## PART 1781 - RESOURCE CONSERVATION AND DEVELOPMENT (RCD) LOANS

## AND WATERSHED (WS) LOANS AND ADVANCES

## **Table of Contents**

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

PART 1781

Resource Conservation and Development (RCD)

Loans and Watershed (WS) Loans and Watershed Advances

§1781.1 [Purpose]{.underline}.

This part prescribes the policies and procedures for making:

\(a\) Watershed (WS) loans and Watershed (WS) advances for works of
improvement in a watershed project; and

\(b\) Resource Conservation and Development (RCD) loans for measures or
projects needed to implement the RCD area plan to achieve objectives in
an RCD area.

§1781.2 [Policy]{.underline}.

\(a\) 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 the Department of
Agriculture Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat.
3178), successor to the Soil Conservation Service (SCS). RUS will make
WS and RCD loans available to sponsoring local public bodies, agencies,
and nonprofit organizations to assist them in obtaining the local cost
of WS works of improvement and RCD measures. Any processing or servicing
activity conducted pursuant to this part involving authorized assistance
to RUS employees, members of their families, known close relatives, or
business or close personal associates, is subject to the provisions of
subpart D of Part 1900 of this title. Applicants for this assistance are
required to identify any known relationship or association with an RUS
employee. RUS will assist the local sponsors and the NRCS in making
loans from NRCS construction funds as WS advances when needed for the
development of future water supplies or for site preservation.

\(b\) Rural Development State and local offices will administer these
programs on behalf of RUS and will coordinate application processing
with the NRCS and other appropriate State and Federal agencies.

§1781.3 [Authorities, responsibilities and delegation of
authority]{.underline}.

\(a\) 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.]{.underline}) or Public Law 566 (83rd Cong.) funds authorized in
the Watershed Protection and Flood Prevention Act of 1954 (68 Stat. 666)
to cover a part or all of the local cost for a watershed work of
improvement.

\(c\) WS loans and WS advances may be made to project sponsors in
watershed project areas for which:

\(1\) A watershed work plan has been approved administratively or by
resolutions adopted by the Committee on Agriculture and Forestry of the
Senate and by the Committee on Agriculture of the House of
Representatives; and

\(2\) Federal assistance has been authorized for the installation of
works of improvement by the Administrator of NRCS.

\(d\) RCD loans may be made in areas authorized for RCD program
assistance by the Secretary of Agriculture and for which an RCD plan
design or area plan has been accepted by the State NRCS Conservationist.

\(e\) Delegation of authority. The Rural Development State Director is
authorized to approve WS and RCD loans subject to limitations in RUS
Staff Instruction 1780-1 and conditions of this Part. The Rural
Development State Director is authorized to relegate authority in
accordance with this Part to the Chief, Community Programs; or other
members of the State Office staff.

\(f\) NRCS is responsible for providing technical and financial
assistance to sponsoring local organizations for planning and developing
WS and RCD areas. This includes development of WS and RCD plans and WS
works of improvement and RCD measures or projects.

\(g\) RUS is responsible for making and servicing WS loans and advances
and RCD loans.

\(h\) The NRCS - RUS Agreements in RUS Bulletin's 1781-1 and 1781-2
include further responsibilities and functions of NRCS and RUS in WS and
RCD areas.

§1781.4 [Definitions]{.underline}.

\(a\) [Watershed (WS) project]{.underline}. 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]{.underline}. One of the 11 watersheds
authorized by Congress in the Flood Control Act of 1944, Public Law
78-534 as amended.

\(2\) [Public Law-566 Watershed]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. An activity or development
indicated in the RCD area plan as being needed to achieve RCD area goals
and objectives.

\(h\) [Cost sharing]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. A loan made by RUS from watershed
funds to a sponsoring local organization to develop a WS work of
improvement.

\(n\) [RCD loan]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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.]{.underline} Means the office designated by
the Rural Development State Director to accept and process applications
for WS and RCD loans and advances.

§1781.5 [Eligibility]{.underline}.

To be eligible for a WS loan, WS advance, or an RCD loan, the sponsoring
local organization must meet the following requirements as applicable.
Questions on eligibility will be referred to the Regional Attorney, OGC
for legal advise prior to development of a loan docket.

\(a\) Be named in the WS or RCD plan as a sponsor of the development to
be financed.

\(b\) Be legally organized and established in the WS or RCD area with
legal authority, responsibility and capability to develop and operate
the facility for which assistance is requested.

\(c\) Have authority under and comply with Federal, State and local laws
on such matters as;

\(1\) Organizing, installing, operating, and maintaining proposed WS
works of improvement or RCD measures or projects.

\(2\) Borrowing money, giving security, levying taxes, making
assessments or raising revenues for operation and maintenance of the
facility and repayment of loans.

\(3\) Land use zoning.

\(4\) Acquiring necessary property, lands, and rights.

\(5\) Obtaining approval of construction plans and specifications by
appropriate Federal, State, and local agencies and construction
facilities.

\(6\) Health and sanitation standards, water pollution control, and
environmental regulations.

\(7\) Design and installation standards.

\(8\) Public service commission or similar State public body rules and
regulations.

\(d\) Be financially sound and capable of providing service essential to
the rural development needs of the area.

\(e\) If it is a nonprofit corporation.

\(1\) Membership should be broadly based and representative of the area
benefiting from the facility. Membership on the governing board of the
corporation will be limited to those living in the area to be benefited
unless for justifiable reasons the Rural Development State Director
gives prior approval for other than local residents to serve on the
board of directors.

\(2\) The corporation must propose a facility which will primarily serve
or generate other substantial, tangible benefits for farmers and other
residents of the area. In the case of a recreational development at
least two-thirds of the membership must be farmers and other residing in
the area.

\(3\) Nonprofit corporations will not be formed to serve an area which
could be served by a public agency which has adequate authority to
provide the needed service unless prior approval of the National Office
is obtained.

§1781.6 [Loan purposes]{.underline}.

