Allocations, Common Application, Waivers, and Alternative Requirements for Grantees Receiving Community Development Block Grant (CDBG) Disaster Recovery Funds in Response to Hurricane Sandy, 14329-14349 [2013-05170]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 78, Number 43 (Tuesday, March 5, 2013)]
[Notices]
[Pages 14329-14349]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05170]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5696-N-01]


Allocations, Common Application, Waivers, and Alternative 
Requirements for Grantees Receiving Community Development Block Grant 
(CDBG) Disaster Recovery Funds in Response to Hurricane Sandy

AGENCY: Office of the Assistant Secretary for Community Planning and 
Development, HUD.

ACTION: Notice.

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SUMMARY: This Notice advises the public of the initial allocation of 
$5,400,000,000 of Community Development Block Grant disaster recovery 
(CDBG-DR) funds appropriated by the Disaster Relief Appropriations Act, 
2013 (Pub. L. 113-2) for the purpose of assisting recovery in the most 
impacted and distressed areas declared a major disaster due to 
Hurricane Sandy. This Notice describes applicable waivers and 
alternative requirements, relevant statutory provisions for grants 
provided under this Notice, the grant award process, criteria for plan 
approval, and eligible disaster recovery activities.

DATES: Effective Date: March 11, 2013.

FOR FURTHER INFORMATION CONTACT: Stan Gimont, Director, Office of Block 
Grant Assistance, Department of Housing and Urban Development, 451 7th 
Street SW., Room 7286, Washington, DC 20410, telephone number 202-708-
3587. Persons with hearing or speech impairments may access this number 
via TTY by calling the Federal Relay Service at 800-877-8339. Facsimile 
inquiries may be sent to Mr. Gimont at 202-401-2044. (Except for the 
``800'' number, these telephone numbers are not toll-free.) Email 
inquiries may be sent to disaster_recovery@hud.gov.

SUPPLEMENTARY INFORMATION: 

Table of Contents

I. Allocation
II. Use of Funds
III. Timely Expenditure of Funds, and Prevention of Fraud, Abuse, 
and Duplication of Benefits
IV. Authority to Grant Waivers
V. Overview of Grant Process
VI. Applicable Rules, Statutes, Waivers, and Alternative 
Requirements
    A. Grant Administration
    B. Housing and Related-Floodplain Issues
    C. Infrastructure
    D. Economic Revitalization
    E. Certifications and Collection of Information
VII. Duration of Funding
VIII. Catalog of Federal Domestic Assistance
IX. Finding of No Significant Impact

    Appendix A: Allocation Methodology

I. Allocation

    The Disaster Relief Appropriations Act, 2013 (Pub. L. 113-2, 
approved January 29, 2013)(Appropriations Act) makes available 
$16,000,000,000 in Community Development Block Grant (CDBG) funds for 
necessary expenses related to disaster relief, long-term recovery, 
restoration of infrastructure and housing, and economic revitalization 
in the most impacted and distressed areas resulting from a major 
disaster declared pursuant to the Robert T. Stafford Disaster Relief 
and Emergency Assistance Act of 1974 (42 U.S.C. 5121 et seq.) (Stafford 
Act), due to Hurricane Sandy and other eligible events in calendar 
years 2011, 2012, and 2013. The law provides that funds shall be 
awarded directly to a State or unit of general local government (UGLG) 
(hereafter local government) at the discretion of the Secretary. Unless 
noted otherwise, the term ``grantee'' refers to any jurisdiction 
receiving a direct award under from HUD under this Notice.
    To comply with statutory direction that funds be used for disaster-
related expenses in the most impacted and distressed areas, HUD 
computes allocations based on the best available data that cover all 
the eligible affected areas. This Notice allocates funds based on unmet 
housing and economic revitalization needs, but not infrastructure 
restoration needs as FEMA damage estimates are very preliminary as of 
the date of this Notice.
    Based on a review of the impacts from Hurricane Sandy, and 
estimates of unmet need calculated by the Department, this Notice 
provides the following Round 1 awards:

[[Page 14330]]



                               Table 1--Round 1 Allocations Under Public Law 113-2
----------------------------------------------------------------------------------------------------------------
           FEMA Disaster No.                        State                     Grantee              Allocation
----------------------------------------------------------------------------------------------------------------
4085...................................  New York..................  New York City............    $1,772,820,000
4085...................................  New York..................  New York State...........     1,713,960,000
4086...................................  New Jersey................  New Jersey...............     1,829,520,000
4087...................................  Connecticut...............  Connecticut..............        71,820,000
4089...................................  Rhode Island..............  Rhode Island.............         3,240,000
4091...................................  Maryland..................  Maryland.................         8,640,000
                                                                                               -----------------
    Total..............................  ..........................  .........................     5,400,000,000
----------------------------------------------------------------------------------------------------------------

    Table 2 shows the ``most impacted and distressed'' counties 
impacted by Hurricane Sandy. While these funds may also be used by 
states to address remaining unmet needs in declared counties impacted 
by Hurricane Irene and Tropical Storm Lee in 2011, at least 80 percent 
of the funds provided under this Notice must address unmet needs within 
the ``most impacted and distressed'' counties identified in Table 2.

                Table 2--Most Impacted and Distressed Counties Within Which Funds May Be Expended
----------------------------------------------------------------------------------------------------------------
                                                                                                 Minimum amount
                                                                                                  that must be
                                                                                                   expended in
             Grantee              Counties within which CDBG-DR   Most impacted and distressed    most impacted
                                      funds may be expended                 counties             and distressed
                                                                                                    counties
                                                                                                    (percent)
----------------------------------------------------------------------------------------------------------------
New York City...................  All Counties.................  All Counties.................               100
New York........................  Nassau, Suffolk, Rockland,     Nassau, Suffolk, Rockland....                80
                                   Westchester, Ulster, Orange,
                                   Putnam, Sullivan, Schoharie,
                                   Tioga, Broome, Greene, and
                                   all Counties in New York
                                   City.
New Jersey......................  All Counties.................  Ocean, Monmouth, Atlantic,                   80
                                                                  Hudson, Bergen, Middlesex,
                                                                  Cape May, Union, Essex.
Connecticut.....................  Fairfield, Mashantucket        Fairfield, New Haven.........                80
                                   Pequot Indian Reservation,
                                   Middlesex, New Haven, New
                                   London.
Rhode Island....................  Washington, Newport..........  Washington...................                80
Maryland........................  Somerset.....................  Somerset.....................               100
----------------------------------------------------------------------------------------------------------------

    In addition to the funds allocated in this Notice, and in 
accordance with the Appropriations Act, $10,000,000 will be transferred 
to the Department's Office of Community Planning and Development (CPD), 
Program Office Salaries and Expenses, for necessary costs, including 
information technology costs, of administering and overseeing CDBG-DR 
funds made available under the Appropriations Act; $10,000,000 will 
also be transferred to the Office of the Inspector General for 
necessary costs of overseeing and auditing CDBG-DR funds made available 
under the Appropriations Act.
    A detailed explanation of HUD's allocation methodology is provided 
at Appendix A. As more detailed and complete damage assessments become 
available, HUD will conduct an additional review of unmet long-term 
disaster recovery needs. This review will inform a second allocation of 
funds to address the effects of Hurricane Sandy. A forthcoming 
allocation will address other qualifying disasters that occurred in 
2011 or 2012. The Department will establish, at a future date, a policy 
to address qualifying events in 2013.
    Each grantee receiving an allocation under this Notice must submit 
an initial Action Plan for Disaster Recovery no later than 90 days 
after the effective date of this Notice. However, grantees are 
encouraged to submit their Action Plans as soon as possible. HUD will 
only approve Action Plans that meet the specific criteria identified in 
this Notice. For more information on the Action Plan requirements, see 
paragraph A.1 under section VI of this Notice: ``Applicable Rules, 
Statutes, Waivers, and Alternative Requirements.''

II. Use of Funds

    The Appropriations Act requires funds to be used only for specific 
disaster-related purposes. The law also requires that prior to the 
obligation of funds, a grantee shall submit a plan detailing the 
proposed use of funds, including criteria for eligibility and how the 
use of these funds will address disaster relief, long-term recovery, 
restoration of infrastructure and housing and economic revitalization 
in the most impacted and distressed areas. Thus, in an Action Plan for 
Disaster Recovery, grantees must describe uses and activities that: (1) 
are authorized under title I of the Housing and Community Development 
Act of 1974 (42 U.S.C. 5301 et seq.) (HCD Act) or allowed by a waiver 
or alternative requirement published in this Notice; and (2) respond to 
a disaster-related impact. To help meet these requirements, grantees 
must conduct an assessment of community impacts and unmet needs to 
guide the development and prioritization of planned recovery 
activities. For more guidance on the needs assessment and the creation 
of the Action Plan, see paragraph A.1 under section VI of this Notice.
    Additionally, as provided by the HCD Act, funds may be used as a 
matching requirement, share, or contribution for any other Federal 
program when used to carry out an eligible CDBG-DR activity. This 
includes programs or activities administered by the Federal Emergency 
Management Agency (FEMA) or the U.S. Army Corps of Engineers (USACE).

[[Page 14331]]

III. Timely Expenditure of Funds and Prevention of Waste, Fraud, Abuse, 
and Duplication of Benefits

    To ensure the timely expenditure of funds, section 904(c) under 
Title IX of the Appropriations Act requires that all funds be expended 
within two years of the date HUD obligates funds to a grantee (funds 
are obligated to a grantee upon HUD's signing of the grantee's CDBG-DR 
grant agreement). Action Plans must demonstrate how funds will be fully 
expended within two years of obligation. For any funds that the grantee 
believes will not be expended by the deadline, it must submit a letter 
to HUD justifying why it is necessary to extend the deadline for a 
specific portion of funds. The letter must detail the compelling legal, 
policy, or operational challenges for any such waiver, and must also 
identify the date by when the specified portion of funds will be 
expended. HUD will forward the request to the Office of Management and 
Budget (OMB) and publish any approved waivers in the Federal Register 
once granted. Waivers to extend the expenditure deadline may be granted 
by OMB in accordance with guidance to be issued by OMB, but grantees 
are cautioned that such waivers may not be approved. Funds remaining in 
the grantee's line of credit at the time of its expenditure deadline 
will be returned to the U.S. Treasury, or if before September 30, 2017, 
will be recaptured by HUD. The Appropriations Act requires that HUD 
obligate all funds not later than September 30, 2017. Grantees must 
continue to meet the requirements for Federal cash management at 24 CFR 
85.20(a)(7).
    In addition to the above, the Appropriations Act requires the 
Secretary to certify, in advance of signing a grant agreement, that the 
grantee has in place proficient financial controls and procurement 
processes and has established adequate procedures to prevent any 
duplication of benefits as defined by section 312 of the Stafford Act, 
ensure timely expenditure of funds, maintain comprehensive Web sites 
regarding all disaster recovery activities assisted with these funds, 
and detect and prevent waste, fraud, and abuse of funds. Departmental 
guidance to assist in preventing a duplication of benefits is provided 
in a notice published in the Federal Register at 76 FR 71060 (November 
16, 2011) and in paragraph A.21 under section VI of this Notice. To 
provide a basis for the Secretary to make the certification, each 
grantee must submit documentation to the Department demonstrating its 
compliance with the above requirements. For a complete listing of the 
required documentation, see paragraph A.1.i under section VI of this 
Notice.
    Additionally, this Notice requires grantees to submit to the 
Department a projection of expenditures and outcomes to ensure funds 
are expended in a timely manner. The projections must be based on each 
quarter's expected performance--beginning the quarter funds are 
available to the grantee and continuing each quarter until all funds 
are expended. Each grantee must amend its Action Plan to include these 
projections within 90 days of Action Plan approval. Action Plans must 
also be amended to reflect any subsequent changes, updates, or revision 
of the projections. Amending Action Plans to accommodate these changes 
is not considered to be a substantial amendment. Guidance on the 
preparation of projections is available on HUD's Web site under the 
Office of Community Planning and Development, Disaster Recovery 
Assistance (herein also referred to as the CPD Disaster Recovery Web 
site). This will enable HUD, the public, and the grantee, to track 
proposed versus actual performance. For more information on the 
projection requirements, see paragraph A.1.l under section VI of this 
Notice.
    Grantees are also required to ensure all contracts (with 
subrecipients, recipients, and contractors) clearly stipulate the 
period of performance or the date of completion. In addition, grantees 
must enter expected completion dates for each activity in HUD's 
Disaster Recovery Grant Reporting (DRGR) system. When target dates are 
not met, grantees are required to explain why in the activity 
narrative. For additional guidance on DRGR system reporting 
requirements, see paragraph A.2 under section VI of this Notice. More 
information on the timely expenditure of funds is included in 
paragraphs A.24-27 under section VI of this Notice.
    Other reporting, procedural, and monitoring requirements are 
discussed under ``Grant Administration'' in section VI of this Notice. 
The Department will institute risk analysis and on-site monitoring of 
grantee management as well as collaborate with the HUD Office of 
Inspector General to plan and implement oversight of these funds.

IV. Authority To Grant Waivers

    The Appropriations Act authorizes the Secretary to waive, or 
specify alternative requirements for, any provision of any statute or 
regulation that the Secretary administers in connection with the 
obligation by the Secretary or the use by the recipient of these funds 
(except for requirements related to fair housing, nondiscrimination, 
labor standards, and the environment). Waivers and alternative 
requirements are based upon a determination by the Secretary that good 
cause exists and that the waiver or alternative requirement is not 
inconsistent with the overall purposes of title I of the HCD Act. 
Regulatory waiver authority is also provided by 24 CFR 5.110, 91.600, 
and 570.5.

V. Overview of Grant Process

    To begin expenditure of CDBG-DR funds, the following expedited 
steps are necessary:
     Grantee adopts citizen participation plan for disaster 
recovery in accordance with the requirements of this Notice;
     Grantee consults with stakeholders, including required 
consultation with affected, local governments and public housing 
authorities (as identified in section VI of this Notice);
     Within 30 days of the effective date of this Notice (or 
when the grantee submits its Action Plan, whichever is sooner), grantee 
submits evidence that it has in place proficient financial controls and 
procurement processes and has established adequate procedures to 
prevent any duplication of benefits as defined by section 312 of the 
Stafford Act, ensure timely expenditure of funds, maintain 
comprehensive Web sites regarding all disaster recovery activities 
assisted with these funds, and detect and prevent waste, fraud, and 
abuse of funds;
     Grantee publishes its Action Plan for Disaster Recovery on 
the grantee's official web site for no less than 7 calendar days to 
solicit public comment;
     Grantee responds to public comment and submits its Action 
Plan (which includes Standard Form 424 (SF-424) and certifications) to 
HUD no later than 90 days after the effective date of this Notice;
     HUD expedites review of Action Plan (allotted 45 days from 
date of receipt; however, completion of review is anticipated much 
sooner) and approves the Plan according to criteria identified in this 
Notice;
     HUD sends an Action Plan approval letter, grant 
conditions, and signed grant agreement to the grantee. If the Action 
Plan is not approved, a letter will be sent identifying its 
deficiencies; the grantee must then re-submit the Action Plan within 45 
days of the notification letter;

[[Page 14332]]

     Grantee ensures that the HUD-approved Action Plan is 
posted on its official Web site;
     Grantee signs and returns the fully executed grant 
agreement;
     HUD establishes the proper amount in a line of credit for 
the grantee;
     Grantee requests and receives DRGR system access (if the 
grantee does not already have it);
     If it has not already done so, grantee enters the 
activities from its published Action Plan into DRGR and submits it to 
HUD within the system (funds can be drawn from the line of credit only 
for activities that are established in DRGR);
     The grantee may draw down funds from the line of credit 
after the Responsible Entity completes applicable environmental 
review(s) pursuant to 24 CFR part 58 (or paragraph A.20 under section 
VI of this Notice) and, as applicable, receives from HUD or the State 
an approved Request for Release of Funds and certification;
     Grantee begins to draw down funds within 60 days of 
receiving access to its line of credit;
     Grantee amends its published Action Plan to include its 
projection of expenditures and outcomes within 90 days of the Action 
Plan approval; and
     Grantee updates its full consolidated plan to reflect 
disaster-related needs no later than its Fiscal Year 2015 consolidated 
plan update.

