[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 1999 Edition]
[From the U.S. Government Printing Office]
7
Agriculture
[[Page i]]
PARTS 1600 TO 1899
Revised as of January 1, 1999
CONTAINING
A CODIFICATION OF DOCUMENTS
OF GENERAL APPLICABILITY
AND FUTURE EFFECT
AS OF JANUARY 1, 1999
With Ancillaries
Published by
the Office of the Federal Register
National Archives and Records
Administration
as a Special Edition of
the Federal Register
[[Page ii]]
U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON : 1999
For sale by U.S. Government Printing Office
Superintendent of Documents, Mail Stop: SSOP, Washington, DC 20402-9328
[[Page iii]]
Table of Contents
Page
Explanation................................................. v
Title 7:
Subtitle B--Regulations of the Department of Agriculture--
Continued:
Chapter XVI--Rural Telephone Bank, Department of
Agriculture 5
Chapter XVII--Rural Utilities Service, Department of
Agriculture 17
Chapter XVIII--Rural Housing Service, Rural
Business-Cooperative Service, Rural Utilities
Service, and Farm Service Agency, Department of
Agriculture 1097
Finding Aids:
Material Approved for Incorporation by Reference........ 1145
Table of CFR Titles and Chapters........................ 1155
Alphabetical List of Agencies Appearing in the CFR...... 1173
Redesignation Tables.................................... 1183
List of CFR Sections Affected........................... 1187
[[Page iv]]
----------------------------
Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 7 CFR 1600.1 refers
to title 7, part 1600,
section 1.
----------------------------
[[Page v]]
EXPLANATION
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[[Page vi]]
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[[Page vii]]
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Director,
Office of the Federal Register.
January 1, 1999.
[[Page ix]]
THIS TITLE
Title 7--Agriculture is composed of fifteen volumes. The parts in
these volumes are arranged in the following order: parts 1-26, 27-52,
53-209, 210-299, 300-399, 400-699, 700-899, 900-999, 1000-1199, 1200-
1599, 1600-1899, 1900-1939, 1940-1949, 1950-1999, and part 2000 to end.
The contents of these volumes represent all current regulations codified
under this title of the CFR as of January 1, 1999.
The Food and Nutrition Service current regulations in the volume
containing parts 210-299, include the Child Nutrition Programs and the
Food Stamp Program. The regulations of the Federal Crop Insurance
Corporation are found in the volume containing parts 400-699.
All marketing agreements and orders for fruits, vegetables and nuts
appear in the one volume containing parts 900-999. All marketing
agreements and orders for milk appear in the volume containing parts
1000-1199. Part 900--General Regulations is carried as a note in the
volume containing parts 1000-1199, as a convenience to the user.
Redesignation tables appear in the Finding Aids section of the
volumes containing parts 210-299 and parts 1600-1899.
For this volume, Cheryl E. Sirofchuck was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Frances D. McDonald, assisted by Alomha S. Morris.
[[Page x]]
[[Page 1]]
TITLE 7--AGRICULTURE
(This book contains parts 1600 to 1899)
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SUBTITLE B--Regulations of the Department of Agriculture--Continued:
Part
chapter xvi--Rural Telephone Bank, Department of Agriculture 1600
chapter xvii--Rural Utilities Service, Department of
Agriculture............................................... 1700
chapter xviii--Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, and Farm
Service Agency, Department of Agriculture................. 1806
[[Page 3]]
Subtitle B--Regulations of the Department of Agriculture--Continued
[[Page 5]]
CHAPTER XVI--RURAL TELEPHONE BANK, DEPARTMENT OF AGRICULTURE
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Part Page
1600 General information......................... 7
1610 Loan policies............................... 10
[[Page 7]]
PART 1600--GENERAL INFORMATION--Table of Contents
Meetings of the Board of Directors of the Rural Telephone Bank
Sec.
1600.1 General.
1600.2 Definitions.
1600.3 Open meetings.
1600.4 Scheduling of meetings.
1600.5 Public announcement of meetings.
1600.6 Bases for closing a meeting to the public.
1600.7 Procedures for closing a meeting to the public.
1600.8 Transcript, recording or minutes; availability to the public.
Authority: 7 U.S.C. 941 et seq.; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.).
Source: 56 FR 49134, Sept. 27, 1991, unless otherwise noted.
Meetings of the Board of Directors of the Rural Telephone Bank
Sec. 1600.1 General.
The purpose of this part is to effectuate the provisions of the
Government in the Sunshine Act. This part applies to the deliberations
of a quorum of the Directors of the Bank required to take action on
behalf of the Bank where such deliberations determine or result in the
joint conduct or disposition of official Bank business. Any deliberation
to which this part applies is hereinafter in this part referred to as a
meeting of the Board of Directors.
Sec. 1600.2 Definitions.
As used in this part:
Board means Board of Directors of the Rural Telephone Bank (Bank).
Director means an individual who is a member of the Board.
Legal Counsel means the legal counsel of the Bank.
Meeting means the deliberations (including those conducted by
conference telephone call or by any other method) among a quorum of the
Directors, where such deliberations determine or result in joint conduct
of official business of the Board. For purposes of this part, each item
on the agenda of a meeting is considered a meeting or a portion of a
meeting. To the extent that the discussions do not result in the
beginning of deliberations or achieve a consensus on a matter of
official agency business or effectively predetermine official actions,
the term Meeting does not include:
(1) Deliberations to determine whether a meeting or portions of a
meeting will be open or closed or whether information pertaining to
closed meetings will be disclosed;
(2) Calling a meeting at a date earlier than announced as provided
in Sec. 1600.5;
(3) Changing the subject matter of a publicly announced meeting as
provided in Sec. 1600.5;
(4) Disposition of Board business by circulation of materials to
individual Board members;
(5) Staff briefings of Board members;
(6) Informal background discussions among Board members and staff
which clarify issues and expose varying views; or
(7) Sessions with individuals from outside the Bank where Board
members listen to a presentation and may elicit additional information.
Open to public observation means the right of any member of the
public to attend and observe, but not participate or interfere in any
way in an open meeting of the Board.
Sec. 1600.3 Open meetings.
(a) Except as provided for in Sec. 1600.6 every portion of every
meeting of the Board shall be open to public observation. Observation
does not include participation or disruptive conduct by observers, and
persons engaging in such conduct will be removed from the meeting.
Documents being considered at meetings of the Board may be obtained
subject to the exemptions set forth in Sec. 1600.8.
(b) Board members shall not jointly conduct or dispose of official
Board business other than in accordance with this part.
(c) The Secretary of the Board shall be responsible for assuring
that ample space, sufficient visibility, and adequate acoustics are
provided for public observation of meetings of the Board.
Sec. 1600.4 Scheduling of meetings.
A decision to hold a meeting of the Board should be made as provided
in the bylaws of the Bank and at least ten days prior to the scheduled
meeting date in order for the Secretary of the
[[Page 8]]
Bank to give the public notice required by Sec. 1600.5. Special meetings
of the Board may be held on less than ten days notice if a majority of
the Board determines by a recorded vote that Bank business requires that
the special meeting be held on less than ten days notice. After public
announcement of a meeting of the Board under the provisions of
Sec. 1600.5, the subject matter thereof, or the determination to open or
close a meeting, or portion thereof, may only be changed if a majority
of the Directors determines by a recorded vote that business so requires
and that no earlier announcement of the change is possible.
Sec. 1600.5 Public announcement of meetings.
(a) Except as otherwise provided in this section, public
announcement of open meetings and meetings or portions thereof closed
under Sec. 1600.7 will be made at least seven days in advance of each
meeting. Except to the extent that such information is determined to be
exempt from disclosure under Sec. 1600.6, each such public announcement
will state the time, place, and subject matter of the meeting, whether
it is to be open or closed to the public, and the name and telephone
number of the official designated to respond to requests for information
about the meeting. Each such announcement shall be submitted for
publication in the Federal Register. Copies of the announcement shall
also be mailed to holders of Class B and Class C Bank stock.
(b) If a meeting is closed, the Board may omit from the announcement
information usually included, if and to the extent that it finds that
disclosure would be likely to have any of the consequences listed in
Sec. 1600.6.
(c) Where a majority of the Board members determine by recorded vote
that Bank business requires that a meeting be called on less than ten
days notice, public announcement shall be made at the earliest
practicable time. Such announcement will state the time, place, and the
subject matter of the meeting, whether it is to be open or closed to the
public, and the name and telephone number of the official designated to
respond to requests for information about the meeting.
(d) The time or place of a meeting may be changed following the
public announcement required by paragraph (a) of this section only if
the Secretary publicly announces such change at the earliest practicable
time. The subject matter of a meeting, or the determination of the Board
to open or close a meeting, or portion of a meeting, to the public, may
be changed following the public announcement required by this section
only if:
(1) A majority of the Directors determines by a recorded vote that
business so requires and that no earlier announcement of the change was
possible; and
(2) The Secretary publicly announces such change and the vote of
each Director upon such change at the earliest practicable time.
(e) The earliest practicable time, as used in this subsection, means
as soon as possible, which should in few, if any, instances be later
than the commencement of the meeting or portion in question.
(f) Each person interested in attending an open meeting of the Board
should notify the Assistant Secretary of the Board at least one business
day prior to the open meeting of their intention to attend the meeting.
Any person who fails to do so may not be accommodated if there is
insufficient space in the meeting room.
Sec. 1600.6 Bases for closing a meeting to the public.
(a) A portion or portions of a Board meeting may be closed to the
public and any information pertaining to such meeting otherwise required
by Sec. 1600.3 to be disclosed to the public may be withheld, where the
Board determines that public disclosure of information to be discussed
at such meetings is likely to:
(1) Disclose matters that are:
(i) Specifically authorized under criteria established by an
Executive Order to be kept secret in the interests of national defense
or foreign policy; and
(ii) In fact properly classified pursuant to such Executive Order.
(2) Relate solely to the internal personnel rules and practices of
the Bank;
(3) Disclose matters specifically exempted from disclosure by
statute
[[Page 9]]
(other than the Freedom of Information Act, 5 U.S.C. 552), provided that
such statute:
(i) Requires that the matters be withheld from the public in such a
manner as to leave no discretion on the issue; or
(ii) Establishes particular criteria for withholding or refers to
particular types of matters to be withheld.
(4) Disclose trade secrets and commercial or financial information
obtained from a person and privileged or confidential;
(5) Involve accusing any person of a crime, or formally censuring
any person;
(6) Disclose information of a personal nature where disclosure would
constitute a clearly unwarranted invasion of personal privacy;
(7) Disclose investigatory records compiled for law enforcement
purposes, or information which if written would be contained in such
records, but only to the extent that the production of such records or
information would:
(i) Interfere with enforcement proceedings;
(ii) Deprive a person of a right to a fair trial or to an impartial
adjudication;
(iii) Constitute an unwarranted invasion of personal privacy;
(iv) Disclose the identity of a confidential source, and, in the
case of a record compiled by a criminal enforcement authority in the
course of a criminal investigation, or by an agency conducting a lawful
national security intelligence investigation, confidential information
furnished only by the confidential source;
(v) Disclose investigative techniques and procedures; or
(vi) Endanger the life or physical safety of law enforcement
personnel.
(8) Disclose information contained in or related to examination,
operating, or condition reports prepared by, on behalf of, or for the
use of the Bank or any other agency responsible for the regulation or
supervision of financial institutions;
(9) Disclose information the premature disclosure of which would be
likely to significantly frustrate implementation of a proposed action of
the Board or of another agency, except that this shall not apply in any
instance where the content or nature of the proposed action has already
been disclosed to the public or where the Board is required by law to
make such disclosure on its own initiative prior to taking final action
on such proposal; or
(10) Specifically concern the Board's participation in a civil
action or proceeding, an action in a foreign court or international
tribunal, or an arbitration, or the initiation, conduct, or disposition
by the Board of a particular case of formal agency adjudication pursuant
to the procedures in 5 U.S.C. 554 or otherwise involving a determination
on the record after opportunity for a hearing.
(b) Any Board meeting or portion thereof, which may be closed, or
any information which may be withheld under paragraph (a) of this
section, will not be closed or withheld, respectively, in any case where
the Board finds the public interest requires otherwise.
Sec. 1600.7 Procedures for closing a meeting to the public.
(a) A majority of all Directors may vote to close a meeting or
withhold information pertaining to that meeting. A separate vote shall
be taken with respect to any action under Sec. 1600.6(a). A majority of
the Board may act by taking a single vote with respect to a series of
meetings, a portion or portions of which are proposed to be closed to
the public, or with respect to any information concerning such series of
meetings, so long as each meeting in such series involves the same
particular subject matter and is scheduled to be held no more than
thirty days after the initial meeting in such series. The vote of each
Director participating in such vote shall be recorded and no proxy shall
be allowed.
(b) Whenever any person whose interests may be directly affected by
a portion of the Board's meeting requests that the Board close such
portion to the public on the basis of exemptions in paragraph (a)(5),
(a)(6), or (a)(7) of Sec. 1600.6, the Board, upon request of any one of
its members, will vote whether or not to close such portion of the
meeting. The vote of each Director participating in such vote shall be
recorded and no proxy shall be allowed.
[[Page 10]]
(c) Before every Board meeting closed on the basis of one or more of
the exemptions in Sec. 1600.6(a), the Legal Counsel will publicly
certify that, in Counsel's opinion, the meeting may be closed to the
public and shall state each relevant exemption.
(d) Within one business day after any vote taken pursuant to
paragraph (a), (b), or (c) of this section, the Board will make publicly
available a written copy of the vote, reflecting the vote of each Board
member. Except to the extent that such information is exempt from
disclosure, if a meeting or portion of a meeting is to be closed to the
public, the Board will make publicly available within one business day
after the required vote a full written explanation of its action,
together with a list of all persons expected to attend the meeting and
their affiliation.
Sec. 1600.8 Transcript, recording or minutes; availability to the public.
(a) The Secretary of the Board will maintain the following records
for each Board meeting, or portion thereof which is closed to the public
pursuant to a vote under Sec. 1600.7:
(1) A copy of the Legal Counsel's certification required by
Sec. 1600.7;
(2) A copy of a statement from the presiding officer which sets
forth the time and place of the closed meeting or portion thereof and a
list of persons present; and
(3) A complete verbatim transcript or electronic recording adequate
to record fully the proceedings of each Board meeting or portion of a
meeting, except that in the case of a meeting or portion of a meeting
closed to the public on the basis of exemptions in paragraph (a)(8) or
(a)(10) of Sec. 1600.6, the Secretary of the Board will maintain either
a transcript, electronic recording, or a complete set of minutes. Such
minutes shall fully and clearly describe all matters discussed and shall
provide a full and accurate summary of actions taken and the reasons
therefor, including a description of each of the views expressed on any
item and the record of all roll-call vote reflecting the vote of each
member of the question. All documents considered in connection with any
action will be identified in such minutes.
(b) The retention period for the records required by paragraph (a)
of this section will be for a period of at least two years after the
particular Board meeting or until one year after the conclusion of any
Board proceeding with respect to which the meeting or portion thereof
was held, whichever occurs later.
(c) The Secretary of the Board will make promptly available to the
public the transcript, electronic recording, transcription of the
recording, or minutes of the discussion of any item on the agenda of a
Board meeting, except for such item or items of such discussion as the
Board determines to contain information which may be withheld on the
basis of one or more of the exemptions in Sec. 1600.6.
(d) Requests for public inspection of electronic recording,
transcripts or minutes of Board meetings shall be made to the Assistant
Secretary of the Board of Directors of the Rural Telephone Bank, room
4051-South Building, U.S. Department of Agriculture, 14th Street and
Independence Avenue SW., Washington, DC 20250. Requests for inspection
or copies of transcripts shall specify the date of the meeting, the name
of the agenda and the agenda item number; this information will appear
in the notice of the meeting.
(e) The transcripts, minutes, or transcriptions of electronic
recordings of a Board meeting will disclose the identity of each
speaker, and will be furnished to any person at the actual cost of
transcription or duplication.
PART 1610--LOAN POLICIES--Table of Contents
Sec.
1610.1 General.
1610.2 Definitions.
1610.3 Loan authorizations.
1610.4 Loan applications.
1610.5 Minimum Bank loan.
1610.6 Concurrent Bank and RUS cost-of-money loans.
1610.7 Acquisition of certain exchange facilities.
1610.8 Adoption of applicable RUS policy.
1610.9 Class B stock.
1610.10 Determination of interest rate on Bank loans.
1610.11 Prepayments.
Authority: 7 U.S.C. 941 et seq.; Pub. L. 103-354, 108 Stat. 3178 (7
U.S.C. 6941 et seq.).
[[Page 11]]
Source: 38 FR 17184, June 29, 1973, unless otherwise noted.
Editorial Note: Nomenclature changes to part 1610 appear at 59 FR
66439, Dec. 27, 1994.
Sec. 1610.1 General.
Loans made by the Governor of the Rural Telephone Bank (the
``Bank'') will be made in conformance with title IV of the Rural
Electrification Act of 1936 (the ``Act''), as amended (7 U.S.C. 941 et
seq.), and this part 1610. Loans are made under section 408(a)(1) of the
Act for purposes of section 201 of the Act. Loans are also made for
purposes of section 408(a)(2) of the Act. The Bank will give preference
to the use of loan funds for purposes set forth in section 408(a)(2) of
the Act to the extent that it has completed applications for such loans.
[38 FR 17184, June 29, 1973, as amended at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.2 Definitions.
As used in this part:
Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
Appropriated means funds appropriated based on subsidy.
Bank means the Rural Telephone Bank, an agency and instrumentality
of the United States within the United States Department of Agriculture.
Borrower means any organization which has an outstanding telephone
loan made by the Bank or RUS, or guaranteed by RUS, or which is seeking
such financing.
Governor means the Governor of the Bank.
REA means the Rural Electrification Administration, formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub.L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
RUS cost-of-money-loan means a loan made under section 305(d)(2) of
the Act bearing an interest rate as determined under 7 CFR 1735.31(c).
RUS cost-of-money loans are made concurrently with Bank loans.
TIER (Times Interest Earned Ratio) means the ratio of the borrower's
net income (after taxes) plus interest expense, all divided by interest
expense. For the purpose of this calculation, all amounts will be annual
figures and interest expense will include only interest on debt with a
maturity greater than one year.
[58 FR 66252, Dec. 20, 1993, as amended at 59 FR 66439, Dec. 27, 1994]
Sec. 1610.3 Loan authorizations.
The aggregate amount of loans made will not exceed the amount
authorized by the Board of Directors (the ``Board'') of the Bank.
[38 FR 17184, June 29, 1973. Redesignated at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.4 Loan applications.
No application for a loan will be considered for approval by the
Bank until it has been reviewed by RUS and the Governor has determined,
based on such review, the eligibility of the applicant for a Bank loan
and the amount thereof. Loan application forms are available from RUS on
request. No fees or charges are assessed for Bank loans.
[58 FR 66252, Dec. 20, 1993]
Sec. 1610.5 Minimum Bank loan.
A Bank loan will not be made unless the applicant qualifies for a
Bank loan of at least $50,000.
[38 FR 17184, June 29, 1973. Redesignated at 58 FR 66252, Dec. 20, 1993]
Sec. 1610.6 Concurrent Bank and RUS cost-of-money loans.
(a) The Bank makes loans, under section 408 of the Act, concurrently
with RUS cost-of-money loans made under section 305(d)(2) of the Act. To
qualify for concurrent Bank and RUS cost-of-money loans on or after
November 1, 1993, a borrower must meet each of the following
requirements:
[[Page 12]]
(1) The average number of proposed subscribers per mile of line in
the service area of the borrower is not more than 15, or the borrower
has a projected TIER (including the proposed loans) of at least 1.0, but
not greater than 5.0, as determined by the feasibility study prepared in
connection with the loans, see 7 CFR part 1737, subpart H; and
(2) The Administrator of RUS has approved and the borrower is
participating in a telecommunications modernization plan for the state,
see 7 CFR part 1751, subpart B.
(b) The loan amounts from each program (Bank, including amounts for
class B stock, and RUS cost-of-money) will be proportionate to the total
amount of funds appropriated for the fiscal year for Bank loans and RUS
cost-of-money loans. To determine the Bank portion, the total loan
amount will be multiplied by the ratio of Bank funds appropriated for
the fiscal year to the sum of RUS cost-of-money and Bank funds
appropriated for the fiscal year in which the loan is approved. The same
method would be used to calculate the RUS cost-of-money portion (see 7
CFR 1735.31(b)). If during the fiscal year the amount of funds
appropriated changes, the ratio will be adjusted accordingly and applied
only to those loans approved afterwards.
(c) The actual rate of interest on the Bank loan shall be determined
as provided in Sec. 1610.10; the RUS cost-of-money loan shall bear
interest at a rate equal to the current cost of money to the Federal
Government, on the date of advance of funds to the borrower, for loans
of similar maturity, but not more than 7 percent per year (see 7 CFR
1735.31(c)).
(d) Generally, no more than 10 percent of lending authority from
appropriations in any fiscal year for Bank and RUS cost-of-money loans
may be loaned to a single borrower. The Bank will publish by notice in
the Federal Register the dollar limit that may be loaned to a single
borrower in that particular fiscal year based on approved Bank and RUS
lending authority.
[58 FR 66252, Dec. 20, 1993, as amended at 62 FR 46869, Sept. 5, 1997]
Sec. 1610.7 Acquisition of certain exchange facilities.
In the interest of making optimum use of the Bank's loan funds, a
Bank loan for the acquisition of exchange facilities under section
408(a)(2) of the Act (7 U.S.C. 948(a)(2)) will not be recommended by the
Governor for approval by the Secretary of Agriculture unless the
Governor determines that the acquisition is reasonably necessary to
improve the efficiency, effectiveness, or financial stability of the
borrower's telephone system, that the location and character of the
proposed acquisition are such that the acquisition is reasonably
necessary to accomplish such improvement, and that the amount of the
requested loan for such acquisition is reasonably justified by the
nature and scope of the improvement which the acquisition would effect.
Sec. 1610.8 Adoption of applicable RUS policy.
The policies embodied in 7 CFR part 1610, in all parts of 7 CFR
chapter XVII except those identified below, will be utilized by the
Governor in carrying out the Bank's loan program to the extent that such
policies are consistent with title IV of the Act (7 U.S.C. 941 et seq.)
and to the extent that policies in 7 CFR chapter XVII are consistent
with 7 CFR part 1610. The parts of 7 CFR chapter XVII applicable solely
to the Electric Program and thus exceptions to this section are parts
1710 through 1734 inclusive.
[55 FR 39397, Sept. 27, 1990]
Sec. 1610.9 Class B stock.
Borrowers receiving loans from the Bank shall be required to invest
in class B stock at 5 percent of the total amount of loan funds
advanced. Borrowers may purchase class B stock by:
(1) Paying an amount (using their own general funds) equal to 5
percent of the amount, exclusive of the amount for class B stock, of
each loan advance, at the time of such advance; or
(2) Requesting that funds for the purchase of class B stock be
included in the loan. If funds for class B stock are included in a loan,
the funds for class B stock shall be advanced in an amount
[[Page 13]]
equal to 5 percent of the amount, exclusive of the amount for class B
stock, of each loan fund advance, at the time of such advance.
[56 FR 26596, June 10, 1991]
Sec. 1610.10 Determination of interest rate on Bank loans.
(a) All loan fund advances made on or after December 22, 1987 under
Bank loans approved on or after October 1, 1987, shall bear interest at
the rate determined as established below, but not less than 5 percent
per annum.
(b) The interest rate for the period beginning on the date the
advance is made and ending at the close of the fiscal year in which the
advance is made shall be the average yield on the date of advance on
outstanding marketable obligations of the United States having a final
maturity comparable to the final maturity of the advance. The interest
rate shall be determined to the nearest 0.01 percent.
(1) For this determination, the Bank will use yields on actively
traded Treasury issues adjusted to constant maturities obtained from the
Federal Reserve statistical release (``Treasury rate''). In accordance
with standard Treasury procedures, the rate in effect for any given day
is the rate set at the close of business on the preceding day. The 30-
year Treasury rate will be applied to all advances with a final maturity
of at least 30 years from date of advance. A straight-line interpolation
between other Treasury rates will be used to determine the rate
applicable for advances with final maturities of less than 30 years.
(2) The Bank will notify the borrower in writing of the interest
rate that applies to each advance.
(c) After the fiscal year in which the advance is made, the interest
rate applied to the advance will be the sum of the calculations made in
paragraphs (c) (1) through (5) of this section. This interest rate
determination shall be made by the Governor within 30 days of the end of
each fiscal year and shall be determined to the nearest 0.01 percent.
(1) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class A stock, multiplied by the rate
of return payable by the Bank during the fiscal year as specified in
section 406(c) of the Act, which product is divided by the aggregate of
the amounts advanced by the Bank during the fiscal year.
(2) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class B stock, multiplied by the rate
at which dividends are payable by the Bank during the fiscal year as
specified in section 406(d) of the Act, which product is divided by the
aggregate of the amounts advanced by the Bank during the fiscal year.
Section 406(d) provides that ``No dividends shall be payable on Class B
stock.'' The ``amounts received by the Bank during the fiscal year from
the issuance of Class B stock'' means the amount of cash received during
the fiscal year for the purchase of Class B stock, plus the amount
advanced to borrowers by the Bank during the fiscal year for such
purchases, less any Class B stock that is rescinded during the fiscal
year.
(3) The aggregate of all amounts received by the Bank during the
fiscal year from the issuance of Class C stock, multiplied by the rate
at which dividends are payable by the Bank during the fiscal year as
specified in section 406(e) of the Act, which product is divided by the
aggregate of the amounts advanced by the Bank during the fiscal year.
(4) The amounts received by the Bank during the fiscal year from
each issue of telephone debentures and other obligations of the Bank,
multiplied, respectively, by the rates at which interest is payable by
the Bank during the fiscal year to holders of each issue, each of which
product is divided, respectively, by the aggregate of the amounts
advanced by the Bank during the fiscal year.
(5) The amount by which the aggregate of the amounts advanced by the
Bank during the fiscal year exceeds the aggregate of the amount received
by the Bank from the issuance of Class A stock, Class B stock, Class C
stock, and telephone debentures and other obligations of the Bank during
the fiscal year, multiplied by the historic cost of money rate as of the
close of the immediately preceding fiscal year, which product is divided
by the aggregate of
[[Page 14]]
the amounts advanced by the Bank during the fiscal year.
(6) As used in paragraph (c)(5) of this section, the term ``historic
cost of money rate as of the close of the immediately preceding fiscal
year,'' means the sums of the results of the following calculations: The
amounts advanced by the Bank in each fiscal year during the period
beginning with fiscal year 1974 and ending with the immediately
preceding fiscal year, multiplied, respectively, by the cost of money
rate for the fiscal year (as set forth in Table I for fiscal years 1974
through 1987, and as determined by the Governor in paragraphs (c) (1)
through (5) of this section for fiscal years after fiscal year 1987),
with each product then divided by the aggregate of the amounts advanced
by the Bank from the beginning of fiscal year 1974 through the end of
the fiscal year just ended.
Table I
------------------------------------------------------------------------
The cost of money rate shall
For advances made in fiscal year: be:
------------------------------------------------------------------------
1974...................................... 5.01 percent.
1975...................................... 5.85 percent.
1976...................................... 5.33 percent.
1977...................................... 5.00 percent.
1978...................................... 5.87 percent.
1979...................................... 5.93 percent.
1980...................................... 8.10 percent.
1981...................................... 9.46 percent.
1982...................................... 8.39 percent.
1983...................................... 6.99 percent.
1984...................................... 6.55 percent.
1985...................................... 5.00 percent.
1986...................................... 5.00 percent.
1987...................................... 5.00 percent.
------------------------------------------------------------------------
In this table, ``fiscal year'' means the 12-month period ending on
September 30 of the designated year.
(d) A borrower with a Bank loan approved on or after October 1,
1987, and before December 22, 1987, and with funds not fully advanced as
of December 22, 1987, may until the next advance under the loan or March
21, 1988, whichever is later, elect to have the interest rate specified
in the loan commitment apply to the unadvanced portion in lieu of the
rate which would otherwise apply as set forth in Sec. 1610.10(a). A
borrower making such an election shall contact, in writing, the
applicable Area Office of RUS. The Governor shall then adjust the
interest rate that applies to the unadvanced portion of the loan
accordingly.
(e) If the Bank, pursuant to section 407(b) of the Act, issues
telephone debentures to refinance outstanding telephone debentures or
other obligations, the Bank shall reduce the interest rate charged on
each advance of Bank loan funds made during the fiscal year(s) in which
the refinanced debentures or other obligations were originally issued.
The reduction shall be for the period beginning on the issue date of the
refinancing debentures and ending on the date the advance matures or is
completely prepaid, whichever is earlier. This reduction shall be in
addition to any other interest rate reduction required by section
408(b)(3) of the Act. The interest rate shall be reduced by the amount
which fully reflects that percentage of the funds saved by the Bank as a
result of the refinancing which is equal to the percentage
representation of the advance of all advances made during the fiscal
year(s) involved. In no case, however, shall the interest rate be
reduced to less than 5 percent per annum. The interest rate reduction
for each advance shall be determined as follows:
(1) The funds saved by the Bank as a result of the refinancing shall
be computed.
(2) The advance shall be divided by the total of all advances made
during the fiscal year(s) involved, and stated to the nearest .01
percent.
(3) The percentage in paragraph (e)(2) of this section is multiplied
by the amount in paragraph (e)(1) of this section to determine the
savings for a particular advance. The interest rate on that advance is
then reduced to fully reflect the savings over the remaining
amortization period of the loan from which the advance was made.
(f) Within 60 days after the issue date described in paragraph (e)
of this section, the Governor shall amend the loan documentation for
each advance described in paragraph (e) of this section, as necessary,
to reflect any interest rate reduction applicable to the advance by
reason of paragraph (e) of this section, and shall notify each affected
borrower of the reduction.
(g) Within 5 days of determining the cost of money rate for a fiscal
year, the Governor shall:
[[Page 15]]
(1) Cause the determination to be published in the Federal Register
in accordance with section 552 of title 5, United States Code, and
(2) Furnish a copy of the determination to the Comptroller General
of the United States.
(h) A borrower should not wait until the end of the fiscal year to
submit a requisition for an advance of loan funds if it wants the
advance made in that fiscal year. Borrower requisitions submitted late
in the fiscal year may not be processed in that fiscal year because of
workload and other factors.
[53 FR 36783, Sept. 22, 1988; 53 FR 39014, Oct. 4, 1988]
Sec. 1610.11 Prepayments.
(a) Bank loans approved before November 1, 1993, may be prepaid in
accordance with the terms thereof, including payment of the premium as
provided therein.
(b) A borrower may prepay part or all of a Bank loan made on or
after November 1, 1993, by paying the outstanding principal and any
accrued interest without being required to pay a prepayment premium.
(c) Borrowers that qualify to issue a refunding note or notes in
accordance with 7 CFR 1735.43, Payments on loans, shall not be required
to pay a prepayment premium on all payments made in accordance with the
new payment schedule.
[58 FR 66252, Dec. 20, 1993, as amended at 62 FR 46869, Sept. 5, 1997]
[[Page 17]]
CHAPTER XVII--RURAL UTILITIES
SERVICE, DEPARTMENT OF
AGRICULTURE
--------------------------------------------------------------------
Editorial Note: Nomenclature changes to Chapter XVII appear at 59 FR
66440, Dec. 27, 1994.
Part Page
1700 General information......................... 19
1703 Rural development........................... 24
1710 General and pre-loan policies and procedures
common to insured and guaranteed
electric loans.......................... 81
1714 Pre-loan policies and procedures for insured
electric loans.......................... 126
1717 Post-loan policies and procedures common to
insured and guaranteed electric loans... 132
1718 Loan security documents for electric
borrowers............................... 182
1721 Post-loan policies and procedures for
insured electric loans.................. 223
1724 Electric engineering, architectural services
and design policies and procedures...... 224
1726 Electric system construction policies and
procedures.............................. 238
1728 Electric standards and specifications for
materials and construction.............. 265
1730 Electric system operations and maintenance.. 289
1735 General policies, types of loans, loan
requirements--telecommunications program 293
1737 Pre-loan policies and procedures common to
insured and guaranteed
telecommunications loans................ 315
1741
Pre-loan policies and procedures for insured telephone loans [Reserved]
1744 Post-loan policies and procedures common to
guaranteed and insured telephone loans.. 331
1748
Post-loan policies and procedures for insured telephone loans [Reserved]
1751 Telecommunications system planning and
design criteria, and procedures......... 341
[[Page 18]]
1753 Telecommunications system construction
policies and procedures................. 346
1755 Telecommunications standards and
specifications for materials, equipment
and construction........................ 386
1757
Telephone systems operations and maintenance [Reserved]
1767 Accounting requirements for RUS electric
borrowers............................... 716
1770 Accounting requirements for RUS telephone
borrowers............................... 907
1773 Policy on audits of RUS borrowers........... 928
1775 Technical assistance and training grants.... 959
1777 Section 306C WWD loans and grants........... 965
1778 Emergency Community Water Assistance Grants. 969
1780 Water and waste loans and grants............ 974
1781 Resource Conservation and Development (RCD)
loans and Watershed (WS) loans and
advances................................ 1013
1785 Loan account computations, procedures and
policies for electric and telephone
borrowers............................... 1031
1786 Prepayment of RUS guaranteed and insured
loans to electric and telephone
borrowers............................... 1033
1788 RUS fidelity and insurance requirements for
electric and telephone borrowers........ 1063
1789 Use of consultants funded by borrowers...... 1073
1792 Compliance with other Federal statutes,
regulations, and Executive orders....... 1078
1794 Environmental policies and procedures....... 1081
[[Page 19]]
PART 1700--GENERAL INFORMATION--Table of Contents
Subpart A--General
Sec.
1700.1 General.
1700.2 Availability of information.
1700.3 Requests under the Freedom of Information Act.
1700.4 Public comments on proposed rules.
1700.5-1700.24 [Reserved]
Subpart B--Agency Organization and Functions
1700.25 Office of the Administrator.
1700.26 Deputy Administrators.
1700.27 Electric Program.
1700.28 Telecommunications Program.
1700.29 Water and Environmental Programs.
1700.30 Distance Learning and Telemedicine Loan and Grant Program.
1700.31 Program Accounting and Regulatory Analysis.
1700.32 Financial Services Staff.
1700.33-1700.49 [Reserved]
Subpart C--Loan and Grant Approval Authorities
1700.50-1700.52 [Reserved]
1700.53 Persons serving as Acting Administrator.
1700.54 Electric Program.
1700.55 Telecommunications Program.
1700.56 Water and Environmental Programs.
1700.57 Distance Learning and Telemedicine Loan and Grant Program.
Authority: 5 U.S.C. 301, 552; 7 U.S.C. 901 et seq., 1921 et seq.,
6941 et seq.; 7 CFR 2.7.
Source: 63 FR 16085, Apr. 2, 1998, unless otherwise noted.
Subpart A--General
Sec. 1700.1 General.
(a) The Rural Electrification Administration (REA) was established
by Executive Order No. 7037 on May 11, 1935. Statutory authority was
provided by the Rural Electrification Act of 1936 (RE Act) (7 U.S.C.
901). The RE Act established REA as a lending agency with responsibility
for developing a program for rural electrification.
(b) On October 28, 1949, the RE Act was amended to authorize REA to
make loans to improve and extend telephone service in rural areas. The
Rural Telephone Bank (RTB), an agency of the United States, was
established by amendment to the RE Act, approved May 7, 1971. The
Administrator of RUS serves as the Bank's chief executive with the title
of Governor.
(c) The Secretary of Agriculture (Secretary) established the Rural
Utilities Service (RUS) on October 20, 1994, pursuant to the Department
of Agriculture Reorganization Act of 1994, (7 U.S.C. 6941 et seq.). RUS
was assigned responsibility for administering electric and
telecommunications loan and loan guarantee programs previously
administered by REA, including programs of the Rural Telephone Bank
(RTB), and water and waste loans and grants previously administered by
the Rural Development Administration, along with other functions as the
Secretary determined appropriate. The rights, interests, obligations,
duties, and contracts previously vested in REA were transferred to, and
vested in RUS.
Sec. 1700.2 Availability of information.
(a) The offices of RUS are located in the South Building of the
United States Department of Agriculture at 1400 Independence Avenue, SW,
Washington, DC 20250-1500. Hours of operation are from 8:15 AM to 4:45
PM, Eastern time on Federal Government business days.
(b) Information about RUS is available for public inspection and
copying as required by the Freedom of Information Act, 5 U.S.C. 552 et
seq. Information about availability and costs of agency publications and
other agency materials is available from the Director, Program
Development and Regulatory Analysis, Rural Utilities Service, United
States Department of Agriculture, Room 4034-S, 1400 Independence Avenue,
SW, STOP 1522, Washington, DC 20250-1522. Phone 202-720-0736. FAX 202-
720-4120.
(c) RUS issues indexes of publications in conformance with the
Freedom of Information Act and Department of Agriculture regulations at
7 CFR part 1. Many RUS issuances, including regulations, delegations of
authority for headquarters and field staff, and other documents, are
available on the world wide web at http://www.usda.gov/rus. Single hard
copies of publications, forms, forms of basic loan and security
instruments, and other materials are available either directly from RUS,
[[Page 20]]
from the Superintendent of Documents, U.S. Government Printing Office,
Washington DC 20402, or from another source as identified. Costs for
these publications are established in conformance with 7 CFR part 1.
Sec. 1700.3 Requests under the Freedom of Information Act.
Department of Agriculture procedures for requests for official
records under the Freedom of Information Act are found at 7 CFR part 1.
Requests must be in writing and may be submitted in person or by mail to
United States Department of Agriculture, Rural Development, Room 0164-S,
1400 Independence Avenue, SW, STOP 0742, Washington, DC 20250-0742; or
by FAX to 202-720-1915. As set forth in 7 CFR 1.16, fees may be charged
for processing of requests for records. An appeal of the agency
determination concerning the request for official records shall be made
in writing to the Administrator, Rural Utilities Service, United States
Department of Agriculture, Room 4051-S, 1400 Independence Avenue, SW,
STOP 1510, Washington, DC 20250-1500.
Sec. 1700.4 Public comments on proposed rules.
RUS requires that all persons submitting comments to a proposed rule
or other document published by the agency in the Federal Register
submit, in hard copy, a signed original and three copies of their
comments to the address shown in the preamble to the proposed rule.
Copies of comments submitted are available to the public in conformance
with 7 CFR part 1.
Secs. 1700.5-1700.24 [Reserved]
Subpart B--Agency Organization and Functions
Sec. 1700.25 Office of the Administrator.
The Administrator, who also serves as Governor of the RTB, is
appointed by the President, with the advice and consent of the Senate.
The Under Secretary, Rural Development delegated to the Administrator,
in 7 CFR part 2, responsibility for administering the programs and
activities of RUS and RTB. The Administrator is aided directly by Deputy
Administrators and by Assistant Administrators for the electric program,
telecommunications program, the water and environmental programs, and
program accounting and regulatory analysis, and by other staff offices.
The work of the agency is carried out as described in this part.
Sec. 1700.26 Deputy Administrators.
Deputy Administrators aid and assist the Administrator. The Deputy
Administrator, Program Policy and Telecommunications, provides overall
policy direction to all RUS programs and directs and coordinates the
telecommunications programs. The Deputy Administrator, Water and
Environmental Programs, directs and coordinates the agency's water and
waste disposal programs. The Deputy Administrators review agency
policies in these areas and, as necessary, implement changes, and
participate with the Administrator and other officials in planning and
formulating the programs and activities of the agency, including the
making and servicing of loans and grants.
Sec. 1700.27 Electric Program.
RUS, through the Electric Program, makes loans and loan guarantees
for rural electrification and the furnishing of electric service to
persons in rural areas.
(a) The Assistant Administrator, Electric Program, directs and
coordinates the rural electrification programs, participating with the
Administrator, and others, in planning and formulating the programs and
activities of the agency, and performs other activities as the
Administrator may prescribe from time to time.
(b) Primary point of contact with borrowers. Two regional divisions,
one for the Northern Region and one for the Southern Region, are the
primary points of contact between RUS and its electric distribution
borrowers. Each office administers the rural electric program for its
assigned geographical area through headquarters staff and general field
representatives. The Power Supply Division is the primary point of
contact between RUS and its electric power supply borrowers.
[[Page 21]]
(c) Staff office. The Electric Staff Division is responsible for
engineering aspects of RUS' standards, specifications and other
requirements for design, construction, and technical operation and
maintenance of RUS borrowers' electric systems. The Electric Staff
Division oversees the activities of Technical Standards Committees ``A''
and ``B'', Electric, which determine whether engineering specifications,
drawings, material and equipment are acceptable for use in RUS
borrowers' electric systems. The Office of the Assistant Administrator
prepares analyses of loan making activities and the business and
regulatory environment of RUS borrowers and recommends policies and
procedures.
Sec. 1700.28 Telecommunications Program.
RUS and RTB, through the Telecommunications Program, make loans and
loan guarantees to furnish and improve telecommunications service in
rural areas.
(a) The Assistant Administrator, Telecommunications Program, directs
and coordinates the rural telecommunications programs, including the
distance learning and telemedicine program, and in conjunction with the
Administrator and Deputy Administrator, and others, the planning and
formulating of programs and activities of the agency, and performs other
activities as the Administrator may prescribe from time to time.
(b) Primary point of contact with borrowers. Area offices are the
primary points of contact between RUS and all telecommunications program
borrowers. Each office administers the rural telecommunications program
for its assigned geographical area with assistance of field
representatives located in areas assigned to them.
(c) Staff offices. The Telecommunications Staff Division is
responsible for engineering aspects of design, construction, and
technical operation and maintenance of rural telecommunications systems
and facilities, including the activities of Technical Standards
Committees ``A'' and ``B'', Telecommunications, which determine whether
engineering specifications, drawings, material, and equipment are
acceptable for use in RUS financed telecommunications systems. The
Advanced Telecommunications Services office prepares analyses of loan
making activities and the business and regulatory environment of RUS
borrowers and recommends policies and procedures.
[63 FR 16085, Apr. 2, 1998; 63 FR 18307, Apr. 15, 1998]
Sec. 1700.29 Water and Environmental Programs.
RUS, through the Water and Environmental Programs, provides loan and
grant funds for water and waste disposal projects serving the most
financially needy rural communities.
(a) The Assistant Administrator, Water and Environmental Programs,
develops and institutes plans, procedures, and policies for the
effective, efficient, and orderly management of Water and Environmental
Programs responsibilities; provides leadership to ensure execution of
policies and procedures by the Water and Waste Disposal programs and
support functions; and performs other activities as the Administrator or
Deputy Administrator may prescribe from time to time.
(b) Primary point of contact. The State Rural Development Offices
are the primary points of contact between RUS and loan and grant
recipients.
(c) The Engineering and Environmental Staff is responsible for
engineering staff activities at all stages of Water and Waste Disposal
programs implementation, including review of preliminary engineering
plans and specifications, procurement practices, contract awards,
construction monitoring, and system operation and maintenance. This
staff develops agency engineering practices, policies, guidelines, and
technical data relating to the construction and operation of water and
waste disposal systems, and for implementing the National Environmental
Policy Act, and other environmental requirements as they apply to all
agency programs and activities.
Sec. 1700.30 Distance Learning and Telemedicine Loan and Grant Program.
RUS, through the Telecommunications Program, makes grants and
[[Page 22]]
loans to furnish and improve telemedicine services and distance learning
services in rural areas.
(a) The Assistant Administrator, Telecommunications Program, directs
and coordinates the distance learning and telemedicine program.
(b) Primary point of contact with borrowers. The area offices,
described in Sec. 1700.28(b) support the distance learning and
telemedicine program. Each office administers the distance learning and
telemedicine program for its assigned geographical area with assistance
of field representatives located in areas assigned to them.
[63 FR 16085, Apr. 2, 1998; 63 FR 18307, Apr. 15, 1998]
Sec. 1700.31 Program Accounting and Regulatory Analysis.
RUS, through Program Accounting and Regulatory Analysis, monitors
and administers applicable regulations, RUS policy, and accounting
requirements. The staffs assist the Assistant Administrator with respect
to management, information systems, budgets, and other such matters.
(a) The Assistant Administrator, Program Accounting and Regulatory
Analysis, directs and coordinates program accounting and financial
services with respect to electric and telecommunications borrowers and
directs and coordinates the regulatory actions of the agency.
(b) This division monitors borrowers' accounting operations in order
to ensure compliance with applicable statutory and regulatory
requirements and with the requirements of the Office of Management and
Budget.
(c) The two regional branches (the Northern Region and the Southern
Region) work directly with borrowers. Each regional office has a staff
of headquarters and field accountants. The Technical Accounting and
Auditing Staff monitors industry developments, including the standards
of the Financial Accounting Standards Board, and recommends Agency
policies and procedures.
(d) Program Development and Regulatory Analysis directs and
administers the preparation, clearance, processing, and distribution of
RUS submissions to the Office of the Federal Register in the form of
proposed and final rules and notices and RUS bulletins and staff
instructions.
Sec. 1700.32 Financial Services Staff.
The Financial Services Staff evaluates the financial condition of
financially troubled borrowers in order to protect the Government's
interests.
Secs. 1700.33-1700.49 [Reserved]
Subpart C--Loan and Grant Approval Authorities
Secs. 1700.50-1700.52 [Reserved]
Sec. 1700.53 Persons serving as Acting Administrator.
The following persons are authorized, in descending order, to act
for the Administrator when he or she is not on official duty in the
Washington, DC, Metropolitan Area, is sick, has resigned, or is
deceased. That is, if the first person on the list is also not on
official duty in the Washington, DC, Metropolitan Area, is sick, has
resigned, or is deceased, the second person on the list is authorized to
act for the Administrator and so on down the list. Persons on this list
may not redelegate the authority to act as the Administrator. The
Administrator may in his or her discretion in writing, on a case-by-case
basis, delegate authority to act as Administrator in his or her absence
outside of this specified order.
(1) Deputy Administrator, Program Policy and Telecommunications.
(2) Deputy Administrator, Water and Environmental Programs.
(3) Assistant Administrator, Electric Program.
(4) Assistant Administrator, Telecommunications Program.
(5) Assistant Administrator, Water and Environmental Programs.
(6) Assistant Administrator, Program Accounting and Regulatory
Analysis.
Sec. 1700.54 Electric Program.
(a) Administrator: The authority to approve the following loans,
loan guarantees, and lien accommodations and subordinations of liens is
reserved to the Administrator:
(1) All discretionary hardship loans.
[[Page 23]]
(2) All loans, loan guarantees, and lien accommodations and
subordinations of liens to finance operating costs.
(3) All loans, loan guarantees, and lien accommodations and
subordinations of liens of more than $20,000,000 for distribution
borrowers or more than $50,000,000 for power supply borrowers.
(4) All loans, loan guarantees, and lien accommodations and
subordinations of liens for distribution borrowers that are members of a
power supply borrower that is in default of its obligations to the
Government or that is currently assigned to the Financial Services
Staff, unless otherwise determined by the Administrator.
(5) All loans, loan guarantees, and lien accommodations and
subordinations of liens that require an Environmental Impact Statement.
