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[Federal Register Volume 76, Number 235 (Wednesday, December 7, 2011)]
[Proposed Rules]
[Pages 76492-76539]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-30578]

[[Page 76491]]

Vol. 76

Wednesday,

No. 235

December 7, 2011

Part II

Department of Commerce

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Economic Development Administration

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13 CFR Parts 300, 301, 302, et al.

Economic Development Administration Regulatory Revision; Proposed Rule

Federal Register / Vol. 76 , No. 235 / Wednesday, December 7, 2011 / 
Proposed Rules

[[Page 76492]]

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DEPARTMENT OF COMMERCE

Economic Development Administration

13 CFR Parts 300, 301, 302, 303, 304, 305, 306, 307, 308, 310, 311, 
and 314

[Docket No.: 110726429-1418-01]
RIN 0610-AA66

Economic Development Administration Regulatory Revision

AGENCY: Economic Development Administration, U.S. Department of 
Commerce.

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: Through this notice of proposed rulemaking (``NPRM''), the 
Economic Development Administration (``EDA''), U.S. Department of 
Commerce (``DOC''), proposes and requests comments on updates to the 
agency's regulations implementing the Public Works and Economic 
Development Act of 1965, as amended (``PWEDA''). On February 1, 2011, 
EDA published a notice requesting comments on improving the 
regulations. A 70-day public comment period followed from February 1, 
2011 through April 11, 2011, during which EDA received approximately 
170 comments. In addition, EDA conducted an internal review of its 
regulations. This NPRM addresses and incorporates public comments and 
agency staff suggestions to present an updated set of proposed 
regulations that reflects the agency's current practices and policies 
in administering its economic development assistance programs. For 
convenience, the full text of EDA's regulations as amended is available 
on EDA's Web site at http://www.eda.gov/ gov/.

DATES: Written comments on this NPRM must be received by EDA's Office 
of Chief Counsel no later than 5 p.m. Eastern Time on February 6, 2012.

ADDRESSES: Comments on the NPRM may be submitted through any of the 
following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Agency Web Site: http://www.eda.gov/. EDA has created an 
online feature for submitting comments. Follow the instructions at 
http://www.eda.gov/.
     Mail: Economic Development Administration, Office of Chief 
Counsel, Suite D-100, U.S. Department of Commerce, 1401 Constitution 
Avenue NW., Washington, DC 20230. Please indicate ``Comments on EDA's 
regulations'' and Docket No. 110726429-1418-01 on the envelope.

FOR FURTHER INFORMATION CONTACT: Jamie Lipsey, Attorney Advisor, Office 
of Chief Counsel, Economic Development Administration, U.S. Department 
of Commerce, Room D-100, 1401 Constitution Avenue NW., Washingtonm, DC 
20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION:

Background

    EDA leads the Federal economic development agenda by making 
strategic grants-based investments. EDA's regulations, codified at 13 
CFR chapter III, provide the framework through which the agency 
administers its economic development assistance programs. EDA's 
programs are built on two key pillars: innovation and regional 
collaboration. Innovation--the process by which individuals and 
organizations generate new ideas and put them into practice--is the 
foundation of American economic growth and national competitiveness. 
Innovation is the key element to creating new and better jobs and a 
resilient economy. Regional collaboration also is essential; and 
Regions that work together to leverage resources and build upon their 
unique comparative assets are better poised for economic success. This 
strategic framework builds on EDA's successful history of helping rural 
and urban communities leverage their unique assets by providing 
``bottom up'' investments in infrastructure, planning, and technical 
assistance that promote regional collaboration, innovation, and 
regional innovation clusters. EDA's investments are designed to spur 
innovation and investment at the local level, by providing the tools 
and the flexibility to build the effective public-private partnerships 
required for long-term success.
    EDA currently is updating the agency's regulations to ensure they 
reflect and incentivize innovation and collaboration and is committed 
to ensuring that public feedback helps shape the revised regulations. 
On February 1, 2011, pursuant to Executive Order 13563 ``Improving 
Regulation and Regulatory Review'', EDA published a notice in the 
Federal Register (76 FR 5501) requesting public comments on how the 
agency's regulations can better facilitate more effective economic 
development assistance programs that advance an innovative economy. 
Under the February 1, 2011 notice, comments were due no later than 
March 9, 2011; however, EDA published a second notice (76 FR 12616) on 
March 8, 2011 to extend the comment deadline until April 11, 2011, 
allowing for a total comment period of 70 days. EDA received 
approximately 170 public comments from approximately 71 commenters. In 
addition, EDA conducted an internal review of its regulations and 
received approximately 55 suggestions from agency staff.
    EDA now publishes this NPRM to incorporate and respond to both 
public and agency staff comments and suggestions and to propose a 
revised set of regulations that reflects EDA's current practices and 
policies in administering its economic development assistance programs. 
For the most part, comments received express opinions on 13 CFR parts 
300 through 307 and 314. Capitalized terms used but not otherwise 
defined in this NPRM have the meanings ascribed to them in EDA's 
current regulations (see, e.g., Sec. Sec.  300.3, 303.2, 307.8, 313.2, 
314.1, and 315.2). For convenience, the full text of EDA's regulations 
as amended is available on EDA's Web site at http://www.eda.gov/ gov/.

Overview of Comments Received and Proposed Changes

    EDA's goal is to help communities and Regions transform their 
economies towards economic prosperity through innovation, 
entrepreneurship, and public-private partnerships. Since February 1, 
2011, EDA has taken a critical and comprehensive look-back at its 
regulations to reduce burdens by removing outmoded provisions and 
streamlining and clarifying requirements. EDA requested both public and 
internal comments on the regulations and has received a number of 
helpful suggestions that the agency believes make sense and should be 
put into practice. Therefore, through this NPRM, EDA proposes 
intelligent and intuitive revisions to provide additional flexibilities 
to the agency's stakeholders and support current best practices, while 
protecting taxpayer dollars and the Federal Interest in EDA-assisted 
property. These changes are designed to provide greater flexibility and 
local control to EDA's Recipients and to make the regulations easier to 
navigate and apply.
    As a result of the regulatory revision effort, EDA plans to 
substantially improve its regulations by removing outdated provisions; 
streamlining burdensome or unnecessary requirements; and including 
provisions that increase flexibility, encourage creative collaboration 
and the effective leveraging of resources, and clarify agency 
requirements. Regulatory

[[Page 76493]]

provisions EDA proposes to remove include:
     Outmoded and overly prescriptive membership requirements 
related to Comprehensive Economic Development Strategy (``CEDS'') 
Strategy Committees and District Organization governing bodies to help 
ensure EDA's requirements adapt effectively to the unique qualities of 
all communities and Regions. See proposed revisions to Sec. Sec.  
303.6(b)(1) and 304.2(c)(2).
     The requirement that a disaster-related application must 
be submitted within 18 months of the relevant disaster declaration to 
receive a 100 percent grant rate. Applications still must be submitted 
in an efficient, timely manner, but EDA proposes to remove the 
regulatory deadline to provide additional flexibility in appropriate 
situations. See proposed revisions to Table 2 in Sec.  301.4(b)(5).
     The unnecessary requirement that an RLF Recipient request 
EDA to subordinate its interest when seeking EDA's approval to sell or 
securitize an RLF portfolio. See proposed revisions to Sec.  307.19.
    Ways the regulations have been streamlined include:
     Modernizing the CEDS requirements from a laundry-list of 
items to four essential planning elements. EDA will provide further 
content information to stakeholders through the publication of updated 
CEDS guidelines, which will be grounded in best practices and developed 
in collaboration with our economic development and research partners. 
We expect these changes to enhance local control and allow EDA's 
planning partners to focus on strategies, performance, and outputs. See 
proposed revisions to Sec.  303.7(b).
     Streamlining and clarifying EDA's Property release 
requirements. See proposed revisions to Sec.  314.10.
    Flexibility has been infused throughout the regulations in a number 
of ways, including:
     Providing that EDA may provide a grant rate of up to 80 
percent to incentivize projects that encourage broad, innovative 
Regional planning. See proposed revisions to Table 2 in Sec.  
301.4(b)(5).
     Removing unnecessary restrictions on the RLF program to 
enhance operations in uncertain economic conditions. See proposed 
revisions to Sec. Sec.  307.17(b)(6) and 307.18(a)(1).
     Setting out EDA's flexibilities with respect to 
subordinating the agency's interest in Project Property and updating 
EDA's Property regulations to help Recipients better take advantage of 
financing tools widely available in today's market--including New 
Markets Tax Credit (``NMTC'') arrangements. These provisions provide 
flexibilities while protecting the Federal Interest. See proposed 
revisions to Sec.  314.6.
     Setting out EDA's authority to accept an instrument other 
than a recorded statement to protect the Federal Interest under certain 
circumstances. See proposed revisions to Sec.  314.8.
    We have included and enhanced provisions to facilitate coordination 
and the leveraging of Federal investments through:
     The updated evaluation criteria, which incentivize the 
leveraging of resources and collaboration among all levels of 
government and the public and private sectors. See proposed revisions 
to Sec.  301.8.
     The description of Infrastructure at Sec.  301.11, which 
provides that EDA, through appropriate Federal Funding Opportunity 
(``FFO'') announcements, will advance interagency collaboration by 
funding Projects that demonstrate the leveraging of Federal, State, and 
other resources.
     Providing that EDA may provide a grant rate of up to 80 
percent to incentivize Projects that demonstrate effective leveraging 
of other Federal Agency resources. See proposed revisions to Table 2 in 
Sec.  301.4(b)(5).
     Providing that RLF Recipients may use any Federal loan to 
meet private leveraging requirements. See proposed revisions to Sec.  
307.15(d).
    This NPRM also proposes a number of clarifications, including:
     A definition of Regional Innovation Clusters or RICs to 
define this important economic development strategy. See proposed 
revisions to Sec.  300.3.
     Examples of innovation- and entrepreneurship-related 
infrastructure under the proposed description of ``Infrastructure'' at 
Sec.  301.11.
     A description of EDA's improved grant review and selection 
process. See proposed revisions to Sec.  301.7.
     Updates to the data requirements that Eligible Applicants 
follow to demonstrate economic distress to better reflect the types and 
content of available data sources. See proposed revisions to Sec.  
301.3(a)(4).
     A revised accountability provision, which clarifies EDA's 
performance expectations and reporting requirements. See proposed 
revisions to Sec.  302.16.
     Adding subparts to EDA's regulations at part 303 to 
clarify the distinctions between EDA's Planning investments and 
reorganizing the RLF regulations under part 307 so that all RLF 
requirements are easy to find under ``Subpart B--Revolving Loan Fund 
Program.''
     Clarifying EDA's Property regulations and adding helpful 
headings to help stakeholders navigate them. See proposed revisions to 
Sec. Sec.  314.3, 314.6, and 314.7.
    Although this is not strictly a regulatory issue, EDA currently is 
examining ways to streamline and rationalize its application 
requirements. EDA expects that its new application requirements will 
help applicants focus on the competitiveness of their proposed 
strategies and reduce the cost of applying for EDA assistance, while 
maintaining accountability for taxpayer dollars.
    The following is a thematic summary of most comments received in 
response to the February 1, 2011 request for comments. A more detailed 
analysis is provided below under ``Part-by-Part Analysis of Comments 
Received and Proposed Changes.''

Regional Innovation Clusters and Innovation and Entrepreneurship-
Related Infrastructure

    EDA received five comments suggesting that EDA provide a definition 
for the phrase ``regional innovation cluster,'' which is an economic 
development technique designed to spark job creation and help 
communities and Regions become more competitive in the global economy. 
This NPRM adds a definition of ``Regional Innovation Clusters or RICs'' 
in EDA's set of regulatory definitions at Sec.  300.3. In addition, EDA 
has emphasized the importance of using projects and techniques that 
advance effective innovation ecosystems in Regions throughout the U.S. 
and help communities support promising entrepreneurs and small 
businesses. EDA proposes a new regulation at Sec.  301.11 to provide 
some examples of innovation- and entrepreneurship-related 
infrastructure Projects. Further, this NPRM proposes to specify 
reserved part 311 as a holding place for any regulations that may be 
necessary to implement the America COMPETES Reauthorization Act of 2010 
(Pub. L. 111-358). Please see the sections below titled ``Part 300--
General Information'' and ``Part 301--Eligibility, Investment Rate and 
Application Requirements'' for more detailed information.

EDA's Distress Criteria and Match Requirements

    EDA received several comments suggesting that EDA reform its 
Investment Rate framework. EDA understands that communities and Regions 
face challenging economic

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conditions; however, it is the agency's experience that the current 
Investment Rate determination structure encourages communities to 
collaborate and prioritize their needs and appropriately marshals 
resources to distressed Regions. By ensuring that communities have 
``skin in the game,'' EDA's Investment Rate framework reinforces the 
need for local buy-in and participation, which improves economic 
development outcomes. In addition, the current structure provides EDA 
with needed flexibility to appropriately increase the EDA share based 
on Special Need and distress considerations. Therefore, EDA does not 
propose adjusting its Investment Rate framework through this NPRM. 
However, this NPRM does provide for an Investment Rate of up to 80 
percent to encourage Projects that involve broad Regional planning and 
coordination and for Projects that effectively leverage other Federal 
resources. In addition, this NPRM contains a number of provisions 
designed to smooth connections between EDA and other Federal Agencies 
to ensure that stakeholders can effectively leverage Federal resources; 
including specifying that any Federal loan may meet an RLF's private 
leveraging requirements. Please see the sections below titled ``Part 
301--Eligibility, Investment Rate and Application Requirements'' and 
``Part 307--Economic Adjustment Assistance Investments'' for more 
information.

Comprehensive Economic Development Strategies, Economic Development 
Districts, and EDA's Planning Program

    EDA received a number of comments on the regulations governing its 
Planning program, the requirements of CEDS, and Economic Development 
Districts (``EDDs''). Several comments suggest that EDA provide 
additional flexibilities with respect to the composition of CEDS 
Strategy Committees and District Organizations' governing bodies. EDA 
agrees and proposes revisions to Sec. Sec.  303.6(b)(1) and 304.2(c)(2) 
to shift the focus from membership requirements to performance and 
outcomes, by maintaining the requirement that Strategy Committees and 
District Organization governing bodies represent the main economic 
interests of the Region, but no longer require a majority or membership 
threshold from any type of economic stakeholder. EDA proposes new 
language to clarify that these organizations must demonstrate the 
capacity to effectively undertake planning processes and implement 
strategies, as applicable. EDA expects that these changes will provide 
communities and Regions the flexibility to establish planning 
organizations that reflect and work most effectively for their unique 
make-up and priorities. In accord with best practices, EDA expects that 
the private sector will be strongly represented on both Strategy 
Committees and District Organization governing bodies.
    Several comments suggest that EDA simplify and streamline the 
content requirements of CEDS. EDA agrees with the commenters and 
proposes changes to Sec.  303.7(b) to remove the ``laundry list'' 
elements of CEDS and replace them with four essential planning 
elements. EDA will publish CEDS guidelines that incorporate best 
practice recommendations of EDA's planning and research partners.
    Commenters suggest increased coordination with District 
Organizations in a variety of ways. Some commenters suggest that EDA 
ensure that all implementation projects are tied to the CEDS, while 
others request that EDA require coordination between Eligible 
Applicants and the relevant District Organization. EDA values its 
relationship with its stakeholders, but does not make these changes 
because of the requirements of PWEDA. Under sections 201(b)(3) and 
209(b)(2) of PWEDA (42 U.S.C. 3141 and 3149, respectively), all grants 
awarded under EDA's Public Works and Economic Adjustment Assistance 
programs must be consistent with a relevant CEDS. PWEDA does not impose 
this requirement upon its other programs. EDA strongly encourages 
collaboration and coordination amongst District Organizations and other 
stakeholders, but EDA is not authorized to impose such requirements. 
Please see the sections below titled ``Part 303--Planning Investments 
and Comprehensive Economic Development Strategies'' and ``Part 304--
Economic Development Districts'' for more information.

Revolving Loan Fund Program

    EDA received numerous comments on the agency's revolving loan fund 
(``RLF'') program, several of which recommend that EDA set a time limit 
for releasing the Federal Interest in RLF grants. EDA understands that 
some RLF awards have been operating for a considerable length of time, 
some for as many as three decades, but EDA currently is not authorized 
to release its interest in RLF awards. EDA continues to work to achieve 
the necessary authorities. In addition, commenters opine that the RLF 
program reporting requirements are too burdensome. The semi-annual 
reporting requirement for the RLF program is in place to address an 
audit report by the DOC's Office of Inspector General (``OIG''), which 
recommended that EDA undertake more rigorous oversight of the RLF 
program to ensure the financial integrity and sustainability of the 
program. Because the reporting requirements are designed to address 
past program issues and ensure the viability and transparency of the 
program, EDA declines to make wholesale changes, but intends to 
continue to improve the Recipient reporting system to make it more 
user-friendly. In addition, six comments suggest the establishment of 
an RLF task force to address program issues and improve communications 
between EDA and program stakeholders. EDA currently is in the process 
of establishing an internal RLF task force and expects it to begin 
meeting in the very near future. Please see the section below titled 
``Part 307--Economic Adjustment Assistance Investments'' for more 
information.

Property Management Updates

    EDA received several comments that offered ways to make the 
agency's Property management regulations more flexible and adaptive to 
today's economy. For example, some commenters suggest that EDA should 
subordinate its interest when a Project warrants, require a lien only 
on the value of the Federal Interest, and make necessary changes to 
facilitate the agency's participation in Projects involving NMTC 
arrangements and other types of financing. EDA agrees, and proposes 
clarifying changes to its encumbrances regulation at Sec.  314.6 to set 
out EDA's subordination flexibilities. EDA also amends its recorded 
statement requirement at Sec.  314.8 to allow EDA to accept alternative 
instruments to protect the Federal Interest in certain situations. 
Please see the section below titled ``Part 314--Property'' for more 
information.

Non-Regulatory Comments

    EDA received a number of comments related to agency policy and 
process rather than EDA's regulations. For instance, several comments 
opined on the agency's mission and direction, two of which request that 
EDA continue to fund traditional infrastructure. One commenter 
specifically notes that EDA should fund infrastructure to help smaller 
communities connect more effectively to telecommunications networks and 
electric grids. On the other hand, another comment suggests that EDA 
allocate more funding to ``programs and services that create jobs and 
less on infrastructure.'' Whether the scope of work of an EDA 
Investment

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includes basic infrastructure, such as road upgrades, or business 
incubation technical assistance, EDA's goals remains the same: 
advancing the community's or Region's economic development strategy and 
building the capacity to create and retain jobs. EDA funds a variety of 
Projects to provide a broad portfolio of assistance through which 
Eligible Applicants can strategically meet their needs. Another comment 
encourages EDA to ``consider the funding of operations for business 
incubator projects for the start-up phase.'' EDA generally avoids 
funding operations for Projects that provide business incubation, 
acceleration, and similar services because the agency expects Projects 
to be self-sustaining. To this end, proposed application requirements 
for Projects to construct a business, technology, or other type of 
incubator or accelerator, as set out in Sec.  301.10(d) of this NPRM, 
are designed to help EDA ensure that these Investments will continue 
creating jobs once the Project period expires. However, EDA may 
consider an application that proposes certain eligible business 
incubation activities performed by an Eligible Recipient.
    We received one comment noting a disconnect between EDA's 
encouragement of ``public-private partnerships'' and the agency's 
regulatory framework that ``makes it hard to fund a project where a 
private entity expects to earn a profit.'' EDA acknowledges that 
private sector profit is essential to sustained economic growth and job 
creation; however, profit for a particular entity cannot be an 
objective under the terms of an EDA award. EDA's goal is not to replace 
private sector investment, but to spark economic development Projects 
that would not happen otherwise by leveraging private investment more 
efficiently. EDA believes the public and private sectors must work 
together to achieve vibrant Regional economies and encourages 
appropriate partnerships through its evaluation criteria, which are 
proposed in this NPRM at Sec.  301.8. However, such partnerships must 
meet EDA's conflicts-of-interest requirements as set out at Sec.  
302.17. See the discussion under ``Part 302--General Terms and 
Conditions for Investment Assistance'' for more information.
    EDA also received two comments stating that EDA's ``[f]ield 
representatives in the states are absolutely necessary.'' EDA agrees, 
and the agency's Economic Development Representatives (``EDRs'') serve 
every State.
    EDA received several comments on its award approval process. One 
commenter suggests that the agency ``[s]treamline submittal and 
reporting procedures for smaller grants ($100,000 or less).'' EDA 
understands the commenter's concern; however, EDA is responsible for 
ensuring all requirements are met and for tracking performance on all 
of its awards, and so must require certain submittals and reports to 
ensure Federal funds are used efficiently and effectively. However, as 
noted above, EDA is reviewing its application requirements to reduce 
burdens and ensure efficiency for all Eligible Applicants. Two 
commenters suggest that ``the amount of time it takes to get an EDA 
grant approved'' is excessive. EDA recently undertook a comprehensive 
effort to improve the agency's award selection processes to shorten the 
amount of time between application and final award approval, while 
maintaining EDA's excellent customer service. The new award selection 
process that went into effect on October 14, 2010, greatly enhances 
transparency and competitiveness and significantly reduces the time it 
takes for EDA to evaluate an application. EDA now considers 
applications in quarterly funding cycles. Applications still are 
accepted on an ongoing basis, but instead of funding Projects on a 
piecemeal basis, EDA now competitively evaluates all applications 
received during a particular funding cycle. As a result, Eligible 
Applicants that submit a complete application by a funding cycle 
deadline are notified of EDA's selection decision within 20 business 
days of the deadline. Please see EDA's Web site at http://www.eda.gov/PDF/Process%20Improvement%20Nov%204,%202010%20Webinar.pdf for more 
information on EDA's new award selection process.
    EDA received one comment stating that the new award approval 
process ``worked'' to make EDA's ``programs more user friendly and 
efficient.'' However, EDA received another comment requesting that EDA 
``return to the rolling submission of grant requests.'' The commenter 
suggests that the new process ``fails communities'' that seek to 
attract new businesses and prospects because such prospects are 
``unwilling to wait until the next submittal deadline to decide if a 
community can provide adequate water pressure or sewer capacity.'' 
EDA's new process is designed to speed up the approval process and 
provide Eligible Applicants with feedback earlier. Under the new 
process, EDA still accepts applications on a rolling basis and 
generally provides feedback on an application within 15 business days 
of application receipt. Although EDA makes awards on a quarterly basis, 
those awards are made much more efficiently. EDA believes that the new 
process provides Eligible Applicants and their stakeholders increased 
certainty, but welcomes additional comments.
    The commenter also suggests that the new process ``favors mega-
projects that would succeed without EDA's assistance.'' While the new 
process is designed to be competitive, EDA is committed to helping 
distressed communities flourish, and is not interested in assisting 
Projects that would succeed in any case. In fact, one criterion on 
which EDA evaluates every application is the extent to which it assists 
economically distressed and underserved communities. Two commenters 
state that ``EDA should not depend solely on a strict standard 
application and point grading system.'' While EDA's staff works hard 
with communities as they develop their applications, evaluating 
submitted applications in a standard manner is the only way to achieve 
objective, data-driven results. Two commenters suggest that 
``[r]estricting projects to those that are shovel ready [is] likely to 
eliminate promising projects in need of some extra funding to become a 
reality.'' EDA is committed to providing its limited resources to 
distressed communities so they can spark job creation and positive 
economic change as efficiently as possible. Waiting on projects that 
are not yet ready for implementation would be a disservice to 
communities across the U.S. EDA works closely with communities as they 
develop projects that are ready for consideration.
    EDA received five comments requesting that EDA provide 
``conditional grants of funding using written documentation that lists 
the conditions and timeframe for meeting requirements * * *.'' Through 
the new award selection process, EDA attempts to strike a balance 
between cost efficiency and certainty for Eligible Applicants. Under 
the new process, an Eligible Applicant that submits an application 
sufficiently in advance of a funding cycle deadline receives an initial 
project analysis on the application's fit with EDA's priorities using 
the evaluation criteria set out in the relevant FFO and completeness, 
which lets the Eligible Applicant know what additional materials must 
be submitted before a funding cycle deadline. EDA cannot make a 
conditional award before a complete application is received because it 
is very difficult to competitively evaluate such applications. EDA 
strongly encourages Eligible Applicants to work with EDA

[[Page 76496]]

staff as early as possible to help ensure successful outcomes. In 
addition, as noted above, EDA is reviewing its application requirements 
to streamline them and ensure they are efficient and cost-effective for 
communities.
    EDA received one comment suggesting that the ``very rigid legal 
interpretation of scope of work compliance * * * be relaxed'' as 
``frequently innovation efficiencies emerge after project work has 
begun, but these efficiencies, and the related potential for over 
delivering the project are not allowed because they were not 
specifically identified in the original project scope of work.'' EDA 
understands that new efficiencies and synergies may emerge as a Project 
moves forward, and EDA staff work closely with Recipients to ensure 
that useful changes to a Project's scope of work can be implemented. 
However, EDA must be careful to maintain the competitiveness and 
transparency of its grant process and ensure that any proposed changes 
do not affect the nature and justification of the Project as originally 
proposed.
    EDA received one comment requesting that EDA no longer use 
www.grants.gov for application submissions. Application submission 
through www.grants.gov is a requirement across the Federal government 
and is designed to reduce paperwork, while making the application 
process simpler and more efficient. Numerous improvements have been 
made to www.grants.gov over the past several years, which have greatly 
improved system performance.
    One commenter suggests that ``EDA consider establishing a state-by-
state grant formula.'' EDA is uniquely effective because the agency can 
encourage Regional collaboration across State borders and work directly 
with communities in implementing economic development plans. EDA works 
closely with its State partners, and State coordination is required 
under EDA's ``Inter-governmental review of projects'' regulation (Sec.  
302.9). Therefore, EDA has not revised its regulations based on this 
comment.
    EDA received several comments on post-award issues. One commenter 
suggests that EDA measure jobs created using a count of ``pay checks to 
people * * * instead of the constant debate of what a job is and is 
not.'' EDA will consider the comment in developing performance 
measures; however often EDA is constrained by government-wide guidance 
and requirements with respect to performance measures, including how to 
count jobs. The agency received five comments requesting that it no 
longer collect information for individual background screenings using 
Form CD-346 (Applicant for Funding Assistance). EDA is required to 
perform this due diligence step in accordance with DOC policy, which 
recently was changed to require Form CD-346 from additional types of 
Eligible Applicants. EDA apologizes for any inconvenience, but is not 
authorized to change the requirement.
    We received one comment suggesting that EDA had imposed ``arbitrary 
caps on [facilities and administrative] F&A reimbursement'' creating 
``a[n] unsustainable financial burden for research institutions.'' The 
commenter particularly cites EDA's FY 2010 i6 Challenge competition, 
which resulted in six Economic Adjustment Assistance Investments under 
part 307. EDA is uncertain of the precise circumstances behind the 
comment, but in general, if facilities and administrative costs (also 
referred to as indirect costs) are included in a project budget, EDA 
may accept the Eligible Applicant's approved ``Facilities and 
Administrative Cost Rate Agreement.'' Nonetheless, EDA is responsible 
for taxpayer dollars and ensuring that Projects generate effective 
economic impacts. Every EDA Project represents an important opportunity 
to create jobs and improve the quality of life in Regions across the 
U.S; therefore, EDA looks carefully at Project budgets to maximize the 
use of funds for direct program costs and EDA staff may work with 
Recipients to negotiate effective budgets. Also, note that under the 
University Center program, Sec.  306.6(d) requires that 80 percent of 
EDA funding be allocated to direct costs of Program delivery.
    One commenter suggests that ``it is important [for stakeholders] to 
have more dialogue with senior officials within the EDA so they can 
hear from the field, in addition to the internal management teams.'' 
The commenter goes on to tell of an experience with ``a very well 
structured round table with the Assistant Secretary'' that was 
coordinated by EDA's Philadelphia regional office, and comments that 
``more of these need to occur.'' EDA believes that stakeholder input 
and feedback is invaluable. Forums that facilitate dialogue between 
EDA's senior management and economic development practitioners in the 
field, including face-to-face meetings, teleconferences, and webinars, 
are a high priority and EDA coordinates as many as possible. Over the 
past year, each region held a conference to share innovative ideas and 
best practices. We hope to continue to offer these conferences as a 
venue to bring together practitioners, EDA staff and leadership, and 
experts to continue the important dialogue about how to continue to 
improve our nation's economy. Senior management from both Headquarters 
and the regional offices frequently are out in the field gathering 
information and requesting feedback and ideas. We welcome additional 
suggestions for useful dialogue opportunities.

Part-by-Part Analysis of Comments Received and Proposed Changes

    Specifically, this NPRM proposes the following revisions to EDA's 
regulations:

Part 300--General Information

    Part 300 of the regulations states EDA's mission and highlights the 
policies and practices that EDA employs in order to attract private 
capital investments and new and better jobs to those Regions 
experiencing substantial and persistent economic distress. EDA seeks to 
help Regions become more competitive in an innovative economy. To 
facilitate these goals, this NPRM introduces several new terms and 
revises existing terms to assist readers in better understanding EDA's 
requirements and ensure clarity, consistency, and technical precision.
    EDA proposes revising Sec.  300.1, which introduces EDA and sets 
out the agency's mission, by inserting the term ``new and better jobs'' 
in place of the phrase ``higher-skill, higher-wage jobs.'' The current 
use of the phrase ``higher-skill, higher-wage jobs'' may cause 
confusion and suggest that EDA is only interested in ``high tech'' jobs 
or jobs that require particular skill sets. The phrase ``new and 
better'' is qualitative enough to adapt to all communities. EDA also 
revises Sec.  300.2, which provides information on EDA's Headquarters 
and regional offices, to replace the address ``14th Street and 
Constitution Avenue NW.'' with the more precise address ``1401 
Constitution Avenue NW.'' in Sec.  300.2(a). This NPRM revises the 
first sentence of Sec.  300.2(b) to replace the phrase ``Web site'' 
with the word ``Web site'' for consistency with EDA's current 
convention, the word ``notice'' with ``applicable announcement'' to 
provide greater clarity on the type of funding announcement that EDA 
issues, and the word ``published'' with ``issued'' to better describe 
how EDA makes such announcements public. In addition, we propose 
removing the word ``annually,'' as EDA may issue several funding 
announcements throughout the year.
    This NPRM proposes several clarifying revisions to the 
``Definitions'' section of EDA's regulations at Sec.  300.3.

[[Page 76497]]

First, EDA proposes revising the definitions of ``Cooperative 
Agreement'' and ``Grant'' in Sec.  300.3 to specify that EDA may 
administer a cooperative agreement or a grant under a statute other 
than PWEDA. In both definitions, EDA removes the phrase ``under PWEDA'' 
and replaces the phrase ``the activities contemplated in an agreement 
between the parties'' with the phrase ``a purpose or activity 
authorized under PWEDA or another statute'' to provide greater clarity 
and improve sentence structure.
    EDA proposes a minor change to the definition of ``Eligible 
Recipient'' to delete an unnecessary reference to ``of part 306.'' We 
also propose revising the definition of ``Federal Funding Opportunity'' 
or ``FFO,'' by replacing the phrase ``the notice EDA publishes 
annually'' with the phrase ``an announcement EDA publishes during the 
fiscal year,'' as EDA may issue several funding announcement throughout 
the fiscal year. In addition, for clarity, EDA proposes revising the 
first sentence of the definition by replacing the phrase ``Web site'' 
with ``Web site'' and the word ``describes'' with ``provides;'' adding 
the word ``funding'' before the word ``amounts;'' replacing the phrase 
``particular application procedures'' with the phrase ``application and 
programmatic requirements;'' and replacing the phrase ``special 
circumstances and other relevant information concerning EDA's 
Investment programs for the year'' with the phrase ``special 
circumstances, and other information concerning a specific competitive 
solicitation for EDA's economic development assistance programs.'' EDA 
also corrects a grammatical error in the second sentence of the 
definition by replacing the phrase ``EDA may also'' with ``EDA also 
may.''
    EDA proposes minor punctuation and capitalization corrections to 
the definition of ``Federally Declared Disaster'' to remove the hyphens 
between ``Federally'' and ``Declared'' and ``Presidentially'' and 
``Declared'' and to capitalize ``Federally.'' We also propose revising 
the definition of ``Indian Tribe'' to replace the phrase ``any Indian 
tribe, band, nation, pueblo, or other organized group or community, 
including * * *'' with the phrase ``an entity on the list of recognized 
tribes published pursuant to the Federally Recognized Indian Tribe List 
Act of 1994 (Pub. L. 103-454) (25 U.S.C. 479a et seq.), as amended, 
and* * * '' This revision does not affect EDA's relationship with 
Indian Tribes in any way, but provides greater clarity and ensures the 
regulation comports with the definitions of other Federal Agencies, 
including the U.S. Department of the Interior. In addition, we propose 
removing an unnecessary reference to ``an EDA'' from the definition of 
``Investment'' or ``Investment Assistance.'' We also propose replacing 
``costs'' with the singular ``cost'' in the definition of ``Investment 
Rate.''
    With respect to the definition of ``Local Share'' or ``Matching 
Share,'' we received one comment requesting that EDA ``allow for 
Federal funds that are designated to local state agencies, to be 
considered as eligible matching funds for EDA funding.'' EDA is working 
to address this issue by ensuring that Federal Agency resources can be 
leveraged efficiently and effectively, but is not authorized to allow 
all Federal funds provided to States to be used as Matching Share 
because of the requirements of appropriations law. All Federal funds 
are appropriated for particular purposes, as mandated by Congress and 
set out in the relevant authorizing statute, appropriation, or other 
Congressional statement of intent. For another Federal Agency's funds 
to be used to match an EDA award, there must be such a statement of 
Congressional intent. In some cases Congress has indicated that other 
Federal funds may be used to meet EDA's match requirement. For 
instance, currently one of the uses to which Community Development 
Block Grant (``CDBG'') funds provided by the U.S. Department of Housing 
and Urban Development ``HUD'' may be put is ``payment of the non-
Federal share required in connection with a Federal grant-in-aid 
program'' undertaken as part of HUD's Community Development program. 
See 42 U.S.C. 5305(a)(9). In addition, section 205 of PWEDA (42 U.S.C. 
3145) authorizes EDA to supplement a grant awarded under another 
designated Federal program. EDA must determine that Federal funds may 
be used as match for another Federal grant each time funds from another 
Federal Agency are requested to be all or a portion of the Matching 
Share, including when the Federal funds are made available to a State.
    In addition, we received three comments regarding costs that may be 
considered as Local Share or Matching Share. Two suggest that EDA 
consider certain pre-award costs ``to verify eligibility for EDA 
funds'' as a portion of the Matching Share and the third comment sets 
out the commenter's own experience in which the agency did not allowed 
a particular Recipient to use purchased property as Matching Share. All 
costs under an award are determined in accordance with relevant Federal 
cost principles, as set out in the following Office of Management and 
Budget (``OMB'') Circulars: Circular No. A-122 titled ``Cost Principles 
for Nonprofit Organizations'' (2 CFR part 230); Circular No. A-21 
titled ``Cost Principles for Education Institutions'' (2 CFR part 220); 
and Circular No. A-87 titled ``Cost Principles for State, Local and 
Indian Tribal Governments'' (2 CFR part 225). EDA, in its sole 
discretion, may accept certain eligible costs, including pre-award 
costs and Recipient-provided property, as Matching Share or reimburse 
them consistent with the EDA-approved Investment Rate. For pre-award 
costs related to contracts for goods and services to be used as 
Matching Share, such contracts must have been procured in accordance 
with Federal competitive procurement requirements as set out at 15 CFR 
14.43 or 24.36, as applicable. EDA is uncertain of the precise 
circumstances behind the comment with respect to property used as 
Matching Share, but we encourage all Eligible Applicants to work with 
EDA staff early in the application process to ensure costs are 
allowable. We propose non-substantive revisions to the definition of 
``Local Share'' or ``Matching Share'' to replace plural references with 
singular ones for better sentence structure. Accordingly, we replace 
``Recipients'' with ``a Recipient,'' ``third parties'' with ``third 
party,'' and ``other Federal agencies'' with ``another Federal 
agency.''
    In the definition of ``Presidentially Declared Disaster,'' we 
correct a punctuation error by removing the hyphen between 
``Presidentially'' and ``Declared.'' With respect to the definition of 
``PWEDA,'' we propose removing the unnecessary phrase ``including the 
comprehensive amendments made by the Economic Development 
Reauthorization Act of 2004 (Pub. L. 108-373, 118 Stat. 1756).''
    EDA proposes removing the definition of ``Private Sector 
Representative'' to reflect proposed changes to the membership 
requirements applicable to CEDS Strategy Committees and District 
Organization governing bodies. Under current Sec.  303.6(a), a CEDS 
Strategy Committee must include Private Sector Representatives as a 
majority of its membership and under Sec.  304.2(c)(2), the governing 
body of a District Organization must include at least one Private 
Sector Representative. Under this NPRM, EDA proposes removing CEDS 
Strategy Committee and District Organization governing body membership 
threshold requirements; and proposes instead to focus on

[[Page 76498]]

program processes and outputs. Because the defined term ``Private 
Sector Representative'' is used largely in the context of these 
membership threshold requirements, EDA proposes to remove the 
definition. See also the proposed changes to parts 303 and 304.
    EDA corrects a grammatical error in the third sentence of the 
definition of ``Region'' or ``Regional'' by replacing the phrase ``may 
also'' with ``also may.''
    In response to five comments the agency received that support a 
definition of regional innovation cluster, this NPRM includes a 
definition of ``Regional Innovation Clusters'' or ``RICs'' after the 
definition of ``Regional Commission'' in Sec.  300.3. One comment 
requests EDA to ensure that the definition does not exclude communities 
that may lack the resources to form a RIC from partnering with 
communities that do have that capacity. Another comment notes that EDA 
should ``make sure [the] reader understands the vertical integration of 
the cluster and [that] it is not just a conglomerate of like [North 
American Industry Classification System] NAICS [codes].'' Other 
comments express concern regarding the implications of RICs, including 
two that question how RICs will work as a strategy for isolated 
communities ``where the nearest town could be 90 to 167 miles away'' 
and in communities that ``are not accessible by roads and lack many 
essential infrastructure and program needs.'' In addition, two comments 
warn that ``[r]egionalism and collaboration are two words espoused at 
most conferences, however, there is a real need to look at these 
concepts and adjust as needed for particular projects'' and that 
``while `regionalism' is the buzz word * * * revitalization and 
progress must begin locally before it ever reaches a regional stage.'' 
One commenter goes on to note, ``government funds should not be awarded 
unless there are identifiable [benchmarks] to incorporate these 
concepts.'' Another comment states that ``EDA should be willing to fund 
existing programs that have successful track records just as much as 
new programs with promising projections.''
    EDA thanks the commenters for their thoughtful responses and will 
endeavor to ensure the proposed definition of RICs addresses these 
concerns. EDA is striving to create a highly flexible and inclusive RIC 
framework that works for all types of Regions. EDA recognizes that RIC 
participants can and should have strategic partnerships outside of the 
RIC's geographic Region and the definition emphasizes that a RIC can 
cross jurisdictional boundaries. EDA's RIC-based programs are designed 
to increase the capacity of distressed communities to establish a RIC 
and take advantage of the resources of existing RICs. Also, EDA has 
tried to craft the definition to emphasize vertical integration while 
remaining flexible by defining RICs as ``networks of similar, 
synergistic, or complementary entities'' that ``have active channels 
for business transactions and communication.'' EDA believes RICs can be 
integral to successful economic development strategies for many 
communities and continues to develop performance measures and goals to 
help assess the impact of RICs and build a portfolio of best practices. 
Also, RICs are just one strategy amongst EDA's array of policy and 
program options that can be tailored to meet communities' needs. 
Through the RIC framework, EDA will work closely to articulate a 
strategy that incorporates the attributes and challenges of all types 
of communities, from densely populated to very rural. We invite 
additional constructive comments on ways to improve the definition.
    Last, EDA proposes revising the definition of ``Trade Act'' to 
include a reference to the statutory citation for the Trade Adjustment 
Assistance for Communities program. Therefore, in the definition of 
Trade Act, the phrase ``chapters 3 and 5'' is revised to read as 
``chapters 3, 4, and 5.'' Finally, EDA adds the phrase ``for purposes 
of EDA,'' to clarify that the definition of ``Trade Act'' is specific 
to EDA and its programs.

