Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 61039 

percent haze after shrinkage. Seams, 

blisters, wrinkles or other protrusions 

on shrinkwrap material should not 

obscure addresses on the top pieces of 

bundles. We also recommend that any 

bundle with multiple layers of bundling 

materials show less than 70 percent 

haze through all combined layers. We 

encourage mailers to use USPS 

Publication 177, Guidelines for 

Optimizing Readability of Flat-Size 

Mail. 

Summary of the New Standard 

Mailers preparing presort bundles 

must make the delivery address 

information and any presort label or 

optional endorsement line visible and 

readable by the naked eye. The new 

standard applies to mail processed on 

APPS equipment. The requirements do 

not apply to: 

• Letter-size mailpieces, 

• First-Class Mail flat-size pieces or 

parcels, 

• Mail placed in or on 5-digit or 5- 

digit scheme sacks or pallets, 

• Mail placed in carrier route or 5- 

digit carrier routes sacks, 

• Carrier route mail entered at a 

destination delivery unit, 

• Standard Mail flat-size pieces 

prepared in letter trays under DMM 

345.3.4, and 

• Customized MarketMail. 

Effective Date 

We are revising these standards on 

October 27, 2005. Recognizing that the 

mailing industry may have to change 

some procedures to ensure address 

visibility, we will allow a six-month 

grace period for compliance. We will 

not assess penalties on bundles not 

meeting the standards until April 30, 

2006. Until April 30, 2006, acceptance 

employees will randomly examine 

bundles for address visibility. We will 

provide feedback to mailers at 

acceptance and via eMIR from 

destination sites. We also will work 

closely with mailers to improve address 

readability on their bundles. 

List of Subjects in 39 CFR Part 111 

Postal Service. 

PART 111—[AMENDED] 

■ 1. The authority citation for 39 CFR 

part 111 continues to read as follows: 

Authority: 5 U.S.C. 552(a); 39 U.S.C. 101, 

401, 403, 404, 414, 416, 3001–3011, 3201–

3219, 3403–3406, 3621, 3626, 5001. 

■ 2. Amend Mailing Standards of the 

United States Postal Service, Domestic 

Mail Manual (DMM) as listed below: 

300 Discount Mail Flats 

* * * * * 

340 Standard Mail 

* * * * * 

345 Mail Preparation 

* * * * * 

2.0 Bundles 

* * * * * 

[Renumber current 2.2 through 2.13 as 

new 2.3 through 2.14. Add new 2.2, 

‘‘Address Visibility,’’ and revise new 

2.11, as explained below. Make these 

same changes to 445.2.0 (for Standard 

Mail parcels), 365.2.0 and 465.2.0 (for 

Bound Printed Matter flats and parcels), 

375.2.0 and 475.2.0 (for Media Mail flats 

and parcels), 385.2.0 and 485.2.0 (for 

Library Mail flats and parcels), 705.8.5 

(for bundles on pallets), and 707.19 (for 

Periodicals). Exception: Do not repeat 

items a through e for Media Mail or 

Library Mail; do not repeat items a and 

e for Bound Printed Matter and 

Periodicals.] 

2.2 Address Visibility 

Mailers preparing presort bundles 

must ensure that the delivery address 

information on the top mailpiece in 

each bundle is visible and readable by 

the naked eye. Mailers using strapping 

that might cover the address can avoid 

obstructing visibility by using clear, 

smooth strapping tightly secured around 

the bundle. Mailers using barcoded 

pressure-sensitive bundle labels, 

optional endorsement lines, carrier 

route information lines, or carrier route 

facing slips also must ensure that the 

information in these presort 

designations is visible and readable by 

the naked eye. This standard does not 

apply to the following: 

a. Customized MarketMail. 

b. Bundles placed in or on 5-digit or 

5-digit scheme (L001) sacks or pallets. 

c. Bundles placed in carrier route and 

5-digit carrier routes sacks. 

d. Bundles of mailpieces at carrier 

route rates entered at a destination 

delivery unit (DDU). 

e. Bundles of Standard Mail flat-size 

pieces prepared in letter trays under 

345.3.4. 

* * * * * 

2.11 Labeling Bundles 

[Replace the third sentence in 2.11 with 

the following two sentences to clarify 

that the bundle label must not obscure 

the delivery address.] 

* * * Barcoded pressure-sensitive 

bundle labels must not obscure the 

delivery address block. Banding or 

shrinkwrap must not obscure any 

bundle label. * * * 

* * * * * 

Neva R. Watson, 

Attorney, Legislative. 

[FR Doc. 05–20924 Filed 10–19–05; 8:45 am] 

BILLING CODE 7710–12–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 35 

[FRL–7983–7] 

Guidance on Fees Charged by States 

to Recipients of Clean Water State 

Revolving Fund Program Assistance 

AGENCY: Environmental Protection 

Agency. 

ACTION: Final guidance. 

