[Federal Register Volume 64, Number 240 (Wednesday, December 15, 1999)]
[Proposed Rules]
[Pages 69937-69946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32009]
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DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1703
Rural Business-Cooperative Service
Rural Utilities Service
7 CFR Part 4280
RIN 0570-AA19
Rural Economic Development Loan and Grant Program
AGENCIES: Rural Business-Cooperative Service and Rural Utilities
Service, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Business-Cooperative Service (RBS or Agency) is
proposing to amend regulations for the Rural Economic Development Loan
and Grant (REDLG) Program. This action is part of a reinvention
laboratory initiative of the Department of Agriculture and RBS. It is
written in a ``Plain Language'' format that is simpler and should
improve ease of use by the public and program beneficiaries.
DATES: Written or e-mail comments must be received on or before
February 14, 2000 to be assured of consideration. The comment period
for information collections under the Paperwork Reduction Act of 1995
continues through February 14, 2000.
ADDRESSES: Submit written comments via the U.S. Postal Service, in
duplicate, to the Regulations and Paperwork Management Branch,
Attention: Cheryl Thompson, Rural Development, U.S. Department of
Agriculture, Stop 0742, 1400 Independence Avenue, SW., Washington, DC
20250-0742. Submit written comments via commercial express carrier, in
duplicate, to the Regulations and Paperwork Management Branch,
Attention: Cheryl Thompson, USDA-Rural Development, 3rd Floor, 300 E.
St., SW., Washington, DC 20546. Also, comments may be submitted via the
Internet by addressing them to comments@rus.usda.gov and must contain
the word ``economic'' in the subject line. All written comments will be
available for public inspection during regular work hours at the 300 E.
St., SW. address listed above.
FOR FURTHER INFORMATION CONTACT: Mark Wyatt, Specialty Lenders
Division, Rural Business-Cooperative Service, U.S. Department of
Agriculture, STOP 3225, 1400 Independence Ave. SW, Washington, DC
20250-3225, Telephone (202) 720-2383.
SUPPLEMENTARY INFORMATION:
[[Page 69938]]
Classification
This proposed rule has been determined to be significant and has
been reviewed by the Office of Management and Budget (OMB) under
Executive Order 12866.
Programs Affected
The Catalog of Federal Domestic Assistance number for the program
impacted by this action is 10.854, Rural Economic Development Loans and
Grants.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995, RBS
announces its intention to seek OMB approval of the reporting and
recordkeeping requirements associated with this proposed rule. The
purpose of the REDLG program is to promote rural economic development
and job creation projects. Loans are made to Rural Utilities Service
(RUS) electric and telecommunications borrowers to finance a wide range
of projects, including businesses. Grants are made to establish
revolving loan funds. The information requirements contained within the
regulation require information from loan and grant applicants and
recipients. The information is vital for RBS to make prudent decisions
regarding the eligibility of applicants, establish selection priority
among competing applicants, ensure compliance with applicable laws and
regulations, and evaluate the program. The requirements include
information to allow RBS to determine that an applicant is a legally
organized entity with authority to enter into contracts and carry out
the proposed activities; provide for a description and scope of the
proposed activities; include information to provide for evaluation of
recipient accomplishments; and require information needed to ensure
compliance with Executive Orders.
Public Burden in 7 CFR Part 4280, Subpart A
At this time, RBS is requesting OMB clearance of the following
burdens:
Section 4280.16(b). The Agency allows the loan recipient to request
a deferment period. This involves a letter or telephone call.
Section 4280.16(d). A former RUS electric borrower that prepaid all
their direct or insured electric program loans must provide an
irrevocable letter of credit as security for the zero-interest loan
because they no longer have property mortgaged to the Government.
Section 4280.20. A RUS borrower that receives a grant to operate a
Revolving Loan Fund would need to operate and administer the fund in
accordance with its Revolving Loan Fund Plan. This involves reviewing
loan applications, preparing loan documents, and disbursing funds.
Section 4280.36(a). RBS uses a copy of the reports prepared by the
Rural Utilities Service for its borrowers to ensure compliance with
certain laws and Executive Orders. RUS borrowers are required to
provide information to the RUS field person to complete the narrative
report.
Section 4280.39(a)(2). The RUS borrower must submit an acceptable
resolution indicating their request for a loan or grant, agree to
provisions of the regulation, etc.
Section 4280.39(a)(4). Assurance as required by 49 CFR 24.4(a). A
signed form provides the required assurance statement that any
relocations of persons or acquisitions of real property, as part of
this completing this project, will be handled in accordance with the
law.
Section 4280.39(a)(5). Certification For Contracts, Grants, and
Loans is required by 31 U.S.C. 1352.
Section 4280.39(a)(8). Seismic Certification as required by 42
U.S.C. 7701.
Section 4280.39(b)(1) and (2). The narrative portion of the
application describes the project, discusses how the project satisfies
the selection factors specified in the regulation, and provides
information to assist in conducting the environmental review of the
project. It also includes a business and project plan and feasibility
study.
Section 4280.39(b)(3). A Revolving Loan Fund Plan is required for
grants to establish revolving loan funds. The plan governs the use of
the funds for the life of the Revolving Loan Fund, how the Revolving
Loan Fund will be administered by the RUS borrower, intended uses once
the funds revolve and become non-Federal, and the review and approval
of loans from the Revolving Loan Fund.
Section 4280.48(a) and (b). Agreements, promissory notes, and
opinion of counsel. The recipient of a loan or grant is required to
sign legal documents that contain the terms and conditions of the
financing provided. For loans, the recipient is also required to
execute a promissory note.
Section 4280.49. The RUS borrower is required to submit for
approval copies of third party documents between the RUS borrower and
the ultimate recipient to determine that the loan funds will be used
for approved purposes and in accordance with the regulation. RBS must
approve any changes in the third-party documents. The RUS borrower must
submit for approval any previously approved document that it wishes to
revise. RBS ensures that the revised document is consistent with the
approved use of funds and the regulation.
Section 4280.53. The RUS borrowers must submit payments through an
electronic method set up to improve the efficiency of Government
collections. This involves calling a bank on a touch-tone telephone and
entering information.
