[Title 7 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2007 Edition]
[From the U.S. Government Printing Office]
[[Page i]]
7
Parts 1940 to 1949
Revised as of January 1, 2006
Agriculture
________________________
Containing a codification of documents of general
applicability and future effect
As of January 1, 2006
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 XVIII--Rural Housing Service, Rural
Business-Cooperative Service, Rural Utilities
Service, and Farm Service Agency, Department of
Agriculture (Continued) 5
Finding Aids:
Table of CFR Titles and Chapters........................ 439
Alphabetical List of Agencies Appearing in the CFR...... 457
List of CFR Sections Affected........................... 467
[[Page iv]]
----------------------------
Cite this Code: CFR
To cite the regulations in
this volume use title,
part and section number.
Thus, 7 CFR 1940.301
refers to title 7, part
1940, section 301.
----------------------------
[[Page v]]
EXPLANATION
The Code of Federal Regulations is a codification of the general and
permanent rules published in the Federal Register by the Executive
departments and agencies of the Federal Government. The Code is divided
into 50 titles which represent broad areas subject to Federal
regulation. Each title is divided into chapters which usually bear the
name of the issuing agency. Each chapter is further subdivided into
parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year
and issued on a quarterly basis approximately as follows:
Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1
The appropriate revision date is printed on the cover of each
volume.
LEGAL STATUS
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HOW TO USE THE CODE OF FEDERAL REGULATIONS
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To determine whether a Code volume has been amended since its
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OMB CONTROL NUMBERS
The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires
Federal agencies to display an OMB control number with their information
collection request.
[[Page vi]]
Many agencies have begun publishing numerous OMB control numbers as
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OBSOLETE PROVISIONS
Provisions that become obsolete before the revision date stated on
the cover of each volume are not carried. Code users may find the text
of provisions in effect on a given date in the past by using the
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1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate
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A subject index to the Code of Federal Regulations is contained in a
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[[Page vii]]
The Office of the Federal Register also offers a free service on the
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Raymond A. Mosley,
Director,
Office of the Federal Register.
January 1, 2006.
[[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, 2006.
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.
For this volume, Cheryl E. Sirofchuck was Chief Editor. The Code of
Federal Regulations publication program is under the direction of
Frances D. McDonald, assisted by Alomha S. Morris.
[[Page 1]]
TITLE 7--AGRICULTURE
(This book contains parts 1940 to 1949)
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SUBTITLE B--Regulations of the Department of Agriculture (Continued)
Part
chapter xviii--Rural Housing Service, Rural Business-
Cooperative Service, Rural Utilities Service, and Farm
Service Agency, Department of Agriculture (Continued)..... 1940
[[Page 3]]
Subtitle B--Regulations of the Department of Agriculture (Continued)
[[Page 5]]
CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE
SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF
AGRICULTURE (CONTINUED)
--------------------------------------------------------------------
Editorial Note: Nomenclature changes to chapter XVIII appear at 61 FR
1109, Jan. 16, 1996, and at 61 FR 2899, Jan. 30, 1996.
SUBCHAPTER H--PROGRAM REGULATIONS (CONTINUED)
Part Page
1940 General..................................... 7
1941 Operating loans............................. 118
1942 Associations................................ 143
1943 Farm ownership, soil and water and
recreation.............................. 232
1944 Housing..................................... 290
1945 Emergency................................... 392
1946 [Reserved]
1948 Rural development........................... 407
1949 [Reserved]
[[Page 7]]
SUBCHAPTER H_PROGRAM REGULATIONS (CONTINUED)
PART 1940_GENERAL--Table of Contents
Subparts A-F [Reserved]
Subpart G_Environmental Program
Sec.
1940.301 Purpose.
1940.302 Definitions.
1940.303 General policy.
1940.304 Special policy.
1940.305 Policy implementation.
1940.306 Environmental responsibilities within the National Office.
1940.307 Environmental responsibilities within the State Office.
1940.308 Environmental responsibilities at the District and County
Office levels.
1940.309 Responsibilities of the prospective applicant.
1940.310 Categorical exclusions from National Environmental Policy Act
(NEPA) reviews.
1940.311 Environmental assessments for Class I actions.
1940.312 Environmental assessments for Class II actions.
1940.313 Actions that normally require the preparation of an
Environmental Impact Statement (EIS).
1940.314 Criteria for determining a significant environmental impact.
1940.315 Timing of the environmental review process.
1940.316 Responsible officials for the environmental review process.
1940.317 Methods for ensuring proper implementation of categorical
exclusions.
1940.318 Completing environmental assessments for Class II actions.
1940.319 Completing environmental assessments for Class I actions.
1940.320 Preparing EISs.
1940.321 Use of completed EIS.
1940.322 Record of decision.
1940.323 Preparing supplements to EIS's.
1940.324 Adoption of EIS or environmental assessment prepared by another
Federal Agency.
1940.325 FmHA or its successor agency under Public Law 103-354 as a
cooperating Agency.
1940.326 FmHA or its successor agency under Public Law 103-354 as a lead
Agency.
1940.327 Tiering.
1940.328 State Environmental Policy Acts.
1940.329 Commenting on other Agencies' EIS's.
1940.330 Monitoring.
1940.331 Public involvement.
1940.332 Emergencies.
1940.333 Applicability to planning assistance.
1940.334 Direct participation of State Agencies in the preparation of
FmHA or its successor agency under Public Law 103-354 EISs.
1940.335 Environmental review of FmHA or its successor agency under
Public Law 103-354 proposals for legislation.
1940.336 Contracting for professional services.
1940.337-1940.349 [Reserved]
1940.350 Office of Management and Budget (OMB) control number.
Exhibit A to Subpart G--Departmental Regulation
Exhibit B to Subpart G--Development and Implementation of Natural
Resource Management Guide
Exhibit C to Subpart G--Implementation Procedures for the Farmland
Protection Policy Act; Executive Order 11988, Floodplain
Management; Executive Order 11990, Protection of Wetlands; and
Departmental Regulation 9500-3, Land Use Policy
Exhibit D to Subpart G--Implementation Procedures for the Endangered
Species Act
Exhibit E to Subpart G--Implementation Procedures for the Wild and
Scenic Rivers Act
Exhibit F to Subpart G--Implementation Procedures for the Coastal
Barrier Resources Act
Exhibit G to Subpart G [Reserved]
Exhibit H to Subpart G--Environmental Assessment for Class II Actions
Exhibit I to Subpart G--Finding of No Significant Environmental Impact
Exhibit J to Subpart G--Locations and Telephone Numbers of Federal
Emergency Management Administration's Regional Offices
Exhibit K to Subpart G--Locations and Telephone Numbers of U.S. Fish and
Wildlife Service's Wetland Coordinators
Exhibit L to Subpart G--Exceptions to Restrictions of Coastal Barrier
Resources Act
Exhibit M to Subpart G--Implementation Procedures for the Conservation
of Wetlands and Highly Erodible Land Affecting Farmer Program
Loans and Loans to Indian Tribes and Tribal Corporations
Subpart H [Reserved]
[[Page 8]]
Subpart I_Truth in Lending_Real Estate Settlement Procedures
1940.401 Truth in lending.
1940.402-1940.405 [Reserved]
1940.406 Real estate settlement procedures.
Subparts J-K [Reserved]
Subpart L_Methodology and Formulas for Allocation of Loan and Grant
Program Funds
1940.551 Purpose and general policy.
1940.552 Definitions.
1940.553-1940.554 [Reserved]
1940.555 Insured Farm Operating loan funds.
1940.556 Guaranteed Farm Operating loan funds.
1940.557 Insured Farm Ownership loan funds.
1940.558 Guaranteed Farm Ownership loan funds.
1940.559 Farmer Programs and Indian Land Acquisition appropriations not
allocated by State.
1940.560 Guarantee Rural Rental Housing Program.
1940.561-1940.562 [Reserved]
1940.563 Section 502 non-subsidized guaranteed Rural Housing (RH) loans.
1940.564 Section 502 subsidized guaranteed Rural Housing loans.
1940.565 Section 502 subsidized Rural Housing loans.
1940.566 Section 504 Housing Repair loans.
1940.567 Section 504 Housing Repair grants.
1940.568 Single Family Housing programs appropriations not allocated by
State.
1940.569-1940.574 [Reserved]
1940.575 Section 515 Rural Rental Housing (RRH) loans.
1940.576 Rental Assistance (RA) for new construction.
1940.577 Rental Assistance (RA) for existing projects.
1940.578 Housing Preservation Grant (HPG) program.
1940.579 Multiple Family Housing appropriations not allocated by State.
1940.580-1940.584 [Reserved]
1940.585 Community Facility loans.
1940.586-1940.587 [Reserved]
1940.588 Business and Industry Guaranteed and Direct Loans.
1940.589 Rural Business Enterprise Grants.
1940.590 [Reserved]
1940.591 Community Program Guaranteed loans.
1940.592 Community facilities grants.
1940.593 Rural Business Opportunity Grants.
1940.594-1940.600 [Reserved]
Exhibit A to Subpart L [Reserved]
Exhibit B to Subpart L--Section 515 Nonprofit Set Aside (NPSA)
Exhibit C to Subpart L--Housing in Underserved Areas
Subparts M-S [Reserved]
Subpart T_System for Delivery of Certain Rural Development Programs
1940.951 General.
1940.952 [Reserved]
1940.953 Definitions.
1940.954 State participation.
1940.955 Distribution of program funds to designated States.
1940.956 State rural economic development review panel.
1940.957 State coordinator.
1940.958 Designated agency.
1940.959 Area plan.
1940.960 Federal employee panel members.
1940.961 Allocation of appropriated funds.
1940.962 Authority to transfer direct loan amounts.
1940.963 Authority to transfer guaranteed loan amounts.
1940.964 [Reserved]
1940.965 Processing project preapplications/applications.
1940.966-1940.967 [Reserved]
1940.968 Rural Economic Development Review Panel Grant (Panel Grant).
1940.969 Forms, exhibits, and subparts.
1940.970 [Reserved]
1940.971 Delegation of authority.
1940.972-1940.999 [Reserved]
1940.1000 OMB control number.
Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480.
Subparts A-F [Reserved]
Subpart G_Environmental Program
Source: 53 FR 36240, Sept. 19, 1988, unless otherwise noted.
Sec. 1940.301 Purpose.
(a) This subpart contains the major environmental policies of the
Farmers Home Administration (FmHA) or its successor agency under Public
Law 103-354. It also provides the procedures and guidelines for
preparing the environmental impact analyses required for a series of
Federal laws, regulations, and Executive orders within one environmental
document. The timing and use of this environmental document within the
FmHA or its successor agency under Public Law 103-354 decision-making
process is also outlined.
(b) This subpart is intended to be consistent with the Council on
Environmental Ouality's (CEQ) Regulations
[[Page 9]]
for Implementing the Procedural Provisions of the National Environmental
Policy Act (NEPA), 40 CFR parts 1500-1508. CEQ's regulations will not be
repeated in this subpart except when essential for clarification of
important procedural or substantive points. Otherwise, citations to
applicable sections of the regulations will be provided. The CEQ
regulations will be available at all FmHA or its successor agency under
Public Law 103-354 offices.
(c) This subpart is designed to integrate the requirements of NEPA
with other planning and environmental review procedures required by law,
or by Agency practice, so that all such procedures run concurrently
rather than consecutively. The environmental document, which results
from the implementation of this subpart, provides on a project basis a
single reference point for the Agency's compliance and/or implementation
of the following requirements and policies:
(1) The National Environmental Policy Act, 42 U.S.C. 4321;
(2) Safe Drinking Water Act--Section 1424(e), 42 U.S.C. 300h;
(3) Endangered Species Act, 16 U.S.C. 1531;
(4) Wild and Scenic Rivers Act, 16 U.S.C. 1271;
(5) The National Historic Preservation Act, 16 U.S.C. 470 (See
subpart F of part 1901 of this chapter for more specific implementation
procedures);
(6) Archaeological and Historic Preservation Act, 16 U.S.C. 469 (See
subpart F of part 1901 of this chapter for more specific implementation
procedures);
(7) Coastal Zone Management Act--Section 307(c) (1) and (2), 16
U.S.C. 1456;
(8) Farmland Protection Policy Act, subtitle I, Pub. L. 97-98;
(9) Coastal Barrier Resources Act, Pub. L. 97-348;
(10) Executive Order 11593, Protection and Enhancement of the
Cultural Environment (See subpart F of part 1901 of this chapter for
more specific implementation procedures);
(11) Executive Order 11514, Protection and Enhancement of
Environmental Quality;
(12) Executive Order 11988, Floodplain Management;
(13) Executive Order 11990, Protection of Wetlands;
(14) Title 7, parts 1b and 1c, Code of Federal Regulations,
Department of Agriculture's National Environmental Policy Act; Final
Policies and Procedures;
(15) Title 7, part 3100, Code of Federal Regulations, Department of
Agriculture's Enhancement, Protection, and Management of the Cultural
Environment (See subpart F of part 1901 of this chapter for more
specific implementation procedures);
(16) Title 7, part 658, Code of Federal Regulations, Department of
Agriculture, Soil Conservation Service, Farmland Protection Policy;
(17) Title 87, part 12, Code of Federal Regulations, Highly Erodible
Land and Wetland Conservation;
(18) Departmental Regulation 9500-3, Land Use Policy (See exhibit A
of this subpart);
(19) Departmental Regulation 9500-4, Fish and Wildlife Policy.
(d) The primary objectives of this subpart are for the Agency to
make better decisions by taking into account potential environmental
impacts of proposed projects and by working with FmHA or its successor
agency under Public Law 103-354 applicants, other Federal agencies,
Indian tribes, State and local governments, and interested citizens and
organizations in order to formulate actions that advance the program
goals in a manner that will protect, enhance, and restore environmental
quality. To accomplish these objectives, the identification of
potentially significant impacts on the human environment is mandated to
occur early in the Agency's planning and decisionmaking processes.
Important decision points are identified. The completion of the
environmental review process is coordinated with these decision points,
and this review must be completed prior to the Agency's first major
decision on whether or not to participate in the proposal. This early
availability of the results of the environmental review process is
intended to ensure that Agency decisions are based on an understanding
of their environmental consequence, as well as the consequences of
alternative courses of action.
(e) Reducing delays, duplication of effort, and superfluous analyses
are
[[Page 10]]
provided for in this subpart. FmHA or its successor agency under Public
Law 103-354 environmental documents are to be supported by accurate
analyses and will concentrate on the issues that are timely and relevant
to the action in question, rather than amassing needless detail. Such
documents and their preparation and review will be coordinated with
other Federal or State agencies jointly participating in proposed
actions or related actions, in order to avoid duplication of effort, and
to achieve a coordinated and timely response.
(f) Public involvement is desirable, and to facilitate public
involvement, environmental documents will be available to interested
citizens as early in the decisionmaking process as possible and before
decisions are made. Provisions are included for citizens or interested
parties to express their views and any concerns.
(g) The FmHA or its successor agency under Public Law 103-354
officials responsible for the environmental review process are
identified.
(h) The FmHA or its successor agency under Public Law 103-354
actions covered by this subpart include:
(1) Financial assistance to include grants, loans, and guarantees,
(2) Subdivision approvals,
(3) The management, leasing and sale of inventory property, and
(4) Other major federal actions such as proposals for legislation
and the issuance of regulations.
Sec. 1940.302 Definitions.
Following is a list of definitions that apply to the implementation
of this subpart. Please note that Sec. 1940.301(b) of this subpart
refers to the Council on Environmental Quality's Regulations for
Implementing the Procedural Provisions of the National Environmental
Policy Act, 40 CFR parts 1500-1508. Consequently, the definitions
contained in part 1508 of the Council's regulations apply to this
subpart, as well as those listed below.
(a) Emergency circumstance. One involving an immediate or imminent
danger to public health or safety.
(b) Environmental review documents. The documents required by this
subpart for the purpose of documenting FmHA or its successor agency
under Public Law 103-354's compliance with the environmental laws and
regulations applicable to the FmHA or its successor agency under Public
Law 103-354 actions covered in this subpart. These documents include:
(1) Form FmHA or its successor agency under Public Law 103-3541940-
22, ``Environmental Checklist for Categorical Exclusions,''
(2) Form FmHA or its successor agency under Public Law 103-354 1940-
21, ``Environmental Assessment of Class I Action,''
(3) Environmental Assessment for Class II Actions (exhibit H of this
subpart), and
(4) Environmental Impact Statements (EIS).
(c) Flood or flooding. A general and temporary condition of partial
or complete inundation of land areas, from the overflow of inland and/or
tidal waters, and/or the rapid accumulation or runoff of surface waters
from any source. Two important classifications of floods are as follows.
(1) A one-percent chance flood or based flood--A flood of a
magnitude that occurs once every 100 years on the average. Within any
one-year period there is one chance in 100 of the occurrence of such a
flood. Most importantly, however, the cumulative risk of flooding
increases with time. Statistically, there is about one chance in five
that a flood of this magnitude will occur within a 20-year period, the
length of time commonly defined as the useful life of a facility. Over a
30-year period, the life of a typical mortgage, the probability of such
a flood occurring increases to greater than one chance in four.
(2) A 0.2-percent chance flood--A flood of a magnitude that occurs
once every 500 years on the average. (Within any one-year period there
is one chance in 500 of the occurrence of such a flood.) As with the
one-percent chance flood, the cumulative risk of this flood occurring
also increases with time.
(d) Floodplains. Lowland and relatively flat areas adjoining inland
and coastal waters, including flood-prone areas of offshore islands. At
a minimum, floodplains consist of those
[[Page 11]]
areas subject to a one percent or greater chance of flooding in any
given year. The term floodplain will be taken to mean the base
floodplain, unless the action involves a critical action, in which case
the critical action floodplain is the minimum floodplain of concern.
(1) Base floodplain (or 100-year floodplain)--The area subject to
inundation from a flood of a magnitude that occurs once every 100 years
on the average (the flood having a one-percent chance of being equalled
or exceeded in any given year).
(2) Critical action floodplain (or 500-year floodplain)--The area
subject to inundation from a flood of a magnitude that occurs once every
500 years on the average (the flood having 0.2-percent chance of being
equalled or exceeded in any given year).
(e) Indirect impacts. Those reasonably foreseeable environmental
impacts that result from the additional public facility, residential,
commercial, or industrial development or growth that a federally
financed project may cause, induce or accommodate. Consequently,
indirect impacts often occur later in time than the construction of the
Federal project and can be removed in distance from the construction
site. For example, a water transmission line may be designed to serve
additional residential development. The environmental impacts of that
residential development represent an indirect impact of the federally
funded water line. Those indirect impacts which deserve the greatest
consideration include changes in the patterns of land use, population
density or growth rate, and the corresponding changes to air and water
quality and other natural systems.