(6) Certifications and findings required by the RE Act or other
applicable laws and regulations, the placing and releasing of conditions
precedent to the advance of funds, and all security instruments, loan
contracts, and all other necessary documents relating to the authorities
reserved in this section.
(7) Execution of all loan contracts, security instruments, and all
other documents in connection with loans, loan guarantees, and lien
accommodations approved by the Administrator.
(b) The Assistant Administrator, Electric Program, has the authority
to approve the following loans, loan guarantees, and lien accommodations
and subordinations of liens, except for those approvals reserved to the
Administrator:
(1) Loans, loan guarantees, and lien accommodations and
subordinations of liens for distribution borrowers in amounts not
exceeding $20,000,000.
(2) Loans, loan guarantees, and lien accommodations and
subordinations of liens for power supply borrowers in amounts not
exceeding $50,000,000.
(3) Execution of all loan contracts, security instruments, and all
other documents in connection with loans, loan guarantees, and lien
accommodations approved by the Assistant Administrator, Electric
Program.
(c) Directors, Regional Divisions, have the authority to approve,
for distribution borrowers:
(1) Loans, loan guarantees, and lien accommodations and
subordinations of liens in amounts not exceeding $15,000,000 except for
those approvals reserved to the Administrator.
(2) All certifications and findings required by the RE Act or other
applicable laws and regulations, the imposing and releasing of
conditions precedent to the advance of loan funds, and all security
instruments, loan contracts, and all other documents relating to the
delegations set forth in paragraph (c)(1) of this section.
(d) Director, Power Supply Division, has the authority to approve
for power supply borrowers:
(1) Loans, loan guarantees, and lien accommodations and
subordinations of liens in amounts not exceeding $30,000,000, except for
those approvals reserved to the Administrator.
(2) All certifications and findings required by the RE Act or other
applicable laws and regulations, the placing and releasing of conditions
precedent to the advance of funds, and all security instruments, loan
contracts or all other documents relating to the delegations set forth
in paragraph (d)(1) of this section.
Sec. 1700.55 Telecommunications Program.
(a) Administrator: The authority to approve the following loans,
loan guarantees, and lien accommodations is reserved to the
Administrator:
(1) All loans, loan guarantees, and lien accommodations and
subordinations of liens to finance operating costs.
(2) All loans, loan guarantees, or lien accommodations and
subordinations of liens of $25,000,000 or more.
(3) Loans and loan guarantees with acquisition costs of $5,000,000
or more.
(4) Loans and loan guarantees containing funds to refinance
outstanding debt of more than $5,000,000.
(5) All loan contracts, security instruments, and all other
documents to be executed in connection with loans and loan guarantees
approved by the Administrator.
[[Page 24]]
(b) Assistant Administrator, Telecommunications Program, has the
authority to approve the following loans, loan guarantees, and lien
accommodations, except for those approvals reserved to the
Administrator:
(1) Loans, loan guarantees, and lien accommodations and
subordinations of liens not to exceed $25,000,000 except for those
reserved to the Administrator.
(2) Loans and loan guarantees with acquisition costs where the
acquisition portion of the loan is less than $5,000,000.
(3) Loans and loan guarantees including refinancing amounts that do
not exceed $5,000,000.
(4) Distance learning and telemedicine loans and loan guarantees
that do not exceed $5,000,000.
(5) Loan contracts, security instruments, and other documents to be
executed in connection with loans and loan guarantees approved by the
Assistant Administrator, Telecommunications Program.
(c) Area Directors have the authority to approve the following
loans, loan guarantees, and lien accommodations, except for those
approvals reserved to the Administrator:
(1) Loans, loan guarantees, and lien accommodations and
subordinations of liens of less than $10,000,000.
(2) Loans and loan guarantees with acquisition costs of less than
$2,000,000.
(3) Loans and loan guarantees including refinancing amounts of less
than $2,000,000.
(4) Any modifications in the method of carrying out loan purposes.
Sec. 1700.56 Water and Environmental Programs.
The State Rural Development Offices have the responsibility for
making and servicing water and waste loans and grants.
Sec. 1700.57 Distance Learning and Telemedicine Loan and Grant Program.
(a) Administrator: The authority to approve the following loans and
lien accommodations is reserved to the Administrator:
(1) Grants or loan and grant combinations.
(2) The number selected from each state for financial assistance for
grant approval and loans or grants approved.
(3) Extension of principal and interest repayments for rural
development purposes.
(4) Loan contracts, security instruments, and all other documents to
be executed in connection with loans and loan guarantees approved by the
Administrator.
(b) Assistant Administrator, Telecommunications Program, has the
authority to approve the following loans and lien accommodations and
subordinations of liens:
(1) Loans, that do not also include requests for grant funds, except
for those reserved to the Administrator.
(2) Loan contracts, security instruments, and all other documents to
be executed in connection with loans and loan guarantees approved by the
Assistant Administrator, Telecommunications Program.
PART 1703--RURAL DEVELOPMENT--Table of Contents
Subpart A [Reserved]
Subpart B--Rural Economic Development Loan and Grant Program
Sec.
1703.10 Purpose.
1703.11 Policy.
1703.12 Definitions.
1703.13 Source of funds.
1703.14 Disposition of funds in the subaccount.
1703.15 [Reserved]
1703.16 Eligibility.
1703.17 Uses of zero-interest loans and grants.
1703.18 Types of projects eligible for grant funding.
1703.19 General requirements for grant funding.
1703.20 Ineligible uses of zero-interest loans and grants.
1703.21 Limitations on the use of zero-interest loan and grant funds.
1703.22 Revolving loan program.
1703.23 Supplemental funds requirements for zero-interest loans and
grants.
1703.24 [Reserved]
1703.25 Significance of RUS financing to the total project cost.
1703.26 [Reserved]
1703.27 Owner's equity in the project.
1703.28 Maximum and minimum sizes of a zero-interest loan or grant
application.
[[Page 25]]
1703.29 Terms of zero-interest loan repayment.
1703.30 Approval of agreements.
1703.31 Transfer of employment or business.
1703.32 Environmental requirements.
1703.33 Other considerations.
1703.34 Applications.
1703.35 Section of the application covering the selection factors.
1703.36 Section of the application covering the project description.
1703.37 Section of the application covering the environmental impact of
the project.
1703.38--1703.44 [Reserved]
1703.45 Review and analysis of applications.
1703.46 Documenting the evaluation and selection of applications for
zero-interest loans and grants.
1703.47--1703.57 [Reserved]
1703.58 Post selection period.
1703.59 Final application processing and legal documents.
1703.60 [Reserved]
1703.61 Disbursement of zero-interest loan and grant funds.
1703.62--1703.65 [Reserved]
1703.66 Review and other requirements.
1703.67 Changes in project objective or scope.
1703.68 Loan and grant termination provisions.
1703.69--1703.79 [Reserved]
Subpart C--Rural Business Incubator Program [Reserved]
1703.80--1703.99 [Reserved]
Subpart D--Distance Learning and Telemedicine Loan and Grant Program
1703.100 Purpose.
1703.101 Policy.
1703.102 Definitions.
1703.103 Applicant eligibility and allocation of funds.
1703.104 Allowable grant and loan funding percentage.
1703.105 Grant and loan purposes.
1703.106 In-kind matching provisions.
1703.107 Ineligible loan and grant purposes.
1703.108 Maximum and minimum sizes of a grant and a loan.
1703.109 The application for financial assistance.
1703.110 Conflict of interest.
1703.111 [Reserved]
1703.112 Determination of types of financial assistance.
1703.113 Application filing dates, location, processing, and public
notification.
1703.114--1703.116 [Reserved]
1703.117 Criteria for scoring applications.
1703.118 Other application selection provisions.
1703.119 Appeal provisions.
1703.120--1703.121 [Reserved]
1703.122 Further processing of selected applications.
1703.123--1703.125 [Reserved]
1703.126 Disbursement of loan and grant funds.
1703.127 Reporting and oversight requirements.
1703.128 Audit requirements.
1703.129 Repayment of loans.
1703.130--1703.134 [Reserved]
1703.135 Grant and loan administration.
1703.136 Changes in project objectives or scope.
1703.137 Grant and loan termination provisions.
1703.138--1703.139 [Reserved]
1703.140 Expedited telecommunications loans.
Appendix A to Subpart D to Part 1703--Environmental Questionnaire
Subpart E--Deferments of RUS Loan Payments for Rural Development
Projects
1703.300 Purpose.
1703.301 Policy.
1703.302 Definitions and rules of construction.
1703.303 Eligibility criteria for deferment of loan payments.
1703.304 Restrictions on the deferment of loan payments.
1703.305 Requirements for deferment of loan payments.
1703.306 Limitation on funds derived from the deferment of loan
payments.
1703.307 Uses of the deferments of loan payments.
1703.308 Amount of deferment funds available.
1703.309 Terms of repayment of deferred loan payments.
1703.310 Environmental considerations.
1703.311 Application procedures for deferment of loan payments.
1703.312 RUS review requirements.
1703.313 Compliance with other regulations.
Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.; Pub. L. 103-354,
108 Stat. 3178 (7 U.S.C. 6941 et seq.).
Source: 54 FR 6870, Feb. 15, 1989, unless otherwise noted.
Redesignated at 55 FR 39394, Sept. 27, 1990.
Editorial Note: Nomenclature changes to part 1703 appear at 55 FR
39397, Sept. 27, 1990.
Subpart A [Reserved]
[[Page 26]]
Subpart B--Rural Economic Development Loan and Grant Program
Source: 57 FR 44317, Sept. 25, 1992, unless otherwise noted.
Sec. 1703.10 Purpose.
(a) This subpart sets forth RUS's policies and procedures for making
zero-interest loans and grants to borrowers in accordance with the
cushion of credit payments program authorized in section 313 of the Act
(7 U.S.C. 940c).
(b) The zero-interest loans and grants are provided for the purpose
of promoting rural economic development and job creation projects.
Sec. 1703.11 Policy.
(a) It is RUS's policy that borrowers use the Rural Economic
Development Loan and Grant Program to promote projects that will result
in a sustainable increase in the productivity of economic resources in
rural areas and thereby lead to a higher level of income for rural
citizens.
(b) It is RUS's policy that borrowers promote economic development
in rural areas and job creation projects that:
(1) Are based on sound economic and financial analyses; and
(2) Take a long-term perspective.
(c) It is RUS's policy to direct the funds under this program to
projects which are located in, or will primarily benefit, those rural
areas that are experiencing the greatest economic hardship.
(d) It is RUS's policy to encourage economic development in rural
areas and job creation projects without regard to service area.
(e) It is RUS's policy to encourage borrowers to make cushion of
credit payments.
(f) It is RUS's policy to maintain liaisons with officials of other
Federal, state, regional and local rural development agencies to
coordinate this program with other rural economic development programs.
Sec. 1703.12 Definitions.
Act--the Rural Electrification Act of 1936, as amended (7 U.S.C. 901
et seq.).
Administrator-- the Administrator of the Rural Utilities Service or
the Administrator's designee.
Approved purpose--a purpose that the Administrator has specifically
approved in the letter of agreement covering the use of the RUS zero-
interest loan and/or grant funds provided to the borrower.
Borrower--an entity that has outstanding RUS and/or Rural Telephone
Bank (RTB) loan(s) or loan guarantee(s) for an electric or telephone
purpose under the provisions of the Act.
Business incubator--a facility in which small businesses can share
premises, support staff, computers, software or hardware,
telecommunications terminal equipment, machinery, janitorial services,
utilities, or other overhead expenses, and where such businesses can
receive technical assistance, financial advice, business planning
services or other support. The business incubator program, however, does
not necessarily have to involve the sharing of premises.
Cushion of credit payment--a voluntary unscheduled payment made
after October 1, 1987, on an RUS note, which is credited to the cushion
of credit account of a borrower.
Demonstration Project--a project for which the owner agrees in
writing to provide RUS, if requested, with detailed information on the
steps it takes in organizing and operating the project, will permit RUS
and RUS's guests to make reasonable visits to the project, and honor any
other reasonable RUS request to disseminate information on the project.
Examples of information include a description of incorporation
procedures, types of financing obtained, permits required by
governments, amount of time required for various stages of the project,
sources of technical assistance from government programs, private
foundations or trade organizations, any experiences or lessons that the
owner wishes to share with the public and other information which will
assist RUS in promoting similar projects. It will not require the
disclosure of trade secrets or proprietary techniques.
Electric or telephone purpose--a purpose that:
[[Page 27]]
(1) The Administrator or Governor of the RTB is authorized to
finance under sections 2, 4, 5, 201, 305, and 408 of the Act; or
(2) Is characterized as furnishing, generating or transmitting
electric energy or other activities involved in providing electricity,
or is characterized as providing telephone service. It will include
electric and telephone facilities and equipment used in connection with
providing such a service. It will not include a relatively insignificant
amount of customer premises equipment, as determined by the
Administrator.
Job creation--creation of jobs in rural areas. This includes the
implementation of a project in close enough proximity to rural areas so
that it is likely that the majority of the jobs created will be held by
rural residents.
Letter of agreement--a legal document executed by the Administrator
and the borrower that contains certain terms, conditions, requirements
and understandings applicable to the zero-interest loan and/or grant, as
determined by the Administrator.
Letter of credit--a commitment from a financial institution
satisfactory to the Administrator to honor a draft drawn on the RUS
borrower should the RUS borrower fail to pay on a zero-interest loan.
Pass-through-grant--a grant that the borrower makes to another
entity that will own or undertake the project using the proceeds of the
RUS grant.
Pass-through-loan--a loan that the borrower makes to another entity
that will own or undertake the project using the proceeds of the RUS
zero-interest loan.
Project--an undertaking that develops the economy of a rural area or
results in job creation. As used in subpart B, the term ``project''
includes both direct undertakings by borrowers as well as those
sponsored by other parties using the proceeds of pass-through-loans or
pass-through-grants. It is the component or phase of the undertaking for
which the borrower is requesting RUS funds, as determined by the
Administrator.
Project feasibility studies--studies, analyses, designs, reports,
manuals, guides, literature, or other forms of creating and/or
disseminating information for use in evaluating or developing a proposed
project. For example, it would include market research and environmental
studies.
REA means the Rural Electrification Administration formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
Reasonable loan servicing charges--charges for expenses the borrower
incurs to service a loan provided to another entity unaffiliated with
the borrower using the proceeds of the RUS zero-interest loan. The
charges over the life of the loan for routine loan servicing expenses
must not exceed an amount equal to the sum of one percent per year of
the outstanding principal on the first day of each year on the
borrower's RUS zero-interest loan. The charges for extraordinary
expenses associated with collection of delinquent payments or other
similar expenses must receive the prior approval of the Administrator.
Revolving loan program--a program established and operated by the
Borrower, using grant funds, the Borrower's contribution and loan
repayments to make loans to businesses or others for rural economic
development and job creation purposes.
RTB--the Rural Telephone Bank, established as a body corporate and
an instrumentality of the United States, to obtain supplemental funds
from non-Federal sources and utilize them in making loans, for the
purposes of financing, or refinancing, the construction, improvement,
expansion, acquisition, and operation of telephone lines, facilities, or
systems, for RUS Borrowers financed under sections 201 and 408 of the
Act.
Rural area--a rural area as defined in section 13 of the Act.
Rural economic development--job creation or preservation or
community facilities improvement projects that clearly demonstrate
significant benefits to rural areas.
Rural economic development account--a federally insured account into
which the borrower deposits any advances of zero-interest loan funds
from RUS until the borrower disburses the funds.
[[Page 28]]
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
Scope of work--a detailed plan, which has been approved by the
Administrator, covering the work to be performed by the loan and/or
grant recipient using the loan and/or grant funds.
Significant stockholder--an owner or holder of five percent or more
of the common stock (or shares) or five percent or more of the preferred
stock (or shares) of the RUS borrower.
Subaccount--the rural economic development subaccount created by
section 313 of the Act.
Technical assistance--analysis of facilities or processes,
managerial, financial and operational consultation by independent
qualified entities to assist project owners to identify and evaluate
problems or potential problems and provide training to enable project
owners to successfully implement, manage, operate and maintain viable
projects.
Tribal government--The governing body or a governmental agency of
any Indian tribe, band, nation, or other organized group or community
(including any Native village as defined in 43 U.S.C. 1602) certified by
the Secretary of the Interior as eligible for the special programs and
services provided through the Bureau of Indian Affairs.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11706, Mar. 14, 1994;
59 FR 53930, Oct. 27, 1994; 59 FR 66440, Dec. 27, 1994]
Sec. 1703.13 Source of funds.
Funds provided under this program come from interest differential
credits to the subaccount and appropriated amounts made available to the
subaccount.
Sec. 1703.14 Disposition of funds in the subaccount.
Zero-interest loans and grants will be made during each fiscal year
to the full extent of the amounts held in the subaccount subject only to
limitations imposed by law. For administrative purposes, the
Administrator will make a determination of the fiscal year-end amount
held in the subaccount as of a date prior to, but as near as practicable
to, the end of the fiscal year.
Sec. 1703.15 [Reserved]
Sec. 1703.16 Eligibility.
Zero-interest loans and grants may be made to any borrower that is
not delinquent on any outstanding Federal debt or in bankruptcy
proceedings. However, a zero-interest loan or grant will not be made to
a borrower during any period in which the Administrator has determined
that no additional financial assistance of any nature should be provided
to the borrower pursuant to any provision of the Act. The determination
to suspend eligibility for assistance under this subpart will be based
on one or more of the following factors:
(a) The borrower's demonstrated unwillingness to exercise diligence
in repaying RUS loans or loan guarantees that results in the
Administrator being unable to find that a loan, or loan guaranteed by
RUS, would be repaid within the time agreed;
(b) The borrower's demonstrated unwillingness to meet requirements
in RUS's legal documents or regulations; or
(c) Other actions on the part of the borrower that thwart the
achievement of the objectives of the RUS program.
Sec. 1703.17 Uses of zero-interest loans and grants.
(a) Zero-interest loans and grants must be used exclusively to
promote rural economic development and/or job creation projects,
including, but not limited to, project feasibility studies, start-up
costs, business incubator projects, and other reasonable expenses for
the purpose of fostering rural economic development.
(b) The Administrator will give preference to providing funds under
this subpart for projects other than business incubator projects to the
extent funds are available to borrowers for business incubator projects
from a
[[Page 29]]
rural business incubator fund administered by the Administrator in
accordance with section 502 of the Act (7 U.S.C. 950aa-1).
(c) Zero-interest loans and grants may be used for Projects that
enhance rural economic development by providing advanced
telecommunications services and computer networks for medical and
educational services, as follows: (1) For telecommunications end use
and/or transmission facilities; and (2) Other portions of the project,
such as modifications to buildings necessary to accommodate
telecommunications equipment for medical care and other services, public
or private education, and employment training.
(d) Zero-interest loans and grants may be used for community antenna
television systems or facilities. The borrower will document that such
facilities provide a tangible economic benefit to the proposed service
area in accordance with Sec. 1703.46 of this subpart. Notwithstanding
this, the Administrator reserves the right to deny any proposal for
community antenna television systems or facilities. Community antenna
television systems or facilities will be considered for funding in
accordance with Sec. 1703.46 of this subpart and this section only when
all of the following conditions exist:
(1) The proposed community antenna television system or facility is
established in cooperation with a local educational and/or medical
entity(ies) to provide educational and/or medical programming which
addresses specific needs of rural residents;
(2) Services to be provided by the proposed community antenna
television systems or facilities are not available in the area to be
served, or services are not being provided by the existing television
programming carrier at an affordable cost to residents; and
(3) Such community antenna systems or facilities will not present
undue competition for existing television programming carriers in the
area.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11706, Mar. 14, 1994;
59 FR 53930, Oct. 27, 1994]
Sec. 1703.18 Types of projects eligible for grant funding.
Grants may be made for the following purposes:
(a) The establishment and operation of a revolving loan program by
Borrowers in accordance with Sec. 1703.22;
(b) Project feasibility studies to assist for-profit and non-profit
entities in conjunction with a loan for an authorized project.
Feasibility studies will include management assistance, consultation,
and research for planning individual projects that the Borrower has
determined will benefit the rural community. Feasibility studies which
may be financed under this section must be performed by qualified
entities subject to Sec. 1703.19, General requirements for grant
funding. Feasibility studies must address the important aspects of
project assessment and planning to ensure, to the extent practicable,
the success of projects. These include the market, technical, economic,
financial, and managerial issues related to project feasibility.
Feasibility studies may be funded in connection with viable projects as
a reimbursement to the project owner for expenses incurred during the
initial planning stages of the project prior to project funding by RUS;
(c) The acquisition of technical assistance in conjunction with
projects funded with zero-interest loans to enable for-profit and non-
profit entities to obtain analysis of facilities and processes,
managerial, financial and operational consultation. Grant funds may also
be used in conjunction with zero-interest loans to enable non-profit
business incubators to provide technical assistance. Technical
assistance will enable project owners to identify and evaluate problems
or potential problems and provide training in order that they may
ultimately implement, manage, operate and maintain viable projects which
are financed with zero-interest loan funds. Technical assistance
financed under this section must be performed by qualified entities
which are independent of the project owner subject to Sec. 1703.19,
General requirements for grant funding;
(d) Business incubators established by non-profit organizations to
assist in
[[Page 30]]
developing emerging enterprises. Business incubators funded in
conjunction with zero-interest loans will include those facilities in
which single or multiple businesses may use premises, support staff,
computer software, hardware, telecommunications equipment, machinery,
janitorial services, utilities, or other overhead facilities. Grant
funding may also be provided to allow business incubators to provide
feasibility studies and technical assistance in accordance with
paragraphs (b) and (c) of this section;
(e) Community development assistance to non-profit entities and
public bodies for employment creation projects, or other projects which
provide needed community facilities and services;
(f) Facilities and equipment to public, for-profit and non-profit
entities to provide education and training to rural residents to
facilitate economic development. Equipment and facilities may be funded
to enable rural businesses to provide educational and job enhancement
skills to employees;
(g) Facilities and equipment to public, for-profit and non-profit
entities to provide medical care to rural residents. Equipment and
facilities may be funded to enable eligible entities to provide medical
training and related professional health care skills to rural health
care providers;
(h) Projects which utilize advanced telecommunications and/or
computer networks to facilitate medical or educational services or job
training in accordance with paragraphs (f) and (g) of this section.
[59 FR 11706, Mar. 14, 1994, as amended at 59 FR 38341, July 28, 1994]
Sec. 1703.19 General requirements for grant funding.
(a) Grants made under Sec. 1703.18(a), establishment and operation
of a revolving loan program by Borrowers, will be limited to Borrowers
and can be made without zero-interest loans. Grants made under
Sec. 1703.18 (b) through (h) will be made only in conjunction with zero-
interest loans, and on a pass-through basis.
(b) Pass-through grant funding for projects under Sec. 1703.18 (b),
(c), (f), (g) and (h) will be available for non-profit and for-profit
entities. Pass-through grant funding for projects under Sec. 1703.18 (d)
and (e) will be available only for non-profit entities.
(c) All projects funded with zero-interest loans and grants will
require supplemental funding in accordance with Sec. 1703.23. For grants
made under Sec. 1703.18(a), the portion eligible for RUS funding may be
fully funded with grant funds. For all other grants funded under
Sec. 1703.18, the portion of project costs eligible for RUS funding may
be funded up to 20 percent with grant funds.
(d) Grant funding will be provided only to the extent necessary for
a feasible project. A feasible project is a project which expects to
generate sufficient income to pay operating expenses and debts and
compensate for depreciation of equipment and facilities for the project
which is to be funded by RUS. Depreciation must be based on allowable
depreciation schedules as set forth by the United States Internal
Revenue Service. Borrowers whose analyses of projects show feasibility
without grant funds should not apply for grant funding. Borrowers
requesting pass-through grant funds will base grant funding requests on
borrower projected income and expense projections for the project, and
documentation regarding depreciation of the equipment and facilities for
the project. The Administrator will determine whether the Borrower's
projections of income, expenses and depreciation are reasonable.
(e) For projects that project insufficient operating revenue the
first two years to show feasibility, borrowers should first consider the
deferral provisions set forth in Sec. 1703.29(b) before determining the
appropriate level of requested grant funding. Zero-interest loan and
grant funding will be approved in accordance with paragraph (d) of this
section based on the option which results in the lowest required grant
percentage.
(f) The owner of the pass-through project that receives grant funds
will be encouraged to commit that the project will be a demonstration
project.
(g) Borrowers or project owners must demonstrate the availability
and commitment of other sources of funding
[[Page 31]]
needed to complete a project in addition to RUS loan and/or grant funds,
prior to the first advance of RUS funds.
(h) Feasibility studies and/or technical assistance funded with
grants under Sec. 1703.18 (b) and (c) must be performed by entities
which are independent of the Borrower and qualified to provide such
services. The project owner, if deemed qualified in accordance with this
paragraph, may furnish a feasibility study under Sec. 1703.18(b).
Entities furnishing technical assistance under Sec. 1703.18(c), must be
independent of the project owner. To be deemed qualified, entities
providing feasibility studies and/or technical assistance must:
(1) Provide sufficient documentation evidencing their proven
ability, background and experience to furnish such services; and
(2) Provide sufficient documentation evidencing their legal
authority and capacity to furnish such services.
[59 FR 11706, Mar. 14, 1994]
Sec. 1703.20 Ineligible uses of zero-interest loans and grants.
(a) Zero-interest loans and grants must not be used:
(1) To fund or assist projects of which any director, officer,
general manager or significant stockholder of the Borrower, or close
relative thereof, is an owner, stockholder, partner or director, or
which would, in the judgment of the Administrator, create a conflict of
interest or the appearance of a conflict of interest. The Borrower must
disclose to the Administrator information regarding any conflict of
interest, potential conflict of interest or any appearance of a conflict
of interest. The Administrator will determine whether there is a
conflict of interest or whether any potential conflict of interest or
appearance of a conflict of interest may adversely affect RUS's
interests. A Borrower organized as, or consisting of a cooperative,
widely held mutual corporation, tribal government, municipal power
corporation, public power district, or a similar widely held
organization would ordinarily be able to have an ownership interest in
or manage a project operated on either a for-profit or non-profit basis.
A Borrower organized as a closely held, for-profit corporation with more
than 5 percent of its stock held by one legal person, its subsidiary or
an affiliate, would ordinarily be able to own or manage a project
operated on a non-profit basis only;
(2) For any costs incurred on the project:
(i) Prior to receipt of the Borrower's completed application by RUS
during an application period unless the Administrator has specifically
approved such usage in writing; or
(ii) For site development, the destruction or alteration of
buildings, or other activities that would adversely affect the
environment or limit the choice of reasonable alternatives prior to
satisfying the requirements of Sec. 1703.32;
(3) By the Borrower to purchase or lease any real property,
materials, equipment, or services from its subsidiary, an affiliate, or
significant stockholders, officers, managers or directors of the
Borrower, or close relatives thereof, where the purchase or lease has
not been fully disclosed to the Administrator and received the
Administrator's prior written approval;
(4) By the recipient of a pass-through-loan or pass-through-grant to
purchase or lease any real property, materials, equipment, or services
from the Borrower, its subsidiary, an affiliate of the Borrower, or
significant stockholders, officers, managers or directors of the
Borrower, or close relatives thereof, where the purchase or lease has
not been fully disclosed to the Administrator and received the
Administrator's prior written approval;
(5) To pay off or refinance existing indebtedness incurred prior to
receipt of the Borrower's completed application by RUS or for
refinancing or repaying a loan made under the Act or a program
administered by the Administrator;
(6) For any electric or telephone purpose, as determined by the
Administrator;
(7) For the Borrower's electric or telephone operations or for any
operations affiliated with the Borrower unless the Administrator has
specifically informed the Borrower in writing that the operations are
part of the approved purposes;
[[Page 32]]
(8) To pay the salaries of any employee or owner of the Borrower,
its subsidiaries, or affiliates. This restriction does not prohibit the
use of loan or grant funds for printing and similar costs for project
feasibility studies it has prepared, commissioned or purchased if
specifically approved by the Administrator. This restriction is subject
to the operating expense allowance for revolving loan funds set forth in
Sec. 1703.22 (a)(6);
(9) To fund feasibility studies and technical assistance as set
forth in Sec. 1703.18 independently of projects which are funded under
the zero-interest loan and grant program;
(10) For community antenna television systems or facilities except
as provided in Sec. 1703.17(d) of this subpart;
(11) For proposed projects located in areas covered by the Coastal
Barrier Resources Act (16 U.S.C. 3501 et seq.); or
(12) For anything other than an approved purpose.
(b) [Reserved]
[59 FR 11707, Mar. 14, 1994, as amended at 59 FR 53930, Oct. 27, 1994]
Sec. 1703.21 Limitations on the use of zero-interest loan and grant funds.
(a) A borrower may not charge interest for the use of the proceeds
of the zero-interest loan provided under this program; however, it may
charge reasonable loan servicing charges, reasonable legal fees involved
in providing the RUS funds to the recipient, and the amount paid for an
irrevocable letter of credit made payable to RUS and issued on behalf of
the borrower that guarantees repayment of an RUS zero-interest loan, all
as determined by the Administrator. A borrower may require the recipient
of a pass-through-loan to provide and/or obtain adequate security for
the zero-interest loan funds.
(b) A borrower must calculate any costs to charge in connection with
the use of grant funds under this program for the project and must
temporarily deposit the grant funds in accordance with 7 CFR parts 3015,
Uniform Federal Assistance Regulations, and 3016, Uniform Administrative
Requirements for Grants and Cooperative Agreements to State and Local
Governments, as appropriate. Grant funds will be disbursed to the
Borrower in accordance with Sec. 1703.61(b).
(c) A borrower may not make a profit from any zero-interest loan or
grant provided from the subaccount, with the exception of the $500
interest income exclusion in paragraph (d) of this section.
(d) The Borrower may not requisition zero-interest loan funds unless
those funds are deposited into the Borrower's RUS construction fund
trustee account. The Borrower will be required to set up a separate
Federally insured account called the Rural Economic Development Account,
if loan funds are not expected to be disbursed within two months after
receipt from RUS. All interest earned on temporarily deposited zero-
interest loan funds in excess of $500 per 12-month period must be used
for approved purposes or returned to RUS. Interest earned in excess of
$500 per 12 month period and returned to RUS will not be used to reduce
the Borrower's principal indebtedness. Grant funds will be disbursed by
RUS in accordance with 7 CFR parts 3015 and 3016, and Sec. 1703.61(b).
(e) The borrower may not condition the receipt of the proceeds of a
zero-interest loan or grant under this subpart with the requirement that
the recipient take electric or telephone service from the borrower.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11708, Mar. 14, 1994]
Sec. 1703.22 Revolving loan program.
Grant funds under this section will be provided only to RUS
Borrowers on a non pass-through basis. RUS Borrowers will, in turn,
provide loans to foster rural economic development in accordance with
this subpart and the specific requirements of this section.
(a) General. Grant funds disbursed to RUS Borrowers to establish
revolving loan programs under this section are subject to the following
requirements:
(1) The uses, restrictions and limitations for zero-interest loans
set forth in Secs. 1703.17, 1703.20 and 1703.21 respectively;
(2) Loans made by RUS Borrowers initially lending grant funds
disbursed by RUS are limited to types of projects specified in
Sec. 1703.18 (d), (e), (f), (g) and
[[Page 33]]
(h). Loans may also be made for feasibility studies and technical
assistance in accordance with Sec. 1703.18 (b) and (c), respectively,
but only for those types of projects specified in this paragraph (a)(2).
Loans made from repayments of the initial loans made by RUS Borrowers
may be used for any rural economic development purpose in accordance
with a prior agreement between the Borrower and RUS;
(3) All other requirements relevant to zero-interest pass-through
loans and grants outlined in this subpart, except the minimum size of a
zero-interest loan as specified in Sec. 1703.28(f);
(4) The initial loans made from the revolving loan fund using the
grant funds must carry an interest rate of zero percent; however, loans
made from repayments of the initial loan may carry an interest rate in
accordance with prior agreement with RUS. In either case, the Borrower
may charge reasonable loan servicing fees;
(5) The Borrower will provide a board resolution certifying a
commitment to provide and maintain additional funding to the revolving
loan fund in an amount no less than 20 percent of the RUS grant
approved. The Borrower will provide documentation that the additional
funding has been deposited in the appropriate account in
Sec. 1703.22(h)(1) prior to grant disbursement. This requirement does
not pertain to supplemental funding requirements for individual projects
as set forth in Sec. 1703.23. Additional funding required in this
paragraph pertains only to borrowers establishing revolving loan funds,
with the following provisions:
(i) Use of additional funding is subject to requirements set forth
in paragraph (b) of this section and with RUS concurrence;
(ii) Individual projects funded under this section are subject to
supplemental funds requirements set forth in Sec. 1703.23;
(iii) At the Borrower's option with RUS concurrence, all or a
portion of the additional funding may be used to assist project owners
receiving funding from Federal grant funds under this section to meet
their supplemental funding requirements set forth in Sec. 1703.23 of
this subpart. Such additional funding will be deemed as Federal funds
and accounted for in accordance with paragraph (h)(1)(i)(A) of this
section for electric borrowers or paragraph (h)(1)(ii)(A) of this
section for telephone borrowers, as appropriate;
(iv) At the Borrower's option, all or a portion of the additional
funding may be retained as non-Federal funds, for any rural economic
development project(s), subject to paragraph (g) of this section and RUS
concurrence. Additional funding committed as non-Federal will be
accounted for in accordance with paragraph (h)(1)(i)(E) of this section
for electric borrowers or paragraph (h)(1)(ii)(E) of this section for
telephone borrowers, as appropriate;
(6) Grant funds will only be provided to an RUS Borrower for a
revolving loan program when a proposed budget submitted to RUS
demonstrates and the Borrower agrees in writing that no more than 10
percent of grant funds received are used to cover operating expenses of
the revolving loan program. Operating expenses include the costs of
administering the revolving loan fund and the provision of technical
assistance to project owners. All proceeds in excess of those needed to
cover authorized expenses, as described above, must revert to the
revolving fund and be available for re-lending for eligible projects.
Budgets which reflect expenses incurred in operating the fund must be
submitted to RUS annually;
(7) The Borrower may charge reasonable loan servicing charges. For
purposes of this section, loan servicing charges must not exceed an
amount equal to the sum of one percent per year of the outstanding
principal on the first day of each year on each project owner's zero-
interest loan which is made from the RUS grant proceeds;
(8) The Borrower will submit documentation indicating that potential
projects which are eligible for funding have sufficiently progressed in
the planning stage to allow grant funding approved for a revolving loan
program to be requisitioned by the Borrower, disbursed by RUS, and
loaned to recipients within 3 years of the date of grant approval by
RUS. Grant funds that have not been requisitioned within 3
[[Page 34]]
years will be cancelled, unless the Administrator has approved an
extension in writing. Grant funds will be disbursed by RUS in accordance
with paragraphs (d) and (g) of this section;
(9) If the revolving loan program is terminated, further
disbursement of grant funds will be cancelled. Repayments of loans made
using grant funds which have been disbursed will be used in accordance
with the Borrower's rural development plan;
(10) Payment of creditors which provide interim or construction
financing to a viable project for eligible purposes as set forth in
Sec. 1703.18 of this subpart may be authorized. Refinancing for the sole
purpose of replacing higher interest conventional financing with zero-
interest revolving loan funds is not authorized.
(b) The Borrower's rural development plan. RUS requires that the
revolving loan program be administered in accordance with a rural
development plan, developed by the Borrower and approved by RUS. The
plan must be of sufficient detail to provide RUS with a complete
understanding of what the Borrower intends to accomplish by
administering a revolving loan program. The rural development plan will
provide the mechanics of how the revolving loan funds will be disbursed
to the project owner. The rural development plan must outline the
Borrower's plans for administering the revolving loan program, during
the initial period when RUS grant funds are lent by the Borrower and
after the revolving fund becomes non-Federal in accordance with
paragraph (g) of this section. The plan must outline the following:
(1) Specific objectives for the revolving loan program, revolving
loan operating procedures, lending parameters, maximum and minimum loan
amount, and types of projects to be funded;
(2) Documentation of Borrower's coordination of lending activities
with other local entities that provide financing for rural economic
development projects. Such documentation will indicate that the Borrower
will not compete with, but supplement other sources of legal financing;
(3) Eligibility criteria if other than outlined in this subpart;
(4) The application process and method of disposition of the funds
to the project owner; and
(5) A procedure for monitoring the project owner's accomplishments
and reporting requirements by the project owner's management.
(c) The Borrower's scope of work. Borrowers applying for grant
funding under this section must submit a scope of work to RUS.
Applications for grants under this section will be evaluated for funding
based on the Borrower's rural development plan in paragraph (b) of this
section and the scope of work. The scope of work must contain the
following items:
(1) Documented need for grant funds. The Borrower must identify a
sufficient number of rural development projects of the type specified in
Sec. 1703.18 (d), (e), (f), (g), and (h) which are currently being
planned requiring zero-interest loans equal to the amount of grant
assistance requested from RUS. These projects may be supported with a
community facilities plan, or other development plan, prepared by local
community leaders in cooperation with the Borrower. For each project,
the Borrower will submit information required under Sec. 1703.34;
(2) Documented authority and ability of the Borrower to administer a
revolving rural development loan program in accordance with the
provisions of this subpart. The Borrower must provide a complete listing
of all personnel responsible for administering this program along with a
statement of their qualifications and experience;
(3) Documented ability of the Borrower to commit financial resources
under the control of the Borrower to assist in the establishment of a
rural development revolving loan program. This should include a
statement of the sources of funding for the administration of the
Borrower's operations, as well as financial and technical assistance for
projects;
(4) Documentation that the Borrower has secured commitments of
significant financial support from public agencies and/or private
organizations for supplemental funding to support a rural development
loan program;
[[Page 35]]
(5) A list of proposed fees and other charges the Borrower will
assess the projects it funds; and
(6) The Borrower's rural development policy for non-Federal funds in
accordance with paragraphs (b) and (g) of this section.
(d) Grant processing and approval. Applications for grants to
establish revolving loan funds will be reviewed in accordance with
Secs. 1703.45 and 1703.46, and with the Borrower's rural development
plan and scope of work outlined in paragraphs (b) and (c) of this
section. Grants will be processed in accordance with Secs. 1703.58 and
1703.59.
(e) Disbursement of grant funds. Borrowers are not authorized to
commence projects to be funded under this section until those projects
have been submitted for authorization in accordance with paragraph
(c)(1) of this section, or the projects have been submitted for
authorization subsequent to grant approval in accordance with paragraph
(e)(2) of this section. RUS grant funds will be disbursed on a
reimbursement basis. However, upon written justification by borrowers
and approval by the Administrator, borrowers unable to fund projects
under reimbursement provisions, for financial or other extraordinary
reasons, may receive grant funds under the special disbursement method
by submitting unpaid invoices from project owners, and grant funds will
be disbursed to borrowers and passed directly to project owners. In
either case, RUS grant funds will be disbursed in accordance with the
provisions of 7 CFR Part 3015, Uniform Federal Assistance Regulations,
the applicable requirements of this subpart, the administrative
provisions outlined in paragraph (g) of this section, and the following
requirements:
(1) Only projects authorized by RUS in accordance with paragraphs
(c)(1) and (e)(2) of this section, for which adequate documentation is
submitted, including receipts for expenditures under the reimbursement
method or unpaid invoices under the special disbursement method, as
applicable, and certification of approved purposes, will be considered
for disbursement;
(2) A project which was not submitted prior to grant approval in
accordance with paragraph (c)(1) of this section, may be authorized for
funding subsequent to grant approval. A project which is authorized for
funding under this paragraph will be considered for disbursement at the
first allowable time period after project authorization in accordance
with paragraphs (e)(3) and (e)(4) of this section. Project authorization
after grant approval is subject to the following requirements:
(i) The project meets the specific objectives for the Borrower's
revolving loan program as outlined in paragraph (b)(1) of this section;
(ii) The Borrower presents evidence that the project requested for
authorization can be funded prior to projects which were authorized
prior to grant approval in accordance with paragraph (b)(1) of this
section; and
(iii) RUS approves the project for funding in accordance with
Sec. 1703.34;
(3) Under the reimbursement method, grant funds requisitioned for
individual projects in increments of less than $100,000, or less than 25
percent of the amount approved for the revolving loan fund, whichever is
less, may be disbursed semi-annually. Submission periods for
requisitioning grant funds on a semi-annual disbursement basis will be
14 days commencing from the 6-month anniversary date of grant approval.
Grant funds under the special disbursement method will be requisitioned
in accordance with the applicable provision in paragraph (e)(4) of this
section;
(4) For the reimbursement method, grant funds requisitioned for
individual projects in increments of $100,000 or greater, or at least 25
percent of the amount approved for the revolving loan fund, whichever is
less, may be submitted for disbursement at any time. Under the special
disbursement method, grant funds of less than $100,000 may be
requisitioned for disbursement at any time. However, the minimum
requisition will be $50,000, or the total grant award, whichever is
less.
(f) Reporting requirements. (1) The Borrower must maintain financial
management systems and retain financial records in accordance with 7 CFR
part 3015, Uniform Federal Assistance Regulations.
(2) Borrower records must include an accurate accounting and source
documentation to support each transaction
[[Page 36]]
involving the revolving loan fund. Records are subject to a rural
economic loan review as set forth in Sec. 1703.66(g).
(3) SF-269, ``Financial Status Report,'' and a revolving loan
program activity report will be required of all Borrowers on an annual
basis. Reports will be submitted no later than 90 days after December 31
of each year. The program activity report will contain an aggregate list
of projects funded, the amount funded for each project, the project
repayment schedule, a brief description of each project, the project
objectives, whether or not the project has been completed, and the
projected number of jobs created or saved by each project. Reports under
this paragraph will be required until all grant funds have been
disbursed and projects completed.
(4) A performance report will be required for each project funded on
an annual basis. Performance reports will be due no later than 90 days
after December 31 of each year. Performance reports will be submitted
until one year after project completion. Project performance reports
will contain the following:
(i) A comparison of actual accomplishments during the reporting
period to the objectives established for the project and, if not
attained, reasons why established objectives were not met;
(ii) Problems, delays, or adverse conditions which will materially
affect attainment of planned project objectives, prevent the meeting of
time schedules or objectives, or preclude the attainment of project work
elements during established time periods. This disclosure shall be
accompanied by a statement of the action taken or contemplated to
resolve the situation;
(iii) Projected accomplishments for the next reporting period, if
applicable; and
(iv) Status of compliance with any special conditions for project
funding, if applicable.
(5) Borrowers must report and remit interest earned on advances of
grant funds deposited in interest accounts to RUS on a quarterly basis
in accordance with 7 CFR part 3015, Uniform Federal Assistance
Regulations.
(g) Non-Federal funds. Once all RUS-derived grant funds have been
utilized by the Borrower to fund rural development projects according to
the provisions of this section and the applicable provisions of this
subpart, loans made by the Borrower thereafter from repayments to the
revolving loan fund shall not be considered as being derived from
Federal funds and the requirements of these regulations will not be
imposed on the Borrower or project owners. However, the Borrower will,
as a condition for receiving a grant under this section, agree to the
following conditions:
(1) To maintain a revolving loan account to promote rural economic
development in accordance with the Borrower's rural development plan for
non-Federal funds submitted in accordance with paragraph (b) of this
section;
(2) To maintain the additional funding supplied by the Borrower in
accordance with paragraph (a)(5) of this section and interest earnings
within the revolving loan fund;
(3) Approval may be granted by the Administrator to terminate the
revolving loan program, or modify the requirements set forth in
paragraphs (g)(1) and (g)(2) of this section, upon written request and
justification by the Borrower. Should the Borrower terminate the
revolving loan program without obtaining approval by the RUS
Administrator, the Borrower will return the amount of the original grant
to RUS.
(h) Administrative provisions. The requirements of this paragraph
set forth the procedures for accounting, requisitioning and disbursement
of Federal funds, those funds initially disbursed for projects which may
be funded in accordance with an approved rural development plan and
scope of work submitted by the Borrower. Disbursement of grant funds
will be approved on a reimbursement basis after the grant agreement is
executed by RUS and the Borrower, the applicable provisions of this
subpart are met, subject to disbursement restrictions in paragraph (e)
of this section, and the requirements in paragraphs (h) (1) through (3)
of this section.
(1) Accounting requirements. Accounting will be performed in
accordance
[[Page 37]]
with 7 CFR part 1767, Accounting Requirements for RUS Electric
Borrowers, or 7 CFR part 1770, Accounting Requirements for RUS Telephone
Borrowers, as appropriate. The Borrower will maintain accounts for the
revolving funds as follows:
(i) RUS electric Borrowers. (A) A general ledger Account 131.13,
``Cash-General--Economic Development Grant Funds.'' The Borrower will
debit this account in an amount equal to the amount of the grant
received from RUS, any additional funds deemed Federal from the Borrower
as required by paragraph (a)(5)(iii) of this section, and all other
funds advanced for the project, regardless of the source, if controlled
by the Borrower. The Borrower will credit this account for all
expenditures made with Federal funds on behalf of the rural development
project.
(B) A general ledger Account 124.1, ``Other Investments--Federal
Economic Development Loans.'' The Borrower will debit this account in
the amount of Federal funds the Borrower advances to non-associated
organizations for authorized rural economic development projects. For
each debit in this account, a corresponding credit will be made in
Account 131.13 in paragraph (h)(1)(i)(A) of this section. This account
will be credited with repayments of loans made with Federal economic
development grant funds.
(C) A general ledger Account 123.3, ``Investment in Associated
Companies--Federal Economic Development Loans.'' The Borrower will debit
this account in the amount of Federal funds the Borrower advances to
associated organizations for authorized rural economic development
projects. For each debit in this account, a corresponding credit will be
made in Account 131.13 in paragraph (h)(1)(i)(A) of this section. This
account will be credited with repayments of loans made with Federal
economic development grant funds.
(D) Account 421, ``Miscellaneous Non-operating Income.'' The
Borrower will credit this account in the amount of grant funds disbursed
by RUS resulting from an approved requisition request in accordance with
paragraph (h)(2) of this section.
(E) A general ledger Account 131.14, ``Cash-General--Economic
Development Non-Federal Revolving Funds.'' The Borrower will debit this
account with any additional funds deemed non-Federal from the borrower
as required by paragraph (a)(5)(iv) of this section, cash received from
the repayment of loans made from accounts in paragraphs (h)(1)(i)(B),
(h)(1)(i)(C), (h)(1)(i)(F), and (h)(1)(i)(G) of this section. The
Borrower will credit this account to reflect loans made for rural
economic development projects from non-Federal funds from accounts
specified in paragraphs (h)(1)(i)(F) and (h)(1)(i)(G) of this section.
(F) A general ledger Account 124.2, ``Other Investments--Non-Federal
Economic Development Loans.'' The Borrower will debit this account in
the amount of non-Federal funds the Borrower advances to non-associated
organizations for authorized rural economic development projects. For
each debit in this account, a corresponding credit will be made in
Account 131.14, in paragraph (h)(1)(i)(E) of this section. This account
will be credited with repayments of loans made from non-Federal economic
development funds.