VI. Applicable Rules, Statutes, Waivers, and Alternative Requirements

    This section of the Notice describes requirements imposed by the 
Appropriations Act, as well as applicable waivers and alternative 
requirements. For each waiver and alternative requirement described in 
this Notice, the Secretary has determined that good cause exists and 
the action is not inconsistent with the overall purpose of the HCD Act. 
The waivers and alternative requirements provide additional flexibility 
in program design and implementation to support full and swift recovery 
following Hurricane Sandy, while also ensuring that statutory 
requirements unique to this appropriation are met. As a result, the 
following requirements apply only to the CDBG-DR funds appropriated in 
the Appropriations Act, and not to funds provided under the annual 
formula State or Entitlement CDBG programs, or those provided under any 
other component of the CDBG program, such as the Section 108 Loan 
Guarantee Program, the Neighborhood Stabilization Program, or any prior 
CDBG-DR appropriation.
    Grantees may request additional waivers and alternative 
requirements from the Department as needed to address specific needs 
related to their recovery activities. Except where noted, waivers and 
alternative requirements described below apply to all grantees under 
this Notice. Under the requirements of the Appropriations Act, 
regulatory waivers must be published in the Federal Register no later 
than five days before the effective date of such waiver.
    Except as described in this Notice, statutory and regulatory 
provisions governing the State CDBG program shall apply to any State 
receiving an allocation under this Notice while statutory and 
regulatory provisions governing the Entitlement CDBG program shall 
apply to New York City. Applicable statutory provisions can be found at 
42 U.S.C. 5301 et seq. Applicable State and Entitlement regulations can 
be found at 24 CFR part 570.
    References to the Action Plan in these regulations shall refer to 
the Action Plan required by this Notice. All references in this Notice 
pertaining to timelines and/or deadlines are in terms of calendar days 
unless otherwise noted. The date of this Notice shall mean the 
effective date of this Notice unless otherwise noted. All references to 
``substantial damage'' and ``substantial improvement'' shall be as 
defined in 44 CFR 59.1 unless otherwise noted.

A. Grant Administration.

    1. Action Plan for Disaster Recovery waiver and alternative 
requirement. The requirements for CDBG actions plans, located at 42 
U.S.C. 12705(a)(2), 42 U.S.C. 5304(a)(1), 42 U.S.C. 5304(m), 42 U.S.C. 
5306(d)(2)(C)(iii), 24 CFR 91.220, and 91.320 are waived for funds 
provided under the Appropriations Act. Instead, each grantee must 
submit to HUD an Action Plan for Disaster Recovery. This streamlined 
Plan will allow grantees to more quickly and effectively implement 
disaster recovery programs while conforming to statutory requirements. 
During the course of the grant, HUD will monitor the grantee's actions 
and use of funds for consistency with the Plan, and meeting the 
performance and timeliness objectives therein. Per the Appropriations 
Act, and in addition to the requirements at 24 CFR 91.500, the 
Secretary may disapprove an Action Plan if it is determined that the 
Plan does not satisfy all of the required elements identified in this 
Notice.
    a. Action Plan. The Action Plan must identify the proposed use(s) 
of the grantee's allocation, including criteria for eligibility, and 
how the uses address long-term recovery needs. To develop and submit an 
acceptable Action Plan in a timely manner, a grantee may elect to 
program or budget only a portion of the grantee's CDBG-DR award in an 
Action Plan. Funds dedicated for uses not described in accordance with 
paragraphs b (applicable to State grantees) or c (applicable to UGLG 
grantees) under this section will not be obligated until the grantee 
submits, and HUD approves, an Action Plan amendment programming the use 
of those funds at the necessary level of detail. Although a grantee may 
submit a partial Action Plan, the partial Action Plan must be amended 
one or more times until it describes uses for 100 percent of the 
grantee's CDBG-DR award, subject to the limitations that HUD may not 
obligate Appropriations Act funds after September 30, 2017 and the last 
date that grantees may submit an amendment is June 1, 2017. The 
requirement to expend funds within two years of the date of obligation 
will be enforced relative to the activities funded under each 
obligation, as applicable.
    The Action Plan must contain:
    (1) An impact and unmet needs assessment. Each grantee must develop 
a needs assessment to understand the type and location of community 
needs to enable it to target limited resources to areas with the 
greatest need. At a minimum, the needs assessment must evaluate three 
core aspects of recovery--housing, infrastructure, and the economy 
(e.g., estimated job losses). The assessment of emergency shelter needs 
and housing needs must address interim and permanent; owner and rental; 
single family and multifamily; public, HUD-assisted, affordable, and 
market rate. For purposes of this Notice, HUD-Assisted Multifamily 
Housing is defined as housing that: (1)(a) is part of a multifamily 
housing property (defined as five units or more), and (b) assisted by 
FHA insurance; or (2)(a) Housing that receives project-based rental 
assistance under HUDs' section 202, 811 or Section 8 programs; or (b) 
receives other HUD project-based rental assistance (e.g., Rent 
Supplement contracts, Rental Assistance Payments (RAP) contract 
Interest Reduction Payments (IRP) Agreements; or (3) properties that 
have active Deed Restrictions and/or a Use Agreement as a result of 
past HUD assistance.
    The assessment must also take into account the various forms of 
assistance available to, or likely to be available to, affected 
communities and individuals (including estimated insurance and eligible 
FEMA, SBA, or other Federal assistance) to identify disaster recovery 
needs that are not likely to be addressed by other sources of funds. 
Grantees must

[[Page 14333]]

use the best, most recent available data (e.g., from FEMA and SBA), 
cite data sources, and estimate the portion of need likely to be 
addressed by insurance proceeds, other Federal assistance, or any other 
funding source.
    Impacts must be described by type at the lowest geographic level 
practicable (e.g., city/county level or lower if available). For 
example, most needs estimates will have a count of businesses, 
homeowners, and renters that are likely to have difficulty recovering 
within a neighborhood and community. Grantees must pay special 
attention to neighborhoods with high percentages of damaged homes and 
provide a demographic analysis (e.g., race, ethnicity, disability, age, 
tenure, income, home value, structure type) in those neighborhoods to 
identify any special needs that will need to be addressed. The needs 
assessment must also identify the types of businesses (including the 
North American Industry Classification System code, the standard used 
by Federal statistical agencies in classifying business establishments 
and available at www.census.gov/eos/www/naics/) most impacted with a 
description of their likely barriers to recovery. In addition, a needs 
assessment must take into account the costs of incorporating mitigation 
and resiliency measures to protect against future hazards. Examples of 
disaster recovery needs assessments can be found on the CPD Disaster 
Recovery Web site.
    Grantees may obtain data on impacts and assistance provided that 
can be used to (a) Support identifying individuals likely to need 
recovery assistance; (b) prevent duplication of benefits risk at time 
of program design; and (c) assist grantees with their unmet needs 
assessment by contacting Juan Gil (FEMA) via email at 
juan.gil@fema.dhs.gov or by calling (940) 898-5141 and Frank Adinolfe 
(SBA) via email at frank.adinolfe@sba.gov or by calling (202) 205-6734. 
HUD will also provide grantees with neighborhood level aggregate data 
to assist with planning.
    Disaster recovery needs evolve over time as the full impact of a 
disaster is realized and costs of damages transition from estimated to 
actual. Remaining recovery needs also evolve over time as they are met 
by dedicated resources. As a result, the needs assessment and Action 
Plan must be amended as conditions change and additional needs are 
identified. CDBG-DR funds may be used to reimburse the costs of 
conducting the needs assessment.
    (2) A description of the connection between identified unmet needs 
and the allocation of CDBG-DR resources by the grantee. Such 
description must demonstrate a proportionate allocation of resources 
relative to areas and categories (i.e., housing, economic 
revitalization, infrastructure) of greatest needs;
    (3) A description of how the grantee will promote (a) sound, 
sustainable long-term recovery planning informed by a post-disaster 
evaluation of hazard risk, especially land-use decisions that reflect 
responsible flood plain management and take into account possible sea 
level rise (for example, by using the new FEMA floodplain maps and 
designs applying the new Advisory Based Flood Elevations (ABFE) or 
higher), and (b) how it will coordinate with other local and regional 
planning efforts to ensure consistency;
    (4) A description of how the grantee will leverage CDBG-DR funds 
with funding provided by other Federal, state, local, private, and non-
profit sources to generate a more effective and comprehensive recovery. 
Examples of other Federal sources are those provided by HUD, FEMA 
(specifically the Public Assistance Program, Individual Assistance 
Program, and Hazard Mitigation Grant Program), SBA (specifically the 
Disaster Loans program), U.S. Department of Transportation, USACE, U.S. 
Environmental Protection Agency, and the U.S. Department of Health and 
Human Services. The grantee must maximize leveraging of CDBG-DR funds 
for the entire recovery. Leveraged funds shall be identified for each 
activity, as applicable, in the DRGR system;
    (5) A description of how the grantee's programs or activities will 
attempt to protect people and property from harm, and how the grantee 
will encourage construction methods that emphasize high quality, 
durability, energy efficiency, a healthy indoor environment, 
sustainability, and water or mold resistance, including how it will 
support adoption and enforcement of modern building codes and 
mitigation of hazard risk, including possible sea level rise, storm 
surge, and flooding, where appropriate. All rehabilitation, 
reconstruction, and new construction should be designed to incorporate 
principles of sustainability, including water and energy efficiency, 
resilience and mitigating the impact of future disasters. Whenever 
feasible, grantees should follow best practices such as those provided 
by the U.S. Department of Energy Home Energy Professionals: 
Professional Certifications and Standard Work Specifications.
    To foster the rebuilding of more resilient neighborhoods and 
communities, HUD strongly encourages grantees to consider sustainable 
rebuilding scenarios such as the use of different development patterns, 
infill development and its reuse, alternative neighborhood designs, and 
the use of green infrastructure. The Partnership for Sustainable 
Communities is an interagency partnership between HUD, the Department 
of Transportation, and the Environmental Protection Agency. The 
Partnership for Sustainable Communities' six Livability Principles 
should serve as a guide to grantees working in areas that were 
substantially destroyed. When grantees seek to rebuild such areas, 
grantees should describe how they will consider sustainable urban 
design and construction in their redevelopment planning process. The 
Livability Principles can be found at the Partnership for Sustainable 
Communities' Web site www.sustainablecommunities.gov.
    At a minimum, HUD is requiring the following construction 
standards:
    (a) Green Building Standard for Replacement and New Construction of 
Residential Housing. Grantees must meet the Green Building Standard in 
this subparagraph for: (i) all new construction of residential 
buildings; and (ii) all replacement of substantially-damaged 
residential buildings. Replacement of residential buildings may include 
reconstruction (i.e., demolishing and re-building a housing unit on the 
same lot in substantially the same manner) and may include changes to 
structural elements such as flooring systems, columns or load bearing 
interior or exterior walls.
    (b) For purposes of this Notice, the Green Building Standard means 
the grantee will require that all construction covered by subparagraph 
(a), above, meet an industry-recognized standard that has achieved 
certification under at least one of the following programs: (i) ENERGY 
STAR (Certified Homes or Multifamily High Rise); (ii) Enterprise Green 
Communities; (iii) LEED (NC, Homes, Midrise, Existing Buildings O&M, or 
Neighborhood Development); (iv) ICC-700 National Green Building 
Standard; (v) EPA Indoor AirPlus (ENERGY STAR a prerequisite); or (vi) 
any other equivalent comprehensive green building program, including 
regional programs such as those operated by the New York State Energy 
Research and Development Authority or the New Jersey Clean Energy 
Program.
    (c) Standards for rehabilitation of non-substantially-damaged 
residential buildings. For rehabilitation other than

[[Page 14334]]

that described in subparagraph (a), above, grantees must follow the 
guidelines specified in the HUD CPD Green Building Retrofit Checklist, 
available on the CPD Disaster Recovery Web site. Grantees must apply 
these guidelines to the extent applicable to the rehabilitation work 
undertaken, including the use of mold resistant products when replacing 
surfaces such as drywall. When older or obsolete products are replaced 
as part of the rehabilitation work, rehabilitation is required to use 
ENERGY STAR-labeled, WaterSense-labeled, or Federal Energy Management 
Program (FEMP)-designated products and appliances. For example, if the 
furnace, air conditioner, windows, and appliances are replaced, the 
replacements must be ENERGY STAR-labeled or FEMP-designated products; 
WaterSense-labeled products (e.g., faucets, toilets, showerheads) must 
be used when water products are replaced. Rehabilitated housing may 
also implement measures recommended in a Physical Condition Assessment 
(PCA) or Green Physical Needs Assessment (GPNA).
    (d) Implementation: (i) For construction projects completed, under 
construction, or under contract prior to the date that assistance is 
approved for the project, the grantee is encouraged to apply the 
applicable standards to the extent feasible, but the Green Building 
Standard is not required; (ii) for specific required equipment or 
materials for which an ENERGY STAR- or Water-Sense-labeled or FEMP-
designated product does not exist, the requirement to use such products 
does not apply.
    (e) HUD encourages grantees to implement green infrastructure 
policies to the extent practicable. Additional tools for green 
infrastructure are available at the Environmental Protection Agency's 
water Web site; Indoor AirPlus Web site; Healthy Indoor Environment 
Protocols for Home Energy Upgrades Web site; and ENERGY STAR Web site: 
www.epa.gov/greenbuilding.
    (6) A description of how the grantee will identify and address the 
rehabilitation (as defined at 24 CFR 570.202), reconstruction, and 
replacement of the following types of housing affected by the disaster: 
public housing (including administrative offices), HUD-assisted housing 
(defined at subparagraph (1), above), McKinney-Vento funded shelters 
and housing for the homeless--including emergency shelters and 
transitional and permanent housing for the homeless, and private market 
units receiving project-based assistance or with tenants that 
participate in the Section 8 Housing Choice Voucher Program. As part of 
this requirement, the grantee must identify how it will address the 
rehabilitation, mitigation, and new construction needs of each impacted 
Public Housing Authority (PHA) within its jurisdiction. The grantee 
must work directly with the PHA in identifying necessary costs and 
ensure that adequate funding is dedicated to addressing the unmet needs 
of damaged public housing. In its Action Plan, each grantee must set 
aside funding to specifically address the needs described in this 
subparagraph; Grantees are reminded that public housing is eligible for 
FEMA Public Assistance and must ensure that there is no duplication of 
benefits when using CDBG-DR funds to assist public housing. Information 
on the public housing agencies impacted by the disaster is available on 
the Department's Web site;
    (7) A description of how the grantee will encourage the provision 
of housing for all income groups that is disaster-resistant, including 
a description of the activities it plans to undertake to address: (a) 
The transitional housing, permanent supportive housing, and permanent 
housing needs of individuals and families (including subpopulations) 
that are homeless and at-risk of homelessness; (b) the prevention of 
low-income individuals and families with children (especially those 
with incomes below 30 percent of the area median) from becoming 
homeless, and (c) the special needs of persons who are not homeless but 
require supportive housing (e.g., elderly, persons with disabilities, 
persons with alcohol or other drug addiction, persons with HIV/AIDS and 
their families, and public housing residents, as identified in 24 CFR 
91.315(e) or 91.215(e) as applicable). Grantees must also assess how 
planning decisions may affect racial, ethnic, and low-income 
concentrations, and ways to promote the availability of affordable 
housing in low-poverty, non-minority areas where appropriate and in 
response to disaster-related impacts.
    (8) A description of how the grantee plans to minimize displacement 
of persons or entities, and assist any persons or entities displaced;
    (9) A description of how the grantee will manage program income 
(e.g., whether subrecipients may retain it), and the purpose(s) for 
which it may be used. Waivers and alternative requirements related to 
program income can be found in this Notice at paragraphs A.2 and A.17 
of section VI;
    (10) A description of monitoring standards and procedures that are 
sufficient to ensure program requirements, including nonduplication of 
benefits, are met and that provide for continual quality assurance and 
investigation. Some of this information may be adopted from the 
grantee's submission of information that is required for the 
Department's certification (see paragraph A.1.i, below; guidance on the 
prevention of duplication of benefits is available at paragraph A.21 of 
section VI). However, a grantee may need to include additional details 
to fully inform the public of the grantee's standards and procedures. 
Grantees must also describe their required internal audit function with 
an organizational diagram showing that responsible audit staff report 
independently to the chief officer or board of the organization 
designated to administer the CDBG-DR award (typically, the organization 
is designated by a chief elected official);
    (11) A description of the mechanisms and/or procedures that are in 
place or will be put into place to detect and prevent fraud, abuse, and 
mismanagement of funds (including potential conflicts of interest);
    (12) A description demonstrating the adequacy of the grantee's 
capacity, and the capacity of any UGLG or other organization expected 
to carry out disaster recovery programs (this assessment shall include 
a description of how the grantee will provide for increasing the 
capacity of UGLGs or other organizations, as needed and where capacity 
deficiencies (e.g., outstanding Office of Inspector General audit 
findings) have been identified. Grantees are responsible for providing 
adequate technical assistance to subrecipients or subgrantees to ensure 
the timely, compliant, and effective use of funds. Although UGLGs or 
other organizations may carry out disaster recovery programs and 
projects, each grantee under this Notice remains legally and 
financially accountable for the use of all funds and may not delegate 
or contract to any other party any inherently governmental 
responsibilities related to management of the funds, such as oversight 
(also see paragraph A.10 under section VI), policy development, and 
financial management;
    b. Funds awarded to a State. A State's Action Plan, or partial 
Action Plan, shall describe the specific programs or activities the 
State will carry out directly, and/or how it will distribute funds to 
UGLGs (i.e., its method of distribution). Each Plan must also describe 
how the State's needs assessment informs the allocation(s) identified 
in the Plan, and how unmet needs that have been identified but not