Section 4280.55(a) and (b). These subsections provide for a list of
expenditures for zero-interest loans to determine the proper use of the
Government's loan funds. It also requires an itemized list and
documentation from the ultimate recipient and record of itemized
receipts. This provides a very workable method for the ultimate
recipient to provide the RUS borrower with a list of the uses of the
loan funds.
Section 4280.56(a). Form RD 4280-1, ``Survey of Recipients of Rural
Economic Development Loan and Grant Program.'' This form will record
the success of the project that was financed with either a loan or
grant. It provides RBS with information on the jobs actually created
from the projects financed under this program, and other information
that would indicate the success of the project and its impact on the
rural economy.
Section 4280.56(b) and (c). For RUS borrowers with existing loans,
RBS obtains from RUS a copy of the RUS borrower's audit. RUS borrowers
without existing loans need to submit a copy of their audit to RBS. All
audits must be conducted in accordance with Generally Accepted
Government Auditing Standards. In addition, ultimate recipients may be
required to send to RBS a copy of an audit conducted in accordance with
7 CFR part 3052, if the recipient is organized as a non-profit
corporation, state government, or local government. Audits pursuant to
7 CFR part 3052 must be submitted only if the amount of federal funds
an ultimate recipient spends in 1 year is $300,000 or more. RBS gets a
copy of the audit to verify that funds are used for approved purposes.
Section 4280.62. An applicant that receives an adverse decision may
appeal the decision. This involves writing a letter requesting an
appeal to the National Appeals Division of the United States Department
of Agriculture.
Estimate of Burden: Public reporting burden for this collection of
information
[[Page 69939]]
is estimated to average 3.4 hours per response.
Respondents: RUS borrowers.
Estimated Number of Respondents: 180.
Estimated Number of Responses per Respondent: 9.1.
Estimated Number of Responses: 1,632.
Estimated Total Annual Burden on Respondents: 5,509 hours.
Copies of this information collection may be obtained from Cheryl
Thompson, Regulations and Paperwork Management Branch, Support Services
Division, telephone 202-692-0043.
Comments: Comments are invited on: (a) Whether the proposed
collection of information is necessary for the proper performance of
the functions of RBS, including whether the information will have
practical utility; (b) the accuracy of RBS's estimate of the burden of
the proposed collection of information including the validity of the
methodology and assumptions used; (c) ways to enhance the quality,
utility and clarity of the information to be collected; and (d) ways to
minimize the burden of the collection of information on those who are
to respond, including through the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology. Comments should be submitted to
the Desk Officer for Agriculture, Office of Information and Regulatory
Affairs, Office of Management and Budget, Washington, DC 20503, and to
Cheryl Thompson, Regulations and Paperwork Management Branch, Support
Services Division, U.S. Department of Agriculture, Rural Development,
STOP 0742, 1400 Independence Ave. SW, Washington, DC 20250-0742. All
responses to this notice will be summarized, included in the request
for OMB approval, and will become a matter of public record. A comment
to OMB is best assured of having full effect if OMB receives it within
30 days of publication of this rule.
Intergovernmental Review
Rural Economic Development Loans and Grants are subject to the
provisions of Executive Order 12372, which requires intergovernmental
consultation with State and local officials. RBS will conduct
intergovernmental consultation in the manner delineated in RD
Instruction 1940-J, ``Intergovernmental Review of Farmers Home
Administration Programs and Activities,'' and in 7 CFR part 3015,
subpart V.
Civil Justice Reform
This proposed rule has been reviewed under Executive Order 12988,
Civil Justice Reform. In accordance with this rule: (1) All State and
local laws and regulations that are in conflict with this rule will be
preempted; (2) no retroactive effect will be given this rule; and (3)
administrative proceedings in accordance with the regulations of the
Department of Agriculture National Appeals Division (7 CFR part 11)
must be exhausted before bringing suit in court challenging action
taken under this rule unless those regulations specifically allow
bringing suit at an earlier time.
Environmental Impact Statement
This document has been reviewed in accordance with 7 CFR part 1940,
subpart G, ``Environmental Program.'' RBS has determined that this
proposed 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, 42
U.S.C. 4321-4374, an Environmental Impact Statement is not required.
Unfunded Mandates
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public
Law 104-4, establishes requirements for Federal agencies to assess the
effects of their regulatory actions on State, local, and tribal
governments and the private sector. Under section 202 of the UMRA, RBS
must prepare a written statement, including a cost-benefit analysis,
for proposed and final rules with ``Federal mandates'' that may result
in expenditures to State, local or tribal governments, in the
aggregate, or to the private sector, of $100 million or more in any one
year. When such a statement is needed for a rule, section 205 of UMRA
generally requires RBS to identify and consider a reasonable number of
regulatory alternatives and adopt the least costly, more cost effective
or least burdensome alternative that achieves the objectives of the
rule.
This rule contains no Federal mandates (under the regulatory
provisions of title II of the UMRA) for State, local, and tribal
governments or the private sector. Thus, this rule is not subject to
the requirements of sections 202 and 205 of UMRA.
Regulatory Flexibility Act
In compliance with the Regulatory Flexibility Act, RBS has
determined that this action would not have a significant economic
impact on a substantial number of small entities. This regulation only
impacts those who choose to participate in the loan and grant program.
Small entity applicants will not be impacted to a greater extent than
large entity applicants.
Background
The existing regulations for the Rural Economic Development Loan
and Grant (REDLG) program are found at 7 CFR part 1703, subpart B, and
will be removed upon publication of a final rule.
This action is part of a reinvention laboratory initiative of the
Department of Agriculture and Rural Business-Cooperative Service. It is
written in a ``Plain Language'' style. The proposed regulation is
simpler and should improve ease of use by the public and program
beneficiaries. The regulation is in a question and answer format from
the perspective of questions from an applicant or recipient under this
program.
The REDLG program was originally implemented in 1989 as part of the
rural economic development program of Rural Electrification
Administration, predecessor to the Rural Utilities Service (RUS). As a
result of the United States Department of Agriculture reorganization,
responsibility for this program was transferred to the Business
Programs under RBS, which provides financing for rural areas. This
program is administered at the State level through the Department of
Agriculture's Rural Development State Offices.