(G) A general ledger Account 123.4, ``Investment in Associated
Companies--Non-Federal Economic Development Loans.'' The Borrower will
debit this account in the amount of non-Federal funds the Borrower
advances to associated organizations for authorized rural economic
development projects. For each debit in this account, a corresponding
credit will be made in Account 131.14, in paragraph (h)(1)(i)(E) of this
section. This account will be credited with repayments of loans made
from non-Federal economic development funds.
(H) A general ledger Account 171 ``Interest and Dividends
Receivable.'' The Borrower will debit this account with the amount of
interest earned on the revolving loan fund. The Borrower will credit
this account and debit the appropriate cash account when the cash is
received.
(I) A general ledger Account 419, ``Interest and Dividend Income.''
The Borrower will credit this account with the amount of interest earned
on the revolving loan fund.
(ii) RUS telephone Borrowers. (A) A general ledger Account 1130.4,
``Cash--
[[Page 38]]
General Fund--Economic Development Grant Funds (Class A Companies)'', or
Account 1120.14, ``Cash-General Fund--Economic Development Grant Funds
(Class B Companies).'' The Borrower will debit the appropriate account
in an amount equal to the amount of the grant received from RUS, any
additional funds deemed Federal from the Borrower required by paragraph
(a)(5)(iii) of this section, and all other funds advanced for the
project, regardless of the source, if controlled by the Borrower. The
Borrower will credit the appropriate account for all expenditures made
with Federal funds on behalf of the rural development project.
(B) A general ledger Account 1402.4, ``Other Investments in
Nonaffiliated Companies--Federal Economic Development Grant Loans.'' The
Borrower will debit this account in the amount of Federal funds the
Borrower advances to nonaffiliated organizations for authorized rural
economic development projects. For each debit in this account, a
corresponding credit will be made in the appropriate account in
paragraph (h)(1)(ii)(A) of this section. This account will be credited
with repayments of loans made from Federal economic development grant
funds.
(C) A general ledger Account 1401.1, ``Other Investments in
Affiliated Companies--Federal Economic Development Grant Loans.'' The
Borrower will debit this account in the amount of Federal funds the
Borrower advances to affiliated organizations for authorized rural
economic development projects. For each debit in this account, a
corresponding credit will be made in the appropriate account in
paragraph (h)(1)(ii)(A) of this section. This account will be credited
with repayments of loans made from Federal economic development grant
funds.
(D) Account 7360, ``Other Non-operating Income (Class A
Companies)'', or Account 7300, Non-operating Income and Expense (Class B
Companies), as appropriate. The Borrower will credit these accounts, as
appropriate, in the amount of grant funds disbursed by RUS resulting
from an approved requisition request in accordance with paragraph (h)(2)
of this section.
(E) A general ledger Account 1130.5, ``Cash--General Fund--Economic
Development Non-Federal Revolving Funds (Class A Companies)'', or
Account 1120.15, ``Cash--General Fund--Economic Development Non-Federal
Revolving Funds (Class B Companies)'', as appropriate. The Borrower will
debit the appropriate account with any additional funds deemed non-
Federal from the Borrower as required by paragraph (a)(5) of this
section, cash received from the repayment of loans made from accounts in
paragraphs (h)(1)(ii)(B), (h)(1)(ii)(C), (h)(1)(ii)(F), and
(h)(1)(ii)(G) of this section. The Borrower will credit the appropriate
account to reflect loans made for rural economic development projects
from non-Federal funds from accounts specified in paragraphs
(h)(1)(ii)(F) and (h)(1)(ii)(G) of this section.
(F) A general ledger Account 1402.5, ``Other Investments in
Nonaffiliated Companies-Non-Federal Economic Development Grant Loans.''
The Borrower will debit this account in the amount of non-Federal funds
the Borrower advances to nonaffiliated organizations for authorized
rural economic development projects. For each debit in this account, a
corresponding credit will be made in the appropriate account in
paragraph (h)(1)(ii)(E) of this section. This account will be credited
with repayments of loans made from non-Federal economic development
funds.
(G) A general ledger Account 1401.2, ``Other Investments in
Affiliated Companies--Non-Federal Economic Development Grant Loans.''
The Borrower will debit this account in the amount of non-Federal funds
the Borrower advances to affiliated organizations for authorized rural
economic development projects. For each debit in this account, a
corresponding credit will be made in the appropriate account in
paragraph (h)(1)(ii)(E) of this section. This account will be credited
with repayments of loans made from non-Federal economic development
funds.
(H) A general ledger Account 1210, ``Interest and Dividends
Receivable.'' The Borrower will debit this account with the amount of
interest earned on the revolving fund loan. The borrower will credit
this account and debit the appropriate cash account when the cash is
received.
[[Page 39]]
(I) A general ledger Account 7320, ``Interest Income (Class A
Companies)'', or Account 7300.2, ``Interest Income (Class B
Companies)'', as appropriate. The Borrower will credit this account with
the amount of interest earned on the revolving fund loans.
(2) Requisition requirements. Grant funds may be requisitioned by
RUS Borrowers in accordance with disbursement requirements in paragraph
(e) of this section. Borrowers will be fully reimbursed for funds
expended for approved projects funded. For each completed project, the
Borrower will submit the following for reimbursement:
(i) Standard Form 270, ``Request for Advance of Reimbursement'';
(ii) Copies of cancelled checks and other verifiable source records
supporting the transactions; and
(iii) Certification and evidence that the project costs to be
reimbursed are for a project which has been authorized by RUS and are
authorized costs for that project.
(3) RUS review. Requisition requests will be evaluated for
compliance with loan purposes previously submitted by the Borrower for
project authorization in accordance with paragraphs (c)(1) or (e)(2) of
this section, compliance with the Borrower's rural development plan,
accounting documentation submitted in paragraph (h)(1) of this section,
and the cancelled checks and source records submitted.
[59 FR 11708, Mar. 14, 1994, as amended at 59 FR 38341, July 28, 1994;
59 FR 53931, Oct. 27, 1994]
Sec. 1703.23 Supplemental funds requirements for zero-interest loans and grants.
The Administrator will not select an application unless the project
will receive supplemental funds in an amount at least equal to 20
percent of the RUS zero-interest loan and grant to be provided to the
project, as determined by the Administrator. Supplemental funds as used
in this section may come from the project owner in the form of equity
funds, private sources, state and local government sources, other
Federal Government sources, the borrower or other sources. Only
supplemental funds that will be provided to the project after the date
RUS receives the borrower's completed application may be used to satisfy
this requirement. Supplemental financing must be verified and committed
to the project in form and substance satisfactory to the Administrator
before RUS will advance any funds.
Sec. 1703.24 [Reserved]
Sec. 1703.25 Significance of RUS financing to the total project cost.
Selection of applications will be based on a preference for
applications requesting RUS financing which will be at least equal to 5
percent of the total project costs, as determined by the Administrator.
Projects costs will be based on the amount that would be spent over the
first 2 years after the first advance of RUS funds for the component or
phase of the undertaking for which the borrower is requesting RUS funds,
as determined by the Administrator. The Administrator may determine that
a component or phase, especially actions necessary to initiate a larger
project, constitute a distinct project for the purposes of this section.
Sec. 1703.26 [Reserved]
Sec. 1703.27 Owner's equity in the project.
The Administrator may require, as a condition to RUS financing, that
the owner(s) of the project invest equity capital if determined to be
financially necessary, based on an RUS financial analysis and sound
lending practices.
Sec. 1703.28 Maximum and minimum sizes of a zero-interest loan or grant application.
(a) The maximum size of an application that will be considered for
funding under this subpart during a fiscal year will be 3 percent of the
projected total amount available for the zero-interest loans or grants
under section 313 of the Act during that fiscal year, rounded to the
nearest $10,000. This determination will be made by the Administrator
for each fiscal year.
(b) Regardless of the projected total amount that will be available,
the maximum size may not be lower than $200,000.
(c) The projected total amount available during a particular fiscal
year is calculated as the sum of the projected
[[Page 40]]
amount that will be credited to the subaccount during a particular
fiscal year from the interest differential calculation based on the RUS
borrowers' cushion of credit levels at the time the Administrator makes
the determination and any amounts appropriated for that fiscal year for
zero-interest loans or grants made under section 313 of the Act.
(d) After the Administrator has determined the maximum size for a
fiscal year, a notice of the calculation and amount will be published
promptly in the Federal Register. Thereafter, the maximum size will
remain in effect until the Administrator has published the maximum size
for the next fiscal year.
(e) All unselected applications on file at RUS, including both loan
and grant applications, from the same borrower for the same project will
be considered to be one application in determining that the maximum size
of the application is in accordance with this section.
(f) The minimum size of an application for assistance under this
subpart that will be considered for funding is $10,000.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11711, Mar. 14, 1994]
Sec. 1703.29 Terms of zero-interest loan repayment.
(a) The Administrator will determine the terms and repayment
schedule of the zero-interest loan to the borrower based on the nature
of the project and approved purposes. Ordinarily, the total term of the
zero-interest loan, including any principal deferment period, will not
exceed 10 years. The repayment terms the borrower sets on a pass-
through-loan must equal the terms of the loan provided to the borrower
unless a written request from the borrower to provide a longer deferment
period, shorter total term of the loan, or other benefits is approved by
the Administrator.
(b) The Administrator has the discretion to defer the repayment of
principal up to two years, based on an analysis of the feasibility of
the project. Ordinarily, if the Administrator considers the project to
be a business expansion or going concern, the first repayment of
principal will not begin until one year after the date of the RUS note.
Ordinarily, if the Administrator considers the project to be a start-up
project, the first repayment of principal will not begin until 2 years
after the date of the RUS note. Loans must be repaid under terms set
forth in RUS's legal documents.
(c) Unless the Administrator has specifically approved otherwise,
the borrower will be required to repay the RUS zero-interest loan in
full at such time as a pass-through-loan has been fully repaid to the
borrower. If the borrower uses the proceeds of the RUS zero-interest
loan to provide pass-through-loans to more than one entity, this
requirement will only apply to that portion of the zero-interest loan
associated with the loan that has been fully repaid to the borrower.
(d) If the Administrator determines that, as a result of state law,
court rulings, or regulatory commission decisions, it is necessary to
ensure that the borrower will repay the RUS zero-interest loan, the
borrower may be required to provide an irrevocable letter of credit, or
another form of guarantee satisfactory to the Administrator. The letter
of credit or other guarantee is to be made payable to RUS. The letter of
credit or other guarantee may not be secured by any assets under a RUS
and/or Rural Telephone Bank mortgage and must be in form and substance
satisfactory to the Administrator. RUS must receive the letter of credit
or other guarantee prior to the advance of any zero-interest loan funds.
Sec. 1703.30 Approval of agreements.
(a) The Administrator must approve any agreements between the
borrower and the owner(s) of the project, those undertaking the project,
or any intermediary that will re-lend or transfer the proceeds of the
RUS funds, that the Administrator deems necessary.
(b) Borrowers must obtain the Administrator's approval of any loan,
grant or security agreement, mortgage or note between the borrower and
the owner(s) of the project, those undertaking the project or any
intermediary that will re-lend or transfer the proceeds of the RUS
funds, prior to the advance of RUS zero-interest loan or
[[Page 41]]
grant funds to the borrower. The borrower must receive the
Administrator's approval of the final draft version of the documents
prior to their execution.
(c) Borrowers must obtain the Administrator's written approval prior
to revising or amending any loan, grant or security agreement, mortgage
or note that has been reviewed and approved by the Administrator
pursuant to paragraph (b) of this section. Additionally, the borrower
must obtain the Administrator's written approval prior to executing,
revising or amending any other agreement, in connection with the
project, between the borrower and the owner(s) of the project, those
undertaking the project or any intermediary that will re-lend or
transfer the proceeds of the RUS funds.
(d) The borrower and the owner(s) of the project, or those
undertaking the project, should make agreements and prepare documents in
accordance with all applicable laws.
(Approved by the Office of Management and Budget under control number
0572-0090)
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11711, Mar. 14, 1994;
59 FR 38341, July 28, 1994]
Sec. 1703.31 Transfer of employment or business.
The project must not result primarily in the transfer of any
existing employment or business activity from one area to another.
Sec. 1703.32 Environmental requirements.
(a) Prospective recipients of zero-interest loans or grants should
consider the potential environmental impact of their proposed projects
at the earliest planning stage and plan development in a manner that
reduces, to the extent practicable, the potential to affect the quality
of the human environment adversely.
(b) Application for zero-interest loans or grants for project
feasibility studies. For a proposal to fund a project feasibility study,
the only environmental information normally required is whether or not
the proposed project being studied or analyzed will be located within an
area protected under the Coastal Barrier Resources Act (16 U.S.C. 3501
et seq.) Generally, the use of Federal funds to promote development on
coastal barriers is strictly limited by the Coastal Barriers Resources
Act.
(c) Application for zero-interest loans or grants for a project that
is not considered project feasibility studies. (1) The Administrator
will review support materials in the application and initiate an
environmental review process pursuant to 7 CFR part 1794. This process
will focus on any environmental concerns or problems that are associated
with the project.
(2) The level and scope of the environmental review will be
determined in accordance with the National Environmental Policy Act of
1969 (NEPA), as amended, (42 U.S.C. 4321 et seq.), the Council on
Environmental Policy for Implementing the Procedural Provisions of NEPA
(40 CFR parts 1500--1508), RUS's environmental policies and procedures
(7 CFR part 1794) and other relevant Federal environmental laws,
regulations and Executive Orders.
(3) Activity related to the project that will adversely affect the
environment or limit the choice of reasonable alternatives must not be
undertaken prior to completion of RUS's environmental review process.
Sec. 1703.33 Other considerations.
(a) Equal opportunity and nondiscrimination requirements. All zero-
interest loans and grants made under this subpart are subject to the
nondiscrimination provisions of title VI of the Civil Rights Act of
1964, as amended, (42 U.S.C. 1971 et seq., 1975a et seq., 2000a et seq.;
7 CFR part 15); section 504 of the Rehabilitation Act of 1973, as
amended, (29 U.S.C. 701 et seq.; 7 CFR part 15b); the Age Discrimination
Act of 1975, as amended, (42 U.S.C. 6101 et seq.; 45 CFR part 90); and
Executive Order 11246, Equal Employment Opportunity, (3 CFR, 1964--1965
Comp., p. 339) as amended by Executive Order 11375, Amending Executive
Order 11246, Relating to Equal Employment Opportunity (3 CFR, 1966--1970
Comp., p. 684).
(b) Architectural barriers. All facilities financed with RUS zero-
interest loans or grants that are open to the public or in which
physically handicapped persons may be employed or reside must be
designed, constructed, and/or altered to be readily accessible to, and
usable by handicapped persons. Standards for
[[Page 42]]
these facilities must comply with the Architectural Barriers Act of
1968, as amended, (42 U.S.C. 4151 et seq.) and with the Uniform Federal
Accessibility Standards (UFAS), (Appendix A to 41 CFR part 101.19,
subpart 101-19.6).
(c) Flood hazard area precautions. In accordance with 7 CFR part
1788, if the project is in an area subject to flooding, flood insurance
must be provided to the extent available and required under the Flood
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001 et seq.).
The insurance must cover, in addition to the buildings, any machinery,
equipment, fixtures and furnishings contained in the buildings. RUS will
comply with Executive Order 11988, Floodplain Management (3 CFR, 1977
Comp., p. 117), and Sec. 1794.41 of this chapter, in considering the
application for the project. As set forth in Sec. 1794.41 of this
chapter, public notice is required if a project will be located in a
floodplain.
(d) Uniform relocation assistance. Relocations in connection with
this program are subject to 49 CFR part 24 as referenced by 7 CFR Part
21, Uniform Relocation Assistance and Real Property Acquisition for
Federal and Federally Assisted Programs except that the provisions in
Title III, Uniform Real Property Acquisition Policy, of the Uniform
Relocation Assistance and Real Property Acquisition Act of 1970, as
amended, (42 U.S.C. 4601-4655) (the ``Uniform Act'') do not apply to
this program.
(e) Drug-free workplace. Grants made under this program are subject
to the requirements set forth in 7 CFR part 3017, subpart F, Drug-Free
Workplace Requirements, which implements the Drug-Free Workplace Act of
1988 (41 U.S.C. 701 et seq.). A borrower requesting a grant will be
required to certify that it will establish and make a good faith effort
to maintain a drug-free workplace program.
(f) Debarment and suspension. The requirements of Executive Order
12549, Debarment and Suspension (3 CFR, 1986 Comp., p. 189), and 7 CFR
part 3017, subparts A through E, Governmentwide Debarment and Suspension
(Nonprocurement), regarding debarment and suspension are applicable to
this program.
(g) Intergovernmental review of Federal programs. (1) This program
is subject to the requirements of Executive Order 12372,
Intergovernmental Review of Federal Programs (3 CFR, 1982 Comp., p. 197)
and 7 CFR part 3015, subpart V, Intergovernmental Review of Department
of Agriculture Programs and Activities, which implements Executive Order
12372.
(2) With the exception of zero-interest loans and grants for project
feasibility studies, proposed projects are subject to the state and
local government review process set forth in 7 CFR part 3015. Under the
review process, state and local governments have 60 days to comment on
the proposed project.
(3) The Administrator will not give final approval to an application
until the requirements of 7 CFR part 3015, subpart V, regarding state
and local government review have been satisfied.
(h) Restrictions on lobbying. (1) The restrictions and requirements
imposed by 31 U.S.C. 1352, entitled ``Limitation on Use of Appropriated
Funds to Influence Certain Federal Contracting and Financial
Transactions'' and the implementing regulation, 7 CFR part 3018, New
Restrictions on Lobbying, are applicable to this program.ca 7v15.018
(2) The regulation that implements this statute requires applicants
for a zero-interest loan in excess of $150,000 and applicants for a
grant in excess of $100,000 to file a certification statement regarding
the use of Federal appropriated funds to lobby the Executive and
Legislative branches of the Federal Government, and to file a disclosure
form if engaged in these activities using unappropriated funds.
(3) In addition, persons that receive contracts or subcontracts in
excess of $150,000 under a zero-interest loan and persons that receive
subgrants, contracts or subcontracts in excess of $100,000 under a grant
are required to file certification statements regarding lobbying the
Executive and Legislative branches and, if engaged in these activities,
to file disclosure forms.
Sec. 1703.34 Applications.
(a) Borrowers may file an application on any official workday during
the
[[Page 43]]
first 14 days of every month. A borrower must send a copy of the
application, except for an application that requests a zero-interest
loan or grant for project feasibility studies, to the state single point
of contact for state and local governments at the same time it submits
the application to RUS. As discussed in Sec. 1703.33(g), state and local
governments have 60 days to review a borrower's proposal before the
Administrator gives final approval to an application, except a proposal
for project feasibility studies. The Administrator may establish a
special application period if determined necessary.
(b) A completed application will consist of an original and two
copies of:
(1) An application form. The application must include a completed
application form, ``Application for Federal Assistance,'' Standard Form
424;
(2) A board resolution. The application must include a board
resolution that:
(i) Requests a zero-interest loan and/or grant, including the amount
of the zero-interest loan and/or the amount of the grant rounded to the
nearest 1,000 dollars;
(ii) Includes the total combined deferment and repayment period
requested for a zero-interest loan if less than 10 years;
(iii) Includes the board's endorsement of the proposed rural
economic development project as described in the application;
(iv) States the proposed project does not violate Secs. 1703.20 and
1703.21; and discloses any information regarding a conflict of interest,
potential conflict of interest, or appearance of a conflict of interest
that would allow the Administrator to make an informed decision;
(v) Authorizes an official of the borrower to requisition zero-
interest loan or grant funds under this program;
(vi) For an application for a grant only, authorizes the chief
executive officer of the borrower to execute and deliver on behalf of
the borrower the certification Form AD-1049 regarding a drug-free
workplace program as required in part 3017, subpart F of this title; and
(vii) Any other matters deemed necessary by the Administrator;
(3) Miscellaneous Federal forms. The application must include the
following completed forms:
(i) Form AD-1047, ``Certification Regarding Debarment, Suspension,
and Other Responsibility Matters--Primary Covered Transactions,'' as
required in part 3015, subparts A through E of this title; and
(ii) Assurance statement or certification statement required under
the Uniform Act as set forth in Sec. 1703.33(d). For pass-through-loans
and pass-through-grants, the ultimate recipient of the proceeds of the
RUS zero-interest loan or grant must sign the assurance statement that
it will comply with the applicable provisions of the Uniform Act or sign
a certification that the provisions of the Uniform Act will not apply to
the rural development project which will be partially financed with the
proceeds of RUS funds. If the borrower will not provide a pass-through-
loan or pass-through-grant to another entity, the borrower must submit a
completed assurance statement or certification regarding the applicable
provisions of the Uniform Act, or have such an assurance statement on
file at RUS;
(4) Contingent certifications and disclosures. As determined by the
type and amount of requested funds, the application must include the
following completed forms:
(i) For an application for a zero-interest loan in excess of
$150,000 or for an application for a grant in excess of $100,000, a
certification statement, ``Certification Regarding Lobbying,'' and, if
the borrower is engaged in lobbying activities described under
Sec. 1703.33(h), a completed disclosure form, ``Disclosure of Lobbying
Activities''; and
(ii) For an application for a grant only, a completed certification
form, ``Certification Regarding Drug-Free Workplace Requirements
(Grants),'' Form AD-1049 as required in part 3017, subpart F of this
title;
(5) Other requirements. The following:
(i) A section entitled ``Selection Factors'' as set forth in
Sec. 1703.35;
(ii) A section entitled ``Project Description'' as set forth in
Sec. 1703.36;
[[Page 44]]
(iii) Except for applications for project feasibility studies, a
section entitled ``Environmental Impact of the Project'' as set forth in
Sec. 1703.37;
(iv) Monitoring plan. For a pass-through loan and/or grant, a copy
of the Borrower's plan to monitor the loan and/or grant and ensure that
the requirements of this subpart are met; and
(v) Scope of work. For an application for a loan and/or grant, a
proposed scope of work for the project.
(c) The Administrator may request additional information it
considers relevant from the borrower.
(d) During the application review process, the borrower may change
the amount of the zero-interest loan or grant funds requested or other
portions of its application, only if approved by the Administrator. A
borrower that changes its request from a grant to a zero-interest loan
must submit information necessary for the Administrator to evaluate a
loan proposal as set forth in this subsection, and submit a new board
resolution requesting the loan.
(The information collection requirements contained in paragraph (b) of
this section were approved by the Office of Management and Budget under
control number 0572-0090)
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11711, Mar. 14, 1994;
59 FR 38341, July 28, 1994]
Sec. 1703.35 Section of the application covering the selection factors.
The application must contain a section addressing the ``selection
factors'' consisting of the following:
(a) ``Nature of the project'' (Sec. 1703.46(g)(1)), which includes
any information considered appropriate including aspects of the project
that may not be obvious to an outside observer;
(b) ``Job creation project'' (Sec. 1703.46(g)(2)), which includes
any information that is not readily apparent concerning whether the
project would directly create jobs in rural areas. The number of the
jobs and the basis for the job projection should be included under
``Number of long-term jobs'';
(c) ``Long-term improvements in economic development''
(Sec. 1703.46(g)(3)), which addresses the extent to which the project
will improve the productive potential of the labor force, industrial
plant, infrastructure, natural resources and institutions by employing
advanced technology, creating higher-skilled occupations, adding higher
value to natural resources, creating jobs with higher-career potential,
or is considered part of a knowledge intensive industry;
(d) ``Diversifying the rural economy or alleviating
underemployment'' (Sec. 1703.46(g)(4)), which includes any information
the borrower desires the Administrator to consider;
(e) ``Supplemental funds'' (Sec. 1703.46(h)(1)), which includes the
name of each source and the respective amount of supplemental funds that
was provided to the project within 6 months of submitting the
application to RUS, and the amount that will be provided within two
years of receiving RUS funds. Also indicate the nature and strength of
the commitments to make these supplemental funds available, when these
funds are expected to be disbursed, any special terms and conditions
associated with the commitments, copies of the commitments, and, if
established, the interest rate, term and deferment period on any loan
for the project;
(f) ``Economic conditions and job creation'' (Sec. 1703.46(h)(2)),
which includes:
(1) ``Unemployment rates'' (Sec. 1703.46(h)(2)(i)). List the county
or counties in which the project will be located. It is not necessary to
include the county, state or national unemployment rates. RUS obtains
these rates from other Federal agencies;
(2) ``Per capita personal income'' (Sec. 1703.46(h)(2)(ii)). As with
``Unemployment rates,'' it is not necessary to include the county, state
or national per capita personal income levels;
(3) ``Change in population'' (Sec. 1703.46(h)(2)(iii)). It is not
necessary to include the county population levels;
(4) ``Number of long-term jobs'' (Sec. 1703.46(h)(2)(iv)). Include
the number of long-term jobs that the project will directly create in
rural areas and the total project cost;
(5) ``Community-based economic development program''
(Sec. 1703.46(h)(2)(v)).
[[Page 45]]
Explain if the project is part of a community-based economic development
program; and
(6) ``Plan for improving the marketable skills of people in rural
areas'' (Sec. 1703.46(h)(2)(vi)). Include information on any written
plan for the project to provide opportunities or incentives to improve
the marketable skills of rural residents through training and/or
education. For projects that consist of providing training or education,
indicate how it will benefit rural residents;
(g) ``Location'' (Sec. 1703.46(h)(3)), which indicates whether or
not the project will be located in a town and, if so, the name of the
town;
(h) ``Support for the program--cushion of credit payments''
(Sec. 1703.46(h)(4)), which mentions any cushion of credits payments
made recently in accounts at RUS;
(i) ``Demonstration project'' (Sec. 1703.46(h)(5)), which includes a
discussion of any commitments from the owner(s) of the project to be a
demonstration project and a copy of the written commitment;
(j) ``Probability of success'' (Sec. 1703.46(h)(6)), which includes:
(1) ``Owners and management of the project'' (Sec. 1703.46(h)(6)(i))
that discusses how the knowledge, experience, education and training of
the proposed owners and management of the project increases the
likelihood of long-term success; and
(2) ``Ultimate recipient's business plan'' (Sec. 1703.46(h)(6)(ii)),
that references an attached copy of the business plan.
(i) The plan should include:
(A) A description of the project;
(B) A description of the business, if applicable, its products and
the prospects of the industry;
(C) What will be produced or accomplished;
(D) The area to be served;
(E) Any market research or marketing plan;
(F) Any operating plan;
(G) Total project costs and projected use of funds by purpose or
category;
(H) A financial plan, including a feasibility study with projected
balance sheets, income statements and cash flow statements;
(I) The source of supplemental funds, the nature and strength of
commitments from other sources of financing, and the equity
contribution;
(J) The proposed ownership and management of the project;
(K) A description of any coordination with a local, regional or
state development organization; and
(L) Other relevant information.
(ii) The scope of the plan should reflect the amount requested in
the application, the risks involved with developing and operating the
project, and the overall cost of the project. The plan should describe
any coordination with a local, regional or state development
organization.
Sec. 1703.36 Section of the application covering the project description.
In general, this section should be more detailed the larger the
project for which the borrower is requesting funding. The section of the
application on the ``project description'' must include:
(a) A description of the proposed project including the nature of
the project, the location of the project, organizations that will be
involved in the project and the primary beneficiaries of the project.
Also include in this subsection a statement describing whether the
borrower has or will have a direct or indirect (through a subsidiary or
affiliated organization) ownership or similar beneficial interest in the
facilities to be constructed or in the entity that will occupy or
utilize these facilities. In addition, explain whether it seems likely
that the proposed project will be undertaken or completed in the absence
of an RUS zero-interest loan or grant;
(b) A separate paragraph entitled ``Uses of RUS Funds and Total
Project Costs'', that includes a breakdown of the specific uses of RUS
funds and a breakdown of the specific uses of all funds necessary to
ensure completion of the project. Project costs should be limited to the
amount to be spent over the 2-year period after receiving RUS funds;
(c) For a project that involves the establishment of a new venture,
such as a rural business incubator or a similar start-up venture, a
discussion of how the costs of establishing, organizing
[[Page 46]]
and arranging financing for the venture will be paid, how start-up costs
incurred after the venture has been established will be paid, the
expected sources of revenue necessary to sustain the project and revenue
and expense projections for the first 3 years of the project;
(d) If the borrower will provide a pass-through-loan or pass-
through-grant to another entity, outline the terms and conditions that
the borrower intends to place on the recipient of the RUS funds
including the security arrangements and collateral on a zero-interest
loan. The discussion of proposed security arrangements and collateral
should reflect the amount requested in the application, the risks
involved with developing and operating the project, and the overall cost
of the project;
(e) For pass-through-loans and pass-through-grants, a description of
the ultimate recipient, including the form of organization and ownership
(i.e., corporation, nonprofit corporation, cooperative, partnership,
sole proprietor), the owner(s) and the chief officers;
(f) If the project involves construction, a brief description of the
construction necessary to make the project operational and the
organization involved with the project that will be responsible for
building the project facilities or having them built;
(g) A discussion of the manner in which the borrower intends to
monitor the zero-interest loan and/or grant proceeds to ensure that they
are used only for approved purposes; and
(h) If applicable, a discussion on any potential conflict of
interest or the appearance of a conflict of interest, a clarification of
any aspect of the project with respect to the restriction that it must
not result primarily in the transfer of any existing employment or
business activity from one area to another or a clarification of any
aspect of the project with respect to limitations in Secs. 1703.20 and
1703.21.
Sec. 1703.37 Section of the application covering the environmental impact of the project.
(a) For a proposed project that only involves internal modifications
or equipment additions to buildings or other structures (for example;
relocating interior walls or adding computer facilities) and/or external
changes or additions to existing buildings, structures or facilities
requiring physical disturbance of less than 0.4 hectare (0.99 acre), the
environmental information normally required is:
(1) A copy of a flood hazard zone map from the Federal Emergency
Management Agency with the location of the project site marked;
(2) A statement of whether or not the proposed project will be
located within an area protected under the Coastal Barrier Resources Act
(16 U.S.C. 3501 et seq.);
(3) A description of the internal modifications or equipment
additions, and the external changes or additions to existing buildings,
structures or facilities being proposed, the size of the site in
hectares, and the general nature of the proposed use of the facilities
once the project is completed, including any hazardous materials to be
used, created or discharged, any substantial amount of air emissions,
wastewater discharge, or solid waste that will be generated; and
(4) A statement of whether the project site contains or is near a
property listed or eligible for listing in the National Register of
Historic Places (16 U.S.C. 470).
(b) For all other proposed projects include:
(1) A copy of a flood hazard zone map from the Federal Emergency
Management Agency with the location of the project site marked (42
U.S.C. 4001 et seq.);
(2) A diagram showing the general layout of the proposed facilities
on the project site;
(3) The size of the project site in hectares;
(4) A map (preferably a U.S. Geological Survey map) of the project
area indicating the boundaries of the project;
(5) A statement of whether or not the project will be located within
an area protected under the Coastal Barrier Resources Act;
(6) The amount of property to be cleared, excavated, fenced or
otherwise disturbed by the project;
(7) The current land use and zoning of the project site and any
vegetation on the project site;
[[Page 47]]
(8) A description of buildings or other major structures, including
dimensions, to be constructed or modified;
(9) A statement of whether the presence of wetlands or existing
agricultural operations are present at the project site (7 CFR part
1794); whether properties listed or eligible for listing in the National
Register of Historic Places are on or near the project site; whether
threatened or endangered species or critical habitat are on or near the
project site (16 U.S.C. 1531 et seq.);
(10) The general nature of the proposed use of the facilities once
the project is completed, including any hazardous materials to be used,
created or discharged, any substantial amount of air emissions,
wastewater discharge, or solid waste that will be generated (7 CFR part
1794); and
(11) A copy of any environmental review, study, assessment, report
or other document that has been prepared in connection with obtaining
permits, approvals or other financing for the proposed project from
state, local or other Federal agencies. Such material, to the extent
relevant, may be used to fulfill the requirements of this section.
(c) The Administrator may request additional environmental
information in specific cases to satisfy Sec. 1703.32.
Secs. 1703.38--1703.44 [Reserved]
Sec. 1703.45 Review and analysis of applications.
Completed applications received at RUS by the 14th day of the month
will be considered at the first selection date which occurs at least 40
days after the application was received. Completed applications received
at RUS after the 14th day of a month will be either be held for the next
application period or returned to the borrower, at the borrower's
option. The review period of at least 40 days should allow sufficient
time for state and local governments to review the proposed projects
under the intergovernmental review process, as set forth in 7 CFR part
3015, and to provide sufficient time for the Administrator to fully
review and analyze these applications. In the event state and local
government review has not been completed, the Administrator's approval
may be contingent upon the review being satisfactorily documented. The
Administrator reserves the discretion to consider applications outside
the normal selection period.
Sec. 1703.46 Documenting the evaluation and selection of applications for zero-interest loans and grants.
(a) The Administrator will only consider for selection applications
that request funds for purposes as set forth in Secs. 1703.17 and
1703.18 and are not ineligible under Sec. 1703.20, as determined by the
Administrator. The Administrator will not consider applications that do
not conform with all of the provisions of this subpart, as determined by
the Administrator. The Administrator will make the determination of all
numbers, dollars, levels and rates, as well as the nature, costs,
location and other characteristics of the proposed project, to calculate
the number of points assigned to an application for each selection
factor. Applications for zero-interest loans and grants will be ranked
separately. In addition, applications requesting less than 5 percent of
the total project costs as provided in Sec. 1703.25 will be ranked
separately, subject to Sec. 1703.46(j). The Administrator will select
applications that receive the greatest number of total points under
paragraphs (f) and (g) of this section, subject to available funds and
the provisions of Sec. Sec. 1703.25, 1703.46(i), and 1703.46(j).
(b) After reviewing an application, the Administrator may decline to
select an application:
(1) That would result in a conflict of interest or the appearance of
a conflict of interest;
(2) Based on the management and financial situation of the borrower
applying for the zero-interest loan or grant. In determining the
borrower's financial situation, the Administrator will consider, among
other things, the borrower's existing and projected cash flows, equity
to asset ratios, times interest earned ratios, debt service coverage
ratios, the level of its investments, the level of its cash and other
liquid assets, its working capital and repayment of its debts;
(3) Based on a determination that limitations under state laws will
lessen the likelihood of repayment of the RUS
[[Page 48]]
zero-interest loan in the event that the borrower does not receive funds
from the project necessary to cover the RUS zero-interest loan payments;
(4) Based on the unwillingness of the borrower applying for the
zero-interest loan or grant to exercise diligence in repaying RUS loans
or loan guarantees, and comply with RUS's legal documents and
regulations;
(5) For an otherwise eligible project when any of the revenues of
the project are derived from a legalized gambling activity; or
(6) For any illegal activity.
(c)(1) The Administrator will first evaluate the application and the
project with respect to the three factors in this paragraph. The
Administrator will not select applications requesting funds for projects
that in the Administrator's best judgment have a low probability of:
(i) Being a viable business or operation;
(ii) Being successful as measured by long-term job creation or
retention; and
(iii) Producing long-term economic development in rural areas.
(2) The Administrator's determination in paragraph (c) of this
section will be based on the ultimate recipient's feasibility studies,
income statements, cash flow statements, existing and projected balance
sheets, market research, job creation potential, industry trends, and
current economic conditions given the nature of the project. Long-term
job creation and economic development in rural areas as used for this
factor will mean jobs or economic development that would generally be
expected to last at least five years.
(d) The Administrator will not award points under the selection
factors in paragraphs (f) and (g) of this section for applications that:
(1) Involve the purchase land that will not be developed or used as
a site for a project structure during the current phase of the project,
as determined by the Administrator;
(2) Will be used for residential purposes or entertainment purposes
at the residential level, such as residential dwellings and land sites,
facilities to provide entertainment television, or personal, non-
business related vehicle(s); however, nursing homes providing medical
care, as determined by the Administrator, will not be considered to be
residential dwellings;
(3) Will be used primarily to finance the purchase of an established
business or operation rather than for economic development in rural
areas or job creation purposes; or
(4) Will be used primarily to transfer property or real estate
between owners without making any improvements or additions that will
promote economic development in rural areas or job creation.
(e) After the above determinations, the Administrator will evaluate
the applications and assign points with respect to the factors in
paragraph (f) of this section. Applications evaluated under paragraph
(f) of this section that do not receive at least 35 points or are not
within the top 75 percent when all applications being assigned points
are ranked from high to low by total number of points will not be
evaluated with respect to the factors in paragraph (g) of this section.
The only exception to this evaluation process would be the
Administrator's determination that additional applications must be
selected in accordance with Sec. 1703.14. After such a determination,
the remaining applications evaluated in paragraph (f) of this section
will be also evaluated under the factors in paragraph (g) of this
section.
(f) Selection factors pertaining to the type of project. The number
of points assigned for each selection factor will be determined as
follows:
(1) Nature of the project. The extent to which the nature of the
project will promote economic development in rural areas and/or job
creation--up to 50 points. The determination for this factor will be
based on whether the project:
(i) Is considered a start-up, expansion, or enhancement of a
business, a business incubator, an industrial building or park,
infrastructure necessary to connect these types of projects to existing
infrastructure, necessary for the development and operation of these
types of projects, or, in the Administrator's determination, basic
infrastructure necessary for successful businesses in the rural economy;
[[Page 49]]
(ii) Will provide technical assistance to rural businesses or rural
residents, train or educate rural residents, promote economic
development in rural areas on a non-profit basis, or provide medical
care to rural residents; and
(iii) Will succeed as envisioned in the application, and the
possibility that the owners or operators may become delinquent on their
loan payments.
(2) Job creation project. The extent to which the project will
directly lead to job creation given the size of the project and the
amount of RUS funds requested or the project is necessary for job
creation--up to 25 points. As part of the determination, the
Administrator will consider whether the project will provide long-term
employment for rural residents. For industrial parks, industrial
buildings, and similar projects, the Administrator will consider whether
the application includes information on businesses or tenants that will
occupy the building(s) and the nature and extent of the commitments to
use the buildings in determining the number of points to award. The
Administrator will also consider the probability that the project will
not result in job creation as envisioned in the application in terms of
both the number of jobs and the duration of the jobs.
(3) Long-term improvements in economic development. Projects that
lead directly to an increase in long-term productivity and per capita
income in rural areas--up to 25 points. The Administrator's
determination will be based on the extent to which the project will
improve the productive potential of the labor force, industrial plant,
natural resources, institutions, and infrastructure necessary for
economic development and job creation by utilizing advanced technology,
creating higher skilled occupations, creating jobs with higher career
potential or jobs that are considered part to be of a knowledge
intensive industry, or adding higher value to natural resources. In
considering infrastructure projects, the Administrator will award points
only for the facilities, such as water and sewer facilities, that will
serve and are necessary for commercial activities described under this
factor.
(4) Diversifying the rural economy or alleviating underemployment.
Projects that in the judgement of the Administrator will diversify the
rural economic base or assist in alleviating chronic underemployment for
rural residents--10 points. The Administrator will assign points only to
the extent the application contains convincing evidence pertaining to
this factor.
(g) Other selection factors. The number of points assigned for each
selection factor will be determined as follows:
(1) Supplemental funds. (i) A determination of the amount of
supplemental funds provided or to be provided to the project from the
project owner in the form of equity funds, private sources, state and
local government sources, other Federal Government sources, the borrower
or other sources of funds. The supplemental funds used in this
calculation must be disbursed to the project during the period covering
six months prior to the receipt of the application by RUS and two years
after the first advance of RUS funds for the project. Supplemental funds
must be committed to the project before RUS will advance its funds. RUS
loan or grant funds from the borrower or RUS loan or grant funds from
any other organization will not be included in the calculations. The
Administrator will determine what constitutes expenditures on the
project. If supplemental funds as a percentage of the RUS zero-interest
loan and/or grant to be provided to the project is:
(A) Equal to 20%--10 points, the minimum number of points;
(B) Equal to 100%--20 points;
(C) Equal to 500%--30 points, the maximum number of points.
(ii) Ratios of supplemental funds to RUS funds falling between these
levels will be assigned points based on a straight-line interpolation
calculated to the nearest whole point. The result will be rounded based
on the standard convention of a fraction of 1/2 or greater equals 1.
(2) Economic conditions and job creation. (i) A comparison will be
made of the unemployment rate in the county where the project will be
located to the state and national unemployment rates.
[[Page 50]]
(A) If the unemployment rate in the county where the project will be
located exceeds the National unemployment rate by 30 percent or more--10
points, the maximum number of points awarded.
(B) If the unemployment rate in the county where the project will be
located is equal to the National unemployment rate--5 points.
(C) If the unemployment rate in the county where the project will be
located is equal to or less than 75 percent of the National unemployment
rate--0 points.
(D) If the unemployment rate in the county where the project will be
located exceeds the state unemployment rate by 30 percent or more--8
points, the maximum number of points awarded.
(E) If the unemployment rate in the county where the project will be
located is equal to the state unemployment rate--4 points.
(F) If the unemployment rate in the county where the project will be
located is equal to or less than 75 percent of the state unemployment
rate--0 points.
(G) For both the state and national unemployment rate calculations,
rates falling between the levels will be assigned points based on
straight-line interpolation calculated to the nearest whole point. The
result will be rounded based on the standard convention of a fraction of
1/2 or greater equals 1. If the project will be located in several
counties, the Administrator will use a simple average (mean) of the
counties for the comparison. The Administrator will use the average of
the most recent twelve months of unemployment rates it has obtained from
the Bureau of Labor Statistics, U.S. Department of Labor or other
government sources and processed into a suitable format.
(ii) A comparison will be made of the per capita personal income in
the county where the project will be located to the state and national
per capita personal income levels.
(A) If the per capita personal income level in the county where the
project will be located is less than or equal to 90 percent of the
National per capita personal income level--10 points, the maximum number
of points awarded.
(B) If the per capita personal income level in the county where the
project will be located is equal to the National per capita personal
income level--5 points.
(C) If the per capita personal income level in the county where the
project will be located exceeds the National per capita personal income
level by 15 percent or more--0 points.
(D) If the per capita personal income level in the county where the
project will be located is less than or equal to 90 percent of the state
per capita personal income level--8 points, the maximum number of points
awarded.
(E) If the per capita personal income level in the county where the
project will be located is equal to the state per capita personal income
level--4 points.
(F) If the per capita personal income level in the county where the
project will be located exceeds the state per capita personal income
level by 15 percent or more--0 points.
(G) For both the state and national per capita personal income
calculations, incomes falling between the levels will be assigned points
based on straight-line interpolation calculated to the nearest whole
point. The result will be rounded based on the standard convention of a
fraction of 1/2 or greater equals 1. If the project will be located in
several counties, the Administrator will use a simple average (mean) of
the counties for the comparison. The Administrator will use the most
recent annual per capita personal income levels it has obtained from the
Bureau of Economic Analysis, U.S. Department of Commerce or other
government sources and processed into a suitable format.
(iii) A calculation will be made of the change in total population
over the most recent two-year period in the county where the project
will be located. The population change will be the based on the total
percentage change over the two-year period calculated as follows: the
population for the most recent year less the population as of two years
prior to that year with the difference being divided by the population
as of two years prior to the most recent year.
(A) If the percentage growth over the two-year period is negative
2.00 percent
[[Page 51]]
or higher negative amount (a population decline)--8 points, the maximum
number of points.
(B) If the percentage growth over the two-year period is equal to
zero or is positive (population increase)--0 points.
(C) Population growth percentages falling between these levels will
be assigned points based on straight-line interpolation calculated to
the nearest whole point. The result will be rounded based on the
standard convention of a fraction of 1/2 or greater equals 1. If the
project will be located in several counties, the Administrator will use
a simple average (mean) of the counties for the comparison. The
Administrator will use the most recent population data for all counties
it has obtained from the Bureau of Economic Analysis, U.S. Department of
Commerce or other government sources and processed into a suitable
format. The data provide one population figure for the year.
(iv) The number of long-term jobs that the project will directly
create in rural areas.
(A) For five or more direct long-term jobs per $100,000 of total
project costs--15 points, the maximum number of points awarded.
(B) For two direct long-term jobs per $100,000 of total project
costs--8 points.
(C) For no direct long-term jobs--0 points.
(D) Direct, long-term jobs under this factor are jobs that would
generally be expected to last at least five years. Long-term jobs that
would provide 6 months per year of equivalent full-time employment will
be counted under this factor. Long-term jobs that would provide fewer
months of employment would be given points based on the ratio of the
number of months per year of employment to 12 months. Jobs of at least
20 hours per week will be counted under this factor. For construction of
an industrial building, extension of water and/or sewer lines to a
building, or a similar project, the Administrator will require a
reasonable analysis of the number of jobs that will be created before
awarding points for this factor. The Administrator reserves the right to
adjust the number based on its analysis of the project, the explanation
in the application of the businesses that will locate in the
building(s), and any commitments from businesses to locate in the
building(s). This factor will not count indirect job creation that
results from an overall increase in the local economy once the project
is completed. If total project costs per job falls between these levels,
points will be assigned based on straight-line interpolation calculated
to the nearest whole point. The result will be rounded based on the
standard convention of a fraction of 1/2 or greater equals 1.
(v) Projects that are part of a local, community-based rural
economic development program that would improve the local economy and
enhance the well-being of rural residents--10 points. The determination
will be based on information submitted by the borrower in its
application and other information the Administrator considers
appropriate.
(vi) Projects that have a written plan to provide opportunities or
incentives to improve marketable skills for rural residents through
training and/or education, or projects which consist of providing this
training and/or education--5 points.
(3) Location. Projects that will be physically in a rural area--20
points.
(4) Support for program--cushion of credit payments. (i)
Applications submitted by borrowers that have made cushion of credit
payments as set forth in section 313 of the Act based on the following:
(A) If the borrower has $300,000 or three percent of total assets,
whichever is less, in cushion of credit payments--15 points;
(B) If the borrower has $100,000 or one percent of total assets,
whichever is less, in cushion of credit payments--10 points;
(C) If the borrower has at least $5,000 or 0.5 percent of total
assets, whichever is less, in cushion of credit payments--5 points.
(ii) The amount of cushion of credit payments will be based on the
amount at the time the Administrator evaluates the project. The
calculation of a borrower's total assets will be based on RUS's most
recently published Statistical Report, Rural Electric Borrowers (RUS
Informational Publication 201-1) or Statistical Report, Rural Telephone
[[Page 52]]
Borrowers (RUS Informational Publication 300-4). These publications are
available from the Rural Utilities Service, Administrative Services
Division, Washington, DC 20250. If the amount of cushion of credits
payments falls between these levels, points will be based on a straight-
line interpolation calculated to the nearest whole point. The result
will be rounded based on the standard convention of a fraction of 1/2 or
greater equals 1.
(5) Demonstration project. If the application contains a written
commitment from the owner(s) of the project that the project will be a
demonstration project--5 points.
(6) Probability of Success. (i) The knowledge, experience, education
and training of the proposed owners and management of the project--up to
10 points.
