§ 1942.364 - Determining the need for development grants.

(a) Responsibility. FmHA or its successor agency under Public Law 103-354 District Directors are responsible for determining applicant's eligibility for grants and the amount of such grants. The amount of grant assistance shall be based on the FmHA or its successor agency under Public Law 103-354 interest rate in effect at the time of grant approval. If an FmHA or its successor agency under Public Law 103-354 loan is associated with the grant, and the loan is closed at a lower rate, no change will be made in the amount of grant assistance. Form FmHA or its successor agency under Public Law 103-354 1942-51, “Water and Waste Disposal Grant Determination,” will be used to determine the amount of FmHA or its successor agency under Public Law 103-354 grant assistance for which the applicant qualifies. A separate form will be used to record the determination of FmHA or its successor agency under Public Law 103-354 grant assistance for each water, sewer collection and/or treatment, solid waste, and storm drainage project.

(b) Grant determination. Grants will be determined in accordance with the following provisions and will not result in user costs below the similar system user cost. Paragraph (b)(2) of this section will not be used in determining the amount of grant in (b)(5) of this section.

(1) Maximum grant. Grants may not exceed the percentages in § 1942.361(b) of this subpart of the eligible project development costs listed in § 1942.359 of this subpart.

(2) Debt service. Applicants will be considered for grant assistance when the debt service portion of the average annual user 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 below the poverty line or below 80 percent (whichever is higher) of the statewide nonmetropolitan median household 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. In cases where FmHA or its successor agency under Public Law 103-354 determines that more grant funds, than authorized by paragraph (b)(2) of this section, are needed to achieve reasonable user rates, similar system cost can be used to determine the amount of the grant.

(4) Average annual cost. If FmHA or its successor agency under Public Law 103-354 determines that a similar system average annual cost to the applicant for delivery of service has not been achieved, FmHA or its successor agency under Public Law 103-354 may proceed with a grant in an amount necessary to reduce such cost to not below similar system user cost. This option is only available to an applicant when:

(i) The annual cost to the applicant for delivery of service is subsidized by either the state, commonwealth, or territory, and

(ii) Uniform user charges are imposed for similar classes of service throughout the service area.

(5) Bulk service. When an applicant provides bulk sales or services on a contract basis to another system(s) (entity), prepare one Form FmHA or its successor agency under Public Law 103-354 1942-51. Similar system cost will be used in determining the amount of grant needed to achieve a reasonable bulk user cost. For purposes of determining income and number of individual users, the service area would be the entire area served by all the other system(s).

(c) Income data. The income data used to determine median household income should 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 for the state will be determined using 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 on Form FmHA or its successor agency under Public Law 103-354 1942-51, and the applicant may furnish, or FmHA or its successor agency under Public Law 103-354 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 be updated on a national basis by the FmHA or its successor agency under Public Law 103-354 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.

(d) User costs. The user costs should be reasonable and produce enough revenue to provide for all costs of the facility after the grant is closed. The planned revenue should be sufficient to provide for all debt service, reserve, operation and maintenance and, if appropriate, additional revenue for facility replacement of short lived assets without building a substantial surplus. Ordinarily, the total reserve will be equal to one average annual loan installment which will accumulate at the rate of one-tenth of the total each year.