[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Rules and Regulations]
[Pages 35245-35253]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14255]
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Rules and Regulations
Federal Register
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Federal Register / Vol. 77, No. 114 / Wednesday, June 13, 2012 /
Rules and Regulations
[[Page 35245]]
DEPARTMENT OF AGRICULTURE
Rural Utilities Service
7 CFR Part 1700
RIN 0572-AC23
Substantially Underserved Trust Areas (SUTA)
AGENCY: Rural Utilities Service, USDA.
ACTION: Final rule.
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SUMMARY: The Rural Utilities Service (RUS) is issuing regulations
related to loans and grants to finance the construction, acquisition,
or improvement of infrastructure projects in Substantially Underserved
Trust Areas (SUTA). The intent is to implement Section 306F of the
Rural Electrification Act by providing the process by which eligible
applicants may apply for funding by the agency.
DATES: Effective: July 13, 2012.
FOR FURTHER INFORMATION CONTACT: Michele Brooks, Director, Program
Development and Regulatory Analysis, Rural Utilities Service, Rural
Development, U.S. Department of Agriculture, 1400 Independence Avenue
SW., STOP 1522, Room 5162-S, Washington, DC 20250-1522. Telephone
number: (202) 690-1078, Facsimile: (202) 720-8435.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be not significant for purposes of
Executive Order 12866 and, therefore, has not been reviewed by the
Office of Management and Budget.
Executive Order 12988
This rule has been reviewed under Executive Order 12988, Civil
Justice Reform. Rural Development has determined that this rule meets
the applicable standards provided in section 3 of that 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 must be exhausted before an
action against the Department or its agencies may be initiated.
Regulatory Flexibility Act Certification
RUS has determined that this rule will not have a significant
economic impact on a substantial number of small entities, as defined
in the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). RUS provides
loans to borrowers at interest rates and on terms that are more
favorable than those generally available from the private sector. RUS
borrowers, as a result of obtaining federal financing, receive economic
benefits that exceed any direct economic costs associated with
complying with RUS regulations and requirements.
Information Collection and Recordkeeping Requirements
The information collection and recordkeeping requirements contained
in this rule are pending approval by OMB and will be assigned OMB
control number 0572-0147 in accordance with the Paperwork Reduction Act
of 1995 (44 U.S.C. chapter 35).
E-Government Act Compliance
Rural Development is committed to the E-Government Act, which
requires Government agencies in general to provide the public the
option of submitting information or transacting business electronically
to the maximum extent possible.
Catalog of Federal Domestic Assistance
The programs described by this rule are listed in the Catalog of
Federal Domestic Assistance Programs under number 10.759, Special
Evaluation Assistance for Rural Communities and Households Program
(SEARCH); 10.760, Water and Waste Disposal Systems for Rural
Communities; 10.761, Technical Assistance and Training Grants; 10.762,
Solid Waste Management Grants; 10.763, Emergency Community Water
Assistance Grants; 10.770, Water and Waste Disposal Loans and Grants
(Section 306C); 10.850; Rural Electrification Loans and Loan
Guarantees; 10.851, Rural Telephone Loans and Loan Guarantees, 10.855,
Distance Learning and Telemedicine Loans and Grants; 10.857, State Bulk
Fuel Revolving Fund Grants, 10.859, Assistance to High Energy Cost
Rural Communities; 10.861, Public Television Station Digital Transition
Grant Program; 10.862, Household Water Well System Grant Program
10.863, Community Connect Grant Program; 10.864, Grant Program to
Establish a Fund for Financing Water and Wastewater Projects; 10.886,
Rural Broadband Access Loans and Loan Guarantees.
The Catalog is available on the Internet at http://www.cfda.gov.
Executive Order 12372
Most programs covered by this rulemaking are excluded from the
scope of Executive Order 12372, Intergovernmental Consultation, which
may require consultation with State and local officials. See the final
rule related notice entitled ``Department Programs and Activities
Excluded from Executive Order 12372,'' (50 FR 47034). However, the
Water and Waste Disposal Loan Program, CFDA number 10.770, is subject
to the provisions of Executive Order 12372 which requires
intergovernmental consultation with State and local officials.
Unfunded Mandates
This rule contains no Federal mandates (under the regulatory
provision of Title II of the Unfunded Mandate Reform Act of 1995) for
State, local, and tribal governments or the private sector. Thus, this
rule is not subject to the requirements of sections 202 and 205 of the
Unfunded Mandate Reform Act of 1995.
National Environmental Policy Act Certification
Rural Development has determined that this rule will not
significantly affect the quality of the human environment as defined by
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).
Therefore, this action does not require an environmental impact
statement or assessment.
Executive Order 13132, Federalism
The policies contained in this rule do not have any substantial
direct effect on states, on the relationship between the
[[Page 35246]]
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 state and local
governments. Therefore, consultation with the states is not required.
Executive Order 13175
The policies contained in this rule do not impose substantial
unreimbursed direct compliance costs on Indian tribal, Alaska native,
or native Hawaiian governments and sovereign institutions or have
tribal implications that preempt tribal law. Prior to development of
this rulemaking, the agency held Tribal Consultations at seven (7) USDA
regional consultations, conducted sixteen (16) SUTA specific
consultations and hosted three (3) Internet and toll free
teleconference based webinars in order to determine the impact of this
rule on Tribal governments, communities, and individuals. Reports from
these sessions for consultation will be made part of the USDA annual
reporting on Tribal Consultation and Collaboration, the annual SUTA
Report to Congress and were used extensively throughout the drafting of
this proposed rule.
