 |
Code of Federal Regulations (Last Updated: May 6, 2024) |
 |
Title 7 - Agriculture |
|
Subtitle B - Regulations of the Department of Agriculture |
|
Chapter XVII - Rural Utilities Service, Department of Agriculture |
|
Part 1775 - Technical Assistance Grants |
§ 1775.100 - OMB control number.
-
The collection of information requirements contained in this part have been approved by the Office of Management and Budget and have been assigned OMB control number 0575-0123. Public reporting for this collection of information is estimated to vary from 15 minutes to 4 hours per response, with an average of 1 hour per response including time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of Management and Budget, Paperwork Reduction Project (OMB 0575-0123), Washington, DC 20503.
Effective Date Note: At 69 FR 70878, Dec. 8, 2004, part 1775 was revised effective January 7, 2005. For the convenience of the user, the revised text is set forth as follows:
PART 1775—TECHNICAL ASSISTANCE GRANTS Subpart A—General Provisions Sec. 1775.1 General. 1775.2 Definitions. 1775.3 Availability of forms and regulations. 1775.4 Allocation of funds. 1775.5 Limitations. 1775.6 Equal opportunity requirements. 1775.7 Environmental requirements. 1775.8 Other Federal Statutes. 1775.9 OMB control number. Subpart B—Grant Application Processing 1775.10 Applications. 1775.11 Priority. 1775.12 Grant processing. 1775.13 Grant agreement. 1775.14-1775.17 [Reserved] 1775.18 Fund disbursement. 1775.19 Grant cancellation or major changes. 1775.20 Reporting. 1775.21 Audit or financial statements. 1775.22 [Reserved] 1775.23 Grant servicing. 1775.24 Delegation of authority. 1775.25-1775.30 [Reserved] Subpart C—Technical Assistance and Training Grants 1775.31 Authorization. 1775.32 [Reserved] 1775.33 Objectives. 1775.34 Source of funds. 1775.35 Eligibility. 1775.36 Purpose. 1775.37 Allocation of funds. 1775.38-1775.60 [Reserved] Subpart D—Solid Waste Management Grants 1775.61 Authorization. 1775.62 [Reserved] 1775.63 Objectives. 1775.64 [Reserved] 1775.65 Eligibility. 1775.66 Purpose. 1775.67 Allocation of funds. 1775.68 Exception authority. 1775.69-1775.99 [Reserved] Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Subpart A—General Provisions § 1775.1 General. This subpart sets forth the general policies and procedures for the Technical Assistance and Training and the Solid Waste Management Grant Programs. Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Rural Development employees with Water and Environmental Program responsibility, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for this assistance are required to identify any known relationship or association with an RUS employee.
§ 1775.2 Definitions. The following definitions apply to subparts A through D of this part.
Association. An entity, including a small city or town, that is eligible for RUS Water and Waste Disposal financial assistance in accordance with 7 CFR 1780.7 (a).Approval official. Any individual with administrative and legal responsibility for Rural Development programs.DUNS Number. Data Universal Numbering System number obtained from Dun and Bradstreet and used when applying for Federal grants or cooperative agreements. A DUNS number may be obtained at no cost, by calling 1-866-705-5711.Grant agreement. RUS Guide 1775-1. The agreement outlines the terms and conditions of the grant awards and establishes the guidelines for administering the grant awards.Grantee. The entity or organization receiving financial assistance directly from the RUS to carry out the project or program under these programs.Low Income. Median household income (MHI) below 100 percent of the statewide non-metropolitan median household income (SNMHI).Regional. A multi-State area or any multi-jurisdictional area within a State.Rural area. Any area not in a city or town with a population in excess of 10,000, according to the latest decennial census of the United States.RUS. The Rural Utilities Service, an Agency of the United States Department of Agriculture.Solid Waste Management. Refers to the operations, maintenance and the recycling of materials disposed of in landfills.State. Any of the 50 States, the District of Columbia, the Commonwealth of Puerto Rico, the Territory of Guam, the Commonwealth of the Northern Mariana Islands, the Republic of the Marshall Islands, the Federated States of Micronesia, the Republic of Palau, and the U.S. Virgin Islands.Technical Assistance. Supervision, oversight, or training by an organization for the practical solution of a problem or need of an association as defined in this section.§ 1775.3 Availability of forms and regulations. Information about the forms, instructions, regulations, bulletins, OMB Circulars, Treasury Circulars, standards, documents and publications cited in this part is available from any UDSA/Rural Development Office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500.
§ 1775.4 Allocation of funds. The National Office of the Rural Utilities Service will administer grant funds and will allocate them on a competitive basis.
§ 1775.5 Limitations. Grant funds may not be used to:
(a) Duplicate current services or replace or substitute support normally provided by other means, such as those performed by an association's consultant in developing a project, including feasibility, design, and cost estimates.
(b) Fund political or lobbying activities.
(c) Purchase real estate or vehicles, improve or renovate office space, or repair and maintain privately owned property.
(d) Pay the costs for construction, improvement, rehabilitation, modification, or operation and maintenance of water, wastewater, and solid waste disposal facilities.
(e) Construct or furnish a building.
(f) Intervene in the Federal regulatory or adjudicatory proceedings.
(g) Sue the Federal Government or any other government entities.
(h) Pay for any other costs that are not allowable under OMB Circular A-87, OMB Circular A-110, OMB Circular A-102 or OMB Circular A-122.
(i) Make contributions or donations to others.
(j) Fund projects that duplicate technical assistance given to implement action plans under the National Forest-Dependent Rural Communities Economic Diversification Act of 1990 (7 U.S.C. 6613). Applicants cannot receive both grants made under this part and grants that the Forest Service makes to implement the action plans for five continuous years from the date of grant approval by the Forest Service.
(1) The Forest Service helps rural communities that are dependent upon national forest resources diversify existing industries and economies. It establishes rural forestry and economic diversification action teams that prepare technical assistance plans for these rural communities to expand their local economies and reduce their dependence on national forest resources. The Forest Service provides assistance to implement the action plans through grants, loans, cooperative agreements, or contracts.
(2) To avoid duplicate assistance, applicants must contact the Forest Service to find out if any geographical areas or local areas in a State have received grants for technical assistance to an economically disadvantaged community. These areas are defined as national forest-dependent communities under 7 U.S.C. 6612. Applicants will provide documentation to the Forest Service and Rural Utilities Service that they have contacted each agency.
(k) To pay an outstanding judgment obtained by the United States in a Federal Court (other than in the United States Tax Court), which has been recorded. An applicant will be ineligible to receive a loan or grant until the judgment is paid in full or otherwise satisfied.
(l) Recruit applications for the RUS's water and waste loan or any other loan or grant program. Grant funds cannot be used to create new business; however, they can be used to assist with application preparation.
§ 1775.6 Equal opportunity requirements. The policies and regulations contained in subpart E of part 1901 of this title apply to grants made under this part.
§ 1775.7 Environmental requirements. The policies and regulations contained in part 1794 of this title apply to grants made for the purposes in §§ 1775.36 and 1775.66.
§ 1775.8 Other Federal statutes. Other Federal statutes and regulations are applicable to grants awarded under this part. These include but are not limited to:
(a) 7 CFR part 1, subpart A—USDA implementation of Freedom of Information Act.
(b) 7 CFR part 3—USDA implementation of OMB Circular No. A-129 regarding debt collection.
(c) 7 CFR part 15, subpart A—USDA implementation of Title VI of the Civil Rights Act of 1964, as amended.
(d) 7 CFR part 1794, RUS Implementation of the National Environmental Policy Act.
(e) 7 CFR part 1901, subpart E—Civil Rights Compliance Requirements.
(f) 7 CFR part 3015—Uniform Federal Assistance Regulations.
(g) 7 CFR part 3016—USDA Implementation of OMB Circular Nos. A-102 and A-97, Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments.
(h) 7 CFR part 3017, as amended—Government-wide Debarment and Suspension (Non-procurement); Government-wide Requirements for Drug-Free Workplace (Grants), implementing Executive Order 12549 on debarment and suspension and the Drug-Free Workplace Act of 1988 (41 U.S.C. 701).
(i) 7 CFR part 3018— Restrictions on Lobbying, prohibiting the use of appropriated funds to influence Congress or a Federal agency in connection with the making of any Federal grant and other Federal contracting and financial transactions.
(j) 7 CFR part 3019—USDA implementation of OMB Circular A-110, Uniform Administrative Requirements for Grants and Agreements With Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations.
(k) 7 CFR part 3052—USDA implementation of OMB Circular No. A-133 regarding audits of institutions of higher education and other nonprofit institutions.
(l) 29 U.S.C. 794, section 504—Rehabilitation Act of 1973, and 7 CFR part 15B (USDA implementation of statute), prohibiting discrimination based upon physical or mental handicap in Federally assisted programs.
§ 1775.9 OMB control number. The information collection requirements contained in this part have been approved by the Office of Management and Budget and
have been assigned OMB control number 0572-0112. Subpart B—Grant Application Processing § 1775.10 Applications. (a)
Filing period. Applications may be filed on or after October 1 and must be received by close of business or postmarked by midnight December 31. If an application is received either before October 1 or after December 31, the receiving office will return it to the applicant.(b)
Where to file. (1) An applicant will apply to the appropriate State Office of Rural Development if the project will serve a single state.(2) An applicant will apply to the National Office if the project will serve multiple states. The application must be submitted to the following address: Assistant Administrator, Water and Environmental Programs, Rural Utilities Service, Washington, DC 20250-1570.
(3) Electronic applications will be accepted prior to the filing deadline through the Federal Government's eGrants Web site (Grants.gov) at
http://www.grants.gov. Applicants should refer to instructions found on the Grants.gov Web site to submit an electronic application. A DUNS number and a Central Contractor Registry (CCR) registration is required prior to electronic submission. The sign-up procedures, required by Grants.gov, may take several business days to complete.(c)
Application requirements. To file an application, an organization must provide their DUNS number. An organization may obtain a DUNS number from Dun and Bradstreet by calling (1-866-705-5711). To file a complete application, the following information should be submitted:(1) Standard Form 424, “Application for Federal Assistance (For Non-Construction).”
(2) Standard Form 424A & B, “Budget Information—Non-Construction Programs.”
(3) Form AD-1047, “Certification Regarding Debarment, Suspension, and Other Responsibility Matters—Primary Covered Transaction.”
(4) Form AD 1049, “Certification Regarding Drug-Free Workplace Requirements (Grants) Alternative I—For Grantees Other Than Individuals.”
(5) Form AD 1048, “Certification Regarding Debarment.”
(6) Attachment regarding assistance provided to Rural Development Employees as required by RD Instruction 1900-D.
(7) Form RD 400-4, “Assurance Agreement.”
(8) Form RD 400-1, “Equal Opportunity Agreement.”
(9) Indirect Cost Rate Agreement (if applicable, applicant must include approved cost agreement rate schedule).
(10) Statement of Compliance for Title VI of the Civil Rights Act of 1964.
(11) SF LLL, “Disclosure of Lobbying Activities” (include only if grant is over $100,000).
(12) Certification regarding Forest Service grant.
(d)
Supporting information. All applications shall be accompanied by:(1) Evidence of applicant's legal existence and authority in the form of:
(i) Certified copies of current authorizing and organizational documents for new applicants or former grantees where changes were made since the last legal opinion was obtained in conjunction with receipt of an RUS grant, or, certification that no changes have been made in authorizing or organizing documents since receipt of last RUS grant by applicant.
(ii) Current annual corporation report, Certificate of Good Standing, or statement they are not required.
(iii) For public nonprofits, Certificate of Continued Status from local attorney (if applicable).
(iv) Certified list of directors/officers with their respective terms.
(2) Evidence of tax exempt status from the Internal Revenue Service (IRS), if applicable.
(3) Narrative of applicant's experience in providing services similar to those proposed. Provide brief description of successfully completed projects including the need that was identified and objectives accomplished.
(4) Latest financial information to show the applicant's financial capacity to carry out the proposed work. A current audit report is preferred, however applicants can submit a balance sheet and an income statement in lieu of an audit report.
(5) List of proposed services to be provided.
(6) Estimated breakdown of costs (direct and indirect) including those to be funded by grantee as well as other sources. Sufficient detail should be provided to permit the approval official to determine reasonableness, applicability, and allowability.
(7) Evidence that a Financial Management System is in place or proposed.
(8) Documentation on each of the priority ranking criteria listed in § 1775.11 as follows:
(i) List of the associations to be served and the State or States where assistance will be provided. Identify associations by name, or other characteristics such as size, income, location, and provide MHI and population.
(ii) Description of the type of technical assistance and/or training to be provided and the tasks to be contracted.
(iii) Description of how the project will be evaluated and provide clearly stated goals
and the method proposed to measure the results that will be obtained. (iv) Documentation of need for proposed service. Provide detailed explanation of how the proposed services differ from other similar services being provided in the same area.
(v) Personnel on staff or to be contracted to provide the service and their experience with similar projects.
(vi) Statement indicating the number of months it takes to complete the project or service.
(vii) Documentation on cost effectiveness of project. Provide the cost per association to be served or proposed cost of personnel to provide assistance.
(viii) Other factors for consideration, such as emergency situation, training need identified, health or safety problems, geographic distribution, Rural Development Office recommendations, etc.
§ 1775.11 Priority. The application and supporting information will be used to determine the applicant's priority for available funds. All applications will be reviewed and scored for funding priority in accordance with RUS Guide 1775-2. Points will be given only for factors that are well documented in the application package and, in the opinion of the RUS, meet the objective outlined under each factor. The following is a listing of the criteria that will be used to select the applications that meet the objectives of the technical assistance program.
(a) Projects proposing to give priority for available services to rural communities having a population less than 5,500 and/or below 2,500.
(b) Projects proposing to give priority for available services to low income communities.
(c) Projects that will provide assistance in a multi-State area.
(d) Points will be awarded for work plans that clearly describe the goals and objectives of the project, how they will be accomplished in targeted communities, and what measurement of accomplishment will be used.
(e) Projects containing needs assessment (
i.e. actual issue or problem being addressed) clearly defined and supported by data.(f) Projects containing evaluation methods that are specific to the activity, clearly defined, measurable, and with projected outcomes.
(g) Applicants proposing to use at least 75 percent of the total grant amount for their own staff, or the staff of an affiliated organization to provide services for a project instead of contracting with an outside organization for the services.
(h) Projects providing technical assistance/training that accomplish the objective within a 12-month or less timeframe.
(i) Projects primarily providing “hands on” technical assistance and training, i.e., on-site assistance as opposed to preparation and distribution of printed material, to communities with existing water and waste systems which are experiencing operation and maintenance or management problems.
(j) Cash or in kind support of project from non-federal sources.
(k) Ability to demonstrate sustainability of project without Federal financial support.
§ 1775.12 Grant processing. (a)
Single State applications. (1) Grant applications submitted at the State level will receive a letter acknowledging receipt and confirmation that all information required for a full application was included in the packet. The State will notify the applicant of missing information. The applicant will have 14 business days to respond.(2) The State Office will review applications for eligibility. Those applicants that are deemed ineligible will be notified. Applicants deemed eligible will be forwarded to the National Office for funding consideration.
(3) The National Office will review all applications received from State Offices. Applications will compete on a priority basis and will be scored and ranked. The applications receiving the highest scores and subject to the availability of funds will be selected for final processing. The National Office will send these applications back to the State Office for processing. The State Office will notify the applicant(s) that they have been selected for funding.
(4) Applicants not selected for funding due to low priority rating shall be notified by the State Office.
(b)
National and multi-State applications. (1) National and multi-State applications submitted to the National Office will receive a letter acknowledging receipt and confirmation that all information required for a full application was included in the packet. The National Office shall notify the applicant of missing information. The applicant will have 14 business days to respond.(2) The National Office will review applications for eligibility. Those applications that are deemed ineligible will be notified. Applications deemed eligible will be reviewed and given a rating score. Applications receiving the highest scores will be grouped with those received from State Offices for funding consideration.
(3) The National Office will review all applications received. Applications will compete on a priority basis and will be scored and ranked. The applications receiving the highest scores and subject to the availability of funds will be notified by the National Office that they have been selected for funding.
The National Office shall conduct final processing of multi-State and national applications. (4) Multi-State and National applicants not selected for funding due to low priority rating will be notified by the National Office.
(c)
Low priority applications. Applications that cannot be funded in the fiscal year received will not be retained for consideration in the following fiscal year and will be handled as outlined in paragraph (a)(4) or (b)(4) of this section.§ 1775.13 Grant agreement. Applicants selected for funding will complete a grant agreement, RUS Guide 1775-1, which outlines the terms and conditions of the grant award.
§§ 1775.14-1775.17 [Reserved] § 1775.18 Fund disbursement. Grantees will be reimbursed as follows:
(a) SF-270, “Request for Advance or Reimbursement,” will be completed by the grantee and submitted to either the State or National Office not more frequently than monthly.
(b) Upon receipt of a properly completed SF-270, the funds will be requested through the field office terminal system. Ordinarily, payment will be made within 30 days after receipt of a proper request for reimbursement.
(c) Grantees are encouraged to use women- and minority-owned banks (a bank which is owned at least 50 percent by women or minority group members) for the deposit and disbursement of funds.
§ 1775.19 Grant cancellation or major changes. Any change in the scope of the project, budget adjustments of more than 10 percent of the total budget, or any other significant change in the project must be reported to and approved by the approval official by written amendment to RUS Guide 1775-1. Any change not approved may be cause for termination of the grant.
§ 1775.20 Reporting. (a) Grantees shall constantly monitor performance to ensure that time schedules are being met, projected work by time periods is being accomplished, and other performance objectives are being achieved.
(b) SF-269, “Financial Status Report (short form),” and a project performance activity report will be required of all grantees on a quarterly basis, due 30 days after the end of each calendar quarter.
(c) A final project performance report will be required with the last SF-269 due 90 days after the end of the last quarter in which the project is completed. The final report may serve as the last quarterly report.
(d) All multi-State grantees are to submit an original of each report to the National Office. Grantees serving only one State are to submit an original of each report to the State Office. The project performance reports should detail, preferably in a narrative format, activities that have transpired for the specific time period and shall include, but not be limited to, the following:
(1) A comparison of actual accomplishments to the objectives established for that period (
i.e. number of meetings held, number of people contacted, results of activity);(2) Analysis of challenges or setbacks that occurred during the grant period;
(3) Copies of fliers, news releases, news articles, announcements and other information used to promote services or projects;
(4) Problems, delays, or adverse conditions which will affect attainment of overall project objectives, prevent meeting time schedules or objectives, or preclude the attainment of particular project work elements during established time periods. This disclosure shall be accompanied by a statement of the action taken or planned to resolve the situation; and
(5) Activities planned for the next reporting period.
§ 1775.21 Audit or financial statements. The grantee will provide an audit report or financial statements as follows:
(a) Grantees expending $500,000 or more Federal funds per fiscal year will submit an audit conducted in accordance with OMB Circular A-133. The audit will be submitted within 9 months after the grantee's fiscal year. Additional audits may be required if the project period covers more than one fiscal year.
(b) Grantees expending less than $500,000 will provide annual financial statements covering the grant period, consisting of the organization's statement of income and expense and balance sheet signed by an appropriate official of the organization. Financial statements will be submitted within 90 days after the grantee's fiscal year.
§ 1775.22 [Reserved] § 1775.23 Grant servicing. Grants will be serviced in accordance with RUS Guide 1775-1 and subpart E of part 1951 of this title. When grants are terminated for cause, 7 CFR part 11 will be followed.
§ 1775.24 Delegation of authority. The authority under this part is re-delegated to the Assistant Administrator, Water and Environmental Programs, except for the discretionary authority contained in § 1775.34 and § 1775.68. The Assistant Administrator, Water and Environmental Programs may re-delegate the authority in this part.
§§ 1775.25—1775.30 [Reserved] Subpart C—Technical Assistance and Training Grants § 1775.31 Authorization. This subpart sets forth additional policies and procedures for making Technical Assistance and Training (TAT) grants authorized under Section 306(a)(14)(A) of the Consolidated Farm and Rural Development Act (CONACT) (7 U.S.C. 1921
et seq. , as amended.§ 1775.32 [Reserved] § 1775.33 Objectives. The objectives of the program are to:
(a) Identify and evaluate solutions to water and waste problems in rural areas.
(b) Assist applicants in preparing applications for water and waste disposal loans/grants.
(c) Assist associations in improving operation and maintenance of existing water and waste facilities in rural areas.
§ 1775.34 Source of funds. Grants will be made from not less than 1 percent or not more than 3 percent of any appropriations for grants under Section 306(a)(2) of the CONACT. Funds not obligated by September 1 of each fiscal year will be used for water and waste disposal grants made in accordance with part 1780 of this chapter.
§ 1775.35 Eligibility. (a) Entities eligible for grants must be private nonprofit organizations with tax exempt status, designated by the Internal Revenue Service. A nonprofit organization is defined as any corporation, trust, association, cooperative, or other organization that:
(1) Is operated primarily for scientific, education, service, charitable, or similar purposes in the public interest.
(2) Is not organized primarily for profit.
(3) Uses its net proceeds to maintain, improve, and/or expand its operations.
(b) Entities must be legally established and located within a state as defined in § 1775.2.
(c) Organizations must be incorporated by December 31 of the year the application period occurs to be eligible for funds.
(d) Private businesses, Federal agencies, public bodies, and individuals are ineligible for these grants.
(e) Applicants must also have the proven ability, background, experience (as evidenced by the organization's satisfactory completion of project(s) similar to those proposed), legal authority, and actual capacity to provide technical assistance and/or training on a regional basis to associations as provided in § 1775.33. To meet the requirement of actual capacity, an applicant must either:
(1) Have the necessary resources to provide technical assistance and/or training to associations in rural areas through its staff, or
(2) Be assisted by an affiliate or member organization which has such background and experience and which agrees, in writing, that it will provide the assistance, or
(3) Contract with a nonaffiliated organization for not more than 49 percent of the grant to provide the proposed assistance.
§ 1775.36 Purpose. Grants may be made to organizations as defined in § 1775.35 to enable such organizations to assist associations to:
(a) Identify and evaluate solutions to water problems of associations in rural areas relating to source, storage, treatment, and/or distribution.
(b) Identify and evaluate solutions to waste problems of associations in rural areas relating to collection, treatment, and/or disposal.
(c) Prepare water and/or waste disposal loan/grant applications.
(d) Provide technical assistance/training to association personnel that will improve the management, operation, and maintenance of water and waste facilities.
(e) Pay the expenses associated with providing the technical assistance and/or training authorized in paragraphs (a) through (d) of this section.
§ 1775.37 Allocation of funds. At least 10 percent of available funds will be used for funding single State projects based on the priority criteria.
§§ 1775.38-1775.60 [Reserved] Subpart D—Solid Waste Management Grants § 1775.61 Authorization. This subpart sets forth the policies and procedures for making Solid Waste Management (SWM) grants authorized under section 310B of the CONACT.
§ 1775.62 [Reserved] § 1775.63 Objectives. The objectives of the program are to:
(a) Reduce or eliminate pollution of water resources, and
(b) Improve planning and management of solid waste sites.
§ 1775.64 [Reserved] § 1775.65 Eligibility. (a) Entities eligible for grants must be either:
(1) Private nonprofit organizations with tax exempt status designated by the Internal Revenue Service. A nonprofit organization is
defined as any corporation, trust, association, cooperative, or other organization that: (i) Is operated primarily for scientific, education, service, charitable, or similar purposes in the public interest.
(ii) Is not organized primarily for profit.
(iii) Uses its net proceeds to maintain, improve, and/or expand its operations.
(2) Public bodies.
(3) Federally acknowledged or State-recognized Native American tribe or group.
(4) Academic institutions.
(b) Entities must be legally established and located within a state as defined in § 1775.2.
(c) Organizations must be incorporated by December 31 of the year the application period occurs to be eligible for funds.
(d) Private businesses, Federal agencies, and individuals are ineligible for these grants.
(e) Applicants must also have the proven ability; background; experience, as evidenced by the organization's satisfactory completion of project(s) similar to those proposed; legal authority; and actual capacity to provide technical assistance and/or training on a regional basis to associations as provided in § 1775.63. To meet the requirement of actual capacity, an applicant must either:
(1) Have the necessary resources to provide technical assistance and/or training to associations in rural areas through its staff, or
(2) Be assisted by an affiliate or member organization which has such background and experience and which agrees, in writing, that it will provide the assistance, or
(3) Contract with a nonaffiliated organization for not more than 49 percent of the grant to provide the proposed assistance.
§ 1775.66 Purpose. Grants may be made to organizations as defined in § 1775.65 to enable such organizations to assist associations to:
(a) Provide technical assistance and/or training to reduce the solid waste stream through reduction, recycling, and reuse.
(b) Provide training to enhance operator skills in maintaining and operating active landfills.
(c) Provide technical assistance and/or training for operators of landfills which are closed or will be closed in the near future with the development/implementation of closure plans, future land use plans, safety and maintenance planning, and closure scheduling within permit requirements.
(d) Evaluate current landfill conditions to determine the threats to water resources.
(e) Pay the expenses associated with providing the technical assistance and/or training authorized in paragraphs (a) through (d) of this section.
§ 1775.67 Allocation of funds. The maximum amount for a single applicant for a Solid Waste Management project will be 25 percent of available grant funds.
§ 1775.68 Exception authority. The Administrator may, in individual cases, make an exception to any requirement or provision of this part which is not inconsistent with the authorizing statute or other applicable law and is determined to be in the Government's interest.
§§ 1775.69-1775.99 [Reserved] Pt. 1777 PART 1777—SECTION 306C WWD LOANS AND GRANTS Sec. 1777.1 General. 1777.2 [Reserved] 1777.3 Objective. 1777.4 Definitions. 1777.5-1777.10 [Reserved] 1777.11 Making, processing, and servicing loans and grants. 1777.12 Eligibility. 1777.13 Project priority. 1777.14-1777.20 [Reserved] 1777.21 Use of funds. 1777.22-1777.30 [Reserved] 1777.31 Rates. 1777.32-1777.40 [Reserved] 1777.41 Individual loans and grants. 1777.42 Delegation of authority. 1777.43 Bulletins. 1777.44-1777.99 [Reserved] 1777.100 OMB control number. Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Source: 62 FR 33473, June 19, 1997, unless otherwise noted.
§ 1777.1 General. (a) This part outlines Rural Utilities Service (RUS) policies and procedures for making Water and Waste Disposal (WWD) loans and grants authorized under section 306C of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926(c)), as amended.
(b) Agency officials will maintain liaison with officials of other Federal, State, regional, and local development agencies to coordinate related programs to achieve rural development objectives.
(c) Agency officials shall cooperate with appropriate State agencies in making loans and/or grants that support State strategies for rural area development.
(d) Funds allocated in accordance with this part will be considered for use by Indian tribes within the State regardless of whether State development strategies include Indian reservations within the State's boundaries. Indians residing on such reservations must have an equal opportunity to participate in this program.
(e) Federal statutes provide for extending the Agency's financial programs without regard to race, color, religion, sex, national origin, marital status, age, or physical/mental handicap (provided the participant possesses the capacity to enter into legal contracts).
§ 1777.2 [Reserved] § 1777.3 Objective. The objective of the Section 306C WWD Loans and Grants program is to provide water and waste disposal facilities and services to low-income rural communities whose residents face significant health risks.
§ 1777.4 Definitions. Applicant. Entity that receives the Agency loan or grant under this part. The entities can be public bodies such as municipalities, counties, districts, authorities, or other political subdivisions of a State, and organizations operated on a not-for-profit basis such as associations, cooperatives, private corporations, or Indian tribes on Federal and State reservations, and other Federally recognized Indian tribes.Colonia. Any identifiable community designated in writing by the State or county in which it is located; determined to be a colonia on the basis of objective criteria including lack of potable water supply, lack of adequate sewage systems, and lack of decent, safe, and sanitary housing, inadequate roads and drainage; and existed and was generally recognized as a colonia before October 1, 1989.Cooperative. A cooperative formed specifically for the purpose of the installation, expansion, improvement, or operation of water supply or waste disposal facilities or systems.Individual. Recipient of a loan or grant through the applicant to facilitate use of the applicant's water and/or waste disposal system.Rural areas. Includes unincorporated areas and any city or town with a population not in excess of 10,000 inhabitants according to the most recent decennial census of the United States. They can be located in any of the 50 States, the Commonwealth of Puerto Rico, the Western Pacific Territories, Marshall Islands, Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands.Statewide Nonmetropolitan Median Household Income (SNMHI). Median household income of the State's nonmetropolitan counties and portions of metropolitan counties outside of cities, towns or places of 50,000 or more population.[62 FR 33473, June 19, 1997, as amended at 69 FR 65519, Nov. 15, 2004] §§ 1777.5-1777.10 [Reserved] § 1777.11 Making, processing, and servicing loans and grants. Unless specifically modified by this part, loans and/or grants will be made, processed, and serviced in accordance with part 1780 of this chapter.
§ 1777.12 Eligibility. (a) The provisions of paragraphs (a) (1) and (2) of this section do not apply to a rural area recognized as a colonia. Otherwise, the facility financed under this part must provide water and/or waste disposal services to rural areas of a county where, on the date preapplication is received by the Agency, the:
(1) Per capita income of the residents is not more than 70 percent of the most recent national average per capita income, as determined by the Department of Commerce; and
(2) Unemployment rate of the residents is not less than 125 percent of the most recent national average unemployment rate, as determined by the Bureau of Labor Statistics.
(b) Residents of the rural area to be served must face significant health risks due to the fact that a significant proportion of the community's residents do not have access to, or are not served by, adequate, affordable, water and/or waste disposal systems. The file
should contain documentation to support this determination. § 1777.13 Project priority. Paragraphs (a) through (d) of this section indicate items and conditions which must be considered in selecting preapplications for further development. When ranking eligible preapplications for consideration for limited funds, Agency officials must consider the priority items met by each preapplication and the degree to which those priorities are met.
(a)
Preapplications. The preapplication and supporting information submitted with it will be used to determine applicant eligibility and the proposed project's priority for available funds. Applicants determined ineligible will be advised of their appeal rights in accordance with 7 CFR part 11.(b)
State Office review. All preapplications will be reviewed and scored for funding priority at each State Office using RUS Bulletin 1777-2. Funds will be requested from the National Office, Attention: Water and Waste Processing, using RUS Bulletin 1777-3. Eligible applicants that cannot be funded should be advised that funds are not available and advised of their appeal rights as set forth in 7 CFR part 11.(c)
National Office. The National Office will allocate funds on a project-by-project basis as requests are received. If the amount of funds requested exceeds the amount of funds available, the total project score will be used to select projects for funding. The RUS Administrator may assign up to 35 additional points that will be considered in the total points for items such as geographic distribution of funds, severity of health risks, etc.(d)
Selection priorities. The priorities described below will be used to rate preapplications and in selecting projects for funding. Points will be distributed as indicated in paragraphs (d)(1) through (d)(5) of this section and will be used in selecting projects for funding. A copy of RUS Bulletin 1777-2, used to rate applications, should be placed in the case file for future reference.(1)
Population. The proposed project will serve an area with a rural population:(i) Not in excess of 1,500—30 points.
(ii) More than 1,500 and not in excess of 3,000—20 points.
(iii) More than 3,000 and not in excess of 5,500—10 points.
(2)
Income. The median household income of population to be served by the proposed project is:(i) Not in excess of 50 percent of the statewide nonmetropolitan median household income—40 points.
(ii) More than 50 percent and not in excess of 60 percent of the statewide nonmetropolitan median household income—20 points.
(iii) More than 60 percent and not in excess of 70 percent of the statewide nonmetropolitan median household income—10 points.
(3)
Joint financing. The amount of joint financing committed to the proposed project is:(i) Twenty percent or more private, local, or State funds except Federal funds channeled through a State agency—10 points.
(ii) Five to 19 percent private, local, or State funds except Federal funds channeled through a State agency—5 points.
(4)
Colonia. (See definition in § 1777.4). The proposed project will provide water and/or waste disposal services to the residents of a colonia—50 points.(5)
Discretionary. In certain cases, the State Program Official may assign up to 15 points for items such as natural disaster, to improve compatibility/coordination between the Agency's and other agencies' selection systems, to assist those projects that are the most cost effective, high unemployment rate, severity of health risks, etc. A written justification must be prepared and attached to RUS Bulletin 1777-2 each time these points are assigned.§§ 1777.14-1777.20 [Reserved] § 1777.21 Use of funds. (a)
Applicant. Funds may be used to:(1) Construct, enlarge, extend, or otherwise improve community water and/or waste disposal systems. Otherwise
improve would include extending service lines to and/or connecting residence's plumbing to the system. (2) Make loans and grants to individuals for extending service lines to and/or connecting residences to the applicant's system. The approval official must determine that this is a practical and economical method of connecting individuals to the community water and/or waste disposal system. Loan funds can only be used for loans, and grant funds can only be used for grants.
(3) Make improvements to individual's residence when needed to allow use of the water and/or waste disposal system.
(4) Grants can be made up to 100 percent of eligible project costs.
(b)
Individuals. Funds may be used to:(1) Extend service lines to residence.
(2) Connect service lines to residence's plumbing.
(3) Pay reasonable charges or fees for connecting to a community water and/or waste disposal system.
(4) Pay for necessary installation of plumbing and related fixtures within dwellings lacking such facilities. This is limited to one bathtub, sink, commode, kitchen sink, water heater, and outside spigot.
(5) Construction and/or partitioning off a portion of dwelling for a bathroom, not to exceed 4.6 square meters (48 square feet) in size.
(6) Pay reasonable costs for closing abandoned septic tanks and water wells when necessary to protect the health and safety of recipients of a grant in paragraphs (b)(1) or (b)(2) of this section and is required by local or State law.
§§ 1777.22-1777.30 [Reserved] § 1777.31 Rates. (a) Applicant loans will bear interest at the rate of 5 percent per annum.
(b) Individual loans will bear interest at the rate of:
(1) Five percent per annum; or
(2) The Federal Financing Bank rate for loans of a similar term at the time of Agency loan approval, whichever is less.
§§ 1777.32-1777.40 [Reserved] § 1777.41 Individual loans and grants. (a) The amount of loan and grant funds approved by the Agency will be based on the need shown in the application and an implementation plan submitted by the applicant. The implementation plan will include such things as: purpose, how funds will be used, proposed application process, construction requirements, control and disbursement of funds, etc. The implementation plan will be attached to RUS Bulletin 1777-1.
(b) RUS Bulletin 1777-1 is a Memorandum of Agreement which sets forth the procedures and regulations for making and servicing loans and grants made by applicants to individuals. The State Program Official is authorized to enter into a Memorandum of Agreement with any applicant providing loans and/or grants to individuals. The Memorandum of Agreement can be amended to comply with State law and recommendations by the Office of General Counsel. It may also be amended to eliminate references to loans and/or grants if no loan and/or grant is involved. The State Program Official is responsible for:
(1) Ensuring that all provisions of the Agreement are understood.
(2) Determining that the applicant has the ability to make and service loans and/or grants in the manner outlined in the Agreement.
(c) Agency funds remaining after providing individual loans and/or grants will be returned to the Agency. The funds should be disbursed to individuals within 1 year from the date water and/or waste disposal service is available to the individuals. The State Program Official can make an exception to this 1 year requirement if written justification is provided by the applicant.
§ 1777.42 Delegation of authority. The State Program Official is responsible for the overall implementation of the authorities contained in this part and may redelegate any such authority to appropriate Agency employees.
§ 1777.43 Bulletins. RUS Bulletin 1780-12 referenced in part 1780 of this chapter and RUS Bulletin 1777-1, 1777-2 and 1777-3 are for use in administering loans and/or grants made under this part. Bulletins, instructions and forms are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500.
§§ 1777.44-1777.99 [Reserved] § 1777.100 OMB control number. The reporting and recordkeeping requirements contained in this part have been approved by the Office of Management and Budget and assigned OMB control number 0570-0001. Public reporting burden for this collection of information is estimated to vary from 5 to 30 hours per response with an average of 17.5 hours per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to U.S. Department of Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, Washington, DC 20503.
Pt. 1778 PART 1778—EMERGENCY AND IMMINENT COMMUNITY WATER ASSISTANCE GRANTS Sec. 1778.1 General. 1778.2 [Reserved] 1778.3 Objective. 1778.4 Definitions. 1778.5 [Reserved] 1778.6 Eligibility. 1778.7 Project priority. 1778.8 [Reserved] 1778.9 Uses. 1778.10 Restrictions. 1778.11 Maximum grants. 1778.12 [Reserved] 1778.13 Set-aside. 1778.14 Other considerations. 1778.15-1778.20 [Reserved] 1778.21 Application processing. 1778.22 Planning development and procurement. 1778.23 Grant closing and disbursement of funds. 1778.24-1778.30 [Reserved] 1778.31 Performing development. 1778.32-1778.33 [Reserved] 1778.34 Grant servicing. 1778.35 Subsequent grants. 1778.36 [Reserved] 1778.37 Forms, Instructions and Bulletins. 1778.38-1778.99 [Reserved] 1778.100 OMB control number. Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Source: 68 FR 46078, Aug. 5, 2003, unless otherwise noted.
§ 1778.1 General. (a) This part outlines policies and procedures for making Emergency Community Water Assistance Grants (ECWAG) authorized under Section 306A of the Consolidated Farm and Rural Development Act, (7 U.S.C. 1926(a)), as amended. Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Agency employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for this assistance are required to identify any known relationship or association with an Agency employee.
(b) Agency officials will maintain liaison with officials of other Federal, State, regional and local development agencies to coordinate related programs to achieve rural development objectives.
(c) Agency officials shall cooperate with appropriate State agencies in making grants that support State strategies for rural area development.
(d) Funds allocated for use in accordance with this part are also to be considered for use by Indian tribes within the State regardless of whether State development strategies include Indian reservations within the State's boundaries. Indians residing on such reservations must have an equal opportunity along with other rural residents to participate in the benefits of this program. This includes equal application of outreach activities of Field Offices.
(e) Federal statutes provide for extending the Agency financial programs without regard to race, color, religion, sex, national origin, marital status, age, or physical/mental handicap (provided the participant possesses the capacity to enter into legal contracts).
§ 1778.2 [Reserved] § 1778.3 Objective. The objective of the ECWAG Program is to assist the residents of rural areas that have experienced a significant decline in quantity or quality of water, or in which such a decline is considered imminent, to obtain or maintain adequate quantities of water that meets the standards set by the Safe Drinking Water Act (42 U.S.C. 300f
et seq. ) (SDWA).§ 1778.4 Definitions. Acute shortage. An acute shortage is a situation in which the system either cannot deliver water at all through its distribution system or can only deliver water on a sporadic basis.Emergency. Occurrence of an incident such as, but not limited to, a drought; earthquake; flood; tornado; hurricane; disease outbreak; or chemical spill, leakage, or seepage.Rural areas. Includes any area not in a city or town with a population in excess of 10,000 inhabitants, according to the latest decennial census of the United States. located in any of the fifty States, the Commonwealth of Puerto Rico, the Western Pacific Territories, Marshall Islands, Federated States of Micronesia, Republic of Palau, and the U.S. Virgin Islands.Significant decline in quality. A significant decline in quality of potable water occurs when the present community source or delivery system does not meet, as a result of an emergency, the current SDWA requirements. For a private source or delivery system a significant decline in quality occurs when the water is no longer potable as a result of an emergency. As used in this Subpart, the term significant decline in quality may also include a situation where a significant decline is likely to occur within one year from the date of the filing of an application.Significant decline in quantity. A significant decline in the quantity is caused by a disruption of the potable water supply by an emergency. The disruption in quantity of water prevents the present source or delivery system from supplying potable water needs to rural residents. This would not include a decline in excess water capacity. As used in this Subpart, the term significant decline in quantity may also include a situation where a significant decline is likely to occur within one year from the date of the filing of an application.Statewide Nonmetropolitan Median Household Income (SNMHI). Median household income of the State's nonmetropolitan counties and portions of metropolitan counties outside of cities, towns or places of 50,000 or more population.[68 FR 46078, Aug. 5, 2003, as amended at 69 FR 65519, Nov. 15, 2004] § 1778.5 [Reserved] § 1778.6 Eligibility. (a) Grants may be made to public bodies and private nonprofit corporations serving rural areas. Public bodies include counties, cities, townships, incorporated towns and villages, boroughs, authorities, districts, and other political subdivisions of a State. Public bodies also include Indian tribes on Federal and State reservations and other Federally recognized Indian Tribal groups in rural areas.
(b) In the case of grants made to alleviate a significant decline in quantity or quality of water available from the water supplies of rural residents, the applicant must demonstrate that the decline occurred within two years of the date the application was filed with the Agency. This would not apply to grants made for repairs, partial replacement, or significant maintenance on an established water system. In situations involving imminent decline, evidence must be presented to demonstrate that the decline is likely to occur within one year of the date the application is filed with the Agency.
§ 1778.7 Project priority. Paragraph (d) of this section indicates items and conditions which must
be considered in selecting applications for further development. When ranking eligible applications for consideration for limited funds, Agency officials must consider the priority items met by each application and the degree to which those priorities are met. (a)
Applications. The application and supporting information submitted with it will be used to determine the proposed project's priority for available funds.(b)
State Office review. All applications will be reviewed and scored for funding priority using RUS Bulletin 1778-1. Eligible applicants that cannot be funded should be advised that funds are not available.(c)
National Office review. Each year all funding requests will be reviewed by the National Office beginning 30 days after funds from the annual appropriation are made available to the Agency. Reviews will continue throughout the fiscal year as long as funds are available. Projects selected for funding will be considered based on the priority criteria and available funds. Projects must compete on a national basis for available funds, and the National Office will allocate funds to State offices on a project by project basis.(d)
Selection priorities. The priorities described below will be used by the State Program Official to rate applications and by the Assistant Administrator of Water and Environmental Programs to select projects for funding. Points will be distributed as indicated in paragraphs (d)(1) through (d)(5) of this section and will be considered in selecting projects for funding. A copy of RUS Bulletins 1778-1 and 1778-2 used to rate applications, should be placed in the case file for future reference.(1)
Population. The proposed project will serve an area with a rural population:(i) Not in excess of 1,500—30 points.
(ii) More than 1,500 and not in excess of 3,000—20 points.
(iii) More than 3,000 and not in excess of 5,000—15 points.
(iv) Over 5,000—0 points.
(2)
Income. The median household income of population to be served by the proposed project is:(i) Not in excess of 70% of the statewide nonmetropolitan median household income—30 points.
(ii) More than 70% and not in excess of 80% of the statewide nonmetropolitan median household income—20 points.
(iii) More than 80% and not in excess of 90% of the statewide nonmetropolitan median household income—10 points.
(iv) Over 90% of the statewide nonmetropolitan median household income—0 points.
(3)
Significant decline. Points will be assigned for only one of the following paragraphs when the primary purpose of the proposed project is to correct a significant decline that has occurred in the:(i) Quantity of water available from private individually owned wells or other individual sources of water—30 points; or
(ii) Quantity of water available from an established system's source of water—20 points; or
(iii) Quality of water available from private individually owned wells or other individual sources of water—30 points; or
(iv) Quality of water available from an established system's source of water—20 points.
(4)
Imminent decline. The proposed project will attempt to avert an imminent decline expected to occur during the one-year period following the filing of an application—10 points.( Note: If points were assigned above for a significant decline, no points will be awarded for imminent decline.)(5)
Acute shortage. Grants made in accordance with § 1778.11(b) of this part to assist an established water system remedy an acute shortage of quality water or correct a significant decline in the quantity or quality of water that is available—10 points.(6)
Discretionary. In certain cases the Administrator may assign up to 30 points for items such as geographic distribution of funds, rural residents hauling water, severe contamination levels,etc. § 1778.8 [Reserved] § 1778.9 Uses. Grant funds may be used for the following purposes:
(a) Waterline extensions from existing systems.
(b) Construction of new waterlines.
(c) Repairs to an existing system.
(d) Significant maintenance to an existing system.
(e) Construction of new wells, reservoirs, transmission lines, treatment plants, and other sources of water.
(f) Equipment replacement.
(g) Connection and/or tap fees.
(h) Pay costs that were incurred within six months of the date an application was filed with the Agency to correct an emergency situation that would have been eligible for funding under this part.
(i) Any other appropriate purpose such as legal fees, engineering fees, recording costs, environmental impact analyses, archaeological surveys, possible salvage or other mitigation measures, planning, establishing or acquiring rights associated with developing sources of, treating, storing, or distributing water.
(j) Assist rural water systems to comply with the requirements of the Federal Water Pollution Control Act (33 U.S.C. 1251
et seq. ) (FWPCA) or the SDWA when such failure to comply is directly related to a recent decline in quality of potable water. This would not apply to changes in the requirements of FWPCA or SDWA.(k) Provide potable water to communities through means other than those covered above for not to exceed 120 days when a more permanent solution is not feasible in a shorter time frame.
§ 1778.10 Restrictions. (a) Grant funds may not be used to:
(1) Assist any city or town with a population in excess of 10,000 inhabitants according to the most recent decennial census of the United States. Facilities financed by RUS may be located in non-rural areas. However, loan and grant funds may be used to finance only that portion of the facility serving rural areas, regardless of facility location.
(2) Assist a rural area that has a median household income in excess of the statewide nonmetropolitan median household income according to the most recent decennial census of the United States.
(3) Finance facilities which are not modest in size, design, cost, and are not directly related to correcting the potable water quantity or quality problem.
(4) Pay loan or grant finder's fees.
(5) Pay any annual recurring costs that are considered to be operational expenses.
(6) Pay rental for the use of equipment or machinery owned by the rural community.
(7) Purchase existing systems.
(8) Refinance existing indebtedness, except for short-term debt incurred in accordance with § 1778.9(h).
(9) Make reimbursement for projects developed with other grant funds.
(10) Finance facilities that are not for public use.
(b) Nothing in paragraph (a)(1) of this section shall preclude rural areas from submitting joint proposals for assistance under this part. Each entity applying for financial assistance under this part to fund their share of a joint project will be considered individually.
§ 1778.11 Maximum grants. (a) Grants not to exceed $500,000 may be made to alleviate a significant decline in quantity or quality of water available to a rural area that occurred within two years of filing an application with the Agency, or to attempt to avoid a significant decline that is expected to occur during the twelve month period following the filing of an application.
(b) Grants made for repairs, partial replacement, or significant maintenance on an established system to remedy an acute shortage or significant decline in the quality or quantity of potable water, or an anticipated acute shortage or significant decline, cannot exceed $150,000.
(c) Grants under this part, subject to paragraphs (a) and (b) of this section, shall be made for 100 percent of eligible project costs.
§ 1778.12 [Reserved] § 1778.13 Set-aside. (a) At least 70 percent of all grants made under this grant program shall be for projects funded in accordance with § 1778.11(a).
(b) At least 50 percent of the funds appropriated for this grant program shall be allocated to rural areas with populations not in excess of 3,000 inhabitants according to the most recent decennial census of the United States.
§ 1778.14 Other considerations. (a)
Civil rights compliance requirements. All grants made under this part are subject to Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000det seq. ) as outlined in subpart E of part 1901 of this title.(b)
Environmental requirements. All projects must have appropriate environmental reviews in accordance with RUS requirements.(c)
Uniform Relocation and Real Property Acquisition Policies Act (42 U.S.C. 4601 et seq.). All projects must comply with the requirements set forth in 7 CFR Part 21.(d)
Flood and mudslide hazard area precautions. If the project is located in a flood or mudslide area, then flood or mudslide insurance must be provided as required in subpart A of part 1806 of this title (RD Instruction 426.2).(e)
Governmentwide debarment and suspension (nonprocurement) and requirements for drug-free work place. All projects must comply with the requirements set forth in the U.S. Department of Agriculture regulations 7 CFR part 3017 and RD Instruction 1940-M.(f)
Intergovernmental review. All projects funded under this part are subject to Executive Order 12372 (3 CFR, 1983 Comp., p. 197), which requires intergovernmental consultation with State and local officials. These requirements are set forth in U.S. Department of Agriculture regulations 7 CFR part 3015, Subpart V, and RD Instruction 1940-J.§§ 1778.15-1778.20 [Reserved] § 1778.21 Application processing. (a) The material submitted with the application should include the Preliminary Engineering Report, population and median household income of the area to be served, description of project, and nature of emergency that caused the problem(s) being addressed by the project. The documentation must clearly show that the applicant has had a significant decline in the quantity or quality of potable water or an acute shortage of potable water, or that such a decline or shortage is imminent, and that the proposed project will eliminate or alleviate the problem. For projects to be funded in accordance with § 1778.11 (a), evidence must be furnished that a significant decline in quantity or quality occurred within two years before filing the application with the Agency, or is expected to occur within one year after filing the application.
(b) When favorable action will not be taken on an application, the applicant will be notified in writing by the State Program Official of the reasons why the request was not favorably considered. Notification to the applicant will state that a review of this decision by the Agency may be requested by the applicant in accordance with 7 CFR part 11.
§ 1778.22 Planning development and procurement. Planning development and procurement for grants made under this part will be in accordance with subpart C of Part 1780 of this chapter. A certification should be obtained from the State agency or the Environmental Protection Agency if the State does not have primacy, stating that the proposed improvements will be in compliance with requirements of the SDWA.
§ 1778.23 Grant closing and disbursement of funds. (a) Grants will be closed in accordance with § 1780.45 of part 1780 of this chapter.
(b) RUS Bulletin 1780-12, “Water or Waste Grant Agreement,” will be executed by all applicants.
(c) The Agency's policy is not to disburse grant funds from the Treasury until they are actually needed by the applicant. Grant funds will be disbursed by using multiple advances.
§§ 1778.24-1778.30 [Reserved] § 1778.31 Performing development. (a) Applicable provisions of subpart C of part 1780 of this chapter will be followed in performing development for grants made under this part.
(b) After filing an application in accordance with § 1778.21 and when immediate action is necessary, the State Program Official may concur in an applicant's request to proceed with construction before funds are obligated provided the RUS environmental requirements are complied with. The applicant must be advised in writing that:
(1) Any authorization to proceed or any concurrence in bid awards, contract concurrence, or other project development activity, is not a commitment by the Agency to provide grant funds under this part.
(2) The Agency is not liable for any debt incurred by the applicant in the event that funds are not provided under this part.
§ 1778.32-1778.33 [Reserved] § 1778.34 Grant servicing. (a) Grants will be serviced in accordance with § 1951.215 of subpart E of part 1951 of this title and subpart O of part 1951 of this title.
(b) The grantee will provide an audit report in accordance with § 1780.47 of part 1780 of this chapter.
§ 1778.35 Subsequent grants. Subsequent grants will be processed in accordance with the requirements set forth in this part. The initial and subsequent grants made to complete a previously approved project must comply with the maximum grant requirements set forth in § 1778.11.
§ 1778.36 [Reserved] § 1778.37 Forms, Instructions and Bulletins. Bulletins, instructions and forms referenced are for use in administering grants made under this part and are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500.
§§ 1778.38-1778.99 [Reserved] § 1778.100 OMB control number. The information collection requirements contained in this part have been approved by the Office of Management and Budget and assigned OMB control number 0572-0110.
Pt. 1779 PART 1779—WATER AND WASTE DISPOSAL PROGRAMS GUARANTEED LOANS Sec. 1779.1 General. 1779.2 Definitions. 1779.3 Full faith and credit. 1779.4 Conditions of guarantee. 1779.5-1779.7 [Reserved] 1779.8 Access to lender's records. 1779.9 Environmental requirements. 1779.10-1779.11 [Reserved] 1779.12 Inspections. 1779.13 Appeals. 1779.14-1779.16 [Reserved] 1779.17 Exception authority. 1779.18-1779.19 [Reserved] 1779.20 Eligibility. 1779.21-1779.23 [Reserved] 1779.24 Eligible loan purposes. 1779.25 Ineligible loan purposes. 1779.26 [Reserved] 1779.27 Eligible lenders. 1779.28 Transfer of lenders or borrowers (prior to issuance of Loan Note Guarantee). 1779.29 Fees and charges by lender. 1779.30 Loan guarantee limitations. 1779.31-1779.32 [Reserved] 1779.33 Interest rates. 1779.34 Terms of loan repayment. 1779.35-1779.36 [Reserved] 1779.37 Insurance and fidelity bonds. 1779.38-1779.41 [Reserved] 1779.42 Design and construction requirements. 1779.43 Other Federal, State, and local requirements. 1779.44-1779.46 [Reserved] 1779.47 Economic feasibility requirements. 1779.48 Security. 1779.49-1779.51 [Reserved] 1779.52 Processing. 1779.53 Evaluation of application. 1779.54-1779.58 [Reserved] 1779.59 Review of requirements. 1779.60-1779.62 [Reserved] 1779.63 Conditions precedent to issuance of the Loan Note Guarantee. 1779.64 Issuance of Lender's Agreement, Loan Note Guarantee, and Assignment Guarantee Agreement. 1779.65 Lender's sale or assignment of the guaranteed portion of loan. 1779.66-1779.68 [Reserved] 1779.69 Loan servicing. 1779.70-1779.72 [Reserved] 1779.73 Replacement of loss, theft, destruction, mutilation, or defacement of Loan Note Guarantee or Assignment Guarantee Agreement. 1779.74 [Reserved] 1779.75 Defaults by borrower. 1779.76-1779.77 [Reserved] 1779.78 Repurchase of loan. 1779.79 [Reserved] 1779.80 Interest rate changes after loan closing. 1779.81 Liquidation. 1779.82 [Reserved] 1779.83 Protective advances. 1779.84 Additional loans or advances. 1779.85 Bankruptcy. 1779.86-1779.87 [Reserved] 1779.88 Transfer and assumptions. 1779.89 Mergers. 1779.90 Disposition of acquired property. 1779.91-1779.93 [Reserved] 1779.94 Determination and payment of loss. 1779.95 Future recovery. 1779.96 Termination of Loan Note Guarantee. 1779.97-1779.99 [Reserved] 1779.100 OMB control number. Authority: 5 U.S.C. 301, 7 U.S.C. 1989, 16 U.S.C. 1005.
Source: 66 FR 23138, May 8, 2001, unless otherwise noted.
§ 1779.1 General. (a) This part contains the regulations for Water and Waste Disposal (WW) loans guaranteed by the Agency and applies to lenders, holders, borrowers, and other parties involved in making, guaranteeing, holding, servicing, or liquidating such loans.
(b) The purpose of the WW guaranteed loan program is to provide a loan guarantee for the construction or improvement of water and waste projects serving the financially needy communities in rural areas. This purpose is achieved through bolstering the existing private credit structure through the guarantee of quality loans which will provide lasting benefits.
§ 1779.2 Definitions. The following general definitions are applicable to the terms used in this part:
Agency. The Rural Utilities Service which is within the Rural Development mission area of the United States Department of Agriculture or its successor agencies with authority delegated by the Secretary of Agriculture to administer the Water and Waste Disposal Programs.Application. An Agency prescribed form to request an Agency guarantee (available in any Agency office).Arm's length transaction. The sale, release, or disposition of assets in which the title to the property passes to a ready, willing, and able third party who is not affiliated with, or related to, and has no security, monetary, or stockholder interest in the borrower or transferor at the time of the transaction.Assignment Guarantee Agreement. The signed agreement among the Agency, the lender, and the holder setting forth the terms and conditions of an assignment of the guaranteed portion of a loan or any part thereof (available in any Agency office).Borrower. The entity that borrows money from the lender.Collateral. Property pledged to secure the guaranteed loan.Conditional Commitment for Guarantee. The Agency's written statement to the lender that the material submitted is approved subject to the completion of all conditions and requirements contained in the commitment (available in any Agency office).Guaranteed loan. A loan made and serviced by a lender for which the Agency and lender have entered into a Lender's Agreement and for which the Agency has issued a Loan Note Guarantee.Holder. The person or entity (other than the lender) who holds all or a part of the guaranteed portion of the loan with no servicing responsibilities. When the lender assigns part or all of the guaranteed portion of the loan to an assignee, the assignee becomes a holder when the Assignment Guarantee Agreement is signed by all parties.Immediate family. Individuals who are closely related by blood or by marriage, or within the same household, such as a spouse, parent, child, brother, sister, aunt, uncle, grandparent, grandchild, niece, or nephew.In-house expenses. In-house expenses include, but are not limited to, employees' salaries, retainers being paid to lawyers, travel, and overhead.Insurance. Fire, windstorm, lightning, hail, explosion, riot, civil commotion, aircraft, vehicles, smoke, builder's risk, liability, property damage, flood or mudslide, worker's compensation, fidelity bond, malpractice, or any similar insurance that is available and needed to protect the security or that is required by law.Joint financing. Two or more lenders (or any combination of lenders and other financial sources) making separate relatively contemporaneous loans or grants to supply the funds required by one borrower. For example, such joint financing may consist of the Agency's financial assistance with the Economic Development Administration, Department of Housing and Urban Development (HUD), or other Federal and State agencies, and private and quasi-public financial institutions.Lender. The person or organization making and responsible for servicing the loan. The lender is also referred to in this part as the applicant who is requesting a guarantee during the preapplication and application stage of processing.Lender's Agreement. The signed agreement between the Agency and the lender containing the lender's responsibilities when the Loan Note Guarantee is issued (available in any Agency office).Loan Note Guarantee. The signed commitment issued by the Agency containing the terms and conditions of the guarantee of an identified loan (available in any Agency office).Market value. The amount for which property would sell for its highest and best use at a voluntary sale in an arm's length transaction.Note. An evidence of debt. In those instances where the Agency guarantees a bond issue, “note” shall also be construed to include a bond or other evidence of indebtedness, as appropriate.Participation. Sale of an interest in a loan in which the lender retains the note, collateral securing the note, and all responsibility for loan servicing and liquidation.Principals of borrowers. The owners, officers, directors, entities, and supervisors directly involved in the operation and management of the borrower.Protective advances. Advances made by the lender for the purpose of preserving and protecting the collateral where the debtor has failed to, and will not or cannot, meet obligations to protect or preserve collateral.Report of loss. An Agency form used by lenders when reporting a loss under an Agency guarantee (available in any Agency office).Rural and rural area. Any area not in a city or town with a population in excess of 10,000 inhabitants, according to the latest decennial census of the United StatesService area. The area reasonably expected to be served by the project being financed by the guaranteed loan.State. Any of the 50 States, the Commonwealth of Puerto Rico, the Virgin Islands of the United States, Guam, American Samoa, Commonwealth of the Northern Mariana Islands, Republic of the Marshall Islands, Republic of Palau, and the Federated States of Micronesia.State Bond Banks and State Bond Pools. An entity authorized by the State to issue State debt instruments and utilize the funds received to finance the construction or improvement of drinking water or waste disposal facilities.State Director. The Rural Development State Director or the staff member who has been delegated authority to perform action on behalf of the State Director.Substantive change. Any change in the purpose of the loan or any change in the financial condition of the borrower or the collateral which would jeopardize the performance of the loan.Transfer and assumption. The conveyance by a debtor to an assuming party of the assets, collateral, and liabilities of the loan in return for the assuming party's binding promise to pay the outstanding debt.Waste disposal. Sanitary sewer (treatment and collection), solid waste, and storm drainage facilities.WW. An acronym for Water and Waste Disposal.§ 1779.3 Full faith and credit. The Loan Note Guarantee constitutes an obligation supported by the full faith and credit of the United States and is not contestable except for fraud or misrepresentation (including
negligent misrepresentation) of which the lender or holder has actual knowledge, participates in, or condones. A note which provides for the payment of interest on interest shall not be guaranteed and any Loan Note Guarantee or Assignment Guarantee Agreement attached to, or relating to, a note which provides for payment of interest on interest is void. The Loan Note Guarantee will not be enforceable by the lender to the extent any loss is occasioned by violation of usury laws, negligent servicing, or failure to obtain the required security regardless of the time at which the Agency acquires knowledge of the foregoing. Any losses occasioned will not be enforceable by the lender to the extent that loan funds are used for purposes other than those specifically approved by the Agency in its Conditional Commitment for Guarantee. Negligent servicing is defined as the failure to perform those services which a reasonably prudent lender would perform in servicing its own portfolio of loans that are not guaranteed. The term includes not only the concept of a failure to act, but also not acting in a timely manner, acting in a manner contrary to the manner in which a reasonably prudent lender would act up to the time of loan maturity, or until a final loss is paid. The Loan Note Guarantee or Assignment Guarantee Agreement in the hands of a holder shall not cover interest accruing 90 days after the holder has demanded repurchase by the lender, nor shall the Loan Note Guarantee or Assignment Guarantee Agreement in the hands of a holder cover interest accruing 90 days after the lender or Agency has requested the holder to surrender the evidence of debt for repurchase. § 1779.4 Conditions of guarantee. A loan guarantee under this part will be evidenced by a Loan Note Guarantee issued by the Agency. Each lender will also execute a Lender's Agreement.