\(a\) [WS and RCD loans]{.underline}. 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-ways to be acquired. In some
cases, sponsoring local organizations may need to acquire lands in
excess of actual needs when it is expedient for planned development. If
the Rural Development State Director determines that the acquisition of
excess land is necessary or expedient for the orderly development of a
WS works of improvement, or RCD measure, he may authorize the action
subject to the following conditions:

\(i\) The applicant must agree to sell excess land as soon as
practicable and apply the proceeds, together with any income from excess
land, on the debt to RUS.

\(ii\) The applicant must furnish legal evidence of authority to acquire
additional land and dispose of it as agreed.

\(iii\) Evidence must be provided to justify acquisition of additional
land.

\(iv\) Easements for land or water resource protection structures must
be perpetual and must not include clauses that terminate the easement
with the dissolution or abandonment of the applicant organization. Loan
funds will not be used for an easement that deviates in any way from
that provided in the standard NRCS form unless modifications of it are
approved by both NRCS and RUS.

\(10\) Acquisition of water supply or water right by purchase or by
appropriation under local, State, and Federal laws. The loan may include
funds for the purchase of land on which the water supply or water right
is presently being used when:

\(i\) The water supply or water right cannot be purchased without the
land; and

\(ii\) The value of the land is not the major portion of the cost; and

\(iii\) Any excess land thus acquired will be sold as soon as possible
and the proceeds applied on the loan.

\(11\) Purchase of equipment and machinery necessary for development and
operation of planned WS works of improvement or RCD measures or projects
including:

\(i\) [Special-purpose equipment]{.underline}. 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]{.underline}. 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, business, 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 RUSRUS.

\(15\) 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]{.underline}. Purposes for which RCD loans may be made
in addition to those included in paragraph (a) of this section are:

\(1\) [Solid waste management]{.underline}. 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]{.underline}. Lands for uses such as grazing,
forestry, wildlife, natural areas and parks, greenbelts, and other open
spaces.

\(3\) [Purchase existing facilities]{.underline}. 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.]{.underline} NRCS watershed advances are
loans that may be made from NRCS construction funds for the following
purposes included in a watershed work plan agreement:

(1i) To pay construction costs including cost of engineering and related
services for increasing reservoir capacity (including intake and outlet
structures) for a future water supply for municipal, domestic,
industrial, or agricultural uses.

\(2\) To preserve sites for authorized watershed works of improvement by
acquiring land, easements, and rights-of-ways or other property rights.

§1781.7 [Loan and advance limitations and obligations incurred before
loan closing]{.underline}.

\(a\) [WS and RCD loan limitations]{.underline}.

\(1\) Loans will not be used for:

\(i\) Land treatment measures on individual farms except as provided in
§1781.6 (a) (5) (iv).

\(ii\) Buildings and facilities to be used for lodging, dining or
entertainment purposes.

\(iii\) Building industrial parks or constructing facilities in them, or
establishing private industrial or commercial enterprises, or purchasing
land to be used primarily for industrial purposes.

\(iv\) Paying costs allocated to structural measures for flood
prevention.

\(v\) Facilities for the production and harvesting of fish and wildlife
such as hatcheries, rearing ponds, and related facilities other than
those under natural conditions.

\(vi\) Facilities primary for treatment and distribution of water or for
sewerage, collection and treatment for domestic or industrial use or for
municipal or community systems.

\(vii\) Electric generating, transmission, and distribution facilities,
except when provided as part of the minimum basic facilities for
recreation and fish and wildlife developments authorized in §1781.6 (a)
(7).

\(viii\) Storm and sanitary sewers and solid waste disposal facilities
other than authorized in §1781.6 (b) (1).

\(ix\) Payment for a tract of land, easements, or rights-of-ways on
which NRCS will share the cost if the amount to be paid with loan funds
exceeds the difference between the NRCS share and the value on which the
NRCS share is based.

\(x\) Purchasing tracts of land primarily for later resale to private
developers or individuals for agricultural or nonagricultural use.

\(xii\) Buildings for residential, commercial, or industrial, use.

\(xiii\) Developments on private property primarily for the benefit of
the individual property owner.

\(xiv\) Payment of that part of the cost of facilities, improvements,
and practices that could be earned by participation in agricultural
conservation programs unless such cost cannot be covered by purchase
orders or assignments to material suppliers or contractors. If a loan is
made for such purposes for which practice or cost share payments exceed
\$500, RUS will obtain an assignment on such payments to be paid on the
loan.

\(xv\) Primarily for water and sewage treatment plants and distribution
systems.

\(xvi\) Drainage facilities primarily for the benefit of other than
rural areas.

\(xvii\) Any single RCD measure that requires a loan of more than
\$500,000.

\(xviii\) The total amount of principal outstanding for all WS loans
made for one or more watershed works of improvement in a single
watershed project, whether made to one or more sponsoring organizations,
will not exceed \$10,000,000.

\(b\) [Watershed advance limitations]{.underline}.

\(1\) A WS advance for future water supply will not be used for
acquiring property rights including lands, easements, and rights-of-way;
water rights; administration of contracts; storage capacity for
immediate municipal use; pipelines from the reservoir to place of use;
or for other uses such as irrigation, fish and wildlife, and recreation.

\(2\) A WS advance for increasing reservoir capacity for future water
supply will not exceed 30 percent of the total installation cost of one
structure.

\(3\) A WS advance for site preservation will not exceed that determined
necessary by NRCS except to purchase land in excess of actual needs in
accordance with the provisions of §1781.6 (a) (7).

\(4\) Before a project agreement is entered into, there must be
satisfactory evidence that the borrower will develop the site to be
acquired or will use the future water supply and that revenue will be
sufficient to meet all scheduled installments.

\(c\) [Obligations incurred before loan closing]{.underline}.

\(1\) WS loans, WS advances, and RCD loans may be used for payment of
obligations incurred before loan closing when the Rural Development
State Director determines that:

\(i\) The obligations incurred are necessary for planned developments;
and

\(ii\) The obligations are incurred for authorized loan purposes; and

\(iii\) Contracts and construction plans meet RUS and NRCS standards;
and

\(iv\) The applicant has legal authority to incur the obligations at the
time proposed; and

\(v\) The Rural Development State Director authorizes such action in a
letter to the applicant.