Background
USDA Rural Development (Rural Development) is a mission area within
the U.S. Department of Agriculture comprising the Rural Housing
Service, Rural Business/Cooperative Service and Rural Utilities
Service. Rural Development's mission is to increase economic
opportunity and improve the quality of life for all rural Americans.
Rural Development meets its mission by providing loans, loan
guarantees, grants and technical assistance through more than forty
programs aimed at creating and improving housing, businesses and
infrastructure throughout rural America.
Rural Utilities Service (RUS) loan, loan guarantee and grant
programs act as a catalyst for economic and community development. By
financing improvements to rural electric, water and waste, and telecom
and broadband infrastructure, RUS also plays a big role in improving
other measures of quality of life in rural America, including public
health and safety, environmental protection, conservation, and cultural
and historic preservation.
The 2008 Farm Bill (Pub. L. 110-246, codified at 7 U.S.C. 936f)
authorized the Substantially Underserved Trust Area (SUTA) initiative.
The SUTA initiative gives the Secretary of Agriculture certain
discretionary authorities relating to financial assistance terms and
conditions that can enhance infrastructure financing options in areas
that are underserved by electric, water and waste, and
telecommunications and broadband utilities. Given the challenges,
dynamics, and opportunities in implementing the SUTA initiative, RUS
has aimed to foster a process that includes the voices of tribal
leaders, tribal community members, Alaska Native Regional and Village
Corporations, Guam, American Samoa and the Commonwealth of the Northern
Mariana Islands, and other stakeholders.
Preliminary research by RUS identified various reports that
provided several insights. In 2007, the United States Census Bureau
Facts for Features article (dated 10/29/07) reported that the poverty
rate of people who reported being sole race American Indian and Alaska
Native (AI/AN) was 27 percent. Additionally, in 2006, the United States
Government Accountability Office reported that based on the 2000
decennial census, the telephone subscribership rate for Native American
households on tribal lands was substantially below the national level
of about 98 percent. Specifically, about 69 percent of Native American
households on tribal lands in the lower 48 states and about 87 percent
in Alaska Native villages had telephone service. Additionally, in 2000,
the United States Census Bureau reported that on Native American lands,
11.7 percent of residents lack complete plumbing facilities, compared
to 1.2 percent of the general U.S. population.
There are special considerations and challenges in implementing an
initiative to communities residing on trust lands. Many American
Indians, Alaska Natives, Native Hawaiians, and Pacific Islanders have a
deep spiritual, cultural, and historical relationship with the land. In
certain circumstances, the objectives of economic and infrastructure
development can be at odds with spiritual, cultural, historical, and
environmental values. Additionally, there are special legal
considerations inherent in financing projects in areas where the land
itself cannot be used as security.
The SUTA initiative identifies the need to improve utility service
and seeks to improve the availability of RUS programs to reach
communities within trust areas when communities are determined by the
Secretary of Agriculture (such authority has been delegated to the
Administrator of RUS) to be substantially underserved. The RUS programs
that are affected by this provision include: Rural Electrification
Loans and Guaranteed Loans, and High Cost Energy Grants; Water and
Waste Disposal Loans, Guaranteed Loans and Grants; Telecommunications
Infrastructure Loans and Guaranteed Loans; Distance Learning and
Telemedicine Loans and Grants; and Broadband Loans and Guaranteed
Loans.
In addition to its discretionary authority to implement the SUTA
provisions, RUS is under a continuing obligation to make annual reports
to Congress on (a) the progress of the SUTA initiative, and (b)
recommendations for any regulatory or legislative changes that would be
appropriate to improve services to communities located in substantially
underserved trust areas. RUS has submitted three reports to Congress,
dated June 18, 2009, June 21, 2010, and August 23, 2011.
The USDA Office of Native American Programs (since renamed the
Office of Tribal Relations, hereinafter OTR) and RUS began exploring
SUTA initiative implementation in 2008 after passage of the Farm Bill.
RUS in conjunction with OTR interpreted implementation to include
formal USDA Tribal Consultations and working with stakeholders that are
federally recognized tribes. Pursuant to this determination and in
accordance with President Obama's November 5, 2009, Memorandum on
Tribal Consultation, RUS conducted sixteen (16) direct tribal
consultations, seven (7) regional consultations, one listening session
and three (3) Internet and toll free teleconference based webinars on
implementation of the SUTA provision with Indian tribes from across the
country. Additionally, the agency heard from six Federal agencies at
three separate consultations on how best to implement the SUTA
provision.
Federal agencies that were consulted include: The Department of the
Interior, as the primary Federal agency with many direct
responsibilities to Native American and Pacific Islander stakeholders;
the Department of Veterans Affairs, for its clarification of the
definition of ``trust land''; the Environmental Protection Agency,
because it has information regarding underserved trust areas with
environmental challenges; the Department of Energy, because it has an
interest in promoting energy development and conservation in trust
areas; the Department of Commerce and the Federal Communications
Commission, because each agency has an interest in telecommunications
service in trust areas; the Department of Health and Human Services,
because it has a long standing interest in providing health care
services and promoting the
[[Page 35247]]
adoption of health IT in native communities; and the Office of
Management and Budget.
As a result of categorizing and analyzing the comments received
through tribal consultations and filed comments, RUS was able to
identify certain issues that impact both the underserved communities
that seek better access to RUS programs, and the federal agencies that
have similar yet sometimes competing interests in trust areas. This
regulation is informed by the insight gained through consultations and
comments, and is designed to complement existing loan, grant, and
combination loan and grant programs with the SUTA provisions that
authorize the Administrator to apply certain discretionary authorities
(2 percent interest and extended repayment terms; waivers of
nonduplication restrictions, matching fund requirements, or credit
support requirements; and highest funding priority) for the benefit of
eligible communities, and the entities that serve them, in underserved
Trust areas.