(a) The entire loan will be secured by the same security with equal lien priority for the guaranteed and non-guaranteed portions of the loan. The non-guaranteed portion of the loan will not be paid first nor given any preference or priority over the guaranteed portion.
(b) The lender will be responsible for servicing the entire loan and will remain mortgagee or secured party of record notwithstanding the fact that another party may hold a portion of the loan.
(c) When a guaranteed portion of a loan is sold to a holder, the holder shall have all rights of the lender under the Loan Note Guarantee to the extent of the portion purchased. The lender will remain bound by all the obligations under the Loan Note Guarantee, Lender's Agreement, and Agency program regulations. If the Agency makes a payment to a holder, then the lender must reimburse the Agency.
(d) A lender will receive all payments of principal and interest on the account of the entire loan and will promptly remit to each holder a pro rata share, less any lender servicing fee.
(e) The lender may retain all of the unguaranteed portion of the loan or may sell part of the unguaranteed portion of the loan through participation. However, the lender is required to retain 5 percent of the loan amount from the unguaranteed portion in their portfolio.
§§ 1779.5-1779.7 [Reserved] § 1779.8 Access to lender's records. Upon request by the Agency, the lender will permit representatives of the Agency (or other agencies of the U.S. Department of Agriculture authorized by that Department or the U.S. Government) to inspect and make copies of any of the records of the lender pertaining to the guaranteed loans. Such inspection and copying may be made during regular office hours of the lender or at any other time the lender and the Agency agree upon.
§ 1779.9 Environmental requirements. Facilities financed must undergo an environmental impact analysis in accordance with the National Environmental Policy Act and Agency requirements as contained in part 1794 of this chapter. In accordance with Agency guidance documents (RUS Bulletin 1794A-602; this document is available in any Agency State Office or online at http://www.usda.gov/rus/water/ees/
index.htm), the environmental review requirements shall be performed by the applicant simultaneously and concurrently with the project's engineering planning and design. This should provide flexibility to consider reasonable alternatives to the project and development methods to mitigate any adverse environmental effects. Facility planning and design must not only be responsive to the owner's needs but must consider the environmental consequences of the proposed project. Facility design will incorporate and integrate, where practicable, mitigation measures that avoid or minimize adverse environmental impacts. The lender must assist the Agency in ensuring that the borrower complies with the Agency's environmental review process and implements any mitigation measure identified in the environmental review document or Conditional Commitment for Guarantee. This assistance includes ensuring that the borrower takes no action (for example, initiation of construction) or incur any obligations that will have an adverse environmental impact or limit the range of alternatives to be considered prior to completion of the environmental review process. If construction is started prior to completion of the environmental review and the Agency is deprived of its opportunity to fulfill its obligation to comply with applicable environmental requirements, the application for financial assistance may be denied. Satisfactory completion of the environmental review process must occur prior to the approval of the applicant's request or commitment of Agency resources. §§ 1779.10-1779.11 [Reserved] § 1779.12 Inspections. The lender will notify the Agency of any scheduled field inspections during construction and after issuance of the Loan Note Guarantee. The Agency may attend such field inspections. Any inspections or review conducted by the Agency, including those with the lender, are for the benefit of the Agency only and not for the benefit of other parties in interest. Agency inspections do not relieve any parties in interest of their responsibilities to conduct necessary inspections.
§ 1779.13 Appeals. Only the borrower, lender, or holder can appeal an Agency decision. In cases where the Agency has denied or reduced the amount of final loss payment to the lender, the adverse decision may be appealed only by the lender. A decision by a lender adverse to the interest of the borrower is not a decision by the Agency, whether or not concurred in by the Agency. Appeals will be handled in accordance with the regulations of the National Appeals Division, U.S. Department of Agriculture, published at 7 CFR part 11.
§§ 1779.14-1779.16 [Reserved] § 1779.17 Exception authority. The Administrator may, in individual cases, make an exception to any requirement or provision of this part which is not inconsistent with the authorizing statute or other applicable law and is determined to be in the Government's interest.
§§ 1779.18-1779.19 [Reserved] § 1779.20 Eligibility. (a)
Availability of credit from other sources. The Agency must determine that the borrower is unable to obtain the required credit without the loan guarantee from private, commercial, or cooperative sources at reasonable rates and terms for loans for similar purposes and periods of time. The Agency must also determine if an outstanding judgment obtained by the United States in a Federal Court (other than the U.S. Tax Court) has been entered against the borrower or if the borrower has an outstanding delinquent debt with any Federal agency. Such judgment or delinquency shall cause the potential borrower to be ineligible to receive a loan guarantee until the judgment is paid in full or otherwise satisfied or the delinquency is cured.(b)
Legal authority and responsibility. (1) Each borrower must have, or will obtain, the legal authority necessary to construct, operate, and maintain the proposed facility and services. Theymust also have legal authority for obtaining, giving security for, and repaying the proposed loan. (2) The borrower shall be responsible for operating, maintaining, and managing the facility and services, and providing for the continued availability and use of the facility and services at reasonable rates and terms.
(c)
Applicant. Eligible entities are:(1) A public body such as a municipality, county, district, authority, or other political subdivision of a State located in a rural area.
(2) An organization operated on a not-for-profit basis, such as an association, cooperative, or private corporation. The organization must be an association controlled by a local public body or bodies, or have a broadly based ownership by or membership of people of the local community; or
(3) Indian tribes on Federal and State reservations and other federally recognized Indian tribes.
(d)
Facility location. Facilities must be located in rural areas, except: For utility services such as drinking water, sanitary sewer, solid waste disposal or storm drainage facilities serving both rural and non-rural areas. In such cases, Agency funds may be used to finance only that portion serving rural areas, regardless of facility location.(e)
Facilities for public use. All facilities financed under the provisions of this part shall be for public purposes.(1) Facilities will be installed to serve any user within the service area who desires service and can be feasibly and legally served.
(2) In no case will boundaries for the proposed service area be chosen in such a way that any user or area will be excluded because of race, color, religion, sex, marital status, age, disability, or national origin.
(3) The lender will determine that, when feasible and legally possible, inequities within the proposed project's service area for the same type service proposed will be remedied by the owner on, or before, completion of the project. Inequities are defined as unjustified variations in availability, adequacy, or quality of service. User rate schedules for portions of existing systems or facilities that were developed under different financing, rates, terms, or conditions do not necessarily constitute inequities.
§§ 1779.21-1779.23 [Reserved] § 1779.24 Eligible loan purposes. (a) To construct, enlarge, extend, or otherwise improve rural drinking water, sanitary sewage, solid waste disposal, and storm wastewater disposal facilities.
(b) To construct or relocate public buildings, roads, bridges, fences, or utilities, and to make other public improvements necessary for the successful operation or protection of facilities authorized in paragraph (a) of this section.
(c) To relocate private buildings, roads, bridges, fences, or utilities, and other private improvements necessary for the successful operation or protection of facilities authorized in paragraph (a) of this section.
(d) For payment of other utility connection charges as provided in service contracts between utility systems.
(e) When a necessary part of the project relates to those facilities authorized in paragraphs (a), (b), (c) or (d) of this section the following may be considered:
(1) Reasonable fees and costs such as: legal, engineering, administrative services, fiscal advisory, recording, environmental analyses and surveys, possible salvage or other mitigation measures, planning, establishing or acquiring rights;
(2) Costs of acquiring interest in land: rights, such as water rights; leases; permits; rights-of-way; and other evidence of land or water control or protection necessary for development of the facility;
(3) Purchasing or renting equipment necessary to install, operate, maintain, extend, or protect facilities;
(4) Cost of additional applicant labor and other expenses necessary to install and extend service;
(5) In unusual cases such as a low-income area, the cost for connecting the user to the main service line;
(6) Interest incurred during construction in conjunction with multiple advances or interest on interim financing;
(7) Initial operating expenses, including interest, for a period ordinarily not exceeding one year when the applicant is unable to pay such expenses;
(8) The purchase of existing facilities when it is necessary either to improve service or prevent the loss of service; and
(9) Refinancing non-Agency debts incurred by, or on behalf of, an applicant when all of the following conditions exist:
(i) The debts being refinanced are a secondary part of the total loan unless the debt being refinanced is an Agency direct loan;
(ii) The debts were incurred for the facility or service being financed or any part thereof; and
(iii) Arrangements cannot be made with the creditors to extend or modify the terms of the debts so that a sound basis will exist for making a loan.
(10) Refinancing Agency debts.
§ 1779.25 Ineligible loan purposes. Loan funds may not be used to finance:
(a) Facilities which are not modest in size, design, and cost;
(b) Loan or grant finder's fees;
(c) The construction of any new combined storm and sanitary sewer facilities;
(d) Any portion of the cost of a facility which does not serve a rural area;
(e) That portion of project costs normally provided by a business or industrial user, such as wastewater pretreatment;
(f) Rental for the use of equipment or machinery owned by the applicant;
(g) For other purposes not directly related to operating and maintenance of the facility being installed or improved; or
(h) The payment of a judgment which would disqualify an applicant for a loan under § 1779.20(a).
§ 1779.26 [Reserved] § 1779.27 Lenders. (a)
Eligible lenders. Eligible lenders may participate in the loan guarantee program. These lenders must be subject to credit examination and supervision by an appropriate agency of the United States or a State that supervises and regulates credit institutions. A lender must have the capability to adequately service loans for which a guarantee is requested. Eligible lenders are:(1) Any Federal or State chartered bank or savings and loan association;
(2) Any mortgage company that is a part of a bank holding company;
(3) Co-Bank, National Rural Utilities Cooperative Finance Corporation, Farm Credit Bank of the Federal Land Bank, or other Farm Credit System institution with direct lending authority authorized to make loans of the type guaranteed by this part;
(4) An insurance company regulated by a State or National insurance regulatory agency;
(5) State Bond Banks or State Bond Pools; and
(6) Other lenders that possess the legal powers necessary and incidental to making and servicing guaranteed loans involving community development-type projects. Lenders under this category must be approved by the National Office prior to the issuance of the loan guarantee.
(b)
Conflict of interest. When the lender's officers, stockholders, directors, or partners (including their immediate families) or the borrower, its officers, stockholders, directors, or partners (including their immediate families) own, or have management responsibilities in each other, the lender must disclose such business or ownership relationships. The Agency will determine if such relationships are likely to result in a conflict of interest. This does not preclude lender officials from being on the borrower's board of directors.§ 1779.28 Transfer of lenders or borrowers (prior to issuance of Loan Note Guarantee). (a) Prior to issuance of the loan guarantee, the Agency may approve the transfer of an outstanding Conditional Commitment for Guarantee from the present lender to a new eligible lender: Provided, That:
(1) The former lender states in writing why it does not wish to continue to be the lender for this project;
(2) No substantive changes in ownership or control of the borrower has occurred;
(3) No substantive changes in the borrower's written plan, scope of work, or changes in the purpose or intent of the project has occurred; and
(4) No substantive changes in the loan agreement or Conditional Commitment for Guarantee are required.
(b) The substitute lender must execute a new application for loan and guarantee (available in any Agency office).
(c) If approved, the Agency will issue a letter of amendment to the original Conditional Commitment for Guarantee reflecting the new lender who will acknowledge acceptance of the offer in writing.
(d) Once the Conditional Commitment for Guarantee is issued, the Agency will not approve any substitution of borrowers, including changes in the form of the legal entity, except a change in the legal entity may be requested when the original borrower is replaced with substantially the same individuals or officers with the same interest as originally approved.
§ 1779.29 Fees and charges by lender. (a)
Routine charges and fees. The lender may establish charges and fees for the loan if they do not exceed those charged other borrowers for similar types of transactions. “Similar types of transactions” mean those transactions involving the same type of loan for which a non-guaranteed loan borrower would be assessed charges and fees.(b)
Late payment fees. Late payment charges will not be covered by the Loan Note Guarantee. Such charges may not be added to the principal and interest due under any guaranteed note. Late payment charges may be made only if:(1) They are routinely made by the lender in all types of loan transactions;
(2) Payment has not been received within the customary timeframe allowed by the lender; or
(3) The lender agrees with the borrower, in writing, that the rate or method of calculating the late payment charges will not be changed to increase charges while the Loan Note Guarantee is in effect.
(c)
Guarantee fees. The guaranteed loan fee will be the applicable guarantee fee rate multiplied by the principal loan amount multiplied by the percent of guarantee. The one-time guarantee fee is paid when the Loan Note Guarantee is issued.(1) The fee will be paid to the Agency by the lender and is nonreturnable. The lender may pass the fee to the borrower.
(2) The guarantee fee rates are available in any Agency office.
§ 1779.30 Loan guarantee limitations. (a) The guarantee will be 90 percent of eligible loss.
(b) The lender will retain a minimum of 5 percent of the total loan amount. The retained amount must be from the unguaranteed portion of the loan and cannot be participated to another lender.
§§ 1779.31-1779.32 [Reserved] § 1779.33 Interest rates. (a)
General. Rates will be negotiated between the lender and the borrower. They may be either fixed or variable rates. Interest rates will be those rates customarily charged borrowers in similar circumstances in the ordinary course of business and are subject to Agency review and approval.(b)
Variable rate publication. A variable interest rate must be tied to a base rate published periodically in a recognized national or regional financial publication specifically agreed to by the lender and borrower. Such an agreement must be documented in the borrower or lender loan agreement.(1) Interest rate caps and incremental adjustment limitations will also be negotiated between the lender and the borrower. Notice of any interest rate change proposed by the lender should allow a sufficient time period for the borrower to obtain any required State or other regulatory approval and to implement any user rate adjustments necessary as a result of the interest rate change. The intervals between interest rate adjustments will be specified in the loan agreement (but not more often than quarterly).
(2) The lender must incorporate within the variable rate note, the provision for adjustment of payments coincident with an interest rate adjustment. This
will ensure the outstanding principal balance is properly amortized within the prescribed loan maturity and eliminate the possibility of a balloon payment at the end of the loan. (c)
Changes. Any change in the interest rate between the date of issuance of the Conditional Commitment for Guarantee and before the issuance of the Loan Note Guarantee must be approved by the Agency. Approval of such change will be shown as an amendment to the Conditional Commitment for Guarantee.(d)
Different rates on guaranteed and unguaranteed portion of the loan. It is permissible to have one interest rate on the guaranteed portion of the loan and another interest rate on the unguaranteed portion of the loan, provided the lender and borrower agree, and:(1) The rate on the unguaranteed portion does not exceed that currently being charged on loans for similar purposes to borrowers under similar circumstances; and
(2) The rate on the guaranteed portion of the loan will not exceed the rate on the unguaranteed portion. This requirement does not apply when the unguaranteed rate is variable and the guaranteed portion is fixed.
(e)
Multi-rates. When multi-rates are used, the lender will provide the Agency with the overall effective interest rate for the entire loan. Multi-rate loans may be either fixed, variable, or a combination of fixed and variable.§ 1779.34 Terms of loan repayment. (a)
General. Principal and interest on the loan will be due and payable as provided in the note except, any interest accrued as the result of the borrower's default on the guaranteed loan over and above that which would have accrued at the note rate on the guaranteed loan will not be guaranteed by the Agency. The lender will structure repayments as established in the loan agreement between the lender and borrower. Ordinarily, such installments will be scheduled for payment as agreed upon by the lender and borrower on terms that reasonably ensure repayment of the loan. However, the first installment to include a repayment of principal may be scheduled for payment after the project is operable and has begun to generate income. Such installment must be due and payable within 3 years from the date of the note and at least annually thereafter. Interest will be due at least annually from the date of the note. Monthly payments will be required except for borrowers with income limited to less frequent intervals.(b)
Term length. The maximum time allowable for final maturity for a guaranteed WW loan will be limited to the useful life of the facility, not to exceed 40 years.(c)
Balloon payments. The principal balance should be properly amortized within the prescribed loan maturity. Balloon payments at the end of the loan are prohibited.§§ 1779.35-1779.36 [Reserved] § 1779.37 Insurance and fidelity bonds. The lender must provide evidence that the borrower has adequate insurance and fidelity bond coverage by loan closing or start of construction, whichever occurs first. Adequate coverage must be maintained for the life of the loan and is subject to Agency review and approval.
§§ 1779.38-1779.41 [Reserved] § 1779.42 Design and construction requirements. The lender will provide the Agency with a written certification at the end of construction that all funds were utilized for authorized purposes. The borrower and the lender will authorize designs and plans based upon the preliminary architectural and engineering reports or plans approved by the lender and concurred in by the Agency. The borrower will take into consideration any lender or Agency comments when the facility is being designed.
(a)
Architectural and engineering practices. All project facilities must be designed utilizing accepted architectural and engineering practices and must conform to applicable Federal, State, and local codes and requirements. The lender must ensure that the planned project will be completed within the available funds and, once completed, will be suitable for the borrower's needs.(b)
Construction monitoring. The lender will monitor the progress of construction and undertake the reviews and inspections necessary to ensure that construction proceeds in accordance with the approved plans, specifications, and contract documents and that funds are used for eligible project costs. The lender must expeditiously report any problems in project development to the Agency.(c)
Equal employment opportunities. For all construction contracts in excess of $10,000, the contractor must comply with Executive Order 11246 (30 FR 12319, 3 CFR, 1964-1965 Comp., p. 339) entitled “Equal Employment Opportunity” as amended and as supplemented by applicable Department of Labor regulations (41 CFR part 60-1). The borrower and lender are responsible for ensuring that the contractor complies with these requirements.(d)
Americans with Disabilities Act. WW loans which involve the construction of, or addition to, facilities that accommodate the public and commercial facilities as defined by the Americans with Disabilities Act (42 U.S.C. 12181—et seq. ) must comply with that Act. The lender and borrower are responsible for compliance.(e)
Administrative. When the Agency reviews the preliminary architectural and engineering reports or plans, they must also consider all applicable Federal laws such as the seismic requirements of Executive Order 12699 (55 FR 835, 3 CFR, 1990 Comp., p. 269), the debarment requirements of 7 CFR part 3017, and the Copeland Anti-Kickback Act (18 U.S.C. 874).§ 1779.43 Other Federal, State, and local requirements. In addition to the specific requirements of this part and beginning on the date of issuance of the Loan Note Guarantee, proposals for facilities financed in whole or in part with a loan guaranteed by the Agency will be coordinated with all appropriate Federal, State, and local agencies. Borrowers and lenders will be required to comply with any Federal, State, or local laws or regulatory commission rules which are in existence and which affect the project including, but not limited to:
(a) Applicant's authority to design, construct, develop, operate, and maintain the proposed facilities;
(b) Borrowing money, giving security, and raising revenues for repayment;
(c) Land use zoning;
(d) Health, safety, and sanitation standards as well as design and installation standards; and
(e) Protection of the environment and consumer affairs.
§§ 1779.44-1779.46 [Reserved] § 1779.47 Economic feasibility requirements. All projects financed under the provisions of this section must be based on taxes, assessments, revenues, fees, or other sources of revenues in an amount sufficient to provide for facility operation and maintenance, a reasonable reserve, and debt payment. The lender is responsible for determining the credit quality and economic feasibility of the proposed loan and must address all elements of the credit quality in a written financial feasibility analysis which includes adequacy of equity, cash flow, security, history, and management capabilities. Financial feasibility reports must take into consideration any interest rate adjustment which may be instituted under the terms of the note. The lender's financial credit analysis may also serve as the feasibility analysis when sufficient evidence is included to determine economic feasibility as well as financial viability. The borrower's consulting engineer may complete the financial feasibility analysis for WW systems. If the facility is used by businesses and the success or failure of the facility is dependent on individual businesses, then the economic viability of those businesses must be assessed.
(a)
Exceptions. The Agency loan approval official may exempt the lender from the requirement for an independent financial feasibility report (when requested by the borrower and the lender) provided the approval official determines that the financial feasibility analysis prepared by the borrower fairly represents the financialfeasibility of the facility and the financial feasibility analysis contains an accurate projection of the usage, revenues, and expenses of the facility. (b)
Insufficient information. When the lender or Agency has insufficient information to determine the borrower's repayment ability, an independent feasibility analysis is required.§ 1779.48 Collateral. (a)
Lender responsibility. The lender is responsible for obtaining and maintaining proper and adequate collateral to protect the interest of the lender, the holder, and the Government.(b)
Type of collateral. Collateral must be of such a nature that repayment of the loan is reasonably ensured when considered with the integrity and ability of project management, soundness of the project, and the borrower's prospective earnings. The collateral may include, but is not limited to, the following: General obligation bonds, revenue bonds, pledge of taxes or assessments, assignment of facility revenue, land, easements, rights-of-way, water rights, buildings, machinery, equipment, accounts receivable, contracts, cash, or other accounts or assignments of leases or leasehold interest.(c)
Separate collateral. All collateral must secure the entire loan. The lender will not take separate security to secure only the unguaranteed portion of the loan. The lender will not require compensating balances or certificates of deposit as a means of eliminating the lender's exposure on the unguaranteed portion of the loan.§§ 1779.49-1779.51 [Reserved] § 1779.52 Processing. (a)
Preapplications. (1) The preapplication package may be submitted either alone or the necessary information may be submitted simultaneously with the application. The preapplication package will contain:(i) An Application for Federal Assistance on a form provided by the Agency (available in any Agency office);
(ii) State intergovernmental or other type review comments and recommendations for the borrower's project (clearinghouse comments, if applicable);
(iii) Supporting documentation necessary to make an eligibility determination such as financial statements, audits, copies of organizational documents, or existing debt instruments; and
(iv) Documentation of lender eligibility in accordance with § 1779.27.
(2) If the Agency determines that the project may meet requirements and is likely to be funded, the lender must submit a complete application if it has not previously submitted one.
(b)
Applications. Contents of application package:(1) Application for Loan and Guarantee on a form prescribed by the Agency (available in any Agency office);
(2) Proposed loan agreement;
(3) Environmental Report. (See RUS Bulletin 1794A-602; this document is available in any Agency State Office or online at http://www.usda.gov/rus/water/ees/index.htm);
(4) Preliminary architectural or engineering report (PER);
(5) Cost estimates;
(6) Appraisal reports (as appropriate);
(7) Credit reports (as appropriate);
(8) Financial feasibility analysis and report (as appropriate) if not included in PER; and
(9) Any additional information required.
§ 1779.53 Evaluation of application. If the Agency determines that the borrower is eligible, the proposed loan is for an eligible purpose, there is reasonable assurance of repayment ability, sufficient collateral and equity exists, the proposed loan complies with all applicable statutes and regulations, the environmental impact analyses is complete, and adequate funds are available, the Agency will provide the lender and the borrower with the Conditional Commitment for Guarantee, listing all conditions for the guarantee. Applicable requirements will include the following:
(a) Approved use of guaranteed loan funds (source and use of funds);
(b) Rates and terms of the loan;
(c) Scheduling of payments;
(d) Number of customers;
(e) Security and lien priority;
(f) Appraisals;
(g) Insurance and bonding;
(h) Financial reporting;
(i) Equal opportunity and nondiscrimination;
(j) Mitigation measures for environmental issues (if necessary);
(k) Americans with Disabilities Act;
(l) By-laws and articles of incorporation changes; and
(m) Other requirements necessary to protect the Government.
§§ 1779.54-1779.58 [Reserved] § 1779.59 Review of requirements. (a)
Lender and borrower. The lender and borrower must complete and sign the Acceptance of Conditions and return a copy to the Agency as soon as possible. Notwithstanding the preceding sentence, if certain conditions cannot be met, the lender and borrower may propose alternate conditions for Agency consideration.(b)
Cancellation. If the lender decides at any time after receiving a Conditional Commitment for Guarantee that it no longer wants a guarantee, the lender must immediately advise the Agency of the cancellation.(c)
Modifications. The lender agrees that once the Conditional Commitment for Guarantee is issued and accepted by the lender and borrower, it will not be modified as to the scope of the project, overall facility concept, project purpose, use of proceeds, or other terms and conditions.§§ 1779.60-1779.62 [Reserved] § 1779.63 Conditions precedent to issuance of the Loan Note Guarantee. The Loan Note Guarantee will not be issued until:
(a) The lender certifies that:
(1) No changes have been made in the lender's loan conditions and requirements since the issuance of the Conditional Commitment for Guarantee except those approved in the interim by the Agency in writing.
(2) All planned property acquisition has been completed and all development has been substantially completed in accordance with plans, specifications, and applicable building codes. No costs have exceeded the amounts approved by the lender and the Agency.
(3) Required insurance is in effect.
(4) The loan has been properly closed and the required security instruments have been obtained on any after-acquired property that cannot be covered initially under State statutory provisions.
(5) The borrower has marketable title to the collateral then owned by the borrower, subject to the instrument securing the loan to be guaranteed and subject to any other exceptions approved, in writing, by the Agency.
(6) When required, the entire amount of the loan for working capital has been disbursed except in cases where the Agency has approved disbursement over an extended time.
(7) All other requirements of the Conditional Commitment for Guarantee have been met.
(8) Lien priorities are consistent with requirements of the Conditional Commitment for Guarantee.
(9) The loan proceeds have been disbursed for purposes and in amounts consistent with the Conditional Commitment for Guarantee and as specified on the application for the guaranteed loan. A copy of a detailed statement by the lender detailing the use of loan funds will be attached to support this certification.
(10) There has been no substantive adverse change in the borrower's financial condition nor any other adverse change in the borrower during the period of time from the Agency's issuance of the Conditional Commitment for Guarantee to issuance of the Loan Note Guarantee. The lender's certification must address all adverse changes of the borrower and the guarantors. For purposes of this paragraph (a)(10), the term borrower includes any parent, affiliate, or subsidiary of the borrower.
(11) All Federal, State, and local design and construction requirements have been met.
(12) The lender understands and will meet the requirements of the Debt Collection Act (31 U.S.C. Chapter 37).
(13) The lender would not make the loan without an Agency guarantee.
(b) The lender has executed and delivered the Lender's Agreement and closing report for the guaranteed loan
along with the appropriate guarantee fee. (c) The lender has advised the Agency of plans to sell or assign any part of the loan as provided in the Lender's Agreement.
(d) Where applicable, the lender must certify that the borrower has obtained:
(1) A legal opinion relative to the title to rights-of-way and easements. Lenders are responsible for ensuring that borrowers have obtained valid, continuous, and adequate rights-of-way and easements needed for the construction, operation, and maintenance of a facility.
(2) A title opinion or title insurance showing ownership of the land and all mortgages or other lien defects, restrictions, or encumbrances, if any. It is the responsibility of the lender to ensure that the borrower has obtained and recorded such releases, consents, or subordinations to such property rights from holders of outstanding liens or other instruments as may be necessary for the construction, operation, and maintenance of the facility and to provide the required security. For example, when a site is for major structures and the lender and borrower are able to obtain only a right-of-way or easement on such a site rather than a fee simple title, such a title opinion must be requested.
(e) If the Loan Note Guarantee cannot be issued before the Conditional Commitment expires, the lender must submit a written request for an extension of the expiration date. The lender must document and certify to paragraph (a)(1) and (a)(11) of this section specifically identifying any modifications.
(f) Coincident with, or immediately after, loan closing, the lender will contact the Agency and provide those documents and certifications required in this section. For loans to public bodies, lenders may require an opinion from recognized bond counsel regarding the adequacy of the preparation and issuance of the debt instruments. Only when the Agency is satisfied that all conditions for the guarantee have been met will the Loan Note Guarantee be executed.
§ 1779.64 Issuance of Lender's Agreement, Loan Note Guarantee, and Assignment Guarantee Agreement. (a)
Lender's Agreement. If the Agency finds that all requirements have been met, the lender and the Agency will execute the Lender's Agreement. The original will be retained by the Agency and a signed duplicate original will be retained by the lender. A separate Lender's Agreement must be executed for each loan to be guaranteed by the Agency.(b)
Loan Note Guarantee. (1) Upon receipt of the executed Lender's Agreement and after all requirements have been met, the Agency will execute the Loan Note Guarantee. All originals of the Loan Note Guarantee will be provided to the lender and attached to the note.(2) If the lender has selected the multi-note system, a Loan Note Guarantee will be prepared and attached to each note the borrower issues. All the notes will be listed on the Loan Note Guarantee. Not more than ten notes will be issued for the guaranteed portion (unless the Agency and borrower agree otherwise) and one note issued for the unguaranteed portion.
(c)
Assignment of Guarantee. In the event the lender assigns the guaranteed portion of the loan to a holder, the lender, holder, and Agency will execute an Agency prescribed Assignment Guarantee Agreement.(d)
Failure to meet conditions. If the Agency determines that it cannot execute the Loan Note Guarantee because all requirements have not been met, the lender will have a reasonable period within which to satisfy the objections. If the lender satisfies the objections within the time allowed, the guarantee will be issued.(e)
Loan closing report. The lender will prepare and deliver a guaranteed loan closing report for each loan to be guaranteed and a guarantee fee to the Agency in return for the Loan Note Guarantee.§ 1779.65 Lender's sale or assignment of the guaranteed portion of loan. The lender may retain all of the guaranteed loan. The lender must not sell or participate any amount of the guaranteed or non-guaranteed portion
of the loan to the borrower or to members of the borrower's immediate families, the borrower's officers, directors, stockholders, other owners, or a subsidiary or affiliate. Disposition of the guaranteed portion of a loan may not be made prior to full disbursement, completion of construction, and acquisition of real estate and equipment without the prior written approval of the Agency. If the lender desires to market all or part of the guaranteed portion of the loan at, or subsequent to, loan closing, the loan must not be in default. (a)
Assignment. Any sale or assignment by the lender of the guaranteed portion of the loan must be accomplished in accordance with the conditions in the Lender's Agreement.(b)
Participation. The lender may obtain participation in the loan under its normal operating procedures.(c)
Minimum retention. The lender is required to hold in its own portfolio or retain a minimum of 5 percent of the total loan amount. This amount must be of the non-guaranteed portion of the loan and cannot be participated to another. The lender may sell the remaining amount of the non-guaranteed portion of the loan only through participation.§§ 1779.66-1779.68 [Reserved] § 1779.69 Loan servicing. (a)
Lender responsibilities. The lender is responsible for servicing the entire loan in accordance with the lender's loan agreement. The unguaranteed portion of the loan will not be paid first nor given any preference or priority over the guaranteed portion of the loan. The lender is responsible for taking all servicing actions that a prudent lender would perform in servicing a portfolio of loans that are not guaranteed. This responsibility includes, but is not limited to, the collection of payments; obtaining compliance with the covenants and provisions in the note, loan agreement, security instrument, or any supplemental agreements; obtaining and analyzing financial statements; verifying the payment of taxes and insurance premiums; and maintaining liens on collateral. The lender must notify the Agency of any violation of the loan agreement with the borrower within 30 days of such violation.(b)
Financial reports. The lender must obtain the financial statements required by the Loan Agreement. The lender must submit the borrower's annual financial statements to the Agency within 120 days of the end of the borrower's fiscal year. The lender must analyze the financial statements and provide the Agency with a written summary of the lender's analysis and conclusions, including trends, strengths, weaknesses, extraordinary transactions, and other indications of the financial condition of the borrower. Additionally, when applicable, the lender will require an audit in accordance with Office of Management and Budget (OMB) circulars (available in any Agency office).(c)
Delinquent loans. The lender will service delinquent loans in accordance with the Lender's Agreement and reasonable and prudent lending standards.(d)
Loan balances. The lender must report to the Agency the outstanding principal and interest balance on each guaranteed loan semiannually.(e)
Collateral inspections. The lender will inspect the collateral as often as necessary to properly service the loan.§§ 1779.70-1779.72 [Reserved] § 1779.73 Replacement of loss, theft, destruction, mutilation, or defacement of Loan Note Guarantee or Assignment Guarantee Agreement. (a)
Replacement. The Agency may issue a replacement Loan Note Guarantee or Assignment Guarantee Agreement which may have been lost, stolen, destroyed, mutilated, or defaced to the lender or holder upon receipt of a certificate of loss and an indemnity bond in accordance with this section.(b)
Lender responsibilities. When a Loan Note Guarantee or Assignment Guarantee Agreement is lost, stolen, destroyed, mutilated, or defaced while in the custody of the lender or holder, the lender will coordinate the activities of the party who seeks the replacement documents and will submit the required documents to the Agency for processing. The requirements for replacement are as follows:(1) A certificate of loss properly notarized which includes:
(i) Legal name and present address of either the lender or the holder who is requesting the replacement forms;
(ii) Legal name and address of the lender of record;
(iii) Capacity of person certifying;
(iv) Full identification of the Loan Note Guarantee or Assignment Guarantee Agreement, including the name of the borrower, Agency case number, date of the Loan Note Guarantee, Assignment Guarantee Agreement, face amount of the evidence of debt purchased, date of evidence of debt, present balance of the loan, percentages of guarantee and, if Assignment Guarantee Agreement, the original named holder and the percentage of the guaranteed portion of the loan assigned to that holder. Any existing parts of the document to be replaced must be attached to the certificate;
(v) A full statement of circumstances of the loss, theft, or destruction of the Loan Note Guarantee or Assignment Guarantee Agreement; and
(vi) The holder shall present evidence demonstrating current ownership of the Loan Note Guarantee and Note or Assignment Guarantee Agreement. If the present holder is not the same as the original holder, a copy of the endorsement of each successive holder in the chain of transfer from the initial holder to present holder must be included. If copies of the endorsement cannot be obtained, best available records of transfer must be presented to the Agency (e.g., order confirmation, canceled checks).
(2) An indemnity bond acceptable to the Agency shall accompany the request for replacement except when the holder is the United States, a Federal Reserve Bank, a Federal Government corporation, a State or Territory, or the District of Columbia.
(3) All indemnity bonds must be issued and payable to the United States of America. The bond shall be in an amount not less than the unpaid principal and interest. The bond shall hold the Government harmless against any claim or demand which might arise or against any damage, loss, costs, or expenses which might be sustained or incurred by reasons of the loss or replacement of the instruments.
§ 1779.74 [Reserved] § 1779.75 Defaults by borrower. (a)
Lender notification to Agency. The lender must notify the Agency when a borrower is 30 days past due on a payment, has not met its responsibilities of providing the required financial statements, or is otherwise in default. The lender will continue to keep the Agency informed on a bimonthly basis until such time as the loan is no longer in default. If a monetary default exceeds 60 days, the lender will arrange a meeting with the borrower to resolve the default. The lender will provide a summary of the meeting and any decisions or actions agreed upon.(b)
Servicing options. In considering servicing options, the prospects for providing a permanent cure without adversely affecting the risks to the Agency and the lender must be the paramount objective. Temporary curative actions (such as payment deferments or collateral subordination) must strengthen the loan and be in the best financial interest of the lender and the Agency. Some of these actions may require concurrence of the holder.(c)
Multi-note. If the loan was closed with the multi-note option, the lender may need to possess all notes to take some servicing actions. In those situations when the Agency is holder of some of the notes, the Agency may endorse the notes back to the lender, provided a proper receipt is received from the lender which defines the reason for the transfer. Under no circumstances will the Agency endorse the original Loan Note Guarantee to the lender.§§ 1779.76-1779.77 [Reserved] § 1779.78 Repurchase of loan. (a)
Repurchase by lender. The lender has the option to repurchase the loan from a holder within 30 days of written demand from the holder when the borrower is in default not less than 60 days on payment. The repurchase will be for an amount equal to the unpaid guaranteed portion of principal and accrued interest less the lender's servicing fee. The guarantee does not cover the noteinterest to the holder on the guaranteed loan accruing after 90 days from the date of the demand letter to the lender. The holder will concurrently send a copy of the demand to the Agency. The lender will accept an assignment without recourse from the holder upon repurchase. The lender is encouraged to repurchase the loan to facilitate the accounting of funds, resolve the problem, and permit the borrower to cure the default, where reasonable. The lender will notify the holder and the Agency of its decision within 30 days of receipt of demand from the holder. (b)
Agency repurchase. (1) If the lender does not repurchase as provided in paragraph (a) of this section, the Agency will purchase from the holder the unpaid principal balance of the guaranteed portion together with accrued interest to date of repurchase (less the lender's servicing fee) within 30 days after a specific written demand directed to the Agency. The copy of the demand on the lender is not sufficient. The guarantee will not cover the note interest to the holder on the guaranteed loan accruing after 90 days from the date of the original demand letter. The lender shall not charge the Agency any servicing fees nor are any such fees collectible from the Agency.(2) The holder's demand to the Agency must include a copy of the written demand made upon the lender. The holder or duly authorized agent must also include evidence of the right to require payment from the Agency. Such evidence will consist of either the original of the Loan Note Guarantee properly endorsed to the Agency or the original of the Assignment Guarantee Agreement properly assigned to the Agency without recourse including all rights, title, and interest in the loan. The Agency will be subrogated to all rights of the holder. The holder must include in the demand the amount due including unpaid principal, unpaid interest to date of demand, and interest subsequently accruing from the date of demand to the proposed payment date. Unless otherwise agreed to by the Agency, such proposed payment will not be later than 30 days from the date of demand.
(3) The lender must promptly provide the Agency with the information necessary for the Agency's determination of the appropriate amount due the holder upon the Agency's notification to the lender of the holder's demand for payment. This information must be certified by an authorized officer of the lender. Any discrepancy between the amount claimed by the holder and the information submitted by the lender must be resolved before payment will be approved. The Agency will notify both parties and such conflict will suspend the running of the 30-day payment requirement.
(4) Any purchase by the Agency does not change, alter, or modify any of the lender's obligations to the Agency arising from the loan or guarantee nor does it waive any of the Agency's rights against the lender. The Agency may set off against the lender all rights inuring to the Agency as the holder of the instrument against the Agency's obligation to the lender under the Loan Note Guarantee.
(c)
Repurchase for servicing. When the lender determines that repurchase of the guaranteed portion of the loan is necessary to service the loan, the holder must sell the guaranteed portion to the lender for the unpaid principal and interest balance (less the lender's servicing fee). The guarantee does not cover interest accruing after 90 days from the date the lender's or Agency's letter requesting the holder to tender its guaranteed portion. The lender must not repurchase from the holder for arbitrage purposes to further its own financial gain. Any repurchase must be made only after the lender obtains the Agency written approval. If the lender does not repurchase the portion from the holder, the Agency may, at its option, purchase such guaranteed portion for servicing purposes.§ 1779.79 [Reserved] § 1779.80 Interest rate changes after loan closing. (a)
General. Subject to the restrictions below, the borrower, lender, and holder (if any) may collectively effect a permanent reduction in the interest rate on the guaranteed loan at any time during the life of the loan on writtenagreement by all of the applicable parties. After such a permanent reduction, the Loan Note Guarantee will only cover losses of interest at the reduced interest rate. The Agency must be notified by the lender, in writing, within 10 calendar days of the change. When the Agency is a holder, it will concur only when it is demonstrated that the change is more viable than liquidation and that the Government's financial interests are not adversely affected. Factors which will be considered in making such determination are the Government's cost of borrowing money and the project's enhancement of rural development. The monetary recovery must be greater than the liquidation recovery, and a financial feasibility analysis must show the project's continued viability. (1) Fixed rates cannot be changed to variable rates to reduce the interest rate to the borrower unless the variable rate has a ceiling which is less than the original fixed rate.
(2) Variable rates can be changed to a lower fixed rate. In a final loss settlement when qualifying rate changes are made with the required written agreements and notification, the interest will be calculated for the periods the given rates were in effect. The lender must maintain records which adequately document the accrued interest claimed.
(3) The lender is responsible for the legal documentation of interest rate changes. However, the lender may not issue a new note.
(b)
Increases. No increases in interest rates will be permitted under the loan guarantee except the normal fluctuations in approved variable interest rate loans.§ 1779.81 Liquidation. Liquidation will occur when the lender concludes that liquidation of the guaranteed loan is necessary because of default or third party actions that the borrower cannot, or will not, cure or eliminate within a reasonable period of time and the Agency concurs with the lender; or the Agency, at any time, independently concludes that liquidation is necessary. The lender will proceed as expeditiously as possible, including giving any notices or taking any legal actions required by the security instruments.
(a)
General. If a lender has made a loan guaranteed by the Agency under previous regulations, the lender has the option to liquidate the loan under the provisions of this part or under the provisions of previous regulations. The lender will notify the Agency in writing within 10 days after its decision to liquidate, which regulatory provisions it chooses to use. The lender may not choose some provisions of one regulation and other provisions of the other regulation.(b)
Acquiring property titles. If a lender acquires title to property, the Agency may elect to permit the lender the option of calculating the final loss settlement using the net proceeds received at the time of the ultimate disposition of the property. The lender must submit to the Agency a written request to use this option within 15 days of acquiring title and the Agency must agree, in writing, prior to the lender submitting any request for estimated loss payment.(c)
Liquidation plan. The lender will (within 30 days after a decision to liquidate) submit to the Agency, in writing, a proposed, detailed liquidation plan. Upon approval by the Agency of the liquidation plan, the lender will commence liquidation. The lender's liquidation plan must include, but is not limited to, the following:(1) Such proof as the Agency requires to establish the lender's ownership of the guaranteed loan notes and related security instruments, a copy of the payment ledger or other documentation which reflects the outstanding loan balance and accrued interest to date, and the method of computing the interest;
(2) A complete list of collateral;
(3) The recommended liquidation methods for making the maximum collection possible on the indebtedness and the justification for such methods, including the recommended action for acquiring and disposing of all collateral;
(4) Necessary steps for preservation of the collateral;
(5) Copies of the borrower's latest available financial statements;
(6) An itemized list of estimated liquidation expenses expected to be incurred and justification for each expense;
(7) A schedule to periodically report to the Agency on the progress of the liquidation;
(8) Estimated protective advance amounts with justification;
(9) Proposed protective bid amounts on collateral to be sold at auction and a discussion of how the amounts were determined;
(10) If a voluntary conveyance is considered, the proposed amount to be credited to the guaranteed debt;
(11) Legal opinions, as needed; and
(12) If the outstanding balance of principal and interest is less than $250,000, the lender will obtain an estimate of fair market and potential liquidation value of the collateral. If the outstanding balance of principal and interest is $250,000 or more, the lender will obtain an independent appraisal report on all collateral securing the loan which will reflect the fair market value and potential liquidation value. The independent appraiser's fee will be shared equally by the Agency and the lender.
(d)
Partial liquidation plan. If actions are necessary to immediately preserve and protect the collateral, a partial liquidation plan may be submitted and, when approved, must be followed by a complete liquidation plan prepared by the lender.(e)
Disposition of collateral. Disposition of collateral acquired by the lender must be approved, in writing, by the Agency when:(1) The lender's cost to acquire the collateral of a borrower exceeds the potential recovery value of the security and the lender proposes abandoning the collateral in lieu of liquidation; or
(2) The acquired collateral is to be sold to the borrower, borrower's stockholders or officers, or the lender or lender's stockholders or officers.
(f)
Agency liquidation. The Agency will liquidate at its option only when it is a holder and there is reason to believe the lender is not likely to initiate liquidation efforts that will result in maximum recovery. When the Agency liquidates, proceeds derived from the sale of the collateral will be applied first to reasonable liquidation expenses and second to the guaranteed portion of the loan.(g)
Final loss payment. Final loss payments will be made only after all collateral has been properly accounted for and liquidation expenses are determined to be reasonable and within approved limits. Any estimated loss payments made to the lender will be credited against the final loss on the guaranteed loan. The amount of an estimated loss payment must be credited as a deduction from the principal balance of the loan.§ 1779.82 [Reserved] § 1779.83 Protective advances. Protective advances can only be added to the loan account for purposes of requirements to preserve the value of the security. Protective advances constitute an indebtedness of the borrower to the lender and must be secured by collateral to the same extent as principal and interest. Protective advances include, but are not limited to, advances made for taxes, annual assessments, ground rent, hazard and flood insurance premiums affecting the collateral (including any other expenses necessary to protect the collateral). Attorney fees are not a protective advance.
(a)
Agency approval. The Agency must approve, in writing, all protective advances on loans within its loan approval authority which exceed a total cumulative advance amount of $5,000 to the same borrower. Protective advances must be reasonable when associated with the value of the collateral being preserved.(b)
Preserving collateral. When considering protective advances, sound judgment must be exercised in determining that the additional funds advanced will actually preserve collateral and recovery is actually enhanced by making the advance.§ 1779.84 Additional loans or advances. The lender will not make additional expenditures or new loans to the borrower without first obtaining the written approval of the Agency even though such expenditures or loans will not be guaranteed.
§ 1779.85 Bankruptcy. (a)
Calculating losses. Report of Loss form (available in any Agency office) will be used for calculating estimated and final loss determinations.(b)
Lender responsibility. The lender is responsible for protecting the guaranteed loan debt and all the collateral securing it in bankruptcy proceedings. These responsibilities include, but are not limited to, the following:(1) Filing a proof of claim, where necessary, and all necessary papers and pleadings;
(2) Attending and, where necessary, participating in meetings of the creditors and all court proceedings;
(3) Immediately seeking adequate protection of the collateral if it is subject to being used by the trustee in bankruptcy or the debtor in possession;
(4) Where appropriate, seeking involuntary conversion of a pending chapter 11 case to a liquidation proceeding or seeking dismissal of the proceedings; and
(5) Keeping the Agency adequately and regularly informed, in writing, of all aspects of the proceedings.
(c)
Appraisals. In a chapter 9 or chapter 11 reorganization, the lender must obtain an independent appraisal of the collateral if the Agency believes an independent appraisal is necessary. The Agency and the lender will share the appraisal fee equally.(d)
Liquidation expenses. Only expenses authorized by the court of chapter 9 plans or chapter 11 reorganizations, or chapters 11 or 7 liquidation (unless the liquidation is by the lender), may be deducted from the collateral proceeds.(e)
Repurchase from the holder. The Agency or the lender, with the approval of the Agency, may initiate the repurchase of the unpaid guaranteed portion of the loan from the holder. If the lender is the holder, an estimated loss payment may be filed at the initiation of a chapter 7 proceeding or after a chapter 9 or chapter 11 proceeding becomes a liquidation proceeding. Any loss payment on loans in bankruptcy must be approved by the Agency.(f)
Chapter 11 bankruptcy. If a borrower has filed for protection under chapters 9 or 11 of the United States Code for a reorganization (but not chapter 13) and all or a portion of the debt has been discharged, the lender may request an estimated loss payment of the guaranteed portion of the accrued interest and principal discharged by the court. If the court approves revisions to the chapter 9 plan or chapter 11 reorganization plan, subsequent estimated loss payments may be requested in accordance with the court approved changes. Once the reorganization plan has been satisfactorily completed, the lender is responsible for submitting the documentation necessary for the Agency to review and adjust the estimated loss claim to reflect any actual discharge of principal and interest and to reimburse the lender for any court ordered interest-rate reduction under the terms of the reorganization plan.(g)
Agency approval of estimated liquidation expenses. The Agency must approve, in advance and in writing, the lender's estimated liquidation expenses of collateral in a liquidation if the liquidation is performed by the lender. These expenses must be reasonable and customary and not include in-house expenses of the lender.(h)
Reconciliation. In the event that the estimated loss payment exceeds the actual loss, the lender will reimburse the Agency the amount in excess of the actual loss plus interest at the note rate from the date of the estimated loss payment.§§ 1779.86-1779.87 [Reserved] § 1779.88 Transfers and assumptions. (a)
General. For all transfers and assumptions, the lender must concur in the plans for disposition of funds in the transferor's debt service, reserve, and operation and maintenance account. The Agency will approve, in writing, transfers and assumptions of loans to transferees who will continue the original purpose of the guaranteed loan subject to the following applicable provisions:(1) When the transaction is to a member of the borrower's organization, it will be at an amount which will not result in a loss to the lender.
(2) Transfers to eligible borrowers will receive preference if recovery to the lender from the sale price is not
less than it would be if the transfer was to an ineligible borrower. (3) The present borrower is unable or unwilling to accomplish the objectives of the guaranteed loan, and the transfer will be to the lender's and Agency's advantage.
(4) The transferee will assume an amount at least equal to either the present market value or the debt, whichever is less.
(b)
Transfers to an eligible borrower. (1) The total indebtedness may be transferred to an eligible borrower on the same terms.(2) The total indebtedness may be transferred to another eligible borrower on different terms not to exceed those terms for which an initial guaranteed loan can be made.
(3) Less than the total indebtedness may be transferred to another eligible borrower on the same or different terms and the pro rata share of any eligible loss paid to the lender.
(4) A guaranteed loan for which the transferee is eligible may be made in connection with a transfer subject to the policies and procedures governing the type of loan being made.
(5) If the transferor is to receive a payment for the equity, the total debt must be assumed.
(c)
Ineligible borrower. Transfers to ineligible borrowers are considered only when needed as a method for servicing problem cases when an eligible transferee is not available. Transfers should not be considered as a means by which members can obtain equity or as a method of providing a source of easy credit for purchasers. Transfers must meet the following requirements:(1) All transfers to ineligible borrowers will include a one-time nonrefundable transfer fee to the Agency of no more than 1 percent. Transfer fees will be collected, and payments applied, in accordance with paragraph (d) of this section.
(2) For all loans covered by this part, the Agency may approve a transfer of indebtedness to, and assumption of, a loan by a transferee who does not meet the eligibility requirements for the kind of loan being assumed when the ineligible borrower will:
(i) Make a significant down payment, and
(ii) Agree to pay the remaining balance within not more than 15 years. Installments will be at least equal to the amount amortized over a period not greater than the remaining life of the debt being transferred, and the balance will be due the fifteenth year.
(3) Interest rates to ineligible transferees will be the rate specified in the note of the transferor or the rates customarily charged borrowers in similar circumstances in the ordinary course of business and are subject to Agency review and approval. The rates may be either fixed or variable.
(i) Transferees must have the ability to repay as determined by the lender the debt according to the Assumption Agreement and must have the legal authority to enter into the contract. The transferee will submit a current balance sheet to the lender. The lender will obtain and analyze the credit history of the transferee.
(ii) The transferor may receive equity payments only when the full amount of the debt is assumed. However, equity payments will not be made on more favorable terms than those on which the balance of the debt will be paid.
(d)
Transfer fees. Transfer fees are a one-time nonrefundable cost to be collected by the lender at the time of application or proposal.(1) The transfer fees will be a standard fee plus the cost of the appraisal.
(2) The lender will collect and submit the fee to the Agency.
(3) The Agency may waive the transfer fee if it determines that such waiver is in the best interest of the Agency.
(e)
Processing transfers and assumptions. (1) In any transfer and assumption case, the transferor (including any guarantor) may be released from liability by the lender only with prior Agency written concurrence and only when the value of the collateral being transferred is at least equal to the amount of the loan, or part of the loan, being assumed. If the transfer is for less than the entire debt:(i) The Agency must determine that the transferor and any guarantor have no reasonable debt-paying ability considering their assets and income at the time of transfer, and
(ii) The lender must certify that the transferor has cooperated in good faith, used due diligence to maintain the collateral against loss, and has otherwise fulfilled all of the regulations of this part to the best of the borrower's ability.
(2) The lender will make, in all cases, a complete credit analysis to determine viability of the project (subject to the Agency review and approval) including any requirement for deposit in an escrow account as security to meet the determined equity requirements for the project.
(3) The lender will confirm that the transaction can be properly transferred and the conveyance instruments will be filed, registered, or recorded as appropriate and legally permissible.
(4) The assumption will be made on the lender's form of Assumption Agreement and will contain the Agency case number of the transferor and transferee.
(5) Loan terms cannot be changed by the Assumption Agreement unless previously approved in writing by the Agency with the concurrence of holder and the transferor (including guarantor if it has not been released from personal liability). Any new loan terms cannot exceed those authorized in this part. The lender's request will be supported by:
(i) An explanation of the reasons for the proposed change in the loan terms, and
(ii) Certification that the lien position securing the guaranteed loan will be maintained or improved, and proper hazard insurance will be continued in effect.
(6) In the case of a transfer and assumption, it is the lender's responsibility to see that all such transfers and assumptions will be noted on all originals of the Loan Note Guarantee. The lender will provide the Agency a copy of the Transfer and Assumption Agreement.
(7) If a loss should occur upon a complete transfer of assets and assumption for less than the full amount of the debt and the transferor-debtor (including personal guarantor) is released from personal liability (as provided in paragraph (e)(1)(i) of this section), the lender (if holding the guaranteed portion) may file an estimated Report of Loss to recover their pro rata share of the actual loss at that time. Approved protective advances and accrued interest made during the arrangement of a transfer and assumption, if not assumed by the transferee, will be entered on the estimated Report of Loss.
§ 1779.89 Mergers. (a)
General. The Agency may approve mergers or consolidations (herein referred to as “mergers”) when the resulting organization will be eligible for an Agency guaranteed loan and assumes all the liabilities and acquires all the assets of the merged borrower. Mergers may be approved when:(1) The merger is in the best interest of the Government and the merging borrower;
(2) The resulting borrower can meet all required conditions as contained in specific loan note agreements; and
(3) All property can be legally transferred to the resulting borrower.
(b)
Distinguishing mergers from transfers and assumptions. Mergers occur when one entity combines with another entity in such a way that the first entity ceases to exist as a separate entity while the other continues. In a consolidation, two or more entities combine to form a new, consolidated entity with the original entity ceasing to exist. Such transactions must be distinguished from transfers and assumptions in which a transferor will not necessarily go out of existence, and the transferee will not always take all the transferor's assets nor assume all the transferor's liabilities.§ 1779.90 Disposition of acquired property. (a)
General. When the lender acquires title to the collateral and the final loss claim is not paid until final disposition, the lender must proceed as quickly as possible to develop a plan to fully protect the collateral, and the lender must dispose of the collateral without delay.(b)
Re-title collateral. Any collateral accepted by the lender must not be titled in the Agency's name in whole or in part. The Agency's position is that of a guarantor relating to losses, not a lender.(c)
Collateral preservation. After acquiring the collateral, the lender must protect the collateral from deterioration (weather, vandalism, etc.). Hazard insurance in an amount necessary to cover the fair market value of the collateral must be maintained.(d)
Collateral sale. (1) The lender will prepare and submit to the Agency a plan on the best method of sale, keeping in mind any prospective purchasers. The Agency must approve the plan in writing. If an existing approved liquidation plan addresses the disposition of acquired property, no further review is required unless modification of the plan is needed.(2) Anytime there is a case when the conversion of collateral to cash can reasonably be expected to result in a negative net recovery amount, abandonment of the collateral should be considered. The Agency must approve abandonment in writing.
§§ 1779.91-1779.93 [Reserved] § 1779.94 Determination and payment of loss. In all liquidation cases, final settlement will be made with the lender after the collateral is liquidated. The Agency will have the right to recover losses paid under the guarantee from any liable party.
(a)
General. If the lender takes title to collateral, any loss will be based on the collateral value at the time the lender obtains title.(b)
Loss calculations. The Report of Loss form (available in any Agency office) will be used for calculations of all estimated and final loss determinations. Estimated loss payments may only be approved after the lender has submitted a liquidation plan approved by the Agency.(c)
Estimated loss payments. When the lender is conducting the liquidation and owns any of the guaranteed portion of the loan, it may request an estimated loss payment by submitting an estimate of loss that will occur in connection with liquidation of the loan. An estimated loss payment may be approved after the Agency has approved the liquidation plan.(1) The lender will prepare and submit a Report of Loss using the appraised value in lieu of amount received from sale of collateral.
(2) The estimated loss payment shall be calculated as of the date of such payment. The total amount of the loss payment remitted by the Agency will be applied by the lender on the guaranteed portion of the loan debt. Such application does not release the borrower from liability. At the time of final loss settlement, the lender may notify the borrower that the loss payment has been so applied.
(3) After liquidation has been completed, a final Report of Loss will be submitted by the lender to the Agency.
(d)
Final report of loss. In all cases, a final Report of Loss must be submitted to the Agency. Before Agency approval of any final loss report, the lender must account for all funds obtained, disposition of the collateral, all costs incurred, and any other information necessary for the successful completion of liquidation. Upon receipt of the final accounting and Report of Loss, the Agency may conduct an audit and will determine the final loss. The lender will make its records available to, and otherwise assist, the Agency in making any audit it requires of the Report of Loss. The documentation accompanying the Report of Loss must support the loss claimed.(1) The lender must document and show that all of the collateral has been accounted for and properly liquidated and that liquidation proceeds have been properly accounted for and applied correctly on the loan. The Agency must be satisfied that the lender has accomplished this in the manner contained herein and that the lender has maximized the collections in conducting the liquidation.
(2) The lender must show a breakdown on any protective advance amount as to the payee, purpose of the expenditure, date paid, evidence that the amount expended was proper, and that the amount was actually paid.
(3) The lender must show a breakdown of liquidation expenses as to the payee, purpose of the expenditure, date paid, evidence that the amount expended was proper, and that the amount was actually paid.
(4) Accrued interest should be supported by attachments showing how
the amount was accrued by the lender. A copy of the promissory note and ledger will be attached. If the interest rate was a variable rate, the lender must include documentation of changes in the selected base rate and when the changes in the loan rate became effective. (e)
Liquidation income. Any net rental or other income that has been received by the lender from the collateral will be applied on the guaranteed loan debt.(f)
Liquidation costs. Certain reasonable liquidation costs will be allowed during the liquidation process. The liquidation costs must be submitted as a part of the liquidation plan. Such costs will be deducted from gross proceeds received from the disposition of collateral unless the costs have been previously determined by the lender (with Agency concurrence) to be protective advances. If changed circumstances after submission of the liquidation plan require a revision of liquidation costs, the lender will obtain the Agency's written concurrence prior to proceeding with the proposed changes. No in-house expenses of the lender will be allowed.(g)
Protective advance losses. In those instances where the lender made authorized protective advances, the lender may claim recovery for the guaranteed portion of any loss of monies advanced as well as interest resulting from such protective advances. These claims shall be included in the final Report of Loss.(h)
Final loss approval. After the final Report of Loss has been tentatively approved:(1) If the actual loss is greater than any estimated loss payment, such loss will be paid by the Agency;
(2) If the actual loss is less than any estimated loss payment, the lender will reimburse the Agency;
(3) If the Agency conducted the liquidation, it will provide an accounting to the lender and will pay the lender in accordance with the Loan Note Guarantee.
(i)
Loss limits. The amount payable by the Agency to the lender cannot exceed the limits contained in the Loan Note Guarantee. If the Agency conducts the liquidation, loss occasioned by accruing interest will be covered by the guarantee only to the date the Agency accepts this responsibility. When the liquidation is conducted by the lender, loss occasioned by accruing interest will be covered to the extent of the guarantee to the date of final settlement provided the lender proceeds expeditiously with the liquidation plan approved by the Agency.§ 1779.95 Future recovery. After a loan has been liquidated and a final loss has been paid by the Agency, any future funds which may be recovered by the lender will be pro-rated between the Agency and the lender in accordance with the guaranteed percentage even if the Loan Note Guarantee has been terminated.
§ 1779.96 Termination of Loan Note Guarantee. The Loan Note Guarantee under this part will terminate automatically:
(a) Upon full payment of the guaranteed loan; or
(b) Upon full payment of any loss obligation or negotiated loss settlement except for future recovery provisions; or
(c) Upon written request from the lender to the Agency, provided that the lender holds all of the guaranteed portion and the original Loan Note Guarantee is returned to the Agency.
§§ 1779.97-1779.99 [Reserved] § 1779.100 OMB control number. The reporting and recordkeeping requirements contained in this part have been approved by the Office of Management and Budget and have been assigned OMB control number 0572-0122.