(ii) The ultimate recipient's business plan and indications that the
project will successfully result in economic development in rural areas
and/or job creation--up to 40 points. The Administrator's evaluation of
the success of the project will be based on indications in the
application and RUS's analysis that the project will be a viable
business or operation, be successful in creating or retaining long-term
jobs, and be successful in producing economic development that will
result in long-term benefits to rural areas. The plan should include:
(A) A description of the project;
(B) A description of the business, if applicable, its products and
the prospects of the industry;
(C) What will be produced or accomplished;
(D) The area to be served;
(E) Any market research or marketing plan;
(F) Any operating plan;
(G) Total project costs and projected use of funds by purpose or
category;
(H) A financial plan, including a feasibility study with projected
balance sheets, income statements and cash flow statements;
(I) The source of supplemental funds, the nature and strength of
commitments from other sources of financing, and the equity
contribution;
(J) The proposed ownership and management of the project;
(K) A description of any coordination with a local, regional or
state development organization; and
(L) Other relevant information.
(iii) The Administrator expects the ultimate recipient's business
plan referenced in paragraph (g)(6)(ii) of this section to be comparable
to a plan normally submitted to a bank for long-term financing. In
evaluating an application for this selection factor, the Administrator
will consider the probability that the project will result in long-term
economic development in rural areas and/or job creation as envisioned in
the application.
(iv) Quality and completeness of borrower's initial application
submitted to RUS--up to 10 points. The Administrator's determination
will be based on the completeness and quality of the application as
measured by the additional information required from the borrower to
complete the analysis. For a pass-through loan and grant, the quality of
the Borrower's plan to monitor the loan and grant and assure that the
requirements of this subpart and 7 CFR parts 3015 and 3016 are met will
also be considered.
(7) Special economic status. The Administrator has the discretion to
designate special economic status (up to 25 points) to applications
submitted by borrowers that have documented one or more of the following
four conditions in one or more county(ies) to be served by the proposed
project:
(i) A designation of disaster area by the President of the United
States which has been so designated within three years prior to applying
to RUS;
(ii) The loss, removal, or closing of a major source or sources of
employment in the last 3 years which causes an increase of 2 percentage
points or more in the area's most recent unemployment rate compared with
the period immediately before the dislocation;
(iii) Chronic or long-term economic deterioration, documented by one
or both of the following conditions:
(A) An unemployment level equal to or greater than 1.5 times the
National average unemployment percentage from 4 out of the last 5 years,
starting with the most current statistics available. The applicant, when
calculating
[[Page 53]]
recent years' unemployment percentages, should compare county statistics
with the National Average unemployment for the corresponding year.
Statistics on unemployment will be based on figures provided by the U.S.
Bureau of Labor Statistics. However, the Administrator may, at his
discretion, also consider verifiable, published State statistical data
provided by the applicant in situations where county-wide statistical
data is not representative of local conditions. Such statistical data
must be part of a recognized database which reflects information for
other areas within the State;
(B) A 15% loss of population due to out-migration over the most
recent 10-year decennial census, based on the U.S. Bureau of the Census
decennial data;
(iv) A designation as a Rural Empowerment Zone or Rural Enterprise
Community by the Empowerment Zone Program authorized by Section 13301 of
the Omnibus Reconciliation Act of 1993, Public Law 103-66 (107 Stat.
312), 26 U.S.C. 1391-1393.
(h) Outline of selection factors. The selection factors contained in
Secs. 1703.46(f) and 1703.46(g) and the maximum number of points that
may be assigned to each is listed below:
(1) Nature of the project--50 points;
(2) Job creation project--25 points;
(3) Long-term improvements in economic development--25 points;
(4) Diversifying the rural economy or alleviating underemployment--
10 points;
(5) Supplemental funds--30 points;
(6) Economic conditions and job creation:
(i) Unemployment rates--18 points;
(ii) Per capita personal income--18 points;
(iii) Change in population--8 points;
(iv) Number of long-term jobs--15 points;
(v) Community-based economic development program--10 points;
(vi) Plan for improving the marketable skills of people in rural
areas--5 points;
(7) Location--20 points;
(8) Support for program--cushion of credit payments--15 points;
(9) Demonstration project--5 points;
(10) Probability of success:
(i) Owners and management of the project--10 points;
(ii) Ultimate recipient's business plan--40 points; and
(iii) Completeness of borrower's initial application--10 points;
(11) Special economic status--25 points.
(i) Regardless of the number of points assigned to a borrower's
application, the Administrator may:
(1) Limit the number of applications selected in any one state
during any fiscal year to the ratio of borrowers in that state to the
total number of borrowers multiplied by three, or ten percent of the
total number selections that have been made during the current fiscal
year, or ten, whichever is greatest. The number of borrowers will be
determined as of the latest published RUS statistical reports
(Statistical Report, Rural Electric Borrowers, RUS Informational
Publication 201-1 and Statistical Report, Rural Telephone Borrowers, RUS
Informational Publication 300-4. These publications are available from
the Rural Utilities Service, Administrative Services Division,
Washington, DC 20250);
(2) Limit a borrower to one selected application during any
selection period;
(3) Limit the number of applications selected for a particular
project;
(4) Allocate available funds between applications from electric and
telephone borrowers;
(5) Select an application receiving fewer points than another
application if there are insufficient funds during a particular budget
period to select the higher ranked application; except that the
Administrator may ask the borrower that submitted the higher ranked
application if it desires to reduce the amount of its application to the
amount of funds available. The reduction may require additional
supplemental funds to ensure a successful project. Based on information
the borrower provides, the Administrator will re-analyze the project to
ensure that the project will still be feasible with reduced funding; or
(6) Select the highest ranking applications for funds to finance
projects that the Administrator classifies as project feasibility
studies.
(j) During each selection period, the highest ranking application
from among the applications requesting less
[[Page 54]]
than 5 percent of the total project costs as provided in Sec. 1703.25
will be considered with the applications requesting 5 percent or more of
total project costs.
(k) The Administrator reserves the right to use the region or data
it considers most appropriate if ``county'' data are unavailable for a
particular area.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11711, Mar. 14, 1994;
59 FR 38341, July 28, 1994; 59 FR 53931, Oct. 27, 1994]
Secs. 1703.47--1703.57 [Reserved]
Sec. 1703.58 Post selection period.
(a) RUS will inform a borrower whether the Administrator has
selected its application. The advance of RUS funds after the selection
has occurred is contingent upon the borrower meeting any terms and
conditions the Administrator determines are necessary. A borrower that
submitted an application which was not selected will be asked to inform
RUS whether it desires to be reconsidered at a later date. The borrower
may modify the application after it has been considered without
resubmitting all the required material in an application, except if it
changes the request from a grant to a zero-interest loan it must submit
information necessary for the Administrator to evaluate a loan proposal
as set forth in Secs. 1703.35 and 1703.36 and submit a new board
resolution requesting a loan. If the borrower so desires, the
Administrator will consider an application for up to one year after the
date RUS originally received the application. A borrower may submit new
applications as often as it desires.
(b) During the period between the selection of the application and
the execution of RUS's legal documents, the borrower must inform the
Administrator if the project is no longer viable or the borrower no
longer desires a zero-interest loan or grant for the project. Upon a
determination by the Administrator to that effect, the selected
application will be considered cancelled.
(c) If an application has been selected and the nature of the
project changes, as determined by the Administrator, the borrower may be
required to submit a new application to RUS for consideration. The
selection may not be transferred to another project, as determined by
the Administrator. At any time after the selection of an application,
the Administrator may, upon a request from the borrower and receipt of
any documentation the Administrator considers necessary, approve changes
in the method of carrying out the purpose of the project as long as the
overall purpose of the project remains the same, revise the amount of
the zero-interest loan and/or grant, revise the loan maturity date and
principal deferment period and make other adjustments. The Administrator
may reduce the amount of the RUS loan or grant to reflect reductions in
the amount of supplemental funds to be provided to the project. For
substantial reductions in amount of supplemental funds to be provided to
the project, the Administrator may require the borrower to re-apply for
the RUS loan or grant funds.
(d) If state or local governments raise objections to a proposed
project under the intergovernmental review process that are not resolved
within three months of the Administrator's selection of the application,
the Administrator may consider the selection of the application
cancelled.
Sec. 1703.59 Final application processing and legal documents.
(a) After a borrower has submitted all information the Administrator
determines is necessary for the selected application, RUS will send the
necessary legal documents to the borrower to execute and return to RUS.
The legal documents will include a letter of agreement and any legal
documents the Administrator deems appropriate, including any loan
agreements, notes, security instruments, certifications or legal
opinions. The letter of agreement will, among other things, constitute
the Administrator's approval of funds for the project subject to certain
terms and conditions as determined by the Administrator, and include a
project description, approved purposes of the zero-interest loan and/or
grant, the maximum amount of zero-interest loan and/or grant,
supplemental funds to be provided to the project and certain
[[Page 55]]
agreements or commitments the borrower proposed in its application.
(b) The Administrator has the discretion to include as an approved
purpose the reimbursement of short-term financing and expenditures that
were used for costs incurred on the project in accordance with
Sec. 1703.20(a)(2).
(c) If the borrower fails to submit within one month from the date
of the Administrator's selection of an application all of the
information that the Administrator determines to be necessary for RUS to
prepare legal documents, the Administrator may consider the selection of
the application cancelled.
Sec. 1703.60 [Reserved]
Sec. 1703.61 Disbursement of zero-interest loan and grant funds.
(a) RUS will disburse zero-interest loan funds to the borrower which
must disburse zero-interest loan proceeds to the project for approved
purposes in accordance with the legal documents executed by the
Administrator and the borrower and applicable RUS regulations. The
borrower must make payments on a zero-interest loan as set forth in the
legal documents executed by the Administrator and the borrower. The
Borrower or project owner's share in the cost of the project must be
utilized in advance of RUS zero-interest loan funds, or upon RUS
approval, on a pro-rata distribution basis with loan funds during the
disbursement period. The Borrower or project owner will not be permitted
to provide its contribution at the end of the loan disbursement period.
(b) RUS will disburse grant funds to the borrower which must
disburse grant proceeds to the project for approved purposes in
accordance with the provisions of 7 CFR part 3015 and 7 CFR part 3016,
as appropriate, the legal documents executed by the Administrator and
the borrower, and applicable RUS regulations. Prior to the disbursement
of grant funds under this subpart, the Borrower will provide evidence of
fidelity bond coverage as required by 7 CFR 3015.17. The grant portion
of a pass-through zero-interest loan and grant will be disbursed to the
Borrower on a reimbursement basis after all other project funds have
been utilized and evidence is provided that the project has been
completed. Grants to Borrowers for establishment of revolving loan funds
will be disbursed in accordance with Sec. 1703.22 of this subpart.
(c) If the borrower fails to satisfy all conditions, requirements,
and terms prerequisite to the advance of zero-interest loan and/or grant
funds as set forth in the letter of agreement or other RUS legal
documents within 120 days from the date the borrower signs the letter of
agreement agreeing and accepting the conditions, requirements, and terms
of the RUS zero-interest loan and/or grant, or such later date as the
Administrator may approve, the Administrator may rescind the zero-
interest loan and/or grant commitment.
(d) During the period between the execution of RUS's legal documents
and the disbursement of funds, the borrower must provide the
Administrator written notification if the project is no longer viable or
the borrower no longer desires a zero-interest loan or grant for the
project. After RUS has received the borrower's notification, the
Administrator will rescind the commitment.
(e) The borrower must return to RUS all proceeds of the zero-
interest loan and/or grant, including any interest earned on the funds
being returned, which have not been lent or disbursed by the borrower
for approved purposes during the six months following the advance of the
loan or grant funds from RUS to the borrower, or such later date as the
Administrator may approve. If the project is under the control of the
borrower, all proceeds of the zero-interest loan and/or grant must be
returned to RUS, including any interest earned on the funds being
returned, which have not been expended by the borrower for approved
purposes before the first anniversary of the date of the advance of the
loan or grant funds from RUS to the borrower, or such later date as the
Administrator may approve. Authorization of any extension rests solely
within the discretion of the Administrator.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11712, Mar. 14, 1994]
[[Page 56]]
Secs. 1703.62--1703.65 [Reserved]
Sec. 1703.66 Review and other requirements.
(a) RUS will review borrowers receiving zero-interest loans or
grants, as necessary, to ensure that funds are expended for approved
purposes. Borrowers receiving zero-interest loans or grants must monitor
the project to the extent necessary to ensure that the project is in
compliance with all applicable regulations, including ensuring that
funds are expended for approved purposes. The borrower is responsible
for ensuring that disbursements and expenditures of funds are properly
supported with certifications, invoices, contracts, bills of sale, or
any other forms of evidence determined appropriate by the Administrator
and that such supporting material is available, at the borrower's
premises, for review by the RUS field accountant, borrower's certified
public accountant, the Office of Inspector General, the General
Accounting Office and any other accountant conducting an audit of the
borrower's financial statements or this rural economic development
program. Borrowers will be required to permit RUS to inspect and copy
its records and documents that pertain to the project.
(b) The Borrower must require the recipient of a pass-through loan
and grant to provide an itemized list to the Borrower that shows the
expenditures made on the project for approved purposes, including a
certification to that effect. The Borrower will also require the
recipient to attach invoices, receipts, bills of sale, and other
evidence representing the items on the list of expenditures that at
least total the amount of the RUS zero-interest loan and grant. In
addition, the Borrower will also require the recipient to furnish a
record of itemized receipts showing total project costs in such detail
that will permit auditors to establish the RUS funding percentage. RUS's
legal agreements will include the terms and conditions that the Borrower
must require in its agreement with the recipient of a pass-through loan
and grant covering the use and intended schedule of expenditures of the
loan funds.
(c) RUS's legal documents may require the borrower to include in its
legal documents with the recipient of a pass-through loan or a pass-
through-grant the requirement to expend the funds for approved purposes
by a certain date specified in RUS's legal documents or return to the
borrower all funds that have not been expended by such date. The
borrower must promptly return to RUS all unexpended funds that the
recipient returns to the borrower under the terms set forth in the legal
documents executed between the Administrator and the borrower. The
borrower may request an extension due to delays in the project.
Authorization of any extension rests solely within the discretion of the
Administrator.
(d) The legal documents executed between the Borrower and the
Administrator in connection with a zero-interest loan and/or grant must
contain certain provisions giving the Administrator discretionary rights
and remedies in the event a Borrower fails to comply with this subpart,
other Federal regulations and statutes, or the terms, conditions and
requirements of the executed legal documents. Regardless of any right or
remedy the Administrator chooses to assert, if the Borrower uses any
zero-interest loan and/or grant funds other than for approved purposes,
the Borrower will be required to return to RUS the amount used for
unapproved purposes. An unauthorized zero-interest loan amount which is
returned will be considered a prepayment on the RUS note.
(e) Borrowers receiving zero-interest loans and/or grants will be
subject to a rural economic development review of zero-interest loan and
grant funds.
(f) The borrower must promptly notify the Administrator in writing
if another entity is in default on a pass-through-loan between the
borrower and the entity.
(g) Grants provided under this program will be administered in
accordance with 7 CFR part 3015 and 7 CFR part 3016, as appropriate.
Copies of these USDA Uniform Assistance regulations can be obtained by
contacting RUS in Washington, DC. A Borrower that receives a grant for
the establishment of a revolving loan fund, or project owner that
receives a pass-
[[Page 57]]
through loan and grant, will be subject to requirements under these
regulations which cover, among other things, financial reporting,
accounting records, budget controls, record retention and audit
requirements. For pass-through loans and grants, RUS Borrowers will be
required to include in their legal documents the requirement for project
owners to provide sufficient financial, accounting and budget
information and other records deemed necessary to facilitate audits in
accordance with 7 CFR part 3015 and 7 CFR part 3016 for non-profit
entities, and RUS rural economic development loan reviews for projects
in a for-profit status.
(h) For pass-through loans and grants awarded under this subpart,
the Borrower must diligently monitor performance to ensure that time
schedules are being met, projected work by time periods is being
accomplished, and other performance objectives are being achieved. The
Borrower must submit an original and one copy of each report to RUS on
an annual basis. The project performance reports shall include, but not
be limited to, the following:
(1) A comparison of actual accomplishments to the objectives
established for that period;
(2) Reasons why any established objectives were not met;
(3) A description of any problems, delays, or adverse conditions
which have occurred, or are anticipated, and which may affect the
attainment of overall project objectives, prevent meeting of time
schedules or objectives, or preclude the attainment of particular
project work elements during established time periods. This disclosure
shall be accompanied by a statement of the action taken or planned to
resolve the situation; and
(4) Objectives and timetable established for the next reporting
period.
(i) For pass-through loans and grants, a final project performance
report will be required with the last SF 269, ``Financial Status
Report,'' available from RUS in Washington, DC. The final report also
must provide an evaluation of the success of the project in meeting the
objectives of the program. The final report may serve as the last annual
report.
(j) Monitoring requirements for Borrowers receiving grants for
revolving loan funds are specified in Sec. 1703.22.
[57 FR 44317, Sept. 25, 1992, as amended at 59 FR 11712, Mar. 14, 1994]
Sec. 1703.67 Changes in project objective or scope.
For loans and grants awarded under this subpart, the Borrower must
obtain prior approval for any material change to the scope or objectives
of the approved project, including changes to the scope of work or
budget. Failure to obtain prior approval of changes can result in
suspension or termination of grant funds.
[59 FR 11712, Mar. 14, 1994]
Sec. 1703.68 Loan and grant termination provisions.
(a) Termination for cause. The Administrator may terminate any loan
and/or grant in whole, or in part, at any time before the date of
completion of loan and/or grant disbursement, whenever the Borrower has
failed to comply with the conditions of the loan and/or grant. The
Administrator will promptly notify the Borrower in writing of the
determination and the reasons for the termination, together with the
effective date. The termination date will be no less than 30 days
following receipt of the termination notice. The Borrower will have such
time to cure the default, or to state why it feels the loan and/or grant
should not be terminated. The Administrator will stay the termination
upon the curing of the default, and may delay termination if, sufficient
cause has been given by the Borrower.
(b) Termination for convenience. The Administrator or the Borrower
may terminate a loan and/or grant in whole, or in part, when both
parties agree that the continuation of the project would not produce
beneficial results commensurate with further expenditure of funds. The
two parties will agree upon termination conditions, including the
effective date, and in the case of partial terminations, the portion to
be terminated. The Borrower will not incur new obligations for the
terminated portion after the effective date, and will cancel as many
outstanding
[[Page 58]]
obligations as possible. The Administrator will allow full credit to the
Borrower for the Federal share of unfulfilled contractual obligations
which were incurred in good faith by the Borrower prior to grant
termination.
[59 FR 11712, Mar. 14, 1994]
Secs. 1703.69--1703.79 [Reserved]
Subpart C--Rural Business Incubator Program [Reserved]
Secs. 1703.80--1703.99 [Reserved]
Subpart D--Distance Learning and Telemedicine Loan and Grant Program
Source: 62 FR 32437, June 13, 1997, unless otherwise noted.
Sec. 1703.100 Purpose.
The purpose of this subpart is to encourage and improve telemedicine
services and distance learning services in rural areas through the use
of telecommunications, computer networks, and related advanced
technologies by students, teachers, medical professionals, and rural
residents.
Sec. 1703.101 Policy.
(a) RUS recognizes that the transmission of information is vital to
the economic development, education, and health of rural Americans. To
further this objective, RUS will award loans and grants under this
subpart to distance learning and telemedicine projects that will improve
the access of people residing in rural areas to improved educational,
learning, training, and health care services. Unless a distinction is
made in the various sections of this subpart, all aspects of this
subpart will apply to all requests for financial assistance.
(b) In providing assistance under this subpart, RUS will give
priority to rural areas that it believes have the greatest need of
distance learning and telemedicine services. RUS believes that generally
the need is greatest in economically challenged areas and those
requiring high costs to serve. This program is consistent with
provisions of the 1996 Telecommunications Act (Public Law 104-104, 110
Stat. 56) that designates telecommunications service discounts for
schools, libraries, and rural health care providers providing benefits
to rural end-users. RUS will take into consideration the community's
involvement in the project and the applicant's ability to leverage grant
funds based on its access to capital.
(c) RUS believes that the residents of rural areas and their local
institutions which serve them can best determine what are the most
appropriate communications or information systems for use in their
respective communities. Therefore, in administering this subpart, RUS
will not favor or mandate the use of one particular technology over
another.
(d) All rural institutions are encouraged to cooperate with each
other and with applicants and end users in promoting the program being
implemented under this subpart.
(e) RUS staff will make diligent efforts to inform potential
applicants in rural areas of the program being implemented under this
subpart.
(f) Financial assistance under this subpart will consist of grants
or cost of money loans, or both. The Administrator shall determine the
portion of the financial assistance provided to a recipient that
consists of grants and the portion that consists of cost of money loans
so as to result in the maximum feasible repayment to the government of
the financial assistance, based on the ability of the recipient to repay
and with the full utilization of funds made available to carry out this
subpart.
(g) The Administrator may provide a cost of money loan to entities
using telemedicine and distance learning services, and, to entities
providing or proposing to provide telemedicine service or distance
learning service to other persons at rates calculated to ensure that the
benefit of the financial assistance is passed through to the other
persons.
(h) The Administrator may provide a cost of money loan under this
subpart to a borrower of a telecommunications or electric loan under the
Rural Electrification Act of 1936, as amended. A
[[Page 59]]
borrower receiving a cost of money loan under this subpart shall:
(1) Make the funds provided available, under any terms it so chooses
as long as the terms are no more stringent than the terms under which it
received the financial assistance, to entities that qualify as distance
learning or telemedicine projects satisfying the requirements of this
subpart.
(2) Use the funds provided to acquire, install, improve, or extend a
system referred to in this subpart.
Sec. 1703.102 Definitions.
Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
Administrator means the Administrator of the Rural Utilities
Service, or designee or successor.
Applicant means an eligible organization which applies for financial
assistance under this subpart.
Champion Community means any community that submitted a valid
application to become an Empowerment Zone/Enterprise Community (EZ/EC)
area, met the requirements to be designated an EZ/EC area, but was not
chosen because their score was not high enough to be selected.
Completed application means an application that includes all those
items specified in Sec. 1703.109 in form and substance satisfactory to
the Administrator.
Computer networks means computer hardware and software, terminals,
signal conversion equipment including both modulators and demodulators,
or related devices, used to communicate with other computers to process
and exchange data through a telecommunication network in which signals
are generated, modified, or prepared for transmission, or received, via
telecommunications terminal equipment and telecommunications
transmission facilities.
Consortium means a combination or group of eligible entities formed
to undertake the purposes for which the distance learning and
telemedicine financial assistance is provided. Each consortium shall be
composed of a minimum of two eligible organizations that meet the
requirements of Sec. 1703.103.
Construct means to acquire, construct, extend, improve, or install a
facility or system.
Cost of money loan means a loan made under the DLT program bearing
interest at a rate equal to the then current cost of money to the
government, at the time the feasibility study is completed, for loans of
similar maturity not to exceed 10 years.
Data terminal equipment means equipment that converts user
information into data signals for transmission, or reconverts the
received data signals into user information, and is normally found on
the terminal of a circuit and on the premises of the end user.
Distance learning means a telecommunications link to an end user
through the use of eligible equipment to:
(1) Provide educational programs, instruction, or information
originating in one area, whether rural or not, to students and teachers
who are located in rural areas; or
(2) Connect teachers and students, located in one rural area with
teachers and students that are located in a different rural area.
DLT borrower means an entity that has outstanding loans under the
provisions of the DLT program.
DLT program means the Distance Learning and Telemedicine Loan and
Grant Program administered by RUS pursuant to subtitle D, chapter 1, of
the Rural Economic Development Act of 1990, as amended (7 U.S.C. 950aaa
through 950aaa-4).
Economic useful life as applied to facilities financed under the DLT
program means the number of years resulting from dividing 100 percent by
the depreciation rate (expressed as a percent) based on Internal Revenue
Service depreciation rules or recognized telecommunications industry
guidelines.
Eligible equipment means computer hardware and software, audio and
visual equipment, computer network components, telecommunications
terminal equipment, telecommunications transmission facilities, data
terminal equipment, inside wiring, interactive video equipment, or other
facilities that would further telemedicine services or
[[Page 60]]
distance learning services. Land, buildings, or building construction
are not considered eligible equipment (see Sec. 1703.107(a)(10)).
Eligible organization means an incorporated entity that meets the
requirements of Sec. 1703.103.
Empowerment Zone and Enterprise Community (EZ/EC) means any
community whose designation as such pursuant to 26 U.S.C. 1391 et seq.
is in effect at the time RUS agrees to provide financial assistance.
End user means either or both of the following:
(1) Rural elementary or secondary schools or other educational
institutions, such as institutions of higher education, vocational and
adult training and education centers, libraries, and teacher training
centers, and students, teachers and instructors using such rural
educational facilities, that participate in a rural distance learning
telecommunications program through a project funded under this subpart;
(2) Rural hospitals, primary care centers or facilities, such as
medical centers and clinics, and physicians and staff using such rural
medical facilities, that participate in a rural telemedicine program
through a project funded under this subpart.
End user site means a facility that is part of a network or
telecommunications system that is utilized by end users.
Financial assistance shall consist of grants, cost of money loans,
or both, made under the DLT program.
Grant documents means the letter of agreement, including any
amendments and supplements thereto, between RUS and the grant recipient.
Grantee means a recipient of a grant from RUS to carry out the
purposes of the DLT program.
Hub means control center of a network or telecommunications system.
Instructional programming means educational material, including
computer software, which would be used for educational purposes in
connection with eligible equipment but does not include salaries,
benefits, and overhead of medical or educational personnel.
Interactive video equipment means equipment used to produce and
prepare for transmission audio and visual signals from at least two
distant locations such that individuals at such locations can orally and
visually communicate with each other. Such equipment includes monitors,
other display devices, cameras or other recording devices, audio pickup
devices, and other related equipment.
Letter of agreement means a legal document executed by RUS and the
grantee that contains specific terms, conditions, requirements, and
understandings applicable to a particular grant.
Loan documents mean the loan agreement, note, and security
agreement, including any amendments and supplements thereto, between RUS
and the DLT or Telecommunications/Electric borrower.
Local exchange carrier means a commercial, cooperative or mutual-
type association, or public body that is engaged in the provision of
telephone exchange service or exchange access.
Matching funds means the applicant's funding contribution for
allowable purposes.
National School Lunch Program (NSLP) means the federally assisted
meal program established under the National School Lunch Act of 1946 (42
U.S.C. 1751).
Project means an undertaking to provide or improve distance learning
or telemedicine by using financial assistance provided under the DLT
program.
Project service area means the area in which at least 90 percent of
the persons to be served by the project are likely to reside.
Rural community facilities means facilities such as schools,
libraries, learning centers, training facilities, hospitals, medical
centers, or similar facilities, primarily used by residents of rural
areas, that will use a telecommunications, computer network, or related
advanced technology system to provide educational or health care
benefits primarily to residents of rural areas.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture formerly known as REA, see 7 CFR
1700.1.
Scope of work means a detailed plan of work that has been approved
by the Administrator to be performed by the
[[Page 61]]
applicant using financial assistance provided under this subpart.
Secretary means the Secretary of Agriculture.
Technical assistance means:
(1) Assistance in learning to operate equipment or systems; and
(2) Studies, analyses, designs, reports, manuals, guides,
literature, or other forms of creating, acquiring, or disseminating
information.
Telecommunications carrier means any provider of telecommunications
services.
Telecommunications/Electric borrower means an entity that has
outstanding electric or telecommunications RUS or Rural Telephone Bank
loans or loan guarantees under the provisions of the Act.
Telecommunications systems plan means the plan submitted by an
applicant in accordance with Sec. 1703.109(f).
Telecommunications terminal equipment means the assembly of
telecommunications equipment at the end of a circuit or path of a
signal, including but not limited to over the air broadcast, satellite,
and microwave, normally located on the premises of the end user, that
interfaces with telecommunications transmission facilities, and that is
used to modify, convert, encode, or otherwise prepare signals to be
transmitted via such telecommunications facilities, or that is used to
modify, reconvert, or carry signals received from such facilities, the
purpose of which is to accomplish the goal for which the circuit or
signal was established.
Telecommunications transmission facilities means facilities that
transmit, receive, or carry data between the telecommunications terminal
equipment at each end of the telecommunications circuit or path. Such
facilities include microwave antennae, relay stations and towers, other
telecommunications antennae, fiber-optic cables and repeaters, coaxial
cables, communication satellite ground station complexes, copper cable
electronic equipment associated with telecommunications transmissions,
and similar items.
Telemedicine means a telecommunications link to an end user through
the use of eligible equipment which electronically links medical
professionals at separate sites in order to exchange health care
information in audio, video, graphic, or other format for the purpose of
providing improved health care services primarily to residents of rural
areas.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
Sec. 1703.103 Applicant eligibility and allocation of funds.
(a) To be eligible to receive financial assistance under this
subpart, the applicant must be organized in one of the following
corporate structures:
(1) An incorporated organization, partnership, Indian tribe and
tribal organization as defined in 25 U.S.C. 450b (b) and (c), or other
legal entity, including a municipal corporation or a private corporation
organized on a for-profit or not-for-profit basis, which operates, or
will operate, a school, college, university, learning center, training
facility, or other educational institution, including a regional
educational laboratory, library, hospital, medical center, medical
clinic or any rural community facility. A state government, other than a
state government entity that operates a rural community facility, is not
considered an eligible applicant; or
(2) A consortium, as defined in Sec. 1703.102. A consortium which
includes a state government entity is only eligible if the state
government entity operates a rural community facility; or
(3) An incorporated organization, partnership, Indian tribe and
tribal organization as defined in 25 U.S.C. 450b (b) and (c), or other
legal entity which is providing or proposes to provide telemedicine
service or distance learning service to other legal entities or
consortia at rates calculated to ensure that the economic value and
other benefits of the distance learning or telemedicine grant or loan is
passed through to such other legal entities or consortia.
(b) At least one of the entities in a partnership or consortium must
be eligible individually, and the partnership or consortium must provide
written evidence of its legal capacity to contract with RUS. If a
partnership or
[[Page 62]]
consortium lacks the capacity to contract, each individual entity must
contract with RUS on its own behalf.
(c) A borrower of an electric or telecommunications loan under the
Act is eligible for a cost of money loan only.
(d) All applications for financial assistance, with the exception of
applications requesting a loan and having the minimum required score,
will be ranked by the type of application (health care or educational)
and total points scored. Grant funds available for medical and
educational applicants will be allocated based on the total number of
medical and educational applications scoring in the top 50 percent of
all applications received for that fiscal year. Applications will be
ranked only in one category based on the predominant use of the project.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
Sec. 1703.104 Allowable grant and loan funding percentage.
(a) Financial assistance, except as noted in paragraph (b) of this
section, may be used by eligible organizations for distance learning and
telemedicine projects to finance up to 70 percent of the cost of
allowable purposes outlined in Sec. 1703.105 provided that no financial
assistance may exceed the maximum grant or loan amount for the year in
which the grant or loan is made.
(b) Cost of money loans requested by an applicant may be used by
eligible organizations for distance learning and telemedicine projects
to finance up to 90 percent of the cost of allowable loan purposes
outlined in Sec. 1703.105, provided that no loan may exceed the maximum
loan amount for the year in which the loan is made. Financial assistance
applications that do not request a loan and qualify for a loan or
combination loan and grant will be funded up to 70 percent of the cost
of allowable purposes.
Sec. 1703.105 Grant and loan purposes.
Grants and loans shall be limited to costs associated with the
initial capital assets associated with the project. Grant and loan funds
as set out in the last sentence of this section shall not exceed twenty
percent (20 percent) of the requested financial assistance. The
following are allowable grant and loan purposes:
(a) Acquiring, by lease or purchase, eligible equipment as defined
in Sec. 1703.102;
(b) Acquiring instructional programming; and
(c) Providing technical assistance and instruction for using
eligible equipment, including any related software; developing
instructional programming; providing engineering or environmental
studies relating to the establishment or expansion of the phase of the
project that is being financed with the financial assistance.
Sec. 1703.106 In-kind matching provisions.
(a) In-kind matching, the applicant's minimum funding contribution
(specified in Sec. 1703.104) for allowable purposes, is generally
required in the form of cash. However, in-kind contributions for the
purposes listed in Sec. 1703.105 may be substituted for cash.
(b) In-kind items listed in Sec. 1703.105 must be non-depreciated or
new assets with established monetary value. Manufacturers or service
providers discounts are not considered in-kind matching.
(c) Financial assistance may be provided for end user sites.
Financial assistance may also be provided for hubs located in rural or
non-rural areas, if they are necessary to provide distance learning or
telemedicine services to rural residents at end user sites.
Sec. 1703.107 Ineligible loan and grant purposes.
(a) Without limitation, financial assistance under this subpart will
not be provided:
(1) To cover the costs of installing or constructing
telecommunications transmission facilities, except as provided in
paragraph (c) of this section;
(2) To pay for medical equipment except medical equipment primarily
used for encoding and decoding data, such as images, for transmission
over a telecommunications or computer network;
(3) To pay salaries, wages, or employee benefits to medical or
educational personnel;
[[Page 63]]
(4) To pay for the salaries or administrative expenses of the
applicant or the project;
(5) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider, unless such
carrier or provider is the recipient of the financial assistance being
provided under this subpart;
(6) To duplicate facilities providing distance learning or
telemedicine services in place or to reimburse the applicant or others
for costs incurred prior to RUS' receipt of the completed application;
(7) To pay costs of preparing the application package for financial
assistance under this program;
(8) For projects whose sole objective is to provide links between
teachers and students or medical professionals who are located at the
same facility;
(9) For site development and the destruction or alteration of
buildings;
(10) For the purchase of land, buildings, or building construction;
(11) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 et seq.);
(12) For any purpose that the Administrator has not specifically
approved; or
(13) Except for leases provided in Sec. 1703.105, to pay the cost of
recurring or operating expenses for the project.
(b) Except as otherwise provided in Sec. 1703.140, funds shall not
be used to finance a project in part when success of the project is
dependent upon the receipt of additional financial assistance under this
subpart D or is dependent upon the receipt of other funding that is not
assured.
(c) Loans can be used to cover the costs of telecommunications
transmission facilities if no telecommunications carrier will install
such facilities under the Act or through other financing procedures
within a reasonable time period and at a cost to the applicant that does
not jeopardize the feasibility of the project, as determined by the
Administrator.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
Sec. 1703.108 Maximum and minimum sizes of a grant and a loan.
Applications for grants and loans to be considered under this
subpart will be subject to limitations on the proposed amount of
financial assistance. The Administrator may establish the maximum amount
of financial assistance to be made available to an individual recipient
for each fiscal year under this subpart, by publishing notice of the
maximum amount in the Federal Register not more than 45 days after funds
are made available for the fiscal year to carry out this subpart. The
minimum size of a grant or loan is $50,000.
Sec. 1703.109 The application for financial assistance.
The following items comprise the required material that must be
submitted to RUS in support of the application for financial assistance:
(a) Proposed scope of work of the project. The proposed scope of
work of the project which includes, at a minimum:
(1) The specific activities to be performed under the project;
(2) Who will carry out the activities;
(3) The time-frames for accomplishing the project objectives and
activities; and
(4) A budget for capital expenditures reflecting the line item costs
for both the grant and loan funds and other sources of funds for the
project.
(b) Executive summary for the project. The applicant must provide
RUS a general project overview, verification of compliance with the
general requirements of this subpart, and documentation of eligibility.
The executive summary shall contain the following 9 categories:
(1) A description of why the project is needed.
(2) An explanation of how the applicant will address the need cited
in paragraph (b)(1) of this section, why the applicant requires
financial assistance and types of educational or medical services to be
offered by the project, and the benefits to the rural residents.
(3) A description of the applicant, documenting eligibility with
Sec. 1703.103.
[[Page 64]]
(4) An explanation of the total cost of the project including a
breakdown of the RUS financial assistance required and the source of
funding for the remainder of the project.
(5) A statement that the project is either a distance learning or
telemedicine facility as defined in Sec. 1703.102. If the project
provides both distance learning and telemedicine services, the applicant
must identify the predominant use of the system.
(6) A general overview of the telecommunications system to be
developed, including the types of equipment, technologies, and
facilities used.
(7) A description of the participating hubs and end user sites and
the number of rural residents which will be served by the proposed
project at each end user site.
(8) The applicant must certify that facilities using financial
assistance do not duplicate adequate established telemedicine services
or distance learning services. RUS will make the final determination
whether or not financial assistance requested by an applicant will
duplicate such adequate established services.
(9) A listing of the location of each end user site (city, town,
village, borough or rural area plus the state) discussing how the
appropriate National School Lunch Program eligibility percentage was
determined in accordance with Sec. 1703.112. These percentages may be
obtained from the State or local organization that administers the
program and must be certified by that organization as being correct.
(c) Financial information. The applicant must provide financial
information to support the need for the financial assistance requested
for the project. It must show its financial capacity to carry out the
proposed work, and show project feasibility. For educational
institutions participating in a project application (including all
members of a consortium), the financial data must reflect revenue and
expense reports and balance sheet reports, reflecting net worth, for the
most recent annual reporting period preceding the date of the
application. For medical institutions participating in a project
application (including all members of a consortium), the financial data
must include income statement and balance sheet reports, reflecting net
worth, for the most recent completed fiscal year preceding the date of
the application. When the applicant is a partnership, company,
corporation or other entity, current balance sheets, reflecting net
worth, are needed from each of the entities that has at least a 20
percent interest in such partnership, company, corporation or other
entity. When the applicant is a consortium, a current balance sheet,
reflecting net worth, is needed from each member of the consortium and
from each of the entities that has at least a 20 percent interest in
such member of the consortium.
(1) Applicants must include sufficient pro-forma financial data
which adequately reflects the financial capability of project
participants and the project as a whole to continue a sustainable
project for a minimum of 10 years after completion of the project. This
documentation should include sources of sufficient income or revenues to
pay operating expenses including telecommunications access and toll
charges, system maintenance, salaries, training, and any other general
operating expenses, and provide for replacement of depreciable items.
(2) For applicants requesting a loan and applicants who qualify for
a loan or a combination loan/grant in accordance with Sec. 1703.112, the
documentation must demonstrate the ability to repay the loan. RUS will
consider a secured loan guarantee by a third party as evidence of the
ability of the applicant to repay a loan.
(3) For each hub and end user site, the applicant must identify and
provide reasonable evidence of each source of revenue. If the projection
relies on cost sharing arrangements among hub and end user sites, the
applicant must provide evidence of agreements made among project
participants.
(4) For applicants eligible under Sec. 1703.103(a)(3), an
explanation of the economic analysis justifying the rate structure to
ensure that the benefit, including cost saving, of the financial
assistance is passed through to the other persons receiving telemedicine
or distance learning services.
(5) For RUS telecommunications and electric borrowers applying for a
cost
[[Page 65]]
of money loan, the only financial information required in support of
that application is the respective most recent Annual Report to RUS
(i.e. RUS Form 479, Form 7, or Form 12).
(d) A statement of experience. The applicant must provide a written
narrative (not exceeding three single spaced pages) describing its
demonstrated capability and experience, if any, in operating an
educational or health care endeavor and any project similar to the
proposed project. Experience in a similar project is desirable but not
required.
(e) Funding commitment from other sources. The applicant must
provide evidence, in form and substance satisfactory to the
Administrator, that all funds in addition to funds provided under this
subpart are committed and will be used for the proposed project.
(f) Telecommunications System Plan. A Telecommunications System
Plan, consisting of the following, is required. The items in paragraphs
(f) (4) and (5) of this section are needed only when the applicant is
requesting loan funds for telecommunications transmission facilities:
(1) The capabilities of the telecommunications terminal equipment,
including a description of the specific equipment which will be used to
deliver the proposed service. The applicant must document discussions
with various technical sources which could include consultants,
engineers, product vendors, or internal technical experts, provide
detailed cost estimates for operating and maintaining the end user
equipment and provide evidence that alternative equipment and
technologies were evaluated.
(2) A listing of the proposed purchases or leases of
telecommunications terminal equipment, telecommunications transmission
facilities, data terminal equipment, interactive video equipment,
computer hardware and software systems, and components that process data
for transmission via telecommunications, computer network components,
communication satellite ground station equipment, or any other elements
of the telecommunications system designed to further the purposes of
this subpart, that the applicant intends to build or fund using RUS
financial assistance.
(3) A description of the consultations with the appropriate
telecommunications carriers (including other interexchange carriers,
cable television operators, enhanced service providers, providers of
satellite services and telecommunications equipment manufacturers and
distributors) and the anticipated role of such providers in the proposed
telecommunications system.
(4) Results of discussion with local exchange carriers serving the
project area addressing concerns in Sec. 1703.107 (c).
(5) The capabilities of the telecommunications transmission
facilities, including bandwidth, networking topology, switching,
multiplexing, standards and protocols for intra-networking and open
systems architecture (the ability to effectively communicate with other
networks). In addition, the applicant must explain the manner in which
the transmission facilities will deliver the proposed services. For
example, for medical diagnostics, the applicant might indicate whether
or not a guest or other diagnosticians can join the network from
locations off the network. For educational services, indicate whether or
not all hub and end-user sites are able to simultaneously hear in real-
time and see each other or the instructional material in real-time. The
applicant must include detailed cost estimates for operating and
maintaining the network, and include evidence that alternative delivery
methods and systems were evaluated.
(g) Proposed evaluation methodology. The applicant must provide a
proposed method of evaluating the success of the project in meeting the
objectives of the program as set forth in Sec. 1703.100 and
Sec. 1703.101 and the proposed scope of work.
(h) Compliance with other Federal statutes and regulations. The
applicant is required to submit evidence that it is in compliance with
other applicable Federal requirements including, but not limited to the
following:
(1) Equal opportunity and nondiscrimination requirements;
(2) Architectural barriers;
(3) Flood hazard area precautions;
[[Page 66]]
(4) Uniform Relocation Assistance and Real Property Acquisition for
Federal and Federally Assisted Programs;
(5) Drug-free workplace;
(6) ``Certification Regarding Debarment, Suspension and Other
Responsibility Matters--Primary Covered Transaction'' (See 7 CFR
3017.510);
(7) Intergovernmental review of Federal programs if clearing
house(s) exists for the state(s) in which project is located; and
(8) Restrictions on lobbying. For an application for financial
assistance in excess of $100,000, a certification statement,
``Certification Regarding Lobbying'' is required. If the applicant is
engaged in lobbying activities, the applicant must submit a completed
disclosure form, ``Disclosure of Lobbying Activities'' (see 7 CFR part
3018).
(i)(1) Environmental impact and historic preservation. The applicant
must provide details of the project's impact on the environment and
historic preservation. Grants and loans made under this part are subject
to 7 CFR part 1794 which contains the policies and procedures of RUS for
implementing a variety of Federal statutes, regulations and executive
orders generally pertaining to protection of the quality of the human
environment that are listed in 7 CFR 1794.1. The application shall
contain a separate section entitled ``Environmental Impact of the
Project.''
(2) Environmental information. An ``Environmental Questionnaire,''
appendix A to this subpart, may be used by applicants to assist in
complying with the requirements of this section. Copies of the
Environmental Questionnaire are available from RUS.
(j) A completed Standard Form 424, ``Application for Federal
Assistance,'' along with a board of directors resolution authorizing the
request for financial assistance.
(k) Evidence of the applicant's legal existence and authority to
enter into a grant or loan agreement with RUS and perform activities
proposed under the grant or loan application.
(l) Evidence that the applicant is not delinquent on any obligation
owed to the government (7 CFR parts 3016 and 3019).
(m) Evidence that the applicant has consulted with the USDA State
Director, Rural Development, concerning the availability of other
sources of funding available at the state or local level.
(n) Evidence from the USDA State Director, Rural Development, that
the application conforms with the State strategic plan as prepared under
section 381D of the Consolidated Farm and Rural Development Act (7
U.S.C. 1921 et seq.). The applicant should indicate if such a plan does
not exist.
(o) A depreciation schedule covering all assets of the project.
Those assets for which financial assistance is being requested should be
clearly indicated.
(p) Supplemental information. The applicant should provide any
additional information it considers relevant to the project and likely
to be helpful in determining the extent to which the proposed project
would further the purposes of this subpart.
(q) Additional information requested by RUS. The applicant must
provide any additional information the Administrator may consider
relevant to the application and necessary to adequately evaluate the
application. 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.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
Sec. 1703.110 Conflict of interest.
At any time prior to the disbursement of a grant or loan awarded
under this subpart, the Administrator may disqualify an otherwise
eligible project whenever, in the judgment of the Administrator, the
project would create a conflict of interest or the appearance of a
conflict of interest. RUS will notify the applicant in writing of the
Administrator's intention to disqualify the project under this section
and set forth the basis for the Administrator's determination that a
conflict of interest or appearance exists. Thereafter, the applicant
will have 30 days from the date of such notice to file a written
response with the Administrator. If the Administrator receives the
applicant's response within the 30-day period, the
[[Page 67]]
Administrator will consider the information contained therein before
making a final determination whether to disqualify the project. RUS will
promptly notify the applicant of the final determination whether a
conflict of interest or appearance of a conflict exists. If the
determination is affirmative, the notice will also advise the applicant
whether the project is disqualified or conditionally disqualified. If
the project is conditionally disqualified, the notice will state under
what circumstances the project may continue to be eligible for
assistance under this subpart. The Administrator's decision under this
section will be final.
Sec. 1703.111 [Reserved]
Sec. 1703.112 Determination of types of financial assistance.
(a) To maximize the use of available funding and to obtain the
maximum repayment to the government, RUS will determine if an applicant
will be awarded a grant, loan or a combination of both loans and grants
based upon the following:
(1) The percentage of students eligible to participate in the
National School Lunch Program in the areas where the end user sites
comprising the project are located; and
(2) The applicant's ability to pay for the project. Financial
assistance in the form of grants or a combination of loans and grants
will be made available only to those otherwise eligible applicants
determined by the Administrator, after review of the financial
information furnished by the applicant, to have the least ability to
repay the full amount of assistance provided.
(b) The methodology contained in this section will be used to
evaluate the relative financial need of the applicant, community, and
project. All applicants are required to provide the applicable
percentage of students eligible to participate in the National School
Lunch Program for each end user site which must be certified as being
correct by the appropriate State or local organization administering the
program. The type of financial assistance will be determined as follows:
(1) If the end user site(s) for the project have, or are located in
school districts which have, from 0-32 percent student eligibility in
the National School Lunch Program, the project qualifies for a loan.
(2) If the end user site(s) for the project have, or are located in
school districts which have, from 33-60 percent student eligibility in
the National School Lunch Program, the project qualifies for a loan and
may be eligible for some grant funds.
(3) If the end user site(s) for the project have, or are located in
school districts which have, from 61-100 percent student eligibility in
the National School Lunch Program, the project qualifies for a grant.
The applicant may indicate its desire to be considered for a loan or a
combination loan and grant if denied a grant provided the financial data
required in Sec. 1703.109(c) indicates the ability to repay a loan.
Grant applicants should indicate if they desire to be considered for a
loan.
(4) Percentage ratios will be rounded up to the next highest or
rounded down to the next lowest whole number for fraction of percentages
at or greater than .5 or less than .5, respectively.
(c) The following guidelines will be used to determine the
applicable National School Lunch Program eligibility percent for a
particular end user site:
(1) Public schools or nonprofit private schools of high school grade
or under will use the actual eligibility percentage for that particular
school.
