[Federal Register Volume 69, Number 193 (Wednesday, October 6, 2004)]
[Rules and Regulations]
[Pages 59770-59775]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-22446]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1783

RIN 0572-AB95


Grant Program To Establish a Fund for Financing Water and 
Wastewater Projects (Revolving Fund Program (RFP))

AGENCY: Rural Utilities Service, USDA.

ACTION: Direct final rule.

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SUMMARY: The Rural Utilities Service (RUS or the Agency) is issuing a 
regulation to establish the Grant Program to Establish a Fund for 
Financing Water and Wastewater Projects (Revolving Fund Program (RFP)) 
as authorized by the Consolidated Farm and Rural Development Act 
(CONACT), as amended by section 6002 of the Farm Security and Rural 
Investment Act of 2002 (Farm Bill). The Secretary may make grants to 
qualified, private, non-profit entities. Grant Recipients will make 
loans to eligible entities to finance pre-development costs associated 
with proposed water and wastewater projects or with existing water and 
wastewater systems, and short-term costs incurred for replacement 
equipment, small-scale extension of services, or other small capital 
projects that are not part of the regular operations and maintenance 
activities of existing water and wastewater systems.

DATES: This rule will become effective November 22, 2004, unless RUS 
receives written adverse comments or a written notice of intent to 
submit adverse comments on or before November 5, 2004. If RUS receives 
such comments or notice, the Agency will publish a timely notice in the 
Federal Register withdrawing the rule. Comments received will be 
considered under the proposed rule published in this edition of the 
Federal Register in the proposed rule section. A second public comment 
period will not be held. Comments must be received by RUS or carry a 
postmark or equivalent no later than November 5, 2004. Comments 
regarding the information collection requirements under the Paperwork 
Reduction Act must be received on or before December 6, 2004, to be 
assured of consideration.

ADDRESSES: Submit adverse comments or notice of intent to submit 
adverse comments by any of the following methods:
    <bullet> Federal eRulemaking Portal: Go to http://www.regulations.gov. Follow the online instruction for submitting 
comments.
    <bullet> Agency Web Site: http://www.usda.gov/rus/index2.Comments.htm. Follow the instructions for submitting comments.
    <bullet> E-mail: <a href="/cdn-cgi/l/email-protection#7f2d2a2c3c1012121a110b0c3f0a0c1b1e51181009"><span class="__cf_email__" data-cfemail="693b3c3a2a0604040c071d1a291c1a0d08470e061f">[email protected]</span></a>. Include in the subject line 
of the message ``7 CFR 1783.''
    <bullet> Mail: Addressed to Richard Annan, Acting Director, Program 
Development and Regulatory Analysis, Rural Utilities Service, United 
States Department of Agriculture, 1400 Independence Avenue, STOP 1522, 
Washington, DC 20250-1522.
    <bullet> Hand Delivery/Courier: Addressed to Richard Annan, Acting 
Director, Program Development and Regulatory Analysis, Rural Utilities 
Service, United States Department of Agriculture, 1400 Independence 
Avenue, SW., Room 5168-S, Washington, DC 20250-1522.
    Instructions: All submissions received must include ``Rural 
Utilities Service'' and the subject heading ``7 CFR 1783.'' All 
comments received must identify the name of the individual (and the 
name of the entity, if applicable) who is submitting the comment. All 
comments received will be posted without change to http://www.usda.gov.rus.index2.Comments.htm, including any personal 
information provided.

FOR FURTHER INFORMATION CONTACT: Stephen Saulnier, Loan Specialist, 
Water Programs Division, Rural Utilities Service, U.S. Department of 
Agriculture, 1400 Independence Avenue, SW., Room 2235-S, Stop 1570, 
Washington, DC 20250-1570. Telephone (202) 690-2526. E-Mail: 
<a href="/cdn-cgi/l/email-protection#82f1f6e7f2eae7ecacf1e3f7eeecebe7f0c2f7f1e6e3ace5edf4"><span class="__cf_email__" data-cfemail="2c5f58495c444942025f4d59404245495e6c595f484d024b435a">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This direct final rule has been determined to be not significant 
for the purposes of Executive Order 12866 and, therefore, has not been 
reviewed by the Office of Management and Budget (OMB).