Since its inception in 1989, this program has had a substantial
impact on economic development in rural areas. As of September 30,
1998, it had provided $106 million in loans and $53 million in grants,
leveraged $914 million in private capital, and directly created
approximately 23,000 new jobs for rural areas.
Under this program, loans and grants are provided to electric and
telecommunications utilities that have borrowed funds from RUS. The
purpose of the program is to encourage these electric and
telecommunications utilities to promote rural economic development and
job creation projects. The RUS utility can receive loans to help
finance projects such as business start-up costs, business expansion,
community development, and business incubator projects. The RUS utility
uses the program loan funds to make a pass-through loan to an ultimate
recipient such as a business. The RUS utility is responsible for fully
repaying its loan to the government even if the ultimate recipient does
not repay its loan. The RUS utility uses program grant funds, along
with its required contribution, to create a revolving loan fund that it
will
[[Page 69940]]
operate and administer. Loans are made from the revolving loan fund for
a variety of community development projects.
The regulation proposes to simplify the application format, review
and selection process, and recipient recordkeeping requirements. A
section is proposed to be added covering the appeal of certain adverse
decisions under this program.
This program will be available through the Rural Development
Mission Area's Service Center Initiative.
List of Subjects
7 CFR Part 1703
Community development, Grant programs--housing and community
development, Loan programs--housing and community development,
Reporting and recordkeeping requirements, Rural areas.
7 CFR Part 4280
Business and industry, Community development, Economic development,
Grant programs--housing and community development, Loan programs--
housing and community programs, Reporting and recordkeeping
requirements, Rural areas.
Therefore, chapters XVII and XLII, title 7, Code of Federal
Regulations, are proposed to be amended as follows:
CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
PART 1703--RURAL DEVELOPMENT
1. The authority citation for part 1703 continues to read as
follows:
Authority: 7 U.S.C. 901, et seq. and 950aaa, et seq.
2. Subpart B of part 1703 is removed and reserved.
CHAPTER XLII--RURAL BUSINESS--COOPERATIVE SERVICE AND RURAL UTILITIES
SERVICE, DEPARTMENT OF AGRICULTURE
3. A new part 4280, consisting only of subpart A (Sec. Sec. 4280.1
through 4280.100), is added to chapter XLII to read as follows:
PART 4280--RURAL ECONOMIC DEVELOPMENT LOANS AND GRANTS
Subpart A--Rural Economic Development Loan and Grant Program
Sec.
Am I Eligible Under This Program?
4280.1 Point of reference.
4280.2 What is the Rural Economic Development Loan and Grant
Program?
4280.3 Definitions.
4280.4-4280.12 [Reserved]
4280.13 Am I eligible to apply?
4280.14 [Reserved]
What Purposes Are Eligible for Loans?
4280.15 What type of projects may I finance with a zero-interest
loan?
4280.16 What would be the terms of my zero-interest loan?
4280.17 If I receive a zero-interest loan, what happens if the
ultimate recipient fails to repay me?
4280.18 What security do I need on the loan to the ultimate
recipient?
What Purposes Are Eligible for Grants?
4280.19 What can I use a grant to fund?
4280.20 Do I operate and administer the fund?
4280.21 What types of projects may I finance with the initial loans
I make from the grant funds I receive?
4280.22 [Reserved]
4280.23 What level of contribution must I make into the fund?
4280.24 How long must my contribution remain in the fund and what
happens if the fund is terminated?
4280.25 What must I do in operating the fund?
4280.26 May I use grant funds to cover operating costs of the fund?
What Is Not Eligible for Either a Loan or Grant?
4280.27 What may I not do with program funds?
4280.28 [Reserved]
What Are the Other Terms and Conditions for Loans and Grants?
4280.29 Do I need supplemental financing?
4280.30 What other restrictions are there on the use of loan or
grant funds?
4280.31-4280.35 [Reserved]
4280.36 What are some other laws that contain compliance
requirements for this program?
How Do I Apply and How Much May I Request?
4280.37 How do I obtain and submit an application?
4280.38 What are the maximum and minimum amounts I may request for
loans and grants?
4280.39 What must be included in my application for a loan or
grant?
4280.40 [Reserved]
4280.41 What environmental review will be required after I submit
my application?
How Are Applications Selected?
4280.42 How is my application evaluated and how are applications
selected?
4280.43 Is there a possibility for discretionary points and how are
they awarded?
4280.44 Are there limits on the number of loans or grants I may
receive?
4280.45-4280.46 [Reserved]
4280.47 What if I am not selected?
What Must I do After Selection?
4280.48 If I am selected, what documents must I execute?
4280.49 What documents must I submit for approval before I can
receive my funds?
4280.50 How do I obtain the approved loan or grant funds?
4280.51-4280.52 [Reserved]
4280.53 How do I make loan payments?
4280.54 Do I have to follow certain construction procurement
requirements?
4280.55 What are my responsibilities to monitor and review the
project?
4280.56 What reports or audits must I and ultimate recipients
submit?
4280.57-4280.61 [Reserved]
4280.62 How may I appeal an adverse decision?
4280.63 Exception authority.
4280.64-4280.99 [Reserved]
4280.100 OMB control number. [Reserved]
Authority: 5 U.S.C. 301; 7 U.S.C. 940c; 7 CFR 2.17(a)(21).
Subpart A--Rural Economic Development Loan and Grant Program
Am I Eligible Under This Program?
Sec. 4280.1 Point of reference.
This subpart is written from the perspective of questions from an
RUS borrower, the applicant under this program. Therefore, ``I'',
``My'', and ``Me'' in the question and ``You'' and ``Your'' in the
answer in refer to the RUS borrower. ``Our'', ``Us'' and ``We'' in the
answer refer to the Agency.
Sec. 4280.2 What is the Rural Economic Development Loan and Grant
Program?
This program provides financing to Rural Utilities Service (RUS)
electric or telecommunications borrowers to promote rural economic
development and job creation projects.
(a) Loans. Zero-interest loans are made to you, the RUS borrower,
which you, in turn, relend at a zero interest rate to ultimate
recipients. You transmit ultimate recipient repayments of the loan to
the U.S. Treasury.