\(2\) The Rural Development State Director\'s letter will specifically
state that the permission is granted on the condition that RUS is not
committed to make a loan and assumes no responsibility for any
obligation incurred by the applicant because of the permission granted
and that the loan will be closed subject to compliance with agency
regulations including closing instructions of the Regional Attorney
Office of the General Counsel.

§1781.8 [Rates and terms - WS loans and WS advances and RCD
loans]{.underline}.

\(a\) [Interest rates]{.underline}. 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]{.underline}. 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]{.underline}. Deferred or partial
payments may be authorized in the following circumstances:

\(1\) Payments need to be delayed until the receipt of income from taxes
or other revenues is enough to meet a regular installment but not
exceed:

\(i\) The completion date of the facility; or

\(ii\) The date when benefits from the facility begins; but

\(iii\) In no case for more than 5 years for other than future water
supply.

\(2\) Payments will depend on the increased returns expected from
planned improvements, or from the installation on individual farms of
land development or other soil and water improvements essential for
obtaining benefits from the improvement to be installed with loan funds.

\(3\) They will not be used to permit the accelerated payment of other
debts, to make capital improvements, or to create operating reserves.

\(4\) Where prohibited by State statutes; interest payments will not be
deferred even though payments on principal may be deferred.

\(5\) Loans or advances for future water supply will be repaid within
the life of the reservoir structure but in no event later than 50 years
for WS and 30 years for RCD after the reservoir structure is built.
Payments on the principal amount may be deferred one year after the
water is first used from the storage capacity installed with the advance
or for 10 years from the scheduled completion date of the structures,
whichever occurs first.

\(i\) Interest will begin for a future water supply as required by State
law, or when water is first used from the future storage capacity or 10
years from the scheduled date of completion of the facility, whichever
occurs first.

\(ii\) If State law requires that interest be charged and repaid before
water is first used or earlier than 10 years from completion date of the
structure, interest payments will be scheduled to comply with State law
even though payments of principal may be deferred.

\(iii\) The borrower should be encouraged to begin repayments as soon as
practicable after the reservoir is built even though this liberal
deferment policy exists.

\(iv\) WS advances for preservation of sites must be fully repaid before
beginning construction of the works of improvement for which such sites
were acquired.

\(A\) Unless a WS advance is to be repaid with a WS loan, installments
will be scheduled at the earliest possible date following the date of
closing the advance. The date and amount of each such installment will
be fixed to coincide with the receipt of income from taxes or other
revenues.

\(B\) Payments for both principal and interest on a WS advance for
preservation of sites may be scheduled for payment in one installment to
be paid on the

date of the closing of a WS loan which includes funds for the repayment
of the WS advance.

\(C\) Interest on a WS advance for preservation of sites will begin on
the date the WS advance is closed.

\(d\) [Payment amortization and application]{.underline}.

\(1\) A borrower may make prepayments on WS loans, WS advances or RCD
loans in any amount at any time.

\(2\) Payments will be applied first to interest accrued to the date of
the receipt of payment, and second to the principal balance. If the
regular payments plus any prepayments exceed the cumulative amount due,
the excess payments will be applied on the next installment first to
interest, then principal. Loan refunds and proceeds from the sale of
security property, however, will be applied on the final unpaid
installment.

\(3\) Payments will be scheduled annually beginning one year following
the date of loan closing or one year following the end of any approved
deferment period, unless another annual due date is required by State
statute or upon prior written authorization from the National Office. In
those cases where loans are being made under statutes requiring a
repayment date other than this, the Rural Development State Director
will send a copy of the Regional Attorney\'s opinion that such is
required, to the Finance Office.

\(4\) When a single obligation instrument is used, amortized
installments will be required. When this cannot be done because of state
law, serial bonds or a single bond having installments of principal plus
interest, stated separately, will be used. In cases where the payment of
interest has been deferred, all collections will be applied to interest
until such interest has been paid. Also, when a full installment is not
paid when due, the payment made will be applied first to accrued
interest.

\(5\) In cases where the indebtedness will be represented by serial
bonds or a single bond having installments of principal plus interest,
stated separately, annual payments of principal and interest will be
scheduled to permit them to be paid in amounts approximately equal to
the amounts that would be required for annual amortized installments.

\(6\) If the borrower will be retiring other debts represented by bonds
or notes, the payment on such bonds may be considered in developing the
payment schedule for the RUS loan. In some cases, it may be desirable to
reduce the amount of payments to RUS in the early years of the loan in
order to preclude the necessity for refinancing the outstanding debt.
When such payment schedules are proposed, National Office authorization
will be obtained prior to loan approval.

\(7\) Payment date. Insofar as loan payments are consistent with income
availability, applicable State statutes, and commercial customs in the
preparation of bonds or other evidence of indebtedness, they should be
scheduled on a monthly basis either in the bond or other evidence of
indebtedness or through the use of a supplemental agreement. Such
requirements will be accomplished not later than the time of loan
closing. When monthly payments are required, such payments will be
scheduled beginning one full month following the date of loan closing or
the end of any approved deferment period. Subsequent monthly payments
will be scheduled each full month thereafter. In those cases where
evidence of indebtedness calls for annual or semiannual payments, they
will be scheduled beginning six or twelve full months, respectively
following the date of loan closing or the end of any approved deferment
period. Subsequent payments will be scheduled each sixth or twelfth full
month respectively, thereafter. When the evidence of indebtedness is
dated the 29th, 30th, or 31st day of a month, the payment date will be
scheduled the 28th day of the month.

§1781.9 [Security, feasibility, evidence of debt, title, insurance and
other requirements]{.underline}.

\(a\) [Security]{.underline}. WS loans, WS advances, and RCD loans will
be secured in accordance with applicable provisions of §1780.14 of this
chapter.