SUMMARY: Title VI of the Clean Water 

Act (CWA) Amendments of 1987 

provides flexibility for States to use four 

percent of all capitalization grant 

awards for the reasonable costs of 

administering their Clean Water State 

Revolving Fund (CWSRF) programs. 

Because many States have CWSRF 

administrative costs which exceed the 

four percent limit, the U.S. 

Environmental Protection Agency (EPA) 

has allowed States to charge fees on 

CWSRF loans. This guidance addresses 

the use of fees that are charged on loans 

and included as principal in loans and 

the use of fees that are charged on loans 

but not included as principal in loans. 

These requirements will be included as 

terms and conditions in all future grant 

agreements (or operating agreements). 

DATES: This guidance is effective 

October 20, 2005. 

FOR FURTHER INFORMATION CONTACT: For 

technical inquiries, contact Kit Farber, 

State Revolving Fund Branch, 

Municipal Support Division, Office of 

Wastewater Management (MC–4204M), 

U.S. Environmental Protection Agency, 

1200 Pennsylvania Avenue, NW., 

Washington, DC 20460. The telephone 

number is (202) 564–0601 and the email address is farber.kit@epa.gov. 

Copies of this document can be 

obtained from EPA’s Office of 

Wastewater Management Web site at 

http://www.epa.gov/owm/cwfinance/ 

cwsrf. 

SUPPLEMENTARY INFORMATION: 

Background 

The CWA authorizes States to charge 

interest on loans under the CWSRF 

program. At their discretion, States may 

provide loans at or below market 

61040 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 

interest rates, including interest free 

loans. Payments of interest on loans 

together with principal repayments 

must be credited to the CWSRF. 

In addition to collecting principal 

repayments and interest on loans, some 

States charge recipients other fees when 

providing CWSRF assistance. Fees are 

used for a variety of purposes but most 

often to supplement funds available for 

administration of the CWSRF. The 

manner in which fees are charged to 

assistance recipients determines the 

allowable uses for these funds. 

Fees can be grouped into one of two 

categories. Fees either (1) are included 

as principal in loans or (2) are other 

charges that are not included in loan 

principal. This guidance is being issued 

to address the two categories of CWSRF 

loan fees since their use is governed by 

two distinct principles. 

Fees included in loan principal are 

funds originating from the CWSRF, 

borrowed by the recipient and repaid to 

the State, most often for loan origination 

expenses. The use of fees included in 

CWSRF loan principal is subject to the 

limitations on eligible uses of CWSRF 

funds and amounts available for costs of 

administration found in Title VI of the 

CWA. The FY 2006 Appropriations Act 

eased these limitations for fees included 

in loans made in FY 2006 and in earlier 

years. Congress may continue extending 

this provision. 

In contrast, other fees charged on 

loans are paid by the recipient from 

non-CWSRF funds. These fees are often 

based on the outstanding balance of the 

loan in much the same way that interest 

is charged. These fees may also be 

charged up-front but are not borrowed 

from the CWSRF. Examples of these fees 

are annual loan servicing fees, 

application fees, loan origination fees, 

and processing fees. 

For this guidance, references to loans 

are meant to also include any other 

types of assistance provided by a State 

to recipients under the CWSRF program. 

References to the operating agreement 

are meant to also include the intended 

use plan where either document is 

incorporated by reference into the grant 

agreement. 

This guidance was developed with 

substantial review and comment from 

EPA Regional staff, national stakeholder 

organizations, and a State/EPA SRF 

Work Group comprised of State DWSRF 

managers, State CWSRF managers, and 

managers of State financial agencies. 

Many of the comments received were 

incorporated into the final guidance. 

Statutory and Executive Order Reviews 

Under Executive Order 12866 (58 FR 

51735, October 4, 1993), this guidance 

is not a ‘‘significant regulatory action’’

and is therefore not subject to OMB 

review. Because this grant guidance is 

not subject to notice-and-comment 

requirements under the Administrative 

Procedure Act or any other statute, it is 

not subject to the Regulatory Flexibility 

Act (5 U.S.C. 601 et seq.) or sections 202 

and 205 of the Unfunded Mandates 

Reform Act of 1995 (UMRA) (Pub. L. 

104–4). In addition, this guidance does 

not significantly or uniquely affect small 

governments. This guidance does not 

have tribal implications, as specified in 

Executive Order 13175 (63 FR 67249, 

November 9, 2000). This guidance will 

not have federalism implications, as 

specified in Executive Order 13132 (64 

FR 43255, August 10, 1999). This 

guidance also is not subject to Executive 

Order 13045 (62 FR 19885, April 23, 

1997), because it is not economically 

significant. This guidance is not subject 

to Executive Order 13211, ‘‘Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use’’ (66 FR 28355 (May 

22, 2001)) because it is not a significant 

regulatory action under Executive Order 

12866. This guidance does not involve 

technical standards; thus, the 

requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) do not apply. This guidance 

also does not impose an information 

collection burden under the provisions 

of the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.). 

