[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2001 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
7
Parts 1600 to 1899
Revised as of January 1, 2001
Agriculture
Containing a codification of documents of general
applicability and future effect
As of January 1, 2001
With Ancillaries
Published by:
Office of the Federal Register
National Archives and Records
Administration
A Special Edition of the Federal Register
[[Page ii]]
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[[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 1067
Finding Aids:
Material Approved for Incorporation by Reference........ 1115
Table of CFR Titles and Chapters........................ 1125
Alphabetical List of Agencies Appearing in the CFR...... 1143
Redesignation Tables.................................... 1153
List of CFR Sections Affected........................... 1157
[[Page iv]]
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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.
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[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
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[[Page vi]]
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the revision dates of the 50 CFR titles.
[[Page vii]]
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Director,
Office of the Federal Register.
January 1, 2001.
[[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, 2001.
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.
[[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................. 1800
[[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
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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.......................... 91
1714 Pre-loan policies and procedures for insured
electric loans.......................... 139
1717 Post-loan policies and procedures common to
insured and guaranteed electric loans... 145
1718 Loan security documents for electric
borrowers............................... 195
1721 Post-loan policies and procedures for
insured electric loans.................. 236
1724 Electric engineering, architectural services
and design policies and procedures...... 237
1726 Electric system construction policies and
procedures.............................. 252
1728 Electric standards and specifications for
materials and construction.............. 279
1730 Electric system operations and maintenance.. 303
1735 General policies, types of loans, loan
requirements--telecommunications program 307
1737 Pre-loan policies and procedures common to
insured and guaranteed
telecommunications loans................ 331
1741
Pre-loan policies and procedures for insured telephone loans [Reserved]
1744 Post-loan policies and procedures common to
guaranteed and insured telephone loans.. 346
1748
Post-loan policies and procedures for insured telephone loans [Reserved]
1751 Telecommunications system planning and
design criteria, and procedures......... 357
1753 Telecommunications system construction
policies and procedures................. 362
1755 Telecommunications standards and
specifications for materials, equipment
and construction........................ 399
[[Page 18]]
1757
Telephone systems operations and maintenance [Reserved]
1767 Accounting requirements for RUS electric
borrowers............................... 692
1770 Accounting requirements for RUS telephone
borrowers............................... 883
1773 Policy on audits of RUS borrowers........... 904
1775 Technical assistance and training grants.... 935
1777 Section 306C WWD loans and grants........... 941
1778 Emergency Community Water Assistance Grants. 945
1780 Water and waste loans and grants............ 950
1781 Resource Conservation and Development (RCD)
loans and Watershed (WS) loans and
advances................................ 989
1785 Loan account computations, procedures and
policies for electric and telephone
borrowers............................... 1007
1786 Prepayment of RUS guaranteed and insured
loans to electric and telephone
borrowers............................... 1009
1788 RUS fidelity and insurance requirements for
electric and telecommunications
borrowers............................... 1039
1789 Use of consultants funded by borrowers...... 1044
1792 Compliance with other Federal statutes,
regulations, and Executive orders....... 1049
1794 Environmental policies and procedures....... 1051
[[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--
General
1703.100 Purpose.
1703.101 Policy.
1703.102 Definitions.
1703.103 Applicant eligibility and allocation of funds.
1703.104 [Reserved]
1703.105 Processing of selected applications.
1703.106 Disbursement of loans and grants.
1703.107 Reporting and oversight requirements.
1073.108 Audit requirements.
1703.109 Grant and loan administration.
1703.110 Changes in project objectives or scope.
1703.111 Grant and loan termination.
1703.112 Expedited telecommunications loans.
1703.113-1703.119 [Reserved]
Subpart E--Distance Learning and Telemedicine Grant Program
1703.120 Use of grants.
1703.121 Approved purposes for grants.
1703.122 Matching contributions.
1703.123 Nonapproved purposes for grants.
1703.124 Maximum and minimum grant amounts.
1703.125 Completed application.
1703.126 Criteria for scoring grant applications.
1703.127 Application selection provisions.
1703.128 Submission of applications.
1703.129 Appeals.
Subpart F--Distance Learning and Telemedicine Combination Loan and Grant
Program
1703.130 Use of combination loan and grant.
1703.131 Approved purposes for a combination loan and grant.
1703.132 Nonapproved purposes for a combination loan and grant.
1703.133 Maximum and minimum amounts.
1703.134 Completed application.
1703.135 Application selection provisions.
1703.136 Submission of applications.
1703.137 Appeals.
1703.138-1703.139 [Reserved]
Subpart G--Distance Learning and Telemedicine Loan Program
1703.140 Use of loan funds.
1703.141 Approved purposes for loans.
1703.142 Nonapproved purposes for loans.
1703.143 Maximum and minimum amounts.
1703.144 Completed application.
1703.145 Application selection provisions.
1703.146 Submission of applications.
1703.147 Appeals.
Subpart H--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.
[[Page 26]]
Source: 54 FR 6870, Feb. 15, 1989, unless otherwise noted.
Redesignated at 55 FR 39394, Sept. 27, 1990.
Subpart A [Reserved]
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
[[Page 27]]
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:
(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.
[[Page 28]]
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.
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
[[Page 29]]
subpart for projects other than business incubator projects to the
extent funds are available to borrowers for business incubator projects
from a 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--
General
Source: 64 FR 14357, Mar. 25, 1999, unless otherwise noted.
Sec. 1703.100 Purpose.
The purpose of the Distance Learning and Telemedicine (DLT) Loan and
Grant Program 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. This
subpart describes the general policies for administering the DLT
program. Subpart E contains the policies and procedures related to
grants; subpart F contains the policies and procedures related to a
combination loan and grant; and subpart G contains the policies and
procedures related to loans.
Sec. 1703.101 Policy.
(a) The transmission of information is vital to the economic
development, education, and health of rural Americans. To further this
objective, RUS will provide financial assistance to distance learning
and telemedicine projects that will improve the access of people
residing in rural areas to educational, learning, training, and health
care services.
(b) In providing financial assistance, RUS will give priority to
rural areas that it believes have the greatest need for distance
learning and telemedicine services. RUS believes that generally the need
is greatest in areas that are economically challenged, costly to serve,
and experiencing outward migration. This program is consistent with the
provisions of the Telecommunications Act of 1996 that designate
telecommunications service discounts for schools, libraries, and rural
health care centers. RUS will take into consideration the community's
involvement in the proposed project and the applicant's ability to
leverage grant funds.
(c) In administering this subpart, RUS will not favor or mandate the
use of one particular technology over another.
(d) Rural institutions are encouraged to cooperate with each other,
with applicants, and with end-users to promote the program being
implemented under this subpart.
(e) RUS staff will make diligent efforts to inform potential
applicants in rural areas of the programs being implemented under this
subpart.
(f) The Administrator will provide only loans under this subpart to
any entity that has received a telecommunications or electric loan under
the Rural Electrification Act of 1936. Telecommunications and Electric
borrowers are encouraged to seek a loan under this subpart to bolster
educational and health care opportunities in the rural communities they
serve. A borrower receiving a loan shall:
(1) Make the loan available to entities that qualify as distance
learning or telemedicine projects satisfying the requirements of this
subpart, 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.
(2) Use the loan to acquire, install, improve, or extend a distance
learning or telemedicine system referred to in this subpart.
(g) The Administrator will allocate funds that are appropriated each
fiscal year for the subparts E, F, and G, of this part respectively. Not
more than 30 days before the end of the fiscal year, the Administrator
may transfer any funds not committed to grants in the combination loan
and grant program to the grant program.
[[Page 59]]
(h) 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.
(i) The Administrator will publish, at the end of each fiscal year,
a notice in the Federal Register of all applications receiving financial
assistance under this subpart. Subject to the provisions of the Freedom
of Information Act, (5 U.S.C. 552), applications will be available for
public inspection at the U.S. Department of Agriculture, 1400
Independence Avenue, SW., Washington, DC, 20250.
Sec. 1703.102 Definitions.
1996 Act means the Federal Agriculture Improvement Act of 1996.
Act means the Rural Electrification Act of 1936 (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 that applies for financial
assistance under this subpart.
Approved purposes means project purposes for which grant, loan, or
combination loan and grant financial assistance may be expended.
Champion community means any community that submitted a valid
application to become a USDA Empowerment Zone/Enterprise Community (EZ/
EC) area, that met the requirements to be designated an EZ/EC area, but
not chosen because their score was not high enough to be selected.
Combination loan and grant means a grant in combination with a loan
made under the DLT program.
Completed application means an application that includes all those
items specified in Secs. 1703.125, 1703.134, and 1703.144 in form and
substance satisfactory to the Administrator.
Computer networks mean 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 one eligible organization that meets the
requirements of Sec. 1703.103.
Construct means to acquire, construct, extend, improve, or install a
facility or system.
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 an outstanding loan under the
provisions of the DLT program.
DLT program means the Distance Learning and Telemedicine Loan and
Grant Program administered by RUS.
Economic useful life as applied to equipment and 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 or
video equipment, computer network components, telecommunications
terminal equipment, data terminal equipment, inside wiring, interactive
video equipment, or other facilities that would further telemedicine
services or distance learning services.
[[Page 60]]
Eligible facilities means land, buildings, or building construction
needed to carry out an eligible distance learning or telemedicine
project for loan financial assistance only.
Eligible organization means an entity that meets the requirements of
Sec. 1703.103.
Empowerment Zone and Enterprise Community (EZ/EC) means any
community whose designation as such by USDA pursuant to 26 U.S.C. 1391
et seq., is in effect at the time RUS agrees to provide financial
assistance.
End user is one or more of the following:
(1) Rural elementary, secondary schools, and 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, nursing homes, 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; and
(3) Other rural community facilities, institutions, or entities that
receive distance learning or telemedicine services.
End user site means a facility that is part of a network or
telecommunications system that is utilized by end users.
Financial assistance means a grant, combination loan and grant, or
loan.
GFR means RUS telecommunications program General Field
Representative.
Grant documents means the grant agreement, including any amendments
and supplements thereto, between RUS and the grantee.
Grantee means a recipient of a grant from RUS to carry out the
purposes of the DLT program.
Guarantee means a guarantee for a loan provided by a RUS borrower or
other qualified third party.
Hub means a facility that is part of a network or telecommunications
system that provides educational or medical services to end user sites.
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 equipment means equipment used to produce and prepare
for transmission audio and visual signals from at least two distant
locations so 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.
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.
Loan documents mean the loan agreement, note, and security
instrument, including any amendments and supplements thereto, between
RUS and the DLT 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 contribution means the applicant's contribution for
approved 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 approved purposes for which financial assistance has
been provided.
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.
Recipient means a grantee, borrower, or both of a DLT program grant,
loan or combination loan and grant.
Rural community facilities mean facilities such as schools,
libraries, learning centers, training facilities, hospitals, medical
centers, and similar facilities, primarily used by residents of rural
areas, that will use a telecommunications, computer network, or related
[[Page 61]]
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, successor to the Rural Electrification
Administration.
Secretary means the Secretary of Agriculture.
Technical assistance means:
(1) Assistance in learning to manage, operate, or use 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 or electric borrower means an entity that has
outstanding RUS or Rural Telephone Bank electric or telecommunications
loans or loan guarantees under the provisions of the Act.