(b) Grants. Grants are made to you, the RUS borrower, to establish
revolving loan funds and to finance specific projects. You use the
grant funds to make zero-interest loans to ultimate recipients to
finance the approved projects. The repaid principal on these loans is
retained in your revolving loan fund to finance other rural economic
development projects.
Sec. 4280.3 Definitions.
The following definitions are applicable to this subpart:
Advanced telecommunications. Using communications equipment for
purposes, such as the simultaneous transmission of images and voice or
the electronic transmission of data between multiple sites, that do not
consist primarily of providing local exchange voice communications. It
does not include providing only local exchange
[[Page 69941]]
voice telephone service. Providing the local exchange voice telephone
service for an area is not an eligible purpose for funding under this
program.
Agency. The Rural Business-Cooperative Service (RBS), an agency of
the United States Department of Agriculture, or a successor agency.
Agency is referred to in this subpart as ``we'', ``our'', and ``us''.
Agricultural production. The cultivation, production, growing,
raising, feeding, housing, breeding, hatching, or managing of crops,
plants, animals, or birds, either for fiber, food for human
consumption, or livestock feed.
Business incubator. A facility in which small businesses can share
premises, support staff, computers, software or hardware,
telecommunications terminal equipment, machinery, janitorial services,
utilities, or other overhead expenses, and where such businesses can
receive technical assistance, financial advice, business planning
services or other support.
Conflict of interest. A situation in which your officers, manager,
board of directors, their spouses, or children, have a financial
interest in the project, including its construction or development.
Cushion of credit payment. A voluntary unscheduled payment made by
you pursuant to 7 U.S.C. 940c.
Fund. A revolving loan fund that is created in part with grant
funds under this program that makes loans and uses the loan repayments
to make subsequent loans until the fund is terminated.
Grant. A transfer of monies from the Agency to the borrower under
the program other than a loan.
Independent provider. An entity other than the RUS borrower that is
not owned by a subsidiary or an affiliate of the RUS borrower.
Loan. A zero-interest loan made to the RUS borrower under the
program.
Program. The Rural Economic Development Loan and Grant Program.
Project. The facility, equipment, or other assistance funded under
this program, which is authorized by 7 U.S.C. 940c(b)(2).
Revolving Loan Fund Plan. A plan developed by the RUS borrower that
governs the use of the fund established with grants, including how the
fund will be administered by the RUS borrower, intended uses once the
funds are repaid by the ultimate recipient, and the review and approval
of loans from the fund.
Rural area. Any area of the United States not included within the
boundaries of any urban area, as defined by the United States Bureau of
the Census.
Rural Utilities Service (RUS). The Rural Utilities Service, an
agency of the United States Department of Agriculture, or a successor
agency.
RUS Borrower. An entity that has borrowed funds under the Rural
Electrification Act of 1936. RUS borrower is referred to as ``you'' or
``your'' in the answers and ``I'', ``me'' and ``my'' in the questions.
State. Any of the 50 States, the District of Columbia, the
Commonwealth of Puerto Rico, the Virgin Islands of the United States,
Guam, American Samoa, the Commonwealth of the Northern Mariana Islands,
the Republic of Palau, the Federated States of Micronesia, and the
Republic of the Marshall Islands.
Technical assistance. Managerial, financial and operational
analysis and consultation by independent providers to assist project
owners in identifying and evaluating problems or potential problems and
to provide training that enable project owners to successfully
implement, manage, operate and maintain viable projects.
Ultimate recipient. An entity that receives a loan from you and
which may be a sole proprietorship, corporation, cooperative, political
subdivision of a state or locality, and a Federally recognized Indian
tribe.
Uniform Act. The Uniform Relocation Assistance and Real Property
Acquisition Act of 1970 (42 U.S.C. 4601-4655).
USDA. The United States Department of Agriculture.
Sec. Sec. 4280.4-4280.12 [Reserved]
Sec. 4280.13 Am I eligible to apply?
You are eligible to apply if you are:
(a) A RUS borrower that currently has an outstanding electric or
telephone program debt; or
(b) A former RUS electric borrower that prepaid its direct or
insured electric program loans.
Sec. 4280.14 [Reserved]
What Purposes Are Eligible for Loans?
Sec. 4280.15 What type of projects may I finance with a zero-interest
loan?
You may use zero-interest loans to finance the following types of
economic development or job creation projects for residents of rural
areas:
(a) Start-up costs, including business start-up costs;
(b) Business expansion;
(c) Business incubator projects;
(d) Technical assistance;
(e) Project feasibility studies;
(f) Advanced telecommunications services and computer networks for
medical, educational, and job training services; or
(g) Other rural economic development projects that we approve.
Sec. 4280.16 What would be the terms of my zero-interest loan?
(a) The maximum term of your zero-interest loan is 10 years,
including any principal deferment period.
(b) Deferments will automatically be granted on your request as
follows:
(1) A deferment of principal of up to 1 year for projects involving
a business expansion or established operation; or
(2) A deferment of principal of up to 2 years for projects
involving a start-up venture.
(c) You must provide the ultimate recipient the same repayment
terms you receive from us.
(d) If you are a former RUS electric borrower that prepaid all your
direct or insured electric program loans, you must provide an
irrevocable letter of credit or other security, satisfactory to us, for
the term of the loan as security for our zero-interest loan.
Sec. 4280.17 If I receive a zero-interest loan, what happens if the
ultimate recipient fails to repay me?
You are responsible for fully repaying the zero-interest loan to us
even if the ultimate recipient does not repay you.
Sec. 4280.18 What security do I need on the loan to the ultimate
recipient?
You determine an adequate level of security on your loan to the
ultimate recipient to ensure recovery of funds in the event of
nonpayment of the loan.
What Purposes Are Eligible for Grants?
Sec. 4280.19 What can I use a grant to fund?
You use a program grant to partially finance the fund that you will
operate and administer. Grants are subject to 7 CFR parts 3015 and
3016, as applicable, and any conflicts between 7 CFR parts 3015 and
3016 and this part will be resolved in favor of the applicable
provision of 7 CFR parts 3015 and 3016.