Because this guidance includes 

binding legal requirements, it is 

considered a rule and subject to the 

Congressional Review Act (CRA) (5 

U.S.C. 801 et seq.). The CRA generally 

provides that before a rule may take 

effect, the agency promulgating the rule 

must submit a rule report, which 

includes a copy of the rule, to each 

House of the Congress and to the 

Comptroller General of the United 

States. EPA will submit a report 

containing this guidance and other 

required information to the U.S. Senate, 

the U.S. House of Representatives, and 

the Comptroller General of the United 

States prior to publication in the 

Federal Register. This guidance is not, 

however, a ‘‘major rule’’ as defined by 

5 U.S.C. 804(2). 

Dated: September 26, 2005. 

Benjamin H. Grumbles, 

Assistant Administrator, Office of Water. 

Fees Charged by States to Recipients of 

Clean Water State Revolving Fund 

Program Assistance 

Table of Contents 

I. Fees Included as Principal in Loans 

A. Applicability 

B. Limitation on Using CWSRF to Cover 

Administrative Costs 

C. FY 2006 Appropriations Act Provisions 

D. Implementation Under the FY 2006 

Appropriations Act 

E. Implementation for Fees Collected on 

Loans Made After FY 2006 

II. Fees Charged on CWSRF Assistance But 

Not Included as Principal in Loans 

A. Applicability 

B. Purpose 

C. Program Income 

1. Definition of Program Income 

2. Allowable Uses of Program Income 

D. Fees Other than Program Income That 

Are Not Included as Principal in Loans 

E. Implementation of Guidance 

F. Records Retention 

I. Fees Included as Principal in Loans 

A. Applicability 

This section applies where States 

include fees in a CWSRF loan and the 

total amount of the loan includes not 

only the cost of project construction but 

also the amount of the fee. Particularly, 

this guidance applies to fees included in 

loan principal that are charged to 

borrowers for CWSRF administrative 

costs. Even though the borrower pays 

the fee, the amount of the fee originated 

in the CWSRF and will be repaid to it. 

For example, 

—The State charges the loan recipient 

an administrative fee based on a 

percentage of the principal amount of 

the loan similar to a loan origination 

fee; 

—The recipient borrows funds from the 

CWSRF to cover the project costs and 

the fee; 

—The loan proceeds are disbursed to 

the recipient; 

—The recipient pays the State the fee; 

and 

—The State deposits the collected 

amount into an account outside the 

CWSRF. 

The amount borrowed to finance the fee 

is rolled into the total amount of the 

loan. Loan repayments consist of the 

principal amount borrowed for 

construction, the amount borrowed to 

finance the fee, and any interest charged 

on the loan. 

Costs of issuing bonds that are 

initially paid from bond proceeds are 

not restricted under this guidance even 

if those costs are subsequently allocated 

to the borrower and included in loan 

principal. 

B. Limitation on Using CWSRF To Cover 

Administrative Costs 

Because fees included in loan 

principal originate in the CWSRF, use of 

these amounts is governed by the CWA. 

For fees included in loans issued in FY 

2006 or prior years, Congress, through 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 61041 

the FY 2006 Appropriations Act, eased 

the CWA’s four percent limit on 

administration costs. In the absence of 

additional legislative relief, fees 

included in loans issued after FY 2006, 

i.e., after September 30, 2006, are again 

subject to the CWA’s provisions 

governing administration costs. 

The CWA states that the CWSRF may 

be used ‘‘for the reasonable costs of 

administering the fund and conducting 

activities under this title, except that 

such amounts shall not exceed four 

percent of all grant awards to such fund 

under this title.’’ [CWA section 

603(d)(7)]. CWSRF regulations define 

allowable administrative costs to 

‘‘include all reasonable costs incurred 

for management of the CWSRF program 

and for management of projects 

receiving financial assistance from the 

CWSRF. Reasonable costs unique to the 

CWSRF, such as costs of servicing loans 

and issuing debt, CWSRF program startup costs, financial management and 

legal consulting fees, and 

reimbursement costs for support 

services from other State agencies are 

also allowable.’’ [40 CFR 35.3120(g)(2)]. 

The language of the CWA places a 

ceiling on the amount of all CWSRF 

moneys that may be used by the State 

at no more than four percent of the 

amount of all capitalization grant 

awards. Further, the CWSRF regulations 

state: ‘‘Money in the CWSRF may be 

used for the reasonable costs of 

administering the CWSRF, provided 

that the amount does not exceed four 

percent of all grant awards received by 

the CWSRF.’’ [40 CFR 35.3120(g)(1)]. 