Executive Order 12372

    This rule is not subject to the requirements of Executive Order 
12372, ``Intergovernmental Review of Federal Programs'', as implemented 
under USDA's regulations at 7 CFR Part 3015.

Executive Order 12988

    This direct final rule has been reviewed under Executive Order 
12988, Civil Justice Reform. RUS has determined that this proposed rule 
meets the applicable standards provided in section 3 of the Executive 
Order. In addition all State and local laws and regulations that are in 
conflict with this rule will be preempted; no retroactive effect will 
be given to the rule; and, in accordance with Section 212(e) of the 
Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)) 
administrative appeal procedures, if any are required, must be 
exhausted prior to initiating any action against the Department or its 
agencies.

Regulatory Flexibility Act Certification

    Pursuant to 5 U.S.C. 553(a)(2), this proposed rule related to 
grants is exempt from the rulemaking requirements of the Administrative 
Procedure Act, 5 U.S.C. 551 et seq., including the requirement to 
provide prior notice and an opportunity for public comment. Because 
this proposed rule is not subject to a requirement to provide prior 
notice and an opportunity for public comment pursuant to 5 U.S.C. 553, 
or any other law, the analytical requirements of the Regulatory 
Flexibility Act, 5 U.S.C. 601 et seq. are inapplicable.

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
rule impose substantial direct compliance costs on states and local 
governments. Therefore, consultation with states is not required.

Information Collection and Recordkeeping Requirements

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
chapter 35) RUS is requesting comments on the information collection 
incorporated in this proposed rule. Comments on this information 
collection must be received by December 6, 2004.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the functions of the agency, 
including whether the information will have practical utility; (b) the 
accuracy of the

[[Page 59771]]

agency's estimate of the burden including the validity of the 
methodology and assumption used; (c) ways to enhance the quality, 
utility and clarity of the information to be collected; and (d) ways to 
minimize the burden of the collection of information on those who are 
to respond, including through the use of automated electronic, 
mechanical, or other technological collection techniques or other forms 
of information technology.
    Title: 7 CFR part 1783, Revolving Fund Program.
    OMB Control Number: 0582-0138.
    Type of Request: Approval for collection.
    Abstract: The information collections contained in this rule are 
requirements prescribed by the Consolidated Farm and Rural Development 
Act (CONACT) (7 U.S.C. 1926(a)), as amended.
    The primary reason for the promulgation of the proposed collection 
of information under this rule is to implement the Revolving Fund 
Program.
    RUS applicants would submit an application for consideration of 
grant funding, and if selected for funding, submit quarterly reports, 
as prescribed by the rule. The collection of information is only that 
information which is essential for RUS to award and service grants in 
the best interest of the Government.
    Estimate of Burden: Public reporting burden for this collection of 
information is estimated to average 8.2 hours per response.
    Respondents: Not-for-profit institutions.
    Estimated Number of Respondents: 5.
    Estimated Number of Responses per Respondents: 7.6.
    Estimated Total Annual Burden on Respondents: 313 hours.
    Copies of this information collection can be obtained from MaryPat 
Daskal, Program Development and Regulatory Analysis, Rural Utilities 
Service. Telephone: (202) 720-7853.
    Send comments regarding this information collection requirement to 
Richard Annan, Acting Director, Program Development and Regulatory 
Analysis, USDA, Rural Utilities Service, 1400 Independence Ave., SW., 
Room 5168, Stop 1522, Washington, DC 20250-1522.
    Comments must be received on or before 30 days of publication in 
the Federal Register. All comments will become a matter of public 
record.

National Environmental Policy Act Certification

    The Administrator of RUS has determined that this proposed rule 
will not significantly affect the quality of the human environment as 
defined by the National Environmental Policy Act of 1969 (42 U.S.C. 
4321 et seq.). Therefore, this action does not require an environmental 
impact statement or assessment.

