Community Development Block Grant Program; Revision of CDBG Eligibility and National Objective Regulations

Note: EPA no longer updates this information, but it may be useful as a reference or resource.
 [Federal Register: May 24, 2006 (Volume 71, Number 100)]
[Rules and Regulations]
[Page 30029-30036]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24my06-16]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 570
[Docket No. FR-4699-F-02]
RIN 2506-AC12
 
Community Development Block Grant Program; Revision of CDBG 
Eligibility and National Objective Regulations

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

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SUMMARY: This final rule revises the Community Development Block Grant 
(CDBG) program regulations to clarify the eligibility of brownfields 
cleanup, development, or redevelopment within existing program 
eligibility categories. In addition, this final rule makes changes to 
CDBG national objectives that relate to brownfields and clarifies 
regulatory language.
    The final rule expands the ``slums or blight'' national objective 
criteria to include known and suspected environmental contamination, as 
well as economic disinvestment, as blighting influences. The rule also 
expands the definition of ``clearance'' to include remediation of known 
or suspected environmental contamination. The rule requires grantees to 
establish definitions of blighting influences and to retain records to 
support those definitions. In addition, an area slums or blight 
designation is required to be redetermined every 10 years for continued 
qualification. The regulatory amendments include the abatement of 
asbestos hazards and lead-based paint hazard evaluation and reduction 
as eligible rehabilitation activities. The final rule eliminates 
duplicative text concerning the treatment of lead-based paint hazards. 
Finally, the final rule requires that acquisition or relocation, if 
undertaken to address slums or blight on a spot basis, must be followed 
by other eligible activities that eliminate specific conditions of 
blight or physical decay.
    The final rule follows publication of a July 9, 2004, proposed rule 
and takes into consideration the public comments received on the 
proposed rule.
    On October 22, 1996, the Department published an interim rule, 
``Community Development Block Grant Program for States; Community 
Revitalization Strategy Requirements and Miscellaneous Technical 
Amendments.'' This rule also makes final, with no changes, the 
provisions of that rule, which have been in effect for states on an 
interim basis since November 21, 1996.

DATES: Effective Date: June 23, 2006.

FOR FURTHER INFORMATION CONTACT: Steve Higginbotham, Community Planning 
and Development Specialist, State and Small Cities Division, Office of 
Block Grant Assistance, Office of Community Planning and Development, 
Department of Housing and Urban Development, 451 Seventh Street, SW., 
Room 7184, Washington, DC 20410-7000; telephone (202) 708-1322 (this is 
not a toll-free number). Hearing- or speech-impaired individuals may 
access the telephone number listed in this section via TTY by calling 
the toll-free Federal Information Relay Service at (800) 877-8339. 
Copies of studies mentioned in this rule are available for a fee from 
HUD User at (800) 245-2691 (a toll-free number).

SUPPLEMENTARY INFORMATION:

I. Background

    In the Departments of Veterans Affairs and Housing and Urban 
Development and Independent Agencies Appropriations Act, 1999 (Pub. L. 
105-276, approved October 21, 1998) (FY1999 Appropriations Act), 
Congress clarified the eligibility of environmental cleanup and 
economic development activities under the CDBG program. Section 205 of 
the FY1999 Appropriations Act stated:

    For fiscal years 1998, 1999, and all fiscal years thereafter, 
States and entitlement communities may use funds allocated under the 
community development block grants program under Title I of the 
Housing and Community Development Act of 1974 for environmental 
cleanup and economic development activities related to Brownfields 
projects in conjunction with the appropriate environmental 
regulatory agencies, as if such activities were eligible under 
section 105(a) of such Act.

    On July 9, 2004, HUD published a proposed rule (69 FR 41434) for 
public comment to clarify the eligibility of brownfields cleanup, 
development, or redevelopment within existing program eligibility 
categories, as well as make changes to CDBG national objectives that 
relate to brownfields and clarify regulatory language.
    Although cleanup and redevelopment of brownfields can already be 
accomplished using numerous categories of eligible activities, 
qualifying such an activity under the existing criteria has often been 
confusing and problematic. In addition, ambiguity in statutory and 
regulatory language has made grantees reluctant to use the ``slums or 
blight'' national objective to justify brownfields cleanup. To 
eliminate this ambiguity, HUD proposed to add project-specific 
assessment and remediation of known or suspected environmentally 
contaminated sites to the list of eligible activities under Sec. Sec.  
570.201(d) and 570.703(e), which addresses clearance activities. HUD 
also proposed to expand the ``slums or blight'' national objective 
criteria to include known and suspected environmental contamination as 
blighting influences. The proposed rule stated HUD's intent to accept, 
as blighting influences, signs of economic disinvestment, such as 
property abandonment, chronic high turnover rates; or chronic high 
vacancy rates in occupancy of commercial or industrial buildings; and 
significant declines in property values.
    HUD proposed that grantees be required to establish definitions and 
retain records to substantiate how the area met the ``slums or blight'' 
criteria. Specifically, grantees would be required to define 
deteriorating or deteriorated buildings or improvements, abandonment of 
properties, chronic high turnover rates, chronic high vacancy rates, 
significant declines in property values, abnormally low property 
values, and environmental contamination. HUD also proposed that at 
least 33 percent of the properties in the designated area meet one or 
more of these conditions. Furthermore, HUD proposed the requirement 
that the ``slums or blight'' designation for the area be re-determined 
every 5 years.
    In addition, the proposed rule sought to curb the use of 
acquisition or relocation by itself, when using the spot slums or 
blight national objective criterion. The proposed rule stated that if 
acquisition or relocation were undertaken to address the spot slums or 
blight national objective, it must be a precursor to another eligible 
activity that directly eliminates the conditions of blight or physical 
decay.
    HUD received 11 comments to the July 9, 2004, proposed rule. Many 
commenters expressed concern over the proposal to require that at least 
33 percent of the properties in a designated area meet the slum/blight 
definitions. Several commenters also stated that the 5-year designation 
period was too short. Other commenters were unclear as to what HUD 
meant in saying that acquisition or relocation must be a precursor to 
other eligible activities that eliminate specific conditions of blight 
or physical decay when addressing slums or blight on a spot basis. 
There were no objections to expanding the definition of ``clearance'' 
to include remediation of known or suspected environmental contamination.

