[Federal Register Volume 62, Number 118 (Thursday, June 19, 1997)]
[Rules and Regulations]
[Pages 33462-33511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13445]
[[Page 33461]]
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Part II
Department of Agriculture
_______________________________________________________________________
Rural Utilities Service
Rural Housing Service
Rural Business-Cooperation Service
Farm Service Agency
_______________________________________________________________________
7 CFR Parts 1775, 1777, 1778, et al.
Streamlining the Rural Utilities Service Water and Waste Program
Regulations; Final Rule
Federal Register / Vol. 62, No. 118 / Thursday, June 19, 1997 / Rules
and Regulations
[[Page 33462]]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Parts 1775, 1777, 1778, 1780, and 1781
Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency
7 CFR Parts 1901, 1940, 1942, 1951, and 1956
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4284
RIN 0572-AB20
Streamlining the Rural Utilities Service Water and Waste Program
Regulations
AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,
Rural Utilities Service, and Farm Service Agency; USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) hereby amends the
regulations utilized to administer the water and waste loan and grant
programs. The final rule will combine the water and waste loan and
grant regulations into one regulation. Unnecessary and burdensome
requirements for entities seeking water and waste loan and grant
financial assistance under the program are eliminated. The streamlining
of the water and waste loan and grant regulation will allow RUS to
provide better service to rural entities needing assistance in
correcting and alleviating health and sanitary problems in their
communities, and in general improve the quality of life in rural areas.
This rule incorporates changes in the water and waste loan and grant
program, the emergency community water assistance grant program, and
the resource conversation and watershed loan programs mandated by the
1996 Farm Bill.
This rule also amends the regulations originally published by the
former Farmers Home Administration (FmHA) and the former Rural
Development Administration (RDA). These amendments implement
legislation directing the Secretary of Agriculture to establish the
Rural Utilities Service (RUS) with responsibility for the water and
waste programs formerly administered by FmHA and RDA. The amendments
published in this document consist solely of nomenclature changes
required by law and of amendments necessary to conform to these
nomenclature changes. The substance of the regulations is not affected
by these amendments.
This rule could impact the amount of water and waste loan and grant
funds an applicant could receive. Therefore, RUS will honor all written
commitments of water and waste loan and grant amounts issued prior to
the effective date of this rule.
EFFECTIVE DATE: June 19, 1997.
FOR FURTHER INFORMATION CONTACT: Jerry W. Cooper, Loan Specialist,
Water and Waste Division, Rural Utilities Service, USDA, South
Agriculture Building, Room 2229, STOP 1570, Washington, DC 20250,
telephone: (202) 720-9589.
SUPPLEMENTARY INFORMATION:
Classification
We are issuing this final rule in conformance with Executive Order
12866 and the Office of Management and Budget has determined that it is
a ``significant regulatory action''.
Intergovernmental Review
These programs are listed in the Catalog of Federal Domestic
Assistance under numbers 10.760, Water and Waste Disposal Systems For
Rural Communities; 10.763, Emergency Community Water Assistance Grants;
10.764, Resource Conversation and Development Loans; 10.765, Watershed
Protection and Flood Preventation Loans; and 10.770, Water and Waste
Disposal Loans and Grants (Section 306C) and are subject to the
provisions of Executive Order 12372 which requires intergovernmental
consultation with State and local officials.
Environmental Impact Statement
This action has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' It has been determined that the
action does not constitute a major Federal action significantly
affecting the quality of the human environment, and in accordance with
the National Environmental Policy Act of 1969, Pub. L. 91-190, an
Environmental Impact Statement is not required.
Compliance With Executive Order 12778
The regulation has been reviewed in light of Executive Order 12778
and meets the applicable standards provided in sections 2(a) and
(2)(b)(2) of that Order. Provisions within this part which are
inconsistent with State law are controlling. All administrative
remedies pursuant to 7 CFR part 11 must be exhausted prior to filing
suit.
Information Collection and Paperwork Requirements
The recordkeeping and reporting burden in this rule, under OMB
control number 0575-0015, is not fully effective until approved by OMB.
For further information contact Jerry W. Cooper, Loan Specialist,
Water and Waste Division, Rural Utilities Service, U.S. Department of
Agriculture, 1400 Independence Ave., SW., STOP 1570, Washington, DC
20250-1548, telephone: (202) 720-9589.
National Performance Review
This regulatory action is being taken as part of the National
Performance Review program to eliminate unnecessary regulations and
improve those that remain in force.
Unfunded Mandate Reform Act
This rule contains no Federal mandates (under the regulatory
provisions of Title II of the Unfunded Mandate Reform Act of 1995) for
State, local, and tribal governments or the private sector. Thus
today's rule is not subject to the requirements of sections 202 and 205
of the Unfunded Mandate Reform Act of 1995.
Cross References of Regulations
The Rural Utilities Service is an Agency resulting from a
reorganization of programs administered by the former Farmers Home
Administration, the former Rural Development Administration, and the
former Rural Electrification Administration. Dual-references or cross-
references to former Farmers Home Administration regulations and forms
are provided for by the Department of Agriculture Reorganization Act of
1994.
Regulatory Flexibility Act Certification
The Administrator of RUS has determined that the Regulatory
Flexibility Act (5. U.S.C. 601 et seq.) does not apply to this rule.
Background
The water and waste loan and grant programs are authorized by
various sections of the Consolidated Farm and Rural Development Act, (7
U.S.C. 1921 et seq.), as amended. The regulations for these programs,
particularly the loan program, have not been completely reviewed for
many years. The recent streamlining and reorganization of the
Department of Agriculture provided an opportunity to review and rewrite
the
[[Page 33463]]
water and waste loan and grant regulations. A task force was formed to
review and rewrite the regulations. The aim of the task force was to
make the regulations easier to understand, eliminate unnecessary
requirements, and continue to protect the interest of the U.S.
taxpayer.
The program provides loan and grant funds for water and waste
disposal projects serving the most financially needy rural communities.
Financial assistance should result in reasonable user costs for rural
residents, rural businesses, and other rural users. The program is
limited to rural areas and small towns with a population of 10,000 or
less.
The final rule will divide the regulation into four subparts: A, B,
C, and D. Subpart A contains the general policies and requirements of
the loan and grant program. Subpart B contains the loan and grant
application processing requirements. Subpart C contains all the
requirements for planning, designing, bidding, contracting,
constructing, and inspections. Subpart D has information required in
the preparation of notes or bonds and bond transcript documents for
public body applicants.
Major changes are:
1. Redirects additional grant funds to communities that truly need
the assistance in order to construct a project. Communities with
incomes over 100 percent of the State nonmetropolitan median household
income will not qualify for any grant funds as in the current
regulations.
2. Stretches the grant dollars appropriated by Congress to help
more communities by changing the maximum percentage of grant funds that
a higher income community can receive from 55 percent to 45 percent of
RUS's share of the project costs. This change could have an indirect
effect of having an incentive for development of regional projects.
3. The process used to select projects for funding has been revised
to direct funds to low income, small communities that need to correct
health problems. Also, the priority points awarded for regional systems
have been increased.
4. The application process has been streamlined to reduce
unnecessary paperwork and improve service to the rural communities.
There will be less regulations and the number of pages will be greatly
reduced.
5. The application process has been shortened by eliminating the
preapplication process. However, an applicant will have the option of
requesting an Agency eligibility review before submitting a complete
application.
6. A preliminary engineering report (PER) must be submitted earlier
in the application process. The requirement of submitting a PER earlier
in the process will assist the staff in making better decisions. Also,
applicants have to have this type of document to help them determine
what, where, and how they are going to build needed facilities. This
change will force applicants to have a clear picture of what they want
to construct prior to applying for assistance. A majority of applicants
have a PER at the preapplication stage now, therefore the change will
tend to put all applicants on a level field.
7. The functions of former Farmers Home Administration (FmHA) and
the Rural Development Administration (RDA) relating to the water and
waste loan and grant programs authorized by various sections of the
Consolidated Farm and Rural Development Act, (7 U.S.C. 1926(a)), as
amended have been transferred to RUS. Therefore in order to enhance the
delivery of customer services and better assist the public, RUS is
amending regulations originally published by FmHA and RDA. These
amendments will replace references to FmHA and RDA and its officials
with references to RUS and to appropriate officials. This action will
also separate the regulation now utilized by RUS and Rural Housing
Service (RHS) to administering the water and waste loan and community
facilities loan programs, respectively. All parts pertaining to the
water and waste loan program will be moved into 7 CFR part 1780. This
action will have no effect on RHS's community facilities loan program
as this action makes no changes in the regulation. The following
programs are affected by these amendments: (1) Water and Waste Loans
and Grants, (2) Technical Assistance and Planning Grants, (3) Emergency
Community Water Assistance Grants, (4) Section 306C WWD Loans and
Grants, and (5) Resource Conservation and Development Loans and
Watershed Loans and Advances.
8. The criteria utilized to allocate water and waste program funds
has been moved from 7 CFR part 1940, subpart L to 7 CFR part 1780.
The major 1996 Farm Bill changes are:
1. Funds made available for these programs may be made available
for a water system that is making significant progress toward meeting
the Safe Drinking Water Act standards.
2. Funds made available for water treatment discharge or waste
disposal system must meet applicable Federal and State water pollution
control standards.
3. Within 60 days of filing an application for loan or grant
assistance, a notice of intent shall be published in a general
circulation newspaper.
4. When applicants hire outside engineers, the applicant shall
publicly announce all requirements for engineering and architectural
services, and negotiate contracts for such services on the basis of
demonstrated competence and qualifications for the type professional
service required and at a fair and reasonable price. When project
design services are procured separately, the selection of the engineer
or architect shall be done by a request for proposal.
5. Assistance under any rural development program administered by
the Secretary or any agency of the Department of Agriculture shall not
be conditioned on any requirement that the recipient of the assistance
accept or receive electric service from any particular utility,
supplier, or cooperative. This is being implemented for the water and
waste loan and grant programs.
6. Section 306B of the Consolidated Farm and Rural Development Act
(7 U.S.C. 1926b) was repealed. References to section 306B were deleted
from the regulations and the amendments to section 306A are included.
7. The interest rate formula for Resource Conversation and
Development Loans, and Watershed Protection and Flood Preventation
Loans was amended to establish the interest rate on these loans based
on 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.