Part 301--Eligibility, Investment Rate and Application Requirements

    Part 301 sets forth eligibility criteria, the maximum allowable 
Investment Rates, and application requirements common to all PWEDA-
enumerated programs (excluding Community Trade Adjustment Assistance at 
part 313 and Trade Adjustment Assistance for Firms (``TAAF'') at part 
315). In general, subpart A of part 301 presents an overview of EDA's 
eligibility requirements; subpart B addresses applicant eligibility; 
subpart C addresses Regional economic distress level requirements; 
subpart D sets forth maximum allowable Investment Rates and Matching 
Share requirements; and subpart E addresses application requirements, 
as well as the evaluation criteria used by EDA in selecting Projects. 
EDA revises the table of contents of part 301 to include a reference to 
new Sec.  301.11--Infrastructure, which is described below.
    We propose clarifying changes to Sec.  301.1 to simplify the 
provision and ensure it better reflects EDA's application process. We 
remove the phrase ``an applicant and the Project proposed by the 
applicant must satisfy each of'' so that the provision's introductory 
text simply and clearly reads ``In order to receive EDA Investment 
Assistance, the following requirements must be met.'' In addition, to 
better reflect EDA's application selection process, we propose 
relocating the phrase ``EDA must select the Eligible Applicant's 
Project'' from Sec.  301.1(d) to new Sec.  301.1(f) and rephrase it 
slightly to read ``EDA must select the Eligible Applicant's proposed 
Project.''
    EDA received one comment on the agency's economic distress level 
requirements, which are set out at Sec.  301.3. The commenter expresses 
concern that one of the economic distress criteria to demonstrate 
eligibility for EDA's Public Works and Economic Adjustment Assistance 
programs may disproportionately exclude rural communities where 
``smaller job loss numbers become huge in today's economy.'' The 
commenter urges ``EDA to consider lowering the dislocation job 
requirement.'' The regulation at Sec.  301.3 tracks the requirements of 
section 301 of PWEDA (42 U.S.C. 3161), which requires that a Project be 
located in a Region that meets one or more of the following economic 
distress criteria in order to be eligible for EDA assistance:
     An unemployment rate that is, for the most recent 24-month 
period for which data are available, one percentage point greater than 
the national unemployment rate;
     Per capita income that is, for the most recent period for 
which data are available, 80 percent or less of the national average 
per capita income; or
     A ``Special Need,'' as determined by EDA.
    EDA does not have the authority to adjust these requirements, but 
recognizes the devastation that loss of a significant number of jobs 
has on a smaller community. If a Region does not meet the statistical 
economic distress criteria set out by PWEDA, EDA may be authorized to 
provide assistance through its Special Need criteria as defined at 
Sec.  300.3, which provide the flexibility to address a variety of 
sudden and severe economic dislocations.
    In response to an internal comment from EDA staff, EDA proposes 
changes to Sec.  301.3(a)(4) to reduce confusion regarding data sources 
for demonstrating economic distress. The proposed text recognizes that 
the U.S. Census Bureau's American Community Survey (``ACS''), which is 
EDA's default data source for determining distress

[[Page 76499]]

levels, does not include 24-month unemployment data. For clarity, EDA 
proposes to insert the heading Data requirements to demonstrate 
economic distress levels to Sec.  301.3(a)(4). For distress levels 
based on per capita income, the regulation provides that EDA still will 
base its determination on ACS data, and EDA proposes making the first 
sentence of Sec.  301.3(a)(4)(i) specific to per capita income by 
removing the reference to ``the unemployment rate or * * *'' EDA also 
relocates the clause that currently concludes the first sentence of 
Sec.  301.3(a)4)(i), which sets out the requirement that data 
correspond to the geographic area upon which the Eligible Applicant is 
basing eligibility, to be the final sentence of the provision. EDA 
appropriately rephrases the sentence to remove the unnecessary word 
``either'' so that the sentence begins ``The required data must be for 
the Region * * *'' The remainder of the sentence remains unchanged. EDA 
proposes a second sentence specific to distress levels based upon the 
unemployment rate that reads ``For economic distress levels based upon 
the unemployment rate, EDA will base its determination upon the most 
recent data published by the Bureau of Labor Statistics (``BLS''), 
within the U.S. Department of Labor.'' EDA proposes revising the 
sentence of the provision that currently begins ``Where a recent ACS is 
not available,'' by replacing that introductory phrase with a 
clarifying introductory clause that reads ``For eligibility based upon 
either per capita income requirements or the unemployment rate, when 
the ACS or BLS data, as applicable, are not the most recent Federal 
data available.'' The remainder of the sentence remains unchanged.
    In addition to the changes to Sec.  301.3(a)(4), EDA makes a non-
substantive change to Sec.  301.3(a)(1) to remove the parentheses from 
around the phrase ``or more.'' For clarity and better sentence 
structure in Sec.  301.3(a)(2), EDA replaces the phrase ``economic 
distress criteria of paragraph (a)(1) of this section'' with ``economic 
distress criteria described in paragraph (a)(1) of this section'' and 
the phrase ``is also'' with ``also is.'' This NPRM also proposes 
removing repetitive numerical references by replacing ``twenty-four 
(24) month'' with ``24-month'' and ``one (1)'' with ``one'' in Sec.  
301.3(a)(1)(i); replacing ``eighty (80)'' with ``80'' in Sec.  
301.3(a)(1)(ii); and replacing ``one (1)'' with ``one'' in Sec.  
301.3(c)(1).
    EDA received 17 comments regarding the agency's Investment Rate 
requirements, which are set out at Sec.  301.4 and provide the 
framework for the proportion of total Project costs EDA may provide. In 
general, Sec.  301.4 provides that an Eligible Applicant may be 
eligible for a 50 percent grant rate. Applicants experiencing 
relatively higher levels of distress or that are subject to a Special 
Need may be eligible for a higher grant rate, up to 80 percent. See 
Sec.  300.3 for the definition of ``Special Need.'' Several comments 
express concern regarding the 50 percent Investment Rate and suggest 
additional flexibilities to establish higher rates, particularly for 
EDA's Planning awards and Projects in distressed communities. In 
addition, one internal comment suggests that EDA establish standard 
Investment Rates for certain Recipients of Planning awards; 
specifically 75 percent for District Organizations and 100 percent for 
Indian Tribes.
    The general Investment Rate requirements in Sec.  301.4(b)(1) 
implement section 204 of PWEDA (42 U.S.C. 3144), which requires a 50 
percent baseline share plus an additional amount up to 80 percent 
``based on the relative needs of the area.'' EDA is not authorized to 
set particular Investment Rates for Planning awards, but the agency is 
authorized to provide higher maximum Investment Rates for all types of 
awards based on a Region's distress level, as set out in Table 1 of 
Sec.  301.4(b)(1)(ii). In addition, in accordance with Table 2 in Sec.  
301.4(b)(5), EDA may establish an Investment Rate of up to 100 percent 
for special Projects, including Projects of Indian Tribes.
    Two commenters suggest that EDA restore ``EDA's local match rate 
requirements to the pre-2005 levels'' and two commenters support EDA's 
inclusion of ``the revised Federal-local cost share provisions included 
in S. 2778 by the U.S. Senate Committee on Environment and Public Works 
during the 111th Congress.'' EDA understands that communities and 
Regions face challenging economic conditions; however, it is the 
agency's experience that the current Investment Rate determination 
structure encourages communities to collaborate and prioritize their 
needs and appropriately marshals resources to distressed Regions. By 
ensuring that communities have ``skin in the game,'' EDA's Investment 
Rate framework reinforces the need for local buy-in and participation, 
which improves economic development outcomes. In addition, the current 
structure provides EDA with needed flexibility to appropriately 
increase the EDA share based on Special Need and distress 
considerations. Therefore, EDA does not propose adjusting its 
Investment Rate framework through this NPRM. However, this NPRM does 
provide additional flexibilities for higher Investment Rates, 
specifically, up to 80 percent to encourage Projects that involve broad 
Regional planning and coordination, and Projects that effectively 
leverage other Federal resources. Also, this NPRM contains a number of 
provisions designed to smooth connections between EDA and other Federal 
Agencies to ensure that stakeholders can effectively leverage Federal 
resources; including specifying that any Federal loan may meet an RLF's 
private leveraging requirements.
    In response to an internal comment, EDA proposes syntax changes to 
Sec.  301.4(b)(1), which sets out the general requirements with regards 
to Investment Rates, to clarify that EDA's grant rates generally must 
be determined in accordance with Table 1 of Sec.  301.4(b)(1)(ii). EDA 
proposes splitting the initial sentence of the provision into two 
clearer sentences. In the first sentence of the provision, EDA replaces 
the phrase ``shall, after the application of Table 1'' with the phrase 
``shall be determined in accordance with Table 1.'' EDA proposes ending 
the sentence at the word ``subsection.'' To begin the second sentence 
of the provision, EDA proposes adding the phrase ``The maximum EDA 
investment rate shall'' before the clause that begins with the phrase 
``not exceed the sum of.'' In addition, EDA removes use of the 
variables (x) and (y) in the second sentence for clarity. These 
revisions do not change EDA's current practice and only clarify the 
regulation to reflect the requirements of PWEDA. In addition, EDA 
proposes removing the second sentence of Sec.  301.4(b)(3)(iii), to 
allow the Assistant Secretary to delegate authority to grant a waiver 
of the requirement that for Planning Investments under part 303, the 
Investment Rate shall be the maximum allowable under Table 1 of Sec.  
301.4(b)(1)(ii). In addition, in Sec.  301.4(c), EDA replaces the 
phrase ``Federal Funding Opportunity notices'' with ``Federal Funding 
Opportunity announcements'' for increased clarity.
    Six comments suggest that EDA use its grant rates ``to re-establish 
Federal incentives for regional collaboration of local governments and 
other related entities through the national network of Economic 
Development Districts.'' Regional collaboration in planning and 
implementing economic development projects is a key indicator of 
success, and EDA agrees that such efforts should be incentivized. 
Therefore, EDA revises Table 2 of Sec.  301.4(b)(5) to authorize an 
Investment Rate of up to 80 percent for

[[Page 76500]]

Projects that involve broad Regional planning and coordination with 
other entities outside the Eligible Applicant's political jurisdiction 
or area of authority, under special circumstances as determined by EDA. 
In general, to demonstrate broad Regional planning and coordination, 
Eligible Applicants must demonstrate costs necessary for such efforts 
that would not ordinarily have been incurred in the course of their 
usual planning and Project efforts; for example, new maps and analyses 
because of the expanded Regional coverage. Also, EDA proposes revising 
Table 2 to incentivize Projects that effectively leverage other Federal 
Agency resources with a maximum grant rate of up to 80 percent. Note 
that EDA also incentivizes broad Regional collaboration through its 
evaluation criteria as set out at Sec.  301.8.
    Two comments recommend that EDA waive match for FEMA-declared 
disasters. EDA agrees that maximum flexibility is necessary in disaster 
situations, and therefore also amends Table 2 of Sec.  301.4(b)(5) to 
clarify that EDA may provide up to a 100 percent grant rate when ``EDA 
receives appropriations under section 703 of PWEDA (42 U.S.C. 3233),'' 
which authorizes disaster economic recovery activities. EDA proposes a 
second revision to remove a deadline that applies to disaster 
applications. Under the current regulation, to be eligible for a 100 
percent grant rate, an application for a Project to address a 
Presidentially Declared Disaster must be submitted within 18 months of 
the disaster declaration. EDA believes that the 18 month requirement 
may be unduly restrictive, and revises the provision to provide that 
EDA may provide a maximum Investment Rate of 100 percent for ``Projects 
to address and implement post-disaster economic recovery efforts in 
Presidentially Declared Disaster areas in a timely manner.'' EDA 
expects that communities will respond to disasters expeditiously, and 
the phrase ``in a timely manner'' gives EDA the flexibility to set time 
limits appropriate to a disaster scenario.
    This NPRM proposes removing repetitive numerical references 
throughout Sec.  301.4 by replacing ``Fifty (50)'' with ``50'' and 
``thirty (30)'' with ``30'' in Sec.  301.4(b)(1); ``one (1)'' with 
``one'' in Sec.  301.4(b)(1)(ii); all instances of ``twenty-four (24) 
month'' with ``24-month'' and ``1 percentage point '' with ``one 
percentage point'' in Table 1 in (b)(1)(ii); ``eighty (80)'' with 
``80'' in Sec.  301.4(b)(2); ``fifty (50)'' with ``50'' in Sec.  
301.4(b)(3)(i); ``eighty (80)'' with ``80'' in Sec.  301.4(b)(3)(ii), 
and ``one hundred (100)'' with ``100'' in Sec.  301.4(b)(4).
    We propose clarifying revisions to Sec.  301.6, which sets out the 
requirements for EDA to provide assistance to supplement another 
Federal grant, to correct capitalization errors in the section heading 
so that it reads ``Supplementary Investment Assistance'' instead of 
``Supplementary investment assistance.'' We also revise the beginning 
of the first sentence of Sec.  301.6(a) to read ``Pursuant to a request 
made by an Eligible Applicant, EDA Investment Assistance may supplement 
a grant'' instead of ``Pursuant to a request by an Eligible Applicant, 
EDA Investment Assistance may supplement grants'' and replace the 
phrase ``any Federal grant program'' with ``a Federal grant program'' 
in the second sentence. We also revise the beginning of the first 
sentence of Sec.  301.6(b) to read ``For a Project that meets the 
economic distress criteria provided in Sec.  301.3(a)'' instead of 
``For Projects located in Regions meeting the criteria of Sec.  
301.3(a)'' and remove the unnecessary reference to ``EDA'' immediately 
before the phrase ``Investment Assistance.'' For clarity, in the second 
sentence of Sec.  301.6(b), we replace the phrase ``the combination of 
EDA Investment and other Federal funds'' with the phrase ``the EDA 
Investment and other Federal funds together'' and insert the word 
``that'' after provided.
    This NPRM revises and reformats Sec.  301.7(a) for clarity and to 
reflect EDA's improved grant-making process under the agency's Public 
Works and Economic Adjustment Assistance programs, which is designed to 
provide greater transparency and faster feedback to Eligible 
Applicants. EDA continues to accept applications on a continuing basis, 
but in general competitively evaluates all applications received in 
quarterly funding cycles. Note that in cases of extremely urgent 
distress, EDA may evaluate and select an award outside of the usual 
funding cycles. Also, applications under EDA's Planning, Local 
Technical Assistance, University Center, and Research and Evaluation 
programs are not subject to the funding cycle deadlines. Therefore, EDA 
proposes revising the first sentence of the provision by removing the 
second use of the phrase ``Investment Assistance'' immediately 
preceding ``application,'' as it is unnecessary. EDA clarifies the 
second sentence of Sec.  301.7(a) to specify that EDA's application, 
Form ED-900, is available electronically from www.grants.gov instead of 
on EDA's Web site. In addition, we revise the third sentence of the 
provision to add the introductory phrase ``In general;'' remove the 
words ``competitive and'' immediately before ``continuing;'' and 
replace the concluding phrase ``to respond to market forces in Regional 
economies'' with the clause ``and competitively evaluates all 
applications received in quarterly funding cycles throughout the fiscal 
year.'' For better sentence structure and to reduce confusion, we 
propose revising the fourth sentence of the provision so that it reads 
``Subject to the availability of funds, the timing in which EDA 
receives complete and competitive applications affects EDA's ability to 
participate in a given Project,'' instead of ``The timing with which 
competitive investment opportunities arise, as determined by the 
criteria set forth in Sec.  301.8, paired with the availability of 
funds in a given fiscal year, will affect EDA's ability to participate 
in any given Project.'' In the fifth sentence of the provision, EDA 
replaces the phrase ``using the criteria set forth in Sec.  301.8'' 
with the phrase ``in accord with the criteria set forth in the 
applicable FFO and in Sec.  301.8'' to clarify that a published FFO may 
contain specific evaluation criteria. In addition, in Sec.  
301.7(a)(1), EDA replaces the phrase ``upon corrections'' with ``after 
corrections are made'' for better sentence structure.
    EDA revises Sec.  301.8 to set out EDA's updated evaluation 
criteria. As set out in Sec.  301.8(a) through (f), EDA will evaluate 
applications on the extent to which they:
     Ensure collaborative Regional innovation;
     Leverage public-private partnerships;
     Advance national strategic priorities;
     Enhance global competitiveness;
     Encourage environmentally sustainable development; and
     Support economically distressed and underserved 
communities.
    EDA also proposes minor changes within the introductory text to 
Sec.  301.8 to replace the phrase ``EDA statutory and regulatory 
requirements'' with ``EDA's statutory and regulatory requirements'' in 
the first sentence of the provision; replace ``applicant'' with 
``Eligible Applicant'' in the second sentence; and add the introductory 
clause ``In addition to criteria set out in the applicable FFO'' and 
replace ``one (1)'' with ``one'' in the third sentence.
    EDA received eight comments regarding the evaluation criteria. One 
comment requests ``that EDA establish preferential selection criteria 
recognizing communities that are impacted by Defense Department actions 
such as base realignment and

[[Page 76501]]

closure (BRAC), specifically base closure and mission growth.'' EDA 
does not enumerate this as an evaluation criterion because Projects 
involving communities impacted by military base closures or 
realignments, as well as defense contractor reductions-in-force and 
U.S. Department of Energy defense-related funding reductions, are 
considered under EDA's Special Need criterion for eligibility. See also 
the definition of ``Special Need'' as set out in Sec.  300.3 and the 
distress requirements of Sec.  301.3(a). The evaluation criteria are 
geared towards selecting applications that best demonstrate the ability 
to help the impacted community grow the local economy effectively, 
create new and better jobs, and coherently engage local partners.
    A second comment suggests that EDA's evaluation criteria ``should 
favor awards to regions with developing clusters that need help rather 
than rewarding established clusters that will continue to grow on their 
own.'' EDA's proposed evaluation criteria incentivize RICs, and the 
agency's programs are designed to assist distressed communities; 
therefore, EDA anticipates helping Regions nurture developing clusters. 
Depending on the unique circumstances facing a Region, leveraging an 
established cluster may be the most effective strategy to aid a 
distressed Region. Another commenter requests that EDA not so heavily 
favor distressed communities in order to allow healthier communities to 
access its grant assistance. EDA's mission is to help distressed 
communities become competitive, productive, and strong; and Congress 
mandates that appropriated funds meet those goals. EDA encourages 
healthy communities to mentor and share best practices with distressed 
communities to help develop robust Regional economies across the U.S. 
In addition, EDA's Research and National Technical Assistance programs 
provide tools and resources that all types of communities are 
encouraged to access. See http://www.eda.gov/Research/Research.xml for 
more information.
    Two comments suggest that EDA support sustainable development 
through ``grant guidelines that reward communities for sustainable 
development strategies such as locating new development on previously 
developed land or close to existing activity centers and near 
transportation choices'' and ensure that the agency's rules and 
regulations do not contribute to development sprawl. EDA encourages 
such Projects through the evaluation criterion (set out at Sec.  
301.8(e)) that highlights environmentally sustainable development, and 
an application that includes elements of place-based development may 
meet EDA's ``sustainable development'' evaluation criterion. EDA 
strongly encourages Projects that enhance the environment and advance 
economic development goals and welcomes comments that offer specific 
ways the agency can incentivize sustainable development practices.
    Another commenter suggests that ``EDA consider evaluating * * * 
projects * * * on the extent to which they engage the full spectrum of 
key participants,'' and illustrates the point by citing research on the 
creation of innovation networks. EDA realizes that having the right 
stakeholders at the table is crucial to a coordinated, efficient 
economic development program, and through its evaluation criteria set 
out at Sec.  301.8, EDA encourages collaborative Regional innovation 
and public-private partnerships. In addition, through the agency's 
initiatives to encourage commercialization and technology transfer, 
including the i6 Challenge competitions, EDA encourages partnerships 
that engage the full spectrum of necessary stakeholders, from research 
and development to marketing and commercialization.
    Two comments suggest that EDA should not focus on Projects with 
indicia of success (i.e., high matching levels, clear leadership, etc.) 
to avoid ``funding projects that do not need government assistance.'' 
One of the commenters notes that ``EDA should continue to make sure 
that projects have sound business plans for sustainability, but rural 
projects should not be held to the same economic thresholds for 
economic benefit because they do not have the population base and 
economy to support rural projects as urban projects do.'' EDA is 
accountable for Federal funds, and to ensure that they go the furthest 
and provide the most benefit, EDA does assess the feasibility and job 
creation potential of Projects. However, EDA is sensitive to the unique 
economic condition of individual communities and Regions. While EDA 
ensures that Recipients are accountable for individual Project goals, 
EDA does not require any particular output or benefit threshold, and 
seeks to incentivize results that work for and are proportionate to 
each community. See also EDA's revised accountability provision at 
Sec.  302.16.
    EDA received one overarching comment requesting that the agency 
adopt and announce specific award and match amounts, eligible areas, 
and project types. PWEDA and the agency's implementing regulations 
provide an adaptable framework within which EDA helps communities 
assess their present economic environment, envision their future goals 
and develop economic development plans accordingly, and deploy 
resources appropriate to effect those plans. EDA's assistance also 
allows Regions to adapt to changing economic landscapes and needs. 
Adopting specific requirements would stymie EDA from meeting the 
current needs of distressed Regions and helping to implement the most 
effective economic development strategies. Therefore, EDA declines to 
make this change.
    This NPRM proposes to amend Sec.  301.9 to remove the phrase ``for 
further consideration'' in paragraph (a), which relates to a concept 
specific to EDA's application selection process that was in place prior 
to October 14, 2010. In addition, EDA proposes minor changes to replace 
the phrase ``based on'' with ``in accord with'' in Sec.  301.9(a)(2) 
and rephrase Sec.  301.9(b) to read ``EDA will endeavor to notify 
applicants as soon as practicable regarding whether their applications 
are selected for funding'' instead of ``EDA will endeavor to notify 
applicants regarding whether their applications are selected as soon as 
practicable.''
    EDA proposes removing the word ``construction'' from the first 
sentence of Sec.  301.10(c). The use of ``construction'' is confusing 
as CEDS are required for all Projects under parts 305 and 307, 
including non-construction implementation Projects under part 307. Note 
that a CEDS is not a requirement for Strategy Grant Projects and a 
Project located in a Special Impact Area, as specified under Sec.  
301.10(c)(1) and (2). In addition, we propose minor changes to 
capitalize ``Federal'' in Sec.  301.10(b) to adhere to the 
capitalization convention of the regulations, replace the word ``of'' 
with the phrase ``stated in'' in the third sentence of Sec.  301.10(c), 
and replace ``Projects'' with ``A Project'' in Sec.  301.10(c)(2). In 
response to an internal comment from EDA staff, EDA proposes amending 
Sec.  301.10 by adding new paragraph (d) to clarify the application 
requirements for the construction of business, technology, or other 
types of incubators or accelerators. Because these types of 
construction Investments are designed to catalyze growth in innovative 
sectors, EDA proposes requiring a feasibility study to evaluate the 
need for the Project and an operational plan based on industry best 
practices to ensure the Project's longevity. EDA will provide 
additional information on these requirements in an applicable FFO. The 
information provided by such documents is crucial in helping EDA ensure 
that Federal

[[Page 76502]]

funds are put to their best use. The third sentence of new Sec.  
301.10(d) also provides that EDA may require a Recipient to demonstrate 
that a feasibility study has been conducted by an impartial third 
party, as determined by EDA.
    This NPRM also adds a new section at Sec.  301.11 to clarify that 
EDA funds a broad spectrum of construction and non-construction 
infrastructure to meet a community's strategic goals, from basic assets 
to innovation- and entrepreneurship-related infrastructure. Each EDA 
Investment is designed to meet a community where it is and help it 
reach its highest economic development potential. Paragraph (a) of the 
proposed provision provides some examples of innovation- and 
entrepreneurship-related infrastructure, including business incubation, 
business acceleration, venture development organizations, proof of 
concept centers, and technology transfer. Before this NPRM, these terms 
had not been delineated within the framework of EDA's regulations. 
Paragraph (b) of the proposed provision provides that EDA will seek to 
fund Projects that effectively leverage Federal resources and restates 
EDA's statutory restriction on providing funds to any for-profit 
entity. Proposed Sec.  301.11 is intended to help clarify these terms 
and is not intended to be restrictive or exclusive.

Part 302--General Terms and Conditions for Investment Assistance

    Part 302 sets forth the general terms and conditions for EDA 
Investment Assistance, including environmental reviews of Projects; 
relocation assistance and land acquisition requirements; inter-
governmental review of Projects; and Recipients' reporting, 
recordkeeping, post-approval, and civil rights requirements.
    EDA proposes a minor change to the third sentence of Sec.  302.1 to 
clarify that environmental information may be obtained from the 
individual serving as the Environmental Officer in the appropriate 
regional office. EDA also capitalizes ``Project'' in the second 
sentence, and replaces the word ``can'' with ``may'' and removes ``as'' 
immediately before ``listed'' in the third sentence. We propose small 
changes to Sec.  302.3 to replace the word ``any'' with ``an'' 
immediately preceding the phrase ``EDA-administered program'' in the 
first sentence of the provision and to remove the unnecessary phrase 
``but is not limited to'' in the second sentence. We also propose 
removing the unnecessary phrases ``but not limited to'' from Sec. Sec.  
302.6 and 302.8. In addition, the agency proposes non-substantive 
changes to Sec.  302.9(a), which sets out the requirements for inter-
governmental reviews of Projects, to replace ``fifteen (15)'' with 
``15'' in the first sentence of the provision and ``Eligible 
Applicants'' with ``the Eligible Applicant'' and ``their'' with ``its'' 
in the second sentence of the provision. In addition, EDA proposes to 
make the regulation easier to read by separately listing the 
documentation required when a Recipient either does or does not receive 
comments from an Authority as subsections (1) and (2) under paragraph 
(a). In Sec.  302.9(b), EDA makes a grammatical correction by replacing 
the phrase ``must also'' with ``also must.'' EDA also proposes a minor 
change by replacing the phrase ``Web site'' with ``website'' in Sec.  
302.11.
    This NPRM also proposes updating Sec.  302.10, which implements 
section 606 of PWEDA (42 U.S.C. 3216) and sets out requirements 
regarding entities that expedite applications to EDA and restrictions 
on the employment of certain EDA employees by Eligible Applicants. 
Section 606(2) of PWEDA (42 U.S.C. 3216) sets out a post-employment 
restriction that requires ``businesses'' to refrain from offering 
employment to or employing certain EDA employees for a period of two 
years after an award of Investment Assistance. The purpose of the post-
employment restriction is to prevent situations in which an Eligible 
Applicant uses or appears to use its employment practices to influence 
EDA and DOC employees with award decision-making authority. EDA 
recently made a policy decision to provide greater flexibility in the 
application of the post-employment restriction, specifically addressing 
Eligible Applicants where there is a greater chance of such undue 
influence. In general, such Eligible Applicants are smaller 
organizations or organizations that lack standard hiring procedures. 
Therefore, in the context of the post-employment restriction, EDA has 
determined that ``businesses'' means Eligible Applicants that are: (1) 
Non-profit organizations; (2) District Organizations of an EDA-
designated EDD; and (3) for-profit organizations. In addition, EDA 
retains the flexibility to require another type of Eligible Applicant 
to execute an agreement to abide by the above-described post-employment 
restriction on a case-by-case basis; for example when an institution of 
higher education implements the EDA scope of work or activities related 
to the EDA scope of work through a separate non-profit organization.
    EDA proposes revising Sec.  302.10 to reflect its updated policies. 
Currently, both the expediter requirements and post-employment 
restriction are combined in Sec.  302.10. EDA proposes to restructure 
the regulation so that Sec.  302.10(a) incorporates the expediter 
requirements, which remain substantively unchanged, and Sec.  302.10(b) 
incorporates the updated post-employment restriction. Accordingly, EDA 
revise the heading of Sec.  302.10 to read ``Attorneys' and 
consultants' fees, employment of expediters, and post-employment 
restriction'' instead of ``Attorneys' and consultants' fees; employment 
of expediters and administrative employees,'' adds the heading 
Employment of expediters to revised Sec.  302.10(a), and the heading 
Post-employment restriction to revised Sec.  302.10(b). EDA makes minor 
clarifying corrections, replacing two instances of the word 
``applications'' with ``an application'' or ``the application,'' as 
applicable, in the second sentence of proposed Sec.  302.10(a) and 
removing two repetitive numerical references from proposed Sec.  
302.10(b), replacing ``two-year (2)'' with ``two-year'' and ``one-year 
(1)'' with ``one-year.''
    EDA received two comments requesting that EDA relax or waive the 
wage rate requirements of the Davis-Bacon Act (40 U.S.C. 3142 et seq.), 
which apply to contractors and subcontractors performing on Federally 
funded or assisted contracts in excess of $2,000 for the construction, 
alteration, or repair (including painting and decorating) of public 
buildings or public works. The Davis-Bacon Act requires contractors and 
subcontractors to pay any laborers and mechanics employed under the 
contract (or subcontract) no less than the locally prevailing wages and 
fringe benefits for corresponding work on similar projects in the area. 
Section 602 of PWEDA (42 U.S.C. 3212) provides that Davis-Bacon applies 
to all ``projects assisted by the Secretary under this Act.'' 
Therefore, EDA cannot waive the wage rate requirements. Accordingly, 
the regulation at Sec.  302.13 implements the Davis-Bacon requirement. 
EDA provides guidance and works closely with Recipients to ensure that 
the Davis-Bacon requirements and responsibilities are clear under the 
terms of an award of financial assistance.
    This NPRM makes a clarifying revision to the heading of Sec.  
302.15 by inserting the word ``made'' immediately after the word 
``certifications.'' This NPRM revises Sec.  302.16 to set out EDA's 
accountability and performance expectations, along with its reporting

[[Page 76503]]

requirements. Accordingly, EDA revises the heading of the provision to 
read ``Accountability'' instead of ``Reports by Recipients.'' EDA also 
adds new paragraph (d) to clarify that EDA expects Recipients to use 
good faith efforts to meet Project goals and set out the consequences 
for failure to undertake such efforts. This provision is not punitive 
and is not intended to discourage accurate reporting; EDA understands 
that at times, circumstances beyond a Recipient's control will prevent 
the fulfillment of Project goals. Its purpose is to underscore the 
importance that a Recipient undertake the Project scope of work in good 
faith and with integrity. EDA works closely with its partners to make 
sure they have the tools and resources necessary to achieve the best 
economic outcomes possible. Also, EDA adds paragraph headings to Sec.  
302.16 to help the reader navigate the provision; specifically adding 
the header General to paragraph (a); Data on Project effectiveness to 
paragraph (b); Reporting Project service benefits to paragraph (c); and 
Consequences for failure to undertake good faith efforts to new 
paragraph (d). We propose removing a repetitive numerical reference in 
paragraph (a) by replacing ``ten (10)'' with ``ten.'' In the first 
sentence of paragraph (b) of the provision, EDA proposes adding the 
phrase ``and meeting Project goals'' immediately following the phrase 
``including alleviation of economic distress'' with the parenthetical, 
inserting ``as amended'' following the reference to the Government 
Performance and Results Act of 1993 (``GPRA''), and adding a citation 
for the GPRA, specifically, Public Law 103-62.
    EDA received three comments on the agency's conflicts-of-interest 
requirements, which are set out at Sec.  302.17. Under EDA's policy, 
Eligible Applicants must avoid the appearance of or actual conflicts-
of-interest, which generally exist when an Interested Party of a 
Recipient participates in a matter that has a direct and predictable 
effect on the Interested Party's personal or financial interests. EDA 
defines ``Interested Party'' as ``any officer, employee or member of 
the board of directors or other governing board of the Recipient, 
including any other parties that advise, approve, recommend or 
otherwise participate in the business decisions of the Recipient, such 
as agents, advisors, consultants, attorneys, accountants or 
shareholders. An Interested Party also includes the Interested Party's 
Immediate Family and other persons directly connected to the Interested 
Party by law or through a business arrangement.'' See Sec.  300.3. The 
comments suggest that EDA reevaluate and relax the conflicts-of-
interest requirements. One commenter details how EDA's conflicts-of-
interest policy impacted a Project and was particularly concerned with 
the ``vague'' standard of an apparent conflict-of-interest and how the 
requirement impacts the ability of small communities to attract ``well-
informed and motivated residents to run for locally elected offices.''
    EDA's requirements comport with the requirements of other Federal 
Agencies, including DOC's requirements set out at 15 CFR 24.36(b) or 
14.42, as applicable, and are designed to maintain public trust in the 
efficiency and effectiveness of the agency's grant assistance. EDA does 
not intend for its conflicts-of-interest policy to burden or penalize 
communities or to halt innovative economic development projects, but 
does believe that the policy is extremely important to the integrity 
and transparency of EDA's programs. EDA staff work closely with 
Eligible Applicants to identify conflicts-of-interest issues early on 
and develop solutions that will keep Projects on track. This NPRM does 
not propose substantive changes to Sec.  302.17, but EDA welcomes 
constructive comments on ways to balance the agency's fiduciary and 
transparency responsibilities with the goal of implementing economic 
development projects. Note that this NPRM does make minor grammatical 
corrections by replacing ``may also'' with ``also may'' in the third 
sentence of Sec.  302.17(a), replacing ``shall also'' with ``also 
shall'' in Sec.  302.17 (b)(2), and removing ``also'' from Sec.  
302.17(c)(2). We replace ``two (2)'' with ``two'' in Sec.  
302.17(c)(3).
    EDA received one comment that the agency's post-approval 
requirements regulation (Sec.  302.18) is confusing in that it does not 
specifically apply to all EDA awards. This NPRM proposes revising the 
regulation by removing paragraph (b), which applies only to EDA's 
Economic Adjustment Assistance Investments, in its entirety. We 
maintain paragraph (a) in substance, but remove the unnecessary 
lettered designation and revise the provision to clarify that post-
approval requirements apply to all EDA awards. EDA also replaces the 
phrase ``special terms'' with ``special award conditions'' to comport 
with EDA's usual terminology.
    EDA received an internal comment suggesting that EDA specify in the 
regulations that the requirements under the Americans with Disabilities 
Act (``ADA'') (42 U.S.C. 12101 et seq.) apply to EDA Projects. The 
civil rights requirements applicable to Recipients and Other Parties 
are set out at Sec.  302.20. Section 302.20 specifies that 
discrimination is prohibited by a Recipient or Other Party with respect 
to a Project receiving Investment Assistance under PWEDA or by an 
entity receiving Adjustment Assistance under the Trade Act, in 
accordance with a list of enumerated authorities. While EDA agrees that 
it should be clear that the ADA applies to EDA Projects, we note that 
the enumerated list set out at Sec.  302.20 includes section 504 of the 
Rehabilitation Act of 1973, as amended (29 U.S.C. 794), which prohibits 
discrimination on the basis of disabilities. In addition, the 
requirements of the ADA are applicable to all EDA Recipients by virtue 
of the DOC's Financial Assistance Standard Terms and Conditions, which 
apply to all non-construction awards, and EDA's Standard Terms and 
Conditions for Construction Projects, which apply to all construction 
awards. Because discrimination on the basis of disability already is 
prohibited with respect to EDA Projects, we decline to make the change. 
EDA makes non-substantive changes in Sec.  302.20(b)(1) by replacing 
``fifteen (15)'' with ``15,'' making a minor grammatical correction by 
replacing ``is also'' with ``also is,'' and replacing the final usage 
of the term ``Investment Assistance'' immediately following the phrase 
``EDA's final disbursement of'' with ``award'' for simplicity.