[[Page 14335]]

yet addressed will be addressed in a subsequent amendment to the Plan.
    In addition, for each program or activity that will be carried out 
by the State, the Action Plan or partial Action Plan must describe: (1) 
The projected use of the CDBG-DR funds, including the entity 
administering the program/activity, budget, and geographic area; (2) 
the threshold factors or applicant eligibility criteria, grant size 
limits, and proposed start and end dates; (3) how the projected use 
will meet CDBG eligibility criteria and a national objective; (4) how 
the projected use relates to a specific impact of the disaster and will 
result in long-term recovery; and (5) estimated and quantifiable 
performance outcomes (i.e., a performance measure) relative to the 
identified unmet need.
    When the State uses a method of distribution to allocate funds to 
UGLGs, it must describe all criteria used to determine the 
distribution, including the relative importance of each criterion.
    c. Funds awarded directly to an UGLG. The UGLG's Action Plan, or 
partial Action Plan, shall describe specific programs and/or activities 
it will carry out directly or through subrecipients, including other 
local governments. Each Plan must also describe how the UGLG's needs 
assessment informed the allocation(s) identified in the Plan, and how 
unmet needs that have been identified but not yet addressed will be 
addressed in a subsequent amendment to the Plan.
    In addition, for each program or activity that will be carried out 
by the UGLG or through a subrecipient, the Action Plan or partial 
Action Plan must describe: (1) The projected use of the CDBG-DR funds, 
including the entity administering the program/activity, budget, and 
geographic area; (2) the threshold factors or applicant eligibility 
criteria, grant size limits, and proposed start and end dates; (3) how 
the projected use will meet CDBG eligibility criteria and a national 
objective; (4) how the projected use relates to a specific impact of 
the disaster and will result in long-term recovery; and (5) estimated 
and quantifiable performance outcomes (i.e., a performance measure) 
relative to the identified unmet need.
    d. Clarification of disaster-related activities. All CDBG-DR 
activities must clearly address an impact of the disaster for which 
funding was appropriated. This means each activity must be CDBG-
eligible (or receive a waiver), meet a national objective, and address 
a direct or indirect impact from the disaster in a county covered by a 
Presidential disaster declaration and cited in Table 2 of this Notice. 
Additional details on disaster-related activities are provided under 
Section VI, parts B through D.
    (1) Housing. Typical housing activities include new construction 
and rehabilitation of single family or multifamily units (including 
garden apartments, condominiums, and units that participate in a 
housing cooperative). Most often, grantees use CDBG-DR funds to 
rehabilitate damaged homes and rental units; rehabilitation activities 
may include the costs associated with mold remediation. However, 
grantees may also fund new construction or rehabilitate units not 
damaged by the disaster if the activity clearly addresses a disaster-
related impact and is located in a disaster-affected area. This impact 
can be demonstrated by the disaster's overall effect on the quality, 
quantity, and affordability of the housing stock and the resulting 
inability of the existing stock to meet post-disaster needs and 
population demands.
    (2) Infrastructure. Typical infrastructure activities include the 
rehabilitation, replacement, or relocation of damaged public facilities 
and improvements.
    (3) Economic Revitalization. Without the return of businesses and 
jobs to a disaster-impacted area, recovery may be impossible. 
Therefore, HUD strongly encourages grantees to envision economic 
revitalization as a cornerstone to long-term recovery. Economic 
revitalization is not limited to activities that are ``special economic 
development'' activities under the HCD Act, or to activities that 
create or retain jobs. For CDBG-DR purposes, economic revitalization 
can include any activity that demonstrably restores and improves the 
local or regional economy, such as addressing job losses. Examples of 
eligible activities include providing loans and grants to businesses, 
funding job training, building education facilities to teach technical 
skills, making improvements to commercial/retail districts, and 
financing other efforts that attract/retain workers in devastated 
communities.
    Local and regional economic recoveries are typically driven by 
small businesses. To target assistance to small businesses, the 
Department is instituting an alternative requirement to the provisions 
at 42 U.S.C. 5305(a) to prohibit grantees from assisting businesses, 
including privately owned utilities, that do not meet the definition of 
a small business as defined by SBA at 13 CFR part 121.
    All economic revitalization activities must address an economic 
impact(s) caused by the disaster (e.g., loss of jobs). Through its 
needs assessment and Action Plan, the grantee must clearly identify the 
economic loss or need resulting from the disaster, and how the proposed 
activities will address that loss/need.
    (4) Preparedness and Mitigation. The Appropriations Act states that 
funds shall be used for recovering from a Presidentially-declared major 
disaster. As such, all activities must respond to the impacts of the 
declared disaster. HUD strongly encourages grantees to incorporate 
preparedness and mitigation measures into all rebuilding activities, 
which helps to ensure that communities recover to be safer, stronger, 
and more resilient. Incorporation of these measures also reduces costs 
in recovering from future disasters. Mitigation measures that are not 
incorporated into rebuilding activities must be a necessary expense 
related to disaster relief, long-term recovery, and restoration of 
infrastructure, housing, or economic revitalization. Furthermore, the 
costs associated with these measures may not prevent the grantee from 
meeting unmet needs.
    (5) Connection to the Disaster. Each grantee must document how each 
activity is connected to the disaster for which it is receiving CDBG 
assistance. In regard to physical losses, damage or insurance estimates 
are often the most effective tool for demonstrating the connection to 
the disaster. For economic or other non-physical losses, post-disaster 
analyses or assessments may document the relationship between the loss 
and the disaster.
    Grantees are not limited in their recovery to returning to pre-
disaster conditions. Rather, HUD encourages grantees to carry out 
activities that not only address disaster-related impacts, but leave 
communities sustainably positioned to meet the needs of their post-
disaster populations and to further prospects for growth.
    e. Use of funds for disasters not covered by the Appropriations 
Act. CDBG-DR funds awarded under this Notice are limited to activities 
that respond to the disasters identified in section I, Table 1, and 
areas that have Presidential disaster declarations for Hurricane Irene 
and Tropical Storm Lee as described in section I, Allocation. However, 
funds awarded in this Notice may be used to address an unmet need that 
arose from a previous disaster, which was exacerbated by a disaster 
cited in this Notice. If an impact or need originating from a disaster 
identified in this Notice is subsequently exacerbated by a future 
disaster, funds under this Notice may also be used to address the 
resulting exacerbated unmet need.

[[Page 14336]]

    f. Use of the urgent need national objective. The certification 
requirements for the documentation of urgent need, located at 24 CFR 
570.208(c) and 24 CFR 570.483(d), are waived for the grants under this 
Notice until two years after the date HUD obligates funds to a grantee 
for the activity. In the context of disaster recovery, these standard 
requirements may prove burdensome and redundant. Since the Department 
only provides CDBG-DR awards to grantees with documented disaster-
related impacts (as supported by data provided by FEMA, SBA, and other 
sources), and each grantee is limited to spending funds only in 
counties with a Presidential disaster declaration of recent origin 
respective to each appropriation, the following temporary, streamlined 
alternative requirement recognizes the inherent urgency in addressing 
the serious threat to community welfare following a major disaster.
    Grantees need not issue formal certification statements to qualify 
an activity as meeting the urgent need national objective. Instead, 
each grantee receiving a direct award under this Notice must document 
how all programs and/or activities funded under the urgent need 
national objective respond to a disaster-related impact identified by 
the grantee. This waiver and alternative requirement allows grantees to 
more effectively and quickly implement disaster recovery programs. 
Grantees must reference in their Action Plan the type, scale, and 
location of the disaster-related impacts that each program and/or 
activity is addressing.
    Grantees must identify these disaster-related impacts in their 
Action Plan needs assessment. The needs assessment must be updated as 
new or more detailed/accurate disaster-related impacts are known. As a 
reminder, at least 50 percent of each grantee's CDBG-DR grant award 
must be used for activities that benefit low- and moderate-income 
persons.
    g. Clarity of the Action Plan. All grantees must include sufficient 
information so that citizens, UGLGs (where applicable), and other 
eligible subgrantees, subrecipients, or applicants will be able to 
understand and comment on the Action Plan and, if applicable, be able 
to prepare responsive applications to the grantee. The Action Plan must 
include a single chart or table that illustrates, at the most practical 
level, how all funds programmed by the Action Plan are budgeted (e.g., 
by program, subgrantee, grantee-administered activity, or other 
category).
    h. Review and Approval of the Action Plan. For funds provided under 
the Appropriations Act, 24 CFR 91.500 has been augmented with the 
following requirements. The initial Action Plan must be submitted to 
HUD (including Standard Form 424 (SF-424) and certifications) within 90 
days of the date of this Notice. HUD will expedite its review of each 
Action Plan--taking no more than 45 days from the date of receipt to 
complete its review. The Secretary may disapprove an Action Plan if it 
is determined that the Plan does not meet the requirements of this 
Notice.
    i. Certification of proficient controls, processes and procedures. 
The Appropriations Act requires that the Secretary certify, in advance 
of signing a grant agreement, that the grantee has in place proficient 
financial controls and procurement processes and has established 
adequate procedures to prevent any duplication of benefits as defined 
by section 312 of the Stafford Act, ensure timely expenditure of funds, 
maintain comprehensive Web sites regarding all disaster recovery 
activities assisted with these funds, and detect and prevent waste, 
fraud, and abuse of funds.
    To enable the Secretary to make the certification, each grantee 
must submit the items listed below to the grantee's designated HUD 
representative. The information must be submitted within 30 days of the 
effective date of this Notice, or with the grantee's submission of its 
Action Plan, whichever date is earlier. Grant agreements will not be 
executed until HUD has issued a certification in response to the 
grantee's submission.
    (1) Financial Control Checklist. A grantee has in place proficient 
financial controls if each of the following criteria are satisfied:
    (a) Most recent OMB Circular A-133 audit and annual financial 
statement indicates that the grantee has no material weaknesses, 
deficiencies, or concerns that HUD considers to be relevant to the 
financial management of the CDBG program. If the A-133 or annual 
financial statement identified weaknesses or deficiencies, the grantee 
must provide documentation showing how those weaknesses have been 
removed or are being addressed; and
    (b) Completed HUD monitoring checklist for financial standards 
(Exhibit 3-18 of the Community Planning and Development Monitoring 
Handbook 6509.02) and the grantee's financial standards. The checklist 
and standards must demonstrate the financial standards are complete and 
conform with the requirements of Exhibit 3-18. The grantee must 
identify which sections of its financial standards address each of the 
questions in the monitoring checklist and which personnel or unit are 
responsible for each checklist item.
    (2) Procurement. A grantee has in place a proficient procurement 
process if the:
    (a) Grantee has adopted the specific procurement standards 
identified in 24 CFR 85.36. The grantee must provide a copy of its 
procurement standards and indicate the sections of its procurement 
standards that incorporate 24 CFR 85.36. The procedures should also 
indicate which personnel or unit are responsible for each item; or
    (b) Grantee's procurement process/standards are equivalent to the 
procurement standards at 24 CFR 85.36 (applicable to State grantees 
only). Grantee must provide its procurement standards and indicate the 
sections of its procurement standards that align with each procurement 
provision of 24 CFR 85.36. The procedures should also indicate which 
personnel or unit are responsible for the task.
    (3) Duplication of benefits. A grantee has adequate procedures to 
prevent the duplication of benefits when it provides to HUD a uniform 
prevention of duplication of benefits procedure wherein the grantee 
identifies its processes for each of the following: verifying all 
sources of disaster assistance; determining an applicant's unmet 
need(s) before awarding assistance; and ensuring beneficiaries agree to 
repay the assistance if they later receive other disaster assistance 
for the same purpose. The procedures should also indicate which 
personnel or unit are responsible for the task. Departmental guidance 
to assist in preventing a duplication of benefits is provided in a 
notice published in the Federal Register at 76 FR 71060 (November 16, 
2011) and in paragraph A.21, section VI, of this Notice.
    (4) Adequate procedures to determine timely expenditures. A grantee 
has adequate procedures to determine timely expenditures if a grantee 
provides procedures to HUD that indicate how the grantee will track 
expenditures each month; how it will monitor expenditures of its 
recipients; how it will reprogram funds in a timely manner for 
activities that are stalled; and how it will project expenditures. The 
procedures should also indicate which personnel or unit are responsible 
for the task.
    (5) Procedures to maintain comprehensive Web sites regarding all 
disaster recovery activities assisted with these funds. A grantee has 
adequate procedures to maintain comprehensive Web sites regarding all 
disaster recovery

