Source: https://www.federalregister.gov/documents/2004/10/06/04-22446/grant-program-to-establish-a-fund-for-financing-water-and-wastewater-projects-revolving-fund-program
Timestamp: 2017-08-18 15:16:39
Document Index: 208187512

Matched Legal Cases: ['art 1783', 'art 3015', 'art 1783', 'art 6937', 'art 4274', 'art 1783', 'art 1783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783', '§\u20091783']

This rule will become effective November 22, 2004, unless RUS receives written adverse comments or a written notice of intent to submit adverse comments on or before November 5, 2004. If RUS receives such comments or notice, the Agency will publish a timely notice in the Federal Register withdrawing the rule. Comments received will be considered under the proposed rule published in this edition of the Federal Register in the proposed rule section. A second public comment period will not be held. Comments must be received by RUS or carry a postmark or equivalent no later than November 5, 2004. Comments regarding the information collection requirements under the Paperwork Reduction Act must be received on or before December 6, 2004, to be assured of consideration.
59770-59775 (6 pages)
List of Subjects in 7 CFR Part 1783
Subpart C—Revolving Loan Program Loans
https://www.federalregister.gov/d/04-22446 https://www.federalregister.gov/d/04-22446
The Rural Utilities Service (RUS or the Agency) is issuing a regulation to establish the Grant Program to Establish a Fund for Financing Water and Wastewater Projects (Revolving Fund Program (RFP)) as authorized by the Consolidated Farm and Rural Development Act (CONACT), as amended by section 6002 of the Farm Security and Rural Investment Act of 2002 (Farm Bill). The Secretary may make grants to qualified, private, non-profit entities. Grant Recipients will make loans to eligible entities to finance pre-development costs associated with proposed water and wastewater projects or with existing water and wastewater systems, and short-term costs incurred for replacement equipment, small-scale extension of services, or other small capital projects that are not part of the regular operations and maintenance activities of existing water and wastewater systems.
Instructions: All submissions received must include “Rural Utilities Service” and the subject heading “7 CFR 1783.” All comments received must identify the name of the individual (and the name of the entity, if applicable) who is submitting the comment. All comments received will be posted without change to http://www.usda.gov.rus.index2.Comments.htm, including any personal information provided.
This direct final rule has been determined to be not significant for the purposes of Executive Order 12866 and, therefore, has not been reviewed by the Office of Management and Budget (OMB).
This rule is not subject to the requirements of Executive Order 12372, “Intergovernmental Review of Federal Programs”, as implemented under USDA's regulations at 7 CFR Part 3015.
This direct final rule has been reviewed under Executive Order 12988, Civil Justice Reform. RUS has determined that this proposed rule meets the applicable standards provided in section 3 of the Executive Order. In addition all State and local laws and regulations that are in conflict with this rule will be preempted; no retroactive effect will be given to the rule; and, in accordance with Section 212(e) of the Department of Agriculture Reorganization Act of 1994 (7 U.S.C. 6912(e)) administrative appeal procedures, if any are required, must be exhausted prior to initiating any action against the Department or its agencies.
Pursuant to 5 U.S.C. 553(a)(2), this proposed rule related to grants is exempt from the rulemaking requirements of the Administrative Procedure Act, 5 U.S.C. 551 et seq., including the requirement to provide prior notice and an opportunity for public comment. Because this proposed rule is not subject to a requirement to provide prior notice and an opportunity for public comment pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act, 5 U.S.C. 601 et seq. are inapplicable.
The policies contained in this rule do not have any substantial direct effect on states, on the relationship between the national government and the states, or on the distribution of power and responsibilities among the various levels of government. Nor does this rule impose substantial direct compliance costs on states and local governments. Therefore, consultation with states is not required.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35) RUS is requesting comments on the information collection incorporated in this proposed rule. Comments on this information collection must be received by December 6, 2004.
Comments are invited on: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the Start Printed Page 59771agency's estimate of the burden including the validity of the methodology and assumption used; (c) ways to enhance the quality, utility and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of automated electronic, mechanical, or other technological collection techniques or other forms of information technology.