Catalog of Federal Domestic Assistance

    The programs described by this proposed rule are listed in the 
Catalog of Federal Domestic Assistance Programs under numbers 10-864, 
Revolving Fund Program Grant. This catalog is available on a 
subscription basis from the Superintendent of Documents, the United 
States Government Printing Office, Washington, DC, 20402-9325, 
telephone number (202) 512-1800.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provision of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus this 
rule is not subject to the requirements of section 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

Background

    On May 13, 2002, the Farm Security and Rural Investment Act of 2002 
(Farm Bill) was signed into law as Public Law 107-171. Section 6002 of 
the Farm Bill amended the Consolidated Farm and Rural Development Act 
(CONACT), by adding a grant program to establish a revolving loan fund. 
The Secretary may make grants to qualified, private, non-profit 
entities. The grant recipients will use the grant funds to establish a 
revolving loan fund. The loans will be made to eligible entities to 
finance predevelopment costs of water or wastewater projects, or short-
term small capital projects not part of the regular operation and 
maintenance of current water and wastewater systems.
    Eligible entities for the revolving loan fund will be the same 
entities eligible to obtain a loan, loan guarantee, or grant from the 
Rural Utilities Service Water and Waste Disposal and Wastewater loan 
and grant programs. The amount of financing to an eligible entity shall 
not exceed $100,000.00 and shall be repaid in a term not to exceed 10 
years. The rate shall be determined in the approved grant work plan.
    No funds were appropriated for the grant program for fiscal years 
(FY) 2002 and FY 2003. However, the Consolidated Appropriations Act, 
2004 (Pub. L. 108-199) included $500,000.00 for the grant program. 
Therefore, we are developing the regulation to implement the grant 
program.
    The Administrator of RUS is required to prescribe regulations to 
implement the provisions of the CONACT. Rural Utilities Service will be 
relying heavily on existing regulations within the Rural Development 
Program in order to develop regulations for this new program.
    A Notice of Inquiry was published in the Federal Register, 
Thursday, February 12, 2004 at 69 CFR Part 6937, requesting interested 
parties to review the CONACT and comment on six topics. The comment 
period closed on March 15, 2004. RUS received responses from six 
parties; National Rural Water Association (NRWA), Association of State 
Drinking Water Administrators (ASDWA), Rural Community Assistance 
Program (RCAP), Midwest Assistance Program (MAP), Community Resource 
Group (CRG), and South Central Illinois Regional Planning & Development 
Commission (SCIRP&DC). The topics, comments, and Agency responses as 
follows:
    (1) RUS is seeking comments on a requirement for current lending 
experience of potential grant applicants.
    ASDWA did not feel they were able to comment on this topic. 
SCIRP&DC was in favor of requiring current lending experience of 
potential grant applicants. CRG, MAP, and RCAP believe that the 
applicant should have the demonstrated capacity and financial ability 
to provide on-site technical assistance to the borrowers, both before 
and after a loan is made. RCAP further recommends that RUS base its 
criteria for determining applicants' qualifications on the criteria 
outlined in regulations for USDA's Intermediary Relending Program (7 
CFR Part 4274). RCAP believes this would allow the Agency flexibility 
to award a grant to a non-profit that may not have significant loan 
making experience.
    The Agency's position is that in order to fulfill its fiduciary and 
oversight responsibilities, the primary experience for an applicant is 
a successful record of making and servicing loans.
    (2) RUS is also interested in comments regarding a proposed minimum 
20 percent matching funds contribution by the grant recipient. Should 
in-kind contributions be accepted as part of the 20 percent minimum?
    All respondents except NRWA agree with a minimum 20 percent match. 
NRWA did not comment on this topic. CRG believes that above a 20 
percent match should not favor one area of the country above another 
and the cash match should be proportionate to every loan. All loan 
losses should come out of