[[Page 14337]]

activities if its procedures indicate that the grantee will have a 
separate page dedicated to its disaster recovery that will contain 
links to all action plans, action plan amendments, performance reports, 
citizen participation requirements, and activity/program information 
for activities described in the action plan. The procedures should also 
indicate the frequency of Web site updates and which personnel or unit 
are responsible for the task.
    (6) Procedures to detect fraud, waste, and abuse of funds. A 
grantee has adequate procedures to detect fraud, waste, and abuse if 
its procedures indicate how the grantee will verify the accuracy of 
information provided by applicants; provides a monitoring policy 
indicating how and why monitoring is conducted, the frequency of 
monitoring, and which items are monitored; and that the internal 
auditor has affirmed and described its role in detecting fraud, waste, 
and abuse.
    (7) Grantee certification. As part of its submission, the grantee 
is required by paragraph E.42.q to attest to the proficiency and 
adequacy of its controls.
    j. Obligation and expenditure of funds. Upon the Secretary's 
certification, HUD will issue a grant agreement obligating the funds to 
the grantee. Only the funds described by the grantee in its Action 
Plan, at the necessary level of detail, will be obligated. In addition, 
HUD will establish the line of credit and the grantee will receive DRGR 
system access (if it does not have access already). The grantee must 
also enter its Action Plan activities into the DRGR system before it 
may draw funds as described in paragraph A.2, below.
    Each activity must meet the applicable environmental requirements. 
After the Responsible Entity completes an environmental review(s) 
pursuant to 24 CFR part 58, as applicable (or paragraph A.20, as 
applicable), and receives from HUD or the State an approved Request for 
Release of Funds and certification (as applicable), the grantee may 
draw down funds from the line of credit for the activity. Note that the 
disbursement of grant funds must begin no later than 60 days after the 
grantee has received access to its line of credit.
    k. Amending the Action Plan. As the grantee finalizes its long-term 
recovery goals, or as needs change through the recovery process, the 
grantee must amend its Action Plan to update its needs assessment, 
modify or create new activities, or re-program funds, as necessary. 
Each amendment must be highlighted, or otherwise identified, within the 
context of the entire Action Plan. The beginning of every Action Plan 
amendment must include a section that identifies exactly what content 
is being added, deleted, or changed. This section must also include a 
chart or table that clearly illustrates where funds are coming from and 
where they are moving to. The Action Plan must include a revised budget 
allocation table that reflects the entirety of all funds, as amended. A 
grantee's most recent version of its entire Action Plan must be 
accessible for viewing as a single document at any given point in time, 
rather than the public or HUD having to view and cross-reference 
changes among multiple amendments.
    If a grantee amends its Action Plan to program additional funds 
that the Department has allocated to it, the grant agreement must also 
be revised. As stated in paragraph 1.a, the requirement for each 
grantee to expend funds within two years of the date of obligation will 
be enforced relative to the activities funded under each obligation, as 
applicable.
    l. Projection of expenditures and outcomes. Each grantee must amend 
its published Action Plan to project expenditures and outcomes within 
90 days of the Action Plan approval. The projections must be based on 
each quarter's expected performance--beginning the quarter funds are 
available to the grantee and continuing each quarter until all funds 
are expended. The published Action Plan must be amended to reflect any 
subsequent changes, updates, or revision of the projections. Amending 
the Action Plan to accommodate these changes is not considered a 
substantial amendment. Guidance on the preparation of projections is 
available on HUD's Web site. The projections will enable HUD, the 
public, and the grantee, to track proposed versus actual performance.
    2. HUD performance review authorities and grantee reporting 
requirements in the Disaster Recovery Grant Reporting (DRGR) System.
    a. Performance review authorities. 42 U.S.C. 5304(e) 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 
grantee has carried out its activities in a timely manner, whether the 
grantee's activities and certifications are carried out in accordance 
with the requirements and the primary objectives of the HCD Act and 
other applicable laws, and whether the grantee has the continuing 
capacity to carry out those activities in a timely manner. Grantees are 
advised that HUD is increasing its monitoring and technical assistance 
effort to coincide with the two-year expenditure deadline.
    This Notice waives the requirements for submission of a performance 
report pursuant to 42 U.S.C. 12708 and 24 CFR 91.520. In the 
alternative, and to ensure consistency between grants allocated under 
the Appropriations Act and prior CDBG-DR appropriation laws, HUD is 
requiring that grantees enter information in the DRGR system in 
sufficient detail to permit the Department's review of grantee 
performance on a quarterly basis and to enable remote review of grantee 
data to allow HUD to assess compliance and risk.
    b. DRGR Action Plan. Each grantee must enter its Action Plan for 
Disaster Recovery, including performance measures, into HUD's DRGR 
system. As more detailed information about uses of funds is identified 
by the grantee, it must be entered into the DRGR system at a level of 
detail that is sufficient to serve as the basis for acceptable 
performance reports, and permits HUD review of compliance requirements.
    The Action Plan must also be entered into the DRGR system so that 
the grantee is able to draw its CDBG-DR funds. The grantee may enter 
activities into DRGR before or after submission of the Action Plan to 
HUD. To enter an activity into the DRGR system, the grantee must know 
the activity type, national objective, and the organization that will 
be responsible for the activity. In addition, a Data Universal 
Numbering System (DUNS) number must be entered into the system for any 
entity carrying out a CDBG-DR funded activity, including the grantee, 
recipient(s) and subrecipient(s), contractor(s), and developers. To 
comply with the statutory requirements regarding identification of 
contractors, and to provide a mechanism for tracking large contracts in 
DRGR, HUD is requiring grantees to identify in the DRGR system any 
contract over $25,000.
    Each activity entered into the DRGR system must also be categorized 
under a ``project''. Typically, projects are based on groups of 
activities that accomplish a similar, broad purpose (e.g., Housing, 
Infrastructure, or Economic Development) or are based on an area of 
service (e.g., Community A). If a grantee submits a partial Action Plan 
or amendment to describe just one program (e.g., Single Family 
Rehabilitation), that program is entered as a project in DRGR. Further, 
the budget of the program would be identified as the project's budget. 
If a State grantee has only identified the Method of Distribution (MOD) 
upon HUD's approval of the published Action Plan, the MOD itself 
typically serves as

[[Page 14338]]

the projects in the DRGR system, rather than the activities. As funds 
are distributed to subgrantees and subrecipients, who decide which 
specific activities to fund, those activity fields are then populated.
    c. Tracking oversight activities in the DRGR system; use of DRGR 
data for HUD review and dissemination. Each grantee must also enter 
into DRGR summary information on monitoring visits and reports, audits, 
and technical assistance it conducts as part of its oversight of its 
disaster recovery programs. The grantee's Quarterly Performance Report 
(QPR) will include a summary indicating the number of grantee oversight 
visits and reports (see subparagraph e for more information on the 
QPR). HUD will use data entered into the DRGR Action Plan and the QPR, 
transactional data from the DRGR system, and other information provided 
by the grantee to provide reports to Congress and the public, as well 
as to (1) Monitor for anomalies or performance problems that suggest 
fraud, abuse of funds, and duplication of benefits; (2) reconcile 
budgets, obligations, funding draws, and expenditures; (3) calculate 
expenditures to determine compliance with administrative and public 
service caps and the overall percentage of funds that benefit low- and 
moderate-income persons; and (4) analyze the risk of grantee programs 
to determine priorities for the Department's monitoring.
    d. Tracking program income in the DRGR system. Grantees must use 
the DRGR system to draw grant funds for each activity. Grantees must 
also use the DRGR system to track program income receipts, 
disbursements, and revolving loan funds. If a grantee permits local 
governments or subrecipients to retain program income, the grantee must 
establish program income accounts in the DRGR system. The DRGR system 
requires grantees to use program income before drawing additional grant 
funds, and ensures that program income retained by one organization 
will not affect grant draw requests for other organizations.
    e. DRGR System Quarterly Performance Report (QPR). Each grantee 
must submit a QPR through the DRGR system no later than 30 days 
following the end of each calendar quarter. Within 3 days of submission 
to HUD, each QPR must be posted on the grantee's official Web site. The 
grantee's first QPR is due after the first full calendar quarter after 
the grant award. For example, a grant award made in April requires a 
QPR to be submitted by October 30. QPRs must be submitted on a 
quarterly basis until all funds have been expended and all expenditures 
have been reported.
    Each QPR will include information about the uses of funds in 
activities identified in the DRGR system Action Plan during the 
applicable quarter. This includes, but is not limited to, the: project 
name, activity, location, and national objective; funds budgeted, 
obligated, drawn down, and expended; the funding source and total 
amount of any non-CDBG-DR funds to be expended on each activity; 
beginning and actual completion dates of completed activities; achieved 
performance outcomes such as number of housing units complete or number 
of low- and moderate-income persons benefiting; and the race and 
ethnicity of persons assisted under direct-benefit activities. Grantees 
must also record the amount of funding expended for each contractor 
identified in the Action Plan. The DRGR system will automatically 
display the amount of program income receipted, the amount of program 
income reported as disbursed, and the amount of grant funds disbursed. 
Grantees must include a description of actions taken in that quarter to 
affirmatively further fair housing within the section titled ``Overall 
Progress Narrative'' in the DRGR system.
    3. Citizen participation waiver and alternative requirement. To 
permit a more streamlined process, and ensure disaster recovery grants 
are awarded in a timely manner, provisions of 42 U.S.C. 5304(a)(2) and 
(3), 42 U.S.C. 12707, 24 CFR 570.486, 91.105(b) and (c), and 91.115(b) 
and (c), with respect to citizen participation requirements, are waived 
and replaced by the requirements below. The streamlined requirements do 
not mandate public hearings at a state, entitlement, or local 
government level, but do require providing a reasonable opportunity (at 
least 7 days) for citizen comment and ongoing citizen access to 
information about the use of grant funds. The streamlined citizen 
participation requirements for a grant carried out under this Notice 
are:
    a. Publication of the Action Plan, opportunity for public comment, 
and substantial amendment criteria. Before the grantee adopts the 
Action Plan for this grant or any substantial amendment to this grant, 
the grantee will publish the proposed plan or amendment (including the 
information required in this Notice for an Action Plan for Disaster 
Recovery). The manner of publication must include prominent posting on 
the grantee's official Web site and must afford citizens, affected 
local governments, and other interested parties a reasonable 
opportunity to examine the plan or amendment's contents. The topic of 
disaster recovery must be navigable by citizens from the grantee (or 
relevant agency) homepage. Grantees are also encouraged to notify 
affected citizens through electronic mailings, press releases, 
statements by public officials, media advertisements, public service 
announcements, and/or contacts with neighborhood organizations.
    Despite the expedited process, grantees are still responsible for 
ensuring that all citizens have equal access to information about the 
programs, including persons with disabilities and limited English 
proficiency (LEP). Each grantee must ensure that program information is 
available in the appropriate languages for the geographic area served 
by the jurisdiction. For assistance in ensuring that this information 
is available to LEP populations, recipients should consult the Final 
Guidance to Federal Financial Assistance Recipients Regarding Title VI, 
Prohibition Against National Origin Discrimination Affecting Limited 
English Proficient Persons published on January 22, 2007, in the 
Federal Register (72 FR 2732).
    Subsequent to publication of the Action Plan, the grantee must 
provide a reasonable time frame and method(s) (including electronic 
submission) for receiving comments on the plan or substantial 
amendment. In its Action Plan, each grantee must specify criteria for 
determining what changes in the grantee's plan constitute a substantial 
amendment to the plan. At a minimum, the following modifications will 
constitute a substantial amendment: a change in program benefit or 
eligibility criteria; the allocation or re-allocation of more than $1 
million; or the addition or deletion of an activity. The grantee may 
substantially amend the Action Plan if it follows the same procedures 
required in this Notice for the preparation and submission of an Action 
Plan for Disaster Recovery. Prior to submission of a substantial 
amendment, the grantee is encouraged to work with its HUD 
representative to ensure the proposed change is consistent with this 
Notice, and all applicable regulations and Federal law.
    b. Non-substantial amendment. The grantee must notify HUD, but is 
not required to undertake public comment, when it makes any plan 
amendment that is not substantial. HUD must be notified at least five 
days before the amendment becomes effective. However, every amendment 
to the Action Plan (substantial and non-substantial) must be numbered 
sequentially and posted on the grantee's Web site. The Department will

[[Page 14339]]

acknowledge receipt of the notification of non-substantial amendments 
via email within 5 business days.
    c. Consideration of public comments. The grantee must consider all 
comments, received orally or in writing, on the Action Plan or any 
substantial amendment. A summary of these comments or views, and the 
grantee's response(s), must be submitted to HUD with the Action Plan or 
substantial amendment.
    d. Availability and accessibility of the Action Plan. The grantee 
must make the Action Plan, any amendments, and all performance reports 
available to the public on its Web site and on request. In addition, 
the grantee must make these documents available in a form accessible to 
persons with disabilities and non-English-speaking persons. During the 
term of the grant, the grantee will provide citizens, affected local 
governments, and other interested parties with reasonable and timely 
access to information and records relating to the Action Plan and to 
the grantee's use of grant funds.
    e. Citizen complaints. The grantee will provide a timely written 
response to every citizen complaint. The response will be provided 
within 15 working days of the receipt of the complaint, if practicable.
    4. Direct grant administration and means of carrying out eligible 
activities.
    a. Requirements applicable to State grantees. Requirements at 42 
U.S.C. 5306 are waived, to the extent necessary, to allow a State to 
directly carry out CDBG-DR activities eligible under this Notice, 
rather than distribute all funds to UGLGs. Experience in administering 
CDBG supplemental disaster recovery funding demonstrates that this 
practice can expedite recovery. Pursuant to this waiver, the standard 
at section 570.480(c) and the provisions at 42 U.S.C. 5304(e)(2) will 
also include activities that the State carries out directly. In 
addition, activities eligible under this Notice may be carried out, 
subject to State law, by the State through its employees, through 
procurement contracts, or through assistance provided under agreements 
with subrecipients or recipients. Notwithstanding this waiver, State 
grantees continue to be responsible for civil rights, labor standards, 
and environmental protection requirements contained in the HCD Act and 
24 CFR part 570, as well as ensuring such compliance by subgrantees.
    b. Requirements for all grantees--direct administration and 
assistance to neighborhood organizations described in 42 U.S.C. 
5305(a)(15) of the HCD Act. Activities made eligible at 42 U.S.C. 
5305(a)(15) may only be undertaken by the eligible entities described 
in that section, whether the assistance is provided to such an entity 
from the State or from a UGLG.
    c. Use of Funds for Structures Owned by Religious Organizations. 
The provision of assistance for buildings used for religious purposes 
is governed by 24 CFR 570.200(j). Although CDBG funds cannot be used 
for structures dedicated solely to religious use, such as a religious 
congregation's principal place of worship, grantees may in certain 
circumstances pay some rehabilitation or new construction costs for 
structures used for religious and secular purposes.
    Funding for rehabilitating or reconstructing storm-damaged or 
destroyed buildings may be appropriate where a facility is not used 
exclusively for the benefit of the religious congregation, such as a 
building used as a homeless shelter, food pantry, adult literacy 
center, or child care center. Where a structure is used for both 
religious and secular uses, CDBG-DR funds may pay the portion of 
eligible rehabilitation or construction costs attributable to the non-
religious use. For example, for a building that is used 50 percent of 
the time for, or has 50 percent of the square footage dedicated to, 
homeless services, CDBG-DR funds may pay 50 percent of the 
rehabilitation or construction cost. Grantees are encouraged to work 
closely with their CPD Representative to ensure compliance with the 
requirements of 24 CFR 570.200(j) or to obtain further guidance on the 
applicability of this rule to specific programs or properties.
    5. Consolidated Plan waiver. HUD is waiving the requirement for 
consistency with the consolidated plan (requirements at 42 U.S.C. 
12706, 24 CFR 91.325(a)(5), 91.225(a)(5), 91.325(b)(3), and 
91.225(b)(3)), because the effects of a major disaster alter a 
grantee's priorities for meeting housing, employment, and 
infrastructure needs. In conjunction, 42 U.S.C. 5304(e), to the extent 
that it would require HUD to annually review grantee performance under 
the consistency criteria, is also waived. However, this waiver applies 
only until the grantee first updates its full consolidated plan. HUD 
expects grantees to update its full consolidated plan to reflect 
disaster-related needs no later than its Fiscal Year 2015 consolidated 
plan update. At a minimum, the updated consolidated plan must include 
the criteria discussed in this Notice. While grantees are encouraged to 
incorporate disaster recovery needs into their consolidated plan 
updates as soon as practicable, any unmet disaster-related needs and 
associated priorities must be incorporated into the grantee's next 
consolidated plan update by Fiscal Year 2015. If not completed already, 
the grantee must update its Analysis of Impediments to Fair Housing 
Choice in coordination with its post-waiver consolidated plan update, 
so that it more accurately reflects housing conditions following the 
disaster.
    6. Requirement for consultation during plan preparation. Currently, 
the statute and regulations require States to consult with affected 
units of local government in non-entitlement areas of the State in 
determining the State's proposed method of distribution. HUD is waiving 
42 U.S.C. 5306(d)(2)(C)(iv), 42 U.S.C. 5306(d)(2)(D), 24 CFR 91.325(b), 
and 91.110, with the alternative requirement that any State receiving 
an allocation under this Notice consult with all disaster-affected 
UGLGs (including any CDBG-entitlement communities, and local public 
housing authorities in affected areas) in determining the use of funds. 
This ensures State grantees sufficiently assess the recovery needs of 
all areas affected by the disaster.
    For New York City, HUD is supplementing 24 CFR 91.100 with the 
additional requirement that the jurisdiction must consult with adjacent 
UGLGs, including local government agencies with metropolitan-wide 
planning responsibilities (particularly for problems and solutions that 
go beyond a single jurisdiction), and local public housing authorities 
(affected by the disaster).
    Last, all grantees must consult with States, tribes, UGLGs, and 
other stakeholders and affected parties in the surrounding geographic 
area to ensure consistency with applicable regional redevelopment 
plans.
    7. Overall benefit waiver and alternative requirement. The primary 
objective of the HCD Act is the ``development of viable urban 
communities, by providing decent housing and a suitable living 
environment and expanding economic opportunities, principally for 
persons of low and moderate income.'' 42 U.S.C. 5301(c). To carry out 
this objective, the statute requires that 70 percent of the aggregate 
of a regular CDBG program's funds be used to support activities 
benefitting low- and moderate-income persons. This target could be 
difficult to reach, and perhaps even impossible, for many grantees 
affected by Hurricane Sandy. Grantees under this Notice experienced 
disaster impacts that affected entire communities--regardless of 
income, and the existing requirement