Discussion of Proposed Rule and Comments Received
In its Proposed Rule, published in the Federal Register October 14,
2011, (76 FR 63846), the agency requested comments regarding
implementing the Substantially Underserved Trust Areas provision of the
2008 Farm Bill. The agency received nine comments from the following
organization/individuals:
Society of American Indian Government Employees
Lalamilo Community Association
NANA Regional Corporation
Winnebago Tribe of Nebraska
WAIMEA Hawaiian Homesteaders Assoc., Inc.
State of Hawaii, Department of Hawaiian Home Lands
Council for Native Hawaiian Advancement
National Tribal Telecommunications Association
Cheyenne River Sioux Tribe
These comments have been summarized and are addressed below:
Society of American Indian Government Employees
The Society expressed support and appreciation for the hard work
performed by the RUS staff. The Society recommended that the agency (1)
affirmatively proclaim that all land (including all ``fee land'')
within tribal reservation boundaries to be qualified as trust lands for
the SUTA provision, (2) designate the data requirements under Sec.
1700.107 as burdensome and require that the burden of proof be on the
current service providers to demonstrate that they are actually
providing service at reasonable prices, (3) refrain from requiring
tribal communities to document significant health risks when a
significant proportion of the community is unserved, and (4) ensure
that RUS applicant reviewers have some tribal training on special legal
status of tribes as sovereign nations before reviewing these types of
applications. The Society also suggested that the SUTA Farm Bill
provisions ensure that tribes are automatically eligible to receive
waivers from the agency's non-duplication policies when a tribe applies
to serve their own areas.
RUS Response
With regard to trust land status, the RUS does not have the
authority to adjust the statutory definition of trust lands. RUS
understands the unique ``checker board'' character of trust and non-
trust lands in tribal communities The agency, consistent with its
current practice, may consider SUTA related applications that include
non-Trust territories when the service to or through those areas are
``necessary and incidental'' to improving service to a covered Trust
area. In other cases, the agency could allocate SUTA benefits to SUTA
eligible territories.
With regard to data requirements under Sec. 1700.107, the proposed
rule provides that the ``explanation and documentation of the high need
for the benefits of the eligible program * * * may'' include data from
the list of proxies. As such the list is not exclusive and applicants
are welcome to provide additional information which could demonstrate
to the Administrator that the high need for the benefits of the
eligible program exists. The agency understands the burden; however,
the applicant is in the best position to at least make an initial case
that current services are inadequate. The agency can then attempt to
document the service delivery by incumbent providers and the agency
will make an independent determination based on the information that is
available.
With regard to areas unserved by water utilities, the agency
certainly supports the general proposition that the absence of clean
sources of drinking water poses serious health risks, but the specific
details of the types of health risks a community faces due to water
quality and availability in that specific location both helps the
agency meet the finding of ``substantially underserved'' and target
limited funding to areas where it is needed the most.
As for training on the special legal status of tribes as sovereign
nations for application reviewers, the agency has and will continue to
train staff on the SUTA provision and a wide range of issues affecting
tribal participation in RUS program including the sovereign nation
status of tribes. RUS has provided service to numerous tribes as
sovereign nations, and understands the legal status and collateral
challenges to develop solutions that provide for program participation
and the balance to protect taxpayer investments.
Regarding amendments to the Farm Bill, under SUTA the RUS may make
legislative recommendations and will take our experience with the new
authorities into account.
Waimea Hawaiian Homesteaders Association, Council for Native Hawaiian
Advancement, Lalamilo Community Association and the Department of
Hawaiian Homelands
The agency received comments from several entities in support of
RUS' historic consultation efforts to implement the SUTA provisions to
communities residing on trust lands managed by the Department of
Hawaiian Home lands. The agency has a long history of providing access
to capital for infrastructure projects to communities throughout the
Hawaiian home lands. The current statute only applies the SUTA
provisions to RUS programs. The Rural Development mission area will
likely learn from the implementation of SUTA by the RUS and may outline
important best practices in its annual report to Congress.
In comments submitted by the state of Hawaii's Department of
Hawaiian Homelands (DHHL), recommendations were made requesting the
agency to (1) interpret Sec. 1700.104 to apply feasibility
requirements on the specific project rather than the applicant and (2)
interpret Sec. 1700.107 to permit USDA to provide grant assistance of
up to 75 percent for communities on Trust lands in Alaska and Hawaii
that have a median family income of 80 percent.
RUS Response
Regarding the feasibility recommendation, the agency points to its
response to the NTTA (below) which raised similar recommendations. The
RUS is bound under Section 306F(c)(4) of the Rural Electrification Act
(RE Act) which states that the Secretary ``shall only make loans or
loan guarantees that are found to be financially feasible'' under the
SUTA amendments to the RE Act and it does not expand other discretions.
The SUTA discretionary authorities defined by these provisions of the
RE Act are summarized earlier.
[[Page 35248]]
The RUS will continue its long standing practice of working
collaboratively with native communities to find solutions that balance
federal loan security requirements with the unique circumstances facing
native communities. Therefore, DHHL's recommendations regarding loan
security and financial feasibility will be addressed in the application
review process.
With regard to DHHL's recommendation to authorize grant assistance
of up to 75 percent for communities on Trust lands in Alaska and Hawaii
with a median family income of 80 percent, the agency points to its
response to NTTA regarding the level of grant funds dedicated for a
particular provision in the statute. The amount of loan and grant funds
that can be dedicated for any single purpose are generally defined by
the authorizing statutes the agency administers and the annual
appropriations laws which allocate budget authority (BA) to various
programs. The SUTA provisions of the RE Act do not grant the agency any
new authorities to convert BA among and between grant, direct loan or
loan guarantee categories. Where it has such authority, the agency
takes into account the needs of eligible communities.