\(b\) [Feasibility]{.underline}. All projects financed under the
provisions of this part must be based on taxes, assessments, revenues,
fees, or other satisfactory sources in an amount that will provide for
facility operation and maintenance, a reasonable reserve, and payment of
the debt. The Rural Development State Director may obtain needed
assistance in determining economic feasibility from officials of NRCS
and other appropriate USDA agencies. See §1780.7(f) of this chapter for
applicable economic feasibility requirements and feasibility reports.

\(c\) [Notes, bonds, and bond transcript documents]{.underline}. See
subpart D of Part 1780 of this chapter for applicable requirements and
provisions.

\(d\) [Insurance]{.underline}. See §1780.39(g) of this chapter for
requirements.

\(e\) [National flood insurance]{.underline}. The requirements of the
National Flood Insurance Act of 1968 (42 U.S.C 4001 [et
seq.]{.underline}) as amended by the Flood Disaster Protection Act of
1973 (42 U.S.C. 4003 [et seq.]{.underline}) will be complied with in
accordance with applicable provisions of RD Instruction 1901-L. Also see
§1780.39(g) of this chapter.

\(f\) [Borrower contracts and bonds]{.underline}. See subpart C of Part
1780 of this chapter for applicable provisions.

\(g\) [Title requirements]{.underline}.

\(1\) Title evidence for land, easements, and rights-of-way to be
acquired with proceeds of loans or advances will be furnished by the
sponsoring local organization in accordance with NRCS policies and
procedures.

\(2\) RUS will specify and approve the form and content of instruments
for conveying title to or interest in real estate on which a lien will
be taken to secure a WS loan, WS advance, or RCD loan. These should be
consistent with the applicable provisions of §1780.14 of this chapter.
The Rural Development State Director will make his decision after
consultation with the Regional Attorney and the State Conservationist.
He will notify NRCS in writing of his decision. Thereafter, title
clearance will be completed under NRCS regulations except that a
marketable title must be obtained on any tract of land, a part of which
will be sold as excess land in accordance with §1781.6 (a)(9). In
addition to the title evidence required by NRCS, applicants will furnish
an opinion of legal counsel on all land and interest in land acquired
with loan or advance funds.

\(h\) [Purchasing lands, rights and facilities]{.underline}. 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]{.underline}. Applicants will be required to comply
with applicable State and local laws and regulations governing
appropriating, diverting, storing and using water, changing the place
and manner of use of water, and in disposing of water. All of the rights
of any landowner, appropriator, or user of water from any source will be
fully honored in all respects as they may be affected by facilities
installed with WS loans and advances and RCD loans. If, under the
provisions of State law, notice of the proposed diversion or storage of
water by the applicant may be filed, the applicant will be required to
file such a notice. An applicant must furnish evidence to provide
reasonable assurance that its water rights will be or have been properly
established, will not interfere with prior vested rights, will likely
not be contested or enjoined by other water users or riparian owners,
and will be within the provisions of any applicable interstate compact.

§1781.10 Reserved.

§1781.11 [Other considerations]{.underline}.

\(a\) [Technical assistance]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. Actions will be taken to
comply with the National Environmental Policy Act (42 U.S.C. 4321 [et
seq.]{.underline}) 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]{.underline}. All projects
will comply with the provisions of the National Historic Preservation
Act of 1966 (16 U.S.C. 470 [et seq.]{.underline}) in accordance with RD
Instruction 1901-F.

\(i\) [Civil Rights Act of 1964]{.underline}. 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.]{.underline}) 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]{.underline}. 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]{.underline}. 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.]{.underline}).

§1781.12 [Preapplication and application processing]{.underline}.

\(a\) [WS and RCD Loans]{.underline}.

\(1\) [Preapplications]{.underline}.

\(i\) The processing office or other person designated by the Rural
Development State Director may assist the applicant in completing SF
424.1, \"Application for Federal Assistance (For Non-construction),\"
and will forward one of SF 424.1 to the Rural Development State
Director.

\(ii\) The Rural Development State Director will review SF 424.1 along
with other necessary information and will coordinate selection of
preapplications to be processed with NRCS. He will consult with NRCS
State Conservationist concerning the status of the WS plan or RCD
measure plan, the estimated time schedule for construction and cost of
the proposed works to be installed with the loan, cost sharing funds to
be made available to the applicant, and other pertinent information.

\(iii\) Form AD-622, \"Notice of Preapplication Review Action,\" will be
prepared and signed by the Rural Development State Director within
forty-five (45) days from receipt of the preapplication in the
processing office stating the results of the review action. An original
and one copy of Form AD-622 will be sent to the processing office who
will deliver the original to the applicant.

\(2\) [Applications]{.underline}.

\(i\) 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]{.underline}. WS loan, WS advance, and RCD loan dockets
will be developed and assembled in accordance with applicable RUS
Instruction 1780.

\(b\) [Watershed advances]{.underline}. 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]{.underline}. 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]{.underline}. 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, will notify the applicant in writing of the reasons
why the request was not favorably considered. The notification to the
applicant will state that the RUS Administrator may be requested to
review the decision. This action will be taken in accordance with
§1780.37 of Part 1780 of this chapter.

\(1\) Upon receipt of the State Office copy of a review request from the
applicant, the Rural Development State Director will furnish a report on
the matter to the Administrator.

\(2\) The Administrator will notify the applicant and the Rural
Development State Director in writing of his decision and the reasons
therefore.

§1781.13 Reserved.

§1781.14 [Planning, options, and appraisals]{.underline}.

\(a\) WS and RCD area plans are developed by sponsoring local agencies
and organizations with technical assistance from NRCS and other Federal
and State agencies. These plans include WS works of improvement and RCD
measures to be developed or constructed for which NRCS construction
funds may be made available on a cost share basis along with funds
provided by the sponsoring local organization, a portion or all of which
may be obtained by a WS loan and/or WS advance or a RCD loan.

