Allocations, Common Application, Waivers, and Alternative Requirements for Community Development Block Grant Disaster Recovery Grantees, 39687-39710 [2016-14110]

Agencies

• DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Federal Register Volume 81, Number 117 (Friday, June 17, 2016)]
[Notices]
[Pages 39687-39710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-14110]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

[Docket No. FR-5938-N-01]


Allocations, Common Application, Waivers, and Alternative 
Requirements for Community Development Block Grant Disaster Recovery 
Grantees

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

ACTION: Notice.

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SUMMARY: This notice allocates $299 million in Community Development 
Block Grant disaster recovery (CDBG-DR) funds appropriated by the 
Transportation, Housing and Urban Development, and Related Agencies 
Appropriations Act of 2016 for the purpose of assisting long-term 
recovery in South Carolina and Texas. 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. The 
waivers, alternative requirements, and other provisions of this notice 
reflect the Department's commitment to expediting recovery, increasing 
the resilience of impacted communities and ensuring transparency in the 
use of Federal disaster recovery funds.

DATES: Effective Date: June 22, 2016.

FOR FURTHER INFORMATION CONTACT: Stanley Gimont, Director, Office of 
Block Grant Assistance, Department of Housing and Urban Development, 
451 7th Street SW., Room 7286, Washington, DC 20410, telephone number 
202-708-3587. Persons with hearing or speech impairments may access 
this number via TTY by calling the Federal Relay Service at 800-877-
8339. 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. Allocations
II. Use of Funds
III. Management and Oversight of Funds
IV. Authority To Grant Waivers

[[Page 39688]]

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. Allocations

    Section 420 of the Transportation, Housing and Urban Development, 
and Related Agencies Appropriations Act, 2016 (Pub. L. 114-113, 
approved December 18, 2015) (Appropriations Act) makes available $300 
million 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 
in 2015, pursuant to the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act of 1974 (42 U.S.C. 5121 et seq.), related to 
the consequences of Hurricane Joaquin and adjacent storm systems, 
Hurricane Patricia, and other flood events. The Appropriations Act 
provides $1 million of these funds for the Department's management and 
oversight of funded disaster recovery grants. The law provides that 
grants shall be awarded directly to a State or unit of general local 
government (UGLG) at the discretion of the Secretary. Unless noted 
otherwise, the term ``grantee'' refers to the State or UGLG receiving a 
direct award 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 allocates funds using the best 
available data that cover all of the eligible affected areas.
    Based on a review of the impacts from these disasters, and 
estimates of unmet need, HUD is making the following allocations:

                                  Table 1--Allocations Under Public Law 114-113
----------------------------------------------------------------------------------------------------------------
                                                                                        Minimum amount that must
                                                                                        be expended for recovery
       Disaster No.                State                Grantee          Allocation      in the HUD-identified
                                                                                        ``most impacted'' areas
                                                                                               identified
----------------------------------------------------------------------------------------------------------------
4241.....................  South Carolina......  Lexington County         $16,332,000  ($16,332,000) Lexington
                                                  (Urban County).                       County Urban County
                                                                                        jurisdiction.
4241.....................  South Carolina......  Columbia............      19,989,000  (19,989,000) City of
                                                                                        Columbia.
4241.....................  South Carolina......  Richland County           23,516,000  (23,516,000) Richland
                                                  (Urban County).                       County Urban County
                                                                                        jurisdiction.
4241.....................  South Carolina......  State of South            96,827,000  (65,494,200) Charleston,
                                                  Carolina.                             Dorchester, Florence,
                                                                                        Georgetown, Horry,
                                                                                        Lexington, Richland,
                                                                                        Sumter, Williamsburg.
4223, 4245...............  Texas...............  Houston.............      66,560,000  (66,560,000) City of
                                                                                        Houston.
4223, 4245...............  Texas...............  San Marcos..........      25,080,000  (25,080,000) City of San
                                                                                        Marcos.
4223, 4245...............  Texas...............  State of Texas......      50,696,000  (22,228,800) Harris,
                                                                                        Hays, Hidalgo, Travis.
                                                                      ----------------
    Total................  ....................  ....................     299,000,000
----------------------------------------------------------------------------------------------------------------

    Table 1 also shows the HUD-identified ``most impacted and 
distressed'' areas impacted by the disasters that did not receive a 
direct award. At least 80 percent of the total funds provided within 
each State under this notice must address unmet needs within the HUD-
identified ``most impacted and distressed'' areas, as identified in the 
last column in Table 1. A State may determine where the remaining 20 
percent may be spent by identifying areas it deems as ``most impacted 
and distressed.'' A detailed explanation of HUD's allocation 
methodology is provided at Appendix A.
    Each grantee receiving an allocation under this notice must submit 
an initial action plan for disaster recovery, or ``action plan,'' no 
later than 90 days after the effective date of this notice. HUD will 
only approve action plans that meet the specific requirements 
identified in this notice under section VI, ``Applicable Rules, 
Statutes, Waivers, and Alternative Requirements.''

II. Use of Funds

    The Appropriations Act requires that prior to the obligation of 
funds a grantee shall submit a plan detailing the proposed use of all 
funds, including criteria for eligibility, and how the use of these 
funds will address long-term recovery, restoration of infrastructure, 
and housing and economic revitalization in the most impacted and 
distressed areas. Thus, an action plan for disaster recovery must 
describe uses and activities that: (1) Are authorized under title I of 
the Housing and Community Development Act of 1974 (HCD Act) or allowed 
by a waiver or alternative requirement published in this notice, and 
(2) respond to a disaster-related impact. To inform the plan, grantees 
must conduct an assessment of community impacts and unmet needs to 
guide the development and prioritization of planned recovery 
activities.
    Additionally, as provided for in 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) and the U.S. Army Corps of Engineers (USACE), 
among other Federal sources. In accordance with Public Law 105-276, 
grantees are advised that not more than $250,000 may be used for the 
non-Federal cost-share of any project funded by the Secretary of the 
Army through USACE. Additionally, CDBG-DR funds cannot supplant, and 
may not be used for activities reimbursable by or for which funds are 
made available by FEMA or USACE.

III. Management and Oversight of Funds

    Consistent with 2 CFR 200.205 of the Uniform Administrative 
Requirements, Cost Principles, and Audit Requirements for Federal 
Awards (Uniform Requirements), HUD will evaluate the risks posed by 
grantees before they receive Federal awards. HUD believes there is 
merit in establishing an assessment method similar to the method 
employed under a prior CDBG-DR appropriation

[[Page 39689]]

(Disaster Relief Appropriations Act, 2013 (Pub. L. 113-2)). Therefore, 
this notice requires grantees to submit documentation required by 
paragraphs (1) through (8) below (``Risk Analysis Documentation'') in 
advance of signing a grant agreement that will allow the Department to 
ensure that grantees can adequately manage and oversee the CDBG-DR 
award.
    The grant terms of the award will reflect HUD's risk assessment of 
the grantee and will require the grantee to adhere to the description 
of its grant oversight and implementation plan submitted in response to 
this notice (as described in paragraph 8 of section III of this 
notice). HUD will also institute an annual risk analysis as well as on-
site monitoring of grantee management to further guide oversight of 
these funds.
    Each grantee must submit Risk Analysis Documentation to demonstrate 
in advance of signing a grant agreement that it has in place proficient 
controls, procedures, and management capacity. This includes 
demonstrating financial controls, procurement processes, and adequate 
procedures to prevent any duplication of benefits as defined by section 
312 of the Stafford Act. The grantee must also demonstrate that it can 
effectively manage the funds, ensure timely expenditure of funds, 
maintain a comprehensive Web site regarding all disaster recovery 
activities assisted with these funds, and ensure timely communication 
of application status to applicants for disaster recovery assistance. 
Grantees must also demonstrate adequate capacity to manage the funds 
and address any capacity needs. In order to demonstrate proficient 
controls, procedures, and management capacity, each grantee must submit 
the following Risk Analysis Documentation to the grantee's designated 
HUD representative within 30 days of the effective date of this notice, 
or with the grantee's submission of its action plan, whichever date is 
earlier.
    1. Financial Controls. A grantee has in place proficient financial 
controls if each of the following criteria is satisfied:
    a. The grantee's most recent single 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 single audit 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. The grantee has assessed its financial standards and has 
completed the HUD monitoring guide for financial standards (Pub. L. 
114-113, Guide for Review of Financial Management (the Financial 
Management Guide)). The grantee's standards must conform to the 
requirements of the Financial Management Guide. The grantee must 
identify which sections of its financial standards address each of the 
questions in the guide and which personnel or unit are responsible for 
each item.
    2. Procurement. A grantee has in place a proficient procurement 
process if:
    a. For local governments: The grantee will follow the specific 
applicable procurement standards identified in 2 CFR 200.318 through 
200.326 (subject to 2 CFR 200.110, as applicable). The grantee must 
provide a copy of its procurement standards and indicate the sections 
of its procurement standards that incorporate these provisions. The 
procedures should also indicate which personnel or unit are responsible 
for each item; or
    b. For States: The grantee has adopted 2 CFR 200.318 through 
200.326 (subject to 2 CFR 200.110, as applicable), or the effect of the 
grantee's procurement process/standards are equivalent to the effect of 
procurements under 2 CFR 200.318 through 200.326, meaning that the 
process/standards operate in a manner providing fair and open 
competition. The grantee must provide its procurement standards and 
indicate how the sections of its procurement standards align with the 
provisions of 2 CFR 200.318 through 200.326, so that HUD may evaluate 
the overall effect of the grantee's procurement standards. The 
procedures should also indicate which personnel or unit are responsible 
for the task. Guidance on the procurement rules applicable to States is 
provided in paragraph A.22, section VI, of this notice.
    3. Duplication of benefits. A grantee has adequate procedures to 
prevent the duplication of benefits when it provides HUD a uniform 
prevention of duplication of benefits procedure wherein the grantee 
identifies its processes for each of the following: (1) Verifying all 
sources of disaster assistance received by the grantee or applicant, as 
applicable; (2) determining an applicant's unmet need(s) before 
awarding assistance; and (3) ensuring beneficiaries agree to repay the 
assistance if they later receive other disaster assistance for the same 
purpose. Grantee procedures shall provide that prior to the award of 
assistance, the grantee will use the best, most recent available data 
from FEMA, the Small Business Administration (SBA), insurers, and other 
sources of funding to prevent the duplication of benefits. The 
procedures should also indicate which personnel or unit is 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. 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 to provide for the expenditure of all CDBG-DR 
funds within the period provided for in paragraph A.24 of section VI of 
this notice. The procedures should also indicate which personnel or 
unit is responsible for the task.
    5. Management of funds. A grantee has adequate procedures to 
effectively manage funds if its procedures indicate how the grantee 
will verify the accuracy of information provided by applicants; if it 
provides a monitoring policy indicating how and why monitoring is 
conducted, the frequency of monitoring, and which items are monitored; 
and if it demonstrates that it has an internal auditor and includes a 
document signed by the internal auditor that describes his or her role 
in detecting fraud, waste, and abuse.
    6. Comprehensive disaster recovery Web site. A grantee has adequate 
procedures to maintain a comprehensive Web site regarding all disaster 
recovery 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, contracts 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 is responsible for the task.
    7. Timely information on application status. A grantee has adequate 
procedures to inform applicants of the status of their applications for 
recovery assistance, at all phases, if its procedures indicate methods 
for communication (i.e., Web site, telephone, case managers, letters, 
etc.), ensure the accessibility and privacy of individualized 
information for all applicants, indicate the frequency of applicant 
status updates and identify