Comments on the Proposed Rule
RUS published a proposed rule in the Federal Register on September
12, 1996, (61 FR 48075) and asked for written comments on or before
October 15, 1996. The Agency received seventy-nine comments from the
public review process. All comments were considered when preparing the
final rule; however, all comments have not been addressed separately
since many could be addressed collectively. Responses to comments
received are grouped according to corresponding sections of the rule
and are as follows:
[[Page 33464]]
Subpart A--General Policies and Requirements
Sec.
1780.1 General.
1. Sec. 1780.1(k)--Include the Brooks Architect-Engineer Act, Title
40 of the U.S. Code subchapter VI, Sections 541, 542, 543, and 544 as
the federal statute applicants should be aware of and comply with
relative to the procurement of engineering services.
Agency response: The Agency has not implemented this suggested
change. The Brooks Architect-Engineer Act only applies to Federal
procurement and would not be applicable to non-profit organizations and
units of local and State government who are the recipients of the
financial assistance.
1780.3 Definitions and grammatical rules of construction.
1. Add a definition of Agency Identified Target Areas referred to
in Sec. 1780.17.
Agency response: The Agency agrees and has added a definition.
2. Sec. 1780.3(a)--Similar System Cost--Recommend establishment of
similar system cost based on a comparison of rate structure for the
same amount of water usage.
Agency response: The Agency does not agree with this
recommendation. While this might be possible for a water system, the
Agency funds other types of projects where this type information would
not be available. The proposed language would be broad enough to cover
all types of projects funded by the Agency, including similar usage
levels.
3. Sec. 1780.3(a)--Equivalent Dwelling Unit--Add after ``typical
rural residential dwelling'' add the following, ``or users whose total
water needs could be met by a single residential sized water meter.'' A
property with a permanent residence and a stop gap housing structure
should only be considered as one connection.
Agency response: The Agency made no change in the definition.
Number of individual meters or residential dwellings are not what
determines an equivalent dwelling unit (EDU). An EDU is based on the
average consumption of a typical rural residential household.
4. Sec. 1780.3(a)--Rural and rural areas--Should be written as
broadly as possible to avoid defining a rural area as a local
government unit.
Agency response: The Agency made no change in the definition of
rural and rural areas. The Agency does not define a rural area outside
a city or town by the type of local governmental unit.
1780.7 Eligibility.
1. Sec. 1780.7(c)(2)--Delete last sentence. The capacity for fire
protection is repeated in Sec. 1780.57(d) and should not be in this
section.
Agency response: The Agency agrees and made the change.
2. Sec. 1780.7(d)--Place a period after the word ``terms'' and
delete ``or other funding sources.''
Agency response: The Agency agreed and made the change.
3. Sec. 1780.7(e)--What is meant by ``reasonable rates and terms?''
Agency response: The words ``and terms'' should have not been
included in that sentence. The applicant would be responsible for
providing continued availability and use of the proposed facility at
reasonable rates. The Agency has made the change.
1780.9 Eligible loan and grant purposes.
1. Sec. 1780.9(e)(1)(iv)--Change to specify that only ``hired''
applicant labor be reimbursable and not for people already on payroll.
Agency response: The Agency agrees and limited the use of funds to
``additional'' applicant labor necessary to install and extend service.
2. Sec. 1780.9(f)(1)--After the word ``obligations for'' add
``engineering and other services used to prepare the application or.''
Agency response: The Agency agrees and changed the word
``construction'' to ``eligible project costs.'' This would cover all
project costs incurred before loan or grant approval.
3. Sec. 1780.9(e)(1)(v)--2 commenters--Should provide clearer
guidance on what circumstances may warrant using funds for connecting
users to the system.
Agency response: The Agency made no change. The wording ``unusual
cases'' means that using loan and grant funds to connect users to the
main service line would be the exception rather than the rule. This
should only be considered in situations where the users cannot pay the
cost or from an engineering standpoint that it is the logical thing to
do.
4. Sec. 1780.9(e)(1)(i)--Revise to include training as an eligible
cost. Would assure that equipment and processes will function as
intended. The lack of technical expertise to properly operate and
maintain new equipment or treatment processes can be a major problem
with small systems.
Agency response: The Agency made no change. The proposed language
is broad enough to allow the use of funds to provide necessary training
to operators to assure proper operation and maintenance of equipment.
1780.10 Limitations.
1. Sec. 1780.10(c)(2)--13 commenters--Do not change the formula
from 55 percent grant to 45 percent grant.
Agency response: The Agency made no change. The Agency has a
limited amount of grant funds available for rural communities. The
Agency is directing these funds to the communities that have the
greatest need for these funds. The reduction from 55 percent to 45
percent will make additional grant funds available to low income
communities that have the greatest need for the limited grant funds.
2. Sec. 1780.10(c)--2 commenters--Revise the requirement that
restricts the amount of grant to RUS's share of project costs. Change
the wording ``RUS funded project development costs'' to ``RUS eligible
project development costs.''
Agency response: The Agency agrees and has made the change.
3. Sec. 1780.10(c)(2)--Allow grants up to 75 percent to all
existing borrowers where funding is considered servicing action.
Agency response: The Agency does not agree with this
recommendation. The amount of grant funds an applicant can receive
should be based on eligibility and not if they are an existing RUS
borrower.
4. Sec. 1780.10(a)(6)--Recommend that the limitation on allowing
rental of applicant owned equipment be deleted. Should allow for
community owned equipment to be rented for the project if it is the
most cost effective option.
Agency response: This recommendation was not adopted. Program funds
should not be used to rent equipment an applicant owns. Program funds
should be used to cover services and equipment not available to the
applicant.
5. Sec. 1780.10(c)(1)--2 commenters--Recommend removing the
requirement regarding health or sanitary problem. If not removed, need
to clarify that if there is no health or sanitary problem, the amount
of grant that could be obtained is based on income only.
Agency response: The Agency made no change. The eligibility for the
maximum 75 percent grant should be based on need as well as income. The
addition of health or sanitary problems makes eligibility for the 75
percent grant consistent with the eligibility for the poverty interest
rate.
6. Sec. 1780.10(c)(2)--Recommend changing 45 percent grant to 50
percent grant.
[[Page 33465]]
Agency response: The Agency made no change. The 45 percent grant
amount will make more grant funds available to communities with a
median household income of less than 80 percent of the nonmetropolitian
median household income of the State. This will allow the Agency to
target grant funds to more low income communities.
7. Sec. 1780.10(c)(1)--Recommend increasing maximum grant
percentage to 85 percent.
Agency response: Agency made no change. The maximum grant is
limited by law to 75 percent.
8. Sec. 1780.10(b)(3)--As written, this section is confusing.
Should rephrase to read: ``Pay project costs when other loan funding
for the project is available at reasonable rates and terms.''
Agency response: The Agency made no change. This is a limitation on
when grant funds can be used. The proposed language would prohibit a
grant being made when the interest rate or length of repayment are not
in line with those received by other communities with similar economic
conditions.
1780.11 Service area requirements.
1. Sec. 1780.11(a)(2)--Recommend that this paragraph be deleted.
System officials should make decisions regarding areas to serve based
on financial, environmental, and design factors.
Agency response: The Agency made no change. The Agency agrees that
in installing a facility the decisions regarding areas to be served
should be based on financial, environmental, and design factors. This
paragraph allows the decisions regarding areas to be served to be based
on these factors.
1780.13 Rates and terms.
1. Sec. 1780.13(d)--There are currently four weekly Bond Buyer
indices used to measure interest rates. This section needs to
specifically identify which index is used.
Agency response: The Agency agrees and has made the change.
2. Sec. 1780.13(e) Add a new paragraph (4) to read as follows:
``Principal and interest may be deferred in whole or in part for a
period not to exceed 36 months prior to the date of the first
installment due. This would be only in those cases where the
development of the water source and treatment facility or sanitary
treatment facilities are needed prior to the water or sewer being
available to the rural users.''
Agency response: The Agency has not made this change. The
regulations allow for deferment of principal and loan funds can be used
to pay interest. By putting these together the same purpose can be
accomplished as the suggested change.
1780.14 Security.
1. Sec. 1780.14(c)--Recommend that the parity security requirement
be deleted.
Agency response: The Agency did not make this change. Eliminating
the parity security requirement would not adequately protect the
security interest of the Government. The Agency should be in a
``parity'' security position with other lenders when jointly financing
a project. If the project is financially sound, there is no problem
with the parity requirement. The government should not guarantee other
lenders loans by taking junior lien positions when jointly funded
projects are developed.
1780.17 Selection priorities and process.
1. Sec. 1780.17(a)(1)--Reduce population from 1,000 to 500 and add
5 points.
Agency response: The Agency agrees to make part of the suggested
change. The Agency agrees to change the population points for
communities with a population not in excess of 1,000 to 25 points. The
Agency did not reduce the population to 500. Leaving the breaking point
at 1,000 or less will give balance between financial feasibility and
population priority.
2. Sec. 1780.17(b)--The points for ``health'' should equal those
for ``income.'' Recommend increasing points in Sec. 1780.17(b) (1) and
(2) to 30 points and increasing points in Sec. 1780.17(b)(3) to 20.
Agency response: The Agency did not make this change. The Agency
agrees that the protection of public health is a high priority.
However, low income communities can least afford to construct the
infrastructure that is needed to improve their health. By giving more
priority to income and equal priority to small populations and health,
funds can be directed to communities with the greatest need.
3. Sec. 1780.17(b)--Recommends that there be a gradation within the
25 points allowed for health priorities for severity of health hazard.
This would give more points to the greatest health hazards and less
points to ``lesser'' health issues.
Agency response: The Agency did not make this change. The health
priority pertaining to a water system are required by the Federal
statute that authorizes the program. This would make it difficult to
develop an equitable graduation scale within the health priority points
for each category.
4. Sec. 1780.17(b)--Should there be health priority points for
storm drainage?
Agency response: The Agency did not make a change. There could be
measurable health problems associated with a storm drainage project,
the majority are safety related. Storm drainage would receive priority
points under other categories, but would not rank as high as a drinking
water or sewer project that directly corrects a health problem.
5. Sec. 1780.17(c)--Change heading to ``Median Household Income.''
Also, word ``household'' should be in (c)(1).
Agency response: Agency made the change.
6. Sec. 1780.17(f)--Delete the phase ``exceeding 20% of the
development cost at time of loan or grant approval or.'' Placing an
arbitrary limit would further compound the problem at hand and would
hinder the resolution of the funding problem.