[[Page 30031]]

II. Differences Between This Final Rule and the July 9, 2004, Proposed 
Rule

    This final rule follows publication of the July 9, 2004, proposed 
rule, and takes into consideration the public comments received on the 
proposed rule. The noteworthy differences between this final rule and 
the July 9, 2004, proposed rule are summarized below. Additional 
information regarding these changes is provided in the discussion of 
the public comments in sections III through VI of this preamble.
    1. Requirement that 33 percent of properties in a slum/blight 
designated area must experience one or more of the conditions in the 
expanded list of slum/blight national objective criteria. In response 
to significant public comment on this issue, this final rule revises 
the percentage of properties that must meet slum and blight conditions. 
The final rule reduces the percentage to the 25 percent threshold, 
which is consistent with the standard currently in place.
    2. Requirement that an area be re-determined to be a ``slums or 
blight'' area every 5 years for continued qualification. This final 
rule revises the period of time between re-determination of ``slums or 
blight'' in response to several commenters' observation that 5 years is 
not enough time to remediate a blighted area. The final rule changes 
the re-designation period to 10 years.
    3. Technical correction in text at Sec.  570.703(e). In order to 
make the text at Sec.  570.703(e) more consistent with the proposed 
text found at Sec.  570.201(d), the final rule will change the 
subparagraph to read ``Clearance, demolition, and removal, including 
movement of structures to other sites and remediation of properties 
with known or suspected environmental contamination, of buildings and 
improvements on real property acquired or rehabilitated pursuant to 
paragraphs (a) and (b) of this section. Remediation may include 
project-specific environmental assessment costs not otherwise eligible 
under Sec.  570.205.''

III. Discussion of Public Comments Received on the July 9, 2004, 
Proposed Rule

    The public comment period on the July 9, 2004, proposed rule closed 
on September 7, 2004. HUD received 11 comments. Commenters included 
five trade associations, five units of local government, and a bank. 
The summary of comments that follows presents the major issues and 
questions raised by the public commenters on the proposed rule.
    The summary of public comments is organized as follows: Section IV 
of this summary discusses the public comments regarding changes to the 
national objective criteria; section V discusses the public comments 
regarding CDBG entitlement program-eligible activities; section VI 
discusses the public comments on national objective standards for 
addressing slums or blight on a spot basis; section VII discusses the 
public comments on additional reporting in the Integrated Disbursement 
& Information System (IDIS); and section VIII presents miscellaneous 
public comments.

IV. Comments on Changes to National Objective Criteria

A. Comments Regarding the Requirement That at Least 33 Percent of the 
Properties Throughout the Area Meet Certain Qualifying Conditions

    Comment: This proposed requirement is counterproductive and will 
have an adverse impact on designation of slum/blight areas to receive 
CDBG assistance. The comments stated that a small percentage of 
deteriorated and/or abandoned properties along with other factors could 
cause blighting conditions in an area, contributing to the area's 
downward spiral. They cautioned that the increase would condemn many 
areas to continued deterioration until the threshold is reached for 
assistance under the CDBG program. One commenter questioned how the 33 
percent standard is considered met and requested that HUD clarify what 
methodology grantees should use to determine whether a brownfields-
related project activity meets the percentage standard.
    Another commenter cautioned that increasing the threshold would 
prevent entitlements from proactively addressing areas on the fringe of 
disinvestment before they spiral downward while simultaneously being 
encouraged to cite violations on more buildings. One commenter 
suggested it is reasonable to assume that if 25 percent of properties 
in an area met one or more of these conditions, there would already be 
a significant disincentive to investment. Yet another commenter opposed 
the change, stating that the current definition was overly narrow.
    HUD's Response: HUD believes that the expansion of the ``slums or 
blight'' national objective to recognize physical deterioration of 
improvements on private property and other economic disinvestment as 
blighting influences would make it easier for grantees to reach the 
proposed 33 percent threshold. Nevertheless, the Department 
acknowledges that there was universal opposition among commenters to 
the proposal to increase the threshold for the percentage of blighted 
properties in the delineated area from 25 percent to 33 percent. The 
Department also gave serious consideration to the concerns of grantees 
that the higher threshold might cause blighted areas to slip further 
into decline before the cause is addressed. Therefore, HUD has decided 
to allow the threshold to remain at 25 percent.
    The methodology for determining compliance will change somewhat in 
that each grantee will now be required to establish its own definitions 
for the newly enumerated blighting conditions or influences, retain 
records to substantiate how the area meets the slum/blight criteria, 
and re-determine every 10 years whether the area still meets the 
regulatory criteria; however, the flexibility that grantees will have 
in defining deterioration will make it much easier to meet the national 
objective. To make it even easier to make that determination, the final 
rule refers more generally to buildings and ``properties'' rather than 
just buildings, because a parcel could contain buildings or be vacant.
    Grantees should note that the final rule establishes the 25 percent 
threshold as a regulatory requirement. In the past, the percent 
threshold existed as a policy determination in the State and 
Entitlement Guides to Eligibility and National Objectives. The 25 
percent threshold was created to answer grantees' confusion concerning 
how many buildings in an area had to be deteriorated to satisfy the 
requirement of Sec. Sec.  570.483(c)(1)(ii) and 570.208(b)(1)(ii) that 
a ``substantial'' number be deteriorated.