Telecommunications systems plan means the plan submitted by an
applicant in accordance with Sec. 1703.125 for grants, Sec. 1703.134 for
a combination loan and grant, or Sec. 1703.144 for loans.
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 facilities that receive or transmit
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 voice, video, or 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.
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 political subdivision of a
State government, other than a political subdivision of a State
government 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 political subdivision of a State government is only eligible
if the political subdivision of the State government 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 financial assistance is
[[Page 62]]
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 and to
obtain the applicable financial assistance. If a partnership or
consortium lacks the capacity to contract, each individual entity must
contract with RUS on its own behalf.
(c) Electric or telecommunications borrowers are eligible for loans
only.
[64 FR 14357, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.104 [Reserved]
Sec. 1703.105 Processing of selected applications.
(a) During the period between the submission of an application and
the execution of documents, the applicant must inform RUS if the project
is no longer viable or the applicant no longer is requesting financial
assistance for the project. When the applicant so informs RUS, the
selection will be rescinded or the application withdrawn and written
notice to that effect sent to the applicant.
(b) If an application has been selected and the scope of the project
changes substantially, the applicant may be required to submit a new
application to RUS for review and consideration depending on the degree
of change. A new application will be subject to review in accordance
with this subpart. The financial assistance may not be transferred by
the applicant for use for another project.
(c) If State or local governments raise objections to a proposed
project under the intergovernmental review process that are not resolved
within 90 days of the Administrator's selection of the application, the
Administrator will rescind the selection and written notice to that
effect will be sent to the applicant. The Administrator, in his sole
discretion may extend the 90 day period if it appears resolution is
imminent.
(d) RUS may request additional information to complete the
appropriate documents covering financial assistance.
(e) Financial assistance documents. (1) The documents will include a
grant agreement for grants; loan documents, including third party
guarantees, notes and security instruments for loans; or any other legal
documents the Administrator deems appropriate, including suggested forms
of certifications and legal opinions.
(2) The grant 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 for 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 additional assurance that loans 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 and must, before
receiving any advance 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 facilities and equipment
financed by the loan. RUS may require additional security as it deems
necessary.
(4) Adequate security may also be provided by third-party
guarantees, letters of credit, pledges of revenue, or other forms of
security satisfactory to RUS.
(5) The security instrument and other loan documents required by RUS
in connection with a loan under the DLT program shall contain such
pledges, covenants, and other provisions as may, in the opinion of RUS,
be required to secure repayment of the loan.
(6) If the project does not constitute a complete operating system,
the DLT recipient shall provide evidence, in form and substance
satisfactory to
[[Page 63]]
RUS, demonstrating that the recipient has sufficient contractual,
financing, or other arrangements to assure that the project will provide
adequate and efficient service.
(f) Prior to the execution of a grant and loan document, RUS
reserves the right to require any changes in the project or legal
documents covering the project to protect the integrity of the DLT
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.
[64 FR 14357, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.106 Disbursement of loans and grants.
(a) For financial assistance of $100,000 or greater, prior to the
disbursement of a grant and a loan, 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) Grants and loans will be disbursed to recipients on a
reimbursement basis, or with unpaid invoices for the eligible purposes
contained 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) RUS will review the SF 270 for accuracy when received and will
schedule payment if the form is satisfactory. Payment will ordinarily be
made within 30 days; and
(3) For financial assistance approved during and subsequent to FY
1999, funds will be advanced in accordance with 7 CFR 1744.69.
(c) The recipient's share in the cost of the project must be
disbursed in advance of the loan and grant, or if the recipient agrees,
on a pro rata distribution basis with financial assistance during the
disbursement period. Recipients will not be permitted to provide their
contributions at the end of the project.
(d) A combination loan and grant will be disbursed on a pro rata
basis based on the respective amounts of financial assistance provided.
Sec. 1703.107 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 expended by the applicant.
(b) A final project performance report must be provided by the
recipient. 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 the financial assistance is 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 project
performance reports, including, but not 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. 1703.108 Audit requirements.
A recipient of financial assistance shall provide RUS with an audit
for each year, beginning with the year in which a portion of the
financial assistance is expended, in accordance with the following:
[[Page 64]]
(a) If the recipient is a for-profit entity, a Telecommunications or
Electric borrower, or any other entity not covered by the following
paragraph, the recipient shall provide an independent audit report in
accordance with 7 CFR part 1773, ``Policy on Audits of RUS Borrowers.''
(b) If the recipient is a State or local government, or non-profit
organization, the recipient shall provide an audit in accordance with 7
CFR part 3052, ``Audits of States, Local Governments, and Non-Profit
Organizations.''
[64 FR 14357, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.109 Grant and loan administration.
RUS will conduct reviews as necessary to determine whether the
financial assistance was expended for approved purposes. The recipient
is responsible for ensuring that the project complies with all
applicable regulations, and that the grants and loans are 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 official conducting an audit of the recipient's financial
statements or records, and program performance for the grants and loans
made under this subpart. The recipient shall permit RUS to inspect and
copy any records and documents that pertain to the project.
Sec. 1703.110 Changes in project objectives or scope.
The recipient shall obtain prior written approval by RUS for any
material change to the scope or objectives of the project, including any
changes to the scope of work or the budget submitted to RUS. Any
material change shall be contained in a revised scope of work plan to be
prepared by the recipient, submitted to, and approved by RUS in writing.
Sec. 1703.111 Grant and loan termination.
(a) The financial assistance may be terminated when RUS and the
recipient agree upon the conditions of the termination, the effective
date of the termination, and, in the case of a partial termination of
the financial assistance, any unadvanced portion of the financial
assistance to be terminated and any advanced portion of the financial
assistance to be returned.
(b) The recipient may terminate the financial assistance by written
notification to RUS, providing the reasons for such termination, the
effective date, and, in the case of a partial termination, the portion
of the financial assistance to be terminated. In the case of a partial
termination, if RUS believes that the remaining portion of the financial
assistance will not accomplish the approved purposes, then, RUS may
terminate the financial assistance in its entirety, pursuant to the
provisions of paragraph (a) of this section.
Sec. 1703.112 Expedited telecommunications loans
RUS will expedite consideration and determination of an application
submitted by an RUS telecommunications borrower for a loan under the Act
or an advance of such loan funds to be used in conjunction with
financial assistance under subparts E, F, or G of this part. See 7 CFR
part 1737 for loans and 7 CFR part 1744 for advances under this section.
Secs. 1703.113-1703.119 [Reserved]
Subpart E--Distance Learning and Telemedicine Grant Program
Source: 64 FR 14360, Mar. 25, 1999, unless otherwise noted.
Sec. 1703.120 Use of grants.
(a) Grants may be used by eligible organizations for distance
learning and telemedicine projects to finance up to 70 percent of the
amount designated for approved purposes; at least 30 percent of the
project must be funded by
[[Page 65]]
matching contributions. For purposes of determining the applicant's
ability to leverage resources in Sec. 1703.126(b)(4), the minimum
matching contribution of 30 percent of the amount designated for
approved purposes equals 42.85 percent of the grant requested.
(b) Only projected costs for approved grant purposes will be
considered in determining the amount of DLT grant eligibility in
accordance with paragraph (a) of this section.
(c) Funding from Federal sources other than RUS cannot be considered
as matching contributions under this subpart.
Sec. 1703.121 Approved purposes for grants.
Grants shall be expended only for the costs associated with the
initial capital assets associated with the project. The following are
approved grant 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 grant (this purpose shall not
exceed 10 percent of the grant).
Sec. 1703.122 Matching contributions.
(a) The grant applicant's minimum matching contribution (as
specified in Sec. 1703.120) for approved purposes, generally must be in
the form of cash. However, in-kind contributions for the purposes listed
in Sec. 1703.121 may be substituted for cash.
(b) In-kind items listed in Sec. 1703.121 must be non-depreciated or
new assets with established monetary values. Manufacturers' or service
providers' discounts are not considered in-kind matching.
(c) Costs incurred by the applicant, or others on behalf of the
applicant, for facilities or equipment installed, or other services
rendered prior to submission of a completed application, shall not be
considered as an eligible in-kind matching contribution.
(d) Costs incurred for non-approved purposes for grant outlined in
Sec. 1703.123 shall not be used as an in-kind matching contribution.
Sec. 1703.123 Nonapproved purposes for grants.
(a) A grant made under this subpart will not be provided or used:
(1) To cover the costs of installing or constructing
telecommunications transmission facilities, other than those facilities
not available and necessary for the completion of the proposed project
and not otherwise available;
(2) To pay for medical equipment not having telemedicine as its
essential function;
(3) To pay salaries, wages, or employee benefits to medical or
educational personnel;
(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 that
service provider is the applicant.
(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 between 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;
(13) Except for leases provided for in Sec. 1703.121, to pay the
cost of recurring or operating expenses for the project; or
[[Page 66]]
(14) For any other purposes not specifically contained in
Sec. 1703.121.
(b) Except as otherwise provided in Sec. 1703.112, grants shall not
be used to finance a project, in part, when the success of the project
is dependent upon the receipt of additional financial assistance under
this subpart or is dependent upon the receipt of other financial
assistance that is not assured.
[64 FR 14360, Mar. 25, 1999; 64 FR 25422, May 12, 1999, as amended at 64
FR 25423, May 12, 1999]
Sec. 1703.124 Maximum and minimum grant amounts.
Applications for grants under this subpart will be subject to
limitations on the proposed amount of grant funds. The Administrator
will establish the maximum amount of a grant 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
sooner than 45 days before the period for accepting applications begins.
The minimum amount of a grant is $50,000.
Sec. 1703.125 Completed application.
The following items are required to be submitted to RUS in support
of an application for grant funds:
(a) An application for Federal Assistance. A completed Standard Form
424.
(b) An executive summary of the project. The applicant must provide
RUS with a general project overview that addresses the following 8
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, the types of educational or medical services to be
offered by the project, and the benefits to rural residents;
(3) A description of the applicant, documenting eligibility in
accordance with Sec. 1703.103;
(4) An explanation of the total project cost including a breakdown
of the grant required and the source of matching contribution and other
financial assistance for the remainder of the project;
(5) A statement specifying whether 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 that will be served by the project at each
end user site; and
(8) A certification by the applicant that facilities constructed
with grants do not duplicate adequate established telemedicine or
distance learning services.
(9) A listing of the location of each end user site (city, town,
village, borough, or rural areas) plus the State.
(c) Scoring criteria documentation. Each grant applicant must
address and provide documentation on how it meets each of the scoring
criteria contained in Sec. 1703.126.
(d) A scope of work. The scope of work must include, 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 all capital expenditures reflecting the line item
costs for approved purposes for both the grant funds and other sources
of funds for the project. Separately, the budget must specify any line
item costs that are nonapproved purposes for grants as contained in
Sec. 1703.123.
(e) Financial information. The applicant must provide financial
information to support the need for the financial assistance requested
for the project and the applicant's ability and financial capacity to
carry out the proposed project. It must show its financial and other
ability to carry out the proposed work. All institutions participating
in a project application (including all members of a consortium), must
include an income statement (or equivalent revenue and expense reports)
and
[[Page 67]]
balance sheet reports, reflecting net worth, for the most recent annual
reporting period 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 to
demonstrate feasibility of the project and the financial capability of
the project participants to continue a sustainable project for a minimum
of 10 years after completion of the project. This documentation should
include non-contingent sources of income or revenues that are sufficient
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 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.