[[Page 59772]]

the matching funds. MAP recommends that more points should be given for 
a greater than 20 percent match only when two or more applications are 
from the same region of the country. RCAP recommends that priority 
points be awarded for a match above 20 percent.
    The Agency's position is to require a minimum 20 percent matching 
funds contribution by the grant recipient. Contributions by the grant 
recipient signal a serious intent to invest in the project as well as 
increasing the overall size of the loan fund from which loans shall be 
made, thereby increasing the number of potential loan recipients. The 
Agency agrees with RCAP's recommendation and will award priority points 
for greater than 20 percent match.
    (3) RUS is interested in comments regarding the percentage of the 
grant funds that may be used for administrative or servicing fees.
    ASDWA believes that 6 percent would be reasonable although the 
current allowable percentage for the Drinking Water State Revolving 
Fund is 4 percent. SCIRP&DC recommends a rate of 2 to 3 percent is 
adequate. SCIRP&DC further recommends 0.5 percent be incorporated into 
the loan rate for debt servicing. CRG believes that no Federal or match 
funds should be used for administrative fees. Interest and fees earned 
from loans should be used to fund loan loss reserves. MAP believes that 
allowable eligible costs as described in the authorizing Farm Bill 
language are adequate. RCAP recommends that Federal funds not be used 
for administrative costs. Administrative costs should come from 
matching funds. NRWA believes that administrative costs and overhead 
should be minimal.
    The Agency's position is to maximize the use of limited grants 
dollars in order to fund the greatest number of projects possible, 
therefore, grant funds may not be used for payment of the 
intermediary's administrative cost or expenses. Interest collected from 
loans made by the intermediary may be used to cover reasonable 
administrative costs.
    (4) RUS is seeking comments on the issue of the revolving fund 
paying up to a maximum of 75 percent of the project costs, with the 
other 25 percent of project costs paid from non-Federal sources.
    ASDWA had no objection. SCIRP&DC has some confusion between the 
organization's match funding a maximum of 75 percent of project costs. 
CRG believes limiting Federal participation to no more than 75 percent 
of project costs is reasonable. Both MAP and RCAP believe that the 75 
percent maximum may restrict or deter borrowers from seeking financing 
through this program. MAP further believes that this requirement will 
create a financial burden to low-income communities.
    The Agency's response is to establish a maximum loan amount of the 
lesser of $100,000 or 75 percent of the total costs of the project in 
order to focus program funding of small capital projects. The 
authorizing legislation sets a maximum loan amount of $100,000. The 
Agency believes that the lesser of $100,000 or 75 percent of the cost 
of the project will allow for a greater number of loans to be made and 
also comply with the authorizing legislation.
    (5) RUS is interested in comments regarding the use of the Central 
Servicing Center (http://www.rurdev.usda.gov/rhs/sfh/bor_sfh.htm) for 
servicing loans made from the revolving loan fund, to include 
processing loan payments, reviewing financial statements, and other 
responsibilities involved in loan servicing.
    ASDWA had no comment. SCIRP&DC wants to service the loans in house 
and has a proven track record. MAP recommends not utilizing the Central 
Servicing Center. Both CRG and RCAP believe maintaining servicing in 
house allows the lender to stay close to borrowers and alerts the 
lender to any potential problems. Also, using a third party for 
servicing would raise costs.
    The Agency agrees with SCIRP&DC, MAP, CRG, and RCAP that the grant 
recipient should service loans made from the Revolving Fund Program. 
The direct final rule, 7 CFR Part 1783, does not require loans made 
from the Revolving Fund Program to be serviced by the Central Servicing 
Center.
    (6) RUS is also seeking comments on the definition of eligible and 
ineligible projects for the loans made from the revolving loan fund.
    ASDWA wants the lender to consult with state agencies in defining 
eligible projects. SCIRP&DC believes that reasonable administrative 
fees for providing guidance/technical assistance should be an eligible 
project. CRG recommends that pre-development, upgrades, or extending 
service should have the same eligibility requirements as the regular 
RUS Water and Waste Disposal Loan Program. RCAP believes that projects 
financed under this program should be coordinated with the State Rural 
Development Office. RCAP also presents a long list of eligible projects 
they feel should be included.
    The Agency is required to follow the definition of eligible as set 
forth in the authorizing legislation of the CONACT. The Agency will, to 
the extent possible within the parameters of the authorizing 
legislation, be flexible in determining the specific projects that 
qualify as eligible.