B. Comments Regarding Proposal That Would Require Grantees To 
Redesignate Blighted Areas Every 5 Years

    Comment: Five years is not enough time to begin and complete a 
redevelopment project. Nine commenters stated that the 5-year period 
for redesignation is too short. These commenters suggested time frames 
from 10 years to 40 years as being more appropriate. Seven commenters 
cited as reasons for requiring a longer redesignation period the length 
of time needed to remediate blighted properties or redevelop a blighted 
area. One commenter also cited the administrative burden of frequent 
redesignations.
    HUD's Response: The Department's original intent in requiring a 
redetermination every 5 years was to make it easier for grantees to 
coincide their redetermination process with the Consolidated Planning 
process. However, HUD agrees with the

[[Page 30032]]

commenters that expressed concern that a blighted area may not 
substantially change in such a short period of time. However, HUD 
disagrees with the statements of some commenters that it could take up 
to 40 years to feel the effects of a project. Neighborhood growth and 
decay would suggest that a grantee use caution in applying decades-old 
data to justify CDBG expenditures. In addition, the Department's focus 
on performance and outcomes in its grant programs necessitate a sooner 
rather than later review of the impact of CDBG grant funds in assisted 
areas. HUD has determined that a 10-year redetermination process is a 
reasonable compromise.
    Areas designated less than 10 years prior to the effective date of 
the final rule would be required to be redetermined on the 10-year 
anniversary of the original designation using the criteria in effect at 
the time of the redetermination. Any area designated more than 10 years 
prior to the effective date of the final rule must be redetermined to 
be blighted before any additional funds are obligated for new or 
existing activities.
    Comment: ``Since the classification of a ``blighted area'' is 
derived from state law, HUD should also use state law in determining 
how often a ``blighted area'' requires reassessment and subsequently, 
reclassification.'' This commenter stated that under state law, time 
frames of 20 years to 40 years are not uncommon and that 5 years is an 
unreasonably short period of time. The commenter also stated, ``It 
often takes years to determine and remediate brownfield contaminated 
sites. And, as long as it takes for grantees to address environmental 
contamination, it takes even more time to secure funding,'' often from 
more than one source.
    Another commenter stated that ``Many county entitlements survey 
hundreds of thousands of structures to identify blighted areas, a 
valuable but burdensome process. Many counties rely on census data and 
data collected by other federal agencies that are not released as often 
as every 5 years or that lag in their release dates. Re-determining 
slums and blighted areas every 5 years would add little value to county 
programs at a high expense to scar[c]e [sic]
HUD resources.'' One 
commenter stated that the requirement would be an added regulatory and 
paperwork burden, and another commenter stated that HUD should ``allow 
states to pass this requirement onto their grantees, the local entities 
requesting the area designations.''
    HUD's Response. HUD disagrees with the statement that HUD should 
allow states to pass on this requirement to its grantees. Judging by 
the wide divergence of opinion among commenters as to what constitutes 
a reasonable time period, allowing each jurisdiction to determine its 
own process would lead to inconsistent implementation. In addition, 
allowing jurisdictions to set re-designation periods of anywhere from 5 
years to 40 years would greatly complicate oversight by HUD and state 
agencies.