Sec. 4280.20 Do I operate and administer the fund?
Yes, you operate and administer the fund. You may contract for the
daily administration of the fund. However, you must permanently retain
all project review and approval authority.
Sec. 4280.21 What types of projects may I finance with the initial
loans I make from the grant funds I receive?
You may make initial loans from the fund only to:
(a) Non-profit entities or public bodies for community development
projects
[[Page 69942]]
that will create or save employment (but not for projects that are for-
profit businesses). Community facilities must serve a wide area of
beneficiaries in rural areas and must be owned by the non-profit entity
or public body receiving the loan;
(b) Non-profit or for-profit entities, or public bodies for
facilities and equipment to provide education and training to residents
of rural areas that will facilitate economic development;
(c) Non-profit or for-profit entities, or public bodies for
facilities and equipment to provide medical care to residents of rural
areas. Equipment and facilities may be funded to enable eligible
entities to provide medical training and related professional health
care skills to rural health care providers;
(d) Non-profit or for-profit entities, or public bodies for
projects which utilize advanced telecommunications or computer networks
to facilitate medical or educational services or job training;
(e) Non-profit entities or public bodies for business incubators;
or
(f) Non-profit or for-profit entities, or public bodies for project
feasibility studies and technical assistance. An independent provider
must perform feasibility studies. Qualified entities independent of you
and the project owner must provide technical assistance.
Sec. 4280.22 [Reserved]
Sec. 4280.23 What level of contribution must I make into the fund?
You must contribute from your funds an amount equal to 20 percent
of the amount of our funds. The contribution may not be provided from
other federal loans or grants. For example, if you receive a program
grant of $200,000, you must deposit $40,000 of your funds into the
fund.
Sec. 4280.24 How long must my contribution remain in the fund and what
happens if the fund is terminated?
Your contribution must remain until the fund is terminated. Until
the total amount in the fund has been loaned, all loans must be for the
purposes contained in Sec. 4280.21. After the total amount in the fund
has been loaned for the purposes of Sec. 4280.21, you may make loans
from the repayments and any additional amounts you contribute to the
fund for any rural economic development purpose eligible under this
program in accordance with the Revolving Loan Fund Plan. We may
terminate the fund and require repayment of our grant funds if funds
being re-lent are not being used according to the Revolving Loan Fund
Plan. Termination will be in accordance with 7 CFR part 3015 or 3016,
as applicable.
Sec. 4280.25 What must I do in operating the fund?
Your Revolving Loan Fund Plan must specify that:
(a) The initial loans made from the fund using our funds must carry
an interest rate of zero percent and have a maximum term of 10 years;
(b) Loans made from your contribution to the fund and from loan
repayments may carry an interest rate greater than zero percent but
less than, or equal to, the prime rate. You determine the other
repayment terms on these loans;
(c) Until all our funds have been loaned, each loan from the fund
will consist of your contribution and our contribution in the ratio of
the respective contributions to the fund. The interest rate for our
contribution will be at zero percent and the interest rate on your
contribution will be based on paragraph (b) of this section. Whether or
not multiple projects are involved, the percent of your funds in a loan
cannot be less than the percent you have contributed in accordance with
Sec. 4280.23. Loan security and recovery of loan losses must provide
for the pro rata recovery and distribution between you and us based on
the respective amounts of each contribution to the total loan amount
for the project;
(d) Loans made from repayments of the initial and subsequent loans
may be used for any rural economic development purpose eligible under
this program in accordance with the Revolving Loan Fund Plan. These
loans may carry an interest rate greater than zero percent. The maximum
interest rate is the prime rate; and
(e) Once you have provided assistance with project loans in an
amount equal to the grant monies provided by us, future loans from the
fund shall not be considered as being derived from federal funds.
Sec. 4280.26 May I use grant funds to cover operating costs of the
fund?
Yes, up to 10 percent of our grant funds may be applied toward
operating expenses of the fund. Operating expenses include the costs of
administering the fund and technical assistance provided to project
owners by independent entities.
What Is Not Eligible for Either a Loan or Grant?
Sec. 4280.27 What may I not do with program funds?
You may not use zero-interest loans and grants:
(a) For any costs incurred on the project prior to our receipt of
your completed application;
(b) For activities that would adversely affect the environment, or
activities that limit the choice of reasonable alternatives prior to
satisfying our environmental requirements;
(c) To pay off or refinance your existing indebtedness incurred
prior to our receipt of your completed application unless approved by
us;
(d) For any electric or telephone purpose; or for your electric or
telephone operations or other affiliated operations except those
purposes contained in Sec. 4280.15(f);
(e) To pay the salaries of your employees or those of your owner,
its subsidiaries, or affiliates except for salaries incurred in
administering a fund established under this program;
(f) For community antenna television systems or facilities;
(g) For residential purposes such as residential dwellings and land
sites; facilities to provide entertainment television; or personal,
non-business related vehicles;
(h) Where you have a conflict of interest in the project;
(i) For any purpose when receipt of loan funds is conditioned upon
the requirement that the ultimate recipient acquire electric or
telephone service from you;
(j) For an otherwise eligible project when any of the revenues of
the project are derived from a gambling activity;
(k) For a project that would result in the transfer of existing
employment or business activity more than 25 miles from its existing
location;
(l) For proposed projects located in areas covered by the Coastal
Barrier Resources Act (16 U.S.C. 3501-3510);
(m) For any illegal activity or any activity involving
prostitution; or
(n) For agricultural production.
Sec. 4280.28 [Reserved]
What Are the Other Terms and Conditions for Loans and Grants?
Sec. 4280.29 Do I need supplemental financing?
(a) Is supplemental financing for the project required? Yes, the
ultimate recipient must have supplemental financing at least equal to
20 percent of the zero interest loan and grant.
(b) What are possible sources? The owner of the project, banks,
other governmental sources, the RUS borrower, or other appropriate
sources may provide the supplemental funds.
(c) What are the timeframes for supplying these funds? Only
supplemental funds that are provided to
[[Page 69943]]
the project after we receive your completed application may be used to
meet this requirement.