[[Page 39690]]

which personnel or unit is responsible for the task.
    8. Preaward Implementation Plan. In order to assess risk as 
described in 2 CFR 200.205(b) and (c), the grantee will submit an 
implementation plan to the Department. The plan must describe the 
grantee's capacity to carry out the recovery and how it will address 
any capacity gaps. HUD will determine a plan is adequate to reduce risk 
if, at a minimum:
    a. Capacity Assessment. The grantee has conducted an assessment of 
its capacity to carry out recovery efforts, and has developed a 
timeline with milestones describing when and how the grantee will 
address all capacity gaps that are identified.
    b. Staffing. The plan shows that the grantee has assessed staff 
capacity and identified personnel that will be in place for purposes of 
case management in proportion to the applicant population; program 
managers who will be assigned responsibility for each primary recovery 
area (i.e., housing, economic revitalization, and infrastructure); and 
staff responsible for procurement/contract management, environmental 
compliance and compliance with applicable requirements, as well as 
staff responsibile for monitoring and quality assurance, and financial 
management. An adequate plan will also provide for an internal audit 
function with responsible audit staff reporting independently to the 
chief officer or board of the governing body of any designated 
administering entity.
    c. Internal and Interagency Coordination. The grantee's plan 
describes, in the plan, how it will ensure effective communication 
between different departments and divisions within the grantee's 
organizational structure that are involved in CDBG-DR-funded recovery 
efforts between its lead agency and subrecipients responsible for 
implementing the grantee's action plan, and with other local and 
regional planning efforts to ensure consistency.
    d. Technical Assistance. The grantee's implementation plan 
describes its plan for the procurement and provision of technical 
assistance for any personnel that the grantee does not employ at the 
time of action plan submission, and to fill gaps in knowledge or 
technical expertise required for successful and timely recovery 
implementation where identified in the capacity assessment.
    e. Accountability. The grantee's plan identifies the principal lead 
agency responsible for implementation of the jurisdiction's CDBG-DR 
award and indicates that the head of that agency will report directly 
to the chief executive officer of the jurisdiction.
    9. Certification of Accuracy of Risk Analysis Documentation. The 
grantee must submit a certification to the accuracy of its Risk 
Analysis Documentation submissions as required by section VI.E.44 of 
this notice.
    Additionally, this notice requires grantees to submit to the 
Department a projection of expenditures and outcomes as part of its 
action plan for approval. Any subsequent changes, updates or revision 
of the projections will require the grantee to amend its action plan to 
reflect the new projections. This will enable HUD, the public, and the 
grantee to track planned versus actual performance. For more 
information on the projection requirements, see paragraph A.1.i of 
section VI of this notice.
    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 or are extended, grantees are required to 
explain the reason for the delay in the Quarterly Performance Report 
(QPR) 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 to guide 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 use by the recipient, of these funds, except for 
requirements related to fair housing, nondiscrimination, labor 
standards, and the environment (including, but not limited to, 
requirements concerning lead-based paint). 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 1 of the HCD Act. 
Regulatory waiver authority is also provided by 24 CFR 5.110, 91.600, 
and 570.5. Grantees may request such waivers, as described in Section 
VI of this notice.

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 paragraph A.3 of 
section VI 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 earlier), the 
grantee submits the required documentation in its Risk Analysis 
Documentation in order to demonstrate proficient controls, procedures, 
and management capacity, as described in section III of this notice.
     Grantee publishes its action plan for disaster recovery on 
the grantee's required disaster recovery Web site for no less than 14 
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 date of this notice.
     HUD expedites review (allotted 60 days from date of 
receipt) and approves the action plan according to criteria identified 
in this notice.
     HUD sends an action plan approval letter, grant 
conditions, and grant agreement to the grantee. If the action plan is 
not approved, a letter will be sent identifying its deficiencies; the 
grantee must then resubmit the action plan within 45 days of the 
notification letter.
     Grantee signs and returns the fully executed grant 
agreement.
     Grantee ensures that the final HUD-approved action plan is 
posted on its official Web site.
     HUD establishes the grantee's line of credit.
     Grantee requests and receives DRGR system access (if the 
grantee does not already have DRGR access).
     If it has not already done so, grantee enters the 
activities from its published action plan into the DRGR system and 
submits its DRGR action plan to HUD (funds can be drawn from the line 
of credit only for activities that are established in the DRGR system).
     The grantee may draw down funds from the line of credit 
after the Responsible Entity completes applicable environmental 
review(s) pursuant to 24

[[Page 39691]]

CFR part 58 and, as applicable, receives from HUD or the State an 
approved Request for Release of Funds and certification.

    The grantee must begin to draw down funds no later than 180 days 
after the date of this notice.

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, the 
Secretary has determined that good cause exists and the action remains 
consistent 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 
the disasters, while also ensuring that statutory requirements are met. 
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, 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, waivers 
and alternative requirements must be published in the Federal Register 
no later than 5 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 entitlement communities receiving an allocation. 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.

A. Grant Administration

    1. Action Plan for Disaster Recovery waiver and alternative 
requirement. 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 24 CFR 91.320, are waived for 
these disaster recovery grants. Instead, grantees must submit to HUD an 
action plan for disaster recovery. This streamlined plan will allow 
grantees to quickly implement disaster recovery programs while 
conforming to applicable requirements. During the course of the grant, 
HUD will monitor the grantee's actions and use of funds for consistency 
with the plan, as well as meeting the performance and timeliness 
objectives therein. The Secretary may disapprove an action plan as 
substantially incomplete 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 of 
all funds, including criteria for eligibility, and how the uses address 
long-term recovery needs. Funds dedicated for uses not described in 
accordance with paragraphs b or c 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.
    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. Grantees receiving an award under this notice must 
conduct a needs assessment to inform the allocation of CDBG-DR 
resources. At a minimum, the needs assessment must evaluate three core 
aspects of recovery--housing (interim and permanent, owner and rental, 
single-family and multifamily, affordable and market rate, and housing 
to meet the needs of predisaster homeless persons), infrastructure, and 
the economy (e.g., estimated job losses). The assessment must also take 
into account the various forms of assistance available to, or likely to 
be available to, affected communities (e.g., projected FEMA funds) and 
individuals (e.g., estimated insurance) to ensure CDBG-DR funds meet 
needs that are not likely to be addressed by other sources of funds. 
Grantees must also assess whether public services (i.e., job training, 
mental health and general health services) are necessary to complement 
activities intended to address housing and economic revitalization 
needs. The assessment must use the most recent available data and cite 
data sources. CDBG-DR funds may be used to develop the action plan, 
including the needs assessment, environmental review, and citizen 
participation requirements.
    Impacts should be described geographically by type at the lowest 
level practicable (e.g., county level or lower if available for States, 
and neighborhood or census tract level for cities). Grantees should use 
the most recent available data and estimate the portion of need likely 
to be addressed by insurance proceeds, other Federal assistance, or any 
other funding source (thus producing an estimate of unmet need). In 
addition, a needs assessment must take into account the costs of 
incorporating mitigation and resilience measures to protect against 
future hazards, including the anticipated effects of climate change on 
those hazards. HUD has developed a Disaster Impact and Unmet Needs 
Assessment Kit to guide CDBG-DR grantees through a process for 
identifying and prioritizing critical unmet needs for long-term 
community recovery, and it is available on the HUD Exchange Web site at 
https://www.hudexchange.info/resources/documents/Disaster_Recovery_Disaster_Impact_Needs_Assessment_Kit.pdf.
    Disaster recovery needs evolve over time and the needs assessment 
and action plan are expected to be amended as conditions change and 
additional needs are identified.
    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 reasonably proportionate allocation of 
resources relative to areas and categories (i.e., housing, economic 
revitalization, infrastructure) of greatest needs, including how the 
proposed allocation addressing the identified unmet needs of public 
housing, HUD-assisted housing, homeless facilities and other housing 
identified in paragraph 7 below.
    3. A description of how the grantee plans to: (a) Adhere to the 
advanced elevation requirements established in paragraph A.28 of 
section VI of this notice; (b) promote 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

[[Page 39692]]

continued sea level rise; and (c) coordinate with other local and 
regional planning efforts to ensure consistency. This information 
should be based on the history of FEMA flood mitigation efforts, and 
take into account projected increase in sea level and frequency and 
intensity of precipitation events, which is not considered in current 
FEMA maps and National Flood Insurance Program premiums.
    4. A description of how the grantee will leverage CDBG-DR funds 
with funding provided by other Federal, State, local, private, and 
nonprofit 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), Economic Development Administration, USACE, 
and the U.S. Department of Agriculture. The grantee should seek to 
maximize the number of activities and the degree to which CDBG funds 
are leveraged. Grantees shall report on leveraged funds in the DRGR 
system.
    5. A description of how the grantee will design and implement 
programs or activities with the goal of protecting people and property 
from harm, and a description of how construction methods used will 
emphasize high quality, durability, energy efficiency, sustainability, 
and mold resistance, including how it will support adoption and 
enforcement of modern building codes and mitigation of hazard risk, 
including possible sea level rise, high winds, storm surge, and 
flooding, where appropriate. The grantee must also describe how it will 
implement and ensure compliance with the Green Building standards 
required in paragraph A.28 of section VI of this notice. 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's Guidelines for Home Energy 
Professionals--Professional Certifications and Standard Work 
Specifications. HUD also 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 the standards to be established for housing and 
small business rehabilitation contractors performing work in the 
jurisdiction and a mechanism for homeowners and small business owners 
to appeal rehabilitation contractor work. HUD strongly encourages the 
grantee to require a warranty period post-construction, with formal 
notification to homeowners and small business owners on a periodic 
basis (e.g., 6 months and one month prior to expiration date of the 
warranty).
    7. Each grantee must include a description of how it 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 Homeless Assistance Act-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.
    8. A description of how the grantee will encourage the provision of 
housing for all income groups that is resilient to natural hazards, 
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, nonminority areas where appropriate 
and in response to natural hazard-related impacts.
    9. A description of how the grantee plans to minimize displacement 
of persons or entities, and assist any persons or entities displaced.
    10. A description of how the grantee will handle program income, 
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.
    11. A description of monitoring standards and procedures that are 
sufficient to ensure program requirements, including an analysis for 
duplication of benefits, are met and that provide for continual quality 
assurance and adequate program oversight.
    b. Funds Awarded Directly to a State. The action plan shall 
describe the method of distribution of funds to UGLGs and/or 
descriptions of specific programs or activities the State will carry 
out directly (see section VI.A.4 of this notice for the alternative 
requirement permitting States to carry out activities directly). The 
description must include:
    1. How the needs assessment informed allocation determinations, 
including the rationale behind the decision(s) to provide funds to 
State-identified ``most impacted and distressed'' areas that were not 
defined by HUD as being ``most impacted and distressed,'' if 
applicable.
    2. The threshold factors and grant size limits that are to be 
applied.
    3. The projected uses for the CDBG-DR funds, by responsible entity, 
activity, and geographic area, when the State carries out an activity 
directly.
    4. For each proposed program and/or activity carried out directly, 
its respective CDBG activity eligibility category (or categories) as 
well as national objective(s).
    5. How the method of distribution to local governments or programs/
activities carried out directly will result in long-term recovery from 
specific impacts of the disaster.
    6. When funds are allocated to UGLGs, all criteria used to 
distribute funds to local governments including the relative importance 
of each criterion.
    7. When applications are solicited for programs carried out 
directly, all criteria used to select applications for funding, 
including the relative importance of each criterion.
    c. Funds awarded directly to a UGLG. The UGLG shall describe 
specific programs and/or activities it will carry out. The action plan 
must describe:
    1. How the needs assessment informed allocation determinations.
    2. The threshold factors and grant size limits that are to be 
applied.
    3. The projected uses for the CDBG-DR funds, by responsible entity, 
activity, and geographic area.