C. Comments Regarding Additional Blighting Influences

    Comment: Graffiti, trash, and debris and other additional blight 
factors should be added. One commenter stated that because graffiti, 
trash, and debris have a blighting influence, the definition of 
``clearance'' as an eligible activity should include graffiti and 
blight abatement. Furthermore, the definition of ``clearance'' as an 
activity that meets the national objective criteria of elimination of 
slums and blight on a spot basis in Sec.  570.208(b) should be expanded 
to include graffiti, trash, and debris removal.
    Another commenter offered the following as additional blight 
factors: inadequate or non-existent alleyways; inadequate or non-
existent parking in a business area; street and sidewalk design that 
discourages foot and vehicular traffic; inadequate lighting; unpaved 
streets, or streets and alleys in substantial disrepair; and zoning 
that contributes to inappropriate or incompatible uses, such as 
churches, and liquor stores in the same block.
    HUD's Response: HUD does not consider transitory conditions such as 
graffiti-sprayed walls and litter-strewn, vacant lots to be the sort of 
long-term ``blighting influences'' that the Department is attempting to 
address in this rule. Painting or cleaning up the affected areas can 
rectify such conditions relatively quickly. However, the conditions 
specified in this rule pose a more long-term negative effect on an area 
that can easily lead to blight in adjoining areas.
    Grantees must be aware of the distinction between allowing graffiti 
and litter to be used as blighting influences to qualify an area as 
slum/blighted versus carrying out activities to address these 
conditions in an area that has already been designated as slum/
blighted. While the designation process is held to the higher standards 
of the Housing and Community Development Act of 1974 (HCDA), as 
amended, activities carried out within these areas can address 
conditions that fit the state and local definitions. It should be noted 
that HUD regards graffiti as a dangerous sign of gang activity and is 
committed to using CDBG funds for its removal. The Department ruled 
several years ago that CDBG funds may be used for graffiti removal 
under the eligibility category of property rehabilitation for private 
residences and commercial or industrial buildings, and under the 
category of public service when removing graffiti from public buildings.
    As the Department has stated many times in the past, HUD does not 
accept inappropriate zoning, the absence of infrastructure, or the 
presence of vacant or undeveloped land as prima facie evidence of 
blighted conditions. The Housing and Community Development Act of 1974, 
as amended, sets a higher standard than is intended or required under 
some state laws, which have broader purposes that might include examples 
of inadequate planning such as those listed by a commenter as additional 
blight factors. HUD holds to the higher standards set by the HCDA.

V. Comments on CDBG Entitlement Program Eligible Activities

A. Comments Concerning the Addition of Lead-Based Paint Evaluation and 
Reduction and Asbestos Abatement as Eligible Activities Under the CDBG 
Entitlement Regulations

    Comment: Four commenters offered support for addition of 
elimination of lead-based paint and asbestos as conditions detrimental 
to public health and safety.

B. Comments Regarding Remediation of Environmental Contamination as 
Eligible Activity

    Comment: Support for the addition of remediation of environmental 
contamination to the list of eligible activities. Six commenters 
declared support for this provision. One commenter stated that HUD 
should define the types of environmental contamination that may be 
considered blighting influences and that HUD's referring to other 
federal programs may cause confusion. This commenter recommended that 
instead of requiring state and local housing agencies to define 
environmental contamination themselves, that housing authorities could 
simply adopt, by reference, existing state definitions for 
environmental contamination under their respective state's brownfields 
program or voluntary cleanup program. Another commenter suggested that 
HUD provide grantees the flexibility to determine what constitutes 
contamination without tying the CDBG

[[Page 30033]]

program to complicated environmental regulatory standards.
    HUD's Response. HUD stands behind its belief that the Department 
has neither the statutory responsibility nor the technical expertise to 
define levels or types of environmental contamination. Grantees are 
responsible for determining what constitutes a contaminated property 
within their program and for establishing definitions for their 
program. The Department realizes that local grantee staffs are not 
necessarily experts, either; therefore, they are free to adopt other 
federal or state definitions. However, tying the definition of 
``brownfields'' in the CDBG program to that of another federal or state 
program should be approached with caution, as other programs may have 
statutory purposes and limitations that are much different from CDBG.