\(b\) Current information on the availability of cost share funds and
purposes for which they may be used is provided by NRCS. The amount of
NRCS cost share funds and the amount of funds to be provided by the
sponsoring local organizations will be indicated in each plan. The
estimated amount of WS loan, WS advance or RCD loan anticipated by the
sponsoring local organization should also be included.

\(c\) Plans for the development or construction of individual WS works
of improvement and RCD measures will normally be developed with NRCS
technical assistance. In every case they will be approved by both the
NRCS State conservationist and the Rural Development State Director or
their designated agent when a WS loan, WS advance or RCD loan is made.

\(d\) Options and appraisals related to the purchase of real estate for
which a WS loan, WS advance, or RCD loan is made must be developed in
accordance with NRCS and RUS requirements and approved by RUS. The
determination of present market value will be made in accordance with
§1780.44(g) of this chapter.

§1781.15 [Planning and performing development]{.underline}.

Planning and performing development will be handled in accordance with
subpart C of Part 1780 of this chapter and guidance from NRCS.

§1781.16 [Reserved]{.underline}.

§1781.17 [Docket preparation and processing]{.underline}.

\(a\) [Loan dockets]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}.

\(1\) [Review of the docket]{.underline}. 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]{.underline}. 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]{.underline}. 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]{.underline}. 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 to the National Office
unless he wants review and comments before approval.

\(c\) [WS advance processing]{.underline}.

\(1\) 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 §1781.17
(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 §1781.17
(a) of this section.

\(3\) The Rural Development State Director and the NRCS State
Conservationist will sign the memorandum of concurrence to NRCS when:

\(i\) It has been determined that funds for the advance will be
obligated by NRCS; and

\(ii\) The WS advance docket, has been approved; and

\(iii\) Closing instructions have been issued by the Regional Attorney;
and

\(iv\) The Rural Development State Director and NRCS State
Conservationist have determined that the applicant can comply with all
requirements of the letter of conditions and closing instructions.

§1781.18 [Feasibility]{.underline}.

\(a\) Before WS loan, WS advance, or RCD loan is approved, a
determination of feasibility will be made by the Rural Development State
Director based upon a review of plans developed in cooperation with NRCS
personnel. The feasibility determination must have the concurrence of
the NRCS State Conservationist before a WS loan, WS advance, or RCD loan
is approved.

\(b\) A written assessment of the project\'s feasibility will be made by
the processing office, Architect/Engineer, and Program Chief in their
recommendations or comments on the Project Summary. These should reflect
concurrence of the respective NRCS personnel in counterpart positions
with whom they cooperate in administering these programs.

§1781.19 [Approval, closing, and cancellation]{.underline}.

\(a\) Approval and closing actions will be taken in accordance with the
applicable provisions of Part 1780 of this chapter and the following
requirements have been met:

\(1\) The WS or RCD plan has been approved for operations by NRCS and
the applicant is an official sponsoring or cosponsoring local
organization for the plan as evidenced by being included in the list of
sponsoring or co-sponsoring local organizations in the plan.

\(2\) Closing instructions or a preliminary legal opinion has been
prepared by the Regional Attorney.

\(3\) The governing body of the applicant\'s sponsoring local
organization has formally passed and approved the loan resolution.

\(4\) The Rural Development State Director and NRCS State
Conservationist have determined that all planned actions can be carried
out as proposed in the project plan and the docket.

\(5\) The NRCS State Conservationist and Rural Development State
Director have mutually agreed on the priority to be given the WS loan or
WS advance, or RCD loan. In making this determination, consideration
will be given to the relative priority of the WS works of improvement or
RCD measures to all other such work in the State and the anticipated
availability of Federal and local funds to assure continuity of action
and work until the project is completed. When funds are to be provided
by NRCS for a WS or RCD loan or a WS advance such funds must be
obligated by NRCS before closing.

\(6\) Public bodies will be required to use bond counsel in accordance
with subpart D of Part 1780 of this chapter.

\(b\) When favorable action is not taken on a WS loan, WS advance, or
RCD loan, the Rural Development State Director will notify the NRCS
State Conservationist and the applicant in writing and, if possible,
arrange for a meeting of RUS and NRCS representatives with the applicant
to explain the action. WS loans, WS advances, or RCD loans may be
canceled before closing.

§1781.20 [Disbursement of WS and RCD loan funds and WS advance
funds]{.underline}.

\(a\) WS and RCD loan funds will be disbursed by the processing office
in accordance with the applicable provisions of §1780.45 of this chapter
and RUS Bulletin 1781-1, paragraph (5). Funds will be made available to
the borrower as needed for payment of development or other costs for
which the loan is made. The processing office must determine that the
payment is for an authorized purpose and is for benefits accrued to the
borrower. This will require evidence from NRCS in accordance with the
applicable provisions of RUS Bulletin 1781-1, \"Memorandum of
Understanding Between RUS and NRCS.\"

\(b\) WS advance funds may be disbursed in the same manner as WS loan
funds if such funds are transferred to RUS by NRCS for disbursement or
they may be disbursed by NRCS. When WS advance funds are disbursed by
NRCS, payments from advance of funds will be reported to the Rural
Development State Director each month to be reported to the Finance
Office and charged to the borrower\'s account. This action will be taken
in accordance with the applicable provisions of RUS Bulletin 1781-1 or
RUS Bulletin 1781-2 and agreement between the NRCS State Conservationist
and Rural Development State Director as follows:

\(1\) When a future water supply is being developed with NRCS, WS
advance funds, the NRCS State Conservationist will send the Rural
Development State Director a monthly report of funds disbursed. This
will include three (3) copies of Form NRCS-AS-49a and 49b, \"Contract
Payment Estimate and Construction Progress Report,\" along with a
transmittal Memorandum showing the sequential number (first, second,
third, etc.) of the payment, the amount and date of payment, the check
number by which the payment was made and the cumulative amount of
advance funds disbursed to date. When the works of improvement, for
which WS advance funds are used is completed the final report will, in
addition to the above, show the date that construction was completed and
the total amount of WS advance funds used.