[[Page 14340]]

may prevent grantees from providing assistance to damaged areas of 
need. Therefore, this Notice waives the requirements at 42 U.S.C. 
5301(c), 42 U.S.C. 5304(b)(3)(A), 24 CFR 570.484, and 570.200(a)(3), 
that 70 percent of funds be used for activities that benefit low- and 
moderate-income persons. Instead, 50 percent of funds must benefit low- 
and moderate-income persons. This provides grantees with greater 
flexibility to carry out recovery activities by allowing up to 50 
percent of the grant to assist activities under the urgent need or 
prevention or elimination of slums or blight national objectives.
    Grantees may seek to reduce the overall benefit requirement below 
50 percent of the total grant, but must submit a justification that, at 
a minimum: (a) Identifies the planned activities that meet the needs of 
its low- and moderate-income population; (b) describes proposed 
activity(ies) and/or program(s) that will be affected by the 
alternative requirement, including their proposed location(s) and 
role(s) in the grantee's long-term disaster recovery plan; (c) 
describes how the activities/programs identified in (b) prevent the 
grantee from meeting the 50 percent requirement; and (d) demonstrates 
that the needs of non-low and moderate-income persons or areas are 
disproportionately greater, and that the jurisdiction lacks other 
resources to serve them. Upon request, a sample justification can be 
provided by the Department. Note that the 50 percent overall benefit 
requirement will not be reduced unless the Secretary specifically finds 
that there is a compelling need to further reduce the threshold.
    8. Use of the ``upper quartile'' or ``exception criteria'' for low- 
and moderate-income area benefit activities. This exception applies to 
entitlement communities that have few, if any, areas within their 
jurisdiction that have 51 percent or more low- and moderate-income 
residents. per the requirements at 42 U.S.C. 5305(c)(2)(A), these 
communities are allowed to use a percentage less than 51 percent to 
qualify activities under the low- and moderate-income area benefit 
category. This exception is referred to as the ``exception criteria'' 
or the ``upper quartile''.
    HUD assesses Census block groups to determine whether an 
entitlement community meets the exception criteria. For communities 
that qualify, the Department identifies the alternative percentage 
(i.e., the lowest proportion) the community may use, instead of 51 
percent, for the purpose of qualifying activities under the low- and 
moderate-income area benefit. HUD advises the entitlement community 
accordingly. Periodically, HUD updates the low- and moderate-income 
summary data used to identify the exception criteria; disaster recovery 
grantees are required to use the most recent data available in 
implementing the exception criteria. Note that for entitlement 
communities that meet the exception criteria, the community may apply 
the criteria if it receives funds from a State grantee.
    9. Use of ``uncapped'' income limits. The Quality Housing and Work 
Responsibility Act of 1998 (Title V of Pub. L. 105-276) enacted a 
provision that directed the Department to grant exceptions to at least 
10 jurisdictions that are currently ``capped' under HUD's low and 
moderate-income limits. Under this exception, a number of CDBG 
entitlement grantees may use ``uncapped'' income limits that reflect 80 
percent of the actual median income for the area. Each year, HUD 
publishes guidance on its Web site identifying which grantees may use 
uncapped limits. The uncapped limits apply to disaster recovery 
activities funded pursuant to this Notice in jurisdictions covered by 
the uncapped limits, including jurisdictions that receive disaster 
recovery funds from the State.
    10. Grant administration responsibilities and general 
administration cap.
    a. Grantee responsibilities. per the Appropriations Act, each 
grantee shall administer its award directly, in compliance with all 
applicable laws and regulations. Each grantee shall be financially 
accountable for the use of all funds provided in this Notice and may 
contract for administrative support but grantees may not delegate or 
contract to any other party any inherently governmental 
responsibilities related to management of the funds, such as oversight, 
policy development, and financial management.
    b. General administration cap. For grants under this Notice, the 
annual CDBG program administration requirements must be modified to be 
consistent with the Appropriations Act, which allows up to 5 percent of 
the grant to be used for general administration costs, by the grantee, 
by UGLGs, or by subrecipients. Thus, the total of all costs charged to 
the grant and classified as general administration must be less than or 
equal to the 5 percent cap.
    (1) For State grantees under this Notice, the provisions of 42 
U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i), (ii), and (iii) will not 
apply to the extent that they cap general administration and technical 
assistance expenditures, limit a State's ability to charge a nominal 
application fee for grant applications for activities the State carries 
out directly, and require a dollar-for-dollar match of State funds for 
administrative costs exceeding $100,000. 42 U.S.C. 5306(d)(5) and (6) 
are waived and replaced with the alternative requirement that the 
aggregate total for general administrative and technical assistance 
expenditures must not exceed 5 percent. States remain limited to 
spending a maximum of 20 percent of their total grant amount on a 
combination of planning and general administration costs. Planning 
costs subject to the 20 percent cap are those defined in 42 U.S.C. 
5305(a)(12).
    (2) New York City is also subject to the 5 percent administrative 
cap. This 5 percent applies to all general administration costs--
whether incurred by the grantee or its subrecipients. The City also 
remains limited to spending 20 percent of its total allocation on a 
combination of planning and general administration costs.
    11. Planning-only activities--applicable to State grantees only. 
The annual State CDBG program requires that local government grant 
recipients for planning-only grants must document that the use of funds 
meets a national objective. In the State CDBG program, these planning 
grants are typically used for individual project plans. By contrast, 
planning activities carried out by entitlement communities are more 
likely to include non-project specific plans such as functional land-
use plans, master plans, historic preservation plans, comprehensive 
plans, community recovery plans, development of housing codes, zoning 
ordinances, and neighborhood plans. These plans may guide long-term 
community development efforts comprising multiple activities funded by 
multiple sources. In the entitlement program, these general planning 
activities are presumed to meet a national objective under the 
requirements at 24 CFR 570.208(d)(4).
    The Department notes that effective CDBG disaster recoveries have 
relied on some form of area-wide or comprehensive planning activity to 
guide overall redevelopment independent of the ultimate source of 
implementation funds. Therefore, for State grantees receiving an award 
under this Notice, the Department is removing the eligibility 
requirements at 24 CFR 570.483(b)(5) or (c)(3). Instead, States must 
comply with 570.208(d)(4) when funding disaster recovery-assisted 
planning-only grants, or directly administering planning activities 
that

[[Page 14341]]

guide recovery in accordance with the Appropriations Act. In addition, 
the types of planning activities that States may fund or administer are 
expanded to be consistent with those of entitlement communities 
identified at 24 CFR 570.205.
    12. Waiver and alternative requirement for distribution to CDBG 
metropolitan cities and urban counties--applicable to State grantees 
only. Section 5302(a)(7) of title 42, U.S.C. (definition of 
``nonentitlement area'') and provisions of 24 CFR part 570 that would 
prohibit or restrict a State from distributing CDBG funds to 
entitlement communities and Indian tribes under the CDBG program, are 
waived, including 24 CFR 570.480(a) and 570.486(c) (revised April 23, 
2012). Instead, the State may distribute funds to UGLGs and Indian 
tribes.
    13. Use of subrecipients--applicable to State grantees only. The 
State CDBG program rule does not make specific provision for the 
treatment of entities that the CDBG Entitlement program calls 
``subrecipients.'' The waiver allowing the State to directly carry out 
activities creates a situation in which the State may use subrecipients 
to carry out activities in a manner similar to an entitlement 
community. Therefore, for States taking advantage of the waiver to 
carry out activities directly, the requirements at 24 CFR 570.502, 
570.503, and 570.500(c) apply, except the requirements that specific 
references to 24 CFR parts 84 and 85 must be included in subrecipient 
agreements. Pursuant to 24 CFR 570.489(n) (revised April 23, 2012) and 
570.502, State grantees must ensure that its costs and those of its 
state recipients and subrecipients are in conformance with 2 CFR part 
225 (OMB Circular A-87), whether carrying out activities directly or 
through the use of a subrecipient.
    14. Recordkeeping.
    a. State grantees. When a State carries out activities directly, 24 
CFR 570.490(b) is waived and the following alternative provision shall 
apply: 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-DR funds under 24 CFR 570.493. Consistent with 
applicable statutes, regulations, waivers and alternative requirements, 
and other Federal requirements, the content of records maintained by 
the State shall be sufficient to: enable HUD to make the applicable 
determinations described at 24 CFR 570.493; make compliance 
determinations for activities carried out directly by the State; and 
show how activities funded are consistent with the descriptions of 
activities proposed for funding in the Action Plan and/or DRGR system. 
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.
    b. UGLGs grantees. New York City remains subject to the 
recordkeeping requirements of 24 CFR 570.506.
    15. Change of use of real property--applicable to State grantees 
only. This waiver conforms to the change of use of real property rule 
to the waiver allowing a State to carry out activities directly. For 
purposes of this program, all references to ``unit of general local 
government'' in 24 CFR 570.489(j), shall be read as ``unit of general 
local government or State.''
    16. Responsibility for review and handling of noncompliance --
applicable to State grantees only. This change is in conformance with 
the waiver allowing the State to carry out activities directly. 24 CFR 
570.492 is waived and the following alternative requirement applies for 
any State receiving a direct award under this Notice: the State shall 
make reviews and audits, including onsite reviews of any subrecipients, 
designated public agencies, and UGLGs, as may be necessary or 
appropriate to meet the requirements of 42 U.S.C. 5304(e)(2), as 
amended, and as modified by this Notice. In the case of noncompliance 
with these requirements, the State shall take such actions as may be 
appropriate to prevent a continuance of the deficiency, mitigate any 
adverse effects or consequences, and prevent a recurrence. The State 
shall establish remedies for noncompliance by any designated 
subrecipients, public agencies, or UGLGs.
    17. Program income alternative requirement. The Department is 
waiving applicable program income rules at 42 U.S.C 5304(j), 24 CFR 
570.500(a) and (b), 570.504, and 570.489(e) to the extent necessary to 
provide additional flexibility as described under this Notice. The 
alternative requirements provide guidance regarding the use of program 
income received before and after grant closeout and address revolving 
loan funds.
    a. Definition of program income.
    (1) For the purposes of this subpart, ``program income'' is defined 
as gross income generated from the use of CDBG-DR funds, except as 
provided in subparagraph D of this paragraph, and received by a State, 
UGLG, or tribe, or a subrecipient of a State, UGLG, or tribe. When 
income is generated by an activity that is only partially assisted with 
CDBG-DR funds, the income shall be prorated to reflect the percentage 
of CDBG-DR funds used (e.g., a single loan supported by CDBG-DR funds 
and other funds; a single parcel of land purchased with CDBG-DR funds 
and other funds). Program income includes, but is not limited to, the 
following:
    (a) Proceeds from the disposition by sale or long-term lease of 
real property purchased or improved with CDBG-DR funds;
    (b) Proceeds from the disposition of equipment purchased with CDBG-
DR funds;
    (c) Gross income from the use or rental of real or personal 
property acquired by a State, UGLG, or tribe or subrecipient of a 
State, UGLG, or tribe with CDBG-DR funds, less costs incidental to 
generation of the income (i.e., net income);
    (d) Net income from the use or rental of real property owned by a 
State, UGLG, or tribe or subrecipient of a State, UGLG, or tribe, that 
was constructed or improved with CDBG-DR funds;
    (e) Payments of principal and interest on loans made using CDBG-DR 
funds;
    (f) Proceeds from the sale of loans made with CDBG-DR funds;
    (g) Proceeds from the sale of obligations secured by loans made 
with CDBG-DR funds;
    (h) Interest earned on program income pending disposition of the 
income, but excluding interest earned on funds held in a revolving fund 
account;
    (i) Funds collected through special assessments made against 
properties owned and occupied by households not of low- and moderate-
income, where the special assessments are used to recover all or part 
of the CDBG-DR portion of a public improvement; and
    (j) Gross income paid to a State, UGLG, tribe, or paid to a 
subrecipient thereof from the ownership interest in a for-profit entity 
in which the income is in return for the provision of CDBG-DR 
assistance.
    (2) ``Program income'' does not include the following:
    (a) The total amount of funds which is less than $25,000 received 
in a single year and retained by a State, UGLG, tribe, or retained by a 
subrecipient thereof;
    (b) Amounts generated by activities both eligible and carried out 
by an entity under the authority of section 105(a)(15) of the HCD Act;
    b. Retention of program income. Per 24 CFR 570.504(c), a UGLG 
receiving a direct award under this Notice may permit a subrecipient to 
retain program income. State grantees may permit a UGLG or tribe, which 
receives or will