(f) Mitigation measure. A measure(s) included in a project or
application for the purpose of avoiding, minimizing, reducing or
rectifying identified, adverse environmental impacts. Examples of such
measures include:
(1) The deletion, relocation, redesign or other modifications of the
project's elements;
(2) The dedication to open space of environmentally sensitive areas
of the project site, which would otherwise be adversely affected by the
action or its indirect impacts;
(3) Soil erosion and sedimentation plans to control runoff during
land-disturbing activities;
(4) The establishment of vegetative buffer zones between project
sites and adjacent land uses;
(5) Protective measures recommended by environmental and
conservation agencies having jurisdiction or special expertise regarding
the project's impacts;
(6) Storm water management plans to control potential downstream
flooding effects that would result from a project;
(7) Zoning; and
(8) Reuse of existing facilities as opposed to new construction.
(g) No-action alternative. The alternative of not approving an
application for financial assistance, a subdivision feasibility
analysis, or an Agency proposal.
(h) Practicable alternative. An alternative that is capable of
attainment within the confines of relevant constraints. The test of
practicability, therefore, depends upon the particulars of the situation
under consideration and those constraints imposed by environmental,
economic, legal, social and technological parameters. This test,
however, is not limited by the temporary unavailability of sufficient
financial resources to implement an alternative. That is, alternatives
cannot be rejected solely on the basis of moderately increased costs.
The range of alternatives that must be analyzed to determine if a
practicable alternative exists includes the following three categories
of alternatives:
(1) Alternative project sites or designs,
(2) Alternative projects with similar benefits as the proposed
actions, and
(3) The no-action alternative.
(i) Preparer of Environmental Review Documents. The FmHA or its
successor agency under Public Law 103-354 official who is responsible
for reviewing the potential environmental impacts of the proposed action
and for completing the appropriate environmental review document. Under
the circumstances indicated, the following Agency positions and
divisions will act as the preparer of
[[Page 12]]
the environmental review documents covered by this subpart.
(1) County Office. When the approval official for the action under
review is located at the County Office level, that official will
prepare, as required, Environmental Checklist for Categorical Exclusions
and Class I and Class II assessments.
(2) District Office. When the approval official for the action under
review is located at the District Office level, that official will
prepare, as required, Environmental Checklist for Categorical Exclusions
and Class I and Class II assessments or may delegate this responsibility
to either:
(i) The District Office staff member having primary responsibility
for assembling the associated pre-application, application or other case
materials, analyzing the materials and developing recommendations for
the approval official, or
(ii) A County Office staff member having the same responsibilities
as the District Office member, if the action is initiated at the County
Office level.
(3) State Program Chief. For actions approved within the State
Office, the Chief will prepare, as required, Environmental Checklist for
Categorical Exclusions and Class I and II assessments or may delegate
this responsibility to either:
(i) The appropriate State Office Loan Specialist, if not the State
Environmental Coordinator (SEC),
(ii) An architect or engineer on the Chief's staff who is not the
SEC, or
(iii) A District or County Office staff member located within the
office in which the action is initiated and having the responsibilities
outlined in paragraph (i)(2)(i) of this section.
(4) State Environmental Coordinator. EIS's for actions within the
approval authority of County Supervisors, District Directors, and State
Office officials.
(5) Assistant Administrators for Programs. Checklists, assessments,
and EIS's for all actions initiated within their program office.
(6) Program Support Staff. Checklists, assessments, and EIS's that
the Deputy Administrator for Program Operations requests be done.
(j) Water resource project. Includes any type of construction which
would result in either impacts on water quality and the beneficial uses
that water quality criteria are designed to protect or any change in the
free-flowing characteristics of a particular river or stream to include
physical, chemical, and biological characteristics of the waterway. This
definition encompasses construction projects within and along the banks
of rivers or streams, as well as projects involving withdrawals from,
and discharges into such rivers or streams. Projects which require Corps
of Engineers dredge and fill permits are also water resource projects.
Sec. 1940.303 General policy.
(a) FmHA or its successor agency under Public Law 103-354 will
consider environmental quality as equal with economic, social, and other
relevant factors in program development and decision-making processes.
(b) In assessing the potential environmental impacts of its actions,
FmHA or its successor agency under Public Law 103-354 will consult early
with appropriate Federal, State, and local agencies and other
organizations to provide decision-makers with both the technical and
human aspects of environmental planning.
(c) When adverse environmental impacts are identified, either direct
or indirect, an examination will be made of alternative courses of
action, including their potential environmental impacts. The objective
of the environmental review will be to develop a feasible alternative
with the least adverse environmental impact. The alternative of not
proceeding with the proposal will also be considered particularly with
respect to the need for the proposal.
(d) If no feasible alternative exists, including the no-action
alternative, measures to mitigate the identified adverse environmental
impacts will be included in the proposal.
(e) The performance of environmental reviews and the consideration
of alternatives will be initiated as early as possible in the FmHA or
its successor agency under Public Law 103-354 application review process
so that the Agency will be in the most flexible
[[Page 13]]
and objective position to deal with these considerations.
Sec. 1940.304 Special policy.
(a) Land use. (1) FmHA or its successor agency under Public Law 103-
354 recognizes that its specific mission of assisting rural areas,
composed of farms and rural towns, goes hand-in-hand with protecting the
environmental resources upon which these systems are dependent. Basic
resources necessary to both farm and rural settlements include important
farmlands and forestlands, prime rangelands, wetlands, and floodplains.
The definitions of these areas are contained in the appendix to
Departmental Regulation 9500-3, Land Use Policy, which is included as
exhibit A of this subpart. For assistance in locating and defining
floodplains and wetlands, the locations and telephone numbers of the
Federal Emergency Management Administration's regional offices have been
included as exhibit J of this subpart, and similar information for the
U.S. Fish and Wildlife Service's Wetland Coordinators has been included
as exhibit K of this subpart. Given the importance of these resources,
as emphasized in the Departmental Regulation, Executive Order 11988,
``Floodplain Management,'' and Executive Order 11990, ``Protection of
Wetlands,'' it is FmHA or its successor agency under Public Law 103-
354's policy not to approve or fund any proposals that, as a result of
their identifiable impacts, direct or indirect, would lead to or
accommodate either the conversion of these land uses or encroachment
upon them. The only exception to this policy is if the approving
official determines that
(i) There is no practicable alternative to the proposed action,
(ii) The proposal conforms to the planning criteria identified in
paragraph (a)(2) of this section, and
(iii) The proposal includes all practicable measures for reducing
the adverse impacts and the amount of conversion/encroachment.
(A) For Farmer Program loans and guarantees, and loans to Indian
Tribes and Tribal Corporations, exhibit M of this subpart imposes
additional and more restrictive requirements regarding wetland and
highly erodible land conservation.
(B) Unless otherwise exempted by the provisions of exhibit M, the
proceeds of any Farmer Program loan or loan to an Indian Tribe or Tribal
Corporation made or guaranteed by FmHA or its successor agency under
Public Law 103-354 cannot be used.
(1) For a purpose that will contribute to excessive erosion of
highly erodible land (as defined in exhibit M), or
(2) For a purpose that will contribute to conversion of wetlands (as
defined in exhibit M) to produce an agricultural commodity.
(2) It is also recognized that unless carefully reviewed, some
proposals designed to serve the needs of rural communities can adversely
affect the existing economic base and settlement patterns of the
community, as well as create development pressures on land and
environmental resources essential to farm economies. An example of such
a proposal might be the extension of utilities and other types of
infrastructure beyond a community's existing settlement pattern and into
important farmlands for the purpose of commercial or residential
expansion, even though there is available space within the existing
settlement pattern for such expansion. Not only may the loss of
important farmlands unnecessarily result, but the community may be faced
with the economic costs of providing public services to outlying areas,
as well as the deterioration of its central business or commercial area;
the latter may not be able to compete with the newer, outlying
commercial establishments. These results are undesirable, and to avoid
their occurrence, projects designed to meet rural community needs (i.e.,
residential, industrial, commercial, and public facilities) will not be
approved unless the following conditions are met.
(i) The project is planned and sited in a manner consistent with the
policies of this section, the Farmland Protection Policy Act, and
Departmental Regulation 9500-3 (exhibit A of this subpart).
(ii) The project is not inconsistent with an existing comprehensive
and enforceable plan that guides growth and
[[Page 14]]
reflects a realistic strategy for protecting natural resources, and the
project is compatible, to the extent practicable, with State, unit of
local government, and private programs and policies to protect farmland.
(If no such plan or policies exist, there is no FmHA or its successor
agency under Public Law 103-354 requirement that they either be prepared
and adopted, as further specified in paragraph (a)(3) of this section.)
(iii) The project will encourage long-term, economically viable
public investment by fostering or promoting development patterns that
ensure compact community development, that is, development that is
limited to serving existing settlement patterns or is located in
existing settlement patterns, e.g., the rehabilitation and renovation of
existing structures, systems and neighborhoods; infilling of
development; the provision of a range of moderate-to-high residential
densities appropriate to local and regional needs. When these
development patterns or types are not practicable, the development must
be contiguous with the existing settlement pattern and provide for a
range of moderate-to-high residential densities appropriate to local and
regional needs. It is recognized that some FmHA or its successor agency
under Public Law 103-354 Community Programs projects are designed to
serve rural residents, such as rural water and waste disposal systems
and, therefore, cannot be limited in service area to these areas
contiguous with existing settlement patterns. These types of projects
will be designed to primarily serve existing structures and rural
residents in noncontiguous areas. Any additional capacity within the
system will be limited to meet reasonable growth needs, and, to the
extent practicable, be designed to meet such needs within existing
settlements and areas contiguous to them.
(3) The conditions specified in paragraph (a)(2) of this section
should not be construed as advocating excessive densities, congestion,
or loss of open space amenities within rural communities. Desirable
living conditions can be obtained under these objectives, along with
economic and social benefits for the community and the surrounding farm
operations. Additionally, these conditions should not be construed as
requiring localities to develop plans which contain the conditions. In
any instance in which these planning conditions or criteria do not exist
within the project area, project reviews will not be postponed until the
criteria are adopted. Rather, projects will be reviewed and funding
decisions made in light of a project's consistency with the contents of
this subpart (excluding paragraph (a)(2)(ii) of this section, which
would not be applicable).
(b) Endangered species. FmHA or its successor agency under Public
Law 103-354 will not authorize, fund, or carry out any proposal or
project that is likely to
(1) Jeopardize the continued existence of any plant or wildlife
species listed by the Secretary of the Interior or Commerce as
endangered or threatened; or
(2) Destroy or adversely modify the habitats of listed species when
such habitats have been determined critical to the species' existence by
the Secretary of the Interior or Commerce, unless FmHA or its successor
agency under Public Law 103-354 has been granted an exemption for such
proposal by the Endangered Species Committee pursuant to paragraph (h)
of section 7 of the Endangered Species Act.
(c) Wild and scenic rivers. FmHA or its successor agency under
Public Law 103-354 will not provide financial assistance or plan
approval for any water resource project that would have a direct and
adverse effect on the values for which a river has been either included
in the National Wild and Scenic Rivers System or is designated for
potential addition. Additionally, FmHA or its successor agency under
Public Law 103-354 will not approve or assist developments (commercial,
industrial, residential, farming or community facilities) located below
or above a wild, scenic or recreational river area, or on any stream
tributary thereto which will invade the area or unreasonably diminish
the scenic, recreational, and fish and wildlife values present in the
area.
(d) Historic and cultural properties. As part of the environmental
review process, FmHA or its successor agency under Public Law 103-354
will identify
[[Page 15]]
any properties that are listed in, or may be eligible for, listing in
the National Register of Historic Places and are located within the
project's area of potential environmental impacts. Consultations will be
undertaken with State Historic Preservation Officers and the Advisory
Council on Historic Preservation, through the implementation of subpart
F of part 1901 of this chapter, in order to determine the most
appropriate course of action for protecting such identified properties
or mitigating potential adverse impacts to them.
(e) Coastal barriers. Under the requirements of the Coastal Barrier
Resources Act, FmHA or its successor agency under Public Law 103-354
will not provide financial assistance for any activity to be located
within the Coastal Barrier Resources System unless
(1) Such activity meets the criteria for an exception, as defined in
section 6 of the Act, and
(2) Consultation regarding the activity has been completed with the
Secretary of the Interior.
(f) Water and energy conservation. FmHA or its successor agency
under Public Law 103-354 will encourage the conservation of water and
energy in the development of its programs and policies and will
encourage applicants to incorporate all economically feasible water and
energy-saving features and designs within their proposals.
(g) Intergovernmental initiatives on important land resources. On a
broader scale, FmHA or its successor agency under Public Law 103-354
will advocate, in cooperation with other USDA agencies (through the USDA
State-level committee system), the retention of important farmlands and
forestlands, prime rangeland, wetlands and floodplains whenever proposed
conversions to other uses
(1) Are caused or encouraged by actions or programs of a Federal
Agency, or
(2) Require licensing or approval by a Federal Agency, unless other
needs clearly override the benefits derived from retention of such
lands.
(h) Water quality. FmHA or its successor agency under Public Law
103-354 will not provide financial assistance to any activity that would
either impair a State water quality standard, including designated and/
or existing beneficial uses that water quality criteria are designed to
protect, or that would not meet antidegradation requirements.
Sec. 1940.305 Policy implementation.
(a) Environmental impact analysis. The implementation of the
environmental impact analysis requirements described in this subpart
serves as the primary mechanism for FmHA or its successor agency under
Public Law 103-354 as follows:
(1) Incorporating environmental quality considerations into FmHA or
its successor agency under Public Law 103-354 program and decision-
making processes,
(2) Obtaining the views of the public and government agencies on
potential environmental impacts associated with FmHA or its successor
agency under Public Law 103-354 projects, and
(3) Using all practicable means to avoid or to minimize any possible
adverse environmental effects of FmHA or its successor agency under
Public Law 103-354 actions.
(b) Natural resource management. The State Director will develop a
natural resource management guide. This guide will serve as an essential
mechanism for implementing Sec. 1940.304 of this subpart; and,
therefore, the guide must be consistent with and reflect the objectives
and policies contained in Sec. 1940.304 of this subpart. At the same
time, however, it must be tailored to take into account important State,
regional, and local natural resource management objectives. The guide
will be issued as a State Supplement for prior approval. The basic
content, purposes, and uses of the guide are enumerated in exhibit B of
this subpart and can be summarized as follows:
(1) The guide will serve as a mechanism for assembling an inventory
of the locations within the State of those natural resources, land uses,
and environmental factors that have been specified by Federal, State and
local authorities as deserving some degree of protection or special
consideration;
(2) The guide will summarize the various standards or types of
Federal, State, or local protection that apply to
[[Page 16]]
the natural resources, land uses, and environmental factors listed in
the inventory; and
(3) Applications for individual projects must be reviewed for
consistency with the guide.
(c) Intergovernmental initiatives. When commenting on proposed
Federal actions subject to environmental impact statements, FmHA or its
successor agency under Public Law 103-354 commentors will focus on the
consistency of these actions with the appropriate State natural resource
management guide. A similar focus or element will be addressed in FmHA
or its successor agency under Public Law 103-354's review of the
Environmental Protection Agency's 201 Wastewater Management Plans.
(d) Farmland Protection Policy Act and Departmental Regulation 9500-
3, Land Use Policy. The natural resource management guide serves as a
tool for implementing the requirements of the Act and the Departmental
Regulation at the broad level of implementing the Agency's programs at
the State level. These requirements must also be followed in the review
of applications for financial assistance or subdivision approval, as
well as the disposal of real property. FmHA or its successor agency
under Public Law 103-354's implementation procedures for the project
review process are contained in exhibit C of this subpart.
(e) Endangered Species. FmHA or its successor agency under Public
Law 103-354 will implement the consultation procedures required under
section 7 of the Endangered Species Act as specified in 50 CFR part 402.
It is important to note that these consultation procedures apply to the
disposal of real property and all FmHA or its successor agency under
Public Law 103-354 applications for financial assistance and subdivision
approval, including those applicants which are exempt from environmental
assessments. FmHA or its successor agency under Public Law 103-354's
implementation procedures are contained in exhibit D of this subpart.
(f) Wild and scenic rivers. Each application for financial
assistance or subdivision approval and the proposed disposal of real
property will be reviewed to determine if it will affect a river or
portion of it, which is either included in the National Wild and Scenic
Rivers System, designated for potential addition to the system, or
identified in the Nationwide Inventory prepared by the National Park
Service (NPS) in the Department of the Interior (DOI). FmHA or its
successor agency under Public Law 103-354's procedures for completing
this review are contained in exhibit E of this subpart.
(g) Historic and cultural properties. (1) As part of the
environmental review process, FmHA or its successor agency under Public
Law 103-354 will identify any properties that are listed in or may be
eligible for listing in the National Register of Historic Places, and
located within the area of potential environmental impact.
Identification will consist of consulting the published lists of the
National Register and formally contacting and seeking the comments of
the appropriate State Historic Preservation Officer (SHPO). Since it is
not always possible from the consultation with the SHPO to determine
whether historic and cultural properties are present within the
project's area of environmental impact, it may be necessary for FmHA or
its successor agency under Public Law 103-354 to consult public records
and other individuals and organizations, such as university
archaeologists, local historical societies, etc. These latter
discussions should take place before initiating a detailed site survey
since they may provide reliable information that obviates the need for a
survey. However, whenever insufficient information exists to document
the presence or absence of potentially eligible National Register
properties and where the potential for previously unidentified
properties is recognized by FmHA or its successor agency under Public
Law 103-354, the SHPO, or other interested parties, FmHA or its
successor agency under Public Law 103-354 will conduct the necessary
investigations to determine if such properties are present within the
area of potential environmental impact. FmHA or its successor agency
under Public Law 103-354 will involve the SHPO in the planning and
formulation of any historic, cultural, architectural or archaeological
testing,
[[Page 17]]
studies or surveys conducted to investigate the presence of such
properties and will utilize persons with appropriate knowledge and
experience.