General Comments

    (1) ASDWA believes that, historically, the primary vehicle to 
provide low-interest loans water and wastewater systems is through the 
Drinking Water State Revolving Funds and the Clean Water State 
Revolving Funds and that Federal funds should be channeled through 
these mechanisms. ASDWA believes all water projects should be aligned 
with state drinking water priorities.
    The Agency's response is that it is not authorize to roll funds for 
the Revolving Fund Program into the existing USDA loan and grant 
program or through the Drinking Water State Revolving Funds and the 
Clean Water State Revolving Funds.
    (2) SCIRP&DC suggest that revolving fund grants be made to regional 
planning commissions that are familiar with state and local funding 
options. NRWA believes funds for the Revolving Fund Program would be 
more effectively used within the existing USDA loan and grant program. 
Cost of administering such a small program will significantly outweigh 
any potential benefits.
    The Agency's response is that the CONACT, as amended by the Farm 
Bill, added a grant program to establish a revolving loan fund. The 
Secretary may make grants to qualified, private, non-profit entities, 
not state agencies. As with current RUS water and waste disposal 
projects, loans made under this program will be coordinated with state 
agencies.
    All comments received were taken into consideration in developing 
the regulation.

List of Subjects in 7 CFR Part 1783

    Business and industry, Community development, Community facilities, 
Grant programs-housing and community development, Reporting and 
recordkeeping requirements, Rural areas, Waste treatment and disposal, 
Water supply, Watersheds.

    For reasons set forth in the preamble, RUS amends chapter XVII of 
Title 7 of the Code of Federal Regulations by adding a new Part 1783 to 
read as follows:

[[Page 59773]]

PART 1783--REVOLVING FUNDS FOR FINANCING WATER AND WASTEWATER 
PROJECTS (REVOLVING FUND PROGRAM)

Subpart A--General
Sec.
1783.1 What is the purpose of the Revolving Fund Program?
1783.2 What Uniform Federal Assistance Provisions apply to the 
Revolving Fund Program?
1783.3 What definitions are used in this regulation?
1783.4 [Reserved]
Subpart B--Revolving Loan Program Grants
1783.5 What are the eligibility criteria for grant recipients?
1783.6 When will applications for grants be accepted?
1783.7 What is the grant application process?
1783.8 What are the acceptable methods for submitting applications?
1783.9 What are the criteria for scoring applications?
1783.10 What is the grant agreement?
1983.11 What is the revolving loan fund?
1783.12 What are eligible uses of grant proceeds?
1783.13 What administrative expenses may be funded with grant 
proceeds?
Subpart C--Revolving Loan Program Loans
1783.14 What are the eligibility criteria for RFP loan recipients?
1783.15 What are the terms of RFP loans?
1783.16 How will loans from the revolving fund be serviced?

    Authority: 7 U.S.C. 1926 (a)(2)(B).

Subpart A--General


Sec.  1783.1  What is the purpose of the Revolving Fund Program?

    This part sets forth the policies and procedures for making grants 
to qualified private, non-profit entities to capitalize revolving funds 
for the purpose of providing financing to eligible entities for pre-
development costs associated with proposed water and wastewater 
projects or with existing water and wastewater systems, and short-term 
costs incurred for replacement equipment, small-scale extension of 
services, or other small capital projects that are not part of the 
regular operations and maintenance activities of existing water and 
wastewater systems.


Sec.  1783.2  What Uniform Federal Assistance Provisions apply to the 
Revolving Fund Program?

    (a) This program is subject to the general provisions that apply to 
all grants made by USDA and that are set forth in 7 CFR Part 3015--
Uniform Federal Assistance Regulations.
    (b) This program is subject to the uniform administrative 
requirements that apply to all grants made by USDA to non-profit 
organizations and that are set forth in 7 CFR Part 3019--Uniform 
Administrative Requirements for Grants And Agreements with Institutions 
of Higher Education, Hospitals, and Other Non-Profit Organizations.
    (c) This program is subject to OMB Circular No. A-122 (Revised): 
Cost Principles for Non-Profit Organizations.