[[Page 39693]]

    4. How the projected uses of the funds will meet CDBG eligibility 
criteria and a national objective.
    5. How the projected uses of funds will result in long-term 
recovery from specific impacts of the disaster.
    6. All criteria used to select applications, including the relative 
importance of each criterion.
    d. Clarification of disaster-related activities. All CDBG-DR 
activities must clearly address an impact of the disaster for which 
funding was allocated. Given the standard CDBG requirements, this means 
each activity must: (1) Be CDBG-eligible (or receive a waiver), (2) 
meet a national objective, and (3) address a direct or indirect impact 
from the disaster in a Presidentially-declared county. A disaster-
related impact can be addressed through any eligible CDBG activity. 
Additional details on disaster-related activities are provided under 
section VI, parts B through D. Additionally, HUD has developed a series 
of CDBG-DR toolkits that guide grantees through specific grant 
implementation activities. These can be found on the HUD Exchange Web 
site at https://www.hudexchange.info/programs/cdbg-dr/toolkits/.
    1. Housing. Typical housing activities include new construction and 
rehabilitation of single-family or multifamily units. Most often, 
grantees use CDBG-DR funds to rehabilitate damaged homes and rental 
units. However, grantees may also fund new construction (see paragraph 
28 of section VI of this notice) 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 
that stock to meet post-disaster needs and population demands.
    a. Prohibition on forced mortgage payoff. In some instances, 
homeowners with an outstanding mortgage balance are required, under the 
terms of their loan agreement, to repay the balance of the mortgage 
loan prior to using assistance to rehabilitate or reconstruct their 
homes. CDBG-DR funds, however, may not be used for a forced mortgage 
payoff. The ineligibility of a forced mortgage payoff with CDBG-DR 
funds does not affect HUD's longstanding guidance that when other non-
CDBG disaster assistance is taken by lenders for a forced mortgage 
payoff, those funds are not available to the homeowner and, therefore, 
do not constitute a duplication of benefits for the purpose of housing 
rehabilitation or reconstruction.
    b. Housing Counseling Services. HUD-approved housing counseling 
agencies play a critical role in helping communities recover from a 
disaster by providing helpful information about key housing programs 
and resources available to both renters and homeowners. Grantees are 
encouraged to coordinate with approved housing counseling services to 
ensure that such services are made available to both renters and 
homeowners. Additional information is available for South Carolina at 
https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?&webListAction=search&searchstate=SC, and for Texas at https://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=TX.
    2. Infrastructure. Typical infrastructure activities include the 
repair, replacement, or relocation of damaged public facilities and 
improvements to include, but not be limited to, bridges, water 
treatment facilities, roads, and sewer and water lines. Grantees that 
use CDBG-DR funds to assist flood control structures (i.e., dams and 
levees) are prohibited from using CDBG-DR funds to enlarge a dam or 
levee beyond the original footprint of the structure that existed prior 
to the disaster event. Grantees that use CDBG-DR funds for levees and 
dams are required to: (1) Register and maintain entries regarding such 
structures with the U.S. Army Corps of Engineers National Levee 
Database or National Inventory of Dams; (2) ensure that the structure 
is admitted in the U.S. Army Corps of Engineers PL 84-99 Program (Levee 
Rehabilitation and Improvement Program); (3) ensure the structure is 
accredited under the FEMA National Flood Insurance Program; (4) upload 
into DRGR system the exact location of the structure and the area 
served and protected by the structure; and (5) maintain file 
documentation demonstrating that the grantee has conducted a risk 
assessment prior to funding the flood control structure and 
documentation that the investment includes risk reduction measures.
    3. Economic Revitalization. For CDBG-DR purposes, economic 
revitalization may include any CDBG-DR eligible activity that 
demonstrably restores and improves some aspect of the local economy. 
The activity may address job losses, or negative impacts to tax 
revenues or businesses. Examples of eligible activities include 
providing loans and grants to businesses, funding job training, making 
improvements to commercial/retail districts, and financing other 
efforts that attract/retain workers in devastated communities. For 
additional guidance see https://www.iedconline.org/web-pages/resources-publications/iedc-releases-new-disaster-recovery-publication/.
    All economic revitalization activities must address an economic 
impact(s) caused by the disaster (e.g., loss of jobs, loss of public 
revenue). 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 or 
need. Local and regional economic recoveries are typically driven by 
small businesses.
    4. Preparedness and Mitigation. The Appropriations Act states that 
funds shall be used for recovering from a Presidentially declared major 
disaster and all assisted activities must respond to the impacts of the 
declared disaster. HUD strongly encourages grantees to incorporate 
preparedness and mitigation measures into the aforementioned rebuilding 
activities, which help to ensure that communities recover to be safer 
and stronger than prior to the disaster. Incorporation of these 
measures also reduces costs in recovering from future disasters. 
Mitigation measures that are not incorporated into those rebuilding 
activities must be a necessary expense related to disaster relief, 
long-term recovery, and restoration of infrastructure, housing, or 
economic revitalization that responds to the eligible disaster. 
Furthermore, the costs associated with these measures may not prevent 
the grantee from meeting unmet needs.
    5. Connection to the Disaster. Grantees must maintain records about 
each activity funded, as described in the Recordkeeping section of this 
notice. In regard to physical losses, damage or rebuilding estimates 
are often the most effective tools for demonstrating the connection to 
the disaster. For economic or other nonphysical losses, post-disaster 
analyses or assessments may best document the relationship between the 
loss and the disaster.
    Note that grantees are not limited in their recovery to returning 
to predisaster conditions. Rather, HUD encourages grantees to carry out 
activities in such a way that not only addresses the disaster-related 
impacts, but leaves communities sustainably positioned to meet the 
needs of their post-disaster population, economic, and environmental 
conditions.
    e. Clarity of Action Plan. All grantees must include sufficient 
information so that all interested parties will be able to understand 
and comment on the action plan and, if applicable, be able to

[[Page 39694]]

prepare responsive applications to the grantee. The action plan (and 
subsequent Amendments) must include a single chart or table that 
illustrates, at the most practical level, how all funds are budgeted 
(e.g., by program, subgrantee, grantee-administered activity, or other 
category).
    f. Review and Approval of Action Plan. For funds provided under the 
Appropriations Act, the action plan must be submitted to HUD (including 
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 
60 days from the date of receipt to complete its review. The Secretary 
may disapprove an action plan as substantially incomplete if it is 
determined that the Plan does not meet the requirements of this notice.
    g. Obligation and expenditure of funds. Once HUD approves the 
action plan, it will then issue a grant agreement obligating all funds 
to the grantee. In addition, HUD will establish the line of credit and 
the grantee will receive DRGR system access (if it does not already 
have DRGR system access). The grantee must also enter its action plan 
activities into the DRGR system in order to draw funds for those 
activities. The grantee may enter these activities into the DRGR system 
before or after submission of the action plan to HUD. Each activity 
must meet the applicable environmental requirements prior to the use of 
funds. After the Responsible Entity (usually the grantee) completes 
environmental review(s) pursuant to 24 CFR part 58 (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 an activity. The disbursement of grant funds 
must begin no later than 180 days after the date of this notice.
    h. 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 reprogram 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.
    i. Projection of expenditures and outcomes. Each grantee must amend 
its published action plan to project expenditures and outcomes within 
90 days of action plan approval. The projections must be based on each 
quarter's expected performance--beginning with 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 accommodate 
any subsequent changes, updates or revision of the projections. 
Guidance on the preparation of projection is available on the HUD 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.
    This notice waives the requirements for submission of a performance 
report pursuant to 42 U.S.C. 12708 and 24 CFR 91.520. Alternatively, 
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 through the Quarterly Performance 
Report (QPR) and to enable remote review of grantee data to allow HUD 
to assess compliance and risk. HUD-issued general and appropriation-
specific guidance for DRGR reporting requirements can be found on the 
HUD exchange at https://www.hudexchange.info/programs/drgr/.
    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 permit 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 the DRGR system 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.
    All funds programmed or budgeted at a general level in the DRGR 
system will be restricted from access on the grantee's line of credit. 
Once the general uses are described in an amended action plan, at the 
necessary level of detail, the funds will be released by HUD and made 
available for use.
    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 revitalization) or are based on an area of 
service (e.g., Community A). If a grantee describes just one program 
within a broader category (e.g., single family rehabilitation), that 
program is entered as a project in the DRGR system. 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 the projects in the DRGR system, rather than activity groupings. 
Activities are added to MOD projects as subgrantees and subrecipients 
decide which specific CDBG-DR programs and projects will be funded.
    c. Tracking oversight activities in the DRGR system; use of DRGR 
data for HUD review and dissemination. Each grantee must also enter 
into the DRGR system 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 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,

[[Page 39695]]

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 applicable). 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. In 
the event the QPR is rejected by HUD, the grantee must post the revised 
version, as approved by HUD, within 3 days of HUD approval. The 
grantee's first QPR is due after the first full calendar year quarter 
after HUD enters the grant award into the DRGR system. 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 and accomplishments have been reported. 
If a satisfactory report is not submitted in a timely manner, HUD may 
suspend funding until a satisfactory report is submitted, or may 
withdraw and reallocate funding if HUD determines, after notice and 
opportunity for a hearing, that the jurisdiction did not submit a 
satisfactory report.
    Each QPR will include information about the uses of funds in 
activities identified in the DRGR 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 completed or number of low- 
and moderate-income persons served; and the race and ethnicity of 
persons assisted under direct-benefit activities. 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, 24 CFR 91.105(b) and (c), and 24 
CFR 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 14 days) for citizen comment and 
ongoing citizen access to information about the use of grant funds. The 
streamlined citizen participation requirements for a grant administered 
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. 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 should 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. This issue may be particularly applicable to 
States receiving an award under this notice. Unlike grantees in the 
regular State CDBG program, State grantees under this notice may make 
grants throughout the State, including to entitlement communities. 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 (again, no less than 14 days) 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 addition or 
deletion of an activity; or the allocation or reallocation of a 
monetary threshold specified by the grantee in their action plan. 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. Nonsubstantial 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 5 
business days before the amendment becomes effective. However, every 
amendment to the action plan (substantial and nonsubstantial) must be 
numbered sequentially and posted on the grantee's Web site. The 
Department will acknowledge receipt of the notification of 
nonsubstantial amendments via email within 5 business days. The grantee 
must define what constitutes a nonsubstantial amendment in its Citizen 
Participation Plan.
    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