The four percent limitation applies to 

all moneys originating or deposited in 

the CWSRF. Both the moneys paid by 

the State directly from the CWSRF for 

administration and the amounts loaned 

from the CWSRF to a recipient for 

repayment to the State for 

administrative costs are applied against 

the four percent ceiling. If CWSRF 

moneys are loaned and repaid to the 

State for administration costs, the 

amount disbursed is considered used for 

administration costs at the time it is 

disbursed from the fund. A fee charged 

that is not used for administrative costs 

(but utilized for other eligible uses of 

the fund) is not counted toward the four 

percent limit. Similarly, the four percent 

does not apply to fees paid by loan 

recipients that do not originate from 

CWSRF funds (not included in the loan) 

and are not deposited into the CWSRF. 

C. FY 2006 Appropriations Act 

Provisions 

In the FY 2006 Appropriations Act, 

Congress gave States temporary relief 

from the four percent limit on 

administration costs. The FY 2006 Act 

provides: 

* * * notwithstanding section 603(d)(7) of 

the Federal Water Pollution Control Act, as 

amended, the limitation on the amounts in a 

State water pollution control revolving fund 

that may be used by a State to administer the 

fund shall not apply to amounts included as 

principal in loans made by such fund in the 

fiscal year 2006 and prior years where such 

amounts represent costs of administering the 

fund to the extent that such amounts are or 

were deemed reasonable by the 

Administrator, accounted for separately from 

other assets in the fund, and used for eligible 

purposes of the fund, including 

administration.’’

The relief provided by the 

Appropriations Act applies to fees 

included in CWSRF loans made in FY 

2006 and prior years only. Such fees 

must be used for eligible purposes of the 

fund, including administration, and are 

not limited by the CWA’s four percent 

ceiling on administration costs if they 

are accounted for separately from other 

CWSRF moneys and are deemed 

reasonable by EPA. Provided the fee 

amounts are accounted for separately, 

States may hold fees originating in 

CWSRF loans either inside or outside 

the CWSRF. Absent Congressional 

extension of this provision, however, 

after September 30, 2006, the four 

percent limitation again applies to costs 

of program administration. If, on the 

other hand, Congress substantively 

alters the provision pertaining to the 

four percent limitation, this guidance 

will be reviewed to determine if changes 

are needed to reflect such changes. 

Of course, States may use fees 

collected for any of the uses specified as 

eligible under the CWA, not just 

administration. Pursuant to section 

603(d) of the CWA, the only permissible 

uses of the CWSRF are loans, certain 

refinancings, guarantees of and 

purchasing insurance for certain local 

financings, as a source of revenue or 

security for repayment of CWSRF 

bonds, to guarantee loans of sub-state 

revolving funds, to earn interest, and for 

costs of administration. These activities 

must be undertaken for eligible 

purposes: ‘‘for providing assistance (1) 

for construction of treatment works (as 

defined in section 212 of this Act) 

which are publicly owned, (2) for 

implementing a management program 

under section 319, and (3) for 

developing and implementing a 

conservation and management plan 

under section 320.’’ [CWA section 

601(a)]. 

To summarize: 

Under the Appropriations Act 

provisions, States may use fees included 

in loans in excess of the CWA’s four 

percent ceiling on CWSRF moneys used 

for fund administration if: 

—The fees were included as principal in 

CWSRF loans made during FY 2006 

or prior years; and 

—EPA determines the fees were 

reasonable in amount; and 

—The fees were accounted for 

separately from other fund assets. 

D. Implementation Under the FY 2006 

Appropriations Act 

EPA Regional Offices should identify 

which States have included fees in 

loans and determine the reasonableness 

of the fees included in loans made in FY 

2006 and prior years. If used for eligible 

purposes, fee amounts collected that 

were previously described in a State’s 

Intended Use Plan or other document 

approved by EPA may be deemed 

reasonable. 

For fees already collected, States must 

identify (1) the amount collected that 

was included in loan principal; (2) the 

amount expended; (3) the purposes for 

which the fees were used; and (4) the 

amount still remaining. The Regional 

Offices and Headquarters will work 

together with each State to ensure 

compliance with the FY 2006 

Appropriations Act and to determine 

what actions are necessary where State 

actions are not in conformance with the 

Appropriations Act. 

States must ensure that fee amounts 

unused and uncollected fees (and 

interest earnings thereon) included in 

loans made prior to the end of FY 2006 

will also be used only for eligible 

CWSRF purposes and will be accounted 

for separately. 

E. Implementation for Fees Collected on 

Loans Made After FY 2006 

In the absence of future legislative 

provisions to the contrary, fees included 

in CWSRF loans made after September 

30, 2006, are subject to the four percent 

ceiling on administration costs. Fees 

assessed in this manner will be deemed 

reasonable provided they do not cause 

the effective rate of the loan (which 

includes both interest and fees) to 

exceed the market rate. Fees and 

earnings thereon must be used for 

eligible CWSRF purposes whether held 

inside or outside the fund. 

States that include fees in loan 

principal may need to modify their 

operating agreements and other program 

implementation documents pursuant to 

this guidance. Each grant agreement or 

operating agreement entered into after 

September 30, 2006, must contain 

provisions to identify the fees included 

in CWSRF loans and specify the uses of 

those fees consistent with this guidance. 