Part 303--Planning Investments and Comprehensive Economic Development 
Strategies

    Part 303 sets forth regulations governing EDA's Planning program, 
through which the agency provides assistance to help Eligible 
Applicants create strategies or plans to stimulate and guide the 
economic development efforts of a community or Region. EDA has three 
distinct types of Planning Investments: (1) Partnership Planning; (2) 
State Planning; and (3) short-term Planning. Through EDA's Partnership 
Planning Investments, the agency facilitates the development, 
implementation, revision, or replacement of CEDS. EDA provides 
Partnership Planning awards to Planning Organizations (e.g., District 
Organizations) serving EDA-designated EDDs (as defined in Sec.  300.3) 
throughout the U.S. The EDDs are recognized by the State(s) in which 
they reside as multi-jurisdictional councils of governments, regional 
commissions, or planning and development centers. Further information 
on EDDs may be found on EDA's Web site at http://www.eda.gov/

[[Page 76504]]

PDF/EDD%20List--030410.pdf. The Partnership Planning awards enable 
Planning Organizations to manage and coordinate the development and 
implementation of CEDS to address the unique needs of their respective 
Regions. The CEDS are central to EDA's economic development 
initiatives, and a proposed Project must be consistent with a relevant 
CEDS before EDA makes a competitive award under the Public Works or 
Economic Adjustment Assistance programs under parts 305 or 307. 
Finally, part 303 sets forth the requirements for State and short-term 
Planning Investments, which can help distressed Regions strategize to 
create and retain new and better jobs and respond quickly and 
effectively to sudden economic dislocations.
    In response to a suggestion from EDA staff, this NPRM proposes 
adding subparts to part 303 to better organize and clarify the 
distinctions between EDA's Planning Investments. General requirements 
that apply to all Planning Investments are set out at Sec. Sec.  303.1 
thorough 303.5 and included under new ``Subpart A--General.'' 
Requirements specific to Partnership Planning Investments are set out 
at Sec. Sec.  303.6 and 303.7 under new ``Subpart B--Partnership 
Planning Assistance.'' Similarly, requirements specific to State plans 
and short-term Planning Investments, Sec. Sec.  303.8 and 303.9, 
respectively, are included under new ``Subpart C--State and Short-Term 
Planning Assistance.''
    This NPRM proposes revising the heading of Sec.  303.1 from 
``Purpose and scope'' to ``Overview of EDA's Planning Program'' to 
clarify the content of the provision. In the final sentence of the 
introductory text to Sec.  303.1, EDA proposes to replace the phrase 
``Private Sector Representatives'' with ``the private sector.'' As 
noted above under ``Part 300--General Information'' this NPRM proposes 
to remove ``Private Sector Representative'' as a defined term; however, 
EDA expects that the private sector will remain actively involved in 
Regions' planning processes. We also propose adding ``non-profit 
organization'' and ``educational institutions'' to the list of entities 
that EDA expects will be active participants in the planning process. 
EDA also proposes minor changes to Sec.  303.1 to move the phrase 
``short-term Planning Investments'' after ``State plans'' to comport 
with the order of the regulations, and to replace the phrase ``higher-
skill, higher-wage jobs'' with ``new and better jobs.'' EDA capitalizes 
``Regional'' in the second sentence for consistency in the use of 
defined terms. In Sec.  303.3, EDA proposes minor textual changes to 
paragraph (a)(5) by replacing the phrase ``higher-skill, higher wage'' 
with ``new and better'' and to paragraph (c) by replacing ``shall 
also'' with ``also shall.'' In Sec.  303.4(a), EDA proposes replacing 
the sentence ``Planning Investments shall function in conjunction with 
any other available Federal, State or local planning assistance to 
ensure adequate and effective planning and economical use of funds'' 
with ``Planning Investments shall be coordinated with and effectively 
leverage any other available Federal, State, or local planning 
assistance and private sector investments'' for better sentence 
structure and to emphasize the importance of public-private 
partnerships. EDA also removes a redundant numerical reference from 
Sec.  303.4(c), replacing ``thirty-six (36) month'' with ``36-month.''
    As noted above, this NPRM proposes incorporating all Partnership 
Planning provisions under new ``Subpart B--Partnership Planning 
Assistance'' for increased clarity. Because the Partnership Planning 
Investments and CEDS process are closely linked, EDA proposes 
restructuring Sec.  303.6, which currently sets out the process 
requirements for developing a CEDS, to incorporate a description of 
Partnership Planning along with the CEDS process requirements. 
Accordingly, this NPRM revises the heading of Sec.  303.6 to read 
``Partnership Planning and the EDA-funded CEDS process'' to better 
specify the intent of the provision. EDA proposes a description of 
Partnership Planning Investments at new Sec.  303.6(a), which this NPRM 
titles Partnership Planning overview, and incorporates CEDS Strategy 
Committee and process requirements, which are currently set out under 
Sec.  303.6(a) through (e), under Sec.  303.6(b), which this NPRM 
titles CEDS process. EDA also appropriately renumbers proposed Sec.  
303.6(b). EDA proposes subparagraph headings within Sec.  303.6(b) to 
serve as guideposts to help the reader more easily navigate the 
provision. Accordingly, headings to proposed Sec.  303.6(b)(1) through 
(b)(5) are added to read as follows: CEDS Strategy Committee, Public 
notice and comment, Reports and updates, Inadequate CEDS, and Regional 
Commission notification, respectively.
    EDA received five public comments suggesting that the agency 
provide increased flexibility with regard to the membership 
requirements of CEDS Strategy Committees, the requirements of which 
currently are set out at Sec.  303.6(a) and that this NPRM proposes 
relocating to Sec.  303.6(b)(1) as stated above. Currently, a CEDS 
Strategy Committee must represent the main economic interests of the 
Region, and must include Private Sector Representatives as a majority 
of its membership. For the CEDS process and the resulting strategy to 
be effective, the Strategy Committee must reflect all key stakeholders 
from across the Region. However, EDA wishes to provide flexibility for 
all types of communities and Regions, and therefore, under this NPRM, 
EDA proposes to maintain the requirement that a Strategy Committee 
represent the main economic interests of the Region, including the 
private sector, public officials, community leaders, private 
individuals, representatives of workforce development boards, 
institutions of higher education, and minority and labor groups, but no 
longer requires a majority or membership threshold from any type of 
economic stakeholder. In addition, EDA proposes to add the clause ``and 
others who can contribute to and benefit from improved economic 
development in the Region'' to revised Sec.  303.6(b)(1) to address any 
stakeholders that EDA's list may miss. Although EDA proposes to remove 
the membership threshold, the capability of each Strategy Committee to 
undertake a Regional planning process remains of principal importance. 
Accordingly, EDA adds the sentence ``In addition, the Strategy 
Committee must demonstrate the capacity to undertake a collaborative 
and effective planning process.'' EDA will provide guidance to 
implement this requirement. EDA expects that every Strategy Committee 
will include strong private sector representation unless such 
representation is proscribed by State law.
    One public comment and an internal comment from EDA staff suggest 
that EDA reform its regulations to ``emphasize broader and ongoing 
multi-stakeholder input in the planning process.'' The current public 
review and comment requirement, as set out at Sec.  303.6(b)(2), 
requires simply that CEDS be made available to the public for comment 
for at least 30 days before submission to EDA. EDA believes that public 
input is crucial to a Regional planning process and agrees that the 
requirement should contain further details. EDA proposes revising the 
regulation to combine existing Sec.  303.6(b)(1) and (b)(2) into 
revised Sec.  303.6(b)(2), which sets out revised public comment 
requirements. Under the revised requirements, before submission of a 
CEDS to EDA, the Planning Organization must provide the public and 
appropriate governments and interest groups with adequate notice and 
opportunity to comment on

[[Page 76505]]

the CEDS. For maximum flexibility, EDA maintains the requirement that 
the comment period be for at least 30 days, but goes on to specify that 
the Planning Organization must make the CEDS available appropriately, 
electronically and otherwise, throughout the comment period. The 
Planning Organization also must make the CEDS available in hardcopy 
upon request. Finally, the provision states that EDA may require the 
Planning Organization to provide any comments received on the CEDS and 
demonstrate how the comments were resolved. The proposed regulation is 
designed to be flexible enough to work for all communities, while 
providing ample guidance to gather public input.
    The remainder of the CEDS process requirements remain substantively 
the same, and are incorporated under Sec.  303.6(b)(3)-(5). This NPRM 
also removes a repetitive numerical reference, replacing ``five (5)'' 
with ``five'' in proposed Sec.  303.6(b)(3)(ii).
    EDA proposes textual changes to the introductory text of Sec.  
303.7(b), which frames the process and participation expectations of 
CEDS and introduces the content requirements. EDA revises the heading 
of Sec.  303.7(b) to read ``Strategy requirements'' instead of 
``Technical requirements'' to emphasize that CEDS are strategy 
documents and replaces the word ``continuing'' with the phrase 
``comprehensive and continuous'' in the first sentence of Sec.  
303.7(b)(1). EDA proposes a second sentence to EDA highlight that CEDS 
must be consistent with section 302 of PWEDA (42 U.S.C. 3162), which 
sets out the requirements for CEDS, and that CEDS must promote Regional 
economic resiliency and be unique and responsive to the relevant 
Region.
    EDA received several comments, both public and internal, on the 
content requirements of CEDS, which currently are set out at Sec.  
303.7(b)(1)-(10). One commenter recommends that EDA ``support regional 
and local planning and economic visioning efforts that take into 
account local and regional assets.'' Another commenter suggests that 
EDA ensure the Planning program encourages ``strategic doing'' by 
``funding strategic planning activities that begin with an initial 
survey of regional assets, stakeholders, and opportunities and provide 
a framework for activities for ongoing networking and feedback.'' EDA's 
Planning program and the requirements of CEDS accomplish those goals by 
creating an ongoing planning process that begins by evaluating current 
Regional baselines, setting a vision for competitiveness and 
innovation, and establishing a strategy tailored to reach the Region's 
goals.
    Several comments suggest that the current CEDS content requirements 
are counterproductive in that they create ``a situation in which the 
CEDS must be used as a place to dump data and becomes a lengthy 
narrative * * * of limited value to businesses and economic development 
practitioners'' and that ``plan writers spend most of their time trying 
to check off its boxes rather than focus on a plan that is truly 
relevant to the unique circumstances and assets of any given region.'' 
The commenters suggest various ways to streamline CEDS, including four 
that suggest adopting the National Association of Development 
Organizations' (``NADO'') Peer Standards of Excellence. One of the 
comments suggests that the amount of background materials required in 
CEDS should be reduced to ``[a]llow EDDs to focus CEDS on specific 
strategies (put the S back in CEDS), rather than a comprehensive 
narrative of the region.'' EDA received several comments that focus on 
the ``project list'' aspect of CEDS in current Sec.  303.7(b)(5), which 
requires that CEDS include ``[a] section listing all suggested Projects 
and the projected numbers of jobs to be created as a result thereof.'' 
Two comments request that EDA eliminate this requirement, suggesting 
that it encourages the making of project laundry lists instead of 
catalyzing strategic thinking. Four comments suggest that any required 
CEDS project list should be meaningful in the EDA selection process, 
and one comment recommends that any project not included in a CEDS 
should not be considered for funding by EDA. One comment states that 
``[o]nly in rare and unusual circumstances should projects not 
prioritized in the CEDS be supported without a full CEDS amendment 
including public review of project priorities.''
    EDA agrees with its stakeholders that the list of CEDS requirements 
may be counterproductive for many Regions and therefore proposes 
significantly streamlining Sec.  303.7(b) from ten detailed 
specifications to four essential planning elements set out at Sec.  
303.7(b)(1)(i) through (iv): (1) A summary of economic development 
conditions of the Region; (2) an in-depth analysis of economic and 
community strengths, weaknesses, opportunities, and threats (commonly 
known as a ``SWOT'' analysis); (3) strategies and an implementation 
plan to build upon the Region's strengths and opportunities and resolve 
the weaknesses and threats facing the Region, which should not be 
inconsistent with applicable State and local economic development or 
workforce development strategies; and (4) performance measures used to 
evaluate the Planning Organization's successful development and 
implementation of the CEDS. Lists of specific projects, including 
prioritized lists, will not be required in the CEDS, but may be used by 
the Planning Organization to illustrate the implementation of the CEDS. 
EDA neither encourages nor discourages such project lists in order to 
provide Planning Organizations the maximum flexibility to create 
strategies most suited to their Region.
    EDA recognizes that economic development planning is a dynamic 
field and best practices are constantly evolving. Therefore, EDA will 
publish and periodically update specific CEDS content guidelines, which 
will be based on best practices developed in collaboration with the 
agency's cutting edge planning and economic development partners as 
well as on leading edge research. For example, EDA expects that the 
relevant guidelines will include NADO's Peer Standards of Excellence, 
which are strategic principles that ensure accountability and 
performance, while allowing for Regional flexibility and creativity. 
Transformative CEDS take the form of effective, agile strategies, not 
static lists of requirements and projects. The development and 
maintenance of a CEDS requires Planning Organizations to undertake an 
iterative process of gathering data and community input and adapting 
the strategy to the facts on the ground. EDA expects that these changes 
will ensure that CEDS remain relevant economic development strategies 
by allowing Planning Organizations to focus on inclusive planning 
processes and positive economic development results.
    With respect to the comment suggesting that EDA implementation 
projects must be tied to the CEDS of EDDs, EDA already requires that 
Projects under the agency's Public Works and Economic Adjustment 
Assistance programs be consistent with a relevant CEDS, per the 
requirements of sections 201 and 209 of PWEDA (42 U.S.C. 3141 and 3149, 
respectively).
    Other comments suggest discrete changes, including requiring an 
analysis of RICs in the CEDS document and modernizing ``CEDS data sets 
* * * to include relevant 21st Century global knowledge economy 
indicators and measures at the regional level.'' EDA thanks the 
commenters and expects that these comments will be addressed through 
the CEDS guidelines that EDA

[[Page 76506]]

publishes incorporating the best practices of its economic development 
and research partners.
    EDA received two public comments and an internal comment regarding 
the agency's consideration of a CEDS developed independent of EDA 
assistance, as set out at Sec.  303.7(c). EDA-funded CEDS must adhere 
to the requirements of Sec.  303.7(b), but the agency may accept a non-
EDA funded strategy as a CEDS at the agency's discretion. Both public 
and internal comments suggest that consistent requirements should apply 
to both EDA-funded and non-EDA funded CEDS. EDA is currently reviewing 
the issue, and expects to address the requirements of non-EDA funded 
CEDS in published CEDS guidelines.
    As noted above, State and short-term Planning requirements are 
incorporated under new ``Subpart C--State and Short-Term Planning 
Assistance.'' In addition, this NPRM proposes minor changes to the 
first sentence of Sec.  303.9(a), replacing the phrase ``may also'' 
with ``also may,'' for better sentence structure, and to Sec.  303.9(b) 
to remove the unnecessary phrase ``but are not limited to.''
    In addition, EDA received two comments stating that 
``[d]ocumentation on how to prepare CEDS Updates, Government 
Performance and Results Act reports, and CEDS Annual Performance 
reports is ambiguous or unclear and results in a disparity among 
reports of EDDs.'' Clearer guidance on what EDA expects in these 
documents is an identified need. Accordingly, EDA currently is 
evaluating its Planning program and expects to issue updated guidance 
in the near future.

Part 304--Economic Development Districts

    Part 304 on Economic Development Districts, which also may be 
referred to as a ``District'' or an ``EDD'' in Sec.  300.3, sets forth 
the Regional eligibility requirements that must be satisfied in order 
for EDA to consider a District Organization's request to designate a 
Region as an EDD, including submission of an EDA-approved CEDS, and the 
District Organization's formation and organizational requirements. This 
part also contains provisions relating to termination and performance 
evaluations of District Organizations.
    EDA corrects a punctuation error in Sec.  304.1(c) by adding a 
colon (``:'') at the end of the phrase ``Has an EDA-approved CEDS 
that.'' In addition, we remove a redundant numerical reference by 
replacing ``one (1)'' with ``one'' in Sec.  304.1(a) and, for better 
sentence structure, replace ``must also'' with ``also must'' in Sec.  
304.2(c)(1) and ``shall also'' with ``also shall'' in Sec.  
304.2(c)(4)(i).
    Section 304.2(c)(2) sets out the requirements for governing bodies 
(sometimes known as ``policy boards'') of District Organizations. 
Currently, the governing body of a District Organization must be 
broadly representative of the principal economic interests of the 
Region and, unless prohibited by State or local law, must include:
     At least one Private Sector Representative;
     At least one or more Executive Directors of Chambers of 
Commerce, or representatives of institutions of post-secondary 
education, workforce development groups, or labor groups, all of which 
must comprise in the aggregate a minimum of 35 percent of the District 
Organization's governing body; and
     A simple majority of its membership who are elected 
officials and/or employees of a general purpose unit of State, local, 
or Indian tribal government who have been appointed to represent the 
government.
    EDA received four public comments suggesting that the regulations 
should provide ``[i]ncreased flexibility for governance structure and 
local control of EDD policy boards.'' EDA agrees that District 
Organizations should be focused on implementing a dynamic and effective 
planning process for the Region instead of meeting and maintaining 
membership thresholds. Therefore, we propose revisions to Sec.  
304.2(c)(2) to remove the current membership thresholds, but maintain 
the requirement that governing bodies demonstrate that they are broadly 
representative of the principal economic interests of the Region, 
including the private sector, public officials, community leaders, 
representatives of workforce development boards, institutions of higher 
education, minority and labor groups, and private individuals. Although 
EDA proposes to remove the membership thresholds, the capability of 
each governing body to implement the relevant CEDS remains of principal 
importance. Accordingly, EDA adds the sentence ``In addition, the 
governing body must demonstrate the capacity to implement the EDA-
approved CEDS.'' EDA will provide guidance to implement this 
requirement. EDA expects that every District Organization governing 
body will include strong private sector representation unless such 
representation is proscribed by State law.
    EDA makes conforming changes to Sec.  304.2(c)(2) to remove the 
provisions that allow the Assistant Secretary to waive the Private 
Sector Representative requirement upon a Region's showing of its 
inability to locate such a representative and the prohibition on the 
Assistant Secretary's delegation of this waiver authority.
    Also with respect to District Organization governing body 
membership requirements, one commenter suggests that EDA ``expand its 
list of representatives able to be members of an EDD Board to include 
Executive Directors of Economic Development Corporations in addition to 
Chambers of Commerce directors.'' One internal comment suggests that 
EDA specify that the simple majority requirement can be met by special 
purpose as well as general purpose units of government and a second 
internal comment suggests that EDA reduce the 35 percent requirement to 
25 percent to better fit with local board composition requirements. EDA 
agrees, but as EDA has revised the membership requirements of District 
Organization governing bodies to remove membership thresholds, these 
changes are no longer necessary.
    In response to an internal comment, EDA revises Sec.  304.2(c)(4) 
to require that governing bodies of District Organizations meet at 
least twice a year, instead of only once a year. EDA hopes that 
requiring at least two meetings a year will increase public 
participation in District Organization operations and help to provide 
increased insight into the importance of these organizations.
    EDA corrects a typographical error in Sec.  304.4(a)(3), replacing 
the phrase ``on this chapter'' with ``of this chapter.'' In addition, 
this NPRM removes redundant numerical references by replacing ``sixty 
(60)'' with ``60'' in Sec.  304.3(b), two instances of ``three (3)'' 
with ``three'' in Sec.  304.4(a), and ``one (1)'' with ``one'' in Sec.  
304.4(b).
    EDA received six comments suggesting that the agency require 
greater coordination between Eligible Applicants and District 
Organizations. Commenters provide a variety of coordination 
recommendations; two suggest that EDA not fund projects that are not 
included in a CEDS, three suggest that EDA ``require coordination with 
Districts for projects submitted by those outside the District but 
proposing activities that affect a District's communities,'' and one 
suggests requiring a letter of consistency from the relevant District 
Organization for all projects. EDA strongly values its partnerships 
with District Organizations of EDDs. However, EDA does not make these 
changes because of the requirements of PWEDA. Under sections

[[Page 76507]]

201(b)(3) and 209(b) of PWEDA (42 U.S.C. 3141 and 3149, respectively), 
all grants awarded under EDA's Public Works and Economic Adjustment 
Assistance programs must be consistent with a relevant CEDS. PWEDA does 
not impose this requirement upon its other programs.
    EDA received two comments that recommend restoring the 10 percent 
bonus for Eligible Applicants that demonstrate active participation 
with the relevant District Organization. The Economic Development 
Administration Reauthorization Act of 2004 (Pub. L. 108-373) removed 
former section 403 of PWEDA, which authorized up to a 10 percent 
``bonus'' for certain Projects as an incentive for coordination with 
District Organizations. Because such use of appropriated funds is not 
authorized under PWEDA, EDA is unable to reinstate the bonus.
    EDA also received two comments suggesting that the agency provide 
additional financial resources to District Organization planners and 
staff and provide ``access to regularly scheduled professional 
development opportunities to [ensure] that their skill sets are at peak 
performance'' and that they are the ``best economic development 
professionals in a region.'' One commenter suggests that EDA's 
University Center program be ``encouraged to provide * * * professional 
development for District Organizations to improve and enhance their 
professional capacity.'' EDA endeavors to fulfill the budget 
requirements and needs of all of its District Organizations across the 
U.S. The agency strongly encourages District Organization planners and 
staff to seek out and take advantage of professional development 
opportunities; and the agency strives to be a part of this by providing 
regional conferences and webinars throughout the year and by providing 
practitioner tools. See http://www.eda.gov/Research/Research.xml.
    In addition, EDA agrees that collaborations across programs are 
essential to leveraging constrained resources and continually seeks 
ways to ensure its programs coordinate effectively. For example, in 
EDA's FY 2011 University Center program competition, EDA specified that 
the agency encourages University Center Projects that ``present a clear 
plan for collaborating with and assisting other EDA investment 
partners, recipients, and stakeholders, including EDA-funded Economic 
Development Districts'' and Projects that ``offer a full range of 
economic development research and technical assistance services to EDA 
regional partners (e.g., District Organizations * * *).'' See section 
I.B. of EDA's FY 2011 University Center FFO dated March 31, 2011.
    Finally, one comment suggests that District Organizations provide 
``grant-writing support'' to rural regions and that EDA provide 
``additional resources to support this function'' and an internal 
comment suggests that EDA ``identify ways to compensate or provide 
financial incentives for District Organizations that help design and 
process successful EDA applications.'' As noted above, EDA supports 
such collaborations and strives to provide the resources to make them 
happen.

Part 305--Public Works and Economic Development Investments

    Part 305 provides information about EDA's Public Works and Economic 
Development Investments. Section 305.1 explains the purpose and scope 
of these Investments. Section 305.2 specifies the scope of activities 
eligible for consideration under a Public Works Investment and sets 
forth a list of determinations that EDA must reach in order to award a 
Public Works Investment. Specific application requirements are set 
forth in Sec.  305.3, and Sec.  305.4 provides the requirements for 
Public Works Investments awarded solely for design and engineering 
work.
    EDA proposes a minor change to Sec.  305.1 to replace the phrase 
``higher-skill, higher-wage job opportunities'' with ``new and better 
job opportunities'' in the last sentence of the provision. EDA also 
replaces the phrase ``the creation of new, or the retention of 
existing'' with the phrase ``to create new or retain existing'' in the 
second sentence of the provision for better sentence structure. Section 
305.2(c) sets out the requirement that not more than 15 percent of 
EDA's appropriations made available for Public Works Investments be 
used in any one State. We received an internal comment suggesting that 
EDA revise Sec.  305.2(c) by replacing the phrase ``Not more than 
fifteen (15) percent of the annual appropriations made available to EDA 
to fund Public Works Investments'' with the phrase ``Not more than 
fifteen (15) percent of EDA's total annual appropriations to fund 
Public Works Investments.'' The comment raises the question of whether 
EDA's regular annual appropriations include special or supplemental 
appropriations that may be used for Public Works Investments. We have 
examined the law on this topic and, since an agency's annual 
appropriations include both regular annual and any special or 
supplemental appropriations, the requested change does not add anything 
to the phrase and therefore we decline to make it. However, EDA 
proposes non-substantive revisions to Sec.  305.2(c) to remove 
repetitive numerical references, replacing ``fifteen (15)'' with ``15'' 
and ``one (1)'' with ``one.''
    Section 305.5 sets out the requirements for a request and EDA's 
determination that a District Organization may administer a Project on 
behalf of another Recipient. Section 305.5(b) provides that EDA may 
approve such a request either by approving the application in which the 
request is made or through a separate specific written approval. We 
received an internal comment suggesting that the reference to the 
separate specific written approval be removed; however, we decline to 
make the change as we believe the regulation is clear and that the 
additional language gives EDA's regional offices needed flexibility. In 
addition, we received two internal comments suggesting that the 
regulation be clarified with respect to whether competition is required 
when a District Organization administers a Project. PWEDA envisions a 
special role for District Organizations of EDDs as Regional economic 
development planners and leaders, and we believe the current 
regulations reflects that role. Therefore, we decline to make the 
change.
    EDA received one public comment and an internal staff comment with 
respect to the alternate construction procurement methods set out at 
Sec.  305.6(a). The commenters recommend that ``construction management 
at risk'' not be allowed as an alternate construction procurement 
method because such contracts are contrary to the Government-wide 
competitive procurement requirements (see DOC's regulations at 15 CFR 
14.43 and 24.36, as applicable). We have considered the commenters' 
concern; but determined that EDA's regulation is consistent with DOC's 
requirements, which prescribe the procurement requirements applicable 
to Federal grant assistance, and decline to make the requested change. 
However, in response to another internal comment from EDA staff, we 
propose revising the first sentence of Sec.  305.6(a) to clarify that 
use of an alternate procurement method is subject to EDA's approval by 
adding the phrase ``shall seek EDA's prior written approval to'' 
immediately following ``Recipients.'' EDA believes that this approval 
step will help ensure that Recipients follow correct procedures and 
that the maximum amount of Project costs are allowable under applicable 
regulations and Federal cost principles. Also, to provide additional 
clarity on the content

[[Page 76508]]

of the justification a Recipient must provide to use an alternate 
procurement method, we propose the clause ``, including a brief 
analysis of the appropriateness and benefits of using the method to 
successfully execute the Project and the Recipient's experience in 
using the method'' to Sec.  305.6(a)(1). For better sentence structure, 
EDA replaces the introductory phrase ``These methods include but are 
not limited to'' with ``These alternate methods may include'' in the 
second sentence of Sec.  305.6(a). In addition, in Sec.  305.6(b), EDA 
proposes replacing the phrase ``procurement standards'' with 
``procedures and standards'' for consistency with the content of the 
DOC regulations at 15 CFR parts 14 and 24.
    EDA proposes revisions to Sec.  305.8 to improve sentence 
construction by replacing ``may also'' with ``also may'' in the second 
sentence of Sec.  305.8(a) and replacing ``and/or'' with ``or'' and 
``is also'' with ``also is'' in Sec.  305.8(c). In response to an 
internal comment from EDA staff, we propose to add a regulatory 
provision regarding procedures with respect to bid overrun, the 
omission of which appears to simply have been an oversight. 
Accordingly, we propose revising the heading of Sec.  305.10, which 
currently only addresses construction contract bid underrun procedures, 
to read ``Bid underrun and overrun.'' We incorporate the existing 
provision regarding procedures in case of bid underrun under new 
paragraph (a), titled Underrun. We add a new paragraph (b) titled 
Overrun to set out EDA's procedures in case of an overrun at 
construction contract bid opening. In general, the proposed provision 
provides that in case of an overrun at the construction contract bid 
opening, the Recipient may take deductive alternatives if provided for 
in the bid documents, reject all bids and re-advertise, or augment the 
Matching Share. If the Recipient demonstrates to EDA's satisfaction 
that the above options are not feasible and the Project cannot be 
completed otherwise, the Recipient may submit a written request to EDA 
for additional funding, which will be at EDA's sole discretion and 
considered in accord with EDA's competitive process requirements. The 
new provision on bid overrun does not add to or change current 
requirements; it simply clarifies EDA's existing practice.
    EDA received an internal comment suggesting that EDA specify that 
underrun amounts be transferred to the contingencies line item. EDA 
agrees that the current provision regarding bid underrun does not 
reflect EDA's procedures and revises proposed Sec.  305.10(a) to 
provide that the Recipient must contact EDA immediately to determine 
correct procedures by replacing the phrase ``the Recipient will notify 
EDA to determine whether Investment funds should be deobligated from 
the Project'' with the phrase ``the Recipient shall notify EDA 
immediately to determine relevant procedures.''
    EDA received one comment requesting that EDA streamline its 
contract approval procedures, suggesting that the agency adopt a pre-
approval system or ``some dollar limit or some other threshold'' that 
triggers EDA's review. Section 305.11 requires EDA to ``determine that 
the award of all contracts necessary for design and construction of the 
Project facilities is in compliance with the terms and conditions of 
the Investment award in order for the costs to be eligible for EDA 
reimbursement.'' EDA's contract review is intended to help Recipients 
navigate various Federal requirements, including DOC's regulations (see 
15 CFR parts 14 and 24, as applicable) and relevant OMB cost principles 
(see 2 CFR parts 220, 225, and 230, as applicable), and help EDA 
determine whether it can reimburse specific Project costs. EDA's review 
is not intended to be burdensome and staff makes every effort to 
expedite the process. As the regulation is in the interest of both the 
agency and Recipients, EDA does not propose a substantive change.

Part 306--Training, Research and Technical Assistance

    Part 306 sets out the requirements for EDA's Local and National 
Technical Assistance and Research Investments. Both Local and National 
Technical Assistance Investments help Recipients fill the knowledge and 
information gaps that may prevent leaders in the public and non-profit 
sectors in economically distressed Regions from making optimal 
decisions on local economic development issues. Through the Research 
program, EDA invests in research and technical assistance-related 
Projects to promote competitiveness and innovation in distressed rural 
and urban Regions.
    EDA received two comments on part 306. One comment states that 
``[c]oordinated regional research networks can provide local political, 
economic development and business leaders with an understanding of the 
regional economic context in which they operate, set policy, attract 
investment and attract and retain jobs,'' and suggests that 
``[r]esearch dollars ought to be invested in building coordinated 
broad-based regional efforts that provide for better dissemination and 
application of research findings to improve the life of Midwest 
residents and the competitiveness of Midwest employers.'' EDA has 
invested extensively in RIC research and capacity building, including 
the Know Your Region project, which provides resources to help 
practitioners across the nation implement effective Regional economic 
development strategies. Please see the Know Your Region Web site at 
http://www.knowyourregion.org/about for more information. See EDA's Web 
site at http://www.eda.gov/AboutEDA/RIC/ for more information on EDA's 
RIC efforts.
    The second comment recommends that Technical Assistance program 
awards ``be reserved for the EDDs to conduct feasibility studies, 
management and operation plans, and CEDS coordination to [ensure] that 
any investment targeted [at] RICs [includes] measures that will address 
the five core evaluation criteria of EDA and create value-added 
outcomes for the region.'' An EDD is one of the Eligible Recipients 
listed in section 3 of PWEDA (42 U.S.C. 3122). EDA is not authorized to 
reserve Technical Assistance program funds for any particular group of 
Eligible Recipients. Therefore, we decline to make a change to the 
regulations; however, EDA continues to support District Organizations 
of EDDs in their efforts to advance new and established RICs.
    We make several non-substantive changes to part 306, including 
rephrasing Sec.  306.1(a) to read ``Local and National Technical 
Assistance Investments may be awarded to'' instead of ``Local and 
National Technical Assistance Investments may.'' In addition, we 
propose italicizing the parenthetical ``(``University Centers'')'' in 
the final sentence of Sec.  306.4. This NPRM also removes repetitive 
numerical references from part 306 by replacing the phrase ``twelve 
(12) to eighteen (18)'' with ``12 to 18'' in Sec.  306.3(a); ``eighty 
(80)'' with ``80'' in Sec.  306.6(d); two instances of ``three (3)'' 
with ``three'' in Sec.  306.7(a)(1); and ``one (1)'' with ``one'' in 
Sec.  306.7(c). EDA proposes no other revisions to part 306.