(d) When must I obtain commitments for the supplemental funds? The
funds must be committed in writing to the project before we will
advance any funds to you.
Sec. 4280.30 What other restrictions are there on the use of loan or
grant funds?
(a) You must not own or manage any ultimate recipient project,
unless the project is acquired as a result of servicing a loan made
from the fund.
(b) You may charge reasonable loan servicing fees, which are
limited to one percent of the principal amount outstanding on the loan,
reasonable professional service fees that are customary for the service
being provided and in accordance with any standard fee schedules that
have been established for the service, and expenses you have incurred
from independent providers.
(c) Any interest earned on advances of our loan or grant funds must
be returned to the Agency.
Sec. Sec. 4280.31--4280.35 [Reserved]
Sec. 4280.36 What are some other laws that contain compliance
requirements for this program?
(a) Equal opportunity and nondiscrimination requirements. All loans
and grants made under this subpart are subject to the nondiscrimination
provisions of title VI of the Civil Rights Act of 1964, (42 U.S.C.
2000(d)); section 504 of the Rehabilitation Act of 1973, (29 U.S.C.
794); and the Age Discrimination Act of 1975, (42 U.S.C. 6101-6107).
(b) Architectural barriers. All facilities financed with zero-
interest loans or grants that are open to the public or in which
persons may be employed or reside must be designed, constructed, or
altered to be readily accessible to, and usable by disabled persons.
Standards for these facilities must comply with the Architectural
Barriers Act of 1968, (42 U.S.C. 4151-4157) and the ``Uniform Federal
Accessibility Standards'', (41 CFR part 101.19, subpart 101--19.6,
Appendix A).
(c) Uniform relocation assistance. Relocations in connection with
this program are subject to 49 CFR part 24 as referenced by 7 CFR part
21, ``Uniform Relocation Assistance and Real Property Acquisition for
Federal and Federally Assisted Programs,'' except that the provisions
in title III, ``Uniform Real Property Acquisition Policy,'' of the
Uniform Act do not apply to this program.
(d) Drug-free workplace. Grants made under this program are subject
to the requirements contained in 7 CFR part 3017, subpart F, ``Drug-
Free Workplace Requirements (Grants)'', which implements the Drug-Free
Workplace Act of 1988 (41 U.S.C. 701-706). A borrower requesting a
grant will be required to certify that it will establish and make a
good faith effort to maintain a drug-free workplace program.
(e) Debarment and suspension. The requirements of 7 CFR part 3017,
subparts A through E, regarding Governmentwide debarment and suspension
(nonprocurement) are applicable to this program.
(f) Intergovernmental review of Federal programs. This program is
subject to the requirements of Executive Order 12372,
``Intergovernmental Review of Federal Programs'' (3 CFR 1982 Comp., p.
197) and 7 CFR part 3015, subpart V, ``Intergovernmental Review of
Department of Agriculture Programs and Activities,'' which implements
Executive Order 12372. Proposed projects are subject to the state and
local government review process contained in 7 CFR part 3015.
(g) Restrictions on lobbying. The restrictions and requirements
imposed by 31 U.S.C. 1352, entitled ``Limitation on Use of Appropriated
Funds to Influence Certain Federal Contracting and Financial
Transactions'' and the implementing regulation, 7 CFR part 3018, ``New
Restrictions on Lobbying,'' are applicable to this program.
(h) Earthquake hazards. This program is subject to the seismic
requirements of the Earthquake Hazards Reduction Act of 1977 (42 U.S.C.
7701-7706).
(i) Environmental requirements. The requirements of 7 CFR part
1940, subpart G, are applicable to the program and the loans made from
the revolving loan fund using our funds.
(j) Affirmative fair housing. If applicable, the RUS borrower will
be required to comply with the Affirmative Fair Housing Act (42 U.S.C.
3601-3631)
How Do I Apply and How Much May I Request?
Sec. 4280.37 How do I obtain and submit an application?
(a) You may obtain forms that supplement the written narrative
sections of your application from the USDA Rural Development State
Office for the state where the project is located.
(b) You need to file an original only of your application with the
USDA Rural Development State Office on any official working day.
Sec. 4280.38 What are the maximum and minimum amounts I may request
for loans and grants?
During a fiscal year:
(a) The maximum amount of a single loan application is 3 percent of
the available fiscal year loan funds, or $200,000, whichever is
greater. This is a limit on the maximum amount of an application, not
the number of applications.
(b) The maximum amount of a single grant application is 3 percent
of the available fiscal year grant funds. This is a limit on the
maximum amount of an application, not the number of applications.
(c) We will publish a notice of available fiscal year loan and
grant funds and the maximum loan and grant amounts per application in
the Federal Register on an annual basis.
(d) The minimum loan or grant amount to you is $20,000.
Sec. 4280.39 What must be included in my application for a loan or
grant?
Your application for a loan and a grant must contain the following:
(a) Required forms and certifications:
(1) ``Application for Federal Assistance,'' signed by you;
(2) A board resolution certified by your board secretary. The board
resolution must indicate whether you are requesting a loan or grant,
agree to the provisions of this subpart and loan or grant agreement,
and that you have the legal authority to enter in a loan or grant
agreement under this program;
(3) ``Certification Regarding Debarment, Suspension, and Other
Responsibility Matters--Primary Covered Transactions,'' and
``Ineligibility and Voluntary Exclusion--Lower Tier Covered
Transactions'';
(4) Assurance statement for the Uniform Act signed by the ultimate
recipient. This statement provides us with the required assurance
statement that any relocations of persons or acquisitions of real
property, as part of completing this project, will be handled in
accordance with this statute;
(5) ``Certification for Contracts, Grants and Loans'' (If your loan
is greater than $150,000 or your grant is greater than $100,000);
(6) ``Disclosure of Lobbying Activities,'' (If you engage in
lobbying activities);
(7) ``Certification Regarding Drug-Free Workplace Requirements
(Grants),'' for grants only;
(8) Seismic certification if construction of a building is
proposed. The project owner certifies that any building constructed
will comply with standards that reduce the damage caused by
earthquakes; and
[[Page 69944]]
(9) ``Request for Environmental Information''.