[[Page 39696]]

comments or views, and the grantee's response to each 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 substantial 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. Public Web site. HUD is requiring grantees to maintain a public 
Web site that provides information accounting for how all grant funds 
are used and managed/administered, including links to all action plans, 
action plan amendments, performance reports, citizen participation 
requirements, and activity/program information for activities described 
in the action plan, including details of all contracts and ongoing 
procurement policies. To meet this requirement, each grantee must make 
the following items available on its Web site: (1) The action plan 
(including all amendments); each QPR (as created using the DRGR 
system); (2) procurement policies and procedures; (3) executed CDBG-DR 
contracts; and (4) status of services or goods currently being procured 
by the grantee (e.g., phase of the procurement, requirements for 
proposals, etc.).
    f. Application status. HUD is requiring grantees to provide mediums 
of communication, such as Web sites or other means that provide 
individual applicants for recovery assistance with timely information 
on the status of their application, as provided for section III.7 of 
this notice.
    g. 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--applicable to State grantees only. Requirements at 42 
U.S.C. 5306 are waived to the extent necessary to allow a State to use 
its disaster recovery grant allocation directly to carry out State-
administered activities eligible under this notice, rather than 
distribute all funds to UGLGs. 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. 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. State grantees continue to be responsible for civil rights, 
labor standards, and environmental protection requirements. Note that 
any city or county receiving a direct award from HUD under this notice 
will be subject to the standard CDBG entitlement program regulations 
and this waiver and alternative requirement is not applicable.
    Activities made eligible under section 105(a)(15) of the HCD Act, 
as amended, whether the assistance is provided to such an entity from 
the State or from a UGLG, will follow the definition of a nonprofit 
under that section rather than the Entitlement program definition 
located in 24 CFR 570.204, even in such cases where the UGLG is an 
Entitlement jurisdiction.
    5. Consolidated Plan waiver. HUD is temporarily waiving the 
requirement for consistency with the consolidated plan (requirements at 
42 U.S.C. 12706, 24 CFR 91.325(a)(5), 24 CFR 91.225(a)(5), 24 CFR 
91.325(b)(2), and 24 CFR 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 submits its next full (3-5 year) 
consolidated plan, or for 24 months after the effective date of this 
notice, whichever is less. If the grantee is not scheduled to submit a 
new 3-5 year consolidated plan within the next 2 years, HUD expects 
each grantee to update its existing 3-5 year consolidated plan to 
reflect disaster-related needs no later than 24 months after the 
effective date of this notice. Additionally, 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 no later than its Fiscal Year 2017 update. HUD 
has issued guidance for incorporating CDBG-DR funds into consolidated 
plans in the eCon Planning Suite. This guidance is on the HUD Exchange 
at https://www.hudexchange.info/resource/4400/updating-the-consolidated-plan-to-reflect-disaster-recovery-needs-and-associated-priorities/. This waiver does not affect the requirements of HUD's July 
16, 2015, final rule on Affirmatively Furthering Fair Housing (80 FR 
42272), which requires grantees to complete an Assessment of Fair 
Housing in accordance with the requirements of 24 CFR 5.160.
    6. Requirement for consultation during plan preparation. Currently, 
the statute and regulations require States to consult with affected 
UGLGs in nonentitlement 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 24 
CFR 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 any local public 
housing authorities) in determining the use of funds. This ensures that 
State grantees sufficiently assess the recovery needs of all areas 
affected by the disaster. Additional guidance on consultation with 
local stakeholders can be found in publications such as Equity in 
Building Resilience in Adaptation Planning, produced by the National 
Association for the Advancement of Colored People.
    Last, and consistent with the approach encouraged through the 
National Disaster Recovery Framework and National Preparedness Goal, 
all grantees must consult with States, tribes, UGLGs, Federal partners, 
nongovernmental organizations, the private sector, and other 
stakeholders and affected parties in the surrounding geographic area to 
ensure consistency of the action plan with applicable regional 
redevelopment plans. Grantees are encouraged to establish a recovery 
task force with representative members of each sector to advise the 
grantee on how its recovery activities can best contribute towards the 
goals of regional redevelopment plans.
    7. Overall benefit 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 CDBG program funds be used to support 
activities benefitting low- and moderate-income persons. In some prior 
disasters, the Secretary has waived the requirements at 42 U.S.C. 
5301(c), 42 U.S.C. 5304(b)(3)(A), 24 CFR

[[Page 39697]]

570.484, and 24 CFR 570.200(a)(3) that 70 percent of funds be used for 
activities that benefit low- and moderate-income persons and, instead, 
established a 50 percent overall low- and moderate-income benefit 
requirement for a CDBG-DR grant. To ensure, however, that maximum 
assistance is provided initially to low- and moderate-income persons, 
the 70 percent overall benefit requirement shall remain in effect for 
this allocation, subject to a waiver request by an individual grantee 
to authorize a lower overall benefit for their CDBG-DR grant. A 
grantee's waiver requests are to be submitted to the grantee's 
designated HUD representative.
    Grantees may seek to reduce the overall benefit requirement below 
70 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 70 percent requirement; and (d) demonstrates 
that low- and moderate-income persons' disaster-related needs have been 
sufficiently met and 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.
    8. Use of the ``upper quartile'' or ``exception criteria'' for low- 
and moderate-income area benefit activities. Section 105(c)(2)(A) of 
the HCD Act generally provides that assisted activities designed to 
serve an area generally and clearly designed to meet identified needs 
of persons of low- and moderate-income in the area, shall be considered 
to principally benefit persons of low- and moderate-income if the area 
served in a metropolitan city or urban county is within the highest 
quartile of all areas within the jurisdiction of such city or county in 
terms of the degree of concentration of persons of low and moderate 
income.
    In some cases, HUD permits an exception to the low- and moderate-
income area benefit requirement that an area contain at least 51 
percent low- and moderate-income residents. 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. 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.'' A grantee qualifies for this 
exception when less than one quarter of the populated-block groups in 
its jurisdictions contain 51 percent or more low- and moderate-income 
persons. In such communities, activities must serve an area that 
contains a percentage of low- and moderate-income residents that is 
within the upper quartile of all census-block groups within its 
jurisdiction in terms of the degree of concentration of low- and 
moderate-income residents. HUD assesses each grantee's census-block 
groups to determine whether a grantee qualifies to use this exception 
and identifies the alternative percentage the grantee may use instead 
of 51 percent for the purpose of qualifying activities under the low- 
and moderate-income area benefit. HUD determines the lowest proportion 
a grantee may use to qualify an area for this purpose and advises the 
grantee, accordingly. Disaster recovery grantees are required to use 
the most recent data available in implementing the exception criteria. 
The ``exception criteria'' apply to disaster recovery activities funded 
pursuant to this notice in jurisdictions covered by such criteria, 
including jurisdictions that receive disaster recovery funds from a 
State.
    9. Grant administration responsibilities and general administration 
cap.
    a. Grantee responsibilities. 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.
    b. General administration cap. For all grantees 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 (plus program income) to be used for administrative costs, 
by the grantee, by entities designated by the grantee, by UGLGs, or by 
subrecipients. Thus, the total of all costs classified as 
administrative must be less than or equal to the 5 percent cap.
    (1) Combined technical assistance and administrative expenditures 
cap for States only. For State grantees under this notice, the 
provisions of 42 U.S.C. 5306(d) and 24 CFR 570.489(a)(1)(i) and (iii) 
will not apply to the extent that they cap 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 administrative and technical assistance 
expenditures must not exceed 5 percent of the grant, plus program 
income. States remain limited to spending a maximum of 20 percent of 
their total grant amount on a combination of planning and program 
administration costs. Planning costs subject to the 20 percent cap are 
those defined in 42 U.S.C. 5305(a)(12). As a reminder, grantees may use 
CDBG-DR funds to develop a disaster recovery and response plan that 
addresses pre- and post-disaster hazard mitigation, if one does not 
currently exist (in accordance with paragraph (A)(1)(d)(4) of section 
VI of this notice).
    (2) Administrative expenditures cap for local governments. Any city 
or county (UGLG) receiving a direct award under this notice is also 
subject to the 5 percent administrative cap. This 5 percent applies to 
all administrative costs--whether incurred by the grantee or its 
subrecipients. However, cities or counties receiving a direct 
allocation under this notice also remain limited to spending 20 percent 
of their total allocation on a combination of planning and program 
administration costs.
    10. 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 more general 
planning activities are presumed to meet a national objective under the 
requirements at 24 CFR 570.208(d)(4).
    The Department notes that almost all effective CDBG disaster 
recoveries in the past have relied on some form of areawide or 
comprehensive planning activity to guide overall redevelopment 
independent of the ultimate source of implementation funds. Therefore, 
for

[[Page 39698]]

State grantees receiving an award under this notice, the Department is 
waiving the requirements at 24 CFR 570.483(b)(5) or (c)(3), which limit 
the circumstances under which the planning activity can meet a low- and 
moderate-income or slum-and-blight national objective. Instead, States 
must comply with 24 CFR 570.208(d)(4) when funding disaster recovery-
assisted, planning-only grants, or directly administering planning 
activities that guide recovery in accordance with the Appropriations 
Act. In addition, the types of planning activities that States may fund 
or undertake are expanded to be consistent with those of entitlement 
communities identified at 24 CFR 570.205.
    Grantees are therefore strongly encouraged to use their planning 
funds to create pre-disaster plans for long-term recovery. Plans should 
include an assessment of natural hazard risks, including risks expected 
to increase due to climate change, to low- and moderate-income 
residents based on an analysis of data and findings in (1) the National 
Climate Assessment (NCA),\1\ the U.S. Climate Resilience Toolkit,\2\ 
The Impact of Climate Change and Population Growth on the National 
Flood Insurance Program Through 2100,\3\ or the Community Resilience 
Planning Guide for Buildings and Infrastructure Systems prepared by the 
National Institute of Standards and Technology (NIST); \4\ or (2) other 
climate risk related data published by the Federal Government, or other 
State or local government climate risk related data, including FEMA-
approved hazard mitigation plans that incorporate climate change; and 
(3) other climate risk data identified by the jurisdiction. For 
additional guidance also see: The Coastal Hazards Center's State 
Disaster Recovery Planning Guide \5\ and FEMA's Guide on Effective 
Coordination of Recovery Resources for State, Tribal, Territorial and 
Local Incidents.\6\
---------------------------------------------------------------------------