Part 307--Economic Adjustment Assistance Investments

    Part 307 sets out the requirements for awards under EDA's Economic 
Adjustment Assistance program, which can provide a wide-range of 
technical assistance, planning, and infrastructure assistance in 
Regions experiencing adverse economic changes that may occur suddenly 
or over time, including strategy development, infrastructure

[[Page 76509]]

construction, and revolving loan fund (``RLF'') capitalization. Subpart 
A of part 307 details the general requirements for Economic Adjustment 
Assistance awards, and subpart B sets out requirements specific to the 
RLF program.
    Through this NPRM, EDA proposes reorganizing part 307 to help 
clarify award requirements and incorporate all RLF program requirements 
under subpart B, which EDA proposes renaming the ``Revolving Loan Fund 
Program.'' Currently, certain RLF application and post-approval 
requirements are set out under subpart A of part 307, which may make 
them difficult to locate. For example, RLF-specific application review 
requirements are set out at Sec.  307.4(c)(2) and RLF post-approval 
requirements are set out under Sec.  307.6(d), both of which currently 
are under subpart A. To eliminate confusion, this NPRM incorporates the 
RLF application review and post-approval requirements under new Sec.  
307.7 titled ``Revolving Loan Fund award requirements'' in subpart B. 
In addition, EDA proposes non-substantive changes by removing the 
unnecessary phrase ``but not limited to'' from the first sentence of 
Sec.  307.1 and removing the hyphen from the phrase ``Federally 
Declared Disasters'' in Sec.  307.1(b).
    In EDA's interim final rule (``IFR'') published in the Federal 
Register on October 22, 2008 (73 FR 62858), EDA made revisions to 
clarify that it no longer allows RLF Recipients to use RLF Capital to 
guarantee loans. As stated in the 2008 IFR, while the authority for RLF 
Recipients to guarantee loans with RLF Capital has been used extremely 
infrequently throughout the four-decade history of the RLF program, EDA 
determined that loan guaranties are too risky and of limited utility, 
since, unlike Federal guaranties that are backed by the full faith and 
credit of the United States, RLF loan guaranties are backed only by the 
assets in the RLF. Therefore, in response to an internal comment from 
EDA staff, this NPRM proposes a minor revision to Sec.  307.3(b)(2) to 
remove a reference to ``loan guaranties'' that was inadvertently missed 
in the last revision to the regulations.
    Through the RLF program, EDA assists Regions affected by a variety 
of types of distress, including Regions that are Presidentially 
Declared Disaster areas, by supplying businesses and entrepreneurs with 
the gap financing necessary to start or expand their businesses. 
Currently, EDA's regulation at Sec.  307.4(c)(2) specifies that EDA 
will review applications to capitalize or recapitalize an RLF to assess 
the need for a new or expanded public financing tool to enhance other 
business assistance programs and services targeting economic sectors 
and locations described in the CEDS. However, the provision fails to 
reference how EDA will assess RLF applications to address 
Presidentially Declared Disaster areas. Therefore, EDA proposes 
revisions to the text of new Sec.  307.7(a)(1)(ii) to specify that EDA 
will review disaster-related RLF applications to assess the need to 
provide appropriate support for post-disaster economic recovery efforts 
in Presidentially Declared Disaster areas. In order to consolidate 
award requirements in a single section, this NPRM proposes relocating 
the remainder of text in connection with Economic Adjustment Assistance 
post-approval requirements, which currently are set out at Sec.  
307.6(a) through (c), to Sec.  307.4(b) and (c) of subpart A, titled 
Strategy Grants and Implementation Grants, respectively. We also revise 
Sec.  307.4(d) to refer the reader to Sec.  307.7 for RLF award 
requirements and relocate the sentence specifying that funding priority 
considerations for Economic Adjustment Assistance may be set forth in 
an FFO from Sec.  307.4(d) to Sec.  307.4(a) and revise it to add a 
reference to RLF Grants. Note that these revisions do not change the 
requirements applicable to Economic Adjustment Assistance awards; they 
simply make part 307 easier to navigate. EDA also proposes conforming 
changes to the table of contents of part 307 to appropriately renumber 
the regulations affected by reorganizing part 307.
    We received an internal comment suggesting that EDA replace the 
term ``CEDS'' with ``strategy'' throughout part 307. We decline to make 
the change because sections 209 and 302 of PWEDA (42 U.S.C. 3149 and 
3162, respectively) refer to the requirement of a ``comprehensive 
economic development strategy,'' and we believe the current language is 
helpful in that it encourages the creation of CEDS, yet allows for 
alternatives when necessary.
    EDA received an internal comment from EDA staff requesting that the 
``Application requirements'' provision as set out at Sec.  307.5 
provide greater specificity in what is required in an application for 
Economic Adjustment Assistance. Section 307.5 provides guidance that 
follows the requirements of PWEDA and other regulations. Because of the 
flexibility inherent in the regulation and other tools available to 
provide specificity in application requirements, including FFOs, we 
decline to make the requested change. However, we welcome further 
constructive comments on needed adjustments.
    We received another internal comment suggesting changes to Sec.  
307.4(c)(i), which states that EDA will review Economic Adjustment 
Assistance implementation applications to ensure the applicable CEDS 
meets the requirements of Sec.  303.7. The suggested change appears to 
suggest that CEDS are not required for non-construction implementation 
grants. However, CEDS are required for all Economic Adjustment 
Assistance implementation grants, whether they are construction or non-
construction, and therefore we decline to make the change.
    EDA received an internal comment suggesting that Sec.  307.6 should 
be revised and that subsections (a) and (c) should be removed as 
Economic Adjustment Assistance post-approval requirements are set out 
in current Sec.  302.18. EDA believes that the cross-references in 
current Sec.  307.6 provide useful information for the various types of 
Economic Adjustment Assistance Projects. In addition, this NPRM 
proposes changes to current Sec.  302.18 to remove the specific 
reference to Economic Adjustment Assistance post-approval requirements, 
making the cross-references even more salient. However, as noted above, 
through this NPRM, we propose relocating the provisions of Sec.  307.6 
to relevant portions of part 307. Accordingly, the text of current 
Sec.  307.6(a) is relocated to Sec.  307.4(b); the text of current 
Sec.  307.6(b) is relocated to Sec.  307.4(c)(2); the text of current 
Sec.  307.6(c) is relocated to Sec.  307.4(c)(3); and the text of Sec.  
307.6(d) is relocated to redesignated Sec.  307.7(b).
    We propose revising the heading of ``Subpart B--Special 
Requirements for Revolving Loan Funds and Use of Grant Funds'' to read 
``Subpart B--Revolving Loan Fund Program'' for simplicity and to 
comport with the convention of the subpart setting out requirements for 
the University Center program in part 306. This NPRM proposes 
redesignating current Sec.  307.7 as Sec.  307.6 and incorporating 
redesignated Sec.  307.6 under Subpart B. EDA also makes a minor change 
to the first sentence of redesignated Sec.  307.6 to improve sentence 
structure, replacing ``may also'' with ``also may.'' As noted above, 
EDA also proposes new Sec.  307.7 to set out RLF award requirements 
under Subpart B.
    In response to an internal comment, EDA also proposes amending 
Sec.  307.9(a)(2) to clarify the existing requirement that the RLF 
Recipient is responsible for complying with applicable environmental 
laws as set out at Sec.  307.10, which means the Recipient must adopt 
compliance

[[Page 76510]]

procedures and ensure that borrowers adhere to relevant environmental 
laws and regulations. In addition, in the second sentence of Sec.  
307.9(c)(2), EDA adds the word ``consolidation'' between the word 
``merger'' and the phrase ``or change in the EDA-approved lending area 
under Sec.  307.18'' to comport with the proposed revisions to Sec.  
307.18(b) to more precisely use the terms ``consolidation'' and 
``merger.'' Note that these revisions do not add to or change existing 
requirements. EDA proposes minor, non-substantive changes to Sec.  
307.9(b)(2)(ii) by replacing ``EDA policies and requirements'' with 
``EDA's policies and requirements'' and Sec.  307.9(b)(3) by replacing 
``shall also'' with ``also shall'' in the second sentence, Sec.  
307.9(c)(1) by replacing ``five (5)'' with ``five,'' Sec.  307.10(a) by 
removing the unnecessary phrase ``but not limited to'' in the second 
sentence and replacing ``must also'' with ``also must'' in the third 
sentence, Sec.  307.10(b) by adding the clarifying word 
``Accordingly,'' to the beginning of the second sentence, Sec.  
307.11(b) and (e) by replacing three instances of ``thirty (30)'' with 
``30,'' and to Sec.  307.11(f)(2) by replacing ``twenty (20)'' with 
``20.'' In addition, EDA corrects capitalization errors by revising the 
paragraph heading of Sec.  307.11(d) to read Interest-bearing account 
instead of Interest-bearing Account and replacing ``federal'' with 
``Federal'' in Sec.  307.12(b). EDA also removes an unnecessary 
parenthetical reference to ``(an ``EDA funds account'')'' in Sec.  
307.11(d), as that phrase is not used elsewhere in the regulations. In 
addition, EDA removes additional repetitive numerical references by 
replacing two instances of ``six-month (6)'' with ``six-month'' in 
Sec.  307.12(a)(1) and (a)(2) and one instance of ``three-year (3)'' 
with ``three-year'' and two instances of ``three (3) years'' with 
``three years'' in Sec.  307.13(a), (b)(2), and (b)(3).
    Nine comments express concern with EDA's RLF reporting 
requirements, which are set out at Sec.  307.14. Most comments suggest 
that RLF reporting is overly burdensome and request that EDA ``pursue 
some more flexible options to minimize the reporting burdens for RLF 
intermediaries with a proven track record.'' EDA has made numerous 
improvements to the RLF program in response to the OIG's report titled 
Aggressive EDA Leadership and Oversight Needed to Correct Persistent 
Problems in the RLF Program (March 2007), including establishing a 
framework for ensuring compliance with RLF reporting requirements. In 
response to the OIG's recommendations, RLF Recipients must report to 
EDA on a semi-annual basis in order to maintain the proper operational 
and financial integrity of RLF awards established with assistance from 
EDA. In April 2010, EDA successfully launched the Revolving Loan Fund 
Management System (``RLFMS''), which is the agency's central electronic 
management system for the program. The RLFMS greatly enhances EDA's 
ability to manage the RLF program in a consistent, cohesive manner, and 
provides a medium for record-keeping and clear communication between 
agency staff and RLF Recipients. Semi-annual reports must be submitted 
electronically through RLFMS, which has significantly reduced paperwork 
and made reporting more efficient.
    In addition, EDA has taken steps to make the RLF reporting form 
more effective and user-friendly. In June 2008, EDA issued the revised 
RLF semi-annual reporting form (Form ED-209) to replace the former 
semi-annual and annual reporting forms. Form ED-209 collects more 
useful information and has additional data fields to allow EDA to 
exercise more rigorous oversight of the RLF program. In the agency's 
IFR published in the Federal Register on October 22, 2008 (73 FR 
62858), EDA noted that the new Form ED-209 will reduce the average 
paperwork burden for each RLF report from 12 hours to 2.9 hours. This 
significant decrease results from the elimination of duplicative fields 
and EDA's successful launch of RLFMS on April 1, 2010.
    EDA received an internal comment from EDA staff suggesting that the 
agency no longer require submission of the RLF Income and Expense 
Statement (Form ED-209I), which is required of any RLF Recipient that 
uses either 50 percent or more (or more than $100,000) of RLF Income 
for administrative costs in a six-month Reporting Period. See Sec.  
307.14(c). EDA surveyed agency staff members, and some reported that 
Form ED-209I is helpful as it does provide useful information and 
serves as an incentive for RLF Recipients to avoid high administrative 
costs. Therefore EDA declines to remove the requirement wholesale, but 
understands that in certain cases, particularly for RLFs that are 
smaller and may have relatively less RLF Income, proportionately higher 
administrative costs may be unavoidable. Therefore, EDA provides 
additional language to Sec.  307.14(c) to provide that EDA may waive 
the requirement to submit Form ED-209I for small RLFs as determined by 
EDA. EDA expects to make such a determination on a case-by-case basis 
and will provide guidance on requesting a waiver. Because EDA recently 
changed the RLF reporting requirements to address management and 
oversight issues and to ensure the administrative integrity and 
sustainability of the RLF program, this NPRM does not make any further 
substantive changes to Sec.  307.14. This NPRM does propose removing 
repetitive numerical references from Sec.  307.14(c), replacing ``fifty 
(50)'' with ``50'' and ``six-month (6)'' with ``six-month.''
    In response to an EDA staff comment, EDA proposes a revision to 
Sec.  307.15(b)(1), which sets out the requirement that an accountant 
certify to the adequacy of an RLF Recipient's accounting system before 
EDA can disburse funds. The current regulation requires that the 
certification be made by ``an independent accountant familiar with the 
RLF Recipient's accounting system.'' This provision has raised concerns 
in past programmatic audits, and therefore, this NPRM proposes new 
language to require that the certification be made by ``a qualified 
independent accountant who preferably has audited the RLF Recipient in 
accordance with OMB Circular A-133 requirements.'' EDA received another 
internal comment suggesting that the phrase ``board of directors'' 
should be changed to ``Loan Administration Board'' in Sec.  
307.15(b)(2)(iii) to comport with previous regulations, FFOs, and EDA-
approved RLF Plans. We decline to make this change because the term 
``board of directors'' as used in the regulations is a generic term 
used to refer to the body of elected or appointed members who jointly 
oversee the activities of the RLF. In practice, the body sometimes has 
a different name, such as board of trustees, board of governors, board 
of managers, or executive board.
    An internal comment suggests revising Sec.  307.15(d) to clarify 
that private investment is not limited to a 12-month period before loan 
approval. We note that the January 27, 2010 final rule (75 FR 4259 at 
4261) added the phrase ``within twelve (12) months of approval of an 
RLF loan'' to Sec.  307.15(d)(1) to clarify that RLF operators may 
count as private leveraging any funds invested from private sources 
within 12 months before or after the RLF loan is made, rather than just 
12 months before the loan is made. We believe that this previous 
revision addresses any private leveraging undertaken short of the 12-
month limit. Please also see the full discussion on the provision in 
the January 27, 2010 final rule.
    In response to another internal comment, EDA proposes revising 
Sec.  307.15(d)(1)(iii) to provide that any

[[Page 76511]]

Federally guaranteed loan may leverage an RLF portfolio by inserting 
the phrase ``a Federal loan, including'' in between ``the guaranteed 
portions of'' and ``the U.S. Small Business Administration's.'' This 
change provides Recipients with greater flexibility in meeting the RLF 
leveraging requirement with Federal resources. Currently, certain Small 
Business Administration (``SBA'') loans are the only Federal loans that 
may meet the leveraging requirement. In addition, we propose to 
reference U.S. Department of Agriculture loans as an example of a type 
of Federal loan that can be used as leverage, as many RLF stakeholders 
may have experience with such loans. EDA expects that these revisions 
will provide needed flexibility for RLF Recipients to meet RLF 
leveraging requirements in challenging economic conditions and will 
further incentivize the leveraging of Federal investments.
    EDA also removes redundant numerical references by replacing 
``sixty (60)'' with ``60'' in Sec.  307.15(b)(1), two instances of 
``four (4)'' with ``four'' in Sec.  307.15(c)(1), ``fourteen (14) with 
``14'' and ``ten (10)'' with ``ten'' in Sec.  307.15(c)(2), ``twelve 
(12)'' with ``12'' in Sec.  307.15 (d)(1), and ``ninety (90)'' with 
``90'' in Sec.  307.15(d)(1)(iii).
    EDA received an internal comment requesting the deletion of Sec.  
307.16(c)(1)(i), which sets out an exception to EDA's capitalization 
utilization standard of 75 percent of RLF Capital in the case of an RLF 
Recipient that anticipates making large loans relative to the size of 
its RLF Capital base. The commenter notes that the exception provision 
is incorrectly worded and should be removed ``because it gives tacit 
approval to make loans in excess of 25 percent of the capital base to a 
single borrower.'' Upon consideration, EDA agrees to remove the 
provision, as it is incorrectly phrased as an ``exception.'' The 
relevant RLF Plan sets out the minimum and maximum amounts that the RLF 
Recipient may loan, and the Recipient must request EDA's approval (with 
appropriate justification) for any deviation from the prescribed 
procedures and amounts contained in the Plan. Therefore, the provision 
in Sec.  307.16(c)(1)(i) is a deviation from the rule, rather than an 
exception. In all cases, the Recipient must (a) adhere to prudent and 
appropriate underwriting standards and practices, and (b) seek EDA's 
approval for any variation below the capital utilization standard set 
of 75 percent. Accordingly, EDA will consider the qualitative aspects 
of a requested deviation. The capitalization utilization standard of 75 
percent is EDA's required floor. Therefore, this NPRM proposes to 
remove Sec.  307.16(c)(1)(i) and replace the phrase ``The following 
exceptions apply:'' in paragraph (c)(1) with the introductory phrase 
``except that'' and the text of current Sec.  307.16(c)(1)(ii). As the 
removal of Sec.  307.16(c)(1)(i) makes a list unnecessary, EDA 
incorporates the contents of existing (c)(1)(ii) under (c)(1).
    In response to an internal comment, EDA proposes a clarifying 
amendment in Sec.  307.16(d)(1)(i) to replace the phrase ``business 
plan'' with the correct defined term ``RLF Plan'' and corrects a 
grammatical error by removing the unnecessary second use of the word 
``and'' in the subparagraph. EDA also proposes removing redundant 
numerical references by replacing ``three (3)'' with ``three'' in the 
second sentence of Sec.  307.16(a)(1), ``forty-five (45)'' with ``45'' 
in Sec.  307.16(a)(2)(i), ``seventy-five (75)'' with ``75'' in Sec.  
307.16(c)(1), and ``two (2)'' with ``two'' in the first sentence of 
Sec.  307.16(c)(2)(i). This NPRM also revises Sec.  307.16(d)(1) to 
remove the unnecessary parenthetical phrase ``(as defined in Sec.  
314.5 of this chapter),'' as that phrase already appears in Sec.  
307.16(c)(2)(i).
    Generally, RLF Capital cannot be used to refinance existing debt. 
However, under Sec.  307.17(b)(6)(ii), EDA may allow the RLF Recipient 
to use RLF Capital to purchase the rights of a prior lien holder during 
a foreclosure action, if such action is necessary to prevent 
significant loss on an RLF loan. Currently, to make such use of RLF 
Capital, the RLF Recipient must demonstrate that there is a high 
probability that the sale of assets will result in compensation 
sufficient to cover the RLF's costs, plus a reasonable portion of the 
outstanding loan within 18 months of the refinancing. In response to a 
comment from EDA staff, this NPRM proposes a small change to Sec.  
307.17(b)(6)(ii) to provide greater flexibility in uncertain economic 
conditions by changing the 18-month time limit to ``a reasonable time, 
as determined by EDA.'' This NPRM also proposes to remove a repetitive 
numerical reference from Sec.  307.17(c), replacing ``three (3)'' with 
``three'' in the first sentence.
    Also in response to an internal comment from EDA staff, this NPRM 
proposes revisions to Sec.  307.18(a) to allow EDA to approve the 
addition of a new lending area (at the request of an RLF Recipient) 
before the full amount of the RLF Grant is disbursed to the Recipient. 
This change will provide EDA with needed flexibilities to respond to 
changing economic conditions and to quickly provide assistance in 
distressed areas. To effect this amendment, we remove Sec.  
307.18(a)(1)(i), which requires that ``EDA shall have disbursed the 
full amount of its Investment Assistance to the RLF Recipient'' before 
new lending areas may be added, and renumber the remainder of the 
subparagraph accordingly, redesignating subsections Sec.  
307.18(a)(1)(ii) through (vii) as Sec.  307.17(a)(1)(i) through (vi).
    Also, as all RLF loans must be in accordance with the relevant RLF 
Plan, we propose a clarifying change to remove the phrase ``to 
implement and assist economic activity'' from the first sentence of 
Sec.  307.18(a)(1). EDA proposes minor changes to correct a 
capitalization error in the heading of Sec.  307.18(a)(1), revising it 
to read Addition of lending areas instead of Addition of Lending Areas; 
remove the unnecessary phrase ``an additional'' from the second 
sentence of Sec.  307.18(a)(1); replace the term ``fulfill'' with 
``meet'' and the phrase ``Economic Adjustment Investments'' with 
``Economic Adjustment Assistance Investments'' in redesignated Sec.  
307.18(a)(1)(i); and, at the suggestion of EDA staff, replace the term 
``RLF Grant award agreement'' in redesignated Sec.  307.18(a)(1)(v) 
with the term ``financial assistance award'' for increased clarity and 
consistency.
    EDA received four comments suggesting that ``EDA should use its 
existing authority to allow for shared management, marketing, and 
administration of RLFs for underperforming loan funds.'' EDA believes 
these comments suggest allowing an RLF Recipient to contract with a 
third party to carry out certain tasks such as shared management, 
marketing, and administration of RLFs, or obtaining EDA's approval to 
merge an underperforming RLF award with another award to form a single 
RLF award. EDA currently may authorize both of these actions. If the 
RLF Recipient contracts with a third party to undertake these tasks, 
the contract must be procured in accordance with Federal competitive 
procurement requirements as set out at 15 CFR 14.43 or 24.36, as 
applicable. In addition, under Sec.  307.18(b)(2), EDA may approve the 
merger of two or more RLF awards into a single RLF award. This 
authority can and has been used to address underperforming RLF awards. 
In addition, in response to an EDA staff comment, this NPRM proposes 
textual revisions to Sec.  307.18(b) to more precisely use the terms 
``consolidation'' and ``merger.'' For purposes of the RLF program, a 
``consolidation'' under Sec.  307.18(b)(1) occurs when a single RLF 
Recipient that has multiple RLF awards requests, and EDA approves, the

[[Page 76512]]

consolidation of the multiple awards into a single RLF. In contrast, a 
``merger'' under Sec.  307.18(b)(2) occurs when two or more RLF 
Recipients request, and EDA approves, the merger of their respective 
RLF awards to form a single RLF award. Accordingly, EDA revises the 
heading of Sec.  307.18 to read ``Addition of lending areas; 
consolidation and merger of RLFs'' instead of ``Addition of lending 
areas; merger of RLFs'' and the heading of Sec.  307.18(b) to read 
Consolidation and merger of RLFs instead of Merger of RLFs. In 
addition, EDA replaces ``merger'' with ``consolidation'' in Sec.  
307.18(b)(1)(ii) and (b)(1)(iii) and ``consolidate'' with ``merge'' in 
Sec.  307.18(b)(2). These revisions do not change existing 
requirements; they merely clarify terminology. Finally, we propose 
removing repetitive numerical references, replacing ``one (1)'' with 
``one'' and ``two (2)'' with ``two'' in both Sec.  307.18(b)(1) and 
(b)(2).
    Section 307.19 sets out the requirements for an RLF Recipient to 
sell or securitize RLF loans, which may be an important and efficient 
way of infusing an RLF with new RLF Capital. Under Sec.  307.19, EDA 
may approve a Sale or Securitization of all or a portion of an RLF loan 
portfolio, provided that: (a) The RLF Recipient uses all proceeds from 
any Sale or Securitization to make additional RLF loans; (b) the RLF 
Recipient requests that EDA subordinate the agency's interest in all or 
a portion of the RLF loan portfolio to be sold or securitized; and (c) 
any Sale or Securitization in which an RLF Recipient may participate 
complies with the Securities Act of 1933, the Securities Exchange Act 
of 1934, and any rule or regulation made public by the Securities and 
Exchange Commission. EDA received an internal comment suggesting the 
deletion of Sec.  307.19(b), which sets out the subordination request 
requirement. The comment notes that subordination of the agency's 
interest could ``greatly affect the value of the portfolio, having an 
adverse consequence on the sale'' of all or a portion of the RLF 
Recipient's RLF loan portfolio. In considering the comment and the 
provision, EDA notes that the agency's interest is in the proportional 
dollar amount of the RLF Capital base. EDA has no interest per se upon 
the conclusion of a Sale or Securitization, at which point its interest 
is limited to the cash proceeds received upon the Sale or 
Securitization, which the Recipient must use to make additional loans. 
Worded differently, EDA's interest in the RLF loan portfolio, in 
relation to the RLF Capital base, is alive only up to the point of a 
Sale or Securitization. If, after seeking EDA's approval, the Recipient 
sells a portion of its loan portfolio, there is no ``interest'' for EDA 
to subordinate. In all cases, EDA, considering the Recipient's request, 
will evaluate the provisions or conditions to the proposed Sale or 
Securitization vis-[agrave]-vis dictated conformance to standards and 
market practices. Accordingly, this NPRM eliminates paragraph (b) in 
Sec.  307.19 and re-alphabetizes paragraphs (c) and (d) as (b) and (c), 
respectively. The commenter also suggests that EDA delete the reference 
to Securitizations in an effort to streamline the regulations. Although 
RLF portfolio Securitizations may not happen frequently, EDA declines 
to make this revision because the agency wishes to maintain maximum 
flexibility in an RLF Recipient's ability to raise additional RLF 
Capital.
    Two internal comments suggest that EDA remove the references to 
specific situations that may result in partial liquidation or 
disallowance of a portion of an RLF Grant as set out at Sec.  
307.20(a)(1) through (5) and suspension or termination of an RLF Grant 
for cause as set out in Sec.  307.21(a)(1)(i) through (x). EDA declines 
to make these changes as the agency believes it is important to specify 
circumstances that merit partial liquidation, disallowance, suspension, 
and termination and because the language addressing circumstances that 
may warrant termination for cause were added to the regulations through 
the October 22, 2008 IFR at the recommendation of the OIG (73 FR 
62858). However, EDA proposes removing the unnecessary phrases ``but 
are not limited to'' from the final sentence of Sec.  307.20(a) and 
``but not limited to'' from Sec.  307.21(a)(1). We also remove 
redundant numerical references in Sec.  307.20, replacing ``one hundred 
and twenty (120)'' with ``120'' in Sec.  307.20(a)(1), ``twelve (12)'' 
with ``12'' in Sec.  307.20(a)(2), and ``one (1)'' with ``one'' in 
Sec.  307.20(c)(3). EDA also proposes small changes by italicizing the 
acronym ``SEFA'' and capitalizing the first instance of ``Federal'' in 
Sec.  307.21(a)(1)(viii).
    EDA received nine comments requesting that EDA ``fully defederalize 
RLFs within the constraints of the current law.'' One commenter notes 
the success of specific RLF Grants in meeting program goals of job 
creation and investment leveraging and goes on to state ``[t]he 
continued requirement by EDA regarding reporting and guidelines seems 
ludicrous given the excellent performance record.'' EDA appreciates 
that some stakeholders may be frustrated with Federal requirements on 
RLF Grants that have been operating for several years, some for as many 
as three decades. EDA realizes the value of these grants and wishes to 
reduce burdens on the successful RLFs operating across the country; 
however, EDA currently is not authorized to release its Federal 
Interest in RLF awards. EDA's authority to release its interest after 
20 years (section 601(d) of PWEDA, 42 U.S.C. 3211) applies to Real 
Property and tangible Personal Property only, and does not apply to RLF 
awards, which exist in theoretic perpetuity so long as borrowers repay 
loans and the RLF Recipient continues to makes new loans. Although EDA 
currently does not have authority to release its interest in RLF 
awards, EDA is engaged in an ongoing effort to revise its authorities 
to provide greater flexibility for RLF Recipients.
    EDA received two comments stating that the requirements of ``Davis-
Bacon should not apply to borrowers of RLF dollars'' because such loans 
are ``not grant proceeds, and the company [or relevant borrower] must 
repay these loans with non-tax dollars.'' The wage rate requirements 
under the Davis-Bacon Act (40 U.S.C. 3142 et seq.) apply to contractors 
and subcontractors performing on Federally funded or assisted contracts 
in excess of $2,000 for the construction, alteration, or repair 
(including painting and decorating) of public buildings or public 
works. Under the Davis-Bacon Act, contractors and subcontractors must 
pay any laborers and mechanics employed under the contract (or 
subcontract) no less than the locally prevailing wages and fringe 
benefits for corresponding work on similar projects in the area. 
Section 602 of PWEDA (42 U.S.C. 3212) makes the Davis-Bacon wage 
requirements mandatory in all ``projects assisted by the Secretary 
under [PWEDA].'' See also Sec.  302.13. Therefore, Recipients and any 
RLF borrower, contractor, or subcontractor must comply with Davis-Bacon 
prevailing wage rate requirements where RLF funds under an EDA award 
are used for construction work.
    EDA received six comments suggesting EDA establish ``an RLF 
Advisory Committee of RLF practitioners to assist in the development of 
a more streamlined and user-friendly RLF reporting system and 
process.'' EDA has identified the need to create an internal RLF task 
force to improve communications and resolve program issues, and 
currently is in the process of establishing one. EDA expects that the 
task force will consist of Headquarters staff and RLF

[[Page 76513]]

administrators from each of the agency's six regional offices.

Part 308--Performance Incentives

    Part 308 sets out EDA's performance incentives for Recipients. When 
a Project is constructed under projected cost, EDA may allow the 
Recipient to use the excess funds to either increase the Investment 
Rate of the Project to the maximum percentage allowable under Sec.  
301.4 for which the Project was eligible at the time of the Investment 
award, or further improve the Project consistent with its purpose. The 
terms for performance awards under EDA's Public Works and Economic 
Adjustment Assistance programs are set out in Sec.  308.2 and the terms 
for performance awards under EDA's Planning program are set out under 
Sec.  308.3.
    EDA did not receive any comments on part 308, but capitalizes 
``Federal'' in Sec.  308.3(a)(3) to adhere to the capitalization 
convention of the regulations and removes repetitive numerical 
references throughout the part by replacing use of ``ten (10)'' with 
``ten'' in Sec.  308.2(a), ``one (1)'' with ``one'' in Sec.  308.2(b) 
and Sec.  308.3(a)(2), ``three (3)'' with ``three'' in Sec.  308.2(c), 
two references to ``one-hundred (100)'' with ``100'' in Sec.  308.2(d) 
and Sec.  308.3(b), and ``five (5)'' with ``five'' in Sec.  308.3(a).

Part 309--Redistributions of Investment Assistance

    Part 309 sets out EDA's policies regarding redistributing grant 
funds in the form of subgrants, loans, or other appropriate assistance. 
Information with respect to redistributions of Investment funds for 
Planning, Public Works, and Training, Research, and Technical 
Assistance Investments is presented in Sec.  309.1. Specifically, Sec.  
309.1(a) provides that a Recipient under any program governed by parts 
303, 305, and 306 may directly expend the Investment Assistance, or, 
with prior EDA approval, redistribute such funds in the form of a 
subgrant to another Eligible Recipient that qualifies for EDA 
Investment Assistance under the same program part as the Recipient. All 
subgrants must be subject to the same terms and conditions applicable 
to the Recipient under the original Investment award. Subsection 
309.1(b) stipulates that Investment Assistance received under parts 303 
or 305 may not be redistributed to a for-profit entity.
    Section 309.2 addresses redistributions under part 307 for Economic 
Adjustment Assistance Investments. This section reads similarly to 
Sec.  309.1. However, a Recipient under part 307 may redistribute 
Investment funds to another Eligible Recipient in the form of a grant 
or to a non-profit and private for-profit entity in the form of a loan 
or other appropriate assistance under subpart B of part 307. EDA did 
not receive any comments on and does not propose any revisions to part 
309.

Part 310--Special Impact Areas

    Part 310 implements section 214 of PWEDA (42 U.S.C. 3154), which 
authorizes the Assistant Secretary to waive the CEDS requirements of 
section 302 of PWEDA (42 U.S.C. 3162) for a Project that will fulfill a 
``pressing need'' of the Region or prominently address or alleviate 
Regional underemployment or unemployment. Section 310.1 outlines the 
process for designating a Region as a Special Impact Area and Sec.  
310.2 defines what may be considered a pressing need. EDA did not 
receive any comments on part 310.
    This NPRM proposes revising Sec. Sec.  310.1 and 310.2(b) and (c) 
to replace ``Recipient'' with ``Applicant,'' in order to clarify that 
designations under part 310 occur at the application stage. In 
addition, this NPRM proposes minor, non-substantive changes to Sec.  
310(a)(6) to replace ``Federally-Declared Disaster area'' with 
``Federally Declared Disaster area'' and Sec.  310.2(b) to replace the 
percentage symbol (``%'') with the word ``percent'' for consistency 
with the rest of the regulations and to remove a repetitive numerical 
reference, replacing ``twenty-four (24) month'' with ``24-month.''

Part 311--America COMPETES

    EDA proposes revising the heading of reserved part 311 to read 
``America COMPETES'' in preparation for any regulations necessary to 
implement the ``America Competes Reauthorization Act of 2010'' 
(``COMPETES'') (Pub. L. 111-358, January 4, 2011). EDA currently does 
not propose regulations to implement COMPETES.

Part 312--[Reserved]

Part 313--Community Trade Adjustment Assistance

    Part 313 sets forth regulations to implement the Trade Adjustment 
Assistance for Communities program authorized under chapter 4 of title 
II of the Trade Act of 1974, as amended (19 U.S.C. 2371 et seq.) EDA 
did not receive any comments on and does not propose any revisions to 
part 313.

Part 314--Property

    Part 314 sets forth the rules governing Property acquired or 
improved, in whole or in part, with EDA Investment Assistance. Through 
the February 1, 2011 Federal Register notice, EDA sought comments on 
how the Property regulations could be improved to provide needed 
flexibilities to encourage innovative economic development projects, 
while still protecting taxpayer dollars and the Federal Interest. EDA 
received a number of helpful comments in this regard specifically 
recommending that EDA provide flexibility both to the Recipient to deal 
with grant-assisted Real Property and to enhance EDA's ability to work 
with new forms of financing to support job creation in distressed 
communities. This NPRM sets forth proposed amendments to help reach 
these goals, along with additional revisions designed to streamline 
EDA's requirements.
    EDA proposes to amend the table of contents to part 314 to 
eliminate subparts A through D. EDA proposes this format change because 
the entire part contains only ten sections and dividing the ten 
sections into four subparts hinders comprehension. Because of the 
elimination of the subparts, EDA revises the section heading for Sec.  
314.8 to read ``Recorded Statement for Real Property'' instead of 
simply ``Recorded Statement'' as additional context is needed to 
clarify that Sec.  314.8 sets out recorded statement requirements for 
Real Property. Similarly, as Sec.  314.9 concerns the requirements for 
recordation of Personal Property interests, the section heading is 
revised to read ``Recorded Statement for Personal Property.'' These 
changes are designed to help the reader more easily navigate part 314 
and are not substantive.
    EDA proposes a non-substantive revision to remove the unnecessary 
phrase ``but not limited to'' from the definition of ``Real Property'' 
in Sec.  314.1. We received an internal comment on Sec.  314.2, which 
sets out the legal tenants of EDA's Federal Interest in Project 
Property, suggesting that EDA should consider ``parity consideration 
(as opposed to subordination)'' to ``be fair to other funders.'' EDA's 
regulations do not preclude this option; however, to make this clearer, 
EDA proposes clarifications to its encumbrances regulation (Sec.  
314.6) to specify the agency's authority to accept a shared first lien 
position. See proposed Sec.  314.6(b)(1) below titled Shared first lien 
position.
    Section 314.3, titled Authorized Use of Property, provides the 
circumstances under which Recipients may use Property acquired or 
improved, in whole or in part, with Investment Assistance. An internal 
comment noted that EDA's regulations did not refer to the terms and 
conditions of the award

[[Page 76514]]

as the reference point for determining the purpose of a given Project. 
Therefore, EDA proposes dividing Sec.  314.3(a) into two clearer 
sentences and replacing the phrase ``only for the authorized purpose of 
the Project'' with the phrase ``only for authorized Project purposes as 
set out in the terms and conditions of the Investment Assistance.'' The 
prohibition on disposing of or encumbering Project Property without 
EDA's prior written authorization is now the second sentence in the 
provision. Also, in response to an internal comment from an EDA 
employee, this NPRM adds the clause ``during the Estimated Useful Life 
of the Project'' to both Sec.  314.3(a) and (b) to clarify that EDA's 
use restrictions apply only during the Estimated Useful Life of Project 
Property.
    We received another internal comment suggesting that the 
regulations setting out the authorized and unauthorized uses of Project 
Property (Sec. Sec.  314.3 and 314.4, respectively) should be ``relaxed 
so as not to deter or discourage developers from the opportunity to 
make a fair recovery on their investments when they sell or lease the 
non-public rights-of-way.'' EDA believes Sec. Sec.  314.3 and 314.4 
appropriately articulate the authorized and unauthorized uses of 
Property funded or improved by EDA assistance. EDA is proposing 
clarifications to its title regulation as set out at 314.7(c), which 
may provide needed clarification and certainty to help address this 
comment. In addition, we propose minor changes to add a reference to 
EDA's proposed accountability provision (Sec.  302.16) to Sec.  
314.4(c) and remove the unnecessary phrases ``but not limited to'' from 
Sec. Sec.  314.3(c) and 314.4(c). In addition, EDA proposes removing 
two repetitive numerical references from Sec.  314.5(b), replacing 
``fifty (50) percent'' with ``50 percent.''
    EDA received five comments suggesting various flexibilities with 
respect to the agency's Property encumbrance requirements set out at 
Sec.  314.6. By way of background, as trustee of appropriated taxpayer 
dollars, EDA safeguards the public's interest in award assets by taking 
and retaining a security interest (the Federal Interest) in Property 
purchased or improved with grant funds. In general, Property must 
remain unencumbered and the Recipient must hold title to the Property 
for its Estimated Useful Life. In some instances, the regulations at 
Sec.  314.6 have proved particularly challenging for public-private 
partnerships. Two of the comments suggest that EDA should be amenable 
to subordinating the Federal Interest if the Project will not move 
forward without such action and the Recipient has a strong financial 
standing in the community and a proven history of meeting its 
obligations. In such circumstances, the Recipient's agreement to return 
the grant funds in the event of default should be sufficient. EDA 
understands the comment and by-and-large agrees. EDA in fact added 
flexibility to this section in the IFR published on October 22, 2008 
(73 FR 62858) to take into consideration the difference in risks posed 
by Recipients that are governmental bodies and Recipients that are non-
profit organizations. The 2008 IFR also clarified that a key factor in 
determining whether to subordinate the Federal Interest is whether the 
Recipient requesting the subordination poses a relatively lower risk 
because it has demonstrated stability over time. See paragraph 
(b)(3)(iv) of Sec.  314.6, which includes one of the requirements for 
EDA to accept an encumbrance, namely that EDA determine that there is a 
reasonable expectation that the Recipient will not default on its 
obligations. One of the comments also recommends that when a Project is 
designed to help a community adjust to the departure of a significant 
employer, it is critically important that EDA act expeditiously and 
allow alternate mechanisms when a lender is unwilling to subordinate 
its interest to EDA. The agency agrees that timeliness is important and 
is adding flexibility depending on whether the request for EDA to 
subordinate is made prior to, contemporaneous with, or after the EDA 
Grant award. In addition, see the discussion set out below regarding 
new flexibility in Sec.  314.8 regarding forms of security as 
alternatives to mortgages, such as execution of a letter of credit or 
escrow agreement in EDA's favor.
    Similarly, a third comment suggests that EDA should consider 
compromising its lien position in certain cases because a bank 
sometimes cannot afford to take less than a first lien position when 
there simply is not sufficient equity coverage. In such circumstances, 
it is important for EDA to agree to a second position in order to 
engender more economic development opportunities. As noted above, EDA 
agrees and has added additional flexibility to Sec.  314.6 (see 
discussion below). The fourth comment suggests that EDA require a first 
position lien only on the portion of the Project financed by EDA, 
allowing the Recipient to encumber the remainder of the equity in 
Project Property to obtain additional capital. This comment appears to 
suggest that EDA should consider subordinating its interest in real 
estate after issuance of the Grant to allow the Recipient to obtain 
additional financing, which could then enable the Recipient to finance 
more job-creating projects. EDA's ability to revise the regulations to 
accommodate this comment is constrained by legal considerations. To the 
extent the terms and conditions of the award do not contemplate 
consideration of subordination subsequent to the Grant award, which is 
EDA's current practice, the agency would need to demonstrate the 
financial benefit to the Federal government in agreeing to subordinate 
its interest. Federal law prohibits EDA from agreeing to cede the 
Federal Interest in Property without receiving fair compensation in 
return unless specifically authorized by statute. The Supreme Court 
established this principle in Royal Indemnity Co. v. United States, 313 
U.S. 289, 294 (1941), in what is sometimes referred to as the ``quid 
pro quo'' doctrine. The Royal Indemnity Court held that the:

[p]ower to release or otherwise dispose of the rights and property 
of the United States is lodged in the Congress by the Constitution. 
Art. IV, Sec.  3, Cl. 2. Subordinate officers of the United States 
are without that power, save only as it has been conferred upon them 
by Act of Congress or is to be implied from other powers so granted.