(b) Your written narrative section of the application must consist
of the following:
(1) Project description, including the work to be performed with
our funds;
(2) A discussion of how the project meets each selection factor in
Sec. 4280.42(b);
(3) A Revolving Loan Fund Plan. A plan is required if you apply for
a grant to establish a fund.
Sec. 4280.40 [Reserved]
Sec. 4280.41 What environmental review will be required after I submit
my application?
(a) We will conduct a review of the environmental impact of the
project in your application and inform you of any additional
information we need and any environmental requirements for the project.
(b) We will conduct all necessary environmental reviews as
prescribed in 7 CFR part 1940, subpart G. These reviews must be
completed before your application can be considered for approval.
How Are Applications Selected?
Sec. 4280.42 How is my application evaluated and how are applications
selected?
(a) We will evaluate your application and score it based on the
selection factors in this section. All applications will be ranked on a
nationwide basis based on the total points scored.
(b) Your application will be evaluated and scored using the
information provided in accordance with Sec. 4280.39(b)(2). Points will
be awarded based on the following:
(1) Nature of your project. We will award points based on whether
your project:
(i) Is a for-profit business start-up or expansion, business
incubator, industrial building or park, or infrastructure necessary to
connect only for-profit businesses to existing infrastructure--20
points;
(ii) Provides technical assistance to rural businesses or rural
residents, or educates or provides medical care to rural residents--20
points;
(iii) Will enhance rural economic development by providing advanced
telecommunications services and computer networks for medical,
educational, and job training services. This review will be based on
your application's telecommunications design--20 points.
(2) Number of full-time jobs.
------------------------------------------------------------------------
If the number of direct full-time rural
jobs either created or saved per $100,000 Then we will award
of total project costs is
------------------------------------------------------------------------
(i) Greater than five.................... 25 points;
------------------------------------------------------------------------
(ii) From one to five.................... 15 points.
------------------------------------------------------------------------
(3) Supplemental funds for your project. Points will be based on a
calculation of the amount of supplemental funds to be provided to the
project. Supplemental funds must be provided on a pro rata basis to the
project within a 12 month period that begins on the day our funds are
provided to the project. All supplemental funds used in the following
calculation must be disbursed to the project between the date of our
receipt of your application and 1 year after our first advance of
funds:
------------------------------------------------------------------------
If supplemental funds as a percentage of
the Agency loan or grant to be provided Then we will award
to the project are
------------------------------------------------------------------------
(i) Greater than 200%.................... 20 points;
------------------------------------------------------------------------
(ii) From 100% to 200%................... 10 points;
------------------------------------------------------------------------
(iii) From 50% to less than 100%......... 5 points.
------------------------------------------------------------------------
(4) Unemployment rate for the county(ies) where your project is
located. We will compare the unemployment rate(s) in the county(ies) to
the state and national unemployment rates, as follows:
------------------------------------------------------------------------
If the unemployment rate(s) in the
county(ies) where your project will be Then we will award
located
------------------------------------------------------------------------
(i) Exceeds the national unemployment 15 points;
rate by 30% or more.
------------------------------------------------------------------------
(ii) Is greater than the national 5 points;
unemployment rate, but is less than 130%
of the national unemployment rate.
------------------------------------------------------------------------
(iii) Exceeds the state unemployment rate 10 points;
by 30% or more.
------------------------------------------------------------------------
(iv) Is greater than the state 5 points.
unemployment rate but is less than 130%
of the state unemployment rate.
------------------------------------------------------------------------
(5) Median household income for the county(ies) where your project
is located. We will compare the median household income in the
county(ies) where your project will be located to the national and
state median household income levels, as follows:
[[Page 69945]]
------------------------------------------------------------------------
If the median household income level in
the county(ies) is: Then we will award
------------------------------------------------------------------------
(i) Less than or equal to 90% national 15 points;
level.
------------------------------------------------------------------------
(ii) Between 90 and 100% of the national 5 points;
level.
------------------------------------------------------------------------
(iii) Less than or equal to 90% state 10 points;
level.
------------------------------------------------------------------------
(iv) Between 90 and 100% of the state 5 points.
level.
------------------------------------------------------------------------
(6) Decline in population for the county(ies) where your project is
located. If there has been a long-term decline in population in the
county(ies) where your project will be located over the time period
covered by the three most recent decennial censuses of the United
States to the present--10 points.
(7) Cushion of credit payments. We will determine the level of your
cushion of credit payments, as follows:
------------------------------------------------------------------------
If your cushion of credit account level
is Then we will award
------------------------------------------------------------------------
(i) In excess of $300,000, or a dollar 15 points;
amount in excess of three percent of
your total assets, whichever is less.
------------------------------------------------------------------------
(ii) Within the range of $100,000 to less 10 points;
than $300,000, or a dollar amount that
is within the range of one percent to
less than three percent of your total
assets, whichever is less.
------------------------------------------------------------------------
(iii) Within the range of $10,000 to less 5 points.
than $100,000, or a dollar amount that
is within the range of 0.5 percent to
less than one percent of your total
assets, whichever is less.
------------------------------------------------------------------------
(8) Initial loan and grant. If your loan application would be the
first loan awarded to you under this program or the grant application
is the first grant awarded to you under this program--10 points.
(9) County participation. If your project would be the first
project this program financed in the county where your project is to be
located--10 points.
(10) Ultimate recipient's plan. We will evaluate the ultimate
recipient's business plan or telecommunications design that would
include the following:
(i) A description of the business or project plans and, if
applicable, its products and operating plans. (For applications for
advanced telecommunications, the business plan we evaluate would be the
application's telecommunications and engineering design)--15 points;
and
(ii) An appropriate financial plan, including a feasibility study
with projected balance sheets, income statements and cash flow
statements for the term of the loan--20 points.
Sec. 4280.43 Is there a possibility for discretionary points and how
are they awarded?