(3) 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 those receiving telemedicine or distance
learning services.
(f) 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
project. Experience in a similar project is desirable but not required.
(g) Funding commitment from other sources. The applicant must
provide evidence, in form and substance satisfactory to RUS, that
funding agreements have been obtained to ensure completion of the
project. These agreements shall be sufficient to ensure:
(1) Payment of all proposed expenditures for the project;
(2) All required matching contribution in 1703.120;
(3) any additional matching funding provided in accordance with
Sec. 1703.126(b)(4); and
(4) Any other funds necessary to complete the project.
(h) A telecommunications system plan. A telecommunications system
plan consisting of the following:
(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.
[[Page 68]]
(i) Compliance with other Federal statutes. The applicant must
provide evidence of compliance with other Federal statutes and
regulations including, but not limited to the following:
(1) E.O. 11246, Equal Employment Opportunity, as amended by E.O.
11375 and as supplemented by regulations contained in 41 CFR part 60;
(2) Architectural barriers;
(3) Flood hazard area precautions;
(4) Assistance and Real Property Acquisition Policies Act of 1970;
(5) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);
(6) E.O.s 12549 and 12689, Debarment and Suspension;
(7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).
(j) Environmental impact and historic preservation. (1) The
applicant must provide details of the project's impact on the
environment and historic preservation. Grants made under this part are
subject to part 1794 of this chapter which contains RUS' policies and
procedures for implementing a variety of Federal statutes, regulations,
and executive orders generally pertaining to the 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) The applicant may use the ``Environmental Questionnaire,''
available from RUS, to assist in complying with the requirements of this
section.
(k) Evidence of legal authority and existence. The applicant must
provide evidence of its legal existence and authority to enter into a
grant agreement with RUS and perform the activities proposed under the
grant application.
(l) Federal debt certification. The applicant must provide a
certification that it is not delinquent on any obligation owed to the
government (7 CFR parts 3016 and 3019).
(m) Consultation with USDA State Director, Rural Development. The
applicant must provide evidence that it 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) State strategic plan conformity. The applicant must provide
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) 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 project would
further the purposes of the 1996 Act.
(p) Additional information required by RUS. The applicant must
provide any additional information RUS may consider relevant to the
application and necessary to adequately evaluate the application. RUS
may request modifications or changes, including changes in the amount of
financial assistance requested, in any proposal described in an
application submitted under this subpart.
[64 FR 14360, Mar. 25, 1999, as amended at 64 FR 25423, May 12, 1999]
Sec. 1703.126 Criteria for scoring grant 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. Applications for grants must meet the
rurality requirements in paragraph (b)(2)(iv) of this section and
address each of the following scoring criteria:
(1) The need for services and benefits derived from services (up to
55 points);
(2) The comparative rurality of the project service area (up to 45
points);
(3) The economic need of the applicant's service area as estimated
by the NSLP or other supplemental objective criteria (up to 35 points);
(4) The ability of the applicant to leverage resources (up to 35
points);
(5) Innovativeness of the project (up to 15 points);
(6) The cost effectiveness of the system (up to 35 points);
(7) Project participation in EZ/ECs (Empowerment Zone and Enterprise
Communities) and Champion Communities (up to 15 points).
(b) Scoring criteria:
[[Page 69]]
(1) The need for services and benefits derived from services--Up to
55 Points. (i) This criterion will be used by RUS to score applications
based on the documentation in support of the need for services, benefits
derived from the services proposed by the project, and local community
involvement in planning, implementing, and financial assistance of the
project. Applicants may receive up to 45 points for documenting the need
for services and benefits derived from service as explained in this
section. Applicants with an average NSLP percentage less than 50 percent
as determined in paragraph (b)(3) of this section may receive up to an
additional 10 points based on information submitted that evidences the
economic need of the project's service area. This determination will be
made by RUS based on information submitted by the applicant under
paragraph (b)(1) of this section.
(ii) RUS will consider the extent of the applicant's documentation
explaining the economic, education, or health care challenges facing the
community; the applicant's proposed plan to address these challenges;
how the grant can help; and why the applicant cannot complete the
project without a grant. RUS will also consider the extent to which the
applicant provides evidence that economic, education, or health care
challenges could not be addressed without employing advanced technology.
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.
(A) Some examples of benefits to be provided by the project include,
but are not limited to:
(1) Improved educational opportunities for a specified number of
students;
(2) Travel time and money saved by telemedicine diagnoses;
(3) Number of doctors retained in rural areas;
(4) Number of additional students electing to attend higher
education institutions;
(5) Lives saved due to prompt medical diagnoses and treatment;
(6) New education courses offered, including college level courses;
(7) Expanded use of educational facilities such as night training;
(8) Number of patients receiving telemedicine diagnoses;
(9) Provision of training, information resources, library assets,
adult education, lifetime learning, community use of technology, jobs,
connection to region, nation, and world.
(B) Other matters that will be considered by RUS under this
criterion include:
(1) 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 the extent possible, to contribute to the capital costs
of establishing the project. This could include letters of financial
commitment toward the project from local institutions.
(2) The extent of the project's planning, development, and support
by local residents and institutions. This may include evidence of
community involvement, as exemplified in community meetings, public
forums, and surveys. In addition, applicants should provide evidence of
local residents' participation in the project planning and development.
(3) The extent to which the application addresses the problems of
population out-migration and how the project seeks to slow, halt, or
prevent population loss.
(4) 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 project service area--Up to 45
Points. This criterion will be used to evaluate the relative rurality of
service areas for various projects. Under this system, the end user
sites and hubs (as defined in Sec. 1703.102) contained within the
project service area are identified and
[[Page 70]]
given a score according to the population of the area where the end user
sites are located.
(i) 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 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) Mid-Rural Area means any area of the United States included
within the boundaries of any incorporated or unincorporated city,
village, or borough having a population over 10,000 and not in excess of
20,000 inhabitants.
(D) 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 20,000 inhabitants.
(ii) There are a total of 45 possible points for this criterion.
Each end user site will receive points based on its location in
accordance with paragraph (b)(2)(i) of this section. If a hub is
utilized as an end user site, the hub will be considered as an end user
site. The applicant will receive points as follows:
(A) If the end user site is located in an Exceptionally Rural Area,
it will receive 45 points.
(B) If the end user site is located in a Rural Area, it will receive
30 points.
(C) If the end user site is located in a Mid-Rural Area, it will
receive 15 points.
(D) If the end user site is located in an Urban Area, it will
receive 0 points.
(iii) The total score for this criterion will be based on the
average score for all the end user sites included in the project.
(iv) An application must receive a minimum of 20 points as an
average score for all the end user sites under this criterion to be
eligible for a grant.
(3) The economic need of the applicant's service area as estimated
by NSLP--Up to 35 points. This criterion 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 NSLP for each area to be served by the
end user site. The appropriate State or local organization administering
the program must certify the percentages as being correct. The applicant
must provide RUS with a listing of the location of each end user site
(city, town, village, borough or rural area plus the State) discussing
how the appropriate NSLP percentage was determined in accordance with
this section. 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. For purposes of this subpart, the NSLP
percentage will reflect the percentage of eligibility rather than the
percentage of actual participation.
(i) The following guidelines will be used to determine the
applicable NSLP percent for a particular application:
(A) Public schools or non-profit private schools of high school
grade or under will use the actual eligibility percentage for that
particular school.
(B) Schools and institutions of higher learning ineligible to
participate in the NSLP 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.
(C) 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.
(D) The project NSLP percentage will be determined by the average of
the NSLP percentages of the end user sites. 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. 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.
(ii) The applicant will receive points as follows:
(A) NSLP percentage greater than or equal to 75 percent--35 points
[[Page 71]]
(B) NSLP percentage greater than or equal to 50 percent but less
than 75 percent--25 points
(C) NSLP percentage greater than or equal to 25 percent but less
than 50 percent--15 points
(D) NSLP percentage less than 25% percent--0 points
(4) The ability of the applicant to leverage resources--Up to 35
points. This criterion will be used to evaluate the ability of the
applicant to provide a matching contribution for the project using other
non-Federal financial assistance. Documentation submitted in support of
the application should reflect any additional financial support for the
project from non-Federal sources above the applicant's matching
contribution as required by Sec. 1703.120. Based on the maximum RUS
financial assistance percentage of 70 percent of eligible project costs,
the minimum matching as a percentage of the grant requested is 42.85
percent. The applicant must include evidence from authorized
representatives of the sources that the funds are available and will be
used for the project. The applicant will receive points as follows:
(i) Matching contribution for a grant for approved purposes greater
than 42.85 percent, but less than or equal to 70 percent of the grant--0
points.
(ii) Matching contribution for a grant for approved purposes greater
than 70 percent, but less than or equal to 100 percent of the grant--15
points.
(iii) Matching contribution for a grant for approved purposes
greater than 100 percent, but less than or equal to 150 percent of the
grant--25 points.
(iv) Matching contribution for a grant for approved purposes greater
than 150 percent, but less than or equal to 200 percent of the grant--30
points.
(v) Matching contribution for a grant for approved purposes greater
than 200 percent of the grant--35 points.
(5) Innovativeness of the project--Up to 15 points. This criterion
will be used to evaluate the innovativeness of application based on
documentation that shows how the project utilizes advanced
telecommunications in a unique way to address the needs of the
community. Innovativeness should be addressed in the context of how the
project will deliver distance learning or telemedicine services more
effectively or at a lower cost. The following issues may be addressed to
show how the project differs from a typical distance learning and
telemedicine network as follows:
(i) The extent to which the project differs from a technical
standpoint;
(ii) The extent to which the project differs from an educational or
medical programmatic standpoint;
(iii) The extent to which the project reflects a unique adaptation
of technology based on the special needs or circumstances of the
proposed area to be served by the project; and
(iv) The potential of the project to influence or lead changes in
how telecommunications services can be delivered in other areas.
(6) The cost-effectiveness of the project--Up to 35 points. This
criterion will be used to evaluate the cost effectiveness of the
application based on the extent that cost-efficiency is considered in
delivering the services in the project. The following issues should be
addressed under this criterion:
(i) The extent to which the applicant has considered various
technological options for delivering the services. The applicant must
provide sufficient documentation reflecting accepted analytical and
financial methodologies to substantiate its choice of technology as the
most cost-effective option. RUS will consider the applicant's
documentation and analysis comparing various systems and technologies.
(ii) Whether buying or leasing specific equipment is more cost
effective.
(iii) The extent to which the project will utilize other existing
networks at the regional, statewide, national or international levels.
To the extent possible, educational and health care networks should be
designed to utilize the widest practicable number of other networks that
expand the capabilities of the project, thereby affording rural
residents opportunities that may not be available at the local level.
The ability to connect to the Internet alone cannot be used as the sole
basis to fulfill this criteria.
(iv) The extent to which the facilities being constructed with
financial assistance, particularly financial assistance under this
chapter provided to entities
[[Page 72]]
other than the applicant, will be utilized to extend or enhance the
benefits of the project.
(v) The extent to which the project utilizes existing
telecommunications transmission facilities that could provide the
transmission path for the needed services. For projects that do not
utilize existing transmission facilities, RUS will consider
documentation explaining the necessity of this option. RUS will also
consider any agreements between the applicant and other entities for
sharing transmission facilities to lower the fixed costs of such
facilities.