Pt. 1780 PART 1780—WATER AND WASTE LOANS AND GRANTS Subpart A—General Policies and Requirements Sec. 1780.1 General. 1780.2 Purpose. 1780.3 Definitions and grammatical rules of construction. 1780.4 Availability of forms and regulations. 1780.5 [Reserved] 1780.6 Application information. 1780.7 Eligibility. 1780.8 [Reserved] 1780.9 Eligible loan and grant purposes. 1780.10 Limitations. 1780.11 Service area requirements. 1780.12 [Reserved] 1780.13 Rates and terms. 1780.14 Security. 1780.15 Other Federal, State, and local requirements. 1780.16 [Reserved] 1780.17 Selection priorities and process. 1780.18 Allocation of program funds. 1780.19 Public information. 1780.20-1780.23 [Reserved] 1780.24 Approval authorities. 1780.25 Exception authority. 1780.26-1780.30 [Reserved] Subpart B—Loan and Grant Application Processing 1780.31 General. 1780.32 Timeframes for application processing. 1780.33 Application requirements. 1780.34 [Reserved] 1780.35 Processing office review. 1780.36 Approving official review. 1780.37 Applications determined ineligible. 1780.38 [Reserved] 1780.39 Application processing. 1780.40 [Reserved] 1780.41 Loan or grant approval. 1780.42 Transfer of obligations. 1780.43 [Reserved] 1780.44 Actions prior to loan or grant closing or start of construction, whichever occurs first. 1780.45 Loan and grant closing and delivery of funds. 1780.46 [Reserved] 1780.47 Borrower accounting methods, management reporting and audits. 1780.48 Regional commission grants. 1780.49 Rural or Native Alaskan villages. 1780.50-1780.52 [Reserved] Subpart C—Planning, Designing, Bidding, Contracting, Constructing and Inspections 1780.53 General. 1780.54 Technical services. 1780.55 Preliminary engineering reports and Environmental Reports. 1780.56 [Reserved] 1780.57 Design policies. 1780.58-1780.60 [Reserved] 1780.61 Construction contracts. 1780.62 Utility purchase contracts. 1780.63 Sewage treatment and bulk water sales contracts. 1780.64-1780.66 [Reserved] 1780.67 Performing construction. 1780.68 Owner's contractual responsibility. 1780.69 [Reserved] 1780.70 Owner's procurement regulations. 1780.71 [Reserved] 1780.72 Procurement methods. 1780.73 [Reserved] 1780.74 Contracts awarded prior to applications. 1780.75 Contract provisions. 1780.76 Contract administration. 1780.77-1780.79 [Reserved] Subpart D—Information Pertaining to Preparation of Notes or Bonds and Bond Transcript Documents for Public Body Applicants 1780.80 General. 1780.81 Policies related to use of bond counsel. 1780.82 [Reserved] 1780.83 Bond transcript documents. 1780.84-1780.86 [Reserved] 1780.87 Permanent instruments for Agency loans. 1780.88 [Reserved] 1780.89 Multiple advances of Agency funds using permanent instruments. 1780.90 Multiple advances of Agency funds using temporary debt instruments. 1780.91-1780.93 [Reserved] 1780.94 Minimum bond specifications. 1780.95 Public bidding on bonds. 1780.96-1780.100 [Reserved] Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Source: 62 FR 33478, June 19, 1997, unless otherwise noted.
Subpart A—General Policies and Requirements § 1780.1 General. (a) This part outlines the policies and procedures for making and processing direct loans and grants for water and waste projects. The Rural Utilities Service (RUS) shall cooperate fully with State and local agencies in making loans and grants to assure maximum support to the State strategy for rural development. Agency officials and their staffs shall maintain coordination and liaison with State agency and substate planning districts.
(b) The income data used in this part to determine median household income must be that which most accurately reflects the income of the service area. The median household income of the service area and the nonmetropolitan median household income of the State will be determined from income data from the most recent decennial census of the United States. If there is reason to believe that the census data is not
an accurate representation of the median household income within the area to be served, the reasons will be documented and the applicant may furnish, or the Agency may obtain, additional information regarding such median household income. Information will consist of reliable data from local, regional, State or Federal sources or from a survey conducted by a reliable impartial source. The nonmetropolitan median household income of the State may only be updated on a national basis by the RUS National Office. This will be done only when median household income data for the same year for all Bureau of the Census areas is available from the Bureau of the Census or other reliable sources. Bureau of the Census areas would include areas such as: Counties, County Subdivisions, Cities, Towns, Townships, Boroughs, and other places. (c) RUS debt instruments will require an agreement that if at any time it shall appear to the Government that the borrower is able to refinance the amount of the indebtedness to the Government then outstanding, in whole or in part, by obtaining a loan for such purposes from responsible cooperative or private credit sources, at reasonable rates and terms for loans for similar purposes and periods of time, the borrower will, upon request of the Government, apply for and accept such loan in sufficient amount to repay the Government and will take all such actions as may be required in connection with such loan.
(d) Funds allocated for use under this part are also for the use of Indian tribes within the State, regardless of whether State development strategies include Indian reservations within the State's boundaries. Native Americans residing on such reservations must have equal opportunity to participate in the benefits of these programs as compared with other residents of the State. Such tribes might not be subject to State and local laws or jurisdiction. However, any requirements of this part that affect applicant eligibility, the adequacy of RUS's security, or the adequacy of service to users of the facility and all other requirements of this part must be met.
(e) RUS financial programs must be extended without regard to race, color, religion, sex, national origin, marital status, age, or physical or mental handicap.
(f) Any processing or servicing activity conducted pursuant to this part involving authorized assistance to Agency employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of part 1900 of this title. Applicants for assistance are required to identify any known relationship or association with a RUS employee.
(g) Water and waste facilities will be designed, installed, and operated in accordance with applicable laws which include but are not limited to the Safe Drinking Water Act, Clean Water Act and the Resource Conservation and Recovery Act.
(h) RUS financed facilities will be consistent with any current development plans of State, multijurisdictional areas, counties, or municipalities in which the proposed project is located.
(i) Each RUS financed facility will be in compliance with appropriate State or Federal agency regulations which have control of the appropriation, diversion, storage and use of water and disposal of excess water.
(j) Water and waste applicants must demonstrate that they possess the financial, technical, and managerial capability necessary to consistently comply with pertinent Federal and State laws and requirements. In developing water and waste systems, applicants must consider alternatives of ownership, system design, and the sharing of services.
(k) Applicants should be aware of and comply with other Federal statute requirements including but not limited to:
(1)
Section 504 of the Rehabilitation Act of 1973. Under section 504 of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794et seq. ), no handicapped individual in the United States shall, solely by reason of their handicap, be excluded from participation in, be deniedthe benefits of, or be subjected to discrimination under any program or activity receiving RUS financial assistance; (2)
Civil Rights Act of 1964. All borrowers are subject to, and facilities must be operated in accordance with, title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000det seq. ) and subpart E of part 1901 of this title, particularly as it relates to conducting and reporting of compliance reviews. Instruments of conveyance for loans and/or grants subject to the Act must contain the covenant required by § 1901.202(e) of this title;(3)
The Americans with Disabilities Act (ADA) of 1990. This Act (42 U.S.C. 12101et seq. ) prohibits discrimination on the basis of disability in employment, State and local government services, public transportation, public accommodations, facilities, and telecommunications. Title II of the Act applies to facilities operated by State and local public entities which provides services, programs and activities. Title III of the Act applies to facilities owned, leased, or operated by private entities which accommodate the public; and(4)
Age Discrimination Act of 1975. This Act (42 U.S.C. 6101et seq. ) provides that no person in the United States shall on the basis of age, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.§ 1780.2 Purpose. Provide loan and grant funds for water and waste projects serving the most financially needy communities. Financial assistance should result in reasonable user costs for rural residents, rural businesses, and other rural users.
§ 1780.3 Definitions and grammatical rules of construction. (a)
Definitions. For the purposes of this part:Agency means the Rural Utilities Service and any United States Department of Agriculture (USDA) employee acting on behalf of the Rural Utilities Service in accordance with appropriate delegations of authority.Agency identified target areas means an identified area in the State strategic plan or other plans developed by the Rural Development State Director.Approval official means the USDA official at the State level who has been delegated the authority to approve loans or grants.Equivalent Dwelling Unit (EDU) means the level of service provided to a typical rural residential dwelling.Parity bonds means bonds which have equal standing with other bonds of the same Issuer.Poverty line means the level of income for a family of four, as defined in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 9902(2)).Processing office means the office designated by the State program official to accept and process applications for water and waste disposal assistance.Project means all activity that an applicant is currently undertaking to be financed in whole or part with RUS assistance.Protective advances are payments made by a lender for items such as insurance or taxes in order to preserve and protect the security or the lien or priority of the lien securing the loan.Rural and rural areas means any area not in a city or town with a population in excess of 10,000 inhabitants, according to the latest decennial census of the United States.Rural Development means the mission area of the Under Secretary for Rural Development. Rural Development State and local offices will administer this water and waste program on behalf of the Rural Utilities Service.RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to section 232 of the Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to the Farmer's Home Administration and the Rural Development Administration with respect to certain water and waste disposal loan and grant programs.Service area means the area reasonably expected to be served by the project.Servicing office means the office designated by the State program officialto service water and waste disposal loans and grants. Similar system cost means the average annual EDU user cost of a system within a community having similar economic conditions and being served by the same type of established system. Similar system cost shall include all charges, taxes, and assessments attributable to the system including debt service, reserves and operation and maintenance costs.State program official means the USDA official at the State level who has been delegated the responsibility of administering the water and waste disposal programs under this regulation for a particular State or States.Statewide nonmetropolitan median household income means the median household income of the State's nonmetropolitan counties and portions of metropolitan counties outside of cities, towns or places of 50,000 or more population.(b)
Rules of grammatical construction. Unless the context otherwise indicates, “includes” and “including” are not limiting, and “or” is not exclusive. The terms defined in paragraph (a) of this section include the plural as well as the singular, and the singular as well as the plural.[62 FR 33478, June 19, 1997, as amended at 69 FR 65519, Nov. 15, 2004] § 1780.4 Availability of forms and regulations. Information about the availability of forms, instructions, regulations, bulletins, OMB Circulars, Treasury Circulars, standards, documents and publications cited in this part is available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC 20250-1500.
§ 1780.5 [Reserved] § 1780.6 Application information. (a) The Rural Development State Director in each State will determine the office and staff that will be responsible for delivery of the program (processing office) and designate an approving office. Applications will be accepted by the processing office.
(b) The applicant's governing body should designate one person to act as contact person with the Agency during loan and grant processing. Agency personnel should make every effort to involve the applicant's contact person when meeting with the applicant's professional consultants or agents.
§ 1780.7 Eligibility. Facilities financed by water and waste disposal loans or grants must serve rural areas.
(a)
Eligible applicant. An applicant must be:(1) A public body, such as a municipality, county, district, authority, or other political subdivision of a state, territory or commonwealth;
(2) An organization operated on a not-for-profit basis, such as an association, cooperative, or private corporation. The organization must be an association controlled by a local public body or bodies, or have a broadly based ownership by or membership of people of the local community; or
(3) Indian tribes on Federal and State reservations and other Federally recognized Indian tribes.
(b)
Eligible facilities. Facilities financed by RUS may be located in non-rural areas. However, loan and grant funds may be used to finance only that portion of the facility serving rural areas, regardless of facility location.(c)
Eligible projects. (1) Projects must serve a rural area which, if such project is completed, is not likely to decline in population below that for which the project was designed.(2) Projects must be designed and constructed so that adequate capacity will or can be made available to serve the present population of the area to the extent feasible and to serve the reasonably foreseeable growth needs of the area to the extent practicable.
(3) Projects must be necessary for orderly community development and consistent with a current comprehensive community water, waste disposal, or other current development plan for the rural area.
(d)
Credit elsewhere. Applicants must certify in writing and the Agency shall determine and document that the applicant is unable to finance the proposed project from their own resourcesor through commercial credit at reasonable rates and terms. (e)
Legal authority and responsibility. Each applicant must have or will obtain the legal authority necessary for owning, constructing, operating, and maintaining the proposed facility or service and for obtaining, giving security for, and repaying the proposed loan. The applicant shall be responsible for operating, maintaining, and managing the facility, and providing for its continued availability and use at reasonable user rates and charges. This responsibility shall be exercised by the applicant even though the facility may be operated, maintained, or managed by a third party under contract or management agreement. Guidance for preparing a management agreement is available from the Agency. Such contracts, management agreements, or leases must not contain options or other provisions for transfer of ownership.(f)
Economic feasibility. All projects financed under the provisions of this section must be based on taxes, assessments, income, fees, or other satisfactory sources of revenues in an amount sufficient to provide for facility operation and maintenance, reasonable reserves, and debt payment. If the primary use of the facility is by business and the success or failure of the facility is dependent on the business, then the economic viability of that business must be assessed.(g)
Federal Debt Collection Act of 1990 (28 U.S.C. 3001 et seq.). An outstanding judgment obtained by the United States in a Federal Court (other than in the United States Tax Court), which has been recorded, shall cause the applicant to be ineligible to receive a loan or grant until the judgment is paid in full or otherwise satisfied.[62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999] § 1780.8 [Reserved] § 1780.9 Eligible loan and grant purposes. Loan and grant funds may be used only for the following purposes:
(a) To construct, enlarge, extend, or otherwise improve rural water, sanitary sewage, solid waste disposal, and storm wastewater disposal facilities.
(b) To construct or relocate public buildings, roads, bridges, fences, or utilities, and to make other public improvements necessary for the successful operation or protection of facilities authorized in paragraph (a) of this section.
(c) To relocate private buildings, roads, bridges, fences, or utilities, and other private improvements necessary for the successful operation or protection of facilities authorized in paragraph (a) of this section.
(d) For payment of other utility connection charges as provided in service contracts between utility systems.
(e) When a necessary part of the project relates to those facilities authorized in paragraphs (a), (b),(c) or (d) of this section the following may be considered:
(1) Loan or grant funds may be used for:
(i) Reasonable fees and costs such as: legal, engineering, administrative services, fiscal advisory, recording, environmental analyses and surveys, possible salvage or other mitigation measures, planning, establishing or acquiring rights;
(ii) Costs of acquiring interest in land; rights, such as water rights, leases, permits, rights-of-way; and other evidence of land or water control or protection necessary for development of the facility;
(iii) Purchasing or renting equipment necessary to install, operate, maintain, extend, or protect facilities;
(iv) Cost of additional applicant labor and other expenses necessary to install and extend service; and
(v) In unusual cases, the cost for connecting the user to the main service line.
(2) Only loan funds may be used for:
(i) Interest incurred during construction in conjunction with multiple advances or interest on interim financing;
(ii) Initial operating expenses, including interest, for a period ordinarily not exceeding one year when the applicant is unable to pay such expenses;
(iii) The purchase of existing facilities when it is necessary either to improve service or prevent the loss of service;
(iv) Refinancing debts incurred by, or on behalf of, an applicant when all of the following conditions exist:
(A) The debts being refinanced are a secondary part of the total loan;
(B) The debts were incurred for the facility or service being financed or any part thereof; and
(C) Arrangements cannot be made with the creditors to extend or modify the terms of the debts so that a sound basis will exist for making a loan; and
(v) Prepayment of costs for which RUS grant funds were obligated.
(3) Grant funds may be used to restore loan funds used to prepay grant obligated costs.
(f) Construction incurred before loan or grant approval.
(1) Funds may be used to pay obligations for eligible project costs incurred before loan or grant approval if such requests are made in writing by the applicant and the Agency determines that:
(i) Compelling reasons exist for incurring obligations before loan or grant approval;
(ii) The obligations will be incurred for authorized loan or grant purposes; and
(iii) The Agency's authorization to pay such obligations is on the condition that it is not committed to make the loan or grant; it assumes no responsibility for any obligations incurred by the applicant; and the applicant must subsequently meet all loan or grant approval requirements, including environmental and contracting requirements.
(2) If construction is started without Agency approval, post-approval in accordance with this section may be considered, provided the construction meets applicable requirements including those regarding approval and environmental matters.
(g) Water or sewer service may be provided through individual installations or small clusters of users within an applicant's service area. The approval official should consider items such as: quantity and quality of the individual installations that may be developed; cost effectiveness of the individual facility compared with the initial and long term user cost on a central system; health and pollution problems attributable to individual facilities; operational or management problems peculiar to individual installations; and permit and regulatory agency requirements.
(1) Applicants providing service through individual facilities must meet the eligibility requirements in § 1780.7.
(2) The Agency must approve the form of agreement between the applicant and individual users for the installation, operation, maintenance and payment for individual facilities.
(3) If taxes or assessments are not pledged as security, applicants providing service through individual facilities must obtain security necessary to assure collection of any sum the individual user is obligated to pay the applicant.
(4) Notes representing indebtedness owed the applicant by a user for an individual facility will be scheduled for payment over a period not to exceed the useful life of the individual facility or the RUS loan, whichever is shorter. The interest rate will not exceed the interest rate charged the applicant on the RUS indebtedness.
(5) Applicants providing service through individual or cluster facilities must obtain:
(i) Easements for the installation and ingress to and egress from the facility if determined necessary by RUS; and
(ii) An adequate method for denying service in the event of nonpayment of user fees.
§ 1780.10 Limitations. (a) Loan and grant funds may not be used to finance:
(1) Facilities which are not modest in size, design, and cost;
(2) Loan or grant finder's fees;
(3) The construction of any new combined storm and sanitary sewer facilities;
(4) Any portion of the cost of a facility which does not serve a rural area;
(5) That portion of project costs normally provided by a business or industrial user, such as wastewater pretreatment, etc.;
(6) Rental for the use of equipment or machinery owned by the applicant;
(7) For other purposes not directly related to operating and maintenance of the facility being installed or improved; and
(8) A judgment which would disqualify an applicant for a loan or grant as provided for in § 1780.7(g).
(b) Grant funds may not be used to:
(1) Reduce EDU costs to a level less than similar system cost;
(2) Pay any costs of a project when the median household income of the service area is more than 100 percent of the nonmetropolitan median household income of the State;
(3) Pay project costs when other loan funding for the project is not at reasonable rates and terms; and
(4) Pay project costs when other funding is a guaranteed loan obtained in accordance with 7 CFR part 1779 of this title.
(c) Grants may not be made in excess of the following percentages of the RUS eligible project development costs. Facilities previously installed will not be considered in determining the development costs.
(1) 75 percent when the median household income of the service area is below the higher of the poverty line or 80% of the state nonmetropolitan median income and the project is necessary to alleviate a health or sanitary problem.
(2) 45 percent when the median household income of the service area exceeds the 80 percent requirements described in paragraph (c)(1) of this section but is not more than 100 percent of the statewide nonmetropolitan median household income.
(3) Applicants are advised that the percentages contained in paragraphs (c)(1) and (c)(2) of this section are maximum amounts and may be further limited due to availability of funds or the grant determination procedures contained in § 1780.35 (b).
[62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999; 66 FR 23151, May 8, 2001] § 1780.11 Service area requirements. (a) All facilities financed under the provisions of this part shall be for public use. The facilities will be installed so as to serve any potential user within the service area who desires service and can be feasibly and legally served. This does not preclude:
(1) Financing or constructing projects in phases when it is not practical to finance or construct the entire project at one time; and
(2) Financing or constructing facilities where it is not economically feasible to serve the entire area, provided economic feasibility is determined on the basis of the entire system and not by considering the cost of separate extensions to or parts thereof; the applicant publicly announces a plan for extending service to areas not initially receiving service from the system; and potential users located in the areas not to be initially served receive written notice from the applicant that service will not be provided until such time as it is economically feasible to do so.
(b) Should the Agency determine that inequities exist within the applicants service area for the same type service proposed (i.e., water or waste disposal) such inequities will be remedied by the applicant prior to loan or grant approval or included as part of the project. Inequities are defined as unjustified variations in availability, adequacy or quality of service. User rate schedules for portions of existing systems that were developed under different financing, rates, terms or conditions do not necessarily constitute inequities.
(c) Developers are normally expected to provide utility-type facilities in new or developing areas in compliance with appropriate State statutes. RUS financing will be considered to an eligible applicant only in such cases when failure to complete development would result in an adverse economic condition for the rural area (not the community being developed); the proposal is necessary to the success of a current area development plan; and loan repayment can be assured by:
(1) The applicant already having sufficient assured revenues to repay the loan; or
(2) Developers providing a bond or escrowed security deposit as a guarantee sufficient to meet expenses attributable to the area in question until a sufficient number of the building
sites are occupied and connected to the facility to provide enough revenues to meet operating, maintenance, debt service, and reserve requirements. Such guarantees from developers will meet the requirements in § 1780.39(c)(4)(ii); or (3) Developers paying cash for the increased capital cost and any increased operating expenses until the developing area will support the increased costs; or
(4) The full faith and credit of a public body where the debt is evidenced by general obligation bonds; or
(5) The loan is to a public body evidenced by a pledge of tax revenue or assessments; or
(6) The user charges can become a lien upon the property being served and income from such lien can be collected in sufficient time to be used for its intended purposes.
§ 1780.12 [Reserved] § 1780.13 Rates and terms. (a)
General. (1) Each loan will bear interest at the rate prescribed in RD Instruction 440.1, exhibit B. The interest rates will be set by the Agency for each quarter of the fiscal year. All rates will be adjusted to the nearest one-eighth of one per centum. The rate will be the lower of the rate in effect at the time of loan approval or the rate in effect at the time of loan closing unless the applicant otherwise chooses.(2) If the interest rate is to be that in effect at loan closing on a loan involving multiple advances of RUS funds using temporary debt instruments, the interest rate charged shall be that in effect on the date when the first temporary debt instrument is issued.
(b)
Poverty rate. The poverty interest rate will not exceed 5 per centum per annum. All poverty rate loans must comply with the following conditions:(1) The primary purpose of the loan is to upgrade existing facilities or construct new facilities required to meet applicable health or sanitary standards; and
(2) The median household income of the service area is below the higher of the poverty line, or 80 percent of the Statewide nonmetropolitan median household income.
(c)
Intermediate rate. The intermediate interest rate will be set at the poverty rate plus one-half of the difference between the poverty rate and the market rate, not to exceed 7 percent per annum. It will apply to loans that do not meet the requirements for the poverty rate and for which the median household income of the service area is not more than 100 percent of the nonmetropolitan median household income of the State.(d)
Market rate. The market interest rate will be set using as guidance the average of the Bond Buyer (11-GO Bond) Index for the four weeks prior to the first Friday of the last month before the beginning of the quarter. The market rate will apply to all loans that do not qualify for a different rate under paragraph (b) or (c) of this section.(e)
Repayment terms. The loan repayment period shall not exceed the useful life of the facility, State statute or 40 years from the date of the note or bond, whichever is less. Where RUS grant funds are used in connection with an RUS loan, the loan will be for the maximum term permitted by this part, State statute, or the useful life of the facility, whichever is less, unless there is an exceptional case where circumstances justify making an RUS loan for less than the maximum term permitted. In such cases, the reasons must be fully documented.(1) Principal payments may be deferred in whole or in part for a period not to exceed 36 months following the date the first interest installment is due. If for any reason it appears necessary to permit a longer period of deferment, the Agency may authorize such deferment. Deferments of principal will not be used to:
(i) Postpone the levying of taxes or assessments;
(ii) Delay collection of the full rates which the borrower has agreed to charge users for its services as soon as those services become available;
(iii) Create reserves for normal operation and maintenance;
(iv) Make any capital improvements except those approved by the Agency which are determined to be essential to the repayment of the loan or to maintain adequate security; and
(v) Make payment on other debt.
(2)
Payment date. Loan payments will be scheduled to coincide with income availability and be in accordance with State law. If State law only permits principal plus interest (P&I) type bonds, annual or semiannual payments will be used. Insofar as practical monthly payments will be scheduled one full month following the date of loan closing; or semiannual or annual payments will be scheduled six or twelve full months, respectively, following the date of loan closing or any deferment period. Due dates falling on the 29th, 30th or 31st day of the month will be avoided.(3) In all cases, including those in which RUS is jointly financing with another lender, the RUS payments of principal and interest should approximate amortized installments.
§ 1780.14 Security. Loans will be secured by the best security position practicable in a manner which will adequately protect the interest of RUS during the repayment period of the loan. Specific security requirements for each loan will be included in a letter of conditions.
(a)
Public bodies. Loans to such borrowers, including Federally recognized Indian tribes as appropriate, will be evidenced by notes, bonds, warrants, or other contractual obligations as may be authorized by relevant laws and by borrower's documents, resolutions, and ordinances. Security, in the following order of preference, will consist of:(1) The full faith and credit of the borrower when the debt is evidenced by general obligation bonds; and/or
(2) Pledges of taxes or assessments; and/or
(3) Pledges of facility revenue and, when it is the customary financial practice in the State, liens will be taken on the interest of the applicant in all land, easements, rights-of-way, water rights, water purchase contracts, water sales contracts, sewage treatment contracts, and similar property rights, including leasehold interests, used or to be used in connection with the facility whether owned at the time the loan is approved or acquired with loan funds.
(b)
Other-than-public bodies. Loans to other-than-public body applicants and Federally recognized Indian tribes, as appropriate, will be secured in the following order of preference:(1) Assignments of borrower income will be taken and perfected by filing, if legally permissible; and
(2) A lien will be taken on the interest of the applicant in all land, easements, rights-of-way, water rights, water purchase contracts, water sales contracts, sewage treatment contracts and similar property rights, including leasehold interest, used, or to be used in connection with the facility whether owned at the time the loan is approved or acquired with loan funds. In unusual circumstances where it is not legally permissible or feasible to obtain a lien on such land (such as land rights obtained from Federal or local government agencies, and from railroads) and the approval official determines that the interest of RUS is otherwise adequately secured, the lien requirement may be omitted as to such land rights. For existing borrowers where the Agency already has a security position on real property, the approval official may determine that the interest of the Government is adequately secured and not require additional liens on such land rights. When the subsequent loan is approved or the acquisition of real property is subject to an outstanding lien indebtedness, the next highest priority lien obtainable will be taken if the approval official determines that the loan is adequately secured.
(c)
Joint financing security. For projects utilizing joint financing, when adequate security of more than one type is available, the other lender may take one type of security with RUS taking another type. For projects utilizing joint financing with the same security to be shared by RUS and another lender, RUS will obtain at least a parity position with the other lender. A parity position is to ensure that with joint security, in the event of default, each lender will be affected on a proportionate basis. A parity position will conform with the following unless an exception is granted by the approval official:(1) It is not necessary for loans to have the same repayment terms. Loans made by other lenders involved in joint
financing with RUS should be scheduled for repayment on terms similar to those customarily used in the State for financing such facilities. (2) The use of a trustee or other similar paying agent by the other lender in a joint financing arrangement is acceptable to RUS. A trustee or other similar paying agent will not normally be used for the RUS portion of the funding unless required to comply with State law. The responsibilities and authorities of any trustee or other similar paying agent on projects that include RUS funds must be clearly specified by written agreement and approved by the State program official and the Office of the General Counsel (OGC). RUS must be able to deal directly with the borrower to enforce the provisions of loan and grant agreements and perform necessary servicing actions.
(3) In the event adequate funds are not available to meet regular installments on parity loans, the funds available will be apportioned to the lenders based on the respective current installments of principal and interest due.
(4) Funds obtained from the sale or liquidation of secured property or fixed assets will be apportioned to the lenders on the basis of the pro rata amount outstanding; provided, however, funds obtained from such sale or liquidation for a project that included RUS grant funds will be apportioned as required by the grant agreement.
(5) Protective advances must be charged to the borrower's account and be secured by a lien on the security property. To the extent consistent with State law and customary lending practices in the area, repayment of protective advances made by either lender, for the mutual protection of both lenders, should receive first priority in apportionment of funds between the lenders. To ensure agreement between lenders, efforts should be made to obtain the concurrence of both lenders before one lender makes a protective advance.
§ 1780.15 Other Federal, State, and local requirements. Proposals for facilities financed in whole or in part with RUS funds will be coordinated with appropriate Federal, State and local agencies. If there are conflicts between this part and State or local laws or regulatory commission regulations, the provisions of this part will control. Applicants will be required to comply with Federal, State, and local laws and any regulatory commission rules and regulations pertaining to:
(a) Organization of the applicant and its authority to own, construct, operate, and maintain the proposed facilities;
(b) Borrowing money, giving security therefore, and raising revenues for the repayment thereof;
(c) Land use zoning; and
(d) Health and sanitation standards and design and installation standards unless an exception is granted by RUS.
§ 1780.16 [Reserved] § 1780.17 Selection priorities and process. When ranking eligible applications for consideration for limited funds, Agency officials must consider the priority items met by each application and the degree to which those priorities are met. Points will be awarded as follows:
(a)
Population priorities. (1) The proposed project will primarily serve a rural area having a population not in excess of 1,000—25 points;(2) The proposed project primarily serves a rural area having a population between 1,001 and 2,500—15 points;
(3) The proposed project primarily serves a rural area having a population between 2,501 and 5,500—5 points.
(b)
Health priorities. The proposed project is:(1) Needed to alleviate an emergency situation, correct unanticipated diminution or deterioration of a water supply, or to meet Safe Drinking Water Act requirements which pertain to a water system—25 points;
(2) Required to correct inadequacies of a wastewater disposal system, or to meet health standards which pertain to a wastewater disposal system—25 points;
(3) Required to meet administrative orders issued to correct local, State, or Federal solid waste violations—15 points.
(c)
Median household income priorities. The median household income of thepopulation to be served by the proposed project is: (1) Less than the poverty line if the poverty line is less than 80% of the statewide nonmetropolitan median household income—30 points;
(2) Less than 80 percent of the statewide nonmetropolitan median household income—20 points;
(3) Equal to or more than the poverty line and between 80% and 100%, inclusive, of the State's nonmetropolitan median household income—15 points.
(d)
Other priorities. (1) The proposed project will: merge ownership, management, and operation of smaller facilities providing for more efficient management and economical service—15 points;(2) The proposed project will enlarge, extend, or otherwise modify existing facilities to provide service to additional rural areas—10 points;
(3) Applicant is a public body or Indian tribe—5 points;
(4) Amount of other than RUS funds committed to the project is:
(i) 50% or more—15 points;
(ii) 20% to 49%—10 points;
(iii) 5%—19%—5 points;
(5) Projects that will serve Agency identified target areas—10 points;
(6) Projects that primarily recycle solid waste products thereby limiting the need for solid waste disposal—5 points;
(7) The proposed project will serve an area that has an unreliable quality or supply of drinking water—10 points.
(e) In certain cases the State program official may assign up to 15 points to a project. The points may be awarded to projects in order to improve compatibility and coordination between RUS's and other agencies' selection systems, to ensure effective RUS fund utilization, and to assist those projects that are the most cost effective. A written justification must be prepared and placed in the project file each time these points are assigned.
(f)
Cost overruns. An application may receive consideration for funding before others at the State or National Office level when it is a subsequent request for a previously approved project which has encountered construction cost overruns. The cost overruns must be due to high bids or unexpected construction problems that cannot be reduced by negotiations, redesign, use of bid alternatives, rebidding or other means. Cost overruns exceeding 20% of the development cost at time of loan or grant approval or where the scope of the original purpose has changed will not be considered under this paragraph.(g)
National office priorities. In selecting projects for funding at the National Office level State program official points may or may not be considered. The Administrator may assign up to 15 additional points to account for items such as geographic distribution of funds, the highest priority projects within a state, and emergency conditions caused by economic problems or natural disasters. The Administrator may delegate the authority to assign the 15 points to appropriate National Office staff.§ 1780.18 Allocation of program funds. (a)
General. (1) The purpose of this part is to set forth the methodology and formulas by which the Administrator of the RUS allocates program funds to the States. (The term “State” means any of the States of the United States, the Commonwealth of Puerto Rico, any territory or possession of the United States, or the Western Pacific Areas.)(2) The formulas in this part are used to allocate program loan and grant funds to Rural Development State offices so that the overall mission of the Agency can be carried out. Considerations used when developing the formulas include enabling legislation, congressional direction, and administration policies. Allocation formulas ensure that program resources are available on an equal basis to all eligible individuals and organizations.
(3) The actual amounts of funds, as computed by the methodology and formulas contained herein, allocated to a State for a funding period, are distributed to each State office. The allocated amounts are available for review in any Rural Development State office.
(b)
Definitions —(1)Amount available for allocations. Funds appropriated or otherwise made available to the Agency for use in authorized programs. On occasion, the allocation of funds toStates may not be practical for a particular program due to funding or administrative constraints. In these cases, funds will be controlled by the National Office. (2)
Basic formula criteria, data source and weight. Basic formulas are used to calculate a basic State factor as a part of the methodology for allocating funds to the States. The formulas take a number of criteria that reflect the funding needs for a particular program and through a normalization and weighting process for each of the criteria calculate the basic State factor (SF). The data sources used for each criteria are believed to be the most current and reliable information that adequately quantifies the criterion. The weight, expressed as a percentage, gives a relative value to the importance of each of the criteria.(3)
Basic formula allocation. The result of multiplying the amount available for allocation less the total of any amounts held in reserve or distributed by base or administrative allocation times the basic State factor for each State. The basic formula allocation (BFA) for an individual State is equal to:BFA=(Amount available for allocation−NO reserve−total base and administrative allocations) × SF. (4)
Transition formula. (i) A formula based on a proportional amount of previous year allocation used to maintain program continuity by preventing large fluctuations in individual State allocations. The transition formula limits allocation shifts to any particular State in the event of changes from year to year of the basic formula, the basic criteria, or the weights given the criteria. The transition formula first checks whether the current year's basic formula allocation is within the transition range (plus or minus 20 percentage points of the proportional amount of the previous year's BFA). The formula follows:ER19JN97.000 (ii) If the current year's State BFA is not within the transition range in paragraph (b)(4)(i) of this section, the State formula allocation is changed to the amount of the transition range limit closest to the BFA amount. After having performed this transition adjustment for each State, the sum of the funds allocated to all States will differ from the amount of funds available for BFA. This difference, whether a positive or negative amount, is distributed to all States receiving a formula allocation by multiplying the difference by the SF. The end result is the transition formula allocation. The transition range will not exceed 40% (plus or minus 20%), but when a smaller range is used it will be stated in the individual program section.
(5)
Base allocation. An amount that may be allocated to each State dependent upon the particular program to provide the opportunity for funding at least one typical loan or grant in each Rural Development State office. The amount of the base allocation may be determined by criteria other than that used in the basic formula allocation such as Agency historic data.(6)
Administrative allocations. Allocations made by the Administrator in cases where basic formula criteria information is not available. This form of allocation may be used when the Administrator determines the program objectives cannot be adequately met with a formula allocation.(7)
Reserve. An amount retained under the National Office control for each loan and grant program to provide flexibility in meeting situations of unexpected or justifiable need occurring during the fiscal year. The Administrator may make distributions from this reserve to any State when it is determined necessary to meet a program need or Agency objective. The Administrator may retain additional amounts to fund authorized demonstration programs.(8)
Pooling of funds. A technique used to ensure that available funds are used in an effective, timely and efficient manner. At the time of pooling those funds within a State's allocation for the fiscal year or portion of the fiscal year, depending on the type of pooling, that have not been obligated by the State are placed in the National Office reserve. The Administrator will establish the pooling dates for each affected program.(i) Mid-year: Mid-year pooling occurs near the midpoint of the fiscal year.
(ii) Year-end: Year-end pooling usually occurs near the first of August.
(iii) Emergency: The Administrator may pool funds at any time that it is determined the conditions upon the initial allocation was based have changed to such a degree that it is necessary to pool funds in order to efficiently carry out the Agency mission.
(9)
Availability of the allocation. Program funds are made available to the Agency on a quarterly basis.(10)
Suballocation by the Rural Development State Director. The State Director may be directed or given the option of suballocating the State allocation to processing offices. When suballocating the State Director may retain a portion of the funds in a State office reserve to provide flexibility in situations of unexpected or justified need. When performing a suballocation the State Director will use the same formula, criteria and weights as used by the National Office.(c)
Water and waste disposal loans and grants —(1)Amount available for allocations. See paragraph (b)(1) of this section.(2)
Basic formula criteria, data source and weight. See paragraph (b)(2) of this section.(i) The criteria used in the basic formula are:
(A) State's percentage of national rural population will be 50 percent.
(B) State's percentage of national rural population with incomes below the poverty level will be 25 percent.
(C) State's percentage of national nonmetropolitan unemployment will be 25 percent.
(ii) Data source for each of these criterion is based on the latest census data available. Each criterion is assigned a specific weight according to its relevance in determining need. The percentage representing each criterion is multiplied by the weight factor and summed to arrive at a State factor (SF). The SF cannot exceed .05, as follows:
SF = (criterion in paragraph (b)(1)(i) of this section × 50 percent) + (criterion in paragraph(b)(1)(ii) of this section × 25 percent) + (criterion in paragraph(b)(1)(iii) of this section × 25 percent) (3)
Basic formula allocation. See paragraph (b)(3) of this section. States receiving administrative allocations do not receive formula allocations.(4)
Transition formula. See paragraph (b)(4) of this section. The percentage range for the transition formula equals 30 percent (plus or minus 15%).(5)
Base allocation. See paragraph (b)(5) of this section. States receiving administrative allocations do not receive base allocations.(6)
Administrative allocation. See paragraph (b)(6) of this section. States participating in the formula and base allocation procedures do not receive administrative allocations.(7)
Reserve. See paragraph (b)(7) of this section. Any State may request reserve funds by forwarding a request to the National Office. Generally, a request for additional funds will not be honored unless the State has insufficient funds to obligate the loan requested.(8)
Pooling of funds. See paragraph (b)(8) of this section. Funds are generally pooled at mid-year and year-end. Pooled funds will be placed in the National Office reserve and will be made available administratively.(9)
Availability of the allocation. See paragraph (b)(9) of this section. The allocation of funds is made available for States to obligate on an annual basis although the Office of Management and Budget apportions it to the Agency on a quarterly basis.(10)
Suballocation by the State Director. See paragraph (b)(10) of this section. The State Director has the option to suballocate funds to processing offices.§ 1780.19 Public information. (a)
Public notice of intent to file an application with the Agency. Within 60 days of filing an application with theAgency the applicant must publish a notice of intent to apply for a RUS loan or grant. The notice of intent must be published in a newspaper of general circulation in the proposed area to be served. (b)
General public meeting. Applicants should inform the general public regarding the development of any proposed project. Any applicant not required to obtain authorization by vote of its membership or by public referendum, to incur the obligations of the proposed loan or grant, must hold at least one public information meeting. The public meeting must be held not later than loan or grant approval. The meeting must give the citizenry an opportunity to become acquainted with the proposed project and to comment on such items as economic and environmental impacts, service area, alternatives to the project, or any other issue identified by Agency. To the extent possible, this meeting should cover items necessary to satisfy all public information meeting requirements for the proposed project. To minimize duplication of public notices and public involvement, the applicant shall, where possible, coordinate and integrate the public involvement activities of the environmental review process into this requirement. The applicant will be required, at least 10 days prior to the meeting, to publish a notice of the meeting in a newspaper of general circulation in the service area, to post a public notice at the applicant's principal office, and to notify the Agency. The applicant will provide the Agency a copy of the published notice and minutes of the public meeting. A public meeting is not normally required for subsequent loans or grants which are needed to complete the financing of a project.§§ 1780.20-1780.23 [Reserved] § 1780.24 Approval authorities. Appropriate reviews, concurrence, and authorization must be obtained for all loans or grants in excess of the amounts indicated in RUS Staff Instruction 1780-1.
(a)
Redelegation of authority by State Directors. Unless restricted by memorandum from the RUS Administrator, State Directors can redelegate their approval authorities to State employees by memorandum.(b)
Restriction of approval authority by the RUS Administrator. The RUS Administrator can make written restrictions or revocations of the authority given to any approval official.§ 1780.25 Exception authority. The Administrator may, in individual cases, make an exception to any requirement or provision of this part which is not inconsistent with the authorizing statute or other applicable law and is determined to be in the Government's interest.
§§ 1780.26-1780.30 [Reserved] Subpart B—Loan and Grant Application Processing § 1780.31 General. (a) Applicants are encouraged to contact the Agency processing office early in the planning stages of their project. Agency personnel are available to provide general advice and assistance regarding RUS programs, other funding sources, and types of systems or improvements appropriate for the applicants needs. The Agency can also provide access to technical assistance and other information resources for other project development issues such as public information, income surveys, developing rate schedules, system operation and maintenance, and environmental compliance requirements. Throughout the planning, application processing and construction of the project, Agency personnel will work closely and cooperatively with the applicant and their representatives, other State and Federal agencies and technical assistance providers.
(b) The processing office will handle initial inquiries and provide basic information about the program. They are to provide the application, SF 424.2, “Application for Federal Assistance (For Construction),” assist applicants as needed in completing SF 424.2, and in filing a request for intergovernmental review. Federally recognized Indian tribes are exempt from intergovernmental review. The processing
office will explain eligibility requirements and meet with the applicant whenever necessary to discuss application processing. (c) Applicants can make a written request for an eligibility determination in lieu of filing an SF 424.2 along with the information required by § 1780.33. Applicants seeking only an eligibility determination, should contact the processing office to obtain a list of the items needed to make this determination. An eligibility determination for loan or grant assistance will not give an applicant priority for funding as set forth in § 1780.17.
(d) Applications that are not developed in a reasonable period of time taking into account the size and complexity of the proposed project may be removed from the State's active file. Applicants will be consulted prior to taking such action.
(e) Starting with the earliest discussion with prospective applicants, the State Environmental Coordinator shall discuss with prospective applicants and be available for consultation during the application process the environmental review requirements for evaluating the potential environmental consequences of the project. Pursuant to 7 CFR part 1794 and guidance in RUS Bulletin 1794A-602, the environmental review requirements shall be performed by the applicant simultaneously and concurrently with the project's engineering planning and design. This should provide flexibility to consider reasonable alternatives to the project and development methods to mitigate identified adverse environmental effects. Mitigation measures necessary to avoid or minimize any adverse environmental effects must be integrated into project design.
[62 FR 33478, June 19, 1997, as amended at 63 FR 68655, Dec. 11, 1998] § 1780.32 Timeframes for application processing. (a) The processing office will determine if the application is properly assembled. If not, the applicant will be notified within fifteen federal working days as to what additional submittal items are needed.
(b) The processing and approval offices will coordinate their reviews to ensure that the applicant is advised about eligibility and anticipated fund availability within 45 days of the receipt of a completed application.
§ 1780.33 Application requirements. An initial application consists of the following:
(a) One copy of a completed SF 424.2;
(b) A copy of the State intergovernmental comments or one copy of the filed application for State intergovernmental review; and
(c) Two copies of the preliminary engineering report (PER) for the project.
(1) The PER may be submitted to the processing office prior to the rest of the application material if the applicant desires a preliminary review.
(2) The processing office will forward one copy of the PER with comments and recommendations to the State staff engineer for review upon receipt from the applicant.
(3) The State staff engineer will consult with the applicant's engineer as appropriate to resolve any questions concerning the PER. Written comments will be provided by the State staff engineer to the processing office to meet eligibility determination time lines.
(d) Written certification that other credit is not available.
(e) Supporting documentation necessary to make an eligibility determination such as financial statements, audits, organizational documents, or existing debt instruments. The processing office will advise applicants regarding the required documents. Applicants that are indebted to RUS will not need to submit documents already on file with the processing office.
(f)
Environmental Report. For those actions listed in §§ 1794.22(b) and 1794.23(b), the applicant shall submit, in accordance with RUS Bulletin 1794A-602, two copies of the completed Environmental Report.(1) Upon receipt of the Environmental Report, the processing office shall forward one copy of the report with comments and recommendation to the State Environmental Coordinator for review.
(2) The State Environmental Coordinator will consult with the applicant
as appropriate to resolve any environmental concerns. Written comments will be provided by the State Environmental Coordinator to the processing office to meet eligibility determination time lines. (g) The applicant's Internal Revenue Service Taxpayer Identification Number (TIN). The TIN will be used by the Agency to assign a case number which will be the applicant's or transferee's TIN preceded by State and County Code numbers. Only one case number will be assigned to each applicant regardless of the number of loans or grants or number of separate facilities, unless an exception is authorized by the National Office.
(h) Other Forms and certifications. Applicants will be required to submit the following items to the processing office, upon notification from the processing office to proceed with further development of the full application:
(1) Form RD 442-7, “Operating Budget”;
(2) Form RD 1910-11, “Application Certification, Federal Collection Policies for Consumer or Commercial Debts”;
(3) Form RD 400-1, “Equal Opportunity Agreement”;
(4) Form RD 400-4, “Assurance Agreement”;
(5) Form AD-1047, “Certification Regarding Debarment, Suspension and other Responsibility Matters”;
(6) Form AD-1049, Certification regarding Drug-Free Workplace Requirements (Grants) Alternative I For Grantees Other Than Individuals;
(7) Certifications for Contracts, Grants, and Loans (Regarding Lobbying); and
(8) Certification regarding prohibited tying arrangements. Applicants that provide electric service must provide the Agency a certification that they will not require users of a water or waste facility financed under this part to accept electric service as a condition of receiving assistance.
[62 FR 33478, June 19, 1997, as amended at 63 FR 68655, Dec. 11, 1998] § 1780.34 [Reserved] § 1780.35 Processing office review. Review of the application will usually include the following:
(a)
Nondiscrimination. Boundaries for the proposed service area must not be chosen in such a way that any user or area will be excluded because of race, color, religion, sex, marital status, age, handicap, or national origin. This does not preclude construction of the project in phases as noted in § 1780.11 as long as it is not done in a discriminatory manner.(b)
Grant determination. Grants will be determined by the processing office in accordance with the following provisions and will not result in EDU costs below similar system user cost.(1)
Maximum grant. Grants may not exceed the percentages in § 1780.10(c) of the eligible RUS project development costs listed in § 1780.9.(2)
Debt service. Applicants will be considered for grant assistance when the debt service portion of the average annual EDU cost, for users in the applicant's service area, exceeds the following percentages of median household income:(i) 0.5 percent when the median household income of the service area is equal to or below 80% of the statewide nonmetropolitan median income.
(ii) 1.0 percent when the median household income of the service area exceeds the 0.5 percent requirement but is not more than 100 percent the statewide nonmetropolitan household income.
(3)
Similar system cost. If the grant determined in paragraph (b)(2) of this section results in an annual EDU cost that is not comparable with similar systems, the Agency will determine a grant amount based on achieving EDU costs that are not below similar system user costs.(4)
Wholesale service. When an applicant provides wholesale sales or services on a contract basis to another system or entity, similar wholesale system cost will be used in determining the amount of grant needed to achieve a reasonable wholesale user cost.(5)
Subsidized cost. When annual cost to the applicant for delivery of serviceis subsidized by either the state, commonwealth, or territory, and uniform flat user charges regardless of usage are imposed for similar classes of service throughout the service area, the Agency may proceed with a grant in an amount necessary to reduce such delivery cost to a reasonable level. (c)
User charges. The user charges should be reasonable and produce enough revenue to provide for all costs of the facility after the project is complete. The planned revenue should be sufficient to provide for all debt service, debt reserve, operation and maintenance, and, if appropriate, additional revenue for facility replacement of short-lived assets without building a substantial surplus. Ordinarily, the total debt service reserve will be equal to one average annual loan installment which will accumulate at the rate of one-tenth of the total each year.[62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999] § 1780.36 Approving official review. Projects may be obligated as their applications are completed and approved.
(a)
Selection of applications for further processing. The application and supporting information submitted will be used to determine the applications selected for further development and funding. After completing the review, the approval official will normally select those eligible applications with the highest priority scores for further processing. When authorizing the development of an application for funding, the following will be considered:(1) Funds available in State allocation;
(2) Anticipated allocation of funds for the next fiscal year; and
(3) Time necessary for applicant to complete the application.
(b)
Lower scoring projects. (1) In cases where preliminary cost estimates indicate that an eligible, high scoring application is unfeasible or would require an amount of funding from RUS that exceeds either 25 percent of a State's current annual allocation or an amount greater than that remaining in the State's allocation, the approval official may instead select the next lower scoring application for further processing provided the high scoring applicant is notified of this action and given an opportunity to revise the proposal and resubmit it.(2) If it is found that there is no effective way to reduce costs or no other funding sources, the approval official, after consultation with applicant, may submit a request for an additional allocation of funds for the proposed project to the National Office. The request should be submitted during the fiscal year in which obligation is anticipated. Such request will be considered along with all others on hand. A written justification must be prepared and placed in the project file.
§ 1780.37 Applications determined ineligible. If at any time an application is determined ineligible, the processing office will notify the applicant in writing of the reasons. The notification to the applicant will state that an appeal of this decision may be made by the applicant under 7 CFR part 11.
§ 1780.38 [Reserved] § 1780.39 Application processing. (a)
Processing conference. Before starting to assemble the full application, the applicant should arrange through the processing office an application conference to provide a basis for orderly application assembly. The processing office will explain program requirements, public information requirements and provide guidance on preparation of items necessary for approval.(b)
Professional services and contracts related to the facility. Fees provided for in contracts or agreements shall be reasonable. The Agency shall consider fees to be reasonable if they are not in excess of those ordinarily charged by the profession as a whole for similar work when RUS financing is not involved. Applicants will be responsible for providing the services necessary to plan projects including design of facilities, environmental review and documentation requirements, preparation of cost and income estimates, development of proposals for organization and financing, and overall operation and maintenance of the facility. Applicantsshould negotiate for procurement of professional services, whereby competitors' qualifications are evaluated and the most qualified competitor is selected, subject to negotiations of fair and reasonable compensation. Contracts or other forms of agreement between the applicant and its professional and technical representatives are required and are subject to RUS concurrence. (1)
Engineering and architectural services. (i) Applicants shall publicly announce all requirements for engineering and architectural services, and negotiate contracts for engineering and architectural services on the basis of demonstrated competence and qualifications for the type of professional services required and at a fair and reasonable price.(ii) When project design services are procured separately, the selection of the engineer or architect shall be done by requesting qualification-based proposals and in accordance with this section.
(iii) Applicants may procure engineering and architectural services in accordance with applicable State statutes or local requirements provided the State Director determines that such procurement meets the intent of this section.
(2)
Other professional services. Professional services of the following may be necessary: Attorney, bond counsel, accountant, auditor, appraiser, environmental professionals, and financial advisory or fiscal agent (if desired by applicant). Guidance on entering into an agreement for legal services is available from the Agency.(3)
Bond counsel. Unless otherwise provided by subpart D of this part, public bodies are required to obtain the service of recognized bond counsel in the preparation of evidence of indebtedness.(4)
Contracts for other services. Contracts or other forms of agreements for other services including management, operation, and maintenance will be developed by the applicant and presented to the Agency for review and concurrence. Guidance on entering into a management agreement is available from the Agency.(c)
User estimates. Applicants dependent on users fees for debt payment or operation and maintenance expenses shall base their income and expense forecast on realistic user estimates. For users presently not receiving service, consideration must be given to the following:(1) An estimated number of maximum users should not be used when setting user fees and rates since it may be several years before all residents will need service by the system. In establishing rates a realistic number of users should be employed.
(2)
New user cash contributions. The amount of cash contributions required will be set by the applicant and concurred in by the approval official. Contributions should be an amount high enough to indicate sincere interest on the part of the potential user, but not so high as to preclude service to low income families. Contributions ordinarily should be an amount approximating one year's minimum user fee, and shall be paid in full before loan closing or commencement of construction, whichever occurs first. Once economic feasibility is ascertained based on a demonstration of potential user cash contributions, the contribution, membership fee or other fees that may be imposed are not a loan requirement under this section. A new user cash contribution is not required when:(i) The Agency determines that the potential users as a whole in the applicant's service area cannot make cash contributions; or
(ii) State statutes or local ordinances require mandatory use of the system and the applicant or legal entity having such authority agrees in writing to enforce such statutes, or ordinances.
(3) An enforceable user agreement with a penalty clause is required (RUS Bulletin 1780-9 can be used) except:
(i) For users presently receiving service; or
(ii) Where mandatory use of the system is required.
(4) Individual vacant property owners will not be considered when determining project feasibility unless:
(i) The owner has plans to develop the property in a reasonable period of time and become a user of the facility; and
(ii) The owner agrees in writing to make a monthly payment at least equal to the proportionate share of debt service attributable to the vacant property until the property is developed and the facility is utilized on a regular basis. A bond or escrowed security deposit must be provided to guarantee this monthly payment and to guarantee an amount at least equal to the owner's proportionate share of construction costs. If a bond is provided, it must be executed by a surety company that appears on the Treasury Department's most current list (Circular 570, as amended) and be authorized to transact business in the State where the project is located. The guarantee shall be payable jointly to the borrower and the United States of America.
(5) Applicants must provide a positive program to encourage connection by all users as soon as service is available. The program will be available for review and concurrence by the processing office before loan closing or commencement of construction, whichever occurs first. Such a program shall include:
(i) An aggressive information program to be carried out during the construction period. The applicant should send written notification to all signed users in advance of the date service will be available, stating the date users will be expected to have their connections completed, and the date user charges will begin;
(ii) Positive steps to assure that installation services will be available. These may be provided by the contractor installing the system, local plumbing companies, or local contractors;
(iii) Aggressive action to see that all signed users can finance their connections.
(d)
Interim financing. For all loans exceeding $500,000, where funds can be borrowed at reasonable interest rates on an interim basis from commercial sources for the construction period, such interim financing may be obtained so as to preclude the necessity for multiple advances of RUS loan funds. However, the approval official may make an exception when interim financing is cost prohibitive or unavailable. Guidance on informing the private lender of RUS's commitment is available from the Agency. When interim commercial financing is used, the application will be processed, including obtaining construction bids, to the stage where the RUS loan would normally be closed, that is immediately prior to the start of construction. The RUS loan should be closed as soon as possible after the disbursal of all interim funds.(e)
Reserve requirements. Provision for the accumulation of necessary reserves over a reasonable period of time will be included in the loan documents.(1)
General obligation or special assessment bonds. Ordinarily, the requirements for reserves will be considered to have been met if general obligation or other bonds which pledge the full faith and credit of the political subdivision are used, or special assessment bonds are used, and if such bonds provide for the annual collection of sufficient taxes or assessments to cover debt service.(2)
Other than general obligation or special assessment bonds. Each borrower will be required to establish and maintain reserves sufficient to assure that loan installments will be paid on time, for emergency maintenance, for extensions to facilities, and for replacement of short-lived assets which have a useful life significantly less than the repayment period of the loan. Borrowers issuing bonds or other evidences of debt pledging facility revenues as security will plan their debt reserve to provide for at least one average annual loan installment. The debt reserve will accumulate at the rate of one-tenth of an average annual loan installment each year unless prohibited by state law.(f)
Membership authorization. For organizations other than public bodies, the membership will authorize the project and its financing. Form RD 1942-8, “Resolution of Members or Stockholders,” may be used for this authorization. The approval official may accept RUS Bulletin 1780-28, “Loan Resolution Security Agreement,” without such membership authorization when State statutes and the organization's charter and bylaws do not require such authorization; and(1) The organization is well established and is operating with a sound financial base; or
(2) The members of the organization have all signed an enforceable user agreement with a penalty clause and have made the required meaningful user cash contribution.
(g)
Insurance. The purpose of RUS's insurance requirements is to protect the government's financial interest based on the facility financed with loan funds. It is the responsibility of the applicant and not that of RUS to assure that adequate insurance and fidelity or employee dishonesty bond coverage is maintained. The requirements below apply to all types of coverage determined necessary. The approval official may grant exceptions to normal requirements when appropriate justification is provided establishing that it is in the best interest of the applicant and will not adversely affect the government's interest.(1) Insurance requirements proposed by the applicant will be accepted if the processing office determines that proposed coverage is adequate to protect the government's financial interest. Applicants are encouraged to have their attorney, consulting engineer, and/or insurance provider(s) review proposed types and amounts of coverage, including any deductible provisions.
(2) The use of deductibles may be allowed by RUS providing the applicant has financial resources which would likely be adequate to cover potential claims requiring payment of the deductible.
(3) Fidelity or employee dishonesty bonds. Applicants will provide coverage for all persons who have access to funds, including persons working under a contract or management agreement. Coverage may be provided either for all individual positions or persons, or through “blanket” coverage providing protection for all appropriate employees. An exception may be granted by the approval official when funds relating to the facility financed are handled by another entity and it is determined that the entity has adequate coverage or the government's interest would otherwise be adequately protected. The amount of coverage required by RUS will normally approximate the total annual debt service requirements for the RUS loans.
(4) Property insurance. Fire and extended coverage will normally be maintained on all structures except as noted below. Ordinarily, RUS should be listed as mortgagee on the policy when RUS has a lien on the property. Normally, major items of equipment or machinery located in the insured structures must also be covered. Exceptions:
(i) Reservoirs, pipelines and other structures if such structures are not normally insured;
(ii) Subsurface lift stations except for the value of electrical and pumping equipment therein.
(5) General liability insurance, including vehicular coverage.
(6) Flood insurance required for facilities located in special flood-and mudslide-prone areas.
(7) Worker's compensation. The borrower will carry worker's compensation insurance for employees in accordance with State laws.
(h) [Reserved]
(i) The processing office will assure that appropriate forms and documents listed in RUS Bulletin 1780-6 are complete. Letters of conditions will not be issued unless funds are available.
[62 FR 33478, June 19, 1997, as amended at 63 FR 68655, Dec. 11, 1998; 64 FR 29946, June 4, 1999] § 1780.40 [Reserved] § 1780.41 Loan or grant approval. (a) The processing office will submit the following to the approval official:
(1) Form RD 1942-45, “Project Summary”;
(2) Form RD 442-7, “Operating Budget”;
(3) Form RD 442-3, “Balance Sheet” or a financial statement or audit that includes a balance sheet;
(4) Form RD 442-14, “Association Project Fund Analysis”;
(5) “Letter of Conditions”;
(6) Form RD 1942-46, “Letter of Intent to Meet Conditions”;
(7) Form RD 1940-1, “Request for Obligation of Funds”;
(8) Completed environmental review documents including copies of public
notices and appropriate proof of publication, if applicable; and (9) Grant determination, if applicable.
(b) Approval and applicant notification will be accomplished by mailing to the applicant on the obligation date a copy of Form RD 1940-1. The date the applicant is notified is also the date the interest rate at loan approval is established.
[62 FR 33478, June 19, 1997, as amended at 63 FR 68655, Dec. 11, 1998] § 1780.42 Transfer of obligations. An obligation of funds established for an applicant may be transferred to a different (substituted) applicant provided:
(a) The substituted applicant is eligible and has the authority to receive the assistance approved for the original applicant; and
(b) The need, purpose(s) and scope of the project for which RUS funds will be used remain substantially unchanged.
§ 1780.43 [Reserved] § 1780.44 Actions prior to loan or grant closing or start of construction, whichever occurs first. (a) Applicants must provide evidence of adequate insurance and fidelity or employee dishonesty bond coverage.
(b)
Verification of users and other funds. In connection with a project that involves new users and will be secured by a pledge of user fees or revenues, the processing office will authenticate the number of users. Ordinarily each signed user agreement will be reviewed and checked for evidence of cash contributions. If during the review any indication is received that all signed users may not connect to the system, there will be such additional investigation made as deemed necessary to determine the number of users who will connect to the system.(c)
Initial compliance review. An initial compliance review should be completed under subpart E of part 1901 of this title.(d)
Applicant contribution. An applicant contributing funds toward the project cost shall deposit these funds in its project account before start of construction. Project costs paid with applicant funds prior to the required deposit time shall be appropriately accounted for.(e)
Excess RUS loan and grant funds. If there is a significant reduction in project cost, the applicant's funding needs will be reassessed. Decreases in RUS funds will be based on revised project costs and current number of users, however, other factors including RUS regulations used at the time of loan or grant approval will remain the same. Obligated loan or grant funds not needed to complete the proposed project will be deobligated. Any reduction will be applied to grant funds first. In such cases, applicable forms, the letter of conditions, and other items will be revised.(f)
Evidence of and disbursement of other funds. Applicants expecting funds from other sources for use in completing projects being partially financed with RUS funds will present evidence of the commitment of these funds from such other sources. An agreement should be reached with all funding sources on how funds are to be disbursed before the start of construction. RUS funds will not be used to pre-finance funds committed to the project from other sources.(g)
Acquisition of land, easements, water rights, and existing facilities. Applicants are responsible for acquisition of all property rights necessary for the project and will determine that prices paid are reasonable and fair. RUS may require an appraisal by an independent appraiser or Agency employee.(1)
Rights-of-way and easements. Applicants will obtain valid, continuous and adequate rights-of-way and easements needed for the construction, operation, and maintenance of the facility.(i) The applicant must provide a legal opinion relative to the title to rights-of-way and easements. Form RD 442-22, “Opinion of Counsel Relative to Rights-of-Way,” may be used. When a site is for major structures such as a reservoir or pumping station and the applicant is able to obtain only a right-of-way or easement on such a site rather than a fee simple title, the applicant will furnish a title report thereon by the applicant's attorney showing ownership of the land and all mortgages or
other lien defects, restrictions, or encumbrances, if any. (ii) For user connections funded by RUS, applicants will obtain adequate rights to construct and maintain the connection line or other facilities located on the user's property. This right may be obtained through formal easement or user agreements.