Sec.  1783.3  What definitions are used in this regulation?

    Administrative expenses means expenses incurred by a grant 
recipient that are of the type more particularly described in Sec.  
1783.12.
    Applicant means a private, non-profit organization that applies for 
an RFP grant under this part.
    CONACT means the Consolidated Farm and Rural Development Act.
    Eligible entity means an entity eligible to obtain a loan, loan 
guarantee or grant under paragraph 1 or paragraph 2 of section 306(a) 
the CONACT (codified at 7 U.S.C. 1926(a)(1) and (2)).
    Grant agreement means the contract between RUS and the grant 
recipient which sets forth the terms and conditions governing a 
particular grant awarded under this part.
    Grant recipient means a private, non-profit entity that has been 
awarded a grant under this part.
    Loan recipient means an eligible entity that has received an RFP 
loan.
    Revolved funds means the cash portion of the revolving loan fund 
that is not composed of RFP grant funds, including cash comprising 
repayments of RFP loans, fees relating to RFP loans and interest 
collected on RFP loans.
    Revolving loan fund means the loan fund established by the grant 
recipient to carry out the purposes of this part, such fund comprising 
the proceeds of an RFP grant and other related assets.
    RFP means Revolving Fund Program.
    RFP grant means a grant from RUS to a grant recipient under this 
part.
    RFP loan means a loan from a grant recipient using the direct or 
indirect proceeds of an RFP grant awarded under this part.
    Rural and rural area means a city, town or unincorporated area that 
has a population of no more than 10,000 inhabitants, according to the 
latest decennial census of the United States.
    RUS means the Rural Utilities Service, a Federal agency delivering 
the USDA's Rural Development Utilities Program.
    USDA means the United States Department of Agriculture.


Sec.  1783.4  [Reserved]

Subpart B--Revolving Loan Program Grants


1783.5  What are the eligibility criteria for grant recipients?

    (a) The applicant must be a private entity.
    (b) The applicant must be organized as a non-profit entity.
    (c) The applicant must have the legal capacity and lawful authority 
to perform the obligations of a grantee under this part.

    Example 1 to paragraph (c): If the organization is incorporated 
as a non-profit corporation, it must have corporate authority under 
state law and its corporate charter to engage in the practice of 
making loans to legal entities.
    Example 2 to paragraph (c): If the organization is an 
unincorporated association, state law may prevent the organization 
from entering into binding contracts, such as a grant agreement.

    (d) The applicant must have sufficient expertise and experience in 
making and servicing loans to assure the likelihood that the objectives 
of this part can be achieved.


Sec.  1783.6  When will applications for grants be accepted?

    In Fiscal Year 2004, applications will be accepted for this RFP 
grant program from October 6, 2004, until December 6, 2004, at which 
time the initial application period shall close. An applicant may 
withdraw, substitute, amend or supplement its application at any time 
prior to the closing of the initial application period. Once the 
initial application period has closed, all applications shall be 
considered final. For subsequent fiscal years, if any funds for this 
program are available, the Secretary will publish a notice to that 
effect. The notice will establish the period during which applications 
for such funds may be submitted for consideration.


Sec.  1783.7  What is the grant application process?

    (a) The applicant must complete and submit the following items to 
RUS to apply for a grant under this part:
    (1) Application for Federal Assistance: Standard Form 424;
    (2) Budget Information--Non-Construction Programs: Standard Form 
424A;
    (3) Assurances--Non-Construction Programs: Standard Form 424B;
    (4) Evidence of applicant's legal existence and authority in the 
form of certified copies of organizational documents and a certified 
list of directors and officers with their respective terms;

[[Page 59774]]

    (5) Evidence of tax exempt status, and
    (6) Most recent annual audit conducted by an independent auditor.
    (b) The applicant must submit a written work plan that demonstrates 
the ability of the applicant to make and service loans to eligible 
entities under this program and the feasibility of the applicant's 
lending program to meet the objectives of this part.
    (c) The applicant should submit a narrative establishing the basis 
for any claims that it has substantial expertise in making and 
servicing loans. The Secretary will give priority to an applicant that 
demonstrates it has substantial experience of this type.
    (d) The applicant may submit such additional information as it 
elects to support and describe its plan for achieving the objectives of 
the part.