(7) Project participation in EZ/ECs and champion communities--(Up to
15 Points). This criterion will be used by RUS to score applications
based on the number of end user sites within an EZ/EC and Champion
Community. Ten (10) points will be assigned if at least one end user
site is located in an EZ/EC. Five (5) points will be assigned if at
least one end user site is located in a Champion Community.
[64 FR 14360, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.127 Application selection provisions.
(a) Applications will be selected for approval based on scores
assigned, 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; costs;
location; and other characteristics of the application and the project
to determine the number of points assigned to a grant application for
all selection criteria.
(b) Regardless of the number of points an application receives in
accordance with Sec. 1703.126, 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. In this case,
however, the Administrator will provide the applicant of the higher
scoring application the opportunity to reduce the amount of its grant
request to the amount of funds available. If the applicant agrees to
lower its grant request, it must certify that the purposes of the
project can be met, and the Administrator must determine the project is
financially feasible at the lower amount in accordance with
Sec. 1703.125(e)(1). An applicant or multiple applicants affected under
this paragraph will have the opportunity to be considered for loan
financing in accordance with subparts F and G of this part.
(c) RUS will not approve a grant 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. 1703.125(e)(1);
(2) The applicant's proposal indicates technical flaws, which, in
the opinion of RUS, would prevent successful implementation, operation,
or sustainability of the project;
(3) Other applications would provide more benefit to rural America
based on a review of the financial and technical information submitted
in accordance with Sec. 1703.125(e).
(4) Any other aspect of the applicant's proposal fails to adequately
address any requirement 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 contained in Sec. 1703.101.
(d) Grant applications will be ranked by the type of application
(health care or educational) and total points scored. Grants available
for medical and educational applicants may 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. Based on
the number and type of applications received, applications may be ranked
only in one category based on the predominant use of the project.
(e) RUS may reduce the amount of the applicant's grant based on
insufficient program funding for the fiscal
[[Page 73]]
year in which the project is reviewed. 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 (f) of this
section.
(f) RUS will provide the applicant with an explanation of any
determinations made with regard to paragraphs (c)(1) through (c)(4) 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. 1703.129.
(g) Grantees shall comply with all applicable provisions of 7 CFR
parts 3015, 3016, and 3019.
[64 FR 14360, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.128 Submission of applications.
(a) Applications for grants shall be submitted to the RUS, 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 must be submitted to RUS postmarked not later than
the application filing deadline established by the Administrator if the
applications are to be considered during the period for which the
application was submitted. The deadline for submission of applications
each fiscal year will be published, and provided through other notices,
by RUS in the Federal Register, at least 30 days before the deadline
occurs. It is suggested that applications be submitted prior to the
respective deadline to ensure they can be reviewed and considered
complete by the deadline. RUS will review each application for
completeness in accordance with Sec. 1703.125, and notify the applicant,
within 15 working days of the receipt of the application, of the results
of this review, citing any information that is incomplete. To be
considered for a grant, the applicant must submit the information to
complete the application within 15 working days of the date of RUS'
written response. If the applicant has submitted an application prior to
the application filing deadline, the applicant will have 15 working days
from RUS' response or until the application filing deadline to submit
information, whichever provides the applicant more time. If the
applicant fails to submit such information by the appropriate deadline,
the application will be considered during the next established
application period.
(c) All applicants must submit an original and two copies of a
completed application. Applicants 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 required by
Sec. 1703.125.
Sec. 1703.129 Appeals.
All qualifying applications under this subpart will be scored based
on the criteria contained in Sec. 1703.126. Awards will be made by RUS
based on the highest ranking applications and the amount of financial
assistance available for grants. 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,
that 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
[[Page 74]]
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, RUS, 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.
Subpart F--Distance Learning and Telemedicine Combination Loan and Grant
Program
Source: 64 FR 14366, Mar. 25, 1999, unless otherwise noted.
Sec. 1703.130 Use of combination loan and grant.
(a) A combination loan and grant may be used by eligible
organizations as defined in Sec. 1703.103 for distance learning and
telemedicine projects to finance 100 percent of the cost of approved
purposes contained in Sec. 1703.131 provided that no financial
assistance may exceed the maximum amount for the year in which the
combination loan and grant is made.
(b) Applicants must meet the minimum eligibility requirement for
determining the extent to which the project serves rural areas as
determined in Sec. 1703.126(b)(2) (the applicant must receive at least
20 points to be eligible to receive financial assistance under this
subpart).
Sec. 1703.131 Approved purposes for a combination loan and grant.
The approved purposes for a combination loan and grant are:
(a) Acquiring, by lease or purchase, eligible equipment or
facilities as defined in Sec. 1703.102;
(b) Acquiring instructional programming;
(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 a combination loan and grant (this
purpose shall not exceed 10 percent of the total requested financial
assistance);
(d) Paying for medical or educational equipment and facilities that
are shown to be necessary to implement the project, including vehicles
utilizing distance learning and telemedicine technology to deliver
educational and health care services. The applicant must demonstrate
that such items are necessary to meet the purposes under this subpart
and financial assistance for such equipment and facilities is not
available from other sources at a cost which would not adversely affect
the economic viability of the project;
(e) Providing links between teachers and students or medical
professionals who are located at the same facility, provided that such
facility receives or provides distance learning or telemedicine services
as part of a distance learning or telemedicine network which meets the
purposes of this subpart;
(f) Providing for site development and alteration of buildings in
order to meet the purposes of this subpart. Financial assistance for
this purpose must be necessary and incidental to the total amount of
financial assistance requested;
(g) Purchasing of land, buildings, or building construction
determined by RUS to be necessary and incidental to the project. The
applicant must demonstrate that financial assistance funding from other
sources is not available at a cost that does not adversely impact the
economic viability of the project as determined by the Administrator.
Financial assistance for this purpose must be necessary and incidental
to the total amount of financial assistance requested; and
(h) Acquiring telecommunications transmission facilities provided
that no telecommunications carrier will install such facilities under
the Act or through other financial procedures within a reasonable time
period and at a cost to the applicant that does not impact the economic
viability of the
[[Page 75]]
project, as determined by the Administrator.
Sec. 1703.132 Nonapproved purposes for a combination loan and grant.
(a) Without limitation, a combination loan and grant made under this
subpart shall not be expended:
(1) To pay salaries, wages, or employee benefits to medical or
educational personnel;
(2) To pay for the salaries or administrative expenses of the
applicant or the project;
(3) To purchase equipment that will be owned by the local exchange
carrier or another telecommunications service provider, unless the
applicant is the local exchange carrier or other telecommunications
service provider;
(4) 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;
(5) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 et seq.);
(6) For any purpose that the Administrator has not specifically
approved;
(7) Except for leases (see Sec. 1703.131), to pay the cost of
recurring or operating expenses for the project; or,
(8) For any other purposes not specifically outlined in
Sec. 1703.131.
(b) Except as otherwise provided in Sec. 1703.112, funds shall not
be used to finance a project, in part, when the success of the project
is dependent upon the receipt of additional financial assistance under
this subpart or is dependent upon the receipt of other funding that is
not assured.
Sec. 1703.133 Maximum and minimum amounts.
Applications for a combination loan and grant under this subpart
will be subject to limitations on the proposed amount of loans and
grants. The Administrator will establish the maximum amount of loans and
grants and the portion of grant funds as a percentage of total
assistance for each project 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 before the beginning of
the fiscal year to carry out this subpart. The minimum amount of a
combination loan and grant is $50,000.
Sec. 1703.134 Completed application.
The following items are required to be submitted to RUS in support
of an application for a combination loan and grant:
(a) An application for federal assistance: A completed Standard Form
424.
(b) An executive summary of the project: The applicant must provide
RUS with a general project overview that addresses each of 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, the 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 in
accordance with Sec. 1703.103;
(4) An explanation of the total project cost including a breakdown
of the combination loan and grant required and the source of funding, if
applicable, for the remainder of the project;
(5) A statement specifying whether the project provides
predominantly distance learning or telemedicine services 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 that will be served by the project at each
end user site;
(8) A certification by the applicant that facilities constructed
with a combination loan and grant do not duplicate adequately
established telemedicine or distance learning services.
[[Page 76]]
(9) A listing of the location of each end user site (city, town,
village, borough, or rural area plus the State).
(c) A scope of work. The scope of work must include, 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 combination loan and grant and any other sources of funds
for the project.
(d) Financial information. The applicant must show its financial
ability to complete the project; show project feasibility; and provide
evidence that it can execute a note for a loan with a maturity period
greater than one year. 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 that
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 and repay the loan portion of the combination loan and
grant. 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, provide for replacement of depreciable
items, and show repayment of interest and principal for the loan portion
of the combination loan and grant.
(2) A list of property which will be used as collateral to secure
repayment of the loan. The applicant shall purchase and own collateral
that secures the loan free from liens or security interests and take all
actions necessary to perfect a security interest in the collateral that
secures the loan. RUS considers as adequate security for a loan, a
guarantee by a RUS telecommunications or electric borrower or by another
qualified party. Additional forms of security, including letters of
credit, real estate, or any other items will be considered. RUS will
determine the adequacy of the security offered.
(3) As applicable, a depreciation schedule covering all assets of
the project. Those assets for which a combination loan and grant are
being requested should be clearly indicated.
(4) 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.
(5) 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.
(e) 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 similar to the project. Experience
in a similar project is desirable but not required.
[[Page 77]]
(f) A telecommunications system plan. A telecommunications system
plan, consisting of the following (the items in paragraphs (f)(4) and
(f)(5) of this section are required only when the applicant is
requesting a combination loan and grant 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 a
combination loan and grant.
(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 discussions with local exchange carriers serving the
project area addressing the concerns contained in Sec. 1703.131(h).
(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) Compliance with other Federal statutes. The applicant must
provide evidence of compliance with other federal statutes and
regulations including, but not limited to the following:
(1) E.O. 11246, Equal Employment Opportunity, as amended by E.O.
11375 and as supplemented by regulations contained in 41 CFR part 60;
(2) Architectural barriers;
(3) Flood hazard area precautions;
(4) Assistance and Real Property Acquisition Policies Act of 1970;
(5) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);
(6) E.O.s 12549 and 12689, Debarment and Suspension;
(7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).
(h) Environmental impact and historic preservation. (1) The
applicant must provide details of the project's impact on the
environment and historic preservation. Loans and grants made under this
part are subject to 7 CFR part 1794 which contains RUS' policies and
procedures for implementing a variety of Federal statutes, regulations,
and Executive orders generally pertaining to the 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) The applicant may use the ``Environmental Questionnaire,''
available from RUS, to assist in complying with the requirements of this
section.
[[Page 78]]
(i) Evidence of legal authority and existence. The applicant must
provide evidence of its legal existence and authority to enter into a
grant and incur debt with RUS.
(j) Federal debt certification. The applicant must provide evidence
that it is not delinquent on any obligation owed to the government.
(k) 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 project would
further the purposes of this subpart.
(l) Additional information required by RUS. The applicant must
provide any additional information RUS 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.
[64 FR 14366, Mar. 25, 1999; 64 FR 25422, May 12, 1999, as amended at 64
FR 25423, May 12, 1999]
Sec. 1703.135 Application selection provisions.
(a) A combination loan and grant will be approved based on
availability of funds, the financial feasibility of the project in
accordance with Sec. 1703.134(d), the services to be provided which
demonstrate that the project meets the general requirements of this
subpart, the design of the project; costs; location; and other
characteristics of the application.