We also note DHHL's support for Sec. 1700.108 which covers
application requirements that invite SUTA applicants to provide a
variety of data sets that are already provided to other federal
agencies who work closely with native communities. With the inclusion
of subsection (H), RUS recognizes the need for native communities to
articulate their unique circumstances to federal agencies for purposes
of program eligibility.
NANA Regional Corporation
The NANA Regional Corporation (an ANCSA Regional Corporation in
Alaska) filed comments expressing concern over the current eligibility
requirements contained in the Proposed Rule on SUTA. NANA argues that
the current requirements may preclude villages in its region and across
Alaska for SUTA consideration since many Alaska Native villages are not
located on large tracts of trust land.
RUS Response
The definition of trust areas in the Proposed Rule is taken
directly from the current statute (7 U.S.C. 306F (B)(2)) added to the
RE Act as part of the Food, Conservation and Energy Act of 2008 (the
Farm Bill). This definition includes land that ``is owned by a Regional
Corporation or a Village Corporation, as such terms are defined in
Section 3(g) and 3(j) of the Alaska Native Claims Settlement Act * *
*.'' The RUS does not have the authority to adjust the statutory
definition of trust lands. RUS understands the many unique
infrastructure challenges that rural communities (both Native and non-
Native) face throughout Alaska. The agency, consistent with current
practice, however, may consider SUTA related applications that include
non-Trust territories when the service to or through those areas are
``necessary and incidental'' to improving service to a covered Trust
area. In other cases, the agency could allocate SUTA benefits to SUTA
eligible territories. RUS is also legislatively mandated to report to
Congress annually on its implementation of the SUTA legislation. As
part of that report, RUS may suggest ``recommendations for any
regulatory or legislative changes that would be appropriate to improve
services to substantially underserved trust areas.'' In this regard,
the NANA suggestions on coverage of non-Trust territories are very
helpful.
Winnebago Tribe of Nebraska
The Winnebago Tribe of Nebraska expressed support for the SUTA
regulations championing waivers of matching requirements and giving the
highest priority to SUTA projects to facilitate expedient construction,
acquisition or improvements of infrastructure throughout tribal
communities. The Tribe noted the ongoing need for access to robust
broadband service to be deployed in order for economic capacity
building to occur throughout the Winnebago community. Specifically, the
Tribe highlighted the inadequate level of mobile wireless and broadband
coverage in their region. The tribe's listed priorities in health,
education, safety and economic capacity building and recommend that
tribal governments merit the right to control the planning, adoption,
utilization and sustainability of any and all services that advance
their goals.
RUS Response
SUTA will give the RUS new tools to make financial resources more
accessible to entities seeking to bring modern utility services to
tribal areas. We share the concerns expressed by the Tribe that
unserved native communities can no longer be ignored and that the
availability of adequate broadband access remains an important national
priority. USDA has made the deployment of advanced services on Tribal
lands a central pillar to our rural economic development mission which
will be accelerated by this regulation.
National Tribal Telecommunications Association
The National Tribal Telecommunications Association commended USDA
for its diligence implementing the SUTA provisions and offered specific
comment on the following topics:
Disparity Analysis
The National Tribal Telecommunications Association (NTTA) suggested
that the USDA adopt a metric of ``disparity'' to assess infrastructure
``underservice'' and recommended a comparison of access to
infrastructure in a Trust Area and an area of community immediately
contiguous to the Trust Area.
RUS Response
In Sec. 1700.108(i) of the proposed rule, the agency seeks data
from the applicant documenting a lack of service or inadequate service
in the affected community (Sec. 1700.108(i)). The relative level of
service between Trust and non-Trust territories as well as the relative
cost between those areas are relevant factors and could be provided by
applicants in a SUTA request. A disparity analysis may be very helpful
in demonstrating a lack of service. If disparity information is
provided in a RUS application, the agency will take such information
into consideration when reviewing SUTA requests. RUS believes that
codifying a disparity test may have the unintended consequence of
signaling that SUTA authorities would be less available where a Trust
Area exists and its surrounding non-Trust areas all suffer from a lack
of service.
Overlapping or Incumbent Service Provider Areas
The NTTA recommends that the proposed definition of ``underserved''
in section 1700.101 be amended to add the phrase, ``notwithstanding
that a service provider is an RUS borrower.''
RUS Response
A change in the definition of ``underserved'' is not necessary to
address the concern of the commenter and is addressed elsewhere.
Whether an area is determined to be ``underserved'' does not depend on
the relationship of the incumbent service provider to the RUS. However,
among the discretionary powers given to the agency under section
306F(c)(2) of the RE Act and under section 1700.106 of the proposed
rule, is the power to waive ``non-
[[Page 35249]]
duplication restrictions.'' That core discretionary authority is not
limited to areas served by RUS borrowers or non-borrowers.
Financial Feasibility Considerations
NTTA makes several comments and recommended changes regarding
financial feasibility, loan security and risk assessments as well as
weighing financial feasibility against a community's lack of essential
infrastructure. Specifically, NTTA recommends changing proposed section
1700.104 from ``the financial feasibility of an application will be
determined pursuant to normal underwriting practices for a particular
eligible program'' to ``pursuant to normal underwriting practices, and
such reasonable alternative practices as may support financial
feasibility determination for a particular eligible program.'' NTTA
also proposes to add additional discretionary authorities related to
collateral, security and risk assessment and Times Interest Earned
Ratio (TIER) calculations.