(2)
Title for land or existing facilities. Title to land essential to the successful operation of facilities or title to facilities being purchased, must not contain any restrictions that will adversely affect the suitability, successful operation, security value, or transferability of the facility. Preliminary and final title opinions must be provided by the applicant's attorney. The opinions must be in sufficient detail to assess marketability of the property. Form RD 1927-9, “Preliminary Title Opinion,” and Form RD 1927-10, “Final Title Opinion,” may be used to provide the required title opinions.(i) In lieu of receiving title opinions from the applicant's attorney, the applicant may use a title insurance company. If a title insurance company is used, the applicant must provide the Agency a title insurance binder, disclosing all title defects or restrictions, and include a commitment to issue a title insurance policy. The policy should be in an amount at least equal to the market value of the property as improved. The title insurance binder and commitment should be provided to the Agency prior to requesting closing instructions. The Agency will be provided a title insurance policy which will insure RUS's interest in the property without any title defects or restrictions which have not been waived by the Agency.
(ii) The approval official may waive title defects or restrictions, such as utility easements, that do not adversely affect the suitability, successful operation, security value, or transferability of the facility.
(3)
Water rights. The following will be furnished as applicable:(i) A statement by the applicant's attorney regarding the nature of the water rights owned or to be acquired by the applicant (such as conveyance of title, appropriation and decree, application and permit, public notice and appropriation and use).
(ii) A copy of a contract with another company or municipality to supply water; or stock certificates in another company which represents the right to receive water.
(4)
Lease agreements. Where the right of use or control of real property not owned by the applicant is essential to the successful operation of the facility during the life of the loan, such right will be evidenced by written agreements or contracts between the owner of the property and the applicant. Lease agreements shall not contain provisions for restricted use of the site of facility, forfeiture or summary cancellation clauses. Lease agreements shall provide for the right to transfer, encumber, assign and sub-lease without restriction. Lease agreements will ordinarily be written for a term at least equal to the term of the loan. Such lease contracts or agreements will be approved by the approval official with the advice and counsel of OGC, as necessary.(h)
Obtaining loan closing instructions. The information required by OGC will be transmitted to OGC with request for closing instructions. Upon receipt of closing instructions, the processing office will discuss with the applicant and its engineer, attorney, and other appropriate representatives, the requirements contained therein and any actions necessary to proceed with closing. State program officials have the option to work with OGC to obtain waivers for closing instructions in certain cases. Closing instructions are not required for grants.§ 1780.45 Loan and grant closing and delivery of funds. (a)
Loan closing. Notes and bonds will be completed on the date of loan closing except for the entry of subsequent RUS multiple advances where applicable. The amount of each note will be in multiples of not less than $100. The amount of each bond will ordinarily be in multiples of not less than $1,000.(1) Form RD 440-22, “Promissory Note (Association or Organization),” will ordinarily be used for loans to nonpublic bodies.
(2) RUS Bulletins 1780-27, “Loan Resolution (Public Bodies),” or 1780-28, “Loan Resolution Security Agreement,” will be adopted by public and other-than-public bodies. These resolutions supplement other provisions in this part.
(3) Subpart D of this part contains instructions for preparation of notes and bonds evidencing indebtedness of public bodies.
(b)
Loan disbursement. (1) Multiple advances. Multiple advances will be used only for loans in excess of $100,000. Advances will be made only as needed to cover disbursements required by the borrower over a 30-day period.(i) Subpart D of this part contains instructions for making multiple advances to public bodies.
(ii) Advances will be requested by the borrower in writing. The request should be in sufficient amounts to pay cost of construction, rights-of-way and land, legal, engineering, interest, and other expenses as needed. The borrower may use Form RD 440-11, “Estimate of Funds Needed for 30 Day Period Commencing XXX,” to show the amount of funds needed during the 30-day period.
(2) RUS loan funds obligated for a specific purpose, such as the paying of interest, but not needed at the time of loan closing will remain in the Finance Office until needed unless State statutes require all funds to be delivered to the borrower at the time of closing. Loan funds may be advanced to prepay costs under § 1780.9 (e)(2)(iv). If all funds must be delivered to the borrower at the time of closing to comply with State statutes, funds not needed at loan closing will be handled as follows:
(i) Deposited in an appropriate borrower account, such as debt service or construction accounts; or
(ii) Deposited in a joint bank account under paragraph (e)(3) of this section.
(c)
Grant closing. RUS Bulletin 1780-12 “Water or Waste System Grant Agreement” of this part will be completed and executed in accordance with the requirements of grant approval. The grant will be considered closed when RUS Bulletin 1780-12 has been properly executed. Processing or approval officials are authorized to sign the grant agreement on behalf of RUS. For grants that supplement RUS loan funds, the grant should be closed simultaneously with the closing of the loan. However, when grant funds will be disbursed before loan closing, as provided in paragraph (d)(1) of this section, the grant will be closed not later than the delivery date of the first advance of grant funds.(d)
Grant disbursements. RUS policy is not to disburse grant funds from the Treasury until they are actually needed by the applicant. Applicant funds will be disbursed before the disbursal of any RUS grant funds. RUS loan funds will be disbursed before the disbursal of any RUS grant funds except when:(1) Interim financing of the total estimated amount of loan funds needed during construction is arranged; and
(2) All interim funds have been disbursed; and
(3) RUS grant funds are needed before the RUS loan can be closed.
(e)
Use and accountability of funds. (1) Arrangements will be agreed upon for the prior concurrence by the Agency of the bills or vouchers upon which warrants will be drawn. Form RD 402-2, “Statement of Deposits and Withdrawals,” or similar form will be used by the Agency to monitor funds. Periodic reviews of these accounts shall be made by the Agency.(2)
Pledge of collateral for grants to nonprofit organizations. Grant funds must be deposited in a bank with Federal Deposit Insurance Corporation (FDIC) insurance coverage. Also, if the balance in the account containing grant funds exceeds the FDIC insurance coverage, the excess amount must be collaterally secured. The pledge of collateral for the excess will be in accordance with Treasury Circular 176.(3)
Joint RUS/borrower bank account. RUS funds and any funds furnished by the borrower including contributions to purchase major items of equipment, machinery, and furnishings will be deposited in a joint RUS/borrower bank account if determined necessary by the approval official. When RUS has a Memorandum of Understanding with another agency that provides for the use of joint RUS/borrower accounts, or when RUS is the primary source of funds for a project and has determined that the use of a joint RUS/borrower bank account is necessary, projectfunds from other sources may also be deposited in the joint bank account. RUS shall not be accountable to the source of the other funds nor shall RUS undertake responsibility to administer the funding program of the other entity. Joint RUS/borrower bank accounts should not be used for funds advanced by an interim lender. When funds exceeds the FDIC insurance coverage, the excess must have a pledge of collateral in accordance with Treasury Circular 176. (4)
Payment for project costs. Project costs will be monitored by the RUS processing office. Invoices will be approved by the borrower and their engineer, as appropriate, and submitted to the processing office for concurrence. The review and acceptance of project costs, including construction pay estimates, by RUS does not attest to the correctness of the amounts, the quantities shown or that the work has been performed under the terms of the agreements or contracts.(f)
Use of remaining funds. Funds remaining after all costs incident to the basic project have been paid or provided for will not include applicant contributions. Funds remaining, may be considered in direct proportion to the amounts obtained from each source. Remaining funds will be handled as follows:(1) Remaining funds may be used for eligible loan or grant purposes, provided the use will not result in major changes to the facility(s) and the purpose of the loan and grant remains the same;
(2) RUS loan funds that are not needed will be applied as an extra payment on the RUS indebtedness unless other disposition is required by the bond ordinance, resolution, or State statute; and
(3) Grant funds not expended under paragraph (f)(1) of this section will be canceled. Prior to the actual cancellation, the borrower, its attorney and its engineer will be notified of RUS's intent to cancel the remaining funds. The applicant will be given appropriate appeal rights.
(g)
Post review of loan closing. In order to determine that the loan has been properly closed the loan docket will be reviewed by OGC. The State program official has the option to consult with OGC to obtain waivers of this review.[62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999] § 1780.46 [Reserved] § 1780.47 Borrower accounting methods, management reporting and audits. (a) Borrowers are required to provide RUS an annual audit or financial statements.
(b)
Method of accounting and preparation of financial statements. Annual organization-wide financial statements must be prepared on the accrual basis of accounting, in accordance with generally accepted accounting principles (GAAP), unless State statutes or regulatory agencies provide otherwise, or an exception is granted by the Agency. An organization may maintain its accounting records on a basis other than accrual accounting, and make the necessary adjustments so that annual financial statements are presented on the accrual basis.(c)
Record retention. Each borrower shall retain all records, books, and supporting material for 3 years after the issuance of the audit or management reports. Upon request, this material will be made available to RUS, Office of the Inspector General (OIG), United States Department of Agriculture (USDA), the Comptroller General, or to their assignees.(d)
Audits. All audits are to be performed in accordance with the latest revision of the generally accepted government auditing standards (GAGAS), developed by the Comptroller General of the United States. In addition, the audits are also to be performed in accordance with various Office of Management and Budget (OMB) Circulars. The type of audit each borrower is required to submit will be designated by RUS. Further guidance on preparing an acceptable audit can be obtained from RUS. It is not intended that audits required by this part be separate and apart from audits performed in accordance with State and local laws. To the extent feasible, the audit work should be done in conjunction with those audits. Audits shall be annual unless otherwise prohibited and supplied to theprocessing office as soon as possible but in no event later than 150 days following the period covered by the audit. OMB Circulars are available in any USDA/RUS office. (e)
Borrowers exempt from audits. All borrowers who are exempt from audits, will, within 60 days following the end of each fiscal year, furnish the RUS with annual financial statements, consisting of a verification of the organization's balance sheet and statement of income and expense by an appropriate official of the organization. Forms RD 442-2, “Statement of Budget, Income and Equity,” and 442-3 may be used.(f)
Management reports. These reports will furnish management with a means of evaluating prior decisions and serve as a basis for planning future operations and financial strategies. In those cases where revenues from multiple sources are pledged as security for an RUS loan, two reports will be required; one for the project being financed by RUS and one combining the entire operation of the borrower. In those cases where RUS loans are secured by general obligation bonds or assessments and the borrower combines revenues from all sources, one management report combining all such revenues is acceptable. The following management data will be submitted by the borrower to the processing office. These reports at a minimum will include a balance sheet and income and expense statement.(1)
Quarterly reports. A quarterly management report will be required for the first year for new borrowers and for all borrowers experiencing financial or management problems for one year from the date problems were noted. If the borrower's account is current at the end of the year, the processing office may waive the required reports.(2)
Annual management reports. Prior to the beginning of each fiscal year the following will be submitted to the processing office. (If Form RD 442-2 is used as the annual management report, enter data in column three only of Schedule 1, and complete all of Schedule 2.)(i) Two copies of the management reports and proposed “Annual Budget”.
(ii) Financial information may be reported on Form RD 442-2 which includes Schedule 1, “Statement of Budget, Income and Equity” and Schedule 2, “Projected Cash Flow” or information in similar format.
(iii) A copy of the rate schedule in effect at the time of submission.
(g)
Substitute for management reports. When RUS loans are secured by the general obligation of the public body or tax assessments which total 100 percent of the debt service requirements, the State program official may authorize an annual audit to substitute for other management reports if the audit is received within 150 days following the period covered by the audit.§ 1780.48 Regional commission grants. Grants are sometimes made by regional commissions for projects eligible for RUS assistance. RUS has agreed to administer such funds in a manner similar to administering RUS assistance.
(a) When RUS has funds in the project, no charge will be made for administering regional commission funds.
(b) When RUS has no loan or grant funds in the project, an administrative charge will be made pursuant to the Economy Act of 1932 (31 U.C.S. 1535). A fee of 5 percent of the first $100,000 of a regional commission grant and 1 percent of any amount over $100,000 will be paid to RUS by the commission.
(1)
Appalachian Regional Commission (ARC). RUS Bulletin 1780-23 will be followed in determining the responsibilities of RUS. The ARC Federal Co-chairman and the State program official will provide each other with the necessary notification and certification.(2)
Other regional commissions. Title V of the Public Works and Economic Development Act of 1965 (42 U.S.C. 3121et seq. ) authorizes other commissions similar to ARC. RUS Bulletin 1780-23 will be used to develop a separate project management agreement between RUS and the commission for each project. The agreement should be prepared by the State program official as soon as notification is received that a commission grant will be made and the amount is confirmed.(c) Regional commission grants should be obligated as soon as possible
in accordance with § 1780.41, except that the announcement procedure referred to in RUS Staff Instruction 1780-2 is not applicable. Regional commission grants will be disbursed from the Finance Office in the same manner as RUS funds. [62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999] § 1780.49 Rural or Native Alaskan villages. (a)
General. (1) This section contains regulations for providing grants to remedy the dire sanitation conditions in rural Alaskan villages using funds specifically made available for this purpose.(2) Unless specifically modified by this section, grants will be made, processed, and serviced in accordance with this subpart.
(b)
Definitions— (1)Dire sanitation condition. For the purpose of this section a dire sanitation condition exists where:(i) Recurring instances of a waterborne communicable disease have been documented; or
(ii) No community-wide water and sewer system exists and individual residents must haul water to or human waste from their homes and/or use pit privies.
(2)
Rural or Native Alaskan village. A rural or Native Alaskan community which meets the definition of a village under State statutes and does not have a population in excess of 10,000 inhabitants, according to the latest decennial Census of the United States.(c)
Eligibility. (1) The applicant must be a rural or Native Alaskan village.(2) The median household income of the village cannot exceed 110 percent of the statewide nonmetropolitan household income.
(3) A dire sanitation condition must exist in the village.
(4) The applicant must obtain 25 percent of project development costs from State or local contributions. The local contribution can be from loan funds authorized under this part.
(d)
Grant amount. Grants will be made for up to 75 percent of the project development costs.(e)
Use of funds. Grant funds can be used to pay reasonable costs associated with providing potable water or waste disposal services to residents of rural or Native Alaskan villages.(f)
Construction. (1) If the State of Alaska is contributing to the project costs, the project does not have to meet the construction requirements of this subpart.(2) If a loan is made in accordance with this part for part of the local contribution, all of the requirements of this part apply.
[62 FR 33478, June 19, 1997, as amended at 64 FR 29946, June 4, 1999] §§ 1780.50-1780.52 [Reserved] Subpart C—Planning, Designing, Bidding, Contracting, Constructing and Inspections § 1780.53 General. This subpart is specifically designed for use by owners including the professional or technical consultants or agents who provide assistance and services such as engineering, environmental, inspection, financial, legal or other services related to planning, designing, bidding, contracting, and constructing water and waste disposal facilities. These procedures do not relieve the owner of the contractual obligations that arise from the procurement of these services. For this subpart, an owner is defined as an applicant, borrower, or grantee.
§ 1780.54 Technical services. Owners are responsible for providing the engineering, architect and environmental services necessary for planning, designing, bidding, contracting, inspecting, and constructing their facilities. Services may be provided by the owner's “in house” engineer or architect or through contract, subject to Agency concurrence. Engineers and architects must be licensed in the State where the facility is to be constructed.
§ 1780.55 Preliminary engineering reports and Environmental Reports. Preliminary engineering reports (PERs) must conform to customary professional standards. PER guidelines for water, sanitary sewer, solid waste, and storm sewer are available from the Agency. Environmental Reports must
meet the policies and intent of the National Environmental Policy Act and RUS procedures. Guidelines for preparing Environmental Reports are available in RUS Bulletin 1794A-602. [64 FR 29946, June 4, 1999] § 1780.56 [Reserved] § 1780.57 Design policies. Facilities financed by the Agency will be designed and constructed in accordance with sound engineering practices, and must meet the requirements of Federal, State and local agencies.
(a)
Environmental review. Facilities financed by the Agency must undergo an environmental impact analysis in accordance with the National Environmental Policy Act and RUS procedures. Facility planning and design must not only be responsive to the owner's needs but must consider the environmental consequences of the proposed project. Facility design shall incorporate and integrate, where practicable, mitigation measures that avoid or minimize adverse environmental impacts. Environmental reviews serve as a means of assessing environmental impacts of project proposals, rather than justifying decisions already made. Applicants may not take any action on a project proposal that will have an adverse environmental impact or limit the choice of reasonable project alternatives being reviewed prior to the completion of the Agency's environmental review.(b)
Architectural barriers. All facilities intended for or accessible to the public or in which physically handicapped persons may be employed must be developed in compliance with the Architectural Barriers Act of 1968 (42 U.S.C. 4151et seq. ) as implemented by 41 CFR 101-19.6, section 504 of the Rehabilitation Act of 1973 (42 U.S.C 1474et seq. ) as implemented by 7 CFR parts 15 and 15b, and Titles II and III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12101et seq. ).(c)
Energy/environment. Facility design should consider cost effective energy-efficient and environmentally-sound products and services.(d)
Fire protection. Water facilities should have sufficient capacity to provide reasonable fire protection to the extent practicable.(e)
Growth capacity. Facilities should have sufficient capacity to provide for reasonable growth to the extent practicable.(f)
Water conservation. Owners are encouraged, when economically feasible, to incorporate water conservation practices into a facility's design. For existing water systems, evidence must be provided showing that the distribution system water losses do not exceed reasonable levels.(g)
Conformity with State drinking water standards. No funds shall be made available under this part for a water system unless the Agency determines that the water system will make significant progress toward meeting the standards established under title XIV of the Public Health Service Act (commonly known as the ‘Safe Drinking Water Act') (42 U.S.C. 300fet seq. ).(h)
Conformity with Federal and State water pollution control standards. No funds shall be made available under this part for a water treatment discharge or waste disposal system unless the Agency determines that the effluent from the system conforms with applicable Federal and State water pollution control standards.(i)
Combined sewers. New combined sanitary and storm water sewer facilities will not be financed by the Agency. Extensions to existing combined systems can only be financed when separate systems are impractical.(j)
Dam safety. Projects involving any artificial barrier which impounds or diverts water, or the rehabilitation or improvement of such a barrier, must comply with the provisions for dam safety as set forth in the Federal Guidelines for Dam Safety (Government Printing Office stock No. 041-001-00187-5, Superintendent of Documents, Attn: New Orders, P.O. Box 371954, Pittsburgh, PA 15250-7954) as prepared by the Federal Coordinating Council for Science, Engineering and Technology.(k)
Pipe. All pipe used shall meet current American Society for Testing Materials (ASTM) or American Water Works Association (AWWA) standards.(l)
Water system testing. For new water systems or extensions to existing watersystems, leakage shall not exceed limits set by either ASTM or AWWA whichever is the more stringent. (m)
Metering devices. Water facilities financed by the Agency will have metering devices for each connection. An exception to this requirement may be granted by the State program official when the owner demonstrates that installation of metering devices would be a significant economic detriment and that environmental considerations would not be adversely affected by not installing such devices. Sanitary sewer projects should incorporate water system metering devices whenever practicable.(n)
Economical service. The facility's design must provide the most economical service practicable.(o)
Seismic safety. All new structures, fully or partially enclosed, used or intended for sheltering persons or property will be designed with appropriate seismic safety provisions in compliance with the Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701et seq. ), and Executive Order 12699, Seismic Safety of Federal and Federally Assisted or Regulated New Building Construction (3 CFR, 1990 Comp., p. 269). Designs of components essential for system operation and substantial rehabilitation of structures that are used for sheltering persons or property should incorporate seismic safety provisions to the extent practicable. RUS implementing regulations for seismic safety are in 7 CFR part 1972, subpart C.[62 FR 33478, June 19, 1997, as amended at 63 FR 68655, Dec. 11, 1998; 64 FR 29946, June 4, 1999] §§ 1780.58-1780.60 [Reserved] § 1780.61 Construction contracts. Contract documents must be sufficiently descriptive and legally binding in order to accomplish the work as economically and expeditiously as possible.
(a)
Standard construction contract documents. If the construction contract documents utilized are not in the format previously approved by the Agency, OGC's review of the construction contract documents will be obtained prior to their use.(b)
Contract review and concurrence. The owner's attorney will review the executed contract documents, including performance and payment bonds, and will certify that they are adequate, and that the persons executing these documents have been properly authorized to do so. The contract documents, engineer's recommendation for award, and bid tabulation sheets will be forwarded to the Agency for concurrence prior to awarding the contract. All contracts will contain a provision that they are not effective until they have been concurred in by the Agency. The State program official or designee is responsible for concurring in construction contracts with the legal advice and guidance of the OGC when necessary.§ 1780.62 Utility purchase contracts. Applicants proposing to purchase water or other utility service from private or public sources shall have written contracts for supply or service which are reviewed and concurred in by the Agency. To the extent practical, the Agency review and concurrence of such contracts should take place prior to their execution by the owner. OGC advice and guidance may be requested. Form RD 442-30, “Water Purchase Contract,” may be used when appropriate. If the Agency loan will be repaid from system revenues, the contract will be pledged to the Agency as part of the security for the loan. Such contracts will:
(a) Include a commitment by the supplier to furnish, at a specified point, an adequate quantity of water or other service and provide that, in case of shortages, all of the supplier's users will proportionately share shortages.
(b) Set out the ownership and maintenance responsibilities of the respective parties including the master meter if a meter is installed at the point of delivery.
(c) Specify the initial rates and provide a type of escalator clause which will permit rates for the association to be raised or lowered proportionately as certain specified rates for the supplier's regular customers are raised or lowered. Provisions may be made for altering rates in accordance with the decisions of the appropriate State
agency which may have regulatory authority. (d) Cover period of time which is at least equal to the repayment period of the loan. State program officials may approve contracts for shorter periods of time if the supplier cannot legally contract for such period, or if the owner and supplier find it impossible or impractical to negotiate a contract for the maximum period permissible under State law, provided:
(1) The supplier is subject to regulations of the Federal Energy Regulatory Commission or other Federal or State agency whose jurisdiction can be expected to prevent unwarranted curtailment of supply; or
(2) The contract contains adequate provisions for renewal; or
(3) A determination is made that in the event the contract is terminated, there are or will be other adequate sources available to the owner that can feasibly be developed or purchased.
(e) Set out in detail the amount of connection or demand charges, if any, to be made by the supplier as a condition to making the service available to the owner. However, the payment of such charges from loan funds shall not be approved unless the Agency determines that it is more feasible and economical for the owner to pay such a connection charge than it is for the owner to provide the necessary supply by other means.
(f) Provide for a pledge of the contract to the Agency as part of the security for the loan.
(g) Not contain provisions for:
(1) Construction of facilities which will be owned by the supplier. This does not preclude the use of money paid as a connection charge for construction to be done by the supplier.
(2) Options for the future sale or transfer. This does not preclude an agreement recognizing that the supplier and owner may at some future date agree to a sale of all or a portion of the facility.
(h) If it is impossible to obtain a firm commitment for either an adequate quantity or sharing shortages proportionately, a contract may be executed and concurred in provided adequate evidence is furnished to enable the Agency to make a determination that the supplier has adequate supply and/or treatment facilities to furnish its other users and the applicant for the foreseeable future; and:
(1) The supplier is subject to regulations of the Federal Energy Regulatory Commission or other Federal or State agency whose jurisdiction can be expected to prevent unwarranted curtailment of supply; or
(2) A suitable alternative supply could be arranged within the repayment ability of the borrower if it should become necessary; or
(3) Concurrence in the proposed contract is obtained from the National Office.
§ 1780.63 Sewage treatment and bulk water sales contracts. Owners entering into agreements with private or public parties to treat sewage or supply bulk water shall have written contracts for such service and all such contracts shall be subject to the Agency concurrence. Section 1780.62 should be used as a guide to prepare such contracts.
§§ 1780.64-1780.66 [Reserved] § 1780.67 Performing construction. Owners are encouraged to accomplish construction through contracts with qualified contractors. Owners may accomplish construction by using their own personnel and equipment provided the owners possess the necessary skills, abilities and resources to perform the work and provided a licensed engineer prepares design drawings and specifications and inspects construction and furnishes inspection reports as required by § 1780.76. Inspection services may be provided by individuals as approved by the State staff engineer. Payments for construction will be handled under § 1780.76(e).
§ 1780.68 Owner's contractual responsibility. This part does not relieve the owner of any responsibilities under its contract. The owner is responsible for the settlement of all contractual and administrative issues arising out of procurement entered into in support of a loan or grant. These include, but are
not limited to: source evaluation, protests, disputes, and claims. Matters concerning violation of laws are to be referred to the applicable local, State, or Federal authority. § 1780.69 [Reserved] § 1780.70 Owner's procurement regulations. Owner's procurement requirements must comply with the following standards:
(a)
Code of conduct. Owners shall maintain a written code or standards of conduct which shall govern the performance of their officers, employees or agents engaged in the award and administration of contracts supported by Agency funds. No employee, officer or agent of the owner shall participate in the selection, award, or administration of a contract supported by Agency funds if a conflict of interest, real or apparent, would be involved. Examples of such conflicts would arise when: the employee, officer or agent; any member of their immediate family; their partner; or an organization which employs, or is about to employ, any of the above; has a financial or other interest in the firm selected for the award.(1) The owner's officers, employees or agents shall neither solicit nor accept gratuities, favors or anything of monetary value from contractors, potential contractors, or parties to subagreements.
(2) To the extent permitted by State or local law or regulations, the owner's standards of conduct shall provide for penalties, sanctions, or other disciplinary actions for violations of such standards by the owner's officers, employees, agents, or by contractors or their agents.
(b)
Maximum open and free competition. All procurement transactions, regardless of whether by sealed bids or by negotiation and without regard to dollar value, shall be conducted in a manner that provides maximum open and free competition. Procurement procedures shall not restrict or eliminate competition. Examples of what are considered to be restrictive of competition include, but are not limited to: placing unreasonable requirements on firms in order for them to qualify to do business; noncompetitive practices between firms; organizational conflicts of interest; and unnecessary experience and bonding requirements. In specifying materials, the owner and its consultant will consider all materials normally suitable for the project commensurate with sound engineering practices and project requirements. The Agency shall consider fully any recommendation made by the owner concerning the technical design and choice of materials to be used for a facility. If the Agency determines that a design or material, other than those that were recommended should be considered by including them in the procurement process as an acceptable design or material in the water or waste disposal facility, the Agency shall provide such owner with a comprehensive justification for such a determination. The justification will be documented in writing.(c)
Owner's review. Proposed procurement actions shall be reviewed by the owner's officials to avoid the purchase of unnecessary or duplicate items. Consideration should be given to consolidation or separation of procurement items to obtain a more economical purchase. Where appropriate, an analysis shall be made of lease versus purchase alternatives, and any other appropriate analysis to determine which approach would be the most economical. To foster greater economy and efficiency, owners are encouraged to enter into State and local intergovernmental agreements for procurement or use of common goods and services.(d) Solicitation of offers, whether by competitive sealed bid or competitive negotiation, shall:
(1) Incorporate a clear and accurate description of the technical requirements for the material, product or service to be procured. When it is impractical or uneconomical to make a clear and accurate description of the technical requirements, a “brand name or equal” description may be used to define the performance or other salient requirements of a procurement. The specific feature of the name brands which must be met by the offeror shall be clearly stated; and
(2) Clearly specify all requirements which offerors must fulfill and all
other factors to be used in evaluating bids or proposals. (e) Affirmative steps should be taken to assure that small, minority, and women businesses are utilized when possible as sources of supplies, equipment, construction and services.
(f)
Contract pricing. Cost plus a percentage of cost method of contracting shall not be used.(g)
Unacceptable bidders. The following will not be allowed to bid on, or negotiate for, a contract or subcontract related to the construction of the project:(1) An engineer as an individual or firm who has prepared plans and specifications or who will be responsible for monitoring the construction;
(2) Any firm or corporation in which the owner's engineer is an officer, employee, or holds or controls a substantial interest;
(3) The governing body's officers, employees, or agents;
(4) Any member of the immediate family or partners in the entities referred to in paragraphs (g)(1), (g)(2) or (g)(3) of this section; or
(5) An organization which employs, or is about to employ, any person in the entities referred to in paragraphs (g)(1), (g)(2), (g)(3) or (g)(4) of this section.
(h)
Contract award. Contracts shall be made only with responsible parties possessing the potential ability to perform successfully under the terms and conditions of a proposed procurement. Consideration shall include but not be limited to matters such as integrity, record of past performance, financial and technical resources, and accessibility to other necessary resources. Contracts shall not be made with parties who are suspended or debarred by any Agency of the United States Government.§ 1780.71 [Reserved] § 1780.72 Procurement methods. Procurement shall be made by one of the following methods: Small purchase procedures; competitive sealed bids (formal advertising); competitive negotiation; or noncompetitive negotiation. Competitive sealed bids (formal advertising) is the preferred procurement method for construction contracts.
(a)
Small purchase procedures. Small purchase procedures are those relatively simple and informal procurement methods that are sound and appropriate for a procurement of services, supplies or other property, costing in the aggregate not more than $100,000. If small purchase procedures are used for a procurement, written price or rate quotations shall be requested from at least three qualified sources.(b)
Competitive sealed bids. In competitive sealed bids (formal advertising), an invitation for sealed bids is publicly advertised and a firm-fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is lowest, price and other factors considered. When using this method the following shall apply:(1) The invitation for bids shall be publicly advertised at a sufficient time prior to the date set for opening of bids. The invitation shall comply with the requirements in § 1780.70(d). Bids shall be solicited from an adequate number of qualified sources;
(2) All bids shall be opened publicly at the time and place stated in the invitation for bids;
(3) A firm-fixed-price contract award shall be made by written notice to that responsible bidder whose bid, conforming to the invitation for bids, is lowest. When specified in the bidding documents, factors such as discounts and transportation costs shall be considered in determining which bid is lowest; and
(4) Any or all bids may be rejected by the owner when it is in its best interest.
(c)
Competitive negotiation. In competitive negotiations, proposals are requested from a number of sources and the Request for Proposal is publicized. Negotiations are normally conducted with more than one of the sources submitting offers. Competitive negotiation may be used if conditions are not appropriate for the use of formal advertising and where discussions and bargaining with a view to reaching agreement on the technical quality, price, other terms of the proposed contractand specifications may be necessary. If competitive negotiation is used for a procurement, the following requirements shall apply: (1) Proposals shall be solicited from an adequate number of qualified sources to permit reasonable competition consistent with the nature and requirements of the Procurement. The Request for Proposal shall be publicized and reasonable requests by other sources to compete shall be honored to the maximum extent practicable;
(2) The Request for Proposal shall identify all significant evaluation factors and their relative importance;
(3) The owner shall provide mechanisms for technical evaluation of the proposals received, determination of responsible offerors for the purpose of written or oral discussions, and selection for contract award; and
(4) Award may be made to the responsible offeror whose proposal will be most advantageous to the owner. Unsuccessful offerors should be promptly notified.
(d)
Noncompetitive negotiation. Noncompetitive negotiation is procurement through solicitation of a proposal from only one source, or after solicitation of a number of sources, competition is determined inadequate. Noncompetitive negotiation may be used when the award of a contract is not feasible under small purchase or competitive sealed bids. Circumstances under which a contract may be awarded by noncompetitive negotiations are limited to the following:(1) The item is available only from a single source; or
(2) There exists a public exigency or emergency and the urgency for the requirement will not permit a delay incident to competitive solicitation; or
(3) After solicitation of a number of sources, competition is determined inadequate; or
(4) No acceptable bids have been received after formal advertising; or
(5) The procurement is for professional services; or
(6) The aggregate amount does not exceed $100,000.
§ 1780.73 [Reserved] § 1780.74 Contracts awarded prior to applications. Owners awarding construction or other procurement contracts prior to filing an application, must provide evidence that is satisfactory to the Agency that the contract was entered into without intent to circumvent the requirements of Agency regulations.
(a)
Modifications. The contract shall be modified to conform with the provisions of this part. Where this is not possible, modifications will be made to the extent practicable and, as a minimum, the contract must comply with all State and local laws and regulations as well as statutory requirements and executive orders related to the Agency financing. When all construction is complete and it is impracticable to modify the contracts, the owner must provide the certification required by paragraph (c) of this section.(b)
Consultant's certification. Provide a certification by an engineer, licensed in the State where the facility is constructed, that any construction performed complies fully with the plans and specifications.(c)
Owner's certification. Provide a certification by the owner that the contractor has complied with applicable statutory and executive requirements related to Agency financing for construction already performed.§ 1780.75 Contract provisions. In addition to provisions required for a valid and legally binding contract, any recipient of Agency funds shall include the following contract provisions in all contracts.
(a)
Remedies. Contracts other than small purchases shall contain provisions or conditions which will allow for administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as may be appropriate. A realistic liquidated damage provision should be included in all contracts for construction.(b)
Termination. All contracts exceeding $10,000, shall contain suitable provisions for termination by the owner including the manner by which it will beeffected and the basis for settlement. In addition, such contracts shall describe conditions under which the contract may be terminated for default as well as conditions where the contract may be terminated because of circumstances beyond the control of the contractor. (c)
Surety. In all contracts for construction or facility improvements exceeding $100,000, the owner shall require bonds or cash deposit in escrow assuring performance and payment each in the amount of 100 percent of the contract cost. The surety will be in the form of performance bonds and payment bonds. For contracts of lesser amounts, the owner may require surety. When a surety is not provided, contractors will furnish evidence of payment in full for all materials, labor, and any other items procured under the contract. Form RD 1924-10, “Release by Claimants,” and Form RD 1924-9, “Certificate of Contractor's Release,” may be used for this purpose. Companies providing performance bonds and payment bonds must hold a certificate of authority as an acceptable surety on Federal bonds as listed in Treasury Circular 570 as amended and the surety must be listed as having a license to do business in the State where the facility is located.(d)
Equal employment opportunity. All contracts awarded in excess of $10,000 by owners shall contain a provision requiring compliance with Executive Order 11246 (3 CFR, 1966 Comp., p.339), entitled, “Equal Employment Opportunity,” as amended by Executive Order 11375 (3 CFR, 1968 Comp., p. 321), and as supplemented by Department of Labor regulations 41 CFR chapter 60.(e)
Anti-kickback. All contracts for construction shall include a provision for compliance with the Copeland “Anti-Kickback” Act (18 U.S.C. 874). This Act provides that each contractor shall be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which they are otherwise entitled. The owner shall report suspected or reported violations to the Agency.(f)
Records. All negotiated contracts (except those of $10,000 or less) awarded by owners shall include a provision to the effect that the owner, the Agency, the Comptroller General of the United States, or any of their duly authorized representatives, shall have access to any books, documents, papers, and records of the contractor which are directly pertinent to a specific Federal loan or grant program for the purpose of making audits, examinations, excerpts, and transcriptions. Owners shall require contractors to maintain all required records for 3 years after making final payment and all other pending matters are closed.(g)
State energy conservation plan. Contracts shall incorporate mandatory standards and policies relating to energy efficiency which are contained in the State energy conservation plan issued in compliance with the Energy Policy and Conservation Act (42 U.S.C. 6201).(h)
Change orders. The construction contract shall require that all contract change orders be concurred in by the Agency.(i)
Agency concurrence. All contracts must contain a provision that they shall not be effective unless and until the State program official or designee concurs in writing.(j)
Retainage. All construction contracts shall contain adequate provisions for retainage. No payments will be made that would deplete the retainage nor place in escrow any funds that are required for retainage nor invest the retainage for the benefit of the contractor. The retainage shall not be less than an amount equal to 5 percent of an approved partial payment estimate until the project is substantially complete and accepted by the owner, consulting engineer and Agency. The contract must provide that additional amounts may be retained if the job is not proceeding satisfactorily.(k)
Other compliance requirements. Contracts in excess of $100,000 shall contain a provision which requires compliance with all applicable standards, orders, or requirements issued under section 306 of the Clean Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act (33 U.S.C. 1368), Executive Order 11738 (3 CFR, 1974 Comp., p.209), and Environmental Protection Agency (EPA) regulations 40 CFR part15, which prohibit the use under non-exempt Federal contracts, grants or loans of facilities included on the EPA List of Violating Facilities. The provision shall require reporting of violations to the Agency and to the U.S. Environmental Protection Agency, Assistant Administrator for Enforcement. Solicitations and contract provisions shall include the requirements of 4 CFR 15.4(c) as set forth in RUS Bulletin 1780-14. § 1780.76 Contract administration. Owners shall be responsible for maintaining a contract administration system to monitor the contractors' performance and compliance with the terms, conditions, and specifications of the contracts.
(a)
Preconstruction conference. Prior to beginning construction, the owner will schedule a preconstruction conference where the consulting engineer will review the planned development with the Agency, owner, resident inspector, attorney, contractor, and other interested parties. The conference will thoroughly cover applicable items included in Form RD 1924-16, “Record of Pre-construction Conference,” and the discussions and agreements will be documented.(b)
Monitoring reports. The owner is required to monitor construction and provide a report to the Agency giving a full explanation under the following circumstances:(1) Reasons why approved construction schedules were not met;
(2) Analysis and explanation of cost overruns and how payment is to be made for the same; and
(3) If events occur which have a significant impact upon the project.
(c)
Inspection. Full-time resident inspection is required for all construction unless a written exception is made by the Agency upon written request of the owner. Unless otherwise agreed, the resident inspector will be provided by the consulting engineer. Prior to the preconstruction conference, the consulting engineer will submit a resume of qualifications of the resident inspector to the owner and to the Agency for acceptance in writing. If the owner provides the resident inspector, it must submit a resume of the inspector's qualifications to the project engineer for comments and the Agency for acceptance in writing prior to the preconstruction conference. The resident inspector will work under the technical supervision of the project engineer and the role and responsibilities will be defined in writing.(d)
Inspector's daily diary. The resident inspector will maintain a record of the daily construction progress in the form of a daily diary and daily inspection reports. The daily entries shall be made available to the Agency personnel and will be reviewed during project inspections. The original complete set will be furnished to the owner upon completion of construction. RUS Bulletin 1780-18 is available from the Agency for preparing daily inspection reports or the reports can be provided in other formats approved by the State staff engineer.(e)
Payment for Construction. Form RD 1924-18, “Partial Payment Estimate,” or other similar form may be used for construction payments. If Form 1924-18 is not used, prior concurrence by the State staff engineer must be obtained.(1) Payment of contract retainage will not be made until such retainage is due and payable under the terms of the contact.
(2) Invoices for the payment of construction costs must be approved by the owner, project engineer and concurred in by the Agency.
(3) The review and acceptance of project costs, including construction payment estimates by the Agency shall not attest to the correctness of the amounts, the quantities shown, or that the work has been performed under the terms of agreements or contracts.
(f)
Prefinal inspections. A prefinal inspection will be made by the owner, resident inspector, project engineer, contractor, representatives of other agencies involved, and Agency representative (preferably the State staff engineer or designee). The inspection results will be recorded by the project engineer and a copy provided to all interested parties.(g)
Final inspection. A final inspection will be made by the Agency before final payment is made.(h)
Changes in development plans. (1) Changes in development plans shall be reviewed and approved by the Agency provided:(i) Funds are available to cover any additional costs; and
(ii) The change is for an authorized loan or grant purpose; and
(iii) It will not adversely affect the soundness of the facility operation or the Agency's security; and
(iv) The change is within the scope of the contract,
(2) Changes will be recorded on Form RD 1924-7, “Contract Change Order,” or other similar form if approved by the State program official or designee. Regardless of the form, change orders must be approved by the State program official or designee.
(3) Changes should be accomplished only after Agency approval and shall be authorized only by means of contract change order. The change order will include items such as:
(i) Any changes in labor and material;
(ii) Changes in facility design;
(iii) Any decrease or increase in quantities based on final measurements that are different from those shown in the bidding schedule; and
(iv) Any increase or decrease in the time to complete the project.
(4) All changes shall be recorded on chronologically numbered contract change orders as they occur. Change orders will not be included in payment estimates until approved by all parties.
§§ 1780.77-1780.79 [Reserved] Subpart D—Information Pertaining to Preparation of Notes or Bonds and Bond Transcript Documents for Public Body Applicants § 1780.80 General. This subpart includes information for use by public body applicants in the preparation and issuance of evidence of debt (bonds, notes, or debt instruments, referred to as bonds in this subpart) and other necessary loan documents.
§ 1780.81 Policies related to use of bond counsel. The applicant is responsible for preparation of bonds and bond transcript documents. The applicant will obtain the services and opinion of recognized bond counsel experienced in municipal financing with respect to the validity of a bond issue, except for issues of $100,000 or less. With prior approval of the approval official, the applicant may elect not to use bond counsel. Such issues will be closed in accordance with the following:
(a) The applicant must recognize and accept the fact that application processing may require additional legal and administrative time;
(b) It must be established that not using bond counsel will produce significant savings in total legal costs;
(c) The local attorney must be able and experienced in handling this type of legal work;
(d) The applicant must understand that it will likely have to obtain an opinion from bond counsel at its expense should the Agency require refinancing of the debt;
(e) Bonds will be prepared in accordance with this regulation and conform as closely as possible to the preferred methods of preparation stated in § 1780.94; and
(f) Closing instructions must be issued by OGC.
§ 1780.82 [Reserved] § 1780.83 Bond transcript documents. Any questions relating to Agency requirements should be discussed with Agency representatives. Bond counsel or local counsel, as appropriate, must furnish at least two complete sets of the following to the applicant, who will furnish one complete set to the Agency:
(a) Copies of all organizational documents;
(b) Copies of general incumbency certificate;
(c) Certified copies of minutes or excerpts from all meetings of the governing body at which action was taken in connection with the authorizing and issuing of the bonds;
(d) Certified copies of documents evidencing that the applicant has complied fully with all statutory requirements incident to calling and holding a favorable bond election, if one is necessary;
(e) Certified copies of the resolutions, ordinances, or other documents such as the bond authorizing resolutions or ordinances and any resolution establishing rates and regulating use of facility, if such documents are not included in the minutes furnished;
(f) Copies of the official Notice of Sale and the affidavit of publication of the Notice of Sale when State statute requires a public sale;
(g) Specimen bond, with any attached coupons;
(h) Attorney's no-litigation certificate;
(i) Certified copies of resolutions or other documents pertaining to the bond award;
(j) Any additional or supporting documents required by bond counsel;
(k) For loans involving multiple advances of Agency loan funds, a preliminary approving opinion of bond counsel (or local counsel if no bond counsel is involved) if a final unqualified opinion cannot be obtained until all funds are advanced. The preliminary opinion for the entire issue shall be delivered at or before the time of the first advance of funds. It will state that the applicant has the legal authority to issue the bonds, construct, operate and maintain the facility, and repay the loan, subject only to changes occurring during the advance of funds, such as litigation resulting from the failure to advance loan funds, and receipt of closing certificates;
(l) Final unqualified approving opinion of bond counsel, (and preliminary approving opinion, if required) or local counsel if no bond counsel is involved, including an opinion as to whether interest on bonds will be exempt from Federal and State income taxes. With approval of the State program official, a final opinion may be qualified to the extent that litigation is pending relating to Indian claims that may affect title to land or validity of the obligation. It is permissible for such opinion to contain language referring to the last sentence of section 306 (a)(1) or to section 309A (h) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926 (a)(1) or 1929a (h)).
§§ 1780.84-1780.86 [Reserved] § 1780.87 Permanent instruments for Agency loans. Agency loans will be evidenced by an instrument determined legally sufficient and in accordance with the following order of preference:
(a)
First preference—Form RD 440-22, “Promissory Note”. Refer to paragraph (b) of this section for methods of various frequency payment calculations.(b)
Second preference—single instruments with amortized installments. A single instrument providing for amortized installments which follows Form RD 440-22 as closely as possible. The full amount of the loan must show on the face of the instrument, and there must be provisions for entering the date and amount of each advance on the reverse or an attachment. When principal payments are deferred, the instrument will show that “interest only” is due on interest-only installment dates, rather than specific dollar amounts. The payment period including the “interest only” installment cannot exceed 40 years, the useful life of the facility, or State statute limitations, whichever occurs first. The amortized installment, computed as follows, will be shown as due on installment dates thereafter.(1)
Monthly payments. Multiply by twelve the number of years between the due date of the last interest-only installment and the final installment to determine the number of monthly payments. When there are no interest-only installments, multiply by twelve the number of years over which the loan is amortized. Then multiply the loan amount by the amortization factor and round to the next higher dollar.(2)
Semiannual payments. Multiply by two the number of years between the due date of the last interest-only installment and the due date of the final installment to determine the correct number of semiannual periods. When there are no interest-only installments, multiply by two the number of years over which the loan is amortized.Then multiply the loan amount by the applicable amortization factor. (3)
Annual payments. Subtract the due date of the last interest-only installment from the due date of the final installment to determine the number of annual payments. When there are no interest-only installments, the number of annual payments will equal the number of years over which the loan is amortized. Then multiply the loan amount by the applicable amortization factor and round to the next higher dollar.(c)
Third preference—single instruments with installments of principal plus interest. If a single instrument with amortized installments is not legally permissible, use a single instrument providing for installments of principal plus interest accrued on the principal balance. For bonds with semiannual interest and annual principal, the interest is calculated by multiplying the principal balance times the interest rate and dividing this figure by two. Principal installments are to be scheduled so that total combined interest and principal payments closely approximate amortized payments.(1) The repayment terms concerning interest only installments described in paragraph (b) of this section apply.
(2) The instrument shall contain in substance provisions indicating:
(i) Principal maturities and due dates;
(ii) Regular payments shall be applied first to interest due through the next principal and interest installment due date and then to principal due in chronological order stipulated in the bond; and
(iii) Payments on delinquent accounts will be applied in the following sequence:
(A) Billed delinquent interest;
(B) Past due interest installments;
(C) Past due principal installments;
(D) Interest installment due; and
(E) Principal installment due.
(d)
Fourth preference—serial bonds with installments of principal plus interest. If instruments described under the first, second, and third preferences are not legally permissible, use serial bonds with a bond or bonds delivered in the amount of each advance. Bonds will be numbered consecutively and delivered in chronological order. Such bonds will conform to the minimum requirements of § 1780.94. Provisions for application of payments will be the same as those set forth in paragraph (c)(2)(ii) of this section.(e)
Coupon bonds. Coupon bonds will not be used unless required by State statute. Such bonds will conform to the minimum requirements of § 1780.94.§ 1780.88 [Reserved] § 1780.89 Multiple advances of Agency funds using permanent instruments. Where interim financing from commercial sources is not used, Agency loan proceeds will be disbursed on an “as needed by borrower” basis in amounts not to exceed the amount needed during 30-day periods.
§ 1780.90 Multiple advances of Agency funds using temporary debt instruments. When none of the instruments described in § 1780.87 are legally permissible or practical, a bond anticipation note or similar temporary debt instrument may be used. The debt instrument will provide for multiple advances of Agency funds and will be for the full amount of the Agency loan. The instrument will be prepared by bond counsel, or local counsel if bond counsel is not involved, and approved by the State program official and OGC. At the same time the Agency delivers the last advance, the borrower will deliver the permanent bond instrument and the canceled temporary instrument will be returned to the borrower. The approved debt instrument will show at least the following:
(a) The date from which each advance will bear interest;
(b) The interest rate as determined by § 1780.13;
(c) A payment schedule providing for interest on outstanding principal at least annually; and
(d) A maturity date which shall be no earlier than the anticipated issuance date of the permanent instruments and no longer than the 40-year statutory limit.
§§ 1780.91-1780.93 [Reserved] § 1780.94 Minimum bond specifications. The provisions of this section are minimum specifications only and must be followed to the extent legally permissible.
(a)
Type and denominations. Bond resolutions or ordinances will provide that the instruments be either a bond representing the total amount of the indebtedness or serial bonds in denominations customarily accepted in municipal financing (ordinarily in multiples of not less than $1,000). Single bonds may provide for repayment of principal plus interest or amortized installments. Amortized installments are preferred by the Agency.(b)
Bond registration. Bonds will contain provisions permitting registration for both principal and interest. Bonds purchased by the Agency will be registered in the name of “United States of America” and will remain so registered at all times while the bonds are held or insured by the Government. The Agency address for registration purposes will be that of the Finance Office.(c)
Size and quality. Size of bonds and coupons should conform to standard practice. Paper must be of sufficient quality to prevent deterioration through ordinary handling over the life of the loan.(d)
Date of bond. Bonds will normally be dated as of the day of delivery. However, the borrower may use another date if approved by the Agency. Loan closing is the date of delivery of the bonds or the date of delivery of the first bond when utilizing serial bonds, regardless of the date of delivery of the funds. The date of delivery will be stated in the bond if different from the date of the bond. In all cases, interest will accrue from the date of delivery of the funds.(e)
Payment date. Loan payments will be scheduled to coincide with income availability and be in accordance with State law.(1) If income is available monthly, monthly payments are recommended unless precluded by State law. If income is available quarterly or otherwise more frequently than annually, payments must be scheduled on such basis. However, if State law only permits principal plus interest (P&I) type bonds, annual or semiannual payments will be used.
(2) The payment schedule will be enumerated in the evidence of debt, or if that is not feasible, in a supplemental agreement.
(3) If feasible, the first payment will be scheduled one full month, or other period, as appropriate, from the date of loan closing or any deferment period. Due dates falling on the 29th, 30th, and 31st day of the month will be avoided. When principal payments are deferred, interest-only payments will be scheduled at least annually.
(f)
Extra payments. Extra payments are derived from the sale of basic chattel or real estate security, refund of unused loan funds, cash proceeds of property insurance and similar actions which reduce the value of basic security. At the option of the borrower, regular facility revenue may also be used as extra payments when regular payments are current. Unless otherwise established in the note or bond, extra payments will be applied as follows:(1) For loans with amortized debt instruments, extra payments will be applied first to interest accrued to the date of receipt of the payment and second to principal.
(2) For loans with debt instruments with P&I installments, the extra payment will be applied to the final unpaid principal installment.
(3) For borrowers with more than one loan, the extra payment will be applied to the account secured by the lowest priority of lien on the property from which the extra payments was obtained. Any balance will be applied to other Agency loans secured by the property from which the extra payment was obtained.
(4) For assessment bonds, see paragraph (k) of this section.
(g) The place of payments on bonds purchased by the Agency will be determined by the Agency.
(h)
Redemptions. Bonds will normally contain customary redemption provisions. However, no premium will be charged for early redemption on any bonds held by the Government.(i)
Additional revenue bonds. Parity bonds may be issued to complete the project. Otherwise, parity bonds may not be issued unless acceptable documentation is provided establishing that net revenues for the fiscal year following the year in which such bonds are to be issued will be at least 120 percent of the average annual debt serviced requirements on all bonds outstanding, including the newly-issued bonds. For purposes of this section, net revenues are, unless otherwise defined by State statute, gross revenues less essential operation and maintenance expenses. This limitation may be waived or modified by the written consent of bondholders representing 75 percent of the then-outstanding principal indebtedness. Junior and subordinate bonds may be issued in accordance with the loan resolution.(j)
Precautions. The following types of provisions in debt instruments should be avoided:(1) Provisions for the holder to manually post each payment to the instrument.
(2) Provisions for returning the permanent or temporary debt instrument to the borrower in order that it, rather than the Agency, may post the date and amount of each advance or repayment on the instrument.
(3) Provisions that amend covenants contained in RUS Bulletins 1780-27 or 1780-28.
(4) Defeasance provisions in loan or bond resolutions. When a bond issue is defeased, a new issue is sold which supersedes the contractual provisions of the prior issue, including the refinancing requirement and any lien on revenues. Since defeasance in effect precludes the Agency from requiring refinancing before the final maturity date, it represents a violation of the statutory refinancing requirement; therefore, it is disallowed. No loan documents shall include a provision of defeasance.
(k)
Assessment bonds. When security includes special assessment to be collected over the life of the loan, the instrument should address the method of applying any payments made before they are due. It may be desirable for such payments to be distributed over remaining payments due, rather than to be applied in accordance with normal procedures governing extra payments, so that the account does not become delinquent.(l)
Multiple debt instruments. The following will be adhered to when preparing debt instruments:(1) When more than one loan type is used in financing a project, each type of loan will be evidenced by a separate debt instrument or series of debt instruments;
(2) Loans obligated in different fiscal years and those obligated with different terms in the same fiscal year will be evidenced by separate debt instruments;
(3) Loans obligated for the same loan type in the same fiscal year with the same term may be combined in the same debt instrument;
(4) Loans obligated in the same fiscal year with different interest rates that will be closed at the same interest rate may be combined in the same debt instrument.
[62 FR 33478, June 19, 1997, as amended at 64 FR 29947, June 4, 1999] § 1780.95 Public bidding on bonds. Bonds offered for public sale shall be offered in accordance with State law and in such a manner to encourage public bidding. The Agency will not submit a bid at the advertised sale unless required by State law, nor will reference to Agency's rates and terms be included. If no acceptable bid is received, the Agency will negotiate the purchase of the bonds.
§§ 1780.96-1780.100 [Reserved] Pt. 1781 PART 1781—RESOURCE CONSERVATION AND DEVELOPMENT (RCD) LOANS AND WATERSHED (WS) LOANS AND ADVANCES Sec. 1781.1 Purpose. 1781.2 Policy. 1781.3 Authorities, responsibilities, and delegation of authority. 1781.4 Definitions. 1781.5 Eligibility. 1781.6 Loan purposes. 1781.7 Loan and advance limitations and obligations incurred before loan closing. 1781.8 Rates and terms—WS loans and WS advances and RCD loans. 1781.9 Security, feasibility, evidence of debt, title, insurance, and other requirements. 1781.10 [Reserved] 1781.11 Other considerations. 1781.12 Preapplication and application processing. 1781.13 [Reserved] 1781.14 Planning, options, and appraisals. 1781.15 Planning and performing development. 1781.16 [Reserved] 1781.17 Docket preparation and processing. 1781.18 Feasibility. 1781.19 Approval, closing, and cancellation. 1781.20 Disbursement of WS and RCD loan funds and WS advance funds. 1781.21 Borrower accounting methods, management, reporting, and audits. 1781.22 Subsequent loans. 1781.23 Servicing. 1781.24 State supplements and availability of bulletins, instructions, forms, and memorandums. 1781.25-1781.100 [Reserved] Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Source: 62 FR 33500, June 19, 1997, unless otherwise noted.
§ 1781.1 Purpose. This part prescribes the policies and procedures for making:
(a) Watershed (WS) loans and Watershed (WS) advances for works of improvement in a watershed project; and
(b) Resource Conservation and Development (RCD) loans for measures or projects needed to implement the RCD area plan to achieve objectives in an RCD area.
§ 1781.2 Policy. (a) Rural Utilities Service (RUS), is an agency of the United States Department of Agriculture established pursuant to section 232 of the Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to the Farmers's Home Administration. Natural Resources Conservation Service (NRCS), is an agency of the United States Department of Agriculture established pursuant to section 232 of the Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to the Soil Conservation Service. RUS will make WS and RCD loans available to sponsoring local public bodies, agencies, and nonprofit organizations to assist them in obtaining the local cost of WS works of improvement and RCD measures. Any processing or servicing activity conducted pursuant to this part involving authorized assistance to RUS employees, members of their families, known close relatives, or business or close personal associates, is subject to the provisions of subpart D of Part 1900 of this title. Applicants for this assistance are required to identify any known relationship or association with an RUS employee. RUS will assist the local sponsors and the NRCS in making loans from NRCS construction funds as WS advances when needed for the development of future water supplies or for site preservation.
(b) Rural Development State and local offices will administer these programs on behalf of RUS and will coordinate application processing with the NRCS and other appropriate State and Federal agencies.
§ 1781.3 Authorities, responsibilities, and delegation of authority. (a) NRCS provides technical and financial assistance to sponsoring local organizations for developing WS and RCD area plans and for individual RCD measures or projects and watershed works of improvement. The watershed work plan for developing, operating, and maintaining watershed works of improvement must be agreed upon by sponsoring local organizations and NRCS. When approved, it is the basis for extending technical and cost sharing assistance from watershed funds. The RCD area plan is prepared for the development of the RCD area by sponsoring local organizations with assistance from NRCS and other agencies, endorsed by the Governor or by the agency designated by the Governor, and accepted by the Secretary of Agriculture or his delegate. It includes objectives, planned courses of action, and RCD measures or projects to be developed. It is amended as necessary to include continuing activities and needs in the RCD area.
(b) RUS receives and processes applications for WS loans and NRCS WS advances and RCD loans and makes and services such loan and advances. WS loans are made by RUS from either Public Law 534 (78th Cong.) funds authorized in the Flood Control Act of
1944 (33 U.S.C. 701 et seq. ) or Public Law 566 (83rd Cong.) funds authorized in the Watershed Protection and Flood Prevention Act of 1954 (68 Stat. 666) to cover a part or all of the local cost for a watershed work of improvement.(c) WS loans and WS advances may be made to project sponsors in watershed project areas for which:
(1) A watershed work plan has been approved administratively or by resolutions adopted by the Committee on Agriculture and Forestry of the Senate and by the Committee on Agriculture of the House of Representatives; and
(2) Federal assistance has been authorized for the installation of works of improvement by the Administrator of NRCS.
(d) RCD loans may be made in areas authorized for RCD program assistance by the Secretary of Agriculture and for which an RCD plan design or area plan has been accepted by the State NRCS Conservationist.
(e)
Delegation of authority. The Rural Development State Director is authorized to approve WS and RCD loans subject to limitations in RUS Staff Instruction 1780-1 and conditions of this part. The Rural Development State Director is authorized to relegate authority in accordance with this part to the Chief, Community Programs; or other members of the State Office staff.(f) NRCS is responsible for providing technical and financial assistance to sponsoring local organizations for planning and developing WS and RCD areas. This includes development of WS and RCD plans and WS works of improvement and RCD measures or projects.
(g) RUS is responsible for making and servicing WS loans and advances and RCD loans.
(h) The NRCS-RUS Agreements in RUS Bulletin's 1781 and 1781-2 include further responsibilities and functions of NRCS and RUS in WS and RCD areas.
§ 1781.4 Definitions. (a)
Watershed (WS) project. An authorized area in which watershed assistance from NRCS and other U.S. Department of Agriculture (USDA) agencies including WS loans and advances may be provided. Watershed assistance is provided in two types of watershed projects identified by the Public Law under which they are authorized.(1)
Public Law-534 Watershed. One of the 11 watersheds authorized by Congress in the Flood Control Act of 1944 (33 U.S.C. 701et seq. ), Public Law 78-534 as amended.(2)
Public Law-566 Watershed. A small watershed of not more than 250,000 acres authorized in accordance with the Watershed Protection and Flood Prevention Act, August 4, 1954, Public Law 83-566 as amended.(b)
Resource Conservation and Development (RCD) area. An area in which RCD program assistance from NRCS and other USDA agencies has been authorized. It usually includes all or part of more than one county and may be coterminous with substate planning and development areas. RCD loans are authorized under Section 32 of Title III of the Bankhead-Jones Farm Tenant Act (7 U.S.C. 1011).(c)
Watershed plan. A plan agreed upon by sponsoring local organizations and the NRCS for developing, operating, and maintaining watershed works of improvement.(d)
RC&D measure plan. A plan document for a land area, directly controlled or under the jurisdiction of the sponsoring public bodies or public nonprofit organization. It involves one of the measure purposes eligible for RC&D cost sharing assistance. The document sets forth what will be done, how, when and by whom, and involves RC&D technical and/or financial assistance.(e)
RCD area plan. A plan prepared by sponsoring local organizations with assistance from NRCS and other agencies for the development of the RCD area which has been endorsed by the Governor or his designated agency and accepted by the Secretary of Agriculture or his delegate. It includes objectives, planned courses of action, and RCD measures to be developed. It is amended as necessary to include continuing activities and needs in the RCD area.(f)
Watershed works of improvement. Structural, nonstructural, and land treatment measures included in a watershed plan which are to be installed in a watershed project.(g)
RCD measure or project. An activity or development indicated in the RCD area plan as being needed to achieve RCD area goals and objectives.(h)
Cost sharing. The WS and RCD legislative authorities provide for sharing certain costs of installing WS works of improvement or RCD measures by the Federal Government and by sponsoring local organizations. Federal cost sharing from WS and RCD funds is provided by NRCS for certain WS works of improvement and RCD measures. Information on amounts, purposes, and procedures for cost sharing is available from the NRCS.(i)
Local cost. The part of the cost of a WS work of improvement or a RCD measure or project that is to be paid by a sponsoring local organization.(j)
Public agency or public body. A State agency or department or instrumentality, county, municipality or other political subdivision or instrumentality of a State or agencies or districts created by or pursuant to State law for making improvements of a public nature or providing public services such as soil and water conservation districts, irrigation districts, drainage districts, flood prevention and control districts, school districts, other special purpose districts, municipal corporations or similar governmental units.(k)
Non-profit corporation. Mutual and other irrigation, water users, water supply, drainage, or waste disposal companies or associations, ditch companies, grazing, recreation and forestry associations and similar associations and organizations generally designated as private corporations operating on a non-profit basis. They may be organized and chartered under special law, general nonprofit corporation law, or general profit corporation law, if operated on a nonprofit basis under adequate charter, bylaw, mortgage or supplementary agreement provisions which will assure continued operation in that manner.(l)
Sponsoring local organization. A local public agency or body or a local nonprofit corporation having authority under State law to plan, develop, maintain and operate WS works of improvement or RCD measures or projects included in a WS or RCD area plan. The name of the sponsoring local organization must be included in the plan and sponsorship must be evidenced by execution of the plan.(m)
Watershed loan. A loan made by RUS from watershed funds to a sponsoring local organization to develop a WS work of improvement.(n)
RCD loan. A loan made by RUS from RCD funds to a local sponsoring organization to develop a RCD measure or project. RCD loans are made from RCD funds to enable sponsoring local organizations to provide a part or all of the local share of cost for an RCD measure.(o)
Watershed advance. A loan made from NRCS watershed construction funds to develop a future water supply or for the preservation of a site for a work of improvement authorized in a watershed plan.(p)
Future water supply. Water storage capacity in a reservoir with related facilities for release or withdrawal of water to meet future needs for municipal or industrial use.(q)
Preservation of sites. Acquisition to assure their availability for planned developments. Land, easements, or rights-of-way essential to preserve sites for watershed works of improvement or RCD measures.(r)
Processing office. Means the office designated by the Rural Development State Director to accept and process applications for WS and RCD loans and advances.§ 1781.5 Eligibility. To be eligible for a WS loan, WS advance, or an RCD loan, the sponsoring local organization must meet the following requirements as applicable. Questions on eligibility will be referred to the Regional Attorney, OGC for legal advise prior to development of a loan docket.