VI. Comments on National Objective Standards for Addressing Slums or 
Blight on a Spot Basis

    Comment: Acquisition and relocation must be a precursor to other 
eligible activities that directly eliminate the conditions of blight or 
physical decay when addressing slums or blight on a spot basis. One 
commenter stated that HUD should consider including some flexibility 
for unexpected situations, such as the need to relocate tenants when 
their apartments have suffered extreme damage from a fire, when the 
property is uninhabitable and cannot be rehabilitated, or in cases 
where environmental contamination has been discovered and tenants 
cannot return to unsafe conditions.
    HUD's response. The final rule does not decrease the flexibility 
grantees have in handling unexpected situations; it simply requires 
that grantees plan for a subsequent use. In the past, HUD has allowed 
grantees to acquire contaminated land with the immediate goal of 
relocating residents under the spot blight national objective, 
primarily on occasions when residents are not of low- or moderate-
income. However, even in these instances, future activities were 
usually planned, such as clearance or cleanup of contamination.
    One commenter explained that while every local community would 
agree with the goal of improving neighborhoods after land acquisition 
or relocation takes place, there is a concern that this requirement 
could be misinterpreted (by HUD or local grantees) to eliminate 
critical, appropriate pre-development activities. Another commenter 
agreed that stand-alone property acquisition or relocation of occupants 
does not remedy blight by itself. However, the commenter expressed 
concern about being able to demonstrate a fully realizable plan at the 
beginning of a redevelopment effort in order to secure grant funding.
    HUD's response. The final rule does not discourage acquisition and 
relocation as pre-development activities, nor does it require that a 
proposed plan be in place before CDBG funds are spent. Acquisition and 
relocation continue to be eligible spot slums or blight-addressing 
activities, but only when they are a precursor to other eligible 
activities that directly eliminate the conditions of blight or physical 
decay. However, ``stand-alone'' acquisition of a property or relocation 
of occupants, with no further action to rehabilitate, redevelop, 
demolish, or to undertake other eligible activities that directly 
eliminate the blighting condition(s) or physical decay of the property, 
will not qualify as meeting the spot slums or blight national 
objective. Other development activities that address the blighting 
conditions do not have to be funded with funds from the CDBG program, 
Section 108 Loan Guarantee program, Economic Development Initiative, or 
Brownfields Economic Development Initiative.
    This requirement is not unprecedented in the CDBG program. In fact, 
Sec. Sec.  570.208(d)(1) and (2), and 570.483(e)(2) and (3) refer 
generally to the national objective determination of acquisition and 
relocation being tied to the property's planned use. Also, the public 
benefit standards for economic development projects found in Sec. Sec.  
570.209(b)(3)(D) and 570.482(f)(4)(ii)(D) forbids ``acquisition of land 
for which the specific proposed use has not yet been identified.'' The 
final rule would not require grantees to have a proposed plan in place 
or be ready to move forward with the end-use at the time of acquisition 
or relocation, but it is the Department's sense that it would be 
prudent for a grantee to have a proposed plan for the property's re-use 
beforehand. HUD expects that some additional clearance or development 
activity will occur within a reasonable amount of time after the 
acquisition or relocation.
    Comment: One commenter stated that the section of the final rule 
dealing with acquisition or relocation carried out under the spot slums 
and blight national objective needs clarification. The commenter asked 
whether direct treatment of a contaminated site without the necessity 
of acquisition of the site or relocation would be ineligible.
    HUD's response. The Department does not mean to imply that any of 
the other eligible spot slums or blight-addressing activities has to be 
accompanied by acquisition and/or relocation. On the contrary, if 
acquisition or relocation occurs, it must be followed by another 
eligible activity that would directly eliminate the specific 
condition(s) of blight or physical decay. For instance, a grantee could 
clean up a contaminated site without acquiring the site; however, if 
the grantee acquired the site first, the project would be considered to 
be meeting the slum/blight national objective criteria only after 
clean-up occurred.

VII. Comments on Additional Reporting in IDIS

    Comment: IDIS--Data collection. One commenter supported the 
addition of a data field to the Integrated Disbursement & Information 
System (IDIS) that would assist in determining the extent to which CDBG 
funds are used for brownfields-related activities. Another commenter 
sought clarification about what type of data pertaining to brownfields 
projects would be entered into the IDIS data field.
    HUD's response. The IDIS system enables grantees to denote CDBG-
funded activities that address brownfields.

VIII. Comments on Miscellaneous Issues

    Comment: Rulemaking issue. A commenter requested that HUD publish a 
revised proposed rule prior to issuing a final rule and thereby allow 
another opportunity for public comment.
    HUD's response. HUD allowed a reasonable time for citizens and 
interest groups to comment on the proposed rule. Since that time, the 
Department has carefully considered those public comments in the 
development of this final rule. Therefore, HUD does not feel that it is 
necessary to issue another proposed rule.
    Comment: Clarification is still necessary. One commenter asked, 
``The proposed rule appears to allow some site assessment costs to be 
eligible as planning costs, while others may be the actual project 
delivery costs * * * how should grantees distinguish between planning 
and project costs? Using what criteria? Will activities such as 
symposia, workshops, conferences, general site visits, general 
administration of Brownfields programs at the local level, training 
activities, and overall monitoring of Brownfields project progress be 
eligible under Planning * * * or may these costs be added to project 
delivery?'
    HUD's response. HUD is not changing the recordkeeping requirements 
regarding differentiation between

[[Page 30034]]

general administration, planning, and project delivery costs. Instead, 
the Department is merely enlarging the scope of planning activities 
considered eligible under CDBG to include some site assessment costs. 
Grantees should use the same methodology as in previous years to 
determine whether an activity is considered a planning or project delivery.
    Comment: Support for the proposed rule. In general, six commenters 
offered support for the rule, using adjectives such as ``positive,'' 
``appropriate,'' and ``needed.'' One commenter stated that the proposed 
revisions ``clarify the confusing parts of the existing regulations.''

IX. Publication of Final Rule Concerning Community Revitalization 
Strategies Requirements and Miscellaneous Technical Amendments

    On October 22, 1996, the Department published an interim rule, 
``Community Development Block Grant Program for States; Community 
Revitalization Strategy Requirements and Miscellaneous Technical 
Amendments'' (61 FR 54913). The interim rule implemented the community 
revitalization strategies concept for the State CDBG program; it also 
made various technical amendments to correct or revise inaccurate or 
outdated regulatory citations. As an interim rule, it was effective on 
November 21, 1996, while providing an opportunity for public comment on 
the provisions of that rule, before putting them into final effect.
    HUD received only one comment on the 1996 interim rule, and the 
comment supported the regulatory changes. In the intervening years, 
relatively few states have chosen to implement the community 
revitalization strategy concept in their program. HUD has not received 
any objections to the overall community revitalization strategy concept 
or to the specific regulatory provisions implementing it; rather, most 
states have chosen to take different approaches to the design and 
implementation of their programs. Therefore, this final rule makes final 
those interim provisions currently in effect for states, with no change.
    The Community Revitalization Strategies portion of this final rule 
affects only the State CDBG program. Regulations for a comparable 
provision in the Entitlement CDBG program, Neighborhood Revitalization 
Strategies, have been in place for a number of years.