    \1\ See https://nca2014.globalchange.gov/highlights#submenu-highlights-overview.
    \2\ See https://toolkit.climate.gov.
    \3\ See https://www.acclimatise.uk.com/login/uploaded/resources/FEMA_NFIP_report.pdf.
    \4\ See https://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.1197.pdf.
    \5\ https://coastalhazardscenter.org/dev/wp-content/uploads/2012/05/State-Disaster-Recovery-Planning-Guide_2012.pdf.
    \6\ https://www.fema.gov/media-library/assets/documents/101940.
---------------------------------------------------------------------------

    11. Use of the urgent need national objective. The CDBG 
certification requirements for 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 24 months after HUD first obligates funds to 
the grantee. In the context of disaster recovery, these standard 
requirements may impede recovery. Since the Department only provides 
CDBG-DR awards to grantees with documented disaster-related impacts and 
each grantee is limited to spending funds only in the most impacted and 
distressed areas, the following streamlined alternative requirement 
recognizes the urgency in addressing serious threats 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. For each activity that will meet an urgent need national 
objective, grantees must reference in their action plan needs 
assessment the type, scale, and location of the disaster-related 
impacts that each program and/or activity is addressing.
    Grantees should still be mindful to use the low- and moderate-
income person benefit national objective for all activities that 
qualify under the criteria for that national objective. At least 70 
percent of the entire CDBG-DR grant award must be used for activities 
that benefit low- and moderate-income persons (see section VI.A.7 of 
this notice for overall benefit requirement and instructions for 
seeking an alternative requirement to the 70-percent rule).
    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 a State from distributing CDBG funds to entitlement 
communities and tribes under the CDBG program, are waived, including 24 
CFR 570.480(a). Instead, the State may distribute funds to units of 
local government and 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.
    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: (1) Enable HUD to make the applicable 
determinations described at 24 CFR 570.493; (2) make compliance 
determinations for activities carried out directly by the State; and 
(3) 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. UGLG grantees. UGLGs remain 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 (UGLG) 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 on-site reviews of any 
subrecipients, designated public agencies, and UGLGs, as may be 
necessary or appropriate to meet the requirements of section 104(e)(2) 
of the HCD Act, as amended, as modified by this notice. In the case of 
noncompliance with these requirements, the State shall take such 
actions as may be appropriate to prevent a continuance of the 
deficiency, mitigate any adverse effects or consequences, and prevent a 
recurrence. The State shall establish remedies for noncompliance by any 
designated

[[Page 39699]]

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 close out and address revolving 
loan funds.
    a. Definition of program income.
    (1) For 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, 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 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, including interest earned on funds held in a revolving fund 
account.
    (i) Funds collected through special assessments made against 
nonresidential properties and 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.
    (j) Gross income paid to a State, UGLG, or 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 that is less than $35,000 received in 
a single year and retained by a State, UGLG, tribe, or retained by a 
subrecipient thereof.
    (b) Amounts generated by activities eligible under section 
105(a)(15) of the HCD Act and carried out by an entity under the 
authority of section 105(a)(15) of the HCD Act.
    b. Retention of program income. Per 24 CFR 570.504(c), a unit of 
government receiving a direct award under this notice may permit a 
subrecipient to retain program income. State grantees may permit a UGLG 
or tribe that receives or will receive program income to retain the 
program income, but are not required to do so.
    c. Program income--use, close out, and transfer.
    (1) Program income received (and retained, if applicable) before or 
after close out 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 close out of the grant that 
generated the program income to its annual CDBG program. In addition, 
State grantees may transfer program income before close out to any 
annual CDBG-funded activities carried out by a UGLG or tribe within the 
State. Program income received by a grantee, or received and retained 
by a subgrantee, after close out 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 that is not used to 
continue the disaster recovery activity 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. UGLGs receiving a direct award under this 
notice, State grantees, and UGLGs or tribes (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 that could be funded from the revolving fund. Such program 
income is not required to be disbursed for nonrevolving 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. Note that no revolving fund established per this notice 
shall be directly funded or capitalized with CDBG-DR grant funds, 
pursuant to 24 CFR 570.489(f)(3).
    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 
(PHAs)) on or after the incident date of the covered disaster. A local 
government grantee 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. 
Section 570.200(h)(1)(i) will not apply to the extent that it requires 
preagreement activities to be included in a consolidated plan. The 
Department expects both State and local government grantees to include 
all preagreement 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. Additionally, grantees are 
permitted to charge to grants the preaward and preapplication costs of 
homeowners, businesses, and other qualifying entities for eligible 
costs they have incurred in response to an eligible disaster covered 
under this notice.

[[Page 39700]]

However, a grantee may not charge such preaward or preapplication costs 
to grants if the preaward or preapplication action results in an 
adverse impact to the environment. Grantees are required to consult 
with the State Historic Preservation Officer, Fish and Wildlife Service 
and National Marine Fisheries Service, to obtain formal agreements for 
compliance with section 106 of the National Historic Preservation Act 
(54 U.S.C. 306108) and section 7 of the Endangered Species Act (16 
U.S.C. 1536) when designing a reimbursement program.
    19. One-for-One Replacement Housing, 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 purpose of promoting the availability of decent, 
safe, and sanitary housing, 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) and (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 that 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. Further, 
the requirement 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 to economic revitalization. Grantees should reassess post-
disaster population and housing needs to determine the appropriate type 
and amount of lower-income dwelling units to rehabilitate and/or 
rebuild. Grantees should note, however, that the demolition and/or 
disposition of PHA-owned public housing units is covered by section 18 
of the United States Housing Act of 1937, as amended, and 24 CFR part 
970.
    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 CDBG funds are subject to the requirements of the URA; 
however, CDBG funds are 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 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) and (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, 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 rent in excess of 30 percent of household income without 
``demonstrable hardship'' before the project. Thus, if a tenant has 
been paying rent in excess of 30 percent of household income without 
demonstrable hardship, using 30 percent of household income to 
calculate the rental assistance would not be required. Before carrying 
out a program activity in which the grantee provides 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)(vii), 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 rental voucher or certificate), 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.
    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

[[Page 39701]]

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 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 makes clear grantees, including 
subrecipients, receiving CDBG disaster funds may establish separate 
optional relocation policies. This waiver is intended to provide States 
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. Usually, 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 this grant, HUD will allow a State grantee to 
also 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. Unified Federal Review. The Sandy Recovery Improvement Act was 
signed into law on January 29, 2013, and directed the Administration to 
``establish an expedited and unified interagency review process (UFR) 
to ensure compliance with environmental and historic requirements under 
Federal law relating to disaster recovery projects, in order to 
expedite the recovery process, consistent with applicable law.'' The 
process aims to coordinate environmental and historic preservation 
reviews to expedite planning and decisionmaking for disaster recovery 
projects. This can improve the Federal Government's assistance to 
States, local, and tribal governments; communities; families; and 
individual citizens as they recover from future presidentially declared 
disasters. Tools for the UFR process can be found at here: https://www.fema.gov/unified-federal-environmental-and-historic-preservation-review-presidentially-declared-disasters.
    d. 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.).
    e. Historic preservation reviews.
    To facilitate expedited historic preservation reviews under section 
106 of the National Historic Preservation Act of 1966 (54 U.S.C. 
Section 306108), HUD strongly encourages grantees to allocate general 
administration funds to retain a qualified historic preservation 
professional, and support the capacity of the State Historic 
Preservation Officer/Tribal Historic Preservation Officer to review 
CDBG-DR projects. For more information on qualified historic 
preservation professional standards see https://www.nps.gov/history/local-law/arch_stnds_9.htm.
    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 for which such person, business 
concern, or other entity has received financial assistance under any 
other program or from insurance or any other source. To comply with 
this law and the limitation on the use of CDBG-DR funds under the 
Appropriations Act for necessary expenses, each grantee must ensure 
that each activity provides assistance to a person or entity only to 
the extent that the person or entity has a disaster recovery need that 
has not been fully met. Grantees are subject to the requirements of a 
separate notice explaining the duplication of benefit requirements (76 
FR 71060, published November 16, 2011). As a reminder, and as noted in 
the November 16, 2011, notice, at section VI, paragraph B, CDBG-DR 
funds may not be used to pay down an SBA home or business loan. 
Additionally, this notice does not require households and businesses to 
apply for SBA assistance prior to applying for CDBG-DR assistance. 
However, CDBG-DR grantees may institute an SBA application requirement 
in order to target assistance to households and businesses with the 
greatest need.
    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. Additionally, States and State subgrantees (UGLGs and 
subrecipients) shall follow requirements of 24 CFR 570.489(g). HUD is 
imposing a waiver and alternative requirement to require the State to 
establish requirements for procurement policies and procedures based on 
full and open competition for subrecipients in addition to UGLGs.
    The State can comply with the requirement under 24 CFR 570.489(g) 
to follow its procurement policies and procedures and establish 
procurement requirements for its UGLGs and subrecipients in one of 
three ways (subject to 2 CFR 200.110, as applicable):
    i. A State can follow its existing procurement policies and 
procedures and establish requirements for procurement policies and 
procedures for UGLGs and subrecipients, based on full and open 
competition, that specify methods of procurement (e.g., small purchase, 
sealed bids/formal advertising, competitive proposals, and 
noncompetitive proposals) and their applicability;
    ii. A State can adopt 2 CFR 200.317, which requires the State to 
follow the same policies and procedures it uses for procurements from 
its non-Federal funds and comply with 2 CFR 200.322 (procurement of 
recovered materials) and 2 CFR 200.326 (required contract provisions), 
but requires the State to make its subrecipients and UGLGs