(a) Be named in the WS or RCD plan as a sponsor of the development to be financed.
(b) Be legally organized and established in the WS or RCD area with legal authority, responsibility and capability to develop and operate the facility for which assistance is requested.
(c) Have authority under and comply with Federal, State and local laws on such matters as:
(1) Organizing, installing, operating, and maintaining proposed WS works of improvement or RCD measures or projects.
(2) Borrowing money, giving security, levying taxes, making assessments or raising revenues for operation and maintenance of the facility and repayment of loans.
(3) Land use zoning.
(4) Acquiring necessary property, lands, and rights.
(5) Obtaining approval of construction plans and specifications by appropriate Federal, State, and local agencies and construction facilities.
(6) Health and sanitation standards, water pollution control, and environmental regulations.
(7) Design and installation standards.
(8) Public service commission or similar State public body rules and regulations.
(d) Be financially sound and capable of providing service essential to the rural development needs of the area.
(e) If it is a nonprofit corporation.
(1) Membership should be broadly based and representative of the area benefiting from the facility. Membership on the governing board of the corporation will be limited to those living in the area to be benefited unless for justifiable reasons the Rural Development State Director gives prior approval for other than local residents to serve on the board of directors.
(2) The corporation must propose a facility which will primarily serve or generate other substantial, tangible benefits for farmers and other residents of the area. In the case of a recreational development at least two-thirds of the membership must be farmers and other residing in the area.
(3) Nonprofit corporations will not be formed to serve an area which could be served by a public agency which has adequate authority to provide the needed service unless prior approval of the National Office is obtained.
§ 1781.6 Loan purposes. (a)
WS and RCD loans. WS and RCD loans may be used for:(1) Water development, storage, treatment and conveyance to farms for irrigation and other farm use, including farmstead, livestock, orchard, and crop spraying.
(2) Drainage systems and facilities in farm areas to sustain agricultural production or protect farmers and rural residents from water damage.
(3) Agricultural water management practices for annual streamflow stabilization, recharging ground water reservoirs, and conserving water supplies by management and control of vegetation along waterways and in drainage basins.
(4) Soil conservation and water control facilities such as dikes, terraces, detention reservoirs, stream channels, ditches, and other special land treatment and stabilization measures needed to protect farms and rural residents from water damage, provided such facilities cannot be installed or improved under, or will not conflict with, other public programs such as those administered by the Corps of Engineers.
(5) Special treatment measures or equipment primarily, though not exclusively, for flood prevention such as:
(i) Facilities and equipment for fire prevention and control.
(ii) Tree planting and establishment of other vegetative cover for stabilizing critical runoff and sediment-producing areas.
(iii) Structural and vegetative measures to stabilize stream channels and gullies.
(iv) Basic farm conservation practices to control runoff, erosion, and sedimentation.
(6) Installing, repairing, and improving water storage facilities, including outlets for immediate and future domestic, municipal and industrial water supply and water quality management, and conveying water to treatment facilities or distribution systems. When payment of loans for such facilities are primarily dependent upon revenues from use of water stored the loan approval official must determine the adequacy of facility for use of the water before a loan is closed.
(7) Public water based recreation and fish and wildlife developer loans will only be made to public bodies for the local share of cost for such developments for which NRCS is providing technical or financial assistance from WS or RCD funds. Loans will not be
made for developments larger or more elaborate than that which is included in the WS or RCD plan. Loans may include funds for: (i) Construction of necessary water resource improvements such as storage capacity in multipurpose and single purpose reservoirs, water level control structures in reservoirs and streams, and stream channel improvements necessary for the development of the facilities. This may include practices for improvement of fish and wildlife habitat and environment and related areas and facilities for proper protection and management of the development.
(ii) Essential developments, improvements, equipment and facilities for access, public health and safety, and efficient operation management and maintenance; such as energy utilities, water supply and waste disposal systems, maintenance buildings, fences, cattle guards, roads and trails, parking, picnicking, camping, beaches, playgrounds, and related shelters and equipment.
(iii) Special areas and structures such as forest and other vegetative cover, marshes, pits, shelters and fish ladders to provide protected natural spawning, breeding, nesting, and feeding for fish and wildlife.
(8)
Soil and water management for agriculture-related pollutant control. Measures to reduce agriculture-related pollutants that adversely affect the community and the general public. Measures may include, but are not limited to, holding ponds, debris basins, diversions, terraces, and community distribution systems.(9) Acquiring fee simple title to lands or perpetual easements, or rights-of-way for sites for works of improvement or project measures and related costs for removal, relocation, or replacement of existing improvements including relocation payments for displaced persons, business enterprises and facilities, and other related purposes. Funds for land acquisition will be limited to costs necessary for WS works of improvement or RCD measures. Final construction plans will indicate minimum essential lands and rights-of-way to be acquired. In some cases, sponsoring local organizations may need to acquire lands in excess of actual needs when it is expedient for planned development. If the Rural Development State Director determines that the acquisition of excess land is necessary or expedient for the orderly development of a WS works of improvement, or RCD measure, he may authorize the action subject to the following conditions:
(i) The applicant must agree to sell excess land as soon as practicable and apply the proceeds, together with any income from excess land, on the debt to RUS.
(ii) The applicant must furnish legal evidence of authority to acquire additional land and dispose of it as agreed.
(iii) Evidence must be provided to justify acquisition of additional land.
(iv) Easements for land or water resource protection structures must be perpetual and must not include clauses that terminate the easement with the dissolution or abandonment of the applicant organization. Loan funds will not be used for an easement that deviates in any way from that provided in the standard NRCS form unless modifications of it are approved by both NRCS and RUS.
(10) Acquisition of water supply or water right by purchase or by appropriation under local, State, and Federal laws. The loan may include funds for the purchase of land on which the water supply or water right is presently being used when:
(i) The water supply or water right cannot be purchased without the land; and
(ii) The value of the land is not the major portion of the cost; and
(iii) Any excess land thus acquired will be sold as soon as possible and the proceeds applied on the loan.
(11) Purchase of equipment and machinery necessary for development and operation of planned WS works of improvement or RCD measures or projects including:
(i)
Special-purpose equipment. Purchase or rent special-purpose equipment to install or maintain any community facility in categories in paragraph (a)(11) of this section or to establish on farms soil and water conservation measures such as terraces, ponds, land leveling for irrigation or drainage, subsoiling, seeding, tree planting, andremoval of brush, scattered trees, and stumps, provided: (A) Such equipment is not otherwise available when needed.
(B) There is sufficient need and local demand to justify ownership or rental.
(C) Rates to be charged include, among other things, an allowance for depreciation, obsolescence, and replacement based upon the recommendations of the equipment manufacturer or the experience of contractors engaged in providing services for similar types of work.
(ii)
Forestry equipment and services. Purchase or rent basic special-purpose equipment, facilities, certain land or land rights, and supplies needed for furnishing services for the establishment, improvement, protection, and harvesting of timber (not processing) suitable for lumber, pulp, poles or posts; providing that the forest program and forest practices benefiting from such services are in accordance with approved conservation practices for the development, use, and control of water resources on farms and in forests. Special-purpose equipment may include such items as tractors, bull dozers, plows, planters, trucks, loaders, fire-fighting equipment, and sprayers. Facilities may include such items as ponds and reservoirs, pipelines, buildings for storage of equipment and supplies, nurseries, access roads, fire lanes, and lookout towers. Supplies may include such things as seed, seedlings, fertilizers, fencing, and pesticides. Land or land-rights acquisition will be limited to that necessary for sites for facilities listed above which are directly related to the forestry program. Loans for these purposes may be made only when the equipment, supplies, and facilities to be provided:(A) Are not readily available when needed.
(B) Will be justified by local need and demand.
(C) Will be available to users at rates sufficient to cover loan amortization, obsolescence, replacement, operation, and cost of supplies.
(D) Will more efficiently serve the group through cooperative effort.
(12) Refinancing debt obligations of the sponsoring local organization that were incurred before application for a WS or RCD loan when that is not the primary purpose of the loan and:
(i) The debt being refinanced was for works of improvement or measures for which loan funds could be used; and
(ii) The debt is a valid obligation of the sponsor; and
(iii) Creditors will not modify payment terms on existing debts, and the organization cannot pay existing debts and a loan from RUS over the same period of time; and
(iv) Long-term debts will not be refinanced unless necessary to provide a sound basis for the loan or WS advance and concurrence is obtained from the National Office.
(13) If repayment is based on revenues, loan funds (not WS advances) can be used for payment of interest installments until the facility is generating enough revenue to make accrued interest payments. Loan funds for interest payments will not exceed the estimated amount that will accrue to the end of the third full calendar year after loan closing without prior approval from the National Office.
(14) Relocation payment to displaced persons, businesses, and farm operations and for relocation assistance advisory services in accordance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970 (Public Law 91-646, 84 Stat. 1894), the Regulations issued by the Secretary of Agriculture under the Act (7 CFR part 21), and the Memorandum of Understanding Between NRCS and RUS.
(15) Services of engineers, architects, attorneys, auditors, construction foremen, managers, clerks, and others for organizing, planning, surveying, supervising, analyzing, developing, operating, managing, and accounting for activities related to loan processing and closing and development for which the loan is made.
(16) Buildings, fences, roads, utilities, facilities, and relocation:
(i) To construct buildings of modest design essential for the operation and maintenance of the works of improvement or measure.
(ii) To provide support facilities and utilities such as gas, electricity, water, sewer, and waste disposal.
(iii) To build or relocate roads, bridges, utilities, fences, and other improvements when necessary to acquire rights-of-ways or to construct or operate the facility.
(17) Services and fees. To pay costs for services for any purposes listed under this section such as:
(i) Fees or other legal expenses for establishing a water right through appropriation, agreement, permit, or court decree.
(ii) Purchase of water stock or membership in an incorporated water users' association to acquire a water supply.
(iii) Costs of labor, technical or professional services, and fees to be incurred in obtaining the loan and in planning and completing the facilities or services to be financed with loan funds.
(iv) Services such as those listed in paragraph (a)(16) of this section.
(b)
RCD loans. Purposes for which RCD loans may be made in addition to those included in paragraph (a) of this section are:(1)
Solid waste management. Lands, equipment and facilities to collect, transport, and dispose of solid waste in sanitary landfills for which NRCS is providing technical assistance.(2)
Shifts-in-land use. Lands for uses such as grazing, forestry, wildlife, natural areas and parks, greenbelts, and other open spaces.(3)
Purchase existing facilities. Purchase existing facilities for shift-in-land use, soil and water development, conservation, control and use when it is determined that purchase is necessary to provide efficient service through a facility owned and operated by a public agency (or a nonprofit corporation in a rural area), or the owner is either unwilling or unable to make improvements, enlargement, or extensions needed to provide significant additional or improved service for present users or for a new group of users at reasonable rates.(c)
NRCS watershed advances. NRCS watershed advances are loans that may be made from NRCS construction funds for the following purposes included in a watershed work plan agreement:(1) To pay construction costs including cost of engineering and related services for increasing reservoir capacity (including intake and outlet structures) for a future water supply for municipal, domestic, industrial, or agricultural uses.
(2) To preserve sites for authorized watershed works of improvement by acquiring land, easements, and rights-of-ways or other property rights.
§ 1781.7 Loan and advance limitations and obligations incurred before loan closing. (a)
WS and RCD loan limitations. (1) Loans will not be used for:(i) Land treatment measures on individual farms except as provided in § 1781.6(a)(5)(iv).
(ii) Buildings and facilities to be used for lodging, dining or entertainment purposes.
(iii) Building industrial parks or constructing facilities in them, or establishing private industrial or commercial enterprises, or purchasing land to be used primarily for industrial purposes.
(iv) Paying costs allocated to structural measures for flood prevention.
(v) Facilities for the production and harvesting of fish and wildlife such as hatcheries, rearing ponds, and related facilities other than those under natural conditions.
(vi) Facilities primary for treatment and distribution of water or for sewerage, collection and treatment for domestic or industrial use or for municipal or community systems.
(vii) Electric generating, transmission, and distribution facilities, except when provided as part of the minimum basic facilities for recreation and fish and wildlife developments authorized in § 1781.6(a)(7).
(viii) Storm and sanitary sewers and solid waste disposal facilities other than authorized in § 1781.6(b)(1).
(ix) Payment for a tract of land, easements, or rights-of-ways on which NRCS will share the cost if the amount to be paid with loan funds exceeds the difference between the NRCS share and the value on which the NRCS share is based.
(x) Purchasing tracts of land primarily for later resale to private developers or individuals for agricultural or nonagricultural use.
(xii) Buildings for residential, commercial, or industrial, use.
(xiii) Developments on private property primarily for the benefit of the individual property owner.
(xiv) Payment of that part of the cost of facilities, improvements, and practices that could be earned by participation in agricultural conservation programs unless such cost cannot be covered by purchase orders or assignments to material suppliers or contractors. If a loan is made for such purposes for which practice or cost share payments exceed $500, RUS will obtain an assignment on such payments to be paid on the loan.
(xv) Primarily for water and sewage treatment plants and distribution systems.
(xvi) Drainage facilities primarily for the benefit of other than rural areas.
(xvii) Any single RCD measure that requires a loan of more than $500,000.
(xviii) The total amount of principal outstanding for all WS loans made for one or more watershed works of improvement in a single watershed project, whether made to one or more sponsoring organizations, will not exceed $10,000,000.
(b)
Watershed advance limitations. (1) A WS advance for future water supply will not be used for acquiring property rights including lands, easements, and rights-of-way; water rights; administration of contracts; storage capacity for immediate municipal use; pipelines from the reservoir to place of use; or for other uses such as irrigation, fish and wildlife, and recreation.(2) A WS advance for increasing reservoir capacity for future water supply will not exceed 30 percent of the total installation cost of one structure.
(3) A WS advance for site preservation will not exceed that determined necessary by NRCS except to purchase land in excess of actual needs in accordance with the provisions of § 1781.6(a)(7).
(4) Before a project agreement is entered into, there must be satisfactory evidence that the borrower will develop the site to be acquired or will use the future water supply and that revenue will be sufficient to meet all scheduled installments.
(c)
Obligations incurred before loan closing. (1) WS loans, WS advances, and RCD loans may be used for payment of obligations incurred before loan closing when the Rural Development State Director determines that:(i) The obligations incurred are necessary for planned developments; and
(ii) The obligations are incurred for authorized loan purposes; and
(iii) Contracts and construction plans meet RUS and NRCS standards; and
(iv) The applicant has legal authority to incur the obligations at the time proposed; and
(v) The Rural Development State Director authorizes such action in a letter to the applicant.
(2) The Rural Development State Director's letter will specifically state that the permission is granted on the condition that RUS is not committed to make a loan and assumes no responsibility for any obligation incurred by the applicant because of the permission granted and that the loan will be closed subject to compliance with agency regulations including closing instructions of the Regional Attorney Office of the General Counsel.
§ 1781.8 Rates and terms—WS loans and WS advances and RCD loans. (a)
Interest rates. The interest rate for WS loans, WS advances and RCD loans will be at a rate not to exceed the current market yield for outstanding municipal obligations with remaining periods to maturity comparable to the average maturity for the loan, adjusted to the nearest 1/8 of 1 percent.(1) For loans, unless otherwise required by State law, interest will accrue from date of check delivery where Form RD 440-22, “Promissory Note (Association Organization),” is used. Where bonds are used interest will accrue from the applicable dates recorded on the bonds. Where multiple loan disbursements are used interest will accrue from date of check.
(2) Interest on an advance for future water supply will begin as required by State law, when water is first used from the future water storage capacity installed with advance, or ten years from the scheduled date of the completion of the facility, whichever date is the earlier.
(3) Interest on an advance for preservation of sites will begin on the date the advance is closed.
(b)
Length of repayment period. The repayment period on loans may not exceed the shortest of the following periods:(1) The statutory limitation on the sponsoring local organization's borrowing authority.
(2) Fifty (50) years for WS loans and WS advances and 30 years for RCD loans from the date when the principal benefits from the WS works of improvement or RCD measure being financed first become available.
(3) The useful life of the WS works of improvement or RCD measure being financed with loan or advance funds.
(c)
Deferred or partial payments. Deferred or partial payments may be authorized in the following circumstances:(1) Payments need to be delayed until the receipt of income from taxes or other revenues is enough to meet a regular installment but not exceed:
(i) The completion date of the facility; or
(ii) The date when benefits from the facility begins; but
(iii) In no case for more than 5 years for other than future water supply.
(2) Payments will depend on the increased returns expected from planned improvements, or from the installation on individual farms of land development or other soil and water improvements essential for obtaining benefits from the improvement to be installed with loan funds.
(3) They will not be used to permit the accelerated payment of other debts, to make capital improvements, or to create operating reserves.
(4) Where prohibited by State statutes; interest payments will not be deferred even though payments on principal may be deferred.
(5) Loans or advances for future water supply will be repaid within the life of the reservoir structure but in no event later than 50 years for WS and 30 years for RCD after the reservoir structure is built. Payments on the principal amount may be deferred one year after the water is first used from the storage capacity installed with the advance or for 10 years from the scheduled completion date of the structures, whichever occurs first.
(i) Interest will begin for a future water supply as required by State law, or when water is first used from the future storage capacity or 10 years from the scheduled date of completion of the facility, whichever occurs first.
(ii) If State law requires that interest be charged and repaid before water is first used or earlier than 10 years from completion date of the structure, interest payments will be scheduled to comply with State law even though payments of principal may be deferred.
(iii) The borrower should be encouraged to begin repayments as soon as practicable after the reservoir is built even though this liberal deferment policy exists.
(iv) WS advances for preservation of sites must be fully repaid before beginning construction of the works of improvement for which such sites were acquired.
(A) Unless a WS advance is to be repaid with a WS loan, installments will be scheduled at the earliest possible date following the date of closing the advance. The date and amount of each such installment will be fixed to coincide with the receipt of income from taxes or other revenues.
(B) Payments for both principal and interest on a WS advance for preservation of sites may be scheduled for payment in one installment to be paid on the date of the closing of a WS loan which includes funds for the repayment of the WS advance.
(C) Interest on a WS advance for preservation of sites will begin on the date the WS advance is closed.
(d)
Payment amortization and application. (1) A borrower may make prepayments on WS loans, WS advances or RCD loans in any amount at any time.(2) Payments will be applied first to interest accrued to the date of the receipt of payment, and second to the principal balance. If the regular payments plus any prepayments exceed the cumulative amount due, the excess payments will be applied on the next installment first to interest, then principal. Loan refunds and proceeds from the sale of security property, however, will be applied on the final unpaid installment.
(3) Payments will be scheduled annually beginning one year following the date of loan closing or one year following the end of any approved deferment period, unless another annual due date is required by State statute or upon prior written authorization from the National Office. In those cases where loans are being made under statutes requiring a repayment date other than this, the Rural Development State Director will send a copy of the Regional Attorney's opinion that such is required, to the Finance Office.
(4) When a single obligation instrument is used, amortized installments will be required. When this cannot be done because of state law, serial bonds or a single bond having installments of principal plus interest, stated separately, will be used. In cases where the payment of interest has been deferred, all collections will be applied to interest until such interest has been paid. Also, when a full installment is not paid when due, the payment made will be applied first to accrued interest.
(5) In cases where the indebtedness will be represented by serial bonds or a single bond having installments of principal plus interest, stated separately, annual payments of principal and interest will be scheduled to permit them to be paid in amounts approximately equal to the amounts that would be required for annual amortized installments.
(6) If the borrower will be retiring other debts represented by bonds or notes, the payment on such bonds may be considered in developing the payment schedule for the RUS loan. In some cases, it may be desirable to reduce the amount of payments to RUS in the early years of the loan in order to preclude the necessity for refinancing the outstanding debt. When such payment schedules are proposed, National Office authorization will be obtained prior to loan approval.
(7)
Payment date. Insofar as loan payments are consistent with income availability, applicable State statutes, and commercial customs in the preparation of bonds or other evidence of indebtedness, they should be scheduled on a monthly basis either in the bond or other evidence of indebtedness or through the use of a supplemental agreement. Such requirements will be accomplished not later than the time of loan closing. When monthly payments are required, such payments will be scheduled beginning one full month following the date of loan closing or the end of any approved deferment period. Subsequent monthly payments will be scheduled each full month thereafter. In those cases where evidence of indebtedness calls for annual or semiannual payments, they will be scheduled beginning six or twelve full months, respectively following the date of loan closing or the end of any approved deferment period. Subsequent payments will be scheduled each sixth or twelfth full month respectively, thereafter. When the evidence of indebtedness is dated the 29th, 30th, or 31st day of a month, the payment date will be scheduled the 28th day of the month.§ 1781.9 Security, feasibility, evidence of debt, title, insurance and other requirements. (a)
Security. WS loans, WS advances, and RCD loans will be secured in accordance with applicable provisions of § 1780.14 of this chapter.(b)
Feasibility. All projects financed under the provisions of this part must be based on taxes, assessments, revenues, fees, or other satisfactory sources in an amount that will provide for facility operation and maintenance, a reasonable reserve, and payment of the debt. The Rural Development State Director may obtain needed assistance in determining economic feasibility from officials of NRCS and other appropriate USDA agencies. See § 1780.7(f) of this chapter for applicable economic feasibility requirements and feasibility reports.(c)
Notes, bonds, and bond transcript documents. See subpart D of Part 1780 of this chapter for applicable requirements and provisions.(d)
Insurance. See § 1780.39(g) of this chapter for requirements.(e)
National flood insurance. The requirements of the National Flood Insurance Act of 1968 (42 U.S.C. 4001et seq. ) as amended by the Flood Disaster Protection Act of 1973 (42 U.S.C. 4003et seq. ) will be complied with in accordance with applicable provisions of RDInstruction 1901-L. Also see § 1780.39(g) of this chapter. (f)
Borrower contracts and bonds. See subpart C of Part 1780 of this chapter for applicable provisions.(g)
Title requirements. (1) Title evidence for land, easements, and rights-of-way to be acquired with proceeds of loans or advances will be furnished by the sponsoring local organization in accordance with NRCS policies and procedures.(2) RUS will specify and approve the form and content of instruments for conveying title to or interest in real estate on which a lien will be taken to secure a WS loan, WS advance, or RCD loan. These should be consistent with the applicable provisions of § 1780.14 of this chapter. The Rural Development State Director will make his decision after consultation with the Regional Attorney and the State Conservationist. He will notify NRCS in writing of his decision. Thereafter, title clearance will be completed under NRCS regulations except that a marketable title must be obtained on any tract of land, a part of which will be sold as excess land in accordance with § 1781.6(a)(9). In addition to the title evidence required by NRCS, applicants will furnish an opinion of legal counsel on all land and interest in land acquired with loan or advance funds.
(h)
Purchasing lands, rights and facilities. The amounts paid for lands, rights, and facilities with loan funds will be not more than that determined to be reasonable and fair by the loan approval official based upon an appraisal of the current market value made by an Rural Development employee or an independent appraiser.(i)
Water rights. Applicants will be required to comply with applicable State and local laws and regulations governing appropriating, diverting, storing and using water, changing the place and manner of use of water, and in disposing of water. All of the rights of any landowner, appropriator, or user of water from any source will be fully honored in all respects as they may be affected by facilities installed with WS loans and advances and RCD loans. If, under the provisions of State law, notice of the proposed diversion or storage of water by the applicant may be filed, the applicant will be required to file such a notice. An applicant must furnish evidence to provide reasonable assurance that its water rights will be or have been properly established, will not interfere with prior vested rights, will likely not be contested or enjoined by other water users or riparian owners, and will be within the provisions of any applicable interstate compact.§ 1781.10 [Reserved] § 1781.11 Other considerations. (a)
Technical assistance. When pipelines from reservoirs to treatment plants are included in watershed work plans, NRCS will not furnish engineering services for their design or installation. When such pipelines are to be financed by WS or RCD loans, RUS will supervise the activities of the private engineers retained for the purpose. Such RUS supervision will include, among other things, approval of private engineer's contracts, approval of plans and specifications, authorization of contract awards, spot checks of engineering inspection, and final inspection and acceptance.(b)
Professional services. Applicants will be responsible for providing the services necessary to plan projects including design of facilities, preparation of cost and income estimates, development of proposals for organization and financing, and overall operation and maintenance of the facility. Necessary professional services may include such as that of an engineer, architect, attorney, bond counsel, accountant, auditor, and financial advisor or fiscal agent. Form RD 442-19, “Agreement for Engineering Services,” may be used when appropriate. RUS Bulletin 1780-7, “Legal Service Agreement” may be used to prepare the agreement for legal services.(c)
Other services. Contracts for other services such as management, operation, and maintenance will be developed by the applicant and presented to the RUS official developing the docket for review and approval.(d)
Fees for services. Fees provided for in contracts, agreements or services will not be more than those ordinarily charged by the profession for similarwork when RUS financing is not involved. (e)
State pollution control or Environmental Protection Agency standards. Facilities will be designed, installed and operated to prevent pollution of water in excess of established standards. Effluent disposal will conform with appropriate State and Federal Water Pollution Control Standards.(f)
Water pollution. When repayment of a WS loan, WS advance, or RCD loan will be dependent upon income from the use or sale of water, RUS approval will be contingent upon a determination that the proposed use of stored water for recreation or municipal supply might not be permitted by a State health department because the water is being polluted from an upstream or other source.(g)
Environmental requirements. Actions will be taken to comply with the National Environmental Policy Act (42 U.S.C. 4321et seq. ) in accordance with subpart G of part 1940 of this title. When environmental assessments and environmental impact statements have been prepared on WS plans or RCD area plans by NRCS, a separate environmental impact statement or assessment on WS works of improvement or RCD measures for which a WS loan, WS advance, or RCD loan is requested will not be necessary unless the NRCS environmental review fails to meet the requirements of subpart G of part 1940 of this title. The Rural Development State Director should document the action taken by NRCS in compliance with the requirements of the National Environmental Policy Act and formally adopt the impact statement or assessment if satisfactory. If a determination is made that a further analysis of the environmental impact is needed, the Rural Development State Director will make necessary arrangements with the State NRCS conservationist for such action to be taken before a loan is made.(h)
National Historic Preservation Act. All projects will comply with the provisions of the National Historic Preservation Act of 1966 (16 U.S.C. 470et seq. ) in accordance with RD Instruction 1901-F.(i)
Civil Rights Act of 1964. Recipients of WS loans, WS advances, or RCD loans are subject to Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000det seq. ), which prohibits discrimination because of race, color, or national origin. Borrowers must agree not to discriminate in their operations by signing Form RD 400-4, “Nondiscrimination Agreement,” before loan closing. This requirement should be discussed with the applicant as early in the negotiations as possible. Necessary actions will be taken in accordance with RD Instruction 1901-E.(j)
Appraisals. When required by the Rural Development State Director, appraisals will be made by an Rural Development official designated or an independent appraiser. Form RD 442-10, “Appraisal Report—Water and Waste Disposal Systems,” with appropriate supplements, may be modified as needed for use with the type of facilities being appraised.(k)
Architectural Barriers Act of 1968. All facilities financed with RUS loans and grants which are accessible to the public or in which physically handicapped persons may be employed or reside must be developed in compliance with this act (42 U.S.C. 4151et seq. ).§ 1781.12 Preapplication and application processing. (a)
WS and RCD loans —(1)Preapplications. (i) The processing office or other person designated by the Rural Development State Director may assist the applicant in completing SF 424.1, “Application for Federal Assistance (For Non-construction),” and will forward one of SF 424.1 to the Rural Development State Director.(ii) The Rural Development State Director will review SF 424.1 along with other necessary information and will coordinate selection of preapplications to be processed with NRCS. He will consult with NRCS State Conservationist concerning the status of the WS plan or RCD measure plan, the estimated time schedule for construction and cost of the proposed works to be installed with the loan, cost sharing funds to be made available to the applicant, and other pertinent information.
(iii) Form AD-622, “Notice of Preapplication Review Action,” will be prepared and signed by the Rural Development State Director within forty-
five (45) days from receipt of the preapplication in the processing office stating the results of the review action. An original and one copy of Form AD-622 will be sent to the processing office who will deliver the original to the applicant. (2)
Applications. (i) The application includes applicable forms and information indicated in RUS Instruction 1780. When the Rural Development State Director determines that an application will be further processed and Form AD-622 is delivered, he will designate a community program specialist (field), or a member of the community program staff to assist the processing office and the applicant with assembling and processing the application.(ii) The processing office should arrange needed conferences with the applicant and its legal and engineering consultants, and when necessary, arrange for review of other Rural Development officials, and provide bulletins, forms, instructions and other assistance with assembling and processing the application. A processing checklist and time schedule will be established by using Form RD 1942-40, “Processing Check List (Public Bodies),” or Form RD 1942-39, “Processing Check List (Other than Public Bodies).” The processing office will send a letter and a copy of the processing checklist to the applicant to confirm decisions reached at the conference. The original and a copy of the processing checklist will be kept in the processing office and will be posted current as application processing actions are taken. The copy will be circulated from the processing office to the State Office for use in updating copies of the forms retained, after which it will be returned from the State Office to the processing office.
(3)
Dockets. WS loan, WS advance, and RCD loan dockets will be developed and assembled in accordance with applicable RUS Instruction 1780.(b)
Watershed advances. Applications for WS advances will be developed and processed with NRCS assistance as necessary.(1) The Rural Development State Director will arrange with the NRCS State Conservationist to be advised when a local sponsoring organization applies to NRCS for a WS advance.
(2) The Rural Development State Director will request the NRCS State Conservationist to provide information justifying the WS advance along with a written recommendation that it be made. This will include:
(i) Economic feasibility of the proposed WS advance.
(ii) Evidence of the legal authority of the sponsoring local organization to incur the obligation and make required payments.
(iii) Any limitations on the issuance of additional bonds or notes which may be imposed by the provisions of bond ordinances or on resolutions which authorize the issuance of any outstanding obligation of the sponsoring local organization.
(iv) The amount of WS advance funds to be provided, purpose for which funds will be used, and date funds will be needed.
(3) When the above information has been made available to the Rural Development State Director, he will send written recommendations concerning further action on the WS advance request to the NRCS State Conservationist including actions to be taken in the preparation of the WS advance docket.
(c)
Combination WS loans and WS advances. If an applicant requests both a WS loan and WS advance, the application for the WS loan should indicate the amount of the WS advance needed and whether a request for it has been made to NRCS. The Rural Development State Director and the NRCS State Conservationist will coordinate applicable processing actions of such applications. When the Rural Development State Director determines that favorable consideration will be given to an application for a loan or advance, he will provide instructions to the processing office for completing and processing the appropriate docket. Any questions concerning eligibility or other legal matters should be cleared with the Regional Attorney.(d)
Review of decision. When it is determined that the preapplication or application cannot be given favorable consideration, the Rural Development State Director will return it to the processing office along with writtenreasons. When the processing office receives this information, it will notify the applicant in writing of the reasons why the request was not favorably considered. The notification to the applicant will state that the RUS Administrator may be requested to review the decision. This action will be taken in accordance with § 1780.37 of this chapter. (1) Upon receipt of the State Office copy of a review request from the applicant, the Rural Development State Director will furnish a report on the matter to the Administrator.
(2) The Administrator will notify the applicant and the Rural Development State Director in writing of his decision and the reasons therefore.
§ 1781.13 [Reserved] § 1781.14 Planning, options, and appraisals. (a) WS and RCD area plans are developed by sponsoring local agencies and organizations with technical assistance from NRCS and other Federal and State agencies. These plans include WS works of improvement and RCD measures to be developed or constructed for which NRCS construction funds may be made available on a cost share basis along with funds provided by the sponsoring local organization, a portion or all of which may be obtained by a WS loan and/or WS advance or a RCD loan.
(b) Current information on the availability of cost share funds and purposes for which they may be used is provided by NRCS. The amount of NRCS cost share funds and the amount of funds to be provided by the sponsoring local organizations will be indicated in each plan. The estimated amount of WS loan, WS advance or RCD loan anticipated by the sponsoring local organization should also be included.
(c) Plans for the development or construction of individual WS works of improvement and RCD measures will normally be developed with NRCS technical assistance. In every case they will be approved by both the NRCS State conservationist and the Rural Development State Director or their designated agent when a WS loan, WS advance or RCD loan is made.
(d) Options and appraisals related to the purchase of real estate for which a WS loan, WS advance, or RCD loan is made must be developed in accordance with NRCS and RUS requirements and approved by RUS. The determination of present market value will be made in accordance with § 1780.44(g) of this chapter.
§ 1781.15 Planning and performing development. Planning and performing development will be handled in accordance with subpart C of part 1780 of this chapter and guidance from NRCS.
§ 1781.16 [Reserved] § 1781.17 Docket preparation and processing. (a)
Loan dockets. Dockets for WS loans, WS advances and RCD loans will be prepared in accordance with the applicable provisions of part 1780 of this chapter.(1)
Time for preparation of docket. Docket preparation may begin as soon as a preliminary draft of the watershed plan or RCD area plan, together with an estimate of costs and benefits, have been prepared with the assistance of NRCS and approved by the sponsoring local organization applicant. However, the applicant must understand that approval of the WS loan, WS advance, or RCD loan will not be determined until the work plan has been authorized for assistance by NRCS. To the extent practicable, docket preparation may be completed by that time to facilitate the availability of funds when needed.(2)
Instructions for preparation of docket. When the Rural Development State Director has determined that plans and other requirements are completed to the extent that preparation of the loan docket may begin, he will send the processing office a memorandum giving complete instructions for docket preparation, with a list of documents to be included in the docket.(3)
Objectives of the docket. The docket should include information for use in determining that:(i) The sponsoring local organization:
(A) Has legal authority to construct and operate the proposed facility, borrow money, give security, incur debt,
and generate revenue needed for operation, maintenance, reserves, debt payment, and other cash requirements. (B) Is a sponsor or cosponsor of the WS plan or RCD work plan and is otherwise eligible for assistance.
(ii) Funds will be used for authorized purposes.
(iii) The source of income to be pledged for debt payment and the security proposed is adequate.
(iv) Actions required for loan closing are administratively satisfactory, legally sufficient and properly documented in accordance with Agency regulations.
(4)
Assembly of the docket. The docket will be assembled in accordance with paragraph (a)(2) of this section and will include the following:(i) A copy of the WS works of improvement agreement or RCD measure agreement.
(ii) A copy of the Operation and Maintenance Agreement between NRCS and the WS or RCD sponsoring local organization for the WS works of improvement or the RCD measure.
(iii) A statement from the NRCS State Conservationist concurring in the feasibility of the WS work of improvement or RCD measure and that NRCS is providing financial and/or technical assistance in accordance with applicable WS or RCD authorities.
(5)
Narrative by processing office. This should be included in or attached to the Project Summary. It should relate project costs to benefits of the WS or RCD loan or WS advance. Minimum and average individual charges, tax levies or assessments should be given where applicable. Where taxes or assessments on land will be levied, acres should be indicated and average cost per acre should be given. Analyses of income from recreational facilities should be based on the best information available from local, State, and Federal agencies concerned with such recreation facilities. Determination of water rates, schedules, and estimated consumption of water should be made by the same methods as for loans for domestic water and irrigation.(6)
Estimates of right-of-way Costs. The docket should include, as part of the Project Summary, current estimated costs of easements, rights-of-way, and other land rights which must be acquired. The amount estimated for such purposes in the WS or RCD plan should reflect current conditions.(b)
Loan processing by State Office —(1)Review of the docket. The processing office will check the docket for accuracy and completeness and forward it to the State Office with their recommendations. The Rural Development State Director will review the docket to determine that:(i) All documents are accurate and complete.
(ii) The proposed loan complies with WS and RCD program policies and procedures of both RUS and NRCS.
(iii) Security is adequate and the repayment plan is sound.
(iv) Funds requested are for authorized purposes.
(v) Actions are in compliance with requirements of applicable Federal and State laws.
(2)
Letter of conditions. When the Rural Development State Director determines that the docket is complete and the proposed activity is feasible, he will prepare a proposed letter of conditions under which the application may be further processed. The letter will be delivered to and discussed with the applicant. Upon acceptance of the conditions the applicant will indicate intentions to meet the conditions by a letter of interest and the application will be further processed.(3)
Legal review. The complete docket and proposed letter of conditions will be forwarded to the Regional Attorney, OGC for review and preparation of closing instructions. If it is not possible to issue closing instructions at that time, the Regional Attorney, will issue a preliminary legal opinion commenting upon the applicants legal existence, authority to incur debt and give security for the WS loan, WS advance, or RCD loan requested and actions to be taken before closing instructions may be issued.(4)
Authorization for approval. When the Rural Development State Director receives closing instructions or a preliminary legal opinion for a WS loan, WS advance, or RCD loan that is not within his approval authority he will send this information along with thedocket, the proposed letter of conditions, and a memorandum recommending approval to the National Office. A copy of his memorandum will be sent to the processing office. If the proposed action is within the Rural Development State Director's approval authority he need not submit the material listed in this paragraph (b)(4) to the National Office unless he wants review and comments before approval. (c)
WS advance processing. (1) When the Rural Development State Director has concurred with the NRCS State Conservationist in the inclusion of a WS advance in a watershed plan, preparation of the advance docket can be initiated and will be processed in the same manner as for a WS loan. Where both a WS loan and WS advance are planned only one docket will be prepared to include both the WS loan and WS advance.(2) If the advance appears to be sound and proper, the Rural Development State Director will send a proposed memorandum of concurrence to the NRCS State Conservationist. The memorandum will state that RUS concurs in the execution of a work of improvement agreement for which NRCS will obligate advance funds and that RUS will accept the proposed obligations of the applicant to repay the advance subject to conditions specified in or attached to the memorandum. These conditions will include all appropriate requirements in accordance with paragraph (b)(2) of this section and will specify compliance with closing instructions issued by the Regional Attorney. It will also indicate that preparation of the WS advance docket will be in accordance with paragraph (a) of this section.
(3) The Rural Development State Director and the NRCS State Conservationist will sign the memorandum of concurrence to NRCS when:
(i) It has been determined that funds for the advance will be obligated by NRCS; and
(ii) The WS advance docket, has been approved; and
(iii) Closing instructions have been issued by the Regional Attorney; and
(iv) The Rural Development State Director and NRCS State Conservationist have determined that the applicant can comply with all requirements of the letter of conditions and closing instructions.
§ 1781.18 Feasibility. (a) Before WS loan, WS advance, or RCD loan is approved, a determination of feasibility will be made by the Rural Development State Director based upon a review of plans developed in cooperation with NRCS personnel. The feasibility determination must have the concurrence of the NRCS State Conservationist before a WS loan, WS advance, or RCD loan is approved.
(b) A written assessment of the project's feasibility will be made by the processing office, Architect/Engineer, and Program Chief in their recommendations or comments on the Project Summary. These should reflect concurrence of the respective NRCS personnel in counterpart positions with whom they cooperate in administering these programs.
§ 1781.19 Approval, closing, and cancellation. (a) Approval and closing actions will be taken in accordance with the applicable provisions of part 1780 of this chapter and the following requirements have been met:
(1) The WS or RCD plan has been approved for operations by NRCS and the applicant is an official sponsoring or cosponsoring local organization for the plan as evidenced by being included in the list of sponsoring or co-sponsoring local organizations in the plan.
(2) Closing instructions or a preliminary legal opinion has been prepared by the Regional Attorney.
(3) The governing body of the applicant's sponsoring local organization has formally passed and approved the loan resolution.
(4) The Rural Development State Director and NRCS State Conservationist have determined that all planned actions can be carried out as proposed in the project plan and the docket.
(5) The NRCS State Conservationist and Rural Development State Director have mutually agreed on the priority to be given the WS loan or WS advance, or RCD loan. In making this determination, consideration will be given to the relative priority of the WS
works of improvement or RCD measures to all other such work in the State and the anticipated availability of Federal and local funds to assure continuity of action and work until the project is completed. When funds are to be provided by NRCS for a WS or RCD loan or a WS advance such funds must be obligated by NRCS before closing. (6) Public bodies will be required to use bond counsel in accordance with subpart D of part 1780 of this chapter.
(b) When favorable action is not taken on a WS loan, WS advance, or RCD loan, the Rural Development State Director will notify the NRCS State Conservationist and the applicant in writing and, if possible, arrange for a meeting of RUS and NRCS representatives with the applicant to explain the action. WS loans, WS advances, or RCD loans may be canceled before closing.
§ 1781.20 Disbursement of WS and RCD loan funds and WS advance funds. (a) WS and RCD loan funds will be disbursed by the processing office in accordance with the applicable provisions of § 1780.45 of this chapter and RUS Bulletin 1781-1, paragraph (5). Funds will be made available to the borrower as needed for payment of development or other costs for which the loan is made. The processing office must determine that the payment is for an authorized purpose and is for benefits accrued to the borrower. This will require evidence from NRCS in accordance with the applicable provisions of RUS Bulletin 1781-1, “Memorandum of Understanding Between RUS and NRCS.”
(b) WS advance funds may be disbursed in the same manner as WS loan funds if such funds are transferred to RUS by NRCS for disbursement or they may be disbursed by NRCS. When WS advance funds are disbursed by NRCS, payments from advance of funds will be reported to the Rural Development State Director each month to be reported to the Finance Office and charged to the borrower's account. This action will be taken in accordance with the applicable provisions of RUS Bulletin 1781-1 or RUS Bulletin 1781-2 and agreement between the NRCS State Conservationist and Rural Development State Director as follows:
(1) When a future water supply is being developed with NRCS, WS advance funds, the NRCS State Conservationist will send the Rural Development State Director a monthly report of funds disbursed. This will include three (3) copies of Form NRCS-AS-49a and 49b, “Contract Payment Estimate and Construction Progress Report,” along with a transmittal Memorandum showing the sequential number (first, second, third, etc.) of the payment, the amount and date of payment, the check number by which the payment was made and the cumulative amount of advance funds disbursed to date. When the works of improvement, for which WS advance funds are used is completed the final report will, in addition to the above, show the date that construction was completed and the total amount of WS advance funds used.
(2) WS advances for construction costs will be set out each month on Form NRCS-49a. The Rural Development State Director should make arrangements with the NRCS State Conservationist to be supplied each month with a copy of Form NRCS 49a when advance funds are included together with an official statement from the NRCS State Administrative Officer giving the date of the check and the exact amount of each advance of funds made under the advance provisions of the project agreement or of any engineering services agreement or other supplementary agreement which further implements the proposal for the advance in the project agreement. The original will be sent immediately to the Finance Office and a copy provided for the processing office file.
(3) When WS advance funds are used to acquire property for site preservation the same reporting procedure as for a future water supply will be used except that Form NRCS-AS-49a and 49b if used, should be adopted to indicate fund use. As payments are made on land on which a mortgage or other security instrument is required, such instruments will be executed in accordance with instructions from the Regional Attorney, OGC.
(4) The Rural Development State Director must send the bond or note evidencing WS advance indebtedness of the borrower to the Finance Office along with reports of payments from advance funds disbursed by NRCS. A copy of the bond or note and copy of each report of payment will be sent to the processing office.
(c)
Actions subsequent to closing of loans or advances. Actions will be taken in accordance with § 1780.44 of this chapter.§ 1781.21 Borrower accounting methods, management, reporting, and audits. These activities will be handled in accordance with the provisions of § 1780.47 of this chapter.
§ 1781.22 Subsequent loans. Subsequent loans will be processed in accordance with this part.
§ 1781.23 Servicing. Servicing will be handled in accordance with the provisions of subpart E of part 1951 of this title.
§ 1781.24 State supplements and availability of bulletins, instructions, forms, and memorandums. (a) State supplements will be issued as needed in accordance with applicable provisions of part 1780 of this chapter.
(b) Bulletins, instructions, forms and memorandums are available from any USDA/Rural Development office or the Rural Utilities Service, United States Department of Agriculture, Washington, DC. 20250-1500.
§§ 1781.25-1781.100 [Reserved] Pt. 1783 PART 1783—REVOLVING FUNDS FOR FINANCING WATER AND WASTEWATER PROJECTS (REVOLVING FUND PROGRAM) Subpart A—General Sec. 1783.1 What is the purpose of the Revolving Fund Program? 1783.2 What Uniform Federal Assistance Provisions apply to the Revolving Fund Program? 1783.3 What definitions are used in this regulation? 1783.4 [Reserved] Subpart B—Revolving Loan Program Grants 1783.5 What are the eligibility criteria for grant recipients? 1783.6 When will applications for grants be accepted? 1783.7 What is the grant application process? 1783.8 What are the acceptable methods for submitting applications? 1783.9 What are the criteria for scoring applications? 1783.10 What is the grant agreement? 1983.11 What is the revolving loan fund? 1783.12 What are eligible uses of grant proceeds? 1783.13 What administrative expenses may be funded with grant proceeds? Subpart C—Revolving Loan Program Loans 1783.14 What are the eligibility criteria for RFP loan recipients? 1783.15 What are the terms of RFP loans? 1783.16 How will loans from the revolving fund be serviced? Authority: 7 U.S.C. 1926 (a)(2)(B).
Source: 69 FR 59772, Oct. 6, 2004, unless otherwise noted.
Subpart A—General § 1783.1 What is the purpose of the Revolving Fund Program? This part sets forth the policies and procedures for making grants to qualified private, non-profit entities to capitalize revolving funds for the purpose of providing financing to eligible entities for pre-development costs associated with proposed water and wastewater projects or with existing water and wastewater systems, and short-term costs incurred for replacement equipment, small-scale extension of services, or other small capital projects that are not part of the regular operations and maintenance activities of existing water and wastewater systems.
§ 1783.2 What Uniform Federal Assistance Provisions apply to the Revolving Fund Program? (a) This program is subject to the general provisions that apply to all grants made by USDA and that are set
forth in 7 CFR Part 3015—Uniform Federal Assistance Regulations. (b) This program is subject to the uniform administrative requirements that apply to all grants made by USDA to non-profit organizations and that are set forth in 7 CFR Part 3019—Uniform Administrative Requirements for Grants And Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations.
(c) This program is subject to OMB Circular No. A-122 (Revised): Cost Principles for Non-Profit Organizations.
§ 1783.3 What definitions are used in this regulation? Administrative expenses means expenses incurred by a grant recipient that are of the type more particularly described in § 1783.12.Applicant means a private, non-profit organization that applies for an RFP grant under this part.CONACT means the Consolidated Farm and Rural Development Act.Eligible entity means an entity eligible to obtain a loan, loan guarantee or grant under paragraph 1 or paragraph 2 of section 306(a) the CONACT (codified at 7 U.S.C. 1926(a)(1) and (2)).Grant agreement means the contract between RUS and the grant recipient which sets forth the terms and conditions governing a particular grant awarded under this part.Grant recipient means a private, non-profit entity that has been awarded a grant under this part.Loan recipient means an eligible entity that has received an RFP loan.Revolved funds means the cash portion of the revolving loan fund that is not composed of RFP grant funds, including cash comprising repayments of RFP loans, fees relating to RFP loans and interest collected on RFP loans.Revolving loan fund means the loan fund established by the grant recipient to carry out the purposes of this part, such fund comprising the proceeds of an RFP grant and other related assets.RFP means Revolving Fund Program.RFP grant means a grant from RUS to a grant recipient under this part.RFP loan means a loan from a grant recipient using the direct or indirect proceeds of an RFP grant awarded under this part.Rural and rural area means a city, town or unincorporated area that has a population of no more than 10,000 inhabitants, according to the latest decennial census of the United States.RUS means the Rural Utilities Service, a Federal agency delivering the USDA's Rural Development Utilities Program.USDA means the United States Department of Agriculture.§ 1783.4 [Reserved] Subpart B—Revolving Loan Program Grants 1783.5 What are the eligibility criteria for grant recipients? (a) The applicant must be a private entity.
(b) The applicant must be organized as a non-profit entity.
(c) The applicant must have the legal capacity and lawful authority to perform the obligations of a grantee under this part.
Example 1 to paragraph (c): If the organization is incorporated as a non-profit corporation, it must have corporate authority under state law and its corporate charter to engage in the practice of making loans to legal entities.
Example 2 to paragraph (c): If the organization is an unincorporated association, state law may prevent the organization from entering into binding contracts, such as a grant agreement.
(d) The applicant must have sufficient expertise and experience in making and servicing loans to assure the likelihood that the objectives of this part can be achieved.
§ 1783.6 When will applications for grants be accepted? In Fiscal Year 2004, applications will be accepted for this RFP grant program from October 6, 2004, until December 6, 2004, at which time the initial application period shall close. An applicant may withdraw, substitute, amend or supplement its application at any time prior to the closing of the initial application period. Once the initial application period has closed, all applications shall be considered final. For subsequent fiscal years, if any funds for
this program are available, the Secretary will publish a notice to that effect. The notice will establish the period during which applications for such funds may be submitted for consideration. § 1783.7 What is the grant application process? (a) The applicant must complete and submit the following items to RUS to apply for a grant under this part:
(1) Application for Federal Assistance:
Standard Form 424; (2) Budget Information—Non-Construction Programs:
Standard Form 424A; (3) Assurances—Non-Construction Programs:
Standard Form 424B; (4) Evidence of applicant's legal existence and authority in the form of certified copies of organizational documents and a certified list of directors and officers with their respective terms;
(5) Evidence of tax exempt status, and
(6) Most recent annual audit conducted by an independent auditor.
(b) The applicant must submit a written work plan that demonstrates the ability of the applicant to make and service loans to eligible entities under this program and the feasibility of the applicant's lending program to meet the objectives of this part.
(c) The applicant should submit a narrative establishing the basis for any claims that it has substantial expertise in making and servicing loans. The Secretary will give priority to an applicant that demonstrates it has substantial experience of this type.
(d) The applicant may submit such additional information as it elects to support and describe its plan for achieving the objectives of the part.
§ 1783.8 What are the acceptable methods for submitting applications? (a) Applications for RFP grants may be submitted by U.S. Mail. Applications submitted by mail must be addressed as follows: Rural Utilities Service, U.S. Department of Agriculture, 1400 Independence Avenue, SW., STOP 1548, Washington, DC 20250-1548. The outside of the application should be marked: “Attention: Assistant Administrator, Water and Environmental Programs.” Applications submitted by mail must be postmarked not later than the filing deadline to be considered during the period for which the application was submitted.
(b) In lieu of submitting an application by U.S. Mail, an applicant may file its application electronically by using the Federal Government's eGrants Web site (Grants.gov) at
http://www.grants.gov. Applicants should refer to instructions found on the Grants.gov Web site for procedures for registering and using this facility. Applicants who have not previously registered on Grants.gov should allow a sufficient number of business days to complete the process necessary to be qualified to apply for Federal Government grants using electronic submissions. Electronic submissions must be filed not later than the filing deadline to be considered during the period for which the application was submitted.(c) The methods of submitting applications may be changed from time to time to reflect changes in addresses and electronic submission procedures. Applicants should refer to the most recent notice of funding availability for notice of any such changes. In the event of any discrepancy, the information contained in the notice must be followed.
§ 1783.9 What are the criteria for scoring applications? (a) Applications that are incomplete or ineligible will be returned to the applicant, accompanied by a statement explaining why the application is being returned.
(b) Promptly after an application period closes, all applications that are complete and eligible will be ranked competitively based on the following scoring criteria:
(1) Degree of expertise and successful experience in making and servicing commercial loans, with a successful record, for the following number of full years:
(i) At least 1 but less than 3 years—5 points
(ii) At least 3 but less than 5 years—10 points
(iii) At least 5 but less than 10 years—20 points
(iv) 10 or more years—30 points
(2) Extent to which the work plan demonstrates a well thought out, comprehensive approach to accomplishing the objectives of this part, clearly defines who will be served by the project, clearly articulates the problem/issues to be addressed, identifies the service area to be covered by the RFP loans, and appears likely to be sustainable. Up to 40 points.
(3) Percentage of applicant contributions. Points allowed under this paragraph will be based on written evidence of the availability of funds from sources other than the proceeds of an RFP grant to pay part of the cost of a loan recipient's project. In-kind contributions will not be considered. Funds from other sources as a percentage of the RFP grant and points corresponding to such percentages are as follows:
(i) Less than 20%—ineligible
(ii) At least 20% but less than 50%—10 points
(iii) 50% or more—20 points
(4) Extent to which the goals and objectives are clearly defined, tied to the work plan, and are measurable. Up to 15 points.
(5) Lowest ratio of projected administrative expenses to loans advanced. Up to 10 points.
(6) The evaluation methods for considering loan applications and making RFP loans are specific to the program, clearly defined, measurable, and are consistent with program outcomes. Up to 20 points.
(7) Administrator's discretion, considering such factors as creative outreach ideas for marketing RFP loans to rural residents; the amount of funds requested in relation to the amount of needs demonstrated in the work plan; previous experiences demonstrating excellent utilization of a revolving loan fund grant; and optimizing the use of agency resources. Up to 10 points.
(c) All qualifying applications under this part will be scored based on the criteria contained in this section. Awards will be made based on the highest ranking applications and the amount of financial assistance available for RFP grants. All applicants will be notified of the results in writing on form AD-622.
§ 1783.10 What is the grant agreement? RUS and the grant recipient will enter into a contract setting forth the terms and conditions governing a particular RFP grant award. RUS will furnish the form of grant agreement. No funds awarded under this part shall be disbursed to the grant recipient before the grant agreement is binding and RUS has received a fully executed counterpart of the grant agreement.
§ 1783.11 What is the revolving loan fund? The grant recipient shall establish and maintain a revolving loan fund for the purposes set forth in § 1783.12. The revolving loan fund shall be comprised of revolving loan fund grant funds and the grant recipient's contributed funds. All revolving loan fund loans made to loan recipients shall be drawn from the revolving loan fund. All revolving loan fund loans shall be serviced and the revolving loan fund maintained, in accordance with this part and applicable law.
§ 1783.12 What are eligible uses of grant proceeds? (a) Grant proceeds shall be used solely for the purpose of establishing the revolving loan fund to provide loans to eligible entities for:
(1) Pre-development costs associated with proposed water and wastewater projects or with existing water and wastewater systems, and
(2) Short-term costs incurred for replacement equipment, small-scale extension of services, or other small capital projects that are not part of the regular operations and maintenance activities of existing water and wastewater systems.
(b) A grant recipient may not use grant funds in any manner inconsistent with the terms of the grant agreement.
§ 1783.13 What administrative expenses may be funded with grant proceeds? RFP grant funds may not be used for any purposes not described in § 1783.12, including, without limitation, payment or reimbursement of any of the grant recipient's administrative costs or expenses. Administrative expenses may, however, be paid or reimbursed from
revolving loan fund assets that are not RFP grant funds, including revolved funds and cash originally contributed by the grant recipient. Subpart C—Revolving Fund Program Loans § 1783.14 What are the eligibility criteria for RFP loan recipients? (a) A loan recipient must be an eligible entity as defined in § 1783.3.
(b) The loan recipient must be unable to finance the proposed project from their own resources or through commercial credit at reasonable rates and terms.
(c) The loan recipient must have or will obtain the legal authority necessary for owning, constructing, operating and maintaining the proposed service or facility, and for obtaining, giving security for, and repaying the proposed loan.
(d) The project funded by the proceeds of an RFP loan must be located in, or the services provided as the result of such project must benefit, rural areas.
§ 1783.15 What are the terms of RFP loans? (a) RFP loans under this part—
(1) Shall have an interest rate that is determined by the grant recipient and approved by RUS;
(2) Shall have a terms not to exceed 10 years; and
(3) Shall not exceed the lesser of $100,000 or 75 percent of the total cost of a project. The total outstanding balance for all loans under this program to any one entity shall not exceed $100,000.
(b) The grant recipient must set forth the RFP loan terms in written documentation signed by the loan recipient.
(c) Grant recipients must develop and use RFP loan documentation that conforms to the terms of this part, the grant agreement, and the laws of the state or states having jurisdiction.
§ 1783.16 How will the loans given from the revolving fund be serviced? The grant recipient shall be responsible for servicing all loans, to include preparing loan agreements, processing loan payments, reviewing financial statements and debt reserves balances, and other responsibilities such as enforcement of loan terms. Loan servicing will be in accordance with the work plan approved by the Agency when the grant is awarded for as long as any loan made in whole or in part with Agency grant funds is outstanding.
Pt. 1785 PART 1785—LOAN ACCOUNT COMPUTATIONS, PROCEDURES AND POLICIES FOR ELECTRIC AND TELEPHONE BORROWERS Subpart A [Reserved] Subpart B—RUS Cushion of Credit Account Computations and Procedures Sec. 1785.66 General. 1785.67 Definitions. 1785.68 Establishing an RUS cushion of credit payment account. 1785.69 Cushion of credit payment account computations. 1785.70 Application of RETRF cushion of credit payments. Authority: 7 U.S.C. 901
et seq .; Title I, Subtitle D, sec. 1403, Omnibus Budget Reconciliation Act of 1987, Pub. L. 100-203; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941et seq .).Subpart A [Reserved] Subpart B—RUS Cushion of Credit Account Computations and Procedures Source: 54 FR 13669, Apr. 5, 1989, unless otherwise noted.
