Lesson 9: Environmental review under Part 58

No CDBG activity that involves physical work can commit or spend money before its environmental review is finished, and the review process has to match the size of the project. 24 CFR Part 58 sets five levels of review, from projects too small to need much of anything, up to the kind of large development that needs a full impact statement. Getting the level wrong, or spending money before clearance, is one of the most common and most consequential mistakes a CDBG grantee makes.

The five levels

1. Exempt. Studies, administrative costs, technical assistance, and public services that have no physical effect. The grantee still has to document the exemption in writing, it does not happen automatically just because no review was performed, and the flood insurance, coastal barrier, and runway clear zone requirements of 58.6 still apply.
2. Categorically excluded, not subject to 58.5. Rental assistance, supportive services, and economic development activities that do not involve construction. This level needs a written determination in the Environmental Review Record plus compliance with the flood insurance, coastal barrier, and runway clear zone requirements of 58.6, even though it is excluded from the fuller review.
3. Categorically excluded, subject to 58.5. Physical projects that fit within defined conditions, for example rehabilitation of a building with one to four residential units (density not raised past four units, land use unchanged), or repair of an existing public facility or improvement, other than a building, with no more than a 20 percent change in size or capacity. This level requires completing a Statutory Checklist that walks through the specific federal laws 58.5 incorporates.
4. Environmental Assessment. Everything that is neither exempt nor categorically excluded lands here. An Environmental Assessment ends in either a Finding of No Significant Impact, a FONSI, or a finding that the impact is significant, which then requires the next level up.
5. Environmental Impact Statement. Reserved for large projects, for example sites intended for 2,500 or more housing units (58.37), or any project found in an assessment to have a potentially significant impact. This level is, in practice, very rare under the CDBG program.

Most GCHS single-family rehabilitation work will sit at level 3, categorically excluded subject to 58.5, because that is exactly the category rehabilitation of one-to-four unit residential buildings was written for. The Statutory Checklist at that level is not a formality to skip past. It is where flood plain, historic preservation, and other federal cross-cutting requirements actually get checked against the specific property.

Release of funds and the Certifying Officer

Before funds can be committed for an activity that needed an Environmental Assessment, or that is categorically excluded subject to 58.5 and has circumstances requiring compliance with a federal law listed in 58.5, a Request for Release of Funds has to be submitted along with a certification. If the Statutory Checklist shows no such circumstances, the activity converts to exempt under 58.34(a)(12) and needs no Request for Release of Funds. The certification is signed by the Certifying Officer, the official authorized to sign for the responsible entity, typically the chief elected official or another official designated by formal resolution. In the State CDBG program the State approves the release (TDA issues an Authority to Use Grant Funds in TxCDBG); in HUD-administered grants HUD does. Nothing covered by the request can be obligated until that approval.

Choice-limiting actions

This is the part of Part 58 that catches grantees off guard. Before environmental clearance is complete, neither a recipient nor anyone else in the development process, including nonprofits, for-profit developers, and contractors, may commit HUD funds to the activity, and none of them may commit non-HUD funds or begin the activity if it would have an adverse environmental impact or limit the choice of reasonable alternatives (58.22). The restriction reaches further than most people expect: typical examples are executing binding agreements, acquiring or leasing real property, demolition, excavation, rehabilitation, construction, relocating structures, and converting land to a different use.

The part worth reading twice: this restriction covers CDBG or non-CDBG funds. A grantee that spends its own money, or a homeowner's own money, on a choice-limiting action before clearance can disqualify the project from CDBG assistance (committing funds early is a listed ground for objecting to a Request for Release of Funds), even though no CDBG dollar was involved in the premature spending. The exceptions are exempt activities and categorical exclusions not subject to 58.5, which may start as soon as the determination is documented. A homeowner who gets excited and starts demolition work themselves before the environmental review clears the project has created a real problem, not a minor paperwork issue.

Notice and comment periods

Two of the five levels carry public notice requirements:

• Categorically excluded subject to 58.5, where compliance with a federal law is required: publish a combined Notice of Intent to Request Release of Funds, an NOI/RROF, with a 7-day public comment period (10 days if mailed and posted instead of published), before submitting the Request for Release of Funds to HUD or the State.
• Environmental Assessment: a combined FONSI and NOI/RROF notice is published with a 15-day public comment period (18 days if mailed and posted). Counting starts the day after publication, and the Request for Release of Funds goes in only after the period ends. HUD, or the State in TxCDBG, then allows a further 15-day objection period, counted from receipt of the request, before funds can actually move. A 30-day FONSI comment period applies when a project draws considerable controversy or is unique (58.46).

These periods stack. An Environmental Assessment project has to clear the 15-day comment period, then the 15-day objection period, before funds are released (the 15-day objection period follows the 7-day route too), which is a real scheduling consideration for a project timeline, not just a compliance detail.

What this means in practice for GCHS

The practical sequence on a typical GCHS single-family rehab project: first confirm the project fits the categorically excluded subject to 58.5 category, which single-family rehab usually does. Second, complete the Statutory Checklist rather than treating environmental review as a rubber stamp. Third, and this is the step that actually prevents problems, make sure the homeowner and any contractor involved understand that no work, demolition, site prep, ordering materials for installation, nothing physical, happens before clearance, and that this restriction applies even to work the homeowner might want to pay for themselves in order to get started sooner. The choice-limiting action rule does not care whose money moves first. It cares whether an alternative was foreclosed before the review was done.