(2) If the information obtained, as a result of the consultation and
investigations conducted by FmHA or its successor agency under Public
Law 103-354, indicates the presence of an historic or cultural property
within the area of potential environmental impact that, in the opinion
of the SHPO and FmHA or its successor agency under Public Law 103-354,
appear to meet the National Register Criteria (36 CFR 60.4), the
property will be considered eligible for the National Register of
Historic Places. If the SHPO and FmHA or its successor agency under
Public Law 103-354 do not agree on the property's eligibility for the
National Register or if the Secretary of the Interior or the Advisory
Council on Historic Preservation so requests, FmHA or its successor
agency under Public Law 103-354 will request a determination of
eligibility from the Keeper of the National Register in accordance with
36 CFR part 63. Consultations will be initiated with the SHPO and the
Advisory Council on Historic Preservation in accordance with 36 CFR part
800, through the implementation of subpart F of part 1901 of this
chapter, to determine the most appropriate course of action to protect
all National Register and eligible properties within the area of
potential environmental impact.
(3) Further instructions detailing the procedures to be followed in
considering and protecting historic and cultural properties and the
responsible Agency officials are contained in subpart F of part 1901 of
this chapter. These procedures will be followed whenever a proposal,
considered by FmHA or its successor agency under Public Law 103-354, has
the potential to affect National Register or eligible properties.
(h) Coastal barriers. In those States having coastal barriers within
the Coastal Barrier Resources System, each application for financial
assistance or subdivision approval, as well as the proposed disposal of
real property, will be reviewed to determine if it would be located
within the system, and, if so, whether the action must be denied on this
basis or meets the Act's criteria for an exception. To accomplish the
review, all affected State, District and County Offices will maintain a
current set of maps, as issued by DOI, which depict those coastal
barriers within their jurisdiction that have been included in the
system. FmHA or its successor agency under Public Law 103-354's
implementation procedures for accomplishing this review requirement and
for consulting as necessary with DOI are contained in exhibit F of this
subpart. The exceptions to the restrictions of the Coastal Barrier
Resources Act are contained in exhibit L of this subpart.
(i) Water and energy conservation. Water and energy conservation
measures will be considered at both the program and project level in a
manner consistent with program regulations.
(j) Noise abatement. For purposes of assessing noise impacts and for
determining the acceptability of housing sites in terms of their
exposure to noise, FmHA or its successor agency under Public Law 103-354
has adopted and follows the standards and procedures developed by the
U.S. Department of Housing and Urban Development (HUD) and contained in
24 CFR part 51 of subpart B entitled, ``Noise Abatement and Control.''
(k) Water quality. Each application for financial assistance or
subdivision approval and the proposed disposal of real property will be
reviewed to determine if it would impair a State water quality standard
or meet antidegradation requirements. When necessary, the proposed
activity will be modified to protect water quality standards, including
designated and/or existing beneficial uses that water quality criteria
are designed to protect, and meet antidegradation requirements.
Sec. 1940.306 Environmental responsibilities within the National Office.
(a) Administrator. The Administrator of FmHA or its successor agency
under Public Law 103-354 has the direct responsibility for Agency
compliance with all environmental laws, Executive orders, and
regulations that apply to FmHA or its successor agency under
[[Page 18]]
Public Law 103-354's program and administrative actions. As such, the
Administrator ensures that this responsibility is adequately delegated
to Agency staff and remains informed on the general status of Agency
compliance, as well as the need for any necessary improvements. The
Administrator is also responsible for ensuring that the Agency's
manpower and financial needs for accomplishing adequate compliance with
this subpart are reflected and documented in budget requests for
departmental consideration.
(b) Deputy Administrator Program Operations. (1) The Deputy
Administrator for Program Operations has the delegated overall Agency
responsibility for developing and implementing environmental policies
and compliance procedures, monitoring their effectiveness, and advising
the Administrator on the status of compliance, to include
recommendations for any necessary changes in this subpart. The incumbent
is also responsible for developing and documenting, as part of the
Agency's budget formulation process, the manpower and financial needs
necessary to implement this subpart.
(2) The specific responsibilities of the Deputy Administrator--
Program Operations are as follows:
(i) Provide for the Agency an interdisciplinary approach to
environmental impact analysis and problem resolution, as required by the
CEQ regulations;
(ii) Provide the leadership and technical expertise for the
implementation of the Agency's environmental policies with special
emphasis being placed on those policies relating to natural resource
management, energy conservation, and orderly community development;
(iii) Coordinate the implementation of this subpart with affected
program offices;
(iv) Provide policy direction and advice on the implementation of
this subpart to Agency staff, particularly to SECs and technical support
personnel within State Offices;
(v) Consult and coordinate, as needed or upon request, with the
Department's interagency committees dealing with environmental, land
use, and historic preservation matters;
(vi) Monitor the Agency's record in complying with this subpart;
(vii) Provide training programs and materials for the Agency staff
assigned the functions identified in this subpart;
(viii) Review, as necessary, applications for funding assistance,
proposed policies and regulations, and recommend their approval,
disapproval, or modification after analyzing and considering their
anticipated adverse environmental impacts, their benefits, and their
consistency with the requirements of this subpart;
(ix) Develop and direct Agency procedures for complying with
environmental legislation, Executive orders, and regulations, including,
but not limited to, those listed in Sec. 1940.301(c) of this subpart;
(x) Maintain a position identified as the Senior Environmental
Specialist (hereafter called the Environmental Specialist), who will
serve as the responsible Agency official under the National
Environmental Policy Act and the National Historic Preservation Act,
maintain liaison on environmental matters with interested public groups
and Federal agencies, and serve as the focal point for developing and
coordinating the Agency's procedures for the requirements listed in
Sec. 1940.301(c) of this subpart; and
(xi) Review and evaluate legislative and administrative proposals in
terms of their environmental impact.
(c) Assistant Administrators for Programs. The Assistant
Administrators for Programs will:
(1) Ensure, as necessary, that environmental assessments and EISs
for proposed program regulations are prepared by their staff;
(2) Ensure that all proposed actions that fall under the
requirements of this subpart, and that are submitted to the National
Office for approval or concurrence, contain adequate analyses and
documentation of their potential environmental impacts (Transfer of
program funds from National Office to State Office control to enable the
State Office to approve an application is not considered to be National
Office approval of or concurrence in an application);
[[Page 19]]
(3) Consider and include, in the development of program regulations,
feasible policies and mechanisms that promote program goals in a manner
that either enhances environmental quality or reduces unnecessary
adverse environmental impacts; and
(4) Designate one or more staff members to serve as a program
environmental coordinator, having generally the same duties and
responsibilities within the program office as the SEC has within the
State Office (See Sec. 1940.307(b) of this subpart).
Sec. 1940.307 Environmental responsibilities within the State Office.
(a) State Director. The State Director will:
(1) Serve as the responsible FmHA or its successor agency under
Public Law 103-354 official at the State Office level for ensuring
compliance with the requirements of this subpart; and
(2) Appoint one individual to serve as the SEC. Thereafter, the SEC
will report directly to the State Director on the environmental matters
contained in this subpart.
(b) State Environmental Coordinator (SEC). The SEC will:
(1) Act as advisor to the State Director on environmental matters
and coordinate the requirements of this subpart;
(2) Review those Agency actions which are not categorically excluded
from this subpart (see Sec. Sec. 1940.311 and 1940.312 of this subpart)
and which require the approval and/or clearance of the State Office and
recommend to the approving official either project approval,
disapproval, or modification after analyzing and considering the--
(i) Anticipated adverse environmental impacts,
(ii) The anticipated benefits, and
(iii) The action's consistency with this subpart's requirements;
(3) Represent the State Director at conferences and meetings dealing
with environmental matters of a State Office nature;
(4) Maintain liaison on State Office environmental matters with
interested public groups and local, State, and other Federal agencies;
(5) Serve as the State Director's alternate on State-level USDA
committees dealing with environmental, land use and historic
preservation matters;
(6) Solicit, whenever necessary, the expert advice and assistance of
other professional staff members within the State Office in order to
adequately implement this subpart;
(7) Provide technical assistance as needed on a project-by-project
basis to State, District, and County Office staffs;
(8) Develop controls for avoiding or mitigating adverse
environmental impacts and monitor their implementation;
(9) Provide assistance in resolving post-approval environmental
matters at the State Office level;
(10) Maintain records for those actions required by this subpart;
(11) Coordinate for the State Director the development of the State
Office natural resource management guide;
(12) Provide direction and training to State, District, and County
Office staffs on the requirements of this subpart; and
(13) Coordinate for the State Director the monitoring of the State
Office's compliance with this subpart and keep the State Director
advised of the results of the monitoring process.
(c) Program Chiefs. State Office Program Chiefs will:
(1) Be responsible for the adequacy of the environmental impact
reviews required by this subpart for all program actions to be approved
at the State Office level or concurred in at that level;
(2) Coordinate the above reviews as early as possible with the SEC,
so that the latter can assist in addressing the resolution of any
unresolved or difficult environmental issues in a timely manner; and
(3) Incorporate into projects and actions measures to avoid or
reduce potential adverse environmental impacts identified in
environmental reviews.
Sec. 1940.308 Environmental responsibilities at the District and
County Office levels.
(a) The District Director will be responsible for carrying out the
actions required by this subpart to be completed at the District Office
level.
(b) The County Supervisor will be responsible for carrying out the
actions
[[Page 20]]
required by this subpart to be completed at the County Office level.
(c) In discussing FmHA or its successor agency under Public Law 103-
354 assistance programs with potential applicants, District Directors
and County Supervisors will inform them of the Agency's environmental
requirements, as well as the environmental information needs and
responsibilities that FmHA or its successor agency under Public Law 103-
354 applicants are expected to address. (See Sec. 1940.309 of this
subpart.)
Sec. 1940.309 Responsibilities of the prospective applicant.
(a) FmHA or its successor agency under Public Law 103-354 expects
applicants and transferees (and in the case of the loan guarantee
programs, borrowers and transferees) to consider the potential
environmental impacts of their requests at the earliest planning stages
and to develop proposals that minimize the potential to adversely impact
the environment. Prospective applicants should contact County
Supervisors or District Directors, as appropriate, to determine FmHA or
its successor agency under Public Law 103-354's environmental
requirements as soon as possible after they decide to pursue FmHA or its
successor agency under Public Law 103-354 financial assistance.
(b) As specified in paragraph (c) of this section, applicants for
FmHA or its successor agency under Public Law 103-354 assistance will be
required to provide information necessary to FmHA or its successor
agency under Public Law 103-354 to evaluate their proposal's potential
environmental impacts and alternatives to them. For example, the
applicant will be required to provide a complete description of the
project elements and the proposed site(s) to include location maps,
topographic maps, and photographs when needed. The applicant will also
be required to provide data on any expected gaseous, liquid and solid
wastes to be produced, including hazardous wastes as defined by the
Resource Conservation and Recovery Act or State law, and all permits
and/or correspondence issued by the appropriate local, State, and
Federal agencies which regulate treatment and disposal practices.
(c) Form FmHA or its successor agency under Public Law 103-354 1940-
20, ``Request for Environmental Information,'' will be used for
obtaining environmental information from applicants whose proposals
require an environmental assessment under the requirements of this
subpart. These same applicants must notify the appropriate State
Historic Preservation Officer of the filing of the application and
provide a detailed project description as specified in Item 2 of Form
FmHA or its successor agency under Public Law 103-354 1940-20 and the
FMI. If the applicant's proposal meets the definition of a Class II
action as defined in Sec. 1940.312 of this subpart, all of Form FmHA or
its successor agency under Public Law 103-354 1940-20 must be completed.
If the applicant's proposal meets the definition of a Class I action as
defined in Sec. 1940.311 of this subpart, the entire form need not be
completed, but just the face of the form and categories (1), (2), (13),
(15), (16), and (17) of Item 1b of the FMI. As an exception to the
foregoing statement, an applicant for an action that is normally
categorically excluded but requires a Class I assessment for any of the
reasons stated in Sec. 1940.317(e) of this subpart is not required to
complete Form FmHA or its successor agency under Public Law 103-354
1940-20. Additionally, for Class I actions within the Farm Programs, a
site visit by the FmHA or its successor agency under Public Law 103-354
official completing the environmental assessment obviates the need for
the applicant to complete any of the form, and the adoption by FmHA or
its successor agency under Public Law 103-354 of a Soil Conservation
Service (SCS) environmental assessment or evaluation for the action
obviates the need to complete the form for either a Class I or Class II
action.
(d) Applicants will ensure that all required materials are current,
sufficiently detailed and complete, and are submitted directly to the
FmHA or its successor agency under Public Law 103-354 office processing
the application. Incomplete materials or delayed submittals may
seriously jeopardize consideration or postponement of a proposed action
by FmHA or its successor agency under Public Law 103-354.
[[Page 21]]
(e) During the period of application review and processing,
applicants will not take any actions with respect to their proposed
undertakings which are the subject of the application and which would
have an adverse impact on the environment or limit the range of
alternatives. This requirement does not preclude development by
applicants of preliminary plans or designs or performance of other work
necessary to support an application for Federal, State, or local permits
or assistance. However, the development of detailed plans and
specifications is discouraged when the costs involved inhibit the
realistic consideration of alternative proposals.
(f) Applicants are required to provide public notification and to
fully cooperate in holding public information meetings as described in
Sec. Sec. 1940.318(e), 1940.320 (c) and (g), and 1940.331 (b) and (c)
of this subpart.
(g) Any applicant that is directly and adversely affected by an
administrative decision made by FmHA or its successor agency under
Public Law 103-354 under this subpart may appeal that decision under the
provisions of subpart B of part 1900 of this chapter.
Sec. 1940.310 Categorical exclusions from National Environmental
Policy Act (NEPA) reviews.
(a) General guidelines. The following actions have been determined
not to have a significant impact on the quality of the human
environment, either individually or cumulatively. They will not be
subject to environmental assessments or impact statements. It must be
emphasized that even though these actions are excluded from further
environmental reviews under NEPA, they are not excluded from either the
policy considerations contained in Sec. Sec. 1940.303 through 1940.305
of this subpart or from compliance with other applicable local, State,
or Federal environmental laws. Also, the actions preceded by an asterisk
(*) are not excluded from further review depending upon whether in some
cases they would be located within, or in other cases, potentially
affect:
(1) A floodplain,
(2) A wetland,
(3) Important farmlands, or prime forestlands or rangelands,
(4) A listed species or critical habitat for an endangered species,
(5) A property that is listed on or may be eligible for listing on
the National Register of Historic Places,
(6) An area within an approved State coastal zone management
program,
(7) A coastal barrier or a portion of a barrier within the Coastal
Barrier Resources System,
(8) A river or portion of a river included in, or designated for,
potential addition to the Wild and Scenic Rivers System,
(9) A sole source aquifer recharge area, or
(10) A State water quality standard (including designated and/or
existing beneficial uses and antidegradation requirements).
(i) Whether location within one of the preceding resource areas is
sufficient to require a further review or a potential impact to one of
them must also be identified to require a review is determined by FmHA
or its successor agency under Public Law 103-354's completion of Form
FmHA or its successor agency under Public Law 103-354 1940-22 in
accordance with the FMI and Sec. 1940.317 of this subpart.
(ii) When the categorical exclusion classification is lost, as
specified in Sec. 1940.317 of this subpart, the action must be reviewed
under the requirements of paragraph (g) of that section. This
requirement serves to implement Sec. 1508.4 of the CEQ regulations
which requires Federal agencies to detect extraordinary circumstances in
which a normally excluded action may have a significant environmental
effect.
(iii) Further guidance on the use of these exclusions is contained
in Sec. 1940.317 of this subpart.
(b) Housing assistance. *(1) The provision of financial assistance
for the purchase of a single family dwelling or a multi-family project
serving no more than four families, i.e., units;
(2) The approval of an individual building lot that is located on a
scattered site and either not part of a subdivision or within a
subdivision not requiring FmHA or its successor agency under Public Law
103-354's approval;
*(3) Rehabilitation, replacement, or renovation of any existing
housing
[[Page 22]]
units, with no expansion in the number of units;
(4) Self-Help Technical Assistance Grants;
*(5) The approval of a subdivision that consists of four or fewer
lots and is not part of, or associated with, building lots or
subdivisions;
(6) Technical Supervisory Assistance Loans and Grants;
(7) Weatherization of any existing housing unit(s), unless the
property is listed in the National Register of Historic Places or may be
eligible for listing, or is located either within the Coastal Barrier
Resources System or in a listed or potentially eligible historic
district, in which case the application will require a Class I
assessment as specified in Sec. 1940.317(g) of this subpart;
(8) The financing of housing construction or the approval of lots in
a previously approved FmHA or its successor agency under Public Law 103-
354 subdivision provided that
(i) The action is consistent with all previously adopted
stipulations for the multi-family housing project or subdivision, and
(ii) The FmHA or its successor agency under Public Law 103-354
environmental impact review that was previously completed for the
original application is still current with respect to applicable
environmental requirements and conditions present at the site, and it
assessed the lots or expansion for which approval is being requested;
(9) The purchase of any existing, non-FmHA or its successor agency
under Public Law 103-354 owned housing unit(s), unless the property is
listed in the National Register of Historic Places or may be eligible
for listing, or is located either within a 100-year floodplain, the
Coastal Barrier Resources System, or in a listed or potentially eligible
historic district, in which case the application will require a Class I
assessment as specified in Sec. 1940.317(g) of this subpart; and
(10) Appraisals of nonfarm tracts and small farms for rural housing
loans.
(c) Community and business programs and nonprofit national
corporations loan and grant program. *(1) Financial assistance directed
to existing businesses, facilities, and/or structures that does not
involve new construction or large increases in employment; does not
involve a facility that presently or previously produced or stored
hazardous waste or disposed of hazardous waste on the facility's
property; and does not result in the increased production of gaseous,
liquid, or solid wastes, or a change in the type or content of such
wastes as long as waste production, handling, treatment and disposal
practices presently comply with applicable Federal, State and local
regulations and there is no history of violations. If any of these waste
production, handling, treatment, disposal or compliance criteria cannot
be met, a Class I assessment must be initiated to include a narrative
discussion of the types and quantities of wastes produced and the
adequacy of the treatment, storage, and disposal practices, if the
involved wastes meet the criteria for a Class I assessment contained in
Sec. 1940.311(b)(3)(iii) of this subpart. If not, a Class II assessment
must be completed.
*(2) Projects that solely involve the acquisition, construction,
reconstruction, renovation, or installation of facilities, structures or
businesses, for replacement or restoration purposes, with minimal change
in use, size, capacity, purpose or location from the original facility
(e.g., replacement in-kind of utilities such as water or sewer lines and
appurtenances, reconstruction of curbs and sidewalks, street repaving,
and building modifications, renovations, and improvements);
(3) Project management actions relating to invitation for bids,
contract award, and the actual physical commencement of construction
activities;
(4) Financial assistance for a technical assistance grant under the
nonprofit national corporation loan and grant program;
(5) Projects that solely involve the purchase and installation of
office equipment, public safety equipment, or motor vehicles; and
(6) Amendments to approved projects meeting the criteria of
paragraph (e)(2) of this section.