Title: 7 CFR part 1783, Revolving Fund Program.
OMB Control Number: 0582-0138.
Type of Request: Approval for collection.
The primary reason for the promulgation of the proposed collection of information under this rule is to implement the Revolving Fund Program.
RUS applicants would submit an application for consideration of grant funding, and if selected for funding, submit quarterly reports, as prescribed by the rule. The collection of information is only that information which is essential for RUS to award and service grants in the best interest of the Government.
Estimated Number of Responses per Respondents: 7.6.
Copies of this information collection can be obtained from MaryPat Daskal, Program Development and Regulatory Analysis, Rural Utilities Service. Telephone: (202) 720-7853.
Send comments regarding this information collection requirement to Richard Annan, Acting Director, Program Development and Regulatory Analysis, USDA, Rural Utilities Service, 1400 Independence Ave., SW., Room 5168, Stop 1522, Washington, DC 20250-1522.
Comments must be received on or before 30 days of publication in the Federal Register. All comments will become a matter of public record.
The programs described by this proposed rule are listed in the Catalog of Federal Domestic Assistance Programs under numbers 10-864, Revolving Fund Program Grant. This catalog is available on a subscription basis from the Superintendent of Documents, the United States Government Printing Office, Washington, DC, 20402-9325, telephone number (202) 512-1800.
On May 13, 2002, the Farm Security and Rural Investment Act of 2002 (Farm Bill) was signed into law as Public Law 107-171. Section 6002 of the Farm Bill amended the Consolidated Farm and Rural Development Act (CONACT), by adding a grant program to establish a revolving loan fund. The Secretary may make grants to qualified, private, non-profit entities. The grant recipients will use the grant funds to establish a revolving loan fund. The loans will be made to eligible entities to finance predevelopment costs of water or wastewater projects, or short-term small capital projects not part of the regular operation and maintenance of current water and wastewater systems.
Eligible entities for the revolving loan fund will be the same entities eligible to obtain a loan, loan guarantee, or grant from the Rural Utilities Service Water and Waste Disposal and Wastewater loan and grant programs. The amount of financing to an eligible entity shall not exceed $100,000.00 and shall be repaid in a term not to exceed 10 years. The rate shall be determined in the approved grant work plan.
No funds were appropriated for the grant program for fiscal years (FY) 2002 and FY 2003. However, the Consolidated Appropriations Act, 2004 (Pub. L. 108-199) included $500,000.00 for the grant program. Therefore, we are developing the regulation to implement the grant program.
The Administrator of RUS is required to prescribe regulations to implement the provisions of the CONACT. Rural Utilities Service will be relying heavily on existing regulations within the Rural Development Program in order to develop regulations for this new program.
A Notice of Inquiry was published in the Federal Register, Thursday, February 12, 2004 at 69 CFR Part 6937, requesting interested parties to review the CONACT and comment on six topics. The comment period closed on March 15, 2004. RUS received responses from six parties; National Rural Water Association (NRWA), Association of State Drinking Water Administrators (ASDWA), Rural Community Assistance Program (RCAP), Midwest Assistance Program (MAP), Community Resource Group (CRG), and South Central Illinois Regional Planning & Development Commission (SCIRP&DC). The topics, comments, and Agency responses as follows:
(1) RUS is seeking comments on a requirement for current lending experience of potential grant applicants.
ASDWA did not feel they were able to comment on this topic. SCIRP&DC was in favor of requiring current lending experience of potential grant applicants. CRG, MAP, and RCAP believe that the applicant should have the demonstrated capacity and financial ability to provide on-site technical assistance to the borrowers, both before and after a loan is made. RCAP further recommends that RUS base its criteria for determining applicants' qualifications on the criteria outlined in regulations for USDA's Intermediary Relending Program (7 CFR Part 4274). RCAP believes this would allow the Agency flexibility to award a grant to a non-profit that may not have significant loan making experience.
The Agency's position is that in order to fulfill its fiduciary and oversight responsibilities, the primary experience for an applicant is a successful record of making and servicing loans.