(2) Schools and institutions of higher learning ineligible to
participate in the National School Lunch Program and non-school end user
sites (medical facilities, libraries, etc.) will use the eligibility
percentage of all students in the school district where the end user
will be located.
(d) If all the end user sites in a proposed network or system fall
within the same percentile category, the project will be eligible for
the type of financial assistance set forth in paragraph (b) of this
section.
(e) If end user sites fall within different percentile categories
the eligibility percentages associated with each end user site will be
averaged to determine the percentile category and type of financial
assistance the applicant is
[[Page 68]]
eligible for. For purposes of averaging, if a hub is also utilized as an
end user site, the hub will be considered as an end user site.
(f) For those applicants which qualify for a combination loan/grant,
the Administrator will determine the amount of the grant the applicant
will receive, if any, based upon analysis of the financial condition of
the applicant as reflected by the information submitted under
Sec. 1703.109(c). The minimum amount of a grant will be $5,000.
(g) RUS will submit a letter to those applicants being offered
financial assistance in the form of a loan, or a combination of a loan
and grant, outlining terms and conditions of such assistance. The
applicant will have 15 days from the date of the letter to accept the
terms and conditions in the letter. If the applicant fails to respond
within this time the Administrator may withdraw the offer of financial
assistance and the applicant will have no right to appeal the
withdrawal.
Sec. 1703.113 Application filing dates, location, processing, and public notification.
(a) Applications for financial assistance under this subpart shall
be submitted to the Rural Utilities Service, U.S. Department of
Agriculture, 1400 Independence Avenue, SW., STOP 1590, Washington, DC
20250-1590. Applications should be marked ``Attention: Assistant
Administrator, Telecommunications Program''.
(b) Applications for loans can be submitted at any time. RUS will
review each application for completeness in accordance with
Sec. 1703.109, and notify the applicant, within 15 working days of the
receipt of the application, of the results of this review, citing any
information which is incomplete. To be considered for loan funds during
the fiscal year (FY) that the application is submitted, any information
needed to complete the application must be postmarked no later than
August 14. If this review concludes that a loan is feasible and the
application receives the required minimum number of points as determined
using the scoring criteria in Sec. 1703.117, the Administrator will
immediately process the application. The minimum number of points
required for a loan application to be immediately processed will be
published in the Federal Register each fiscal year.
(c) Applications requesting grant funds must be submitted to RUS and
postmarked not later than June 1 if the applications are to be
considered during the fiscal year the application is submitted. It is
suggested that applications be submitted prior to the above deadline to
ensure they can be reviewed and considered complete by the deadline. RUS
will review each application for completeness in accordance with
Sec. 1703.109, and notify the applicant, within 15 working days of the
results of this review, citing any information which is incomplete. To
be considered for grant funds, the applicant must submit the information
to complete the application by June 1. If the applicant fails to submit
such information by the appropriate deadline, the application will be
considered during the next fiscal year.
(d) The Administrator will publish, at the end of each fiscal year,
a notice in the Federal Register of all completed applications receiving
financial assistance under this subpart. The Administrator will also
make those applications available for public inspection at the U.S.
Department of Agriculture, 1400 Independence Avenue, SW., Washington,
DC. For purposes of this paragraph, applications include any information
not protected by the Privacy Act of 1974, 5 U.S.C. 552a, and any other
information that has not been designated as proprietary information by
the applicant.
(e) All applicants must submit an original and two copies of a
completed application. A grant applicant must also submit a copy of the
application to the State government point of contact, if one has been
designated for the state, at the same time it submits an application to
RUS. All applications must include the information described in
Sec. 1703.109.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
[[Page 69]]
Secs. 1703.114--1703.116 [Reserved]
Sec. 1703.117 Criteria for scoring applications.
(a) Criteria. The criteria in this section will be used by RUS to
score applications that have been determined to be in compliance with
the requirements of this subpart. Applicants shall address the following
criteria:
(1) The need for services and benefits derived from services;
(2) The comparative rurality of the proposed project service area;
(3) The ability to leverage resources;
(4) Innovativeness of design;
(5) Connectivity with outside networks;
(6) The cost effectiveness of the design;
(7) Project participation in EZ/EC (Empowerment Zone and Enterprise
Communities); and
(8) Project participation in Champion communities.
(b) Scoring criteria--(1) The need for services and benefits derived
from services. (i) This criterion will be used by RUS to score
applications based on the documentation submitted in support of the
application for financial assistance that reflects the need for services
and benefits derived from the services proposed by the project. Up to 45
points can be assigned to this criterion.
(ii) RUS will consider the extent of the applicant's documentation
explaining the economic, education or health care challenges facing the
community; the applicants proposed plan to address these challenges; how
the financial assistance can help; and why the applicant cannot complete
the project without a loan or grant. The Administrator will also
consider any support by recognized experts in the related educational or
health care field, any documentation substantiating the educational or
health care underserved nature of the applicant's proposed service area,
and any justification for specific educational or medical services which
are needed and will provide direct benefits to rural residents. Some
examples of benefits to be provided by the project include, but are not
limited to:
(A) Improved education opportunities for a specified number of
students;
(B) Travel time and money saved by telemedicine diagnosis;
(C) Number of doctors retained in rural areas;
(D) Number of additional students electing to attend higher
education institutions;
(E) Lives saved due to prompt medical diagnosis and treatment;
(F) New education courses offered, including college level courses;
(G) Expanded use of educational facilities such as night training;
(H) Number of patients receiving telemedicine diagnosis;
(I) Provision of training, information resources, library assets,
adult education, lifetime learning, community use of technology, jobs,
connection to region, nation, and world.
(iii) That rural residents, and other beneficiaries, desire the
educational or medical services to be provided by the project (a strong
indication of need is the willingness of local end users or institutions
to pay, to the extent possible, for proposed services).
(iv) The project's development and support based on input from the
local residents and institutions.
(v) The extent to which the application is consistent with the State
strategic plan prepared by the Rural Development State Director of the
United States Department of Agriculture.
(2) The comparative rurality of the proposed project service area.
(i) The methodology contained in this section is used to evaluate the
relative rurality (i.e. population) of service areas for various
projects. Under this system, the end user sites and hubs (as defined in
Sec. 1703.102) contained within the proposed project service area are
identified. Then, those locations are given a score according to the
population of the area where the end user sites are located. Up to 35
points can be assigned to this criterion.
(ii) The following definitions are used in the evaluation of
rurality:
(A) Exceptionally Rural Area means any area of the United States not
included within the boundaries of any incorporated or unincorporated
city, village, or borough having a population in excess of 5,000
inhabitants.
(B) Rural Area means any area of the United States included within
the
[[Page 70]]
boundaries of any incorporated or unincorporated city, village, or
borough having a population over 5,000 and not in excess of 10,000
inhabitants.
(C) Urban Area means any area of the United States included within
the boundaries of any incorporated or unincorporated city, village, or
borough having a population in excess of 10,000 inhabitants.
(iii) The applicant will receive points as follows:
(A) There are a total of 35 possible points for this criterion. The
maximum number of points each end user site can receive is determined by
dividing the total possible points for this criterion, 35, by the total
number of end user sites. If a hub is utilized as an end user site, the
hub will be considered as an end user site.
(B) If the end user site is located in an Exceptionally Rural Area,
it will receive the maximum number of points each end user site can
receive. If the end user site is located in a Mid-Rural Area, it will
receive 50 percent of the maximum number of points each end user site
can receive. If the end user site is located in an Urban Area, it will
receive 0 percent of the maximum number of points each end user site can
receive.
(C) The total points for each end user site will be added to reach a
final point total for the project.
(D) An application must receive a minimum of 18 points under this
criterion to be eligible for any financial assistance.
(3) The ability to leverage resources. (i) This section is used to
evaluate the ability of the applicant to contribute financially to the
project and to secure other non-Federal sources of funding.
Documentation submitted in support of the application for financial
assistance should reflect any additional financial support for the
project from non-Federal sources above the applicant's required percent
matching of the RUS financial assistance as set forth in Sec. 1703.104.
The applicant must include evidence from authorized representatives of
the sources that the funds are available and will be used for the
proposed project--up to 35 points.
(ii) The applicant will receive points as follows:
(A) Matching for allowable financial assistance purposes greater
than 30 percent, but less than or equal to 50 percent of the RUS
financial assistance--10 points.
(B) Matching for allowable financial assistance purposes greater
than 50 percent, but less than or equal to 100 percent of the RUS
financial assistance--20 points.
(C) Matching for allowable financial assistance purposes greater
than 100 percent, but less than or equal to 150 percent of the RUS
financial assistance--25 points.
(D) Matching for allowable financial assistance purposes greater
than 150 percent, but less than or equal to 200 percent of the RUS
financial assistance--30 points.
(E) Matching for allowable financial assistance purposes greater
than 200 percent of the RUS financial assistance--35 points.
(4) Innovativeness of project. This criterion will be used by RUS to
score applications based on the documentation submitted in support of
the application for financial assistance that reflects the innovative
nature of the project. The applicant should explain the extent to which,
if any, the project is an innovative approach to either delivering or
using telecommunications to address the needs of the community, and how
the project differs in approach from the typical educational or health
care application of technology. Up to 20 points can be assigned to this
criterion.
(5) Connectivity with outside networks. (i) This criterion will be
used by RUS to score applications based on the documentation submitted
in support of the application for financial assistance that reflects the
extent to which the proposed project can be connected to other
educational or health care networks. Up to 20 points can be assigned to
this criterion.
(ii) Consideration will be given to the extent that the proposed
project will interconnect with other existing networks at the regional,
statewide, national or international levels. RUS believes that to the
extent possible, educational and health care networks should be designed
to connect to the widest practicable number of other networks that
expand the capabilities of
[[Page 71]]
the proposed project, thereby affording rural residents opportunities
that may not be available at the local level. The ability to connect to
the internet alone can not be used as the sole basis to fulfill this
criteria.
(iii) Consideration will also be given to the extent that facilities
constructed with federal financial assistance, particularly financial
assistance under this chapter provided to entities other than the
applicant, will be utilized to extend or enhance the benefits of the
proposed project.
(6) Cost effective design. (i) This criterion will be used by RUS to
score applications based on the documentation submitted in support of
the application for financial assistance that reflects the cost
efficiency of the project design. Up to 15 points can be assigned to
this criterion.
(ii) Consideration will be given to the extent that the proposed
technology or technologies for delivering the proposed educational or
health care services for the project service area are the most cost
effective for the project proposed. The application must contain
information necessary for RUS to use accepted analytical and financial
methodologies to determine whether the applicant is proposing the most
cost-effective option. RUS will consider the applicant's documentation
comparing various systems and technologies, whether the applicant's
system is the most cost-effective system, and whether buying or leasing
specific equipment is more cost effective. Points will be deducted from
the scores of the applications that fail to utilize existing
telecommunications facilities that could provide the transmission path
for the needed services.
(7) Project participation in EZ/ECs. This criterion will be used by
RUS to score applications based on the documentation submitted in
support of the application for financial assistance that reflects the
designation of Empowerment Zones and Enterprise Communities (EZ/EC)
included as beneficiaries of the proposed project. Ten (10) points will
be assigned if at least one end user site is located in an EZ/EC.
(8) Project participation in Champion Communities. This criterion
will be used by RUS to score applications based on the documentation
submitted in support of the application for financial assistance that
reflects the designation of Champion Communities included as
beneficiaries of the proposed project. Five (5) points will be assigned
if at least one end user site is located in a Champion Community.
Sec. 1703.118 Other application selection provisions.
(a) Selection. Applications will be selected for financial
assistance based on scores, availability of funds, and the provisions of
this section. RUS will make determinations regarding the reasonableness
of all numbers; dollar levels; rates; the nature and design of the
project; cost; location; and other characteristics of the application
and the proposed project to determine the number of points assigned to a
grant application for all selection criteria. Joint applications
submitted by multiple applicants as set forth in Sec. 1703.113 will be
rated as a single application.
(b) Regardless of the number of points an application receives in
accordance with Sec. 1703.117 or the feasibility of the proposed
project, the Administrator may, based on a review of the applications in
accordance with the requirements of this subpart:
(1) Limit the number of applications selected for projects located
in any one state during a fiscal year;
(2) Limit the number of selected applications for a particular
project;
(3) Select an application receiving fewer points than another higher
scoring application if there are insufficient funds during a particular
funding period to select the higher scoring application; provided,
however, the Administrator may ask the applicant of the higher scoring
application if it desires to reduce the amount of its application to the
amount of funds available if, notwithstanding the lower grant amount,
the Administrator determines the project is financially feasible in
accordance with Sec. 1703.109(d)(1) at the lower amount;
(4) Award a grant to an applicant whose application carries out the
priorities listed in the scoring criteria in such a way to make the
application unique; or
[[Page 72]]
(5) Award a grant to an applicant which would normally qualify for
other financial assistance, if the project achieves one or more of the
following:
(i) Utilitizes cutting edge technology to provide a solution to a
unique problem;
(ii) Provides services otherwise not possible in an extremely
isolated geographic area; or
(iii) Provides inordinate quantifiable benefit to rural communities
relative to the amount of financial assistance requested.
(c) RUS will not approve an application if RUS determines that:
(1) The applicant's proposal does not indicate financial feasibility
or is not sustainable in accordance with the requirements of
Sec. 1703.109(d)(1);
(2) The applicant's proposal indicates technical flaws, which, in
the opinion of RUS, would prevent successful implementation, operation,
or sustainability of the proposed project; or
(3) Any other aspect of the applicant's proposal fails to adequately
address any requirements of this subpart or contains inadequacies which
would, in the opinion of RUS, undermine the ability of the project to
meet the general purpose of this subpart or comply with policies of the
DLT program set forth in Sec. 1703.101.
(d) RUS may reduce the amount of the applicant's grant award based
on insufficient program funding for the fiscal year in which the project
is reviewed, and offer the applicant loan funds in addition to the grant
funds, if RUS determines that, notwithstanding a lower grant award, the
project will show financial feasibility in accordance with
Sec. 1703.109(d)(1), and continues to meet all other provisions of this
subpart. RUS will discuss its findings informally with the applicant and
make every effort to reach a mutually acceptable agreement with the
applicant. Any discussions with the applicant and agreements made with
regard to a reduced grant amount will be confirmed in writing, and these
actions shall be deemed to have met the notification requirements set
forth in paragraph (e) of this section.
(e) RUS will provide the applicant an explanation of any
determinations made with regard to paragraphs (c)(1) through (c)(3) of
this section prior to making final project selections for the year. The
applicant will be provided 15 days from the date of RUS' letter to
respond, provide clarification, or make any adjustments or corrections
to the project. If, in the opinion of the Administrator, the applicant
fails to adequately respond to any determinations or other findings made
by the Administrator, the project will not be funded, and the applicant
will be notified of this determination. If the applicant does not agree
with this finding an appeal may be filed in accordance with
Sec. 1703.119.
Sec. 1703.119 Appeal provisions.
All qualifying applications under this subpart will be scored based
on criteria in section Sec. 1703.117. A determination will be made by
RUS based on the highest ranking applications and the amount of funds
available for grants and loans. All applicants will be notified in
writing of the score each application receives, and included in this
notification will be a tentative minimum required score to receive
financial assistance. If the score received by the applicant could
result in the denial of its application, or if its score, while
apparently sufficient to qualify for financial assistance, may be
surpassed by the score awarded to a competing application after appeal,
the applicant may appeal its numerical scoring. Any appeal must be based
on inaccurate scoring of the application by RUS and no new information
or data that was not included in the original application will be
considered. The appeal must be made in writing within 10 days after the
applicant is notified of the scoring results. Appeals shall be submitted
to the Administrator, Rural Utilities Service, U.S. Department of
Agriculture, 1400 Independence Ave., SW., STOP 1590, Washington, DC
20250-1590. Thereafter, the Administrator will review the original
scoring to determine whether to sustain, reverse or modify the original
scoring determination. Final determinations will be made after
consideration of all appeals. The Administrator's determination will be
final. A copy of the Administrator's decision will be furnished promptly
to the applicant. An appeal based solely
[[Page 73]]
upon the type of financial assistance the applicant qualifies for will
not be considered.
Secs. 1703.120--1703.121 [Reserved]
Sec. 1703.122 Further processing of selected applications.
(a) During the period between the submission of the application and
the execution of implementing documents, the applicant must inform RUS
if the project is no longer viable or the applicant no longer desires
financial assistance for the project. If the applicant so informs RUS,
the selection will be rescinded and written notice to that effect shall
be sent promptly to the applicant.
(b) If an application has been selected and the nature of the
project changes, the applicant may be required to submit a new
application to RUS for consideration depending on the degree of change.
A new application will be subject to review in accordance with this
subpart. The selection may not be transferred to another project.
(c) If state or local governments raise objections to a proposed
project under the intergovernmental review process that are not resolved
within 3 months of the Administrator's selection of the application, the
Administrator may rescind the selection and written notice to that
effect will be sent promptly to the applicant.
(d) Recipients of financial assistance will be required to submit
RUS Form 479-A, ``Distance Learning and Telemedicine Technical
Questionnaire.''
(e) After an applicant selected for financial assistance has
submitted such additional information, if any, that RUS determines is
necessary for completing the financial assistance documents, RUS will
send the documents to the applicant to execute and return to RUS.
(1) The financial assistance documents will include, among other
things, a letter of agreement for grants; loan documents, including
third party guarantees, for loans; or any other legal documents the
Administrator deems appropriate, including suggested forms of
certifications and legal opinions.
(2) The letter of agreement and the loan documents will include,
among other things, conditions on the release or advance of funds and
include at a minimum, a project description, approved purposes, the
maximum amount of the financial assistance, supplemental funds, required
of the project and certain agreements or commitments the applicant may
have proposed in its application. In addition, the loan documents may
contain covenants and conditions the Administrator deems necessary or
desirable to provide assurance that the loan will be repaid and the
purposes of the loan will be accomplished.
(3) The recipient of a loan will be required to execute a security
instrument in form and substance satisfactory to RUS.
(4) DLT borrowers must, before receiving any advances of loan funds,
provide security that is adequate, in the opinion of RUS, to assure
repayment, within the time agreed, of all loans to the borrower under
the DLT program. This assurance will generally be provided by a first
lien upon all of the borrower's assets or such portion thereof as shall
be satisfactory to RUS. RUS may consider the projected revenues from the
facilities subject to the lien.
(5) Security may also be provided by third-party guarantees, letters
of credit, pledges of revenue or other forms of security satisfactory to
RUS.
(6) The security instrument and other loan documents required by RUS
in connection with loans under the DLT program shall contain such
pledges, covenants, and other provisions as may, in the opinion of RUS,
be necessary or desirable to secure repayment of the loan.
(7) If the facilities financed do not constitute a complete
operating system, the DLT borrower shall provide evidence demonstrating,
to RUS' satisfaction, that the borrower has sufficient contractual or
other arrangements to assure that the facilities financed will provide
adequate and efficient service.
(f) Until the letter of agreement or loan documents have been
executed and delivered by RUS and by the applicant, RUS reserves the
right to require
[[Page 74]]
any changes in the project or legal documents covering the project to
protect the integrity of the program and the interests of the
government.
(g) If the applicant fails to submit, within 120 calendar days from
the date of RUS' selection of an application, all of the information
that RUS determines to be necessary to prepare legal documents and
satisfy other requirements of this subpart, RUS may rescind the
selection of the application and written notice of such rescission will
be sent promptly to the applicant.
[62 FR 32437, June 13, 1997, as amended at 63 FR 3637, Jan. 26, 1998]
Secs. 1703.123--1703.125 [Reserved]
Sec. 1703.126 Disbursement of loan and grant funds.
(a) For financial assistance of $100,000 or greater, prior to the
disbursement of funds, the recipient, if it is not a unit of government,
will provide evidence of fidelity bond coverage as required by 7 CFR
part 3019.
(b) Financial assistance will be disbursed to recipients on a
reimbursement basis, or with unpaid invoices for the eligible purposes
set forth in this subpart, by the following process:
(1) An SF 270, ``Request for Advance or Reimbursement,'' will be
completed by the recipient and submitted to RUS not more frequently than
once a month;
(2) After receipt of a properly completed SF 270, RUS will review
for accuracy and if the form is satisfactory will schedule payment.
Payment will ordinarily be made within 30 days; and
(3) For financial assistance approved during and subsequent to FY
1997, funds will be advanced in accordance to 7 CFR 1744.69.
(c) The recipient's share in the cost of the project will be
disbursed in advance of financial assistance, or if the recipient
agrees, on a pro rata distribution basis with financial assistance
during the disbursement period. Recipient will not be permitted to
provide its contribution at the end of the project.
(d) Concurrent grant and loan funds will be disbursed on a pro rata
distribution basis.
Sec. 1703.127 Reporting and oversight requirements.
(a) A project performance activity report will be required of all
recipients on an annual basis until the project is complete and the
funds are disbursed by the applicant.
(b) A final project performance report will be required. It must
provide an evaluation of the success of the project in meeting the
objectives of the program. The final report may serve as the last annual
report.
(c) RUS will monitor recipients as it determines necessary to assure
that projects are completed in accordance with the approved scope of
work and that funds are expended for approved purposes.
(d) Recipients shall diligently monitor performance to ensure that
time schedules are being met, projected work by time periods is being
accomplished, and other performance objectives are being achieved.
Recipients are to submit an original and one copy of all reports
submitted to RUS. The project performance reports shall include, but not
be limited to, the following:
(1) A comparison of actual accomplishments to the objectives
established for that period;
(2) A description of any problems, delays, or adverse conditions
which have occurred, or are anticipated, and which may affect the
attainment of overall project objectives, prevent the meeting of time
schedules or objectives, or preclude the attainment of particular
project work elements during established time periods. This disclosure
shall be accompanied by a statement of the action taken or planned to
resolve the situation; and
(3) Objectives and timetable established for the next reporting
period.
Sec. 1703.128 Audit requirements.
(a) The grant recipients and DLT borrowers will provide an audit
report in accordance with either:
(1) 7 CFR part 3051, Audits of Institutions of Higher Education and
Other Nonprofit Institutions, or its successor; or
(2) 7 CFR part 1773, Policy on Audits of RUS Borrowers.
[[Page 75]]
(b) 7 CFR part 3051 applies to not-for-profit organizations
(including hospitals, colleges and universities) and state, local, and
Indian tribal governments. 7 CFR part 1773 applies to for-profit
organizations receiving grants or loans, and all RUS telecommunications
and electric borrowers receiving cost of money loans.
(c) For grant recipients the audit requirements only apply to the
year(s) in which grant funds are expended. For DLT borrowers the audit
requirements apply until the loan is repaid.
Sec. 1703.129 Repayment of loans.
The term of cost of money loans will be based on the economic useful
life of the facilities to be financed, not to exceed 10 years. If the
recipient requests, a one year deferment of principal will be included.
In special hardship cases, which the recipient must justify, RUS may
approve a two year deferment of principal. Interest on the loan will be
due and payable during the principal deferral period. RUS will establish
uniform debt service payments based on the total amortization period.
Secs. 1703.130--1703.134 [Reserved]
Sec. 1703.135 Grant and loan administration.
(a) RUS will review recipients as necessary to determine whether
funds were expended for approved purposes. The recipient is responsible
for ensuring that the project complies with all applicable regulations,
and that the financial assistance is expended only for approved
purposes. The recipient is responsible for ensuring that disbursements
and expenditures of funds are properly supported by invoices, contracts,
bills of sale, canceled checks, or other appropriate forms of evidence,
and that such supporting material is provided to RUS, upon request, and
is otherwise made available, at the recipient's premises, for review by
the RUS representatives, the recipient's certified public accountant,
the office of Inspector General, U.S. Department of Agriculture, the
General Accounting Office and any other officials conducting an audit of
the recipient's financial statements or records, and program performance
for the financial assistance awarded under this subpart. The recipient
will be required to permit RUS to inspect and copy any records and
documents that pertain to the project.
(b) Grants provided under this program will be administered under,
and are subject to 7 CFR parts 3016 through 3019 or their successor, as
appropriate. 7 CFR parts 3016 and 3019 subject grantees to a number of
requirements which cover, among other things, financial reporting,
accounting records, budget controls, record retention and audits,
bonding and insurance, cash depositories for grant funds, grant related
income, use and disposition of real property and equipment purchased
with grant funds, procurement standards, allowable costs for grant
related activities, and grant close-out procedures.
Sec. 1703.136 Changes in project objectives or scope.
The recipient will obtain prior approval for any material change to
the scope or objectives of the approved project, including changes to
the scope of work or budget. Failure to obtain prior approval of changes
may result in suspension or termination of funds.
Sec. 1703.137 Grant and loan termination provisions.
(a) Termination for cause. RUS may terminate any financial
assistance in whole, or in part, at any time before the date of
completion of funding disbursement, whenever it is determined that the
recipient has failed to comply with the conditions of the financial
assistance. RUS will promptly notify the recipient in writing of the
determination and the reasons for the termination, together with the
effective date.
(b) Termination for convenience. RUS or the recipient may terminate
financial assistance in whole, or in part, when both parties agree that
the continuation of the project would not produce beneficial results
commensurate with further expenditure of funds. The two parties will
agree upon termination conditions, including the effective date, and in
the case of partial termination's, the portion to be terminated. The
recipient will not incur new
[[Page 76]]
obligations for the terminated portion after the effective date, and
will cancel as many outstanding obligations as possible. RUS will allow
full credit to the applicant for the Federal share of the noncancelable
obligations, properly incurred by the recipient prior to termination.
Secs. 1703.138--1703.139 [Reserved]
Sec. 1703.140 Expedited telecommunications loans.
General. RUS will expedite consideration and determination of an
application for a loan or a request for advance of funds submitted by an
RUS telecommunications borrower that supports the project seeking
financial assistance under this subpart. See 7 CFR part 1737 for loans
and 7 CFR part 1744 for advances under this section.
Appendix A to Subpart D to Part 1703--Environmental Questionnaire
Note: It is extremely important to respond to all questions
completely to ensure expeditious processing of the Distance Learning and
Telemedicine application. The information herein is required by Federal
law.
Important: Any activity related to the project that may adversely
affect the environment or limit the choice of reasonable development
alternatives shall not be undertaken prior to the completion of Rural
Utilities Service's environmental review process.
Legal Name of Applicant_________________________________________________
Signature
(Type/Sign/Date)________________________________________________________
The applicant's representative certifies, to the best of his/her
knowledge and belief, that the information contained herein is accurate.
Any false information may result in disqualification for consideration
of the loan or grant or rescission of the loan or grant.
I. Project Description--Detailing construction, including, but not
limited to, internal modifications of existing structures, and
installation of telecommunications transmission facilities (defined in 7
CFR 1703.102), including satellite uplinks or downlinks, microwave
transmission towers, and cabling.
1. Describe the portion of the project, and site locations
(including legal ownership of real property), involving internal
modifications, or equipment additions to buildings or other structures
(e.g., relocating interior walls or adding computer facilities) for each
site.
2. Describe the portion of the project, and site locations
(including legal ownership or real property), involving construction of
transmission facilities, including cabling, microwave towers, satellite
dishes; or, disturbance of property of .99 acres or greater for each
project site.
3. Describe the nature of the proposed use of the facilities, and
whether any hazardous materials, air emissions, wastewater discharge or
solid waste will result.
4. State whether or not any project site(s) contain or are near
properties listed or eligible for listing in the National Register of
Historic Places, and identify any historic properties (The applicant
must supply evidence that the State Historic Preservation Officer (SHPO)
has cleared development regarding any historical properties).
5. Provide information whether or not any facility(ies) or site(s)
are located in a 100-year floodplain. A National Flood Insurance Map
should be included reflecting the location of the project site(s).
II. For projects which involve construction of transmission
facilities, including cabling, microwave towers, satellite dishes, or
physical disturbance of real property of .99 acres or greater, the
following information must be submitted (7 CFR 1703.109(i)(3)).
1. A map (preferably a U.S. Geological Survey map) of the area for
each site affected by construction (include as an attachment).
2. A description of the amount of property to be cleared, excavated,
fenced or otherwise disturbed by the project and a description of the
current land use and zoning and any vegetation for each project site
affected by construction.
3. A description of buildings or other structures (i.e.,
transmission facilities), including dimensions, to be constructed or
modified.
4. A description of the presence of wetlands or existing
agricultural operations and threatened or endangered species or critical
habitats on or near the project site(s) affected by construction.
5. Describe any actions taken to mitigate any environmental impacts
resulting from the proposed project (use attachment if necessary).
Note: The applicant may submit a copy of any environmental review,
study, assessment, report or other document that has been prepared in
connection with obtaining permits, approvals or other financing for the
proposed project from State, local or other Federal bodies. Such
material, to the extent relevant, may be used to meet the requirements
herein.
Subpart E--Deferments of RUS Loan Payments for Rural Development
Projects
Source: 58 FR 21639, Apr. 23, 1993, unless otherwise noted.
[[Page 77]]
Sec. 1703.300 Purpose.
This subpart E sets forth RUS's policies and procedures for making
loan deferments of principal and interest payments on direct loans or
insured loans made for electric or telephone purposes, but not for loans
made for rural economic development purposes, in accordance with
subsection (b) of section 12 of the RE Act. Loan deferments are provided
for the purpose of promoting rural development opportunities.
Sec. 1703.301 Policy.
It is RUS's policy to encourage borrowers to invest in and promote
rural development and rural job creation projects that are based on
sound economic and financial analyses. Borrowers are encouraged to use
this program to promote economic, business and community development
projects that will benefit rural areas.
Sec. 1703.302 Definitions and rules of construction.
(a) Definitions. For the purpose of this subpart, the following
terms will have the following meanings:1
Administrator means the Administrator of RUS.
Borrower means any organization which has an outstanding direct loan
or insured loan made by RUS for the provision of electric or telephone
service.
Cushion of credit payment means a voluntary unscheduled payment on
an RUS note made after October 1, 1987, credited to the cushion of
credit account of a borrower.
Deferment means a re-amortization of a payment of principal and/or
interest on an RUS direct loan or insured loan for over either a 5- or
10 year period, with the first payment beginning on the date of the
deferment.
Direct loan means a loan that is made by the Administrator pursuant
to section 4 or section 201 of the RE Act (7 U.S.C. 901 et seq.) for the
provision of electric or telephone service in rural areas and does not
include a loan made to promote economic development in rural areas.
Financially distressed borrower means an RUS-financed borrower
determined by the Administrator to be either:
(i) In default or near default on interest or principal payments due
on loans made or guaranteed under the RE Act;
(ii) A borrower that was in default or near default, but is
currently participating in a workout or debt restructuring plan with
RUS; or
(iii) Experiencing a financial hardship.
Insured loan means a loan that is made, held, and serviced by the
Administrator, and sold and insured by the Administrator, pursuant to
Section 305 of the RE Act (7 U.S.C. 901 et seq.) for the provision of
electric or telephone service in rural areas and does not include a loan
made to promote economic development in rural areas.
Job creation means the creation of jobs in rural areas, or in close
enough proximity to rural areas so that it is likely that the majority
of the jobs created will be held by residents of rural areas.
Project means a rural development project that a borrower proposes
and the Administrator approves as qualifying under this subpart.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
REA means the Rural Electrification Administration formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
RTB means the Rural Telephone Bank (telephone bank), a body
corporate and an instrumentality of the United States, that obtains
supplemental funds from non-Federal sources and utilizes them in making
loans, operating on a self-sustaining basis to the extent practicable
(section 401, RE Act).
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
[[Page 78]]
Technical assistance means market research, product or service
improvement, feasibility studies, environmental studies, and similar
activities that benefit rural development or rural job creation
projects.
(b) Rules of construction. Unless the context otherwise indicates;
``includes'' and ``including'' are not limiting, and ``or'' is not
exclusive. The terms defined in Sec. 1703.302(a) include both the plural
and the singular.
[58 FR 21639, Apr. 23, 1993, as amended at 59 FR 66440, Dec. 27, 1994]
Sec. 1703.303 Eligibility criteria for deferment of loan payments.
The deferment of loan payments may be granted to any borrower that
is not financially distressed, delinquent on any Federal debt, or in
bankruptcy proceedings. However, the deferment of loan payments will not
be granted to a borrower during any period in which the Administrator
has determined that no additional financial assistance of any nature
should be provided to the borrower pursuant to any provision of the RE
Act. The determination to suspend eligibility for the deferment of loan
payments under this subpart will be based on:
(a) The borrower's demonstrated unwillingness to exercise diligence
in repaying loans made by RUS or RTB or guaranteed by RUS that results
in the Administrator being unable to find that such loans, would be
repaid within the time agreed; or
(b) The borrower's demonstrated unwillingness to meet the
requirements in RUS's or RTB's legal documents or regulations.
Sec. 1703.304 Restrictions on the deferment of loan payments.
(a) The deferment must not impair the security of any loans made RUS
or RTB, or guaranteed by RUS, pursuant to the RE Act.
(b) At no point in time may the amount of the debt service payments
deferred exceed 50 percent of the total cost of a community, business,
or economic development project for which a deferment is provided.
(c) A borrower may defer debt service payments only in an amount
equal to the investment made by such borrower in a rural development
project. The investment must not be made from:
(1) Proceeds of loans made or guaranteed pursuant to the RE Act, or
grants made pursuant to the RE Act or section 2331 through section 2335A
of the Rural Economic Development Act of 1990 (7 U.S.C. 950aaa et seq.);
(2) Funds necessary to make timely payments of principal and
interest on loans made, guaranteed or lien accommodated pursuant to the
RE Act;
(3) Insurance proceeds from mortgaged property;
(4) Damage awards and sale proceeds resulting from eminent domain
and similar proceedings involving mortgaged property;
(5) Sale proceeds from mortgaged property sales requiring specific
Administrator approval; and
(6) Funds which are restricted by RUS or RTB loan instruments to be
held in trust for the Government or to be held for any other specific
purpose.
(d) Any investment made in a rural development project prior to the
date of the application for a deferment based on such project cannot be
used to satisfy the requirements of this section.
Sec. 1703.305 Requirements for deferment of loan payments.
(a) Except as otherwise provided in paragraph (b) of this section,
the borrower must make a cushion of credit payment equal to the amount
of the payment deferred and subject to the following rules:
(1) Cushion of credit payments made prior to the date that an
application for deferral has been approved by RUS cannot be used to
satisfy the requirements of this section;
(2) Once a cushion of credit payment has been made to satisfy the
requirements of paragraph (a) of this section, it must remain on deposit
in the cushion of credit account on the date of the deferral or the
deferral will not take place; and
(3) The cushion of credit payment must be received by RUS on the
date the payment being deferred is due, or within 30 days prior to this
date.
(b) A borrower may elect to consolidate in one application filed
pursuant to Sec. 1703.311, all of the related deferrals
[[Page 79]]
it wishes to receive in a twelve month period following application
approval. In such a case, the requirement contained in paragraph (a)(1)
of this section may alternatively be satisfied by depositing an amount
equal to the aggregate deferrals covered by such application into the
cushion of credit account at the time the first cushion of credit
payment is due under paragraph (a)(1) of this section.
Sec. 1703.306 Limitation on funds derived from the deferment of loan payments.
Funds derived from the deferment of loan payments will not be used:
(a) To fund or assist projects which would, in the judgement of the
Administrator, create a conflict of interest or the appearance of a
conflict of interest. The borrower must disclose to the Administrator
information regarding any potential conflict of interest or appearance
of a conflict of interest;
(b) For any purpose not reasonably related to the project as
determined by the Administrator;
(c) To transfer existing employment or business activities from one
area to another; or
(d) For the borrower's electric or telephone operations, nor for any
operations affiliated with the borrower unless the Administrator has
specifically informed the borrower in writing that the affiliated
operations are part of the approved purposes.
Sec. 1703.307 Uses of the deferments of loan payments.
The deferment of loan payments will be made to enable the borrower
to provide funding and assistance for rural development and job creation
projects. This includes, but is not limited to, the borrower providing
financing to local businesses, community development assistance,
technical assistance to businesses, and other community, business, or
economic development projects that will benefit rural areas.
Sec. 1703.308 Amount of deferment funds available.
(a) The total amount of deferments made available for each fiscal
year under this program will not exceed 3 percent of the total payments
due during fiscal year 1993 from all borrowers on direct loans and
insured loans made under the RE Act. For each subsequent fiscal year
after 1993, the total amount of deferments will not exceed 5 percent of
the total payments due for the year from all borrowers on direct loans
and insured loans.
(b) The total amount of annual deferments are subject to limitations
established by appropriations Acts.
Sec. 1703.309 Terms of repayment of deferred loan payments.
(a) Deferments made to enable the borrower to provide financing to
local businesses will be repaid over a period of 60 months, in equal
installments, with payments beginning on the date of the deferment, and
continuing in such a manner until the total amount of the deferment is
repaid. The deferment payments will be made on either a monthly or
quarterly basis depending on the existing repayment terms of the direct
loan or insured loan being deferred. The deferment will not accrue
interest.
(b) In the case of deferments made to enable the borrower to provide
community development assistance, technical assistance to businesses,
and for other community, business, or economic development projects not
included in paragraph (a) of this section, the deferment will be repaid
over a period of 120 months, in equal installments, with payments
beginning on the date of the deferment and continuing in such a manner
until the total amount of the deferment is repaid. The deferment
payments will be made on either a monthly or quarterly basis depending
on the existing repayment terms of the direct loan or insured loan being
deferred. The deferment will not accrue interest.
(c) The maturity date of a loan may not be extended as a result of a
deferment.
(d) If the required payment is not made by the borrower or received
by the Administrator when due, the Administrator will reduce the
borrower's cushion of credit account established under this subpart in
an amount equal to the deferment payment required.
[[Page 80]]
(e) The balance in a borrower's cushion of credit account shall not
be reduced by the borrower below the level of the unpaid balance of the
payment deferred.
Sec. 1703.310 Environmental considerations.
Prospective recipients of funds received from the deferment of loan
payments are encouraged to consider the potential environmental impact
of their proposed projects at the earliest planning stage and plan
development in a manner that reduces, to the extent practicable, the
potential to affect the quality of the human environment adversely.
Sec. 1703.311 Application procedures for deferment of loan payments.
(a) A borrower applying for a deferment must:
(1) Submit a certified board resolution to the Administrator
requesting a deferment of principal and interest. The resolution must:
(i) Be signed by the president or vice president of the borrower;
(ii) Contain information on the total amount of deferment requested
for each specific project;
(iii) Contain information on the type of project and the length of
deferment requested as defined in Sec. 1703.309; and
(iv) Specify which officer of the borrower has been given the
authority to certify to those matters required in this section;
(2) Submit certification by the appropriate officer to the
Administrator that the proposed project will not violate the limitations
set forth in Sec. 1703.306 and disclose all information regarding any
potential conflict of interest or appearance of a conflict of interest
that would allow the Administrator to make an informed decision;
(3) Submit certification by the appropriate officer to the
Administrator that an investment in the rural development project will
be made by the borrower in an amount equal to the deferred debt service
payment;
(4) Submit certification by the appropriate officer to the
Administrator that the amount of the deferment will not exceed 50
percent of the total cost of the project for which the deferment is
provided;
(5) Submit certification by the appropriate officer to the
Administrator that it will make a cushion of credit payment necessary to
satisfy the requirement of Sec. 1703.305(a);
(6) Submit certification by the appropriate officer to the
Administrator that it will comply with Sec. 1703.313 and provide
documentation showing that its total investments, including the proposed
investment, will not exceed the investment limitations specified in 7
CFR part 1717, Subpart N, Investments, Loans and Guarantees by Electric
Borrowers, or 7 CFR Part 1744, Post Loan Policies and Procedures Common
to Guaranteed and Insured Loans. The documentation must provide a list
of each rural development project the borrower has invested in to date,
including the investment amounts;
(7) Submit to the Administrator written identification of the direct
loan(s) and/or insured loan(s) for which payments are to be deferred;
(8) Submit to the Administrator a written narrative which contains
information regarding the proposed rural development or job creation
project such as the manner in which the project will promote community,
business, or economic development in rural areas, the nature of the
project, its location, the primary beneficiaries, and, if applicable,
the number and type of jobs to be created; and
(9) Submit to the Administrator a letter of approval from the state
regulatory authority, if applicable, granting its approval for the
borrower to defer direct loan payment(s) and/or insured loan payment(s)
and invest the amount in a rural development project.
(b) The Administrator reserves the right to determine that special
circumstances require additional data from borrowers before acting on a
deferment. The Administrator also reserves the right to require, as a
condition of approving a loan payment deferment pursuant to this
subpart, that the borrower execute and deliver any amendments or
supplements to its loan documents that may be necessary or appropriate
to achieve the purposes outlined in Sec. 1703.300.
[[Page 81]]
(c) The Administrator will decide whether the borrower is eligible
for the deferment and will notify the borrower of the decision.
Sec. 1703.312 RUS review requirements.
Borrowers shall ensure that funds are invested in the rural
development project as approved by RUS. The Administrator reserves the
right to review the books and copy records of borrowers receiving loan
payment deferments as necessary to ensure that the investments in the
rural development project are in accordance with this subpart and the
representations and purposes stated in the borrower's completed
application. If an audit discloses that the amount deferred was not used
for the purposes stated in the completed application, the borrower shall
be required to promptly repay the amount deferred and the benefits of
the deferment to the borrower will be recaptured by RUS. The borrower is
responsible for ensuring that disbursements and expenditures of funds
covering the investment in the rural development project are properly
supported with certifications, invoices, contracts, bills of sale,
cancelled checks, or any other forms of evidence determined appropriate
by the Administrator and that such supporting material is available at
the borrower's premises for review by the RUS field accountant,
borrower's certified public accountant, the Office of Inspector General,
the General Accounting Office and any other accountant conducting an
audit of the borrower's financial statements for this rural development
program.
Sec. 1703.313 Compliance with other regulations.
(a) Investments in a rural economic development project made by an
electric borrower under this subpart are subject to the provisions of 7
CFR part 1717, Subpart N, Investments, Loans and Guarantees by Electric
Borrowers.
(b) Investments in a rural economic development project made by a
telephone borrower under this subpart are subject to the provisions of 7
CFR Part 1744, Post Loan Policies and Procedures Common to Guaranteed
and Insured Loans.
PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO INSURED AND GUARANTEED ELECTRIC LOANS--Table of Contents
Subpart A--General
Sec.
1710.1 General statement.
1710.2 Definitions and rules of construction.
1710.3 Form and bulletin revisions.
1710.4 Exception authority.
1710.5 Availability of forms.
1710.6 Applicability of certain provisions to completed loan
applications.
1710.7 Exemptions of RUS operational controls under section 306E of the
RE Act.
1710.8--1710.49 [Reserved]
Subpart B--Types of Loans and Loan Guarantees
1710.50 Insured loans.
1710.51 Loan guarantees.
1710.52--1710.99 [Reserved]
Subpart C--Loan Purposes and Basic Policies.
1710.100 General.
1710.101 Types of eligible borrowers.
1710.102 Borrower eligibility for different types of loans.
1710.103 Area coverage.
1710.104 Service to non-RE Act beneficiaries.
1710.105 State regulatory approvals.
1710.106 Uses of loan funds.
1710.107 Amount lent for acquisitions.
1710.108 Mergers and consolidations.
1710.109 Reimbursement of general funds and interim financing.
1710.110 Supplemental financing.
1710.111 Refinancing.
1710.112 Loan feasibility.
1710.113 Loan security.
1710.114 TIER, DSC, OTIER and ODSC requirements.
1710.115 Final maturity.
1710.116 [Reserved]
1710.117 Environmental considerations.
1710.118 [Reserved]
1710.119 Loan processing priorities.
1710.120 Construction standards and contracting.
1710.121 Insurance requirements.
1710.122 Equal opportunity and nondiscrimination.
1710.123 Debarment and suspension.
1710.124 Uniform Relocation Act.
1710.125 Restrictions on lobbying.
1710.126 Federal debt delinquency.
1710.127 Drug free workplace.
1710.128--1710.149 [Reserved]
[[Page 82]]
Subpart D--Basic Requirements for Loan Approval
1710.150 General.
1710.151 Required findings for all loans.
1710.152 Primary support documents.
1710.153 Additional requirements and procedures.
1710.154--1710.199 [Reserved]
Subpart E--Power Requirements Studies
1710.200 Purpose.
1710.201 Requirement to prepare a PRS--power supply borrowers.
1710.202 Requirement to prepare a PRS--distribution borrowers.
1710.203 Basic policies and requirements for a PRS.
1710.204 PRS work plan requirements.
1710.205 Basic criteria for RUS approval of a PRS.
1710.206 Waiver of borrower requirements.
1710.207--1710.249 [Reserved]
Subpart F--Construction Work Plans and Related Studies
1710.250 General.
1710.251 Construction work plans--distribution borrowers.
1710.252 Construction work plans--power supply borrowers.
1710.253 Engineering and cost studies--addition of generation capacity.
1710.254 Alternative sources of power.
1710.255--1710.299 [Reserved]
Subpart G--Long-Range Financial Forecasts
1710.300 General.
1710.301 Financial forecasts--distribution borrowers.
1710.302 Financial forecasts--power supply borrowers.
1710.303 Power cost studies--power supply borrowers.
1710.304--1710.349 [Reserved]
Subpart H--Demand Side Management and Renewable Energy Systems
1710.350 Purpose.
1710.351 General policy; renewable energy systems.
1710.352 General policy; energy resource conservation programs.
1710.353 General policy; demand side management.
1710.354 Eligible DSM activities.
1710.355 DSM loan applications.
1710.356 Integrated resource plans.
1710.357 DSM plans.
1710.358 Requirements for a DSM plan.
1710.359 DSM effects.
1710.360 Submittal of alternate documentation.
1710.361 Type and term of loans.
1710.362 Loan approval.
1710.363 Advance and documentation of use of loan funds.
1710.364 Loan limits.
Subpart I--Application Requirements and Procedures for Insured and
Guaranteed Loans
1710.400 Initial contact.
1710.401 Loan application documents.
1710.402--1710.403 [Reserved]
1710.404 Additional requirements.
1710.405 Supplemental financing documents.
1710.406 Loan approval.
1710.407 Loan documents.
Authority: 7 U.S.C. 901-950(b); Pub. L. 99-591, 100 Stat. 3341; Pub.
L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).
Source: 57 FR 1053, Jan. 9, 1992, unless otherwise noted.
Subpart A--General
Sec. 1710.1 General statement.
(a) This part establishes general and pre-loan policies and
requirements that apply to both insured and guaranteed loans to finance
the construction and improvement of electric facilities in rural areas,
including generation, transmission, and distribution facilities.
(b) Additional pre-loan policies, procedures, and requirements that
apply specifically to guaranteed and/or insured loans are set forth
elsewhere:
(1) For guaranteed loans in 7 CFR part 1712 and RUS Bulletins 20-22,
60-10, 86-3, 105-5, and 111-3, or the successors to these bulletins; and
(2) For insured loans in 7 CFR part 1714 and in RUS Bulletins 60-10,
86-3, 105-5, and 111-3, or the successors to these bulletins.
(c) This part supersedes those portions of the following RUS
Bulletins and supplements that are in conflict.