(b) RUS will determine, from the information submitted with each
application for a combination loan and grant, whether the application
achieves sufficient priority, based on the criteria set forth in the
1996 Act, to receive a combination loan and grant from funds available
for the fiscal year. If such priority is achieved, RUS will process the
combination loan and grant application on a first-in, first-out basis,
provided that the total amount of applications on-hand for combination
loans and grants does not exceed 90 percent of the total loan and grant
funding available for the fiscal year. At such time as the total amount
of applications eligible for combination loans and grants, if such
applications were approved, exceeds 90 percent of amount of combination
loan and grant funding available, RUS will process the remaining
applications using the evaluation criteria set forth in Sec. 1703.126.
(c) RUS will not approve a combination loan and grant if RUS
determines that:
(1) The applicant's proposal does not indicate financial
feasibility, or will not be adequately secured in accordance with the
requirements contained in Sec. 1703.134(d);
(2) The applicant's proposal indicates technical flaws, which, in
the opinion of RUS, would prevent successful implementation, or
operation of the 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 contained in Sec. 1703.101.
(d) RUS will provide the applicant with a statement of any
determinations made with regard to paragraphs (c)(1) through (c)(3) of
this section. 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. 1703.137.
Sec. 1703.136 Submission of applications.
(a) RUS will accept applications for a combination loan and grant
submitted by RUS telecommunications General Field representatives
(GFRs), by Rural Development State Directors, or by applicants
themselves. Applications for a combination loan and grant under this
subpart may be filed at any time and will be evaluated as received.
[[Page 79]]
(b) Applications submitted to the State Director, Rural Development,
in the State serving the headquarters of the project will be evaluated
as they are submitted. All applicants must submit an original and two
copies of a completed application. The 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 the State Director. The State Director will:
(1) Review each application for completeness in accordance with
Sec. 1703.134, and notify the applicant, within 15 working days of
receiving the application, of the results of this review, acknowledging
a complete application, or citing any information that is incomplete. To
be considered for a combination loan and grant, the applicant must
submit any additional information requested to complete the application
within 15 working days of the date of the State Director's written
response. If the applicant fails to submit such information, the
application will be returned to the applicant.
(2) Within 30 days of the determination of a completed application
in accordance with paragraph (b)(1) of this section, review the
application to determine suitability for financial assistance in
accordance with Sec. 1703.135, and other requirements of this subpart.
Based on its review, the State Director will work with the applicant to
resolve any questions or obtain any additional information. The
applicant will be notified, in writing, of any additional information
required to allow a financial assistance recommendation and will be
provided a reasonable period of time to furnish the additional
information.
(3) Based on the review in accordance with Sec. 1703.135 and other
requirements of this subpart, make a preliminary determination of
suitability for financial assistance. A combination loan and grant
recommendation will be prepared by the State Director with concurrence
of the RUS telecommunications GFR that addresses the provisions of
sections Sec. 1703.134 and Sec. 1703.135 and other applicable
requirements of this subpart.
(4) If the application is determined suitable for further
consideration by RUS, forward an original and one copy of the
application with a financial assistance recommendation, signed jointly,
to the Assistant Administrator, Telecommunications Program, Rural
Utilities Service, Washington, DC. The applicant will be notified by
letter of this action. Upon receipt of the application from the State
Director, RUS will conduct a review of the application and the financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a combination loan and grant
can be approved, the State Director will be notified and the State
Director will notify the applicant. A combination loan and grant will be
processed, approved, and serviced in accordance with Secs. 1703.105
through 1703.112 of subpart D.
(5) If the State Director determines that the application is not
suitable for further consideration by RUS, notify the applicant with the
reasons for this determination. The applicant may appeal this
determination pursuant to section Sec. 1703.137 of this subpart.
(c) Applications submitted by RUS telecommunications GFRs or
directly by applicants will be evaluated as they are submitted. All
applicants must submit an original and two copies of a completed
application. The 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. RUS will:
(1) Review each application for completeness in accordance with
Sec. 1703.134, and notify the applicant, within 15 working days of
receiving the application, of the results of this review, acknowledging
a complete application, or citing any information that is incomplete. To
be considered for a combination loan and grant assistance, the applicant
must submit any additional information requested to complete the
application within 15 working days of the date of the RUS written
response. If the applicant fails to submit such information, the
application will be returned to the applicant.
(2) Within 30 days of the determination of a completed application
in accordance with paragraph (c)(1) of this
[[Page 80]]
section, review the application to determine suitability for financial
assistance in accordance with Sec. 1703.135, and other requirements of
this subpart. Based on its review, RUS will work with the applicant to
resolve any questions or obtain any additional information. The
applicant will be notified, in writing, of any additional information
required to allow a financial assistance recommendation and will be
provided a reasonable period of time to furnish the additional
information.
(3) If the application is determined suitable for further
consideration by RUS, conduct a review of the application and financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a combination loan and grant
can be approved, the applicant will be notified. A combination loan and
grant will be processed, approved, and serviced in accordance with
Secs. 1703.105 through 1703.112 of subpart D.
(4) If RUS determines that the application is not suitable for
further consideration, notify the applicant with the reasons for this
determination. The applicant will be able to appeal in accordance with
Sec. 1703.137 of this subpart.
Sec. 1703.137 Appeals.
Any appeal must be made, in writing, within 10 days after the
applicant is notified of the determination to deny the application.
Appeals shall be submitted to the Administrator, RUS, U.S. Department of
Agriculture, 1400 Independence Ave., SW., STOP 1590, Washington, DC
20250-1590. Thereafter, the Administrator will review the appeal to
determine whether to sustain, reverse, or modify the original
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.
Secs. 1703.138-1703.139 [Reserved]
Subpart G--Distance Learning and Telemedicine Loan Program
Source: 64 FR 14369, Mar. 25, 1999, unless otherwise noted.
Sec. 1703.140 Use of loan funds.
A loan may be used by eligible organizations as defined in
Sec. 1703.103 for distance learning and telemedicine projects to finance
100 percent of the cost of approved purposes contained in Sec. 1703.141
provided that no financial assistance may exceed the maximum amount for
the year in which the loan is made. Entities seeking a loan must be able
to provide security and execute a note with a maturity period greater
than one year. The following entities are eligible for loans under this
subpart:
(a) Organizations as defined in Sec. 1703.103. If a RUS
telecommunications borrower is seeking a loan, the borrower does not
need to submit all of the financial security information required by
Sec. 1703.144(d). The borrower's latest financial report (Form 479)
filed with RUS and any additional information relevant to the project,
as determined by RUS, will suffice;
(b) Any non-profit or for-profit entity, public or private entity,
urban or rural institution, or rural educational broadcaster, which
proposes to provide and receive distance learning and telemedicine
services to carry out the purposes of this subpart; or
(c) Any entity that contracts with an eligible organization in
paragraphs (a) or (b) of this section for constructing distance learning
or telemedicine facilities for the purposes contained in Sec. 1703.141,
except for those purposes in Sec. 1703.141(h).
(d) Applicants must meet the minimum eligibility requirement for
determining the extent to which the project serves rural areas as
contained in Sec. 1703.126(b)(2) (the applicant must receive at least 20
points to be eligible to receive financial assistance under this
subpart).
[64 FR 14369, Mar. 25, 1999, as amended at 64 FR 25423, May 12, 1999]
Sec. 1703.141 Approved purposes for loans.
The following are approved purposes for loans:
(a) Acquiring, by lease or purchase, eligible equipment or
facilities as defined in Sec. 1703.102;
[[Page 81]]
(b) Acquiring instructional programming;
(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 loan (financial assistance for
this purpose shall not exceed 10 percent of the requested financial
assistance);
(d) Paying for medical or educational equipment and facilities which
are shown to be necessary to implement the project, including vehicles
utilizing distance learning and telemedicine technology to deliver
educational and health care services. The applicant must demonstrate
that such items are necessary to meet the purposes under this subpart
and financial assistance for such equipment and facilities is not
available from other sources at a cost which would not adversely affect
the economic viability of the project;
(e) Providing links between teachers and students or medical
professionals who are located at the same facility, provided that such
facility receives or provides distance learning or telemedicine services
as part of a distance learning or telemedicine network which meets the
purposes of this subpart;
(f) Providing for site development and alteration of buildings in
order to meet the purposes of this subpart. Loans for this purpose must
be necessary and incidental to the total amount of financial assistance
requested;
(g) Purchasing of land, buildings, or building construction, where
such costs are demonstrated necessary to construct distance learning and
telemedicine facilities. The applicant must demonstrate that funding
from other sources is not available at a cost which does not adversely
impact the economic viability of the project as determined by the
Administrator. Financial assistance for this purpose must be necessary
and incidental to the total amount of financial assistance requested;
(h) Acquiring of telecommunications transmission facilities provided
that no telecommunications carrier will install such facilities under
the Act or through other financial procedures within a reasonable time
period and at a cost to the applicant that does not impact the economic
viability of the project, as determined by the Administrator;
(i) Any project costs, except for salaries and administrative
expenses, not included in paragraphs (a) through (h) of this section,
incurred during the first two years of operation after the financial
assistance has been approved. The applicant must show that financing
such costs are necessary for the establishment or continued operation of
the project and that financing is not available for such costs
elsewhere, including from the applicant's financial resources. The
Administrator will determine whether such costs will be financed based
on information submitted by the applicant. Loans shall not be made
exclusively to finance such costs, and financing for such costs will not
exceed 20 percent of the loan provided to a project under this section;
and
(j) All of the costs needed to provide distance learning
broadcasting to rural areas. Loans may be used to cover the costs of
facilities and end-user equipment dedicated to providing educational
broadcasting to rural areas for distance learning purposes. If the
facilities are not 100 percent dedicated to broadcasting, a portion of
the financing may be used to fund such facilities based on a percentage
of use factor that approximates the distance learning broadcasting
portion of use.
[64 FR 14369, Mar. 25, 1999, as amended at 64 FR 25423, May 12, 1999]
Sec. 1703.142 Nonapproved purposes for loans.
(a) Loans made under this subpart will not be provided to pay the
costs of recurring or operating expenses incurred after two years from
approval of the project except for leases (see Sec. 1703.141).
(b) Loans made under this subpart will not be provided for any of
the following costs:
(1) To purchase equipment that will be owned by the local exchange
carrier
[[Page 82]]
or another telecommunications service provider, unless the applicant is
the local exchange carrier or other telecommunications service provider;
(2) 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;
(3) For projects located in areas covered by the Coastal Barrier
Resources Act (16 U.S.C. 3501 et seq.); or
(4) To pay for salaries, wages, or administrative expenses; or
(5) For any purpose that the Administrator has not specifically
approved.
(c) Except as otherwise provided in Sec. 1703.112, funds shall not
be used to finance a project, in part, when the success of the project
is dependent upon the receipt of additional financial assistance under
this subpart G or is dependent upon the receipt of other funding that is
not assured.
[64 FR 14369, Mar. 25, 1999, as amended at 64 FR 25423, May 12, 1999]
Sec. 1703.143 Maximum and minimum amounts.
Applications for loans under this subpart will be subject to
limitations on the proposed amount of loans. The Administrator will
establish the maximum amount of a loan available to an applicant under
this subpart, by publishing notice of the maximum amount in the Federal
Register before the opening of the application window. The minimum
amount of a loan is $50,000.