Yes, the Administrator, based on the State Director's
recommendation, has the discretion to designate up to 25 points based
on whether your project:
(a) Is located in a Rural Empowerment Zone, Rural Enterprise
Community, or Champion Community;
(b) Is located in a county that has experienced the loss, removal,
or closing of a major source or sources of employment in the last 3
years which causes an increase of 2 percentage points or more in the
county's most recent unemployment rate compared with the period
immediately before the dislocation;
(c) Is located in a county that has experienced chronic or long-
term economic deterioration;
(d) Utilizes advanced telecommunications or computer networks to
facilitate medical or educational services or job training;
(e) Is located in a county that was designated a disaster area by
the President of the United States or Secretary of Agriculture that
significantly affected rural economic development and job creation. The
county must have been designated within 3 years prior to your applying
to us; or
(f) Is consistent with the Rural Development State Office's
approved strategic plan and mission area objectives.
Sec. 4280.44 Are there limits on the number of loans or grants I may
receive?
Yes, depending on the amount of funds available, we may limit you
to one selected grant application and two selected loan applications in
a fiscal year.
Secs. 4280.45-4280.46 [Reserved]
Sec. 4280.47 What if I am not selected?
(a) If you are not selected, you may elect to have your application
reconsidered.
(b) Your application will be considered for a total of four of our
selection competitions. You may reapply if the application is revised
and be considered for another four selection competitions.
What Must I do After Selection?
Sec. 4280.48 If I am selected, what documents must I execute?
We will notify you in writing if your application is selected. The
documents to be executed will include:
(a) Loan. (1) A Letter of Agreement with specific terms and
conditions;
(2) A loan agreement with general terms and conditions;
(3) A note covering the repayment terms of the loan; and
(4) A legal opinion concerning your authority to engage in the
project.
(b) Grant. (1) A Letter of Agreement with project specific terms
and conditions;
(2) A grant agreement with general terms and conditions; and
(3) A legal opinion concerning your authority to participate in the
project.
Sec. 4280.49 What documents must I submit for approval before I can
receive my funds?
We must approve any agreements or changes in agreements between you
and the ultimate recipient. We must also approve agreements involved in
any multi-step financial transaction that involves lending our funds to
any intermediate entities, which will subsequently lend the funds to
the ultimate recipient.
Sec. 4280.50 How do I obtain the approved loan or grant funds?
(a) We will disburse zero-interest loan funds to you in accordance
with the terms of the executed loan agreement. All loan funds will be
disbursed in
[[Page 69946]]
advance to you at one time once you have complied with our
requirements.
(b) We will disburse grant funds to you in accordance with 7 CFR
parts 3015 and 3016, as applicable. Specifically, we will disburse the
grant funds in advance if the following requirements are met:
(1) You have demonstrated to us the willingness and ability to
establish written procedures that will minimize the time elapsing
between the transfer of funds from us and their disbursement to the
ultimate recipient;
(2) Your financial management system meets the requirements of 7
CFR parts 3015 and 3016, as applicable;
(3) All necessary supplemental funds for the project have been
obligated or committed to the project; and
(4) Your request for cash advances from us are limited to the
minimum amounts needed and timed to be in accordance with the actual,
immediate cash needs of carrying out the project.
(c) You must provide to the ultimate recipient all loan funds that
we have disbursed to you within 6 months of your receiving them.
Secs. 4280.51-4280.52 [Reserved]
Sec. 4280.53 How do I make loan payments?
You must make all loan payments to us by electronic funds transfer
or other means as specified in the loan documents.
Sec. 4280.54 Do I have to follow certain construction procurement
requirements?
Yes, construction, including bidding and awarding of contracts,
must be conducted in a manner that provides maximum open and free
competition.
Sec. 4280.55 What are my responsibilities to monitor and review the
project?
(a) If you receive a loan or grant, you must monitor the project to
the extent necessary to ensure that:
(1) Funds are used only for approved purposes;
(2) Disbursements and expenditures of funds are properly supported
with certifications, invoices, contracts, bills of sale, or other forms
of evidence, which are maintained on your premises;
(3) Project time schedules are being met, projected work by time
periods is being accomplished, and other performance objectives are
being achieved; and
(4) The project is in compliance with all applicable regulations.
(b) We may inspect and copy your records and documents that pertain
to the project which you must retain for the term of the project loan
plus 2 years. In addition, we may also perform project site visits and
reviews of the use of loan or grant proceeds.
(c) We will review and monitor grants in accordance with
appropriate United States Department of Agriculture regulations at 7
CFR parts 3015, 3016, 3017, 3018, and 3052.
Sec. 4280.56 What reports or audits must I and ultimate recipients
submit?
(a) If you receive a loan or grant, you must submit the following
report:
(1) Loan. You must submit the ``Survey of Recipients of Rural
Economic Development Loan and Grant Program,'' to us on an annual basis
until the project is completed.
(2) Revolving Loan Fund (Grant). You must submit the ``Survey of
Recipients of Rural Economic Development Loan and Grant Program,'' to
us on an annual basis until the projects financed with our proceeds are
completed and, thereafter, on a triennial basis until the fund is
terminated.
(b) If you have an outstanding loan with RUS, we will obtain a copy
of your audit from RUS. If you do not have an existing loan with RUS,
you will need to submit a copy of your annual audit to us. All audits
must be conducted in accordance with Generally Accepted Government
Auditing Standards and/or Generally Accepted Accounting Principles.
(c) We may require ultimate recipients of grant funds provided
under this program to submit annual audits to comply with federal audit
regulations. In accordance with 7 CFR part 3052, if an ultimate
recipient spends $300,000 or more of Federal funds in one year and they
are a nonprofit entity, or a State or local government, then they may
be required to submit an audit.
Secs. 4280.57-4280.61 [Reserved]
Sec. 4280.62 How may I appeal an adverse decision?
You may appeal any appealable adverse decision we make that affects
you in accordance with 7 CFR part 11.
Sec. 4280.63 Exception authority.
The Administrator of the Agency may, in individual cases, grant an
exception to any non-statutory requirement or provision of this
subpart, provided the Administrator determines in writing that the
application of the requirement or provision would adversely affect
USDA's interest.
Secs. 4280.64-4280.99 [Reserved]
Sec. 4280.100 OMB control number. [Reserved]
Dated: December 3, 1999.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 99-32009 Filed 12-14-99; 8:45 am]
BILLING CODE 3410-XY-U