§ 1785.66 General. This subpart B sets forth policies and procedures on the RUS cushion of creditpayments program. The cushion of credit payments program will be maintained only for insured loans evidenced by obligations of the Fund. A subaccount within the Fund is hereby established for purposes of promoting rural economic development. It shall be known as the “Rural Economic Development Subaccount.” The assets of the subaccount shall be obtained from crediting (on a monthly basis) a sum
determined by multiplying the outstanding cushion of credit payments made after October 1, 1987, by the difference (converted on a monthly basis) between the average weighted interest rate paid on outstanding certificates of beneficial ownership issued by the Fund and the 5 percent rate of interest provided to borrowers on cushion of credit payments, repayment of loans made pursuant to Section 313 of the Act, and other sources as provided by law. This subaccount shall be used to provide grants or zero interest loans to borrowers under the Act for the purpose of promoting rural economic development. § 1785.67 Definitions. Accumulated (deferred) interest means interest allowed to accumulate up to, and including, the basis date of RUS notes covering loans approved before June 5, 1957. The accumulated interest is payable in equal periodic installments over the remaining life of the notes.Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901et. seq .).Advance payment means a voluntary unscheduled payment on an RUS note, made prior to October 2, 1987, credited to the advance payment account of a borrower.Cushion of Credit Payment means a voluntary unscheduled payment on an RUS note made after October 1, 1987, credited to the cushion of credit account of a borrower.Current interest means interest payable periodically as it accrues.Fund means the Rural Electrification and Telephone Revolving Fund established pursuant to the Act.Interest credit means interest earned on balances in advance payment or cushion of credit accounts. Since the periodic installments are established by the terms of the notes, the interest credits cannot serve to change the total amount of each installment; therefore, an amount equal to the interest credits is added to the principal installment due. On receipt of the full installments, amounts equal to the interest credits (the principal offsets) are added to the respective advance payment accounts.Prepayment means a voluntary unscheduled payment which the borrower instructs RUS to apply directly and immediately to the principal of an RUS note.RUS notes means those notes, bonds, or other obligations evidencing indebtedness created by loans made by RUS pursuant to titles I, II, or III of the Act.Subaccount means theRural Economic Development Subaccount established pursuant to the Act as part of the Fund.§ 1785.68 Establishing an RUS cushion of credit payment account. A cushion of credit account shall be automatically established by RUS for each borrower who makes a payment after October 1, 1987, in excess of amounts then due on an RUS note. Such account will bear interest at a rate of 5 percent per annum. All payments on RUS notes which are in excess of required payments and not otherwise designated shall be deposited in the borrowers' respective cushion of credit accounts. Payments received in the month in which an installment is due will be applied to the installment due. However, if the regular installment payment is received at a later date in the month, the first payment received will be applied retroactively to a cushion of credit account and the second will be applied to the installment due.
§ 1785.69 Cushion of credit payment account computations. (a)
Deposits. Cushion of credit payments are credited to the borrowers' cushion of credit accounts.(b)
Interest. Interest at the rate of 5 percent per annum shall be credited on a quarterly basis to cushion of credit accounts. Interest earned will appear as a reduction in the interest billed on the borrower's RUS notes and will be separately shown on RUS Form 694, “Statement of Interest and Principal Due.”§ 1785.70 Application of RETRF cushion of credit payments. (a) If a maturing installment on an RUS note or a note which has been guaranteed by RUS is not received by
its due date, funds will be withdrawn from the borrower's cushion of credit account and applied as of the installment due date beginning with the oldest of such notes as follows: first, to current interest then due on all notes; second, to the accumulated interest due, if any, on all notes; and third, to the principal then due on all notes. In those instances where a borrower has prior to October 2, 1987, maintained an advance payment account with RUS, its cushion of credit account will be applied in accordance with the provisions of this section prior to using any balance remaining in its advance payment account to pay interest and principal installments on notes. Computations required under this section have been made by RUS as of October 2, 1987; however, on or before May 25, 1989 any borrower may make a one time irrevocable election to have all such computations made as of April 5, 1989, by filing written notice to that effect with Robert D. Ruddy, Director, Fiscal Accounting Division, Rural Utilities Service, Washington, DC 20250-1500. (b) A borrower may reduce the balance of its cushion of credit account only if the amount obtained from the reduction is used to make scheduled payments on loans made or guaranteed under the Act.
[54 FR 13669, Apr. 5, 1989; 54 FR 17703, Apr. 25, 1989] Pt. 1786 PART 1786—PREPAYMENT OF RUS GUARANTEED AND INSURED LOANS TO ELECTRIC AND TELEPHONE BORROWERS Subpart A—General [Reserved] 1786.1-1786.24 [Reserved] Subpart B—Prepayment of RUS Guaranteed Federal Financing Bank Loans Pursuant to Section 306(A) of the RE Act Sec. 1786.25 Purpose. 1786.26 Policy. 1786.27 Definitions and rules of construction. 1786.28 Qualifications. 1786.29 Prepayment authority, program allocations, categories of prepayment applications and financially distressed borrowers' reserve. 1786.30 Processing procedure. 1786.31 Application procedure. 1786.32 Settlement procedure. 1786.33 Forms. 1786.34 Access to records of lenders, servicers, and trustees. 1786.35 Loss, theft, destruction, mutilation, or defacement of RUS guarantee. 1786.36 Other prepayments. 1786.37 Application of regulation to previous prepayments. 1786.38 Judicial review. 1786.39-1786.49 [Reserved] Subpart C—Special Discounted Prepayments on RUS Direct/Insured Loans 1786.50 Purpose. 1786.51 Definitions. 1786.52 Prepayment. 1786.53 Discounted present value. 1786.54 Eligibility criteria. 1786.55 Application procedure. 1786.56 Approval of applications. 1786.57 Prepayment agreement. 1786.58 Security. 1786.59 Loan fund audit. 1786.60 Closing. 1786.61 Other prepayments. 1786.62-1786.74 [Reserved] Subpart D [Reserved] Subpart E—Discounted Prepayments on RUS Notes in the Event of a Merger of Certain RUS Electric Borrowers 1786.95 Purpose. 1786.96 Definitions. 1786.97 Prepayment. 1786.98 Discounted present value. 1786.99 Eligibility criteria. 1786.100 Application procedure. 1786.101 Approval of application. 1786.102 Prepayment agreement. 1786.103 Security. 1786.104 Loan fund audit. 1786.105 Closing. 1786.106 Other prepayments. Appendix A to Subpart E—Listing of Eligible Borrowers Appendix B to Subpart E—Federal Reserve Statistical Release Subpart F—Discounted Prepayments on RUS Electric Loans 1786.150 Purpose. 1786.151 Definitions and rules of construction. 1786.152 Prepayments of RUS loans. 1786.153 Discounted present value. 1786.154 Qualified Notes. 1786.155 Eligible borrower. 1786.156 Application procedure. 1786.157 Approval of applications. 1786.158 Terms and conditions of prepayment agreement. 1786.159 Initial closing. 1786.160 Subsequent closings. 1786.161 Return of Qualified Notes and release of lien. 1786.162 Outstanding loan documents. 1786.163 Existing wholesale power contracts. 1786.164 Loan fund audit. 1786.165 Reporting. 1786.166 Approvals. 1786.167 Restrictions to additional RUS financing. 1786.168 Borrowers who prepaid under this part prior to October 21, 1992. 1786.169 Liability. 1786.170 Prepayment of loans approved after December 20, 1993. [Reserved] 1786.171-1786.199 [Reserved] Subpart G—Refinancing and Prepayment of RUS Guaranteed FFB Loans Pursuant to Section 306(C) of the RE Act 1786.200 Purpose. 1786.201 Definitions and rules of construction. 1786.202 Prepayment and refinancing of RUS guaranteed FFB loans. 1786.203 Special considerations. 1786.204 Limitations. 1786.205 Application procedure. 1786.206 Refinancing note. 1786.207 Prepayment premium. 1786.208 Increased principal. 1786.209 Outstanding loan documents. 1786.210 Approvals. Authority: 7 U.S.C. 901-950b; Title I, subtitle B, Pub. L. 99-509; Pub. L. 101-624, 104 Stat. 4051; Pub. L. 103-354, 108 Stat. 3178, (7 U.S.C. 6941
et seq .), unless otherwise noted.Source: 55 FR 1145, Jan. 11, 1990, unless otherwise noted.
Subpart A—General [Reserved] §§ 1786.1-1786.24 [Reserved] Subpart B—Prepayment of RUS Guaranteed Federal Financing Bank Loans Pursuant to Section 306(A) of the RE Act Authority: 7 U.S.C. 901-950b; Title I, Subtitle B, Pub. L. 99-509; Title I, Pub. L. 100-202; Pub. L. 100-203; Title VI, Pub. L. 100-460; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941
et seq .).Source: 55 FR 1145, Jan. 11, 1990, unless otherwise noted. Redesignated at 55 FR 49250, Nov. 27, 1990.
§ 1786.25 Purpose. This subpart contains the general regulations of the Rural Utilities Service (RUS) for implementing the provisions of (a) section 306(A) of the Rural Electrification Act of 1936, as amended (RE Act); (b) section 633 of the Rural Development, Agriculture, and Related Agencies Appropriations Act, 1988 (Pub. L. 100-202) (the continuing resolution); and (c) section 637 of the Rural Development, Agriculture, and Related Agencies Appropriations Act, 1989 (Pub. L. 100-460) (the 1989 Appropriations Act) which permit, in certain circumstances, loans made by the Federal Financing Bank (FFB) and guaranteed by the Administrator of RUS to be prepaid by RUS electric and telephone borrowers by paying the outstanding principal balance due on the FFB loan, using a private loan with the existing RUS guarantees or using internally generated funds.
§ 1786.26 Policy. It is the policy of RUS to facilitate the prepayment of FFB loans in accordance with the provisions of section 306(A) of the RE Act and section 633 of the continuing resolution as modified by section 637 of the 1989 Appropriations Act. Furthermore, consistent with the RE Act, the continuing resolution and the 1989 Appropriations Act, it is the policy of RUS to implement the objectives of the prepayment program in a manner which does not result in an increase in loan guarantee risk or an inappropriate increase in the administrative burden on RUS.
§ 1786.27 Definitions and rules of construction. (a)
Definitions. For the purposes of this subpart, the following terms shall have the following meanings:Administrator means the Administrator of RUS.Application Category shall have the meaning set forth in § 1786.29(c).Application period means a period during which RUS is accepting applications to make prepayments pursuant to this subpart, and initially means:(1) In the case of telephone borrowers, the period commencing on February 12, 1990 and ending on March 12, 1990;
(2) In the case of financially distressed borrowers, the period commencing October 1, 1990 and ending on July 30, 1993; or
(3) In the case of other borrowers, the period to be announced by RUS.
Borrower means any organization which has an outstanding FFB loan guaranteed by RUS under the RE Act.Business Day means any day other than a Saturday, a Sunday, a legal public holiday under 5 U.S.C. section 6103 for the purposes of statutes relating to pay and leave of employees, or any other day declared to be legal holiday for the purposes of statutes relating to pay and leave of employees by Federal statute or Federal Executive Order.Continuing Resolution means section 633 of the Rural Development, Agriculture, and Related Agencies Appropriations Act, 1988 (Pub. L. 100-202).Date Received means the date inscribed on the Notice of Intent to Prepay the Federal Financing Bank, by an authorized official of RUS, as the date the application was received.Documentation means all or part of the agreements relating to a prepayment under this part, irrespective of whether RUS is a party to each agreement, including all exhibits to such agreements.Electric Program Applications shall have the meaning specified in § 1786.29(c)(1).Existing Loan Guarantee means a guarantee of payment issued by RUS to FFB pursuant to the RE Act for an FFB loan made on or before July 2, 1986.Fees means any fees, costs or charges, incurred in connection with obtaining the private loan used to make the prepayment including without limitation, accounting fees, filing fees, legal fees (including fees and disbursements charged by counsel representing the borrower), printing costs, recording fees, trustee fees, underwriting fees, capital stock purchases or other equity investment requirements of the lender, and other related transaction expenses.Financially Distressed Borrower means an RUS-financed electric system determined by the Administrator to be either (1) in default or near default on interest or principal payments due on loans made or guaranteed under the RE Act, and is making a good faith effort to increase rates and reduce costs to avoid or mitigate default; or (2) participating in a work out or debt restructuring plan with RUS, either as the borrower being restructured or as a borrower providing assistance as part of the work out or restructuring.Financially Viable Lender means:(1) A lender (i) which has a capital and surplus of at least $50 million; (ii) is a beneficiary of an irrevocable letter of credit, in form and substance satisfactory to the Administrator, payable to it in the amount of $50 million; (iii) is the beneficiary of a guarantee, in form and substance satisfactory to the Administrator, in the amount of $50 million from a lending institution with a capital and surplus of at least $50 million; or (iv) has other credit support, in form and substance satisfactory to the Administrator, in the amount of $50 million; or
(2) In the event of a prepayment totalling less than $100 million, a lender (i) which has a capital and surplus of at least $10 million; (ii) is a beneficiary of an irrevocable letter of credit, in form and substance satisfactory to the Administrator, payable to it in the amount of $10 million; (iii) is the beneficiary of a guarantee, in form and substance satisfactory to the Administrator, in the amount of $10 million from a lending institution with a capital and surplus of at least $10 million; or (iv) has other credit support, in form and substance satisfactory to the Administrator, in the amount of $10 million;
FFB means the Federal Financing Bank, an instrumentality and wholly owned corporation of the United States.FFB Loan means one or more advances, or a part of one or more advances, made on or before July 2, 1986, by FFB on a promissory note or notes executed by a borrower and guaranteed by RUS pursuant to section 306 of the RE Act (7 U.S.C. 936).Guarantee means the original endorsement, in the form specified by RUS which is executed by the Administrator and shall be an obligation supported by the full faith and credit ofthe United States and incontestable except for fraud or misrepresentation of which the holder had actual knowledge at the time it became a holder. Increase in Loan Guarantee Risk means the change in any of the components of loan guarantee risk associated with the private loan which in the judgment of RUS increases the magnitude or duration of the loan guarantee risk currently assumed by RUS in connection with the existing loan guarantee;Internally Generated Funds means money belonging to the borrower other than: (1) Proceeds of loans made or guaranteed under the RE Act or (2) funds on deposit in the cash construction trustee account;Lender means the organization making and servicing the private loan which is to be guaranteed under the provisions of this subpart and used to prepay the FFB loan. The termlender does not include the FFB, or any other Government agency.Loan Guarantee Agreement means the written contract by and among the lender, the borrower, the Administrator, and such other parties that RUS may require, setting forth the terms and conditions of a guarantee issued pursuant to the provisions of this subpart.Loan Guarantee Risk means the risk as determined by RUS associated with guaranteeing a loan for a particular borrower. Components of loan guarantee risk include the following:(1) The outstanding principal balance of a loan;
(2) The dollar weighted average interest rate (stated as an annual percentage rate) on a loan;
(3) The final maturity date of a loan;
(4) The annual principal amortization of the loan; and
(5) Any other factor that as determined by RUS increases the magnitude or duration of the guarantee.
Mortgage means the mortgage and security agreements by and among the borrower and RUS, as from time to time supplemented, amended and restated.1989 Appropriations Act means the Rural Development, Agriculture, and Related Agencies Appropriations Act, 1989 (Pub. L. 100-460).Notice of Intent to Prepay the Federal Financing Bank means the notice in the form specified in § 1786.33 hereof.Prepayment Authority shall have the meaning specified in § 1786.29(a).Private Loan means a loan or loans to be guaranteed under the provisions of this part and used to prepay an FFB loan.Pro-rated Percentage shall have the meaning specified in § 1786.30(b)(1).RE Act means the Rural Electrification Act of 1936 (7 U.S.C. 901-950b), as amended.REA means the Rural Electrification Administration formerly an agency of the United States Department of Agriculture and predecessor agency to RUS with respect to administering certain electric and telephone loan programs.RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to Section 232 of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to REA with respect to administering certain electric and telephone programs. See 7 CFR 1700.1.Service orServicing means the following activities:(1) The billing and collecting of the private loan payments from the borrower;
(2) Notifying the Administrator promptly of any default in the payment of principal and interest on the private loan and submitting a report, as soon as possible thereafter, setting forth the servicer's views as to the reasons for the default, how long the servicer expects the borrower to be in default, and what corrective actions the borrower states it is taking to achieve a current debt service position;
(3) Notifying the Administrator of any known violations or defaults by the borrower under the lending agreement, loan guarantee agreement, the mortgage, or related security instruments, or conditions of which the servicer or the lender is aware which might lead to nonpayment, violation or other default; and
(4) Such other activities as may be specified in the loan guarantee agreement.
Settlement Date means the date the borrower disburses funds to the FFB in order to complete a prepayment pursuant to this subpart, and shall be a date agreed to by RUS, and a date on which both the FFB and the Federal Reserve Bank of New York are open for business.Standard Electric Program Application shall have the meaning specified in § 1786.29(c)(1).Telephone Borrower means a borrower that provides telephone service as defined in 7 CFR 1735.2(a).Telephone Program Applications shall have the meaning specified in § 1786.29(c)(2).(b)
Rules of Construction. Unless the context shall otherwise indicate, the terms defined in § 1786.27(a) hereof include the plural as well as the singular, and the singular as well as the plural. The words “herein,” “hereof” and “hereunder”, and words of similar import, refer to this subpart as a whole.[55 FR 1145, Jan. 11, 1990, as amended at 55 FR 35426, Aug. 30, 1990. Redesignated at 55 FR 49250, Nov. 27, 1990, and amended at 59 FR 66440, Dec. 27, 1994] § 1786.28 Qualifications. (a)
Borrowers. To qualify to prepay an FFB loan pursuant to this subpart, the borrower must:(1) Demonstrate that the FFB loan was outstanding on July 2, 1986;
(2) Prepay the FFB loan by:
(i) Using a private loan with the existing loan guarantee;
(ii) Using internally generated funds; or
(iii) Using a combination of a private loan with the existing loan guarantee and internally generated funds; and
(3) Certify that any savings resulting from such prepayment will be passed on to its customers, or used to improve the financial strength of the borrower in cases of financial hardship.
(b)
Lenders. To participate pursuant to this subpart, in a borrower's prepayment of an FFB loan by means of a private loan, the lender must:(1) Be a private legally organized lender, or a lender established pursuant to the Farm Credit Act of 1971, as amended;
(2)(i) Be subject to credit examination and supervision by either an agency of the United States or a state and be in good standing with its licensing authority and have met the requirements, if any, of licensing, lending and loan servicing in the state where the collateral for the Loan is located;
(ii) Be a financially viable lender; or
(iii) Be a trust administered. by an entity meeting the requirements of paragraph (b)(2) (i) or (ii) of this section; and
(3) Have the capability to adequately service the private loan either by using its own resources or by contracting for such resources with a financially viable lender. Under no circumstances may the borrower or an affiliate of the borrower service the private loan. A qualified lender may participate out each private loan to entities other than a Government agency, the borrower, or an affiliate of the borrower, provided that such participation shall be on terms and conditions satisfactory to the Administrator.
(c)
Private Loans. A borrower who qualifies pursuant to § 1786.28(a) may at its option elect to use a private loan to make a prepayment, or a portion of a prepayment, pursuant to this subpart. Private loans, the proceeds of which are used exclusively to prepay FFB loans, shall be eligible for a guarantee under this subpart. The Administrator shall endorse a guarantee on each note evidencing a qualifying private loan. The private loan shall be structured in a manner which in the judgment of RUS shall not result in an increase in loan guarantee risk and shall comply with the following:(1) The private loan shall provide for the periodic payment of interest by the borrower not less frequently than annually, at either a variable or fixed rate in a manner which shall not result in an increase in loan guarantee risk. (i.e. The dollar weighted average interest rate on the private loan shall be less than or equal to the dollar weighted average interest rate on the FFB loan being prepaid, so that:
EC16SE91.024 Where, C r =The revised interest rate cap;C o =The original interest rate cap at the time of prepayment;A i =The average interest rate actually charged in the ith period;T i =Length of the ith period expressed in years;n=The number of years that have elapsed since the initial prepayment; J=The initial term of the private loan, at the time of prepayment; Subject to the constraint that A 1 must be less or equal to Co ).(2) Principal payments on the private loan shall be made either quarterly, semiannually, or annually and shall commence on or before the last day of the calendar year during which the prepayment pursuant to this subpart was made.
(3) With the approval of the Administrator, the lender may refund the private loan with the proceeds of another loan from the same lender, with the existing guarantee and under terms, conditions, and a structure substantially similar to the private loan, on such dates as the lender, the borrower and RUS may agree, provided however, that such a refunding loan shall comply with the provisions of § 1786.28(c) hereof. Additionally, with the approval of the Administrator, the private loan may be prepaid either in whole or in part at any time by the borrower using its general funds.
(4) The private loan and the guaranteed note evidencing the private loan shall not be directly or indirectly part of a transaction the income of which is excluded from gross income for the purposes of Chapter I of the Internal Revenue Code of 1986.
(5) The guaranteed note evidencing the private loan shall not be transferable or assignable except
(i) With the written approval of the Administrator;
(ii) In the event that the guaranteed note evidencing the private loan is held by a trust, to a similar trust, in connection with a refunding loan made by the lender pursuant to § 1786.28(c)(3); or
(iii) As an undivided pro rata interest in a pool of obligations.
(6) The loan documentation shall provide RUS with the right to accelerate the note evidencing the private loan upon the occurrence of any “Event of Default” under the mortgage with the effect that all of the unpaid principal and interest on any such note shall become immediately due and payable to RUS, and RUS shall continue to pay under its guarantee the principal of and interest on such note without taking into account such acceleration. The loan documentation shall also provide RUS with a right, upon the occurrence of such an “Event of Default,” to accelerate payment on its guarantee and accelerate payment on the note evidencing the private loan on the earlier of any date the interest rate on the private loan is reset, without premium or penalty; any date the borrower may prepay in accordance with the terms of the private loan, or the tenth anniversary of the date the private loan first bears interest at a fixed interest rate.
(7) The principal of the private loan shall not include amounts attributable to fees associated with the private loan. At the time it submits its application, a borrower may request that the Administrator approve the inclusion of amounts attributable to fees as part of the interest rate on the private loan, if the net effective interest rate including such fees meets the test contained in § 1786.28(c)(1). For the purposes of these regulations, such financed fees shall be considered “interest”.
(8) Private loans and guaranteed notes evidencing private loans shall otherwise be in form and substance satisfactory to the Administrator.
(d)
Prepayments Without a Guarantee. Qualifying borrowers may elect to utilize internally generated funds without a guarantee to prepay an FFB loan, orpartially prepay an FFB loan, pursuant to this subpart, if (1) The borrower notifies RUS, of its intent to prepay using internally generated funds in accordance with the application procedures set forth in this subpart; and
(2) The borrower submits a certification to RUS that the prepayment does not, materially adversely affect the financial stability of the borrower and its ability to meet all its obligations, including debt service on all loans made, guaranteed or lien accommodated under the RE Act which will remain outstanding after the date of the prepayment.
(e)
The Use of both a Private Loan and Internally Generated Funds. Qualifying borrowers may elect to utilize a combination of private loans and internally generated funds without a guarantee, to prepay an FFB loan pursuant to this subpart, if(1) The private loans comply with the provisions of paragraph (c) of this section, and
(2) The borrower complies with paragraph (d) of this section.
(f)
FFB loans. A borrower's FFB loans that qualify to be prepaid pursuant to this subpart are:(1)
Qualifying Borrowers. In the case of qualifying borrowers other than financially distressed borrowers, FFB advances with long-term maturity dates may be prepaid pursuant to this subpart; and(2)
Financially distressed borrowers. FFB loans that are eligible to be prepaid by utilizing the financially distressed borrowers' reserve are advances with long-term maturity dates, and which in the opinion of the Administrator, if prepaid, would result in an economic savings to the financially distressed borrower.[55 FR 1145, Jan. 11, 1990, as amended at 55 FR 35426, Aug. 30, 1990. Redesignated at 55 FR 49250, Nov. 27, 1990] § 1786.29 Prepayment authority, program allocations, categories of prepayment applications and financially distressed borrowers' reserve. (a)
Prepayment Authority. So long as the aggregate amount of prepayments made after December 22, 1987, including prepayments made pursuant to § 1786.28(d) and § 1786.28(e), under section 306(A) of the RE Act, does not exceed $2.5 billion, the approval of the Secretary of the Treasury is not required in order to make a prepayment pursuant to this subpart (such amount of prepayments is hereinafter called prepayment authority).(b)
Program Allocations. In accordance with the provisions of section 637 of the 1989 Appropriations Act, $350 million of prepayment authority is allocated to RUS-financed electric systems and $150 million of prepayment authority is allocated to RUS-financed telephone utilities. The amounts of prepayment authority allocated to electric program borrowers and telephone program borrowers shall not be transferred between programs. Borrowers may not sell, assign, or otherwise transfer prepayment authority to another borrower.(c)
Categories of Prepayment Applications. Applications received by RUS from borrowers desiring to prepay pursuant to this subpart will be separated into the following two application categories:(1)
Electric Program Applications. Electric program applications are applications to make a prepayment pursuant to this subpart from RUS-financed electric utilities, that qualify in accordance with § 1786.28(a) hereof and which are received by RUS during the application period. Electric program applications will be further subdivided and classified as being either (i) a financially distressed borrower's application, or (ii) a standard electric program application. Applications received from borrowers determined by the Administrator not to be a financially distressed borrower will be classified and processed as a standard electric program application;(2)
Telephone Program Applications. Telephone program applications are applications to make a prepayment pursuant to this subpart from RUS-financed telephone utilities that qualify in accordance with § 1786.28(a) hereof and which are received by RUS during the application period;(d)
Financially distressed borrowers' reserve. The $350 million of prepayment authority allocated for RUS-financed electric utilities, is initially set aside into a financially distressed borrowers'reserve. This reserve of prepayment authority will be available for prepayments pursuant to this subpart by financially distressed borrowers who apply to make such a prepayment during the application period. In the event that a portion of financially distressed borrowers' reserve remains unsubscribed at the end of the initial application period, the unallocated portion of the financially distressed borrowers' reserve will be allocated to other electric borrowers having submitted applications during an application period to be announced by RUS. Such prepayment applications shall be classified as standard electric program applications. [55 FR 1145, Jan. 11, 1990, as amended at 55 FR 35427, Aug. 30, 1990. Redesignated at 55 FR 49250, Nov. 27, 1990] § 1786.30 Processing procedure. (a)
Priority of Processing. The determination of the order or method in which applications or portions of applications will be processed by RUS pursuant to this subpart rests solely within the discretion of the Administrator. RUS expects that a number of prepayment applications will be processed simultaneously. In the event that it becomes necessary to establish priorities of processing, prepayment applications will be processed without regard to the date received, generally in the following order of priority:(1) Applications from telephone borrowers;
(2) Applications from financially distressed borrowers;
(3) Applications from all other borrowers. When assigning priority to such applications, RUS will consider a number of factors, including without limitation, (i) the number of prepayment applications being processed by the area office; (ii) the novelty or complexity of the proposed transaction; (iii) the method of prepayment; and (iv) the availability of resources. In the event that RUS receives during the initial application period, prepayment applications from such borrowers in an amount less than remaining prepayment authority for each respective program, RUS will establish a new application period and publish a notice to that effect in the
Federal Register .(b)
Pro-rated Applications. Standard electric program applications, and telephone program applications will be prorated within their respective application categories to permit partial prepayments in the event that the aggregate amount of prepayment applications received during the application period exceeds the amount of prepayment authority allocated to that application category. In such circumstances, the amount of each borrower's permitted prepayment shall be determined within each respective application category, as follows:(1) The principal amount of FFB advances under each individual application, which, if prepaid pursuant to this subpart, would result in an economic savings to the borrower, shall be divided by the aggregate principal amount of FFB advances, under all of the applications, which, if prepaid pursuant to this subpart, would result in an economic savings to the borrowers, in order to determine a percentage (hereinafter called a pro-rated percentage) for each borrower;
(2) Each borrower's share of the prepayment authority for its application category shall be equal to the product of (i) the prepayment authority times (ii) the respective pro-rated percentage, and may be used to prepay a portion of any of the borrower's FFB loans listed pursuant to § 1786.31(a)(2);
(3) If any approved prepayment transaction fails to be settled within 180 days of the date the borrower is notified by RUS of its prepayment allocation, RUS may rescind its approval. The unused prepayment authority represented by such a failed transaction is subject to being included in any subsequent notice of a new application period under this subpart; and
(4) In the event that applications from financially distressed borrowers exceed the amount prepayment authority remaining in the financially distressed borrowers' reserve, the Administrator at his discretion shall select one or more of such applications and allocate the reserve. In making such a selection and allocation, the Administrator may consider various factors, including without limitation, (i) the dollar amount of savings to be realized by
the proposed prepayment; (ii) the interest rates on the FFB loans proposed to be prepaid; (iii) the magnitude of the default or potential default; and (iv) whether the borrower has previously completed a prepayment under section 306(A). (c)
Notification of Borrowers' Allocations. Promptly after allocating the prepayment authority to borrowers and completing any proration calculations that may be necessary, RUS will return to each borrower submitting a prepayment application pursuant to this subpart, a copy of their Notice of Intent to Prepay the Federal Financing Bank specifying the amount of the borrower's prepayment allocation.[55 FR 1145, Jan. 11, 1990, as amended at 55 FR 49250, Nov. 27, 1990] § 1786.31 Application procedure. Applications to make a prepayment pursuant to this subpart shall be submitted to RUS on such forms as RUS may prescribe in the following manner:
(a)
Application. Each borrower desiring to make a prepayment pursuant to this subpart shall submit an application to RUS. No application from a borrower will be accepted by RUS prior to the commencement of the application period. An application shall not be deemed submitted to RUS until it is received by RUS, and the “Date Received” has been inscribed on the Notice of Intent to Prepay the Federal Financing Bank by an authorized official of RUS. Incomplete applications may be returned to the borrower at the discretion of RUS and thereafter must be resubmitted in order to be processed. To be considered complete, the application should include the following:(1) “Notice of Intent to Prepay the Federal Financing Bank” in the form specified in § 1786.33 hereof;
(2) A listing of each FFB loan advance to be prepaid by loan designation, RUS note number, RUS account number, advance date, maturity date, original amount, outstanding balance, and interest rate;
(3) Evidence that the borrower meets the qualification provisions of § 1786.28(a) of these regulations;
(4) The certification set forth in part A of the Notice of Intent to Prepay the Federal Financing Bank executed by the chief executive officer of the borrower;
(5) In the event that a borrower submits a prepayment application which proposes to utilize a portion of the financially distressed borrowers' reserve, a certification signed by the chief executive officer of the system to the effect that the borrower is either (i) in default or near default on interest or principal payments due on loans made or guaranteed under the RE Act, and is making a good faith effort to increase rates and reduce costs to avoid or mitigate default; or (ii) participating in a work out or debt restructuring plan with RUS, either as the borrower being restructured or as a borrower providing assistance as part of the work out or restructuring and stating why the borrower is in default or near default.
(b)
Election of Method of Prepayment. Prior to requesting RUS to schedule a settlement date, the borrower shall (1) elect whether it will use a private loan, internally generated funds, or a combination of a private loan and internally generated funds to make the prepayment, by completing part C of its Notice of Intent to Prepay the Federal Financing Bank; (2) specify in part C of the Notice of Intent to prepay the Federal Financing Bank a date after which a prepayment closing may be scheduled; (3) if appropriate, execute the certification set forth in part C of the Notice of Intent to Prepay the Federal Financing Bank; and (4) return a completed copy of the Notice of Intent to Prepay the Federal Financing Bank to the RUS area office.(c)
Final Documentation. All documentation in connection with a proposed prepayment made pursuant to this subpart shall have been submitted to RUS in final form, no later than 5 business days prior to the settlement date agreed to by the borrower and RUS. To be considered complete, the final documentation shall include the following material:(1) A completed copy of the Notice of Intent to Prepay the Federal Financing Bank;
(2) In the event that a borrower proposes to utilize a private loan in connection with a prepayment or a portion of a prepayment,
(i) Evidence, in form and substance satisfactory to RUS, that the borrower has an irrevocable commitment from the lender to close the private loan on the settlement date at an interest rate that meets the requirements of § 1786.28(c)(1);
(ii) Evidence that the lender meets the qualification provisions of § 1786.28(b);
(iii) Evidence that the private loan meets the qualification provisions of § 1786.28(c); and
(iv) The final documentation for the private loan;
(3) Estimate of fees, and expenses, including any taxes, in connection with the prepayment transaction;
(4) A certified copy of a resolution of the board of directors of the borrower approving the certification cited above and requesting RUS approval of the prepayment.
(5) In the case of financially distressed borrowers, evidence in form and substance satisfactory to the Administrator that the benefits of prepayment will not be used to reduce rates and that any Federal or state regulatory body having jurisdiction over the borrower's rates has acknowledged its awareness of this requirement;
(6) In the event that borrower is unable to deliver final documentation or the evidence specified in accordance with, § 1786.31(c), RUS may reschedule the settlement date at its discretion.
(Approved by the Office of Management and Budget under control number 0572-0088) § 1786.32 Settlement procedure. (a)
General. Settlements in connection with prepaying FFB loans pursuant to this subpart shall be conducted in accordance with the provisions of this section.(b)
Settlement Date. The prepayment will be settled and if a private loan is utilized, the guarantee will be delivered, on a settlement date agreed upon by the borrower and RUS. Prior to scheduling a settlement date for a borrower's prepayment pursuant to this subpart, RUS shall have received the material specified in § 1786.31(b).(c)
Place of Settlement. All settlements will take place in Washington, DC, at a location of the borrower's choosing; provided however, if more than one settlement is proposed for the same settlement date, RUS reserves the right to coordinate the date and location of the settlements with borrowers involved.(d)
Repayment of FFB. Prior to 1:00 p.m. prevailing local time in New York, New York, on the settlement date, the borrower shall wire immediately available funds to RUS through the Department of the Treasury account at the Federal Reserve Bank of New York or shall provide for payment to RUS in another manner acceptable to RUS and FFB, in an amount sufficient to pay the outstanding principal of the FFB loan being prepaid plus accrued interest from the last payment date to and including the settlement date.(e)
Documentation. The borrower shall deliver, or cause to be delivered to RUS and FFB, not less than 3 business days prior to the settlement date, written notice of the settlement date and a complete listing of each FFB loan advance to be prepaid or partially prepaid, in the format required by § 1786.31(a)(2). In the event that a private loan is used in connection with the prepayment, the following executed documents, opinions and material shall be delivered at the settlement:(1) The guaranteed note evidencing the private loan.
(2) The guarantee.
(3) The loan guarantee agreement.
(4) Copy of the private loan agreement between the lender and the borrower.
(5) Evidence that the borrower has received all approvals which are required under Federal or state law, loan agreements, security agreements, existing financing arrangements, or any other agreement to which the borrower is a party.
(6) An amendment in recordable form revising the description of the obligations secured by the mortgage including the obligation of the borrower to reimburse RUS for any amounts that RUS may pay under the guarantee.
(7) An approving opinion of the borrower's legal counsel to the effect that the guaranteed note evidencing the private loan is a valid and legally binding
obligation of the borrower which is secured under the mortgage, and the priority of the mortgage, as amended pursuant to paragraph (e)(6) of this section, remains undisturbed. (8) An approving opinion of the lender's legal counsel to the effect that the loan guarantee agreement is a valid and legally binding obligation of the lender.
(9) Such other opinions of counsel as may be required by the Administrator.
(10) Copies of any other documentation required by the lender.
(11) Copies of any other documentation required by RUS to ensure that the obligations of the borrower to reimburse RUS for any amounts that RUS pays under the guarantee or may advance in connection with the private loan are adequately secured under the mortgage.
(Approved by the Office of Management and Budget under control number 0572-0088) § 1786.33 Forms. Guarantees and loan guarantee agreements executed by RUS pursuant to this subpart will be on forms prescribed by RUS. Such forms will include, without limitation, additional details on servicing, procedures for notifying RUS of a default, the manner for requesting payment on a guarantee. The Notice of Intent to Prepay the Federal Financing Bank shall be substantially in the form specified by RUS. RUS may also prescribe standard forms of certifications to be used in connection with materials required to be furnished pursuant to § 1786.31 of this subpart.
§ 1786.34 Access to records of lenders, servicers, and trustees. The lender, the servicer, or the trustee will permit representatives of RUS (or other agencies of the U.S. Department of Agriculture authorized by that Department) to inspect and make copies of any of their records pertaining to RUS guaranteed loans. Such inspection and copying may be made during regular office hours of the respective party or any other time the party and RUS find convenient.
§ 1786.35 Loss, theft, destruction, mutilation, or defacement of RUS guarantee. (a)
Authorized representative. Except where the evidence of debt was or is a bearer instrument, the RUS Administrator is authorized on behalf of RUS to issue a replacement guarantee(s) for one(s) which may have been lost, stolen, destroyed, mutilated, or defaced. Such replacement(s) shall be issued only to the lender or holder and only upon receipt of an acceptable certificate of loss and an indemnity bond.(b)
Requirements. When a guarantee(s) is lost, stolen, destroyed, mutilated, or defaced while in the custody of the lender, or holder, the lender will coordinate the activities of the party who seeks the replacement documents and will submit the required documents to RUS for processing. The requirements for replacement are as follows:(1) A certificate of loss properly notarized which includes:
(i) Legal name and present address of the owner, requesting the replacement forms;
(ii) Legal name and address of lender of record;
(iii) Capacity of person certifying;
(iv) Full identification of the guarantee, including the name of the borrower, date of the guarantee, face amount of the evidence of debt purchased, date of evidence of debt and present balance of the loan. Any existing parts of the documents to be replaced should be attached to the certificate;
(v) A full statement of circumstances of the loss, theft, or destruction of the guarantee; and
(vi) The lender or holder, shall present evidence demonstrating current ownership of the guarantee and note. If the present holder is not the same as the original lender, a copy of the endorsement of each successive holder in the chain of transfer from the initial private lender to present holder shall be included. If copies of the endorsement cannot be obtained, best available records of transfer shall be presented to RUS (e.g., order confirmation, cancelled checks, etc).
(2) An indemnity bond acceptable to RUS shall accompany the request for replacement except when the holder is
the United States, a Federal Reserve Bank, a Federal Government Corporation, a state or territory, or the District of Columbia. The bond may be with or without surety. The bond shall be with surety except when the outstanding principal balance and accrued interest due the present holder is less than $1,000,000 verified by the lender in writing in a letter of certification of balance due. The surety shall be a qualified surety company holding a certificate of authority from the Secretary of the Treasury and listed in Treasury Department Circular 580. (3) All indemnity bonds shall be issued and/or payable to the United States of America acting through the Administrator of the Rural Utilities Service. The bond shall be in an amount not less than the unpaid principal and interest. The bond shall save RUS harmless against any claim or demand which might arise or against any damage, loss, costs, or expenses which might be sustained or incurred by reasons of the loss or replacement of the instruments.
§ 1786.36 Other prepayments. Nothing contained in this subpart shall prohibit a borrower from making prepayments of FFB loans in accordance with the terms thereof.
§ 1786.37 Application of regulation to previous prepayments. Nothing contained in this subpart shall affect the validity of prepayments made or guarantees issued pursuant to previous regulations. Those borrowers, however, that completed a prepayment pursuant to section 306(A) of the RE Act and closed loans prior to February 27, 1988, may, in their discretion request RUS approval and if required by prior regulations the concurrence of the Secretary of the Treasury, of any amendments necessary to make the terms and conditions of such loans consistent with, or to consolidate such loans with, loans guaranteed under these regulations.
§ 1786.38 Judicial review. This subpart is intended to set forth RUS policies and procedures for the orderly administration of the provisions of section 306(A) of the RE Act, section 633 of the continuing resolution, and section 637 of the 1989 Appropriations Act and is not intended to create any right or benefit, substantive or procedural, enforceable at law by a party against the United States, its agencies, its officers or any person.
§§ 1786.39-1786.49 [Reserved] Subpart C—Special Discounted Prepayments on RUS Direct/Insured Loans Authority: 7 U.S.C. 901-950b; Title I, Subtitle B, Pub. L. 99-509; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941
et seq .).Source: 51 FR 46999, Dec. 29, 1986, unless otherwise noted. Redesignated at 55 FR 49250, Nov. 27, 1990.
§ 1786.50 Purpose. This subpart sets forth the policies and procedures of RUS whereby electric and telephone borrowers may prepay outstanding RUS Notes at the Discounted Present Value of the RUS Notes with private financing.
§ 1786.51 Definitions. As used in this subpart:
Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901et seq. ).Administrator means the Administrator of RUS.Discounted Present Value shall have the meaning specified in § 1786.53Fund means the Rural Electrification and Telephone Revolving Fund established pursuant to the Act.REA means the Rural Electrification Administration formerly an agency of the United States Department of Agriculture and predecessor agency to RUS with respect to administering certain electric and telephone loan programs.RUS means the Rural Utilities Service, an agency of the Unites States Department of Agriculture, established pursuant to Section 232 of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to REA with respect to administering certain electric and telephone programs. See 7 CFR 1700.1.RUS Loan Agreement means the agreement between the borrower and RUSproviding for loans pursuant to the Act. RUS Notes means those notes, bonds or other obligations evidencing indebtedness created by loans made pursuant to Titles I, II or III of the Act (7 U.S.C. 901-940).[51 FR 46999, Dec. 29, 1986. Redesignated at 55 FR 49250, Nov. 27, 1990, as amended at 59 FR 66441, Dec. 27, 1994] § 1786.52 Prepayment. Through September 30, 1987, the Administrator may, pursuant to this subpart, permit eligible electric and telephone borrowers to prepay all outstanding RUS Notes issued or assumed by such borrowers and held in the Fund, upon paying the lesser of the outstanding balance or the Discounted Present Value.
§ 1786.53 Discounted present value. The Discounted Present Value shall be calculated five business days before prepayment is made by summing the present values of all remaining payments by using the following formula:
EC16SE91.025 Where: P k =Total payment including interest, due on the kth payment date following the prepayment date.n=Total number of remaining payments dates. I=The discount rate, in decimals, which shall be the average rate on utility bonds bearing a rating of “Aa” as set forth in that issue of Moody's Public Utility News Reports most recently published prior to the date on which Discounted Present Value is calculated. D1 1 =Number of days in the ith payment period that are in a non-leap year (365 day year).D2 i =Number of days in the ith payment period that are in a leap year (366 day year).§ 1786.54 Eligibility criteria. To be eligible to prepay RUS Notes at the Discounted Present Value a borrower must comply with the following criteria:
(a) The borrower must be current on all payments due on its outstanding RUS Notes and all other payment obligations owed to RUS and the Rural Telephone Bank.
(b) The borrower must agree to prepay all of its outstanding RUS Notes.
(c) The borrower must identify the source of private financing that will be used to refinance its outstanding RUS Notes, which financing may not include obligations the income of which is exempt from taxation under the Internal Revenue Code of 1986.
(d) The borrower must have expended all funds advanced on account of the RUS Notes for the purposes for which such funds were advanced.
(e) The borrower must agree to a rescission of the unadvanced balance of the RUS Notes.
(f) The borrower must agree that the borrower, its successors or assigns, shall pay to the Government, as a condition of receiving additional loans or loan guarantees pursuant to Titles I, II and III of the Act, an amount equal to the aggregate of the difference with respect to each of the RUS Notes between the amount outstanding on the RUS Note and the Discounted Present Value of the RUS Note upon prepayment with interest accruing quarterly; the interest rates shall be the rates provided in the respective RUS Notes.
(g) If the borrower is a party to a wholesale power contract with a power supplier financed pursuant to the Act, the borrower must provide the Administrator with such assurances as the Administrator may request that it will meet its obligations to the power supplier.
§ 1786.55 Application procedure. Any borrower seeking to prepay its RUS Notes under this subpart should
apply to the appropriate RUS Area Director by submitting: (a) A board resolution that:
(1) Requests approval of the prepayment of the borrower's outstanding RUS Notes, and
(2) States the intent of the borrower to comply with all eligibility criteria set forth in § 1786.54 of this subpart.
(b) A list of all RUS Notes together with the outstanding amount on such notes.
(c) Such additional information as the Administrator shall request.
§ 1786.56 Approval of applications. The applications will ordinarily be reviewed and, if satisfactory, approved, and closing schedule based on the order in which executed prepayment agreements are received. The Administrator may limit the number of applications approved and closings scheduled from time to time taking into account, among other matters, the financial interests and administrative considerations of the Government.
§ 1786.57 Prepayment agreement. Upon approving an application for prepayment under this subpart, the Administrator shall notify the borrower and deliver to the borrower for its execution a prepayment agreement which shall set forth and provide:
(a) The RUS Notes to be prepaid and when the Discounted Present Value will be calculated.
(b) The place and conditions for closing.
(c) Agreement that the unadvanced balance of RUS Notes shall be rescinded.
(d) Agreement that the borrower, or its successors or assigns, shall pay to the Government, as a condition of receiving additional loans or loan guarantees pursuant to Titles I, II and III of the Act, an amount equal to the aggregate of the difference with respect to each of the RUS Notes between the amount outstanding on the RUS Note and the Discounted Present Value of the RUS Note upon prepayment with interest accruing quarterly; the interest rates shall be the rates provided in the respective RUS Notes.
(e) Assurances that the borrower will meet its obligations to any power supplier financed pursuant to the Act.
(f) Such other terms and conditions as the Administrator deems appropriate.
§ 1786.58 Security. If, after prepayment of RUS Notes, the Government should continue to hold liens on the borrower's property that secure loans made or guaranteed pursuant to the Act, the Administrator of RUS or the Governor of the Rural Telephone Bank, as the case may be, will consider request for the accommodation of such liens for the purpose of providing security for loans the proceeds of which were used to prepay RUS Notes. Such lien accommodations shall be limited in amount to the Discounted Present Value of the RUS Notes plus such costs, as the Administrator shall determine to be reasonable, incurred by the borrower in obtaining such loans.
§ 1786.59 Loan fund audit. Within 6 months of closing RUS shall have the right to audit transactions involving the RUS construction fund established and maintained by the borrower pursuant to the terms of the RUS Loan Agreement and to inspect all books, records, accounts and other documents and papers of the borrower. Should RUS determine that the borrower has made disbursements of funds advanced pursuant to RUS Notes which do not comply with the requirements of the RUS Loan Agreement, the borrower shall be required to pay to the Government an amount equal to the difference between the amount which the borrower prepaid on such RUS Notes evidencing RUS loan funds which were improperly disbursed and the amount which the borrower would otherwise have been required to return to the Government as a result of noncompliance if the borrower had not prepaid such RUS Notes. (See 7 CFR part 1721)
§ 1786.60 Closing. (a) The borrower shall be responsible for obtaining all approvals necessary to consummate the transaction as required by the prepayment agreement
including such approvals as may be required by regulatory bodies and other lenders. (b) The RUS Notes shall be prepaid at a closing to be held in accordance with the prepayment agreement;
Provided, however, That no closing may be scheduled for after September 30, 1987. At closing, a borrower shall prepay the RUS Notes by paying to the Government an amount equal to the Discounted Present Value of the RUS Notes. The closing shall otherwise be conducted as prescribed in the prepayment agreement.§ 1786.61 Other prepayments. RUS loan documentation generally permits borrowers to prepay RUS Notes by paying the outstanding balance due thereon. Nothing in this subpart shall prohibit any borrower from prepaying its outstanding RUS Notes in accordance with the terms thereof. The provisions of this subpart shall not be applicable to such prepayment.
§§ 1786.62-1786.74 [Reserved] Subpart D [Reserved] Subpart E—Discounted Prepayments on RUS Notes in the Event of a Merger of Certain RUS Electric Borrowers Source: 56 FR 37268, Aug. 6, 1991, unless otherwise noted.
§ 1786.95 Purpose. This subpart sets forth the policies and procedures of RUS whereby certain electric borrowers may prepay outstanding RUS Notes at the Discounted Present Value of the RUS Notes with private financing.
§ 1786.96 Definitions. As used in this subpart:
Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901et seq. ).Administrator means the Administrator of RUS.Consolidation means:(1) The combination, pursuant to state law, of two or more borrower or nonborrower organizations into a new successor organization that takes over the assets and assumes the liabilities of those organizations; or
(2) Any other transaction including an acquisition which has substantially the same effect.
Discounted Present Value shall have the meaning specified in § 1786.98.Fund means the Rural Electrification and Telephone Revolving Fund pursuant to the Act.Merger means:(1) The combination, pursuant to state law, of two or more borrower or nonborrower organizations into an existing survivor organization that takes over the assets and assumes the liabilities of the merged organizations; or
(2) Any other transaction including an acquisition which has substantially the same effect.
REA means the Rural Electrification Administration formerly an agency of the United States Department of Agriculture and predecessor agency to RUS with respect to administering certain electric and telephone loan programs.RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to Section 232 of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to REA with respect to administering certain electric and telephone programs. See 7 CFR 1700.1.RUS Loan Agreement means the agreement between the borrower and RUS providing for loans pursuant to the Act.RUS Notes means those notes, bonds or other obligations evidencing indebtedness created by loans made or guaranteed by RUS pursuant to titles I and III of the Act (7 U.S.C. 901-940).[56 FR 37268, Aug. 6, 1991, as amended at 59 FR 66440, Dec. 27, 1994] § 1786.97 Prepayment. There were 29 former RUS electric borrowers that prepaid their direct or insured loans under section 306B(a) of the Act prior to October 1, 1987. (See subpart C of this part.) These borrowers are listed in appendix A to subpart E of this part. Any RUS electric borrower which is the result of a merger or consolidation involving any of
these 29 former borrowers and a borrower with outstanding Notes may, after meeting all requirements of this subpart, prepay all outstanding RUS Notes issued or assumed by the borrower upon paying the lesser of the outstanding balance or the Discounted Present Value. Such prepayment must be made not later than one year after the effective date of the merger or consolidation. § 1786.98 Discounted present value. (a) The Discounted Present Value shall be calculated by RUS before prepayment is made by summing the present values of all remaining payments on all outstanding notes according to the following formula to compute the discounted present value of each note and adjusting as here and after provided for tax exempt financing.
Where: P k =Total payment, including interest, due on the kth payment date following the prepayment date. n=Total number of remaining payment dates. I=The discount rate applied to each transaction will be ascertained by using data specified in the “Federal Reserve Statistical Release” which is published each Monday. (See appendix B to subpart E of this part.) The specific discount rate will be the discount rate(s) specified in the “Treasury Constant Maturities” section of this publication eight working days prior to the closing. In applying the discount rate, the 1-year Treasury rate will be used for all notes with a remaining term of less than 2 years; the 2-year Treasury rate for notes with maturities between 2 and 3 years; the 3-year Treasury rate for all notes with maturities between 3 and 5 years; the 5-year Treasury rate for all notes with maturities between 5 and 7 years; the 7-year Treasury rate for all notes with maturities between 7 and 10 years; the 10-year Treasury rate for all notes with maturities between 10 and 30 years; and the 30-year Treasury rate for all notes with maturities longer than 30 years.D1 i =Number of days in the ith payment period that are in a non-leap year (365 day year).D2 i =Number of days in the ith payment period that are in a leap year (366 day year).(b) Notwithstanding paragraph (a) of this section, in the event that the borrower shall elect to prepay using tax exempt financing, the calculation of the Discounted Present Value shall be adjusted to make the discount the equivalent of fully taxable financing.
§ 1786.99 Eligibility criteria. To be eligible to prepay RUS Notes at the Discounted Present Value, a borrower must comply with the following criteria:
(a) The borrower must be current on all payments due on its outstanding RUS Notes and all other payment obligations owed to RUS;
(b) The borrower must agree to prepay all of its outstanding RUS Notes;
(c) The borrower must identify the source of financing that will be used directly or indirectly to refinance its outstanding RUS Notes. The borrower must certify in writing whether such financing will be tax exempt and, if so, shall furnish all information on the financing as RUS may request to enable RUS to adjust the discount to the equivalent to fully taxable financing;
(d) The borrower must have expended all funds advanced on account of the RUS Notes for the purposes for which such funds were advanced or repaid RUS for all unexpended funds;
(e) The borrower must agree to a rescission of the unadvanced balance of any RUS Notes outstanding as of the date of its application for prepayment;
(f) The borrower must agree that the borrower, its successors and assigns, shall pay to the Government, as a condition of receiving additional loans or loan guarantees pursuant to titles I and III of the Act, an amount equal to
the aggregate of the difference with respect to each of the RUS Notes between the amount outstanding on the RUS Note and the Discounted Present Value of the RUS Note upon prepayment with interest accruing quarterly; the interest rates shall be the rates provided in the respective Notes; and (g) If the borrower is a party to a wholesale power contract with a power supplier financed pursuant to the Act, the borrower must provide the Administrator with such assurances as the Administrator may request that it will meet its obligations to the power supplier. The borrower must also specifically agree to the following limitation: The borrower agrees that, for so long as the Wholesale Power Contract shall be in effect between the borrower and the power supplier, the borrower will not, without the approval in writing of the power supplier and the Administrator, take or suffer to be taken any steps for reorganization or to consolidate with or merge into any corporation or any other public power district, or to sell, lease or transfer (or make any agreement therefor) all or a substantial portion of its assets, whether now owned or hereafter acquired. Notwithstanding the foregoing, the borrower may take or suffer to be taken any steps for reorganization or to consolidate with or merge into any corporation or any other public power district, or to sell, lease or transfer (or make any agreement therefor) all or a substantial portion of its assets, whether now owned or hereafter acquired, so long as the borrower shall pay such portion of the outstanding indebtedness evidenced by the power supplier's Notes at the time outstanding as shall be determined by the power supplier with the prior written consent of the Administrator and shall otherwise comply with such reasonable terms and conditions as the Administrator and the Power Supplier shall require.
§ 1786.100 Application procedure. Any borrower seeking to prepay its RUS Notes under this Subpart should apply to the appropriate RUS Area Director not less than 60 days prior to one year after the effective date of the merger or consolidation by submitting:
(a) A board resolution that:
(1) Requests approval of the prepayment of the borrower's outstanding RUS Notes;
(2) States the intent of the borrower to comply with all eligibility criteria set forth in § 1786.99 of this subpart; and
(3) Identifies the source of financing.
(b) A list of all RUS Notes together with the outstanding amount on such notes.
(c) An opinion of counsel as to the effective date of the merger or consolidation.
(d) Such additional information as the Administrator will request.
§ 1786.101 Approval of application. The applications will be reviewed and, if satisfactory, approved. Closing will be scheduled upon approval.
§ 1786.102 Prepayment agreement. Upon approving an application for prepayment under this subpart, the Administrator shall notify the borrower and deliver to the borrower for its execution a prepayment agreement which shall set forth and provide:
(a) The RUS Notes to be prepaid and when the Discounted Present Value will be calculated.
(b) The place, date and conditions for closing.
(c) Agreement that the unadvanced balance of RUS Notes shall be rescinded.
(d) Agreement that the borrower, or its successors or assigns, shall pay to the Government, as a condition of receiving additional loans or loan guarantees pursuant to titles I and III of the Act, an amount equal to the aggregate of the difference with respect to each of the RUS Notes between the amount outstanding on the RUS Note and the Discounted Present Value of the prepaid RUS Note; with interest accruing quarterly. The interest rates shall be the rates provided in the respective RUS Notes.
(e) Assurances that the borrower will meet its obligations to any power supplier financed pursuant to the Act.
(f) Such other terms and conditions as the Administrator deems appropriate.
§ 1786.103 Security. If, after prepayment of RUS Notes, the Government should continue to hold liens on the borrower's property, the Administrator of RUS will consider a request for the accommodation of such liens for the purpose of providing security for loans the proceeds of which were used to prepay RUS Notes. Such lien accommodations shall be limited in amount to the Discounted Present Value of the RUS Notes plus such costs, as the Administrator shall determine to be reasonable, incurred by the borrower in obtaining such loans.
§ 1786.104 Loan fund audit. RUS shall have the right to audit within 6 months of closing, transactions involving the RUS construction fund established and maintained by the borrower pursuant to the terms of the RUS Loan Agreement and to inspect all books, records, accounts and other documents and papers of the borrower. Should RUS determine that the borrower has made disbursements of funds advanced pursuant to RUS Notes which do not comply with the requirements of the RUS Loan Agreement, the borrower shall be required to pay the Government an amount equal to the difference between the amount which the borrower prepaid on such RUS Notes evidencing RUS loans funds which were improperly disbursed and the amount which the borrower would otherwise have been required to return to the Government as a result of noncompliance if the borrower had not prepaid such RUS Notes. (See 7 CFR part 1721, Post-Loan Policies and Procedures for Insured Electric Loans.)
§ 1786.105 Closing. (a) The borrower shall be responsible for obtaining all approvals necessary to consummate the transaction as required by the prepayment agreement, including such approvals as may be required by regulatory bodies and other lenders.
(b) The RUS Notes shall be prepaid at a closing to be held in accordance with the prepayment agreement. RUS shall designate the date of closing which in no event shall be later than one year after the effective date of the merger or consolidation. At closing, in addition to paying all current interest due on the date of prepayment, a borrower shall prepay the RUS Notes by paying to the Government an amount equal to the lesser of the outstanding balance or the Discounted Present Value of the RUS Notes. The closing shall otherwise be conducted as prescribed in the prepayment agreement.
§ 1786.106 Other prepayments. RUS loan documentation generally permits borrowers to prepay RUS Notes by paying the outstanding balance due thereon. Nothing in this subpart shall prohibit any borrower from prepaying its outstanding RUS Notes in accordance with the terms thereof. The provisions of this subpart shall not be applicable to such prepayment.
Pt. 1786, Subpt. E, App. A Appendix A to Subpart E of Part 1786—Listing of Eligible Borrowers State Borrower name and address Colorado Colorado-Ute Electric Assn., Inc., Montrose. Florida Lee County Electric Coop. Inc., North Fort Myers. Indiana Clark County Rural Elec. Memb. Corp., Sellersburg. Louisiana Beauregard Electric Cooperative, Inc., Deridder. Missouri Culvre River Electric Cooperative, Inc., Troy. Nebraska Roosevelt Public Power District, Mitchell. Nebraska Howard Greely Rural Public Power Dist., St. Paul. Nebraska Cuming County Public Power District, West Point. Nebraska York County Rural Public Power District, York. Nebraska Elkhorn Rural Public Power District, Battle Creek. Nebraska Southern Nebraska Rural P. P. D., Grand Island. Nebraska McCook Public Power District, McCook. Nebraska Niobrara Valley Electric Memb. Corp., O'Neill. Nebraska Cornhusker Public Power District, Columbus. Nebraska Custer Public Power District, Broken Bow. Nebraska Northwest Rural Public Power Dist., Hay Springs. Nebraska Southwest Public Power District, Palisade. Nebraska Loup Valleys Rural Public Power District, Ord. Nebraska South Central Public Power District, Nelson. Oklahoma Peoples' Electric Cooperative, Ada. Texas Deaf Smith County Electric Coop. Inc., Hereford. Texas Pedernales Electric Coop. Inc., Johnson City. Texas Bandera Electric Cooperative, Inc., Bandera. Texas Guadalupe Valley Electric Coop., Inc., Gonzales. Texas Bluebonnet Electric Cooperative, Inc., Giddings. Texas Cap Rock Electric Cooperative, Inc. Stanton. Texas San Bernard Electric Cooperative, Inc., Bellville. Washington Inland Power & Light Company, Spokane. Washington Pub. Util. Dist. No. 1 Grays Harbor Co., Aberdeen. Pt. 1786, Subpt. E, App. B Appendix B to Subpart E of Part 1786—Federal Reserve Statistical Release Federal Reserve Statistical Release These data are released each Monday. The availability of the release will be announced when the information is available, on (202) 452-3206.
