Jan 10 -- HUD is proposing to revise the Community Development Block Grant (CDBG) and related Section 108 loan guarantee program regulations to make it easier for recipients to promote economic development and recovery in low- and moderate-income communities and support investments in underserved areas. This proposed rule also would revise provisions related to Consolidated Plan and citizen participation requirements for the CDBG program and institute quarterly reporting to improve performance with respect to timeliness. HUD is also proposing to make certain corresponding changes to the Indian Community Development Block Grant (ICDBG) program regulations to align the ICDBG program with the revisions being made to the CDBG program regulations. Comments are due by March 11, 2024.
The CDBG program and its loan guarantee component, the Section 108 program, are some of the most potent Federal tools for local governments to assist community and economic development. State and local governments nationwide—each State, more than 1,200 cities and counties, the District of Columbia, Puerto Rico, and four U.S. territories—rely on annual formula CDBG funds to develop meaningful projects and provide essential services that create sustainable, healthy, and prosperous communities for primarily low- and moderate-income persons. The programs' unique flexibility allows grantees to use CDBG funds, as well as Section 108 guaranteed loan proceeds leveraged from their CDBG allocations, for projects and services that meet each community's needs. As a grantee develops strategies for addressing its needs, however, it generally evaluates the viability of activities that it wishes to include in its program. It may, for example, decide that it wants to invest in an underserved area that it has determined to be a food desert. This investment could take the form of a loan to a business that would agree to construct a food store to serve residents of that area. Such assistance to a business would be subject to the CDBG national objectives criteria and public benefit standards. However, HUD has not substantively updated the national objectives criteria and public benefit standards for economic development activities carried out with CDBG, ICDBG, and Section 108 funds for over twenty years. Changes over time in market conditions, inflation, and evolving community development practices have effectively limited the types of activities grantees could carry out. As a consequence, the grantee's plans could be short-circuited by the inability or unwillingness of a business to comply with the current requirements.
The limitations under the current regulations have thus deprived grantees of viable alternatives when developing programs that would best address their needs, and in some cases prevented communities from using CDBG funds to stimulate potentially transformative economic revitalization outcomes. By removing the impediments and disincentives to the use of CDBG funds for economic development activities, the proposed changes could result in a greater proportion of available CDBG funds being used for economic development. It does not follow, however, that spending more on economic development must result in less spending on other activities, because the additional economic development spending could be funded with loans guaranteed under the Section 108 program. For example, if a grantee wants to undertake an economic development activity but also wishes to carry out another activity, e.g., housing rehabilitation, it could use Section 108 as the funding source for the economic development activity and its CDBG allocation for the other activity. If relatively more CDBG funds are expended for economic development purposes, however, it must be presumed that such increase is the result of grantees having determined that the higher spending level is necessary and prioritized to address their local community and economic development needs. . . .
Consistent with Executive Orders 13985, 14002, and 14091 and in response to changed market conditions, HUD seeks to provide authority that would allow CDBG grantees and Section 108 borrowers (hereinafter referred to collectively as “recipients”) to implement funding more effectively and efficiently in their communities.
The proposed changes also would enhance the CDBG program's goal of primarily benefitting low- and moderate-income (“LMI”) persons while removing obstacles that prevent the use of the program in targeted areas and for economic development activities. The proposed changes will not have any impact on the allocation of CDBG funds among recipients. The changes would particularly benefit underserved communities, including historically marginalized communities of color experiencing disproportionate disinvestment and denial of economic opportunities.
The proposed rule also aims to improve data collection to measure effectiveness and improve program outcomes through more effective use of CDBG funds, while ensuring CDBG and Section 108 recipients use funds efficiently and in a timely manner to benefit their communities. The proposed rule would change national objectives criteria to remove impediments to carrying out economic development activities, update the public benefit standards to allow CDBG and Section 108 recipients greater flexibility in undertaking economic development activities, and incorporate several changes to eligible activities under the CDBG and Section 108 programs. The proposed rule would also simplify regulations to encourage CDBG and Section 108 recipients to invest CDBG funds in underserved communities.
Further, the proposed rule would make corresponding changes to the ICDBG regulations in part 1003, where appropriate, to ensure that the CDBG and ICDBG regulations continue to [align. Finally, the proposed rule would remove outdated provisions and make technical corrections.
The proposed rule could result in incentivizing investment in communities by streamlining and improving mechanisms for greater flexibility of funds to flow to economically distressed communities while signaling the Federal Government's willingness to support these investments. These investments would enable communities to encourage, build, and expand activities that revitalize communities. . . .
FRN:
https://www.federalregister.gov/d/2024-00039 [41 pages]