Each grant agreement or operating 

61042 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 

agreement incorporated therein by 

reference must also provide that, for 

loans made after FY 2006, amounts paid 

from the CWSRF for fund 

administration will be limited to an 

amount equal to four percent of 

capitalization grant awards. This limit 

applies to administration amounts paid 

directly by the State and to amounts 

disbursed from the CWSRF to a loan 

recipient and repaid to the State for 

payment of administration costs. The 

grant agreement must also require the 

State to maintain records which account 

separately for fees collected and also 

account for CWSRF funds used for 

CWSRF administrative purposes. The 

next intended use plan prepared by the 

State after the effective date of this 

guidance must identify the type of fees 

charged on loans, the fee rate, and the 

amount of fees available for future use. 

Finally, the annual report must identify 

the fees included in CWSRF loans, the 

amount of fees collected, and their use. 

II. Fees Charged on CWSRF Assistance 

But Not Included as Principal in Loans 

A. Applicability 

This section addresses the use of fees 

that are charged on CWSRF loans but 

not included as principal in loans; and 

discusses the application of the CWA 

and the program income provisions of 

EPA’s regulations at 40 CFR part 31 to 

these fees. For this guidance, the term 

‘‘fees that are charged on CWSRF loans’’

is meant also to include any other 

CWSRF loan charges and the income 

thereon. Costs of issuing bonds that are 

initially paid from bond proceeds are 

not restricted under this guidance even 

if those costs are subsequently allocated 

to the borrower and included in loan 

principal. 

B. Purpose 

There are several purposes for this 

guidance. First, this guidance clarifies 

how the program income regulation at 

40 CFR 31.25 applies to the CWSRF 

program. Second, this guidance 

establishes the parameters for uses of 

certain program income where 

additional flexibility is allowed under 

§ 31.25. Third, this guidance establishes 

the allowable uses of earnings from fees 

not covered by the program income 

provisions of § 31.25. This guidance is 

intended to protect the long-term health 

of the fund. 

Many States charge fees on CWSRF 

loans issued. Most of these fees are used 

for supplementing CWSRF moneys 

available to pay administration costs. 

However, there has been a wide 

spectrum of use beside fund 

administration; some related to waterquality purposes and others not related 

even to environmental purposes. 

Further, the States and EPA recognize 

that there is often a direct trade off 

between the interest rate charged on 

loans and the fee rate charged on loans. 

In general, there is a limit to the amount 

States can charge borrowers before they 

turn elsewhere for financing. When the 

fee rate goes up, the interest rate must 

go down in order to keep the loan 

affordable and competitive. While loan 

interest earnings add to the assets of the 

program, fees are often held outside the 

fund and used for ancillary purposes. 

Unlike loan interest earnings, therefore, 

fees do not add to the assets available 

to the program or support its growth. 

The practice of lowering the interest rate 

on a loan in order to charge a fee 

reduces the future funding capacity of 

the program when the fee is not used 

directly for program purposes. 

C. Program Income 

1. Definition of Program Income 

Program income is defined at 40 CFR 

31.25(b) as ‘‘gross income received by 

the grantee or subgrantee directly 

generated by a grant supported activity, 

or earned only as a result of the grant 

agreement during the grant period.’’

Fees collected or loan charges in 

addition to principal and interest that 

are not deposited as loan repayments 

are ‘‘income received by the grantee 

* * * directly generated by a grant 

supported activity’’. The State is 

receiving income as a result of an 

activity that is established and operated 

with the support of a Federal 

capitalization grant. 

According to part 31, income 

‘‘directly generated by a grant supported 

activity’’ is considered program income. 

Under the CWSRF program, grant 

supported activities are those activities 

funded in an amount equal to the dollar 

amount of the Federal capitalization 

grant, i.e., funds directly made available 

by the capitalization grant. Income 

earned from fees charged on CWSRF 

loans made from funds directly made 

available by the capitalization grant is 

program income and subject to the 

requirements of the general grant 

regulations. 

The regulations make a distinction 

between program income earned during 

the grant period and program income 

earned after the grant period. ‘‘During 

the grant period’’ is defined as ‘‘the time 

between the effective date of the award 

and the ending date of the award 

reflected in the final financial report’’

[40 CFR 31.25(b)]. For the CWSRF 

program, the ‘‘ending date of the award’’

is the date reported in the final 

Financial Status Report (FSR) as the end 

of the period covered by that FSR. Once 

a State has submitted a final FSR for a 

particular capitalization grant, fees 

collected after the end of the period 

covered by that FSR from loans awarded 

with that capitalization grant are 

considered to be earned after the grant 

period. 

Section 31.25 further illustrates what 

is, and what is not, program income. 