\(2\) WS advances for construction costs will be set out each month on
Form NRCS-49a. The Rural Development State Director should make
arrangements with the NRCS State Conservationist to be supplied each
month with a copy of Form NRCS 49a when advance funds are included
together with an official statement from the NRCS State Administrative
Officer giving the date of the check and the exact amount of each
advance of funds made under the advance provisions of the project
agreement or of any engineering services agreement or other
supplementary agreement which further implements the proposal for the
advance in the project agreement. The original will be sent immediately
to the Finance Office and a copy provided for the processing office
file.

\(3\) When WS advance funds are used to acquire property for site
preservation the same reporting procedure as for a future water supply
will be used except that Form NRCS-AS-49a and 49b if used, should be
adopted to indicate fund use. As payments are made on land on which a
mortgage or other security instrument is required, such instruments will
be executed in accordance with instructions from the Regional Attorney,
OGC.

\(4\) The Rural Development State Director must send the bond or note
evidencing WS advance indebtedness of the borrower to the Finance Office
along with reports of payments from advance funds disbursed by NRCS. A
copy of the bond or note and copy of each report of payment will be sent
to the processing office.

\(c\) [Actions subsequent to closing of loans or advances]{.underline}.
Actions will be taken in accordance with §1780.44 of this chapter.

§1781.21 [Borrower accounting methods, management, reporting, and
audits]{.underline}.

These activities will be handled in accordance with the provisions of
§1780.47 of this chapter.

§1781.22 [Subsequent loans]{.underline}.

Subsequent loans will be processed in accordance with this part.

§1781.23 [Servicing]{.underline}.

Servicing will be handled in accordance with the provisions of Subpart E
of Part 1951 of this title.

§1781.24 [State supplements and availability of bulletins, instructions,
forms, and memorandums]{.underline}.

State supplements will be issued as needed in accordance with applicable
provisions of Part 1780 of this chapter.

§§1781.25 - 1781.100 Reserved.

MEMORANDUM OF UNDERSTANDING

Between the

SOIL CONSERVATION SERVICE

and the

FARMERS HOME ADMINISTRATION

Relating to the Making of WS Loans and WS Advances

Under the

Watershed Protection and Flood Prevention Act

\(1\) [Purpose]{.underline} of this memorandum is to coordinate general
agency responsibilities and functions of the Farmers Home Administration
(FmHA) and the Soil Conservation Service (SCS) in connection with loans
and advances made to sponsoring local organizations under the provisions
of the Watershed Protection and Flood Prevention Act (68 Stat. 666), as
amended.

\(2\) [General agency responsibilities]{.underline}. The general
assignments to the SCS and the FmHA for the administration of the
Watershed Protection and Flood Prevention Act are contained in the
Secretary's Policy Statement dated October 19, 1962. Each agency will
establish policy and procedures and take such other action as required
to carry out its responsibility.

\(i\) The FmHA is responsible for making and servicing WS loans or
advancements under Section 8 and obligations for repayment of WS
advances made by the SCS under Section 4 of the Act.

\(ii\) The SCS is responsible for administration of all authority under
the Act, except making and servicing WS loans made under Section 8, and
for servicing obligations for repayment of WS advances made by the SCS
under Section 4 of the Act.

\(iii\) The SCS and the FmHA will cooperate in developing and carrying
out their respective policies, procedures, and requirements, as they
relate to WS loans and WS advances made under the Act.

\(3\) [Receipt and processing of applications for loans and
advances:]{.underline}

\(i\) A works of improvement must be included in an approved watershed
plan before a loan or advance for it is made under the Act. during the
development of a Watershed Plan,the State Conservationist of SCS will
afford the State Director of FmHA an opportunity to gain an
understanding of watershed problems and needs, and the proposed plans
for works of improvement. When a sponsoring local organization indicates
a desire for a WS loan or WS advance the SCS State Conservationist will
consult with the FmHA State Director on matters such as organizational
arrangements, specific local or state requirements and other problems
related to the plans for financing, installing, operating and
maintaining the planned works of improvement being considered.

\(ii\) The SCS State Conservationist will furnish the FmHA State
Director a copy of each Watershed Plan. The Administrator of SCS will
furnish the Administrator of FmHA a copy of each approved WS Plan.

\(iii\) A Watershed Plan and the related executed watershed plan
agreement will not obligate the FmHA to make a WS loan or obligate the
SCS to make a WS advance to sponsoring local organizations.

\(4\) [Coordination of assistance for design, construction and
maintenance.]{.underline} The following principals are to be used as a
guide for the design, construction, operation and maintenance of works
of improvement when a WS loan or WS advance is involved:

\(i\) The SCS will furnish or assume the cost of engineering services
required to plan and install the portion of the works of improvement
allocated to flood prevention, agricultural phases of the conservation,
development, utilization, and disposal of water, fish and wildlife, and
recreational development, and not more than 50 percent of the costs of
engineering services for minimum basic facilities. Sponsoring local
organizations are expected to furnish and assume the cost of other
engineering services required. The SCS will give such engineering advice
and guidance to the sponsoring local organization as required to insure
that plans, specifications and cost estimates furnished by them meet the
design and construction standards and criteria established for the
project and that the works are properly coordinated with any other works
to be installed under the Watershed Plan. The SCS State Conservationist
will consult with and keep the FmHA State Director informed during the
development of construction plans and the construction of works of
improvement. This will include an engineering review and a statement by
the SCS of the adequacy and appropriateness of cost estimates, designs,
plans, and specifications prepared by private engineers.

\(ii\) Engineering plans, including specifications, drawings and cost
estimates for works of improvement involving WS loans or advances will
be approved by the SCS State Conservationist and the FmHA State
Director.

\(iii\) The SCS State Conservationist will consult with FmHA State
Director as to terms and conditions to be included in invitations for
bids and contracts for construction or purchase of supplies and
materials in connection with works of improvement to be installed with
loans or advances. The SCS will provide technical assistance and advice
needed by the sponsoring local organizations for the preparation of
these documents and in analyzing bids and selecting the lowest
responsible bidder. The contracts shall be acceptable to the FmHA State
Director and the SCS State Conservationist before execution by the
sponsoring local organization receiving a loan or advance.

