insurance protection.
574.645 Coastal barriers.
574.650 Audit.
574.655 Wage rates.
Authority: 42 U.S.C. 3535(d) and 12901-12912.
Source: 57 FR 61740, Dec. 28, 1992, unless otherwise noted.
Subpart A--General
Sec. 574.3 Definitions.
The terms Grantee and Secretary are defined in 24 CFR part 5.
Acquired immunodeficiency syndrome (AIDS) or related diseases means
the disease of acquired immunodeficiency syndrome or any conditions
arising from the etiologic agent for acquired immunodeficiency syndrome,
including infection with the human immunodeficiency virus (HIV).
Administrative costs mean costs for general management, oversight,
coordination, evaluation, and reporting on eligible activities. Such
costs do not include costs directly related to carrying out eligible
activities, since those costs are eligible as part of the activity
delivery costs of such activities.
Applicant means a State or city applying for a formula allocation as
described under Sec. 574.100 or a State, unit of general local
government, or a nonprofit organization applying for a competitive grant
as described under Sec. 574.210.
City has the meaning given it in section 102(a) of the Housing and
Community Development Act of 1974 (42 U.S.C. 5302).
Eligible Metropolitan Statistical Area (EMSA) means a metropolitan
statistical area that has a population of more than 500,000 and has more
than 1,500 cumulative cases of AIDS.
Eligible person means a person with acquired immunodeficiency
syndrome or related diseases who is a low-income individual, as defined
in this section, and the person's family. A person with AIDS or related
diseases or a family member regardless of income is eligible to receive
housing information services, as described in Sec. 574.300(b)(1). Any
person living in proximity to a community residence is eligible to
participate in that residence's community outreach and educational
activities regarding AIDS or related diseases, as provided in
Sec. 574.300(b)(9).
Eligible State means a State that has:
(1) More than 1,500 cumulative cases of AIDS in those areas of the
State outside of eligible metropolitan statistical areas that are
eligible to be funded through a qualifying city; and
(2) A consolidated plan prepared, submitted, and approved in
accordance with 24 CFR part 91 that covers the assistance to be provided
under this part. (A State may carry out activities anywhere in the
State, including within an EMSA.)
Family means a household composed of two or more related persons.
The term family also includes one or more eligible persons living with
another person or persons who are determined to be important to their
care or well being, and the surviving member or members of any family
described in this definition who were living in a unit assisted under
the HOPWA program with the person with AIDS at the time of his or her
death.
Low-income individual has the meaning given it in section 853(3) of
the AIDS Housing Opportunity Act (42 U.S.C. 12902).
Metropolitan statistical area has the meaning given it in section
853(5) of the AIDS Housing Opportunity Act (42.U.S.C. 12902).
Nonprofit organization means any nonprofit organization (including a
State or locally chartered, nonprofit organization) that:
(1) Is organized under State or local laws;
[[Page 199]]
(2) Has no part of its net earnings inuring to the benefit of any
member, founder, contributor, or individual;
(3) Has a functioning accounting system that is operated in
accordance with generally accepted accounting principles, or has
designated an entity that will maintain such an accounting system; and
(4) Has among its purposes significant activities related to
providing services or housing to persons with acquired immunodeficiency
syndrome or related diseases.
Non-substantial rehabilitation means rehabilitation that involves
costs that are less than or equal to 75 percent of the value of the
building after rehabilitation.
Population means total resident population based on data compiled by
the U.S. Census and referable to the same point in time.
Project sponsor means any nonprofit organization or governmental
housing agency that receives funds under a contract with the grantee to
carry out eligible activities under this part. The selection of project
sponsors is not subject to the procurement requirements of 24 CFR 85.36.
Qualifying city means a city that is the most populous unit of
general local government in an eligible metropolitan statistical area
(EMSA) and that has a consolidated plan prepared, submitted, and
approved in accordance with 24 CFR part 91 that covers the assistance to
be provided under this part.
Rehabilitation means the improvement or repair of an existing
structure, or an addition to an existing structure that does not
increase the floor area by more than 100 percent.
State has the meaning given it in section 853(9) of the AIDS Housing
Opportunity Act (42 U.S.C. 12902).
Substantial rehabilitation means rehabilitation that involves costs
in excess of 75 percent of the value of the building after
rehabilitation.
Unit of general local government means any city, town, township,
parish, county, village, or other general purpose political subdivision
of a State; Guam, the Northern Mariana Islands, the Virgin Islands,
American Samoa, the Federated States of Micronesia and Palau, the
Marshall Islands, or a general purpose political subdivision thereof;
and any agency or instrumentality thereof that is established pursuant
to legislation and designated by the chief executive to act on behalf of
the jurisdiction with regard to provisions of the National Affordable
Housing Act.
[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994;
60 FR 1917, Jan. 5, 1995; 61 FR 5209, Feb. 9, 1996; 61 FR 7963, Feb. 29,
1996]
Subpart B--Formula Entitlements
Sec. 574.100 Eligible applicants.
(a) Eligible States and qualifying cities, as defined in Sec. 574.3,
qualify for formula allocations under HOPWA.