[[Page 14342]]

receive program income, to retain the program income, but are not 
required to do so.
    c. Program income--use, closeout, and transfer.
    (1) Program income received (and retained, if applicable) before or 
after closeout of the grant that generated the program income, and used 
to continue disaster recovery activities, is treated as additional 
disaster recovery CDBG funds subject to the requirements of this Notice 
and must be used in accordance with the grantee's Action Plan for 
Disaster Recovery. To the maximum extent feasible, program income shall 
be used or distributed before additional withdrawals from the U.S. 
Treasury are made, except as provided in subparagraph d of this 
paragraph.
    (2) In addition to the regulations dealing with program income 
found at 24 CFR 570.489(e) and 570.504, the following rules apply: A 
grantee may transfer program income before closeout of the grant that 
generated the program income to its annual CDBG program. In addition, a 
State grantee may transfer program income before closeout to any annual 
CDBG-funded activities carried out by a UGLG or Indian tribe within the 
State. Program income received by a grantee, or received and retained 
by a subgrantee, after closeout of the grant that generated the program 
income, may also be transferred to a grantee's annual CDBG award. In 
all cases, any program income received, and not used to continue 
disaster recovery activities, will not be subject to the waivers and 
alternative requirements of this Notice. Rather, those funds will be 
subject to the grantee's regular CDBG program rules.
    d. Revolving loan funds. New York City, State grantees, and UGLGs 
or tribes (as permitted by a State grantee) may 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. These activities generate payments, which will be 
used to support similar activities going forward. 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 U.S. Treasury for payments which could be funded from the revolving 
fund. Such program income is not required to be disbursed for non-
revolving fund activities.
    State grantees may also establish a revolving fund to distribute 
funds to UGLGs or tribes to carry out specific, identified activities. 
The same requirements, outlined above, apply to this type of revolving 
loan fund. Last, note that no revolving fund, established per this 
Notice, shall be directly funded or capitalized with an advance of 
CDBG-DR grant funds.
    18. Reimbursement of disaster recovery expenses. The provisions of 
24 CFR 570.489(b) are applied to permit a State to reimburse itself for 
otherwise allowable costs incurred by itself or its recipients 
subgrantees or subrecipients (including public housing authorities) on 
or after the incident date of the covered disaster. New York City is 
subject to the provisions of 24 CFR 570.200(h) but may reimburse itself 
or its subrecipients for otherwise allowable costs incurred on or after 
the incident date of the covered disaster. 24 CFR 570.200(h)(1)(i) will 
not apply to the extent that it requires pre-agreement activities to be 
included in a consolidated plan. The Department expects both State 
grantees and New York City to include all pre-agreement activities in 
their Action Plans. The provisions at 24 CFR 570.200(h) and 570.489(b) 
apply to grantees reimbursing costs incurred by itself or its 
recipients or subrecipients prior to the execution of a grant agreement 
with HUD.
    19. One-for-One Replacement, Relocation, and Real Property 
Acquisition Requirements. Activities and projects assisted by CDBG-DR 
are subject to the Uniform Relocation Assistance and Real Property 
Acquisition Policies Act of 1970, as amended, (42 U.S.C. 4601 et 
seq.)(``URA'') and Section 104(d) of the HCD Act (42 U.S.C. 
5304(d))(``Section 104(d)''). The implementing regulations for the URA 
are at 49 CFR part 24. The regulations for Section 104(d) are at 24 CFR 
part 42, subpart C. For the purposes of promoting the availability of 
decent, safe, and sanitary housing and expediting disaster recovery and 
rehousing efforts, HUD is waiving the following URA and Section 104(d) 
requirements for grantees under this Notice:
    a. One-for-one replacement. One-for-one replacement requirements at 
section 104(d)(2)(A)(i)-(ii) and (d)(3) and 24 CFR 42.375 are waived in 
connection with funds allocated under this Notice for lower-income 
dwelling units that are damaged by the disaster and not suitable for 
rehabilitation. The Section 104(d) one-for-one replacement requirements 
generally apply to demolished or converted occupied and vacant 
occupiable lower-income dwelling units. This waiver exempts disaster-
damaged units that meet the grantee's definition of ``not suitable for 
rehabilitation'' from the one-for-one replacement requirements. Before 
carrying out a program or activity which may be subject to the one-for-
one replacement requirements, the grantee must define ``not suitable 
for rehabilitation'' in its Action Plan or in policies/procedures 
governing these programs and activities. Grantees with questions about 
the one-for-one replacement requirements are encouraged to contact the 
HUD Regional Relocation Specialist responsible for their state.
    HUD is waiving the one-for-one replacement requirements because 
they do not account for the large, sudden changes that a major disaster 
may cause to the local housing stock, population, or economy. 
Furthermore, the requirements may discourage grantees from converting 
or demolishing disaster-damaged housing when excessive costs would 
result from replacing all such units. Disaster-damaged housing 
structures that are not suitable for rehabilitation can pose a threat 
to public health and safety and may impede economic revitalization. 
Grantees should re-assess post-disaster population and housing needs to 
determine the appropriate type, amount, and location of lower-income 
dwelling units to rehabilitate and/or rebuild. Grantees should note, 
however, that the demolition and/or disposition of Public Housing 
Authority-owned public housing units is covered by section 18 of the 
United States Housing Act of 1937, as amended, and 24 CFR part 970, 
neither of which is waived by this Notice.
    b. Relocation assistance. The Section 104(d) relocation assistance 
requirements at section 104(d)(2)(A) and 24 CFR 42.350 are waived to 
the extent that they differ from the requirements of the URA and 
implementing regulations at 49 CFR part 24, as modified by this Notice, 
for activities related to disaster recovery. Without this waiver, 
disparities exist in relocation assistance associated with activities 
typically funded by HUD and FEMA (e.g., buyouts and relocation). Both 
FEMA and HUD funds are subject to the URA; however, HUD's CDBG funds 
are also subject to Section 104(d), while FEMA funds are not. The URA 
provides that a displaced person is eligible to receive a rental 
assistance payment that covers a period of 42 months. By contrast, 
Section 104(d) allows a lower-income displaced person to choose between 
the URA rental assistance payment and a rental assistance payment 
calculated over a period of 60 months. This waiver of the Section 
104(d) requirements

[[Page 14343]]

assures uniform and equitable treatment by setting the URA and its 
implementing regulations as the sole standard for relocation assistance 
under this Notice.
    c. Arm's length voluntary purchase. The requirements at 49 CFR 
24.101(b)(2)(i)-(ii) are waived to the extent that they apply to an 
arm's length voluntary purchase carried out by a person who uses funds 
allocated under this Notice and does not have the power of eminent 
domain, in connection with the purchase and occupancy of a principal 
residence by that person. Given the often large-scale acquisition needs 
of grantees, this waiver is necessary to reduce burdensome 
administrative requirements following a disaster. Grantees are reminded 
that any tenants occupying real property that is acquired through 
voluntary purchase may be eligible for relocation assistance.
    d. Rental assistance to a displaced person. The requirements at 
sections 204(a) and 206 of the URA, and 49 CFR 24.2(a)(6)(viii), 
24.402(b)(2), and 24.404 are waived to the extent that they require the 
grantee to use 30 percent of a low-income displaced person's household 
income in computing a rental assistance payment if the person had been 
paying more than 30 percent of household income in rent/utilities 
without ``demonstrable hardship'' before the project. Thus, if a tenant 
has been paying rent/utilities in excess of 30 percent of household 
income without demonstrable hardship, using 30 percent of household 
income to calculate the rental assistance payment would not be 
required. Before carrying out a program or activity in which the 
grantee will provide rental assistance payments to displaced persons, 
the grantee must define ``demonstrable hardship'' in its Action Plan or 
in the policies and procedures governing these programs and activities. 
The grantee's definition of demonstrable hardship applies when 
implementing these alternative requirements.
    e. Tenant-based rental assistance. The requirements of sections 204 
and 205 of the URA, and 49 CFR 24.2(a)(6)(ix) and 24.402(b) are waived 
to the extent necessary to permit a grantee to meet all or a portion of 
a grantee's replacement housing financial assistance obligation to a 
displaced tenant by offering rental housing through a tenant-based 
rental assistance (TBRA) housing program subsidy (e.g., Section 8 
Housing Choice Voucher Program), provided that the tenant is provided 
referrals to comparable replacement dwellings in accordance with 49 CFR 
24.204(a) where the owner is willing to participate in the TBRA 
program, and the period of authorized assistance is at least 42 months. 
Failure to grant this waiver would impede disaster recovery whenever 
TBRA program subsidies are available but funds for cash relocation 
assistance are limited. This waiver gives grantees an additional 
relocation resource option.
    f. Moving expenses. The requirements at section 202(b) of the URA 
and 49 CFR 24.302, which require that a grantee offer a displaced 
person the option to receive a fixed moving cost payment based on the 
Federal Highway Administration's Fixed Residential Moving Cost Schedule 
instead of receiving payment for actual moving and related expenses, 
are waived. As an alternative, the grantee must establish and offer the 
person a ``moving expense and dislocation allowance'' under a schedule 
of allowances that is reasonable for the jurisdiction and that takes 
into account the number of rooms in the displacement dwelling, whether 
the person owns and must move the furniture, and, at a minimum, the 
kinds of expenses described in 49 CFR 24.301. Without this waiver and 
alternative requirement, disaster recovery may be impeded by requiring 
grantees to offer allowances that do not reflect current local labor 
and transportation costs. Persons displaced from a dwelling remain 
entitled to choose a payment for actual reasonable moving and related 
expenses if they find that approach preferable to the locally 
established ``moving expense and dislocation allowance.''
    g. Optional relocation policies. The regulation at 24 CFR 
570.606(d) is waived to the extent that it requires optional relocation 
policies to be established at the grantee or state recipient level. 
Unlike the regular CDBG program, States receiving CDBG-DR funds may 
carry out disaster recovery activities directly or through 
subrecipients. The regulation at 24 CFR 570.606(d) governing optional 
relocation policies does not account for this distinction. This waiver 
also makes clear that UGLGs receiving CDBG disaster funds may establish 
separate optional relocation policies. This waiver is intended to 
provide States and UGLGs with maximum flexibility in developing 
optional relocation policies with CDBG-DR funds.
    20. Environmental requirements.
    a. Clarifying note on the process for environmental release of 
funds when a State carries out activities directly. In the regular CDBG 
program, a State distributes CDBG funds to UGLGs and takes on HUD's 
role in receiving environmental certifications from the grant 
recipients and approving releases of funds. For State grantees under 
this Notice, HUD allows the State to carry out activities directly, in 
addition to distributing funds to subrecipients and/or subgrantees. 
Thus, per 24 CFR 58.4, when a State carries out activities directly, 
the State must submit the certification and request for release of 
funds to HUD for approval.
    b. Adoption of another agency's environmental review. In accordance 
with the Appropriations Act, recipients of Federal funds that use such 
funds to supplement Federal assistance provided under sections 402, 
403, 404, 406, 407, or 502 of the Stafford Act may adopt, without 
review or public comment, any environmental review, approval, or permit 
performed by a Federal agency, and such adoption shall satisfy the 
responsibilities of the recipient with respect to such environmental 
review, approval, or permit that is required by the HCD Act. The 
grantee must notify HUD in writing of its decision to adopt another 
agency's environmental review. The grantee must retain a copy of the 
review in the grantee's environmental records.
    c. Release of funds. In accordance with the Appropriations Act, and 
notwithstanding 42 U.S.C. 5304(g)(2), the Secretary may, upon receipt 
of a request for release of funds and certification, immediately 
approve the release of funds for an activity or project assisted with 
allocations under this Notice if the recipient has adopted an 
environmental review, approval or permit under subparagraph b, above, 
or the activity or project is categorically excluded from review under 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
    d. Historic preservation reviews. To facilitate expedited historic 
preservation reviews under Section 106 of the National Historic 
Preservation Act of 1966 (16 U.S.C. 470f), HUD strongly encourages 
grantees to allocate general administration funds to support the 
capacity of the State Historic Preservation Officer (SHPO)/Tribal 
Historic Preservation Officer (THPO) to review CDBG-DR projects.
    21. Duplication of benefits. Section 312 of the Stafford Act, as 
amended, generally prohibits any person, business concern, or other 
entity from receiving financial assistance with respect to any part of 
a loss resulting from a major disaster as to which he has received 
financial assistance under any other program or from insurance or any 
other source. To comply with this law and provisions of the 
Appropriations Act, each grantee must ensure that each activity 
provides assistance to a person or entity only to the extent that the

[[Page 14344]]

person or entity has a disaster recovery need that has not been fully 
met.
    Given the often complex nature of this issue, the Department has 
published a separate Notice explaining the duplication of benefit 
requirements applicable to CDBG-DR grantees; it can be found at 76 FR 
71060 (published November 16, 2011). Grantees under this Notice are 
hereby subject to the November 16, 2011, notice.
    22. Procurement.
    a. State grantees. Per 24 CFR 570.489(d), a State must have fiscal 
and administrative requirements for expending and accounting for all 
funds. Furthermore, per Sec.  570.489(g), a State shall establish 
requirements for procurement policies and procedures for UGLGs based on 
full and open competition. All subgrantees of a State (UGLGs) are 
subject to the procurement policies and procedures required by the 
State.
    A State may meet the above requirements by electing to follow 24 
CFR part 85. If a State has adopted part 85 in full, it must follow the 
same policies and procedures it uses when procuring property and 
services with its non-Federal funds. However, the State must ensure 
that every purchase order or other contract includes any clauses 
required by Federal statutes and executive orders and their 
implementing regulations per 24 CFR 85.36(a).
    If a State has not adopted 85.36(a), but has adopted 85.36(b) 
through (i), the State and its subgrantees must follow State and local 
law (as applicable), so long as the procurements conform to applicable 
Federal law and the standards identified in 85.36(b) through (i).
    b. Direct grants to UGLGs. New York City will be subject to the 
procurement requirements of 24 CFR 85.36(b) through (i).
    c. Additional requirements related to procurement. Congress and HUD 
may request periodic updates from grantees that employ contractors. A 
contractor is a third-party firm that the grantee acquires through a 
formal procurement process to perform specific functions; a 
subrecipient is not a contractor. Grantees must incorporate performance 
requirements and penalties into each procured contract or agreement. 
The Appropriations Act requires HUD to provide grantees with technical 
assistance on contracting and procurement processes.
    23. Public Web site. The Appropriations Act requires grantees to 
maintain a public Web site which provides information accounting for 
how all grant funds are used, and managed/administered, including 
details of all contracts and ongoing procurement policies. To meet this 
requirement, each grantee must enter information on contracts in the 
DRGR system activity profiles (for all contracts valued over $25,000), 
and make the following items available on its Web site: the Action Plan 
(including all amendments); each QPR (as created using the DRGR system) 
detailing expenditures for each contractor; procurement policies and 
procedures; executed CDBG-DR contracts; and status of services or goods 
currently being procured by the grantee--e.g., phase of the 
procurement, requirements for proposals, etc.
    24. Timely distribution of funds. The provisions at 24 CFR 570.494 
and 24 CFR 570.902 regarding timely distribution of funds are waived 
and replaced with the alternative requirements under this Notice. 
Section 904(c) of the Appropriations Act requires that all funds be 
expended within two years of the date HUD obligates funds to a grantee. 
Therefore, each grantee must expend all funds within two years of the 
date its grant agreement with HUD is executed. Note that a grant 
agreement must be amended when the Department allocates additional 
funds to the grantee. As stated in paragraph A.1.a, in this section, 
the requirement for each grantee to expend funds within two years of 
the date of obligation will be enforced relative to the activities 
funded under each obligation. HUD expects each grantee to expeditiously 
obligate and expend all funds, including any recaptured funds or 
program income, and to carry out activities in a timely manner to 
ensure this deadline is met. See sections III and VII of this Notice 
for additional details on expenditure of funds.
    To track grantees' progress, HUD will evaluate timeliness in 
relation to each grantee's established projection schedules (see 
section III of this Notice, and paragraph A.1.l under section VI). The 
Department will, absent substantial evidence to the contrary, deem a 
grantee to be carrying out its programs and activities in a timely 
manner if the schedule for carrying out its activities is substantially 
met. In determining the appropriate corrective action pursuant to this 
section, HUD will take into account the extent to which unexpended 
funds have been obligated by the grantee and its subrecipients for 
specific activities at the time the finding is made and other relevant 
information.
    25. Review of continuing capacity to carry out CDBG-funded 
activities in a timely manner. If HUD determines at any time that the 
grantee has not carried out its CDBG-DR activities and certifications 
in accordance with the requirements and criteria described in this 
Notice, HUD will undertake a further review to determine whether or not 
the grantee has the continuing capacity to carry out its activities in 
a timely manner. In making the determination, the Department will 
consider the following alternative requirements to provisions under 42 
U.S.C. 5304(e): the nature and extent of the grantee's performance 
deficiencies, types of corrective actions the grantee has undertaken, 
and the success or likely success of such actions.
    26. Corrective and remedial actions. To ensure compliance with the 
requirements of the Appropriations Act and to effectively administer 
the CDBG-DR program in a manner that facilitates recovery, particularly 
the alternative requirements permitting States to act directly to carry 
out eligible activities, HUD is waiving 42 U.S.C. 5304(e) of the HCD 
Act to the extent necessary to impose the following alternative 
requirement: HUD may undertake corrective and remedial actions for 
States in accordance with the authorities applicable to entitlement 
grantees in subpart O (including corrective and remedial actions in 24 
CFR 570.910, 570.911, and 570.913) or under subpart I of the CDBG 
regulations at 24 CFR part 570. Before determining appropriate 
corrective actions, HUD will notify the grantee of the procedures 
applicable to its review. In accordance with 24 CFR 570.300, the 
policies and procedures set forth in subpart O will apply to New York 
City.
    27. Reduction, withdrawal, or adjustment of a grant or other 
appropriate action. Prior to a reduction, withdrawal, or adjustment of 
a grant or other appropriate action taken pursuant to this section, the 
recipient shall be notified of such proposed action and given an 
opportunity within a prescribed time period for an informal 
consultation. Consistent with the procedures described in this Notice, 
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.