20-5 Extensions of Payments of Principal and Interest
20-20 Deferment of Principal Repayments for Investment in Supplemental
Lending Institutions
20-22 Guarantee of Loans for Bulk Power Supply Facilities
20-23 Section 12 Extensions for Energy Resources Conservation Loans
60-10 Construction Work Plans, Electric Distribution Systems
86-3 Headquarters Facilities for Electric Borrowers
[[Page 83]]
105-5 Financial Forecast-Electric Distribution Systems
111-3 Power Supply Surveys
120-1 Development, Approval, and Use of Power Requirements Studies
(d) When parts 1710, 1712, and 1714 are published in final form, the
bulletins cited in paragraph (b) of this section will be rescinded, in
whole or in part, or revised.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66262, Dec. 20, 1993]
Sec. 1710.2 Definitions and rules of construction.
(a) Definitions. For the purpose of this part, the following terms
shall have the following meanings:
Administrator means the Administrator of RUS or his or her designee.
APRR means Average Adjusted Plant Revenue Ratio calculated as a
simple average of the adjusted plant revenue ratios for 1978, 1979 and
1980 as follows:
[GRAPHIC] [TIFF OMITTED] TC16SE91.000
where:
A=Distribution (plant), which equals Part E, Line 14(e) of RUS Form 7;
B=General Plant, which equals Part E, Line 24(e) of RUS Form 7;
C=Operating Revenue and Patronage Capital, which equals Part A, Line 1
of RUS Form 7; and
D=Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of
RUS Form 7.
Area Coverage means the provision of adequate electric service to
the widest practical number of rural users in the borrower's service
area during the life of the loan.
Borrower means any organization that has an outstanding loan made or
guaranteed by RUS for rural electrification, or that is seeking such
financing.
Bulk Transmission Facilities means the transmission facilities
connecting power supply facilities to the subtransmission facilities,
including both the high and low voltage sides of the transformer used to
connect to the subtransmission facilities, as well as related
supervisory control and data acquisition systems.
Call provision has the same meaning as ``prepayment option''.
Consolidation means the combination of 2 or more borrower or
nonborrower organizations, pursuant to state law, into a new successor
organization that takes over the assets and assumes the liabilities of
those organizations.
Consumer means a retail customer of electricity, as reported on RUS
Form 7, Part R, Lines 1-7.
Demand side management (DSM) means the deliberate planning and/or
implementation of activities to influence consumer use of electricity
provided by a distribution borrower to produce beneficial modifications
to the system load profile. Beneficial modifications to the system load
profile ordinarily improve load factor or otherwise help in utilizing
electric system resources to best advantage consistent with acceptable
standards of service and lowest system cost. Load profile modifications
are characterized as peak clipping, valley filling, load shifting,
strategic conservation, strategic load growth, and flexible load
profile. (See, for example, publications of the Electric Power Research
Institute (EPRI), 3412 Hillview Avenue, Palo Alto, CA 94304, especially
``Demand-Side Management Glossary'' EPRI TR-101158, Project 1940-25,
Final Report, October 1992.) DSM includes energy conservation programs.
It does not include sources of electrical energy such as renewable
energy systems, fuel cells, or traditionally fueled generation, such as
fossil or nuclear fueled generators.
Distribution Borrower means a borrower that sells or intends to sell
electric power and energy at retail in rural areas.
Distribution Facilities means all electrical lines and related
facilities beginning at the consumer's meter base, and continuing back
to and including the distribution substation.
DSC means Debt Service Coverage of the borrower calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.000
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Forms 7 and 12. References to line numbers in
the RUS Forms 7 and 12 refer to the June 1994 version of RUS Form 7 and
the December 1993 version of RUS
[[Page 84]]
Form 12, and will apply to corresponding information in future versions
of the forms;
A=Depreciation and Amortization Expense of the borrower, which equals
Part A, Line 12 of RUS Form 7 (distribution borrowers) or Section A,
Line 20 of RUS Form 12a (power supply borrowers);
B=Interest expense on total long-term debt of the borrower, which equals
Part A, Line 15 of RUS Form 7 or Section A, Line 22 of RUS Form 12a,
except that interest expense shall be increased by \1/3\ of the amount,
if any, by which restricted rentals of the borrower (Part M, Line 3 of
RUS Form 7 or Section K, Line 4 of RUS Form 12h) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets] or RUS Form 12a, Section B,
Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
C=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a; and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the borrower during the calendar year, plus \1/
3\ of the amount, if any, by which restricted rentals of the borrower
(Part M, Line 3 of RUS Form 7 or Section K, Line 4 of RUS Form 12h)
exceed 2 percent of the borrower's equity (RUS Form 7, Part C, Line 36
[Total Margins & Equities] less Line 26 [Regulatory Assets] or RUS Form
12a, Section B, Line 38 [Total Margins & Equities] less Line 28
[Regulatory Assets]);
DSM activities means activities of the type referred to in
Sec. 1710.354(f).
DSM plan means a plan that describes the implementation at the
distribution level of the DSM activities identified in the integrated
resource plan as having positive net benefits. See Sec. 1710.357.
Electric system means all of the borrower's interests in all
electric production, transmission, distribution, conservation, load
management, general plant and other related facilities, equipment or
property and in any mine, well, pipeline, plant, structure or other
facility for the development, production, manufacture, storage,
fabrication or processing of fossil, nuclear, or other fuel or in any
facility or rights with respect to the supply of water, in each case for
use, in whole or in major part, in any of the borrower's generating
plants, including any interest or participation of the borrower in any
such facilities or any rights to the output or capacity thereof,
together with all lands, easements, rights-of-way, other works,
property, structures, contract rights and other tangible and intangible
assets of the borrower in each case used or useful in such electric
system.
Equity means total margins and equities, which equals Part C, Line
33 of RUS Form 7 (distribution borrowers) or Section B, Line 34 of RUS
Form 12a (power supply borrowers).
Final maturity means the final date on which all outstanding
principal and accrued interest on an electric loan is due and payable.
Five percent hardship rate means an interest rate of 5 percent
applicable to a hardship rate loan.
Fund advance period means the period of time during which the
Government may advance loan funds to the borrower. See 7 CFR 1714.56.
Generation Facilities means the generating plant and related
facilities, including the building containing the plant, all fuel
handling facilities, and the stepup substation used to convert the
generator voltage to transmission voltage, as well as related energy
management (dispatching) systems.
Hardship rate loan means a loan made at the 5 percent hardship rate
pursuant to 7 CFR 1714.8.
Insured Loan means a loan made pursuant to Section 305 of the RE
Act, and may include a direct loan made under Section 4 of the RE Act.
Integrated Resources Plan (IRP) means a plan resulting from the
planning and selection process for new energy resources that evaluates
the benefits and costs of the full range of alternatives, including new
generating capacity, power purchases, DSM programs, system operating
efficiency, and renewable energy systems.
Interest rate cap means a maximum interest rate of 7 percent
applicable to certain municipal rate loans as set forth in Sec. 1710.7.
Interest rate term means a period of time selected by the borrower
for the purpose of determining the interest rate on an advance of funds.
See 7 CFR 1714.6.
[[Page 85]]
Loan means any loan made or guaranteed by RUS.
Loan Contract means the agreement, as amended, supplemented, or
restated from time to time, between a borrower and RUS providing for
loans made or guaranteed pursuant to the RE Act.
Loan Feasibility means that the borrower has the capability of
repaying the loan in full as scheduled, in accordance with the terms of
the mortgage, note, and loan contract.
Loan Guarantee means a loan guarantee made by RUS pursuant to the RE
Act.
Loan period means the period of time during which the facilities
included in a loan application will be constructed. It commences with
the date shown on page 1, in the block headed ``Cost Estimates as of,''
of RUS Form 740c, Cost Estimates and Loan Budget for Electric Borrowers,
which is the same as the date on the Financial and Statistical Report
submitted with the loan application. The loan period may be up to 4
years for distribution borrowers and, except in the case of a loan for
new generating and associated transmission facilities, up to 4 years for
the transmission facilities and improvements or replacements of
generation facilities for power supply borrowers. The loan period for
new generating facilities is determined on a case by case basis.
Merger means the combining, pursuant to state law, of borrower or
nonborrower organizations into an existing survivor organization that
takes over the assets and assumes the liabilities of the merged
organizations.
Mortgage means any and all instruments creating a lien on or
security interest in the borrower's assets in connection with loans or
guarantees under the RE Act.
Municipal rate loan means a loan made at a municipal interest rate
pursuant to 7 CFR 1714.5.
ODSC means Operating Debt Service Coverage of the electric system
calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.001
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Form 7. References to line numbers in the RUS
Form 7 refer to the June 1994 version of the form, and will apply to
corresponding information in future versions of the form;
A=Depreciation and Amortization Expense of the electric system, which
usually equals Part A, Line 12 of RUS Form 7;
B=Interest expense on total long-term debt of the electric system, which
usually equals Part A, Line 15 of RUS Form 7, except that such interest
expense shall be increased by \1/3\ of the amount, if any, by which
restricted rentals of the electric system (usually Part M, Line 3 of RUS
Form 7) exceed 2 percent of the borrower's equity (RUS Form 7, Part C,
Line 36 [Total Margins & Equities] less Line 26 [Regulatory Assets]);
C=Patronage Capital & Operating Margins of the electric system, which
usually equals Part A, Line 20 of RUS Form 7, plus cash received from
the retirement of patronage capital by suppliers of electric power and
by lenders for credit extended for the Electric System; and
D=Debt Service Billed (RUS + other), which equals the sum of all
payments of principal and interest required to be made on account of
total long-term debt of the electric system during the calendar year,
plus \1/3\ of the amount, if any, by which restricted rentals of the
Electric System (usually Part M, Line 3 of RUS Form 7) exceed 2 percent
of the borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets]).
Off-grid renewable energy system means an energy source which is not
electrically attached to the grid. Off-grid systems are operated as an
island and will have no direct impact on a utility system's physical
operations. An off-grid system need not meet electric utility power
quality standards.
On-grid renewable energy system means an energy source electrically
attached to an existing grid. It can be attached on either side of a
consumer's meter. On-grid systems are operated as part of the overall
utility system and have a direct impact on a utility system's
operations. An on-grid system must meet electric utility power quality
and safety standards.
Ordinary Replacement means replacing one or more units of plant,
called ``retirement units'', with similar units when made necessary by
normal wear
[[Page 86]]
and tear, damage beyond repair, or obsolescence of the facilities.
OTIER means Operating Times Interest Earned Ratio of the electric
system calculated as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.002
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Form 7. References to line numbers in the RUS
Form 7 refer to the June 1994 version of the form, and will apply to
corresponding information in future versions of the form;
A=Interest expense on total long-term debt of the electric system, which
usually equals Part A, Line 15 of RUS Form 7, except that such interest
expense shall be increased by \1/3\ of the amount, if any, by which
restricted rentals of the electric system (usually Part M, Line 3 of RUS
Form 7) exceed 2 percent of the borrower's equity (RUS Form 7, Part C,
Line 36 [Total Margins & Equities] less Line 26 [Regulatory Assets]);
and
B=Patronage Capital & Operating Margins of the electric system, which
usually equals Part A, Line 20 of RUS Form 7, plus cash received from
the retirement of patronage capital by suppliers of electric power and
by lenders for credit extended for the Electric System.
Power Requirements Study (PRS) means the thorough study of a
borrower's electric loads and the factors that affect those loads in
order to determine, as accurately as practicable, the borrower's future
requirements for energy and capacity.
Power Supply Borrower means a borrower that sells or intends to sell
electric power at wholesale to distribution or power supply borrowers
pursuant to RUS wholesale power contracts.
Prepayment option means a provision included in the loan documents
to allow the borrower to prepay all or a portion of an advance on a
municipal rate loan on a date other than a rollover maturity date. See 7
CFR 1714.9.
PRR means Plant Revenue Ratio calculated as:
[GRAPHIC] [TIFF OMITTED] TC16SE91.001
where:
A = Total Utility Plant, which equals Part C, Line 3 of RUS Form 7;
B = Operating Revenue and Patronage Capital, which equals Part A, Line 1
of RUS Form 7; and
C = Cost of Power, which equals the sum of Part A, Lines 2, 3, and 4 of
RUS Form 7.
PRS Work Plan means the plan that sets forth the resources, methods,
schedules, and milestones to be used in the preparation and maintenance
of a power requirements study.
RE Act means the Rural Electrification Act of 1936, as amended (7
U.S.C. 901 et seq.).
RE Act beneficiary means a person, business, or other entity that is
located in a rural area.
REA means the Rural Electrification Administration formerly an
agency of the United States Department of Agriculture and predecessor
agency to RUS with respect to administering certain electric and
telephone loan programs.
Renewable energy system means a source of energy (kWh) used to meet
borrower electric load that is fueled by any of the following
technologies: Hydropower, geothermal, biomass, municipal waste, solar
thermal, photovoltaic, wind, fuel cells not fueled by fossil fuels. See,
for example, ``Renewable Resources in U.S. Electricity Supply,''
February 1993, Publication number DOE/EIA 0561, published by the
Department of Energy, Energy Information Administration, Forrestal
Building, EI-231, Washington, DC 20585.
Retirement Unit means a substantial unit of property, which when
retired, with or without being replaced, is accounted for by removing
its book cost from the plant account.
Rollover maturity date means the last day of an interest rate term.
Rural area means any area of the United States, its territories and
insular possessions (including any area within the Federated States of
Micronesia, the Marshall Islands, and the Republic of Palau) not
included within the boundaries of any urban area, as defined by the
Bureau of the Census. For purposes of the ``rural area'' definition, the
character of an area is determined at the time of the initial loan to
furnish or improve service in the area.
(i) For initial RUS loans made prior to November 1, 1993, the RE Act
defined ``rural area'' to mean any area of the United States not
included within the
[[Page 87]]
boundaries of any city, village, or borough having a population
exceeding 1500. An area determined to be a ``rural area'' for the
purposes of an initial loan made prior to November 1, 1993, shall
continue to be considered a ``rural area.''
(ii) For initial RUS loans made on or after November 1, 1993, this
definition shall apply. In determining the character of the area, RUS
will rely on the Bureau of the Census designation.
RUS means the Rural Utilities Service, an agency of the United
States Department of Agriculture established pursuant to Section 232 of
the Federal Crop Insurance Reform and Department of Agriculture
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor
to REA with respect to administering certain electric and telephone
programs. See 7 CFR 1700.1.
Subtransmission Facilities means the transmission facilities that
connect the high voltage side of the distribution substation to the low
voltage side of the bulk transmission or generating facilities, as well
as related supervisory control and data acquisition facilities.
System Improvement means the change or addition to electric plant
facilities to improve the quality of electric service or to increase the
quantity of electric power available to RE Act beneficiaries.
TIER means Times Interest Earned Ratio of the borrower calculated
as:
[GRAPHIC] [TIFF OMITTED] TR29DE95.003
Where:
All amounts are for the same calendar year and are based on the RUS
system of accounts and RUS Forms 7 and 12. References to line numbers in
the RUS Forms 7 and 12 refer to the June 1994 version of RUS Form 7 and
the December 1993 version of RUS Form 12, and will apply to
corresponding information in future versions of the forms;
A=Interest expense on total long-term debt of the borrower, which equals
Part A, Line 15 of RUS Form 7 or Section A, Line 22 of RUS Form 12a,
except that interest expense shall be increased by \1/3\ of the amount,
if any, by which restricted rentals of the borrower (Part M, Line 3 of
RUS Form 7 or Section K, Line 4 of RUS Form 12h) exceed 2 percent of the
borrower's equity (RUS Form 7, Part C, Line 36 [Total Margins &
Equities] less Line 26 [Regulatory Assets] or RUS Form 12a, Section B,
Line 38 [Total Margins & Equities] less Line 28 [Regulatory Assets]);
and
B=Patronage Capital or Margins of the borrower, which equals Part A,
Line 28 of RUS Form 7 or Section A, Line 35 of RUS Form 12a.
Total Assets means Part C, Line 26 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Total Utility Plant means Part C, Line 3 of RUS Form 7 (distribution
borrowers) or Section B, Line 27 of RUS Form 12a (power supply
borrowers).
Transmission Facilities means all electrical lines and related
facilities, including certain substations, used to connect the
distribution facilities to generation facilities. They include bulk
transmission and subtransmission facilities.
Urban area is defined by the Bureau of the Census as an area
comprising all territory, population, and housing units in urbanized
areas and in places of 2500 or more persons outside urbanized areas.
More specifically, ``urban'' consists of territory, persons, and housing
units in:
(i) Places of 2500 or more persons incorporated as cities, villages,
boroughs (except in Alaska and New York), and towns (except in the six
New England States, New York, and Wisconsin), but excluding the rural
portions of ``extended cities.''
(ii) Census designated places of 2500 or more persons.
(iii) Other territory, incorporated or unincorporated, included in
urbanized areas.
Urbanized area means an urbanized area as defined by the Bureau of
the Census in notices published periodically in the Federal Register.
Generally an urbanized area is characterized as an area that comprises a
place and the adjacent densely settled territory that together have a
minimum population of 50,000 people.
(b) Rules of Construction. Unless the context otherwise indicates,
``includes'' and ``including'' are not limiting, and
[[Page 88]]
``or'' is not exclusive. The terms defined in paragraph (a) of this part
include the plural as well as the singular, and the singular as well as
the plural.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66263, Dec. 20, 1993; 59 FR 495, Jan. 4, 1994; 59 FR 66440, Dec. 27,
1994; 60 FR 3730, Jan. 19, 1995; 60 FR 67400, Dec. 29, 1995]
Sec. 1710.3 Form and bulletin revisions.
References in this part to RUS or REA forms or line numbers in RUS
or REA forms are based on RUS or REA Form 7 and Form 12 dated December
1992, unless otherwise indicated. These references will apply to
corresponding information in future versions of the forms. The terms
``RUS form'', ``RUS standard form'', ``RUS specification'', and ``RUS
bulletin'' have the same meanings as the terms ``REA form'', ``REA
standard form'', ``REA specification'', and ``REA bulletin'',
respectively, unless otherwise indicated.
[59 FR 66440, Dec. 27, 1994]
Sec. 1710.4 Exception authority.
Consistent with the RE Act and other applicable laws, the
Administrator may waive or reduce any requirement imposed by this part
or other RUS regulations on an electric borrower, or a lender whose loan
is guaranteed by RUS, if the Administrator determines that imposition of
the requirement would adversely affect the Government's financial
interest.
Sec. 1710.5 Availability of forms.
Information about the availability of RUS forms and publications
cited in this part is available from Administrative Services Division,
Rural Utilities Service, United States Department of Agriculture,
Washington, DC 20250-1500. These RUS forms and publications may be
reproduced.
Sec. 1710.6 Applicability of certain provisions to completed loan applications.
(a) Certain new or revised policies and requirements set forth in
this part, which are listed in this paragraph, shall not apply to a
pending loan application that has been determined by RUS to be complete
as of January 9, 1992, the date of publication of such policies and
requirements in the Federal Register. This exception does not apply to
loan applications received after said date, nor to incomplete
applications pending as of said date. This exception applies only to the
following provisions:
(1) Paragraph 1710.115(b)--with respect to limiting loan maturities
to the expected useful life of the facilities financed;
(2) Section 1710.116--with respect to the requirement to develop and
follow an equity development plan;
(3) Paragraph 1710.151(f)--with respect to the borrower providing
satisfactory evidence that a state regulatory authority will allow the
facilities to be included in the rate base or otherwise allow sufficient
revenues to repay the loan;
(4) Paragraphs 1710.250(b), 1710.251(a), and 1710.252(a)--with
respect to the requirement that improvements, replacements, and
retirements of generation plant be included in a Construction Work Plan;
and
(5) Paragraph 1710.300(d)(5)--with respect to the requirement that a
borrower's financial forecast include a sensitivity analysis of a
reasonable range of assumptions for each of the major variables in the
forecast.
(b) Certain provisions of this part apply only to loans made on or
after February 10, 1992. These provisions are identified in the
individual sections of this part.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66263, Dec. 20, 1993]
Sec. 1710.7 Exemptions of RUS operational controls under section 306E of the RE Act.
(a) General policy. (1) Section 306E of the RE Act directs the
Administrator to issue interim final regulations to minimize approval
rights, requirements, restrictions, and prohibitions imposed on the
operations of electric borrowers whose net worth exceeds 110 percent of
the outstanding loans made or guaranteed to the borrower by RUS. The
section also directs the Administrator, when requested by a private
lender providing financing for capital investments by such borrowers, to
[[Page 89]]
offer, without delay, to share the government's lien on the borrowers'
systems or subordinate the government's lien on the property financed by
the private lender.
(2) In issuing the regulations, the Administrator is authorized to
establish requirements, guided by the practices of private lenders with
respect to similar credit risks, to ensure that the security, including
the assurance of repayment, for loans made or guaranteed by RUS will
remain reasonably adequate. If the regulations are not issued within 180
days of enactment of section 306E, the Administrator may not, until the
regulations are issued, require prior approval of, or establish any
requirement, restriction, or prohibition, with respect to the operations
of any electric borrower that meets the 110 percent ratio.
(3) Nothing in section 306E limits the authority of the
Administrator to establish terms and conditions on the use of funds from
loans made or guaranteed by RUS, to establish loan feasibility criteria
and other requirements for the approval of RUS loans or loan guarantees,
such as those set forth in this part, or to take any other action
specifically authorized by law.
(4) This section addresses the application of section 306E of the RE
Act to RUS operational controls and other requirements that apply in
general to RUS borrowers. The application of section 306E to lien
accommodations and subordinations is set forth in 7 CFR 1717.860 and
1717.904.
(5) The exemptions granted by this section, 7 CFR 1717.860, and 7
CFR 1717.904 apply only to RUS controls and approval rights. They do not
affect the controls and approval rights of other co-mortgagees under the
RUS mortgage.
(6) For purposes of this section, the terms ``default,'' ``financed
or funded by RUS,'' ``interchange agreement,'' ``interconnection
agreement,'' ``loan documents,'' ``pooling agreement,'' ``power supply
contract,'' and ``wheeling agreement'' have the meanings as set forth in
7 CFR 1717.602.
(b) Determination of ratio. The following principles and procedures
will apply to the calculation of net worth as a ratio, expressed as a
percent, to the outstanding balance of all loans made or guaranteed to
the borrower by RUS, hereinafter called the borrower's ``net worth to
RUS debt ratio'', or simply ``the ratio'':
(1) For purposes of determining whether a borrower is exempt from
approvals, requirements, restrictions, or prohibitions imposed by RUS
with respect to borrower operations, i.e., ``operational controls,'' the
ratio normally will be based on data as of December 31. Net worth will
be based on the year-end financial and statistical reports submitted by
borrowers to RUS, and outstanding loans made or guaranteed by RUS will
be based on RUS's records. The financial and statistical reports (Form 7
for distribution borrowers and Form 12a for power supply borrowers) are
subject to RUS review and revision, and they must comply with RUS's
system of accounts and accounting principles set forth in 7 CFR part
1767. Since sinking fund depreciation is not approved under 7 CFR part
1767, net worth for borrowers using sinking fund depreciation will be
calculated as if the borrower had been using straight line depreciation;
(2) Net worth will be calculated by taking total margins and
equities (from Part C of RUS Form 7 for distribution borrowers, or
Section B of RUS Form 12a for power supply borrowers) and subtracting
assets properly recordable in account 182.2, Unrecovered Plant and
Regulatory Study Costs, and account 182.3, Other Regulatory Assets, as
defined in 7 CFR part 1767; and
(3) By no later than July 1 of each year, RUS will notify each
borrower in writing of its exemption status. If the borrower's net worth
to RUS debt ratio exceeds 110 percent based on the most recent year-end
data, the borrower will be exempt from the operational controls exempted
under paragraph (c) of this section until subsequently notified in
writing by RUS that it is no longer exempt.
(c) Borrower operations exempted from RUS controls. Borrowers who
are notified by RUS in writing that their net worth to RUS debt ratio
exceeds 110 percent are exempted from the operational controls of the
RUS mortgage
[[Page 90]]
and loan contract listed in this paragraph. These controls, which are
implemented through RUS regulations and other documents, are as follows:
(1) RUS approval of extensions and additions. RUS approval of
extensions and additions to borrowers' electric systems, except for the
following:
(i) Extensions and additions financed by RUS;
(ii) Construction, procurement, or leasing of generating facilities,
regardless of the source of funding, if the combined capacity of the
facilities to be built, procured, or leased, including any future
facilities included in the planned project, will exceed 25 megawatts in
the case of power supply borrowers, or the lesser of 5 megawatts or 30
percent of the borrower's equity in the case of distribution borrowers;
(iii) Acquisition or leasing of existing electric facilities or
systems in service, regardless of the source of funding, whose purchase
price, or capitalized value in the case of a lease, exceeds 10 percent
of the borrower's net utility plant; and
(iv) Construction, procurement, or leasing of electric facilities,
regardless of the source of funding, to serve a customer whose annual
kWh purchases or maximum annual kW demand in the foreseeable future is
projected to exceed 25 percent of the borrower's total kWh sales or
maximum kW demand in the year immediately preceding the acquisition or
start of construction;
(2) Long-range engineering plans and construction work plans. RUS
approval of long-range engineering plans and CWPs if the borrower does
not intend to seek RUS financing for any of the facilities, equipment or
other purposes included in those plans. However, if requested by RUS, a
borrower must provide an informational copy of such plans to RUS;
(3) Plans and specifications. RUS approval of plans and
specifications for construction not financed by RUS;
(4) Standard forms of construction contracts, and engineering and
architectural services contracts. RUS requirements to use standard forms
of contracts for construction, procurement, engineering services, and
architectural services, if the construction, procurement or services are
not financed by RUS. To be eligible for this waiver the contracts used
must not contain any provisions that prohibit or restrict the assignment
of the contracts to the government upon the exercise by RUS of its
remedies under security instruments securing loans made or guaranteed by
RUS;
(5) Contract bidding requirements. RUS requirements regarding the
competitive bidding of construction contracts, if the construction is
not financed by RUS;
(6) RUS approval of contracts. (i) Construction contracts and
architectural and engineering contracts. RUS approval of contracts for
construction and procurement and for architectural and engineering
services, if such construction, procurement or services are not financed
by RUS.
(ii) Large retail power contracts. RUS approval of contracts to sell
electric power to retail customers except when the contract is for
longer than 2 years and the kWh sales or kW demand for any year covered
by the contract exceeds 25 percent of the borrower's total kWh sales or
maximum kW demand for the year immediately preceding execution of the
contract. This exemption applies regardless of the source of funding of
any plant extensions, additions or improvements that may be involved in
connection with the contract.
(iii) Power supply arrangements. (A) RUS approval of power supply
contracts (including but not limited to economy energy sales and
emergency power and energy sales), interconnection agreements,
interchange agreements, wheeling agreements, pooling agreements, and any
other similar power supply arrangements subject to approval by RUS, if
they have a term of 2 years or less. Amendments to said power supply
arrangements are also exempted from RUS approval provided that the
amendment does not extend the term of the arrangement for more than 2
years beyond the date of the amendment.
(B) Any amendment to a schedule or exhibit contained in any power
supply arrangement subject to RUS approval that merely has the effect of
either altering a list of interconnection or delivery points or changing
the value of a variable term (but not the formula
[[Page 91]]
itself) contained in a formulary rate or charge.
(C) The exemptions under this paragraph (c)(6)(iii) apply regardless
of whether the borrower is a seller or purchaser of the services
furnished by the contracts or arrangements, and regardless of whether or
not a Federal power marketing agency is a party to any of them.
(iv) System management and maintenance contracts. RUS approval of
contracts for the management and operation of a borrower's electric
system or for the maintenance of the electric system, if such contracts
do not cover all or substantially all of the electric system.
(v) Other contracts. [Reserved];
(7) RUS approval of general manager. RUS approval of the selection
of a borrower's manager and employment contract, provided that the
borrower is not in default under its loan documents or any other
agreement with RUS. Nothing herein shall limit the right of RUS under
the loan documents to request termination of the employment of a manager
in the event of a default by the borrower;
(8) Board of directors. RUS approval of compensation of a borrower's
board of directors;
(9) Certain expenditures. (i) RUS approval of expenditures for
legal, accounting, and supervisory services by a borrower. However,
while expenditures for accounting do not require RUS approval, the
selection of a certified public accountant by the borrower to prepare
audited reports required by RUS remains subject to RUS approval.
(ii) RUS approval of expenditures for engineering services by a
borrower, if such engineering services will not be financed by RUS;
(10) Banks. RUS approval of banks or other depositories used by a
borrower. However, without the prior written approval of RUS, a borrower
shall not deposit funds from loans made or guaranteed by RUS in any bank
or other depository that is not insured by the Federal Deposit Insurance
Corporation or other Federal agency acceptable to RUS, or in any account
not so insured.
(11) Certain equipment. RUS approval of the purchase of data
processing equipment and system control equipment by a borrower, if the
equipment is not financed by RUS;
(12) Notification of rate changes. Requirement that distribution
borrowers notify RUS in writing of proposed changes in electric rates 90
days prior to the effective date of such rates. Instead, the required
notification period shall be 30 days, and such notification shall be
required only if requested by RUS;
(13) Consolidations and mergers. RUS approval of mergers and
consolidations, and conveyances or transfers of the mortgaged property
substantially as an entirety, if the following conditions are met:
(i) Such consolidation, merger, conveyance or transfer shall be on
such terms as shall fully preserve the lien and security of the mortgage
and the rights and powers of the mortgagees;
(ii) The entity formed by such consolidation or with which the
borrower is merged or the corporation which acquires by conveyance or
transfer the mortgaged property substantially as an entirety shall
execute and deliver to the mortgagees a mortgage supplemental in
recordable form and containing an assumption by such successor entity of
the due and punctual payment of the principal of and interest on all of
the outstanding notes and the performance and observance of every
covenant and condition of the mortgage;
(iii) Immediately after giving effect to such transaction, no
default under the mortgage shall have occurred and be continuing;
(iv) The borrower shall have delivered to the mortgagees a
certificate of its general manager or other officer, in form and
substance satisfactory to each of the mortgagees, which shall state that
such consolidation, merger, conveyance or transfer and such supplemental
mortgage comply with this section and that all conditions precedent
herein provided for relating to such transaction have been complied
with;
(v) The borrower shall have delivered to the mortgagees an opinion
of counsel in form and substance satisfactory to each of the mortgagees;
and
(vi) The entity formed by such consolidation or with which the
borrower
[[Page 92]]
is merged or the corporation which acquires by conveyance or transfer
the mortgaged property substantially as an entirety shall be an entity:
(A) Having equity equal to at least 27% of its total assets on a pro
forma basis after giving effect to such transaction;
(B) Having a pro forma TIER of not less than 1.50 and a pro forma
DSC of not less than 1.25 for each of the two preceding calendar years;
and
(C) Having net utility plant equal to or greater than 1.0 times its
total long-term debt on a pro forma basis;
(14) Sale, lease, or transfer of capital assets. RUS approval for a
distribution borrower to sell, lease, or transfer capital assets, if the
following conditions are met:
(i) The borrower is not in default;
(ii) In the most recent year for which data are available, the
borrower achieved a TIER of at least 1.5, DSC of at least 1.25, OTIER of
at least 1.1, and ODSC of at least 1.1, in each case based on the
average or the best 2 out of the 3 most recent years;
(iii) The sale, lease, or transfer of assets will not reduce the
borrower's existing or future requirements for energy or capacity being
furnished to the borrower under any wholesale power contract which has
been pledged as security to the government;
(iv) Fair market value is obtained for the assets;
(v) The aggregate value of assets sold, leased, or transferred in
any 12-month period is less than 10 percent of the borrower's net
utility plant prior to the transaction;
(vi) The proceeds of such sale, lease, or transfer, less ordinary
and reasonable expenses incident to such transaction, are immediately:
(A) Applied as a prepayment of all notes secured under the mortgage
equally and ratably;
(B) In the case of dispositions of equipment, materials or scrap,
applied to the purchase of other property useful in the borrower's
utility business; or
(C) Applied to the acquisition of construction of utility plant; and
(vii) If the borrower has an RUS-approved wholesale power contract
with a power supply borrower (seller), the circumstances of the sale,
lease or transfer of capital assets conform with the conditions in such
contract under which the seller may not withhold its consent to the
sale, lease or transfer;
(15) Limitations on distributions. RUS approval for a borrower to
declare or pay dividends, pay or determine to pay patronage refunds,
retire patronage capital, or make any other cash distributions, if the
following conditions are met:
(i) After giving effect to the distribution, the borrower's equity
will be greater than or equal to 30 percent of its total assets;
(ii) The borrower is current on all payments due on all notes
secured under the mortgage;
(iii) The borrower is not otherwise in default under its loan
documents; and
(iv) After giving effect to the distribution, the borrower's current
and accrued assets will be not less than its current and accrued
liabilities.
(d) RUS requirements and operational controls not exempted. All
requirements and operational controls contained in the RUS mortgage and
loan contract, or otherwise imposed on borrowers pursuant to statute or
regulation, that are not specifically listed in paragraph (c) of this
section are not exempted and shall continue to apply according to their
terms. Examples of such requirements and controls not exempted are
listed in this paragraph for the convenience of the public. This list is
not exhaustive, and the absence of a requirement or control from this
list in no way means that the requirement or control has been exempted:
(1) Requirements and operational controls contained in the RUS
mortgage or loan contract that are necessary to ensure that the security
for loans made or guaranteed by RUS is reasonably adequate and that the
loans will be repaid, or to accomplish other fundamental purposes of the
RE Act. Some of these also represent terms and conditions with respect
to the use by borrowers of the proceeds of loans made or guaranteed by
RUS. Together, these controls include, but are not limited to, the
following:
(i) Area coverage requirements set forth in the loan contract and in
Sec. 1710.103;
[[Page 93]]
(ii) Requirement that certain borrowers maintain, on an ongoing
basis, a power requirements study and a power requirements study work
plan, as set forth in Secs. 1710.201 and 1710.202;
(iii) Requirement that borrowers follow RUS construction standards
and use RUS accepted materials, as set forth in Sec. 1710.41,
Sec. 1710.45, and 7 CFR part 1728;
(iv) Requirement that borrowers maintain, on an ongoing basis, a
long-range engineering plan and a construction work plan, as set forth
in Sec. 1710.250(b);
(v) Requirement that borrowers set rates for electric service
sufficient to maintain certain coverage ratios, as set forth in
Sec. 1710.114;
(vi) Certain RUS approvals of retirements of capital credits in
excess of amounts specifically authorized in the mortgage;
(vii) RUS approval of borrower investments, loans, guarantees, and
other obligations under 7 CFR part 1717, subpart N;
(viii) RUS requirements on accounting, auditing, irregularities,
financial reporting, and access to books and records;
(ix) Requirement that borrowers record the mortgage and mortgage
amendments;
(x) Requirement that the mortgagor maintain and preserve the
priority lien of the mortgage and defend title to the mortgaged
property;
(xi) Requirements on maintenance and repair of the mortgaged
property;
(xii) Requirements on insurance of the mortgaged property; and
(xiii) Certain RUS approvals of borrower mergers and consolidations;
and
(2) Requirements imposed on borrowers pursuant to statute or
regulation and not specifically exempted by paragraph (c) of this
section. See, for example, Secs. 1710.122 through 1710.127.
(e) Rescission of exemptions if borrower defaults. If a borrower is
in default with respect to any requirement of its mortgage, loan
contract with RUS, or any other agreement with RUS that has not been
exempted pursuant to paragraph (c) of this section or other RUS
regulations, upon written notice to the borrower RUS may rescind all or
any part of the exemptions granted pursuant to paragraph (c) of this
section or other RUS regulations. The reinstated requirements and
controls will remain in effect until RUS determines that they are no
longer needed to help ensure that the security, including the assurance
of repayment, for loans made or guaranteed by RUS will remain reasonably
adequate.
(f) Reinstated controls. If RUS controls are reinstated because the
borrower defaults or its net worth falls below 110 percent of RUS debt,
such controls and approval rights will apply to all applicable
subsequent actions of the borrower, including without limitation the
amendment of contracts that the borrower entered into while eligible for
an exemption under this section.
[60 FR 67401, Dec. 29, 1995, as amended at 62 FR 27930, May 22, 1997]
Secs. 1710.8--1710.49 [Reserved]
Subpart B--Types of Loans and Loan Guarantees
Sec. 1710.50 Insured loans.
RUS makes insured loans under section 305 of the RE Act.
(a) Municipal rate loans. The standard interest rate on an insured
loan made on or after November 1, 1993, is the municipal rate, which is
the rate determined by the Administrator to be equal to the current
market yield on outstanding municipal obligations with remaining periods
to maturity, up to 35 years, similar to the interest rate term selected
by the borrower. In certain cases, an interest rate cap of 7 percent may
apply. The interest rate term and rollover maturity date for a municipal
rate loan will be determined pursuant to 7 CFR part 1714, and the
borrower may elect to include in the loan documents a prepayment option
(call provision).
(b) Hardship rate loans. RUS makes hardship rate loans at the 5
percent hardship rate to qualified borrowers meeting the criteria set
forth in 7 CFR 1714.8
[58 FR 66263, Dec. 20, 1993]
Sec. 1710.51 Loan guarantees.
RUS provides financing through 100 percent loan guarantees made
under
[[Page 94]]
sections 306 and 306A of the RE Act. RUS also provides 90 percent loan
guarantees under section 311 of the RE Act to enable borrowers to secure
financing from certain private lenders. The loan guarantees are made for
a term of up to 35 years, and the interest rate is established at a rate
agreed to by the borrower and the lender, with RUS concurrence. The
guarantee applies to the repayment of both principal and interest.
[58 FR 66264, Dec. 20, 1993]
Secs. 1710.52--1710.99 [Reserved]
Subpart C--Loan Purposes and Basic Policies
Sec. 1710.100 General.
RUS makes loans and loan guarantees to finance the construction of
electric distribution, transmission and generation facilities, including
system improvements and replacements required to furnish and improve
electric service in rural areas, and for demand side management, energy
conservation programs, and on grid and off grid renewable energy
systems. In some circumstances, RUS may finance selected operating
expenses of its borrowers. Loans made or guaranteed by the Administrator
of RUS will be made in conformance with the Rural Electrification Act of
1936, as amended (7 U.S.C. 901 et seq.), and 7 CFR chapter XVII. RUS
provides certain technical assistance to borrowers when necessary to aid
the development of rural electric service and to protect loan security.
[58 FR 66264, Dec. 20, 1993]
Sec. 1710.101 Types of eligible borrowers.
(a) RUS makes loans to corporations, states, territories, and
subdivisions and agencies thereof; municipalities; people's utility
districts; and cooperative, nonprofit, limited-dividend, or mutual
associations that provide or propose to provide:
(1) The retail electric service needs of rural areas, or
(2) The power supply needs of distribution borrowers under the terms
of power supply arrangements satisfactory to RUS.
(b) In making loans, RUS gives preference to states, territories,
and subdivisions and agencies thereof; municipalities; people's utility
districts; and cooperative, nonprofit, or limited-dividend associations.
RUS does not make loans to individual consumers.
(c) For the purpose of determining eligibility of a distribution
borrower not in default on the repayment of a loan made or guaranteed
under the RE Act for a loan, loan guarantee, or lien accommodation, a
default by a borrower from which a distribution borrower purchases
wholesale power shall not:
(1) Be considered a default by the distribution borrower;
(2) Reduce the eligibility of the distribution borrower for
assistance under the RE Act; or
(3) Be the cause, directly or indirectly, of imposing any
requirement or restriction on the borrower as a condition of the
assistance, except such requirements or restrictions as are necessary to
implement a debt restructuring agreed on by the power supply borrower
and RUS.
(d) For the purpose of determining the eligibility of a distribution
borrower, RUS will consider whether the distribution borrower is current
on its obligations to its wholesale power supplier under the RUS
wholesale power contract.
(e) Nothing in paragraph (c) of this section relieves any
distribution borrower that is a member of a power supply borrower in
default on its obligations to RUS or operating under a debt
restructuring agreement, of requirements set forth in RUS regulations,
including, without limitation, Sec. 1710.112(b)(6), or of any terms and
conditions that the Administrator may otherwise impose on any borrower
as a condition of obtaining a loan or loan guarantee (including, in
appropriate cases, member guarantees).
(f) Except as provided in paragraph (g) of this section, former
borrowers that have paid off all outstanding loans may reapply for a
loan to serve RE Act beneficiary loads accruing from the time the former
borrower's complete loan application is received by RUS. The
determination of whether an area is rural will be based on the Census
[[Page 95]]
designation of the area at the time of the reapplication for a loan, if
the area is not served by electric facilities financed by RUS. If the
area is served by electric facilities financed by RUS, it will continue
to be considered rural.
(g) Former borrowers that have prepaid all, or portions of
outstanding insured and direct loans in accordance with RUS regulations
must comply with the provisions of 7 CFR part 1786 before being
considered eligible to borrow additional funds from RUS.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992. Revised and
redesignated at 58 FR 66264, Dec. 20, 1993]
Sec. 1710.102 Borrower eligibility for different types of loans.
(a) Insured loans under section 305. Insured loans are normally
reserved for the financing of distribution and subtransmission
facilities of both distribution and power supply borrowers, including,
under certain circumstances, the implementation of demand side
management, energy conservation programs, and on grid and off grid
renewable energy systems. In accordance with Sec. 1710.110, the
Administrator may require the borrower to obtain no more than 30 percent
of the total debt financing required for a proposed project by means of
a supplemental loan from another lender without an RUS guarantee.
(b) One hundred percent loan guarantees under section 306. Both
distribution and power supply borrowers are eligible for 100 percent
loan guarantees under section 306 of the RE Act for any or all of the
purposes set forth in Sec. 1710.106, including, under certain
circumstances, the implementation of demand side management, energy
conservation programs, and on grid and off grid renewable energy
systems. (See 7 CFR part 1712). These guarantees are normally used to
finance bulk transmission and generation facilities, but they may also
be used to finance distribution and subtransmission facilities. If a
borrower applies for a section 306 loan guarantee to finance all or a
portion of distribution and subtransmission facilities, such request
will not affect the borrower's eligibility for an insured loan to
finance any remaining portion of said facilities or for any future
insured loan to finance other distribution or subtransmission
facilities. A section 306 loan guarantee, however, may not be used to
guarantee a supplemental loan required by Sec. 1710.110.
(c) One hundred percent loan guarantees under section 306A. Under
section 306A of the RE Act, both distribution and power supply borrowers
are eligible under certain conditions to use an existing section 306
guarantee to refinance advances made on or before July 2, 1986 from a
loan made by the Federal Financing Bank. (See 7 CFR part 1786.)
(d) [Reserved]
(e) Ninety percent guarantees of private-sector loans under section
311. Under section 311 of the RE Act, both distribution and power supply
borrowers in the state of Alaska are eligible under certain conditions
to obtain from RUS a 90 percent guarantee of a private-sector loan to
refinance their Federal Financing Bank loans. (See 7 CFR part 1786.)
[57 FR 2832, Jan. 24, 1992, as amended at 58 FR 66264, Dec. 20, 1993]
Sec. 1710.103 Area coverage.
(a) Borrowers shall make a diligent effort to extend electric
service to all unserved persons within their service area who:
(1) Desire electric service; and
(2) Meet all reasonable requirements established by the borrower as
a condition of service.
(b) If economically feasible and reasonable considering the cost of
providing such service and/or the effects on all consumers' rates, such
service shall be provided, to the maximum extent practicable, at the
rates and minimum charges established in the borrower's rate schedules,
without the payment by such persons, other than seasonal or temporary
consumers, of a contribution in aid of construction. A seasonal consumer
is one that demands electric service only during certain seasons of the
year. A temporary consumer is a seasonal or year-round consumer that
demands electric service over a period of less than five years.
(c) Borrowers may assess contributions in aid of construction
provided
[[Page 96]]
such assessments are consistent with the policy set forth in this
section.
[57 FR 1053, Jan. 9, 1992, as amended at 60 FR 67404, Dec. 29, 1995]
Sec. 1710.104 Service to non-RE Act beneficiaries.
(a) To the greatest extent practical, loans are limited to providing
and improving electric facilities to serve consumers that are RE Act
beneficiaries. When it is determined by the Administrator to be
necessary in order to furnish or improve electric service in rural
areas, loans may, under certain circumstances, be made to finance
electric facilities to serve consumers that are not RE Act
beneficiaries.
(b) Loan funds may be approved for facilities to serve non-RE Act
beneficiaries only if:
(1) The primary purpose of the loan is to furnish or improve service
for RE Act beneficiaries; and
(2) The use of loan funds to serve non-RE Act beneficiaries is
necessary and incidental to the primary purpose of the loan.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66264, Dec. 20, 1993]
Sec. 1710.105 State regulatory approvals.
(a) In States where a borrower is required to obtain approval of a
project or its financing from a state regulatory authority, RUS may
require that such approvals be obtained, if feasible for the borrower to
do so, before the following types of loans are approved by RUS:
(1) Loans requiring an Environmental Impact Statement;
(2) Loans to finance generation and transmission facilities, when
the loan request for such facilities is $25 million or more; and
(3) Loans for the purpose of assisting borrowers to implement demand
side management and energy conservation programs and on and off grid
renewable energy systems.
(b) At minimum, in the case of all loans in states where state
regulatory approval is required of the project or its financing, such
state approvals will be required before loan funds are advanced.
(c) In cases where state regulatory authority approval has been
obtained, but the borrower has failed to proceed with the project in a
timely manner according to the schedule contained in the borrower's
project design manual, or if there are cost overruns or other
developments that threaten loan feasibility or security, RUS may require
the borrower to obtain a reaffirmation of the project and its financing
from the state authority before any additional loan funds are advanced.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 58 FR
66265, Dec. 20, 1993]
Sec. 1710.106 Uses of loan funds.
(a) Funds from loans made or guaranteed by RUS may be used to
finance:
(1) Distribution facilities. (i) The construction of new
distribution facilities or systems and the cost of system improvements
and removals, less salvage value, needed to meet load growth
requirements or improve the quality of service.
(ii) The purchase, rehabilitation and integration of existing
distribution facilities and associated service territory when the
acquisition is an incidental and necessary means of providing or
improving service to persons in rural areas who are not receiving
adequate central station service, and the borrower is unable to finance
the acquisition from other sources. See Sec. 1710.107.
(2) Transmission and generation facilities. (i) The construction of
new transmission and generation facilities or systems and the cost of
system improvements and removals, less salvage value, needed to meet
load growth and improve the quality of service.
(ii) The purchase of an ownership interest in new or existing
transmission or generation facilities to serve RE Act beneficiaries.
(3) Ordinary plant replacements. The excess of the total cost of
ordinary replacements over the original cost of the facilities being
replaced, unless financing of the total cost is specifically authorized
by the Administrator.
(4) Warehouse and garage facilities. The purchase, remodeling, or
construction of warehouse and garage facilities required for the
operation of a borrower's system. See paragraph (b) of this section.
(5) Interest. The payment of interest on indebtedness incurred by a
borrower
[[Page 97]]
to finance the construction of generation and transmission facilities
during the period preceding the date such facilities are placed into
service, if requested by the borrower and found necessary by RUS.
(6) Certain costs incurred in demand side management, energy
conservation programs and on and off grid renewable energy systems.