Agency response: The Agency made no change. Project cost overruns
that exceed 20 percent should not be given priority for receiving
additional funding from the Agency. The Agency is trying to reduce
funds that go into project cost overruns and by reducing the funding
priority is one way this can be accomplished.
1780.18 Public information.
1. Sec. 1780.18(a)--The publishing of a notice of intent to file an
application is nothing but extra cost to the applicant.
Agency response: The Agency made no change. This is a requirement
of the 1996 Farm Bill.
2. Sec. 1780.18(a)--Should increase the notice of intent from 60
days to 180 days.
Agency response: The Agency made no change. This 60 day requirement
was part of the 1996 Farm Bill.
3. Sec. 1780.18(a)--Recommend allowing alternative means of
notifying public such as fliers or mailers in small communities.
Agency response: The Agency has not made the changed. The 1996 Farm
Bill requires that the notice of intent to file a application be
published in a general circulation newspaper.
4. Sec. 1780.18(b)--Recommend giving applicant's the option to hold
the public meeting prior to the application submittal. Delete ``after
the application is filed and'' add ``The public meeting must be held
not later than loan or grant approval.''
Agency response: The Agency agrees to this change.
5. Sec. 1780.18(b)--2 commenters--Eliminate the requirement for a
public meeting.
Agency response: The Agency made no change. It is extremely
important that applicants keep the general public
[[Page 33466]]
informed about the development of a proposed project. Support from the
general public for a water or waste project is one of the most
important ingredients for success.
Subpart B--Loan and Grant Application Processing
1780.31 General.
1. Sec. 1780.31(d)--Change ``State Environmental Coordinator'' to
State Environmental Coordinator or designee.''
Agency response: The Agency made no change. The State Environmental
Coordinator should be involved in the application process to assure
that important environmental issues are properly addressed.
1780.32 Timeframes for application processing.
1. Sec. 1780.32(a)--2 commenters--Revise to 15 working days or
delete the 15 day requirement for notifying applicants that application
is incomplete.
Agency response: The Agency agrees and has made this change.
1780.33 Application requirements.
1. Should continue with preapplication process--14 commenters--The
preapplication allows determination if a project is workable in RUS's
view before spending time and money on formal application. This makes
the overall funding process more workable and gives time needed to
explore options before an application is formally filed.
Agency response: The Agency has considered this recommendation and
has given communities another option. If a community wishes to know if
they are eligible for financial assistance they can make a written
request to the Agency.
2. Eliminate requiring a PER and 1940-20 at initial stage of
application process.
Agency response: The Agency did not make this change. The
Preliminary Engineering Report contains information on the proposed
project that the Agency must have at this stage of the application
process. Form RD 1940-20 provides the information necessary for the
Agency to start the environmental review process and is needed at this
stage of the application process.
3. Sec. 1780.33(c)--2 commenters--Should delete last sentence as
the completion of a PER is covered in Sec. 1780.55 or insert ``PER
guidelines for water, sanitary sewer, solid waste, and storm drainage
are available from the agency.''
Agency response: The Agency agrees and has deleted the sentence.
4. Sec. 1780.33(c)--Recommend that RUS provide up front funds in
form of a loan to cover cost of preliminary engineering report for
poorest communities.
Agency response: The Agency made no change. The Agency has a
limited amount of loan funds available and uses these funds toward the
total project costs rather than partial up front costs. The Agency
believes that it is important to utilize its limited funds to build
projects, rather than funding a preliminary engineering report for a
project that may never be built.
5. Sec. 1780.33(f)--Delete reference to Form RD 1940-20, insert
``The applicant will consult with the processing office to determine
the appropriate environmental information that should be provided.''
Agency response: The Agency revised to allow applicant to provide
comparable information without using Form RD 1940-20.
6. Sec. 1780.33(h)--2 commenters--Combine all certifications into
one form called ``General Borrower Certification.'' or include a
statement and check off on the application indicating that these
requirements will apply and allowing the applicant to complete such
certificates if and when the loan actually closes.
Agency response: The Agency made no change. However, this is a
issue that will be reviewed in the future to determine what can be done
in this area.
1780.35 Processing office review.
1. Sec. 1780.35(b)(2)--Recommends that a actual monthly rate
ceilings for the poverty and intermediate categories be established.
Agency response: The Agency made no change. While an actual monthly
rate ceiling might work for a small geographic area it would be
impossible to establish one for the entire United States that would be
fair to all areas. When the debt service portion of the annual user
costs exceeds the appropriate percentage of median household income,
the Agency can determine the grant amount based on similar system cost.
2. Sec. 1780.35(b)(2)--Recommend that the relationship to total
debt service and the project O&M cost be considered in determining
grant eligibility.
Agency response: The Agency made no change. The relationship
between median household income and debt service is used because grant
funds can only be used to reduce the debt. However, the similar system
cost method used in (b)(3) does take into consideration other user
costs in determining the grant amount.
1780.39 Application processing.
1. Sec. 1780.39(a)--In first sentence remove ``and after the
applicant selects its professional and technical representative.''
Agency response: The Agency agrees and made the change.
2. Sec. 1780.39(b)(1)--27 commenters--Request for proposals should
be deleted. Could cause potential conflicts and drive cost up.
Applicants should be allowed to choose the engineer based on knowledge
and experience.
Agency response: The Agency has not deleted this requirement. This
is a requirement of the 1996 Farm Bill and must be complied with.
However, the Agency has revised to make it clear that the selection of
the engineer to develop the preliminary engineering report is not
subject to this requirement. Also, clarified is that the selection of
engineering services should be on the basis of all relevant factors.
3. Sec. 1780.39(b)(1)--4 commenters--When applicants hire outside
engineers, the selection of an engineer for a project design shall be
conducted pursuant to state procurement laws or in the absence thereof,
pursuant to the Federal Brooks Act, Public Law 92-582.
Agency response: The Agency revised the paragraph to reflect state
statutes or local requirements. The Brooks Act only applies to Federal
procurement and construction. This act would not apply because the
Federal government is not selecting the engineer. Revised rule to
reflect that the owner may procure engineering services in accordance
with applicable state laws providing the procurement meets the intent
of this section.
4. Sec. 1780.39(b)(1)--4 commenters--Request for proposals should
be required for all engineering services not only project design.
Delete phase ``for project design.''
Agency response: The Agency revised to make this optional, but not
a requirement. It should be left up to the applicant to make this
decision and not made mandatory by the Agency.
5. Sec. 1780.39(b)(1)--Change all references to request for
proposal to ``Request For Qualifications and/or Request for Proposal or
add a definition for Request For Proposal that includes qualification
and request for engineering services.
Agency response: The Agency has revised the selection of
engineering services to reflect all relevant factors.
6. Sec. 1780.39(b)(1)--Consider moving to Sec. 1780.54 and clarify
how engineers are to be selected in (1).
[[Page 33467]]
Agency response: The Agency did not make this change. The section
was revised to clarify how engineers are to be selected. This section
pertains to all professional services and contracts related to the
facility and the Agency believes that this is the best place to address
engineering services.
7. Sec. 1780.39(b)(1)--Suggest that the regulation make provision
to allow an ``ongoing'' contract or relationship with a community to
continue without a new selection procedure.
Agency response: The Agency made no change. The 1996 Farm Bill
requires that when project design is procured separately, the selection
of the engineer shall be done by a request for proposal.
8. Sec. 1780.39(b)(1)--The rule is silent on the procurement of
engineering services for the planning phase of a project.
Agency response: The Agency has revised the rule to require
applicants to publicly announce all requirements for engineering
services.
9. Sec. 1780.39(b)(1)--2 commenters--Should be made clear that if
engineer has already been selected through an RFP then the process does
not have to be repeated for design phase.
Agency response: The Agency agrees that only one public
announcement covering requirements for engineering services is
necessary for a project. The revision will allow for this situation.
10. Sec. 1780.39(b)(1)--If a project is funded in phases, would an
RFP have to be done for each phase? When can noncompetitive
negotiations be utilized for engineering services?
Agency response: If a project has been divided into phases and the
procurement of engineering services covering all phases has been done
in accordance with Agency requirements, the process would not have to
be repeated as each phase is constructed. Noncompetitive negotiations
could be utilized for the planning and preliminary engineering work
done on a project after the applicant publicly announces all
requirements for engineering services.
11. Sec. 1780.39(b)(1)--Honor agreements for engineering services
entered into prior to submitting an application.
Agency response: The Agency made no change. If engineering services
were selected in accordance with Agency requirements, then the process
would not have to be repeated.
12. Sec. 1780.39(c)(2)--What is ``meaningful user cash
contributions?''
Agency response: To clarify the intent of this paragraph, the
Agency has changed the word ``meaningful'' to ``new.'' This should make
it clear that only users not presently receiving service will be
required to make an up front cash payment to indicate interest in
receiving service when it becomes available.
13. Sec. 1780.39(e)(2)--Divide into two paragraphs by adding a
(e)(3) to read as follows and deleting reference to maintenance,
extensions, etc. in (e)(2): Facility Maintenance Reserve. Additional
reserves will need to be established for emergency maintenance,
improvements to facilities, replacement of short-lived assets and other
restricted reserves as deemed necessary by the governing body and
lender.
Agency response: The Agency made no change. The rule would allow
for the establishment of debt service reserve and a facility
maintenance reserve. The amount of funds that would be placed in the
reserve accounts would be determined by the applicant and the Agency.
The one-tenth of an average annual loan installment is the minimum
requirement and the requirement could be larger.
14. Sec. 1780.39(e)(2)--2 commenters--Recommend that the reserve be
fully funded over the first 10 years of the loan and not over the life
of the loan.
Agency response: Agency made no change. It is important that
borrowers maintain adequate reserves to cover unexpected short-falls of
revenue and to adequately maintain their systems.
15. Sec. 1780.39(f)--Delete last sentence in (f), and all of (1)
and (2).
Agency response: The Agency has made a revision to clarify, but did
not delete the sentence.
16. Sec. 1780.39(g)(3)--Should require fidelity bond coverage be
specifically for RUS funded project.
Agency response: It is not necessary that a fidelity or employee
dishonesty bond cover only the RUS funded project. However, the amount
of fidelity or employee dishonesty bond coverage must be enough to
cover not only RUS requirements, but other claims that could be made on
the bond.
17. Sec. 1780.39(i)--Should be allowed to issue a Letter of
Conditions when funds are not available or at least some percentage.