[[Page 39702]]

follow 2 CFR 200.318 through 200.326; or
    iii. A State can adopt the provisions that apply to CDBG 
entitlement grantees (2 CFR 200.318 through 2 CFR 200.326) for itself 
and its subgrantees (subrecipients and UGLGs).
    b. Direct grants to UGLGs. Any UGLGs receiving a direct 
appropriation under today's notice is subject to procurement 
requirements in the Uniform Administrative Requirements at 2 CFR 
200.318 through 200.326 (subject to 2 CFR 200.110, as applicable).
    c. Additional requirements related to procurement (States and local 
governments). HUD may request periodic updates from grantees that 
employ contractors. A contractor is a third-party firm that the grantee 
acquires through a procurement process to perform specific functions, 
consistent with the procurement requirements in the CDBG program 
regulations; a subrecipient is not a contractor. For contractors 
employed to provide discrete services or deliverables only, HUD is 
establishing an additional alternative requirement to expand on 
existing provisions of 2 CFR 200.317 through 200.326 and 24 CFR 
570.489(g) as follows: (1) Grantees are also required to ensure all 
contracts and agreements (with subrecipients, recipients, and 
contractors) clearly state the period of performance or date of 
completion. (2) Grantees must incorporate performance requirements and 
penalties into each procured contract or agreement. Contracts that 
describe work performed by general management consulting services need 
not adhere to this requirement. (3) Grantees may contract for 
administrative support but 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. HUD will respond to grantee requests for 
technical assistance on contracting and procurement processes.
    23. Public Web site. HUD is requiring grantees to maintain a public 
Web site that 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 make the following items available on its Web site: The 
Action Plan (including all amendments); each QPR (as created using the 
DRGR system); procurement policies and procedures; status of services 
or goods currently being procured by the grantee (e.g., phase of the 
procurement, requirements for proposals, etc.) a copy of contracts the 
grantee has procured directly; and a summary of all procured contracts, 
including those procured by the grantee, recipients, or subrecipients. 
Grantees should post only those contracts subject to 24 CFR 85.36 or in 
accordance with the State's procurement policies. To assist grantees in 
preparing this summary, HUD has developed a template. The template can 
be accessed at: https://www.onecpd.info/cdbg-dr/. Grantees are required 
to use this template, and attach an updated version to the DRGR system 
each quarter as part of their QPR submissions. Updated summaries must 
also be posted quarterly on each grantee's Web site.
    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 alternative requirements under this notice. Grantees 
must expend 100 percent of their allocation of CDBG-DR funds on 
eligible activities within 6 years of HUD's execution of the grant 
agreement.
    25. Review of continuing capacity to carry out CDBG-funded 
activities in a timely manner. If HUD determines that the grantee has 
not carried out its CDBG activities and certifications in accordance 
with the requirements 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 nature and extent of 
the recipient's performance deficiencies, types of corrective actions 
the recipient has undertaken, and the success or likely success of such 
actions, and apply the corrective and remedial actions specified in 
paragraph 26 of this notice.
    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 establish 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.
    27. Reduction, withdrawal, or adjustment of a grant, or other 
appropriate action. Prior to a reduction, withdrawal, or adjustment of 
a CDBG-DR grant, or other actions taken pursuant to this section, the 
recipient shall be notified of the proposed action and be given an 
opportunity for an informal consultation.
    Consistent with the procedures described in this notice, the 
Department may adjust, reduce, or withdraw the CDBG-DR grant or take 
other actions as appropriate, except for funds that have expended for 
eligible approved activities.

B. Housing and Related Floodplain Issues

    28. Housing-related eligibility waivers. The broadening of eligible 
activities under the HCD Act 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.
    Therefore, 42 U.S.C. 5305(a)(24) is waived to the extent necessary 
to allow: (1) Homeownership assistance for households with up to 120 
percent of the area median income and (2) down payment assistance for 
up to 100 percent of the down payment (42 U.S.C. 5305(a)(24)(D)). 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.
    In addition, 42 U.S.C. 5305(a) is waived and alternative 
requirements adopted to the extent necessary to permit new housing 
construction, and to require the following construction standards on 
structures constructed or rehabilitated with CDBG-DR funds as part of 
activities eligible under 42 U.S.C. 5305(a). All references to 
``substantial damage'' and ``substantial improvement'' shall be as 
defined in 44 CFR 59.1 unless otherwise noted:
    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 rebuilding a housing unit on the 
same lot in substantially the same manner) and may include changes to 
structural elements such as flooring

[[Page 39703]]

systems, columns, or load bearing interior or exterior walls.
    b. Meaning of Green Building Standard. 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 
(New Construction, Homes, Midrise, Existing Buildings Operations and 
Maintenance, 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.
    c. Standards for rehabilitation of nonsubstantially damaged 
residential buildings. For rehabilitation other than that described in 
subparagraph (a), above, grantees must follow the guidelines specified 
in the HUD CPD Green Building Retrofit Checklist, available at https://www.hudexchange.info/resource/3684/guidance-on-the-cpd-green-building-checklist/. 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 of green building standards. (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 
WaterSense-labeled or FEMP-designated product does not exist, the 
requirement to use such products does not apply.
    e. Elevation standards for new construction, repair of substantial 
damage, or substantial improvement. The following elevation standards 
apply to new construction, repair of substantial damage, or substantial 
improvement of structures located in an area delineated as a flood 
hazard area or equivalent in FEMA's data source identified in 24 CFR 
55.2(b)(1). All structures, defined at 44 CFR 59.1, designed 
principally for residential use and located in the 1 percent annual (or 
100-year) floodplain that receive assistance for new construction, 
repair of substantial damage, or substantial improvement, as defined at 
24 CFR 55.2(b)(10), must be elevated with the lowest floor, including 
the basement, at least two feet above the 1 percent annual floodplain 
elevation. Residential structures with no dwelling units and no 
residents below two feet above the 1 percent annual floodplain, must be 
elevated or floodproofed, in accordance with FEMA floodproofing 
standards at 44 CFR 60.3(c)(3)(ii) or successor standard, up to at 
least two feet above the 1 percent annual floodplain. Applicable State, 
local, and tribal codes and standards for floodplain management that 
exceed these requirements, including elevation, setbacks, and 
cumulative substantial damage requirements, will be followed.
    f. Broadband infrastructure in housing. Any new construction or 
substantial rehabilitation, as defined by 24 CFR 5.100, of a building 
with more than four rental units must include installation of broadband 
infrastructure, as this term is also defined in 24 CFR 5.100, except 
where the grantee documents that: (i) The location of the new 
construction or substantial rehabilitation makes installation of 
broadband infrastructure infeasible; (ii) the cost of installing 
broadband infrastructure would result in a fundamental alteration in 
the nature of its program or activity or in an undue financial burden; 
or (iii) the structure of the housing to be substantially rehabilitated 
makes installation of broadband infrastructure infeasible.
    g. Resilient Home Construction Standard. Grantees are strongly 
encouraged to incorporate a Resilient Home Construction Standard, 
meaning that all construction covered by subparagraph (a) meet an 
industry-recognized standard such as those set by the FORTIFIED 
HomeTM Gold level for new construction of single-family, 
detached homes; and FORTIFIED HomeTM Silver level for 
reconstruction of the roof, windows and doors; or FORTIFIED 
HomeTM Bronze level for repair or reconstruction of the 
roof; or any other equivalent comprehensive resilient or disaster 
resistant building program. Further, grantees are strongly encouraged 
to meet the FORTIFIED HomeTM Bronze level standard for roof 
repair or reconstruction, for all construction covered under 
subparagraph c. FORTIFIED HomeTM is a risk-reduction program 
providing construction standards for new homes and retrofit standards 
for existing homes, which will increase a home's resilience to natural 
hazards, including high wind, hail, and tropical storms. Insurers can 
provide discounts for homeowner's insurance for properties certified as 
FORTIFIED. Property owners and grantees are encouraged to contact their 
insurance agent for current information on what discounts may be 
available. More information is also available at https://disastersafety.org/fortified/fortified-home/.
    29. Addressing Unmet Public Housing Needs. The grantee must 
identify how it will address the rehabilitation, mitigation, and new 
construction needs of each disaster-impacted PHA within its 
jurisdiction, if applicable. The grantee must work directly with 
impacted PHAs in identifying necessary and reasonable costs and ensure 
that adequate funding from all available sources is dedicated to 
addressing the unmet needs of damaged public housing (e.g., FEMA, 
insurance, and funds available from HUD's Office of Public and Indian 
Housing. In the rehabilitation, reconstruction and replacement of 
public housing provided for in the action plan pursuant to paragraph 
A.1.a.7 of section VI of this notice, each grantee must identify 
funding to specifically address the unmet 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 PHAs impacted by the disaster is available on the Department's 
Web site.
    30. Housing incentives 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 floodplain or to a 
lower-risk area.
    Therefore, 42 U.S.C. 5305(a) and associated regulations are waived 
to the

[[Page 39704]]

extent necessary to allow the provision of housing incentives. These 
grantees must maintain documentation, at least at a programmatic level, 
describing how the amount of assistance was determined to be necessary 
and reasonable, and the incentives must be in accordance with the 
grantee's approved action plan and published program design(s). This 
waiver does not permit a compensation program. If the grantee requires 
the incentives to be used for a particular purpose by the household 
receiving the assistance, then the eligible use for that activity will 
be that required use, not an incentive.
    In undertaking a larger scale migration or relocation recovery 
effort that is intended to move households out of high-risk areas, 
grantees should consider how it can protect and sustain the impacted 
community and its assets. Grantees must also weigh the benefits and 
costs, including anticipated insurance costs, of redeveloping high-risk 
areas that were impacted by a disaster. Accordingly, grantees are 
prohibited from offering incentives to return households to disaster-
impacted floodplains, unless the grantee can demonstrate to HUD how it 
will resettle such areas to mitigate against the risks of future 
disasters and the insurance costs of continued occupation of high-risk 
areas, through mechanisms that can reduce risks and insurance costs, 
such as new land use development plans, building codes or construction 
requirements, protective infrastructure development, or through 
restrictions on future disaster assistance to such properties.
    31. 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 to 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 3 months, during which 
mortgage payments may be due but the home is inhabitable. Thus, this 
interim assistance will be critical for many households facing 
financial hardship during this period. Grantees may use interim housing 
rehabilitation payments to expedite recovery assistance to homeowners, 
but must establish performance milestones for the rehabilitation that 
are to be met by the homeowner in order to receive such payments. 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.
    32. Acquisition of real property; flood and other 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 or 
the acquisition of properties in Disaster Risk Reduction Areas as 
designated by the grantee. HUD is providing alternative requirements 
for consistency with the application of other Federal resources 
commonly used for this type of activity.
    Grantees are encouraged to use buyouts strategically, as a means of 
acquiring contiguous parcels of land for uses compatible with open 
space, recreational, natural floodplain functions, other ecosystem 
restoration, or wetlands management practices. To the maximum extent 
practicable, grantees should avoid circumstances in which parcels that 
could not be acquired through a buyout remain alongside parcels that 
have been acquired through the grantee's buyout program.
    a. Clarification of ``Buyout'' and ``Real Property Acquisition'' 
activities. Grantees that choose to undertake a buyout program have the 
discretion to determine the appropriate valuation method, including 
paying either pre-disaster or post-disaster fair market value (FMV). In 
most cases, a program that provides pre-disaster FMV to buyout 
applicants provides compensation at an amount greater than the post-
disaster FMV. When the purchase price exceeds the current FMV, any 
CDBG-DR funds in excess of the FMV are considered assistance to the 
seller, thus making the seller a beneficiary of CDBG-DR assistance. If 
the seller receives assistance as part of the purchase price, this may 
have implications for duplication of benefits calculations or for 
demonstrating national objective criteria, as discussed below. However, 
a program that provides post-disaster FMV to buyout applicants merely 
provides the actual value of the property; thus, the seller is not 
considered a beneficiary of CDBG-DR assistance.
    Regardless of purchase price, all buyout activities are a type of 
acquisition of real property (as permitted by section 105(a)(1) of the 
HCD Act). However, only acquisitions that meet the definition of a 
``buyout'' are subject to the post-acquisition land use restrictions 
imposed by the applicable prior notices. The key factor in determining 
whether the acquisition is a buyout is whether the intent of the 
purchase is to reduce risk from future flooding or to reduce the risk 
from the hazard that lead to the property's Disaster Risk Reduction 
Area designation. To conduct a buyout in a Disaster Risk Reduction 
Area, the grantee must establish criteria in its policies and 
procedures to designate the area subject to the buyout, pursuant to the 
following requirements: (1) The hazard must have been caused or 
exacerbated by the Presidentially declared disaster for which the 
grantee received its CDBG-DR allocation; (2) the hazard must be a 
predictable environmental threat to the safety and well-being of 
program beneficiaries, as evidenced by the best available data and 
science; and (3) the Disaster Risk Reduction Area must be clearly 
delineated so that HUD and the public may easily determine which 
properties are located within the designated area.
    The distinction between buyouts and other types of acquisitions is 
important, because grantees may only redevelop an acquired property if 
the property is not acquired through a buyout program (i.e., the 
purpose of acquisition was something other than risk reduction). When 
acquisitions are not acquired through a buyout program, the purchase 
price must be consistent with applicable uniform cost principles (and 
the pre-disaster FMV may not be used).
    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 floodplain and 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; or (c) 
a flood control structure, provided that structure does not reduce 
valley storage, increase erosive velocities, or increase flood heights 
on the opposite bank, upstream, or downstream and 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