(2) RUS is also interested in comments regarding a proposed minimum 20 percent matching funds contribution by the grant recipient. Should in-kind contributions be accepted as part of the 20 percent minimum?
All respondents except NRWA agree with a minimum 20 percent match. NRWA did not comment on this topic. CRG believes that above a 20 percent match should not favor one area of the country above another and the cash match should be proportionate to every loan. All loan losses should come out of Start Printed Page 59772the matching funds. MAP recommends that more points should be given for a greater than 20 percent match only when two or more applications are from the same region of the country. RCAP recommends that priority points be awarded for a match above 20 percent.
The Agency's position is to require a minimum 20 percent matching funds contribution by the grant recipient. Contributions by the grant recipient signal a serious intent to invest in the project as well as increasing the overall size of the loan fund from which loans shall be made, thereby increasing the number of potential loan recipients. The Agency agrees with RCAP's recommendation and will award priority points for greater than 20 percent match.
(3) RUS is interested in comments regarding the percentage of the grant funds that may be used for administrative or servicing fees.
ASDWA believes that 6 percent would be reasonable although the current allowable percentage for the Drinking Water State Revolving Fund is 4 percent. SCIRP&DC recommends a rate of 2 to 3 percent is adequate. SCIRP&DC further recommends 0.5 percent be incorporated into the loan rate for debt servicing. CRG believes that no Federal or match funds should be used for administrative fees. Interest and fees earned from loans should be used to fund loan loss reserves. MAP believes that allowable eligible costs as described in the authorizing Farm Bill language are adequate. RCAP recommends that Federal funds not be used for administrative costs. Administrative costs should come from matching funds. NRWA believes that administrative costs and overhead should be minimal.
The Agency's position is to maximize the use of limited grants dollars in order to fund the greatest number of projects possible, therefore, grant funds may not be used for payment of the intermediary's administrative cost or expenses. Interest collected from loans made by the intermediary may be used to cover reasonable administrative costs.
(4) RUS is seeking comments on the issue of the revolving fund paying up to a maximum of 75 percent of the project costs, with the other 25 percent of project costs paid from non-Federal sources.
ASDWA had no objection. SCIRP&DC has some confusion between the organization's match funding a maximum of 75 percent of project costs. CRG believes limiting Federal participation to no more than 75 percent of project costs is reasonable. Both MAP and RCAP believe that the 75 percent maximum may restrict or deter borrowers from seeking financing through this program. MAP further believes that this requirement will create a financial burden to low-income communities.
The Agency's response is to establish a maximum loan amount of the lesser of $100,000 or 75 percent of the total costs of the project in order to focus program funding of small capital projects. The authorizing legislation sets a maximum loan amount of $100,000. The Agency believes that the lesser of $100,000 or 75 percent of the cost of the project will allow for a greater number of loans to be made and also comply with the authorizing legislation.
(5) RUS is interested in comments regarding the use of the Central Servicing Center (http://www.rurdev.usda.gov/​rhs/​sfh/​bor_​sfh.htm) for servicing loans made from the revolving loan fund, to include processing loan payments, reviewing financial statements, and other responsibilities involved in loan servicing.
ASDWA had no comment. SCIRP&DC wants to service the loans in house and has a proven track record. MAP recommends not utilizing the Central Servicing Center. Both CRG and RCAP believe maintaining servicing in house allows the lender to stay close to borrowers and alerts the lender to any potential problems. Also, using a third party for servicing would raise costs.
The Agency agrees with SCIRP&DC, MAP, CRG, and RCAP that the grant recipient should service loans made from the Revolving Fund Program. The direct final rule, 7 CFR Part 1783, does not require loans made from the Revolving Fund Program to be serviced by the Central Servicing Center.
(6) RUS is also seeking comments on the definition of eligible and ineligible projects for the loans made from the revolving loan fund.
ASDWA wants the lender to consult with state agencies in defining eligible projects. SCIRP&DC believes that reasonable administrative fees for providing guidance/technical assistance should be an eligible project. CRG recommends that pre-development, upgrades, or extending service should have the same eligibility requirements as the regular RUS Water and Waste Disposal Loan Program. RCAP believes that projects financed under this program should be coordinated with the State Rural Development Office. RCAP also presents a long list of eligible projects they feel should be included.