Program income is described as ‘‘fees for 

services performed’’ [40 CFR 31.25(a)], 

but it does not include ‘‘(T)axes, special 

assessments, levies, fines, and other 

such (governmental) revenues * * * § ’’

[40 CFR 31.25(d)]. The ‘‘government 

revenues’’ exception was intended to 

exclude from the program income rules 

those revenues collected under the 

general taxing power of the government 

grant recipient. The fees collected in the 

CWSRF program are income for services 

performed, similar to fees charged by 

banks on private loans. 

States and EPA will negotiate specific 

options for calculating the amount of 

program income earned. It is important 

that States are able to account for 

program income and the amount of fees 

collected that are not program income as 

outlined below. Following are three 

examples that might serve as models in 

determining the amount of program 

income earned. Each method could be 

further refined to account for income 

earned during the grant period and 

amounts earned after the grant period: 

(1) Program income may be calculated 

on a project-by-project basis by 

identifying those projects funded with 

capitalization grants and determining 

the amount of fees collected from these 

projects. 

(2) Program income may be calculated 

based on the amount of capitalization 

grants awarded by multiplying the 

amount of capitalization grants by the 

fee rate charged. 

(3) Program income may be calculated 

by pro-rating the total fees collected 

between the Federal loan assistance and 

the non-Federal loan assistance 

provided. The calculation for program 

income would be to multiply total fees 

collected by the ratio of capitalization 

grants to total loan assistance provided. 

The remaining fees would not be 

considered program income. 

2. Allowable Uses of Program Income 

Pursuant to 40 CFR 31.25(g)(1) 

program income must be used to 

‘‘reduce the Federal agency and grantee 

contributions rather than to increase the 

funds committed to the project’’ unless 

used for one or both of the following 

alternatives as provided by the grant 

agreement: 

Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 61043 

(1) ‘‘added to the funds committed to the 

grant agreement by the Federal agency and 

the grantee * * * [and] be used for the 

purposes and under the conditions of the 

grant agreement’’ [40 CFR 31.25(g)(2)] or 

(2) ‘‘used to meet the cost sharing or 

matching requirement of the grant 

agreement’’ [40 CFR 31.25(g)(3)]. 

Pursuant to section 603(d) of the 

CWA, the permissible uses of the 

CWSRF are loans, certain refinancings, 

guarantees of and purchasing insurance 

for certain local financings, as a source 

of revenue or security for repayment of 

CWSRF bonds, to guarantee loans of 

sub-state revolving funds, to earn 

interest, and for costs of administering 

the CWSRF. These activities must be 

undertaken for eligible purposes: ‘‘for 

providing assistance (1) for construction 

of treatment works (as defined in 

section 212 of this Act) which are 

publicly owned, (2) for implementing a 

management program under section 

319, and (3) for developing and 

implementing a conservation and 

management plan under section 320.’’

[CWA section 601(a)]. Therefore, under 

the CWSRF, the alternative uses of 

program income are for these purposes 

and to provide the required State match. 

If program income earnings are held 

outside the CWSRF, their use for 

administration costs is not counted 

against the CWA’s four percent ceiling 

on administration costs. 

EPA has the express authority to limit 

the use of program income earned after 

the grant period [40 CFR 31.25(h)]: 

‘‘There are no Federal requirements 

governing the disposition of program income 

earned after the end of the award period (i.e., 

until the ending date of the final financial 

report * * *), unless the terms of the 

agreement or the Federal agency regulations 

provide otherwise.’’

EPA guidance will allow program 

income earned after the grant period to 

be used for a broad range of water 

quality-related purposes. This guidance 

requires the inclusion of a grant 

condition in all capitalization grants 

awarded or a provision in the operating 

agreement after the effective date of this 

guidance so that in addition to the 

purposes allowed for program income 

earned during the grant period, amounts 

collected after the grant period may be 

used for various water quality activities. 

Such activities include, but are not 

limited to: Water quality monitoring; 

developing total maximum daily loads 

(TMDLs); permits under the National 

Pollutant Discharge Elimination System 

(NPDES) program; unified watershed 

plans; water quality restoration plans; 

source water assessments; wastewater 

treatment operator training programs 

[CWA section 104(g)(1)]; grants and 

loans for planning, designing, and 

building water quality projects; and 

management of other State financial 

assistance programs for water qualityrelated purposes. States may also use 

program income earned after the grant 

period for the combined financial 

administration of the CWSRF and 

DWSRF Funds where the programs are 

administered by the same State agency. 

D. Fees Other Than Program Income 

That Are Not Included as Principal in 

Loans 

Fees collected, that are not included 

as principal in loans, from activities 

financed with CWSRF funds other than 

those directly made available by the 

capitalization grant are not program 

income. Under section 602(a) of the 

CWA, EPA may include conditions in 

grant agreements in addition to those 

required to be included by Title VI of 

the CWA. In keeping with the Agency’s 

mission, EPA has determined that water 

quality activities should be the 

beneficiary of any funds generated by 

the CWSRF program. EPA will treat 

funds deriving from CWSRF fees that 

are not program income the same as 

moneys from program income earned 

after the grant period, both types of 

funds being eligible for use in water 

quality activities. States may also use 

these fees for the combined financial 

administration of the CWSRF and 

DWSRF Funds where the programs are 

administered by the same State agency. 