    This ruling established that no Federal government agent can give 
up something of value without receiving equal value in return absent 
express authority to do so. Hence, in order to give EDA authority to 
release its interest at the request of a Recipient, EDA either needs to 
receive fair value in return or obtain additional discretion from 
Congress under PWEDA to release the Federal Interest in such 
circumstances. Nonetheless, in appropriate circumstances, such as when 
the appraised value of the Property substantially exceeds the amount of 
EDA's Investment, there would appear to be little risk for EDA to 
accept a subordinate position, provided the value of the Property 
continues to cover the risk of default. The agency will consider adding 
flexibility in the terms and conditions of the Investment Assistance to 
enable EDA to consider requests for subordination once a Grant award 
has been made. In such cases, EDA would not be ceding a vested 
government property interest, but simply exercising discretion built in 
at the time of the award.
    The fifth comment suggests that EDA should reform its financing 
framework to help Projects take advantage of New Markets Tax Credit 
(``NMTC'') programs. Because NMTC arrangements generally

[[Page 76515]]

are in place over a seven-year period, Projects involving the tax 
credits raise novel issues about whether EDA will subordinate its 
interest at a time subsequent to the initial award decision. EDA's 
regulations currently do not contemplate the possibility that EDA would 
presently agree to agree in the future to subordinate its interest. In 
a time of severe budgetary constraints at all three levels of 
government (Federal, State, and local), EDA agrees that it must explore 
additional ways to leverage current levels of assistance.
    In light of these comments, EDA amends Sec.  314.6 to provide 
additional flexibility in subsection (b), which sets out exceptions to 
the general rule that Property must be free of encumbrances. For 
clarity, EDA is reordering subsection (b) to set out appropriate 
requirements that apply based on the point in time when a Recipient 
requests EDA to agree to subordinate the Federal Interest; namely, 
whether the Recipient already has mortgaged the Project Property before 
EDA's award decision, or is making the request for subordination 
simultaneously with EDA's award decision or after the award decision 
already has been made. EDA relocates existing paragraph (b)(1) and 
redesignates it as (b)(3) as provided below. EDA also proposes adding 
new paragraph (b)(1), titled Shared first lien position, to set out 
EDA's authority to enter into an inter-creditor agreement under which 
EDA and another lien holder share a first lien position. In light of 
the requirements applicable to requests for subordination, whenever 
possible, EDA ordinarily will prefer to subordinate its first lien 
position to a shared first-lien position with a lender pursuant to an 
inter-creditor agreement. EDA revises the paragraph heading of current 
paragraph (b)(2), which concerns encumbrances in connection with water, 
sewer, and other utility projects, to read Utility encumbrances.
    As noted above, EDA clarifies its requirements for subordinating 
the Federal Interest based on when the subordination is requested under 
proposed paragraphs (b)(3) through (b)(5). Current paragraph (b)(1) is 
re-designated as paragraph (b)(3) and is amended to add the heading 
Pre-existing encumbrances and to delete the phrase ``Recipient-owned 
Property that is subject to an encumbrance'' and substitute the phrase 
``Encumbrances already in place'' for increased clarity and ease of 
comprehension.
    Under current Sec.  314.6(b)(3), EDA can consider requests to 
subordinate its interest, provided that: (1) There is good cause; (2) 
all proceeds from the other financing will be used only for the Project 
or related activities; (3) the grantor or lender will not provide funds 
without the security of a lien on the Property; and (4) there is a 
reasonable expectation that the Recipient will not default on its 
obligations. As drafted, this paragraph is unclear whether it requires 
an Eligible Applicant to request subordination prior to the Grant award 
decision or whether it also applies after EDA has awarded funds to the 
Recipient, or both. To provide clarity, EDA adds a new paragraph (b)(4) 
with the heading Encumbrances proposed proximate to Project approval, 
which sets out requirements applicable to requests for subordination 
made contemporaneously with the Grant award decision. New paragraph 
(b)(4) provides that upon an Applicant's request, EDA may subordinate 
its interest in conjunction with the Grant decision when EDA determines 
that: (1) There is good cause and legal authority to waive the general 
requirement; (2) all the proceeds will be used to enhance Project 
Property or for related activities or other activities consistent with 
the purpose of EDA's programs; (3) the grantor or lender will not 
provide funds without the security of a lien; (4) the terms and 
conditions of the encumbrance are satisfactory to EDA; and (5) the risk 
of the encumbrance is acceptable based on a number of factors, 
including the approximate value of the Project Property at the time the 
encumbrance is requested and the financial strength of the Recipient. 
The list of determinations that EDA must make to subordinate its 
interest are similar to the existing list as set out at current Sec.  
314.6(b)(3); however, EDA has added the requirement that the terms and 
conditions are satisfactory to the agency. In addition, EDA proposes to 
revise the text of paragraph (b)(4)(i) to add the clause ``and legal 
authority'' to indicate that EDA may waive the restriction against 
encumbrances if it finds there is both ``good cause'' to waive the 
restriction and legal authority to waive. EDA is making this change 
because of the need to review such requests in light of the ``quid pro 
quo'' principle noted above. In paragraph (b)(4)(ii), EDA is broadening 
its authority to facilitate the availability of the equity in Project 
Property provided the request is consistent with the mission of the 
agency. Accordingly, EDA adds the phrase ``or other activities that EDA 
determines are authorized under PWEDA'' to ensure that to the extent 
equity is used to support other economic development projects, such 
projects are consistent with EDA's programs. In addition, EDA adds a 
new requirement designated as paragraph (b)(4)(v)(C) to require the 
submission of an appraisal so that EDA can weigh the risk to the 
Federal Interest if the agency agrees to subordinate at a time that may 
be several years after the original award decision.
    In addition, EDA designates each of the requirements under 
paragraph (b)(4)(v) with the letters ``A'' through ``D,'' to improve 
the organization of the provision. The introductory text to paragraph 
(b)(4) also specifies that the kind of ``debt'' that may be the subject 
of a subordination request includes ``time or maturity-limited debt 
that finances the Project Property.'' EDA includes this phrase to 
better accommodate NMTC and other financing mechanisms, which may 
require EDA to agree to subordinate its interest at a future date when 
needed to support the financial structure of the tax credits, which 
often require refinancing at the conclusion of the credit allowance 
period (see the NMTC program Web page on the U.S. Department of the 
Treasury's Web site at http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=5).
    The text of current paragraph (b)(3) is re-designated as (b)(5). 
This NPRM proposes to revise re-designated paragraph (b)(5) to provide 
additional flexibility to waive the prohibition on encumbrances 
subsequent to the grant award. This new flexibility is intended to 
address the comment regarding the possible use by a Recipient of the 
equity in grant-assisted Property to sponsor additional economic 
development. As amended, this paragraph will enable a Recipient to 
request EDA agree to subordinate its interest when the appraised value 
of the Real Property provides ample collateral for the EDA award even 
if EDA takes a second lien position. This NPRM adds the heading 
Encumbrances proposed after Project approval to new Sec.  314.6(b)(5) 
and amends the introductory text to read, ``Encumbrances proposed to be 
incurred after Project approval where all of the following are met:'' 
Similar to the requirements set out at revised paragraph (b)(4), 
revised paragraph (b)(5) provides that EDA may subordinate its interest 
after grant award when EDA determines that: (1) There is good cause and 
legal authority to waive the general requirement; (2) all the proceeds 
will be used to enhance Project Property or for related activities or 
other activities consistent with the purpose of EDA's programs; (3) the 
grantor or lender will not provide funds without the security of a 
lien; (4) the terms and conditions of the encumbrance are satisfactory 
to EDA;

[[Page 76516]]

and (5) the risk of the encumbrance is acceptable based on a number of 
factors, including the approximate value of the Project Property at the 
time the encumbrance is requested, and the financial strength of the 
Recipient.
    Several internal comments noted that EDA's title regulation at 
Sec.  314.7 ``is dense and the source of much confusion.'' One 
commenter suggests that the provision ``should be more specific about 
how the Recipient and private property owners are to comply [with 
certain portions of the provision].'' EDA agrees and proposes a number 
of changes to streamline the requirements and make them more readily 
understandable, including providing paragraph and subparagraph headings 
to act as guideposts as the reader navigates the regulation. To this 
effect, EDA proposes to revise the heading of Sec.  314.7(a) to read 
General title requirement instead of simply General and to add a 
heading to Sec.  314.7(b)(1) to read Disclosure of encumbrances. Within 
Sec.  314.7(c), EDA also adds subparagraph headings as guideposts for 
explaining the exceptions to the general title requirement. 
Accordingly, the following headings are added to Sec.  314.7(c)(1) 
through (c)(5): Real Property acquisition, Leasehold interests, 
Railroad right-of-way construction, Public highway construction, and 
Construction of Recipient-owned facilities to serve Recipient or 
privately owned Real Property, respectively. EDA expects that these 
headings will help the reader locate information more efficiently and 
make the regulation easier to understand. We also propose removing the 
unnecessary phrase ``but not limited to'' from Sec.  314.7(b)(1).
    With one exception noted below, EDA does not propose substantive 
changes to the exceptions to the agency's general title requirement; 
however, EDA proposes adding the substance of Sec.  314.7(c)(6) to 
Sec.  314.7(c)(5) and then removing Sec.  314.7(c)(6). EDA proposes 
this revision because subsections (c)(5) and (6) address analogous 
situations where the EDA-approved purpose of a Project is to construct 
facilities that benefit Real Property owned by the Recipient (Sec.  
314.7(c)(5)) or privately owned Real Property (Sec.  314.7(c)(6)), 
where the benefited Real Property ultimately will be sold or leased to 
private parties in order to spur economic development. The requirements 
of the two provisions are similar, and, as set out in revised Sec.  
314.7(c)(5)(i), in both cases the Recipient or private Owner must 
demonstrate that the Recipient or Owner holds title prior to 
disbursement of EDA funds; the Recipient must provide assurances that 
the Project and the development of the Real Property to be served by 
the Project will be completed in accordance with the terms of the 
Investment Assistance; during the Estimated Useful Life, the sale or 
lease of the Project or of Real Property to be served by the Project 
must be for Adequate Consideration and the terms and conditions of the 
Project must continue to be fulfilled; and the Recipient must agree 
that any failure to complete the Project or the development of the Real 
Property to be served by the Project constitutes a failure on behalf of 
the Recipient. This NPRM also makes conforming changes to paragraph 
(c)(5)(i) of Sec.  314.7 to clarify that these provisions apply to both 
Recipients and private Owners.
    The one substantive change to Sec.  314.7 affects an identical 
provision currently set out in sub-paragraph (i)(D) of Sec.  
314.7(c)(5) and 314.7(c)(6). In response to a suggestion by EDA staff, 
this NPRM proposes removing the provision in Sec.  314.7(c)(5)(i)(D), 
which provides that 10 years after an award is made, EDA may waive the 
requirement that a sale of Project Property during the Estimated Useful 
Life be for Adequate Consideration and that the purpose of the award 
continue to be fulfilled. This provision is inconsistent with EDA's 
policy on Estimated Useful Life and causes confusion in situations 
involving the sale of Property. When EDA added the provision in the IFR 
published on August 11, 2005 (70 FR 47002), EDA invited the public to 
comment on whether the new provision would be useful. At the time, EDA 
received no comments on the provision and since the provision was 
added, EDA has never had occasion to use it. Accordingly, EDA proposes 
removing the phrase in Sec.  314.7(c)(5)(i)(D) that reads ``; provided, 
however, that EDA may waive this provision for any sale or lease 
occurring after the ten (10) year anniversary of the award date of the 
Investment Assistance.'' In addition, EDA removes the unnecessary 
phrase ``but not limited to'' from Sec.  314.7(c)(5)(i) and one 
repetitive numerical reference from Sec.  314.7(c)(5)(i)(E), replacing 
``five (5) year'' with ``five-year.''
    The current regulation at Sec.  314.7(c)(5) refers to both the 
authorized scope of work and the Property that is to be benefitted by 
the scope of work as the ``Project.'' In certain circumstances, the 
failure to distinguish between the ``Project'' supported by the EDA 
grant, such as water and sewer infrastructure leading to an industrial 
park, and the real estate underlying that industrial park which is 
connected by that infrastructure, makes it difficult to comprehend 
exactly what the regulation requires. This broader interpretation of 
what constitutes the ``Project'' is inconsistent with the definition of 
``Project'' in Sec.  300.3, which defines the term to mean the 
``proposed or authorized activity (or activities) the purpose of which 
fulfills EDA's mission and program requirements as set forth in PWEDA 
and this chapter and which may be funded in whole or in part by EDA 
Investment Assistance.'' This NPRM proposes revisions to Sec.  
314.7(c)(5) to distinguish between these two different concepts by 
clarifying that the Recipient is responsible for completing the 
Project, which indicates the activities to be completed under the EDA-
approved scope of work and supported by the grant, and in appropriate 
situations, also is responsible for ensuring that the development of 
land and improvements on the Real Property to be served by or that 
provides the economic justification for the Project is completed in 
accordance with the terms and conditions of the Investment Assistance. 
The revisions refer to Real Property to be benefitted by the Project as 
``the development of land and improvements on the Real Property to be 
served by or that provides the economic justification for the 
Project.'' The revisions insert this clause with appropriate phrasing 
into Sec.  314.7(c)(5)(i)(C), (D), and (E).
    This NPRM proposes adding a useful heading that reads Additional 
conditions on sale or lease to Sec.  314.7(c)(5)(i), which sets out the 
existing requirement that EDA may condition the sale or lease of 
Recipient or Privately owned Real Property improved or benefitted by a 
Project on the satisfaction of additional EDA requirements by the 
Recipient, Owner, purchaser, or lessee, as appropriate. This NPRM also 
proposes removing the unnecessary phrase ``but not limited to'' from 
Sec.  314.7(c)(5)(ii). In addition, under current Sec.  
314.7(c)(6)(i)(B), when an authorized use of the Project is to 
construct facilities to benefit privately owned Real Property, the 
Recipient and Owner must agree to use the Real Property improved or 
benefitted by the EDA Investment Assistance only for authorized uses of 
the Project and consistent with the terms and conditions of the 
Investment Assistance. EDA proposes to relocate this requirement to new 
Sec.  314.7(c)(5)(iii), titled with a descriptive heading that reads 
Agreement between Recipient and Owner. For clarity, EDA also proposes 
relocating the statement currently set out at Sec.  314.7(c)(5)(i)(F) 
and (c)(6)(i)(F)

[[Page 76517]]

that EDA may deem that a violation of Sec.  314.7(c)(5) constitutes an 
Unauthorized Use of Project Property as new Sec.  314.7(c)(5)(iv).
    EDA received one comment suggesting that the agency not require a 
Recipient to hold title in all cases, allowing ``long term or low cost 
leases for important community projects.'' EDA recognizes that it is 
not always realistic for the Recipient to hold title, and the agency's 
exception to the title requirement set out at Sec.  314.7(c)(2), titled 
Leasehold interests, allows EDA to determine that a long-term leasehold 
interest for at least as long as the Estimated Useful Life of Project 
Real Property may meet the title requirement in certain circumstances.
    In light of the elimination of the subpart B designation, EDA 
amends the heading of Sec.  314.8 by adding the phrase ``for Real 
Property'' after the word ``statement'' to clarify that this section 
sets out recordation requirements specifically for Real Property. In 
addition, EDA proposes adding new paragraph (d) to provide that EDA may 
choose to accept an alternate instrument to protect EDA's interest in 
Project Property, such as an escrow agreement or a letter of credit. 
EDA seeks comments from economic development practitioners on whether 
this language will help facilitate innovative Projects.
    In light of the removal of the subpart C heading for Personal 
Property, the phrase ``Recorded statement'' in the heading of Sec.  
314.9 is replaced with the phrase ``Recorded statement for Personal 
Property'' to clarify that the requirements of the regulation apply 
only to Personal Property. In response to an internal comment, EDA 
proposes to amend the first sentence in Sec.  314.9 to better explain 
the form of the security interest EDA requires with respect to Personal 
Property. Accordingly, the phrase ``security interest'' is replaced 
with the phrase ``Uniform Commercial Code Financing Statement (Form 
UCC-1, as provided by State law)'' in the first sentence of the 
provision. In addition, EDA proposes removing the unnecessary phrase 
``but not limited to'' following the word ``including'' in the first 
sentence of the provision.
    EDA received two public comments regarding the length of EDA's 
interest in Project Property. One commenter suggests that EDA's ``20 
year lien position on real estate deals'' is too long in today's 
economy and another commenter suggests that EDA ``choose estimated 
useful lives for facility projects that would increase the potential 
for effective and profitable economic development over the short and 
long term * * * based on factual circumstances, replacement policies, 
or industry practices.'' The commenter recommends that Recipients 
``would be responsible for delineating the reasons for a shorter useful 
life based on certain material criteria established by the EDA.'' EDA 
has carefully reviewed its authorities and regulations and determined 
that it has the flexibility to set an Estimated Useful Life for its 
Investments based on the expected level of effort to create jobs. As 
the Federal Interest normally is coterminous with the useful life of 
Project Property, EDA's interest generally will be extinguished at the 
expiration of a Project's useful life. The Economic Development 
Administration and Appalachian Regional Development Reform Act of 1998 
(Pub. L. 105-393) added section 601(d) to PWEDA (42 U.S.C. 3211) to 
allow EDA to release its interest in Real or Personal Property after 20 
years. This amendment was designed to provide EDA with additional 
flexibilities to release its interest in Project Property, particularly 
as some Projects implicated 40-year Estimated Useful Lives, not to 
mandate a minimum 20-year useful life for all Project Property. EDA's 
current general practice is to establish an Estimated Useful Life of 20 
years for new construction and 15 years for rehabilitation, although 
EDA may establish an Estimated Useful Life of more or less than those 
timeframes when appropriate depending on the circumstances of a 
particular Investment.
    While EDA understands the comment, EDA's regulations currently do 
not prescribe the appropriate length of the Estimated Useful Life of 
Project Property, which EDA establishes on a case-by-case basis by 
means of a special award condition. As this matter is better handled on 
a case-by-case basis, EDA does not need to address the matter by 
regulation.
    In addition, EDA received an internal comment suggesting that EDA 
revise Sec.  314.10, which sets out the procedures for releasing EDA's 
Property interest, ``by providing some relief of the 20-year period 
under certain circumstances, such as providing relief if the project 
met or exceeded its projected performance after 9 years (which is the 
last year EDA reports on project performance for purposes of the 
Government Performance Results Act) or reducing the value of the 
residual Federal Interest over time.'' Section 314.10(a) currently 
provides that at the request of a Recipient and before the expiration 
of the Estimated Useful Life of a Project, EDA may release its interest 
in Project Property 20 years after the Investment Assistance was 
awarded. As noted above, EDA has the authority to set an Estimated 
Useful Life commensurate with job creation and economic development 
expectations of a particular Project. Once EDA establishes the 
Estimated Useful Life and secures the Federal Interest for its 
duration, EDA obtains the benefit of that security for the entire 
Estimated Useful Life. EDA is constrained by law from ceding something 
of value without obtaining equal value in return unless expressly 
authorized by statute. EDA is able to release its interest after 20 
years because section 601(d)(2) of PWEDA provides such specific 
authority. Accordingly, EDA declines to make the textual change to 
Sec.  314.10 requested by the commenter.
    However, with a view to providing Recipients greater flexibility to 
deal with Project Property, EDA is proposing revisions to Sec.  314.10 
to streamline procedures for the release of the Federal Interest in 
connection with EDA-assisted Property. This NPRM reorganizes Sec.  
314.10 to add new Sec.  314.10(a), which provides additional 
information regarding EDA's practice in establishing the Estimated 
Useful Life of Projects. This paragraph notes specifically EDA's 
historical practice before 1999 in establishing Estimated Useful Lives 
for periods of 40 years or more. Since 1999, EDA typically establishes 
useful lives between 15 and 20 years, depending on the nature of the 
asset. Current paragraph (a) is redesignated as new paragraph (d). EDA 
proposes to delete current paragraph (b), which announced the release 
of the Federal Interest with the Local Public Works and Capital 
Investment program that EDA conducted from 1976 until 1978, in its 
entirety. Since the regulation that added this provision in February 
1999 was a simple announcement of the release, there is no current need 
to repeat the provision in the proposed rule. EDA replaces the content 
of paragraph (b) with a new paragraph to set out the general rule that 
upon written request, EDA may release the Federal Interest in Project 
Property at the expiration of the Project's Estimated Useful Life, 
provided that the Recipient has made a good faith effort to fulfill the 
terms and conditions of the award, as determined by EDA. Accordingly, 
EDA revises the heading of Sec.  314.10(b) to read Release of Property 
after the expiration of the Estimated Useful Life instead of Exception.
    This NPRM proposes to remove and relocate certain portions of the 
content of current paragraph (c) and revises the paragraph to provide 
that EDA can release its interest before the expiration of the 
Estimated Useful Life of Project

[[Page 76518]]

Property only if it receives compensation for the fair market value of 
the Federal Interest. Accordingly, EDA revises the heading of Sec.  
314.10(c) to read Release prior to expiration of the Estimated Useful 
Life instead of Unauthorized Use. This paragraph refers to a similar 
statement in Sec.  314.4, but repeats it here in order to place all of 
the provisions relating to release of the Federal Interest in the same 
regulation. Please see below for a detailed explanation of content 
revisions to current Sec.  314.10(c). EDA also redesignates current 
Sec.  314.10(a), which details the process for EDA's release of the 
Federal Interest before the expiration of the Estimated Useful Life but 
at least 20 years after date of award, as Sec.  314.10(d). EDA adds a 
clarifying heading to read Release of certain Property after 20 years 
and the introductory phrase ``In accord with section 601(d)(2) of 
PWEDA'' to redesignated paragraph (d). Also, EDA adds the clause ``that 
exceeds 20 years'' immediately following the phrase ``before the 
expiration of the Estimated Useful Life of a Project'' to further 
clarify EDA's practice. Additionally, EDA removes one repetitive 
numerical reference in newly designated Sec.  314.10(d) by replacing 
``twenty (20)'' with ``20.''
    EDA is removing the content of current paragraph (c)(1)(ii) of 
Sec.  314.10, which provides that notwithstanding the release of the 
Federal Interest, Project Property may not be used for inherently 
religious activities prohibited by applicable Federal law. EDA included 
this subsection in the regulation in 1999 to address the legal 
requirements of and Tilton v. Richardson, (403 U.S. 672 (1971)), which 
held with respect to a grant program to support the construction of 
educational facilities and notwithstanding express statutory authority 
to release the Federal government's interest in grant property 20 years 
after the date of the award that, if such property had value, it 
remained subject to the requirements of the Establishment Clause of the 
First Amendment to the U.S. Constitution (U.S. Const. amend. I). Since 
Tilton was announced, the courts have made a number of important 
distinctions to Establishment Clause jurisprudence. Importantly, the 
Office of Legal Counsel (``OLC'') at the U.S. Department of Justice 
issued an opinion in a question regarding the Old North Church, which 
is the historic property where Robert Newman hung lanterns to alert 
Paul Revere of oncoming British troops; Revere's warnings to colonial 
militias led to the battles of Lexington and Concord (2003 WL 21246893 
(O.L.C.) (April 30, 2003)). The OLC opinion discusses whether the 
Government retains the flexibility to assist religious institutions to 
carry out secular purposes in certain circumstances. In the Old North 
Church opinion, OLC distinguished the grant program under its review, 
the U.S. Department of the Interior's Save America's Treasures program, 
from the educational program under review in Tilton. OLC concluded that 
there was no Constitutional bar to the use of historic preservation 
grants for the preservation of historic properties that satisfy the 
generally applicable criteria for funding under the program. The 
opinion may be found on the OLC Web site at http://www.justice.gov/olc/OldNorthChurch.htm.
    The transactional analysis at the heart of the opinion suggests 
that the prohibition currently set out at Sec.  314.10(c)(1)(ii) may 
not be required and may, to the contrary, serve to disfavor religious 
institutions from full participation in EDA's economic development 
assistance programs by treating them as less than equal in their 
ability to obtain a release of the Federal Interest. Similar to OLC's 
analysis of the legal effect of providing support for improvements to 
the historic church of Paul Revere in return for guaranteed public 
access, EDA does not make Investments to improve properties to ensure 
their availability as educational resources as was the case with the 
buildings at the heart of Tilton. Rather, the purpose of an EDA 
Investment is to support the job-creating activities of the Recipient 
to help counter the economic distress of the Region. It is entirely 
appropriate that EDA establish a reasonable timeframe in which it 
expects a Recipient to pursue its efforts to create jobs. As EDA 
reports on the performance of its programs for purposes of the GPRA at 
the third, sixth, and ninth anniversaries of the date of the award, it 
makes sense for EDA to secure its Investment by using the concept of 
Estimated Useful Life to ensure EDA receives the benefit of its bargain 
in making the funding decision. As noted above, EDA typically 
establishes an Estimated Useful Life of between 15 and 20 years, well 
in excess of the nine-year GPRA reporting timeframe. Inasmuch as EDA 
programs support the construction of economic development related 
Projects, such as a job training facility or business incubation 
center, there would appear to be less potential concern on 
Establishment Clause grounds.
    While EDA is removing the provisions currently set out in Sec.  
314.10(c)(1)(ii), the agency need not decide the underlying legal issue 
as part of this regulation. New paragraph (e) includes an important 
limitation that a release of the Federal Interest is not automatic, but 
requires EDA's express approval. In determining whether to agree to 
release the Federal Interest, this paragraph provides expressly that 
EDA may not approve a release if the agency lacks legal authority to do 
so, including governing Establishment Clause law; if the Recipient has 
not performed in accordance with the terms and conditions of the 
Investment or has used Project Property in violation of Sec. Sec.  
314.3 or 314.4; or other such factors as EDA deems appropriate. With 
this reservation of authority, EDA will review its legal authority to 
release the Federal Interest at the time of the request. In general, 
EDA will not release the Federal Interest in the case of a Recipient's 
poor or non-performance under the terms and conditions of the 
Investment Assistance or the Recipient's violation of the terms and 
conditions applicable to the Investment Assistance. EDA may refuse to 
release its interest if EDA determines that the Recipient has failed to 
carry out the scope of work or a portion thereof under the Investment 
Assistance (e.g., if the Recipient constructs a building to be used as 
a training center, but does not obtain necessary State and local 
permits and approvals so that the building can be used for the purpose 
authorized under the Investment Assistance). In addition, EDA may 
refuse to release its interest if EDA determines that the Recipient has 
used Project Property for an unauthorized use in violation of 
Sec. Sec.  314.3 or 314.4. For example, if the Recipient's incidental 
use of Project Property under Sec.  314.3(f) does interfere with the 
scope of the Project or violates applicable law, including the 
requirement that Project Property not be used in violation of 
nondiscrimination requirements or for inherently religious activities 
prohibited by applicable Federal law. If EDA determines it is legally 
constrained from releasing the Federal Interest, all Project 
requirements will continue to apply until EDA determines that all 
requirements and expectations of the Investment Assistance have been 
fulfilled.
    However, notwithstanding any release of the Federal Interest under 
Sec.  314.10, in accordance with DOC's regulations at 15 CFR part 8, 
compliance with nondiscrimination requirements is a continuing 
obligation. Therefore, EDA is retaining the content of Sec.  
314.10(c)(1)(i).

[[Page 76519]]

EDA proposes relocating the provision to new paragraph Sec.  
314.10(e)(3).
    In addition to comments regarding specific regulatory provisions, 
EDA received three comments with respect to EDA's overall policies 
regarding property management. One commenter suggests that EDA consider 
``[p]articipating mortgages and joint ventures for buildings. * * * 
[w]inners could offset losers and result in new opportunities and 
profit.'' EDA assumes that the commenter is suggesting that EDA enter 
into participating mortgages with its Recipients. Generally speaking, a 
participating mortgage is a mortgage loan under which the lender is 
entitled to share in the rental or resale proceeds from a property 
owned by the borrower or mortgagor. EDA lacks the authority to make a 
regulatory change to carry out this suggestion because PWEDA does not 
authorize profit as part of an EDA award, and all award benefits accrue 
to the community in terms of job creation and economic diversification. 
Under current government-wide procedures, however, any income generated 
under the Project generally is directed to accomplish further Project 
objectives. See also the requirements of ``program income'' at 15 CFR 
14.24 or 24.25, as applicable.
    EDA received two comments suggesting that EDA create an 
``alternate'' mechanism to provide a ``gap financing vehicle which 
could be a letter of credit or the like that would be sufficient to a 
bank'' for critical, time-sensitive Projects. While complex Projects 
that incorporate a variety of financing types may take a longer time to 
be approved, EDA is committed to acting on applications in an 
expeditious manner and recently converted its grant processes to a 
quarterly cycle with award decisions to be made within 20 business days 
of each funding cycle deadline. EDA's statutory authority, PWEDA, does 
not permit EDA to make financial assistance available through a letter 
of credit. Accordingly, EDA is unable to provide an applicant with an 
irrevocable ``promise to pay'' by issuing such a document in advance of 
EDA's approval process.

Part 315--Trade Adjustment Assistance for Firms

    Part 315 sets forth regulations to implement the TAAF program 
authorized under chapters 3 and 5 of title II of the Trade Act of 1974, 
as amended (19 U.S.C. 2341 et seq.) EDA did not receive any comments on 
and does not propose any revisions to part 315.

Classification

    Prior notice and opportunity for public comment are not required 
for rules concerning public property, loans, grants, benefits, and 
contracts (5 U.S.C. 553(a)(2)). Because prior notice and an opportunity 
for public comment are not required 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. Therefore, a regulatory 
flexibility analysis has not been prepared.

Executive Order No. 12866

    The Office of Management and Budget (OMB) has determined that this 
proposed rule is significant for purposes of Executive Order 12866.

Congressional Review Act

    This NPRM is not major under the Congressional Review Act (5 U.S.C. 
801 et seq.)

Executive Order No. 13132

    Executive Order 13132 requires agencies to develop an accountable 
process to ensure ``meaningful and timely input by State and local 
officials in the development of regulatory policies that have 
federalism implications.'' ``Policies that have federalism 
implications'' is defined in Executive Order 13132 to include 
regulations that have ``substantial direct effects on the 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.'' It has been determined that this proposed rule does 
not contain policies that have federalism implications.

Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.) 
(``PRA'') requires that a Federal agency consider the impact of 
paperwork and other information collection burdens imposed on the 
public and, under the provisions of PRA section 3507(d), obtain 
approval from OMB for each collection of information it conducts, 
sponsors, or requires through regulations. Notwithstanding any other 
provision of law, no person is required to respond to, nor shall any 
person be subject to a penalty for failure to comply with a collection 
of information subject to the PRA unless that collection displays a 
currently valid OMB Control Number.
    The following table provides a complete list of the collections of 
information (and corresponding OMB Control Numbers) set forth in this 
proposed rule. These collections of information are necessary for the 
proper performance and functions of EDA.

------------------------------------------------------------------------
    Part or section of this                              Form/title/OMB
         proposed rule             Nature of request     control number
------------------------------------------------------------------------
301.2; 301.10.................  With an application     ED-900,
                                 for Investment          Application for
                                 Assistance, a non-      Investment
                                 profit Eligible         Assistance
                                 Applicant must          (0610-0094)
                                 include a resolution
                                 passed by an
                                 authorized
                                 representative of a
                                 political subdivision
                                 of a State.
301.3(a); 301.10; 305.3(a)(1).  An Eligible Applicant   ED-900,
                                 must substantiate       Application for
                                 Regional eligibility    Investment
                                 and justify the         Assistance
                                 requested EDA           (0610-0094)
                                 Investment Assistance
                                 based on, for
                                 example, the
                                 unemployment rate,
                                 per capita income
                                 levels, or a Special
                                 Need (as determined
                                 by EDA) in the Region
                                 in which the Project
                                 will be located. The
                                 Eligible Applicant
                                 also must identify
                                 and submit to EDA the
                                 source of data used
                                 to substantiate
                                 Regional eligibility
                                 (e.g., ACS or BLS
                                 data, other Federal
                                 data for the Region
                                 in which the Project
                                 will be located, or
                                 data available
                                 through the State
                                 government).
301.4(b)(1)(i); 305.3(a)(1)...  An Eligible Applicant   ED-900,
                                 must provide            Application for
                                 information on the      Investment
                                 severity of the         Assistance
                                 Region's unemployment   (0610-0094)
                                 and its duration, the
                                 per capita income
                                 levels, and extent of
                                 the Region's
                                 unemployment or
                                 outmigration.
301.4(b)(4)...................  An Eligible Applicant   ED-900,
                                 for a Project under     Application for
                                 part 306 must provide   Investment
                                 information to show     Assistance
                                 that the Project        (0610-0094)
                                 merits an increase to
                                 the Investment Rate
                                 because of the
                                 Project's
                                 infeasibility without
                                 such an increase, or
                                 because the Project
                                 will be of no or only
                                 incidental benefit to
                                 the Eligible
                                 Applicant.

[[Page 76520]]

 
301.5; 301.10.................  An Eligible Applicant   ED-900,
                                 must provide            Application for
                                 information to show     Investment
                                 that Matching Share     Assistance
                                 funds will be           (0610-0094)
                                 available for the
                                 Project.
301.10(c).....................  An Eligible Applicant   ED-900,
                                 for a Project under     Application for
                                 parts 305 or 307 must   Investment
                                 include with its        Assistance
                                 application for         (0610-0094)
                                 Investment Assistance
                                 a CEDS acceptable to
                                 EDA (pursuant to part
                                 303) or otherwise
                                 incorporate by
                                 reference a current
                                 CEDS that EDA
                                 approves for the
                                 proposed Project.
301.10(d).....................  An Eligible Applicant   ED-900,
                                 for a Project to        Application for
                                 construct a business,   Investment
                                 technology, or other    Assistance
                                 type of incubator or    (0610-0094)
                                 accelerator, must
                                 include a feasibility
                                 study demonstrating
                                 the need for the
                                 Project and an
                                 operational plan
                                 based on industry
                                 best practices
                                 demonstrating the
                                 Eligible Applicant's
                                 plan for ongoing
                                 successful operations.
302.7(a)......................  Recipients must submit  Award Amendment
                                 requests for            Request (0610-
                                 amendments to           0102)
                                 Investment awards in
                                 writing to EDA for
                                 approval and provide
                                 information and
                                 documentation as EDA
                                 deems necessary.
302.9(a)......................  An Eligible Applicant   ED-900,
                                 must furnish comments   Application for
                                 on the Project from     Investment
                                 the relevant            Assistance
                                 governmental            (0610-0094)
                                 authority in the
                                 Region or proof of
                                 efforts to obtain
                                 comments if none were
                                 provided by the
                                 governmental
                                 authority.
302.10(a).....................  An Eligible Applicant   ED-900,
                                 must certify to EDA     Application for
                                 the names of any        Investment
                                 persons engaged by or   Assistance
                                 on behalf of the        (0610-0094)
                                 Eligible Applicant
                                 for the purpose of
                                 expediting Investment
                                 Assistance
                                 applications made to
                                 EDA.
302.14(a).....................  Recipients shall keep   Audits of
                                 records of the amount   States, Local
                                 and disposition of      Governments,
                                 awards of Investment    and Non-Profit
                                 Assistance, the total   Organizations,
                                 cost of the Project,    OMB Circular A-
                                 the amount and nature   133
                                 of the portion of the
                                 Project costs
                                 provided by other
                                 sources and other
                                 records that would
                                 facilitate an
                                 effective audit.
302.15........................  An Eligible Applicant   ED-900,
                                 must certify (and       Application for
                                 submit evidence         Investment
                                 thereof satisfactory    Assistance
                                 to EDA) that it meets   (0610-0094)
                                 the requirements for
                                 receiving Investment
                                 Assistance.
302.16(b).....................  Recipients are          GPRA Performance
                                 required to submit      Validation
                                 reports consisting of   Forms (0610-
                                 data-specific           0098)
                                 evaluations of the
                                 Project's
                                 effectiveness.
302.16(c).....................  EDA may require a       Project Service
                                 Recipient to provide    Map (0610-0102)
                                 a ``Project service
                                 map'' and other
                                 information in order
                                 to determine which
                                 segments of the
                                 Region are being
                                 assisted with the
                                 Investment Assistance.
302.20(d).....................  Recipients and Other    ED-900,
                                 Parties must submit     Application for
                                 written assurances to   Investment
                                 EDA that they will      Assistance
                                 comply with             (0610-0094)
                                 nondiscrimination
                                 laws and regulations.
303.9(c)......................  Eligible Applicants     GPRA Performance
                                 for short-term          Validation
                                 Planning Investment     Forms (0610-
                                 Assistance must         0098)
                                 provide performance
                                 measures acceptable
                                 to EDA, and provide
                                 EDA with progress
                                 reports during the
                                 term of the Planning
                                 Investment.
304.1; 304.4(a)...............  To have a Region        Comprehensive
                                 certified as an EDD,    Economic
                                 a District              Development
                                 Organization must       Strategies and
                                 submit information      Planning
                                 showing that the        Investments
                                 Region contains at      (0610-0093)
                                 least one area
                                 subject to the
                                 relevant economic
                                 distress criteria, is
                                 able to foster
                                 development on a
                                 larger scale than in
                                 a single area, has an
                                 EDA-approved CEDS,
                                 and obtains
                                 commitments from a
                                 majority of the
                                 relevant counties and
                                 States.
304.2(c)(2); 304.4(b).........  The District            ED-900,
                                 Organization must       Application for
                                 demonstrate that its    Investment
                                 governing body is       Assistance
                                 broadly                 (0610-0094);
                                 representative of the   Comprehensive
                                 principal economic      Economic
                                 interests of the        Development
                                 Region.                 Strategies and
                                                         Planning
                                                         Investments
                                                         (0610-0093)
304.2(c)(4)...................  The District            Comprehensive
                                 Organization must       Economic
                                 notify the public of    Development
                                 its annual meetings,    Strategies and
                                 its decisions, the      Planning
                                 results of programs,    Investments
                                 and as reasonably       (0610-0093)
                                 requested, the
                                 results of audited
                                 statements, annual
                                 budgets, and minutes
                                 of public meetings.
305.2(b); 305.3(a)(3).........  An Eligible Applicant   ED-900,
                                 must show that a        Application for
                                 Public Works Project    Investment
                                 will promote: the       Assistance
                                 growth of industrial    (0610-0094);
                                 or commercial plants,   Construction
                                 the creation of long-   Investments
                                 term employment         (0610-0096)
                                 opportunities
                                 primarily for low-
                                 income families, and
                                 the fulfillment of
                                 the Region's pressing
                                 needs.
305.4(c)......................  In order to receive     ED-900,
                                 any portion of the      Application for
                                 Investment Assistance   Investment
                                 for design and          Assistance
                                 engineering work, an    (0610-0094);
                                 Eligible Applicant      Construction
                                 must submit and         Investments
                                 certify information     (0610-0096)
                                 that documents
                                 compliance with
                                 Investment award
                                 requirements of all
                                 design and
                                 engineering contracts.
305.5.........................  In order to allow a     ED-900,
                                 District Organization   Application for
                                 to administer the       Investment
                                 Project for another     Assistance
                                 Recipient, the          (0610-0094);
                                 Recipient must make     Construction
                                 this request and        Investments
                                 submit information to   (0610-0096)
                                 EDA showing that the
                                 Recipient does not
                                 have the current
                                 staff capacity to
                                 administer the
                                 Project, the District
                                 Organization would be
                                 more effective than
                                 another local
                                 business or
                                 organization, the
                                 District Organization
                                 would not subcontract
                                 the work, and the
                                 costs of District
                                 Organization
                                 administration will
                                 not exceed allowable
                                 costs were the
                                 Recipient
                                 administering it.