X. Findings and Certifications

Public Reporting Burden

    The information collection requirements contained in this final 
rule have been approved by the Office of Management and Budget (OMB) in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-
3520) and assigned OMB control numbers 2506-0077 and 2506-0085. An 
agency may not conduct or sponsor, and a person is not required to 
respond to, a collection of information unless the collection displays 
a currently valid OMB control number.

Environmental Impact

    A Finding of No Significant Impact with respect to the environment 
has been made in accordance with HUD regulations at 24 CFR part 50, 
which implement section 102(2)(C) of the National Environmental Policy 
Act of 1969 (42 U.S.C. 4223). The Finding of No Significant Impact is 
available for public inspection weekdays between the hours of 8 a.m. 
and 5 p.m. in the, Office of General Counsel, Department of Housing and 
Urban Development, 451 Seventh Street, SW., Room 10276, Washington, DC 
20410-0500. Due to security measures at the HUD Headquarters building, 
please schedule an appointment to review the finding by calling the 
Regulations Division at (202) 708-3055 (this is not a toll-free number).

Executive Order 13132, Federalism

    Executive Order 13132, entitled ``Federalism,'' prohibits an agency 
from publishing any rule that has federalism implications if the rule 
either imposes substantial direct compliance costs on state and local 
governments and is not required by statute, or the rule preempts state 
law, unless the agency meets the consultation and funding requirements 
of section 6 of the Executive Order. This final rule does not have 
federalism implications and does not impose substantial direct 
compliance costs on state and local governments or preempt state law 
within the meaning of the Executive Order.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (2 U.S.C. 
1531-1538) establishes requirements for federal agencies to assess the 
effects of their regulatory actions on state, local, and tribal 
governments and on the private sector. This final rule does not impose 
a federal mandate on any state, local, or tribal government, or on the 
private sector, within the meaning of the Unfunded Mandates Reform Act 
of 1995.

Regulatory Planning and Review

    The Office of Management and Budget (OMB) reviewed this rule under 
Executive Order 12866, entitled ``Regulatory Planning and Review.'' OMB 
determined that this rule is a ``significant regulatory action'' as 
defined in section 3(f) of the order (although not an economically 
significant regulatory action under the order). Any changes made to the 
rule as a result of that review are identified in the docket file, 
which is available for public inspection in the office of the 
Department's Rules Docket Clerk, Office of General Counsel, 451 Seventh 
Street, SW., Room 10276, Washington, DC 20410-0500. Due to security 
measures at the HUD Headquarters building, an advance appointment to 
review the file must be scheduled by calling the Regulations Divisions 
at (202) 708-3055 (this is not a toll-free number).

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) program numbers 
applicable to the various components of the CDBG program are: 14.218, 
Entitlement program; 14.219, HUD-Administered Small Cities program; 
14.225, Insular Areas program; 14.228, State program; 14.248, Section 
108 Loan Guarantee program; and 14.246, Community Development Block 
Grants Economic Development Initiative.

List of Subjects in 24 CFR Part 570

    Administrative practice and procedure, American Samoa, Community 
Development Block Grants, Grant programs--education, Grant programs--
housing and community development, Guam, Indians, Loan programs--
housing and community development, Low and moderate income housing, 
Northern Mariana Islands, Pacific Islands Trust Territory, Puerto Rico, 
Reporting and recordkeeping requirements, Student aid, Virgin Islands.

? Accordingly, for the reasons stated in the preamble, HUD amends 24 CFR 
part 570 to read as follows:

PART 570--COMMUNITY DEVELOPMENT BLOCK GRANTS

? 1. The authority citation for 24 CFR part 570 continues to read as 
follows:

    Authority: 42 U.S.C. 3535(d) and 5302-5320.

? 2. Revise Sec.  570.201(d) to read as follows:

[[Page 30035]]

Sec.  570.201  Basic eligible activities.

* * * * *
    (d) Clearance and remediation activities. Clearance, demolition, 
and removal of buildings and improvements, including movement of 
structures to other sites and remediation of known or suspected 
environmental contamination. Demolition of HUD-assisted or HUD-owned 
housing units may be undertaken only with the prior approval of HUD. 
Remediation may include project-specific environmental assessment costs 
not otherwise eligible under Sec.  570.205.
* * * * *

? 3. Remove Sec.  570.202(b)(7)(iv), and revise Sec.  570.202(a)(3), 
(b)(2), and (f) to read as follows:

Sec.  570.202  Eligible rehabilitation and preservation activities.