RUS Response
The Section 306F(c)(4) of the Rural Electrification Act states that
the Secretary ``shall only make loans or loan guarantees that are found
to be financially feasible'' under the SUTA amendments to the Rural
Electrification Act and it does not expand other discretions. The SUTA
discretionary authorities defined by these provisions of the Rural
Electrification Act are summarized here.
AUTHORITY OF SECRETARY.--In carrying out subsection (b),
the Secretary--
[cir] May make available from loan or loan guarantee programs
administered by the Rural Utilities Service to qualified utilities or
applicants financing with an interest rate as low as 2 percent, and
with extended repayment terms;
[cir] May waive nonduplication restrictions, matching fund
requirements, or credit support requirements from any loan or grant
program administered by the Rural Utilities Service to facilitate the
construction, acquisition, or improvement of infrastructure;
[cir] May give the highest funding priority to designated projects
in substantially underserved trust areas; and
[cir] Shall only make loans or loan guarantees that are found to be
financially feasible and that provide eligible program benefits to
substantially underserved trust areas.
The proposed regulation faithfully codifies those authorities and
the constraint of financial feasibility is also aligned with the RUS
programs to assure debt repayment and protect taxpayer funds. The
agency does not have the administrative ability to exceed that
authority. However, the commenter's concerns about finding creative
solutions to feasibility issues are well taken. The RUS has a long
history of working closely with tribal communities to address loan
security issues. Since the earliest days of the Rural Electrification
Administration and now the RUS, the agency has found ways to reconcile
taxpayer's expectation of loan security with the sovereign rights of
tribal governments. In this regard, the agency has adapted its mortgage
documents and its loan contracts to accommodate unique tribal needs and
circumstances.
The agency intends to continue to work with tribal organizations to
find creative ways to address tribal needs while preserving loan
security. Therefore, the final rule will adapt the language proposed by
NTTA for Sec. 1700.104 to read, ``pursuant to normal underwriting
practices, and such reasonable alternatives within the discretion of
RUS that contribute to a financial feasibility determination for a
particular eligible program or project.''
Eligible Communities
NTTA proposes that consistent with its advocacy before the Federal
Communications Commission (FCC), Tribes be given an option to choose
the service provider serving a Trust community or providing services
for its own community and that the Trust Area governments be permitted
to engage service providers on quality of service standards.
RUS Response
All RUS applicants are required to demonstrate in their application
that they have secured all regulatory approvals necessary to construct
infrastructure and deliver services. The RUS does not have the power to
define the jurisdiction of tribal governments and is mindful of their
sovereignty. The agency engages with tribes on a government to
government basis. An applicant must demonstrate that they have secured
all necessary regulatory approvals on the federal, tribal, state and
local levels. Furthermore, applicants must demonstrate that their
projects are financially feasible. The agency notes that an applicant
seeking to finance infrastructure on trust territory would likely have
a difficult time demonstrating financial feasibility if it could not
demonstrate tribal support, at a governmental or community level.
Grant Authority
The NTTA recommends that RUS convert loan funds to grant options
for the benefit of ``underserved'' or ``unserved'' trust communities.
RUS Response
The availability of loan and grant funds are generally defined by
the authorizing statutes the agency administers and the annual
appropriations laws which allocate budget authority (BA) to various
programs. The SUTA provisions of the RE Act do not grant the agency any
new authorities to convert BA among and between loan, grant or loan
guarantee categories. Where it has such authority, the agency takes
into account the needs of eligible communities.
Flexible Proxies for Infrastructure Underservice
The NTTA commends the RUS for providing a list of proxies for
determining ``underservice'' and recommends that an additional
provision be added to allow for additional data to be submitted.
RUS Response
The proposed rule provides that the ``explanation and documentation
of the high need for the benefits of the eligible program * * * may''
include data from the list of proxies. As such the list is not
exclusive and applicants are welcome to provide additional information
which could demonstrate to the Administrator that the high need for the
benefits of the eligible program exists.
Technical Assistance
The NTTA recommends that RUS implement a technical assistance
program. On a related matter, the NTTA also recommends that the RUS
recommend to entities seeking to serve Trust Areas that they apply
under SUTA.
RUS Response
``While the RUS has limited formal technical assistance funding for
some of its programs,'' the RUS is committed to expanding outreach to
tribal communities and applicants on all of its programs. The RUS
appreciates the suggestion and shares the commenter's concern about
technical assistance. That is why in the Broadband Initiatives Program
of the American Recovery and Reinvestment Act of 2009, the RUS
dedicated $3,384,202 of budget authority to fund 19 technical
assistance
[[Page 35250]]
grants. The majority of those awards were to Native American
communities and organizations.
USDA State Rural Development Offices, RUS General Field
Representatives, Rural Water Circuit Riders and RUS headquarters staff
all offer assistance to applicants and are integral parts of the rural
development program delivery. SUTA is an important initiative and RUS
and RD staff members have been trained on the provision and will be
trained on the final rule.
Cheyenne River Sioux Tribe
In comments filed pursuant to the proposed SUTA regulation, the
Cheyenne River Sioux Tribe requests that the RUS interpret the
statutory language for SUTA to allow a waiver of the statutory
limitation on provision of grant in 7 U.S.C. 1926(a)(2) for Water and
Waste Disposal grants.
7 U.S.C. 1926(a)(2)(A)(ii) states that ``the amount of any grant
made under the authority of this subparagraph shall not exceed 75 per
centum of the development cost of the project to serve the area which
the association determines can be feasibly served by the facility and
to adequately serve the reasonably foreseeable growth needs of the
area.''