[[Page 76521]]

 
305.6.........................  A Recipient shall seek  ED-900,
                                 EDA's prior written     Application for
                                 approval to use an      Investment
                                 alternate               Assistance
                                 construction            (0610-0094);
                                 procurement method to   Construction
                                 the traditional         Investments
                                 design/bid/build. If    (0610-0096)
                                 an alternate method
                                 is used, the
                                 Recipient must submit
                                 to EDA for approval a
                                 construction services
                                 procurement plan and
                                 the Recipient must
                                 use a design
                                 professional to
                                 oversee the process.
305.7.........................  The Recipient may use   ED-900,
                                 ``in-house forces''     Application for
                                 for design,             Investment
                                 construction,           Assistance
                                 inspection, legal       (0610-0094);
                                 services, or other      Construction
                                 work on the Project     Investments
                                 if it submits a         (0610-0096)
                                 sufficient
                                 justification to EDA.
305.8(a); 305.8(b)............  Recipients of EDA       ED-900,
                                 construction awards     Application for
                                 must obtain prior       Investment
                                 approval for the use    Assistance
                                 of furnished            (0610-0094);
                                 equipment and           Construction
                                 materials. Requests     Investments
                                 must show that costs    (0610-0096)
                                 claimed for furnished
                                 equipment and
                                 materials are
                                 competitive with
                                 local market costs
                                 for similar equipment
                                 and materials.
305.9.........................  An EDA construction     ED-900,
                                 award Recipient must    Application for
                                 submit information to   Investment
                                 EDA regarding why       Assistance
                                 phasing is necessary,   (0610-0094);
                                 a description of the    Construction
                                 phasing, related        Investments
                                 costs and schedules,    (0610-0096)
                                 and certification
                                 that the Recipient
                                 will pay for overruns
                                 and that it is
                                 capable of paying for
                                 incurred costs before
                                 the first
                                 disbursement.
305.10(a).....................  If at the construction  Construction
                                 contract bid opening,   Investments
                                 the lowest responsive   (0610-0096)
                                 bid is less than
                                 total Project cost,
                                 the Recipient will
                                 notify EDA to
                                 determine relevant
                                 procedures.
305.10(b).....................  In case of an overrun   Construction
                                 at construction         Investments
                                 contract bid opening,   (0610-0096)
                                 the Recipient may
                                 take deductive
                                 alternatives if
                                 provided for in the
                                 bid documents, reject
                                 all bids and re-
                                 advertise if there is
                                 a rational basis to
                                 believe that such
                                 action will result in
                                 a lower bid, or
                                 augment the Matching
                                 Share by an amount
                                 sufficient to cover
                                 the excess cost. If
                                 EDA determines that
                                 these options are not
                                 feasible, the
                                 Recipient may submit
                                 a written request for
                                 additional EDA
                                 funding.
305.11........................  Recipients may issue a  Construction
                                 notice permitting       Investments
                                 construction under      (0610-0096)
                                 contract to commence
                                 prior to an EDA
                                 determination of
                                 award compliance and
                                 eligibility for cost
                                 reimbursement, but
                                 will proceed at their
                                 own risk until EDA
                                 review and
                                 concurrence. The EDA
                                 regional office may
                                 request information
                                 from the Recipient to
                                 make a determination
                                 of award compliance.
305.12........................  EDA requires a          Construction
                                 Recipient to erect a    Investments
                                 Project sign or signs   (0610-0096)
                                 at the Project
                                 construction site to
                                 indicate that the
                                 Federal government is
                                 participating in the
                                 Project. The regional
                                 office will provide
                                 mandatory
                                 specifications for
                                 Project signage.
305.13........................  Recipients involved in  Construction
                                 a contract change       Investments
                                 order must submit       (0610-0096)
                                 them to EDA for
                                 review.
306.2.........................  EDA selects Projects    ED-900,
                                 for Local and           Application for
                                 National Technical      Investment
                                 Assistance based on     Assistance
                                 the criteria in part    (0610-0094)
                                 301 and the extent to
                                 which the Eligible
                                 Applicant
                                 demonstrates that the
                                 Project will achieve
                                 more specific
                                 objectives in the
                                 Region (as set forth
                                 in Sec.   306.2) and
                                 meets the criteria in
                                 the applicable FFO.
306.5.........................  EDA provides            ED-900,
                                 Investment Assistance   Application for
                                 to University Center    Investment
                                 Projects based on the   Assistance
                                 selection criteria in   (0610-0094)
                                 part 301, the
                                 competitive selection
                                 process outlined in
                                 the applicable FFO,
                                 and the extent to
                                 which the Eligible
                                 Applicant
                                 demonstrates other
                                 more specific,
                                 related criteria.
307.5(a)......................  Each application for    ED-900,
                                 Economic Adjustment     Application for
                                 Assistance must         Investment
                                 include or              Assistance
                                 incorporate by          (0610-0094)
                                 reference (if so
                                 approved by EDA) a
                                 CEDS.
307.9.........................  All RLF Recipients      RLF Standard
                                 must submit to EDA an   Terms and
                                 RLF Plan.               Conditions
                                                         (0610-0095)
307.11(a).....................  Prior to the            RLF Standard
                                 disbursement of EDA     Terms and
                                 funds, RLF Recipients   Conditions
                                 must provide in a       (0610-0095)
                                 form acceptable to
                                 EDA evidence of
                                 fidelity bond
                                 coverage and evidence
                                 of certification in
                                 accordance with Sec.
                                  307.15(b)(1).
307.11(e).....................  If the Recipient        RLF Standard
                                 receives Grant funds    Terms and
                                 and the RLF loan        Conditions
                                 disbursement is         (0610-0095)
                                 subsequently delayed
                                 beyond 30 days, the
                                 Recipient must notify
                                 the applicable grants
                                 officer and return
                                 such non-disbursed
                                 funds to EDA.
307.13(a).....................  RLF Recipients must     RLF Standard
                                 maintain Closed Loan    Terms and
                                 files and all related   Conditions
                                 documents, books of     (0610-0095)
                                 account, computer
                                 data files, and other
                                 records over the term
                                 of the Closed Loan
                                 and for a three-year
                                 period from the date
                                 of final disposition
                                 of such Closed Loan.
307.13(b).....................  RLF Recipients must     RLF Standard
                                 maintain adequate       Terms and
                                 accounting records to   Conditions
                                 substantiate the        (0610-0095)
                                 amount of RLF Income
                                 expended for eligible
                                 administrative costs
                                 and retain records of
                                 administrative
                                 expenses incurred for
                                 activities and
                                 equipment relating to
                                 the operation of the
                                 RLF.
307.14(a).....................  All RLF Recipients      ED-209, Semi-
                                 must submit semi-       Annual Report
                                 annual reports in       (0610-0095)
                                 electronic format to
                                 EDA, unless EDA
                                 approves a paper
                                 submission.

[[Page 76522]]

 
307.14(b).....................  All RLF Recipients      ED-209, Semi-
                                 must certify as part    Annual Report
                                 of the semi-annual      (0610-0095)
                                 report that the RLF    ED-209A, Annual
                                 is operating in         Report (0610-
                                 accordance with the     0095)
                                 RLF Plan, and
                                 describe any
                                 modifications to the
                                 RLF Plan to ensure
                                 effective use of the
                                 RLF.
307.14(c).....................  An RLF Recipient using  ED-209I, Income
                                 either fifty percent    and Expense
                                 or more (or more than   Statement (0610-
                                 $100,000) of RLF        0095)
                                 Income for
                                 administrative costs
                                 in a 12-month
                                 reporting period must
                                 submit a completed
                                 Income and Expense
                                 Statement annually to
                                 the appropriate EDA
                                 regional office. EDA
                                 may waive this
                                 requirement for an
                                 RLF Grant with a
                                 small RLF Capital
                                 Base.
307.15(b)(1)..................  Within 60 days prior    RLF Standard
                                 to the initial          Terms and
                                 disbursement of EDA     Conditions
                                 funds, a qualified      (0610-0095)
                                 independent
                                 accountant who
                                 preferably has
                                 audited the RLF
                                 Recipient in
                                 accordance with OMB
                                 Circular A-133
                                 requirements, shall
                                 certify to EDA and
                                 the Recipient that
                                 such system is
                                 adequate to identify,
                                 safeguard, and
                                 account for all RLF
                                 operations.
307.15(b)(2)..................  Prior to the            RLF Standard
                                 disbursement of any     Terms and
                                 EDA funds, an RLF       Conditions
                                 Recipient must          (0610-0095)
                                 certify that standard
                                 loan documents
                                 necessary for lending
                                 are in place and that
                                 these documents have
                                 been reviewed by its
                                 legal counsel for
                                 adequacy and
                                 compliance with the
                                 terms and conditions
                                 of the Grant and
                                 applicable State and
                                 local law.
307.16(b).....................  Recipients must         RLF Standard
                                 promptly notify EDA     Terms and
                                 in writing of any       Conditions
                                 condition that may      (0610-0095)
                                 adversely affect
                                 their ability to meet
                                 prescribed schedule
                                 deadlines. Recipients
                                 must submit a written
                                 request for continued
                                 use of Grant funds
                                 beyond a missed
                                 deadline for
                                 disbursement of RLF
                                 funds.
307.19........................  With prior approval     RLF Standard
                                 from EDA, a Recipient   Terms and
                                 may enter into a Sale   Conditions
                                 or Securitization of    (0610-0095)
                                 all or a portion of
                                 its RLF loan
                                 portfolio.
307.21(b).....................  EDA may approve a       RLF Standard
                                 request from a          Terms and
                                 Recipient to            Conditions
                                 terminate an RLF        (0610-0095)
                                 Grant.
part 310......................  Upon the application    Comprehensive
                                 of an Eligible          Economic
                                 Applicant, EDA may      Development
                                 designate the Region    Strategies and
                                 which the Project       Planning
                                 will serve as a         Investments
                                 Special Impact Area     (0610-0093)
                                 and waive the CEDS
                                 requirement if the
                                 Eligible Applicant
                                 demonstrates that its
                                 proposed Project will
                                 directly fulfill a
                                 pressing need and
                                 assist in preventing
                                 excessive
                                 unemployment.
314.3(f)......................  With EDA's prior        Property
                                 written approval, a     Management 0610-
                                 Recipient may           0103
                                 undertake an
                                 incidental use of
                                 Property that does
                                 not interfere with
                                 the scope of the
                                 Project or the
                                 economic purpose for
                                 which the Investment
                                 was made, provided it
                                 satisfies the
                                 conditions set forth
                                 in Sec.   314.3(f).
314.6(b)......................  In order to use EDA-    ED-900,
                                 funded Property to      Application for
                                 secure a mortgage or    Investment
                                 deed of trust or        Assistance
                                 encumber the            (0610-0094);
                                 Property, the           Construction
                                 Recipient must          Investments
                                 provide information     (0610-0096)
                                 that satisfies one or
                                 more of the
                                 exceptions set forth
                                 in Sec.   314.6(b).
314.7(a) and (c)..............  The Recipient must      ED-900,
                                 provide information     Application for
                                 that satisfies EDA      Investment
                                 that the Recipient      Assistance
                                 has title to the Real   (0610-0094);
                                 Property and all        Construction
                                 easements, rights-of-   Investments
                                 way, permits, or long-  (0610-0096)
                                 term leases, unless
                                 it can provide
                                 information proving
                                 it meets an exception
                                 to the rule.
314.7(b)......................  The Recipient must      ED-900,
                                 provide information     Application for
                                 regarding all           Investment
                                 encumbrances on the     Assistance
                                 Real Property to EDA.   (0610-0094);
                                                         Construction
                                                         Investments
                                                         (0610-0096)
314.8.........................  Recipients must         ED-900,
                                 execute a lien,         Application for
                                 covenant, or other      Investment
                                 statement of EDA's      Assistance
                                 interest in all         (0610-0094);
                                 Property acquired or    Construction
                                 improved with EDA       Investments
                                 Investment Assistance   (0610-0096)
                                 and record it in the
                                 proper jurisdiction.
314.9.........................  Recipients must         ED-900,
                                 execute a security      Application for
                                 interest or other       Investment
                                 statement of EDA's      Assistance
                                 interest in Personal    (0610-0094);
                                 Property acquired or    Construction
                                 improved by EDA funds   Investments
                                 and record the          (0610-0096)
                                 interest in
                                 accordance with
                                 applicable law.
314.10........................  If a Recipient wishes   Property
                                 for EDA to release      Management 0610-
                                 its Real Property or    0103
                                 tangible Personal
                                 Property interest
                                 before or after the
                                 expiration of the
                                 Property's Estimated
                                 Useful Life, it must
                                 submit a request for
                                 such release to EDA.
                                 EDA's release is not
                                 automatic and may
                                 require some action
                                 on behalf of the
                                 Recipient.
315.5(b)......................  Current or prospective  ED-900,
                                 TAACs must submit       Application for
                                 either a new or         Investment
                                 amended application     Assistance
                                 to EDA, along with a    (0610-0094)
                                 proposed budget,
                                 narrative scope of
                                 work, and other
                                 information as may be
                                 requested by EDA.
315.5(c)......................  TAACs must submit       GPRA Performance
                                 information regarding   Validation Form
                                 performance to be       (0610-0098)
                                 evaluated by EDA.
315.6(a)(1); 315.7; 315.8.....  Firms must provide      ED-840P,
                                 specific information    Petition by a
                                 to EDA in order to be   Firm for
                                 certified for           Certification
                                 participation in the    of Eligibility
                                 TAAF program.           to Apply for
                                                         Trade
                                                         Adjustment
                                                         Assistance
                                                         (0610-0091)

[[Page 76523]]

 
315.6(a)(2); 315.6(a)(3);       A Certified Firm must   ED-840P,
 315.16.                         submit an Adjustment    Petition by a
                                 Proposal to EDA for     Firm for
                                 approval. If EDA        Certification
                                 approves the            of Eligibility
                                 Adjustment Proposal,    to Apply for
                                 the Firm may then       Trade
                                 request Adjustment      Adjustment
                                 Assistance from the     Assistance
                                 TAAC.                   (0610-0091)
315.9.........................  In order to have a      ED-840P,
                                 public hearing, a       Petition by a
                                 Person with a           Firm for
                                 Substantial Interest    Certification
                                 in an accepted          of Eligibility
                                 petition for TAAF       to Apply for
                                 certification must      Trade
                                 submit a request that   Adjustment
                                 follows this            Assistance
                                 section's procedures.   (0610-0091)
315.12........................  Each TAAC shall keep    GPRA Performance
                                 records disclosing      Validation Form
                                 the use of all TAAF     (0610-0098)
                                 funds.
------------------------------------------------------------------------

List of Subjects

13 CFR Part 300

    Distressed region, Financial assistance, Headquarters, Regional 
offices.

13 CFR Part 301

    Applicant and application requirements, Economic distress levels, 
Eligibility requirements, Grant administration, Grant programs, 
Investment rates.

13 CFR Part 302

    Civil rights, Conflicts-of-interest, Environmental review, Federal 
policy and procedures, Fees, Inter-governmental review, Post-approval 
requirements, Pre-approval requirements, Project administration, 
Reporting and audit requirements.

13 CFR Part 303

    Award and application requirements, Comprehensive economic 
development strategy, Planning, Short-term planning investments, State 
plans.

13 CFR Part 304

    District modification and termination, Economic development 
district, Organizational requirements, Performance evaluations.

13 CFR Part 305

    Award and application requirements, Economic development, Public 
works, Requirements for approved projects.

13 CFR Part 306

    Award and application requirements, Performance evaluations, 
Research, Technical assistance, Training, University centers.

13 CFR Part 307

    Award and application requirements, Economic adjustment assistance, 
Income, Liquidation, Merger, Pre-loan requirements, Record and 
reporting requirements, Revolving loan fund, Sales and securitizations, 
Termination.

13 CFR Part 308

    Performance awards, Planning performance awards.

13 CFR Part 310

    Excessive unemployment, Special impact area, Special need.

13 CFR Part 311

    America COMPETES.

13 CFR Part 314

    Authorized use, Federal interest, Federal share, Property, Property 
interest, Release, Title.

Regulatory Text

    For reasons stated in the preamble, this NPRM proposes amending 
title 13, chapter III of the Code of Federal Regulations as follows:

PART 300--GENERAL INFORMATION

    1. The authority citation for part 300 continues to read as 
follows:

    Authority: 42 U.S.C. 3121; 42 U.S.C. 3122; 42 U.S.C. 3211; 
Department of Commerce Organization Order 10-4.

    2. Revise Sec.  300.1 to read as follows:

Sec.  300.1  Introduction and mission.

    EDA was created by Congress pursuant to the Public Works and 
Economic Development Act of 1965 to provide financial assistance to 
both rural and urban distressed communities. EDA's mission is to lead 
the Federal economic development agenda by promoting innovation and 
competitiveness, preparing American regions for growth and success in 
the worldwide economy. EDA will fulfill its mission by fostering 
entrepreneurship, innovation, and productivity through Investments in 
infrastructure development, capacity building, and business development 
in order to attract private capital investments and new and better jobs 
to Regions experiencing substantial and persistent economic distress. 
EDA works in partnership with distressed Regions to address problems 
associated with long-term economic distress as well as to assist those 
Regions experiencing sudden and severe economic dislocations, such as 
those resulting from natural disasters, conversions of military 
installations, changing trade patterns, and the depletion of natural 
resources. EDA Investments generally take the form of Grants to or 
Cooperative Agreements with Eligible Recipients.
    3. Revise Sec.  300.2 to read as follows:

Sec.  300.2  EDA Headquarters and regional offices.

    (a) EDA's Headquarters Office is located at: U.S. Department of 
Commerce, Economic Development Administration, 1401 Constitution Avenue 
NW., Washington, DC 20230.
    (b) EDA has regional offices throughout the United States and each 
regional office's contact information may be found on EDA's Internet 
Web site at http://www.eda.gov or in the applicable announcement of 
Federal Funding Opportunity issued by EDA. Please contact the 
appropriate regional office to learn about EDA Investment opportunities 
in your Region.
    4. Amend Sec.  300.3 to:
    a. Revise the definition of Cooperative Agreement, paragraph (7) of 
the definition of Eligible Recipient, and the definition of Federal 
Funding Opportunity or FFO, Federally-Declared Disaster, Grant, Indian 
Tribe, Investment or Investment Assistance, Investment Rate, Local 
Share or Matching Share, Presidentially-Declared Disaster, PWEDA, 
Region or Regional, and Trade Act;
    b. Add a definition of Regional Innovation Clusters or RICs in 
alphabetical order; and
    c. Remove the definition of Private Sector Representative.

Sec.  300.3  Definitions.

* * * * *
    Cooperative Agreement means the financial assistance award of EDA 
funds to an Eligible Recipient where substantial involvement is 
expected between EDA and the Eligible Recipient in carrying out a 
purpose or activity authorized under PWEDA or another statute. See 31 
U.S.C. 6305.
* * * * *

[[Page 76524]]

    Eligible Recipient * * *
    (7) Private individual or for-profit organization, but only for 
Training, Research, and Technical Assistance Investments pursuant to 
Sec.  306.1(d)(3) of this chapter.
* * * * *
    Federal Funding Opportunity or FFO means an announcement EDA 
publishes during the fiscal year at http://www.grants.gov and on EDA's 
Internet Web site at http://www.eda.gov that provides the funding 
amounts, application and programmatic requirements, funding priorities, 
special circumstances, and other information concerning a specific 
competitive solicitation for EDA's economic development assistance 
programs. EDA also may periodically publish FFOs on specific programs 
or initiatives.
    Federally Declared Disaster means a Presidentially Declared 
Disaster, a fisheries resource disaster pursuant to section 312(a) of 
the Magnuson-Stevens Fishery Conservation and Management Act, as 
amended (16 U.S.C. 1861a(a)), or other Federally declared disasters 
pursuant to applicable law.
    Grant means the financial assistance award of EDA funds to an 
Eligible Recipient under which the Eligible Recipient bears 
responsibility for carrying out a purpose or activity authorized under 
PWEDA or another statute. See 31 U.S.C. 6304.
* * * * *
    Indian Tribe means an entity on the list of recognized tribes 
published pursuant to the Federally Recognized Indian Tribe List Act of 
1994, as amended (Pub. L. 103-454) (25 U.S.C. 479a et seq.), and any 
Alaska Native Village or Regional Corporation (as defined in or 
established under the Alaska Native Claims Settlement Act (43 U.S.C. 
1601 et seq.). This term includes the governing body of an Indian 
Tribe, non-profit Indian corporation (restricted to Indians), Indian 
authority, or other non-profit Indian tribal organization or entity; 
provided that the Indian tribal organization or entity is wholly owned 
by, and established for the benefit of, the Indian Tribe or Alaska 
Native Village.
* * * * *
    Investment or Investment Assistance means a Grant or Cooperative 
Agreement entered into by EDA and a Recipient.
    Investment Rate means, as set forth in Sec.  301.4 of this chapter, 
the amount of the EDA Investment in a particular Project expressed as a 
percentage of the total Project cost.
    Local Share or Matching Share means the non-EDA funds and any In-
Kind Contributions that are approved by EDA and provided by a Recipient 
or third party as a condition of an Investment. The Matching Share may 
include funds from another Federal Agency only if authorized by statute 
that allows such use, which may be determined by EDA's reasonable 
interpretation of such authority.
    Presidentially Declared Disaster means a major disaster or 
emergency declared under the Robert T. Stafford Disaster Relief and 
Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.).
* * * * *
    PWEDA means the Public Works and Economic Development Act of 1965, 
as amended (42 U.S.C. 3121 et seq.).
* * * * *
    Region or Regional means an economic unit of human, natural, 
technological, capital, or other resources, defined geographically. 
Geographic areas comprising a Region need not be contiguous or defined 
by political boundaries, but should constitute a cohesive area capable 
of undertaking self-sustained economic development. For the limited 
purposes of determining economic distress levels and Investment Rates 
pursuant to part 301 of this chapter, a Region also may comprise a 
specific geographic area defined solely by its level of economic 
distress, as set forth in Sec. Sec.  301.3(a)(2) and 301.3(a)(3) of 
this chapter.
* * * * *
    Regional Innovation Clusters or RICs means networks of similar, 
synergistic, or complementary entities that support a single industry 
sector and its various supply chains. In general, RICs:
    (1) Are based on a geographic area that may cross municipal, 
county, and other jurisdictional boundaries;
    (2) May include catalysts of innovation and drivers of Regional 
economic growth, such as universities, government research centers, and 
other research and development resources;
    (3) Have active channels for business transactions and 
communication; and
    (4) Depend upon specialized infrastructure, labor markets, and 
services that build on the unique competitive assets of a location, 
including talent, technology, services, and hard and soft 
infrastructure, to spur innovation, job creation, and business 
expansion.
* * * * *
    Trade Act, for purposes of EDA, means title II, chapters 3, 4, and 
5, of the Trade Act of 1974, as amended (19 U.S.C. 2341 et seq.).
* * * * *

PART 301--ELIGIBILITY, INVESTMENT RATE AND APPLICATION REQUIREMENTS

    5. The authority section for part 301 continues to read as follows:

    Authority: 42 U.S.C. 3121; 42 U.S.C. 3141-3147; 42 U.S.C. 3149; 
42 U.S.C. 3161; 42 U.S.C. 3175; 42 U.S.C. 3192; 42 U.S.C. 3194; 42 
U.S.C. 3211; 42 U.S.C. 3233; Department of Commerce Delegation Order 
10-4.

    6. Amend Sec.  301.1 to:
    a. Revise the introductory text and paragraphs (d) and (e); and
    b. Add new paragraph (f) to read as follows:

Sec.  301.1  Overview of eligibility requirements.

    In order to receive EDA Investment Assistance, the following 
requirements must be met:
* * * * *
    (d) The Eligible Applicant must satisfy the formal application 
requirements set forth in subpart E of this part;
    (e) The Project must meet the general requirements set forth in 
part 302 (General Terms and Conditions for Investment Assistance) and 
the specific program requirements (as applicable) set forth in part 303 
(Planning Investments and Comprehensive Economic Development 
Strategies), part 304 (Economic Development Districts), part 305 
(Public Works and Economic Development Investments), part 306 
(Training, Research and Technical Assistance Investments), or part 307 
(Economic Adjustment Assistance Investments) of this chapter; and
    (f) EDA must select the Eligible Applicant's proposed Project.
    7. Revise paragraphs (a)(1), (a)(2), (a)(4) introductory text, 
(a)(4)(i), and (c)(1) of Sec.  301.3 to read as follows:

Sec.  301.3  Economic distress levels.

    (a) Part 305 (Public Works and Economic Development Investments) 
and part 307 (Economic Adjustment Assistance Investments).
    (1) Except as otherwise provided by this paragraph (a), for a 
Project to be eligible for Investment Assistance under parts 305 or 307 
of this chapter, the Project must be located in a Region that, on the 
date EDA receives an application for Investment Assistance, is subject 
to one or more of the following economic distress criteria:
    (i) An unemployment rate that is, for the most recent 24-month 
period for which data are available, at least one percentage point 
greater than the national average unemployment rate;
    (ii) Per capita income that is, for the most recent period for 
which data are

[[Page 76525]]

available, 80 percent or less of the national average per capita 
income; or
    (iii) A Special Need, as determined by EDA.
    (2) A Project located within an Economic Development District, 
which is located in a Region that does not meet the economic distress 
criteria described in paragraph (a)(1) of this section, also is 
eligible for Investment Assistance under parts 305 or 307 of this 
chapter if EDA determines that the Project will be of ``substantial 
direct benefit'' to a geographic area within the District that meets 
the criteria of paragraph (a)(1) of this section. For this purpose, a 
Project provides a ``substantial direct benefit'' if it provides 
significant employment opportunities for unemployed, underemployed or 
low-income residents of the geographic area within the District.
* * * * *
    (4) Data requirements to demonstrate economic distress levels. EDA 
will determine the economic distress levels pursuant to this subsection 
at the time EDA receives an application for Investment Assistance as 
follows:
    (i) For economic distress levels based upon per capita income 
requirements, EDA will base its determination upon the most recent 
American Community Survey (``ACS'') published by the U.S. Census 
Bureau. For economic distress levels based upon the unemployment rate, 
EDA will base its determination upon the most recent data published by 
the Bureau of Labor Statistics (``BLS''), within the U.S. Department of 
Labor. For eligibility based upon either per capita income requirements 
or the unemployment rate, when the ACS or BLS data, as applicable, are 
not the most recent Federal data available, EDA will base its decision 
upon the most recent Federal data from other sources (including data 
available from the Census Bureau and the Bureaus of Economic Analysis, 
Labor Statistics, Indian Affairs, or any other Federal source 
determined by EDA to be appropriate). If no Federal data are available, 
an Eligible Applicant must submit to EDA the most recent data available 
from the State. The required data must be for the Region where the 
Project will be located (paragraph (a)(1) of this section), the 
geographic area where substantial direct Project benefits will occur 
(paragraph (a)(2) of this section), or the geographic area of poverty 
or high unemployment (paragraph (a)(3) of this section), as applicable.
* * * * *
    (c) * * *
    (1) Contain at least one geographic area that fulfills the economic 
distress criteria set forth in paragraph (a)(1) of this section and is 
identified in an approved CEDS; and
* * * * *
    8. Revise paragraphs (b)(1) introductory text, (b)(1)(ii), (b)(2), 
(b)(3)(i) through (iii), (b)(4) introductory text, (b)(5), and (c) of 
Sec.  301.4 as follows:

Sec.  301.4  Investment rates.

* * * * *
    (b) Maximum Investment Rate--
    (1) General rule. Except as otherwise provided by this paragraph 
(b) or paragraph (c) of this section, the maximum EDA Investment Rate 
for all Projects shall be determined in accordance with Table 1 in 
paragraph (b)(1)(ii) of this subsection. The maximum EDA Investment 
Rate shall not exceed the sum of 50 percent, plus up to an additional 
30 percent based on the relative needs of the Region in which the 
Project is located, as determined by EDA.
* * * * *
    (ii) Table 1. Table 1 of this paragraph sets forth the maximum 
allowable Investment Rate for Projects located in Regions subject to 
certain levels of economic distress. In cases where Table 1 produces 
divergent results (i.e., where Table 1 produces more than one maximum 
allowable Investment Rate based on the Region's levels of economic 
distress), the higher Investment Rate produced by Table 1 shall be the 
maximum allowable Investment Rate for the Project.

                                 Table 1
------------------------------------------------------------------------
                                                              Maximum
                                                             allowable
          Projects located in Regions in which:             investment
                                                               rates
                                                           (percentage)
------------------------------------------------------------------------
(A) The 24-month unemployment rate is at least 225% of                80
 the national average; or...............................
(B) The per capita income is not more than 50% of the                 80
 national average.......................................
(C) The 24-month unemployment rate is at least 200% of                70
 the national average; or...............................
(D) The per capita income is not more than 60% of the                 70
 national average.......................................
(E) The 24-month unemployment rate is at least 175% of                60
 the national average; or...............................
(F) The per capita income is not more than 65% of the                 60
 national average.......................................
(G) The 24-month unemployment rate is at least one                    50
 percentage point greater than the national average; or.
(H) The per capita income is not more than 80% of the                 50
 national average.......................................
------------------------------------------------------------------------

     (2) Projects subject to a Special Need. EDA shall determine the 
maximum allowable Investment Rate for Projects subject to a Special 
Need (as determined by EDA pursuant to Sec.  301.3(a)(1)(iii)) based on 
the actual or threatened overall economic situation of the Region in 
which the Project is located. However, unless the Project is eligible 
for a higher Investment Rate pursuant to paragraph (b)(5) of this 
section, the maximum allowable Investment Rate for any Project subject 
to a Special Need shall be 80 percent.
    (3) * * *
    (i) The minimum Investment Rate for Projects under part 303 of this 
chapter shall be 50 percent.
    (ii) Except as otherwise provided in paragraph (b)(3)(iii) of this 
section or in paragraph (b)(5) of this section, the maximum allowable 
Investment Rate for Projects under part 303 of this chapter shall be 
the maximum allowable Investment Rate set forth in Table 1 for the most 
economically distressed county or other equivalent political unit 
(e.g., parish) within the Region. The maximum allowable Investment Rate 
shall not exceed 80 percent.
    (iii) In compelling circumstances, the Assistant Secretary may 
waive the application of the first sentence in paragraph (b)(3)(ii) of 
this section.
    (4) Projects under part 306. Except as otherwise provided in 
paragraph (b)(5) of this section, the maximum allowable Investment Rate 
for Projects under part 306 of this chapter shall generally be 
determined based on the relative needs (as determined under paragraph 
(b)(1) of this section) of the Region which the

[[Page 76526]]

Project will serve. As specified in section 204(c)(3) of PWEDA, the 
Assistant Secretary has the discretion to establish a maximum 
Investment Rate of up to 100 percent where the Project:
* * * * *
    (5) Special Projects. Table 2 of this paragraph sets forth the 
maximum allowable Investment Rate for certain special Projects as 
follows:

                                 Table 2
------------------------------------------------------------------------
                                                              Maximum
                                                             allowable
                        Projects                            investment
                                                               rates
                                                           (percentage)
------------------------------------------------------------------------
Projects that involve broad Regional planning and                     80
 coordination with other entities outside the Eligible
 Applicant's political jurisdiction or area of
 authority, under special circumstances determined by
 EDA....................................................
Projects that effectively leverage other Federal Agency
 resources..............................................
Projects of Indian Tribes...............................             100
Projects for which EDA receives appropriations under                 100
 section 703 of PWEDA (42 U.S.C. 3233) and Projects to
 address and implement post-disaster economic recovery
 efforts in Presidentially Declared Disaster areas in a
 timely manner..........................................
Projects of States or political subdivisions of States               100
 that the Assistant Secretary determines have exhausted
 their effective taxing and borrowing capacity, or
 Projects of non-profit organizations that the Assistant
 Secretary determines have exhausted their effective
 borrowing capacity.....................................
Projects under parts 305 or 307 that receive performance             100
 awards pursuant to Sec.   308.2 of this chapter........
Projects located in a District that receive planning                 100
 performance awards pursuant to Sec.   308.3 of this
 chapter................................................
------------------------------------------------------------------------

     (c) Federal Funding Opportunity announcements may provide 
additional Investment Rate criteria and standards to ensure that the 
level of economic distress of a Region, rather than a preference for a 
geographic area or a specific type of economic distress, is the primary 
factor in allocating Investment Assistance.
    9. Revise the section heading, paragraph (a) introductory text and 
paragraph (b) of Sec.  301.6 to read as follows:

Sec.  301.6  Supplementary Investment Assistance.

    (a) Pursuant to a request made by an Eligible Applicant, EDA 
Investment Assistance may supplement a grant awarded in another 
``designated Federal grant program,'' if the Eligible Applicant 
qualifies for financial assistance under such program, but is unable to 
provide the required non-Federal share because of the Eligible 
Applicant's economic situation. For purposes of this section, a 
``designated Federal grant program'' means a Federal grant program 
that:
* * * * *
    (b) For a Project that meets the economic distress criteria 
provided in Sec.  301.3(a), the Investment Assistance, combined with 
funds from a designated Federal grant program, may be at the maximum 
allowable Investment Rate, even if the designated Federal grant program 
has a lower grant rate. If the designated Federal grant program has a 
grant rate higher than the maximum EDA Investment Rate, the EDA 
Investment and other Federal funds together may exceed the EDA 
Investment Rate, provided that the EDA share of total funding does not 
exceed the maximum allowable Investment Rate.
    10. Revise paragraph (a) of Sec.  301.7 as follows:

Sec.  301.7  Investment Assistance application.

    (a) The EDA Investment Assistance process begins with the 
submission of an application. The Application for Investment Assistance 
(Form ED-900 or any successor form) may be obtained electronically from 
http://www.grants.gov or from the appropriate regional office. In 
general, EDA accepts applications on a continuing basis and 
competitively evaluates all applications received in quarterly funding 
cycles throughout the fiscal year. Subject to the availability of 
funds, the timing in which EDA receives complete and competitive 
applications affects EDA's ability to participate in a given Project. 
EDA will evaluate all applications in accord with the criteria set 
forth in the applicable FFO and in Sec.  301.8 and will:
    (1) Return the application to the applicant for specified 
deficiencies and suggest resubmission after corrections are made; or
    (2) Deny the application for specifically stated reasons and notify 
the applicant.
* * * * *
    11. Revise Sec.  301.8 to read as follows:

Sec.  301.8  Application evaluation criteria.

    EDA will screen all applications for the feasibility of the budget 
presented and conformance with EDA's statutory and regulatory 
requirements. EDA will assess the economic development needs of the 
affected Region in which the proposed Project will be located (or will 
service), as well as the capability of the Eligible Applicant to 
implement the proposed Project. In addition to criteria set out in the 
applicable FFO, EDA will consider the degree to which an Investment in 
the proposed Project will satisfy one or more of the following 
criteria:
    (a) Ensures collaborative Regional innovation. The Investment will 
support the development and growth of innovation clusters based on 
existing Regional competitive strengths. Such initiatives must engage 
stakeholders; facilitate collaboration among urban, suburban, and rural 
(including Tribal) areas; provide stability for economic development 
through long-term intergovernmental and public/private collaboration; 
and support the growth of existing and emerging industries.
    (b) Leverages public-private partnerships. The Investment will use 
both public and private sector resources and leverage complementary 
investments by other government/public entities or non-profit 
organizations.
    (c) Advances national strategic priorities. The Investment will 
encourage job growth and business expansion in clean energy; green 
technologies; sustainable manufacturing; information technology 
infrastructure; communities severely impacted by automotive industry 
restructuring; natural disaster mitigation and resiliency; access to 
capital for small- and medium-sized and ethnically diverse enterprises; 
and innovations in science, health care, and alternative fuel 
technologies.
    (d) Enhances global competitiveness. The Investment will support 
high-growth businesses and innovation-based entrepreneurs to expand and 
compete in global markets.

[[Page 76527]]

    (e) Encourages environmentally sustainable development. The 
Investment will encompass best practices in ``environmentally 
sustainable development,'' broadly defined to include projects that 
enhance environmental quality and develop and implement green products, 
processes, and buildings as part of the green economy.
    (f) Supports economically distressed and underserved communities. 
The Investment will strengthen diverse communities that have suffered 
disproportionate economic and job losses or are rebuilding to become 
more competitive in the global economy.
    12. Revise Sec.  301.9 to read as follows:

Sec.  301.9  Application selection criteria.