    (a) * * *
    (3) Publicly or privately owned commercial or industrial buildings, 
except that the rehabilitation of such buildings owned by a private 
for-profit business is limited to improvement to the exterior of the 
building, abatement of asbestos hazards, lead-based paint hazard 
evaluation and reduction, and the correction of code violations;
* * * * *
    (b) * * *
    (2) Labor, materials, and other costs of rehabilitation of 
properties, including repair directed toward an accumulation of 
deferred maintenance, replacement of principal fixtures and components 
of existing structures, installation of security devices, including 
smoke detectors and dead bolt locks, and renovation through 
alterations, additions to, or enhancement of existing structures and 
improvements, abatement of asbestos hazards (and other contaminants) in 
buildings and improvements that may be undertaken singly, or in 
combination;
* * * * *
    (f) Lead-based paint activities. Lead-based paint activities 
pursuant to Sec.  570.608.

? 4. Revise the undesignated introductory paragraph of Sec.  570.203 to 
read as follows:

Sec.  570.203  Special economic development activities.

    A recipient may use CDBG funds for special economic development 
activities in addition to other activities authorized in this subpart 
that may be carried out as part of an economic development project. 
Guidelines for selecting activities to assist under this paragraph are 
provided at Sec.  570.209. The recipient must ensure that the 
appropriate level of public benefit will be derived pursuant to those 
guidelines before obligating funds under this authority. Special 
activities authorized under this section do not include assistance for 
the construction of new housing. Activities eligible under this section 
may include costs associated with project-specific assessment or 
remediation of known or suspected environmental contamination. Special 
economic development activities include:
* * * * *

? 5. Amend Sec.  570.204 by adding a new sentence following the semicolon 
at the end of paragraph (a)(2).

Sec.  570.204  Special Activities by Community-Based Development 
Organizations (CBDOs).

    (a) * * *
    (2) * * * activities under this paragraph may include costs 
associated with project-specific assessment or remediation of known or 
suspected environmental contamination;
* * * * *
? 6. Amend Sec.  570.205 by revising the first sentence of paragraph 
(a)(4)(iv) and adding a new paragraph (a)(4)(viii) to read as follows:

Sec.  570.205  Eligible planning, urban environmental design, and 
policy-planning-management capacity building activities.

    (a) * * *
    (4) * * *
    (iv) The reasonable costs of general environmental, urban 
environmental design and historic preservation studies; and general 
environmental assessment- and remediation-oriented planning related to 
properties with known or suspected environmental contamination. * * *
* * * * *
    (viii) Developing an inventory of properties with known or 
suspected environmental contamination.
* * * * *
? 7. Revise Sec.  570.208(b)(1)(ii), (b)(1)(iii), and (b)(2) to read as 
follows:

Sec.  570.208  Criteria for national objectives.

* * * * *
    (b) * * *
    (1) * * *
    (ii) The area also meets the conditions in either paragraph (A) or (B):
    (A) At least 25 percent of properties throughout the area 
experience one or more of the following conditions:
    (1) Physical deterioration of buildings or improvements;
    (2) Abandonment of properties;
    (3) Chronic high occupancy turnover rates or chronic high vacancy 
rates in commercial or industrial buildings;
    (4) Significant declines in property values or abnormally low 
property values relative to other areas in the community; or
    (5) Known or suspected environmental contamination.
    (B) The public improvements throughout the area are in a general 
state of deterioration.
    (iii) Documentation is to be maintained by the recipient on the 
boundaries of the area and the conditions and standards used that 
qualified the area at the time of its designation. The recipient shall 
establish definitions of the conditions listed at Sec.  
570.208(b)(1)(ii)(A), and maintain records to substantiate how the area 
met the slums or blighted criteria. The designation of an area as slum 
or blighted under this section is required to be redetermined every 10 
years for continued qualification. Documentation must be retained 
pursuant to the recordkeeping requirements contained at Sec.  570.506 
(b)(8)(ii).
* * * * *
    (2) Activities to address slums or blight on a spot basis. The 
following activities may be undertaken on a spot basis to eliminate 
specific conditions of blight, physical decay, or environmental 
contamination that are not located in a slum or blighted area: 
acquisition; clearance; relocation; historic preservation; remediation 
of environmentally contaminated properties; or rehabilitation of 
buildings or improvements. However, rehabilitation must be limited to 
eliminating those conditions that are detrimental to public health and 
safety. If acquisition or relocation is undertaken, it must be a 
precursor to another eligible activity (funded with CDBG or other 
resources) that directly eliminates the specific conditions of blight 
or physical decay, or environmental contamination.
* * * * *
? 8. Amend Sec.  570.209 by adding a new paragraph (b)(2)(v)(N) to read 
as follows:

Sec.  570.209  Guidelines for evaluating and selecting economic 
development projects.

* * * * *
    (b) * * *
    (2) * * *
    (v) * * *
    (N) Directly involves the economic development or redevelopment of 
environmentally contaminated properties.
* * * * *

? 9. Amend Sec.  570.482 by:
    A. Revising paragraph (c) to read as follows:
    B. Removing and reserving paragraph (d);

[[Page 30036]]

    C. Amending paragraph (f)(3)(v) by adding a new paragraph (N), to 
read as follows

Sec.  570.482  Eligible activities.