Further, interest earnings on program 

income collected during or after the 

grant period and interest earnings on 

other fees that are not program income 

under this section must be used only for 

water quality activities or for the 

combined financial administration of 

the CWSRF and DWSRF Funds where 

the programs are administered by the 

same State agency. 

E. Implementation of Guidance 

Each grant agreement (or operating 

agreement, if the operating agreement is 

incorporated by reference into the grant 

agreement) must contain a provision 

that allows the use of program income 

earned during the grant period for the 

specific purposes identified in 40 CFR 

31.25(g)(2) and (3). Failure to specify the 

permitted uses of program income in the 

grant agreement or operating agreement, 

will cause such earnings to be deducted 

from the grant amount pursuant to 

§ 31.25(g)(1). The grant agreement or 

operating agreement should also state 

that if program income is deposited into 

an account outside the fund, it may be 

used to supplement fund administration 

costs above the CWA’s four percent 

ceiling on administration costs. 

All grant agreements or operating 

agreements subsequent to the effective 

date of this guidance must contain a 

provision that identifies the ways in 

which the State will use program 

income collected after the grant period 

or other fees collected that are not 

considered program income. The uses 

specified must be consistent with this 

guidance. Fees collected from any loans 

awarded after the grant agreement or 

operating agreement become effective 

must be used only for the specified 

purposes. 

The grant agreement must also require 

the State to maintain records which 

account separately for fees collected and 

specify how those amounts were used. 

States must account separately for 

program income earned during the grant 

period, program income earned after the 

grant period, and amounts collected that 

are not program income under this 

section if the uses of these amounts is 

different. Conversely, if the State is 

using all fees collected only for the 

purposes prescribed for program income 

earned during the grant period, then it 

need not account separately for the 

different types of fees collected. 

Similarly, if the State is using program 

income earned after the grant period 

and non-program income only for 

purposes related to water quality, it 

need not account separately for these 

types of fees collected. For example, if 

the State is using all fees collected for 

the cost of administering the CWSRF, 

the State need only report the total 

amount of fees collected and used for 

this purpose. If the State is using 

program income earned during the grant 

period for CWSRF administration and is 

using all other fees for water quality 

purposes, the State need only report the 

amount of fees collected and used for 

each of these two purposes. If fees 

collected are deposited in the CWSRF 

then their use is limited to those 

purposes identified in Title VI of the 

CWA. Further, the use of such fees for 

administering the fund would be subject 

to the CWA’s four percent ceiling on 

administration costs. Fees collected that 

the State intends to use as State match 

must be so designated before being 

deposited in the CWSRF. 

The next intended use plan prepared 

by the State after the effective date of 

this guidance must identify all types of 

fees charged on loans, including the fee 

rate, and the amount of fees available. 

The State’s annual report (submitted 

under section 606(d) of the CWA) must 

identify the types of fees charged on 

loans, the amount of fees collected, and 

how those amounts were used. Several 

examples of how to measure program 

61044 Federal Register / Vol. 70, No. 202 / Thursday, October 20, 2005 / Rules and Regulations 

income are provided above under 

Definition of Program Income. 

States must ensure that the future use 

of program income collected during the 

grant period but not yet used is in 

accordance with the Agency’s 

regulations and this guidance. EPA will 

work with States individually to 

determine what actions are necessary to 

address situations where fee amounts 

were used inconsistently with the 

applicability of the program income 

regulations to the CWSRF program. 

F. Records Retention 

CWSRF programs also must comply 

with requirements of 40 CFR 31.42(c)(3) 

pertaining to the retention of records for 

program income earned after the grant 

period. According to the regulation, 

‘‘the retention period for the records 

pertaining to the earning of the income 

starts from the end of the grantee’s fiscal 

year in which the income is earned.’’

The length of the retention period is 

ordinarily three years, as set forth in 

§ 31.42(b). 

[FR Doc. 05–21014 Filed 10–19–05; 8:45 am] 

BILLING CODE 6560–50–P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 62 

[R01–OAR–2005–MA–0003; FRL–7986–6] 

Approval and Promulgation of State 

Plans For Designated Facilities and 

Pollutants: Massachusetts; Negative 

Declaration 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Direct final rule. 

SUMMARY: EPA is approving the Sections 

111(d) and 129 negative declaration 

submitted by the Massachusetts 

Department of Environmental Protection 

(MADEP) on August 23, 2005. This 

negative declaration adequately certifies 

that there are no existing commercial 

and industrial solid waste incineration 

units (CISWIs) located within the 

boundaries of the Commonwealth of 

Massachusetts. EPA publishes 

regulations under Sections 111(d) and 

129 of the Clean Air Act requiring states 

to submit control plans to EPA. These 

state control plans show how states 

intend to control the emissions of 

designated pollutants from designated 

facilities e.g., CISWIs). The 

Commonwealth of Massachusetts 

submitted this negative declaration in 

lieu of a state control plan. 