    (a) EDA will review completed application materials for compliance 
with the requirements set forth in PWEDA, this chapter, the applicable 
FFO, and other applicable Federal statutes and regulations. From those 
applications that meet EDA's technical and legal requirements, EDA will 
select applications based on the:
    (1) Availability of funds;
    (2) Competitiveness of the applications in accord with the criteria 
set forth in Sec.  301.8; and
    (3) Funding priority considerations identified in the applicable 
FFO.
    (b) EDA will endeavor to notify applicants as soon as practicable 
regarding whether their applications are selected for funding.
    13. Amend Sec.  301.10 to revise paragraphs (b), (c) introductory 
text, and (c)(2), and add paragraph (d) to read as follows:

Sec.  301.10  Formal application requirements.

* * * * *
    (b) Identify the sources of funds, both eligible Federal and non-
EDA, and In-Kind Contributions that will constitute the required 
Matching Share for the Project (see the Matching Share requirements 
under Sec.  301.5); and
    (c) For Projects under parts 305 or 307 of this chapter, include a 
CEDS acceptable to EDA pursuant to part 303 of this chapter or 
otherwise incorporate by reference a current CEDS that EDA approves for 
the Project. The requirements stated in the preceding sentence shall 
not apply to:
* * * * *
    (2) A Project located in a Region designated as a Special Impact 
Area pursuant to part 310 of this chapter.
    (d) Projects that propose the construction of a business, 
technology, or other type of incubator or accelerator, must include a 
feasibility study demonstrating the need for the Project and an 
operational plan based on industry best practices demonstrating the 
Eligible Applicant's plan for ongoing successful operations. EDA will 
provide further guidance in the applicable FFO. EDA may require the 
Recipient to demonstrate that the feasibility study has been conducted 
by an impartial third party, as determined by EDA.
    14. Add Sec.  301.11 to subpart E of part 301 to read as follows:

Sec.  301.11  Infrastructure.

    (a) EDA will fund both construction and non-construction 
infrastructure necessary to meet a Region's strategic economic 
development goals and needs, which in turn results in job creation. 
This includes infrastructure to develop and upgrade basic economic 
development assets as described in Sec. Sec.  305.1 and 305.2 of this 
chapter, such as utility facilities, as well as infrastructure that 
supports innovation and entrepreneurship. The following are examples of 
innovation- and entrepreneurship-related infrastructure that support 
job creation:
    (1) Business Incubation. Business incubation includes both physical 
facilities and business support services to advance the successful 
development of start-up companies by providing entrepreneurs with an 
array of targeted resources and services.
    (2) Business Acceleration. Business acceleration includes both 
physical facilities and an array of business support services to help 
new and existing businesses develop new processes or products, get 
products and services to market more efficiently, expand market 
opportunities, or increase sales and exports.
    (3) Venture Development Organization. A venture development 
organization (``VDO'') works to ensure that Regional economies operate 
as smoothly and efficiently as possible in support of innovation-based 
entrepreneurship. A VDO may make strategic investments of time, talent, 
and other resources toward innovation, entrepreneurship, and technology 
to help nurture and grow promising companies and ideas, thereby 
promoting and taking advantage of the innovation assets of a Region and 
addressing the needs of the high-growth, innovation-oriented start-up 
companies in the Region.
    (4) Proof of Concept Center. A proof of concept center serves as a 
hub of collaborative and entrepreneurial activity designed to 
accelerate the commercialization of innovations into the marketplace. 
Such centers support innovation-based, high growth entrepreneurship 
through a range of services, including technology and market 
evaluation, business planning and mentorship, network development, and 
early stage access to capital.
    (5) Technology Transfer. Technology transfer is the process of 
transferring scientific findings from one organization to another for 
the purpose of further development and commercialization. The process 
typically includes: Identifying new technologies; protecting 
technologies through patents and copyrights; and forming development 
and commercialization strategies, such as marketing and licensing, for 
existing private sector companies or creating start-up companies based 
on the technology.
    (b) In general, successful Projects, including innovation- and 
entrepreneurship-related infrastructure, require the engagement of a 
broad range of Regional stakeholders and resources. Therefore through 
appropriate FFOs, EDA will seek to advance interagency coordination by 
funding Projects that demonstrate effective leveraging of other Federal 
Agency resources based on a Region's strategic economic development 
goals and needs. For all types of Projects, EDA assistance may not be 
used to provide direct venture capital to a for-profit entity because 
of the restrictions set out in section 217 of PWEDA (42 U.S.C. 3154c) 
and part 309 of this chapter. Nonetheless, EDA may consider an 
application more competitive if it includes measures to address the 
need to provide entrepreneurs with access to early stage capital 
outside of the proposed EDA Project budget. See Sec.  301.8(b).

PART 302--GENERAL TERMS AND CONDITIONS FOR INVESTMENT ASSISTANCE

    15. The authority citation for part 302 continues to read as 
follows:

    Authority:  19 U.S.C. 2341 et seq.; 42 U.S.C. 3150; 42 U.S.C. 
3152; 42 U.S.C. 3153; 42 U.S.C. 3192; 42 U.S.C. 3193; 42 U.S.C. 
3194; 42 U.S.C. 3211; 42 U.S.C. 3212; 42 U.S.C. 3216; 42 U.S.C. 
3218; 42 U.S.C. 3220; 42 U.S.C. 5141; Department of Commerce 
Delegation Order 10-4.

    16. Revise Sec.  302.1 to read as follows:

Sec.  302.1  Environment.

    EDA will undertake environmental reviews of Projects in accordance 
with the requirements of the National Environmental Policy Act of 1969, 
as amended (Pub. L. 91-190; 42 U.S.C. 4321 et seq., as implemented 
under 40 CFR chapter V) (``NEPA''), and all applicable Federal 
environmental statutes, regulations, and Executive Orders. These 
authorities include the

[[Page 76528]]

implementing regulations of NEPA requiring EDA to provide public notice 
of the availability of Project-specific environmental documents, such 
as environmental impact statements, environmental assessments, findings 
of no significant impact, and records of decision, to the affected or 
interested public, as specified in 40 CFR 1506.6(b). Depending on the 
Project's location, environmental information concerning specific 
Projects may be obtained from the individual serving as the 
Environmental Officer in the appropriate EDA regional office listed in 
the applicable FFO.
    17. Revise the introductory text of Sec.  302.3 to read as follows:

Sec.  302.3  Project servicing for loans, loan guaranties and 
Investment Assistance.

    EDA will provide Project servicing to borrowers who received EDA 
loans or EDA-guaranteed loans and to lenders who received EDA loan 
guaranties under an EDA-administered program. Project servicing 
includes loans made under PWEDA prior to the effective date of the 
Economic Development Administration Reform Act of 1998, the Trade Act, 
and the Community Emergency Drought Relief Act of 1977 (Pub. L. 95-31; 
42 U.S.C. 5184 note).
* * * * *
    18. Revise Sec.  302.6 to read as follows:

Sec.  302.6  Additional requirements; Federal policies and procedures.

    Recipients are subject to all Federal laws and to Federal, 
Department, and EDA policies, regulations, and procedures applicable to 
Federal financial assistance awards, including 15 CFR part 14, the 
Uniform Administrative Requirements for Grants and Cooperative 
Agreements with Institutions of Higher Education, Hospitals, Other Non-
Profit and Commercial Organizations, and 15 CFR part 24, the Uniform 
Administrative Requirements for Grants and Cooperative Agreements to 
State and Local Governments, as applicable.
    19. Revise Sec.  302.8 to read as follows:

Sec.  302.8  Pre-approval Investment Assistance costs.

    Project activities carried out before approval of Investment 
Assistance shall be carried out at the sole risk of the Eligible 
Applicant. Such activity is subject to the rejection of the 
application, the disallowance of costs, or other adverse consequences 
as a result of non-compliance with EDA or Federal requirements, 
including procurement requirements, civil rights requirements, Federal 
labor standards, or Federal environmental, historic preservation, and 
related requirements.
    20. Revise Sec.  302.9 to read as follows:

Sec.  302.9  Inter-governmental review of projects.

    (a) When an Eligible Applicant is not a State, Indian Tribe, or 
other general purpose governmental authority, the Eligible Applicant 
must afford the appropriate general purpose local governmental 
authority (the ``Authority'') in the Region a minimum of 15 days to 
review and comment on a proposed Project under EDA's Public Works and 
Economic Development program or a proposed construction Project or RLF 
Grant under EDA's Economic Adjustment Assistance program. Under these 
programs, the Eligible Applicant shall furnish the following with its 
application:
    (1) If no comments are received from the Authority, a statement of 
efforts made to obtain such comments; or
    (2) If comments are received from the Authority, a copy of the 
comments and a statement of any actions taken to address such comments.
    (b) As required by 15 CFR part 13 and Executive Order 12372, 
``Intergovernmental Review of Federal Programs,'' as amended, if a 
State has adopted a process under Executive Order 12372 to review and 
coordinate proposed Federal financial assistance and direct Federal 
development (commonly referred to as the ``single point of contact 
review process''), all Eligible Applicants also must give State and 
local governments a reasonable opportunity to review and comment on the 
proposed Project, including review and comment from area-wide planning 
organizations in metropolitan areas, as provided for in 15 CFR part 13.
    21. Revise Sec.  302.10 to read as follows:

Sec.  302.10  Attorneys' and consultants' fees, employment of 
expediters, and post-employment restriction.

    (a) Employment of expediters. Investment Assistance awarded under 
PWEDA shall not directly or indirectly reimburse any attorneys' or 
consultants' fees incurred in connection with obtaining Investment 
Assistance and contracts under PWEDA. Such Investment Assistance shall 
not be awarded to any Eligible Applicant, unless the owners, partners, 
or officers of the Eligible Applicant certify to EDA the names of any 
attorneys, agents, and other persons engaged by or on behalf of the 
Eligible Applicant for the purpose of expediting an application made to 
EDA in connection with obtaining Investment Assistance under PWEDA and 
the fees paid or to be paid to the person(s) for expediting the 
application.
    (b) Post-employment restriction. (1) In general, any Eligible 
Applicant that is a non-profit organization, District Organization, or 
for-profit entity, for the two-year period beginning on the date on 
which the Investment Assistance under PWEDA is awarded to the Eligible 
Applicant, must refrain from employing, offering any office or 
employment to, or retaining for professional services any person who, 
on the date on which the Investment Assistance is awarded or within the 
one-year period ending on that date:
    (i) Served as an officer, attorney, agent, or employee of the 
Department; and
    (ii) Occupied a position or engaged in activities that the 
Assistant Secretary determines involved discretion with respect to the 
award of Investment Assistance under PWEDA.
    (2) In addition to the types of Eligible Applicants noted in this 
paragraph (b), EDA may require another Eligible Applicant to execute an 
agreement to abide by the above-described post-employment restriction 
on a case-by-case basis; for example, when an institution of higher 
education implements activities under or related to the Investment 
Assistance through a separate non-profit organization or association.
    22. Revise Sec.  302.11 to read as follows:

Sec.  302.11  Economic development information clearinghouse.

    Pursuant to section 502 of PWEDA, EDA maintains an economic 
development information clearinghouse on its Internet Web site at 
http://www.eda.gov.
    23. Revise the heading of Sec.  302.15 to read as follows:

Sec.  302.15  Acceptance of certifications made by Eligible Applicants.

* * * * *
    24. Revise Sec.  302.16 to read as follows:

Sec.  302.16  Accountability.

    (a) General. Each Recipient must submit reports to EDA at intervals 
and in the manner that EDA shall require, except that EDA shall not 
require any report to be submitted more than ten years after the date 
of closeout of the Investment Assistance.
    (b) Data on Project effectiveness. Each report must contain a data-
specific evaluation of the effectiveness of the Investment Assistance 
provided in fulfilling the Project's purpose (including alleviation of 
economic distress and meeting Project goals) and in meeting the 
objectives of PWEDA. Data used by a Recipient in preparing reports 
shall be accurate and verifiable as determined by EDA, and from 
independent sources (whenever

[[Page 76529]]

possible). EDA will use this data and report to fulfill its performance 
measurement reporting requirements under the Government Performance and 
Results Act of 1993, as amended (Pub. L. 103-62) and to monitor 
internal, Investment, and Project performance through an internal 
performance measurement system.
    (c) Reporting Project service benefits. To enable EDA to determine 
the economic development effect of a Project that provides service 
benefits, EDA may require the Recipient to submit a Project service map 
and information from which to determine whether services are provided 
to all segments of the Region being assisted.
    (d) Consequences for failure to undertake good faith efforts. (1) 
The Recipient must undertake good faith efforts to fulfill the purpose 
of the Project as set out in the terms and conditions of the Investment 
Assistance and must report regularly on Project goals. In the event 
that EDA determines that the Recipient is failing to make good faith 
efforts to meet these goals, or otherwise is failing to meets its 
obligations under the Investment Assistance, EDA shall take necessary 
actions to protect EDA's interest in the Project, including the 
following:
    (i) Discontinue disbursement of funds pending correction;
    (ii) Suspend the Investment Assistance;
    (iii) Terminate the Investment Assistance;
    (iv) Require reimbursement of the EDA share of the Project; or
    (v) Institute formal Government-wide debarment and suspension 
proceedings against the Recipient.
    (2) Before making a determination under this subsection, EDA shall 
provide the Recipient with reasonable notice and opportunity to 
respond. A determination under this subsection is final and cannot be 
appealed.
    25. Revise paragraphs (a), (b)(2), and (c)(2) and (3) of Sec.  
302.17 to read as follows:

Sec.  302.17  Conflicts of interest.

    (a) General. It is EDA's and the Department's policy to maintain 
the highest standards of conduct to prevent conflicts of interest in 
connection with the award of Investment Assistance or its use for 
reimbursement or payment of costs (e.g., procurement of goods or 
services) by or to the Recipient. A conflict of interest generally 
exists when an Interested Party participates in a matter that has a 
direct and predictable effect on the Interested Party's personal or 
financial interests. A conflict also may exist where there is an 
appearance that an Interested Party's objectivity in performing his or 
her responsibilities under the Project is impaired. For example, an 
appearance of impairment of objectivity may result from an 
organizational conflict where, because of other activities or 
relationships with other persons or entities, an Interested Party is 
unable to render impartial assistance, services, or advice to the 
Recipient, a participant in the Project, or to the Federal government. 
Additionally, a conflict of interest may result from non-financial gain 
to an Interested Party, such as benefit to reputation or prestige in a 
professional field.
    (b) * * *
    (2) An Interested Party also shall not, directly or indirectly, 
solicit or accept any gift, gratuity, favor, entertainment, or other 
benefit having monetary value, for himself or herself or for another 
person or entity, from any person or organization which has obtained or 
seeks to obtain Investment Assistance from EDA.
* * * * *
    (c) * * *
    (2) A Recipient of an RLF Grant shall not lend RLF funds to an 
Interested Party; and
    (3) Former board members of a Recipient of an RLF Grant and members 
of his or her Immediate Family shall not receive a loan from such RLF 
for a period of two years from the date that the board member last 
served on the RLF's board of directors.
    26. Revise Sec.  302.18 to read as follows:

Sec.  302.18  Post-approval requirements.

    A Recipient must comply with all financial, performance, progress 
report, and other requirements set forth in the terms and conditions of 
the Investment Assistance, including any special award conditions and 
applicable Federal cost principles (collectively, ``Post-Approval 
Requirements''). A Recipient's failure to comply with Post-Approval 
Requirements may result in the disallowance of costs, termination of 
the Investment Assistance award, or other adverse consequences to the 
Recipient.
    27. Revise paragraph (b)(1) of Sec.  302.20 to read as follows:

Sec.  302.20  Civil rights.

* * * * *
    (b) Definitions.
    (1) For purposes of this section, an ``Other Party'' means an 
``other party subject to this part,'' as defined in 15 CFR 8.3(l), and 
includes an entity which (or which is intended to) creates and/or saves 
15 or more permanent jobs as a result of Investment Assistance; 
provided that such entity also is either specifically named in the 
application as benefiting from the Project, or is or will be located in 
an EDA building; port; facility; or industrial, commercial, or business 
park constructed or improved in whole or in part with Investment 
Assistance prior to EDA's final disbursement of award funds.
* * * * *

PART 303--PLANNING INVESTMENTS AND COMPREHENSIVE ECONOMIC 
DEVELOPMENT STRATEGIES

    28. The authority citation for part 303 continues to read as 
follows:

    Authority:  42 U.S.C. 3143; 42 U.S.C. 3162; 42 U.S.C. 3174; 42 
U.S.C. 3211; Department of Commerce Organization Order 10-4.

    29. Designate Sec. Sec.  303.1 through 303.5 as subpart A and add a 
heading for subpart A to read as follows:

Subpart A--General

    30. Revise the section heading and introductory text of Sec.  303.1 
to read as follows:

Sec.  303.1  Overview of EDA's Planning Program.

    The purpose of EDA Planning Investments is to provide support to 
Planning Organizations for the development, implementation, revision, 
or replacement of Comprehensive Economic Development Strategies, and 
for related State plans and short-term Planning Investments designed to 
create and retain new and better jobs, particularly for the unemployed 
and underemployed in the nation's most economically distressed Regions. 
EDA's Planning Investments support partnerships with District 
Organizations, Indian Tribes, community development corporations, non-
profit Regional planning organizations, and other Eligible Recipients. 
Planning activities supported by these Investments must be part of a 
continuous process involving the active participation of the private 
sector, public officials, non-profit organizations, educational 
institutions, and private citizens, and include:
* * * * *
    31. Revise paragraphs (a)(5) and (c) of Sec.  303.3 to read as 
follows:

Sec.  303.3  Application requirements and evaluation criteria.

    (a) * * *
    (5) Feasibility of the proposed scope of work to create and retain 
new and better jobs through implementation of the CEDS.
* * * * *
    (c) For Planning Investment awards to a State, the Assistant 
Secretary also

[[Page 76530]]

shall consider the extent to which the State will integrate and 
coordinate its CEDS with local and Economic Development District plans.
* * * * *
    32. Revise paragraphs (a) and (c) of Sec.  303.4 to read as 
follows:

Sec.  303.4  Award requirements.

    (a) Planning Investments shall be coordinated with and effectively 
leverage any other available Federal, State, or local planning 
assistance and private sector investments.
* * * * *
    (c) EDA will provide a Planning Investment for the period of time 
required to develop, revise or replace, and implement a CEDS, generally 
in 36-month renewable Investment project periods.
    33. Designate Sec. Sec.  303.6 and 303.7 as subpart B and add a 
heading for subpart B to read as follows:

Subpart B--Partnership Planning Assistance

    34. Revise Sec.  303.6 to read as follows:

Sec.  303.6  Partnership Planning and the EDA-funded CEDS process.

    (a) Partnership Planning overview. Partnership Planning Investments 
support a nationwide network of Planning Organizations to provide 
comprehensive economic development planning services to distressed 
Regions. EDA makes Partnership Planning Investments to enable Planning 
Organizations to manage and coordinate the development and 
implementation of CEDS to address the unique needs of their respective 
Regions.
    (b) CEDS process. If EDA awards Investment Assistance to a Planning 
Organization to develop, revise, or replace a CEDS, the Planning 
Organization must follow the procedures set forth in this section:
    (1) CEDS Strategy Committee. The Planning Organization must appoint 
a Strategy Committee. The Strategy Committee must represent the main 
economic interests of the Region, including the private sector, public 
officials, community leaders, private individuals, representatives of 
workforce development boards, institutions of higher education, 
minority and labor groups, and others who can contribute to and benefit 
from improved economic development in the relevant Region. In addition, 
the Strategy Committee must demonstrate the capacity to undertake a 
collaborative and effective planning process. The Strategy Committee 
representing Indian Tribes or States may vary.
    (2) Public notice and comment. The Planning Organization must 
develop and submit to EDA a CEDS that complies with the requirements of 
Sec.  303.7. Before submission of the CEDS to EDA, the Planning 
Organization must provide the public and appropriate governments and 
interest groups in the relevant Region with adequate notice of and 
opportunity to comment on the CEDS. The comment period shall be at 
least 30 days and the Planning Organization shall make the CEDS readily 
available through appropriate means of distribution, electronically and 
otherwise, throughout the comment period. The Planning Organization 
also shall make the CEDS available in hardcopy upon request. EDA may 
require the Planning Organization to provide any comments received and 
demonstrate how the comments were resolved.
    (3) Reports and updates.
    (i) After obtaining EDA approval of the CEDS, the Planning 
Organization must submit annually an updated CEDS performance report to 
EDA.
    (ii) The Planning Organization must submit a new or revised CEDS to 
EDA at least every five years, unless EDA or the Planning Organization 
determines that a new or revised CEDS is required earlier due to 
changed circumstances.
    (iii) Any updated CEDS performance report that results in a change 
of the requirements set forth in Sec.  303.7(b)(1)(iii) of the EDA-
accepted CEDS or any new or revised CEDS, must be available for review 
and comment by the public in accordance with paragraph (b)(2) of this 
section.
    (4) Inadequate CEDS. If EDA determines that implementation of the 
CEDS is inadequate, it will notify the Planning Organization in writing 
and the Planning Organization shall submit to EDA a new or revised 
CEDS.
    (5) Regional Commission notification. If any part of a Region is 
covered by one or more of the Regional Commissions as set forth in 
section 404 of PWEDA, the Planning Organization shall ensure that a 
copy of the CEDS is provided to the Regional Commission(s).
    35. Revise paragraph (b) of Sec.  303.7 to read as follows:

Sec.  303.7  Requirements for Comprehensive Economic Development 
Strategies.

* * * * *
    (b) Strategy requirements. (1) A CEDS must be the result of a 
comprehensive and continuous economic development planning process, 
developed with broad-based and diverse public and private sector 
participation. Consistent with section 302 of PWEDA, each CEDS must 
promote Regional economic resiliency and be unique and responsive to 
the relevant Region. Each CEDS must include:
    (i) A summary of economic development conditions of the Region;
    (ii) An in-depth analysis of economic and community strengths, 
weaknesses, opportunities, and threats (commonly known as a ``SWOT'' 
analysis);
    (iii) Strategies and an implementation plan to build upon the 
Region's strengths and opportunities and resolve the weaknesses and 
threats facing the Region, which should not be inconsistent with 
applicable State and local economic development or workforce 
development strategies; and
    (iv) Performance measures used to evaluate the Planning 
Organization's successful development and implementation of the CEDS.
    (2) EDA will publish and periodically update specific CEDS content 
guidelines.
* * * * *
    36. Designate Sec. Sec.  303.8 and 303.9 as subpart C and add a 
heading for subpart C to read as follows:

Subpart C--State and Short-Term Planning Assistance

    37. Revise paragraphs (a) introductory text and (b) of Sec.  303.9 
to read as follows:

Sec.  303.9  Requirements for short-term Planning Investments.

    (a) In addition to providing support for CEDS and State plans, EDA 
also may provide Investment Assistance to support short-term planning 
activities. EDA may provide such Investment Assistance to:
* * * * *
    (b) Eligible activities may include updating a portion of a CEDS, 
economic analysis, development of economic development policies and 
procedures, and development of economic development goals.
* * * * *

PART 304--ECONOMIC DEVELOPMENT DISTRICTS

    38. The authority citation for part 304 continues to read as 
follows:

    Authority:  42 U.S.C. 3122; 42 U.S.C. 3171; 42 U.S.C. 3172; 42 
U.S.C. 3196; Department of Commerce Organization Order 10-4.

    39. Revise paragraph (a) and the introductory text to paragraph (c) 
of Sec.  304.1 to read as follows:

Sec.  304.1  Designation of Economic Development Districts: Regional 
eligibility.

* * * * *
    (a) Contains at least one geographic area that is subject to the 
economic

[[Page 76531]]

distress criteria set forth in Sec.  301.3(a)(1) of this chapter and is 
identified in an approved CEDS;
* * * * *
    (c) Has an EDA-approved CEDS that:
* * * * *
    40. Revise paragraphs (c)(1), (c)(2), and (c)(4)(i) of Sec.  304.2 
to read as follows:

Sec.  304.2  District Organizations: Formation, organizational 
requirements and operations.

* * * * *
    (c) Organization and governance.
    (1) Each District Organization must meet the requirements of this 
paragraph (c) concerning membership composition, the maintenance of 
adequate staff support to perform its economic development functions, 
and its authorities and responsibilities for carrying out economic 
development functions. The District Organization's board of directors 
(or other governing body) also must meet these requirements.
    (2) The District Organization must demonstrate that its governing 
body is broadly representative of the principal economic interests of 
the Region, including the private sector, public officials, community 
leaders, representatives of workforce development boards, institutions 
of higher education, minority and labor groups, and private 
individuals. In addition, the governing body must demonstrate the 
capacity to implement the EDA-approved CEDS.
* * * * *
    (4) * * *
    (i) The District Organization must hold meetings open to the public 
at least twice a year and also shall publish the date and agenda of 
such meetings sufficiently in advance to allow the public a reasonable 
time to prepare in order to participate effectively.
* * * * *
    41. Revise paragraph (b) introductory text of Sec.  304.3 to read 
as follows:

Sec.  304.3  District modification and termination.

* * * * *
    (b) Termination. EDA may, upon 60 days prior written notice to the 
District Organization, member counties, and other areas determined by 
EDA and each affected State, terminate a Region's designation as an 
Economic Development District when:
* * * * *
    42. Revise paragraphs (a) introductory text, (a)(3), and (b) of 
Sec.  304.4 to read as follows:

Sec.  304.4  Performance evaluations.

    (a) EDA shall evaluate the management standards, financial 
accountability and program performance of each District Organization 
within three years after the initial Investment award and at least once 
every three years thereafter, so long as the District Organization 
continues to receive Investment Assistance. EDA's evaluation shall 
assess:
* * * * *
    (3) The implementation of the CEDS, including the District 
Organization's performance and contribution towards the retention and 
creation of employment, as set forth in Sec.  303.7 of this chapter.
    (b) For peer review, EDA shall ensure the participation of at least 
one other District Organization in the performance evaluation on a 
cost-reimbursement basis.

PART 305--PUBLIC WORKS AND ECONOMIC DEVELOPMENT INVESTMENTS

    43. The authority citation for part 305 continues to read as 
follows:

    Authority:  42 U.S.C. 3211; 42 U.S.C. 3141; Department of 
Commerce Organization Order 10-4.

    44. Revise Sec.  305.1 to read as follows:

Sec.  305.1  Purpose and scope.

    Public Works and Economic Development Investments (``Public Works 
Investments'') intend to help the nation's most distressed communities 
revitalize, expand, and upgrade their physical infrastructure to 
attract new industry, encourage business expansion, diversify local 
economies, and generate or retain long-term private sector jobs and 
investments. The primary goal of these Investments is to create new or 
retain existing, long-term private sector job opportunities in 
communities experiencing significant economic distress as evidenced by 
chronic high unemployment, underemployment, low per capita income, 
outmigration, or a Special Need. These Investments also intend to 
assist communities in attracting private capital investment and new and 
better job opportunities and to promote the successful long-term 
economic recovery of a Region.
    45. Revise paragraph (c) of Sec.  305.2 to read as follows:

Sec.  305.2  Award requirements.

* * * * *
    (c) Not more than 15 percent of the annual appropriations made 
available to EDA to fund Public Works Investments may be made in any 
one State.
    46. Revise paragraphs (a) introductory text, (a)(1), and (b) of 
Sec.  305.6 to read as follows:

Sec.  305.6  Allowable methods of procurement for construction 
services.

    (a) Recipients shall seek EDA's prior written approval to use 
alternate construction procurement methods to the traditional design/
bid/build procedures (including lump sum or unit price-type 
construction contracts). These alternate methods may include design/
build, construction management at risk, and force account. If an 
alternate method is used, the Recipient shall submit to EDA for 
approval a construction services procurement plan and the Recipient 
must use a design professional to oversee the process. The Recipient 
shall submit the plan to EDA prior to advertisement for bids and shall 
include the following, as applicable:
    (1) Justification for the proposed method for procurement of 
construction services, including a brief analysis of the 
appropriateness and benefits of using the method to successfully 
execute the Project and the Recipient's experience in using the method;
* * * * *
    (b) For all procurement methods, the Recipient must comply with the 
procedures and standards set forth in 15 CFR parts 14 or 24, as 
applicable.
    47. Revise paragraphs (a) and (c) of Sec.  305.8 to read as 
follows:

Sec.  305.8  Recipient-furnished equipment and materials.

* * * * *
    (a) EDA must approve any use of Recipient-furnished equipment and 
materials. EDA may require that major equipment items be subject to a 
lien in favor of EDA and also may require a statement from the 
Recipient regarding expected useful life and salvage value of such 
equipment;
* * * * *
    (c) Acquisition of Recipient-furnished equipment or materials under 
this section also is subject to the requirements of 15 CFR parts 14 or 
24, as applicable.
    48. Revise Sec.  305.10 to read as follows:

Sec.  305.10  Bid underrun and overrun.

    (a) Underrun. If at the construction contract bid opening, the 
lowest responsive bid is less than the total Project cost, the 
Recipient shall notify EDA immediately to determine relevant 
procedures.
    (b) Overrun.
    (1) In the case of an overrun at the construction contract bid 
opening, the Recipient may:
    (i) If provided for in the bid documents, take deductive 
alternatives

[[Page 76532]]

to eliminate certain Project elements in case of insufficient funds in 
the exact order shown on the invitation for bid until at least one of 
the responsive bids, less deductive alternative(s), results in a price 
within the budget for that item of work;
    (ii) Reject all bids and re-advertise if there is a rational basis 
to expect that re-advertising will result in a lower bid; or
    (iii) Augment the Matching Share by an amount sufficient to cover 
the excess cost. The Recipient must furnish a letter to EDA identifying 
the source of the additional funds and confirming that the Matching 
Share meets the requirements of Sec.  301.5 of this chapter.
    (2) If the Recipient demonstrates to EDA's satisfaction that the 
options listed in paragraph (b)(1) of this section are not feasible and 
the Project cannot be completed otherwise, the Recipient may submit a 
written request to EDA for additional funding in accordance with 
applicable EDA guidance. The award of additional Investment Assistance 
is at EDA's sole discretion and will be considered in accord with EDA's 
competitive process requirements. EDA's consideration of a request for 
additional Investment Assistance does not indicate approval.

PART 306--TRAINING, RESEARCH AND TECHNICAL ASSISTANCE INVESTMENTS

    49. The authority citation for part 306 continues to read as 
follows:

    Authority:  42 U.S.C. 3147; 42 U.S.C. 3196; 42 U.S.C. 3211; 
Department of Commerce Organization Order 10-4.

    50. Revise paragraph (a) introductory text of Sec.  306.1 to read 
as follows:

Sec.  306.1  Purpose and scope.

    (a) Local and National Technical Assistance Investments may be 
awarded to:
* * * * *
    51. Revise paragraph (a) of Sec.  306.3 to read as follows:

Sec.  306.3  Application requirements.

    (a) EDA will provide Investment Assistance under this subpart for 
the period of time required to complete the Project's scope of work, 
generally not to exceed 12 to 18 months.
* * * * *
    52. Revise Sec.  306.4 to read as follows:

Sec.  306.4  Purpose and scope.

    The University Center Economic Development Program is intended to 
help improve the economies of distressed Regions. Institutions of 
higher education have many assets, such as faculty, staff, libraries, 
laboratories, and computer systems that can address local economic 
problems and opportunities. With Investment Assistance, institutions of 
higher education establish and operate research centers (``University 
Centers'') that provide technical assistance to public and private 
sector organizations with the goal of enhancing local economic 
development.
    53. Revise paragraph (d) of Sec.  306.6 to read as follows:

Sec.  306.6  Application requirements.

* * * * *
    (d) At least 80 percent of EDA funding must be allocated to direct 
costs of program delivery.
    54. Revise paragraphs (a)(1) and (c) of Sec.  306.7 to read as 
follows:

Sec.  306.7  Performance evaluations of University Centers.

    (a) * * *
    (1) Evaluate each University Center within three years after the 
initial Investment award and at least once every three years 
thereafter, so long as such University Center continues to receive 
Investment Assistance; and
* * * * *
    (c) For peer review, EDA shall ensure the participation of at least 
one other University Center in the performance evaluation on a cost-
reimbursement basis.

PART 307--ECONOMIC ADJUSTMENT ASSISTANCE INVESTMENTS

    55. The authority citation of part 307 continues to read as 
follows:

    Authority:  42 U.S.C. 3211; 42 U.S.C. 3149; 42 U.S.C. 3161; 42 
U.S.C. 3162; 42 U.S.C. 3233; Department of Commerce Organization 
Order 10-4.

    56. Revise the introductory text and paragraph (b) of Sec.  307.1 
to read as follows:

Sec.  307.1  Purpose.

    The purpose of Economic Adjustment Assistance Investments is to 
address the needs of communities experiencing adverse economic changes 
that may occur suddenly or over time, including those caused by:
* * * * *
    (b) Federally Declared Disasters;
* * * * *
    57. Revise paragraph (b)(2) of Sec.  307.3 as follows:

Sec.  307.3  Use of Economic Adjustment Assistance Investments.

* * * * *
    (b) * * *
    (2) Provision of business or infrastructure financing through the 
capitalization of Recipient-administered Revolving Loan Funds 
(``RLFs''), which may include loans and interest rate buy-downs to 
facilitate business lending activities;
* * * * *
    58. Amend Sec.  307.4 to:
    a. Revise paragraphs (a), (b), (c)(2), and (d); and
    b. Add paragraph (c)(3) to read as follows:

Sec.  307.4  Award requirements.

    (a) General. EDA will select Economic Adjustment Assistance 
Projects in accordance with part 301 of this chapter and the additional 
criteria provided in paragraphs (b), (c), and (d) of this section, as 
applicable. Funding priority considerations for Economic Adjustment 
Assistance, including RLF Grants, may be set forth in an FFO.
    (b) Strategy Grants. EDA will review Strategy Grant applications to 
ensure that the proposed activities conform to the CEDS requirements 
set forth in Sec.  303.7 of this chapter. Strategy Grants shall comply 
with the applicable provisions of part 303 of this chapter.
    (c) * * *
    (2) Implementation Grants involving construction shall comply with 
the provisions of subpart B of part 305 of this chapter.
    (3) Implementation Grants that do not involve construction shall 
comply with the applicable provisions of subpart A of part 306 of this 
chapter.
    (d) See Sec.  307.7 for RLF award requirements.

Sec.  307.6  [Removed]

    59. Remove Sec.  307.6.
    60. Revise the heading of subpart B to read as follows:

Subpart B--Revolving Loan Fund Program

    61. Redesignate Sec.  307.7 as Sec.  307.6 and revise newly 
redesignated Sec.  307.6 to read as follows:

Sec.  307.6  Revolving Loan Funds established for business lending.

    Economic Adjustment Assistance Grants to capitalize or recapitalize 
RLFs most commonly fund business lending, but also may fund public 
infrastructure or other authorized lending activities. The requirements 
in this subpart B apply to RLFs established for business lending 
activities. Special award conditions may contain appropriate 
modifications of these requirements to accommodate non-business RLF 
awards.
    62. Add Sec.  307.7 to read as follows:

[[Page 76533]]

Sec.  307.7  Revolving Loan Fund award requirements.

    (a) For Eligible Applicants seeking to capitalize or recapitalize 
an RLF, EDA will review applications for the following, as applicable:
    (1) Need for a new or expanded public financing tool to:
    (i) Enhance other business assistance programs and services 
targeting economic sectors and locations described in the CEDS; or
    (ii) Provide appropriate support for post-disaster economic 
recovery efforts in Presidentially Declared Disaster areas;
    (2) Types of financing activities anticipated; and
    (3) Capacity of the RLF organization to manage lending activities, 
create networks between the business community and other financial 
providers, and implement the CEDS.
    (b) RLF Grants shall comply with the requirements set forth in this 
part and in the following publications:
    (1) EDA's RLF Standard Terms and Conditions; and
    (2) The Compliance Supplement to OMB Circular A-133. The Compliance 
Supplement is available via the Internet at http://www.omb.gov.
    63. Revise paragraphs (a)(2), (b)(2)(ii), (b)(3), (c)(1), and 
(c)(2) of Sec.  307.9 to read as follows:

Sec.  307.9  Revolving Loan Fund Plan.

* * * * *
    (a) * * *
    (2) Part II of the Plan titled ``Operational Procedures'' must 
serve as the RLF Recipient's internal operating manual and set out 
administrative procedures for operating the RLF consistent with 
``Prudent Lending Practices,'' as defined in Sec.  307.8, the RLF 
Recipient's environmental review and compliance procedures as set out 
in Sec.  307.10, and EDA's conflicts of interest rules set out in Sec.  
302.17 of this chapter.
    (b) * * *
    (2) * * *
    (ii) Financing policies and portfolio standards that are consistent 
with EDA's policies and requirements; and
    (3) The Plan must demonstrate an adequate understanding of 
commercial loan portfolio management procedures, including loan 
processing, underwriting, closing, disbursements, collections, 
monitoring, and foreclosures. It also shall provide sufficient 
administrative procedures to prevent conflicts of interest and to 
ensure accountability, safeguarding of assets, and compliance with 
Federal and local laws.
    (c) * * *
    (1) An RLF Recipient must update its Plan as necessary in 
accordance with changing economic conditions in the Region; however, at 
a minimum, an RLF Recipient must submit an updated Plan to EDA every 
five years.
    (2) An RLF Recipient must notify EDA of any change(s) to its Plan. 
Any material modification, such as a merger, consolidation, or change 
in the EDA-approved lending area under Sec.  307.18, a change in 
critical management staff, or a change to the strategic purpose of the 
RLF, must be submitted to EDA for approval prior to any revision of the 
Plan. If EDA approves the modification, the RLF Recipient must submit 
an updated Plan to EDA in electronic format, unless EDA approves a 
paper submission.
    64. Revise paragraphs (a) and (b) of Sec.  307.10 to read as 
follows:

Sec.  307.10  Pre-loan requirements.