Sec. 1703.144 Completed application.
The following items are required to be submitted in support of an
application for a loan:
(a) An application for federal assistance: A completed standard form
424.
(b) An executive summary of the project. The applicant must provide
RUS with a general project overview that addresses each of the following
9 categories:
(1) A description of why the project is needed;
(2) An explanation of how the applicant will address the need (see
paragraph (b)(1) of this section), why the applicant requires financial
assistance, the 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 in
accordance with Sec. 1703.103;
(4) An explanation of the total project cost including a breakdown
of the loan required and the source of funding, if applicable, for the
remainder of the project;
(5) A statement specifying whether the project provides
predominantly distance learning or telemedicine services 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 project at
each end user site;
(8) A certification by the applicant that facilities funded by a
loan do not duplicate adequate established telemedicine or distance
learning services.
(9) A listing of the location of each end user site (city, town,
village, borough, or rural area plus the State).
(c) A scope of work. The scope of work must include, 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 the loan and any other sources of funds for the project.
(d) Financial information. The applicant must show its financial
ability to complete the project; show project feasibility; and provide
evidence that it can execute a note for a loan for a maturity period
greater than one year. 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.
[[Page 83]]
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 and repay the requested loan. 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, provide for replacement of depreciable items, and
show repayment of interest and principal for the loan.
(2) A list of property which will be used as collateral to secure
repayment of the proposed loan. The applicant shall purchase and own
collateral that secures the loan free from liens or security interests
and take all actions necessary to perfect a first lien in the collateral
that secures the loan. RUS will consider as adequate security a loan
guarantee by a telecommunications or electric borrower or by another
qualified party. Additional forms of security, including letters of
credit, real estate, or any other items will be considered. RUS will
determine the adequacy of the security offered.
(3) As applicable, a depreciation schedule covering all assets of
the project. Those assets for which a loan is being requested should be
clearly indicated.
(4) 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.
(5) 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.
(e) 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
project. Experience in a similar project is desirable but not required.
(f) A telecommunications system plan. A telecommunications system
plan, consisting of the following (the items in paragraphs (f)(4) and
(f)(5) of this section are required only when the applicant is
requesting a loan 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
[[Page 84]]
elements of the telecommunications system designed to further the
purposes of this subpart, that the applicant intends to build or fund
using a loan.
(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 discussions with local exchange carriers serving the
project area addressing the concerns contained in Sec. 1703.141(h).
(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) Compliance with other Federal statutes. The applicant must
provide evidence of compliance with other Federal statutes and
regulations including, but not limited to the following:
(1) E.O. 11246, Equal Employment Opportunity, as amended by E.O.
11375 and as supplemented by regulations contained in 41 CFR part 60;
(2) Architectural barriers;
(3) Flood hazard area precautions;
(4) Assistance and Real Property Acquisition Policies Act of 1970;
(5) Drug-Free Workplace Act of 1998 (41 U.S.C. 701);
(6) E.O.s 12549 and 12689, Debarment and Suspension;
(7) Byrd Anti-Lobbying Amendment (31 U.S.C. 1352).
(h) Environmental impact and historic preservation. (1) The
applicant must provide details of the project's impact on the
environment and historic preservation. Loans made under this part are
subject to 7 CFR part 1794 which contains RUS' policies and procedures
for implementing a variety of Federal statutes, regulations, and
executive orders generally pertaining to the 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) The applicant may use the ``Environmental Questionnaire,''
available from RUS, to assist in complying with the requirements of this
section.
(i) Evidence of legal authority and existence. The applicant must
provide evidence of its legal existence and authority to enter into debt
with RUS and perform the activities proposed under the loan application.
(j) Federal debt certification. The applicants must provide a
certification that it is not delinquent on any obligation owed to the
government (7 CFR parts 3016 and 3019).
(k) 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 project would
further the purposes of this subpart.
(l) Additional information required by RUS. The applicant must
provide any additional information RUS determines is necessary to
adequately evaluate the application. Modifications or changes, including
changes in the loan amount requested, may be requested in any project
described in an application submitted under this subpart.
[64 FR 14369, Mar. 25, 1999; 64 FR 25422, May 12, 1999, as amended at 64
FR 25423, May 12, 1999]
Sec. 1703.145 Application selection provisions.
(a) Loans will be approved based on availability of funds, the
financial feasibility of the project in accordance
[[Page 85]]
with Sec. 1703.144(d), the services to be provided which demonstrate
that the project meets the general requirements of this subpart, the
design of the project; costs; location; and other characteristics of the
application.
(b) RUS will determine, from the information submitted with each
application for a loan, whether the application achieves sufficient
priority, based on the criteria set forth in the 1996 Act, to receive a
loan from funds available for the fiscal year. If such priority is
achieved, RUS will process the loan application on a first-in, first-out
basis, provided that the total amount of applications on-hand for loans
does not exceed 90 percent of the total loan funding available for the
fiscal year. At such time as the total amount of applications eligible
for loans, if such applications were approved, exceeds 90 percent of
amount of loan funding available, RUS will process the remaining
applications using the evaluation criteria set forth in Sec. 1703.126.
(c) A loan will not be approved if it is determined that:
(1) The applicant's proposal does not indicate financial
feasibility, or is not adequately secured in accordance with the
requirements of Sec. 1703.144(d);
(2) The applicant's proposal indicates technical flaws, which, in
the opinion of RUS, would prevent successful implementation, or
operation of the 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 contained in Sec. 1703.101.
(d) RUS will provide the applicant with a statement of any
determinations made with regard to paragraphs (c)(1) through (c)(3) of
this section. The applicant will be provided 15 days from the date of
the 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 loan
will not be approved, 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. 1703.147.
[64 FR 14369, Mar. 25, 1999; 64 FR 25422, May 12, 1999]
Sec. 1703.146 Submission of applications.
(a) RUS will accept applications for loans submitted by RUS
telecommunications General Field Representatives (GFRs), by Rural
Development State Directors, or by applicants themselves. Applications
for loans under this subpart may be filed at any time and will be
evaluated as received on a non-competitive basis.
(b) Applications submitted to the State Director, Rural Development,
in the State serving the headquarters of the project will be evaluated
as they are submitted. All applicants must submit an original and two
copies of a completed application. The 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 the State Director. The State Director will:
(1) Review each application for completeness in accordance with
Sec. 1703.144, and notify the applicant, within 15 working days of
receiving the application, of the results of this review, acknowledging
a complete application, or citing any information that is incomplete. To
be considered for a loan, the applicant must submit any additional
information requested to complete the application within 15 working days
of the date of the State Director's written response. If the applicant
fails to submit such information, the application will be returned to
the applicant.
(2) Within 30 days of the determination of a completed application
in accordance with paragraph (b)(1) of this section, review the
application to determine suitability for financial assistance in
accordance with Sec. 1703.145, and other requirements of this subpart.
Based on its review, the State Director will work with the applicant to
resolve any questions or obtain any additional information. The
applicant will be notified, in writing, of any additional information
required to allow a financial assistance recommendation and will be
[[Page 86]]
provided a reasonable period of time to furnish the additional
information.
(3) Based on the review in accordance with Sec. 1703.145 and other
requirements of this subpart, make a preliminary determination of
suitability for financial assistance. A loan recommendation will be
prepared by the State Director with concurrence of the RUS
telecommunications GFR that addresses the provisions of Secs. 1703.144
and 1703.145 and other applicable requirements of this subpart.
(4) If the application is determined suitable for further
consideration by RUS, forward an original and one copy of the
application with a loan recommendation, signed jointly, to the Assistant
Administrator, Telecommunications Program, Rural Utilities Service,
Washington DC. The applicant will be notified by letter of this action.
Upon receipt of the application from the State Director, RUS will
conduct a cursory review of the application and the recommendation. A
final determination will be made within 15 days. If the Administrator
determines that a loan can be approved, the State Director will be
notified and the State Director will notify the applicant. Applications
for loans will be processed, and approved loans serviced, in accordance
with Secs. 1703.105 through 1703.112.
(5) If the State Director determines that the application is not
suitable for further consideration by RUS, notify the applicant with the
reasons for this determination. The applicant will be offered appeal
rights in accordance with Sec. 1703.147.
(c) Applications submitted by RUS telecommunications GFRs or
directly by applicants will be evaluated as they are submitted. All
applicants must submit an original and two copies of a completed
application. The 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 the RUS. RUS
will:
(1) Review each application for completeness in accordance with
Sec. 1703.144, and notify the applicant, within 15 working days of
receiving the application, of the results of this review, acknowledging
a complete application, or citing any information that is incomplete. To
be considered for a loan, the applicant must submit any additional
information requested to complete the application within 15 working days
of the date of the RUS written response. If the applicant fails to
submit such information, the application will be returned to the
applicant.
(2) Within 30 days of the determination of a completed application
in accordance with paragraph (c)(1) of this section, review the
application to determine suitability for financial assistance in
accordance with this subpart. Based on its review, RUS will work with
the applicant to resolve any questions or obtain any additional
information. The applicant will be notified, in writing, of any
additional information required to allow a financial assistance
recommendation and will be provided a reasonable period of time to
furnish the additional information.
(3) If the application is determined suitable for further
consideration by RUS, conduct a review of the application and financial
assistance recommendation. A final determination will be made within 15
days. If the Administrator determines that a loan can be approved, the
applicant will be notified. Applications will be processed, and approved
loans serviced, in accordance with Secs. 1703.105 through 1703.112 of
subpart D.
(4) If RUS determines that the application is not suitable for
further consideration, notify the applicant with the reasons for this
determination. The applicant will be offered appeal rights in accordance
with Sec. 1703.147 of this subpart.
Sec. 1703.147 Appeals.
Any appeal must be made, in writing, within 10 days after the
applicant is notified of the determination to deny the application.
Appeals shall be submitted to the Administrator, RUS, U.S. Department of
Agriculture, 1400 Independence Ave., SW., STOP 1590, Washington, DC
20250-1590. Thereafter, the Administrator will review the appeal to
determine whether to sustain, reverse, or modify the original
determination. Final determinations will be made after consideration of
all appeals. The Administrator's determination
[[Page 87]]
will be final. A copy of the Administrator's decision will be furnished
promptly to the applicant.
Subpart H--Deferments of RUS Loan Payments for Rural Development
Projects
Source: 58 FR 21639, Apr. 23, 1993, unless otherwise noted.
Redesignated at 64 FR 14356, Mar. 25, 1999.
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).
[[Page 88]]
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.
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,
[[Page 89]]
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 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.
[[Page 90]]
(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.
(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
[[Page 91]]
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.
(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]
[[Page 92]]
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]
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--Load Forecasts
1710.200 Purpose.
1710.201 General.
1710.202 Requirement to prepare a load forecast-power supply borrowers.
1710.203 Requirement to prepare a load forecast-distribution borrowers.
1710.204 Filing requirements for borrowers that must maintain a current
RUS approved load forecast on an ongoing basis.
1710.205 Minimum requirements for all borrower load forecasts.
1710.206 Requirements for load forecasts prepared pursuant to RUS
approved load forecast work plans.
1710.207 RUS approval criteria for approval of load forecasts by
distribution borrowers not required to maintain a current load
forecast on an ongoing basis.
