## Facts

- The City of Alma, Georgia pursued a federally assisted development plan that included construction of a 1,400-acre recreational lake (“Lake Alma”).
- Alma received Community Development Block Grant (CDBG) funds under the Housing and Community Development Act of 1974 (HCDA), totaling about $2.7 million across multiple fiscal years.
- HUD regulations then in effect treated the requirement that a project “principally” benefit low- and moderate-income persons as a project-level threshold of more than 50% low/moderate-income beneficiaries.
- Alma’s beneficiary data did not meet the >50% project-level threshold for Lake Alma.
- HUD decided to waive the regulatory “principal benefit” requirement, citing undue hardship and the project’s role in Alma’s broader development program.
- Environmental organizations and local residents sued to enjoin release and expenditure of the funds and to stop further steps toward construction, asserting statutory, regulatory/APA, and environmental claims.
- The district court denied a preliminary injunction; the Eleventh Circuit earlier affirmed key aspects of that denial and later considered a petition for panel rehearing filed by low/moderate-income individual appellants.
- Congress amended the HCDA in 1983 to require that not less than 51% of CDBG funds benefit low- and moderate-income persons on a program-wide basis.

## Issues

1. Whether HCDA § 5304(b)(3) implicitly required each funded project to “principally benefit” low- and moderate-income persons under a strict project-level numerical threshold (e.g., >50%).
2. Whether HUD could waive the regulatory “principal benefit” requirement for Lake Alma, and whether the waiver was arbitrary, capricious, or contrary to law.
3. Whether the 1983 HCDA amendments imposing a 51% low/moderate-income benefit requirement applied retroactively to previously awarded or committed CDBG funds.

## Decision

- The court denied the petition for rehearing and reaffirmed its earlier statutory interpretation.
- The court held that HCDA § 5304(b)(3) did not impose an implicit, strict project-level >50% “principal benefit” requirement.
- The court concluded the >50% threshold was regulatory, and HUD’s waiver fell within HUD’s waiver authority and was not shown to be arbitrary or capricious.
- The court held the 1983 HCDA amendments were not retroactive and did not apply to the Lake Alma funding decisions already made under prior appropriations.

## Legal Principles

- Absent clear statutory text, courts will not read HCDA § 5304(b)(3) to impose a rigid project-level numerical “principal benefit” threshold; the statute permits program-oriented administration consistent with HCDA objectives.
- An agency may waive its own regulatory requirements when authorized by regulation, so long as the waiver does not conflict with statutory mandates and survives arbitrary-and-capricious review.
- Statutory amendments imposing new substantive funding conditions are presumed prospective; they do not apply retroactively without clear congressional intent, particularly where retroactivity would upset settled administrative decisions and reliance interests.
- A program-wide low/moderate-income benefit framework may satisfy HCDA objectives even if an individual project does not meet a project-level numerical benchmark established only by regulation.

## Conclusion

The Eleventh Circuit declined to rehear its earlier ruling, maintaining that the HCDA did not mandate a strict project-level “principal benefit” percentage, that HUD could waive the regulatory >50% standard for Lake Alma without acting arbitrarily or contrary to law, and that the 1983 statutory 51% requirement applied prospectively rather than to previously awarded CDBG funds.


Nat'l Wildlife Fed'n v. Marsh, 747 F.2d 616 (11th Cir. 1984)