(b) HUD will notify eligible States and qualifying cities of their
formula eligibility and allocation amounts and EMSA service areas
annually.
[57 FR 61740, Dec. 28, 1992, as amended at 59 FR 17199, Apr. 11, 1994;
60 FR 1917, Jan. 5, 1995]
Sec. 574.110 Overview of formula allocations.
The formula grants are awarded upon submission and approval of a
consolidated plan, pursuant to 24 CFR part 91, that covers the
assistance to be provided under this part. Certain states and cities
that are the most populous unit of general local government in eligible
metropolitan statistical areas will receive formula allocations based on
their State or metropolitan population and proportionate number of cases
of persons with AIDS. They will receive funds under this part (providing
they comply with 24 CFR part 91) for eligible activities that address
the housing needs of persons with AIDS or related diseases and their
families (see Sec. 574.130(b)).
[61 FR 7963, Feb. 29, 1996]
Sec. 574.120 Responsibility of applicant to serve EMSA.
The EMSA's applicant shall serve eligible persons who live anywhere
within the EMSA, except that housing assistance shall be provided only
in localities within the EMSA that have a consolidated plan prepared,
submitted, and approved in accordance with 24 CFR part 91 that covers
the assistance to be
[[Page 200]]
provided under this part. In allocating grant amounts among eligible
activities, the EMSA's applicant shall address needs of eligible persons
who reside within the metropolitan statistical area, including those not
within the jurisdiction of the applicant.
[60 FR 1917, Jan. 5, 1995]
Sec. 574.130 Formula allocations.
(a) Data sources. HUD will allocate funds based on the number of
cases of acquired immunodeficiency syndrome reported to and confirmed by
the Director of the Centers for Disease Control, and on population data
provided by the U.S. Census. The number of cases of acquired
immunodeficiency syndrome used for this purpose shall be the number
reported as of March 31 of the fiscal year immediately preceding the
fiscal year for which the amounts are appropriated and allocated.
(b) Distribution of appropriated funds for entitlement awards. (1)
Seventy-five percent of the funds allocated under the formula is
distributed to qualifying cities and eligible States, as described in
Sec. 574.100, based on each metropolitan statistical area's or State's
proportionate share of the cumulative number of AIDS cases in all
eligible metropolitan statistical areas and eligible States.
(2) The remaining twenty-five percent is allocated among qualifying
cities, but not States, where the per capita incidence of AIDS for the
year, April 1 through March 31, preceding the fiscal year of the
appropriation is higher than the average for all metropolitan
statistical areas with more than 500,000 population. Each qualifying
city's allocation reflects its EMSA's proportionate share of the high
incidence factor among EMSA's with higher than average per capita
incidence of AIDS. The high incidence factor is computed by multiplying
the population of the metropolitan statistical area by the difference
between its twelve-month-per-capita-incidence rate and the average rate
for all metropolitan statistical areas with more than 500,000
population. The EMSA's proportionate share is determined by dividing its
high incidence factor by the sum of the high incidence factors for all
EMSA's with higher than average per capita incidence of AIDS.
(c) Minimum grant. No grant awarded under paragraph (b) of this
section shall be less than $200,000. Therefore, if the calculations
under paragraph (b) of this section would result in any eligible
metropolitan statistical area or eligible State receiving less than
$200,000, the amount allocated to that entity is increased to $200,000
and allocations to entities in excess of $200,000 are proportionately
reduced by the amount of the increase.
Sec. 574.190 Reallocation of grant amounts.
If an eligible State or qualifying city does not submit a
consolidated plan in a timely fashion, in accordance with 24 CFR part
91, that provides for use of its allocation of funding under this part,
the funds allocated to that jurisdiction will be added to the funds
available for formula allocations to other jurisdictions in the current
fiscal year. Any formula funds that become available as a result of
deobligations or the imposition of sanctions as provided for in
Sec. 574.540 will be added to the funds available for formula
allocations in the next fiscal year.
[57 FR 61740, Dec. 28, 1992, as amended at 60 FR 1918, Jan. 5, 1995]
Subpart C--Competitive Grants
Sec. 574.200 Amounts available for competitive grants.
(a) The Department will set aside 10 percent of the amounts
appropriated under this program to fund on a competitive basis:
(1) Special projects of national significance; and
(2) Other projects submitted by States and localities that do not
qualify for formula grants.
(b) Any competitively awarded funds that become available as a
result of deobligations or the imposition of sanctions, as provided in
Sec. 574.540, will be added to the funds available for competitive
grants in the next fiscal year.
(c) The competitive grants are awarded based on applications, as
described in subpart C of this part, submitted in
[[Page 201]]
response to a Notice of Funding Availability published in the Federal
Register. All States and units of general local government and nonprofit
organizations are eligible to apply for competitive grants to fund
projects of national significance. Only those States and units of
general local government that do not qualify for formula allocations are
eligible to apply for competitive grants to fund other projects.
(d) If HUD makes a procedural error in a funding competition that,
when corrected, would warrant funding of an otherwise eligible
application, HUD will select that application for potential funding when
sufficient funds become available.
[57 FR 61740, Dec. 28, 1992, as amended at 61 FR 7963, Feb. 29, 1996]