(b) In cases of financial hardship, as determined by the
Administrator, loans may also be made to finance the following items:
(1) The headquarters office and other headquarters facilities in
addition to those cited in paragraph (a)(4) of this section;
(2) General plant equipment, including furniture, office,
transportation, data processing and other work equipment; and
(3) Working capital required for the initial operation of a new
system.
(c) RUS will not make loans to finance the following:
(1) Electric facilities, equipment, appliances, or wiring located
inside the premises of the consumer, except qualifying items included in
a loan for demand side management or energy resource conservation
programs, or on or off grid renewable energy systems;
(2) Facilities to serve consumers who are not RE Act beneficiaries
unless those facilities are necessary and incidental to providing or
improving electric service in rural areas (See Sec. 1710.104);
(3) Any facilities or other purposes that a state regulatory
authority having jurisdiction will not approve for inclusion in the
borrower's rate base, or will not otherwise allow rates sufficient to
repay with interest the debt incurred for the facilities or other
purposes; and
(4) Any facilities or other specific purposes that were included in
a loan made or guaranteed by RUS that the borrower has prepaid or that
has been rescinded.
(d) A distribution borrower may request a loan period of up to 4
years. Except in the case of loans for new generating and associated
transmission facilities, a power supply borrower may request a loan
period of not more than 4 years for transmission and substation
facilities and improvements or replacements of generation facilities.
The loan period for new generating facilities is determined on a case by
case basis. The loan period for DSM activities will be determined in
accordance with Sec. 1710.355. The Administrator may approve a loan
period shorter than the period requested by the borrower, if in the
Administrator's sole discretion, a loan made for the longer period would
fail to meet RUS requirements for loan feasibility and loan security set
forth in Secs. 1710.112 and 1710.113, respectively.
(e)(1) If, in the sole discretion of the Administrator, the amount
authorized for lending for municipal rate loans, hardship rate loans,
and loan guarantees in a fiscal year is substantially less than the
total amount eligible for RUS financing, RUS may limit the size of all
loans of that type approved during the fiscal year. Depending on the
amount of the shortfall between the amount authorized for lending and
the loan application inventory on hand for each type of loan, RUS may
either reduce the amount on an equal proportion basis for all applicants
for that type of loan based on the amount of funds for which the
applicant is eligible, or may shorten the loan period for which funding
will be approved to less than the maximum of 4 years. All applications
for the same type of loan approved during a fiscal year will be treated
in the same manner, except that RUS will not limit funding to any
borrower requesting an RUS loan or loan guarantee of $1 million or less.
(2) If RUS limits the amount of loan funds approved for borrowers,
the Administrator shall notify all electric borrowers early in the
fiscal year of the manner in which funding will be limited. The portion
of the loan application that is not funded during that fiscal year may,
at the borrower's option, be treated as a second loan application
received by RUS at a later date. This date will be determined by RUS in
the same manner for all affected loans and will be based on the
availability of loan funds. The second loan application shall be
considered complete except that the borrower must submit a certification
from a duly authorized corporate official stating that funds are still
needed for loan purposes specified
[[Page 98]]
in the original application and must notify RUS of any changes in its
circumstances that materially affects the information contained in the
original loan application or the primary support documents. See 7 CFR
1710.401(f).
(f)(1) For borrowers having one or more loans approved on or after
October 1, 1991, advances of funds will be made only for the primary
budget purposes included in the loan as shown on RUS Form 740c as
amended and approved by RUS, or on a construction work plan or a
construction work plan amendment approved by RUS. Each advance will be
charged to the oldest outstanding note(s) having unadvanced funds for
the primary budget purpose for which the request for advances was made,
regardless of whether such notes are associated with loans approved
before or after October 1, 1991, unless any conditions on advances under
any of these notes have not been met by the borrower.
(2) For borrowers whose most recent loan was approved before October
1, 1991, advances will be made on the oldest outstanding note having
unadvanced funds, unless any conditions on advances under such note have
not been met by the borrower.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 60
FR 3730, Jan. 19, 1995; 62 FR 7922, Feb. 21, 1997]
Sec. 1710.107 Amount lent for acquisitions.
The maximum amount that will be lent for an acquisition is limited
to the value of the property, as determined by RUS. If the acquisition
price exceeds this amount, the borrower shall provide the remainder
without RUS financial assistance.
Sec. 1710.108 Mergers and consolidations.
(a) RUS encourages its borrowers to consider merging or
consolidating with another electric borrower when such action will
contribute to greater operating efficiency and financial soundness.
(b) After a merger or consolidation, RUS will give priority
consideration per Sec. 1710.119 to the processing of loans for the
surviving system to finance the integration and rehabilitation of
electric facilities, if necessary, and the improvement or extension of
electric service in rural areas. Such priority consideration will also
be given in the case of a borrower that has merged or consolidated with
an electric system that has not previously received RUS financial
assistance, if such system was serving primarily rural residents at the
time of the merger or consolidation and such rural residents will
continue to be served by the merged or consolidated system. RUS does not
make loans for costs incurred in effectuating mergers or consolidations,
such as legal expenses or feasibility study costs.
Sec. 1710.109 Reimbursement of general funds and interim financing.
(a) Borrowers may request that a loan include funds to reimburse
general funds and/or replace interim financing used to finance equipment
and facilities that were included in an RUS-approved construction work
plan, work plan amendment or other RUS-approved plan, and for which loan
funds have not been provided by RUS. Such reimbursement and/or
replacement of interim financing may include the direct costs of
procurement and construction, as well as the related cost of
engineering, architectural, environmental and other studies and plans
needed to support the project, when such cost is capitalized as part of
the cost of the facilities.
(b) If procurement and/or construction of the equipment and
facilities was completed prior to the current loan period,
reimbursement, including replacement of interim financing, will be
limited, except in cases of extreme financial hardship as determined by
the Administrator, to the cost of procurement and construction completed
during the period immediately preceding the current loan period, as
specified in paragraph (c) of this section. As defined in Sec. 1710.2,
the loan period begins on the date shown on page 1 of RUS Form 740c,
Cost Estimates and Loan Budget for Electric Borrowers.
(c)(1) The period immediately preceding the current loan period for
which reimbursement and replacement of interim financing is authorized
under paragraph (b) of this section is as follows:
[[Page 99]]
(i) The number of months agreed to by RUS and the borrower for
complete loan applications received by RUS before February 10, 1992;
(ii) 36 months for complete loan applications received from February
10, 1992 through February 10, 1993; or
(iii) 24 months for complete loan applications received after
February 10, 1993.
(2) Policies for reimbursement of general funds and interim
financing following certain mergers, consolidations, and transfers of
systems substantially in their entirety are set forth in 7 CFR 1717.154.
(d) If the reimbursement of general funds and/or replacement of
interim financing is for approved expenditures for equipment and
facilities whose procurement and/or construction is completed during the
current loan period, the time limits of paragraph (c) of this section do
not apply.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 61
FR 66870, Dec. 19, 1996]
Sec. 1710.110 Supplemental financing.
(a) Except in the case of financial hardship as determined by the
Administrator, and following certain mergers, consolidations, and
transfers of systems substantially in their entirety as set forth in 7
CFR 1717.154, applicants for a municipal rate loan will be required to
obtain a portion of their loan funds from a supplemental source without
an RUS guarantee, in the amounts set forth in paragraph (c) of this
section. RUS will normally grant a lien accommodation to the
supplemental lender. RUS does not require supplemental financing in
conjunction with an RUS guaranteed loan. However, if a borrower elects
to obtain supplemental financing in conjunction with a guaranteed loan,
the granting of RUS's loan guarantee may be conditioned on the
borrower's obtaining supplemental financing.
(b) The terms and conditions of supplemental financing and any
security offered to the supplemental lender are subject to RUS approval.
Generally, supplemental loans must have the same final maturity and be
amortized in the same manner as RUS loans made concurrently. Borrowers
may elect to repay the loans either in substantially equal periodic
installments covering interest and principal, or in periodic
installments that include interest and level amortization of principal.
(c) Supplemental financing required for municipal rate loans--(1)
Distribution borrowers. (i) Distribution borrowers that had, as of
December 31, 1980, an average consumer density of 2 or fewer consumers
per mile or an average adjusted plant revenue ratio (APRR), as defined
in Sec. 1710.2, of over 9.0 shall obtain supplemental financing equal to
10 percent of their loan request.
(ii) All other distribution borrowers must obtain supplemental
financing according to their plant revenue ratio (PRR), as defined in
Sec. 1710.2, based on the most recent year-end data available on the
date of loan approval, as follows:
------------------------------------------------------------------------
Supplemental loan
PRR percentage
------------------------------------------------------------------------
9.00 and above....................................... 10
8.01-8.99............................................ 20
8.00 and below....................................... 30
------------------------------------------------------------------------
(iii) If a distribution borrower enters into a merger,
consolidation, or transfer of system substantially in its entirety, and
the provisions of 7 CFR 1717.154(b) do not apply, required supplemental
financing will be determined as follows for loans approved by RUS after
December 19, 1996. If one of the merging parties met the criteria in
paragraph (c)(1)(i) of this section prior to the effective date of the
merger consolidation or transfer, the borrower will be required to
obtain supplemental financing equal to 10 percent of any loan funds
requested for facilities to serve consumers located in the territory
formerly served by the ``paragraph (c)(1)(i)'' borrower. The required
amount of supplemental financing for the rest of the loan will be
determined according to the provisions of paragraph (c)(1)(ii) of this
section.
(2) Power supply borrowers. The supplemental loan proportion
required of a power supply borrower is based on the simple arithmetic
mean of the supplemental loan proportions required of the borrower's
distribution members.
(3) Subsequent loans. (i) If more than 5 percent of an insured loan
made prior to November 1, 1993, or of a municipal rate loan is
terminated or rescinded,
[[Page 100]]
the amount of supplemental financing required in the borrower's next
loan after the rescission for which supplemental financing is required,
pursuant to paragraph (a) of this section, will be adjusted to average
the actual supplemental financing portion on the terminated or rescinded
loan with the supplemental financing portion that would have been
required on the new loan according to paragraphs (c)(1) and (2) of this
section, in accordance with the formulas set forth in paragraphs
(c)(3)(ii) and (iii) of this section.
(ii) If a borrower's supplemental financing requirement as set forth
in paragraphs (a), (c)(1), and (c)(2) of this section has not changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be
computed as follows:
Supplemental financing amount, new loan = [(A + B) x C] - D
where:
A = The total funds ($) actually advanced from the first loan, including
both RUS loan funds and funds from the supplemental loan, plus any
unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS loan funds and funds from supplemental loans.
C = The proportion (%) of supplemental financing required on the loans
according to paragraphs (a), (c)(1) and (c)(2) of this section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(iii) If a borrower's supplemental financing requirement as set
forth in paragraphs (a), (c)(1), and (c)(2) of this section has changed
between the most recent loan and the loan being considered, then the
amount of supplemental financing required for the new loan will be the
weighted average of the portions otherwise applicable on the two loans
and will be computed as follows:
Supplemental financing amount, new loan =
(A x C1)+(B x C2)-D
where:
A = The total funds ($) actually advanced from the first loan, including
both RUS loan funds and funds from the supplemental loan, plus any
unadvanced funds still available to the borrower after the rescission.
B = The total amount ($) for facilities of the new loan request,
including both RUS funds and funds from supplemental loans.
C1 = The proportion (%) of supplemental financing required on
the old loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
C2 = The proportion (%) of supplemental financing required on
the new loan according to paragraphs (a), (c)(1) and (c)(2) of this
section.
D = The amount ($) of supplemental funds actually advanced on the first
loan, plus any unadvanced supplemental funds still available to the
borrower after the rescission.
(d) Supplemental financing will not be required in connection with
hardship rate loans. Borrowers that qualify for hardship rate loans but
elect to take municipal rate loans instead, will be required to obtain
supplemental financing pursuant to this section, unless at the time of
loan approval, there are no funds remaining available for hardship
loans, in which case supplemental financing will not be required.
[57 FR 1053, Jan. 9, 1992, as amended at 58 FR 66265, Dec. 20, 1993; 60
FR 3730, Jan. 19, 1995; 61 FR 66870, Dec. 19, 1996]
Sec. 1710.111 Refinancing.
(a) RUS makes loans or loan guarantees to refinance the outstanding
indebtedness of borrowers in the following cases:
(1) Loans or loan guarantees to refinance long-term debt owed by
borrowers to the Tennessee Valley Authority fpr credit extended under
the terms of the Tennessee Valley Authority Act of 1933, as amended.
(2) Loan guarantees made in accordance with the provisions of
section 306A of the RE Act to prepay a loan (or any loan advance
thereunder) made by the Federal Financing Bank.
(b) In certain circumstances, RUS may make a loan to replace interim
financing obtained for the construction of facilities (See
Sec. 1710.109).
Sec. 1710.112 Loan feasibility.
(a) RUS will make a loan only if there is reasonable assurance that
the loan, together with all outstanding
[[Page 101]]
loans and other obligations of the borrower, will be repaid in full as
scheduled, in accordance with the mortgage, notes, and loan contracts.
The borrower must provide evidence satisfactory to the Administrator
that the loan will be repaid in full as scheduled, and that all other
obligations of the borrower will be met.
(b) Based on evidence submitted by the borrower and other
information, RUS will use the following criteria to evaluate loan
feasibility:
(1) Projections of power requirements, rates, revenues, expenses,
margins, and other factors for the present system and proposed additions
are based on reasonable assumptions and adequate supporting data and
analysis, including analysis of a range of assumptions for the
significant variables, when required by Sec. 1710.300(d)(5).
(2) Projected revenues from the rates proposed by the borrower are
adequate to meet the required TIER and DSC ratios based on the
borrower's total costs, including the projected maximum debt service
cost of the new loan.
(3) The economics of the borrower's operations and service area are
such that consumers can reasonably be expected to pay the proposed rates
required to cover all expenses and meet RUS TIER and DSC requirements,
and the borrower can reasonably compete with other utilities and other
energy sources to prevent substantial load loss while providing
satisfactory service to its consumers.
(4) Risks of possible loss of substantial loads from large consumers
or from load concentrations in particular industries will not
substantially impair loan feasibility.
(5) Risks of loss of portions of the borrower's service territory
from annexation or other causes will not substantially impair loan
feasibility. If there appears to be a substantial risk, RUS may require
additional information from the borrower, such as a summary and analysis
of the risk by the borrower; state, county or local planning reports
having information on projected growth or expansion plans of local
communities; annexation plans of the municipalities in question; and any
other relevant information.
(6) In states where rates or investment decisions are subject to
approval by state regulatory authorities, there is reasonable
expectation that such approvals will be forthcoming to enable repayment
of the loan in full according to its terms.
(7) The experience and performance of the system's management is
acceptable.
(8) In the case of joint ventures, the borrower has sufficient
management control or other contractual safeguards with respect to the
construction and operation of the jointly owned facility to ensure that
the borrower's interests are protected and the credit risk is minimized.
(9) The borrower has implemented adequate financial and management
controls and there are and have been no significant financial or other
irregularities.
(10) The borrower's projected capitalization, measured by its equity
as a percentage of total assets, is adequate to enable the borrower to
meet its financial needs and to provide service consistent with the RE
Act. Among the factors to be considered in reviewing the borrower's
projected capitalization are the economic strength of the borrower's
service territory, the inherent cost of providing service to the
territory, the disparity in rates between the borrower and neighboring
utilities, the intensity of competition faced by the borrower from
neighboring utilities and other power sources, and the relative amount
of new capital investment required to serve existing or new loads.
(c) RUS considers a loan to be feasible only if the borrower's
electric system is year 2000 compliant, or if the borrower provides RUS
with evidence, satisfactory to RUS, that it is taking measures necessary
to ensure that its electric system will be year 2000 compliant on or
before December 31, 1999. Year 2000 compliant means that product
performance and function are not affected by dates before, during, and a
reasonable time after the year 2000.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR
3731, Jan. 19, 1995; 63 FR 51793, Sept. 29, 1998]
[[Page 102]]
Sec. 1710.113 Loan security.
(a) RUS makes loans only if, in the judgment of the Administrator,
the security therefor is reasonably adequate and the loan will be repaid
according to its terms within the time agreed.
(b) RUS generally requires that borrowers provide it with a first
lien on all of the borrower's real and personal property, including
intangible personal property and any property acquired after the date of
the loan. This lien shall be in the form of a mortgage by the borrower
to the Government or a deed of trust between the borrower and a trustee
satisfactory to the Administrator, together with such security documents
as RUS may deem necessary in a particular case.
(c)(1) When a borrower is unable by reason of preexisting
encumbrances, or otherwise, to furnish a first mortgage lien on its
entire system the Administrator may accept other forms of security, such
as a pledge of revenues, if he or she determines such security is
reasonably adequate and the form and nature thereof is otherwise
acceptable.
(2) The Administrator, at his or her discretion, may approve the use
of an indenture patterned after those indentures commonly used by
utilities engaged in private market financing, in lieu of a mortgage as
the security instrument for loans to power supply borrowers. The use of
an indenture will be by mutual agreement of the borrower and the
Administrator. The terms of each indenture and related loan agreement
will be negotiated on a case by case basis to best meet the needs of the
individual borrower and the Government. The provisions of the indenture
and loan contract shall control, notwithstanding any provisions of 7 CFR
Chapter XVII which may be in conflict therewith.
(d) In the case of loans that include the financing of electric
facilities that are operated as an integral component of a non-RUS
financed system (such as generation and transmission facilities co-owned
with other electric utilities), the borrower shall, in addition to the
mortgage lien on all of the borrower's electric facilities, furnish
adequate assurance, in the form of contractual or other security
arrangements, that the system will be operated on an efficient and
continuous basis. Satisfactory evidence must also be provided that the
non-RUS financed system is financially sound and under capable
management. Examples of such evidence include financial reports, annual
reports, Security and Exchange Commission 10K reports if the system is
required to file them, credit reports from Standard and Poor's, Moodys
or other recognized sources, reports to state regulatory authorities and
the Federal Energy Regulatory Commission, and evidence of a successful
track record in related construction projects.
(e) Additional controls on the borrower's financial, investment and
managerial activities appear in the loan contract and mortgage required
by RUS.
[57 FR 1053, Jan. 9, 1992, as amended at 62 FR 7665, Feb. 20, 1997]
Sec. 1710.114 TIER, DSC, OTIER and ODSC requirements.
(a) General. Requirements for coverage ratios are set forth in the
borrower's mortgage, loan contract, or other contractual agreements with
RUS. The requirements set forth in this section apply to borrowers that
receive a loan approved by RUS on or after February 10, 1992. Nothing in
this section, however, shall reduce the coverage ratio requirements of a
borrower that has contractually agreed with RUS to a higher requirement.
(b) Coverage ratios. (1) Distribution borrowers. The minimum
coverage ratios required of distribution borrowers, whether applied on
an annual or average basis, are a TIER of 1.50, DSC of 1.25, OTIER of
1.1, and ODSC of 1.1. OTIER and ODSC shall apply to distribution
borrowers that receive a loan approved by RUS on or after January 29,
1996.
(2) The minimum coverage ratios required of power supply borrowers,
whether applied on an annual or average basis, are a TIER of 1.05 and
DSC of 1.00.
(3) When new loan contracts are executed, the Administrator may,
case by case, increase the coverage ratios of distribution and power
supply borrowers above the levels cited in paragraphs (b)(1) and (b)(2),
respectively, of
[[Page 103]]
this section if the Administrator determines that the higher ratios are
required to ensure reasonable security for and/or the repayment of loans
made or guaranteed by RUS. Also, the Administrator may, case by case,
reduce said coverage ratios if the Administrator determines that the
lower ratios are required to ensure reasonable security for and/or the
repayment of loans made or guaranteed by RUS. Policies for coverage
ratios following certain mergers, consolidations, and transfers of
systems substantially in their entirety are in 7 CFR 1717.155.
(4) If a distribution borrower has in service or under construction
a substantial amount of generation and associated transmission plant
financed at a cost of capital substantially higher than the cost of
funds under section 305 of the RE Act, then the Administrator may
establish, in his or her sole discretion, blended levels for TIER, DSC,
OTIER, and ODSC based on the respective shares of total utility plant
represented by said generation and associated transmission plant and by
distribution and other transmission plant.
(c) Requirements for loan feasibility. To be eligible for a loan,
borrowers must demonstrate to RUS that they will, on a pro forma basis,
earn the coverage ratios required by paragraph (b) of this section in
each of the years included in the borrower's long-range financial
forecast prepared in support of its loan application, as set forth in
subpart G of this part.
(d) Requirements for maintenance of coverage ratios--(1) Prospective
requirement. Borrowers must design and implement rates for utility
service to provide sufficient revenue (along with other revenue
available to the borrower in the case of TIER and DSC) to pay all fixed
and variable expenses, to provide and maintain reasonable working
capital and to maintain on an annual basis the coverage ratios required
by paragraph (b) of this section. Rates must be designed and implemented
to produce at least enough revenue to meet the requirements of this
paragraph under the assumption that average weather conditions in the
borrower's service territory will prevail in the future, including
average system damage and outages due to weather and the related costs.
Failure to design and implement rates pursuant to the requirements of
this paragraph shall be an event of default upon notice provided in
accordance with the terms of the borrower's mortgage or loan contract.
(2) Retrospective requirement. The average coverage ratios achieved
by a borrower in the 2 best years out of the 3 most recent calendar
years must meet the levels required by paragraph (b) of this section. If
a borrower fails to achieve these average levels, it must promptly
notify RUS in writing. Within 30 days of such notification or of the
borrower being notified in writing by RUS, whichever is earlier, the
borrower, in consultation with RUS, must provide a written plan
satisfactory to RUS setting forth the actions that will be taken to
achieve the required coverage ratios on a timely basis. Failure to
develop and implement a plan satisfactory to RUS shall be an event of
default upon notice provided in accordance with the terms of the
borrower's mortgage or loan contract.
(3) Fixed and variable expenses, as used in this section, include
but are not limited to: all taxes, depreciation, maintenance expenses,
and the cost of electric power and energy and other operating expenses
of the electric system, including all obligations under the wholesale
power contract, all lease payments when due, and all principal and
interest payments on outstanding indebtedness when due.
(e) Requirements for advance of funds. (1) If a borrower applying
for a loan has failed to achieve the coverage ratios required by
paragraph (b) of this section during the latest 12 month period
immediately preceding approval of the loan, or if any of the borrower's
average coverage ratios for the 2 best years out of the most recent 3
calendar years were below the levels required in paragraph (b) of this
section, RUS may withhold the advance of loan funds until the borrower
has adopted an annual financial plan and operating budget satisfactory
to RUS and taken such other action as RUS may require to demonstrate
that the required coverage ratios will be maintained in the future and
that the loan will be repaid with interest within the time agreed.
[[Page 104]]
Such other action may include, for example, increasing system operating
efficiency and reducing costs or adopting a rate design that will
achieve the required coverage ratios, and either placing such rates into
effect or taking action to obtain regulatory authority approval of such
rates. If failure to achieve the coverage ratios is due to unusual
events beyond the control of the borrower, such as unusual weather,
system outage due to a storm or regulatory delay in approving rate
increases, then the Administrator may waive the requirement that the
borrower take the remedial actions set forth in this paragraph, provided
that such waiver will not threaten loan feasibility.
(2) With respect to any outstanding loan approved by RUS on or after
February 10, 1992, if, based on actual or projected financial
performance of the borrower, RUS determines that the borrower may not
achieve its required coverage ratios in the current or future years, RUS
may withhold the advance of loan funds until the borrower has taken
remedial action satisfactory to RUS.
[60 FR 67404, Dec. 29, 1995, as amended at 61 FR 66871, Dec. 19, 1996]
Sec. 1710.115 Final maturity.
(a) RUS is authorized to make loans and loan guarantees with a final
maturity of up to 35 years. The borrower may elect a repayment period
for a loan not longer than the expected useful life of the facilities,
not to exceed 35 years. Most of the electric facilities financed by RUS
have a long useful life, often approximating 35 years. Some facilities,
such as load management equipment and Supervisory Control and Data
Acquisition equipment, have a much shorter useful life due, in part, to
obsolescence. Operating loans to finance working capital required for
the initial operation of a new system are a separate class of loans and
usually have a final maturity of less than 10 years.
(b) Loans made or guaranteed by RUS for facilities owned by the
borrower generally must be repaid with interest within a period, up to
35 years, that approximates the expected useful life of the facilities
financed. The expected useful life shall be based on the weighted
average of the useful lives that the borrower proposes for the
facilities financed by the loan, provided that the proposed useful lives
are deemed appropriate by RUS. RUS Form 740c, Cost Estimates and Loan
Budget for Electric Borrowers, submitted as part of the loan application
must include, as a note, either a statement certifying that at least 90
percent of the loan funds are for facilities that have a useful life of
33 years or longer, or a schedule showing the costs and useful life of
those facilities with a useful life of less than 33 years. The useful
lives proposed by the borrower for the facilities financed must be
consistent with the borrower's proposed depreciation rates for these
facilities. In states where the borrower must obtain state regulatory
authority approval of depreciation rates for rate making purposes, the
depreciation rates used for the purposes of this paragraph shall be the
rates currently approved by the state authority or rates for which the
borrower plans to seek state authority approval, provided that these
rates are deemed appropriate by RUS. In other states, if the rates
proposed by the borrower are not deemed appropriate by RUS, RUS will
base expected useful life on the depreciation rates listed in Bulletin
183-1, or its successor, revising such rates as necessary to reflect
current industry practice (for availability of bulletins, see
Sec. 1710.5.). Final maturities for loans for the implementation of
programs for demand side management and energy resource conservation and
on and off grid renewable energy sources not owned by the borrower will
be determined by RUS. Due to the uncertainty of predictions over an
extended period of time, RUS may add up to 2 years to the composite
average useful life of the facilities in order to determine final
maturity.
(c) [Reserved]
(d) The Administrator may approve a repayment period longer than the
expected useful life of the facilities financed, up to 35 years, if a
longer final maturity is required to ensure repayment of the loan and
loan security is adequate.
(e) The final maturity of a loan established pursuant to the
provisions of
[[Page 105]]
this section shall not be extended as a result of extending loan
payments under section 12(a) of the RE Act.
[58 FR 66265, Dec. 20, 1993, as amended at 60 FR 3731, Jan. 19, 1995]
Sec. 1710.116 [Reserved]
Sec. 1710.117 Environmental considerations.
Borrowers are required to comply with 7 CFR part 1794, which sets
forth applicable requirements of the National Environmental Policy Act
(NEPA), as amended (42 U.S.C. 4321 et seq.); the Council on
Environmental Quality Regulations for Implementing the Procedural
Provisions of NEPA (40 CFR parts 1500-1508); and certain other statutes,
regulations and orders. Borrowers must also comply with any other
applicable Federal or state environmental laws and regulations.
Sec. 1710.118 [Reserved]
Sec. 1710.119 Loan processing priorities.
(a) Generally loans are processed in chronological order based on
the date the complete application is received in the Regional office.
(b) The Administrator may give priority to processing loans that are
required to meet the following needs:
(1) To restore electric service following a major storm or other
catastrophe;
(2) To bring existing electric facilities into compliance with any
environmental requirements imposed by Federal or state law that were not
in effect at the time the facilities were originally constructed;
(3) To finance the capital needs of borrowers that are the result of
a merger, consolidation, or a transfer of a system substantially in its
entirety, provided that the merger, consolidation, or transfer has
either been approved by RUS or does not need RUS approval pursuant to
the borrower's loan documents (See 7 CFR 1717.154); or
(4) To correct serious safety problems, other than those resulting
from borrower mismanagement or negligence.
(c) The Administrator may also change the normal order of processing
loan applications when it is necessary to ensure that all loan authority
for the fiscal year is utilized.
[57 FR 1053, Jan. 9, 1992, as amended at 61 FR 66871, Dec. 19, 1996]
Sec. 1710.120 Construction standards and contracting.
Borrowers shall follow all RUS requirements regarding construction
work plans, construction standards, approved materials, construction and
related contracts, inspection procedures, and bidding procedures.
Sec. 1710.121 Insurance requirements.
Borrowers are required to comply with certain requirements with
respect to insurance and fidelity coverage as set forth in 7 CFR part
1788.
Sec. 1710.122 Equal opportunity and nondiscrimination.
Borrowers are required to comply with certain regulations on
nondiscrimination in program services and benefits and on equal
employment opportunity as set forth in RUS Bulletins 20-15 and 20-19 or
their successors; 7 CFR parts 15 and 15b; and 45 CFR part 90.
Sec. 1710.123 Debarment and suspension.
Borrowers are required to comply with certain requirements on
debarment and suspension as set forth in 7 CFR part 3017.
Sec. 1710.124 Uniform Relocation Act.
Borrowers are required to comply with applicable provisions of 49
CFR part 24, which sets forth the requirements of the Uniform Relocation
Assistance and Real Property Acquisition Policy Act of 1970 (Pub. L. 91-
646; 84 Stat. 1894), as amended by the Uniform Relocation Act Amendments
of 1987 (Pub. L. 100-17; 101 Stat. 246-256) and the Intermodal Surface
Transportation Efficiency Act of 1991.
Sec. 1710.125 Restrictions on lobbying.
Borrowers are required to comply with certain requirements with
respect to restrictions on lobbying activities. See 7 CFR part 3018.
[[Page 106]]
Sec. 1710.126 Federal debt delinquency.
(a) Prior to approval of a loan or advance of funds, a borrower must
report to RUS whether or not it is delinquent on any Federal debt, such
as Federal income tax obligations or a loan or loan guarantee from
another Federal agency. If delinquent, the reasons for the delinquency
must be explained, and RUS will take such explanation into consideration
in deciding whether to approve the loan or advance of funds.
(b) Applicants for a loan or loan guarantee must also certify that
they have been informed of the collection options the Federal government
may use to collect delinquent debt.
Sec. 1710.127 Drug free workplace.
Borrowers are required to comply with the Drug Free Workplace Act of
1988 (Pub. L. 100-690, title V, subtitle D) and the Act's implementing
regulations (7 CFR part 3017) when a borrower receives a Federal grant
or enters into a procurement contract awarded pursuant to the provisions
of the Federal Acquisition Regulation (title 48 CFR) to sell to a
Federal agency property or services having a value of $25,000 or more.
Secs. 1710.128--1710.149 [Reserved]
Subpart D--Basic Requirements for Loan Approval
Sec. 1710.150 General.
The RE Act and prudent lending practice require that the
Administrator make certain findings before approving an electric loan or
loan guarantee. The borrower shall provide the evidence determined by
the Administrator to be necessary to make these findings.
Sec. 1710.151 Required findings for all loans.
(a) Area coverage. Adequate electric service will be made available
to the widest practical number of rural users in the borrower's service
area during the life of the loan. See Sec. 1710.103.
(b) Feasibility. The loan is feasible and it will be repaid on time
according to the terms of the mortgage, note, and loan contract. At any
time after the original determination of feasibility, the Administrator
may require the borrower to demonstrate that the loan remains feasible
if there have been, or are anticipated to be, material changes in the
borrower's costs, loads, rates, rate disparity, revenues, or other
relevant factors from the time that feasibility was originally
determined. See Sec. 1710.112 and subpart G of this part.
(c) Security. RUS will have a first lien on the borrower's total
system or other adequate security, and adequate financial and managerial
controls will be included in loan documents. See Sec. 1710.113.
(d) Interim financing. For loans that include funds to replace
interim financing, there is satisfactory evidence that the interim
financing was used for purposes approved by RUS and that the loan meets
all applicable requirements of this part.
(e) Facilities for nonrural areas. Whenever a borrower proposes to
use loan funds for the improvement, expansion, construction, or
acquisition of electric facilities for non-RE Act beneficiaries, there
is satisfactory evidence that such funds are necessary and incidental to
furnishing or improving electric service for RE Act beneficiaries. See
Sec. 1710.104.
(f) Facilities to be included in rate base. In states having
jurisdiction, the borrower has provided satisfactory evidence based on
the information available, such as an opinion of counsel, that the state
regulatory authority will not exclude from the borrower's rate base any
of the facilities included in the loan request, or otherwise prevent the
borrower from charging rates sufficient to repay with interest the debt
incurred for the facilities. Such evidence may be based on, but not
necessarily limited to, the provisions of applicable state laws; the
rules and policies of the state authority; precedents in other similar
cases; statements made by the state authority; any assurances given to
the borrower by the state authority; and other relevant information and
experience.
Sec. 1710.152 Primary support documents.
The following primary support documents and studies must be prepared
by
[[Page 107]]
the borrower for approval by RUS in order to support a loan application:
(a) Power requirements study (PRS). This study provides the borrower
and RUS with an understanding of the borrower's system loads, the
factors influencing those loads, and valid estimates of future loads. It
provides a basis for projecting annual kWh sales and revenues, and for
engineering estimates of plant additions required to accommodate the
forecasted loads. The requirements for a PRS and the circumstances under
which one must be submitted to RUS are set forth in subpart E of this
part.
(b) Construction work plan (CWP). The CWP shall specify and document
the capital investments required to serve a borrower's planned new
loads, improve service reliability and quality, and service the changing
needs of existing loads. The requirements for a CWP are set forth in
subpart F of this part.
(c) Long-range financial forecasts. RUS encourages borrowers to
maintain on a current basis a long-range financial forecast, which
should be used by a borrower's board of directors and manager to guide
the system toward its financial goals. The forecast submitted in support
of a loan application shall show the projected results of future actions
planned by the board of directors. The requirements for a long-range
financial forecast are set forth in subpart G of this part.
(d) Borrower's environmental report (BER). This document is used to
determine what effect the construction of the facilities included in the
construction work plan will have on the environment. In developing a BER
a borrower shall follow the policy and procedural requirements set forth
in 7 CFR part 1794. After reviewing the BER, RUS will determine whether
additional environmental studies will be required.
Sec. 1710.153 Additional requirements and procedures.
Additional requirements and procedures for obtaining RUS financial
assistance are set forth in 7 CFR part 1712 for loan guarantees, and in
7 CFR part 1714 for insured loans.
Secs. 1710.154--1710.199 [Reserved]
Subpart E--Power Requirements Studies
Sec. 1710.200 Purpose.
This subpart sets forth the policies, procedures and criteria for
the preparation, approval and use of power requirements studies (PRSs)
and PRS work plans. A PRS is a thorough study of a borrower's electric
loads and the factors that affect those loads in order to determine, as
accurately as practicable, the borrower's future requirements for energy
and capacity. The PRS of a power supply borrower includes and integrates
the PRSs of its member systems.
Sec. 1710.201 Requirement to prepare a PRS--power supply borrowers.
(a) A power supply borrower having total assets of $300 million or
more shall:
(1) Meet one of the following two requirements:
(i) Prepare and obtain RUS approval of a new PRS not less frequently
than every 3 years, which shall include new or revised equations and
models, and annually update the PRS in the intervening years based on
new data and assumptions, but not necessarily new or revised equations
and models, and file the annual updates with RUS; or
(ii) Prepare and obtain RUS approval of a new PRS not less
frequently than every 2 years, which shall include new or revised
equations and models;
(2) Maintain a current PRS work plan approved by RUS which shall set
forth the resources, methods, schedules and milestones required for the
preparation and maintenance of the PRS; and
(3) Provide a current PRS approved by RUS in support of any request
for RUS financial assistance or for RUS approval of long-term power
contracts or other actions as appropriate.
(b) A power supply borrower with total assets of less than $300
million is not required to have a current, RUS-approved PRS on an
ongoing basis but is required to provide a current, RUS-approved PRS in
support of:
[[Page 108]]
(1) An application for an RUS loan or loan guarantee if said loan or
guarantee exceeds $25 million or 10 percent of the borrower's total
utility plant, whichever is smaller; and
(2) Requests for RUS approval of long-term power contracts or other
actions, as may be required by RUS on a case by case basis.
(c) A power supply borrower that is a member of another power supply
borrower that has total assets of $300 million or more is subject to the
requirements of Sec. 1710.201(a), except that such member is not
required to have a separate PRS work plan. The distribution members of
such a power supply borrower are also subject to the requirements of
Sec. 1710.201(a), except that such members are not required to have
separate PRS work plans.
(d) At the borrower's request, RUS may extend for up to 3 months the
time frames set forth in Sec. 1710.201(a)(1) if RUS determines the
borrower is in substantial compliance with its RUS-approved work plan
and significant changes in existing PRS models and assumptions are not
required.
(e) For purposes of paragraphs (a)(3) and (b) of this section, the
determination of whether a borrower's PRS is current will be made by RUS
at the time financial assistance or other RUS action is requested. The
borrower may be required to update the PRS to incorporate the most
recently available operating data and other information.
Sec. 1710.202 Requirement to prepare a PRS--distribution borrowers.
(a) If a distribution borrower is a member of a power supply
borrower that has total assets of $300 million or more, it must meet the
requirements of Sec. 1710.201(a), except for the requirement to prepare
a work plan, which is the responsibility of the power supply borrower.
Certain other distribution borrowers, as set forth in Sec. 1710.201(c),
are also subject to provisions of Sec. 1710.201(a).
(b) All other distribution borrowers, including unaffiliated
distribution systems as well as members of power supply borrowers with
total assets of less than $300 million, must either:
(1) Meet the requirements of Sec. 1710.201(a), if the distribution
borrower owns generation and bulk transmission plant valued at $300
million or more, or
(2) Meet the requirements of Sec. 1710.201(b), except that the loan
threshold set forth in paragraph (b)(1) in the case of these
distribution borrowers shall be $3 million and 10 percent of total
utility plant.
Sec. 1710.203 Basic policies and requirements for a PRS.
(a) A PRS or PRS update must be completed and submitted to RUS on a
timely basis to enable prompt review by RUS.
(b) A PRS completed more than 12 months prior to submission will not
be considered by RUS.
(c) Adequate coordination is required between power supply borrowers
and their members in the preparation of their respective PRSs or PRS
updates.
(d) To facilitate RUS review of the PRS work plan and the PRS, the
borrower shall make available to RUS appropriate staff for consultation,
and all essential documentation, data, and other relevant information,
in formats acceptable to RUS, that support the PRS work plan and the
PRS.
(e) Notwithstanding any other provisions of this subpart, any power
supply or distribution borrower may be required to prepare a new or
updated PRS, or to maintain a current PRS on an ongoing basis, if
required for RUS to determine loan feasibility, to ensure loan security,
or to consider requests submitted for approval under a borrower's loan
contract or mortgage.
(f) All PRSs shall include the following information, using a format
approved by RUS, unless such information has already been provided to
RUS in the PRS work plan or other submissions:
(1) A discussion of the scope of the PRS, including the proposed
uses of the information developed for planning load management and
energy efficiency programs, plant investments, and financial
requirements;
(2) A discussion of the borrower personnel, consultants, data, and
other resources used in the preparation of the PRS;
[[Page 109]]
(3) A discussion of the procedures used to collect, validate,
process, and update the data used in the study;
(4) Documentation of the analysis and modeling of the borrower's
electric system loads and other pertinent information used in the PRS.
All relevant data, primary sensitivity analyses and other substantive
procedures used to test significant assumptions and to generate the load
estimates and related factors must be included in the PRS or otherwise
made available to RUS, and clearly identified, sourced and dated;
(5) An analysis of the borrower's past, existing, and future
electric system loads of RE Act beneficiaries and others, including
explanation and documentation of all substantive assumptions, primary
sensitivity analyses and other substantive considerations used to
prepare the estimates. Areas of analysis shall normally include, but are
not limited to: developing land use patterns; potential losses of load
due to annexation or other causes; prospective residential and
commercial development; probable rate levels; the effects of rates and
competition from neighboring utilities on loads; existing and
anticipated patterns of energy usage and appliance saturation; and
availability of alternative energy sources. Load management,
conservation, and power marketing considerations must also be included;
(6) A discussion and analysis of alternative scenarios, which shall
be required for all PRSs submitted to RUS for approval after January 1,
1993. Normally, unless waived by RUS under Sec. 1710.206, the borrower
shall provide a discussion and analysis of the following five scenarios:
(i) Most-probable economic assumptions, with normal weather;
(ii) Most-probable economic assumptions, with severe weather causing
higher loads;
(iii) Most-probable economic assumptions, with mild weather causing
lower loads;
(iv) Normal weather with more pessimistic macroeconomic assumptions
causing lower loads; and
(v) Normal weather with more optimistic macroeconomic assumptions
causing higher loads;
(7) Completed RUS Forms 341 and 345 and 10 years data from RUS Form
7 part R. Computer-generated facsimiles may be used if acceptable in
form to RUS. Graphs, tables, spreadsheets or other exhibits shall be
included as appropriate;
(8) A discussion and documentation of the coordination activities
between a power supply borrower and its RUS-borrower members, as
applicable, and between the borrower and RUS. If a power supply borrower
and any member disagree on an issue or estimate, RUS will provide
assistance, if requested, in attempting to resolve the disagreement;
(9) The borrower's general manager's recommendation to the board of
directors on adoption of the PRS; and
(10) Approval of the PRS by the borrower's board of directors.
(g) A PRS and its essential supporting data and analysis shall be
retained in the borrower's records until the next new PRS is approved by
RUS.
(h) Completed PRSs submitted to RUS for approval prior to the
effective date of this part, as well as PRSs prepared under work plans
approved by RUS prior to the effective date of this part, may meet the
requirements of paragraph (f) of this section or corresponding
requirements of RUS Bulletin 120-1, at the option of the borrower. All
other PRSs must meet the requirements of paragraph (f) of this section.
Sec. 1710.204 PRS work plan requirements.
(a) All borrowers required to prepare and maintain a PRS on an
ongoing basis are required to prepare and obtain RUS approval of a PRS
work plan, except for those borrowers that are members of a power supply
borrower that is required to prepare a PRS work plan. The PRS work plan
shall establish the resources, methods, schedules, and milestones to be
used in the preparation and maintenance of the PRS.
(b) A power supply borrower's work plan shall include the member
inputs and coordination mechanisms required for the preparation of its
PRS as well as the PRSs of the system's members. Member concurrences in
the work plan
[[Page 110]]
are required before the plan is submitted to RUS for approval. The
member systems, as well as the power supply borrower, are required to
follow the work plan in preparing their respective PRS.
(c) A PRS work plan must be approved by the borrower's board of
directors.
(d) A borrower may amend its work plan subject to RUS approval. A
new or revised work plan may be required by RUS if RUS concludes the
existing plan will not result in a satisfactory PRS on a timely basis.
(e) In addition, a PRS work plan shall:
(1) Identify the borrower and, as applicable, member personnel that
will serve as project leaders or liaisons with the authority to make
decisions and commit resources within the scope of the work plan;
(2) Provide for residential consumer surveys at least every 3 years
to obtain data on appliance and equipment saturation and electricity
demand, when residential demand is 50 percent or more of total kWh
sales. In the case of a power supply borrower, such surveys shall be
coordinated with the borrower's members. They may be based on the
aggregation of member-based samples or on a system-wide sample, provided
that the latter provides for relevant regional breakdowns as
appropriate;
(3) Provide for all other data collection and verification,
analyses, modeling, and documentation required in Sec. 1710.203; and
(4) Provide for an ongoing RUS review of the PRS.
(f) Generally, a work plan shall cover a period of 1 to 3 years.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992]
Sec. 1710.205 Basic criteria for RUS approval of a PRS.
RUS will use the following basic criteria in deciding whether to
approve a PRS:
(a) The borrower objectively analyzed all relevant factors that
influence the consumption of electricity and the requirements for
generation and transmission capacity;
(b) The borrower accurately analyzed power requirements stemming
from RE Act beneficiaries and non-RE Act beneficiaries;
(c) The borrower developed adequate supporting data, used valid
assumptions, analyzed a reasonable range of relevant alternative
assumptions and scenarios, and used valid and verifiable analytical
techniques and models;
(d) The borrower provided RUS with adequate documentation and
assistance to allow for a thorough and independent review;
(e) In the case of a power supply borrower, the preparation of the
work plan and PRS was adequately coordinated with its members; and
(f) The PRS was recommended for approval by the borrower's general
manager and has been approved by the borrower's board of directors.
Sec. 1710.206 Waiver of borrower requirements.
For good cause shown by the borrower, the Administrator may waive
any of the requirements applicable to borrowers in this subpart if the
Administrator determines that waiving the requirement will not
significantly affect accomplishment of the objectives of this subpart
and if the requirement imposes a substantial burden on the borrower. The
waiver must be requested in writing by the borrower's general manager.
(Approved by the Office of Management and Budget under control number
0572-0032)
Secs. 1710.207--1710.249 [Reserved]
Subpart F--Construction Work Plans and Related Studies
Sec. 1710.250 General.
(a) An ongoing, integrated planning system is needed by borrowers to
determine their short-term and long-term needs for plant additions,
improvements, replacements, and retirements. The primary components of
the system consist of long-range engineering plans, construction work
plans (CWPs), CWP amendments, and special engineering and cost studies.
Long range engineering plans identify plant investments required over a
period of 10
[[Page 111]]
years or more. CWPs specify and document plant requirements for the
short-term, usually 2 to 3 years, and special engineering and cost
studies are used to support CWPs and to identify and document
requirements for specific items or purposes, such as load management
equipment, System Control and Data Acquisition equipment, sectionalizing
investments, and additions of generation capacity and associated
transmission plant.
(b) Generally, all borrowers are required to maintain up-to-date
long range engineering plans approved by their boards of directors.
Current CWPs approved by the borrower's board must also be developed and
maintained for distribution and transmission facilities and for
improvements and replacements of generation facilities. All such
distribution, transmission or generation facilities must be included in
the respective CWPs regardless of the source of financing.
(c) A long range engineering plan specifies and supports the major
system additions, improvements, replacements, and retirements needed for
an orderly transition from the existing system to the system required 10
or more years in the future. The planned future system should be based
on the most technically and economically sound means of serving the
borrower's long-range loads in a reliable and environmentally acceptable
manner, and it should ensure that planned facilities will not become
obsolete prematurely.
(d) A CWP shall include investment cost estimates and supporting
engineering and cost studies to demonstrate the need for each proposed
facility or activity and the reasonableness of the investment
projections and the engineering assumptions used in sizing the
facilities. The CWP must be consistent with the borrower's long range
engineering plan and both documents must be consistent with the
borrower's RUS-approved power requirements study.
(e) Applications for a loan or loan guarantee from RUS (new loans or
budget reclassifications) must be supported by a current CWP approved by
both the borrower's board of directors and RUS. RUS approval of these
plans relates only to the facilities, equipment, and other purposes to
be financed by RUS, and means that the plans provide an adequate basis
from a planning and engineering standpoint to support RUS financing. RUS
approval of the plans does not mean that RUS approves of the facilities,
equipment, or other purposes for which the borrower is not seeking RUS
financing. If RUS disagrees with a borrower's estimate of the cost of
one or more facilities for which RUS financing is sought, RUS may adjust
the estimate after consulting with the borrower and explaining the
reasons for the adjustment.
(f) Except as provided in paragraph (g) of this section, to be
eligible for RUS financing, the facilities, including equipment and
other items, included in a CWP must be approved by RUS before the start
of construction. This requirement also applies to any amendments to a
CWP required to add facilities to a CWP or to make significant physical
changes in the facilities already included in a CWP.