H. 15 (519) For immediate release February 4, 1991.
Selected Interest Rates [Yields in percent per annum] Instruments 1991 Jan. 28 1991 Jan. 29 1991 Jan. 30 1991 Jan. 31 1991 Feb. 1 This week Last week 1991 Jan. Federal Funds (effective) 1 2 3 7.61 7.16 6.96 8.18 6.30 7.46 6.88 6.91 Commercial paper 3 4 5 1-Month 6.88 6.96 6.95 6.99 6.73 6.90 6.83 7.12 3-Month 6.92 6.96 6.94 6.95 6.67 6.89 6.92 7.10 6-Month 6.87 6.91 6.88 6.88 6.58 6.82 6.86 7.02 Finance paper placed directly 3 4 6 1-Month 6.76 6.85 6.83 6.83 6.55 6.76 6.68 6.95 3-Month 6.75 6.83 6.83 6.76 6.46 6.73 6.77 6.92 6-Month 6.53 6.53 6.59 6.53 6.19 6.47 6.55 6.59 Bankers acceptances (top rated) 3 4 7 3-Month 6.80 6.82 6.77 6.68 6.30 6.67 6.76 6.96 6-Month 6.67 6.70 6.65 6.55 6.15 6.54 6.63 6.84 CDS (secondary market) 3 8 1-Month 6.78 6.85 6.87 6.82 6.52 6.77 6.77 7.10 3-Month 6.94 6.95 6.93 6.88 6.51 6.84 6.94 7.17 6-Month 6.95 6.98 6.95 6.88 6.51 6.85 6.97 7.17 Eurodollar deposits (London) 3 9 1-Month 6.81 6.88 6.88 6.88 6.88 6.86 6.81 7.13 3-Month 6.94 7.06 7.00 6.94 6.94 6.98 7.01 7.23 6-Month 7.00 7.00 7.00 6.94 6.94 6.98 7.04 7.23 Bank prime loan 2 3 10 9.50 9.50 9.50 9.50 9.50 9.50 9.50 9.52 Discount window borrowing 2 11 6.50 6.50 6.50 6.50 6.00 6.50 6.50 6.50 U.S. Government securities Treasury bills Auction average 3 4 12 3-Month 6.22 6.22 6.14 6.30 6-Month 6.28 6.28 6.21 6.34 1-Year 6.22 Auction average (investment) 12 3-Month 6.41 6.41 6.32 6.49 6-Month 6.58 6.58 6.50 6.64 Secondary market 3 4 3-Month 6.25 6.22 6.20 6.19 6.00 6.17 6.12 6.22 6-Month 6.26 6.26 6.24 6.20 5.97 6.19 6.20 6.28 1-Year 6.24 6.20 6.17 6.13 5.91 6.13 6.19 6.25 Treasury Constant maturities 13 1-Year 6.64 6.59 6.56 6.51 6.27 6.51 6.58 6.64 2-Year 7.12 7.10 7.07 7.05 6.83 7.03 7.09 7.13 3-Year 7.38 7.35 7.34 7.30 7.10 7.29 7.35 7.38 5-Year 7.67 7.64 7.64 7.62 7.45 7.60 7.66 7.70 7-Year 7.93 7.90 7.90 7.89 7.75 7.87 7.92 7.97 10-Year 8.06 8.05 8.05 8.03 7.91 8.02 8.04 8.09 30-Year 8.23 8.20 8.23 8.21 8.09 8.19 8.22 8.27 Composite Over 10 years (long-term) 14 8.29 8.26 8.29 8.27 8.15 8.25 8.28 8.33 Corporate bonds Moody's Seasoned AAA 9.03 9.01 9.00 8.99 8.96 9.00 9.05 9.04 BAA 10.43 10.37 10.35 10.33 10.24 10.34 10.44 10.45 A-Utility 15 9.65 9.65 9.80 9.83 State and local bonds 16 7.00 7.00 7.06 7.08 Conventional mortgages 17 9.56 9.56 9.61 9.64 Footnotes: 1 The daily effective federal funds rate is a weighted average of rates on trades through N.Y. brokers.2 Weekly figures are averages of 7 calendar days ending on Wednesday of the current week; monthly figures include each calendar day in the month.3 Annualized using a 360-day year or bank interest.4 Quoted on a discount basis.5 An average of offering rates on commercial paper placed by several leading dealers for firms whose bond rating is AA or the equivalent.6 An average of offering rates on paper directly placed by finance companies.7 Representative closing yields for acceptances of the highest rated money center banks.8 An average of dealer offering rates on nationally traded certificates of deposit.9 Bid rates for Eurodollar deposits at 11 a.m. London time.10 One of several base rates used by banks to price short-term business loans.11 Rate for the Federal Reserve Bank of New York.12 Auction date for daily data; weekly and monthly averages computed on an issue-date basis.13 Yields on actively traded issues adjusted to constant maturities. Source: U.S. Treasury.14 Unweighted average of rates on all outstanding bonds neither due nor callable in less than 10 years, including one very low yielding “flower” bond.15 Estimate of the yield on a recently offered, A-rated utility bond with a maturity of 30 years and call protection of 5 years; Friday quotations.16 Bond buyer Index, general obligation, 20 years to maturity, mixed quality; Thursday quotations.17 Contract interest rates on commitments for fixed-rate first mortgages. Source: FHLMC.Note: Weekly and monthly figures are averages of business days unless otherwise noted.Description of the Treasury Constant Maturity Series Yields on Treasury securities at “constant maturity” are interpolated by the U.S. Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market. These market yields are calculated from composites of quotations reported by five leading U.S. Government securities dealers to the Federal Reserve Bank of New York. The constant maturity yield values are read from the yield curve at fixed maturities, currently 1, 2, 3, 5, 7, 10, and 30 years. This method provides a yield for a 10-year maturity, for example, even if no outstanding security has exactly 10 years remaining to maturity.
Subpart F—Discounted Prepayments on RUS Electric Loans Authority: 7 U.S.C. 901
et seq .; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941et seq .).Source: 59 FR 13620, Mar. 22, 1994, unless otherwise noted.
§ 1786.150 Purpose. This subpart sets forth the policies and procedures of RUS whereby borrowers may prepay, with private financing or internally generated funds, outstanding RUS Notes evidencing electric loans at the Discounted present value of the RUS Notes, pursuant to the provisions of section 306(B) of the RE Act as amended by Public Law 102-428, 106 Stat. 2183, adopted October 21, 1992.
§ 1786.151 Definitions and rules of construction. (a)
Definitions. As used in this subpart:Administrator means the Administrator of the Rural Utilities Service (RUS).Borrower means any organization which has an outstanding note(s) evidencing electric loans made by RUS, or has previously prepaid such notes under subparts C and E of this part.Business day means any day on which both the RUS and the Federal Reserve Bank of New York are open for business.Construction Fund Account means the Cash—Construction Fund—Trustee Account, maintained by the borrower pursuant to the terms of the outstanding RUS Loan Contract.Closing shall mean one of the several contemplated closings of the prepayment of the Qualified Notes prescribed by the Prepayment agreement.Closing date shall mean any business day identified as such by the Government in its preclosing notice delivered to the Company pursuant to § 1786.158.Closing request shall mean a request by the borrower of the Government to schedule a closing for certain Qualified Notes on the date requested therein.Direct loan means a loan made pursuant to section 4 of the RE Act.Discounted present value shall have the meaning set forth in § 1786.153.Distribution borrower means a borrower that sells electric power and energy at retail in rural areas.Electric loan means a Direct loan or an Insured loan made for the purpose of furnishing electric energy to persons in rural areas.Final maturity means the final date on which all outstanding principal and accrued interest on an electric loan is due and payable.Government means the United States of America, acting through the Administrator of the Rural Utilities Service.Insured loan means a loan made pursuant to Section 305 of the RE Act.Lien accommodation means the sharing of the Government's (RUS's) lien on property, usually all property, covered by the lien of the RUS Mortgage.Loan guarantee means a loan guarantee under Section 306 of the RE Act.Power supply borrower means a borrower that sells or intends to sell electric power at wholesale to distribution or power supply borrowers pursuant to RUS wholesale power contracts.Preclosing notice shall mean a notice delivered by the Government to the borrower in response to a closing request, identifying the closing date, the Qualified Notes to be prepaid at such closing and documents to be delivered by the borrower to the Government prior to the closing date.Prepayment agreement shall have the meaning set forth in § 1786.158.Qualified Notes shall have the meaning set forth in § 1786.154.RE Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901et seq. ).RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture.RUS Loan Contract means the agreement, as amended, supplemented, or restated from time to time, between a borrower and RUS providing for loans or loan guarantees pursuant to the RE Act.RUS Mortgage means collectively those mortgages and security agreements made by and among the borrower, the Government, and third parties, if any, securing indebtedness evidencing electric loans or loan guarantees made pursuant to the RE Act.Rural development loans means loans or grants made pursuant to Rural development programs.Rural development programs means loan or grant programs under the authority of the Administrator pursuant to sections 313, 501, and 502 of the RE Act.Supplemental lender means a private lender whose loan to the borrower is secured by the RUS mortgage.Tax exempt financing means borrowing evidenced by bonds, notes and other evidence of indebtedness the income of which is excluded from gross income for the purposes of Chapter 1 of the Internal Revenue Code of 1986 (26 U.S.C. ch. 1).(b)
Rules of construction. Unless the context shall otherwise indicate, the terms defined in paragraph (a) of this section include the plural as well asthe singular, and the singular as well as the plural. § 1786.152 Prepayments of RUS loans. An electric loan made under the RE Act shall not be sold or prepaid at a value that is less than the outstanding principal balance, except that, on request of a borrower, an electric loan made under the RE Act, or a portion of such a loan, that was advanced before May 1, 1992, or has been advanced for not less than 2 years, shall be prepaid by the borrower at the lesser of the outstanding principal balance of the loan or the discounted present value thereof.
§ 1786.153 Discounted present value. (a) The discounted present value shall be calculated by summing the present values of all remaining payments on all Qualified Notes to be prepaid according to the following formula and adjusted as provided in paragraph (b) of this section if tax exempt financing is used.
Where: The Greek letter, Sigma (Σ) means the sum of the following terms. The Greek letter, Pi (Π) means the product of the following terms. P k =Total payment, including interest due on the Kth payment date following the prepayment date.n=Total number of remaining payment dates to final maturity. D1 i =Number of days in the ith payment period that are in a non-leap year (365-day year).D2 i =Number of days in the ith payment period that are in a leap year (366-day year).I=The discount rate applied to each transaction ascertained by using data specified in the “Federal Reserve Statistical Release” (H.15 (519)), which is published each Monday. The availability of this Release will be announced when the information is available by telephone on (202) 452-3206. See adjustment for tax exempt refinancing at paragraph (b) of this section. The specific discount rate will be based on the discount rate(s) specified in the “Treasury Constant Maturities” section of this publication 8 business days prior to the closing and will be interpolated from that information as follows: Remaining final maturity of RUS loan: At least # years But less than # years Treasury constant maturities 0 2 1-year. 2 3 2-year. 3 4 3-year. 4 5 ( 1 )5 6 5-year. 6 7 ( 2 )7 8 7-year. 8 9 ( 3 )9 10 ( 3 )10 11 10-year. 11 20 ( 4 )20 21 20-year. 21 30 ( 5 )30 36 30-year. Notes: 1 The arithmetic mean between the 3-year and 5-year. Treasury Constant Maturities; i.e., if 3-year. rate is 3.00% and the 5-year. rate is 4.00% then the rate used would be 3.5%.2 The arithmetic mean between the 5-year and 7-year Treasury Constant Maturities computed as above.3 A straight line interpolated rate between the 7-year rate and the 10-year rate. (See formula below)4 A straight line interpolated rate between the 10-year note and the 20-year Bond rate. (See formula below)5 A straight line interpolated rate between the 20-year bond and the 30-year bond using the following formula:Where: I=The discount rate interpolated from the cost of money to the Treasury. A=The Treasury interest rate for the most recently published maturity (in years) that is the shortest Treasury term (in years) which is greater than the borrower's remaining term (in years) to final maturity; i.e., (if the note to be prepaid has a final maturity of more than 10 years then this rate is the 20-year Treasury rate) B=The Treasury interest rate for the most recently published maturity (in years) that is the longest Treasury term (in years) which is less than the borrower's remaining term (in years) to final maturity; i.e., (if the note to be prepaid has a final maturity of more than 10 years but less than 20 years then this term is the 10-year Treasury rate) C=The remaining number of full years to the final maturity of the borrower's note. Drop all fractions of a year and use the remaining full years. E=The published Treasury term (in years) to maturity which is the longest term to maturity for the published term that is less than the remaining term (in years) to final maturity of the borrower's note; i.e., (if the note to be prepaid has remaining years to maturity between 11 and 20 years then this term would be 10 or if the note to be prepaid has remaining years to maturity between 21 years and 30 years then this term would be 20). F=The published Treasury term (in years) to maturity which is the shortest term to maturity for the published term that is greater than the remaining term (in years) to maturity of the borrower's note; i.e., (if the note to be prepaid has remaining years to maturity between 11 and 20 years then this term would be 20 or if the remaining years to maturity is between 21 and 30 years then this term would be 30). Note: The percentage terms used in the above formula will be truncated to two decimal places. For the purpose of the terms A, B, E, and F above the published Treasury rate and term shall mean the Treasury Constant Maturities from the Federal Reserve Statistical Release for 7 years, 10 years, 20 years, and 30 years.
(b)(1) In the event that the borrower prepays a loan under paragraph (a) of this section using, directly or indirectly, tax exempt financing, the discount shall be adjusted to ensure that the borrower receives a benefit that is no greater than the benefit the borrower would receive if the borrower used financing that was not tax exempt. The borrower shall certify in writing whether the financing will be tax exempt.
(2) The discount rate established in paragraph (a) of this section shall be adjusted for a tax exempt financing by substituting for the “I” term in the discount rate formula, a discount rate equal to the interest rate(s) published pursuant to 7 CFR 1714.5, determination of interest rates on municipal rate loans. This is the interest rate established for the new RUS loan program which is based on municipal interest rates for issues of comparable maturity. No interpolation or average will be used. If a note is to be prepaid under this subpart and is subject to this tax exempt adjustment, the discount rate will be determined from the published table in the
Federal Register. For example, if the note to be discounted matures in the year 1999 then the discount rate will be the interest rate for the year 1999. RUS will publish a schedule of interest rates for municipal rate loans in theFederal Register at the beginning of each calendar quarter. The published rates in effect eight business days prior to closing will be used for the discount rates. All notes to be prepaid that have remaining years to maturity of more than 20 years will be discounted at the interest rate in effect for new RUS municipal rate loans of comparable maturity at the time of closing.§ 1786.154 Qualified Notes. An eligible borrower may prepay Qualified Notes under this subpart at the discounted present value. A Qualified Note is a note evidencing an RUS electric loan, all advances of which were made prior to May 1, 1992, or not less than 2 years prior to the date of prepayment closing. See §§ 1786.155(a)(3) and 1786.158 (h) and (j).
§ 1786.155 Eligible borrower. (a) To be eligible to prepay an electric loan under this subpart, the borrower must be in compliance with the following:
(1) The borrower shall be current on all payment obligations on outstanding loans made or guaranteed by RUS. For the purpose of determining eligibility for prepayment, a default by a power supply borrower from which a distribution borrower purchases wholesale power shall not be considered a default by the distribution borrower;
(2) There shall exist no material defaults under the borrower's RUS Loan Contract and Mortgage;
(3) The borrower shall have expended all funds advanced pursuant to the RUS Loan Contract for the purposes for which such funds were advanced. A borrower will not be eligible to prepay under this subpart if it has any funds
advanced pursuant to the RUS Loan Contract in its Construction Fund Account; and (4) The borrower shall be current on all obligations under any wholesale power contract with an RUS financed power supply borrower.
(b) The eligibility of borrowers that have had any indebtedness representing loans made or guaranteed by RUS restructured shall be determined on a case by case basis considering the terms and conditions of the restructuring agreement.
§ 1786.156 Application procedure. Any borrower seeking to prepay Qualified Notes under this subpart should apply to the appropriate RUS Regional Director or the Director of the Power Supply Division. The application shall provide the following:
(a) Borrower's RUS designation;
(b) Borrower's name and address;
(c) A certified copy of a resolution of the board of directors of the borrower that the borrower wishes to enter into a prepayment agreement providing for the prepayment of all or a portion of its Qualified Notes;
(d) Listing of each Qualified Note to be prepaid by loan designation, RUS account number, advance date, maturity date, original amount, and outstanding principal balance;
(e) Evidence that the borrower has the ability to obtain the financing necessary to prepay its Qualified Notes listed in paragraph (d) of this section and identification of the source of financing and the need if any of obtaining a lien accommodation from RUS; and
(f) Such additional information as the Administrator may request.
§ 1786.157 Approval of applications. (a) Ordinarily, within 30 days of receipt, an application will be reviewed and the borrower will be notified as to whether the application has been approved. If the application has not been approved, the borrower will be informed as to the reasons. If the application is approved the borrower shall thereafter be provided with a prepayment agreement for execution.
(b) The Administrator may limit the number of applications approved and closings scheduled from time to time, taking into account, among other matters, administrative considerations of the RUS.
§ 1786.158 Terms and conditions of prepayment agreement. Upon receipt of a satisfactory application, RUS shall provide to the borrower for its execution a prepayment agreement, in form and substance satisfactory to RUS, which may include the following:
(a) Provide for the prepayment of one or more Qualified Notes from time to time, but no more than two closings may be scheduled in any calendar year unless a third closing is for the prepayment of all outstanding electric loans of the borrower;
(b) Set forth procedures and forms through which the borrower will notify the Government of each election it makes to prepay certain Qualified Notes upon a requested closing date and the Government will notify the borrower of the established closing date and prepayment amount for the Qualified Notes for each closing;
(c) Reserve to the Administrator the right to reschedule closing dates to meet administrative considerations;
(d) Set forth closing requirements identifying the location and manner of payment, and all documentation and information to be delivered prior to or at closing, including opinions of counsel and certificates from the borrower;
(e) Provide for notice by either telephone or facsimile to be given by RUS to the borrower not more than 8 nor less than 3 business days before a scheduled closing date of the amount to be paid at closing which shall include all accrued interest and the discounted present value of the Qualified Notes to be prepaid;
(f) Provide for notice of the 120 month period during which the borrower's eligibility for direct or insured loans will be restricted;
(g) Set forth representations and warranties;
(h) Require the borrower to prepay each Qualified Note specified in full;
(i) Require the borrower to identify the source of the financing that will be used directly or indirectly to refinance the Qualified Notes. If the source is
other than internally generated funds, the borrower must certify in writing whether such financing will be tax exempt, and if tax exempt financing will be used, furnish all information on the terms and conditions of the financing as RUS may require; (j) Require the borrower to rescind the unadvanced balance of all outstanding electric loans as of the date of initial closing;
(k) Require the borrower, if it is a party to a wholesale power contract with a power supply borrower, to provide the Administrator with such assurances as the Administrator may require that it is in compliance with and will continue to comply with its obligation to such power supply borrower;
(l) Provide RUS, if the Administrator determines it necessary, with security for all outstanding rural development loans and amendments to any outstanding rural development loan agreements in form and substance, and on terms and conditions, satisfactory to RUS;
(m) Prescribe remedies for violating the terms and conditions of the prepayment agreement;
(n) Provide for termination by RUS of the right for the borrower to prepay thereunder;
(o) Provide evidence that any approvals required from any supplemental lender have been obtained; and
(p) Set forth such other terms and conditions as the Administrator shall deem appropriate.
§ 1786.159 Initial closing. (a) Upon receipt of the prepayment agreement, the borrower may submit, pursuant to the terms of the prepayment agreement, a closing request which shall request a closing date no less than 30 business days from the date of the request.
(b) The Government will respond to the borrower's closing request by delivering a preclosing notice to the borrower not less than 10 business days prior to the date which the Government, after reviewing the borrower's closing request, selects as a closing date.
§ 1786.160 Subsequent closings. (a) Each subsequent prepayment after the initial closing shall be facilitated with the submission of an additional closing request by the borrower. Each closing request must request a closing date no less than 30 business days from the date of the request.
(b) The Government will respond to each subsequent closing request by delivering a preclosing notice to the borrower not less than 10 business days prior to the date which the Government, after reviewing the borrower's closing request, selects as a closing date in each case.
§ 1786.161 Return of Qualified Notes and release of lien. Upon payment to RUS at closing of the full amount specified in the notice delivered by RUS to the borrower pursuant to the terms of the prepayment agreement (see § 1786.158(e)), RUS will deliver to the borrower at closing those Qualified Notes which have been paid in full at such closing, and upon payment and discharge of all outstanding RUS debt obligations by the borrower, RUS will deliver to the borrower at the final closing a release of lien prepared by the borrower pursuant to the terms of the prepayment agreement.
§ 1786.162 Outstanding loan documents. (a) Except as expressly provided in this subpart, the borrower shall comply with all provisions of its RUS Loan Contract, its outstanding notes issued to RUS, and the RUS Mortgage.
(b) Nothing in this subpart shall affect any rights of supplemental lenders under the RUS Mortgage, or other creditors of the borrower.
(c) Nothing in this subpart shall prohibit a borrower from making prepayments of any loans pursuant to the RE Act in accordance with the terms of such loans.
§ 1786.163 Existing wholesale power contracts. (a) If the borrower is a party to a wholesale power contract with a power supply borrower financed pursuant to the RE Act, the Administrator may require that the borrower and the power
supply borrower enter into a supplement to the outstanding wholesale power contract providing substantially as follows: Sample Contract Terms So long as any of the notes evidencing secured loans of the power supply borrower are outstanding, the borrower will not, without the approval in writing of the power supply borrower and the Administrator, take or suffer to be taken any steps for reorganization or dissolution, or to consolidate with or merge into any corporation, or to sell, lease or transfer (or make any agreement therefor) all or a substantial portion of its assets, whether now owned or hereafter acquired. The power supply borrower will not unreasonably withhold or condition its consent to any such, reorganization, dissolution, consolidation, or merger, or to any such sale, lease or transfer (or any agreement therefor) of assets. The power supply borrower will not withhold or condition such consent except in cases where to do otherwise would result in rate increases for the other members of the power supply borrower or impair the ability of the power supply borrower to repay its secured loans in accordance with their terms, or adversely affect system performance in a material way. Notwithstanding the foregoing, the borrower may take or suffer to be taken any steps for reorganization or dissolution or to consolidate with or merge into any corporation or to sell, lease or transfer (or make any agreement therefor) all or a substantial portion of its assets, whether now owned or hereafter acquired without the power supply borrower's consent, so long as the borrower shall pay such portion of the outstanding indebtedness on the power supply borrower's notes or other obligations as shall be determined by the power supply borrower with the prior written consent of the Administrator and shall otherwise comply with such reasonable terms and conditions as the Administrator and power supply borrower may require either: (1) To eliminate any adverse effect that such action seems likely to have on the rates of the other members of the power supply borrower, or
(2) To assure that the power supply borrower's ability to repay the secured loans and other obligations of the power supply borrower in accordance with their terms is not impaired.
The Administrator may require, among other things, that any payment owed under (2) of the preceding sentence that represents a portion of the power supply borrower's indebtedness on Notes shall be paid by the borrower in the manner necessary to accomplish a defeasance of those obligations in accordance with the loan documents relating thereto, or be paid directly to the holders of the Notes for application by them as prepayments in accordance with the provisions of such documents, or be paid to the power supply borrower and held and invested in a manner satisfactory to the Administrator.
[End of sample contract terms] (b) The Administrator may exempt a borrower from the requirement to enter into a supplement to its outstanding wholesale power contract if the Administrator determines that such requirement is burdensome and unnecessary in light of the provisions of the existing wholesale power contract, other security arrangements of the power supply borrower, and any other relevant facts and circumstances. Normally such exemption will be granted only with the concurrence of the power supply borrower.
§ 1786.164 Loan fund audit. In the event that a borrower shall prepay all its outstanding electric loans RUS shall have the right to audit within six (6) months of closing transactions involving the RUS Construction Fund Account established and maintained by the borrower pursuant to the terms of the RUS Loan Contract and to inspect all books, records, accounts, and other documents and papers of the borrower. Should RUS determine that the borrower has made disbursements of funds advanced pursuant to the RUS Loan Contracts which do not comply with the requirements thereof, the borrower shall be required to pay the RUS an amount equal to the difference between the amount which the borrower prepaid under this subpart with respect to such advances, and the amount which the borrower would otherwise have been required to return to the RUS as a result of noncompliance if the borrower had not prepaid such advances, plus interest. (See 7 CFR part 1721, Post-Loan Policies and Procedures for Insured Electric Loans.)
§ 1786.165 Reporting. Borrowers that no longer have any loans made or guaranteed by RUS and are considering applying for other financial assistance pursuant to the RE Act are encouraged to file the end-of-year operating report, RUS Form 7.
§ 1786.166 Approvals. The borrower shall be responsible for obtaining all approvals necessary to consummate the transaction as required by the prepayment agreement, including such approvals as may be required by regulatory bodies and other lenders.
§ 1786.167 Restrictions to additional RUS financing. (a) No borrower that prepays an electric loan at a discount as provided under this subpart may apply for or receive direct or insured loans during the 120 months from the most recent closing date, except at the discretion of the Administrator. During the 120 month period the Administrator may consider providing an insured loan if, among other matters, it is necessary to assure repayment of, or protect the Government's security for any outstanding loans or loan guarantees, or the borrower's system has suffered severe physical plant related damage due to conditions beyond its control and the borrower is unable to obtain financing at reasonable terms to restore the system from non-RUS sources, including the Federal Emergency Management Agency, and from private sources. Upon expiration of the 120 months, such borrowers may apply for direct or insured loans in the same manner as other borrowers provided that such borrowers may not apply for direct or insured loans for facilities, construction of which commenced prior to the expiration of the 120 months. Special provisions for mergers involving a borrower that has prepaid pursuant to this subpart are in 7 CFR 1717.158.
(b) Borrowers that prepay their direct or insured RUS loans under this subpart remain eligible for certain types of financial assistance under the RE Act, including loan guarantees and rural development loans.
[59 FR 13620, Mar. 22, 1994, as amended at 61 FR 66874, Dec. 19, 1996] § 1786.168 Borrowers who prepaid under this part prior to October 21, 1992. (a) A borrower that had prepaid, prior to the date of enactment of Public Law 102-428 (106 Stat. 2183) on October 21, 1992, at a discount rate as provided at 7 CFR part 1786, subpart C:
(1) Shall not be eligible except at the discretion of the Administrator as stated in paragraph § 1786.167(a), to apply for or receive direct or insured loans during the 180-month period beginning on the date of the prepayment; and
(2) Shall not be eligible to apply for or receive direct or insured loans from RUS until the borrower has repaid to the RUS the sum of:
(i) The amount (if any) by which the discount the borrower received by reason of the prepayment exceeds the discount the borrower would have received had the discount been based on the cost of funds to the Department of the Treasury as calculated at § 1786.153 at the time of the prepayment; and
(ii) Interest on the amount described in paragraph (a)(2)(i) of this section for the period beginning on the date of the prepayment and ending on the date of the repayment, at a rate equal to the average annual cost of borrowing by the Department of the Treasury. This rate will be calculated first on the date of prepayment and at one year intervals from that date based on the same U.S. Treasury issues published in the Federal Reserve Statistical Release closest to that date. The Treasury rate of interest to be applied for each year will be the rate for the Treasury issue of comparable maturity to the number of years from the prepayment date to the repayment date and at one year intervals thereafter.
(b) If a borrower and the Administrator have entered into an agreement with respect to a prepayment occurring before October 21, 1992, this section shall supersede any provision in the agreement relating to the restoration of eligibility for loans under the RE Act.
(c) Borrowers who prepaid prior to October 1, 1987, are eligible for assistance under the RE Act in the same manner as other borrowers with respect to loan guarantees and the rural development loans.
(d) During the 180 month period described in paragraph (a)(1) of this section the Administrator may consider providing an insured loan, if the conditions described in § 1786.167(a) exist.
(e) Borrowers may not apply for direct or insured loans for facilities, construction of which commenced prior to the expiration of the 180 month period described in paragraph (a)(1) of this section.
§ 1786.169 Liability. It is the intent of this subpart that any failure on the part of RUS to comply with any provisions of this subpart, including without limitation, those provisions setting forth specified timeframes for action by RUS on applications for prepayments or closing requests, shall not give rise to liability of any kind on the part of the Government or any employees of the Government including, without limitation, liability for damages, fees, expenses or costs incurred by or on behalf of a borrower, private lender or any other party.
§ 1786.170 Prepayment of loans approved after December 20, 1993. [Reserved] §§ 1786.171-1786.199 [Reserved] Subpart G—Refinancing and Prepayment of RUS Guaranteed FFB Loans Pursuant to Section 306(C) of the RE Act Authority: 7 U.S.C. 901
et seq .; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941et seq .); sec. 1201(b) of subtitle B of title 1 of Pub. L. 103-66, 107 Stat. 312.Source: 58 FR 51008, Sept. 30, 1993, unless otherwise noted.
§ 1786.200 Purpose. This subpart sets forth the policies and procedures of RUS through the existing FFB program, whereby borrowers may prepay and refinance, outstanding FFB Notes evidencing electric or telephone loans with FFB, pursuant to the provisions of section 306(C) of the RE Act as added by Public Law 103-66, 107 Stat. 312, enacted August 10, 1993.
§ 1786.201 Definitions and rules of construction. (a)
Definitions. As used in this subpart:Administrator means the Administrator of the Rural Utilities Service (RUS).Borrower means any organization which has an outstanding note(s) evidencing electric or telephone loans guaranteed by RUS, from FFB.Business day means any such day on which both the Federal Financing Bank and Federal Reserve Bank—New York are open for business.Electric loan means a loan made by FFB and guaranteed by RUS under section 306 of the RE Act for electric service.FFB means the Federal Financing Bank, an instrumentality and wholly owned corporation of the United States.Government means the United States of America, acting through the Administrator of the Rural Utilities Service.Loan guarantee means RUS's guarantee under section 306 of the RE Act of a loan from FFB.Payment date means the date that payment is due and is the last day in a calendar quarter.Prepayment penalty means the same as prepayment premium.Prepayment premium shall have the meaning set forth at § 1786.207.RE Act means the Rural Electrification Act of 1936, as amended (7 U.S.C. 901et seq. ).REA means the Rural Electrification Administration formerly an agency of the United States Department of Agriculture and predecessor agency to RUS with respect to administering certain electric and telephone loan programs.Refinancing note shall have the meaning set forth at § 1786.206.RUS means the Rural Utilities Service, an agency of the United States Department of Agriculture established pursuant to Section 232 of the Federal Crop Insurance Reform and Department of Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor to REA with respect to administering certain electric and telephone programs. See 7 CFR 1700.1.RUS loan contract means the agreement, as amended, supplemented, or restated from time to time, between a borrower and RUS providing for loans or loan guarantees pursuant to the RE Act.RUS mortgage means collectively those mortgages and security agreements made by and between the borrower and the Government, securing indebtedness evidencing electric and telephone loans or loan guarantees made pursuant to RE Act. The term includes such mortgages regardless whether third parties are mortgagees with RUS.Supplemental lender means a private lender whose loan to the borrower is secured under an RUS mortgage.Telephone loan means a loan made by FFB and guaranteed by RUS under section 306 of the RE Act for telephone service.(b)
Rules of construction. Unless the context shall otherwise indicate, the terms defined in paragraph (a) of this section include the plural as well as the singular, and the singular as well as the plural. The words “herein,” “hereof” and “hereunder”, and words of similar import, refer to this subpart as a whole.[58 FR 51008, Sept. 30, 1993, as amended at 59 FR 66440, Dec. 27, 1994] § 1786.202 Prepayment and refinancing of RUS guaranteed FFB loans. The borrower of an electric or telephone loan made by the FFB and guaranteed by RUS under section 306 of the RE Act may, at the option of the borrower, refinance or prepay a loan or an advance on the loan, or any portion of the loan or advance in accordance with section 306C of the RE Act, after meeting certain conditions using the procedures prescribed in the note. After refinancing existing notes under this section, additional prepayments or refinancings will be governed by the terms of the refinancing note(s).
§ 1786.203 Special considerations. Generally all FFB borrowers with loans guaranteed by RUS whose FFB notes have not been accelerated are eligible to prepay or refinance under this part. All requests for prepayment or refinancing will be processed in accordance with this subpart except that some requests for refinancing and prepayments are more complicated and thus will involve special considerations. These requests will have to be handled on a case by case basis and include:
(a) Telephone borrowers who are required to meet certain terms of their indenture;
(b) Borrowers who have amended their old form note or have already repriced prior to September 30, 1993;
(c) Borrowers that have been involved in a merger or consolidation;
(d) Borrowers whose obligations to RUS, FFB notes, or security instruments differ from those normally used;
(e) A request to prepay or refinance an amount of less than $100,000 or an amount of less than the full amount of an advance outstanding; or
(f) A request to prepay or refinance a note that includes unadvanced loan funds.
§ 1786.204 Limitations. (a) No more than three refinancing notes will be executed for any borrower per calendar year.
(b) The borrower may not select a term for the refinanced advance that ends after the maturity date set for that advance.
§ 1786.205 Application procedure. (a) Any borrower seeking to prepay or refinance an advance from the FFB under this subpart should apply by letter to the appropriate RUS Regional Director or, in the case of power supply borrowers, to the Director of the Power Supply Division. The borrower will be required to submit applications and elections in a digital format to be supplied by RUS. The application letter shall provide the following:
(1) Borrower's RUS designation;
(2) Borrower's name and address;
(3) Listing of each note to be prepaid by loan designation, RUS note number, RUS account number, advance date, maturity date, original amount, outstanding balance, and date(s) of any substitute FFB note(s) amending the original FFB Note;
(4) A statement of the borrower's intention to finance the premium by an addition to principal balance or to pay the premium in cash or with unsecured debt;
(5) A statement of the maturity options that the borrower wishes to select;
(6) Such additional information as the Administrator may request.
(b) Requests for refinancing or prepayment will ordinarily be processed in the order that they are received. Borrower's may withdraw an application by notifying the appropriate RUS office in which they filed the application.
(c) When the request for prepayment or refinancing is approved for processing the borrower will be provided with appropriate instructions, documents and forms which may include but are not limited to the following:
(1) An FFB refinancing note;
(2) Resolution of Board of Directors;
(3) Legal Opinion;
(4) Certificate of Secretary;
(5) Waiver of Notice;
(6) Notice to borrower electing an effective date other than a scheduled quarterly payment date (if applicable);
(7) Documentation of obligations secured pursuant to section 1786.208 if any; and
(8) Security instrument.
(Approved by the Office of Management and Budget under control number 0572-0032) § 1786.206 Refinancing note. (a) RUS will issue a replacement guaranty for refinancing notes delivered to FFB to replace and substitute for existing FFB notes in connection with any refinancing by FFB pursuant to section 306C of the RE Act.
(b) Generally, refinancing notes will, to the extent practicable, consolidate all of a borrower's existing FFB notes which have been guaranteed by RUS and containing terms and conditions as FFB may require and RUS and the borrower may accept.
(c) Notwithstanding any contrary provision contained in this subpart, RUS will give preference to processing refinancings that utilize a generic form of refinancing note in the event that FFB prescribes one.
[58 FR 51008, Sep. 30, 1993; 58 FR 58729, Nov. 3, 1993] § 1786.207 Prepayment premium. (a) A premium shall be assessed against a borrower that refinances or prepays a loan or loan advance, or any portion of a loan or advance, under this section. RUS will collect the prepayment premium as calculated by FFB. FFB will calculate this premium as described in this section. Except as provided in paragraph (b) of this section, the premium shall be equal to the lesser of:
(1) The difference between the outstanding principal balance of the loan being refinanced and the present value of the loan discounted at a rate equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid;
(2) 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced, multiplied by the ratio that:
(i) The number of quarterly payment dates between the date of the refinancing or prepayment and the maturity date for the loan advance; bears to
(ii) The number of quarterly payment dates between the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced was advanced and the maturity date of the loan advance; and
(3)(i) The present value of 100 percent of the amount of interest for 1 year on the outstanding principal balance of the loan or loan advance, or any portion of the loan or advance, being refinanced or prepaid; plus
(ii) For the interval between the date of the refinancing or prepayment and the first quarterly payment date that occurs 12 years after the end of the year in which the amount being refinanced or prepaid was advanced, the present value of the difference between:
(A) Each payment scheduled for the interval on the loan amount being refinanced or prepaid; and
(B) The payment amounts that would be required during the interval on the amounts being refinanced or prepaid if the interest rate on the loan were equal to the then current cost of funds to the Department of the Treasury for obligations of comparable maturity to the loan being refinanced or prepaid.
(b)(1) Except as provided in paragraph (b)(2) of this section, the premium provided by paragraph (a)(1) of
this section shall be required for refinancing or prepayment under this section. (2) In the case of a loan advanced under an agreement that permits the refinancing or prepayment of the loan advance based on the payment of 1 year of interest on the outstanding principal balance of the loan advance, a borrower may, in lieu of the premium required by paragraph (a)(1) of this section, pay a premium as provided by:
(i) Paragraph (a)(2) of this section, if the loan advance has reached the 12-year maturity required under the loan agreement for the refinancing or prepayment; or
(ii) Paragraph (a)(3) of this section, if the loan advance has not reached the 12-year maturity required under the loan agreement for the refinancing or prepayment.
§ 1786.208 Increased principal. A borrower can meet the premium requirements by increasing the outstanding principal balance of the loan advance that is being refinanced. If it does so the borrower shall make a payment at the time of the refinancing equal to 2.5 percent of the amount of the premium that is added to the outstanding principal balance of the loan.
§ 1786.209 Outstanding loan documents. (a) Except as expressly provided in this subpart, the borrower shall comply with all provisions of its RUS loan contract, its outstanding notes issued to RUS, and the RUS mortgage.
(b) Nothing in this subpart shall affect any rights of supplemental lenders under the RUS mortgage or the rights of any other creditors of the borrower.
(c) Nothing in this subpart shall prohibit a borrower from making prepayments on any loans pursuant to the RE Act in accordance with the terms thereof or as may be otherwise permitted by law.
§ 1786.210 Approvals. The borrower shall be responsible for obtaining all approvals necessary to consummate the transaction as required by the refinancing note, including such approvals as may be required by regulatory bodies and other lenders.
Pt. 1788 PART 1788—RUS FIDELITY AND INSURANCE REQUIREMENTS FOR ELECTRIC AND TELECOMMUNICATIONS BORROWERS Subpart A—Borrower Insurance Requirements Sec. 1788.1 General and definitions. 1788.2 General insurance requirements. 1788.3 Flood insurance. 1788.4 Disclosure of irregularities and illegal acts. 1788.5 RUS endorsement required. 1788.6 RUS right to place insurance. 1788.7-1788.10 [Reserved] Subpart B—Insurance for Contractors, Engineers, and Architects, Electric Borrowers 1788.11 Minimum insurance requirements for contractors, engineers, and architects. 1788.12 Contractors' bonds. Subpart C—Insurance for Contractors, Engineers, and Architects, Telecommunications Borrowers 1788.46 General. 1788.47 Policy requirements. 1788.48 Contract insurance requirements. 1788.49 Contractors' bond requirements. 1788.50 Acceptable sureties. 1788.51-1788.53 [Reserved] 1788.54 Compliance with contracts. 1788.55 Providing RUS evidence. Authority: 7 U.S.C. 901
et seq. ; 7 U.S.C. 1921et seq. ; 7 U.S.C. 6941et seq. Source: 64 FR 2, Jan. 4, 1999, unless otherwise noted.
Subpart A—Borrower Insurance Requirements § 1788.1 General and definitions. (a) The standard forms of documents covering loans made or guaranteed by the Rural Utilities Service contain provisions regarding insurance and fidelity coverage to be maintained by each borrower. This part implements those provisions by setting forth the requirements to be met by all borrowers.
(b) As used in this part:
Borrower means any entity with any outstanding loan made or guaranteed by RUS.Irregularity has the meaning found in § 1773.2.Loan documents means the loan agreement, notes, and mortgage evidencing or used in conjunction with an RUS loan.Mortgage means the mortgage, deed of trust, security agreement, or other security document securing an RUS loan.Mortgaged property means any property subject to the lien of a mortgage.RUS means the Rural Utilities Service and includes the Rural Telephone Bank.RUS loan means a loan made or guaranteed by RUS.(c) RUS may revise these requirements on a case by case basis for borrowers with unusual circumstances.
§ 1788.2 General insurance requirements. (a) Borrowers will take out, as the respective risks are incurred, and maintain the classes and amounts of insurance in conformance with generally accepted utility industry standards for such classes and amounts of coverage for utilities of the size and character of the borrower and consistent with Prudent Utility Practice. Prudent Utility Practice shall mean any of the practices, methods, and acts which, in the exercise of reasonable judgment, in light of the facts, including but not limited to, the practices, methods, and acts engaged in or approved by a significant portion of the electric utility industry in the case of an electric borrower or of the telecommunications industry in the case of a telecommunications borrowers prior thereto, known at the time the decision was made, would have been expected to accomplish the desired result consistent with cost-effectiveness, reliability, safety, and expedition. It is recognized that Prudent Utility Practice is not intended to be limited to optimum practice, method, or act to the exclusion of all others, but rather is a spectrum of possible practices, methods, or act which could have been expected to accomplish the desired result at the lowest reasonable cost consistent with cost-effectiveness, reliability, safety, and expedition.
(b) The foregoing insurance coverage shall be obtained by means of bond and policy forms approved by regulatory authorities having jurisdiction, and, with respect to insurance upon any part of the mortgaged property securing an RUS loan, shall provide that the insurance shall be payable to the mortgagees as their interests may appear by means of the standard mortgagee clause without contribution. Each policy or other contract for such insurance shall contain an agreement by the insurer that, notwithstanding any right of cancellation reserved to such insurer, such policy or contract shall continue in force for at least 30 days after written notice to each mortgagee of suspension, cancellation, or termination.
(c) In the event of damage to or the destruction or loss of any portion of the mortgaged property which is used or useful in the borrower's business and which shall be covered by insurance, unless each mortgagee shall otherwise agree, the borrower shall replace or restore such damaged, destroyed, or lost portion so that such mortgaged property shall be in substantially the same condition as it was in prior to such damage, destruction, or loss and shall apply the proceeds of the insurance for that purpose. The borrower shall replace the lost portion of such mortgaged property or shall commence such restoration promptly after such damage, destruction, or loss shall have occurred and shall complete such replacement or restoration as expeditiously as practicable, and shall pay or cause to be paid out of the proceeds of such insurance form all costs and expenses in connection therewith.
(d) Sums recovered under any policy or fidelity bond by the borrower for a loss of funds advanced under a note secured by a mortgage or recovered by any mortgagee or holder of any note secured by the mortgage for any loss under such policy or bond shall, unless applied as provided in the preceding paragraph, be used as directed by the borrower's mortgage.
(e) Borrowers shall furnish evidence annually that the required insurance and fidelity coverage has been in force for the entire year, and that the borrower has taken all steps currently necessary and will continue to take all steps necessary to ensure that the coverage will remain in force until all
loans made or guaranteed by RUS are paid in full. Such evidence shall be in a form satisfactory to RUS. Generally a certification included as part of the RUS Financial and Statistical Report filed by the borrower annually (RUS Form 7 or Form 12 for electric borrowers, RUS Form 479 for telecommunications borrowers, or the successors to these forms) is sufficient evidence of this coverage. § 1788.3 Flood insurance. (a) Borrowers shall purchase and maintain flood insurance for buildings in flood hazard areas to the extent available and required under the National Flood Insurance Act of 1968, as amended (42 U.S.C. 4001,
et seq. ) The insurance should cover, in addition to the building, any machinery, equipment, fixtures, and furnishings contained in the building.(b) The National Flood Insurance Program (see 44 CFR Part 59
et seq. ) provides for a standard flood insurance policy; however, other existing insurance policies which provide flood coverage may be used where flood insurance is available in lieu of the standard flood insurance policy. Such policies must be endorsed to provide:(1) That the insurer give 30 days written notice of cancellation or nonrenewal to the insured with respect to the flood insurance coverage. To be effective, such notice must be mailed to both the insured and RUS and other mortgagees if any and must include information as to the availability of flood insurance coverage under the National Flood Insurance Program, and
(2) That the flood insurance coverage is at least as broad as the coverage offered by the Standard Flood Insurance Policy.
§ 1788.4 Disclosure of irregularities and illegal acts. (a) Borrowers must immediately report, in writing, all irregularities and all indications or instances of illegal acts in its operations, whether material or not, to RUS and the Office of the Inspector General (OIG). See 7 CFR 1773.9(c)(3) for OIG addresses. The reporting requirements for borrowers are the same as those for CPA's set forth in § 1773.9
(b) Borrowers are required to make full disclosure to the bonding company of the dishonest or fraudulent acts.
§ 1788.5 RUS endorsement required. In the case of a cooperative or mutual organization, RUS requires that the following:
Endorsement Waiving Immunity From Tort Liability” be included as a part of each public liability, owned, non-owned, hired automobile, and aircraft liability, employers' liability policy, and boiler policy:
The Insurer agrees with the Rural Utilities Service that such insurance as is afforded by the policy applies subject to the following provisions:
1. The Insurer agrees that it will not use, either in the adjustment of claims or in the defense of suits against the Insured, the immunity of the Insured from tort liability, unless requested by the Insured to interpose such defense.
2. The Insured agrees that the waiver of the defense of immunity shall not subject the Insurer to liability of any portion of a claim, verdict or judgment in excess of the limits of liability stated in the policy.
3. The Insurer agrees that if the Insured is relieved of liability because of its immunity, either by interposition of such defense at the request of the Insured or by voluntary action of a court, the insurance applicable to the injuries on which such suit is based, to the extent to which it would otherwise have been available to the Insured, shall apply to officers and employees of the Insured in their capacity as such; provided that all defenses other than immunity from tort liability which would be available to the Insurer but for said immunity in suits against the Insured or against the Insurer under the policy shall be available to the Insurer with respect to such officers and employees in suits against such officers and employees or against the Insurer under the policy.
§ 1788.6 RUS right to place insurance. If a borrower fails to purchase or maintain the required insurance and fidelity coverage, the mortgagees may place required insurance and fidelity coverage on behalf and in the name of the borrower. The borrower shall pay the cost of this coverage, as provided in the loan documents.
§§ 1788.7-1788.10 [Reserved] Subpart B—Insurance for Contractors, Engineers, and Architects, Electric Borrowers § 1788.11 Minimum insurance requirements for contractors, engineers, and architects. (a) Each electric borrower shall include the provisions in this paragraph in its agreements with contractors, engineers, and architects, said agreements that are wholly or partially financed by RUS loans or guarantees. The borrower should replace “Contractor” with “Engineer” or “Architect” as appropriate.
1. The Contractor shall take out and maintain throughout the period of this Agreement insurance of the following minimum types and amounts:
a. Worker's compensation and employer's liability insurance, as required by law, covering all their employees who perform any of the obligations of the contractor, engineer, and architect under the contract. If any employer or employee is not subject to workers' compensation laws of the governing State, then insurance shall be obtained voluntarily to extend to the employer and employee coverage to the same extent as though the employer or employee were subject to the workers' compensation laws.
b. Public liability insurance covering all operations under the contract shall have limits for bodily injury or death of not less than $1 million each occurrence, limits for property damage of not less than $1 million each occurrence, and $1 million aggregate for accidents during the policy period. A single limit of $1 million of bodily injury and property damage is acceptable. This required insurance may be in a policy or policies of insurance, primary and excess including the umbrella or catastrophe form.
c. Automobile liability insurance on all motor vehicles used in connection with the contract, whether owned, non-owned, or hired, shall have limits for bodily injury or death of not less than $1 million per person and $1 million each occurrence, and property damage limits of $1 million for each occurrence. This required insurance may be in a policy or policies of insurance, primary and excess including the umbrella or catastrophe form.
2. The Owner shall have the right at any time to require public liability insurance and property damage liability insurance greater than those required in paragraphs (a)(1)(b) and (a)(1)(c) of this section. In any such event, the additional premium or premiums payable solely as the result of such additional insurance shall be added to the Contract price.
3. The Owner shall be named as Additional Insured on all policies of insurance required in (a)(1)(b) and (a)(1)(c) of this section.
4. The policies of insurance shall be in such form and issued by such insurer as shall be satisfactory to the Owner. The Contractor shall furnish the Owner a certificate evidencing compliance with the foregoing requirements that shall provide not less than 30 days prior written notice to the Owner of any cancellation or material change in the insurance.
(b) Electric borrowers shall also ensure that all architects and engineers working under contract with the borrower have insurance coverage for Errors and Omissions (Professional Liability Insurance) in an amount at least as large as the amount of the architectural or engineering services contract but not less than $500,000.
(c) The borrower may increase the limits of insurance if desired.
(d) The minimum requirement of $1 million of public liability insurance does not apply to contractors performing maintenance work, janitorial-type services, meter reading services, rights-of-way mowing, and jobs of a similar nature. However, borrowers shall ensure that the contractor performing the work has public liability coverage at a level determined to be appropriate by the borrower.
(e) If requested by RUS, the borrower shall provide RUS with a certificate from the contractor, engineer, or architect evidencing compliance with the requirements of this section.
§ 1788.12 Contractors' bonds. Electric borrowers shall require contractors to obtain contractors' bonds when required by part 1726, Electric System Construction Policies and Procedures, of this chapter. Surety companies providing contractors' bonds shall be listed as acceptable sureties in the U.S. Department of Treasury Circular No. 570. The circular is maintained through periodic publication in the
Federal Register and is available on the Internet under ftp://ftp.fedworld.gov/pub/tel/sureties.txt, and on the Department of the Treasury's computer bulletin board at 202-874-6817.Subpart C—Insurance for Contractors, Engineers, and Architects, Telecommunications Borrowers § 1788.46 General. This subpart sets forth RUS policies for minimum insurance requirements for contractors, engineers, and architects performing work under contracts which are wholly or partially financed by RUS loans or guarantees with telecommunications borrowers.
§ 1788.47 Policy requirements. (a) Contractors, engineers, and architects performing work for borrowers under construction, engineering, and architectural service contracts shall obtain insurance coverage, as required in § 1788.48, and maintain it in effect until work under the contracts is completed.
(b) Contractors entering into construction contracts with borrowers shall furnish a contractors' bond, except as provided for in § 1788.49, covering all of the contractors' undertaking under the contract.
(c) Borrowers shall make sure that their contractors, engineers, and architects comply with the insurance and bond requirements of their contracts.
§ 1788.48 Contract insurance requirements. Contracts entered into between borrowers and contractors, engineers, and architects shall provide that they take out and maintain throughout the contract period insurance of the following types and minimum amounts:
(a) Workers' compensation and employers' liability insurance, as required by law, covering all their employees who perform any of the obligations of the contractor, engineer, and architect under the contract. If any employer or employee is not subject to the workers' compensation laws of the governing state, then insurance shall be obtained voluntarily to extend to the employer and employee coverage to the same extent as though the employer or employee were subject to the workers' compensation laws.
(b) Public liability insurance covering all operations under the contract shall have limits for bodily injury or death of not less than $1 million each occurrence, limits for property damage of not less than $1 million each occurrence, and $1 million aggregate for accidents during the policy period. A single limit of $1 million of bodily injury and property damage is acceptable. This required insurance may be in a policy or policies of insurance, primary and excess including the umbrella or catastrophe form.
(c) Automobile liability insurance on all motor vehicles used in connection with the contract, whether owned, non-owned, or hired, shall have limits for bodily injury or death of not less than $1 million per person and $1 million per occurrence, and property damage limits of $1 million for each occurrence. This required insurance may be in a policy or policies of insurance, primary and excess including the umbrella or catastrophe form.
(d) When a borrower contracts for the installation of major equipment by other than the supplier or for the moving of major equipment from one location to another, the contractor shall furnish the borrower with an installation floater policy. The policy shall cover all risks of damage to the equipment until completion of the installation contract.
§ 1788.49 Contractors' bond requirements. Construction contracts in amounts in excess of $250,000 for facilities shall require contractors to secure a contractors' bond, on a form approved by RUS, attached to the contract in a penal sum of not less than the contract price, which is the sum of all labor and materials including owner-furnished materials installed in the project. RUS Form 168b is for use when the contract exceeds $250,000. RUS Form 168c is for use when the contractor's surety has accepted a Small Business Administration guarantee and the contract is for $1,000,000 or less. For minor construction contracts under which work will be done in sections and no section will exceed a total cost of $250,000, the borrower may waive the requirement for a contractors' bond.
§ 1788.50 Acceptable sureties. Surety companies providing contractors' bonds shall be listed as acceptable sureties in the U.S. Department of Treasury Circular No. 570. The circular is maintained through periodic publication in the
Federal Register and is available on the Internet under ftp://ftp.fedworld.gov/pub/tel/sureties.txt, and on the Department of the Treasury's computer bulletin board at 202-874-6817.§§ 1788.51-1788.53 [Reserved] § 1788.54 Compliance with contracts. It is the responsibility of the borrower to determine, before the commencement of work, that the engineer, architect, and the contractor have insurance that complies with their contract requirements.
§ 1788.55 Providing RUS evidence. When RUS shall specifically so direct, the borrower shall also require the engineer, the architect, and the contractor, to forward to RUS evidence of compliance with their contract representative of the insurance company and include a provision that no change in or cancellation of any policy listed in the certificate will be made without the prior written notice to the borrower and to RUS.
Pt. 1789 PART 1789—USE OF CONSULTANTS FUNDED BY BORROWERS Subpart A—Policy and Procedures With Respect to Consultant Services Funded by Borrowers—General Sec. 1789.150 Purpose. 1789.151 Definitions. 1789.152 Policy. 1789.153 Borrower funding. 1789.154 Eligible borrowers. 1789.155 Approval criteria. 1789.156 Proposal procedure. 1789.157 Consultant contract. 1789.158 Implementation. 1789.159 Contract administration. 1789.160 Access to information. 1789.161 Conflicts of interest. 1789.162 Indemnification agreement. 1789.163 Waiver. 1789.164-1789.165 [Reserved] Subpart B—Escrow Account Funding and Payments 1789.166 Terms and conditions of funding agreement. 1789.167 Terms and conditions of escrow agreement. 1789.168-1789.175 [Reserved] Authority: 7 U.S.C. 901-950b; Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941
et seq. ).Source: 61 FR 48606, Sept. 16, 1996, unless otherwise noted.
Subpart A—Policy and Procedures With Respect to Consultant Services Funded by Borrowers—General § 1789.150 Purpose. This part sets forth policies and the procedures for implementing subsection (c) of section 18 of the Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq. )(RE Act) which authorizes the Rural Utilities Service (RUS) to use the services of Consultants funded by the Borrowers to facilitate timely action on Applications by Borrowers for financial assistance and other approvals.§ 1789.151 Definitions. As used in this part:
Administrator means the Administrator of the Rural Utilities Service (RUS).Application means a request for financial assistance under the RE Act or such other approvals as may be required of the RUS pursuant to the terms of outstanding loan or security instruments or otherwise.Borrower means any organization which has an outstanding loan(s) made or guaranteed by RUS or its predecessor agency, the Rural Electrification Administration (REA) under the RE Act or any organization which has submitted or submits an Application before RUS.Consultant means a person or firm which has been retained pursuant to this subpart under a contract to provide financial, legal, engineering, environmental, or other technical advice and services.Consultant Contract means a contract for the performance of consulting services for RUS, to be paid using fundsprovided by a Borrower, which may be in the form of a Retainer Contract, purchase order, or other form as may be appropriate. Escrow Account means an account established pursuant to § 1789.158.Escrow Agreement means an agreement, between a Borrower, a Consultant and a Third-party Commercial Institution, meeting the requirements of § 1789.167.Final Invoice means the closing Invoice prepared for a given Task Order.Financial Consultant means a Consultant retained pursuant to this part to provide financial advisory services.Funding Agreement means an agreement, between a Borrower and a Consultant, providing for the Borrower to fund the costs of a Task Order and otherwise meeting the requirements of § 1789.166.Indemnification Agreement means an agreement by a Borrower meeting the requirements of § 1789.162.Invoice means an invoice prepared by a Consultant pursuant to the terms of a Consultant Contract.Legal Consultant means any Consultant retained pursuant to this part to provide legal services to RUS.Notice of Proposal to Fund means a notice meeting the requirements of § 1789.156 provided to RUS by the Borrower.Organizational conflict of interest means that because of other activities or relationships with other persons, a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person's objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.Retainer Contract means a Consultant Contract providing for a minimum required payment to a Consultant irrespective of whether services are utilized by RUS thereunder.Task Order means a written request for consultant services pursuant to the terms of a Consultant Contract.Third-party Commercial Institution means a commercial financial institution mutually acceptable to the Borrower and the Consultant.§ 1789.152 Policy. (a) As provided in this subpart, RUS may, at its discretion, use the services of Consultants funded by a Borrower where such services will facilitate timely action on an Application by such Borrower for financial assistance or other approvals. Such Consultants may provide financial, legal, engineering, environmental or other technical advice and services in connection with the review of an Application.
(b) With the approval of RUS, a Borrower may fund the cost of consulting services in connection with the review by RUS of an Application by such Borrower. Such funding shall be provided pursuant to the terms of a Funding Agreement between the Borrower and the Consultant designated by RUS.
(c) RUS may not, without the consent of the Borrower, require, as a condition of processing any Application for approval, that the Borrower agree to pay the costs of a Consultant hired to provide services to RUS.
(d) The government shall retain sole discretion in the selection of Consultants to provide services to RUS and the form of contract utilized. RUS may either use the services of one or more Consultants retained under Retainer Contracts or the government may elect to retain a Consultant not otherwise on retainer. The government shall have sole discretion to prescribe terms and conditions of Consultant Contracts. The Borrower may bring considerations to the attention of the government which the Borrower deems pertinent to the selection process.
(e) RUS shall retain sole discretion as to whether to further pursue use of an outside consultant for the relevant application in the event the Borrower does not enter into the agreements referenced in § 1789.158(c)(3)(iii) within 60 days of the government providing to the Borrower the information set forth in § 1789.158(c)(3).
§ 1789.153 Borrower funding. Borrowers shall use their general funds for the purposes of funding consultant services hereunder. Borrowers may not use the proceeds of loans made or guaranteed under the RE Act for costs incurred by Borrowers pursuant
to the funding of consultant services for RUS. § 1789.154 Eligible borrowers. All Borrowers are eligible to fund consultant services under this part.
§ 1789.155 Approval criteria. RUS will consider approving the use of consultant services funded by a Borrower on a case by case basis taking into account, among other matters, the following:
(a) Whether such services are required to facilitate timely action on a Borrower's Application. RUS shall determine what represents timely action with respect to each Application considering, among other matters, the review period normally required for such projects by RUS and other lenders and the consequences to the Borrower of adjusting the review period.
(b) The availability of staff resources, the priorities of other projects then before RUS, and the efficiencies to be realized from the use of consultant services.
(c) Whether it is in the best interest of RUS to use Borrower-funded Consultants. Certain types of projects, such as those involving issues of program-wide significance, may not be well suited for the use of Borrower funded Consultants.
§ 1789.156 Proposal procedure. (a) In the event RUS determines that consideration should be given to the use of a Borrower-funded consultant in connection with the review of an Application, the RUS Regional Director or the Director of the Power Supply Division, as appropriate, will discuss with the Borrower the nature of the Application and the projected review period required of RUS. If RUS concludes that the projected review period will not result in timely action on the Application, and after being so notified in writing by RUS the Borrower wishes to fund consultant services to facilitate RUS review, the Borrower shall submit to the same Director a funding proposal. The proposal shall set forth the following:
(1) Identification in the heading or caption as a Notice of Proposal to Fund Consulting Services;
(2) Borrower's REA/RUS designation;
(3) Borrower's legal name and address;
(4) A description of the Application, critical issues and concerns relating to the Application, time deadlines, and the consequences of any delays in RUS review;
(5) A description of the consulting service(s) that would facilitate timely RUS review of the Application; and
(6) Such additional documents and information as RUS may request.
(b) RUS will review the Notice of Proposal to Fund and any additional information RUS deems relevant in determining whether to proceed with procuring Borrower funded Consultants. If RUS proposes to utilize Legal Consultants, RUS must obtain the concurrence of the Office of General Counsel (OGC) of the Department of Agriculture. RUS will notify the Borrower in writing of its determination.
§ 1789.157 Consultant contract. (a) The Federal Acquisition Regulation (FAR), 48 CFR Ch. 1, and the Agriculture Acquisition Regulation (AGAR), 48 CFR Ch. 4, shall apply to all Consultant Contracts entered into pursuant to this part except as provided in this section.
(1) Contracts for Legal Consultants shall provide for a technical representative from OGC.
(2) All Consultant Contracts shall provide for an escrow account funding mechanism pursuant to this part and for the government's sole discretion in determining whether payments are to be made from the Escrow Account to the Consultant.
(3) All Consultant Contracts shall provide that payment of all obligations for work performed thereunder must be satisfied by amounts available in the Escrow Account; with the exception of the annual retainer fee, if any, Consultants shall not be entitled to any payments from the government.
(b) The provisions of paragraph (a) of this section shall be given prominent emphasis in requests for proposals issued under this part.
§ 1789.158 Implementation. (a) Upon making a determination to go forward with Borrower funding for
consulting services, RUS shall initiate a procurement request for a Consultant to provide the services. The government may either contract with a Consultant on a case by case basis or elect to use a Consultant pursuant to an outstanding Retainer Contract. The Borrower will not be informed of the Consultant selected until such time as the government provides the information set forth in paragraph (c)(3) of this section. (b) If the government determines to contract with a Consultant on a case by case basis, the government shall notify the Borrower of the applicable procedures.
(c) If the government determines to contract with a Consultant under an outstanding Retainer Contract, the following procedures will normally apply:
(1) Pursuant to the terms of the contract, the government will prepare a draft Task Order requesting consultant services in connection with the review of the Borrower's Application. The draft Task Order shall set forth for the Consultant's review and acceptance, a description of the services to be provided and applicable time frames for the provision of such services.