Agency response: The Agency made no change. Letter of Conditions
are taken by the general public to mean a commitment has been made by
the Agency to fund a project. By not issuing a Letter of Conditions
until funds are available for a project, problems associated with an
applicant thinking that funds are available when in fact they are not
can be avoided.
1780.44 Actions prior to loan or grant closing or start of
construction, whichever occurs first.
1. Sec. 1780.44(e)--Allow deobligation of funds in the same
percentage as funds were obligated.
Agency response: The Agency did not make this change. The amount of
deobligated funds is based on an reassessment of the need for grant
funds to achieve a reasonable user rate. Deobligation of funds based on
percentage of funds obligated could result in an applicant receiving
more grant funds than needed to have reasonable user rates. With the
limited amount of grant funds that the Agency has available, the funds
must be stretched as far as possible in order to serve the maximum
number of communities who need funds to construct projects.
2. Sec. 1780.44(e)--Provide an incentive for communities to save
money by applying savings against the loan first rather than grant.
Agency response: The Agency made no change. The Agency believes
that the best approach is to work with communities early in the process
to reduce the project costs. Once the Agency has committed funds to a
community to construct a project, both parties have agreed on an amount
of loan that can be repaid. Any reduction in the loan amount at this
point could result in the community receiving more grant funds than
needed in order to have reasonable user rates.
3. Sec. 1780.44(e)--Recommend waiting until completion of
construction before deobligating any unused funds.
Agency response: The Agency made no change. All construction
projects have contingency funds set aside to cover unanticipated
expenses during construction. Therefore, funds that are not needed for
project costs should be deobligated and made available to another
community.
1780.45 Loan and grant closing and delivery of funds.
1. Sec. 1780.45(f)(1)--Revise to allow remaining funds to be used
by a community to improve its existing system.
Agency response: The Agency made a change. The language was
broadened to allow use of Agency funds not needed for the project to be
used for the facility being financed. Any improvements must not result
in major changes to the applicant's facility. For example, if RUS funds
were used to construct a water project, then RUS funds that remain
after completion could be used for any RUS eligible purpose on the
applicant's whole water system.
[[Page 33468]]
2. Sec. 1780.45(f)(3)--Delete the requirement to notify the
attorney and engineer when funds are deobligated.
Agency response: The Agency did not make this change. Many of the
engineer's or attorney's are helping the applicant with completion of a
project. It is important that all interested parties be notified before
funds are canceled.
1780.49 Rural or Native Alaskan villages.
1. Sec. 1780.49(c)(4)--Revise to allow use of federal and non-
federal sources of funds.
Agency response: The Agency made no change. The law that authorizes
the funds for rural or native Alaskan villages requires that the
matching funds be non-federal funds.
2. Sec. 1780.49(f)(1)--Revise to authorize projects of Alaska Area
Native Health Service.
Agency response: The Agency made no change. In order to assure that
the projects are properly constructed the Agency will continue to
restrict the waiver of construction requirements contained in this
subpart to projects that are jointly funded with the State of Alaska.
3. Should contain a specific reference that solid waste disposal
projects are eligible grant purposes.
Agency Response: The Agency made no change. The Agency considers
solid waste disposal to be included in waste disposal services
authorized by this paragraph.
Subpart C--Planning, Designing, Bidding, Contracting, Constructing and
Inspections
1780.54 Technical services.
1. Consider including Architects in this section as they are
sometimes involved in water and waste projects.
Agency response: The Agency agrees and made change.
2. Does ``in house'' mean one on the applicant's staff or one under
previous contract with applicant or both?
Agency response: ``in house'' means one on the applicant's staff.
1780.57 Design policies.
1. Sec. 1780.57(c)--Recommend encouraging the procurement of
environmentally preferable products and services.
Agency response: The Agency revised to reflect both energy-
efficient and environmentally-sound products and services.
2. Sec. 1780.57(b)--Delete words ``or reside.'' Do not construct
occupied dwellings.
Agency response: The Agency made the change.
3. Sec. 1780.57(h)--Delete the wording ``Agency determines.''
Agency response: The Agency made no change. This language is
required by the 1996 Farm Bill.
1780.67 Performing construction.
1. Recommend design build and construction management that is in
existing regulations be added as an option.
Agency response: Agency has made no change. The proposed language
would not exclude design build and construction management.
2. Strengthen language by inserting ``using their own personnel or
designated, qualified, and supervised volunteers.''
Agency response: The Agency did not make this change. This section
does not prohibit use of volunteers in addition to an applicant's own
personnel.
1780.70 Owner's procurement regulations.
1. Sec. 1780.70(b)--Recommend deleting the word ``comprehensive''
or the entire last two sentences.
Agency response: The Agency made no change. The Agency cannot make
this change as it is required by law.
1780.72 Procurement methods.
1. Sec. 1780.72--2 commenters--Recommend that design/build be added
to section as an option for procurement.
Agency response: The Agency made no change. The proposed language
would allow design build as a construction option.
2. Sec. 1780.72(a)--The requirements in 1780.75(b) and (d) should
be included for any small purchase over $10,000.
Agency response: The Agency made no change. The provision for
termination and equal employment opportunity would apply to any
contract exceeding $10,000. The type of procurement would not influence
this requirement.
3. Sec. 1780.72(a)--What does the phrase ``costing in the aggregate
not more than $100,000'' mean?
Agency response: The phrase ``costing in the aggregate not more
than $100,000'' means the total dollar amount of an item or product
that is being purchased for a project. For example, a water system
could utilize the small purchase procedures to procure $90,000 for
water meters and $20,000 for equipment. In this example, each item
procured was under $100,000, but the total was over $100,000.
4. Sec. 1780.72(a) and Sec. 1780.72(d)(6)--Recommend deleting small
purchase and using noncompetitive negotiation in its place.
Agency response: The Agency did not make this change. While these
two procurement methods are similar each has its place in the
construction of water and waste projects.
5. Sec. 1780.72(c)--6 commenters--Delete the competitive
negotiation for engineering services.
Agency response: The Agency has not deleted this requirement. This
is a requirement of the 1996 Farm Bill and must be complied with. The
requirement has been clarified to reflect that the selection of
engineering services should be on the basis of all relative factors.
The Agency moved the selection of engineering services to
Sec. 1780.39(b)(1).
6. Sec. 1780.72(c)--2 commenters--Certain States have enacted
legislation that specifically prohibits State and Local Agencies from
seeking formal or informal submission of verbal or written estimates of
costs or price proposals. The rule should be amended to delete any and
all provisions that require or allow the use of cost or price as a
consideration in the selection of a design professional.
Agency response: The Agency made a change by revising
Sec. 1780.39(b)(1) and deleting engineering procurement from this
section.
7. Sec. 1780.72(c)--2 commenters--Should revise to require only one
competitive negotiation procedure which should be at the ``Step I''
phase and not wait until the design phase. Allow credit to those
applicants that can properly document that their engineer selection in
Step I of a project was in conformance with competitive negotiation and
would not have to be repeated at the ``design phase.''
Agency response: The Agency agrees that only one public
announcement covering requirements for engineering services is
necessary for a project. The revision to Sec. 1780.39(b)(1) will allow
for this situation.
8. Sec. 1780.72(c)--Revise by removing reference to obtaining
proposals from other sources.
Agency response: Agency made no change. The procurement of
engineering services was moved to Sec. 1780.39(b)(1).
9. Sec. 1780.72(c)--Delete reference to engineering services,
implies competitive negotiations can only be used for engineering
services.
Agency response: Agency made the change. The procurement of
engineering services was moved to Sec. 1780.39(b)(1).
10. Sec. 1780.72(c)--Should clarify that the applicant could select
an engineer through the noncompetitive process to perform the PER and
assist in the production of the application.
[[Page 33469]]
Agency response: Agency revised the procurement of engineering
services in Sec. 1780.39(b)(1) to clarify this issue.
11. Sec. 1780.72(c)(2)--3 commenters--Modify by deleting references
to price or cost for obtaining engineering services. The significant
evaluation factors to be based on a firm's professional qualifications,
specialized experience, technical competence and so forth.
Agency response: The Agency made a change by removing reference to
cost or price as a consideration in Sec. 1780.39(b)(1).
12. Sec. 1780.72(c)(5)--Delete the word ``other'' before
``professional services.'' This will clarify that competitive
negotiations is an acceptable method of procurement for any
professional service.
Agency response: Agency removed all references to procurement of
professional service from Sec. 1780.72(c) and moved to
Sec. 1780.39(b)(1). Sec. 1780.39(b)(1) contains all procurement
requirements for engineering and architectural services.
13. Sec. 1780.72(d)(5)--Delete word ``design'' so that it covers
all engineering services.
Agency response: Agency removed all references to procurement of
professional service from Sec. 1780.72(c) and moved to
Sec. 1780.39(b)(1).
Sec. 1780.39(b)(1) contains all procurement requirements for
engineering and architectural services.
1780.75 Contract provisions.
1. Sec. 1780.75(a)--Should be made clear that liquidated damages
only applies to construction contracts.
Agency response: The Agency made the change.
2. Sec. 1780.75(c)--Change ``be legally doing business in the State
where the facility is located'' to ``the surety must be listed in the
Treasury Circular 570 as amended as having a license to do business in
the State where the facility is located.''
Agency response: The Agency made the change.
3. Sec. 1780.75 (b) and (f)--Recommend raising the $10,000 to
$100,000.
Agency response: The Agency did not make this change. It is
important to have a termination clause in contracts. The $10,000 cut
off point for this requirement is as high as it should be to adequately
protect the owner. The equal employment provision is required by other
Federal regulations.
4. Sec. 1780.75(c)--Recommend retaining U.S. Government as co-
obligee on payment and performance bonds.
Agency response: The Agency made no change. The Agency is not a
party to the contract and should not be included on any payment or
performance bond.
5. Sec. 1780.75(j)--Recommend adding the ability to modify the
retainage amount to match other funding source requirements on jointly
funded projects.
Agency response: The Agency made no change. Five percent retainage
is the minimum amount that should be withheld to assure that
construction is completed in a satisfactorily and timely manner. The
regulations would allow for more than 5 percent, if required by other
funding sources.
6. Sec. 1780.75(j)--Five percent retainage on approved partial pay
estimates is too low. Leave at 10 percent.
Agency response: The Agency made no change. The 5 percent retainage
is in line with the industry standard. Also, the funds retained will be
held until the project is substantially completed and accepted by the
owner.