\(iv\) The sponsoring local organization will not be permitted to accept
a bid which would require additional loan funds or make changes in plans
or specifications in order to obtain a bid within the estimated cost
without the concurrence of the FmHA State Director. Should the
sponsoring local organization desire to reject bids or to not call for
bids and undertake construction of works of improvement by force
account, the concurrence of the FmHA State Director shall be obtained.

\(v\) The SCS will provide technical assistance including periodic
inspections during construction as necessary to protect the
Government\'s interest and to assure that the works of improvement are
being constructed in accordance with approved drawings and
specifications. The SCS may approve minor changes during construction in
the contract terms and conditions and the drawings and specifications
which do not appreciably affect the design, cost or function of a
structure without concurrence of the FmHA. Major changes or changes
which affect the over-all cost of the works of improvement will require
the prior concurrence of the FmHA State Director.

\(vi\) The SCS and FmHA will make annual joint inspections, for a period
of three years after completion thereof or more frequently if necessary,
to see that works of improvement are being operated and maintained
according to agreements. The sponsoring local organization will be
required to makeannual inspections throughout the life of the structure
and report their findings to the SCS and FmHA offices. When SCS or FmHA
determines that there are serious deficiencies in operation and
maintenance, the FmHA State Director will collaborate with the SCS State
Conservationist in arranging with the local sponsoring organization for
the correction of such deficiencies. The FmHA or SCS may make other
inspections as necessary to service the loan or advance account of the
borrowing sponsoring local organization.

\(vii\) Responsibility rests with the local sponsoring organization to
acquire any land, easements, or rights-of-ways that will be needed for
works of improvement. If a lien is to be taken on works of improvement
and the land, easements, or rights-of way, the FmHA will, after
consultation with the SCS, approve the easements, deeds, and permits
before they are executed. The FmHA will provide instructions to the
local sponsoring organization pertaining to acknowledgment, title
searches and examinations, obtaining consent of holders of liens
outstanding against the land, and recording easements and deeds. The SCS
will check land description in all land rights instruments to the extent
necessary to determine that the areas required for construction,
operation and maintenance of works of improvement are included, except
that the SCS will make no property line surveys.

\(viii\) When loan payments will depend upon a right to use a specific
quantity of water, the local sponsoring organization will furnish to
FmHA satisfactory evidence of such rights, and any required additional
information concerning the water supply. This evidence will include such
documents and materials as affidavits, permits, title certificates,
court decrees, stream gage records, rainfall records, well logs, records
of pumping tests and water analysis. The SCS will examine information
that is furnished together with other available information and give
FmHA a written opinion of the adequacy of supply, including quality, to
meet the requirements of the plan.

\(5\) [Disbursement of funds.]{.underline} Proceeds of WS loans will be
deposited in, and withdrawn from, bank accounts in the manner required
by FmHA regulations. Checks on these bank accounts for payments to
contractors and suppliers of materials will be based upon FormSCS 49a,
\"Contract Payment Estimate and Construction Progress Report.\" Form SCS
49a, prepared by the local sponsoring organization for this purpose,
will be approved by the SCS, In giving his approve to Form SCS 49a, the
SCS representative shall be certain that the items covered are for the
purposes and in the amounts authorized in the project agreement.

\(i\) Advances for future water supply shall be made as provided in the
project agreement, The maximum amount of such advance shall be shown in
the project agreement.

\(ii\) Advances for site preservation will be handled in accordance with
procedures mutually agreeable to the SCS and the FmHA, which will be
developed on a case by case basis.

\(5\) [Starting construction]{.underline}. The local sponsoring
organization will not be authorized to start construction on works of
improvement to be financed in whole or in part, with a WS loan. or a WS
advance until:

\(i\) The SCS has entered into a Project Agreement for Construction of
Works of Improvement.

\(ii\) The State Conservationist has notified the FmHA State Director
that the local organization has complied with all SCS requirements for
receiving PL 566 construction assistance and the State Conservationist
has furnished the FmHA State Director with a schedule indicating the
approximate times that construction work will begin on works of
improvement to be installed with such funds.

\(iii\) The FmHA State Director has notified the State Conservationist
and the borrower that the loan or advance has been properly closed

\(iv\) Any contract entered into by the local organization for
materials, labor, or the construction of works of improvement to be
financed with loan funds has been found acceptable to, the FmHA.

\(v\) The FmHA State Director has notified the State Conservationist
that any advance for the preservation of sites has been repaid.

\(vi\) All engineering drawings and specifications for works of
improvement to be financed in part by WS loans or advances have been
approved by the FmHA and the SCS.

\(7\) [FmHA Contracts with local organizations]{.underline} Ordinarily,
a WS loan or advance will be made to the local organization having
primary interest in, and direct responsibility for, the operation and
maintenance of works of improvement to be installed with loan or advance
funds rather than to an organization that would have to contract with
another organization for the operation and maintenance of works of
improvement and the collection of revenues for repaying the loan or
advance. When it is proposed to make a WS loan to an organization that
would have to contract with another organization, the organization and
the contractual arrangements will be mutually acceptable to the FmHA and
the SCS. This determination will be made before the approval of the
Project Agreement for Construction of the Works of Improvement.

\(8\) [Informational activities]{.underline} The SCS will be responsible
for the preparation, release, or other handling of the overall
informational and educational material regarding the watershed
protection program, including bulletins, press releases and other public
announcements. The SCS will obtain the recommendations of the FmHA prior
to releasing pamphlets and similar informational material which makes
reference to loans. The FmHA may prepare and release informational
material on the handling of loan applications. Such material will be
reviewed with the SCS if it alludes to overall costs or benefits or to
technical aspects for which SCS has responsibility. When desirable or
necessary in particular watershed areas for SCS to arrange for community
meetings to discuss and explain the program to interested local people,
the FmHA will be invited to participate in such meetings if a loan or
advance may be needed by a local organization to carry out planned works
of improvement.