(d) Farm programs. (1) Financial assistance for the purchase of an
existing farm, or an enlargement to one, provided no shifts in land use
are proposed
[[Page 23]]
beyond the limits stated in paragraphs (d) (10) and (11) of this
section;
(2) Financial assistance for the purchase of livestock and essential
farm equipment, including crop storing and drying equipment, provided
such equipment is not to be used to accommodate shifts in land use
beyond the limits stated in paragraphs (d) (10) and (11) of this
section;
(3) Financial assistance for:
(i) The payment of annual operating expenses, which does not cover
activities specifically addressed in this section or Sec. 1940.311 or
Sec. 1940.312 of this subpart;
(ii) Family living expenses, and
(iii) Refinancing debts;
*(4) Financial assistance for the construction of essential farm
dwellings and service buildings of modest design and cost, as well as
repairs and improvements to them;
(5) Financial assistance for onsite water supply facilities to serve
a farm dwelling, farm buildings, and livestock needs;
(6) Financial assistance for the installation or enlargement of
irrigation facilities, including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers designed to
irrigate less than 80 acres, provided that neither a State water quality
standard, a property listed or potentially eligible for listing on the
National Register of Historic Places, a river or portion of a river
included in, or designated for, potential addition to the Wild and
Scenic Rivers System, nor a wetland is affected. If a wetland is
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart. Potential effects to a water quality standard,
an historic property or the Wild and Scenic Rivers System require that a
review be initiated under a Class I assessment as specified in Sec.
1940.317(g) of this subpart.
(7) Financial assistance that solely involves the replacement or
restoration of irrigation facilities, to include those facilities
described in paragraph (d)(6) of this section, with minimal change in
use, size, capacity, or location from the original facility(s) provided
that neither a State water quality standard, a property listed or
potentially eligible for listing on the National Register of Historic
Places, a river or portion of a river included in or designated for
potential addition to the Wild and Scenic Rivers System, nor a wetland
is affected. If a wetland is affected, the application will fall under
Class II as defined in Sec. 1940.312 of this subpart. Potential effects
to a water quality standard, an historic property, or the Wild and
Scenic Rivers System require that a Class I assessment be completed as
specified in Sec. 1940.317(g) of this subpart. Also, to qualify for
this exclusion, the facilities to be replaced or restored must have been
used for similar irrigation purposes at least two out of the last three
consecutive growing seasons. Otherwise, the action will be viewed as an
installation of irrigation facilities.
(8) Financial assistance for the development of farm ponds or lakes
of no more than 5 acres in size, provided that, neither a State water
quality standard, a property listed or potentially eligible for listing
on the National Register of Historic Places, a river or portion of a
river included in or designated for potential addition to the Wild and
Scenic Rivers System, nor a wetland is affected. If a wetland is
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart. Potential effects to a water quality standard,
an historic property, or the Wild and Scenic Rivers System require that
a review be initiated under a Class I assessment as specified in Sec.
1940.317(g) of this subpart;
*(9) Financial assistance for the conversion of:
(i) Land in agricultural production to pastures or forests, or
(ii) Pastures to forests;
*(10) Financial assistance for land-clearing operations of no more
than 15 acres, provided no wetlands are affected, and financial
assistance for any amount of land involved in tree harvesting conducted
on a sustained yield basis and according to a Federal, State or other
governmental unit approved forestry management and marketing plan; and
(11) Financial assistance for the conversion of no more than 160
acres of pasture to agricultural production, provided that in a
conversion to agricultural production no State water
[[Page 24]]
quality standard or wetlands are affected. If a wetland is affected, the
application will fall under Class II as defined in Sec. 1940.312 of
this subpart. If a water quality standard would be impaired or
antidegradation requirement not met, a Class I assessment is required as
specified in Sec. 1940.317(g) of this subpart.
(e) General exclusions. (1) The award of financial assistance for
planning purposes, management and feasibility studies, or environmental
impact analyses;
(2) For actions other than those covered by exhibit M of this
subpart, loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities and amendments and
revisions to approved projects, including the provision of additional
financial assistance that do not alter the purpose, operation, location,
or design of the project as originally approved;
(3) The issuance of regulations and instructions, as well as
amendments to them, describing administrative and financial procedures
for processing, approving, and implementing the Agency's financial
assistance programs;
(4) Procurement activities for goods and services, routine facility
operations, personnel actions, and other such management activities
related to the operation of the Agency;
(5) Reduction in force or employee transfers resulting from workload
adjustments, reduced personnel or funding levels, skill imbalances, or
other similar circumstances; and
*(6) The lease or disposal of real property by FmHA or its successor
agency under Public Law 103-354 whenever the transaction is either not
controversial for environmental reasons or will not result in a change
in use of the real property within the reasonably foreseeable future.
Sec. 1940.311 Environmental assessments for Class I actions.
The Agency's proposals and projects that are not identified in Sec.
1940.310 of this subpart as categorical exclusions require the
preparation of an environmental assessment in order to determine if the
proposal will have a significant impact on the environment. For purposes
of implementing NEPA, the actions listed in this section are presumed to
be major Federal actions. If an action has a potential to create a
significant environmental impact, an EIS must be prepared. (In
situations when there is clearly a potential for a significant impact,
the EIS may be initiated directly without the preparation of an
assessment.) It is recognized that many of the applications funded
annually by FmHA or its successor agency under Public Law 103-354
involve small-scale projects having limited environmental impacts.
However, because on occasion they have the potential to create a
significant impact, each must be assessed to determine the degree of
impact. The scope and level of detail of an assessment for a small-scale
action, though, need only be sufficient to determine whether the
potential impacts are substantial and further analysis is necessary.
Therefore, for the purpose of implementing NEPA, FmHA or its successor
agency under Public Law 103-354 has classified its smaller scale
approval actions as Class I actions. The format which will be used for
accomplishing the environmental assessment of a Class I action is
provided in Form FmHA or its successor agency under Public Law 103-354
1940-21. An important aspect of this classification method is that it
allows FmHA or its successor agency under Public Law 103-354's
environmental review staff to concentrate most of its time and efforts
on those actions having the potential for more serious or complex
environmental impacts. Additional guidance on the application of NEPA to
Class I actions is provided in Sec. 1940.319 of this subpart.
(a) Housing assistance. If either of the following actions is an
expansion of a previously approved FmHA or its successor agency under
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this
subpart to determine if it meets the requirements for a categorical
exclusion. In the case of an expansion for which an environmental
assessment was not done for the original FmHA or its successor agency
under Public Law 103-354 project, the size of the proposal for
assessment purposes is determined by adding the number of units in the
[[Page 25]]
original project(s) to those presently being requested.
(1) Financial assistance for a multi-family housing project,
including labor housing which comprises at least 5 units, but no more
than 25 units; and
(2) Financial assistance for or the approval of a subdivision, as
well as the expansion of an existing one which involves at least 5 lots
but no more than 25 lots; and
(3) Financial assistance for a housing preservation grant.
(b) Community and business programs and nonprofit national
corporations loan and grant program. Class I assessments will be
prepared for the following categories:
(1) Financial assistance for water and waste disposal facilities and
natural gas facilities that meet all of the following criteria:
(i) There will not be a substantial increase in the volume of
discharge or the loading of pollutants from any existing or expanded
sewage treatment facilities, or a substantial increase in an existing
withdrawal from surface or ground waters. A substantial increase may be
evidenced by an increase in hydraulic capacity or the need to obtain a
new or amended discharge or withdrawal permit.
(ii) There will not be either a new discharge to surface or ground
waters or a new withdrawal from surface or ground waters such that the
design capacity of the discharge or withdrawal facility exceeds 50,000
gallons per day and provided that the potential water quality impacts
are documented in a manner required for a Class II assessment and
attached as an exhibit to the Class I assessment.
(iii) From the boundaries listed below, there is no extension,
enlargement or construction of interceptors, collection, transmission or
distribution lines beyond a one-mile limit estimated from the closest
point of the boundary most applicable to the proposed service area:
(A) The boundary formed by the corporate limits of the community
being served.
(B) If there are developed areas immediately contiguous to the
corporate limits of a community, the boundary formed by the limits of
these developed areas.
(C) If an unincorporated area is to be served, the boundary formed
by the limits of the developed areas.
(iv) The proposal is designed for predominantly residential use with
other new or expanded users being small-scale commercial enterprises
having limited secondary impacts.
(v) For a proposed expansion of sewage treatment or water supply
facilities, such expansions would serve a population that is no more
than 20 percent greater than the existing population.
(vi) The proposal is not controversial for environmental reasons,
nor have relevant questions been raised regarding its environmental
impact which cannot be addressed in a Class I assessment.
(2) Financial assistance for group homes, detention facilities,
nursing homes, or hospitals, providing a net increase in beds of not
more than 25 percent or 25 beds, whichever is greater; and
(3) Financial assistance for the construction or expansion of
facilities, such as fire stations, real stores, libraries outpatient
medical facilities, service industries, additions to manufacturing
plants, office buildings, and wholesale industries, that:
(i) Are confined to single, small sites; and
(ii) Are not a source of substantial traffic generation; and
(iii) Do not produce either substantial amounts of liquid or solid
wastes or any of the following type(s) of wastes:
(A) Gaseous, liquid, or solid waste that is hazardous toxic,
radioactive, or odorous;
(B) Either a liquid waste, whether or not disposed of on-site, that
cannot be accepted by a publicly owned treatment works without first
receiving pretreatment, or a liquid waste discharge that is a point
source subject to a Federal, or State discharge permit; or
(C) Gaseous waste or air pollutant that will be emitted either from
a new source at a rate greater than one hundred tons per year or from an
expanded
[[Page 26]]
source at a rate greater than twenty-five tons per year.
(4) Financial assistance for a livestock-holding facility or feed-
lot meeting the criteria of Sec. 1940.311(c)(8) of this subpart.
(c) Farm Programs. In completing environmental assessments for the
following Class I actions and the Class II actions listed in Sec.
1940.312(d), special attention will be given to avoiding a duplication
of effort with other Department agencies, particularly SCS. For
applications in which the applicant is receiving assistance from other
agencies, technical assistance from SCS, for example, FmHA or its
successor agency under Public Law 103-354 will request from that agency
a copy of any applicable environmental review conducted by it and will
adopt that review if the requirements of Sec. 1940.324 of this subpart
are met. FmHA or its successor agency under Public Law 103-354 will work
closely with the other Federal Agencies to supplement previous or
ongoing reviews whenever they cannot be readily adopted.
(1) Financial assistance for the installation or enlargement of
irrigation facilities including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers designed to
irrigate at least 80 acres, but no more than 160 acres and provided that
no wetlands are affected, in which case the application will fall under
Class II as defined in Sec. 1940.312 of this subpart:
(2) Financial assistance for the development of farm ponds or lakes
of more than 5 acres in size, but no more than 10 acres, provided that
no wetlands are affected. If wetlands are affected, the application will
fall under Class II as defined in Sec. 1940.312 of this subpart;
(3) Financial assistance for land-clearing operations encompassing
over 15 acres, but no more than 35 acres, provided that no wetlands are
affected. If wetlands are affected, the application will fall under
Class II as defined in Sec. 1940.312 of this subpart;
(4) Financial assistance for the construction of energy producing
facilities designed for on-farm needs such as methane digestors and fuel
alcohol production facilities;
(5) Financial assistance for the conversion of more than 160 acres
of pasture to agricultural production, but no more than 320 acres,
provided that in a conversion to agricultural production no wetlands are
affected, in which case the application will fall under Class II as
defined in Sec. 1940.312 of this subpart;
(6) Financial assistance to grazing associations;
(7) Financial assistance for the use of a farm or portion of a farm
for recreational purposes or nonfarm enterprises utilizing no more than
10 acres, provided that no wetlands are affected. If wetlands are
affected, the application will fall under Class II as defined in Sec.
1940.312 of this subpart; and
(8) Financial assistance for a livestock-holding facility or feedlot
having a capacity of at least one-half of those listed in Sec.
1940.312(c)(9) of this subpart. (If the facility is located near a
populated area or could potentially violate a State water quality
standard, it will be treated as a Class II action as required by Sec.
1940.312(c)(10) of this subpart.)
(d) General. (1) Any Federal action which is defined in Sec.
1940.310 of this subpart as a categorical exclusion, but which is
controversial for environmental reasons, or which is the subject of an
environmental complaint raised by a government agency, interested group,
or citizen;
(2) Loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities, and amendments and
revisions to all approved actions listed either in this section or
equivalent in size or type to such actions and that alter the purpose,
operation, location or design of the project as originally approved;
(3) The lease or disposal of real property by FmHA or its successor
agency under Public Law 103-354 which meets either the following
criteria:
(i) The lease or disposal may result in a change in use of the real
property in the reasonably foreseeable future, and such change is
equivalent in magnitude or type to either the Class I actions defined in
this section or the categorical exclusions defined in Sec. 1940.310 of
this subpart; or
(ii) The lease or disposal is controversial for environmental
reasons,
[[Page 27]]
and the real property is equivalent in size or type to either the Class
I actions defined in this section or the categorical exclusions defined
in Sec. 1940.310 of this subpart.
Sec. 1940.312 Environmental assessments for Class II actions.
Class II actions are basically those which exceed the thresholds
established for Class I actions and, consequently, have the potential
for resulting in more varied and substantial environmental impacts. A
more detailed environmental assessment is, therefore, required for Class
II actions in order to determine if the action requires an EIS. The
format that will be used for completing this assessment is included as
exhibit H of this subpart. Further guidance on Class II actions is
contained in Sec. 1940.318 of this subpart. Class II actions are
presumed to be major Federal actions and are defined as follows:
(a) Housing assistance. If either of the following actions is an
expansion of a previously approved FmHA or its successor agency under
Public Law 103-354 housing project, see Sec. 1940.310(b)(8) of this
subpart to determine if it meets the requirements for a categorical
exclusion, otherwise it is a Class II action.
(1) Financial assistance for a multi-family housing project,
including labor housing, which comprises more than 25 units; and
(2) Financial assistance for, or the approval of, a subdivision as
well as the expansion of an existing one, which involves more than 25
lots.
(b) Community and business programs and nonprofit national
corporations loan and grant program. (1) Class II actions are those
which either do not meet the criteria for a categorical exclusion as
stated in Sec. 1940.311 of this subpart, or involve a livestock-holding
facility or feedlot meeting the criteria for a Class II action as
defined in paragraphs (c) (9) and (10) of this section; and
(2) Non-technical assistance grant or loan guarantee under nonprofit
national corporation loan and grant program.
(c) Farm programs. In completing environmental assessments for the
following actions, FmHA or its successor agency under Public Law 103-354
will first determine if the applicant has sought technical assistance
from the Soil Conservation Service (SCS). If not, the applicant will be
requested to do so. Subsequently, an approved loan will be structured so
as to be consistent with any conservation plan developed with the
application by SCS. However, the FmHA or its successor agency under
Public Law 103-354 approving official need not include an element of the
conservation plan within the loan agreement if that official determines
that the element is both nonessential to the accomplishment of the
plan's objectives and so costly as to prevent the borrower from being
able to repay the loan. The SCS environmental review will be adopted by
FmHA or its successor agency under Public Law 103-354 if the
requirements of Sec. 1940.324 of this subpart are met.
(1) Financial assistance for the installation or enlargement of
irrigation facilities including storage reservoirs, diversion dams,
wells, pumping plants, canals, pipelines, and sprinklers either designed
to irrigate more than 160 acres or that would serve any amount of
acreage and affects a wetland;
(2) Financial assistance for the development of farm ponds or lakes
either larger than 10 acres in size or for any smaller size that would
affect a wetland;
(3) Financial assistance for land-clearing operations either
encompassing more than 35 acres or affecting a wetland, if less than 35
acres is involved;
(4) Financial assistance for the construction or enlargement of
aquaculture facilities;
(5) Financial assistance for the conversion of more than 320 acres
of pasture to agricultural production or for any smaller conversion of
pasture to agricultural production that affects a wetland;
(6) Financial assistance to an individual farmer or an association
of farmers for water control facilities such as dikes, detention
reservoirs, stream channels, and ditches;
(7) Financial assistance for the use of a farm or portion of a farm
for recreational purposes or nonfarm enterprises either utilizing more
than 10
[[Page 28]]
acres or affecting a wetland, if less than 10 acres is involved.
(8) Financial assistance for alteration of a wetland;
(9) Financial assistance for a livestock-holding facility or feedlot
located in a sparsely populated farming area having a capacity as large
or larger than one of the following capacities; 1,000 slaughter steers
and heifers; 700 mature dairy cattle (whether milkers or dry cows);
2,500 swine; 10,000 sheep; 55,000 turkeys; 100,000 laying hens or
broilers when facility has unlimited continuous flow watering systems;
30,00 laying hens or broilers when facility has liquid manure handling
system; 500 horses; and 1,000 animal units from a combination of
slaughter steers and heifers, mature dairy cattle, swine, and sheep;
(The term animal unit means a unit of measurement for any animal feeding
operation calculated by adding the following numbers: the number of
slaughter and feeder cattle multiplied by 1.0, plus the number of mature
dairy cattle multiplied by 1.4, plus the number of swine weighing over
25 kilograms (approximately 55 pounds) multiplied by 0.4, plus the
number of sheep multiplied by 0.1, plus the number of horses multiplied
by 2.0) and
(10) Financial assistance for a livestock-holding facility or
feedlot which either could potentially violate a State water quality
standard or is located near a town or collection of rural homes which
could be impacted by the facility, particularly with respect to noise,
odor, visual, or transportation impacts and having a capacity of at
least one-half of those listed in paragraph (c)(9) of this section.
(d) General. (1) Any action which meets the numerical criteria or
other restriction for a Class I action contained in Sec. 1940.311 of
this subpart, but is controversial for environmental reasons. If the
action is the subject of isolated environmental complaints or any
questions or concerns that focus on a single impact, air quality, for
example, the analysis of such a complaint or questions can be handled
under the assessment format for a Class I action, Form FmHA or its
successor agency under Public Law 103-354 1940-21, as explained in Sec.
1940.319 of this subpart. When several potential impacts are questioned,
however, the assessment format (exhibit H of this subpart) for a Class
II action must be used to address these questions;
(2) Loan-closing and servicing activities, transfers, assumptions,
subordinations, construction management activities and amendments and
revisions to all approved actions listed either in this section or
equivalent in size or type to such actions and that alter the purpose,
operation, location, or design of the project as originally approved;
(3) The approval of plans and State Investment Strategies for Energy
Impacted Areas, designated under section 601 Energy Impacted Area
Development Assistance Program, as well as the applications for
financial assistance (excluding the award of planning funds) for Energy
Impact Areas;
(4) Proposals for legislation as defined in CEQ's regulations, Sec.