1780.76 Contract administration.
1. Sec. 1780.76(c)--Should be clearly stated that the Agency, not
the project engineer, have sole authority to grant or refuse the
owner's request for a particular independent resident inspector.
Agency response: The Agency agrees and has revised.
2. Sec. 1780.76(d)--Add at end of last sentence ``or similar form
approved by the Agency.''
Agency response: The Agency made the change.
List of Subjects
7 CFR Parts 1775, 1777, 1778, 1780 and 1781
Business and industry, Community development, Community facilities,
Grant programs--housing and community development, Reporting and
recordkeeping requirements, Rural areas, Waste treatment and disposal,
Water supply, Watersheds.
7 CFR Part 1901
Civil rights, Fair housing, Rural areas.
7 CFR Part 1940
Agriculture, Grant programs--housing and community development,
Loan programs--agriculture, Rural areas.
7 CFR Parts 1942 and 4284
Business and industry, Community development, Community facilities,
Grant programs--housing and community development, Loan programs--
housing and community development, Reporting and recordkeeping
requirements, Rural areas, Soil conservation, Waste treatment and
disposal, Water supply.
7 CFR Part 1951
Accounting, Grant programs--housing and community development,
Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 1956
Accounting, Loan programs--agriculture, Rural areas.
Therefore, RUS amends chapters XVII, XVIII and XLII, title 7, Code
of Federal Regulations as follows:
Part 1942, Subpart J--[Redesignated as Part 1775 and Revised]
1. Subpart J of 7 CFR part 1942 is redesignated as 7 CFR part 1775
and is revised to read as follows:
PART 1775--TECHNICAL ASSISTANCE AND TRAINING GRANTS
Sec.
1775.1 General.
1775.2 [Reserved]
1775.3 Objectives.
1775.4 Definitions.
1775.5 Source of funds.
1775.6 Allocation of funds.
1775.7 Eligibility.
1775.8 Purpose.
1775.9 [Reserved]
1775.10 Limitations.
1775.11 Equal opportunity requirements.
1775.12 Environmental requirements.
1775.13 Preapplications.
1775.14 Priority.
1775.15 [Reserved]
1775.16 Application processing.
1775.17 [Reserved]
1775.18 Grant approval and obligation of funds.
1775.19 Fidelity bond.
1775.20-11775.21 [Reserved]
1775.22 Fund disbursement.
1775.23 Grant cancellation or major changes.
1775.24 Reporting.
1775.25 Audit.
1775.26 Grant Agreement.
1775.27 Grant servicing.
1775.28 Delegation of authority.
1775.29-1775.99 [Reserved]
1775.100 OMB control number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Sec. 1775.1 General.
This part sets forth the policies and procedures for making
Technical Assistance grants. Grants for technical assistance and
training for water and waste disposal facilities are authorized under
section 306(a)(16)(A) of the Consolidated Farm and Rural Development
Act, (CONACT), (7 U.S.C. 1926(a)), as amended. Grants for solid waste
management are authorized under Section 310B of the CONACT, (7 U.S.C.
1932), as amended. Any processing or servicing activity conducted
pursuant to this part involving authorized assistance to Agency
employees, members of their
[[Page 33470]]
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.
Sec. 1775.2 [Reserved]
Sec. 1775.3 Objectives.
(a) The objectives of the Technical Assistance and Training Grant
Program are to:
(1) Identify and evaluate solutions to water and waste disposal
problems in rural areas.
(2) Assist applicants in preparing applications for water and waste
grants made in accordance with part 1780 of this chapter.
(3) Improve operation and maintenance of existing water and waste
disposal facilities in rural areas.
(b) The objectives of the Solid Waste Management Grant Program are
to:
(1) Reduce or eliminate pollution of water resources.
(2) Improve planning and management of solid waste sites.
Sec. 1775.4 Definitions.
Association. An entity, including a small city or town, that is
eligible for Rural Utilities Service (RUS) water and waste financial
assistance in accordance with Sec. 1780.7 of this chapter.
Grantee. An entity with whom The Agency has entered into a grant
agreement under this program to provide technical assistance and/or
training to associations as defined in this section.
Low income. Median household income below the poverty line for a
family of four as defined in Section 673(2) of the Community Services
Block Grant Act (42 U.S.C. 9902(2)), or below 80 percent of the
Statewide nonmetropolitan median household income.
Regional. For purposes of the Solid Waste Management grant program,
as implemented through this part, regional is defined as any multi-
jurisdictional area including multi-State or any multi-jurisdictional
area within a State.
Rural area. For water and waste disposal facilities the terms
``rural'' or ``rural area'' will not include any area in a city or town
with population in excess of 10,000 inhabitants according to the latest
decennial census of the United States.
State. 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.
Sec. 1775.5 Source of funds.
Technical Assistance and Training grants awarded will be made from
not less than one (1) percent or, at the discretion of the Agency
Administrator, not more than three (3) percent of any appropriations
for grants under Section 306(a)(2) of the CONACT, (7 U.S.C. 1926(a)).
Technical Assistance and Training grant funds not obligated by
September 1 of each fiscal year will be used for water and waste grants
made in accordance with part 1780 of this chapter. This section does
not apply to Solid Waste Management grants.
Sec. 1775.6 Allocation of funds.
Control of Technical Assistance and Training grant and Solid Waste
Management grant funds will be retained in the National office and
allocated on a project case basis. These funds are not available for
obligation by States.
Sec. 1775.7 Eligibility.
(a) Entities eligible for Technical Assistance and Training (TAT)
grants are private nonprofit organizations that have been granted tax
exempt status by the Internal Revenue Service (IRS) of the United
States.
(b) Entities eligible for Solid Waste Management (SWM) grants are
nonprofit organizations, including:
(1) Private nonprofit organizations that have been granted tax
exempt status by the IRS; and
(2) Public bodies including local governmental-based multi-
jurisdictional organizations.
(c) Applicants for either TAT or SWM grants must also have the
proven ability, background, experience, legal authority, and actual
capacity to provide technical assistance and/or training on a regional
basis to associations as provided in Sec. 1775.3.
Sec. 1775.8 Purpose.
(a) Technical Assistance and/or Training Grants may be used to:
(1) Identify and evaluate solutions to water problems of
associations in rural areas relating to:
(i) Source.
(ii) Storage.
(iii) Treatment.
(iv) Distribution.
(2) Identify and evaluate solutions to waste problems of
associations in rural areas relating to:
(i) Collection.
(ii) Treatment.
(iii) Disposal.
(3) Assist associations that have filed a preapplication with the
Agency in the preparation of water and/or waste loan and/or grant
applications.
(4) Provide training to association personnel that will improve the
management, operation and maintenance of water and waste disposal
facilities.
(5) To pay the expenses associated with providing the technical
assistance and/or training authorized in paragraphs (a) (1) through (4)
of this section.
(b) Solid Waste Management grants may be used to:
(1) Evaluate current landfill conditions to determine threats to
water resources.
(2) Provide technical assistance and/or training to enhance
operator skills in the maintenance and operation of active landfills.
(3) Provide technical assistance and/or training to help
communities reduce the solid waste stream.
(4) 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.
Sec. 1775.9 [Reserved]
Sec. 1775.10 Limitations.
Grant funds may not be used to:
(a) Recruit applications for the Agency's water and waste loan and/
or any loan and/or grant program.
(b) Duplicate current services, replacement or substitution of
support previously provided such as those performed by an association's
consultant in developing a project.
(c) Fund political activities.
(d) Pay for capital assets, the purchase of real estate or
vehicles, improve and renovate office space, or repair and maintain
privately-owned property.
(e) Pay for construction or operation and maintenance costs.
(f) Pay costs incurred prior to the effective date of grants made
under this part.
(g) Pay for technical assistance as defined in this part which
duplicates assistance provided to implement an action plan funded by
Forest Service (FS) under the National Forest-Dependent Rural
Communities Economic Diversification Act (7 U.S.C. 6601 note) for 5
continuous years from the date of grant approval by the FS. To avoid
duplicate assistance, the grantee shall coordinate with the FS and RUS
to ascertain if a grant has been made in a substantially similar
geographical or defined local area in a State for technical assistance
under the above program. The grantee will provide
[[Page 33471]]
documentation to FS and RUS regarding the contact with each agency.
Under its program, the FS assists rural communities dependent upon
national forest resources by establishing rural forestry and economic
diversification action teams which prepare action plans. Action plans
are intended to provide opportunities to promote economic
diversification and enhance local economies dependent upon national
forest resources.
Sec. 1775.11 Equal opportunity requirements.
The policies and regulations contained in subpart E of part 1901 of
this title apply to grants made under this part.
Sec. 1775.12 Environmental requirements.
The policies and regulations contained in subpart G of part 1940 of
this title apply to grants made for the purposes in Sec. 1775.8.
Sec. 1775.13 Preapplications.
(a) Applicants will file an original and one copy of SF-424.1,
``Application for Federal Assistance (For Non-construction),'' with the
appropriate Agency office between October 1 and December 31 each fiscal
year. This form is available in all Agency offices. Applicants
proposing to provide technical assistance and/or training in only one
State will apply through the appropriate State Office. The State Office
will review and forward preapplications, with their recommendations,
within seven working days to the National Office, Attention: Water and
Waste Disposal. Applicants providing technical assistance and/or
training in more than one State will forward the preapplication to the
Assistant Administrator, Water and Waste, Rural Utilities Service,
Washington, DC 20250. Preapplications for Solid Waste Management grants
that cannot be funded in the fiscal year received will not be retained
for consideration for funding in the following fiscal year and will be
handled as outlined in paragraph (g) of this section.
(b) All preapplications shall be accompanied by:
(1) 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.
(2) Evidence tax exempt status from the Internal Revenue Service.
(3) Brief written narrative which includes items such as:
(i) The proposed service(s) to be provided, including the benefits
of the technical assistance and/or training.
(ii) Area to be served.
(iii) Name of association(s) or type of association(s) that will be
served.
(iv) Median household income of the population to be served by each
association(s).
(v) Grantee's experience, including experience of key staff members
and person(s) providing the technical assistance and/or training.
(vi) The number of months duration of the project or service and
the estimated time it will take from grant approval to beginning of
service.
(vii) Method used to select the association(s) that will receive
the service.
(viii) Brief description of how the service will be provided, such
as, through currently employed personnel or some other method.
(ix) Method to be used for delivery of the service, including
personnel to be utilized and tasks to be contracted, if any.