[/s/ Victor H. Barry Jr.]{.underline} [/s/ Gordon Cavanaugh]{.underline}

Acting Administrator Administrator

Soil Conservation Service Farmers Home Administration

May 26, 1978 5/31/78

Date Date

MEMORANDUM OF UNDERSTANDING

Between

THE SOIL CONSERVATION SERVICE

and THE FARMERS HOME ADMINISTRATION

Relating to Loans Made With RCD

Under the

Provisions of Section 102 of

the Food and Agriculture Act of 1962

\(1\) [Purpose]{.underline}. The purpose of this memorandum of
understanding is to outline the responsibilities and functions of the
Soil Conservation Service (SCS) and the Farmers Home Administration
(FmHA) in regard to loans made by FmHA to local sponsors for the
installation of RC&D measures within authorized Resource Conservation
and Development RC&D Areas.

\(2\) [Agency responsibilities]{.underline}. Secretary of Agriculture
Memorandum No. 1515 designates the Soil Conservation Service as the
Departmental agency responsible for administration of the activities
under Section 102, Public Law 87-703, relating to Resource Conservation
and Development Program. The Secretary also directed the Farmers Home
Administration to assist such projects within its departmentally
assigned functions which includes making and servicing RCD loans.

FmHA will establish policies and procedures for making and servicing RCD
loans and will cooperate with RCD sponsors, SCS, and other Federal and
State agencies in carrying out their responsibilities in support of the
RCD program.

\(3\) [Assisting local sponsors:]{.underline}

\(i\) When it is known that an eligible sponsoring local organization
desires information about an RCD loan, the RC&D Coordinator of SCS will
notify the FmHA Processing office. They will consult with the sponsoring
local organization on organizational arrangements, plans for financing,
and operation and maintenance of the RCD measure for which a loan is
needed.

\(ii\) When the RCD measure Plan has been approved by the SCS State
Conservationist, the FmHA representative will assist the interested
sponsoring local organization with the preparation of the application
for an RCD loan.

\(iii\) The application will be reviewed with the RCD area sponsors to
see if the application and the RCD measure for which it is requested
meet the RCD area Plan objectives.

\(iv\) An approved RCD area Plan and the related approved RCD Measure
Plan will not obligate the FmHA to make an RCD loan.

\(v\) The SCS will furnish technical assistance to RCD sponsoring local
organizations receiving a loan in accordance with SCS policies and
procedures. The SCS and FmHA representatives will work together during
the development of plans for RCD measures including estimates of funds
needed and sources of funds for the establishment of RCD measures to
assure that RCD loan funds may be used in accordance with FmHA policies
to serve the needs of the RCD sponsoring local organization and also in
a manner to protect the Government\'s interest.

\(4\) Requirements to be met when financial assistance is provided by
SCS

[and an RCD Loan is made by FmHA]{.underline}:

\(i\) The SCS will confer with FmHA as to terms and conditions to be
included in invitations to bid and contracts for construc­tion or
purchase of supplies and materials issued in connection with RCD
measures to be installed with RCD loan funds. The contracts must be
acceptable to FmHA before execution by the sponsoring local
organization.

\(ii\) The SCS may approve minor changes during construction which do
not appreciably affect design, cost, or function of a struc­ture. However
major changes must have the concurrence of FmHA.

\(iii\) The SCS and FmHA will agree to make joint periodic inspections
annually, or more frequently if necessary, to see that works of
improvement are being operated and maintained according to the RCD
Measure Operation and Maintenance Agreements, The SCS State
Conservationist and FmHA State Director will collaborate in arranging
for correction of deficiencies. The FmHA will make other inspections as
necessary to determine compliance with FmHA loan regulations and
maintenance of the security property or other security interest of the
government.

\(iv\) When a RCD measure sponsoring local organization proposes to
contract with another organization for construction, operation and
maintenance, the organization and contractual arrangements must be
approved by FmHA and SCS. This determination will be made prior to
approval of the Project Agreement.

\(v\) The local organization will not be authorized to start
construction on works of improvement to be financed, in whole or in
part, with a RCD loan until:

\(A\) The SCS State Conservationist has notified the FmHA State Director
that the sponsoring local organization has met all requirements for
receiving RCD assistance from SCS and has furnished the FmHA State
Director with a schedule for beginning and completing the construction
of works of improvement to be installed with RCD loan funds.

\(B\) The SCS has entered into a Project Agreement for Construction of
Works of Improvement, setting forth the mutual understanding,
responsibilities, working relations and cost-sharing arrangements of the
sponsoring and contracting local organizations and the SCS.

\(C\) The FmHA State Director has notified the SCS State Conservationist
and the borrower in writing that the RCD loan has been closed properly
and that RCD loan funds are available and the conditions under which
they will be released.

\(D\) Any contract entered into by the local organization for materials,
labor, or the construction of works of improvement to be financed with
RCD loan funds has been found acceptable by both FmHA and SCS and has
been approved in writing by both.

\(E\) All engineering plans, specifications, and drawings for works of
improvement to be installed with loan funds have been approved by both
FmHA and the SCS.

\(5\) [Performing development where financial assistance (cost-sharing)
is not provided by SCS]{.underline}. The FmHA will be responsible for
construction of project measures for these loans in accordance with FmHA
policies and procedures.

\(6\) [Information activities]{.underline}. The SCS will be responsible
for preparation, release, and handling of all informational and
educational material regarding RCD plans, measures and projects,
including bulletins, press releases, and other public announcements. The
SCS will, however, secure the recommendations of the FmHA prior to
releasing pamphlets and other informational material which makes
reference to RCD loans. The FmHA will, in cooperation with SCS, prepare
and release informational material on receiving and processing RCD loans
applications.

[/s/ Victor H. Barry Jr]{.underline} [/s/ Gordon Cavanaugh]{.underline}

Acting Administrator Administrator

Soil Conservation Service Farmers Home Administration

[May 26, 1978]{.underline} [5/31/78]{.underline}

## Date Date