[[Page 39705]]

relocation program, no subsequent application for additional disaster 
assistance for any purpose or to repair damage or make improvements of 
any sort will be made by the recipient to any Federal entity in 
perpetuity.
    The entity acquiring the property may lease it to adjacent property 
owners or other parties for compatible uses in return for a maintenance 
agreement. Although Federal policy encourages leasing rather than 
selling such property, the property may also be sold. In all cases, a 
deed restriction or covenant running with the property must require 
that the buyout property be dedicated and maintained for compatible 
uses in perpetuity.
    4. 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.
    6. Any State grantee implementing a buyout program or activity must 
consult with affected UGLGs.
    7. When undertaking buyout activities, in order to demonstrate that 
a buyout meets the low- and moderate-income housing national objective, 
grantees must meet all requirements of the HCD Act and applicable 
regulatory criteria described below. Grantees are encouraged to consult 
with HUD prior to undertaking a buyout program with the intent of using 
the LMH national objective. Section 105(c)(3) of the HCD Act (42 U.S.C. 
5305(c)(3)) provides that any assisted activity under this chapter that 
involves the acquisition or rehabilitation of property to provide 
housing shall be considered to benefit persons of low- and moderate-
income only to the extent such housing will, upon completion, be 
occupied by such persons. In addition, the State CDBG regulations at 24 
CFR 570.483(b)(3) and entitlement CDBG regulations at 24 CFR 
570.208(a)(3) apply the LMH national objective to an eligible activity 
carried out for the purpose of providing or improving permanent 
residential structures that, upon completion, will be occupied by low- 
and moderate-income households. Therefore, a buyout program that merely 
pays homeowners to leave their existing homes does not result in a low- 
and moderate-income household occupying a residential structure and, 
thus, cannot meet the requirements of the LMH national objective. 
Buyout programs that assist low- and moderate-income persons can be 
structured in one of the following ways: (a) The buyout program 
combines the acquisition of properties with another direct benefit--
Low- and Moderate-Income housing activity, such as down payment 
assistance--that results in occupancy and otherwise meets the 
applicable LMH national objective criteria in 24 CFR part 570 (e.g., if 
the structure contains more than two dwelling units, at least 51 
percent of the units must be occupied by low- and moderate-income 
households. (b) The program meets the low- and moderate income area 
benefit criteria to demonstrate national objective compliance, provided 
that the grantee can document that the properties acquired through 
buyouts will be used in a way that benefits all of the residents in a 
particular area where at least 51 percent of the residents are low- and 
moderate-income persons. When using the area benefit approach, grantees 
must define the service area based on the end use of the buyout 
properties. (c) The program meets the criteria for the low- and 
moderate-income limited clientele national objective, including the 
prohibition on the use of the limited clientele national objective when 
an activity's benefits are available to all residents of the area. A 
buyout program could meet the national objective criteria for the 
limited clientele national objective if it restricts buyout program 
eligibility to exclusively low- and moderate-income persons, and the 
buyout provides an actual benefit to the low- and moderate income 
sellers by providing pre-disaster valuation uniformly to those who 
participate in the program.
    c. 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-disaster value, consistent with applicable 
cost principles (the pre-disaster 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.
    33. 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: Properties that served as second homes at the time of the 
disaster, or following the disaster, are not eligible for 
rehabilitation assistance, residential incentives, or to participate in 
a CDBG-DR buyout program (as defined by this notice). ``Second homes'' 
are defined in IRS Publication 936 (mortgage interest deductions).
    34. 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 a Special 
Flood Hazard Area (or 100-year floodplain). However, Federal, State, 
local, and tribal 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 
a Special Flood Hazard Area 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 a Special Flood Hazard Area. HUD 
also recommends the purchase of flood insurance outside of a Special 
Flood Hazard Area for properties that have been damaged by a flood, to 
better protect property owners from the economic risks of future floods 
and reduce dependence on Federal disaster assistance in the future, but 
this is not a requirement.
    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 may be used 
to make a payment (including any loan assistance payment)

[[Page 39706]]

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 enumerated at https://uscode.house.gov/view.xhtml?req=granuleid:U.S.C.-prelim-title42-section5154a&num=0&edition=prelim.

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

    35. 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.
    36. Elevation of Nonresidential Structures. Nonresidential 
structures must be elevated or floodproofed, in accordance with FEMA 
floodproofing standards at 44 CFR 60.3(c)(3)(ii) or successor standard, 
up to at least two feet above the 1 percent annual floodplain. All 
Critical Actions, as defined at 24 CFR 55.2(b)(3), within the 0.2 
percent annual floodplain (or 500-year) floodplain must be elevated or 
floodproofed (in accordance with the FEMA standards) to the higher of 
the 0.2 percent annual floodplain flood elevation or three feet above 
the 1 percent annual floodplain. If the 0.2 percent annual floodplain 
or elevation is unavailable for Critical Actions, and the structure is 
in the 1 percent annual floodplain, then the structure must be elevated 
or floodproofed at least three feet above the 1 percent annual 
floodplain level. Applicable State, local, and tribal codes and 
standards for floodplain management that exceed these requirements, 
including elevation, setbacks, and cumulative substantial damage 
requirements, will be followed.
    37. 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). By law, the amount of CDBG-DR funds that may be 
contributed to a USACE project is $250,000 or less. However, the 
Appropriations Act prohibits use of funds for any activity reimbursable 
by, or for which funds are made available by FEMA or USACE.

D. Economic Revitalization

    38. National Objective Documentation for Economic Revitalization 
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 the 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., the number of persons). Thus, it streamlines the documentation 
process because it allows the collection of wage data for each position 
created or retained from the assisted businesses, 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.
    39. Public benefit for certain Economic Revitalization activities. 
The public benefit provisions set standards for individual economic 
revitalization activities (such as a single loan to a business) and for 
economic revitalization 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 were set two decades ago and 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), (f)(2), (f)(3), (f)(4)(i), (f)(5), 
and (f)(6), and 24 CFR 570.209(b)(1), (b)(2), (b)(3)(i), and (b)(4), 
for economic revitalization 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; and the types of 
jobs. Paragraph (g) of 24 CFR 570.482, and 24 CFR 570.209(c), and (d) 
are also waived to the extent these provisions are related to public 
benefit.
    40. Clarifying note on Section 3 resident eligibility and 
documentation requirements. The definition of ``low-income persons'' in 
12 U.S.C. 1701u and 24 CFR 135.5 is the basis for eligibility as 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. 
This authority does not impact other section 3 resident eligibility 
requirements in 24 CFR 135.5. All direct recipients of CDBG-DR funding 
must submit form HUD-60002 annually through the Section 3 Performance 
Evaluation and Registry System (SPEARS) which can be found on HUD's Web 
site.
    41. Waiver and modification of the job relocation clause to permit 
assistance to help a business return. 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 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

[[Page 39707]]

labor market area within the same State to continue business.
    42. Prioritizing 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 require grantees to prioritize 
assisting businesses that meet the definition of a small business as 
defined by SBA at 13 CFR part 121 or, for businesses engaged in 
``farming operations'' as defined at 7 CFR 1400.3, and that meet the 
United States Department of Agriculture Farm Service Agency (FSA), 
criteria that are described at 7 CFR 1400.500, which are used by the 
FSA to determine eligibility for certain assistance programs.
    43. Prohibiting assistance to private utilities. Funds made 
available under this notice may not be used to assist a privately owned 
utility for any purpose.

E. Certifications and Collection of Information

    44. Certifications waiver and alternative requirement. Sections 
91.225 and 91.325 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 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.
    b. The grantee certifies its compliance with restrictions on 
lobbying required by 24 CFR part 87, together with disclosure forms, if 
required by part 87.
    c. 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 entity or entities designated by 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. The grantee certifies that 
activities to be undertaken with funds under this notice are consistent 
with its action plan.
    d. 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.
    e. 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.
    f. 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).
    g. 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 the method of distribution of funding, or activities 
carried out directly by the State.
    h. 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 
2015 pursuant to the Robert T. Stafford Disaster Relief and Emergency 
Assistance Act of 1974 (42 U.S.C. 5121 et seq.) related to the 
consequences of Hurricane Joaquin and adjacent storm systems, Hurricane 
Patricia, and other flood events.
    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 70 percent (or another percentage permitted by HUD in a waiver 
published in an applicable Federal Register notice) 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 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).
    i. The grantee certifies that the grant will be conducted and 
administered in conformity with title VI of the Civil Rights Act of 
1964 (42 U.S.C. 2000d) and the Fair Housing Act (42 U.S.C. 3601-3619) 
and implementing regulations, and that it will affirmatively further 
fair housing.
    j. The grantee certifies that it has adopted and is enforcing the 
following policies, and, 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.
    k. Each State or UGLG receiving a direct award under this notice 
certifies that it (and any subrecipient or administering entity) 
currently has or will develop and maintain the capacity to carry out 
disaster recovery activities in a timely manner and that the grantee 
has reviewed the requirements of this notice and requirements of Public 
Law 114-113 applicable to funds allocated by this notice, and certifies 
to the accuracy of Risk Analysis Documentation submitted to demonstrate 
that it has in place proficient financial controls and procurement 
processes; that it has adequate procedures to prevent any duplication 
of benefits as defined by section 312 of the Stafford Act, to ensure 
timely expenditure of funds; that it has to maintain a comprehensive 
disaster recovery Web site to ensure timely communication of 
application status to applicants for disaster recovery assistance, and 
that its implementation plan accurately describes its current capacity 
and how it will address any capacity gaps.
    l. The grantee certifies that it will not use CDBG-DR funds for any 
activity in an area identified as flood prone for land use or hazard 
mitigation planning

[[Page 39708]]

purposes by the State, local, or tribal government or delineated as a 
Special Flood Hazard Area in FEMA's most current flood advisory maps, 
unless it also ensures that the action is designed or modified to 
minimize harm to or within the floodplain, in accordance with Executive 
Order 11988 and 24 CFR part 55. The relevant data source for this 
provision is the State, local, and tribal government land use 
regulations and hazard mitigation plans and 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.
    m. 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.
    n. The grantee certifies that it will comply with applicable laws.