(4) Latest financial information to show the organization's
financial capacity to carry out the proposed work. As a minimum, the
information should include a balance sheet and an income statement. A
current audit report is preferred.
(5) Estimated breakdown of costs including those to be funded by
grantee as well as other sources.
(6) Budget and accounting system in place or proposed.
(7) Evaluation method to determine if objective(s) of the proposed
activity is being accomplished.
(c) Upon receipt of a preapplication, the National Office will:
(1) Review and evaluate the preapplication and accompanying
documents;
(2) Request from the Office of General Counsel (OGC), a legal
determination of applicant's legal existence and authority to provide
technical assistance and/or training. The legal opinion will be
obtained from the Regional Attorney servicing the area where the
applicant's headquarters is located; and
(3) Normally, respond to the applicant within 45 days after
December 31 of each year using Form AD-622, ``Notice of Preapplication
Review Action,'' indicating the action taken on the preapplication.
(d) Applicants whose preapplications are found to be ineligible
will be given notice by use of Form AD-622 and advised of their appeal
rights under subpart B of part 1900 of this title.
(e) Applicants who are eligible, but do not have the priority
necessary for further consideration will be notified with Form AD-622,
which includes the following statements:
``Your proposal cannot be funded within the available funds.''
``You are advised against incurring obligations which cannot be
fulfilled without Agency funds.''
(f) Applicants that are eligible for funding within the available
funds will be provided forms and instructions for filing a complete
application. Applicants should be advised against incurring obligations
which cannot be fulfilled without Agency funds.
(g) Applicants who have filed preapplications for solid waste
management grant funds that cannot be funded within the available funds
will be notified, using Form AD-622, that their preapplication will not
be retained. They will also be notified that they may file a new
preapplication when funds again become available using the following
statement:
``If the Agency receives funding for the program in FY __, you
may file a new preapplication on or after October 1, 19__.''
Sec. 1775.14 Priority.
(a) The preapplication and supporting information will be used to
determine the applicant's priority for available funds for the
Technical Assistance and Training Grant program. The following specific
criteria will be considered in the competitive selection of Technical
Assistance and Training Grant recipients:
(1) Applicant's demonstrated capability and past performance in
providing technical assistance and/or training to rural associations.
(2) The extent to which the population of the associations served
have low income.
(3) Applicant's financial and if applicable, in-kind resource that
will maximize use of technical assistance and/or training funds for
direct staffing of activities that are delivered to the associations.
(4) The extent to which the project will be cost effective,
including but not limited to the ratio of proposed personnel to the
cost of the project, the cost per associations served by the project,
and the expected benefits from the project.
(5) How well the proposal coincides with the objectives of the
Agency's Water and Waste Disposal program authorized in part 1780 of
this chapter.
(6) Applicants proposing to serve multi-state, regional, or
nationwide areas.
(7) Applicants whose timeframe for completion of the technical
assistance and/or training grant project is 12 months or less.
(b) Preapplications received from local governmental-based, multi-
[[Page 33472]]
jurisdictional organizations for the SWM grant program will be given
priority within the available funds.
Sec. 1775.15 [Reserved]
Sec. 1775.16 Application processing.
(a) Upon notification on Form AD-622 that the applicant is eligible
for funding, the following will be submitted to the National Office by
the applicant:
(1) SF-424.1.
(2) Proposed scope of work detailing the training and/or technical
assistance to be accomplished and timeframes for completion of each
task.
(3) Proposed budget.
(4) Other requested information needed by the Agency to make a
grant award determination.
(b) The following forms and documents will be part of the grant
docket:
(1) Form RD 400-1, ``Equal Opportunity Agreement.''
(2) Form RD 400-4, ``Assurance Agreement.''
(3) Grant Agreement signed by the applicant.
(4) Scope of work prepared by the applicant.
(5) Form RD 1940-1, ``Request for Obligation of Funds.''
(c) If the applicant fails to submit the application and related
material by the date shown on Form AD-622 (normally 30 days from the
date of Form AD-622), the Agency may discontinue consideration of the
application.
Sec. 1775.17 [Reserved]
Sec. 1775.18 Grant approval and obligation of funds.
(a) The National Office will review the application and other
documents to determine whether the proposal complies with this part.
(b) All grants made under this part will be approved and obligated
by the Agency Administrator or designee.
(c) The obligation of funds will be handled in accordance with part
1780 of this chapter.
(d) An executed copy of the Grant Agreement and scope of work will
be sent to the applicant on the obligation date, along with a copy of
Form RD 1940-1. The Agency will retain the executed original of the
Grant Agreement. The grant will be considered closed on the obligation
date.
(e) If the grant is not approved, the applicant will be notified in
writing of the reason(s) for rejection. The notification to the
applicant will state that a review of this decision by the Agency may
be requested by the applicant under subpart B of part 1900 of this
title.
Sec. 1775.19 Fidelity bond.
Prior to the advancing of funds, the grantee will provide fidelity
bond coverage for the positions of persons entrusted with the receipt
and disbursement of its funds and the custody of valuable property. The
amount of the bond will be at least equal to the maximum amount of
monies that the grantee will have on hand at any one time for technical
assistance and/or training provided in accordance with the Grant
Agreement. Unless prohibited by State Law, the United States, acting
through the Agency, will be named as co-obligee in the bond. The bond
must be obtained from a company listed in Department of Treasury
Circular 570, as amended. Form RD 440-24, ``Position Fidelity Schedule
Bond Declarations,'' may be used. A certified power-of-attorney with
effective date will be attached to the bond.
Secs. 1775.20-1775.21 [Reserved]
Sec. 1775.22 Fund disbursement.
Grantees will be reimbursed as follows:
(a) Standard Form (SF) 270, ``Request for Advance or
Reimbursement,'' will be completed by the applicant and submitted to
the 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 minority banks (a bank which is
owned by at least 50 percent minority group members) for the deposit
and disbursement of funds. A list of minority owned banks can be
obtained from the Office of Minority Business Enterprise, Department of
Commerce, Washington, DC 20230.
Sec. 1775.23 Grant cancellation or major changes.
If it is determined that a project will not be funded or if major
changes in the scope of the project are made after release of the
approval announcement, the Administrator will notify the Director of
Legislative Affairs and Public Information Staff (LAPIS) giving the
reasons for such action. In the case of a grant cancellation, Form RD
1940-10, ``Cancellation of U.S. Treasury Check and/or Obligation,''
will not be submitted to the Finance Office until 5 working days after
notifying the Director of LAPIS, and grant obligation cancellations
will not be submitted to the National Office until 5 working days after
notifying the Director of LAPIS.
Sec. 1775.24 Reporting.
Standard Form (SF) 269, ``Financial Status Report,'' SF 272,
``Federal Cash Transactions Report,'' and a project performance
activity report will be required of all grantees on a quarterly basis.
A final project performance report will be required with the last SF
269. The final report may serve as the last quarterly report. 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. All multi-state,
regional, and nationwide 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 Program Official. The
State Program Official will review and forward to the National Office
the report with comments. The project performance reports shall
include, but not be limited to, the following:
(a) A comparison of actual accomplishments to the objectives
established for that period;
(b) Reasons why established objectives were not met;
(c) 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
(d) Objectives and timetable established for the next reporting
period.
Sec. 1775.25 Audit.
The grantee will provide an audit report prepared in accordance
with Sec. 1780.47 of this chapter within 90 days after project
completion.
Sec. 1775.26 Grant Agreement.
RUS Bulletin 1775-1 is a Grant Agreement which sets forth the
procedures for making and servicing grants made under this part.
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, D.C. 20250-1500.
Sec. 1775.27 Grant servicing.
Grants will be serviced in accordance with the grant agreement and
subpart E
[[Page 33473]]
of part 1951 of this title. Subpart B of part 1900 of this title will
be followed when grants are terminated for cause.
Sec. 1775.28 Delegation of authority.
The authority under this part is redelegated to the Assistant
Administrator, Water and Waste, except for the discretionary authority
contained in Sec. 1775.5. The Assistant Administrator, Water and Waste
may redelegate the authority in this section.
Secs. 1775.29-1775.99 [Reserved]
Sec. 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.
Part 4284, Subpart E [Redesignated as Part 1777 and Revised]
2. Subpart E of 7 CFR part 4284 is redesignated as 7 CFR part 1777
and is revised to read as follows:
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.
Sec. 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).
Sec. 1777.2 [Reserved]
Sec. 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.
Sec. 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.
Secs. 1777.5-1777.10 [Reserved]
Sec. 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.
Sec. 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.
Sec. 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
[[Page 33474]]
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 Sec. 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.
Secs. 1777.14-1777.20 [Reserved]
Sec. 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.
Secs. 1777.22-1777.30 [Reserved]
Sec. 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.
Secs. 1777.32-1777.40 [Reserved]
Sec. 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.
[[Page 33475]]
Sec. 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.
Sec. 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.
Secs. 1777.44-1777.99 [Reserved]
Sec. 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.
Part 1942, Subpart K [Redesignated as Part 1778 and Revised]
3. Subpart K of 7 CFR part 1942 is redesignated as 7 CFR part 1778
and is revised to read as follows:
PART 1778--EMERGENCY 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 Grant cancellation.
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.
Sec. 1778.1 General.
(a) This part outlines policies and procedures for making Emergency
Community Water Assistance Grants 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).
Sec. 1778.2 [Reserved]
Sec. 1778.3 Objective.
The objective of the Emergency Community Water Assistance Grant
Program is to assist the residents of rural areas that have experienced
a significant decline in quantity or quality of water to obtain
adequate quantities of water that meet the standards set by the Safe
Drinking Water Act (42 U.S.C. 300f et seq.) (SDWA).
Sec. 1778.4 Definitions.
Emergency. Occurrence of an incident such as, but not limited to, a
drought, earthquake, flood, hurricane, disease outbreak, or chemical
spill.
Rural areas. Includes any area in 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, 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 is where 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 is where the water is no longer potable as a result
of an emergency.
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.
Sec. 1778.5 [Reserved]
Sec. 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 includes 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.
[[Page 33476]]
This would not apply to grants made for repairs, partial replacement,
or significant maintenance on an established water system.
Sec. 1778.7 Project priority.
Paragraphs (a) through (d) of this section indicate 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. The State
Program Official will request funds from the National Office,
Attention: Assistant Administrator, Water and Waste, using RUS
Bulletins 1778-1 and 1778-2. If an application cannot be funded, the
State Program Official will be notified. 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 starting November 1 and will continue
as long as funds are available except for the first year in which funds
are made available for this grant program. A review of funding requests
the first year will start 30 days after funds are made 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 Waste 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.