The commenter writes that the authority provided to the Secretary
pursuant to Section 6105(C)(2) of the 2008 Farm Bill, allows the
Secretary to waive the 75 percent grant limitation when considering
financial assistance pursuant to 7 CFR 1780.
Neither authorizing statute for the Water and Waste Disposal loan
and grant program, nor the program regulations, specifically state that
a match is required. By way of contrast, in 7 U.S.C.
1926(a)(2)(C)(ii)(II), Congress specifically refers to matching funds
related to Special Evaluation Assistance for Rural Communities and
Households (SEARCH). In addition, in Section 306C of the Consolidated
Farm and Rural Development Act (ConAct), Congress specifically
authorized the Secretary to provide up to 100 percent grants for water
and waste infrastructure to Native American Tribes to address health
and sanitary issues.
However, the commenter further suggests that ``a restriction of the
total amount of project cost that would be funded with grant funds
creates a matching requirement whether the word ``matching'' is used.
RUS Response
The Agency will consider requests for waiver of some, or all, of
the loan portion of a loan-grant combination under SUTA authority on a
case-by-case basis. The decision to consider a waiver does not waive
the over-arching requirement for a finding of need or feasibility
pursuant to program regulations. The final determination of grant
assistance will be made based on the following factors:
1. Eligibility requirements, including credit elsewhere
certifications pursuant to 1780.7(d);
2. Underwriting and demonstration of need for grant, including the
use of the prevailing program interest rate and the discretionary as
low as 2% interest rates on loans pursuant to SUTA;
3. Availability of funds, including those funds available pursuant
to the Section 306C grant set-aside for Native American Tribes or other
applicable congressional set-asides; and
4. Percentage of the project that is located on SUTA eligible trust
lands.
Eligibility Requirements
Eligibility requirements pursuant to 7 CFR 1780, such as credit
elsewhere certifications (Sec. 1780.7(d)) and restrictions on the use
of grant to reduce equivalent dwelling unit costs to a level less than
similar systems cost (Sec. 1780.10 (b)(1)), will apply to applicants
seeking a waiver of the loan component under SUTA.
Finding of Need and Feasibility Through Underwriting
To ensure that limited grants funds are awarded to those projects
with the greatest need, financial analysis and underwriting will
continue to be used to determine the need for grant, including grant
above the 75 percent level. The analysis will include the applicant's
ability to incur debt at the prevailing program interest rate and the
discretionary as low as 2 percent interest rates on loans pursuant to
SUTA.
Availability of Funds
The commenter correctly noted that the Agency has limited grant
funding available in the regular loan and grant program and a backlog
of requests that exceeds $3 billion. In addition, reductions in program
funds will impact the ability of the Agency to provide needed grant
funding. To support SUTA efforts to increase tribal participation in
the program, the Agency will maximize the use of the Section 306C grant
program, and other appropriate grant program set-asides to meet the
grant needs of projects seeking waivers of the 75 percent grant
limitation under SUTA. To ensure that grant funds are available to fund
as many projects as possible, the agency may limit the total amount of
grant funding to be used to address requests for additional grants
pursuant to SUTA, as well as total Agency grant investment in the
project.
Percentage of Project on SUTA-Defined Trust Lands
Grant determinations will factor in the percentage of the proposed
project that is located on substantially underserved trust lands as
defined under SUTA.
List of Subjects in 7 CFR Part 1700
Authority delegations (Government agencies), Electric power,
Freedom of information, Loan programs--communications, Loan programs-
energy, Organization and functions (Government agencies), Rural areas,
Telecommunications, Broadband loan and grant programs, water and waste
loan and grant program, and the Distance Learning and Telemedicine
program.
For reasons set out in the preamble, the agency amends chapter XVII
of title 7 of the Code of Federal Regulations by amending part 1700 to
read as follows:
PART 1700--GENERAL INFORMATION
0
1. The authority citation continues to read as follows:
Authority: 5 U.S.C. 301, 552; 7 U.S.C. 901 et seq., 1921 et.
seq., 6941 et seq.; 7 CFR 2.7, 2.17 and 2.47.
Sec. Sec. 1700.59 through 1700.99 [Reserved]
0
2. Add reserved Sec. Sec. 1700.59 through 1700.99 to Subpart C of part
1700.
0
3. Add subpart D, consisting of Sec. Sec. 1700.100 to 1700.150, to
read as follows:
Subpart D--Substantially Underserved Trust Areas
Sec.
1700.100 Purpose.
1700.101 Definitions.
1700.102 Eligible programs.
1700.103 Eligible communities.
1700.104 Financial feasibility.
1700.105 Determining whether land meets the statutory definition of
``trust land.''
1700.106 Discretionary provisions.
1700.107 Considerations relevant to the exercise of SUTA
discretionary provisions.
1700.108 Application requirements.
1700.109 RUS review.
1700.110--1700.149 [Reserved]
1700.150 OMB Control Number.
Subpart D--Substantially Underserved Trust Areas
Sec. 1700.100 Purpose.
This subpart establishes policies and procedures for the Rural
Utilities Service (RUS) implementation of the
[[Page 35251]]
Substantially Underserved Trust Areas (SUTA) initiative under section
306F of the Rural Electrification Act of 1936, as amended (7 U.S.C.
906f). The purpose of this rule is to identify and improve the
availability of eligible programs in communities in substantially
underserved trust areas.
Sec. 1700.101 Definitions.
Administrator means the Administrator of the Rural Utilities
Service, or designee or successor.
Applicant means an entity that is eligible for an eligible program
under that program's eligibility criteria.
Borrower means any organization that has an outstanding loan or
loan guarantee made by RUS for a program purpose.