Sec.  1783.8  What are the acceptable methods for submitting 
applications?

    (a) Applications for RFP grants may be submitted by U.S. Mail. 
Applications submitted by mail must be addressed as follows: Rural 
Utilities Service, U.S. Department of Agriculture, 1400 Independence 
Avenue, SW., STOP 1548, Washington, DC 20250-1548. The outside of the 
application should be marked: ``Attention: Assistant Administrator, 
Water and Environmental Programs.'' Applications submitted by mail must 
be postmarked not later than the filing deadline to be considered 
during the period for which the application was submitted.
    (b) In lieu of submitting an application by U.S. Mail, an applicant 
may file its application electronically by using the Federal 
Government's eGrants Web site (Grants.gov) at http://www.grants.gov. 
Applicants should refer to instructions found on the Grants.gov Web 
site for procedures for registering and using this facility. Applicants 
who have not previously registered on Grants.gov should allow a 
sufficient number of business days to complete the process necessary to 
be qualified to apply for Federal Government grants using electronic 
submissions. Electronic submissions must be filed not later than the 
filing deadline to be considered during the period for which the 
application was submitted.
    (c) The methods of submitting applications may be changed from time 
to time to reflect changes in addresses and electronic submission 
procedures. Applicants should refer to the most recent notice of 
funding availability for notice of any such changes. In the event of 
any discrepancy, the information contained in the notice must be 
followed.


Sec.  1783.9  What are the criteria for scoring applications?

    (a) Applications that are incomplete or ineligible will be returned 
to the applicant, accompanied by a statement explaining why the 
application is being returned.
    (b) Promptly after an application period closes, all applications 
that are complete and eligible will be ranked competitively based on 
the following scoring criteria:
    (1) Degree of expertise and successful experience in making and 
servicing commercial loans, with a successful record, for the following 
number of full years:
    (i) At least 1 but less than 3 years--5 points
    (ii) At least 3 but less than 5 years--10 points
    (iii) At least 5 but less than 10 years--20 points
    (iv) 10 or more years--30 points
    (2) Extent to which the work plan demonstrates a well thought out, 
comprehensive approach to accomplishing the objectives of this part, 
clearly defines who will be served by the project, clearly articulates 
the problem/issues to be addressed, identifies the service area to be 
covered by the RFP loans, and appears likely to be sustainable. Up to 
40 points.
    (3) Percentage of applicant contributions. Points allowed under 
this paragraph will be based on written evidence of the availability of 
funds from sources other than the proceeds of an RFP grant to pay part 
of the cost of a loan recipient's project. In-kind contributions will 
not be considered. Funds from other sources as a percentage of the RFP 
grant and points corresponding to such percentages are as follows:
    (i) Less than 20%--ineligible
    (ii) At least 20% but less than 50%--10 points
    (iii) 50% or more--20 points
    (4) Extent to which the goals and objectives are clearly defined, 
tied to the work plan, and are measurable. Up to 15 points.
    (5) Lowest ratio of projected administrative expenses to loans 
advanced. Up to 10 points.
    (6) The evaluation methods for considering loan applications and 
making RFP loans are specific to the program, clearly defined, 
measurable, and are consistent with program outcomes. Up to 20 points.
    (7) Administrator's discretion, considering such factors as 
creative outreach ideas for marketing RFP loans to rural residents; the 
amount of funds requested in relation to the amount of needs 
demonstrated in the work plan; previous experiences demonstrating 
excellent utilization of a revolving loan fund grant; and optimizing 
the use of agency resources. Up to 10 points.
    (c) All qualifying applications under this part will be scored 
based on the criteria contained in this section. Awards will be made 
based on the highest ranking applications and the amount of financial 
assistance available for RFP grants. All applicants will be notified of 
the results in writing on form AD-622.