(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 only be assigned for one of
the following paragraphs when the primary purpose of the proposed
project is to correct a significant decline 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) Acute shortage. Grants made in accordance with Sec. 1778.11(b)
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.
(5) 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.
Sec. 1778.8 [Reserved]
Sec. 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.
Sec. 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.
(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 Sec. 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.
Sec. 1778.11 Maximum grants.
(a) Grants made to alleviate a significant decline in quantity or
quality of water available from the water supplies in rural areas that
occurred within two years of filing an application with the Agency
cannot exceed $500,000.
[[Page 33477]]
(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 cannot
exceed $75,000.
(c) Grants under this part, subject to paragraphs (a) and (b) of
this section, shall be made for 100 percent of eligible project costs.
Sec. 1778.12 [Reserved]
Sec. 1778.13 Set-aside.
(a) At least 70 percent of all grants made under these grant
programs shall be for projects funded in accordance with
Sec. 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.
Sec. 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. 2000d et 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.
Secs. 1778.15-1778.20 [Reserved]
Sec. 1778.21 Application processing.
(a) To the extent possible, an application under this part will be
approved or disapproved within 60 days of the date that a complete
application and all related material is submitted to the Agency.
(b) The material submitted with the application should include the
Preliminary Engineer 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 and/or quality of potable water or
an acute shortage of potable water and the proposed project will
eliminate the problem. For projects to be funded in accordance with
Sec. 1778.11(a), evidence must be furnished that a significant decline
in quantity or quality occurred within two years of filing the
application with the Agency.
(c) The processing office should assist the applicant in
application assembly and processing.
(d) Appropriate application review and approval procedures outlined
in subpart B of part 1780 of this chapter.
(e) Each application for assistance will be carefully reviewed in
accordance with the priorities established in Sec. 1778.7. A priority
rating will be assigned to each application by the State Program
Official.
(f) When the National Office has allocated funds to the State for a
project, applicable provisions outlined in subpart B of part 1780 of
this chapter will be followed in preparation of the grant docket. This
would include development of an operating budget showing that the
applicant can meet all its obligations and provide the intended
services.
(g) 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.
(h) State Program Officials are authorized to approve grants made
in accordance with this part and RUS Staff Instruction 1780-1.
(i) Funds will be obligated and approval announcement made in
accordance with the provisions of subpart B of part 1780 of this
chapter.
Sec. 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.
Sec. 1778.23 Grant closing and disbursement of funds.
(a) Grants will be closed in accordance with Sec. 1780.45 of this
chapter.
(b) RUS Bulletin 1780-12, ``Water or Waste Grant Agreement,'' will
be executed by all applicants. State Program Officials are authorized
to execute the agreement on behalf of the Agency.
(c) The grant will be considered closed on the date RUS Bulletin
1780-12 is signed by the Agency. The Finance Office will be notified of
the grant closing date. The Agency will retain the original of the
Grant Agreement.
(d) 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.
Secs. 1778.24-1778.30 [Reserved]
Sec. 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 Sec. 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.
Sec. 1778.32 Grant cancellation.
The State Program Official may prepare and execute Form RD 1940-10,
``Cancellation of U.S. Treasury Check and/or Obligation,'' in
accordance with the Forms Manual Insert. If the docket has been
forwarded to OGC, that office should receive a copy of Form RD 1940-10.
The applicant's attorney and engineer may be provided a copy of
[[Page 33478]]
Form RD 1940-10. A copy should also be sent to the National Office,
Attention: Water and Waste Processing.
Sec. 1778.33 [Reserved]
Sec. 1778.34 Grant servicing.
(a) Grants will be serviced in accordance with Sec. 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
Sec. 1780.47 of this chapter.
Sec. 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 Sec. 1778.11.
Sec. 1778.36 [Reserved]
Sec. 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.
Secs. 1778.38-1778.99 [Reserved]
Sec. 1778.100 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 0575-0074. Public reporting burden for this
collection of information is estimated to average two 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
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.
4. Part 1780, is added to read as follows:
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.
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.
Subpart A--General Policies and Requirements
Sec. 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
[[Page 33479]]
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. 794 et
seq.), no handicapped individual in the United States shall, solely by
reason of their handicap, be excluded from participation in, be denied
the 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. 2000d et 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
Sec. 1901.202(e) of this title;
(3) The Americans with Disabilities Act (ADA) of 1990. This Act (42
U.S.C. 12101 et 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. 6101 et
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.
Sec. 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.
Sec. 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
[[Page 33480]]
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
official to 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 all rural areas of a state.
(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.
Sec. 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.
Sec. 1780.5 [Reserved]
Sec. 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.
Sec. 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 resources or 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.
(h) Expanded eligibility for timber-dependent communities in
Pacific Northwest. In the Pacific Northwest, defined as an area
containing national forest covered by the Federal document entitled,
``Forest Plan for a Sustainable Economy and a Sustainable
Environment,'' dated July 1, 1993, the population limits contained in
Sec. 1780.3(a) are expanded to include communities with not more than
25,000 inhabitants until September 30, 1998, if:
(1) Part or all of the community lies within 100 miles of the
boundary of a national forest covered by the Federal document entitled,
``Forest Plan for a Sustainable Economy and a Sustainable
Environment,'' dated July 1, 1993; and
(2) The community is located in a county in which at least 15
percent of the total primary and secondary labor and proprietor income
is derived from forestry, wood products, or forest-related industries
such as recreation and tourism.
Sec. 1780.8 [Reserved]
Sec. 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.
[[Page 33481]]
(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 Sec. 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.
Sec. 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 Sec. 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 and 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 subpart I of part 1980 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
[[Page 33482]]
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 Sec. 1780.35 (b).
Sec. 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
Sec. 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.
Sec. 1780.12 [Reserved]
Sec. 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,
[[Page 33483]]
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.
Sec. 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.
Sec. 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.
Sec. 1780.16 [Reserved]
Sec. 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
[[Page 33484]]
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 the population 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.
Sec. 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 to States 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) x 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:
[GRAPHIC] [TIFF OMITTED] TR19JN97.000
(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
[[Page 33485]]
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 x 50
percent) + (criterion in paragraph(b)(1)(ii) of this section x 25
percent) + (criterion in paragraph(b)(1)(iii) of this section x 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.
Sec. 1780.19 Public information.
(a) Public notice of intent to file an application with the Agency.
Within 60 days of filing an application with the Agency 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
[[Page 33486]]
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.
Secs. 1780.20-1780.23 [Reserved]
Sec. 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.
Sec. 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.
Secs. 1780.26-1780.30 [Reserved]
Subpart B--Loan and Grant Application Processing
Sec. 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 Sec. 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 Sec. 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 discussions with prospective
applicants or review of applications and continuing throughout
application processing, environmental issues must be considered.
Throughout the application process the State Environmental Coordinator
will discuss with the applicant and their engineer, environmental
review requirements for evaluating a project's potential for
environment impacts. This should provide flexibility to consider
alternatives to the project and develop methods to mitigate identified
adverse environmental impacts. The environmental review requirements
shall be performed simultaneously and concurrently with the project's
engineering design and mitigation measures integrated into the design
to minimize any adverse environmental impacts.
Sec. 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.
Sec. 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 will consult with the applicant's engineer as
appropriate to resolve any questions concerning the PER and any
environmental concerns. Written comments will be provided by the State
staff engineer and State Environmental Coordinator 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) Form RD 1940-20, ``Request for Environmental Information'' or
comparable information. The applicant should consult with the
processing office to determine what information should be included with
this form.
(g) The applicants 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'';
[[Page 33487]]
(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.
Sec. 1780.34 [Reserved]
Sec. 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 Sec. 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
Sec. 1780.10(c) of the eligible RUS project development costs listed in
Sec. 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 service is 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 reserve will be equal to one average annual loan
installment which will accumulate at the rate of one-tenth of the total
each year.
Sec. 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.
Sec. 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.
Sec. 1780.38 [Reserved]
Sec. 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, preparation of cost and income estimates, development of
proposals for organization and financing, and overall operation and
maintenance of the facility. Applicants should 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
[[Page 33488]]
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 reserve to provide for at least an annual reserve equal to one-
tenth of an average
[[Page 33489]]
annual loan installment each year for the life of the loan 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, with the concurrence
of OGC, accept Form RD 1942-9, ``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) The processing office will conduct appropriate environmental
reviews in accordance with RUS requirements.
(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.
Sec. 1780.40 [Reserved]
Sec. 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
required publication evidence; 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.
Sec. 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.
Sec. 1780.43 [Reserved]
Sec. 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.
[[Page 33490]]
(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.
Sec. 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) Forms RD 1942-47, ``Loan Resolution (Public Bodies),'' or RD
1942-9, ``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 Sec. 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
[[Page 33491]]
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, project funds 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.
Sec. 1780.46 [Reserved]
Sec. 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 the processing 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
[[Page 33492]]
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.
Sec. 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,
as amended (31 U.S.C. 1535). A fee of 5 percent of the first $50,000 of
a regional commission grant and 1 percent of any amount over $50,000
will be paid 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. 3121 et 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 Sec. 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.
Sec. 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 50 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 50 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.
Secs. 1780.50-1780.52 [Reserved]
Subpart C--Planning, Designing, Bidding, Contracting, Constructing
and Inspections
Sec. 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.
Sec. 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.
Sec. 1780.55 Preliminary engineering reports.
Preliminary engineering reports (PER)s must conform with customary
professional standards. PER guidelines for water, sanitary sewer, solid
waste,
[[Page 33493]]
and storm sewer are available from the Agency.
Sec. 1780.56 [Reserved]
Sec. 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 RUS
requirements. Facility planning and design must not only be responsive
to the owner's needs but must consider the environmental impacts of the
proposed project. Facility designs 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. 4151 et seq.) as implemented by 41 CFR
101-19.6, section 504 of the Rehabilitation Act of 1973 (42 U.S.C 1474
et 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. 12101 et
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. 300f et 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 water systems, 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.
Secs. 1780.58-1780.60 [Reserved]
Sec. 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.
Sec. 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.
[[Page 33494]]
(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.
Sec. 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.
Secs. 1780.64-1780.66 [Reserved]
Sec. 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 Sec. 1780.76. Inspection services may be
provided by individuals as approved by the State staff engineer.