(2) The government will request that the Consultant:
(i) Notify the government as to the acceptability of the form and substance of the draft Task Order;
(ii) Notify the government as to its ability to provide a satisfactory conflict of interest certification consistent with the requirements of the FAR (48 CFR ch. 1); and
(iii) Provide a cost estimate for the draft Task Order.
(3) When the government is satisfied with the response(s) received pursuant to paragraph (c)(2) of this section, the government shall promptly provide to the Borrower:
(i) A copy of the draft Task Order identifying the Consultant;
(ii) The Consultant's cost estimate for the draft Task Order; and
(iii) Contract information required to enable the Borrower to develop a Funding Agreement, an Escrow Agreement and an Indemnification Agreement (the “agreements”).
(4) The Borrower shall develop and submit to the government for approval executed originals of:
(i) The agreements; and
(ii) A certified copy of a resolution of the board of directors authorizing the Borrower to enter into the agreements and to take such other action as is necessary to effect the purposes of the agreements.
(5) Upon receiving written RUS approval of the agreements and the form and substance of the board resolution, the Borrower shall:
(i) Establish and fund the Escrow Account; and
(ii) Provide written notice to the government of the Escrow Account number, the funding thereof, and such other information as required pursuant to the agreements.
(6) After the Borrower has funded the Escrow Account, the government shall issue Task Order(s) for consultant services in accordance with the terms and conditions of the applicable Retainer Contract.
§ 1789.159 Contract administration. The government shall be solely responsible for the administration of a Consulting Contract and shall have complete control over the scope of the Consultant's work, the timetable for performance, the standards to be applied in determining the acceptability of deliverables and the approval of payment of Invoices.
§ 1789.160 Access to information. The Borrower shall not have rights in nor right of access to the work product of the Consultant. All analyses, studies, opinions, memoranda, and other documents and information provided by the Consultant pursuant to a Consulting Contract may be released and made available to the Borrower only with the approval of RUS. This section does not restrict release of information by RUS pursuant to the Freedom of Information Act (5 U.S.C. 552(a)(2)) or other legal process.
§ 1789.161 Conflicts of interest. The standard for determining organizational conflicts of interest shall be as set forth in the FAR subpart 9.5 (48 CFR part 9, subpart 9.5); however, the
identification of the existence of an organizational conflict of interest may be made by either the Administrator or the cognizant Contracting Officer. In the event an organizational conflict of interest is determined to exist, the cognizant Contracting Officer shall take the actions prescribed at FAR 9.504 (48 CFR 9.504) to attempt to avoid, neutralize or mitigate the conflict. Should these actions be deemed by the Administrator and the Contracting Officer to adequately resolve the conflict, the contracting action with the offeror/contractor may proceed. Should the Administrator or the Contracting Officer determine that an organizational conflict of interest still exists such that contract award or other contracting action cannot be taken (award of task/delivery order, etc.) the offeror/contractor shall be so informed by the Contracting Officer and be provided a reasonable opportunity to respond in accordance with FAR 9.504(e) (48 CFR 9.504(e)). After considering the contractor's response, if it is found by both the Administrator and Contracting Officer to remedy the conflict of interest, the contracting action may proceed. If the Administrator and Contracting Officer determine that the contractor's response does not resolve the conflict of interest, yet continuing with the contracting action with the offeror/contractor in question is considered in the best interest of the United States, a waiver in accordance with FAR 9.503 (48 CFR 9.503) may be executed. This waiver shall be submitted under the Contracting Officer's signature and approved by the Administrator. The Administrator has been delegated Head of Contracting Activity authority by the USDA Senior Procurement Executive solely for the purpose of waiver approval. § 1789.162 Indemnification agreement. As a condition of approving Borrower funding, the government will require the Borrower to enter into an Indemnification Agreement, in form and substance satisfactory to RUS, providing that the Borrower will indemnify and hold harmless the government and any officers, agents or employees of the government from any and all liability, including costs, fees, and settlements arising out of, or in any way connected with the payment of the Consultant's fee pursuant to the Consultant Contract. The Indemnification Agreement may recognize, as a condition of liability thereunder, the rights of the borrower to prompt notice, to use of counsel of its own choosing, and to participation in any settlement of a claim against which indemnification is sought.
§ 1789.163 Waiver. RUS may waive any requirement or procedure of this subpart by determining that its application in a particular situation would not be in the government's interest, except that certain provision that the subject contracts are subject to the provisions of the FAR (48 CFR ch. 1) and AGAR (48 CFR ch. 4).
§§ 1789.164-1789.165 [Reserved] Subpart B—Escrow Account Funding and Payments § 1789.166 Terms and conditions of funding agreement. Funding Agreements between the Borrower and a Consultant shall be in form and substance satisfactory to RUS and provide for, among other matters, the following:
(a) Specific reference by number to the applicable Consulting Contract entered into between the government and the Consultant;
(b) Specific reference by number to the applicable Task Order (where applicable);
(c) A brief description of the Application;
(d) A requirement that Invoices make specific reference to:
(1) The applicable contract and Task Order(s); and
(2) The Escrow Account from which payment is to be made;
(e) A requirement that the Final Invoice for a Task Order be clearly identified as such;
(f) A description of the services to be provided by the Consultant to RUS and the applicable time frames for the provision of such services;
(g) Agreement that the Borrower shall pay for the Consultant services
provided to RUS under the applicable contract through an Escrow Account established pursuant to an Escrow Agreement, the Consultant shall not provide services to RUS under the applicable contract unless there are sufficient funds in the Escrow Account to pay for such services, the Consultant shall seek compensation for services provided under the applicable contract from, and only from, funds made available through the Escrow Account, and the Consultant must submit all Invoices to the government for approval. (h) A form of Escrow Agreement satisfactory to the Borrower, Consultant and the designated Third-party Commercial Institution;
(i) A schedule setting forth when and in what amounts the Borrower shall fund the Escrow Account;
(j) Acknowledgment by the Consultant of the Indemnification Agreement provided by the Borrower to the government; and
(k) The Funding Agreement shall not be effective unless and until approved in writing by RUS.
§ 1789.167 Terms and conditions of escrow agreement. Escrow Agreements between and among the Borrower, Consultant and Third-party Commercial Institution shall be in form and substance satisfactory to RUS and provide for, among other matters, the following:
(a) Specific reference by number to the applicable contract for services;
(b) Specific reference by number to the applicable Task Order;
(c) Specific reference by number to the Escrow Account into which funds are to be deposited;
(d) Invoices to specifically identify the applicable contract and Task Order(s);
(e) Funds to be held in the Escrow Account by the escrow agent until paid to the Consultant pursuant to the government's authorization;
(f) The Escrow Account to be closed and all remaining funds remitted to the Borrower after payment of the Final Invoice, unless otherwise directed by the government;
(g) The government, the Consultant and the Borrower to have the right to be informed, in a timely manner and in such form as they may reasonably request, as to the status of and activity in the Escrow Account; and
(h) The Escrow Agreement shall not be effective unless and until approved in writing by RUS.
§§ 1789.168-1789.175 [Reserved] Pt. 1792 PART 1792—COMPLIANCE WITH OTHER FEDERAL STATUTES, REGULATIONS, AND EXECUTIVE ORDERS Subparts A-B [Reserved] Subpart C—Seismic Safety of Federally Assisted New Building Construction Sec. 1792.101 General. 1792.102 Definitions. 1792.103 Seismic design and construction standards for new buildings. 1792.104 Seismic acknowledgments. Authority: 7 U.S.C. 901
et seq., 1921et seq., 6941et seq. ; 42 U.S.C. 7701et seq. ; E.O. 12699 (3 CFR,1990 Comp., p. 269).Source: 58 FR 32437, June 10, 1993, unless otherwise noted.
Subparts A-B [Reserved] Subpart C—Seismic Safety of Federally Assisted New Building Construction § 1792.101 General. (a) The Earthquake Hazards Reduction Act of 1977 (42 U.S.C. 7701
et seq. ) was enacted to reduce risks to life and property through the establishment and maintenance of an effective earthquake hazards reduction program (the National Earthquake Hazards Reduction Program or NEHRP). The Federal Emergency Management Agency (FEMA) is designated as the agency with the primary responsibilities to plan and coordinate the NEHRP. This program includes the development and implementation of feasible design and construction methods to make structures earthquake resistant. Executive Order 12699 of January 5, 1990, Seismic Safety of Federal and Federally Assisted or Regulated New Building Construction (3 CFR, 1990 Comp., p. 269),requires that measures to assure seismic safety be imposed on federally assisted new building construction. (b) This subpart identifies acceptable seismic standards which must be employed in new building construction funded by loans, grants, or guarantees made by the Rural Utilities Service (RUS) or the Rural Telephone Bank (RTB) (or through lien accommodations or subordinations approved by RUS or RTB).
[58 FR 32437, June 10, 1993, as amended at 65 FR 76916, Dec. 8, 2000] § 1792.102 Definitions. As used in this subpart, the following terms have the following meaning:
Administrator— Administrator of RUS or the Governor of the Rural Telephone Bank or his or her designee.Borrower— An entity which borrows or seeks to borrow money from, or arranges financing with the assistance of RUS through guarantees, lien accommodations or lien subordinations.Building— Any structure, fully or partially enclosed, used or intended for sheltering persons or property.Federally assisted— The provision of financing assistance by RUS through loans, loan guarantees, grants, and lien accommodations and subordinations.Grant recipient— Any entity which receives a grant from RUS.Lien accommodation— The consensual sharing of the government's (RUS's) lien on property or the release of government's lien on property.Lien subordination— Agreement that the government's (RUS) lien on property will rank below the lien of another entity.Model Code —A building code developed for the adoption of local or state authorities or to be used as the basis of a local or state building code.NEHRP— National Earthquake Hazards Reduction Program.Registered— A person licensed by the State(s) or Authority(ies) to perform architectural or engineering services in the State(s) where construction occurs.RUS —Rural Utilities Service, and for the purposes of this subpart, shall include the Rural Telephone Bank. For the purposes of RTB borrowers, as used in this subpart, RUS means RTB and Administrator means Governor.State— Each of the 50 States of the United States, the District of Columbia, and territories and possessions of the United States which are authorized to receive loans, loan guarantees, or grants from RUS.[58 FR 32437, June 10, 1993, as amended at 59 FR 66440, Dec. 27, 1994; 65 FR 76916, Dec. 8, 2000; 69 FR 23642, Apr. 30, 2004] § 1792.103 Seismic design and construction standards for new buildings. (a) In the design and construction of federally assisted buildings, the borrowers and grant recipients must utilize the seismic provisions of the most recent edition of those standards and practices that are substantially equivalent to or exceed the seismic safety level in the 1994, 1997, or 2000 editions of the NEHRP Recommended Provisions for the Development of Seismic Regulation for New Buildings.
(b) Each of the following model codes or standards provides a level of seismic safety substantially equivalent to that provided by the 1994 or 1997 NEHRP Recommended Provisions and are appropriate for federally assisted new building construction:
(1) 1997 International Conference of Building Officials (ICBO) Uniform Building Code. Copies of the book or CD-ROM are available from the International Conference of Building Officials, 5360 Workman Mill Road, Whittier, CA 90601-2298, phone: 1-800-284-4406, fax: 1-888-329-4226.
(2) 1995 or 1998 American Society of Civil Engineers (ASCE) 7,
Minimum Design Loads for Buildings and Other Structures. Copies are available from the American Society of Civil Engineers, Publications Marketing Department, 1801 Alexander Bell Drive, Reston, VA 20191-4400, e-mail:marketing@asce.org, fax: 1-703-295-6211.(3) 2000 International Code Council (ICC)
International Building Code. Copies of the book or CD-ROM are available from the International Conference of Building Officials, 5360 Workman Mill Road, Whittier, CA 90601-2298, phone: 1-800-284-4406, fax: 1-888-329-4226.(c) The NEHRP Recommended Provisions for the Development of Seismic
Regulations for New Buildings is available from the Office of Earthquakes and Natural Hazards, Federal Emergency Management Agency, 500 C Street, SW., Washington, DC 20472. [69 FR 23642, Apr. 30, 2004] § 1792.104 Seismic acknowledgments. For each applicable building, borrowers and grant recipients must provide RUS a written acknowledgment from a registered architect or engineer responsible for the building design stating that seismic provisions pursuant to § 1792.103 of this subpart will be used in the design of the building.
(a) For projects in which plans and specifications are required to be submitted to RUS, this acknowledgement shall be on the title page of the drawings included with the final plans and specifications. This acknowledgement will include the identification and date of the model code or standard that is used in the seismic design of the building project. The plans and specifications must be dated, signed, and sealed by the registered architect or engineer.
(b) For projects in which plans and specifications are not submitted, this acknowledgement shall be in the form of a statement from the architect or engineer responsible for the building design. The statement shall identify the model code or standard identified that is used in the seismic design of the building or buildings and, shall be dated and signed.
[69 FR 23642, Apr. 30, 2004] Pt. 1794 PART 1794—ENVIRONMENTAL POLICIES AND PROCEDURES Subpart A—General Sec. 1794.1 Purpose. 1794.2 Authority. 1794.3 Actions requiring environmental review. 1794.4 Metric units. 1794.5 Responsible officials. 1794.6 Definitions. 1794.7 Guidance. 1794.8-1794.9 [Reserved] Subpart B—Implementation of the National Environmental Policy Act 1794.10 Applicant responsibilities. 1794.11 Apply NEPA early in the planning process. 1794.12 Consideration of alternatives. 1794.13 Public involvement. 1794.14 Interagency involvement and coordination. 1794.15 Limitations on actions during the NEPA process. 1794.16 Tiering. 1794.17 Mitigation. 1794.18-1794.19 [Reserved] Subpart C—Classification of Proposals 1794.20 Control. 1794.21 Categorically excluded proposals without an ER. 1794.22 Categorically excluded proposals requiring an ER. 1794.23 Proposals normally requiring an EA. 1794.24 Proposals normally requiring an EA with scoping. 1794.25 Proposals normally requiring an EIS. 1794.26-1794.29 [Reserved] Subpart D—Procedure for Categorical Exclusions 1794.30 General. 1794.31 Classification. 1794.32 Environmental report. 1794.33 Agency action. 1794.34-1794.39 [Reserved] Subpart E—Procedure for Environmental Assessments 1794.40 General. 1794.41 Document requirements. 1794.42 Notice of availability. 1794.43 Agency finding. 1794.44 Timing of agency action. 1794.45-1794.49 [Reserved] Subpart F—Procedure for Environmental Assessments With Scoping 1794.50 Normal sequence. 1794.51 Preparation for scoping. 1794.52 Scoping meetings. 1794.53 Environmental analysis. 1794.54 Agency determination. 1794.55-1794.59 [Reserved] Subpart G—Procedure for Environmental Impact Statements 1794.60 Normal sequence. 1794.61 Environmental impact statement. 1794.62 Supplemental EIS. 1794.63 Record of decision. 1794.64 Timing of agency action. 1794.65-1794.69 [Reserved] Subpart H—Adoption of Environmental Documents 1794.70 General. 1794.71 Adoption of an EA. 1794.72 Adoption of an EIS. 1794.73 Timing of agency action. 1794.74 Incorporation of environmental materials. 1794.75-1794.79 [Reserved] Authority: 7 U.S.C. 6941
et seq., 42 U.S.C. 4321et seq. ; 40 CFR Parts 1500-1508.Source: 63 FR 68655, Dec. 11, 1998, unless otherwise noted.
Subpart A—General § 1794.1 Purpose. (a) This part contains the policies and procedures of the Rural Utilities Service (RUS) for implementing the requirements of the National Environmental Policy Act of 1969 (NEPA), as amended (42 U.S.C. 4321-4346); the Council on Environmental Quality (CEQ) Regulations for Implementing the Procedural Provisions of NEPA (40 CFR parts 1500 through 1508) and certain related Federal environmental laws, statutes, regulations, and Executive Orders (EO) that apply to RUS programs and administrative actions.
(b) The policies and procedures contained in this part are intended to help RUS officials make decisions that are based on an understanding of environmental consequences, and take actions that protect, restore, and enhance the environment. In assessing the potential environmental impacts of its actions, RUS will consult early with appropriate Federal, State, and local agencies and other organizations to provide decision-makers with information on the issues that are truly significant to the action in question.
§ 1794.2 Authority. (a) This part derives its authority from and is intended to be compliant with NEPA, CEQ Regulations for Implementing the Procedural Provisions of NEPA, and other RUS regulations.
(b) Where practicable, RUS will use NEPA analysis and documents and review procedures to integrate the requirements of related environmental statutes, regulations, and orders.
(c) This part integrates the requirements of NEPA with other planning and environmental review procedures required by law, or by RUS practice including but not limited to:
(1) Endangered Species Act of 1973 (16 U.S.C. 1531
et seq .);(2) The National Historic Preservation Act (16 U.S.C. 470
et seq .);(3) Farmland Protection Policy Act (7 U.S.C. 4201
et seq .);(4) E.O. 11593, Protection and Enhancement of the Cultural Environment (3 CFR, 1971 Comp., p. 154);
(5) E.O. 11514, Protection and Enhancement of Environmental Quality (3 CFR, 1970 Comp., p. 104);
(6) E.O. 11988, Floodplain Management (3 CFR, 1977 Comp., p. 117);
(7) E.O. 11990, Protection of Wetlands (3 CFR, 1977 Comp., p. 121); and
(8) E.O. 12898, Federal Actions to Address Environmental Justice in Minority Populations and Low-Income Populations (3 CFR, 1994 Comp., p. 859).
(d) Applicants are responsible for ensuring that proposed actions are in compliance with all appropriate RUS requirements. Environmental documents submitted by the applicant shall be prepared under the oversight and guidance of RUS. RUS will evaluate and be responsible for the accuracy of all information contained therein.
§ 1794.3 Actions requiring environmental review. The provisions of this part apply to actions by RUS including the approval of financial assistance pursuant to the Electric, Telecommunications, and Water and Waste Programs, the disposal of property held by RUS pursuant to such programs, and the issuance of new or revised rules, regulations, and bulletins. Approvals provided by RUS pursuant to loan contracts and security instruments, including approvals of lien accommodations, are not actions for the purposes of this part and the provisions of this part shall not apply to the exercise of such approvals.
§ 1794.4 Metric units. RUS normally will prepare environmental documents using non-metric equivalents with one of the following two options; metric units in parentheses immediately following the non-
metric equivalents or a metric conversion table as an appendix. Environmental documents prepared by or for a RUS applicant should follow the same format. § 1794.5 Responsible officials. The Administrator of RUS has the responsibility for Agency compliance with all environmental laws, regulations, and EOs that apply to RUS programs and administrative actions. Responsibility for ensuring environmental compliance for actions taken by RUS has been delegated as follows:
(a)
Electric and telecommunications programs. The appropriate Assistant Administrator is responsible for ensuring compliance with this part for the respective programs.(b)
Water and waste program. The Assistant Administrator for this program is responsible for ensuring compliance with this part at the national level. The State Director is the responsible official for ensuring compliance with this part for actions taken at the State Office level.§ 1794.6 Definitions. The following definitions, as well as the definitions contained in 40 CFR part 1508 of the CEQ regulations, apply to the implementation of this part:
Applicant. The organization applying for financial assistance or other approval from either the Electric or Telecommunications programs or the organization applying for a loan or grant from the Water and Waste program.Construction Work Plan (CWP). The document required by 7 CFR part 1710.Distributed Generation. The generation of electricity by a sufficiently small electric generating system as to allow interconnection of the system near the point of service at distribution voltages or customer voltages. A distributed generating system may be fueled by any source, including but not limited to renewable energy sources.Emergency situation. A natural disaster or system failure that may involve an immediate or imminent threat to public health, safety, or the human environment.Environmental Report (ER). The environmental documentation normally submitted by applicants for proposed actions subject to compliance with §§ 1794.22 through 1794.24. An ER for the Water and Waste Program refers to the environmental review documentation normally included as part of the Preliminary Engineering Report.Environmental review. Any one or all of the levels of environmental analysis described under subpart C of this part.Equivalent Dwelling Unit (EDU). Level of water or waste service provided to a typical rural residential dwelling.Important land resources. Defined pursuant to the U.S. Department of Agriculture's Departmental Regulation 9500-3, Land Use Policy, as important farmland, prime forestland, prime rangeland, wetlands, and floodplains. Copies of this Departmental Regulation are available from USDA, Rural Utilities Service, Washington, DC 20250.Loan design. Document required by 7 CFR part 1737.Multiplexing center. A field site where a telecommunications provider houses a device that combines individual subscriber circuits onto a single system for economical connection with a switching center. The combiner, or “multiplexer,” may be mounted on a pole, on a concrete pad, or in a partial or full enclosure such as a shelter, or small building.Natural Resource Management Guide. Inventory of natural resources, land uses, and environmental factors specified by Federal, State, and local authorities as deserving some degree of protection or special consideration. The guide describes the standards or types of protection that apply.Preliminary Engineering Report (PER). Document required by 7 CFR part 1780 for Water and Waste Programs. A PER is prepared by an applicant's engineering consultant documenting a proposed action's preliminary engineering plan and design and the applicable environmental review activities as required in this part. Upon approval by RUS, the PER, or a portion thereof, shall serve as the RUS environmental document.Supervisory Control and Data Acquisition System (SCADA). Electronic monitoring and control equipment installed at electric substations and switching stations.Third party consultant. A party selected by RUS to prepare the EIS for proposed actions described in § 1794.25 where the applicant initiating the proposal agrees to fund preparation of the document in accordance with the provisions of 7 CFR Part 1789, “Use of Consultants Funded by Borrowers” and Section 759A of the Federal Agriculture Improvement and Reform Act of 1996 (7 U.S.C. 2204b(b)).[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45158, Aug. 1, 2003] § 1794.7 Guidance. (a)
Electric and Telecommunications Programs. For further guidance in the preparation of public notices and environmental documents, RUS has prepared a series of program specific guidance bulletins. RUS Bulletin 1794A-600 provides guidance in preparing the ER for proposed actions classified as categorical exclusions (CEs) (§ 1794.22(a)); RUS Bulletin 1794A-601 provides guidance in preparing the ER for proposed actions which require EAs (§ 1794.23(b) and (c)); and RUS Bulletin 1794A-603 provides guidance in conducting scoping for proposed actions classified as requiring an EA with scoping or an EIS. Copies of these bulletins are available upon request by contacting the Rural Utilities Service, Publications Office, Program Development and Regulatory Analysis, Stop 1522, 1400 Independence Avenue, SW., Washington, DC 20250-1522.(b)
Water and waste program. RUS Bulletin 1794A-602 provides guidance in preparing the ER for proposed actions classified as CEs (§ 1794.22(b)) and EAs (§ 1794.23(b)). A copy of this bulletin is available upon request by contacting the appropriate State Director. State Directors may provide supplemental guidance to meet state and local laws and regulations and to provide for orderly application procedures and efficient service to applicants. State Directors shall obtain the Administrator's approval for all supplements to RUS Bulletin 1794A-602. Each State Office shall maintain an updated Natural Resource Management Guide and provide applicants with pertinent sections or a copy of the current edition thereof.[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45158, Aug. 1, 2003] §§ 1794.8-1794.9 [Reserved] Subpart B—Implementation of the National Environmental Policy Act § 1794.10 Applicant responsibilities. As described in subpart C of this part, applicants shall prepare the applicable environmental documentation concurrent with a proposed action's engineering, planning, and design activities. RUS shall assist applicants by outlining the types of information required and shall provide guidance and oversight in the development of the documentation. Documentation shall not be considered complete until all public review periods, as applicable, have expired and RUS concurrence, as set forth in the appropriate decision document and associated public notice, has been issued.
§ 1794.11 Apply NEPA early in the planning process. The environmental review process requires early coordination with and involvement of RUS. Applicants should consult with RUS at the earliest stages of planning for any proposal that may require RUS action. For proposed actions that normally require an EIS, applicants shall consult with RUS prior to obtaining the services of an environmental consultant.
§ 1794.12 Consideration of alternatives. In determining what are reasonable alternatives, RUS considers a number of factors. These factors may include, but are not limited to, the proposed action's size and scope, state of the technology, economic considerations, legal and socioeconomic concerns, availability of resources, and the timeframe in which the identified need must be fulfilled.
§ 1794.13 Public involvement. (a) In carrying out its responsibilities under NEPA, RUS shall make diligent efforts to involve the public in the environmental review process through
public notices and public hearings and meetings. (1) All public notices required by this part shall describe the nature, location, and extent of the proposed action and indicate the availability and location of additional information. They shall be published in newspaper(s) of general circulation within the proposed action's area of environmental impact and the county(s) in which the proposed action will take place or such other places as RUS determines.
(2) The number of editions in which the notices should be published will be specified in the Bulletins referenced in § 1794.7 or established on a project-by-project basis. Alternative forms of notice may also be necessary to ensure that residents located in the area affected by the proposed action are notified. The applicant should not publish notices for compliance with this part until so notified by RUS.
(3) A copy of all comments received by the applicant concerning environmental aspects of the proposed action shall be provided to RUS in a timely manner. RUS and applicants shall assess and consider public comments both individually and collectively. Responses to public comments will be appended to the applicable environmental document.
(4) RUS and applicants shall make available to the public those project related environmental documents that RUS determines will enhance public participation in the environmental process. These materials shall be placed in locations convenient for the public as determined by RUS in consultation with applicants. Included with the documentation shall be a list of other project-related information that shall be available for inspection through a designated RUS or applicant contact person.
(5) Public hearings or meetings shall be held at reasonable times and locations concerning environmental aspects of a proposed action in all cases where, in the opinion of RUS, the need for hearings or meetings is indicated in order to develop adequate information on the environmental implications of the proposed action. Public hearings or meetings conducted by RUS will be coordinated to the extent practicable with other meetings, hearings, and environmental reviews which may be held or required by other Federal, state and local agencies. Applicants shall, as necessary, participate in all RUS conducted public hearings or meeting.
(6) Scoping procedures, in accordance with 40 CFR 1501.7, are required for proposed actions normally requiring an EA with scoping (§ 1794.24) or an EIS (§ 1794.25). RUS may require scoping procedures to be followed for other proposed actions where appropriate to achieve the purposes of NEPA.
(b) The applicant shall have public notices described in this section published in a newspaper(s). Applicants shall obtain proof of publication from the newspaper(s) for inclusion into the applicable environmental document. Where the proposed action requires an EIS RUS shall, in addition to applicant published notices, publish notice in the
Federal Register. In all cases, RUS may publish notices in theFederal Register as appropriate.§ 1794.14 Interagency involvement and coordination. In an attempt to reduce or eliminate duplication of effort with state or local procedures, RUS will, to the extent possible and in accordance with 40 CFR 1506.2, actively participate with any governmental agency to cooperatively or jointly prepare environmental documents so that one document will comply with all applicable laws. Where RUS has agreed to participate as a cooperating agency, in accordance with 40 CFR 1501.6, RUS may rely upon the lead agency's procedures for implementing NEPA procedures. In addition, RUS shall request that:
(a) The lead agency indicates that RUS is a cooperating agency in all NEPA-related notices published for the proposed action;
(b) The scope and content of the EA or EIS satisfies the statutory and regulatory requirements applicable to RUS; and
(c) The applicant shall inform RUS in a timely manner of its involvement in a proposed action where another Federal agency is preparing an environmental document so as to permit RUS to adequately fulfill its duties as a cooperating agency.
§ 1794.15 Limitations on actions during the NEPA process. (a)
General. Until RUS concludes its environmental review process, the applicant shall take no action concerning the proposed action which would have an adverse environmental impact or limit the choice of reasonable alternatives being considered in the environmental review process (40 CFR 1506.1). The RUS environmental review process is concluded when:(1) A categorical exclusion determination has been made for proposals listed under §§ 1794.21 and 1794.22.
(2) Applicant notices announcing the RUS FONSI determination have been published for proposals listed under §§ 1794.23 and 1794.24.
(3) Applicant notices announcing the RUS Record of Decision have been published for proposals listed under § 1794.25.
(b)
Electric program. In determining which applicant activities related to a proposed action can proceed prior to completion of the environmental review process, RUS must determine, among other matters that:(1) The activity shall not have an adverse environmental impact and shall not preclude the search for other alternatives. For example, purchase of water rights, optioning or transfer of land title, or continued use of land as historically employed will not have an adverse environmental impact. However, site preparation or construction at or near the proposed site (e.g. rail spur) or development of a related facility (e.g. opening a captive mine) normally will have an adverse environmental impact.
(2) Expenditures are minimal. To be minimal, the expenditure must not exceed the amount of loss which the applicant could absorb without jeopardizing the Government's security interest in the event the proposed action is not approved by the Administrator, and must not compromise the objectivity of RUS environmental review. Not withstanding other considerations, expenditures equivalent to up to 10 percent of the proposed action's cost normally will not compromise RUS objectivity. Expenditures for the purpose of producing documentation required for RUS environmental review are excluded from this limitation.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.16 Tiering. It is the policy of RUS to prepare programmatic level analysis in order to tier an EIS and an EA where:
(a) It is practicable, and
(b) There will be a reduction of delay and paperwork, or where better decision making will be fostered (40 CFR 1502.20).
§ 1794.17 Mitigation. (a)
General. In addition to complying with the requirements of 40 CFR 1502.14(f), it is RUS policy that a discussion of mitigative measures essential to render the impacts of the proposed action not significant will be included in or referenced in the Finding of No Significant Impact (FONSI) and the Record of Decision (ROD).(b)
Water and waste program. (1) Mitigation measures which involve protective measures for environmental resources cited in this part or restrictions or limitations on real property located in the service areas of the proposed action shall be negotiated with applicants and any relevant regulatory agency so as to be enforceable. All mitigation measures incorporating land use issues shall recognize the rights and responsibilities of landholders in making private land use decisions and recognize the responsibility of governments in influencing how land may be used to meet public needs.(2) Mitigation measures shall be included in the letter of conditions.
(3) RUS has the responsibility for the post approval construction or security inspections or monitoring to ensure that all mitigation measures included in the environmental documents have been implemented as specified in the letter of conditions.
§§ 1794.18-1794.19 [Reserved] Subpart C—Classification of Proposals § 1794.20 Control. Electric and telecommunications programs. For environmental review purposes, RUS has identified and established categories of proposed actions (§§ 1794.21 through 1794.25). An applicant may propose to participate with other parties in the ownership of a project where the applicant(s) does not have sufficient control to alter the development of the project. In such a case, RUS shall determine whether the applicant participants have sufficient control and responsibility to alter the development of the proposed project prior to determining its classification. Where the applicant proposes to participate with other parties in the ownership of a proposed project and all applicants cumulatively own:(a) Five percent or less of a project is not considered a Federal action subject to this part;
(b) Thirty-three and one-third percent or more of a project shall be treated in its usual category;
(c) More than five percent but less than 33
1/3 percent of a project, RUS shall determine whether the applicant participants have sufficient control and responsibility to alter the development of the proposal such that RUS's action will be considered a Federal action subject to this part. Consideration shall be given to such factors as:(1) Whether construction would be completed regardless of RUS financial assistance or approval;
(2) The stage of planning and construction;
(3) Total participation of the applicant;
(4) Participation percentage of each utility; and
(5) Managerial arrangements and contractual provisions.
§ 1794.21 Categorically excluded proposals without an ER. (a)
General. Certain types of actions taken by RUS do not normally require an ER. Proposed actions within this classification are:(1) The issuance of bulletins and information publications that do not concern environmental matters or substantial facility design, construction, or maintenance practices;
(2) Procurement activities related to the operation of RUS;
(3) Personnel and administrative actions; and
(4) Repairs made because of an emergency situation to return to service damaged facilities of an applicant's system.
(b)
Electric and telecommunications programs. Applications for financial assistance for the types of proposed actions listed in this paragraph (b) normally do not require the submission of an ER. These types of actions are subject to the requirements of § 1794.31. Applicants shall sufficiently identify all proposed actions so their proper classification can be determined. Detailed descriptions shall be provided for each proposal noted in this section. RUS normally requires additional information in addition to a description of what is being proposed, to ensure that proposals are properly classified. In order to provide for extraordinary circumstances, RUS may require development of an ER for proposals listed in this section. Proposed actions within this classification are:(1) Purchase of land where use shall remain unchanged, or the purchase of existing water rights where no associated construction is involved;
(2) Additional or substitute financial assistance for proposed actions which have previously received environmental review and approval from RUS, provided the scope of the proposal and environmental considerations have not changed;
(3) Rehabilitation or reconstruction of transportation facilities within existing rights-of-way (ROW) or generating facility sites. A description of the rehabilitation or reconstruction shall be provided to RUS;
(4) Changes or additions to microwave sites, substations, switching stations, telecommunications switching or multiplexing centers, buildings, or small structures requiring new physical disturbance or fencing of less than one acre (0.4 hectare). A description of the additions or changes and the area
to be impacted by the expansion shall be provided to RUS; (5) Internal modifications or equipment additions (
e.g., computer facilities, relocating interior walls) to structures or buildings;(6) Internal or minor external changes to electric generating or fuel processing facilities and related support structures where there is negligible impact on the outside environment. A description of the changes shall be provided to RUS;
(7) Ordinary maintenance or replacement of equipment or small structures (
e.g., line support structures, line transformers, microwave facilities, telecommunications remote switching and multiplexing sites);(8) The construction of telecommunications facilities within the fenced area of an existing substation, switching station, or within the boundaries of an existing electric generating facility site. A description of the facilities to be constructed shall be provided to RUS;
(9) SCADA and energy management systems involving no new external construction;
(10) Testing or monitoring work (
e.g., soil or rock core sampling, monitoring wells, air monitoring);(11) Studies and engineering undertaken to define proposed actions or alternatives sufficiently so that environmental effects can be assessed;
(12) Construction of electric power lines within the fenced area of an existing substation, switching station, or within the boundaries of an electric generating facility site;
(13) Contracts for certain items of equipment which are part of a proposed action for which RUS is preparing an EA or EIS, and which meet the limitations on actions during the NEPA process as established in 40 CFR 1506.1(d) and contained in § 1794.15(b)(2);
(14) Rebuilding of power lines or telecommunications cables where road or highway reconstruction requires the applicant to relocate the lines either within or adjacent to the new road or highway easement or right-of-way. A description of the facilities to be constructed shall be provided to RUS;
(15) Phase or voltage conversions, reconductoring or upgrading of existing electric distribution lines, or telecommunication facilities. A description of the facilities to be constructed shall be provided to RUS;
(16) Construction of new power lines, substations, or telecommunications facilities on industrial or commercial sites, where the applicant has no control over the location of the new facilities. Related off-site facilities would be treated in their normal category. A description of the facilities to be constructed shall be provided to RUS;
(17) Participation by an applicant(s) in any proposed action where total applicant financial participation will be five percent or less;
(18) Construction of a battery energy storage system at an existing generating station or substation site. A description of the facilities to be constructed shall be provided to RUS.
(19) Additional bulk commodity storage (
e.g., coal, fuel oil, limestone) within existing generating station boundaries. A certification attesting to the current state of compliance of the existing facilities and a description of the facilities to be added shall be provided to RUS;(20) Proposals designed to reduce the amount of pollutants released into the environment (e.g., precipitators, baghouse or scrubber installations, and coal washing equipment) which will have no other environmental impact outside the existing facility site. A description of the facilities to be constructed shall be provided to RUS;
(21) Construction of standby diesel electric generators (one megawatt or less total capacity) and associated facilities, for the primary purpose of providing emergency power, at an existing applicant headquarters or district office, telecommunications switching or multiplexing site, or at an industrial, commercial or agricultural facility served by the applicant. A description of the facilities to be constructed shall be provided to RUS;
(22) Construction of onsite facilities designed for the transfer of ash, scrubber wastes, and other byproducts from coal-fired electric generating stations for recycling or storage at an existing coal mine (surface or underground). A description of the facilities to be constructed shall be provided to RUS;
(23) Changes or additions to an existing water well system, including new water supply wells and associated pipelines within the boundaries of an existing well field or generating station site. A description of the changes or additions shall be provided; and
(24) Repowering or uprating of an existing unit(s) at a fossil-fueled generating station in order to improve the efficiency or the energy output of the facility. Repowering or uprating that results in increased fuel consumption or the substitution of one fuel combustion technology with another is excluded from this classification.
(25) Electric generating facilities of less than 100 kilowatts at any one site for the purpose of providing service to customers or facilities such as stock tanks and irrigation pumps.
(26) New bulk commodity storage and associated handling facilities within existing fossil-fueled generating station boundaries for the purpose of co-firing bio-fuels and refuse derived fuels. A description of the facilities to be constructed shall be provided to RUS.
(c)
Water and waste program. Applications for financial assistance for certain proposed actions do not normally require the submission of an ER. Applicants shall sufficiently identify all proposed actions so their proper classification can be determined. These types of actions are subject to the requirements of § 1794.31. In order to provide for extraordinary circumstances, RUS may require development of an ER for proposals listed in this section. Proposed actions within this classification are:(1) Management actions relating to invitation for bids, award of contracts, and the actual physical commencement of construction activities;
(2) Proposed actions that primarily involve the purchase and installation of office equipment or motorized vehicles;
(3) The award of financial assistance for technical assistance, planning purposes, environmental analysis, management studies, or feasibility studies; and
(4) Loan closing and servicing activities that do not alter the purpose, operation, location, or design of the proposal as originally approved, such as subordinations, amendments and revisions to approved actions, and the provision of additional financial assistance for cost overruns.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.22 Categorically excluded proposals requiring an ER. (a)
Electric and telecommunications programs. Applications for financial assistance for the types of proposed actions listed in this section normally require the submission of an ER and are subject to the requirements of § 1794.32. Proposed actions within this classification are:(1) Construction of electric power lines and associated facilities designed for or capable of operation at a nominal voltage of either:
(i) Less that 69 kilovolts (kV);
(ii) Less than 230 kV if no more than 25 miles (40.2 kilometers) of line are involved; or
(iii) 230 kV or greater involving no more than three miles (4.8 kilometers) of line;
(2) Construction of buried and aerial telecommunications lines, cables, and related facilities;
(3) Construction of microwave facilities, SCADA, and energy management systems involving no more than five acres (2 hectares) of physical disturbance at any single site;
(4) Construction of cooperative or company headquarters, maintenance facilities, or other buildings involving no more than 10 acres (4 hectares) of physical disturbance or fenced property;
(5) Changes to existing transmission lines that involve less than 20 percent pole replacement, or the complete rebuilding of existing distribution lines within the same ROW. Changes to existing transmission lines that require 20 percent or greater pole replacement will be considered the same as new construction;
(6) Changes or additions to existing substations, switching stations, telecommunications switching or multiplexing centers, or external changes to buildings or small structures requiring one acre (0.4 hectare) or more but no more than five acres (2 hectares) of new physically disturbed land or fenced property;
(7) Construction of substations, switching stations, or telecommunications switching or multiplexing centers requiring no more than five acres (2 hectares) of new physically disturbed land or fenced property;
(8) Construction of distributed generation totaling 10 MW or less at an existing utility, industrial, commercial or educational facility site. There is no capacity limit for a generating facility located at or adjacent to an existing landfill site that is powered by refuse derived fuel. All new associated facilities and related electric power lines shall be covered in the ER;
(9) Installation of new generating units or the replacement of existing generating units at a hydroelectric facility or dam which result in no change in the normal maximum surface area or normal maximum surface elevation of the existing impoundment. All new associated facilities and related electric power lines shall be covered in the ER;
(10) Construction of new water supply wells and associated pipelines not located within the boundaries of an existing well field or generating station site; and
(11) Purchase of existing facilities or a portion thereof where use or operation will remain unchanged. The results of a facility environmental audit can be substituted for the ER.
(12) Installing a heat recovery steam generator and steam turbine with a rating of 200 MW or less on an existing combustion turbine generation site for the purpose of combined cycle operation. All new associated facilities and related electric power lines shall be covered in the ER.
(b)
Water and waste program. For certain proposed actions, applications for financial assistance normally require the submittal of an ER as part of the PER. These types of actions are subject to the requirements of § 1794.32. Proposed actions within this classification are:(1) Rehabilitation of existing facilities, functional replacement or rehabilitation of equipment, or the construction of new ancillary facilities adjacent or appurtenant to existing facilities, including but not limited to, replacement of utilities such as water or sewer lines and appurtenances for existing users with modest or moderate growth potential, reconstruction of curbs and sidewalks, street repaving, and building modifications, renovations, and improvements;
(2) Facility improvements to meet current needs with a modest change in use, size, capacity, purpose or location from the original facility. The proposed action must be designed for predominantly residential use with other new or expanded users being small-scale, commercial enterprises having limited secondary impacts;
(3) Construction of new facilities that are designed to serve not more than 500 EDUs and with modest growth potential. The proposed action must be designed for predominantly residential use with other users being small-scale, commercial enterprises having limited secondary impacts;
(4) The extension, enlargement or construction of interceptors, collection, transmission or distribution lines within a one-mile (1.6-kilometer) limit from existing service areas estimated from any boundary listed as follows:
(i) The corporate limits of the community being served;
(ii) If there are developed areas immediately contiguous to the corporate limits of a community, the limits of these developed areas; or
(iii) If an unincorporated area is to be served, the limits of the developed areas;
(5) Installation of new water supply wells or water storage facilities that are required by a regulatory authority or standard engineering practice as a backup to existing production well(s) or as reserve for fire protection;
(6) Actions described in § 1794.21(c)(4) which alter the purpose, operation, location, or design of the proposed action as originally approved, and such alteration is equivalent in magnitude or type as described in paragraphs (b)(1) through (b)(5) of this section; and
(7) The lease or disposal of real property by RUS, which may result in a change in use of the real property in the reasonably foreseeable future and such change, is equivalent in magnitude or type as described in paragraphs (b)(1) through (b)(5).
(c)
Specialized criteria for not granting a CE for water and waste projects. An EA must be prepared if a proposed action normally classified as a CE meets any of the following:(1) Will either create a new or relocate an existing discharge to or a withdrawal from surface or ground waters;
(2) Will result in substantial increases in the volume or the loading of pollutants from an existing discharge to receiving waters;
(3) Will cause a substantial increase in the volume of withdrawal from surface or ground waters at an existing site; or
(4) Would provide capacity to serve more than 500 EDUs or a 30 percent increase in the existing population whichever is larger.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.23 Proposals normally requiring an EA. RUS will normally prepare an EA for all proposed actions which are neither categorical exclusions (§§ 1794.21 and 1794.22) nor normally requiring an EIS (§ 1794.25). For certain actions within this class, scoping and document procedures contained in §§ 1794.50 through 1794.54 shall be followed (see § 1794.24). The following are proposed actions which normally require an EA and shall be subject to the requirements of §§ 1794.40 through 1794.44.
(a)
General. Issuance or modification of RUS regulations concerning environmental matters.(b)
Telecommunications and water and waste programs. An EA shall be prepared for applications for financial assistance for all proposed actions not specifically defined as a CE or otherwise specifically categorized by the Administrator on a case-by-case basis.(c)
Electric program. Applications for financial assistance for certain proposed actions normally require the preparation of an EA. Proposed actions falling within this classification are:(1) Construction of fuel cell, combustion turbine, combined cycle, or diesel generating facilities of 50 MW (nameplate rating) or less at a new site (no existing generating capacity) except for items covered by § 1794.22(a)(8). All new associated facilities and related electric power lines shall be covered in the EA;
(2) Construction of fuel cell, combustion turbine, combined cycle, or diesel generating facilities of 100 MW (nameplate rating) or less at an existing generating site, except for items covered by § 1794.22(a)(8). All new associated facilities and related electric power lines shall be covered in the EA;
(3) Construction of any other type of new electric generating facility of 20 MW (nameplate rating) or less, except for items covered by § 1794.22(a)(8). All new associated facilities and related electric power lines shall be covered in the EA;
(4) Repowering or uprating of an existing unit(s) at a fossil-fueled generating station where the existing fuel combustion technology of the affected unit(s) is substituted for another (
e.g. coal or oil-fired boiler is converted to a fluidized bed boiler or replaced with a combustion turbine unit);(5) Installation of new generating units at an existing hydroelectric facility or dam, or the replacement of existing generating units at a hydroelectric facility or dam which will result in a change in the normal maximum surface area or normal maximum surface elevation of the existing impoundment. All new associated facilities and related electric power lines shall be covered in the EA;
(6) A new drilling operation or the expansion of a mining or drilling operation;
(7) Construction of cooperative headquarters, maintenance, and equipment storage facilities involving more than 10 acres (4 hectares) of physical disturbance or fenced property;
(8) The construction of electric power lines and related facilities designed for and capable of operation at a nominal voltage of 230 kV or more involving more than three miles (4.8 kilometers) but not more than 25 miles (40 kilometers) of line;
(9) The construction of electric power lines and related facilities designed for or capable of operation at a nominal voltage of 69 kV or more but less than 230 kV where more than 25 miles (40 kilometers) of power line are involved;
(10) The construction of substations or switching stations requiring greater
than five acres (2 hectares) of new physical disturbance at a single site; and (11) Construction of facilities designed for the transfer and storage of ash, scrubber wastes, and other byproducts from coal-fired electric generating stations that will be located beyond the existing facility site boundaries.
(12) Installing a heat recovery steam generator and steam turbine with a rating of more than 200 MW on an existing combustion turbine generation site for the purpose of combined cycle operation. All new associated facilities and related electric power lines shall be covered in the EA.
(13) Construction of a natural gas pipeline to serve an existing gas-fueled generating facility.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.24 Proposals normally requiring an EA with scoping. (a)
General. Applications for financial assistance for certain proposed actions require the use of a scoping procedure in the development of the EA. These types of actions are subject to the requirements of §§ 1794.50 through 1794.54. RUS has the discretion to modify or waive the requirements listed in § 1794.52 for a proposed action in this category.(b)
Electric program. Proposed actions falling within this classification are:(1) The construction of electric power lines and related facilities designed for and capable of operation at a nominal voltage of 230 kV or more where more than 25 miles (40 kilometers) of power line are involved;
(2) Construction of fuel cell, combustion turbine, combined cycle, and diesel generating facilities of more than 50 MW at a new site or more than 100 MW at an existing site; and the construction of any other type of electric generating facility of more than 20 MW but not more than 50 MW (nameplate rating). All new associated facilities and related electric power lines shall be covered in any EA or EIS that is prepared.
(c)
Telecommunications and water and waste programs. There are no actions normally falling within this classification.[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.25 Proposals normally requiring an EIS. Applications for financial assistance for certain proposed actions that may significantly affect the quality of the human environment shall require the preparation of an EIS.
(a)
Electric program. An EIS will normally be required in connection with proposed actions involving the following types of facilities:(1) New electric generating facilities of more than 50 MW (nameplate rating) other than fuel cell, combustion turbine, combined cycle, or diesel generators. All new associated facilities and related electric power lines shall be covered in the EIS; and
(2) A new mining operation when the applicants have effective control (e.g., dedicated mine or purchase of a substantial portion of the mining equipment).
(b) Proposals listed above are subject to the requirements of §§ 1794.60, 1794.61, 1794.63, and 1794.64. Preparation of a supplemental draft or final EIS in accordance with 40 CFR 1502.9 shall be subject to the requirements of §§ 1794.62 and 1794.64.
(c)
Telecommunications and water and waste programs. No groups or sets of proposed actions normally require the preparation of an EIS. The environmental review process, as described in this part, shall be used to identify those proposed actions for which the preparation of an EIS is necessary. If an EIS is required, RUS shall proceed directly to its preparation. Prior completion of an EA is not mandatory.[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] §§ 1794.26-1794.29 [Reserved] Subpart D—Procedure for Categorical Exclusions § 1794.30 General. The procedures of this subpart which apply to proposed actions classified as CEs in §§ 1794.21 and 1794.22 provide RUS
with information necessary to determine if the proposed action meets the criteria for a CE. Where, because of extraordinary circumstances, a normally categorically excluded action may have a significant effect on the quality of the human environment, RUS may require additional environmental documentation. § 1794.31 Classification. (a)
Electric and telecommunications programs. RUS will normally determine the proper environmental classification of projects based on its evaluation of the project description set forth in the construction work plan or loan design which the applicant is required to submit with its application for financial assistance. Each project must be sufficiently described to ensure its proper classification. RUS may require the applicant to provide additional information on a project where appropriate.(b)
Water and waste program. RUS will normally determine the proper environmental classification for projects based on its evaluation of the preliminary planning and design information.§ 1794.32 Environmental report. (a) For proposed actions listed in § 1794.21(b) and (c), the applicant is normally not required to submit an ER.
(b) For proposed actions listed in § 1794.22(a) and (b), the applicant shall normally submit an ER. Guidance in preparing the ER for Electric and Telecommunication proposals is contained in RUS Bulletin 1794A-600. Guidance in preparing the ER for Water and Waste proposals is contained in RUS Bulletin 1794A-602. The applicant may be required to publish public notices and provide evidence of such if the proposed action is located in, impacts, or converts important land resources.
§ 1794.33 Agency action. RUS may act on an application for financial assistance upon determining, based on the review of documents as set forth in § 1794.32 and such additional information as RUS deems necessary, that the project is categorically excluded.
§§ 1794.34-1794.39 [Reserved] Subpart E—Procedure for Environmental Assessments § 1794.40 General. This subpart applies to proposed actions described in § 1794.23. Where appropriate to carry out the purposes of NEPA, RUS may impose, on a case-by-case basis, additional requirements associated with the preparation of an EA. If at any point in the preparation of an EA, RUS determines that the proposed action will have a significant effect on the quality of the human environment, the preparation of an EIS shall be required and the procedures in subpart G of this part shall be followed.
§ 1794.41 Document requirements. Applicants will provide an ER in accordance with the appropriate guidance documents referenced in § 1794.7. After RUS has evaluated the ER and has determined the ER adequately addresses all applicable environmental issues, the ER will normally serve as RUS' EA. However, RUS reserves the right to prepare its own EA from the information provided in the ER. RUS will take responsibility for the scope and content of an EA.
§ 1794.42 Notice of availability. Prior to RUS making a finding in accordance with § 1794.43 and upon RUS authorization and guidance, the applicant shall have a notice published which announces the availability of the EA and solicits public comments on the EA.
§ 1794.43 Agency finding. If RUS finds, based on an EA that the proposed action will not have a significant effect on the quality of the human environment, RUS will prepare a FONSI. Upon authorization of RUS, the applicant shall have a notice published which informs the public of the RUS finding and the availability of the EA and FONSI. The notice shall be prepared and published in accordance with RUS guidance.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45159, Aug. 1, 2003] § 1794.44 Timing of agency action. RUS may take its final action on proposed actions requiring an EA (§ 1794.23) at any time after publication of applicant notices that a FONSI has been made and any required review period has expired. When substantive comments are received on the EA, RUS may provide an additional period (15 days) for public review following the publication of its FONSI determination. Final action shall not be taken until this review period has expired.
[68 FR 45159, Aug. 1, 2003] §§ 1794.45-1794.49 [Reserved] Subpart F—Procedure for Environmental Assessments With Scoping § 1794.50 Normal sequence. For proposed actions covered by § 1794.24 and other actions determined by the Administrator to require an EA with scoping, RUS and the applicant will follow the same procedures for scoping and the requirements for notices and documents as for proposed actions normally requiring an EIS through the point where project scoping has been completed. Following project scoping, RUS will make a judgment to have an EA prepared or contract for the preparation of an EIS.
[68 FR 45159, Aug. 1, 2003] § 1794.51 Preparation for scoping. (a) As soon as practicable after RUS and the applicant have developed a schedule for the environmental review process, RUS shall have its notice of intent to prepare an EA or EIS and schedule scoping meetings (§ 1794.13) published in the
Federal Register (see 40 CFR 1508.22). The applicant shall have published, in a timely manner, a notice similar to RUS' notice.(b) As part of the early planning, the applicant should consult with appropriate Federal, state, and local agencies to inform them of the proposed action, identify permits and approvals which must be obtained, and administrative procedures which must be followed.
(c) Before formal scoping is initiated, RUS will require the applicant to submit an Alternative Evaluation Study and either a Siting Study (generation) or a Macro-Corridor Study (transmission lines).
(d) The applicant is encouraged to hold public information meetings in the general location of the proposed action and any reasonable alternatives when such applicant meetings will make the scoping process more meaningful. A written summary of the comments made at such meetings must be submitted to RUS as soon as practicable after the meetings.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45160, Aug. 1, 2003] § 1794.52 Scoping meetings. (a) Both RUS and the applicant shall have a notice published which announces a public scoping meeting is to be conducted, either in conjunction with the notice of intent or as a separate notice.
(b) The RUS notice shall be published in the
Federal Register at least 14 days prior to the meeting(s). The applicant's notice shall be published in a newspaper at least 10 days prior to the meeting(s). Other forms of media may also be used by the applicant to notice the meetings.(c) Where an environmental document is the subject of the hearing or meeting, that document will be made available to the public at least 10 days in advance of the meeting.
(d) The scoping meeting(s) will be held in the area of the proposed action at such place(s) as RUS determines will best afford an opportunity for public involvement. Any person or representative of an organization, or government body desiring to make a statement at the meeting may make such statement in writing or orally. The format of the meeting may be one of two styles. It can either be of the traditional style which features formal presentations followed by a comment period, or the open house style in which attendees are able to individually obtain information on topics or issues of interest within an established time period. The applicant or its consultant shall prepare a record of the scoping meeting. The record shall consist of a transcript
when a traditional meeting format is used or a summary report when an open house format is used. (e) As soon as practicable after the scoping meeting(s), RUS, as lead agency, shall determine the significant issues to be analyzed in depth and identify and eliminate from detailed study the issues which are not significant or which have been covered by prior environmental review. RUS will develop a proposed scope for further environmental study and review. RUS shall send a copy of this proposed scope to cooperating agencies and the applicant, and allow recipients 30 days to comment on the scope's adequacy and emphasis. After expiration of the 30-day period, RUS shall provide written guidance to the applicant concerning the scope of environmental study to be performed and information to be gathered.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45160, Aug. 1, 2003] § 1794.53 Environmental report. (a) After scoping procedures have been completed, RUS shall require the applicant to develop and submit an ER. The ER shall be prepared under the supervision and guidance of RUS staff and RUS shall evaluate and be responsible for the accuracy of all information contained therein.
(b) The applicant's ER will normally serve as the RUS EA. After RUS has reviewed and found the ER to be satisfactory, the applicant shall provide RUS with a sufficient number of copies of the ER to satisfy the RUS distribution plan.
(c) The ER shall include a summary of the construction and operation monitoring and mitigation measures for the proposed action. These measures may be revised as appropriate in response to comments and other information, and shall be incorporated by summary or reference into the FONSI.
[68 FR 45160, Aug. 1, 2003] § 1794.54 Agency determination. Following the scoping process and the development of a satisfactory ER by the applicant or its consultant that will serve as the agency's EA, RUS shall determine whether the proposed action is a major Federal action significantly affecting the quality of the human environment. If RUS determines the action is significant, RUS will continue with the procedures in subpart G of this part. If RUS determines the action is not significant, RUS will proceed in accordance with §§ 1794.42 through 1794.44. For proposals subject to the procedures of subpart F, RUS shall publish notices in the
Federal Register that announce the availability of the EA and solicit public comments on the EA (refer to § 1794.42) and the RUS finding and the availability of the EA and FONSI (refer to § 1794.43).[68 FR 45160, Aug. 1, 2003] §§ 1794.55-1794.59 [Reserved] Subpart G—Procedure for Environmental Impact Statements § 1794.60 Normal sequence. For proposed actions requiring an EIS (see § 1794.25), the NEPA process shall proceed in the same manner as for proposed actions requiring an EA with scoping through the point at which the scoping process is completed (see § 1794.52).
§ 1794.61 Environmental impact statement. An EIS shall be prepared in accordance with 40 CFR part 1502. Funding, in whole or in part, for an EIS can be obtained from any lawful source (
e.g., cooperative agreements developed in accordance with Section 759A, Federal Agricultural Improvement and Reform Act of 1996, Pub. L. 104-127 and 31 U.S.C. 6301). A third-party consultant selected by RUS and funded by the applicant (7 CFR part 1789) may prepare the EIS.(a) After a draft or final EIS has been prepared, RUS and the applicant shall concurrently have a notice of availability for the document published. The time period allowed for review will be a minimum of 45 days for a draft EIS and 30 days for a final EIS. This period is measured from the date that the U.S. Environmental Protection Agency (EPA) publishes a notice in the
Federal Register in accordance with 40 CFR 1506.10.(b) In addition to circulation required by 40 CFR 1502.19, the draft and final EIS (or summaries thereof, at RUS discretion) shall be circulated to the appropriate state, regional, and metropolitan clearinghouses.
(c) Where a final EIS does not require substantial changes from the draft EIS, RUS may document required changes through errata sheets, insertion pages, and revised sections to be incorporated into the draft EIS. In such cases, RUS shall circulate such changes together with comments on the draft EIS, responses to comments, and other appropriate information as its final EIS. RUS will not circulate the draft EIS again, although RUS will provide the draft EIS if requested within 30 days of publication of notice of availability of the final EIS.
[63 FR 68655, Dec. 11, 1998, as amended at 68 FR 45160, Aug. 1, 2003] § 1794.62 Supplemental EIS. (a) A supplement to a draft or final EIS shall be prepared, circulated, and given notice by RUS and the applicant in the same manner (exclusive of scoping) as a draft and final EIS (see § 1794.61).
(b) Normally RUS and the applicant will have published notices of intent to prepare a supplement to a final EIS in those cases where a ROD has already been issued.
(c) RUS, at its discretion, may issue an information supplement to a final EIS where RUS determines that the purposes of NEPA are furthered by doing so even though such supplement is not required by 40 CFR 1502.9(c)(1). RUS and the applicant shall concurrently have a notice of availability published. The notice requirements shall be the same as for a final EIS and the information supplement shall be circulated in the same manner as a final EIS. RUS shall take no final action on any proposed modification discussed in the information supplement until 30 days after the RUS notice of availability or the applicant's notice is published, whichever occurs later.
§ 1794.63 Record of decision. (a) Upon completion of the review period for a final EIS, RUS will have its ROD prepared in accordance with 40 CFR 1505.2.
(b) Separate RUS and applicant notices of availability shall be published concurrently. The notices shall summarize the RUS decision and announce the availability of the ROD. Copies of the ROD will be made available upon request from the point of contact identified in the notice.
§ 1794.64 Timing of agency action. (a) RUS may take its final action or execute commitments on proposed actions requiring an EIS or Supplemental EIS at any time after the ROD has been published.
(b) For budgetary purposes some financial assistance may be approved conditionally with a stipulation that no funds shall be advanced until a ROD has been prepared.
§§ 1794.65-1794.69 [Reserved] Subpart H—Adoption of Environmental Documents § 1794.70 General. This subpart covers the adoption of environmental documents prepared by other Federal agencies. Where applicants participate in proposed actions for which an EA or EIS has been prepared by or for another Federal agency, RUS may adopt the existing EA or EIS in accordance with 40 CFR 1506.3.
§ 1794.71 Adoption of an EA. RUS may adopt a Federal EA or EIS or a portion thereof as its EA. RUS shall make the EA available and assure that notice is provided in the same manner as if RUS had prepared the EA.
§ 1794.72 Adoption of an EIS. (a) Where RUS determines that an existing Federal EIS requires additional information to meet the standards for an adequate statement for RUS proposed action, RUS may adopt all or a portion of the EIS as a part of its draft EIS. The circulation and notice provisions for a draft and final EIS (see § 1794.61) apply.
(b) If RUS was not a cooperating agency but determines that another Federal agency's EIS is adequate, RUS shall adopt that agency's EIS as its
final EIS. RUS and the applicant shall have separate notices published advising of RUS adoption of the EIS and independent determination of its adequacy. (c) If the adopted EIS is generally available and meets RUS standards, RUS shall have a public notice published informing the public of its action and availability of the EIS to interested parties upon request. If the adopted EIS is not generally available, RUS shall have a public notice published informing the public of its action and will circulate copies of the EIS in accordance with 40 CFR 1502.19 and 40 CFR 1506.3.
§ 1794.73 Timing of agency action. Where RUS has adopted another agency's environmental documents, the timing of the action shall be subject to the same requirements as if RUS had prepared the required EA or EIS.
§ 1794.74 Incorporation of environmental materials. RUS may incorporate into its environmental documents, environmental documents or portions thereof prepared by state, or local agencies or other parties for purposes other than compliance with the requirements of NEPA. RUS will circulate the incorporated documents as a part of its EA or draft and final EIS in the same manner as if prepared by RUS.
§ 1794.75-1794.79 [Reserved]