(g) In the case of damage caused by storms and other natural
catastrophes, a borrower may proceed with emergency repair work before a
CWP or CWP amendment is prepared by the borrower and approved by RUS,
without loosing eligibility for RUS financing of the repairs. The
borrower must notify the RUS regional office in writing, not later than
45 days after the natural catastrophe, of its preliminary estimates of
damages and repair costs. Not later than 120 days after the natural
catastrophe, the borrower must submit to RUS for approval, a CWP or CWP
amendment detailing the repairs.
(h) A CWP may be amended or augmented when the borrower can
demonstrate the need for the changes.
(i) A borrower's CWP or special engineering studies must be
supported by a Borrower's Environmental Report, and when necessary by an
Environmental Analysis or Environmental Impact Statement, as set forth
in 7 CFR 1794 or required by other Federal or state regulations or laws.
(j) All engineering activities required by this subpart must be
performed by qualified engineers, who may be staff employees of the
borrower or outside consultants.
[[Page 112]]
(k) Upon written request from a borrower, RUS may waive in writing
certain requirements with respect to long-range engineering plans and
CWPs if RUS determines that such requirements impose a substantial
burden on the borrower and that waiving the requirements will not
significantly affect the accomplishment of the objectives of this
subpart. For example, if a borrower's load is forecast to remain
constant or decline during the planning period, RUS may waive those
portions of the plans that relate to load growth.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR
67405, Dec. 29, 1995]
Sec. 1710.251 Construction work plans--distribution borrowers.
(a) All distribution borrowers must maintain a current CWP approved
by their board of directors covering all new construction, improvements,
replacements, and retirements of distribution and transmission plant,
and improvements replacements, and retirements of any generation plant.
Construction of new generation capacity need not be included in a CWP
but must be specified and supported by specific engineering and cost
studies. (See Sec. 1710.253.)
(b) A distribution borrower's CWP shall cover a construction period
of between 2 and 4 years, and include all facilities to be constructed
which are eligible for RUS financing, whether or not RUS financial
assistance will be sought or be available for certain facilities. Any
RUS financing provided for the facilities will be limited to a 4 year
loan period. The construction period covered by a CWP in support of a
loan application shall not be shorter than the loan period requested for
financing of the facilities.
(c) The facilities, equipment and other items included in a
distribution borrower's CWP may include:
(1) Line extensions required to connect consumers, improve service
reliability or improve voltage conditions;
(2) Distribution tie lines to improve reliability of service and
voltage regulation;
(3) Line conversions and changes required to improve existing
services or provide additional capacity for new consumers;
(4) New substation facilities or additions to existing substations;
(5) Transmission and substation facilities required to support the
distribution system;
(6) Distribution equipment required to serve new consumers or to
provide adequate and dependable service to existing consumers, including
replacement of existing plant facilities;
(7) Residential security lights;
(8) Communications equipment and meters;
(9) Headquarters facilities;
(10) Improvements, replacements, and retirements of generation
facilities;
(11) Load management equipment, automatic sectionalizing facilities,
and centralized System Control and Data Acquisition equipment. Load
management equipment eligible for financing, including the related costs
of installation, is limited to capital equipment designed to influence
the time and manner of consumer use of electricity, which includes peak
clipping and load shifting. To be eligible for financing, such equipment
must be owned by the borrower, although it may be located inside or
outside a consumer's premises; and
(12) The cost of engineering, architectural, environmental and other
studies and plans needed to support the construction of facilities, when
such cost is capitalized as part of the cost of the facilities.
[57 FR 1053, Jan. 9, 1992; 57 FR 4513, Feb. 5, 1992, as amended at 60 FR
3731, Jan. 19, 1995; 60 FR 67405, Dec. 29, 1995]
Sec. 1710.252 Construction work plans--power supply borrowers.
(a) All power supply borrowers must maintain a current CWP approved
by the borrower's board of directors covering all new construction,
improvements, replacements, and retirements of distribution and
transmission plant, and improvements, replacements, and retirements of
generation plant. Applications for RUS financial assistance for such
facilities must be supported by a current, RUS-approved CWP.
Construction of new generation capacity need not be included in a CWP
but must be specified and supported by specific engineering and cost
studies.
[[Page 113]]
(b) Normally a power supply borrower's CWP shall cover a period of 3
to 4 years. While comprehensive CWP's are desired, if there are
extenuating circumstances RUS may accept a single-purpose transmission
or generation CWP in support of a loan application or budget
reclassification. The construction period covered by a CWP in support of
a loan application shall not be shorter than the loan period requested
for financing of the facilities.
(c) Facilities, equipment, and other items included in a power
supply borrower's CWP may include:
(1) Distribution and related facilities as set forth in
Sec. 1710.251(c);
(2) Transmission facilities required to deliver the power needed to
serve the existing and planned new loads of the borrower and its
members, and to improve service reliability, including tie lines for
improved reliability of service, line conversions, improvements and
replacements, new substations and substation improvements and
replacements, and Systems Control and Data Acquisition equipment,
including communications, dispatching and sectionalizing equipment, and
load management equipment;
(3) The borrower's proportionate share of transmission facilities
required to tie together the operating systems of supporting power pools
and to connect with adjacent power suppliers;
(4) Improvements and replacements of generation facilities; and
(5) The cost of engineering, architectural, environmental and other
studies and plans needed to support the construction of facilities, when
such cost is capitalized as part of the cost of the facilities.
(d) A CWP for transmission facilities shall normally include studies
of load flows, voltage regulation, and stability characteristics to
demonstrate system performance and needs.
[57 FR 1053, Jan. 9, 1992, as amended at 60 FR 3731, Jan. 19, 1995; 60
FR 67405, Dec. 29, 1995]
Sec. 1710.253 Engineering and cost studies--addition of generation capacity.
(a) The construction or purchase of additional generation capacity
and associated transmission facilities by a power supply or distribution
borrower, including the replacement of existing capacity, shall be
supported by comprehensive project-specific engineering and cost studies
as specified by RUS. The studies shall cover a period from the beginning
of the project to at least 10 years after the start of commercial
operation of the facilities.
(b) The studies must include comprehensive economic present-value
analyses of the costs and revenues of the available self-generation,
load management, energy conservation, and purchased-power options,
including assessments of service reliability and financing requirements
and risks. Requirements for analyzing purchased-power options are set
forth in Sec. 1710.254.
(c) Generally, studies of self-generation, load management, and
energy conservation options shall include, as appropriate, analyses of:
(1) Capital and operating costs;
(2) Financing requirements and risks;
(3) System reliability;
(4) Alternative unit sizes;
(5) Alternative types of generation;
(6) Fuel alternatives;
(7) System stability;
(8) Load flows; and
(9) System dispatching.
(d) At the request of a borrower, RUS, in its sole discretion, may
waive specific requirements of this section if such requirements imposed
a substantial burden on the borrower and if such waiver will not
significantly affect the accomplishment of the objectives of this
subpart.
Sec. 1710.254 Alternative sources of power.
(a) General. (1) RUS will make loans to finance the construction of
generation facilities by distribution or power supply borrowers and
transmission facilities by power supply borrowers only under the
following conditions if said borrowers do not already own and operate
such types of facilities:
(i) Where no adequate and dependable source of power is available to
meet the consumers' needs; or
(ii) Where the rates offered by other power sources would result in
a higher cost of power to the consumers than the cost from facilities
financed by RUS, and the amount of the power cost
[[Page 114]]
savings that would result from the RUS-financed facilities bears a
significant relationship to the amount of the proposed loan.
(2) If a borrower already owns and operates the types of facilities
included in a loan request, then a loan for the purposes set forth in
paragraph (a)(1) of this section, as well as for the construction of
transmission facilities by a distribution borrower, will be considered
and evaluated by RUS in terms of whether the proposed facilities
constitute the most effective and economical means of meeting the power
requirements of the consumers.
(b) Loan requests for addition of generation capacity, including
replacement of existing capacity, will be accepted by RUS only when the
applicant has satisfactorily completed the investigations of possible
alternative sources of power as set forth in this section. The
investigations must be coordinated in advance with RUS. The capacity in
question may be owned solely by the borrower or owned on an undivided
ownership basis with other utilities.
(c) The applicant is required to search out and attempt to utilize
capacity available from RUS borrowers and other organizations before
developing plans for additional generation capacity. The applicant
shall:
(1) Solicit power and energy purchase proposals from all reasonable
potential sources of power, such as other electric cooperatives,
investor-owned utilities, municipal utility organizations, and Federal
and state power authorities.
(2) Except as herein exempted, solicit proposals from independent
power producers, including co-generators, to determine the terms and
conditions under which these producers can supply the additional power
and energy needs of the applicant, without RUS financial assistance.
Such solicitations shall be placed in at least three national newspapers
or trade publications, and they shall meet all planning, coordination or
other requirements imposed by state authorities, as well as RUS's
environmental requirements. The following projects are exempted from
this requirement to solicit proposals:
(i) Additions to or replacements of generation capacity of less than
10 megawatts.
(ii) Modifications of existing generation units if any resulting
increase in generation capacity does not exceed 10 percent of the
capacity of the existing unit.
(d) The applicant will evaluate all alternative proposals on an
economic, present-value basis, giving consideration to cost-
effectiveness, reliability of service, the short- and long-term
financial viability of the supplier, and the financial risk to the
borrower and its creditors. The applicant will keep RUS fully informed
on these evaluations and provide supporting information and analysis as
requested by RUS.
(e) After evaluation of all proposals and having informed RUS of the
results, the applicant will be expected to negotiate final proposals
with the entities submitting the best acceptable offers, if any, keeping
RUS fully informed. All contracts entered into shall either be approved
in advance by the Administrator or contain language to the effect that
the contract is not valid until approved in writing by the
Administrator. The Administrator will approve such contracts in a timely
manner provided that the borrower has met all applicable requirements,
including RUS's environmental requirements, and provided adequate
evidence that the alternative selected is the most economical and
effective alternative.
(f) RUS may make independent inquiries with potential power
suppliers as to the availability of power to meet borrowers' needs.
Information developed by RUS will be shared with borrowers at their
request.
(g) Further details of RUS requirements for financing of generation
and bulk transmission facilities are set forth in 7 CFR part 1712.
(h) At the request of a borrower, RUS, in its sole discretion, may
waive specific requirements of paragraphs (b) through (e) of this
section if such waiver is required to prevent unreasonable delays in
obtaining generation capacity that could result in system reliability
problems.
(Approved by the Office of Management and Budget under control number
0572-0032)
[[Page 115]]
Secs. 1710.255--1710.299 [Reserved]
Subpart G--Long-Range Financial Forecasts
Sec. 1710.300 General.
(a) RUS encourages borrowers to maintain a current long-range
financial forecast. The forecast should be used by the board of
directors and the manager to guide the system towards its financial
goals.
(b) A borrower must prepare, for RUS review and approval, a long-
range financial forecast, approved by its board of directors, in support
of its loan application. The forecast must demonstrate that the
borrower's system is economically viable and that the proposed loan is
financially feasible. Loan feasibility will be assessed based on the
criteria set forth in Sec. 1710.112.
(c) The financial forecast and related projections submitted in
support of a loan application shall include:
(1) The projected results of future actions planned by the
borrower's board of directors;
(2) The financial goals established for margins, TIER, DSC, equity,
and levels of general funds to be invested in plant;
(3) A pro forma balance sheet, statement of operations, and general
funds summary projected for each year during the forecast period;
(4) A full explanation of the assumptions, supporting data, and
analysis used in the forecast, including the methodology used to project
loads, rates, revenue, power costs, operating expenses, plant additions,
and other factors having a material effect on the balance sheet and on
financial ratios such as equity, TIER, and DSC;
(5) Current and projected cash flows;
(6) Projections of future borrowings and the associated interest and
principal expenses required to meet the projected investment
requirements of the system;
(7) Current and projected kW and kWh energy sales;
(8) Current and projected unit prices of significant variables such
as retail and wholesale power prices, average labor costs, and interest;
(9) Current and projected system operating costs, including, but not
limited to, wholesale power costs, depreciation expenses, labor costs,
and debt service costs;
(10) Current and projected revenues from sales of electric power and
energy;
(11) Current and projected non-operating income and expense;
(12) A discussion of the historical experience of the borrower, and
in the case of a power supply borrower its member systems as
appropriate, with respect to the borrower's market competitiveness as it
relates to the rates charged for electricity, competition from other
fuels, and other factors. Additional data and analysis may be required
by RUS on a case by case basis to assess the probable future
competitiveness of those borrowers that have a history of serious
competitive problems; and
(13) An analysis of the effects of major factors, such as projected
increases in rates charged for electricity, on the ability of the
borrower, and in the case of a power supply borrower its member systems,
to compete with neighboring utilities and other energy sources.
(d) The following plans, studies and assumptions shall be used in
developing the financial forecast:
(1) The RUS-approved CWP;
(2) RUS-approved power requirements data;
(3) The current rate schedules or new rates already approved by the
board of directors;
(4) Future plant additions and operating expenses projected at
anticipated future cost levels rather than in constant dollars, with the
annual rate of inflation for major items specified; and
(5) A sensitivity analysis may be required by RUS on a case-by-case
basis taking into account such factors as the number and type of large
power loads, projections of future borrowings and the associated
interest, projected loads, projected revenues, and the probable future
competitiveness of the borrower. When RUS determines that a sensitivity
analysis is necessary for distribution borrowers, the variables to be
tested will be determined by the General Field Representative in
consultation with the borrower and the regional office. The regional
office will
[[Page 116]]
consult with the Power Supply Division in the case of generation
projects for distribution borrowers. For power supply borrowers, the
variables to be tested will be determined by the borrower and the Power
Supply Division.
(e) The financial forecast shall use the accrual method, as approved
by RUS, for analyzing costs and revenues, and, as applicable, compare
the economic results of the various alternatives on a present value
basis.
[57 FR 1053, Jan. 9, 1992, as amended at 63 FR 53277, Oct. 5, 1998]
Sec. 1710.301 Financial forecasts--distribution borrowers.
(a) Financial forecasts prepared by distribution borrowers shall
cover at least a ten-year period, unless a shorter period is authorized
by other RUS regulations.
(b) In addition to the requirements set forth in Sec. 1710.300 of
this part, financial forecasts prepared by distribution borrowers in
support of a loan application shall:
(1) Include expenditures for any maintenance determined to be needed
in the current system's operation and maintenance review and evaluation
in order to comply with mortgage covenants and prudent utility practice;
(2) Fully explain the basis for the power cost projections used.
Generally, the power supplier's most recent forecasted rates shall be
used; and
(3) Use RUS Form 325 or computer-generated equivalent reports.
Sec. 1710.302 Financial forecasts--power supply borrowers.
(a) The requirements of this section apply only to financial
forecasts submitted by power supply borrowers in support of a loan from
RUS. The financial forecast prepared by power supply borrowers shall
demonstrate the effects that the addition of generation, transmission
and any distribution facilities will have on the power supply borrower's
sales, costs, and revenues, and on the cost of power to the member
distribution systems.
(b) The financial forecast shall cover a period of 10 years. RUS may
request projections for a longer period of time if RUS deems necessary.
(c) Financial forecasts prepared in support of loan applications to
finance additional generation capacity shall include a power cost study
as set forth in Sec. 1710.303.
(d) In addition to the requirements set forth in Sec. 1710.300,
financial forecasts prepared by power supply borrowers shall:
(1) Identify all plans for generation and transmission capital
additions and system operating expenses on a year-by-year basis,
beginning with the present and running for 10 years, unless a longer
period of time has been requested by RUS.
(2) Integrate projections of operation and maintenance expenses
associated with existing plant with those of new proposed facilities to
determine total costs of system operation as well as the costs of new
generation and generation-related facilities;
(3) Provide an in-depth analysis of the regional markets for power
if loan feasibility depends to any degree on a borrower's ability to
sell surplus power while its system loads grow to meet the planned
capacity of a proposed plant;
(4) If not previously submitted, furnish RUS with all material
information on operating agreements, ownership agreements, fuel
contracts and any other special agreements that affect annual cost
projections, as may be required by RUS on a case by case basis; and
(5) Include sensitivity analysis if required by RUS pursuant to
Sec. 1710.300(d)(5).
(e) The projections shall be coordinated in advance with RUS so that
agreement can be reached on major aspects of the economic studies. These
include, but are not limited to, projections of future kW and kWh
requirements, RE Act beneficiary loads, electricity prices, revenues
from system and off-system power sales, the cost of prospective plant
additions, interest and depreciation rates, fuel costs, cost escalation
factors, the discount rate, and other factors.
(f) The projections, analysis, and supporting information must be
included in a report that will provide RUS with the information needed
to:
[[Page 117]]
(1) Understand and compare various power supply plans;
(2) Determine that the facilities to be financed will perform
satisfactorily; and
(3) Determine that the overall system is economically viable and the
loan is financially feasible and secure.
[57 FR 1053, Jan. 9, 1992, as amended at 63 FR 53278, Oct. 5, 1998]
Sec. 1710.303 Power cost studies--power supply borrowers.
(a) All applications for financing of additional generation capacity
and the associated bulk transmission facilities shall be supported by a
power cost study to demonstrate that the proposed generation and
associated transmission facilities are the most economical and effective
means of meeting the borrower's power requirements. This study usually
is a separate study but it may be integrated with the financial forecast
required by Sec. 1710.302.
(b) A power cost study shall include the following basic elements:
(1) A study of all reasonably available self-generation, purchased-
power, load management, and energy conservation alternatives as set
forth in Secs. 1710.253 and 1710.254;
(2) A present-value analysis of the costs of the alternatives and
their effects on total power costs, covering a period of at least 10
years beyond the projected in-service date of the facilities;
(3) A description of proposed new power-purchase contracts or
revisions to existing contracts, and an analysis of the effects on power
costs;
(4) Use of sensitivity analyses to determine the vulnerability of
the alternatives to a reasonable range of assumptions about fuel costs,
failure to achieve projected load growth, changes in operating and
financing costs, and other major factors, if the financial forecast is
used in support of a loan or loan guarantee that exceeds the smaller of
$25 million or 10 percent of the borrower's total utility plant.
Individual sensitivity analyses need not be duplicated if they have been
included in other materials submitted to RUS; and
(5) Assessment of the financial risks of the various alternatives,
especially as between capital-intensive and non-capital-intensive
alternatives, under the range of assumptions set forth in paragraph
(b)(4) of this section.
(c) Power cost studies must use current, RUS-approved power
requirements data, and all major assumptions are subject to RUS
approval. Alternative assumptions about projected power requirements may
be used, however, in conjunction with the sensitivity analyses required
by paragraph (b)(4) of this section.
(Approved by the Office of Management and Budget under control number
0572-0032)
Secs. 1710.304--1710.349 [Reserved]
Subpart H--Demand Side Management and Renewable Energy Systems
Source: 59 FR 496, Jan. 4, 1994, unless otherwise noted.
Sec. 1710.350 Purpose.
This subpart sets forth RUS policies and procedures with regard to
loans and loan guarantees to RUS borrowers for the purpose of
implementing their demand side management (DSM) plans, energy
conservation programs, and on-grid and off-grid renewable energy
systems. The Administrator reserves the right to determine if loans for
purposes under this subpart will be made to a borrower in default under
its mortgage and loan contract. As is the case with all other RUS loans,
loans for purposes under this subpart will not be made to individuals.
Sec. 1710.351 General policy; renewable energy systems.
(a) Off-grid renewable energy systems will be considered the same as
DSM activities and will qualify for either insured loans or loan
guarantees pursuant to Sec. 1710.102.
(b) On-grid renewable energy systems will be treated as a generation
resource and will be eligible only for loan guarantees pursuant to
Sec. 1710.102. Existing RUS policy with respect to generation resources
shall generally apply.
(c) RUS loans for renewable energy systems will be made only for
systems
[[Page 118]]
utilizing technologies that are proven and commercially available.
Sec. 1710.352 General policy; energy resource conservation programs.
This subpart does not replace the energy resource conservation
program financed by deferments of loan principal.
Sec. 1710.353 General policy; demand side management.
(a) RUS will make loans for the purpose of assisting electric
borrowers to implement RUS approved demand side management plans. For
the purposes of this regulation energy conservation programs are
included as a DSM activity.
(b) RUS will treat demand-side and supply-side resources on an equal
basis. All requirements applicable to loans for traditional electric
facilities will apply to loans for DSM. In addition the requirements set
forth in this subpart will apply.
(c) DSM will be considered a distribution loan purpose, eligible for
either insured loans or loan guarantees pursuant to Sec. 1710.102.
(d) RUS will conduct its own evaluation, as specified in this
subpart, of a borrower's DSM activities before making a determination on
the disposition of a borrower's loan application.
(e) RUS loans for DSM activities will be made only for systems
utilizing technologies that are proven and commercially available.
(f) In general, RUS will require pilot project testing of DSM
activities new to the borrower.
(g) If the borrower's IRP, DSM plan, project construction and/or
financing, and/or rate recovery is subject to the approval of state
authorities, the borrower must obtain such approvals before RUS will
approve a loan for any purpose for which an RUS approved DSM plan or IRP
is required under this subpart.
Sec. 1710.354 Eligible DSM activities.
DSM activities that are projected to result in more efficient use of
electric system resources and which are consistent with an RUS approved
Integrated Resource Plan (IRP) and DSM plan may be eligible for
financing. Examples of such DSM activities, which are not mutually
exclusive, are as follows:
(a) General information and education;
(b) Purchase and installation of borrower owned or consumer owned
equipment or materials, including:
(1) Heating, ventilation, air conditioning;
(2) Building envelope;
(3) Appliances;
(4) Load control;
(5) Lighting and lighting control;
(6) Thermal storage; and
(7) Efficient motors and drives;
(c) Rebates for DSM equipment and facilities;
(d) Fuel switching for dual fuel applications where one of the
energy sources is electricity; and
(e) Pilot DSM projects.
Sec. 1710.355 DSM loan applications.
(a) Any loan application which includes funds for DSM must include
all loan support documents required for a loan for electric facilities,
and must demonstrate that requirements for need, loan feasibility and
loan security are satisfied. In addition, the application must be
supported by an RUS approved IRP, except as provided in
Sec. 1710.356(a)(1), and an RUS approved DSM plan.
(b) DSM loans will be made to provide financing for DSM activities
planned to be implemented within a two year period.
Sec. 1710.356 Integrated resource plans.
(a)(1) An RUS approved IRP is required for all loans that include
funds for DSM activities, unless the cumulative total of all previous
DSM loans and the loan under consideration for that applicant is less
than 1 percent of the applicant's total utility plant.
(2) An RUS approved IRP is required for all loans that include funds
for on-grid renewable energy systems.
(3) An RUS approved IRP is required for all loans that include funds
for off-grid renewable energy systems unless the Administrator
determines that an IRP is not needed to determine that the loan is both
feasible and secure pursuant to Secs. 1710.112 and 1710.113,
respectively.
[[Page 119]]
(b)(1) When an IRP is required, a distribution borrower that is a
member of a power supply borrower must use the IRP prepared by the power
supply borrower for its overall system. This IRP must have been
coordinated with all of the member systems and it must have been
approved by the board of directors of the power supply borrower. Because
of the relationship between the power supply borrower and its members
under which the loans incurred by the power supply borrower are
primarily to construct, improve or acquire facilities that benefit all
members directly or indirectly, the security of loans to all parties is
interlinked. Consequently, DSM activities and renewable energy
activities must be coordinated among all parties to insure that the
activities of one member do not jeopardize the financial integrity or
loan security of any other member or that of the power supply borrower.
(2) A distribution system that is not a member of an RUS financed
power supply borrower shall prepare its own IRP. An IRP developed by a
distribution borrower that is not a member of a power supply borrower
need only address its own system, but shall include an analysis of the
effects of its DSM activities on its wholesale power costs.
(c) The IRP shall identify supply side and demand side options and
analyze their benefits and costs in order to provide adequate and
reliable electric service to consumers at the lowest cost for the system
as a whole.
(d) The IRP shall include necessary features for system operation,
such as diversity, reliability, dispatchability, and other factors of
risk; and it shall take into account the ability to verify energy and
cost savings achieved through DSM, energy conservation, and renewable
energy systems, and the projected durability of such savings measured
over time.
(e) The following elements also included in a DSM plan, pursuant to
Secs. 1710.357 and 1710.358, shall be included except where RUS
determines that they are not necessary:
(1) Load shape objectives;
(2) Wholesale power pricing policy and costs, and their relationship
to the proposed DSM activities;
(3) Ownership and costs of DSM related hardware;
(4) Incentive and marketing costs;
(5) Communication and control costs; and
(6) Monitoring methods and costs.
(f) The IRP shall analyze the DSM effects set forth in
Sec. 1710.359.
Sec. 1710.357 DSM plans.
(a) A DSM plan approved by the borrower's board of directors is
required in support of a loan that includes funds for DSM activities or
for off-grid renewable energy systems. The DSM plan shall address the
borrower's existing and proposed activities for the same period covered
by the Long-Range Financial Forecast submitted in support of the loan
application.
(b)(1) A DSM plan prepared by a member of a power supply borrower
must be consistent with the IRP prepared by the power supply borrower.
(2) A DSM plan prepared by a distribution borrower that is not a
member of an RUS financed power supply borrower must be consistent with
the borrower's own IRP.
(c) The level of detail required in the DSM plan is dependent on
several factors, for example:
(1) Size and term of loan;
(2) Financial impact of loan on the borrower;
(3) Probability of realization of the estimated impacts;
(4) Magnitude of the estimated effects; and
(5) Potential effects, if any, on other distribution members of a
power supply borrower.
(d) RUS will consider effects of proposed and existing DSM plans on
government loan security, rates, revenue requirements, competitiveness,
other distribution borrowers, power supply borrowers or other industry
recognized tests as applicable.
Sec. 1710.358 Requirements for a DSM plan.
A DSM plan shall include:
(a) A list of the DSM activities to be financed by the loan
including details on implementation such as beginning and completion
dates and estimated draw downs of loan funds;
[[Page 120]]
(b) An analysis of the borrower's existing and proposed DSM
activities, including sources of financing and projections of the
effects of those activities as set forth in Sec. 1710.359;
(c) System specific load research and DSM pilot projects as required
by Sec. 1710.353(f);
(d) A benefit/cost and net present value cash flow analysis of each
DSM activity included in the plan. Benefits and costs must be expressed
in the same units where possible. Short term and long term impacts must
be addressed. Who benefits and who pays must be clearly identified.
Objectives of a DSM plan shall be stated in terms of load profile
adjustments by customer rate class and/or market segment. The benefit/
cost analysis shall include the following steps:
(1) Identification of objectives, alternatives, and effects;
(2) Simulation of impacts on the system and its consumers, and the
probable costs and benefits, including sensitivity/probability and
scenario analysis; and
(3) Selection of DSM activities;
(e) An outline of monitoring and reporting procedures to evaluate
the performance of the implemented DSM plan;
(f) A narrative discussing the following:
(1) Scope of the DSM plan;
(2) Resources used to develop the DSM plan;
(3) Internal and external data collection and analysis;
(4) Analysis method used to screen and evaluate the projected
programs;
(5) Analysis of existing and projected plans; and
(6) Coordination activities with power supplier.
Sec. 1710.359 DSM effects.
The IRP and the DSM plan shall consider and discuss the expected
effects of the borrower's DSM activities. The expected effects to be
considered and discussed includes, but are not limited to, the
following:
(a) Effects on the utility (supply side effects):
(1) Operations;
(2) Maintenance;
(3) Environmental compliance;
(4) Capacity planning, including deferment of capacity and
reliability of capacity;
(5) DSM equipment including purchase, operation and maintenance
considerations;
(6) Transmission and distribution effects;
(7) Administrative costs, including administrative and general
costs, program costs, DSM planning costs, integration of supply and DSM
planning, marketing costs, incentive costs, infrastructure support,
monitoring and evaluation costs, bidding costs; and
(8) Revenues and rates;
(b) Effects on consumers (demand side effects):
(1) Equipment purchases;
(2) Operation costs;
(3) Maintenance costs;
(4) Supply voltage quality;
(5) Availability of service and reliability (outages);
(6) Change in benefits received from appliances and housing;
(7) Convenience (availability of equipment, appliances and
services);
(8) Change in comfort and air quality levels of buildings; and
(9) Rates, billing level and elasticity;
(c) Effects on competitiveness;
(d) Effects on other member distribution systems of the power supply
borrower; and
(e) Effects on power supply borrower.
Sec. 1710.360 Submittal of alternate documentation.
(a) The borrower may have performed analysis and prepared comparable
documentation for other purposes, such as for a state regulatory
commission. This information may be acceptable to RUS as an IRP or a DSM
plan if the borrower demonstrates that the alternative information meets
the goals and objectives of this subpart.
(b) The borrower shall advise RUS of all material information
provided to other lenders or other governmental authorities relating to
their DSM plans. This information shall be provided to RUS as requested.
Sec. 1710.361 Type and term of loans.
(a) The final maturity of loans for purposes under this subpart
shall be determined by RUS based on the expected
[[Page 121]]
life of needed capital improvements, expected cost recovery periods, the
expected life of program benefits, the certainty of these benefits, and
matching costs and benefits.
(b) RUS will normally consider final maturities for DSM loans of up
to 5 years. Longer loan terms, not to exceed 10 years, for loans for
these purposes will be considered if the borrower can satisfactorily
demonstrate to the Administrator an acceptable basis for doing so and
can demonstrate that the loan will be feasible and secure pursuant to
Secs. 1710.112 and 1710.113, respectively, for the longer period. As
used in this paragraph, renewable energy resource equipment and
facilities are not considered a DSM purpose. Maturities for such loans
will be limited to the expected useful life of the equipment and
facilities.
Sec. 1710.362 Loan approval.
The amount and scope of loans approved by RUS under this subpart are
subject to the discretion of RUS. Applications will be evaluated on the
merits of the proposals as outlined in the plans specified in this
subpart. RUS approval of a loan for purposes under this subpart and/or
RUS approval of IRPs and DSM plans does not relieve a borrower of its
responsibilities under this subpart or constitute a representation or
warranty by RUS to the borrower or any person that its IRP or DSM plan
will work as described therein.
Sec. 1710.363 Advance and documentation of use of loan funds.
(a) Loan funds for on-grid renewable energy systems will be advanced
using the same procedure as loans for other electric system facilities.
(b) Loan funds for DSM activities. (1) Funds for these purposes
shall be advanced and used only for the specific projects and purposes
detailed in the loan application and supporting documents. Generally
funds shall be drawn down on a reimbursement basis. The borrower shall
certify completion of work according to the DSM plan.
(2) The borrower shall maintain accounting and plant records
sufficient to document the cost and location of DSM activities and to
support loan fund advances and disbursements.
(3) All cost associated with DSM projects related to construction,
operations or maintenance, shall be accumulated using the borrower's
work order procedure. An individual work order or work orders shall be
used to record and control the costs of each DSM project. Daily time and
material reports referenced to the DSM activity shall be kept to record
labor and materials used as the activity(ies) is completed.
(4) All other disbursements for DSM activities must be properly
supported by invoices, contracts, or other forms of evidence required by
RUS regulations. All such supporting material shall be available at the
borrower's premises for review by the RUS Field Accountant, borrower's
certified public accountant and other authorized parties as applicable.
Costs of DSM activities related to operations and maintenance should be
charged to expense in the month incurred. Departures from this
prescribed accounting must be approved by RUS subject to the provisions
of 7 CFR 1767.13.
(c) Requirements on advance of funds for all insured electric loans
are in 7 CFR part 1721, subpart B.
Sec. 1710.364 Loan limits.
Cumulative loans DSM activities at the time of loan approval for,
including energy conservation programs and off-grid renewable energy
systems, shall not exceed the lesser of:
(a) Twenty percent of the borrower's equity at the time of the loan
or any time during amortization of the loan; or
(b) An amount approved for such purposes in a final non-appealable
order by the applicable regulatory body for inclusion in the borrower's
rate base.
Subpart I--Application Requirements and Procedures for Insured and
Guaranteed Loans
Source: 60 FR 3731, Jan. 19, 1995, unless otherwise noted.
Sec. 1710.400 Initial contact.
(a) Loan applicants that do not have outstanding loans from RUS
should
[[Page 122]]
write to the Rural Utilities Service Administration, United States
Department of Agriculture, Washington, DC 20250-1500. A field or
headquarters staff representative may be assigned by RUS to visit the
applicant and discuss its financial needs and eligibility. Borrowers
that have outstanding loans should contact their assigned RUS general
field representative (GFR) or, in the case of a power supply borrower,
the Director, Power Supply Division. Borrowers may consult with RUS
field representatives and headquarters staff, as necessary.
(b) Before submitting an application for an insured loan the
borrower shall ascertain from RUS the amount of supplemental financing
required, as set forth in Sec. 1710.110. If the borrower is applying for
either a municipal rate loan subject to the interest rate cap or a
hardship rate loan, the application must provide a preliminary breakdown
of residential consumers either by county or by census tract. Final data
must be included with the application. See Sec. 1710.401(a)(8).
Sec. 1710.401 Loan application documents.
(a) All borrowers. All applications for electric loans shall include
the documents listed in this paragraph. The first page of the
application shall be a list of the documents included in the
application. The borrower may use RUS Form 726, Checklist for Electric
Loan Application, or a computer generated equivalent as this list.
(1) Transmittal letter. A letter signed by the borrower's manager
indicating the actual corporate name and taxpayer identification number
of the borrower and addressing the following items:
(i) The need for flood hazard insurance;
(ii) Breakdown of requested loan funds by state;
(iii) A listing of the counties served by the borrower;
(iv) A listing of threatened actions by third parties that could
adversely affect the borrower's financial condition, including
annexations or other actions affecting service territory, loads, or
rates; and
(v) A listing of pending regulatory proceedings pertaining to the
borrower.
(2) Board resolution. This document is the formal request by the
borrower's board of directors for a loan from RUS. The board resolution
shall include:
(i) The requested loan amount, loan term, final maturity, and method
of amortization (Sec. 1710.110(b));
(ii) The sources and amounts of any supplemental or other financing;
(iii) Authorization for RUS to release appropriate information to
supplemental or other lender(s), and authorization for these lenders to
release appropriate information to RUS; and
(iv) For an insured loan, a statement of whether the application is
for a municipal rate loan, with or without the interest rate cap, or a
hardship loan. If the application is for a municipal rate loan, the
board resolution must indicate whether the borrower intends to elect the
prepayment option. See 7 CFR 1714.4(c).
(3) RUS Form 740c, Cost Estimates and Loan Budget for Electric
Borrowers. This form together with its attachments lists the
construction, equipment, facilities and other cost estimates from the
construction work plan or engineering and cost studies, and the sources
of financing for each component. The date on page 1 of the form is the
beginning date of the loan period and shall be the same as the date on
the Financial and Statistical Report submitted with the application
(paragraph (a)(5) of this section). Form 740c also includes the
following information, exhibits, and attachments:
(i) Description of funds and materials. This description details the
availability of materials and equipment, any unadvanced funds from prior
loans, and any general funds the borrower designates, to determine the
amount of such materials and funds to be applied against the capital
requirements estimated for the loan period.
(ii) Useful life of facilities financed by the loan. Form 740c must
include, as a note, either a statement certifying that at least 90
percent of the loan funds are for facilities that have a useful life of
33 years or longer, or a schedule showing the costs and useful life of
those facilities with a useful life of less
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than 33 years. This statement or schedule will be used to determine the
final maturity of the loan. See Sec. 1710.115.
(iii) Reimbursement schedule. This schedule lists the date, amount,
and identification number of each inventory of work orders and special
equipment summary that form the basis for the borrower's request for
reimbursement of general funds on the RUS Form 740c. See Sec. 1710.109.
If the borrower is not requesting reimbursement, this schedule need not
be submitted.
(iv) Location of consumers. If the application is for a municipal
rate loan subject to the interest rate cap, or for a loan at the
hardship rate, and the average number of consumers per mile of the total
electric system exceeds 17, Form 740c must include, as a note, a
breakdown of funds included in the proposed loan to furnish or improve
service to consumers located in an urban area. See 7 CFR 1714.7(c) and
1714.8(d). This breakdown must indicate the method used by the borrower
for allocating loan funds between urban and non urban consumers.
(4) RUS Form 740g, Application for Headquarters Facilities. This
form lists the individual cost estimates from the construction work plan
or other engineering study that support the need for RUS financing for
any warehouse and service type facilities included, and funding
requested for such facilities shown on RUS Form 740c. If no loan funds
are requested for headquarters facilities, Form 740g need not be
submitted.
(5) Financial and statistical report. Distribution borrowers shall
submit these data on RUS Form 7; power supply borrowers shall use RUS
Form 12. The form shall contain the most recent data available, which
shall not be more than 60 days old when received by RUS.
(6) Pending litigation statement. A statement from the borrower's
counsel listing any pending litigation, including levels of related
insurance coverage and the potential effect on the borrower. This
statement and the statements from counsel required by paragraphs (a)(7)
and (15) of this section may be combined into a single document.
(7) Mortgage information. A new mortgage will be required if this is
a borrower's first application for a loan under the RE Act. A restated
mortgage, or a mortgage supplement will be required if there has been a
material change to the real property owned by the borrower since the
most recent RUS loan, loan guarantee, or lien accommodation, if the
requested loan would cause the borrower to exceed its previously
authorized debt limit, or if RUS otherwise determines it necessary. If
there has been no material change to the real property owned by the
borrower since the most recent RUS loan or loan guarantee, the borrower
must submit an opinion of its counsel to that effect. If a new or
restated mortgage or a mortgage supplement is required, the borrower
must provide the following:
(i) Property schedule. For a new or restated mortgage or for a
mortgage supplement, the following information shall be submitted in a
form satisfactory to RUS:
(A) A listing of the counties where the borrower's existing electric
facilities and new facilities are or will be located;
(B) A listing and description of all real property owned by the
borrower; and
(C) An opinion of the borrower's counsel certifying that the
property schedule is complete and adequate for inclusion in a security
instrument to be executed by the borrower to secure an RUS loan.
(ii) Maximum debt limit. For a new mortgage, or if the proposed loan
would result in the borrower's existing mortgage debt limit being
exceeded, a resolution of the borrower's board of directors, and any
other authorizations or certifications required by State law, certifying
that a new debt limit has been legally established that is adequate to
accommodate existing indebtedness and the proposed new financing,
including any concurrent loans.
(8) Rate disparity and consumer income data. If the borrower is
applying under the rate disparity and consumer income tests for either a
municipal rate loan subject to the interest rate cap or a hardship rate
loan, the application must provide a breakdown of residential consumers
either by county or by
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census tract. In addition, if the borrower serves in 2 or more states,
the application must include a breakdown of all ultimate consumers by
state. This breakdown may be a copy of Form EIA 861 submitted by the
Borrower to the Department of Energy or in a similar form. See 7 CFR
1714.7(b) and 1714.8(a). To expedite the processing of loan
applications, RUS strongly encourages distribution borrowers to provide
this information to the GFR prior to submitting the application.
(9) Standard Form 100--Equal Employment Opportunity Employer Report
EEO--1. This form, required by the Department of Labor, sets forth
employment data for borrowers with 100 or more employees. A copy of this
form, as submitted to the Department of Labor, is to be included in the
application for an insured loan if the borrower has more than 100
employees. See Sec. 1710.122.
(10) Form AD-1047, Certification Regarding Debarment, Suspension,
and Other Responsibility Matters--Primary Covered Transactions. This
statement certifies that the borrower will comply with certain
regulations on debarment and suspension required by Executive Order
12549, Debarment and Suspension (3 CFR, 1986 Comp., p. 189). See 7 CFR
part 3017 and Sec. 1710.123.
(11) Uniform Relocation Act assurance statement. This assurance,
which need not be resubmitted if previously submitted, provides that the
borrower shall comply with 49 CFR part 24, which implements the Uniform
Relocation Assistance and Real Property Acquisition Policy Act of 1970,
as amended by the Uniform Relocation Act Amendments of 1987 and 1991.
See Sec. 1710.124.
(12) Lobbying. The following information on lobbying is required
pursuant to 7 CFR part 3018 and Sec. 1710.125. Borrowers applying for
both insured and guaranteed financing should consult RUS before
submitting this information.
(i) Certification regarding lobbying. This statement certifies that
the borrower shall comply with certain requirements with respect to
restrictions on lobbying activities.
(ii) Standard Form LLL--Disclosure of Lobbying Activities. This
disclosure form is required from those borrowers engaged in lobbying
activities.
(13) Federal debt delinquency requirements. See 1710.126. The
following documents are required:
(i) Report on Federal debt delinquency. This report indicates
whether or not a borrower is delinquent on any Federal debt.
(ii) Certification Regarding Federal Government Collection Options.
This statement certifies that a borrower has been informed of the
collection options the Federal Government may use to collect delinquent
debt. The Federal Government is authorized by law to take any or all of
the following actions in the event that a borrower's loan payments
become delinquent or the borrower defaults on its loans:
(A) Report the borrower's delinquent account to a credit bureau;
(B) Assess additional interest and penalty charges for the period of
time that payment is not made;
(C) Assess charges to cover additional administrative costs incurred
by the Government to service the borrower's account;
(D) Offset amounts owed directly or indirectly to the borrower under
other Federal programs;
(E) Refer the borrower's debt to the Internal Revenue Service for
offset against any amount owed to the borrower as an income tax refund;
(F) Refer the borrower's account to a private collection agency to
collect the amount due; and
(G) Refer the borrower's account to the Department of Justice for
collection.
(14) Articles of incorporation and bylaws. The following are
required if either document has been amended since the last loan
application was submitted to RUS, or if this is a borrower's first
application for a loan under the RE Act:
(i) The borrower's articles of incorporation currently in effect, as
filed with the appropriate state office, setting forth the borrower's
corporate purpose; and
(ii) The bylaws currently in effect, as adopted by the borrower's
board of directors, setting forth the manner by which the borrower's
organization will be governed and regulated.
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(15) State regulatory approvals. In states in which regulatory
authorities have jurisdiction over the borrower's rates, the borrower
must provide satisfactory evidence, pursuant to Secs. 1710.105 and
1710.151(f), based on the information available, such as an opinion of
counsel or of another qualified source, that the state regulatory
authority will not exclude from the borrower's rate base any of the
facilities included in the loan request, or otherwise prevent the
borrower from charging rates sufficient to repay with interest the debt
incurred for the facilities.
(16) Seismic safety certifications. This certification shall be
included, if required under 7 CFR part 1792.
(17) Rates. (i) A distribution borrower shall explain any recent or
planned changes in retail rates, the status of any pending rate cases
before a state regulatory authority, or other pertinent rate
information.
(ii) A power supply borrower shall submit a schedule of its
wholesale rates currently in effect. Any changes in this schedule are
subject to RUS approval.
(18) Additional supporting data. Additional supporting data may be
required by RUS depending on the individual application or conditions.
Examples of such additional supporting data include information about
acquisitions, headquarters facilities, generation or transmission
facilities, large power loads or special loads.
(b) Distribution borrowers. In addition to the items in paragraph
(a) of this section, applications for loans submitted by distribution
borrowers shall include the borrower's area coverage and line extension
policies. If there have been any amendments to area coverage or line
extension policies since the last loan application submitted to RUS, or
if this is a borrower's first application for a loan under the RE Act,
the borrower shall submit the board of directors' approved policies on
area coverage and line extensions. See Secs. 1710.103 and 1710.151(a).
(c) Primary support documents. In addition to the loan application,
consisting of the documents required by paragraphs (a) and (b) of this
section, all borrowers must also provide RUS with the following primary
support documents pursuant to Sec. 1710.152:
(1) Along with the loan application, the borrower shall submit to
RUS a Long-Range Financial Forecast (LRFF), that meets the requirements
of subpart G of this part. The forecast shall include any sensitivity
analysis or analysis of alternative scenarios required by subpart G of
this part, and shall be accompanied by a certified board resolution
adopting, and indicating the board of directors' approval of, the LRFF,
and directing management to take whatever steps may be necessary,
including the filing for rate increases, to achieve the TIER goals set
forth in the LRFF.
(2) Prior to RUS's acceptance of the loan application, the borrower
shall submit to RUS and receive approval of:
(i) Power Requirements Study (PRS) that meets the requirements of
subpart E of this part, and is accompanied by a certified board
resolution adopting, and indicating the board of directors' approval of,
the PRS.
(ii) Construction Work Plan (CWP) and/or related engineering and
cost studies that meets the requirements of subpart F of this part, and
is accompanied by a certified board resolution adopting, and indicating
the board of directors' approval of, the CWP and/or engineering and cost
studies.
(iii) Borrower's Environmental Report (BER), or other environmental
information as required by 7 CFR part 1794.
(iv) Demand Side Management Plan and/or Integrated Resource Plan, if
required by subpart H of this part.
(d) Submission of documents. (1) Generally, all information required
by paragraphs (a), (b), and (c)(1) of this section is submitted to RUS
in a single application package. The information required by paragraph
(c)(2) of this section is generally submitted to, and approved by RUS
before the application is submitted.
(2) To facilitate loan review, RUS urges borrowers to ensure that
their applications contain all of the information required by this
section before submitting the application to RUS. Borrowers may consult
with RUS field representatives and headquarters staff
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as necessary for assistance in preparing loan applications.
(3) RUS may, in its discretion, return an application to the
borrower if the application is not materially complete to the
satisfaction of RUS within 10 months of receipt of any of the items
listed in paragraph (a) or (b) of this section. RUS will generally
advise the borrower in writing at least 2 months prior to returning the
application as to the elements of the application that are not complete.
(4) If an application is returned, an application for the same loan
purposes will be accepted by RUS if satisfactory evidence is provided
that all of the information required by this section will be submitted
to RUS within a reasonable time. An application for loan purposes
included in an application previously returned to the borrower will be
treated as an entirely new application.
(e) Complete applications. An application is complete when all
information required by RUS to approve a loan is materially complete in
form and substance satisfactory to RUS.
(f) Change in borrower circumstances. A borrower shall, after
submitting a loan application, promptly notify RUS of any changes in its
circumstances that materially affect the information contained in the
loan application or in the primary support documents.
(g) Interest rate category. For pending loans, RUS will promptly
notify the borrower if its eligibility for an interest rate category
changes pursuant to new information from the Department of Energy or the
Bureau of the Census. See 7 CFR part 1714.
(Approved by the Office of Management and Budget under control numbers
0572-0017, 0572-0032 and 0572-1013.)
Secs. 1710.402--1710.403 [Reserved]
Sec. 1710.404 Additional requirements.
Additional requirements for insured electric loans are set forth in
7 CFR part 1714.
Sec. 1710.405 Supplemental financing documents.
(a) The borrower is responsible for ensuring that the loan documents
required for supplemental financing pursuant to Sec. 1710.110 are
executed in a timely fashion. These documents are subject to RUS
approval.
(b) Security. Any security offered by the borrower to a supplemental
lender is subject to RUS approval.
Sec. 1710.406 Loan approval.
(a) A loan is approved when the Administrator signs the
administrative findings.
(b) If the loan is not approved, RUS will notify the borrower of the
reason.
Sec. 1710.407 Loan documents.
Following approval of a loan, RUS will forward the loan documents to
the borrower for execution, delivery, recording, and filing, as directed
by RUS.