Payments for construction will be handled under Sec. 1780.76(e).
Sec. 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.
Sec. 1780.69 [Reserved]
Sec. 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
[[Page 33495]]
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.
Sec. 1780.71 [Reserved]
Sec. 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 Sec. 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 contract and
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.
Sec. 1780.73 [Reserved]
Sec. 1780.74 Contracts awarded prior to applications.
Owners awarding construction or other procurement contracts prior
to
[[Page 33496]]
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.
Sec. 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 be effected 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 part 15, 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.
Sec. 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
[[Page 33497]]
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.
Secs. 1780.77-1780.79 [Reserved]
Subpart D--Information Pertaining to Preparation of Notes or Bonds
and Bond Transcript Documents for Public Body Applicants
Sec. 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.
Sec. 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 Sec. 1780.94; and
(f) Closing instructions must be issued by OGC.
Sec. 1780.82 [Reserved]
Sec. 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;
[[Page 33498]]
(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)).
Secs. 1780.84 and 1780.86 [Reserved]
Sec. 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 Sec. 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
Sec. 1780.94.
Sec. 1780.88 [Reserved]
Sec. 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.
Sec. 1780.90 Multiple advances of Agency funds using temporary debt
instruments.
When none of the instruments described in Sec. 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 Sec. 1780.13;
[[Page 33499]]
(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.
Secs. 1780.91-1780.93 [Reserved]
Sec. 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 Forms RD 1942-47
or RD 1942-9.
(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
[[Page 33500]]
will be closed at the same interest rate may be combined in the same
debt instrument.
Sec. 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.
Secs. 1780.96-1780.100 [Reserved]
Part 1942, Subpart I [Redesignated as Part 1781 and Revised]
5. Subpart I of 7 CFR part 1942 is redesignated as 7 CFR part 1781
and is revised to read as follows:
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.
Sec. 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.
Sec. 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.
Sec. 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.
[[Page 33501]]
(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.
Sec. 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. 701 et 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.
Sec. 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.
[[Page 33502]]
(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.
Sec. 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
[[Page 33503]]
(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, and removal
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.
Sec. 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:
[[Page 33504]]
(i) Land treatment measures on individual farms except as provided
in Sec. 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 Sec. 1781.6(a)(7).
(viii) Storm and sanitary sewers and solid waste disposal
facilities other than authorized in Sec. 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 Sec. 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.
Sec. 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.
[[Page 33505]]
(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.
Sec. 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 Sec. 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 Sec. 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 Sec. 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. 4001 et seq.) as amended by the
Flood Disaster Protection Act of 1973 (42 U.S.C. 4003 et seq.) will be
complied with in accordance with applicable provisions of RD
Instruction 1901-L. Also see Sec. 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
[[Page 33506]]
secure a WS loan, WS advance, or RCD loan. These should be consistent
with the applicable provisions of Sec. 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 Sec. 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.
Sec. 1781.10 [Reserved]
Sec. 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 similar work 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. 4321 et 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. 470 et 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. 2000d et 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. 4151 et seq.).
Sec. 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
[[Page 33507]]
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 written reasons. 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
Sec. 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.
Sec. 1781.13 [Reserved]
Sec. 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
Sec. 1780.44(g) of this chapter.
Sec. 1781.15 Planning and performing development.
Planning and performing development will be handled in accordance
with subpart C of part 1780
[[Page 33508]]
of this chapter and guidance from NRCS.
Sec. 1781.16 [Reserved]
Sec. 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 the docket, 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.
[[Page 33509]]
(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.
Sec. 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.
Sec. 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.
Sec. 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 Sec. 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 Sec. 1780.44 of this chapter.
[[Page 33510]]
Sec. 1781.21 Borrower accounting methods, management, reporting, and
audits.
These activities will be handled in accordance with the provisions
of Sec. 1780.47 of this chapter.
Sec. 1781.22 Subsequent loans.
Subsequent loans will be processed in accordance with this part.
Sec. 1781.23 Servicing.
Servicing will be handled in accordance with the provisions of
subpart E of part 1951 of this title.
Sec. 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.
Secs. 1781.25--1781.100 [Reserved]
PART 1901--PROGRAM-RELATED INSTRUCTIONS
Subpart E--Civil Rights Compliance Requirements*C*
6. The authority citation for subpart E of part 1901 continues to
read as follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 40 U.S.C. 442; 42 U.S.C.
1480, 2942.
7. Section 1901.204 is amended by revising paragraph (a)(25) to
read as follows:
Sec. 1901.204 Compliance reviews.
(a) * * *
(25) Section 306C WWD loans and grants.
* * * * *
PART 1940--GENERAL
8. The authority citation for part 1940 is revised to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart L--Methodology and Formulas for Allocation of Loan and
Grant Program Funds
Secs. 1940.586 and 1940.587 [Removed and Reserved]
9. Sections 1940.586 and 1940.587 are removed and reserved.
PART 1942--ASSOCIATIONS
10. The authority citation for part 1942 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.
Subpart A--Community Facility Loans
11. Section 1942.1 is amended by revising paragraph (a) to read as
follows:
Sec. 1942.1 General.
(a) This subpart outlines the policies and procedures for making
and processing insured loans for community facilities except for fire
and rescue and water and waste disposal facilities. This subpart
applies to community facility loans for fire and rescue facilities only
as specifically provided for in subpart C of this part. Water and waste
loans are provided for in part 1780 of this title. The Agency shall
cooperate fully with State and local agencies in making loans to assure
maximum support to the State strategy for rural development. State
Directors and their staffs shall maintain coordination and liaison with
State agency and substate planning districts. Funds allocated for use
under this subpart 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. Indians residing on
such reservations must have equal opportunity to participate in the
benefits of these programs as compared with other residents of the
State. Federal statues provide for extending Agency financial programs
without regard to race, color, religion, sex, national origin, marital
status, age, or physical/mental handicap. The participants must possess
the capacity to enter into legal contracts under State and local
statutes. Any processing or servicing activity conducted pursuant to
this subpart 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 chapter. Applicants for this assistance are required to
identify any known relationship or association with an Agency employee.
* * * * *
12. Section 1942.17 is amended by revising the heading and
introductory text of paragraph (p)(6)(i) to read as follows:
Sec. 1942.17 Community facilities.
* * * * *
(p) * * *
(6) * * *
(i) Agency loan and/or grant funds. Remaining funds may be used for
purposes authorized by paragraph (d) of this section, provided the use
will not result in major changes to the facility design or project and
that the purposes of the loan and/or grant remains the same.
* * * * *
Subpart G--Rural Business Enterprise Grants and Television
Demonstration Grants
13. Section 1942.308 is amended by revising paragraph (c) to read
as follows:
Sec. 1942.308 Regional Commission grants.
* * * * *
(c) ARC is authorized under the Appalachian Regional Development
Act of 1965 (40 U.S.C. 1-405), as amended, to serve the Appalachian
region. ARC grants are handled in accordance with the ARC Agreement
which applies to all ARC grants administered by the Agency. Therefore,
a separate Project Management Agreement between the Agency and ARC is
not needed for each ARC grant.
* * * * *
14. Section 1942.349 is revised to read as follows:
Sec. 1942.349 Forms, guides, and attachments.
Guides 1 and 2 of this subpart, Attachment 1 and Forms referenced
(all available in any Rural Development office) are for use in
administering RBE/television demonstration grants.
Subpart H--[Removed and Reserved]
15. Subpart H of part 1942 is removed and reserved.
PART 1951--SERVICING AND COLLECTIONS
16. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.
Subpart E--Servicing of Community and Insured Business Programs
Loans and Grants
17. Section 1951.201 is revised to read as follows:
Sec. 1951.201 Purposes.
This subpart prescribes the Rural Development mission area
policies, authorizations, and procedures for servicing Water and Waste
Disposal System loans and grants; Community Facility loans and grants;
Rural Business Enterprise/Television Demonstration grants; loans for
Grazing and other shift-in-land-use projects; Association Recreation
loans; Association Irrigation and Drainage loans; Watershed loans and
advances; Resource Conservation and Development loans; Insured Business
loans; Economic Opportunity
[[Page 33511]]
Cooperative loans; loans to Indian Tribes and Tribal Corporations;
Rural Renewal loans; Energy Impacted Area Development Assistance
Program grants; National Nonprofit Corporation grants; Water and Waste
Disposal Technical Assistance and Training grants; Emergency Community
Water Assistance grants; System for Delivery of Certain Rural
Development Programs panel grants; section 306C WWD loans and grants;
and Rural Technology and Cooperative Development Grants in subpart F of
part 4284 of this title. Rural Development State Offices act on behalf
of the Rural Utilities Service, the Rural Business-Cooperative Service,
and the Farm Service Agency as to loan and grant programs formerly
administered by the Farmers Home Administration and the Rural
Development Administration. Loans sold without insurance to the private
sector will be serviced in the private sector and will not be serviced
under this subpart. The provisions of this subpart are not applicable
to such loans. Future changes to this subpart will not be made
applicable to such loans.
PART 1956--DEBT SETTLEMENT
18. The authority citation for part 1951 continues to read as
follows:
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 31 U.S.C. 3711; 42
U.S.C. 1480.
Subpart C--Debt Settlement-Community and Business Programs
19. Section 1956.101 is revised to read as follows:
Sec. 1956.101 Purposes.
This subpart delegates authority and prescribes policies and
procedures for debt settlement of Water and Waste Disposal System
loans; Community Facility loans; Association Recreation loans;
Watershed loans and advances; Resource, Conservation and Development
loans; Rural Renewal loans; direct Business and Industry loans;
Irrigation and Drainage loans; Shift-in-land-use loans; and Indian
Tribal Land Acquisition loans; and Section 306C WWD loans. Settlement
of Economic Opportunity Cooperative loans, Claims Against Third Party
Converters, Nonprogram loans, Rural Business Enterprise/Television
Demonstration Grants, Rural Development Loan Fund loans, Intermediary
Relending Program loans, Nonprofit National Corporations Loans and
Grants, and 601 Energy Impact Assistance Grants, is not authorized
under independent statutory authority and settlement under these
programs is handled pursuant to the Federal Claims Collection Joint
Standards, 4 CFR parts 101-105 as described in Sec. 1956.147 of this
subpart.
Dated: May 15, 1997.
Jill Long Thompson,
Under Secretary for Rural Development.
[FR Doc. 97-13445 Filed 6-18-97; 8:45 am]
BILLING CODE 3410-15-P