1508.17;
(5) The issuance of regulations and instructions, as well as
amendments to these, that described either the entities, proposals and
activities eligible for FmHA or its successor agency under Public Law
103-354 financial assistance, or the manner in which such proposals and
activities must be located, constructed, or implemented; and
(6) The lease or disposal of any real property by FmHA or its
successor agency under Public Law 103-354 which either does not meet the
criteria for a categorical exclusion as stated in Sec. 1940.310(e)(6)
of this subpart or a Class I action as stated in Sec. 1940.311(d)(3) of
this subpart.
Sec. 1940.313 Actions that normally require the preparation of an
Environmental Impact Statement (EIS).
The environmental assessment process will be used, as defined in
this subpart, to identify on a case-by-case basis those actions for
which the preparation of an EIS is necessary. Given the variability of
the types and locations of actions taken by FmHA or its successor agency
under Public Law 103-354, no groups or set of actions can be identified
which in almost every case would require the preparation of an EIS.
[[Page 29]]
Sec. 1940.314 Criteria for determining a significant environmental
impact.
(a) EISs will be done for those Class I and Class II actions that
are determined to have a significant impact on the quality of the human
environment. The criteria for determining significant impacts are
contained in Sec. 1508.27 of the CEQ regulations.
(b) In utilizing the criteria for a significant impact, the
cumulative impacts of other FmHA or its successor agency under Public
Law 103-354 actions planned or recently approved in the proposal's area
of environmental impact, other related or similarly located Federal
actions, and non-federal related actions must be given consideration.
This is particularly relevant for frequently recurring FmHA or its
successor agency under Public Law 103-354 actions that on an individual
basis may have relatively few environmental impacts but create a
potential for significantly impacts on a cumulative basis. Housing
assistance is one such example. Consequently, in reviewing proposals for
subdivisions and multi-family housing sites, consideration must be given
to the cumulative impacts of other federally assisted housing in the
area, including FmHA or its successor agency under Public Law 103-354's.
The boundaries of the area to be considered should be based upon such
factors as common utility or public service districts, common
watersheds, and common commuting patterns to central employment or
commercial areas. Additionally, the criteria for significant impacts
utilized by the other involved housing agency(s), (VA and HUD, for
example) must be reviewed when there is a potential for cumulative
impacts. FmHA or its successor agency under Public Law 103-354 will
consult with HUD for determining a significant impact whenever the total
of HUD and FmHA or its successor agency under Public Law 103-354 housing
units being planned within a common area of environmental impact exceeds
the HUD thresholds listed in its NEPA regulations. (See 24 CFR part 50.)
(c) Because the environmental values and functions of floodplains
and wetlands are of critical importance to man, and because these areas
are often extremely sensitive to man-induced disturbances, actions which
affect wetlands and floodplains will be considered to have a significant
environmental impact whenever one or more of the following criteria are
met:
(1) The public health and safety are identifiably affected, that is,
whenever the proposed action may affect any standards promulgated under
the Safe Drinking Water Act (42 U.S.C. 300f et seq.), the Clean Water
Act (33 U.S.C. 1251 et seq.) or similar State authorities.
(2) The preservation of natural systems is identifiably affected,
that is, whenever the proposed action or related activities may
potentially create or induce changes in the existing habitat that may
affect species diversity and stability (both flora and fauna and over
the short and long term) or affect ecosystem productivity over the long
term.
(3) The proposal, if located or carried out within a floodplain,
poses a greater than normal risk for flood-caused loss of life or
property. Examples of such actions include facilities which produce,
use, or store highly volatile, toxic, or water-reactive materials or
facilities which contain occupants who may not be sufficiently mobile to
avoid the loss of life or injury during flood and storm events (i.e.,
hospitals, nursing homes, schools).
Sec. 1940.315 Timing of the environmental review process.
(a) The FmHA or its successor agency under Public Law 103-354 office
to which a potential applicant would go to seek program information and
request application materials will notify the applicant of the major
environmental requirements applicable to the type of assistance being
sought. Emphasis should be placed on describing FmHA or its successor
agency under Public Law 103-354's natural resource management policies,
the nature and purpose of the environmental impact assessment process,
and the permissible actions of the applicant during this process.
(b) When a preapplication is either filed by the applicant or
required by FmHA or its successor agency under Public Law 103-354 for a
project not categorically excluded, the prospective
[[Page 30]]
applicant will be requested to complete Form FmHA or its successor
agency under Public Law 103-354 1940-20 at the time of the issuance of
Form AD-622, ``Notice of Preapplication Review Action,'' or other notice
inviting an application. Form AD-622 will clearly inform the applicant
that during the period of application review, the applicant is to take
no actions or incur any obligations which would either limit the range
of alternatives to be considered or which would have an adverse effect
on the environment, and that satisfactory completion of the
environmental review process must occur prior to the issuance of the
letter of conditions for Community Programs and prior to loan approval
for all other programs where a preapplication is used. FmHA or its
successor agency under Public Law 103-354 must make its environmental
reviews simultaneously with other loan processing actions so that they
are an integral part of the loan process. Whenever the potential for a
major adverse environmental impact is recognized, such as issues
pertaining to floodplains, wetlands, endangered species, or the need for
an EIS, priority consideration will be given to resolving this issue by
appropriate FmHA or its successor agency under Public Law 103-354 staff.
Loan processing need not cease during this resolution period, but loan
processing actions will not be taken that might limit alternatives to be
considered or whose outcome may be affected by the environmental review.
The environmental impact review (whether a categorical exclusion,
environmental assessment or EIS) must be completed prior to the issuance
of the letter of conditions for Community Programs, prior to issuance of
a conditional commitment for the Business and Industry and Farmer
Program Guaranteed Loan Programs, and either prior to loan approval or
obligation of funds, whichever occurs first, for all other programs
where a preapplication is used. As an exception, however, whenever an
application must be submitted to the National Office for concurrence or
approval, the environmental review must be completed prior to and
included in the submission to the National Office. The environmental
impact review is not completed by FmHA or its successor agency under
Public Law 103-354 until all applicable public notices and associated
review periods have been completed and FmHA or its successor agency
under Public Law 103-354 has taken any necessary action(s) to address
comments received. The exception to the provisions of this paragraph is
contained in Sec. 1940.332 of this subpart.
(c) When a preapplication is not filed, the prospective applicant
will be required to complete Form FmHA or its successor agency under
Public Law 103-354 1940-20 at the earliest possible time after FmHA or
its successor agency under Public Law 103-354 is contacted for
assistance but no later than when the application is filed with the
appropriate FmHA or its successor agency under Public Law 103-354
office. (For the exception to this statement as regards Farm Programs'
Class I actions, see Sec. 1940.309(c) of this subpart.) FmHA or its
successor agency under Public Law 103-354 will not consider the
application to be complete, until FmHA or its successor agency under
Public Law 103-354 staff have completed the environmental impact review,
whether an assessment or EIS.
(d) For those applications that meet the requirements of a
categorical exclusion, Form FmHA or its successor agency under Public
Law 103-354 1940-22 will be completed by FmHA or its successor agency
under Public Law 103-354 as early as possible after receipt of the
application. The application will not be considered complete until
either the checklist is successfully completed or the need for any
further environmental review is identified and completed.
Sec. 1940.316 Responsible officials for the environmental review process.
(a) Approving official. With the exception of paragraph (b)(2) of
this section, the FmHA or its successor agency under Public Law 103-354
official responsible for executing the environmental impact
determination and environmental findings for a Class I or Class II
action will be the official having approval authority for the action as
specified in subpart A of part 1901 of this chapter (available in any
the
[[Page 31]]
Agency or its successor agency under Public Law 103-354 office).
(b) State Office level. (1) When the approval official is at the
State Office level, the responsible Program Chief will have the
responsibility for preparing the appropriate environmental review
document. Whenever the Chief delegates this responsibility in accordance
with Sec. 1940.302(i) of this subpart, the Chief is responsible for
reviewing the environmental document to ensure that it is adequate, that
any deficiencies are corrected, and that it is signed by the preparer.
When the document is satisfactory to the Chief, the Chief will sign it
as the concurring official. When no delegation occurs, the Chief will
sign as the preparer. If the environmental review document is either a
Class I or Class II assessment, it must be provided to the SEC for
review prior to being submitted to the approval official for final
determinations. The SEC will review the assessment and provide
recommendations to the approval official.
(2) Whenever the preparer and the SEC do not concur on either the
adequacy of the assessment or the recommendations reached, the State
Director, whether or not the approving official, will make the final
decision on the matter or matters in disagreement. The State Director
will also make the final decision whenever a State Office approving
official disagrees with the joint recommendations of the preparer and
the SEC. In either case, should the State Director desire, the matter
will be forwarded to the National Office for resolution. The Program
Support Staff will coordinate its resolution with the appropriate
Assistant Administrator. Failure of these parties to resolve the matter
will require a final decision by the Administrator. The State Director
should also request the assistance of the National Office on actions
that are too difficult to analyze at the State Office level.
(c) District or County Office level. The approval official for the
action under review will be responsible for preparing the appropriate
environmental review document and completing the environmental findings
and impact determinations for Class I and Class II assessments, except
in the circumstances outlined in paragraph (d) of this section. Whenever
the approval official delegates the preparation of the environmental
review in accordance with Sec. 1940.302(i) of this subpart, the
approval official must, after exercising the same responsibilities
assigned to the Program Chief as indicated in paragraph (b)(1) of this
section, sign the environmental review document as the concurring
official. Both District Directors and County Supervisors will contact,
as needed, the SEC for technical assistance in preparing specific
environmental review documents.
(d) Multi-level review. When the approval official is at the County
Office or District Office level but the action must be forwarded to the
State Office for concurrence, the responsible Program Chief will perform
the responsibilities of the concurring official with respect to the
environmental review document and the SEC will review it, if a Class I
or Class II assessment, in a similar manner as indicated in paragraph
(b) of this section. Responsibilities similar to those of the Program
Chief will exist for the District Director when the County Supervisor
forwards an action to the District Office for concurrence.
(e) Reservation of authority. The Administrator reserves the right
to request a State Director to forward to the National Office for review
and approval any action which is highly controversial for environmental
reasons, involves the potential for unique or extremely complex
environmental impacts or is of national, regional, or great local
significance. State Directors have a similar right with respect to
District and County Offices.
Sec. 1940.317 Methods for ensuring proper implementation of
categorical exclusions.
(a) The use of categorical exclusions exempts properly defined
actions or proposals from the review requirements of NEPA. It does not
exempt proposals from the requirements of other environmental laws,
regulations or Executive orders. Each proposal must be reviewed to
determine the applicability of other environmental requirements.
Extraordinary circumstances may cause an application
[[Page 32]]
to lose its categorical exclusion and require a Class I environmental
assessment, as further specified in paragraph (e) of this section.
Section 1508.4 of CEQ's regulations state that ``any procedures under
this section will provide for extraordinary circumstances in which a
normally excluded action may have a significant environmental effect.''
For example, an application for approval of a subdivision of four lots
is normally excluded from a NEPA review (see Sec. 1940.310(b)(5) of
this subpart) but is not exempt from the requirements of Executive Order
11990, ``Protection of Wetlands.'' In the processing of this
application, FmHA or its successor agency under Public Law 103-354 must
determine if a wetland is to be impacted. Assuming that the development
of the proposed subdivision site necessitates the filling of 2 acres of
wetland, such a potential wetland impact, under the requirements of
Sec. 1940.310(a) of this subpart, represents an extraordinary
circumstance that causes the application to lose its categorical
exclusion. An environmental assessment for a Class I action must then be
initiated. This assessment serves the purposes of providing for the
extraordinary circumstance by analyzing the degree of potential impact
and the need for further study as well as completing and documenting
FmHA or its successor agency under Public Law 103-354's compliance with
the Executive order. In this particular example, unless an alternative
site could not be readily located and the approving official wanted to
further pursue consideration of the application, the environmental
assessment would determine that there was a significant impact and an
EIS would be required. (See Sec. 1940.314 of this subpart.)
(b) The approving official for an action will be responsible for
ensuring that no action which requires an environmental assessment is
processed as a categorical exclusion. In order to fulfill this
responsibility, Form FmHA or its successor agency under Public Law 103-
354 1940-22 will be completed for those actions that would normally be
categorically excluded and as further defined in paragraph (c) of this
section. When Form FmHA or its successor agency under Public Law 103-354
1940-22 must be prepared and the approving official delegates its
preparation in accordance with Sec. 1940.302(i) of this subpart, the
approving official must sign the form as the concurring official. If
that approving official must, prior to approval, forward the action to a
District or State Office for review, a second concurrence must be
executed by the Program Chief or District Director, as determined by the
level of review being conducted. The checklist is filed with the
application and serves as FmHA or its successor agency under Public Law
103-354's documentation of compliance with the environmental laws,
regulations and Executive Orders listed on the checklist. Whenever the
preparer is within the State Office or is in the National Office, the
FmHA or its successor agency under Public Law 103-354 office where the
processing of the application was initiated is responsible for providing
sufficient site and project information in order to complete the
checklist.
(c) Form FmHA or its successor agency under Public Law 103-354 1940-
22 need not be completed for all categorical exclusions as defined in
Sec. 1940.310 of this subpart but only for those listed below. This
list identifies the exclusions by their subject heading and paragraph
number within Sec. 1940.310 of this subpart. Additionally, for the
housing assistance exclusion identified in Sec. 1940.310(b)(8), for
farm programs exclusions listed in Sec. 1940.310(d)(2) and (3), and for
community and business programs exclusions processed under Sec.
1940.310(e)(2) of this subpart, a notation must be made in the docket
materials or running record for the action by the processing official
that the specific criteria of the applicable exclusion have been met for
the action under review.
(1) Housing assistance--(b), (1), (2), (3), (5), (7), and (9);
(2) Community and Business Programs--(c) (1) and (2);
(3) Farm Programs--(d) (1) through (11);
(4) General exclusions--(e)(2), if action covered by exhibit M of
the subpart, and (6).
(d) In applying the definition of a categorical exclusion to a
project activity, the preparer must consider the following two elements
in addition to
[[Page 33]]
the specific project elements for which approval is requested.
(1) If the application represents one of several phases of a larger
proposal, the application will undergo the environmental review required
for the elements or the size of the total proposal. For example, if
approval of a four-lot subdivision is requested and the application
evidences or the reviewer knows that additional phases are planned and
will culminate in a 16-lot subdivision, the categorical exclusion does
not apply and an environmental assessment for a Class I action must be
initiated and must address the impact of developing 16 lots. Should the
applicant subsequently apply for approval of any of these additional
phases, no further environmental assessment will be required as long as
the original assessment still accurately reflects the environmental
conditions found at the project site and the surrounding areas.
(2) If the application represents one segment of a larger project
being funded by private parties or other government agencies, the size
and elements of the entire project are used in determining the proper
level of environmental assessment to be conducted by FmHA or its
successor agency under Public Law 103-354. If an environmental
assessment is required, it will address the environmental impacts of the
entire project.
(e) Under any one of the following circumstances, an action that is
normally categorically excluded loses its classification as an exclusion
and must be reviewed in the manner described in paragraph (g) of this
section. The following listing corresponds to the list of land uses and
environmental resources contained in part 2 of Form FmHA or its
successor agency under Public Law 103-354 1940-22.
(1) Wetlands--the proposed action:
(i) Would be located adjacent to a wetland or a wetland is within
the project site, and
(ii) The action would affect the values and functions of the wetland
by such means as converting, filling, draining, or directly discharging
into it;
(2) Floodplains--the proposed action:
(i) Includes or involves an existing structure(s) located within a
100-year floodplain (500-year floodplain if critical action), or
(ii) Would be located within a 100-year floodplain (500-year
floodplain if critical action) and would affect the values and functions
of the floodplain by such means as converting, dredging, or filling or
clearing the natural vegetation;
(3) Wilderness (designated or proposed)--the proposed action:
(i) Would be located in a wilderness area, or
(ii) Would affect a wilderness area such as by being visible from
the wilderness area;
(4) Wild or Scenic River (proposed or designated or identified in
the Department of the Interior's nationwide Inventory)--the proposed
action:
(i) Would be located within one-quarter mile of the banks of the
river,
(ii) Involves withdrawing water from the river or discharging water
to the river via a point source, or
(iii) Would be visible from the river;
(5) Historical and Archeological Sites (listed on the National
Register of Historic Places or which may be eligible for listing)--the
proposed action:
(i) Contains a historical or archeological site within the
construction site, or
(ii) Would affect a historical or archeological site;
(6) Critical Habitat or Endangered/Threatened Species (listed or
proposed)--the proposed action:
(i) Contain a critical habitat within the project site,
(ii) Is adjacent to a critical habitat, or
(iii) Would affect a critical habitat or endangered/threatened
species;
(7) Coastal Barrier Included in Coastal Barrier Resources System--
the proposed action would be located within the Coastal Barrier
Resources System;
(8) Natural Landmark (listed on National Registry of Natural
Landmarks)--the proposed action either:
(i) Contains a natural landmark within the project site, or
(ii) Would affect a natural landmark;
(9) Important Farmlands--the proposed action would convert important
farmland to a nonagricultural use(s) except when the conversion would
result from the construction of on-farm
[[Page 34]]
structures necessary for farm operations;
(10) Prime Forest Lands--the proposed action would convert prime
forest land to another use(s), except when the conversion would result
from the construction of on-farm structures necessary for farm
operations;
(11) Prime Rangelands--the proposed action would convert prime
rangeland to another use(s) except when the conversion would result from
the construction of on-farm structures necessary for farm operations;
(12) Approved Coastal Zone Management Area--the proposed action
would be located within such area and no agreement exists with the
responsible State agency obviating the need for a consistency
determination for the type of action under consideration;
(13) Sole Source Aquifer Recharge Area--the proposed action would be
located within such area and no agreement exists with the Environmental
Protection Agency (EPA) obviating the need for EPA's review of the type
of action under consideration; and
(14) State Water Quality Standard--the proposed action would impair
a water quality standard, including designated and/or existing
beneficial uses, or would not meet applicable antidegradation
requirements for point or nonpoint sources.