Completed application means an application that includes the
elements specified by the rules for the applicable eligible program in
form and substance satisfactory to RUS.
ConAct means the Consolidated Farm and Rural Development Act, as
amended (7 USC 1921 et seq.).
Credit support means equity, cash requirements, letters of credit,
and other financial commitments provided in support of a loan or loan
guarantee.
Eligible community means a community as defined by 7 CFR 1700.103.
Eligible program means a program as defined by 7 CFR 1700.102.
Financial assistance means a grant, combination loan and grant,
loan guarantee or loan.
Financial feasibility means the ability of a project or enterprise
to meet operating expenses, financial performance metrics, such as debt
service coverage requirements and return on investment, and the general
ability to repay debt and sustain continued operations at least through
the life of the RUS loan or loan guarantee.
Matching fund requirements means the applicant's financial or other
required contribution to the project for approved purposes.
Nonduplication generally means a restriction on financing projects
for services in a geographic area where reasonably adequate service
already exists as defined by the applicable program.
Project means the activity for which financial assistance has been
provided.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture, successor to the Rural
Electrification Administration.
Substantially underserved trust area means a community in trust
land with respect to which the Administrator determines has a high need
for the benefits of an eligible program.
Trust land means ``trust land'' as defined in section 3765 of title
38, United States Code as determined by the Administrator under 7 CFR
1700.104.
Underserved means an area or community lacking an adequate level or
quality of service in an eligible program, including areas of
duplication of service provided by an existing provider where such
provider has not provided or will not provide adequate level or quality
of service.
Sec. 1700.102 Eligible programs.
SUTA does not apply to all RUS programs. SUTA only applies to
eligible programs. An eligible program means a program administered by
RUS and authorized in paragraph (a) of the RE Act, or paragraphs
(b)(1), (2), (14), (22), or (24) of section 306(a) (7 U.S.C.
1926(a)(1), (2), (14), (22), (24)), or sections 306A, 306C, 306D, or
306E of the Con Act (7 U.S.C. 1926a, 1926c, 1926d, 1926e).
Sec. 1700.103 Eligible communities.
An eligible community is a community that:
(a) Is located on Trust land;
(b) May be served by an RUS administered program; and
(c) Is determined by the Administrator as having a high need for
benefits of an eligible program.
Sec. 1700.104 Financial feasibility.
Pursuant to normal underwriting practices, and such reasonable
alternatives within the discretion of RUS that contribute to a
financial feasibility determination for a particular eligible program
or project, the Administrator will only make grants, loans and loan
guarantees that RUS finds to be financially feasible and that provide
eligible program benefits to substantially underserved trust areas. All
income and assets available to and under the control of the Applicant
will be considered as part of the Applicant's financial profile.
Sec. 1700.105 Determining whether land meets the statutory definition
of ``trust land.''
The Administrator will use one or more of the following resources
in determining whether a particular community is located in Trust land:
(a) Official maps of Federal Indian Reservations based on
information compiled by the U. S. Department of the Interior, Bureau of
Indian Affairs and made available to the public;
(b) Title Status Reports issued by the U. S. Department of the
Interior, Bureau of Indian Affairs showing that title to such land is
held in trust or is subject to restrictions imposed by the United
States;
(c) Trust Asset and Accounting Management System data, maintained
by the Department of the Interior, Bureau of Indian Affairs;
(d) Official maps of the Department of Hawaiian Homelands of the
State of Hawaii identifying land that has been given the status of
Hawaiian home lands under the provisions of section 204 of the Hawaiian
Homes Commission Act, 1920;
(e) Official records of the U.S. Department of the Interior, the
State of Alaska, or such other documentation of ownership as the
Administrator may determine to be satisfactory, showing that title is
owned by a Regional Corporation or a Village Corporation as such terms
are defined in the Alaska Native Claims Settlement Act (43 U.S.C. 1601
et seq);
(f) Evidence that the land is located on Guam, American Samoa or
the Commonwealth of the Northern Mariana Islands, and is eligible for
use in the Veteran's Administration direct loan program for veterans
purchasing or constructing homes on communally-owned land; and
(g) Any other evidence satisfactory to the Administrator to
establish that the land is ``trust land'' within the meaning of 38
U.S.C. 3765(1).
Sec. 1700.106 Discretionary provisions.
(a) To improve the availability of eligible programs in eligible
communities determined to have a high need for the benefits of an
eligible program, the Administrator retains the discretion, on a case-
by-case basis, to use any of the following SUTA authorities
individually or in combination to:
(1) Make available to qualified applicants financing with an
interest rate as low as 2 percent;
(2) Extend repayment terms;
(3) Waive (individually or in combination) non-duplication
restrictions, matching fund requirements, and credit support
requirements from any loan or grant program administered by RUS; and
(4) Give the highest funding priority to designated projects in
substantially underserved trust areas.
(b) Requests for waivers of nonduplication restrictions, matching
fund requirements, and credit support requirements, and requests for
highest funding priority will be reviewed on a case-by-case basis upon
written request
[[Page 35252]]
of the applicant filed pursuant to 7 CFR 1700.108.
(c) Notwithstanding the requirements in paragraph (b) of this
section, the Administrator reserves the right to evaluate any
application for an eligible program for use of the discretionary
provisions of this subpart without a formal, written request from the
applicant.
Sec. 1700.107 Considerations relevant to the exercise of SUTA
discretionary provisions.
(a) In considering requests to make available financing with an
interest rate as low as 2 percent, and extended repayment terms, the
Administrator will evaluate the effect of and need for such terms on
the finding of financial feasibility.