1710.208 RUS approval criteria for load forecasts submitted by all
power supply borrowers and by distribution borrowers required
to maintain a current load forecast on an ongoing basis.
1710.209 Requirements for load forecast work plans.
1710.210 Waiver of requirements or approval criteria.
1710.211-1710.249 [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 et seq., 1921 et seq., 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.
[[Page 93]]
(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
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.
Approved load forecast means a load forecast that RUS has determined
is current for RUS purposes and has been approved by RUS pursuant to 7
CFR part 1710, subpart E.
Approved load forecast work plan means a load forecast work plan
that RUS has determined is current for RUS' purposes and has been
approved pursuant to 7 CFR part 1710, subpart E.
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
[[Page 94]]
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 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
[[Page 95]]
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.
Load forecast 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.
Load forecast work plan means the plan that contains the resources,
methods, schedules, and milestones to be used in the preparation and
maintenance of a load forecast.
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
[[Page 96]]
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 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) has the same meaning as load
forecast.
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 has the same meaning as load forecast work plan.
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.
[[Page 97]]
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 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
[[Page 98]]
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 ``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; 65 FR
14786, Mar. 20, 2000]
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;
[[Page 99]]
(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
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
[[Page 100]]
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 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
[[Page 101]]
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 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:
[[Page 102]]
(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 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 1.25 and a pro forma
DSC of not less than 1.25 for each of the two proceeding 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 1.25, 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;
[[Page 103]]
(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;
(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
[[Page 104]]
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; 65
FR 51748, Aug. 25, 2000]
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 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
[[Page 105]]
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
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
[[Page 106]]
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 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
[[Page 107]]
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, the cost of system improvements and
removals less salvage value, the cost of ordinary replacements and
removals less salvage value, needed to meet load growth requirements,
improve the quality of service, or replace existing facilities.
(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, the cost of
system improvements and removals, less salvage value, the cost of
ordinary replacements and removals less salvage value, needed to meet
load growth, improve the quality of service, or replace existing
facilities.
(ii) The purchase of an ownership interest in new or existing
transmission or generation facilities to serve RE Act beneficiaries.
(3) 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.
(4) Interest. The payment of interest on indebtedness incurred by a
borrower 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.
(5) 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
[[Page 108]]
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 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; 64 FR 33178, June 22,
1999]
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
[[Page 109]]
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:
(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
[[Page 110]]
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, 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
[[Page 111]]
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 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.
[[Page 112]]
(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]
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
[[Page 113]]
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 1.25, 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 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 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
[[Page 114]]
(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. 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;
65 FR 51748, Aug. 25, 2000]
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
[[Page 115]]
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 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
[[Page 116]]
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.
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
[[Page 117]]
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 the borrower for approval by RUS in order to support a loan
application:
(a) Load forecast. The load forecast provides the borrower and RUS
with an understanding of the borrower's future system loads, the factors
influencing those loads, and estimates of future loads. The load
forecast provides a basis for projecting annual electricity (kWh) sales
and revenues, and for engineering estimates of plant additions required
to provide reliable service to meet the forecasted loads. Subpart E of
this part contains the information to be included in a load forecast and
when an approved load forecast is required.
(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.
[57 FR 1053, Jan. 9, 1992, as amended at 65 FR 14786, Mar. 20, 2000]
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.
[[Page 118]]
Secs. 1710.154-1710.199 [Reserved]
Subpart E--Load Forecasts
Source: 65 FR 14786, Mar. 20, 2000, unless otherwise noted.
Sec. 1710.200 Purpose.
This subpart contains RUS policies for the preparation, review,
approval and use of load forecasts and load forecast work plans. A load
forecast is a thorough study of a borrower's electric loads and the
factors that affect those loads in order to estimate, as accurately as
practicable, the borrower's future requirements for energy and capacity.
The load forecast of a power supply borrower includes and integrates the
load forecasts of its member systems. An approved load forecast, if
required by this subpart, is one of the primary documents that a
borrower is required to submit to support a loan application.
Sec. 1710.201 General.
(a) The policies, procedures and requirements in this subpart are
intended to implement provisions of the loan documents between RUS and
the electric borrowers and are also necessary to support approval by RUS
of requests for financial assistance.
(b) Notwithstanding any other provisions of this subpart, RUS may
require any power supply or distribution borrower to prepare a new or
updated load forecast for RUS approval or to maintain an approved load
forecast on an ongoing basis, if such documentation is necessary for RUS
to determine loan feasibility, or to ensure compliance under the loan
documents.
Sec. 1710.202 Requirement to prepare a load forecast--power supply borrowers.
(a) A power supply borrower with a total utility plant of $500
million or more must maintain an approved load forecast that meets the
requirements of this subpart on an ongoing basis and provide an approved
load forecast in support of any request for RUS financial assistance.
The borrower must also maintain an approved load forecast work plan. The
borrower's approved load forecast must be prepared pursuant to the
approved load forecast work plan.
(b) A power supply borrower that is a member of another power supply
borrower that has a total utility plant of $500 million or more must
maintain an approved load forecast that meets the requirements of this
subpart on an ongoing basis and provide an approved load forecast in
support of any request for RUS financial assistance. The member power
supply borrower may comply with this requirement by participation in and
inclusion of its load forecasting information in the approved load
forecast of its power supply borrower. The approved load forecasts must
be prepared pursuant to the RUS approved load forecast work plan.
(c) A power supply borrower that has total utility plant of less
than $500 million and that is not a member of another power supply
borrower with a total utility plant of $500 million or more must provide
an approved load forecast that meets the requirements of this subpart in
support of an application for any RUS loan or loan guarantee which
exceeds $50 million. The borrower is not required to maintain on an
ongoing basis either an approved load forecast or an approved load
forecast work plan.
Sec. 1710.203 Requirement to prepare a load forecast--distribution borrowers.
(a) A distribution borrower that is a member of a power supply
borrower with a total utility plant of $500 million or more must
maintain an approved load forecast that meets the requirements of this
subpart on an ongoing basis and provide an approved load forecast in
support of any request for RUS financial assistance. The distribution
borrower may comply with this requirement by participation in and
inclusion of its load forecasting information in the approved load
forecast of its power supply borrower. The distribution borrower's load
forecast must be prepared pursuant to the approved load forecast work
plan of its power supply borrower.
(b) A distribution borrower that is a member of a power supply
borrower which is itself a member of another power supply borrower that
has a total
[[Page 119]]
utility plant of $500 million or more must maintain an approved load
forecast that meets the requirements of this subpart on an ongoing basis
and provide an approved load forecast in support of any request for RUS
financial assistance. The distribution borrower may comply with this
requirement by participation in and inclusion of its load forecasting
information in the approved load forecast of its power supply borrower.
The distribution borrower's approved load forecast must be prepared
pursuant to the approved load forecast work plan of the power supply
borrower with total utility plant in excess of $500 million.
(c) A distribution borrower that is a member of a power supply
borrower with a total utility plant of less than $500 million must
provide an approved load forecast that meets the requirements of this
subpart in support of an application for any RUS loan or loan guarantee
that exceeds $3 million or 5 percent of total utility plant, whichever
is greater. The distribution borrower may comply with this requirement
by participation in and inclusion of its load forecasting information in
the approved load forecast of its power supply borrower. The borrower is
not required to maintain on an ongoing basis either an approved load
forecast or an approved load forecast work plan.
(d) A distribution borrower with a total utility plant of less than
$500 million and that is unaffiliated with a power supply borrower must
provide an approved load forecast that meets the requirements of this
subpart in support of an application for any RUS loan or loan guarantee
which exceeds $3 million or 5 percent of total utility plant, whichever
is greater. The borrower is not required to maintain on an ongoing basis
either an approved load forecast or an approved load forecast work plan.
(e) A distribution borrower with a total utility plant of $500
million or more must maintain an approved load forecast that meets the
requirements of this subpart on an ongoing basis and provide an approved
load forecast in support of any request for RUS financing assistance.
The borrower must also maintain an approved load forecast work plan. The
distribution borrower may comply with this requirement by participation
in and inclusion of its load forecasting information in the approved
load forecast of its power supply borrower.
Sec. 1710.204 Filing requirements for borrowers that must maintain an approved load forecast on an ongoing basis.
(a) Filing of load forecasts and updates. A power supply or
distribution borrower required to maintain an approved load forecast on
an ongoing basis under Sec. 1710.202 or Sec. 1710.203 may elect either
of the following two methods of compliance:
(1) Submitting a new load forecast to RUS for review and approval at
least every 36 months, and then submitting updates to the load forecast
to RUS for review and approval in each intervening year; or
(2) Submitting a new load forecast to RUS for review and approval
not less frequently than every 24 months.
(b) Extensions. RUS may extend any time period required under this
section for up to 3 months at the written request of the borrower's
general manager. A request to extend a time period beyond 3 months must
be accompanied by a written request from the borrower's general manager,
an amendment to the borrower's approved load forecast work plan
incorporating the extension, a board resolution approving the extension
request and any amendment to the approved load forecast work plan, and
any other relevant supporting information. RUS may extend the time
periods contained in this section for up to 24 months.
Sec. 1710.205 Minimum approval requirements for all load forecasts.
(a) Documents required for RUS approval of a borrower's load
forecast. The borrower must provide the following documents to obtain
RUS approval for a load forecast:
(1) The load forecast and supporting documentation;
(2) A memorandum from the borrower's general manager to the board of
directors recommending that the board approve the load forecast and its
uses; and
[[Page 120]]
(3) A board resolution from the borrower's board of directors
approving the load forecast and its uses.
(b) Contents of Load Forecast. All load forecasts submitted by
borrowers for approval must include:
(1) A narrative describing the borrower's system, service territory,
and consumers;
(2) A narrative description of the borrower's load forecast
including future load projections, forecast assumptions, and the methods
and procedures used to develop the forecast;
(3) Projections of usage by consumer class, number of consumers by
class, annual system peak demand, and season of peak demand for the
number of years agreed upon by RUS and the borrower;
(4) A summary of the year-by-year results of the load forecast in a
format that allows efficient transfer of the information to other
borrower planning or loan support documents;
(5) The load impacts of a borrower's demand side management
activities, if applicable;
(6) Graphic representations of the variables specifically identified
by management as influencing a borrower's loads; and
(7) A database that tracks all relevant variables that might
influence a borrower's loads.
(c) Formats. RUS does not require a specific format for the
narrative, documentation, data, and other information in the load
forecast, provided that all required information is included and
available. All data must be in a tabular form that can be transferred
electronically to RUS computer software applications. RUS will evaluate
borrower load forecasts for readability, understanding, filing, and
electronic access. If a borrower's load forecast is submitted in a
format that is not readily usable by RUS or is incomplete, RUS will
require the borrower to submit the load forecast in a format acceptable
to RUS.
(d) Document retention. The borrower must retain its latest approved
load forecasts, and supporting documentation until RUS approval of its
next load forecast. Any approved load forecast work plan must be
retained as part of the approved load forecast.
(e) Consultation with RUS. The borrower must designate and make
appropriate staff and consultants available for consultation with RUS to
facilitate RUS review of the load forecast work plan and the load
forecast when requested by RUS.