(f) From the above paragraph (e), it should be noted that the
location within the project site of any of the land uses and
environmental resources identified in paragraphs (e) (1), (2), (9),
(10), (11), (12), and (13) of this section is not sufficient for an
action to lose its categorical exclusion. Rather, the land use or
resource must be affected in the case of paragraphs (e) (1), (2), (9),
(10), and (11) of this section. For paragraphs (e) (12), (13) and (14)
of this section, further review and consultation can be avoided by
written agreement with the responsible agency detailing the types of
actions not requiring interagency review.
(g) Whenever a categorical exclusion loses its status as an
exclusion for any of the reasons stated in paragraph (e) of this
section, the environmental impacts of the action must be reviewed
through the preparation of a Class I assessment, Form FmHA or its
successor agency under Public Law 103-354 1940-21. Not all of the
procedural requirements for a Class I assessment apply in this limited
case, however. The following exemptions exists:
(1) No public notice provisions of this subpart apply.
(2) The applicant does not complete Form FmHA or its successor
agency under Public Law 103-354 1940-20.
(3) The action does not require a Class II assessment should more
than one important land resources be affected.
Sec. 1940.318 Completing environmental assessments for Class II actions.
(a) The first step for the preparer (as defined in Sec. Sec.
1940.302(i) and 1940.316 of this subpart) is to examine Form FmHA or its
successor agency under Public Law 103-354 1940-20 submitted by the
applicant to determine if it is complete, consistent, fully responsive
to the items, signed, and dated. If not, it will be returned to the
applicant with a request for necessary clarifications or additional
data.
(b) Once adequate data has been obtained, the assessment will be
initiated in the format and manner described in exhibit H of this
subpart. In completing the assessment, appropriate experts from State
and Federal agencies, universities, local and private groups will be
contacted as necessary for their views. In so doing, the preparer should
communicate with these agencies or parties in the most appropriate and
expeditious manner possible, depending upon the seriousness of the
potential impacts and the need for formal documentation. Appropriate
experts must be contacted whenever required by a specific provision of
this subpart or whenever the preparer does not have sufficient data or
expertise available within FmHA or its successor agency under Public Law
103-354 to adequately assess the degree of a potential impact or the
need for avoidance or mitigation. Comments from an expert must be
obtained in writing whenever required by a specific provision of this
subpart or the potential environmental impact is either controversial,
complex, major, or apparently major. When correspondence is exchanged,
it will be appended to the assessment. Oral discussions should be
documented in the
[[Page 35]]
manner indicated in exhibit H of this subpart. On the other hand, there
is no need for the preparer to seek expert views outside of the Agency
when there is no specific requirement to do so and the preparer has
sufficient expertise available within FmHA or its successor agency under
Public Law 103-354 to assess the degree of the potential impact and the
need for avoidance or mitigation.
(c) At the earliest possible stage in the assessment process, the
preparer will identify the Federal, State, and local parties which are
carrying out related activities, either planned or under way.
Discussions with the applicant and FmHA or its successor agency under
Public Law 103-354 staff familiar with the project area should assist in
this identification effort. If there is a potential for cumulative
impacts, the preparer will consult with the involved agencies to
determine the nature, timing and results of their environmental
analysis. These consultations will be documented in the assessment and
considered or adopted when making the environmental impact
determination. (See Sec. 1940.324 of this subpart concerning adoption
of assessments.) If it is determined that the cumulative impacts are
significant, the preparer will further contact the involved Federal
agencies and attempt to determine the lead Federal Agency as discussed
in Sec. Sec. 1940.320(b) and 1940.326 of this subpart.
(d) Consultations similar to those discussed in paragraph (c) of
this section will also be undertaken with those Federal and State
agencies which are directly involved in the FmHA or its successor agency
under Public Law 103-354 action, either through the provision of
financial assistance or the review and approval of a necessary plan or
permit. For example, a construction permit from the U.S. Army Corps of
Engineers may be required for a project. In such an instance, the
environmental assessment cannot be completed until the preparer has
either reviewed the other Agency's completed environmental analysis or
consulted with the other Agency and is reasonably sure of the scope,
content, and expected environmental impact determination of the
forthcoming analysis and has so documented for the FmHA or its successor
agency under Public Law 103-354 assessment this understanding. If the
other Agency believes that the project will have a significant impact, a
joint or lead impact statement will be prepared. If the other Agency
does not believe a significant impact will occur, the preparer will
consider this finding and its supporting analysis in completing the FmHA
or its successor agency under Public Law 103-354 environmental impact
determination. Guidance in adopting an environmental assessment prepared
by another Federal Agency is provided in Sec. 1940.324 of this subpart.
(e) For actions having a variety of complex or interrelated impacts
that are difficult for the preparer to assess, consideration should be
given to holding a public meeting in the manner described in Sec.
1940.331(c) of this subpart. Such meetings should not be assumed as
being limited to projects for which EISs are being prepared. Such a
meeting can serve a useful purpose in better defining and identifying
complex impacts, as well as locating expertise with respect to them. The
results of a public meeting and the follow-up from it can also serve as
a valuable tool in reaching an early understanding on the potential need
for an EIS. When identified impacts are difficult to quantify (such as
odor and visual and community impacts) or controversial, a public
information meeting should be held near the project site and the local
area's concern about it. Whenever held, it should be announced and
organized in the manner described in Sec. 1940.331(c). However, a
transcript of the meeting need not be prepared, but the preparer will
make detailed notes for incorporation in the assessment. (See Sec.
1940.331(c) of this subpart.)
(f) Throughout this assessment process, the preparer will keep in
mind the criteria for determining a significant environmental impact. If
at any time in this process it is determined that a significant impact
would result, the preparer will so notify the approving official. Those
actions specified in Sec. 1940.320 of this subpart will then be
initiated, unless the approving official disagrees with the preparer's
recommended determination, in which
[[Page 36]]
case further review of the determination may be required as explained in
Sec. 1940.316 (b), (d) and (e) of this subpart. As soon as possible
after the need for an EIS is determined, the applicant will also be
advised of this in writing, as well as reinformed of the limitations on
its actions during the period that the EIS is being completed. (See
Sec. 1940.309(e) of this subpart.) The applicant's failure to comply
with these limitations will be considered as grounds for postponement of
further consideration of the application until such problem is
alleviated.
(g) Similarly, throughout the assessment process, consideration will
be given to incorporating mechanisms into the proposed action for
reducing, mitigating, or avoiding adverse impacts. Examples of such
mechanisms which are commonly referred to as mitigation measures include
the deletion, relocation, redesign or other modifications of the project
elements; the dedication of environmentally sensitive areas which would
otherwise be adversely affected by the action or its indirect impacts;
soil erosion and sedimentation plans to control runoff during land-
disturbing activities; the establishment of vegetative buffer zones
between project sites and adjacent land uses; protective measures
recommended by environmental and conservation agencies, including but
not limited to interstate, international, Federal, State, area-wide, and
local agencies having jurisdiction or special expertise regarding the
action's impacts; and zoning. Mitigation measures must be tailored to
fit the specific needs of the action, and they must also be practical
and enforceable. Mitigation measures which will be taken must be
documented in the assessment (Item XIX of exhibit H of this subpart),
and include an analysis of their environmental impacts and potential
effectiveness and placed in the offer of financial assistance as special
conditions or in the implementation requirements when the action does
not involve financial assistance. These measures will be consistent with
the basic goal of the proposed action and developed in consultation with
the appropriate program office.
(h) As part of the assessment process, the preparer will initiate
the consultation and compliance requirements for the environmental laws,
regulations, and Executive orders specified in the assessment format.
The assessment cannot be completed until compliance with these laws and
regulations is appropriately documented. The project's failure to meet
the requirements specified in Item 10b of Form FmHA or its successor
agency under Public Law 103-354 1940-21 for a Class I action and Item
XXIb of exhibit H of this subpart for a Class II action will result in
postponement of further consideration of the application until such
problem is alleviated.
(i) When the preparer has completed the assessment, the related
materials and correspondence utilized will be attached. The preparer
will then either recommend to the approving official that the action has
the potential for significantly affecting the quality of the human
environment or will recommend that the action does not have this
potential and, therefore, the preparation of an EIS is not necessary.
(Item 10a of Form FmHA or its successor agency under Public Law 103-354
1940-21 for Class I action and item XXIa of exhibit H of this subpart
for a Class II action.) The recommended environmental findings will also
be completed. (Item 10b of Form FmHA or its successor agency under
Public Law 103-354 1940-21 for a Class I action and Item XXIb of exhibit
H of this subpart for a Class II action.) In those instances specified
in Sec. 1940.316, the assessment will then be forwarded to the
concurring official and, as required, to the SEC for review. The
concurring official will coordinate, as necessary, with the preparer any
questions, concerns or clarifications and complete and document the
review prior to the assessment being submitted to the approving official
or the SEC. The SEC will coordinate with the concurring official in a
similar fashion whenever the latter's review is required.
(j) The approving official will review the environmental file and
recommendations. The official will then
[[Page 37]]
execute the environmental impact determination and findings. If the
conclusions reached are that there is no significant impact and there is
compliance with the listed requirements, the format contained in exhibit
I of this subpart will be used. If a significant impact is determined,
the steps specified in Sec. 1940.320 of this subpart will be initiated
for the preparation of the EIS. If a determination is made that the
proposed action does not comply with the environmental requirements that
are explained in this subpart and listed in Item 10b of Form FmHA or its
successor agency under Public Law 103-354 1940-21 for a Class I action
or Item XXIb of exhibit H of this subpart for a Class II action and
there are no feasible alternatives (practicable alternatives when
required by specific provisions of this subpart), modifications, or
mitigation measures which could comply, the action will be denied or
disapproved. If the approving official's determination or findings
differ from the recommendations of the preparer, concurring official or
the SEC, this difference will be addressed in the manner specified in
Sec. 1940.316 of this subpart.
(k) When there is no need for further review as discussed in
paragraph (j) of this section and findings of compliance and a
determination of no significant impact are reached, the assessment
process is conditionally concluded. To conclude the assessment, the
applicant will then be requested to provide public notification of these
results as indicated in Sec. 1940.331(b)(3) of this subpart. The
approving official will not approve the pending application for at least
15 days from the date the notification is last published. If comments
are received as a result of the notification, they will be included in
the environmental assessment and considered. Any necessary changes
resulting from this consideration will be made in the assessment, impact
determinations, and findings. If the changes require further
implementation steps, such as the preparation of an EIS, they will be
undertaken. If there are no changes in the findings and determination
steps, such as the preparation of an EIS, they will be undertaken. If
there are no changes in the findings and determinations, the approving
official may continue to process the application. The environmental
documents, i.e., the assessment, related correspondence, Form FmHA or
its successor agency under Public Law 103-354 1940-20, and the finding
of no significant impact will be included with the approval documents
which are assembled for review and clearance within the approving
office.
(l) Whenever changes are made to an action or comments or new or
changed information relating to the action's potential environmental
effects is received after the assessment is completed but prior to the
action's approval, such change, comment, or information will be
evaluated by the approving official to determine the impact on the
completed assessment. Whenever the contents or findings of that
assessment are affected, the assessment process for that action will be
revised and any other related requirement of this subpart met. Changes
to an action in terms of its location(s), design, purpose, or operation
will normally require, at a minimum, modification of the original
assessment to reflect such change(s) and the associated environmental
impacts.
(m) When comments are received after the action has been approved,
the approving official will consider the environmental importance of the
comments and the necessity and ability to amend both the action, with
respect to the issue raised and the action's stage of implementation.
The National Office may be consulted to assist in determining whether
there are any remaining environmental requirements which need to be met
under the specific circumstances. A similar procedure will be followed
when new or changed information is received after project approval.
Amendments and revisions to actions will be handled as specified in
Sec. Sec. 1940.310 through 1940.313 of this subpart.
Sec. 1940.319 Completing environmental assessments for Class I actions.
(a) As stated in this subpart, a main purpose of Form FmHA or its
successor agency under Public Law 103-354 1940-21, is to provide a
mechanism for reviewing actions with normally minimal impacts and for
documenting a finding of no significant impact, as
[[Page 38]]
well as compliance determinations for other applicable environmental
laws, regulations and policies. The second major purpose is to serve as
a screening tool for identifying those Class I actions which have more
than minimal impacts and which, therefore, require a more detailed
environmental review.
(b) The approach to reviewing a Class I action under the assessment
format of Form FmHA or its successor agency under Public Law 103-354
1940-21 is exactly the same as for a Class II action. The preparer (as
defined in Sec. Sec. 1940.302(i) and 1940.316 of this subpart) must
become familiar with the elements of the action, the nature of the
environment to be affected, the relationship to any other Federal
actions or related nonfederal actions, and the applicable environmental
laws and regulations.
(c) The data submission requirements placed on the applicant for a
Class I action are not as extensive as for a Class II action. The
requirements are limited to completing the face of Form FmHA or its
successor agency under Public Law 103-354 1940-20, as well as categories
(1), (2), (13), (15), (16), and (17) of Item 1b of the FMI, whenver a
previously completed environmental analysis covering these categories is
not available. Should it later be determined that the magnitude of the
Class I action's impact warrants a more detailed assessment, the
applicant will be required to submit the remaining items of the data
request. Additionally, the circumstances under which FmHA or its
successor agency under Public Law 103-354 does not require the
submission of Form FmHA or its successor agency under Public Law 103-354
1940-20 by an applicant whose proposed action requires a Class I
assessment are specified in Sec. 1940.317(f) of this subpart.
(d) The preparer must ensure that the data received from the
applicant is complete, consistent, signed and dated before initiating
the assessment. If it is not, the applicant will be required to make the
necessary changes and clarifications. The reviewer must also ensure that
the application properly meets the definition of a Class I action.
Phased or segmented projects, as discussed in Sec. 1940.317(d) of this
subpart, will be identified and the elements and the size of the entire
project used to classify the action.
(e) An important element of this assessment is to determine if the
action affects an environmental resource which is the subject of a
special Federal consultation or coordination requirement. Such resources
are listed in the assessment format, Form FmHA or its successor agency
under Public Law 103-354 1940-21, and include wetlands, floodplains, and
historic properties, for example. If one of the listed resources is to
be affected, the preparer must demonstrate the required compliance by
accomplishing the review and coordination requirements for that
resource. Documentation of the steps taken and coordination achieved
will be attached. However, if more than one listed resource is to be
affected, this will be viewed as the action having more than minimal
impacts and the environmental assessment format for a Class II action
will be initiated except if the action under review is an application
for a Housing Preservation Grant.
(f) Similarly in completing item 3, General Impacts of Form FmHA or
its successor agency under Public Law 103-354 1940-21, the assessment
format for a Class II action must be initiated if more than one category
of impacts cannot be checked as minimal. If there is a single category
which needs analysis, this can be accomplished by attaching an
appropriate exhibit addressing the questions and issues for that impact,
as specified in the environmental assessment format for a Class II
action. See Sec. 1940.311(b)(1) of this subpart for when an attached
discussion of water quality impacts is mandatory.
(g) The comments of State, regional, and local agencies obtained
through applicable permit reviews or the implementation of Executive
Order 12372, Intergovernmental Review of Federal Programs, will be
incorported into the assessment, if this review applies to the action.
The receipt of negative comments of an environmental nature will warrant
the initiation of a more detailed assessment under the format for a
Class II action (exhibit H of this subpart). Also, the issue of
controversy must be addressed, and if the action is
[[Page 39]]
controversial for environmental reasons, the environmental assessment
format for a Class II action (exhibit H of this subpart) will be
completed. However, if the action is the subject of isolated
environmental complaints or any questions or concerns that focus on a
single impact, air quality, for example, the analysis of such complaints
or questions can be handled under the assessment format for a Class I
action. This analysis will then be provided by the approving official to
the party or parties which raised the matter with FmHA or its successor
agency under Public Law 103-354. When several potential impacts are
questioned, however, the more detailed assessment format will be
accomplished to address these questions.
(h) The potential cumulative impacts of this action, particularly as
it relates to other FmHA or its successor agency under Public Law 103-
354 actions recently approved in the area or planned, will be analyzed.
If the cumulative impact is not minimal and, for example, cumulatively
exceeds the criteria and threshholds discussed in paragraphs (e), (f)
and (g) of this section, the environmental assessment format for a Class
II action will be completed. The actions of other Federal agencies and
related nonfederal actions must also be assessed on this basis. When
there is a Federal action involved, the environmental review conducted
by that Agency will be requested and, if it sufficiently addresses the
cumulative impact, can be utilized by the preparer as the FmHA or its
successor agency under Public Law 103-354 assessment, assuming the
impacts are not significant. (See Sec. 1940.324 of this subpart.) If
the other Agency is doing or planning an EIS, the preparer will inform
that Agency of our action and request to be a cooperating agency.
(i) The preparer will have the responsibility of initiating the
assessment format for a Class II action (exhibit H of this subpart)
whenever the need is identified. This should be done as early as
possible in the review process. The preparer should not complete the
assessment for a Class I action when it is obvious that the assessment
format for a Class II action will be needed. The preparer will simply
start the more detailed assessment and inform the applicant of the
additional data requirements.
(j) Exhibit I will be completed by the approval official in the same
instances for a Class I assessment as for a Class II assessment.
However, public notification of FmHA or its successor agency under
Public Law 103-354's finding of no significant environmental impact will
not be required for a Class I assessment. Also, special provisions for
completing a Class I assessment for an action that is normally
categorically excluded but loses its classification as an exclusion are
contained in Sec. 1940.317(g) of this subpart. With the exception of
the two preceding sentences, all other procedural requirements of the
assessment process, such as the timing of the assessment and the
limitations on the applicant's actions, apply to a Class I assessment.
Sec. 1940.320 Preparing EISs.
(a) Responsibility. Whenever the District Director or County
Supervisor determines there is a need to prepare an EIS, the State
Director will be notified. The EIS will be prepared at the State Office
and the State Director will assume the responsibility for preparing it.
The State will in turn notify the Administrator of these EISs, as well
as those needed EISs identified by a State Office review. EISs will be
prepared according to this section. The State Director will be
responsible for actions initiated within the State. However, in so
doing, the State Director will consult with the National Office to
determine that the document meets the requirements of NEPA. State
Directors will be responsible for issuing such EISs. However, unless
delegated authority by the Administrator, based upon a demonstrated
capability and experience in preparing EISs, the State Director will not
issue the EIS until reviewed and approved by the Administrator.