B. Housing and Related Floodplain Issues.

    28. Housing-related eligibility waivers. The broadening of 42 
U.S.C. 5305(a)(24) is necessary following major disasters in which 
large numbers of affordable housing units have been damaged or 
destroyed, as is the case of the disasters eligible under this Notice. 
Thus, 42

[[Page 14345]]

U.S.C. 5305(a) is waived to the extent necessary to allow: 
homeownership assistance for households with up to 120 percent of the 
area median income, down payment assistance for up to 100 percent of 
the down payment (42 U.S.C. 5305(a)(24)(D)), and new housing 
construction. While homeownership assistance may be provided to 
households with up to 120 percent of the area median income, only those 
funds used to serve households with up to 80 percent of the area median 
income may qualify as meeting the low- and moderate-income person 
benefit national objective.
    29. Housing incentives to resettle in disaster-affected 
communities. Incentive payments are generally offered in addition to 
other programs or funding (such as insurance), to encourage households 
to relocate in a suitable housing development or an area promoted by 
the community's comprehensive recovery plan. For example, a grantee may 
offer an incentive payment (possibly in addition to a buyout payment) 
for households that volunteer to relocate outside of a floodplain or to 
a lower-risk area. Therefore, 42 U.S.C. 5305(a) and associated 
regulations are waived to the extent necessary to allow the provision 
of housing incentives. Grantees providing housing incentives must 
maintain documentation, at least at a programmatic level, describing 
how the amount of assistance was determined to be necessary and 
reasonable. In addition, the incentives must be in accordance with the 
grantee's approved Action Plan and published program design(s). Note 
that this waiver does not permit a compensation program. Additionally, 
a grantee may require the incentive to be used for a particular purpose 
by the household receiving the assistance.
    30. Limitation on emergency grant payments--interim mortgage 
assistance. 42 U.S.C. 5305(a)(8) is modified to extend interim mortgage 
assistance to qualified individuals from 3 months, for up to 20 months. 
Interim mortgage assistance is typically used in conjunction with a 
buyout program, or the rehabilitation or reconstruction of single 
family housing, during which mortgage payments may be due but the home 
is uninhabitable. The time required for a household to complete the 
rebuilding process may often extend beyond three months. Thus, interim 
assistance is critical for many households facing financial hardship 
during this period. A grantee using this alternative requirement must 
document, in its policies and procedures, how it will determine the 
amount of assistance to be provided is necessary and reasonable.
    31. Acquisition of real property and flood buyouts. Grantees under 
this notice are able to carry out property acquisition for a variety of 
purposes. However, the term ``buyouts'' as referenced in this Notice 
refers to acquisition of properties located in a floodway or floodplain 
that is intended to reduce risk from future flooding. HUD is providing 
alternative requirements for consistency with the application of other 
Federal resources commonly used for this type of activity.
    a. Buyout requirements:
    (1) Any property acquired, accepted, or from which a structure will 
be removed pursuant to the project will be dedicated and maintained in 
perpetuity for a use that is compatible with open space, recreational, 
or wetlands management practices;
    (2) No new structure will be erected on property acquired, accepted 
or from which a structure was removed under the acquisition or 
relocation program other than (a) a public facility that is open on all 
sides and functionally related to a designated open space (e.g., a 
park, campground, or outdoor recreation area); (b) a rest room; (c) a 
flood control structure; or (d) a structure that the local floodplain 
manager approves in writing before the commencement of the construction 
of the structure;
    (3) After receipt of the assistance, with respect to any property 
acquired, accepted, or from which a structure was removed under the 
acquisition or relocation program, no subsequent application for 
additional disaster assistance for any purpose will be made by the 
recipient to any Federal entity in perpetuity;
    (4) Grantees have the discretion to determine an appropriate 
valuation method (including the use of pre-flood value or post-flood 
value as a basis for property value). However, in using CDBG-DR funds 
for buyouts, the grantee must uniformly apply whichever valuation 
method it chooses;
    (5) All buyout activities must be classified using the ``buyout'' 
activity type in the DRGR system; and
    (6) Any State grantee implementing a buyout program or activity 
must consult with affected UGLGs.
    b. Redevelopment of acquired properties.
    (1) Properties purchased through a buyout program may not typically 
be redeveloped, with a few exceptions. See subparagraph a(2), above.
    (2) Grantees may redevelop an acquired property if: (a) the 
property is not acquired through a buyout program, and (b) the purchase 
price is based on the property's post-flood fair market value (the pre-
flood value may not be used). In addition to the purchase price, 
grantees may opt to provide relocation assistance to the owner of a 
property that will be redeveloped if the property is purchased by the 
grantee or subgrantee through voluntary acquisition, and the owner's 
need for additional assistance is documented.
    (3) In carrying out acquisition activities, grantees must ensure 
they are in compliance with their long-term redevelopment plans.
    32. Alternative requirement for housing rehabilitation--assistance 
for second homes. The Department is instituting an alternative 
requirement to the rehabilitation provisions at 42 U.S.C. 5305(a) as 
follows: a ``second home'', as defined in IRS Publication 936 (mortgage 
interest deductions), is not eligible for rehabilitation assistance, 
residential incentives, or to participate in a CDBG-DR buyout program 
(as defined by this Notice).
    33. Flood insurance. Grantees, recipients, and subrecipients must 
implement procedures and mechanisms to ensure that assisted property 
owners comply with all flood insurance requirements, including the 
purchase and notification requirements described below, prior to 
providing assistance. For additional information, please consult with 
the Field Environmental Officer in the local HUD Field Office or review 
the guidance on flood insurance requirements on HUD's Web site.
    a. Flood insurance purchase requirements. HUD does not prohibit the 
use of CDBG-DR funds for existing residential buildings in the Special 
Flood Hazard Area (SFHA) (or ``100-year'' floodplain). However, Federal 
laws and regulations related to both flood insurance and floodplain 
management must be followed, as applicable. With respect to flood 
insurance, a HUD-assisted homeowner for a property located in the SFHA 
must obtain and maintain flood insurance in the amount and duration 
prescribed by FEMA's National Flood Insurance Program. Section 102(a) 
of the Flood Disaster Protection Act of 1973 (42 U.S.C. 4012a) mandates 
the purchase of flood insurance protection for any HUD-assisted 
property within the SFHA.
    b. Future Federal assistance to owners remaining in a floodplain.
    (1) Section 582 of the National Flood Insurance Reform Act of 1994, 
as amended, (42 U.S.C. 5154a) prohibits flood disaster assistance in 
certain circumstances. In general, it provides that no Federal disaster 
relief assistance made available in a flood disaster area

[[Page 14346]]

may be used to make a payment (including any loan assistance payment) 
to a person for repair, replacement, or restoration for damage to any 
personal, residential, or commercial property if that person at any 
time has received Federal flood disaster assistance that was 
conditioned on the person first having obtained flood insurance under 
applicable Federal law and the person has subsequently failed to obtain 
and maintain flood insurance as required under applicable Federal law 
on such property. This means that a grantee may not provide disaster 
assistance for the repair, replacement, or restoration to a person who 
has failed to meet this requirement.
    (2) Section 582 also implies a responsibility for a grantee that 
receives CDBG-DR funds or that designates annually appropriated CDBG 
funds for disaster recovery. That responsibility is to inform property 
owners receiving disaster assistance that triggers the flood insurance 
purchase requirement that they have a statutory responsibility to 
notify any transferee of the requirement to obtain and maintain flood 
insurance, and that the transferring owner may be liable if he or she 
fails to do so. These requirements are described below.
    (3) Duty to notify. In the event of the transfer of any property 
described in subparagraph (5), the transferor shall, not later than the 
date on which such transfer occurs, notify the transferee in writing of 
the requirements to:
    (a) Obtain flood insurance in accordance with applicable Federal 
law with respect to such property, if the property is not so insured as 
of the date on which the property is transferred; and
    (b) Maintain flood insurance in accordance with applicable Federal 
law with respect to such property. Such written notification shall be 
contained in documents evidencing the transfer of ownership of the 
property.
    (4) Failure to notify. If a transferor fails to provide notice as 
described above and, subsequent to the transfer of the property:
    (a) The transferee fails to obtain or maintain flood insurance, in 
accordance with applicable federal law, with respect to the property;
    (b) The property is damaged by a flood disaster; and
    (c) Federal disaster relief assistance is provided for the repair, 
replacement, or restoration of the property as a result of such damage, 
the transferor shall be required to reimburse the Federal Government in 
an amount equal to the amount of the Federal disaster relief assistance 
provided with respect to the property.
    (5) The notification requirements apply to personal, commercial, or 
residential property for which Federal disaster relief assistance made 
available in a flood disaster area has been provided, prior to the date 
on which the property is transferred, for repair, replacement, or 
restoration of the property, if such assistance was conditioned upon 
obtaining flood insurance in accordance with applicable Federal law 
with respect to such property.
    (6) The term ``Federal disaster relief assistance'' applies to HUD 
or other Federal assistance for disaster relief in ``flood disaster 
areas.'' The term ``flood disaster area'' is defined in section 
582(d)(2) of the National Flood Insurance Reform Act of 1994, as 
amended, to include an area receiving a presidential declaration of a 
major disaster or emergency as a result of flood conditions.

C. Infrastructure (Public Facilities, Public Improvements, Public 
Buildings)

    34. Buildings for the general conduct of government. 42 U.S.C. 
5305(a) is waived to the extent necessary to allow grantees to fund the 
rehabilitation or reconstruction of public buildings that are otherwise 
ineligible. HUD believes this waiver is consistent with the overall 
purposes of the HCD Act, and is necessary for many grantees to 
adequately address critical infrastructure needs created by the 
disaster.
    35. Use of CDBG as Match. Additionally, as provided by the HCD Act, 
funds may be used as a matching requirement, share, or contribution for 
any other Federal program when used to carry out an eligible CDBG-DR 
activity. This includes programs or activities administered by the 
Federal Emergency Management Agency (FEMA) or the U.S. Army Corps of 
Engineers (USACE).

D. Economic Revitalization.

    36. National Objective Documentation for Economic Development 
Activities. 24 CFR 570.483(b)(4)(i) and 570.208(a)(4)(i) are waived to 
allow the grantees under this Notice to identify low- and moderate-
income jobs benefit by documenting, for each person employed, the name 
of the business, type of job, and the annual wages or salary of the 
job. HUD will consider the person income-qualified if the annual wages 
or salary of the job is at or under the HUD-established income limit 
for a one-person family. This method replaces the standard CDBG 
requirement in which grantees must review the annual wages or salary of 
a job in comparison to the person's total household income and size 
(i.e., number of persons). Thus, it streamlines the documentation 
process by allowing the collection of wage data from the assisted 
business for each position created or retained, rather than from each 
individual household.
    This alternative requirement has been granted on several prior 
occasions to CDBG-DR grantees, and to date, those grants have not 
exhibited any issues of concern in calculating the benefit to low- and 
moderate-income persons. The Department has determined that, in the 
context of disaster recovery, this waiver is consistent with the HCD 
Act.
    37. Public benefit for certain economic development activities. The 
public benefit provisions set standards for individual economic 
development activities (such as a single loan to a business) and for 
economic development activities in the aggregate. Currently, public 
benefit standards limit the amount of CDBG assistance per job retained 
or created, or the amount of CDBG assistance per low- and moderate-
income person to which goods or services are provided by the activity. 
These dollar thresholds can impede recovery by limiting the amount of 
assistance the grantee may provide to a critical activity.
    This Notice waives the public benefit standards at 42 U.S.C. 
5305(e)(3), 24 CFR 570.482(f)(1), (2), (3), (4)(i), (5), and (6), and 
570.209(b)(1), (2), (3)(i), (4), for economic development activities 
designed to create or retain jobs or businesses (including, but not 
limited to, long-term, short-term, and infrastructure projects). 
However, grantees shall report and maintain documentation on the 
creation and retention of total jobs; the number of jobs within certain 
salary ranges; the average amount of assistance provided per job, by 
activity or program; the North American Industry Classification System 
(NAICS) code for each business assisted; and the types of jobs. HUD is 
also waiving 570.482(g) and 570.209(c) and (d) to the extent these 
provisions are related to public benefit.
    38. Clarifying note on Section 3 income documentation requirements. 
Pursuant to the U.S. Housing Act of 1937 (42 U.S.C. 1437a(b)(2)) and 24 
CFR 135.5, the Secretary is authorized to establish income limits to 
consider an individual to be a Section 3 resident. This Notice 
authorizes grantees to determine that an individual is eligible to be 
considered a Section 3 resident if the annual wages or salary of the 
person are at, or under, the HUD-established income limit for a one-
person family for the jurisdiction.

[[Page 14347]]

    39. Waiver and modification of the job relocation clause to permit 
assistance to help a business return. Traditional CDBG requirements 
prevent program participants from providing assistance to a business to 
relocate from one labor market area to another--if the relocation is 
likely to result in a significant loss of jobs in the labor market from 
which the business moved. This prohibition can be a critical barrier to 
reestablishing and rebuilding a displaced employment base after a major 
disaster. Therefore, 42 U.S.C. 5305(h), 24 CFR 570.210, and 24 CFR 
570.482(h) are waived to allow a grantee to provide assistance to any 
business that was operating in the disaster-declared labor market area 
before the incident date of the applicable disaster and has since 
moved, in whole or in part, from the affected area to another State or 
to a labor market area within the same State to continue business.
    40. Waiver to permit some activities in support of the tourism 
industry (State of New Jersey only). The State of New Jersey plans to 
provide disaster recovery grant assistance to support the State's $38 
billion tourism industry and promote travel to communities in the 
disaster-impacted areas and has requested an eligibility waiver for 
such activities. Without such intervention, the State estimates a $950 
million loss in the third quarter of 2013. Tourism industry support, 
such as a national consumer awareness advertising campaign for an area 
in general, is ineligible for regular CDBG assistance. However, such 
support was eligible, within limits, for CDBG-DR funds appropriated for 
recovery of Lower Manhattan following the September 11, 2001, terrorist 
attacks, and HUD understands that such support can be a useful recovery 
tool in a damaged regional economy that depends on tourism for many of 
its jobs and tax revenues. However, because the State of New Jersey is 
proposing advertising and marketing activities rather than direct 
assistance to tourism-dependent businesses, and because long-term 
benefit from the proposed activities must be derived using indirect 
means, 42 U.S.C. 5305(a) and 24 CFR 570.489(f) are waived only to the 
extent necessary to make eligible use of no more than $25 million for 
assistance for the tourism industry, including promotion of a community 
or communities in general, provided the assisted activities are 
designed to support tourism to the most impacted and distressed areas 
related to the effects of Hurricane Sandy. This waiver will expire at 
the end of the grantee's two year expenditure period.
    41. Alternative requirement for assistance to businesses, including 
privately-owned utilities. The Department is instituting an alternative 
requirement to the provisions at 42 U.S.C. 5305(a) as follows: when 
grantees under this Notice provide funds to for-profit businesses, such 
funds may only be provided to a small business, as defined by the SBA 
under 13 CFR Part 121. CDBG-DR funds made available under this Notice 
may also not be used to assist a privately-owned utility for any 
purpose.