(b) In considering a request for a non-duplication waiver, the
Administrator will consider the offerings of all existing service
providers to determine whether or not granting the non-duplication
waiver is warranted. A waiver of non-duplication restrictions will not
be given if the Administrator determines as a matter of financial
feasibility that, taking into account all existing service providers,
an applicant or RUS borrower would not be able to repay a loan or
successfully implement a grant agreement. Requests for waivers of non-
duplication restrictions will be reviewed by taking the following
factors into consideration:
(1) The size, extent and demographics of the duplicative area;
(2) The cost of service from existing service providers;
(3) The quality of available service; and
(4) The ability of the existing service provider to serve the
eligible service area.
(c) Requests for waivers of matching fund requirements will be
evaluated by taking the following factors into consideration:
(1) Whether waivers or reductions in matching or equity
requirements would make an otherwise financially infeasible project
financially feasible;
(2) Whether permitting a matching requirement to be met with
sources not otherwise permitted in an affected program due to
regulatory prohibition may be allowed under a separate statutory
authority; and
(3) Whether the application could be ranked and scored as if the
matching requirements were fully met.
(d) Requests for waivers of credit support requirements will be
evaluated taking the following factors into consideration:
(1) The cost and availability of credit support relative to the
loan security derived from such support;
(2) The extent to which the requirement is shown to be a barrier to
the applicant's participation in the program; and
(3) The alternatives to waiving the requirements.
(e) The Administrator may adapt the manner of assigning highest
funding priority to align with the selection methods used for
particular programs or funding opportunities.
(1) Eligible programs which use priority point scoring may, in a
notice of funds availability or similar notice, assign extra points for
SUTA eligible applicants as a means to exercise a discretionary
authority under this subpart.
(2) The Administrator may announce a competitive grant opportunity
focused exclusively or primarily on trust lands which incorporates one
or more discretionary authorities under this subpart into the rules or
scoring for the competition.
Sec. 1700.108 Application requirements.
(a) To receive consideration under this subpart, the applicant must
submit to RUS a completed application that includes all of the
information required for an application in accordance with the
regulations relating to the program for which financial assistance is
being sought. In addition, the applicant must notify the RUS contact
for the applicable program in writing that it seeks consideration under
this subpart and identify the discretionary authorities of this subpart
it seeks to have applied to its application. The required written
request memorandum or letter must include the following items:
(1) A description of the applicant, documenting eligibility.
(2) A description of the community to be served, documenting
eligibility in accordance with 7 CFR 1700.103.
(3) An explanation and documentation of the high need for the
benefits of the eligible program, which may include:
(i) Data documenting a lack of service (i.e. no service or unserved
areas) or inadequate service in the affected community;
(ii) Data documenting significant health risks due to the fact that
a significant proportion of the community's residents do not have
access to, or are not served by, adequate, affordable service.
(iii) Data documenting economic need in the community, which may
include:
(A) Per capita income of the residents in the community, as
documented by the U.S. Department of Commerce, Bureau of Economic
Analysis;
(B) Local area unemployment and not-employed statistics in the
community, as documented by the U.S. Department of Labor, Bureau of
Labor Statistics and/or the U.S. Department of the Interior, Bureau of
Indian Affairs;
(C) Supplemental Nutrition Assistance Program participation and
benefit levels in the community, as documented by the U.S. Department
of Agriculture, Economic Research Service;
(D) National School Lunch Program participation and benefit levels
in the community, as documented by the U.S. Department of Agriculture,
Food and Nutrition Service;
(E) Temporary Assistance for Needy Families Program participation
and benefit levels in the community, as documented by the U.S.
Department of Health and Human Services, Administration for Children
and Families;
(F) Lifeline Assistance and Link-Up America Program participation
and benefit levels in the community, as documented by the Federal
Communications Commission and the Universal Service Administrative
Company;
(G) Examples of economic opportunities which have been or may be
lost without improved service.
(H) Data maintained and supplied by Indian tribes or other tribal
or jurisdictional entities on ``trust land'' to the Department of
Interior, the Department of Health and Human Services and the
Department of Housing and Urban Development that illustrates a high
need for the benefits of an eligible program.
(4) The impact of the specific authorities sought under this
subpart.
(b) The applicant must provide any additional information RUS may
consider relevant to the application which is necessary to adequately
evaluate the application under this subpart.
(c) RUS may also request modifications or changes, including
changes in the amount of funds requested, in any proposal described in
an application submitted under this subpart.
(d) The applicant must submit a completed application within the
application window and guidelines for an eligible program.
Sec. 1700.109 RUS review.
(a) RUS will review the application to determine whether the
applicant is eligible to receive consideration under this subpart and
whether the application is timely, complete, and
[[Page 35253]]
responsive to the requirements set forth in 7 CFR 1700.107.
(b) If the Administrator determines that the application is
eligible to receive consideration under this subpart and one or more
SUTA requests are granted, the applicant will be so notified.
(c) If RUS determines that the application is not eligible to
receive further consideration under this subpart, RUS will so notify
the applicant. The applicant may withdraw its application or request
that RUS treat its application as an ordinary application for review,
feasibility analysis and service area verification by RUS consistent
with the regulations and guidelines normally applicable to the relevant
program.
Sec. Sec. 1700.110-1700.149 [Reserved]
Sec. 1700.150 OMB Control Number.
The reporting and recordkeeping requirements contained in this part
have been approved by the Office of Management and Budget and have been
assigned OMB control number 0572-0147.
Dated: May 23, 2012.
Jonathan Adelstein,
Administrator, Rural Utilities Service.
[FR Doc. 2012-14255 Filed 6-12-12; 8:45 am]
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