    (a) RLF Recipients must adopt procedures to review the impacts of 
prospective loan proposals on the physical environment. The Plan must 
provide for compliance with applicable environmental laws and other 
regulations, including parts 302 and 314 of this chapter. The RLF 
Recipient also must adopt procedures to comply, and ensure that 
potential borrowers comply, with applicable environmental laws and 
regulations.
    (b) RLF Recipients must ensure that prospective borrowers, 
consultants, or contractors are aware of and comply with the Federal 
statutory and regulatory requirements that apply to activities carried 
out with RLF loans. Accordingly, RLF loan agreements shall include 
applicable Federal requirements to ensure compliance and RLF Recipients 
must adopt procedures to diligently correct instances of non-
compliance, including loan call stipulations.
* * * * *
    65. Revise paragraphs (b), (d), (e), and (f)(2) of Sec.  307.11 to 
read as follows:

Sec.  307.11  Disbursement of funds to Revolving Loan Funds.

* * * * *
    (b) Timing of request for disbursements. An RLF Recipient shall 
request disbursements of Grant funds only to close a loan or disburse 
RLF funds to a borrower. The RLF Recipient must disburse the RLF funds 
to a borrower within 30 days of receipt of the Grant funds. Any Grant 
funds not disbursed within the 30 day period shall be refunded to EDA 
pursuant to paragraph (e) of this section.
* * * * *
    (d) Interest-bearing account. All grant funds disbursed by EDA to 
the RLF Recipient for loan obligations incurred but not yet disbursed 
to an eligible RLF borrower must be deposited and held in an interest-
bearing account by the Recipient until an RLF loan is made to a 
borrower.
    (e) Delays. If the RLF Recipient receives Grant funds and the RLF 
loan disbursement is subsequently delayed beyond 30 days, the RLF 
Recipient must notify the applicable grants officer and return such 
non-disbursed funds to EDA. Grant funds returned to EDA shall be 
available to the RLF Recipient for future draw-downs. When returning 
prematurely drawn Grant funds, the RLF Recipient must clearly identify 
on the face of the check or in the written notification to the 
applicable grants officer ``EDA,'' the Grant award number, the words 
``Premature Draw,'' and a brief description of the reason for returning 
the Grant funds.
    (f) * * *
    (2) When an RLF has a combination of In-Kind Contributions and cash 
Local Share, the cash Local Share and the Grant funds will be disbursed 
proportionately as needed for lending activities, provided that the 
last 20 percent of the Grant funds may not be disbursed until all cash 
Local Share has been expended. The full amount of the cash Local Share 
shall remain for use in the RLF.
    66. Revise paragraphs (a)(1), (a)(2), and (b) introductory text of 
Sec.  307.12 to read as follows:

Sec.  307.12  Revolving Loan Fund Income.

    (a) * * *
    (1) Such RLF Income and the administrative costs are incurred in 
the same six-month Reporting Period;
    (2) RLF Income that is not used for administrative costs during the 
six-month Reporting Period is made available for lending activities;
* * * * *
    (b) Compliance guidance. When charging costs against RLF Income, 
RLF Recipients must comply with applicable Federal cost principles and 
audit requirements as found in:
* * * * *
    67. Revise paragraphs (a) introductory text, (b)(2), and (b)(3) of 
Sec.  307.13 to read as follows:

Sec.  307.13  Records and retention.

    (a) Closed Loan files and related documents. The RLF Recipient 
shall maintain Closed Loan files and all related documents, books of 
account, computer data files, and other records over the term of the 
Closed Loan and for a three-year period from the date of final 
disposition of such Closed Loan. The

[[Page 76534]]

date of final disposition of a Closed Loan is the date:
* * * * *
    (b) * * *
    (2) Retain records of administrative expenses incurred for 
activities and equipment relating to the operation of the RLF for three 
years from the actual submission date of the last semi-annual report 
that covers the Reporting Period in which such costs were claimed.
    (3) Make available for inspection retained records, including those 
retained for longer than the required period. The record retention 
periods described in this section are minimum periods and such 
prescription does not limit any other record retention requirement of 
law or agreement. In no event will EDA question claimed administrative 
costs that are more than three years old, unless fraud is at issue.
    68. Revise paragraph (c) of Sec.  307.14 to read as follows:

Sec.  307.14  Revolving Loan Fund semi-annual report and Income and 
Expense Statement.

* * * * *
    (c) RLF Income and Expense Statement. An RLF Recipient using either 
50 percent or more (or more than $100,000) of RLF Income for 
administrative costs in a six-month Reporting Period must submit to EDA 
a completed Income and Expense Statement (Form ED-209I or any successor 
form) for that Reporting Period in electronic format, unless EDA 
approves a paper submission. EDA may waive this requirement for an RLF 
Grant with a small RLF Capital base, as determined by EDA.
    69. Revise paragraphs (b)(1), (c)(1), (c)(2), and (d)(1) 
introductory text, and (d)(1)(iii) of Sec.  307.15 to read as follows:

Sec.  307.15  Prudent management of Revolving Loan Funds.

* * * * *
    (b) * * *
    (1) Within 60 days prior to the initial disbursement of EDA funds, 
a qualified independent accountant who preferably has audited the RLF 
Recipient in accordance with OMB Circular A-133 requirements, shall 
certify to EDA and the RLF Recipient that such system is adequate to 
identify, safeguard, and account for all RLF Capital, outstanding RLF 
loans, and other RLF operations.
* * * * *
    (c) * * *
    (1) General rule. An RLF Recipient may make loans to eligible 
borrowers at interest rates and under conditions determined by the RLF 
Recipient to be appropriate in achieving the goals of the RLF. The 
minimum interest rate an RLF Recipient may charge is four percentage 
points below the lesser of the current money center prime interest rate 
quoted in the Wall Street Journal, or the maximum interest rate allowed 
under State law. In no event shall the interest rate be less than the 
lower of four percent or 75 percent of the prime interest rate listed 
in the Wall Street Journal.
    (2) Exception. Should the prime interest rate listed in the Wall 
Street Journal exceed 14 percent, the minimum RLF interest rate is not 
required to be raised above 10 percent if doing so compromises the 
ability of the RLF Recipient to implement its financing strategy.
    (d) * * *
    (1) RLF loans must leverage private investment of at least two 
dollars for every one dollar of such RLF loans. This leveraging 
requirement applies to the RLF portfolio as a whole rather than to 
individual loans and is effective for the duration of the RLF's 
operation. To be classified as leveraged, private investment must be 
made within 12 months of approval of an RLF loan, as part of the same 
business development project, and may include:
* * * * *
    (iii) The non-guaranteed portions and 90 percent of the guaranteed 
portions of a Federal loan, including the U.S. Small Business 
Administration's 7(A) loans and 504 debenture loans and U.S. Department 
of Agriculture loans.
* * * * *
    70. Revise paragraphs (a)(1), (a)(2)(i), (c)(1), (c)(2)(i), (d)(1) 
introductory text, and (d)(1)(i) of Sec.  307.16 to read as follows:

Sec.  307.16  Effective utilization of Revolving Loan Funds.

    (a) * * *
    (1) RLF loan activity must be sufficient to draw down Grant funds 
in accordance with the schedule prescribed in the award conditions for 
loan closings and disbursements to eligible RLF borrowers. The schedule 
usually requires that the RLF Recipient lend the entire amount of the 
initial RLF Capital base within three years of the Grant award.
    (2) * * *
    (i) Closed Loans approved prior to the schedule deadline will 
commence and complete disbursements within 45 days of the deadline;
* * * * *
    (c) * * *
    (1) During the Revolving Phase, RLF Recipients must manage their 
repayment and lending schedules to provide that at all times at least 
75 percent of the RLF Capital is loaned or committed, except that EDA 
may require an RLF Recipient with an RLF Capital base in excess of $4 
million to adopt a Plan that maintains a proportionately higher 
percentage of its funds loaned.
    (2) * * *
    (i) Sequestration of excess funds. If the RLF Recipient fails to 
satisfy the capital utilization standard for two consecutive Reporting 
Periods, EDA may require the RLF Recipient to deposit excess funds in 
an interest-bearing account. The portion of interest earned on the 
account holding excess funds attributable to the Federal Share (as 
defined in Sec.  314.5 of this chapter) of the RLF Grant shall be 
remitted to the U.S. Treasury. The RLF Recipient must obtain EDA's 
written authorization to withdraw any sequestered funds.
* * * * *
    (d) * * *
    (1) EDA shall monitor the RLF Recipient's loan default rate to 
ensure proper protection of the Federal Share of the RLF property, and 
request information from the RLF Recipient as necessary to determine 
whether it is collecting loan repayments and complying with the 
financial obligations under the RLF Grant. Such information may 
include:
    (i) A written analysis of the RLF Recipient's portfolio, which 
shall consider the Recipient's RLF Plan, loan and collateral policies, 
loan servicing and collection policies and procedures, the rate of 
growth of the RLF Capital base, and
* * * * *
    71. Revise paragraphs (b)(6)(ii) and (c) of Sec.  307.17 to read as 
follows:

Sec.  307.17  Uses of capital.

* * * * *
    (b) * * *
    (6) * * *
    (ii) RLF Capital will finance the purchase of the rights of a prior 
lien holder during a foreclosure action which is necessary to preclude 
a significant loss on an RLF loan. RLF Capital may be used for this 
purpose only if there is a high probability of receiving compensation 
from the sale of assets sufficient to cover an RLF's costs plus a 
reasonable portion of the outstanding RLF loan within a reasonable 
period of time, as determined by EDA, following the date of 
refinancing.
    (c) Compliance and Loan Quality Review. To ensure that the RLF 
Recipient makes eligible RLF loans consistent with its RLF Plan or such 
other purposes approved by EDA, EDA

[[Page 76535]]

may require an independent third party to conduct a compliance and loan 
quality review for the RLF Grant every three years. The RLF Recipient 
may undertake this review as an administrative cost associated with the 
RLF's operations provided the requirements set forth in Sec.  307.12 
are satisfied.
* * * * *
    72. Amend Sec.  307.18 to revise the section heading, the heading 
of paragraph (b), and paragraphs (a)(1), (b)(1) introductory text, 
(b)(1)(ii), (b)(1)(iii), and (b)(2) introductory text to read as 
follows:

Sec.  307.18  Addition of lending areas; consolidation and merger of 
RLFs.

    (a)(1) Addition of lending areas. An RLF Recipient shall make loans 
only within its EDA-approved lending area, as set forth and defined in 
the RLF Grant and the Plan. An RLF Recipient may add a lending area (an 
``Additional Lending Area'') to its existing lending area to create a 
new merged lending area (the ``New Lending Area'') only with EDA's 
prior written approval and subject to the following provisions and 
conditions:
    (i) The Additional Lending Area must meet the economic distress 
criteria for Economic Adjustment Assistance Investments under this part 
and in accordance with Sec.  301.3(a) of this chapter;
    (ii) Prior to EDA's disbursement of additional funds to the RLF 
Recipient (for example, through a recapitalization), EDA shall 
determine a new Investment Rate for the New Lending Area based on the 
criteria set forth in Sec.  301.4 of this chapter;
    (iii) The RLF Recipient must demonstrate that the Additional 
Lending Area is consistent with its CEDS, or modify its CEDS for any 
such Additional Lending Area, in accordance with Sec.  307.9(b)(1);
    (iv) The RLF Recipient shall modify its Plan to incorporate the 
Additional Lending Area and revise its lending strategy, as necessary;
    (v) The RLF Recipient shall execute an amended financial assistance 
award, as necessary; and
    (vi) The RLF Recipient fulfills any other conditions reasonably 
requested by EDA.
* * * * *
    (b) Consolidation and merger of RLFs--
    (1) Single RLF Recipient. An RLF Recipient with more than one EDA-
funded RLF Grant may consolidate two or more EDA-funded RLFs into one 
surviving RLF with EDA's prior written approval and provided:
* * * * *
    (ii) It demonstrates a rational basis for undertaking the 
consolidation (for example, the lending area(s) and borrower criteria 
identified in different RLF Plans are compatible, or will be 
compatible, for all RLFs to be consolidated);
    (iii) It amends and consolidates its Plan to account for the 
consolidation of RLFs, including items such as the New Lending Area 
(including any Additional Lending Area(s)), its lending strategy, and 
borrower criteria;
* * * * *
    (2) Multiple RLF Recipients. Two or more RLF Recipients may merge 
their EDA-funded RLFs into one surviving RLF with EDA's prior written 
approval and provided:
* * * * *
    73. Amend Sec.  307.19 to remove paragraph (b), redesignate 
paragraphs (c) and (d) as paragraphs (b) and (c), and revise newly 
designated paragraph (c) to read as follows:

Sec.  307.19  RLF loan portfolio Sales and Securitizations.

* * * * *
    (c) Except as provided in paragraph (b), no provision of this 
section supersedes or otherwise affects the application of the 
``securities laws'' (as such term is defined in section 3(a)(47) of the 
Exchange Act) or the rules, regulations or orders issued by the 
Commission or a self-regulatory organization under the Commission.
    74. Revise paragraphs (a) introductory text, (a)(1), (a)(2), and 
(c)(3) of Sec.  307.20 to read as follows:

Sec.  307.20  Partial liquidation; liquidation upon termination.

    (a) Partial liquidation or disallowance of a portion of an RLF 
Grant. If the RLF Recipient engages in certain problematic practices, 
EDA may disallow a corresponding proportion of the Grant or direct the 
RLF Recipient to transfer loans to an RLF Third Party for liquidation. 
Problematic practices for which EDA may disallow a portion of an RLF 
Grant and recover the pro-rata Federal Share (as defined in Sec.  314.5 
of this chapter) include the RLF Recipient:
    (1) Having RLF loans that are more than 120 days delinquent;
    (2) Having excess cash sequestered for 12 months or longer and EDA 
has not approved an extension request;
* * * * *
    (c) * * *
    (3) EDA may enter into an agreement with the RLF Third Party to 
liquidate the assets of one or more RLFs or RLF Recipients;
* * * * *
    75. Revise paragraphs (a)(1) introductory text and (a)(1)(viii) of 
Sec.  307.21 to read as follows:

Sec.  307.21  Termination of Revolving Loan Funds.

    (a)(1) EDA may suspend or terminate an RLF Grant for cause, 
including the RLF Recipient's failure to:
* * * * *
    (viii) Comply with the audit requirements set forth in OMB Circular 
A-133 and the related Compliance Supplement, including reference to the 
correctly valued EDA RLF Federal expenditures in the Schedule of 
Expenditures of Federal Awards (``SEFA''), timely submission of audit 
reports to the Federal Audit Clearinghouse, and the correct designation 
of the RLF as a ``major program'' (as that term is defined in OMB 
Circular A-133);
* * * * *

PART 308--PERFORMANCE INCENTIVES

    76. The authority citation for part 308 continues to read as 
follows:

    Authority:  42 U.S.C. 3151; 42 U.S.C. 3154a; 42 U.S.C. 3154b; 
Department of Commerce Delegation Order 10-4.

    77. Revise paragraphs (a), (b) introductory text, (c), and (d) of 
Sec.  308.2 to read as follows:

Sec.  308.2  Performance awards.

    (a) A Recipient of Investment Assistance under parts 305 or 307 of 
this chapter may receive a performance award in connection with an 
Investment made on or after the date of enactment of section 215 of 
PWEDA in an amount not to exceed 10 percent of the amount of the 
Investment award.
    (b) To receive a performance award, a Recipient must demonstrate 
Project performance in one or more of the areas listed in this 
paragraph, weighted at the discretion of the Assistant Secretary:
* * * * *
    (c) A Recipient may receive a performance award no later than three 
years following the Project's closeout.
    (d) A performance award may fund up to 100 percent of the cost of 
an eligible Project or any other authorized activity under PWEDA. For 
the purpose of meeting the non-Federal share requirement of PWEDA or 
any other statute, the amount of a performance award shall be treated 
as non-Federal funds.
* * * * *

[[Page 76536]]

    78. Revise paragraphs (a) introductory text, (a)(2), (a)(3), and 
(b) of Sec.  308.3 to read as follows:

Sec.  308.3  Planning performance awards.

    (a) A Recipient of Investment Assistance awarded on or after the 
date of enactment of section 216 of PWEDA for a Project located in an 
EDA-funded Economic Development District may, at the discretion of the 
Assistant Secretary, receive a planning performance award in an amount 
not to exceed five percent of the amount of the applicable Investment 
award if EDA determines before closeout of the Project that:
* * * * *
    (2) The Project demonstrated exceptional fulfillment of one or more 
components of, and is otherwise in accordance with, the applicable 
CEDS, including any job creation or job retention requirements; and
    (3) The Recipient demonstrated exceptional collaboration with 
Federal, State, and local economic development entities throughout the 
development of the Project.
    (b) The Recipient shall use the planning performance award to 
increase, up to 100 percent, the Federal share of the cost of a Project 
under this chapter.
* * * * *

PART 310--SPECIAL IMPACT AREAS

    79. The authority citation for part 310 continues to read as 
follows:

    Authority:  42 U.S.C. 3154; Department of Commerce Organization 
Order 10-4.

    80. Revise the introductory text of Sec.  310.1 to read as follows:

Sec.  310.1  Special Impact Area.

    Upon the application of an Eligible Applicant, and with respect to 
that Eligible Applicant's Project only, the Assistant Secretary may 
designate the Region which the Project will serve as a Special Impact 
Area if the Eligible Applicant demonstrates that its proposed Project 
will:
* * * * *
    81. Revise paragraphs (a)(6), (b), and (c) introductory text of 
Sec.  310.2 to read as follows:

Sec.  310.2  Pressing need; alleviation of unemployment or 
underemployment.

    (a) * * *
    (6) Has been designated as a Federally Declared Disaster area; or
* * * * *
    (b) For purposes of this part, excessive unemployment exists if the 
24-month unemployment rate is at least 225 percent of the national 
average or the per capita income is not more than 50 percent of the 
national average. A Region demonstrates excessive underemployment if 
the employment of a substantial percentage of workers in the Region is 
less than full-time or at less skilled tasks than their training or 
abilities would otherwise permit. Eligible Applicants seeking a Special 
Impact Area designation under this criterion must present appropriate 
and compelling economic and demographic data.
    (c) Eligible Applicants may demonstrate the provision of useful 
employment opportunities by quantifying and evidencing the Project's 
prospective:
* * * * *
    82. Revise the heading of reserved part 311 to read as follows:

PART 311--AMERICA COMPETES [RESERVED]

PART 314--PROPERTY

    83. The authority citation for part 314 continues to read as 
follows:

    Authority: 42 U.S.C. 3211; Department of Commerce Organization 
Order 10-4.

    84. Amend part 314 so that Sec. Sec.  314.1 through 314.6 are no 
longer designated as subpart A. and remove the heading ``Subpart A--
General.''
    85. Revise the definition of Real Property in Sec.  314.1 to read 
as follows:

Sec.  314.1  Definitions.

* * * * *
    Real Property means any land, whether raw or improved, and includes 
structures, fixtures, appurtenances, and other permanent improvements, 
excluding moveable machinery and equipment. Real Property includes land 
that is improved by the construction of Project infrastructure such as 
roads, sewers, and water lines that are not situated on or under the 
land, where the infrastructure contributes to the value of such land as 
a specific purpose of the Project.
* * * * *
    86. Revise paragraphs (a), (b), and (c) of Sec.  314.3 to read as 
follows:

Sec.  314.3  Authorized Use of Property.

    (a) During the Estimated Useful Life of the Project, the Recipient 
or Owner must use any Property acquired or improved in whole or in part 
with Investment Assistance only for authorized Project purposes as set 
out in the terms and conditions of the Investment Assistance. Such 
Property must not be Disposed of or encumbered without EDA's prior 
written authorization.
    (b) Where EDA and the Recipient determine during the Estimated 
Useful Life of the Project that Property acquired or improved in whole 
or in part with Investment Assistance is no longer needed for the 
original purpose of the Investment Assistance, EDA, in its sole 
discretion, may approve the use of such Property in other Federal grant 
programs or in programs that have purposes consistent with those 
authorized by PWEDA and by this chapter.
    (c) Where EDA determines that the authorized purpose of the 
Investment Assistance is to develop Real Property to be leased or sold, 
such sale or lease is permitted provided it is for Adequate 
Consideration and the sale is consistent with the authorized purpose of 
the Investment Assistance and with all applicable Investment Assistance 
requirements, including nondiscrimination and environmental compliance.
* * * * *
    87. Revise paragraph (c) of Sec.  314.4 to read as follows:

Sec.  314.4  Unauthorized Use of Property.

* * * * *
    (c) Where the Disposition, encumbrance, or use of any Property 
violates paragraphs (a) or (b) of this section, EDA may assert its 
interest in the Property to recover the Federal Share for the Federal 
government and may take such actions as authorized by PWEDA and this 
chapter, including the actions provided in Sec. Sec.  302.3, 302.16, 
and 307.21 of this chapter. EDA may pursue its rights under paragraph 
(a) of this section and this paragraph (c) to recover the Federal 
Share, plus costs and interest. When the Federal government is fully 
compensated for the Federal Share, the Federal Interest is extinguished 
as provided in Sec.  314.2(b), and EDA will have no further interest in 
the ownership, use, or Disposition of the Property.
    88. Revise paragraph (b) of Sec.  314.5 to read as follows:

Sec.  314.5  Federal Share.

* * * * *
    (b) The Federal Share excludes that portion of the current fair 
market value of the Property attributable to acquisition or 
improvements before or after EDA's participation in the Project, which 
are not included in the total Project costs. For example, if the total 
Project costs are $100, consisting of $50 of Investment Assistance and 
$50 of Matching Share, the Federal Share is 50 percent. If the Property 
is disposed of when its current fair market is $250, the Federal Share 
is $125 (i.e., 50 percent of

[[Page 76537]]

$250). If $10 is spent to put the Property into salable condition, the 
Federal Share is $120 (i.e., 50 percent of ($250-$10)).
    89. Revise paragraph (b) of Sec.  314.6 to read as follows:

Sec.  314.6  Encumbrances.

* * * * *
    (b) Exceptions. Subject to EDA's approval, which will not be 
unreasonably withheld or unduly delayed, paragraph (a) of this section 
does not apply in the following circumstances:
    (1) Shared first lien position. EDA, at its discretion, may approve 
an encumbrance on Project Property where a lien holder and EDA enter 
into an inter-creditor agreement pursuant to which EDA and the other 
lien holder share a first lien position on terms satisfactory to EDA.
    (2) Utility encumbrances. Encumbrances arising solely from the 
requirements of a pre-existing water or sewer facility or other utility 
encumbrances, which by their terms extend to additional Property 
connected to such facilities.
    (3) Pre-existing encumbrances. Encumbrances already in place at the 
time EDA approves the Project, where EDA determines that the 
requirements of Sec.  314.7(b) of this chapter are met.
    (4) Encumbrances proposed proximate to Project approval. 
Encumbrances required to secure debt, including time and maturity-
limited debt, that finances the Project Property at the same proximate 
time that EDA approves the Project when all of the following are met:
    (i) EDA, in its sole discretion, determines that there is good 
cause and legal authority to waive paragraph (a) of this section;
    (ii) All proceeds secured by the encumbrance on the Property shall 
be available only to the Recipient and shall be used only for the 
Project for which the Investment Assistance applies, for related 
activities of which the Project is an essential part, or other 
activities that EDA determines are authorized under PWEDA;
    (iii) A grantor or lender will not provide funds without the 
security of a lien on the Property;
    (iv) The terms and conditions of the encumbrance are satisfactory 
to EDA; and
    (v) There is a reasonable expectation, as determined by EDA, that 
the Recipient will not default on its obligations. In determining 
whether an expectation is reasonable for purposes of this paragraph, 
EDA shall take into account whether:
    (A) A Recipient that is a non-profit organization is joined in the 
Project with a co-Recipient that is a public body and all co-Recipients 
are jointly and severally responsible;
    (B) The non-profit organization is financially strong and is an 
established organization with sufficient organizational life to 
demonstrate stability over time;
    (C) The approximate value of the Project Property so that the total 
amount of all debt plus the Federal share of cost as reflected on the 
EDA Investment award, and any amendments as applicable, does not exceed 
the value of the Project Property as improved; and
    (D) Such other factors as EDA deems appropriate.
    (5) Encumbrances proposed after Project approval. Encumbrances 
proposed to be incurred after Project approval where all of the 
following are met:
    (i) EDA, in its sole discretion, determines that there is good 
cause and legal authority to waive paragraph (a) of this section;
    (ii) All proceeds secured by the encumbrance on the Property shall 
be available only to the Recipient and shall be used only for the 
Project for which the Investment Assistance applies, for related 
activities of which the Project is an essential part, or other 
activities that EDA determines are authorized under PWEDA;
    (iii) A grantor or lender will not provide funds without the 
security of a lien on the Property;
    (iv) The terms and conditions of the encumbrance are satisfactory 
to EDA; and
    (v) There is a reasonable expectation, as determined by EDA, that 
the Recipient will not default on its obligations. In determining 
whether an expectation is reasonable for purposes of this paragraph, 
EDA shall take into account whether:
    (A) A Recipient that is a non-profit organization is joined in the 
Project with a co-Recipient that is a public body and all co-Recipients 
are jointly and severally responsible;
    (B) The non-profit organization is financially strong and is an 
established organization with sufficient organizational life to 
demonstrate stability over time;
    (C) The Recipient's equity in the Project Property based on the 
appraised value of the Project Property at the time the encumbrance is 
requested so that the total amount of all debt plus the Federal share 
of cost as reflected on the EDA Investment award, and any amendments as 
applicable, does not exceed the value of the Project Property as 
improved; and
    (D) Such other factors as EDA deems appropriate.
* * * * *
    90. Amend part 314 so that Sec. Sec.  314.7 and 314.8 are no longer 
designated as subpart B, and remove the heading ``Subpart B--Real 
Property.''
    91. Amend Sec.  314.7 to:
    a. Revise paragraph (a), the heading of (b), paragraphs (b)(1) 
introductory text, (c)(1) introductory text, (c)(2) introductory text, 
(c)(3), (c)(4) introductory text, and (c)(5); and
    b. Remove paragraph (c)(6) to read as follows:

Sec.  314.7  Title.

    (a) General title requirement. The Recipient must hold title to the 
Real Property required for a Project at the time the Investment 
Assistance is awarded or as provided by paragraph (c) of this section 
and must maintain title at all times during the Estimated Useful Life 
of the Project, except in those limited circumstances as provided in 
paragraph (c) of this section. The Recipient also must furnish 
evidence, satisfactory in form and substance to EDA, that title to Real 
Property required for a Project (other than property of the United 
States) is vested in the Recipient and that any easements, rights-of-
way, State or local government permits, long-term leases, or other 
items required for the Project have been or will be obtained by the 
Recipient within an acceptable time, as determined by EDA.
    (b) Disclosure of encumbrances.
    (1) The Recipient must disclose to EDA all encumbrances, including 
the following:
* * * * *
    (c) * * *
    (1) Real Property acquisition. Where the acquisition of Real 
Property required for a Project is contemplated as part of an 
Investment Assistance award, EDA may determine that an agreement for 
the Recipient to purchase the Real Property will be acceptable for 
purposes of paragraph (a) of this section if:
* * * * *
    (2) Leasehold interests. EDA may determine that a long-term 
leasehold interest for a period not less than the Estimated Useful Life 
of the Real Property required for a Project will be acceptable for 
purposes of paragraph (a) of this section if:
* * * * *
    (3) Railroad right-of-way construction. When a Project includes 
construction within a railroad's right-of-way or over a railroad 
crossing, EDA may find it acceptable for the work to be completed

[[Page 76538]]

by the railroad and for the railroad to continue to own, operate, and 
maintain that portion of the Project, if required by the railroad; and 
provided that, the construction is a minor but essential component of 
the Project.
    (4) Public highway construction. When the Project includes 
construction on a public highway the owner of which is not the 
Recipient, EDA may allow the Project to be constructed in whole or in 
part in the right-of-way of such public highway, provided that:
* * * * *
    (5) Construction of Recipient-owned facilities to serve Recipient 
or privately owned Real Property.
    (i) General. At EDA's discretion, when an authorized purpose of the 
Project is to construct Recipient-owned facilities to serve Recipient 
or privately owned Real Property, including industrial or commercial 
parks, for sale or lease to private parties, such ownership, sale, or 
lease, as applicable, is permitted so long as:
    (A) In cases where an authorized purpose of the Project is to sell 
Real Property, the Recipient or Owner, as applicable, provides evidence 
sufficient to EDA that it holds title to the Real Property required for 
such Project prior to the disbursement of any portion of the Investment 
Assistance and will retain title until the sale of the Property;
    (B) In cases where an authorized purpose of the Project is to lease 
Real Property, the Recipient or Owner, as applicable, provides evidence 
sufficient to EDA that it holds title to the Real Property required for 
such Project prior to the EDA disbursement of any portion of the 
Investment Assistance and will retain title for the entire Estimated 
Useful Life of the Project;
    (C) The Recipient provides adequate assurances that the Project and 
the development of land and improvements on the Recipient or privately 
owned Real Property to be served by or that provides the economic 
justification for the Project will be completed according to the terms 
of the Investment Assistance;
    (D) The sale or lease of any portion of the Project or of Real 
Property served by the Project or that provides the economic 
justification for the Project during the Project's Estimated Useful 
Life must be for Adequate Consideration and the terms and conditions of 
the Investment Assistance and the purpose(s) of the Project must 
continue to be fulfilled after such sale or lease; and
    (E) The Recipient agrees that EDA may deem the termination, 
cessation, abandonment, or other failure on behalf of the Recipient, 
Owner, purchaser, or lessee (as the case may be) to complete the 
Project or the development of land and improvements on Real Property 
served by or that provides the economic justification for the Project 
by the five-year anniversary of the award date of the Investment 
Assistance constitutes a failure on behalf of the Recipient to use the 
Real Property for the economic purposes justifying the Project.
    (ii) Additional conditions on sale or lease. EDA also may condition 
the sale or lease on the satisfaction by the Recipient, Owner, 
purchaser, or lessee (as the case may be) of any additional 
requirements that EDA may impose, including EDA's pre-approval of the 
sale or lease.
    (iii) Agreement between Recipient and Owner. In addition to 
paragraphs (c)(5)(i) and (ii) of this section, when an authorized 
purpose of the Project is to construct facilities to serve privately 
owned Real Property, the Recipient and the Owner must agree to use the 
Real Property improved or benefited by the EDA Investment Assistance 
only for the authorized purposes of the Project and in a manner 
consistent with the terms and conditions of the EDA Investment 
Assistance for the Estimated Useful Life of the Project.
    (iv) Unauthorized Use and compensation of Federal Share. EDA may 
deem that a violation of this paragraph (c)(5) by the Recipient, Owner, 
purchaser, or lessee (as the case may be) constitutes an Unauthorized 
Use of the Real Property and the Recipient must agree to compensate EDA 
for the Federal government's Federal Share of the Project in the case 
of such Unauthorized Use.
    92. Amend Sec.  314.8 to revise the section heading and add 
paragraph (d) to read as follows:

Sec.  314.8  Recorded statement for Real Property.

* * * * *
    (d) In extraordinary circumstances and at EDA's sole discretion, 
EDA may choose to accept another instrument to protect EDA's interest 
in Project Property, such as an escrow agreement or letter of credit, 
provided that EDA determines such instrument is adequate and a recorded 
statement in accord with paragraph (a) of this section is not 
reasonably available. The terms and provisions of the relevant 
instrument shall be satisfactory to EDA in EDA's sole judgment. The 
costs and fees for escrow services and letters of credit shall be paid 
by the Recipient.
    93. Amend part 314 so that Sec.  314.9 is no longer designated as 
subpart C, and remove the heading ``Subpart C--Personal Property.''
    94. Revise Sec.  314.9 to read as follows:

Sec.  314.9  Recorded statement for Personal Property.

    For all Projects which EDA determines involve the acquisition or 
improvement of significant items of Personal Property, including ships, 
machinery, equipment, removable fixtures, or structural components of 
buildings, the Recipient shall execute a Uniform Commercial Code 
Financing Statement (Form UCC-1, as provided by State law) or other 
statement of EDA's interest in the Personal Property, acceptable in 
form and substance to EDA, which statement must be perfected and placed 
of record in accordance with applicable law, with continuances re-filed 
as appropriate. Whether or not a statement is required by EDA to be 
recorded, the Recipient must hold title to the Personal Property 
acquired or improved as part of the Project, except as otherwise 
provided in this part.
    95. Amend part 314 so that Sec.  314.10 is no longer designated as 
subpart D, and remove heading ``Subpart D--Release of EDA's Property 
Interest.''
    96. Revise Sec.  314.10 to read as follows:

Sec.  314.10  Procedures for release of EDA's Property interest.

    (a) General. As provided in Sec.  314.2 of this chapter, the 
Federal Interest in Property acquired or improved with Investment 
Assistance extends for the duration of the Estimated Useful Life of the 
Project. While EDA determines the length of the Estimated Useful Life 
at the time of Investment award, in recent years, the length generally 
extends for 15 to 20 years, depending on the nature of the improvement. 
Prior to 1999, the Estimated Useful Life of some Projects, such as 
water and wastewater Projects, could extend for 40 years or more. Upon 
request of the Recipient, EDA will release the Federal Interest in 
Project Property upon expiration of the Estimated Useful Life as 
established in the terms and conditions of the Investment Assistance 
and in accord with the requirements of this section and part. This 
section provides procedures to govern the manner of obtaining a release 
of the Federal Interest.
    (b) Release of Property after the expiration of the Estimated 
Useful Life. At the expiration of a Project's Estimated Useful Life and 
upon the written request of a Recipient, the Assistant Secretary may 
release the Federal Interest in Project Property if EDA determines that 
the Recipient has

[[Page 76539]]

made a good faith effort to fulfill all terms and conditions of the 
Investment Assistance. The determination provided for in this paragraph 
shall be established at the time of the Recipient's written request and 
shall be based, at least in part, on the facts and circumstances 
provided in writing by the Recipient. For a Project in which a Recorded 
Statement as provided for in Sec. Sec.  314.8 and 314.9 of this chapter 
has been recorded, EDA will provide for the release by executing an 
instrument in recordable form. The release will terminate the 
Investment as of the date of its execution and satisfy the Recorded 
Statement.
    (c) Release prior to expiration of the Estimated Useful Life. If 
the Recipient will no longer use the Project Property in accord with 
the requirements of the terms and conditions of the Investment within 
the time period of the Estimated Useful Life, EDA will determine if 
such use by the Recipient constitutes an Unauthorized Use of Property 
and require compensation for the Federal Interest as provided in Sec.  
314.4 and this part. EDA may release the Federal Interest in connection 
with such Property upon receipt of full payment in compensation of the 
Federal Interest.
    (d) Release of certain Property after 20 years. In accord with 
section 601(d)(2) PWEDA, upon the request of a Recipient and before the 
expiration of the Estimated Useful Life of a Project that exceeds 20 
years, EDA may release any Real Property or tangible Personal Property 
interest held by EDA, in connection with Investment Assistance after 
the date that is 20 years after the date on which the Investment 
Assistance was awarded.
    (e) Limitations and Covenant of Use.
    (1) EDA's release of the Federal Interest pursuant to this section 
is not automatic; it requires EDA's approval, which will not be 
withheld except for good cause or as otherwise required by law, as 
determined in EDA's sole discretion. As deemed appropriate, EDA may 
require the Recipient to take some action as a condition of the 
release.
    (2) In determining whether to release the Federal Interest, EDA 
will review EDA's legal authority to release its interest, including 
governing Establishment Clause law; the Recipient's performance under 
and conformance with the terms and conditions of the Investment 
Assistance; any use of Project Property in violation of Sec. Sec.  
314.3 or 314.4 of this part; and other such factors as EDA deems 
appropriate.
    (3) Notwithstanding any release of the Federal Interest under this 
section, a Recipient must ensure that Project Property is not used in 
violation of nondiscrimination requirements. See Department of Commerce 
regulations at 15 CFR part 8. Accordingly, upon the release of the 
Federal Interest, the Recipient must execute a covenant of use that 
prohibits use of Real Property or tangible Personal Property for any 
purpose that would violate the nondiscrimination requirements set forth 
in Sec.  302.20 of this chapter.
    (i) With respect to Real Property, the Recipient must record a 
covenant under this subsection in the jurisdiction where the Real 
Property is located in accordance with Sec.  314.8.
    (ii) With respect to items of tangible Personal Property, the 
Recipient must perfect and record a covenant under this subsection in 
accordance with applicable law, with continuances re-filed as 
appropriate, in accordance with Sec.  314.9.

    Dated: November 21, 2011.
John Fernandez,
Assistant Secretary for Economic Development, Economic Development 
Administration.
[FR Doc. 2011-30578 Filed 12-6-11; 8:45 a.m.]
BILLING CODE 3510-24-P
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