* * * * *
    (c) Special eligibility provisions. (1) Microenterprise development 
activities eligible under section 105(a)(23) of the Housing and 
Community Development Act of 1974, as amended (42 U.S.C. 5301 et seq.) 
(the Act) may be carried out either through the recipient directly or 
through public and private organizations, agencies, and other 
subrecipients (including nonprofit and for-profit subrecipients).
    (2) Provision of public services. The following activities shall 
not be subject to the restrictions on public services under section 
105(a)(8) of the Act:
    (i) Support services provided under section 105(a)(23) of the Act, 
and paragraph (c) of this section;
    (ii) Services carried out under the provisions of section 
105(a)(15) of the Act, that are specifically designed to increase 
economic opportunities through job training and placement and other 
employment support services, including, but not limited to, peer 
support programs, counseling, child care, transportation, and other 
similar services; and
    (iii) Services of any type carried out under the provisions of 
section 105(a)(15) of the Act pursuant to a strategy approved by a 
state under the provisions of Sec.  91.315(e)(2) of this title.
    (3) Environmental cleanup and economic development or redevelopment 
of contaminated properties. Remediation of known or suspected 
environmental contamination may be undertaken under the authority of 
section 205 of Public Law 105-276 and section 105(a)(4) of the Act. 
Economic development activities carried out under sections 105(a)(14), 
(a)(15), or (a)(17) of the Act may include costs associated with 
project-specific assessment or remediation of known or suspected 
environmental contamination.
* * * * *
    (f) * * *
    (3) * * *
    (v) * * *
    (N) Directly involves the economic development or redevelopment of 
environmentally contaminated properties.
* * * * *

? 10. Revise Sec.  570.483(c)(1)(ii), (c)(1)(iv), and (c)(2) to read as 
follows:

Sec.  570.483  Criteria for national objectives.

* * * * *
    (c) * * *
    (1) * * *
    (ii) The area also meets the conditions in either paragraph 
(c)(1)(ii)(A) or(c)(1)(ii)(B) of this section.
    (A) At least 25 percent of properties throughout the area 
experience one or more of the following conditions:
    (1) Physical deterioration of buildings or improvements;
    (2) Abandonment of properties;
    (3) Chronic high occupancy turnover rates or chronic high vacancy 
rates in commercial or industrial buildings;
    (4) Significant declines in property values or abnormally low 
property values relative to other areas in the community; or
    (5) Known or suspected environmental contamination.
    (B) The public improvements throughout the area are in a general 
state of deterioration.
* * * * *
    (iv) The state keeps records sufficient to document its findings 
that a project meets the national objective of prevention or 
elimination of slums and blight. The state must establish definitions 
of the conditions listed at Sec.  570.483(c)(1)(ii)(A) and maintain 
records to substantiate how the area met the slums or blighted 
criteria. The designation of an area as slum or blighted under this 
section is required to be redetermined every 10 years for continued 
qualification. Documentation must be retained pursuant to the 
recordkeeping requirements contained at Sec.  570.490.
    (2) Activities to address slums or blight on a spot basis. The 
following activities can be undertaken on a spot basis to eliminate 
specific conditions of blight, physical decay, or environmental 
contamination that are not located in a slum or blighted area: 
Acquisition; clearance; relocation; historic preservation; remediation 
of environmentally contaminated properties; or rehabilitation of 
buildings or improvements. However, rehabilitation must be limited to 
eliminating those conditions that are detrimental to public health and 
safety. If acquisition or relocation is undertaken, it must be a 
precursor to another eligible activity (funded with CDBG or other 
resources) that directly eliminates the specific conditions of blight 
or physical decay, or environmental contamination.
* * * * *

? 11. Revise Sec.  570.703(e), the introductory text in paragraph (f), 
and paragraph (l) to read as follows:

Sec.  570.703  Eligible activities.

* * * * *
    (e) Clearance, demolition, and removal, including movement of 
structures to other sites and remediation of properties with known or 
suspected environmental contamination, of buildings and improvements on 
real property acquired or rehabilitated pursuant to paragraphs (a) and 
(b) of this section. Remediation may include project-specific 
environmental assessment costs not otherwise eligible under Sec.  570.205.
    (f) Site preparation, including construction, reconstruction, 
installation of public and other site improvements, utilities or 
facilities (other than buildings), or remediation of properties 
(remediation can include project-specific environmental assessment 
costs not otherwise eligible under Sec.  570.205) with known or 
suspected environmental contamination, which is:
* * * * *
    (l) Acquisition, construction, reconstruction, rehabilitation or 
historic preservation, or installation of public facilities (except for 
buildings for the general conduct of government) to the extent eligible 
under Sec.  570.201(c), including public streets, sidewalks, other site 
improvements and public utilities, and remediation of known or 
suspected environmental contamination in conjunction with these 
activities. Remediation may include project-specific environmental 
assessment costs not otherwise eligible under Sec.  570.205.
* * * * *

    Dated: May 16, 2006.
Pamela H. Patenaude,
Assistant Secretary for Community Planning and Development.
[FR Doc. 06-4795 Filed 5-23-06; 8:45 am]
BILLING CODE 4210-67-P
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