(b) Organizing the EIS process. Prior to initiating the scoping
process outlined below, the preparer of the EIS will take several
organizational steps to ensure that the EIS is properly coordinated and
completed as efficiently as possible. To accomplish this, the
[[Page 40]]
below-listed parties need to be identified in advance; the list should
be expanded as familiarity with the project increases. Those parties
falling within the first four groups should be formally requested to
serve as cooperating agencies. If any of these agencies appear to be a
more appropriate lead agency than FmHA or its successor agency under
Public Law 103-354 (using the criteria contained in Sec. 1501.5(c) of
the CEQ regulations), consultations should be initiated with that agency
to determine the lead agency. If difficulties arise in completing this
determination, the National Office will be consulted for assistance. All
of the parties identified below will be sent a copy of the notice of
intent to prepare the EIS and an invitation to the scoping meeting, as
discussed in paragraph (c) of this section.
(1) All Federal and State agencies that are being requested to
provide financial assistance for the project or related projects;
(2) All Federal agencies that must provide a permit for the project
should it be approved;
(3) All Federal agencies that have a specific environmental
expertise in major environmental issues identified to date;
(4) The Agency responsible for the implementation of the State's
environmental impact analysis requirement, if one has been enacted or
promulgated by the State;
(5) All Federal, State, and local agencies that will be requested to
comment on the draft EIS;
(6) All individuals and organizations that have expressed an
interest in the project; and
(7) National, regional, or local environmental organizations whose
particular area of interest corresponds to the major impacts identified
to date.
(c) Scoping process. As soon as possible after a decision has been
made to prepare an EIS, the following process will be initiated by the
preparer for identifying the major issues to be addressed in the EIS and
for developing a coordinated government approach to the preparation and
review of the EIS.
(1) The first step in this process will be the publication of a
notice of intent to prepare the EIS. The notice will indicate that an
EIS will be prepared and will briefly describe the proposed action and
possible alternatives; state the name, address, and phone number of the
preparer, indicating that this person can answer questions about the
proposed action and the EIS; list any cooperating agencies, and include
the date and time of the scoping meeting. If the latter information is
not known at the time the notice of intent is prepared, it will be
incorporated into a special notice, when available, and published and
distributed in the same manner as the notice of intent. It will be the
responsibility of the preparer of the EIS to inform the National Office
of the need to publish a notice of intent which will coordinate the
publication of the notice in the Federal Register. For requirements
relating to the timing the publication of the notice of intent within
the project area, as well as the applicant's responsibilities for the
notice, see Sec. 1940.331(b) of this subpart.
(2) A scoping meeting will be held. To the extent possible, the
scoping meeting should be integrated with any other early planning
meetings of the Agency or other involved agencies. The scoping meeting
will be chaired by the preparer of the EIS and will be organized to
accomplish the following major purposes (as well as other purposes
listed in Sec. 1501.7 of the CEQ regulations).
(i) Invite the participation of affected Federal, State, and local
agencies, any affected Indian Tribe, the proponent of the action, and
any interested parties including those who may disagree with the action
for environmental reasons;
(ii) Determine the scope and the significant issues to be analyzed
in depth in the EIS;
(iii) Identify and eliminate, from detailed study, the issues which
are not significant or which have been covered by prior environmental
review, narrowing the discussion of these issues in the statement to a
brief presentation of why they will not have a significant effect on the
human environment or providing a reference to their coverage elsewhere;
(iv) Allocate assignments for preparation of the EIS among the lead
and cooperating agencies, with the lead Agency retaining responsibility
for the statement;
[[Page 41]]
(v) Indicate any public environmental assessments and other EISs
which are being or will be prepared that are related to, but are not
part of, the scope of the impact statement under consideration;
(vi) Identify other environmental review and consultation
requirements so the lead and cooperating agencies may prepare other
required analyses and studies concurrently with, and integrated with,
the environmental impact statement; and
(vii) Indicate the relationship between the timing of the
preparation of environmental analyses and the Agency's tentative
planning and decisionmaking schedule;
(3) Minutes of the scoping meeting, including the major points
discussed and decisions made, will be prepared and retained by the
preparer of the EIS as part of the environmental file. The preparer will
offer, during the scoping meeting, to send copies of the minutes to any
interested party upon written request.
(d) Interdisciplinary approach. The EIS will be prepared using an
interdisciplinary approach that will ensure the integrated use of the
natural and social sciences and the environmental design arts. The
disciplines of the preparers will be appropriate to address the
potential environmental impact associated with the project. This can be
accomplished both in the information collection stage and the analysis
stage by communication and coordination with environmental experts at
local, State and Federal agencies (particularly cooperating agencies)
and universities near the project site. When needed information or
expertise is not readily available, these needs should be met through
procurement contracts with qualified consulting firms. Consulting firms
can be utilized to prepare the entire EIS or portions of it as specified
in Sec. 1940.336 of this subpart.
(e) Content and format of EIS. The EIS will be prepared in the
format and manner described in part 1502 of the CEQ regulations. There
is a great deal of specific guidance in that part which will not be
repeated here.
(f) Circulation of the EIS. FmHA or its successor agency under
Public Law 103-354 will circulate for review and comment the draft and
final EIS as broadly as possible. Therefore, it will be necessary for
the preparer to have sufficient copies printed or reproduced for this
purpose. In identifying the parties to receive a draft EIS, the same
process should be utilized as is employed for inviting participants to
the scoping meeting. (See paragraph (b) of this section.) Special
emphasis should be given to transmitting the draft to those agencies
with jurisdiction or expertise on the proposed action's major impacts,
as well as those parties who have expressed an interest in the action.
The final EIS will be provided to all parties that commented on the
draft EIS.
(g) Filing of the EIS. The Deputy Administrator for Program
Operations or any State Director that has been delegated the authority
to prepare an EIS must file the EIS with EPA in accordance with Sec.
1506.9 of the CEQ regulations. The official filing date for an EIS is
the day that it is received by EPA's Office of Federal Activities.
Filing of the EIS cannot occur until copies of the EIS have been
transmitted to commenting agencies and made available to the public.
Transmittal of the EIS must, therefore, occur either prior to its being
filed with EPA (received by EPA) or no later than close of business of
the same day that it is filed.
(h) Public information meetings. A public information meeting, as
specified in Sec. 1940.331(c)(1) of this subpart, will be held near the
project site to discuss and receive comments on the draft EIS.
(i) Response to comments. The preparer of the EIS will respond to
comments on the draft EIS as required by Sec. 1503.4 of the CEQ
regulations. The major and most frequently raised issues during the
public information meeting will also be identified and addressed.
(j) Timing of review. The preparer of the EIS will be responsible
for ensuring that the timing requirements for FmHA or its successor
agency under Public Law 103-354 actions and the review periods for draft
and final EISs are fully met (Sec. 1506.10 of CEQ regulations).
Prescribed review periods are calculated from the date that EPA's Office
of Federal activities publishes in the Federal Register a notice of
availability for the EIS. Any request to reduce a prescribed review
period will
[[Page 42]]
be made to EPA in accordance with Sec. 1506.10(d) of the CEQ
regulations.
Sec. 1940.321 Use of completed EIS.
(a) The final EIS will be a major factor in the Agency's final
decision. Agency staff making recommendations on the action and the
approving official will be familiar with the contents of the EIS and its
conclusions and will consider these in formulating their respective
positions with respect to the action. The final EIS and all comments
received on the draft will accompany the proposal through the FmHA or
its successor agency under Public Law 103-354 final clearance process.
The alternatives considered by the approving official will be those
addressed in the final EIS.
(b) As part of this review process, the preparer of the EIS will
complete the recommendations listed in Item XXIb and c of exhibit H of
this subpart and provide them to the approving official prior to a final
decision.
Sec. 1940.322 Record of decision.
Upon completion of the EIS and its review within FmHA or its
successor agency under Public Law 103-354 and before any action is taken
on the decision reached on the proposal, the approving official will
prepare, in consultation with the preparer of the EIS, a concise record
of the decision which will be available for public review. The record
will:
(a) State the decision reached;
(b) Certify that the timing requirements for the EIS process have
been fully met;
(c) Identify all alternatives considered in reaching the decision
specifying the alternative or alternatives that were considered to be
environmentally preferable and discuss the relevant factors
(environmental, economic, technical, statuatory mission and, if
applicable, national policy) that were considered in the decision;
(d) State whether all practicable means to avoid or minimize
environmental harm from the alternative selected have been adopted, and
if not, why not; and
(e) If any mitigation measures have been adopted, specify the
monitoring and enforcement program that will be utilized.
Sec. 1940.323 Preparing supplements to EIS's.
(a) Either the State Office or the National Office, as appropriate,
will prepare supplements to either draft or final EIS's if:
(1) A substantial change or changes occur in the proposed action and
such changes are relevant to the environmental impacts previously
presented; and
(2) Significant new circumstances or information arise which are
relevant to environmental concerns and bear on the proposed action or
its impacts.
(b) If the preparer of the draft or final EIS determines that the
changes or new circumstances referenced in paragraph (a) of this section
do not require the preparation of a supplemental EIS, the preparer will
complete an environmental assessment for a Class II action which will
document the reasons for this determination.
(c) The preparer will be responsible for advising the approving
official of the need for a supplement. The latter will make the Agency's
formal determination in a manner consistent with Sec. 1940.316 of this
subpart.
(d) All of the requirements of this subpart that apply to the
completion of an initial EIS apply to the completion of a supplement
with the exception of the scoping process, which is optional.
Additionally, if the approving official believes that there is a need
for expedited or special procedures in the completion of a supplement,
the approval of CEQ must first be obtained by the Administrator for any
alternative procedures. The final supplement will be included in the
project file or docket and used in the Agency's decisionmaking process
in the same manner as a final EIS. (See Sec. 1940.321 of this subpart
and in particular subparagraphs (f), (g), and (j) of that section as
well as Sec. 1502.9(c)(4) of the CEQ regulations for associated
circulation, filing, and timing requirements.)
[[Page 43]]
Sec. 1940.324 Adoption of EIS or environmental assessment prepared
by another Federal Agency.
(a) FmHA or its successor agency under Public Law 103-354 may adopt
an EIS or portion thereof prepared by another Federal Agency after
completion if:
(1) An independent review of the document is conducted by the
preparer of the FmHA or its successor agency under Public Law 103-354
environmental review and it is concluded that the document meets the
requirements of this subpart; and
(2) If the actions covered in the EIS are substantially the same as
those proposed by FmHA or its successor agency under Public Law 103-354
and the environmental conditions in the project area have not
substantially changed since its publication, FmHA or its successor
agency under Public Law 103-354 will recirculate the EIS as a ``final''
and so notify the public as specified in Sec. 1940.331(b) of this
subpart. The final EIS will contain an appropriate explanation of the
FmHA or its successor agency under Public Law 103-354 involvement and
will be sent to all parties who would typically receive a draft EIS
published by FmHA or its successor agency under Public Law 103-354. If
there are differences between the actions or the environmental
conditions as discussed in the original EIS, that EIS will be updated to
cover these differences and recirculated as a draft EIS with the public
so notified. From that point, it will be reviewed and processed in the
same manner as any other FmHA or its successor agency under Public Law
103-354 EIS. For circulation, filing, and timing requirements, see
paragraphs (f), (g), and (j) of Sec. 1940.320 of this subpart as well
as Sec. Sec. 1506.3(c), 1506.9, and 1506.10 of the CEQ regulations.
(b) If the adopted EIS is not final within the agency that prepared
it, or if the action it assesses is the subject of a referral under part
1504 of the CEQ regulations, or if the statement's adequacy is the
subject of a judicial action which is not final, FmHA or its successor
agency under Public Law 103-354 must so specify and provide an
explanation in the recirculated EIS.
(c) After recirculation (whether as a draft or final), the EIS will
be reviewed and processed in the same manner as any other FmHA or its
successor agency under Public Law 103-354 EIS.
(d) FmHA or its successor agency under Public Law 103-354 may also
adopt all or part of environmental assessments or environmental reviews
prepared by other Federal agencies. In this case, only paragraph (a)(1)
of this section applies. If the requirements of that paragraph can be
met except for the fact that the Federal agency whose assessment is to
be adopted has no preliminary public notice requirements similar to FmHA
or its successor agency under Public Law 103-354's (see Sec.
1940.331(b)(4) of this subpart), the assessment can be adopted without
FmHA or its successor agency under Public Law 103-354 publishing a
preliminary public notice. Additionally, when all of another Federal
agency's assessment is adopted, without supplementation, for a Class II
action and a finding of no significant environmental impact (exhibit I
of this subpart) is reached by the proper FmHA or its successor agency
under Public Law 103-354 official, no public notification of FmHA or its
successor agency under Public Law 103-354's finding of no significant
environmental impact is required if:
(1) The other Federal agency or its designee published a similar
finding in a newspaper of general circulation in the vicinity of the
proposed action;
(2) The other Federal agency's or its designee's public notice
clearly described the action subject to the FmHA or its successor agency
under Public Law 103-354 environmental review; and
(3) The other Federal agency's or its designee's public notice was
published less than eighteen months from the date FmHA or its successor
agency under Public Law 103-354 adopted the assessment.
Sec. 1940.325 FmHA or its successor agency under Public Law 103-354
as a cooperating Agency.
(a) FmHA or its successor agency under Public Law 103-354 will serve
as a cooperating Agency when requested to do so by the lead Agency for
an action in which FmHA or its successor
[[Page 44]]
agency under Public Law 103-354 is directly involved or for an action
which is directly related to a proposed FmHA or its successor agency
under Public Law 103-354 action. An example of the latter would be a
request from EPA to participate in an EIS covering its sewage treatment
plans for a community, as well as the community's water system plans
pending before FmHA or its successor agency under Public Law 103-354. A
memorandum of understanding or other written correspondence will be
developed with the lead agency in order to define FmHA or its successor
agency under Public Law 103-354's role as the cooperating agency. The
State Director will coordinate FmHA or its successor agency under Public
Law 103-354's participation as a cooperating Agency for an action at the
State Office level. The Administrator will have the same responsibility
at the National Office level.
(b) When requested to be a cooperating Agency on a basis other than
that discussed above, the State Director will consider the expertise
which FmHA or its successor agency under Public Law 103-354 could add to
the particular EIS process in question and existing workload
commitments. If a decision is made on either of these two bases not to
participate as a cooperating Agency, a copy of the letter signed by the
State Director or Administrator and so informing the lead Agency will be
sent to CEQ.
(c) As a cooperating Agency, FmHA or its successor agency under
Public Law 103-354 will participate in the development and
implementation of the scoping process. If requested by the lead Agency,
provide the lead Agency with staff support and descriptive materials
with respect to the analyses of the FmHA or its successor agency under
Public Law 103-354 portion of the action(s) to be covered, review and
comment on all preliminary draft materials prior to their circulation
for public review and comment, and attend and participate in public
meetings called by the lead Agency concerning the EIS.
(d) The State Director will request the lead Agency to fully
identify the Agency's involvement in all public documents and
notifications.
(e) FmHA or its successor agency under Public Law 103-354 will use
the EIS as its own as long as FmHA or its successor agency under Public
Law 103-354's comments and concerns are adequately addressed by the lead
Agency and the final EIS is considered to meet the requirements of this
subpart. It will be the responsibility of the preparer of the FmHA or
its successor agency under Public Law 103-354 environmental review
document to formally advise the approving official on these two points.
The failure of the lead Agency's EIS to meet either of these
stipulations will require FmHA or its successor agency under Public Law
103-354 to follow the steps outlined in Sec. 1940.324 of this subpart
prior to the approving official's decision on the FmHA or its successor
agency under Public Law 103-354 action.
Sec. 1940.326 FmHA or its successor agency under Public Law 103-354
as a lead Agency.
(a) When other Federal agencies are involved in an FmHA or its
successor agency under Public Law 103-354 action or related actions that
require the preparation of an EIS, the preparer will consult with these
agencies to determine a lead Agency for preparing the EIS. The criteria
for making this determination will be those contained in Sec. 1505.5 of
the CEQ regulations. If there is a failure to reach a determination
within a reasonably short time after consultation is initiated, the
National Office will be contacted. The assistance of CEQ will then be
requested by the Administrator in order to conclude the determination of
a lead Agency.
(b) When acting as lead Agency, the FmHA or its successor agency
under Public Law 103-354 preparer will request other Federal and State
agencies to serve as cooperating agencies on the basis of the guidance
provided in Sec. 1940.320(b) of this subpart. A memorandum of
understanding or other written correspondence should be developed with a
cooperating agency in order to define that agency's role in the
preparation of the EIS.
Sec. 1940.327 Tiering.
To the extent possible, FmHA or its successor agency under Public
Law 103-
[[Page 45]]
354 may consider the concept of tiering in the preparation of
environmental assessments and EISs. Tiering refers to the coverage of
general matters in broader environmental impact statements, such as one
done for a national program or regulation, with subsequent narrower
statements or environmental analyses incorporating by reference the
broader matters and concentrating on the issues specific to the action
under consideration. Tiering can be used when the sequence of analysis
is from the program level to site-specific actions taken under that
program or from an initial EIS to a supplement which discusses the
issues requiring supplementation.
Sec. 1940.328 State Environmental Policy Acts.
(a) Numerous States have enacted environmental policy acts or
regulations similar to NEPA, hereafter referred to as State NEPA's. It
is important that FmHA or its successor agency under Public Law 103-354
staff have an understanding of which States have such requirements and
how they apply to applicant's proposals. It will be the responsibility
of each State Director to determine the applicable State requirements
and to establish a working relationship with the State personnel
responsible for their implementation.
(b) In processing projects located within States having State
NEPA's, the preparer of the FmHA or its successor agency under Public
Law 103-354 assessment will determine as early as possible in the
assessment process whether the project falls under the requirements of
the State NEPA. If it does, one of the following cases will exist and
the appropriate actions specified will be taken.
(1) The applicant has complied with the State's NEPA, and it was
determined under the State's requirements that the proposed project
would not result in sufficient potential impacts to warrant the
preparation of an impact statement or other detailed environmental
report required by the State NEPA. This finding or conclusion by the
State will be considered in the FmHA or its successor agency under
Public Law 103-354's review, and any supporting information used by the
State will be requested. However, the State's finding can never be the
total basis for FmHA or its successor agency under Public Law 103-354's
environmental impact determination. An independent and thorough review
in accordance with the requirements of this subpart must be conducted by
the preparer.
(2) The applicant has complied with the State NEPA, and it was
determined under its implementing guidelines that a significant impact
will result. This fact will be given great weight in the Agency's
environmental determination. However, the State's definition of
significant environmental impact may encompass a much lower threshold of
impacts compared to FmHA or its successor agency under Public Law 103-
354's. In such a case, if the preparer does not believe that a
significant impact will result under Agency guidelines for determining
significant impacts, the environmental assessment will be prepared and
include a detailed discussion with supporting information as to why the
environmental reviewer's recommendation differs from that of the
State's. However, the assessment cannot be completed until the State's
impact statement requirements have been fulfilled by the applicant and
the resulting impact statement has been reviewed by the preparer. An
environmental impact determination will then be executed based upon the
assessment and the statement.