DATES: This direct final rule is effective 

on December 19, 2005, without further 

notice unless EPA receives significant 

adverse comment by November 21, 

2005. If EPA receives adverse comment, 

we will publish a timely withdrawal of 

the direct final rule in the Federal 

Register and inform the public that the 

rule will not take effect. 

ADDRESSES: Submit your comments, 

identified by Regional Material in 

EDocket (RME) ID Number R01–OAR–

2005–MA–0003 by one of the following 

methods: 

A. Federal eRulemaking Portal: 

http://www.regulations.gov. Follow the 

on-line instructions for submitting 

comments. 

B. Agency Web site: http:// 

docket.epa.gov/rmepub/ Regional 

Material in EDocket (RME), EPA’s 

electronic public docket and comment 

system, is EPA’s preferred method for 

receiving comments. Once in the 

system, select ‘‘quick search,’’ then key 

in the appropriate RME Docket 

identification number. Follow the online instructions for submitting 

comments. 

C. E-mail: brown.dan@epa.gov 

D. Fax: (617) 918–0048 

E. Mail: ‘‘RME ID Number R01–OAR–

2005–MA–0003’’, Daniel Brown, Chief, 

Air Permits, Toxics & Indoor Programs 

Unit, Office of Ecosystem Protection, 

U.S. EPA, One Congress Street, Suite 

1100 (CAP), Boston, Massachusetts 

02114–2023. 

F. Hand Delivery or Courier. Deliver 

your comments to: Daniel Brown, Chief, 

Air Permits, Toxics & Indoor Programs 

Unit, Office of Ecosystem Protection, 

U.S. EPA, One Congress Street, Suite 

1100 (CAP), Boston, Massachusetts 

02114–2023. Such deliveries are only 

accepted during the Regional Office’s 

normal hours of operation. The Regional 

Office’s official hours of business are 

Monday through Friday, 8:30 to 4:30 

excluding federal holidays. 

Instructions: Direct your comments to 

Regional Material in EDocket (RME) ID 

Number R01–OAR–2005–MA–0003. 

EPA’s policy is that all comments 

received will be included in the public 

docket without change and may be 

made available online at http:// 

docket.epa.gov/rmepub/, including any 

personal information provided, unless 

the comment includes information 

claimed to be Confidential Business 

Information (CBI) or other information 

whose disclosure is restricted by statute. 

Do not submit information that you 

consider to be CBI or otherwise 

protected through Regional Material in 

EDocket (RME), regulations.gov, or email. The EPA RME website and the 

federal regulations.gov website are 

‘‘anonymous access’’ systems, which 

means EPA will not know your identity 

or contact information unless you 

provide it in the body of your comment. 

If you send an e-mail comment directly 

to EPA without going through RME or 

regulations.gov, your e-mail address 

will be automatically captured and 

included as part of the comment that is 

placed in the public docket and made 

available on the Internet. If you submit 

an electronic comment, EPA 

recommends that you include your 

name and other contact information in 

the body of your comment and with any 

disk or CD–ROM you submit. If EPA 

cannot read your comment due to 

technical difficulties and cannot contact 

you for clarification, EPA may not be 

able to consider your comment. 

Electronic files should avoid the use of 

special characters, any form of 

encryption, and be free of any defects or 

viruses. 

Docket: All documents in the 

electronic docket are listed in the 

Regional Material in EDocket (RME) 

index at http://docket.epa.gov/rmepub/. 

Although listed in the index, some 

information is not publicly available, 

i.e., CBI or other information whose 

disclosure is restricted by statute. 

Certain other material, such as 

copyrighted material, is not placed on 

the Internet and will be publicly 

available only in hard copy form. 

Publicly available docket materials are 

available either electronically in RME or 

in hard copy at the Office of Ecosystem 

Protection, U.S. Environmental 

Protection Agency, EPA New England 

Regional Office, One Congress Street, 

Suite 1100, Boston, MA. EPA requests 

that if at all possible, you contact the 

person listed in the FOR FURTHER

INFORMATION CONTACT section below to 

schedule your review. The Regional 

Office’s official hours of business are 

Monday through Friday, 8:30 to 4:30 

excluding federal holidays. 

FOR FURTHER INFORMATION CONTACT: John 

J. Courcier, Office of Ecosystem 

Protection (CAP), EPA–New England, 

Region 1, Boston, Massachusetts 02203, 

telephone number (617) 918–1659, fax 

number (617) 918–0659, e-mail 

courcier.john@epa.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. What action is EPA taking today? 

II. What is the origin of the requirements? 

III. When did the requirements first become 

known? 

IV. When did Massachusetts submit its 

negative declaration? 

V. Statutory and Executive Order Reviews