The Agency is required to follow the definition of eligible as set forth in the authorizing legislation of the CONACT. The Agency will, to the extent possible within the parameters of the authorizing legislation, be flexible in determining the specific projects that qualify as eligible.
(1) ASDWA believes that, historically, the primary vehicle to provide low-interest loans water and wastewater systems is through the Drinking Water State Revolving Funds and the Clean Water State Revolving Funds and that Federal funds should be channeled through these mechanisms. ASDWA believes all water projects should be aligned with state drinking water priorities.
The Agency's response is that it is not authorize to roll funds for the Revolving Fund Program into the existing USDA loan and grant program or through the Drinking Water State Revolving Funds and the Clean Water State Revolving Funds.
(2) SCIRP&DC suggest that revolving fund grants be made to regional planning commissions that are familiar with state and local funding options. NRWA believes funds for the Revolving Fund Program would be more effectively used within the existing USDA loan and grant program. Cost of administering such a small program will significantly outweigh any potential benefits.
The Agency's response is that the CONACT, as amended by the Farm Bill, added a grant program to establish a revolving loan fund. The Secretary may make grants to qualified, private, non-profit entities, not state agencies. As with current RUS water and waste disposal projects, loans made under this program will be coordinated with state agencies.
All comments received were taken into consideration in developing the regulation.
For reasons set forth in the preamble, RUS amends chapter XVII of Title 7 of the Code of Federal Regulations by adding a new Part 1783 to read as follows:
Start Part Start Printed Page 59773
How will loans from the revolving fund be serviced?
§ 1783.1
§ 1783.2
Administrative expenses means expenses incurred by a grant recipient that are of the type more particularly described in § 1783.12.
Rural and rural area means a city, town or unincorporated area that has a population of no more than 10,000 inhabitants, according to the latest decennial census of the United States.
§ 1783.4
If the organization is incorporated as a non-profit corporation, it must have corporate authority under state law and its corporate charter to engage in the practice of making loans to legal entities.
In Fiscal Year 2004, applications will be accepted for this RFP grant program from October 6, 2004, until December 6, 2004, at which time the initial application period shall close. An applicant may withdraw, substitute, amend or supplement its application at any time prior to the closing of the initial application period. Once the initial application period has closed, all applications shall be considered final. For subsequent fiscal years, if any funds for this program are available, the Secretary will publish a notice to that effect. The notice will establish the period during which applications for such funds may be submitted for consideration.
§ 1783.7
(4) Evidence of applicant's legal existence and authority in the form of certified copies of organizational documents and a certified list of directors and officers with their respective terms; Start Printed Page 59774
(c) The methods of submitting applications may be changed from time to time to reflect changes in addresses and electronic submission procedures. Applicants should refer to the most recent notice of funding availability for notice of any such changes. In the event of any discrepancy, the information contained in the notice must be followed.
§ 1783.9
§ 1783.10
§ 1783.11
The grant recipient shall establish and maintain a revolving loan fund for the purposes set forth in § 1783.12. The revolving loan fund shall be comprised of revolving loan fund grant funds and the grant recipient's contributed funds. All revolving loan fund loans made to loan recipients shall be drawn from the revolving loan fund. All revolving loan fund loans shall be serviced and the revolving loan fund maintained, in accordance with this part and applicable law.
§ 1783.12
§ 1783.13
RFP grant funds may not be used for any purposes not described in § 1783.12, including, without limitation, payment or reimbursement of any of the grant recipient's administrative costs or expenses. Administrative expenses may, Start Printed Page 59775however, be paid or reimbursed from revolving loan fund assets that are not RFP grant funds, including revolved funds and cash originally contributed by the grant recipient.
§ 1783.14
(a) A loan recipient must be an eligible entity as defined in § 1783.3.
§ 1783.15
§ 1783.16
[FR Doc. 04-22446 Filed 10-5-04; 8:45 am]