(f) Correlation and consistency with other RUS loan support
documents. If a borrower relies on an approved load forecast or an
update of an approved load forecast as loan support, the borrower must
demonstrate that the approved load forecast and the other primary
support documentation for the loan were reconciled. For example, both
the load forecast and the financial forecast require input assumptions
for wholesale power costs, distribution costs, other systems costs,
average revenue per kWh, and inflation. Also, a borrower's engineering
planning documents, such as the construction work plan, incorporate
consumer and usage per consumer projections from the load forecast to
develop system design criteria. The assumptions and data common to all
the documents must be consistent.
(g) Coordination. Power supply borrowers and their members that are
subject to the requirement to maintain an approved load forecast on an
ongoing basis are required to coordinate preparation of their respective
load forecasts, updates of load forecasts, and approved load forecast
work plan. A load forecast of a power supply borrower must consider the
load forecasts of all its member systems.
Sec. 1710.206 Approval requirements for load forecasts prepared pursuant to approved load forecast work plans.
(a) Contents of load forecasts prepared under an approved load
forecast work plan. In addition to the minimum requirements for load
forecasts under Sec. 1710.205, load forecasts developed and submitted by
borrowers required to have an approved load forecast work plan shall
include the following:
(1) Scope of the load forecast. The narrative shall address the
overall approach, time periods, and expected internal and external uses
of the forecast. Examples of internal uses include providing information
for developing
[[Page 121]]
or monitoring demand side management programs, supply resource planning,
load flow studies, wholesale power marketing, retail marketing, cost of
service studies, rate policy and development, financial planning, and
evaluating the potential effects on electric revenues caused by
competition from alternative energy sources or other electric suppliers.
Examples of external uses include meeting state and Federal regulatory
requirements, obtaining financial ratings, and participation in
reliability council, power pool, regional transmission group, power
supplier or member system forecasting and planning activities.
(2) Resources used to develop the load forecast. The discussion
shall identify and discuss the borrower personnel, consultants, data
processing, methods and other resources used in the preparation of the
load forecast. The borrower shall identify the borrower's member 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 current and future work plans.
(3) A comprehensive description of the database used in the study.
The narrative shall describe the procedures used to collect, develop,
verify, validate, update, and maintain the data. A data dictionary
thoroughly defining the database shall be included. The borrower shall
make all or parts of the database available or otherwise accessible to
RUS in electronic format, if requested.
(4) A narrative for each new load forecast or update of a load
forecast discussing the methods and procedures used in the analysis and
modeling of the borrower's electric system loads as provided for in the
load forecast work plan.
(5) A narrative discussing the borrower's past, existing, and
forecast of future electric system loads. The narrative must identify
and explain substantive assumptions and other pertinent information used
to support the estimates presented in the load forecast.
(6) A narrative discussing load forecast uncertainty or alternative
futures that may determine the borrower's actual loads. Examples of
economic scenarios, weather conditions, and other uncertainties that
borrowers may decide to address in their analysis include:
(i) Most-probable assumptions, with normal weather;
(ii) Pessimistic assumptions, with normal weather;
(iii) Optimistic assumptions, with normal weather;
(iv) Most-probable assumptions, with severe weather;
(v) Most-probable assumptions, with mild weather;
(vi) Impacts of wholesale or retail competition; or
(vii) new environmental requirements.
(7) A summary of the forecast's results on an annual basis. Include
alternative futures, as applicable. This summary shall be designed to
accommodate the transfer of load forecast information to a borrower's
other planning or loan support documents. Computer-generated forms or
electronic submissions of data are acceptable. Graphs, tables,
spreadsheets or other exhibits shall be included throughout the forecast
as appropriate.
(8) A narrative discussing the coordination activities conducted
between a power supply borrower and its members, as applicable, and
between the borrower and RUS.
(b) Compliance with an approved load forecast work plan. A borrower
required to maintain an approved load forecast work plan must also be
able to demonstrate that both it and its RUS borrower members are in
compliance with its approved load forecast work plan for the next load
forecast or update of a load forecast.
Sec. 1710.207 RUS criteria for approval of load forecasts by distribution borrowers not required to maintain an approved load forecast on an ongoing basis.
Load forecasts submitted by distribution borrowers that are
unaffiliated with a power supply borrower, or by distribution borrowers
that are members of a power supply borrower that has a total utility
plant less than $500 million and that is not itself a member of another
power supply borrower with a total utility plant of $500 million or
[[Page 122]]
more must satisfy the following minimum criteria:
(a) The borrower considered all known relevant factors that
influence the consumption of electricity and the known number of
consumers served at the time the study was developed;
(b) The borrower considered and identified all loads on its system
of RE Act beneficiaries and non-RE Act beneficiaries;
(c) The borrower developed an adequate supporting data base and
considered a range of relevant assumptions; and
(d) The borrower provided RUS with adequate documentation and
assistance to allow for a thorough and independent review.
Sec. 1710.208 RUS criteria for approval of all load forecasts by power supply borrowers and by distribution borrowers required to maintain an approved load
forecast on an ongoing basis.
All load forecasts submitted by power supply borrowers and by
distribution borrowers required to maintain an approved load forecast
must satisfy the following criteria:
(a) The borrower objectively analyzed all known relevant factors
that influence the consumption of electricity and the known number of
customers served at the time the study was developed;
(b) The borrower considered and identified all loads on its system
of RE Act beneficiaries and non-RE Act beneficiaries;
(c) The borrower developed an adequate supporting database and
analyzed a reasonable range of relevant assumptions and alternative
futures;
(d) The borrower adopted methods and procedures in general use by
the electric utility industry to develop its load forecast;
(e) The borrower used valid and verifiable analytical techniques and
models;
(f) The borrower provided RUS with adequate documentation and
assistance to allow for a thorough and independent review; and
(g) In the case of a power supply borrower required to maintain an
approved load forecast on an ongoing basis, the borrower adequately
coordinated the preparation of the load forecast work plan and load
forecast with its member systems.
Sec. 1710.209 Approval requirements for load forecast work plans.
(a) In addition to the approved load forecast required under
Secs. 1710.202 and 1710.203, any power supply borrower with a total
utility plant of $500 million or more and any distribution borrower with
a total utility plant of $500 million or more must maintain an approved
load forecast work plan. RUS borrowers that are members of a power
supply borrower with a total utility plant of $500 million or more must
cooperate in the preparation of and submittal of the load forecast work
plan of their power supply borrower.
(b) An approved load forecast work plan establishes the process for
the preparation and maintenance of a comprehensive database for the
development of the borrower's load forecast, and load forecast updates.
The approved load forecast work plan is intended to develop and maintain
a process that will result in load forecasts that will meet the
borrowers' own needs and the requirements of this subpart. An approved
work plan represents a commitment by a power supply borrower and its
members, or by a large unaffiliated distribution borrower, that all
parties concerned will prepare their load forecasts in a timely manner
pursuant to the approved load forecast work plan and they will modify
the approved load forecast work plan as needed with RUS approval to
address changing circumstances or enhance the usefulness of the approved
load forecast work plan.
(c) An approved load forecast work plan for a power supply borrower
and its members must cover all member systems, including those that are
not borrowers. However, only members that are borrowers, including the
power supply borrower, are required to follow the approved load forecast
work plan in preparing their respective load forecasts. Each borrower is
individually responsible for forecasting all its RE Act beneficiary and
non-RE Act beneficiary loads.
(d) An approved load forecast work plan must outline the
coordination and
[[Page 123]]
preparation requirements for both the power supply borrower and its
members.
(e) An approved load forecast work plan must cover a period of 2 or
3 years depending on the applicable compliance filing schedule elected
under Sec. 1710.204.
(f) An approved load forecast work plan must describe the borrower's
process and methods to be used in producing the load forecast and
maintaining current load forecasts on an ongoing basis.
(g) Approved load forecast work plans for borrowers with residential
demand of 50 percent or more of total kWh must provide for a residential
consumer survey at least every 5 years to obtain data on appliance and
equipment saturation and electricity demand. Any such borrower that is
experiencing or anticipates changes in usage patterns shall consider
surveys on a more frequent schedule. Power supply borrowers shall
coordinate such surveys with their members. Residential consumer surveys
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.
(h) Approved load forecast work plans must provide for RUS review of
the load forecasts as the load forecast is being developed.
(i) A power supply borrower's work plan must have the concurrence of
the majority of the members that are borrowers.
(j) The borrower's board of directors must approve the load forecast
work plan.
(k) A borrower may amend its approved load forecast work plan
subject to RUS approval. If RUS concludes that the existing approved
load forecast work plan will not result in a satisfactory load forecast,
RUS may require a new or revised load forecast work plan.
Sec. 1710.210 Waiver of requirements or approval criteria.
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 RUS' objectives and if the
requirement imposes a substantial burden on the borrower. The borrower's
general manager must request the waiver in writing.
Secs. 1710.211-1710.249 [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 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
[[Page 124]]
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. Provision for
funding of ``minor projects'' under an RUS loan guarantee is permitted
on the same basis as that discussed for insured loan funds in 7 CFR part
1721, Post-Loan Policies and Procedures for Insured Electric Loans.
(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.
(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; 64 FR 33178, June 22, 1999]
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
[[Page 125]]
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.
(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
[[Page 126]]
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 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 contained 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 an effective and economical means of meeting the power
requirements of the consumers. A borrower shall contact RUS as soon as
practicable in order for RUS to review information submitted by the
borrower and advise the borrower, in writing, whether there is a need
for the borrower to investigate and seek alternative sources of power.
RUS will determine, based on information provided by the borrower or
otherwise available, whether there is a need to investigate
[[Page 127]]
alternative sources of power or whether RUS will require information or
other methods of determining the need for the generation capacity. RUS
will base its determination on whether RUS is able to conclude that the
project is needed, the borrower would incur delays and costs in pursuing
an RFP, or that an RFP is not likely to produce new alternatives to the
project.
(b) Loan requests for the addition of generation capacity, including
replacement of existing capacity, will be accepted by RUS when the
applicant has completed the requirements established by RUS, in a manner
satisfactory to RUS. The investigations of alternative sources of power
must be coordinated in advance with RUS. This section applies to RUS
financed generation capacity whether owned solely by the borrower, owned
on an undivided ownership basis with other utilities or substantially
controlled by the borrower.
(c) The applicant may be required to seek and utilize capacity
available from RUS borrowers and other organizations before developing
plans for additional generation capacity. RUS may require, on a case by
case basis, that the applicant, among other things:
(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) 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 should
be placed in at least three national newspapers or trade publications,
and they meet all planning, coordination or other requirements imposed
by state authorities, as well as the environmental requirements of RUS.
(d) When solicitations are received in accordance with paragraph (c)
of this section, the applicant will evaluate all alternative proposals
on an economic, present-value basis, giving consideration to cost-
effectiveness, reliability of service, the short-term 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 received in accordance with
paragraph (c) of this section, and having informed RUS of the results,
the applicant may be required to negotiate final proposals with the
entities submitting the best acceptable offers. Contracts requiring RUS
approval will either be approved in advance by the Administrator or
contain a provision that the contract is not valid until approved, in
writing, by the Administrator. The Administrator will approve the
contracts in a timely manner provided that the borrower has met all
applicable requirements, including, among other matters, evidence that
the alternative source of power selected is an 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)
[57 FR 1053, Jan. 9, 1992, as amended at 65 FR 31247, May 17, 2000]
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
[[Page 128]]
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 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,
[[Page 129]]
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:
(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]
[[Page 130]]
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 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.
[[Page 131]]
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.
(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
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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;
(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
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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.