E. Certifications and Collection of Information.

    42. Certifications waiver and alternative requirement. Sections 
91.325 and 91.225 of title 24 of the Code of Federal Regulations are 
waived. Each State or UGLG receiving a direct allocation under this 
Notice must make the following certifications with its Action Plan:
    a. The grantee certifies that it will affirmatively further fair 
housing, which means that it will conduct an analysis to identify 
impediments to fair housing choice within its jurisdiction and take 
appropriate actions to overcome the effects of any impediments 
identified through that analysis, and maintain records reflecting the 
analysis and actions in this regard (see 24 CFR 570.487(b)(2) and 
570.601(a)(2)). In addition, the grantee certifies that agreements with 
subrecipients will meet all civil rights related requirements pursuant 
to 24 CFR 570.503(b)(5).
    b. The grantee certifies that it has in effect and is following a 
residential anti-displacement and relocation assistance plan in 
connection with any activity assisted with funding under the CDBG 
program.
    c. The grantee certifies its compliance with restrictions on 
lobbying required by 24 CFR part 87, together with disclosure forms, if 
required by part 87.
    d. The grantee certifies that the Action Plan for Disaster Recovery 
is authorized under State and local law (as applicable) and that the 
grantee, and any contractor, subrecipient, or designated public agency 
carrying out an activity with CDBG-DR funds, possess(es) the legal 
authority to carry out the program for which it is seeking funding, in 
accordance with applicable HUD regulations and this Notice.
    e. The grantee certifies that activities to be administered with 
funds under this Notice are consistent with its Action Plan.
    f. The grantee certifies that it will comply with the acquisition 
and relocation requirements of the URA, as amended, and implementing 
regulations at 49 CFR part 24, except where waivers or alternative 
requirements are provided for in this Notice.
    g. The grantee certifies that it will comply with section 3 of the 
Housing and Urban Development Act of 1968 (12 U.S.C. 1701u), and 
implementing regulations at 24 CFR part 135.
    h. The grantee certifies that it is following a detailed citizen 
participation plan that satisfies the requirements of 24 CFR 91.105 or 
91.115, as applicable (except as provided for in notices providing 
waivers and alternative requirements for this grant). Also, each UGLG 
receiving assistance from a State grantee must follow a detailed 
citizen participation plan that satisfies the requirements of 24 CFR 
570.486 (except as provided for in notices providing waivers and 
alternative requirements for this grant).
    i. Each State receiving a direct award under this Notice certifies 
that it has consulted with affected UGLGs in counties designated in 
covered major disaster declarations in the non-entitlement, 
entitlement, and tribal areas of the State in determining the uses of 
funds, including method of distribution of funding, or activities 
carried out directly by the State.
    j. The grantee certifies that it is complying with each of the 
following criteria:
    (1) Funds will be used solely for necessary expenses related to 
disaster relief, long-term recovery, restoration of infrastructure and 
housing, and economic revitalization in the most impacted and 
distressed areas for which the President declared a major disaster in 
the aftermath of Hurricane Sandy, pursuant to the Stafford Act.
    (2) With respect to activities expected to be assisted with CDBG-DR 
funds, the Action Plan has been developed so as to give the maximum 
feasible priority to activities that will benefit low- and moderate-
income families.
    (3) The aggregate use of CDBG-DR funds shall principally benefit 
low- and moderate-income families in a manner that ensures that at 
least 50 percent of the grant amount is expended for activities that 
benefit such persons.
    (4) The grantee will not attempt to recover any capital costs of 
public improvements assisted with CDBG-DR grant funds, by assessing any 
amount against properties owned and occupied by persons of low- and 
moderate-income, including any fee charged or assessment made as a 
condition of obtaining access to such public improvements, unless: (a) 
disaster recovery grant funds are used to pay the proportion of such 
fee or assessment that relates to the capital costs of such

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public improvements that are financed from revenue sources other than 
under this title; or (b) for purposes of assessing any amount against 
properties owned and occupied by persons of moderate income, the 
grantee certifies to the Secretary that it lacks sufficient CDBG funds 
(in any form) to comply with the requirements of clause (a).
    k. The grantee certifies that it (and any subrecipient or 
recipient)) will conduct and carry out the grant in conformity with 
title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d) and the Fair 
Housing Act (42 U.S.C. 3601-3619) and implementing regulations.
    l. The grantee certifies that it has adopted and is enforcing the 
following policies. In addition, States receiving a direct award must 
certify that they will require UGLGs that receive grant funds to 
certify that they have adopted and are enforcing:
    (1) A policy prohibiting the use of excessive force by law 
enforcement agencies within its jurisdiction against any individuals 
engaged in nonviolent civil rights demonstrations; and
    (2) A policy of enforcing applicable State and local laws against 
physically barring entrance to or exit from a facility or location that 
is the subject of such nonviolent civil rights demonstrations within 
its jurisdiction.
    m. Each State or UGLG receiving a direct award under this Notice 
certifies that it (and any subrecipient or recipient) has the capacity 
to carry out disaster recovery activities in a timely manner; or the 
State or UGLG will develop a plan to increase capacity where such 
capacity is lacking.
    n. The grantee will not use grant funds for any activity in an area 
delineated as a special flood hazard area or equivalent in FEMA's most 
recent and current data source unless it also ensures that the action 
is designed or modified to minimize harm to or within the floodplain in 
accordance with Executive Order 11988 and 24 CFR part 55. The relevant 
data source for this provision is the latest issued FEMA data or 
guidance, which includes advisory data (such as Advisory Base Flood 
Elevations) or preliminary and final Flood Insurance Rate Maps.
    o. The grantee certifies that its activities concerning lead-based 
paint will comply with the requirements of 24 CFR part 35, subparts A, 
B, J, K, and R.
    p. The grantee certifies that it will comply with applicable laws.
    q. The grantee certifies that it has reviewed the requirements of 
this Notice and requirements of Public Law 113-2 applicable to funds 
allocated by this Notice, and that it has in place proficient financial 
controls and procurement processes and has established adequate 
procedures to prevent any duplication of benefits as defined by section 
312 of the Stafford Act, to ensure timely expenditure of funds, to 
maintain comprehensive Web sites regarding all disaster recovery 
activities assisted with these funds, and to detect and prevent waste, 
fraud, and abuse of funds.
    43. Information collection approval note. HUD has approval for 
information collection requirements in accordance with the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501-20) under OMB control number 
2506-0165. In accordance with the Paperwork Reduction Act, HUD may not 
conduct or sponsor, nor is a person required to respond to, a 
collection of information, unless the collection displays a valid 
control number.

VII. Duration of Funding

    The Appropriations Act requires that HUD obligate all funds 
provided under Chapter 9, Community Development Fund, not later than 
September 30, 2017. Concurrently, section 904(c) of the Appropriations 
Act requires that all funds be expended within two years of the date 
HUD obligates funds. Therefore, each grantee must expend all funds 
within two years of the date HUD signs the grant agreement with the 
grantee. Note that if a grantee amends its Action Plan to program 
additional funds that the Department has allocated to it, the grant 
agreement must also be revised. As stated in paragraph 1.a, under 
section VI of this Notice, the requirement for each grantee to expend 
funds within two years is triggered by each amendment to the grant 
agreement. That is, each grant amendment has its own expenditure 
deadline. Pursuant to section 904(c) of the Appropriations Act, 
grantees or HUD may request waivers of the two-year expenditure 
deadline from the Office of Management and Budget. For any funds that 
the grantee believes will not be expended by the deadline, it must 
submit a letter to HUD justifying why it is necessary to extend the 
deadline for a specific portion of funds. The letter must detail the 
compelling legal, policy, or operational challenges for any such 
waiver, and must also identify the date by when the specified portion 
of funds will be expended. Funds remaining in the grantee's line of 
credit at the time of this expenditure deadline will be returned to the 
U.S. Treasury.

VIII. Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance numbers for the disaster 
recovery grants under this Notice are as follows: 14.218; 14.228.

IX. Finding of No Significant Impact

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

    Dated: February 28, 2013.
Mark Johnston,
Deputy Assistant Secretary for Special Needs Programs.

Appendix A--Allocation Methodology

    To expedite recovery while recognizing that time is needed to 
get a full understanding of long-term recovery needs relating to 
eligible disasters supported by Public Law 113-2, this allocation 
provides $5.4 billion of the $16 billion, reserving the balance to 
address the full scope of needs when better information is 
available.

Background

    Public Law 113-2 states:
    For an additional amount for ``Community Development Fund'', 
$16,000,000,000, to remain available until September 30, 2017, for 
necessary expenses related to disaster relief, long-term recovery, 
restoration of infrastructure and housing, and economic 
revitalization in the most impacted and distressed areas resulting 
from a major disaster declared pursuant to the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121 et 
seq.) due to Hurricane Sandy and other eligible events in calendar 
years 2011, 2012, and 2013, for activities authorized under title I 
of the Housing and Community Development Act of 1974 (42 U.S.C. 5301 
et seq.):
    Provided, That funds shall be awarded directly to the State or 
unit of general local government as a grantee at the discretion of 
the Secretary of Housing and Urban Development:
    Provided further, That the Secretary shall allocate to grantees 
not less than 33 percent

[[Page 14349]]

of the funds provided under this heading within 60 days after the 
enactment of this Act based on the best available data:
    Provided further, That prior to the obligation of funds, a 
grantee shall submit a plan to the Secretary for approval detailing 
the proposed use of all funds, including criteria for eligibility 
and how the use of these funds will address long-term recovery and 
restoration of infrastructure and housing and economic 
revitalization in the most impacted and distressed areas:
    The legislation specifies that the CDBG-DR funds are to be used 
``for necessary expenses related to disaster relief, long-term 
recovery, restoration of infrastructure and housing, and economic 
revitalization in the most impacted and distressed areas resulting 
from a major disaster'' and further specifies that the funds are not 
to be used for activities reimbursable by FEMA or the Corps of 
Engineers.
    The language also calls for HUD to use ``best available'' data 
to make its allocation. For this allocation, similar to prior 
allocations, HUD makes a determination of unmet needs by estimating 
unmet needs related to the main intended uses of the funds:
     ``restoration of * * * housing''. We make an estimate 
with best available data on the amount of housing damage not likely 
to be covered by insurance, SBA disaster loans, or FEMA housing 
assistance. To target the ``most impacted and distressed areas'', 
the calculation limits the need calculation only to homes with high 
levels of individual damage (see below).
     ``economic revitalization''. We make an estimate with 
best available data on the amount of damage to businesses applying 
for an SBA loan that are expected to be turned down, usually because 
of inadequate credit or income to support the needed loan amount.
     ``restoration of infrastructure''. Due to the early 
stage of the disaster, HUD did not use data on infrastructure need 
for this first allocation, pending getting better information on 
infrastructure needs which will be used in a later allocation. That 
noted, grantees may use this initial allocation to begin addressing 
infrastructure needs.
    These estimated needs are then summed together and an allocation 
is made among the grantee universe based on their proportional share 
of ``unmet needs''. At this point, there is good data on number of 
affected households and likely damage, but there is less complete 
data on the extent other resources have addressed those needs, 
specifically:
     Severe unmet housing needs. HUD limits the calculation 
of unmet needs to only properties with significant damage. This goes 
toward meeting the Congressional requirement of most impacted. 
Information on the adequacy of insurance to address housing needs 
was still very early in the disaster response, a high percentage of 
affected property owners are still determining how much of their 
recovery needs will be covered by insurance. To adjust for this 
uncertainty, HUD applied assumptions about insurance coverage rates 
to calculate the severe housing needs.
     Unmet business loss. It is very early in the disaster 
response to accurately estimate the needs for business to recover. 
This estimate looks at the properties that have applied for SBA 
disaster loans and extrapolates both estimated damage and 
disapproval rates based on the applications requested to date. As 
with the housing estimates, HUD applies an assumption about expected 
SBA denial rates.

Methodology for Calculating Unmet Needs

Available Data

    The ``best available'' data HUD staff have identified as being 
available to calculate unmet needs at this time for the targeted 
disasters come from the following data sources:
     FEMA Individual Assistance program data on housing unit 
damage;
     SBA for management of its disaster assistance loan 
program for housing repair and replacement;
     SBA for management of its disaster assistance loan 
program for business real estate repair and replacement as well as 
content loss; and

Calculating Unmet Housing Needs

    The core data on housing damage for both the unmet housing needs 
calculation and the concentrated damage are based on home inspection 
data for FEMA's Individual Assistance program. For unmet housing 
needs, the FEMA data are supplemented by Small Business 
Administration data from its Disaster Loan Program. HUD calculates 
``unmet housing needs'' as the number of housing units with unmet 
needs times the estimated cost to repair those units less repair 
funds already provided by FEMA, where:
     Each of the FEMA inspected owner units are categorized 
by HUD into one of five categories:
    [cir] Minor-Low: Less than $3,000 of FEMA inspected real 
property damage
    [cir] Minor-High: $3,000 to $7,999 of FEMA inspected real 
property damage
    [cir] Major-Low: $8,000 to $14,999 of FEMA inspected real 
property damage
    [cir] Major-High: $15,000 to $28,800 of FEMA inspected real 
property damage and/or 1 to 4 feet of flooding on the first floor.
    [cir] Severe: Greater than $28,800 of FEMA inspected real 
property damage or determined destroyed and/or 4 or more feet of 
flooding on the first floor.
    To meet the statutory requirement of ``most impacted'' in this 
legislative language, homes are determined to have a high level of 
damage if they have damage of ``major-low'' or higher. That is, they 
have a real property FEMA inspected damage of $8,000 or flooding 
over 1 foot. Furthermore, a homeowner is determined to have unmet 
needs if they have received a FEMA grant to make home repairs. For 
other homeowners at this stage of the disaster, assumptions are made 
about the likely percent of damage not covered by insurance. This is 
assumed to increase by severity of damage to the home. The 
assumptions applied to ascertain the range of allocations were 30 
percent for homes with major-low damage; 50 percent for homes with 
major-high damage; and 70 percent for homes with severe damage.
     FEMA does not inspect rental units for real property 
damage so personal property damage is used as a proxy for unit 
damage. Each of the FEMA inspected renter units are categorized by 
HUD into one of five categories:
    [cir] Minor-Low: Less than $1,000 of FEMA inspected personal 
property damage
    [cir] Minor-High: $1,000 to $1,999 of FEMA inspected personal 
property damage
    [cir] Major-Low: $2,000 to $3,499 of FEMA inspected personal 
property damage
    [cir] Major-High: $3,500 to $7,499 of FEMA inspected personal 
property damage or 1 to 4 feet of flooding on the first floor.
    [cir] Severe: Greater than $7,500 of FEMA inspected personal 
property damage or determined destroyed and/or 4 or more feet of 
flooding on the first floor.
    For rental properties, to meet the statutory requirement of 
``most impacted'' in this legislative language, homes are determined 
to have a high level of damage if they have damage of ``major-low'' 
or higher. That is, they have a FEMA personal property damage 
assessment of $2,000 or greater or flooding over 1 foot. 
Furthermore, landlords are presumed to have adequate insurance 
coverage unless the unit is occupied by a renter with income of 
$30,000 or less. Units are occupied by a tenant with income less 
than $30,000 are used to calculate likely unmet needs for affordable 
rental housing.
     The average cost to fully repair a home for a specific 
disaster to code within each of the damage categories noted above is 
calculated using the average real property damage repair costs 
determined by the Small Business Administration for its disaster 
loan program for the subset of homes inspected by both SBA and FEMA. 
Because SBA is inspecting for full repair costs, it is presumed to 
reflect the full cost to repair the home, which is generally more 
than the FEMA estimates on the cost to make the home habitable. If 
fewer than 100 SBA inspections are made for homes within a FEMA 
damage category, the estimated damage amount in the category for 
that disaster has a cap applied at the 75th percentile of all 
damaged units for that category for all disasters and has a floor 
applied at the 25th percentile.

Calculating Economic Revitalization Needs

    Based on SBA disaster loans to businesses, HUD used the sum of 
real property and real content loss of small businesses not 
receiving an SBA disaster loan times 85 percent. This is adjusted 
upward by a per business unmet need times the number of applications 
denied pre-inspection for inadequate credit or income or the loan 
was still in processing and did not yet have an inspection.
    Because applications denied for poor credit or income are the 
most likely measure of requiring the type of assistance available 
with CDBG recovery funds, the calculated unmet business needs for 
each state are adjusted upwards by the proportion of total 
application that were denied at the pre-process stage because of 
poor credit or inability to show repayment ability.

[FR Doc. 2013-05170 Filed 3-4-13; 8:45 am]
BILLING CODE 4210-67-P