VII. Duration of Funding

    The Appropriations Act directs that these funds be available until 
expended. However, in accordance with 31 U.S.C. 1555, HUD shall close 
the appropriation account and cancel any remaining obligated or 
unobligated balance if the Secretary or the President determines that 
the purposes for which the appropriation has been made have been 
carried out and no disbursements have been made against the 
appropriation for 2 consecutive fiscal years. In such case, the funds 
shall not be available for obligation or expenditure for any purpose 
after the account is closed.

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 Federal 
Relay Service at 800-877-8339 (this is a toll-free number).

    Dated: June 8, 2016.
Nani A. Coloretti,
Deputy Secretary.

Appendix A--Allocation of CDBG-DR Funds as a Result of 2015 Flooding 
Disasters

    This section describes the methods behind HUD's allocation of 
$300 million in the 2015 CDBG-DR Funds.
    Section 420 (Division L, Title II) of Public Law 114-113, 
enacted on December 18, 2015, appropriates $300 million through the 
Community Development Block Grant (CDBG) program for necessary 
expenses for authorized activities 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 in 2015 related to the 
consequences of Hurricane Joaquin and adjacent storm systems, 
Hurricane Patricia, and other flood events: This section requires 
that funds be awarded directly to the State or unit of general local 
government at the discretion of the Secretary.
    The key underlying metric used in the allocation process is the 
unmet need that remains to be addressed from qualifying disasters. 
Unmet needs related to infrastructure and to damage to businesses 
and housing are used first to determine the most impacted and 
distressed areas that are eligible for grants and then to determine 
the amount of funding to be made available to each grantee.
    Methods for estimating unmet needs for business, infrastructure, 
and housing: The data HUD staff have identified as being available 
to calculate unmet needs for qualifying disasters come from the 
following data sources:
     FEMA Individual Assistance program data on housing-unit 
damage as of December 21, 2015;
     SBA for management of its disaster assistance loan 
program for housing repair and replacement as of January 13, 2016;
     SBA for management of its disaster assistance loan 
program for business real estate repair and replacement as well as 
content loss as of January 13, 2016; and
     FEMA-estimated and -obligated amounts under its Public 
Assistance program for permanent work, Federal and State cost share 
as of February 3, 2016.

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 SBA 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 and/or 1 to 4 feet of flooding on the first floor.
    [cir] Major-High: $15,000 to $28,800 of FEMA-inspected real 
property damage and/or 4 to 6 feet of flooding on the first floor.
    [cir] Severe: Greater than $28,800 of FEMA-inspected real 
property damage or determined destroyed and/or 6 or more feet of 
flooding on the first floor.
    To meet the statutory requirement of ``most impacted,'' homes 
are determined to have a serious 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 the 
homeowner received a FEMA grant to make home repairs. For homeowners 
with a FEMA grant and insurance for the covered event, HUD assumes 
that the unmet need ``gap'' is 20 percent of the difference between 
total damage and the FEMA grant.
     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 and/or 1 to 4 feet of flooding on the first floor.
    [cir] Major-High: $3,500 to $7,499 of FEMA-inspected personal 
property damage and/or 4 to 6 feet of flooding on the first floor.
    [cir] Severe: Greater than $7,500 of FEMA-inspected personal 
property damage or determined destroyed and/or 6 or more feet of 
flooding on the first floor.
    For rental properties, to meet the statutory requirement of 
``most impacted,'' 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 occupied by a tenant with 
income less than $30,000 are used to calculate likely unmet needs 
for affordable rental housing. For those units occupied by tenants 
with incomes under $30,000, HUD estimates unmet needs as 75 percent 
of the estimated repair cost.
     The average cost to fully repair a home to code for a 
specific disaster within each of the damage categories noted above 
is calculated using the average real property damage repair costs 
determined by the SBA 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

[[Page 39709]]

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 Unmet Infrastructure Needs

     To best proxy unmet infrastructure needs, HUD uses data 
from FEMA's Public Assistance program on the State match requirement 
(usually 25 percent of the estimated public assistance needs). This 
allocation uses only a subset of the Public Assistance damage 
estimates reflecting the categories of activities most likely to 
require CDBG funding above the Public Assistance and State match 
requirement. Those activities are categories: C, Roads and Bridges; 
D, Water Control Facilities; E, Public Buildings; F, Public 
Utilities; and G, Recreational--Other. Categories A (Debris Removal) 
and B (Protective Measures) are largely expended immediately after a 
disaster and reflect interim recovery measures rather than the long-
term recovery measures for which CDBG funds are generally used. 
Because Public Assistance damage estimates are available only 
Statewide (and not county), CDBG funding allocated by the estimate 
of unmet infrastructure needs are suballocated to counties and local 
jurisdictions based on each jurisdiction's proportion of unmet 
housing and business needs.

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. This is adjusted upward by the 
proportion of applications that were received for a disaster for 
which content and real property loss were not calculated because the 
applicant had inadequate credit or income. For example, if a State 
had 160 applications for assistance, 150 had calculated needs and 10 
were denied in the preprocessing stage for not enough income or poor 
credit, the estimated unmet need calculation would be increased as 
(1 + 10/160) multiplied by the calculated unmet real content loss.
     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 
applications that were denied at the preprocess stage because of 
poor credit or inability to show repayment ability. Similar to 
housing, estimated damage is used to determine what unmet needs will 
be counted as serious unmet needs. Only properties with total real 
estate and content loss in excess of $30,000 are considered serious 
damage for purposes of identifying the most impacted areas.
    [cir] Category 1: real estate + content loss = below 12,000.
    [cir] Category 2: real estate + content loss = 12,000-30,000.
    [cir] Category 3: real estate + content loss = 30,000-65,000.
    [cir] Category 4: real estate + content loss = 65,000-150,000.
    [cir] Category 5: real estate + content loss = above 150,000.
     To obtain unmet business needs, the amount for approved 
SBA loans is subtracted out of the total estimated damage.

Most Impacted and Distressed Designation

    HUD allocates funds based on its estimate of the total unmet 
needs for infrastructure and the unmet needs for serious damage to 
businesses and housing that remain to be addressed in the most 
impacted counties after taking into account the most recent 
available data on insurance, FEMA assistance, and SBA disaster 
loans. To meet the statutory requirement that the funds be targeted 
to ``the most impacted or distressed areas,'' this allocation:
    1. Limits allocations to those disasters where FEMA had 
determined the damage was sufficient to declare the disaster as 
eligible to receive Individual Assistance (IA) or Individual and 
Housing Program (IHP) funding.
    2. Only accounts for homes and businesses that experienced 
damage categorized as ``major-low'' or higher (see definitions 
above). That is, it excludes homes and businesses with minor damage 
that may have some unmet needs remaining.
    3. Restricts funding only to States with substantially higher 
unmet needs than other States impacted by disasters. Among disasters 
with data meeting the first two thresholds, HUD identifies a natural 
break in calculated serious unmet recovery needs and funds only 
grantees within those States.
    4. Only includes housing and business unmet needs data toward a 
formula allocation if HUD calculated serious unmet housing and 
business needs for a county is in excess of a Most Impacted 
threshold. Specifically, only counties with $7 million or more in 
serious unmet housing and business needs are used to determine a 
State's allocation. Thus, funding is provided based on the serious 
needs of the most impacted counties in each State.
    5. Factors in disaster-related infrastructure repair costs 
Statewide that are not reimbursed by FEMA Public Assistance. For all 
of these disasters, this is calculated as the 25 percent State match 
requirement.
    6. Specifies the counties and jurisdictions that are most 
impacted or distressed by:
    a. Providing direct funding to CDBG entitlement jurisdictions 
with significant remaining serious unmet needs. Within a State, if 
an entitlement jurisdiction accounts for $15 million or more of the 
funding allocated to the State, it is allocated a direct grant.
    b. Directing that a minimum of 80 percent of the total funds 
allocated within a State, including those allocated directly to the 
State and to local governments, must be spent on the disaster 
recovery needs of the communities and individuals in the most 
impacted and distressed counties (i.e., those counties identified by 
HUD). The principle behind the 80 percent rule is that each State 
received its allocation based on the unmet needs in the HUD-
identified most impacted counties (those counties with more than $7 
million in serious unmet housing and business needs) and, thus, HUD 
will require that all grantees within a State direct these limited 
resources toward those most impacted counties. Nonetheless, HUD 
recognizes that there are likely circumstances where its data is 
incomplete, damage is highly localized outside of one of the heavily 
impacted counties, or recovery would otherwise benefit from 
expenditures outside of those most impacted counties and, thus 
provides some flexibility to address those needs for State grantees. 
While local governments receiving direct grant allocations from HUD 
must spend their total grant within their own jurisdictions, HUD 
will allow a portion of the State nonentitlement grant to be spent 
outside of the most impacted counties, in an amount not to exceed 
that which yields 80 percent of all funding within a State to be 
spent in the most impacted counties.

Allocation Calculation

    Once eligible entities are identified using the above criteria, 
the allocation to individual grantees represents their proportional 
share of the estimated unmet needs. For the formula allocation, HUD 
calculates total serious unmet recovery needs as the aggregate of:
     Serious unmet housing needs in most impacted counties.
     Serious unmet business needs in most impacted counties.
     The estimated local match requirement for the repair of 
infrastructure estimated for FEMA's Public Assistance program. Given 
the relatively late timing of several disasters in 2015, this 
information is generally available only at the State level and not 
yet at county level geography. HUD estimates a local government 
share of public assistance unmet need as proportional to their 
serious housing and business unmet needs.
    Each State receives funding based on all of the infrastructure 
needs within the State, minus the infrastructure needs estimated to 
lie within entitlement jurisdictions receiving direct grants. In 
addition, each State also receives funding from all serious housing 
and business needs in the most impacted counties minus the estimated 
severe housing and business needs within entitlement jurisdictions 
receiving direct grants.

Special Note About Participating Jurisdictions Within Urban 
Counties

    The formula allocations to entitlement jurisdictions are based 
on the geography that those jurisdictions serve in their regular 
CDBG program. Urban Counties are comprised of the balance of a 
county after subtracting out any CDBG entitlement cities and any 
incorporated towns or cities that choose to participate with the 
State government. If an incorporated town or city crosses two Urban 
County boundaries, it may choose the Urban County with which it will 
participate and the data from the town in the adjoining county would 
be included in the chosen county's allocation.
    The formula allocation for the grant to the State government 
reflect both the nonentitled

[[Page 39710]]

portions of the State under the regular CDBG program and all of the 
other areas of the most impacted counties not covered by the CDBG 
entitlement communities getting a direct grant. For example, the 
geography served by Livingston County, South Carolina includes one 
or more communities that cross over into Richland County, South 
Carolina. Because those communities participate with the Livingston 
County CDBG program and not the Richland County CDBG program, their 
need is reflected in the award to Livingston County. In addition, a 
number of incorporated towns in Richland County are served by the 
State CDBG program and the data for those communities were factored 
into the grant to the South Carolina State government and not the 
grant to the Richland County Urban County.

[FR Doc. 2016-14110 Filed 6-16-16; 8:45 am]
 BILLING CODE 4210-67-P