Sec.  1783.10  What is the grant agreement?

    RUS and the grant recipient will enter into a contract setting 
forth the terms and conditions governing a particular RFP grant award. 
RUS will furnish the form of grant agreement. No funds awarded under 
this part shall be disbursed to the grant recipient before the grant 
agreement is binding and RUS has received a fully executed counterpart 
of the grant agreement.


Sec.  1783.11  What is the revolving loan fund?

    The grant recipient shall establish and maintain a revolving loan 
fund for the purposes set forth in Sec.  1783.12. The revolving loan 
fund shall be comprised of revolving loan fund grant funds and the 
grant recipient's contributed funds. All revolving loan fund loans made 
to loan recipients shall be drawn from the revolving loan fund. All 
revolving loan fund loans shall be serviced and the revolving loan fund 
maintained, in accordance with this part and applicable law.


Sec.  1783.12  What are eligible uses of grant proceeds?

    (a) Grant proceeds shall be used solely for the purpose of 
establishing the revolving loan fund to provide loans to eligible 
entities for:
    (1) Pre-development costs associated with proposed water and 
wastewater projects or with existing water and wastewater systems, and
    (2) Short-term costs incurred for replacement equipment, small-
scale extension of services, or other small capital projects that are 
not part of the regular operations and maintenance activities of 
existing water and wastewater systems.
    (b) A grant recipient may not use grant funds in any manner 
inconsistent with the terms of the grant agreement.


Sec.  1783.13  What administrative expenses may be funded with grant 
proceeds?

    RFP grant funds may not be used for any purposes not described in 
Sec.  1783.12, including, without limitation, payment or reimbursement 
of any of the grant recipient's administrative costs or expenses. 
Administrative expenses may,

[[Page 59775]]

however, be paid or reimbursed from revolving loan fund assets that are 
not RFP grant funds, including revolved funds and cash originally 
contributed by the grant recipient.

Subpart C--Revolving Fund Program Loans


Sec.  1783.14  What are the eligibility criteria for RFP loan 
recipients?

    (a) A loan recipient must be an eligible entity as defined in Sec.  
1783.3.
    (b) The loan recipient must be unable to finance the proposed 
project from their own resources or through commercial credit at 
reasonable rates and terms.
    (c) The loan recipient must have or will obtain the legal authority 
necessary for owning, constructing, operating and maintaining the 
proposed service or facility, and for obtaining, giving security for, 
and repaying the proposed loan.
    (d) The project funded by the proceeds of an RFP loan must be 
located in, or the services provided as the result of such project must 
benefit, rural areas.


Sec.  1783.15  What are the terms of RFP loans?

    (a) RFP loans under this part--
    (1) Shall have an interest rate that is determined by the grant 
recipient and approved by RUS;
    (2) Shall have a terms not to exceed 10 years; and
    (3) Shall not exceed the lesser of $100,000 or 75 percent of the 
total cost of a project. The total outstanding balance for all loans 
under this program to any one entity shall not exceed $100,000.
    (b) The grant recipient must set forth the RFP loan terms in 
written documentation signed by the loan recipient.
    (c) Grant recipients must develop and use RFP loan documentation 
that conforms to the terms of this part, the grant agreement, and the 
laws of the state or states having jurisdiction.


Sec.  1783.16  How will the loans given from the revolving fund be 
serviced?

    The grant recipient shall be responsible for servicing all loans, 
to include preparing loan agreements, processing loan payments, 
reviewing financial statements and debt reserves balances, and other 
responsibilities such as enforcement of loan terms. Loan servicing will 
be in accordance with the work plan approved by the Agency when the 
grant is awarded for as long as any loan made in whole or in part with 
Agency grant funds is outstanding.

    Dated: September 2, 2004.
Curtis M. Anderson,
Acting Administrator, Rural Utilities Service.
[FR Doc. 04-22446 Filed 10-5-04; 8:45 am]
BILLING CODE 3410-15-P


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