(c) It should be emphasized that at no time does the completion of
an impact statement under the requirements of a State NEPA obviate the
requirement for FmHA or its successor agency under Public Law 103-354 to
prepare an impact statement. Consequently, as soon as it is clear to the
preparer that the Agency will have to prepare a statement, every attempt
should be made to accomplish the statement simultaneously with the
State's. Coordination with State personnel is necessary so that data and
expertise can be shared. In this manner, duplication of effort and the
review periods for the separate statements can be minimized. This
process clearly requires a close working relationship with the
appropriate State personnel.
[[Page 46]]
Sec. 1940.329 Commenting on other Agencies' EIS's.
(a) State Directors are authorized to comment directly on EIS's
prepared by other Federal agencies. In so doing, comments should be as
specific as possible. Any recommendations for the development of
additional information or analyses should indicate why there is a need
for the material.
(b) Comments should concentrate on those matters of primary
importance to FmHA or its successor agency under Public Law 103-354 and
on areas of Agency expertise, such as rural planning and development.
Any potential conflicts with FmHA or its successor agency under Public
Law 103-354 programs, plans, or actions should be clearly identified.
Special attention should be given to the relationship of the
alternatives under study to the State Office's natural resource
management guide and the objectives of the Department's land use
regulation (exhibit A of this subpart). Copies of comments addressing
land use questions will be provided to the appropriate chairman of the
USDA State-level committee dealing with land use matters.
(c) Whenever a State Director has serious concerns over the
acceptability of the anticipated environmental impacts, the State
Director will notify the Administrator.
Sec. 1940.330 Monitoring.
(a) FmHA or its successor agency under Public Law 103-354 staff who
normally have responsibility for the postapproval inspection and
monitoring of approved projects will ensure that those measures which
were identified in the preapproval stage and required to be undertaken
in order to reduce adverse environmental impacts are effectively
implemented.
(b) This staff, as identified in paragraph (a) of this section, will
review the action's approval documents and consult with the preparer of
the action's environmental review document prior to making site visits
or requesting project status reports in order to determine if there are
environmental requirements to be monitored.
(c) The preparer will directly monitor actions containing difficult
or complex environmental special conditions.
(d) Before certifying that conditions contained within offers of
financial assistance have been fully met, the responsible monitoring
staff will obtain the position of the preparer for those conditions
developed as a result of the environmental review.
(e) Whenever noncompliance with an environmental special condition
is detected by FmHA or its successor agency under Public Law 103-354
staff, the preparer and the SEC will be immediately informed. The
approving official will then take appropriate steps, in consultation
with the responsible program office, the SEC and preparer, to bring the
action into compliance.
Sec. 1940.331 Public involvement.
(a) Objective. The basic objective of FmHA or its successor agency
under Public Law 103-354's public involvement process is threefold. It
is to ensure that interested citizens can readily obtain knowledge of
the environmental review status of FmHA or its successor agency under
Public Law 103-354's funding applications, have the opportunity to input
into this review process before decisions are made, and have access to
the environmental documents supporting FmHA or its successor agency
under Public Law 103-354 decisions.
(b) Public notice requirements. (1) For projects that undergo the
preparation of an environmental impact statement, the first element of
formal public participation in the EIS process involves the publication
of the notice of intent to prepare an EIS. The content of the notice of
intent and its publication by FmHA or its successor agency under Public
Law 103-354 in the Federal Register are explained in Sec. 1940.320 of
this subpart. With respect to notification within the project area, the
applicant will be requested to publish a copy of the notice of intent
and the date of the scoping meeting in the newspaper of general
circulation in the vicinity of the proposed action and in any local or
community-oriented newspapers within the proposed action's area of
environmental impact. The notice will be published in easily readable
type in the nonlegal section of the newspaper(s). It
[[Page 47]]
will also be bilingual if the affected area is largely non-English
speaking or bilingual. Individual copies of the notice will be sent by
the applicant to the appropriate regional EPA office, any State and
regional review agencies established under Executive Order 12372; the
State Historic Preservation Officer; local radio stations and other news
media; any State or Federal agencies planning to provide financial
assistance to this or related actions or required to review permit
applications for this action, any potentially affected Indian Tribe; any
individuals, groups, local, State, and Federal agencies known to be
interested in the project; affected property owners; and to any other
parties that FmHA or its successor agency under Public Law 103-354 has
identified to be so notified. It will also be posted at a readable
location on the project site. The applicant will provide FmHA or its
successor agency under Public Law 103-354 with a copy of the notice as
it appeared in the newspaper(s), the date(s) published, and a list of
all parties receiving an individual notice. Publication and individual
transmittal of the notice for the scoping meeting will be accomplished
at least 14 days prior to the date of the meeting.
(2) Coincident with the distribution of either a draft or final EIS,
a notice of the statement's availability will be published within the
project area in the same manner as a notice of intent to prepare an EIS.
FmHA or its successor agency under Public Law 103-354 will request EPA
to publish in the Federal Register a notice of the statement's
availability in accordance with EPA's requirements and pursuant to Sec.
1506.10 of the CEQ regulations.
(3) For Class II actions that are determined not to have a
significant environmental impact, the Agency will require the applicant
to publish a notification of this determination. This notice will be
published in the same manner as a notice of intent to prepare an EIS but
will appear for at least 3 consecutive days if published in a daily
newspaper or otherwise in two consecutive publications. Individual
copies will be sent to the same parties that are required to be sent a
notice of intent, as specified in paragraph (b)(1) of this section, with
the exception of local radio stations and other news media. Also, there
is no requirement to post this notice on the project site. The applicant
will provide FmHA or its successor agency under Public Law 103-354 with
a copy of this notice, the dates the notice was published, and a list of
all parties receiving an individual notice. This notification procedure
does not apply to actions reviewed solely on the basis of a Class I
assessment.
(4) The public notice procedures for actions that will affect
floodplains, wetlands, important farmlands, prime rangelands or prime
forest lands are contained in exhibit C of this subpart. These
procedures apply to actions that require either an EIS, Class II
assessment or Class I assessment. However, whenever an action normally
classified as a categorical exclusion requires a Class I assessment
because of the potential impact to one of these important land
resources, no public notice procedures apply in the course of completing
the Class I assessment. When applicable to an action, as specified in
exhibit C of this subpart, these public notice procedures can apply at
two distinct stages. The first stage, a preliminary notice, applies to
any of the five important land resources. The second stage, a final
notice, is followed by a fifteen-day public review period and applies
only to actions that will impact floodplains or wetlands. For Class II
actions, this final notice procedure must be combined with any
applicable finding of no significant environmental impact, which is
described in paragraph (b)(3) of this section. Individual copies of the
preliminary and final notices will be sent to the same parties that are
required to be sent a notice of finding of no significant impact, as
specified in paragraph (b)(3) of this section, with the following
exception. Whenever property owners affected by proposed mitigation
measures, such as proposed hook-up restrictions on portions of water or
sewer lines that will traverse floodplains, are advised of these
proposed measures in a preliminary notice, these property owners need
not be sent copies of the final notice as long as the mitigation
measures in the final notice are unchanged from the preliminary notice
and no property
[[Page 48]]
owners raised objections or concerns over the mitigation measures.
(5) The public notice requirements associated with holding a public
information meeting are specified in paragraph (c) of this section.
(c) Public information meetings. (1) Public information meetings
will be held for an action undergoing an EIS as specified in Sec.
1940.320 of this subpart. As part of the EIS process, a public
information meeting will be held near the project site to discuss and
receive comments on the draft EIS. It will be scheduled no sooner than
15 days after the release of the draft EIS. It will be announced in the
same manner as the scoping meeting, and the list of parties receiving an
individual notification will also be developed in the same manner. The
meeting will be chaired by the State Director or a designee and will be
fully recorded so that a transcript can be produced. The applicant will
be requested to assist in obtaining a facility for holding the meeting.
To the extent possible, this meeting will be combined with public
meetings required by other involved agencies.
(2) Whenever a public information meeting is held as part of the
completion of an environmental assessment, it will be scheduled,
announced, and held in generally the same manner as a public information
meeting for an EIS. However, a minimum of 7 days advance notice of the
meeting is sufficient, and a transcript of the meeting will not be
required. Rather a summary of the meeting to include the major issues
raised will be prepared by the FmHA or its successor agency under Public
Law 103-354 official who chaired the meeting.
(d) Distribution of environmental documents. FmHA or its successor
agency under Public Law 103-354 officials will promptly provide to
interested parties, upon request, copies of environmental documents,
including environmental assessments, draft and final environmental
impact statements, and records of decision. Interested parties can
request these materials from the appropriate State Director or approval
official for project activities and from the Administrator on other
activities subject to environmental review.
Sec. 1940.332 Emergencies.
(a) Action Requiring EIS. When an emergency circumstance makes it
necessary to take an action with significant environmental impact
without observing the provisions of this subpart or the CEQ regulations,
the Administrator will consult with CEQ about alternative arrangements
before the proposed action is taken. It must be recognized that CEQ's
regulations limit such arrangements to actions necessary to control the
immediate impacts of the emergency. Other actions remain subject to NEPA
review. For purposes of this subpart, an emergency circumstance is
defined as one involving an immediate or imminent danger to public
health or safety.
(b) Action Not Requiring EIS. When an emergency circumstance makes
it necessary to take an action with apparent non-significant
environmental impact without observing the provisions of this subpart or
the CEQ regulations, the Administrator will be so notified. The
Administrator reserves the authority to waive or amend all procedural
aspects of this subpart relating to the preparation of environmental
assessments including but not limited to the applicant's submission of
Form FmHA or its successor agency under Public Law 103-354 1940-20,
public notice requirements and/or their associated comment periods, the
timing of the assessment process, and the content of environmental
review documents. Alternative arrangements will be established on a case
by case basis taking into account the nature of the emergency and the
time reasonably available to respond to it. These alternative
arrangements will, to the extent possible, attempt to achieve the
substantive requirements of this subpart such as avoiding impacts to
important land resources, when practicable, and minimizing potential
adverse environmental impacts. In all cases, the environmental findings
and determinations required for Class I and Class II assessments must be
executed by the appropriate FmHA or its successor agency under Public
Law 103-354 officials prior to approval of the action and be based upon
the best information available under the circumstances and the
prescribed alternative arrangements.
[[Page 49]]
(Refer to paragraph (a) of this section should the approval official for
the action determine that an EIS is necessary.) Additionally, all
applicable consultation and coordination procedures required by law or
regulation will be initiated with the appropriate Federal or State
agency(s). Such procedures will be accomplished in the most expeditious
manner possible and modified to the extent necessary and mutually
agreeable between FmHA or its successor agency under Public Law 103-354
and the affected agency(s). The provisions of this paragraph are limited
to the same emergency circumstances and scope of action as specified in
paragraph (a) of this section.
Sec. 1940.333 Applicability to planning assistance.
The award of FmHA or its successor agency under Public Law 103-354
funds for the purpose of providing technical assistance or planning
assistance will not be subject to any environmental review. However,
applicants will be expected to consider in the development of their
plans and to generally document within their plans:
(a) The existing environmental quality and the important
environmental factors within the planning area, and
(b) The potential environmental impacts on the planning area of the
plan as well as the alternative planning strategies that were reviewed.
Sec. 1940.334 Direct participation of State Agencies in the
preparation of FmHA or its successor agency under Public Law 103-354 EISs.
FmHA or its successor agency under Public Law 103-354 may be
assisted by a State Agency in the preparation of an EIS subject to the
conditions indicated below. At no time, however, is FmHA or its
successor agency under Public Law 103-354 relieved of its
responsibilities for the scope, objectivity, and content of the entire
statement of any other responsibility under NEPA.
(a) The FmHA or its successor agency under Public Law 103-354
applicant for financial assistance is a State Agency having statewide
jurisdiction and responsibility for the proposed action;
(b) FmHA or its successor agency under Public Law 103-354 furnishes
guidance to the State Agency as to the scope and content of the impact
statement and participates in the preparation;
(c) FmHA or its successor agency under Public Law 103-354
independently evaluates the statement and rectifies any major
deficiencies prior to its circulation by the Agency as an EIS;
(d) FmHA or its successor agency under Public Law 103-354 provides,
early in the planning stages of the project, notification to and
solicits the views of any land management entity (State or Federal
Agency responsible for the management or control of public lands)
concerning any portion of the project and its alternatives which may
have significant impacts upon such land management entities; and
(e) If there is any disagreement on the impacts addressed by the
review process outlined in paragraph (d) of this section, FmHA or its
successor agency under Public Law 103-354 prepares a written assessment
of these impacts and the views of the land management entities for
incorporation into the draft impact statement.
Sec. 1940.335 Environmental review of FmHA or its successor agency
under Public Law 103-354 proposals for legislation.
(a) As stated in Sec. 1940.312(d)(4) of this subpart, all FmHA or
its successor agency under Public Law 103-354 proposals for legislation
will receive an environmental assessment. The definition of such a
proposal is contained in Sec. 1508.17 of the CEQ regulations.
(b) The environmental assessment and, when necessary, the EIS will
be prepared by the responsible Agency staff that is developing the
legislation.
(c) If an EIS is required, it will be prepared according to the
requirements of Sec. 1506.8 of the CEQ Regulations.
Sec. 1940.336 Contracting for professional services.
(a) Assistance from outside experts and professionals can be secured
for the purpose of completing EIS, assessments, or portions of them.
Such assistance will be secured according to
[[Page 50]]
the Federal and Agriculture Procurement Regulations contained in
chapters 1 and 4 of title 48 of the Code of Federal Regulations.
(b) The contractor will be selected by FmHA or its successor agency
under Public Law 103-354 in consultation with any cooperating agencies.
In order to avoid any conflict of interest, contractors competing for
the work will be required to execute a disclosure statement specifying
that they have no financial or other interest in the outcome of the
project.
(c) The Administrator will provide the State Director with a
proposed scope of work for use in securing such professional services.
(d) Applicants will not be required to pay the costs of these
professional services.
Sec. Sec. 1940.337-1940.349 [Reserved]
Sec. 1940.350 Office of Management and Budget (OMB) control number.
The collection of information requirements in this regulation has
been approved by the Office of Management and Budget and has been
assigned OMB control number 0575-0094.
Exhibit A to Subpart G of Part 1940--Departmental Regulation
Number: 9500-3.
Subject: Land Use Policy.
Date: March 22, 1983.
OPI: Land Use Staff, Soil Conservation Service.
Section
1. Purpose
2. Cancellation
3. Policy
4. Abbreviations
5. Definitions
6. Responsibilities
7. Appendix A
1. Purpose
The Nation's farmlands, forest lands, rangelands, flood plains, and
wetlands are unique natural resources providing food, fiber, wood, and
water necessary for the continued welfare of the people of the United
States and protection from floods. Each year, large amounts of these
lands are converted to other uses. Continued conversion of the Nation's
farmlands, forest lands, and rangelands may impair the ability of the
United States to produce sufficient food, fiber, and wood to meet
domestic needs and the demands of export markets. Continued conversion
of the Nation's wetlands may reduce the availability of adequate
supplies of suitable-quality water, indigenous wildlife species, and the
productive capacity of the Nation's fisheries. Continued encroachments
on flood plains decrease the natural flood-control capacity of these
land areas, create needs for expensive manmade flood-control measures
and disaster-relief activities, and endanger both lives and property.
Land use allocation decisions are matters of concern to USDA.
Decisions concerning land use arise from needs to accommodate needed
growth and development; prevent unwarranted and costly sprawl; avoid
unwarranted conversion of farm, range, and forest lands and wetlands
from existing uses and unwarranted encroachment on flood plains;
maintain and enhance agricultural and forest production capabilities;
maintain wildlife, fish, and seafood habitat; provide or improve
community services and facilities; assure appropriate environmental
quality; and assure adequate supplies of suitable-quality water. These
needs are highly interdependent and often compete with each other for
the limited supply of available land and water.
It is Departmental policy to promote land use objectives responsive
to current and long-term economic, social, and environmental needs. This
policy recognizes the rights and responsibilities of State and local
governments for regulating the uses of land under their jurisdiction. It
also reflects the Department's responsibility to (a) assure that the
United States retains a farm, range, and forest land base sufficient to
produce adequate supplies, at reasonable production costs of high-
quality food, fiber, wood, and other agricultural products that may be
needed; (b) assist individual landholders and State and local
governments in defining and meeting needs for growth and development in
such ways that the most productive farm, range, and forest lands are
protected from unwarranted conversion to other uses; and (c) assure
appropriate levels of environmental quality.
In accordance with the authority contained in 7 U.S.C. 1010 and 7
U.S.C. 2204 and consistent with 7 CFR 2.19(f) and provisions of the
Farmland Protection Policy Act, Subtitle I, Title XV, Pub. L. 97-98, the
Department sets forth this statement of policy on land use.
2. Cancellations
This regulation supersedes Secretary's Memorandum 9500-2 dated March
10, 1982.
3. Policy
Federal agencies, in implementing programs, make decisions that
affect current
[[Page 51]]
and potential uses of land. The Department will:
a. Promote and support planning procedures that allow landholders,
interest groups, and State and local governments to have input at all
appropriate stages of the decisionmaking process for public projects,
programs, or activities; that recognize the rights and responsibilities
of landholders in making private land use decisions; and that recognize
the responsibility of governments in influencing how land may be used to
meet public needs.
b. Assure that programs of the agencies within the Department
discourage the unwarranted conversion to other uses of prime and unique
farmlands, farmlands of statewide or local importance, and prime
rangelands, as defined in appendix A; the unwarranted alteration of
wetlands or flood plains; or the unwarranted expansion of the peripheral
boundaries of existing settlements.
c. Manage both its land use-related programs and USDA-administered
land in such manner as to (1) demonstrate leadership in meeting short-
and long-term needs for growth and development, while assuring adequate
supplies of needed food, fiber, and forest products; (2) assure
appropriate levels of environmental quality and adequate supplies of
water; and (3) discourage unwarranted expansion of peripheral boundaries
of existing settlements. Whenever practicable, management of USDA-
administered lands shall be coordinated with the management of adjacent
private and other public lands.
d. Conduct multidisciplinary land use research and education
programs responsive to identified State, local, and national needs and,
when requested, assist State and local governments, citizens groups, and
individual landholders in determining alternative land use values,
thereby enabling local officials to make judicious choices to meet
growth and development needs and to protect the community's farm- and
forest-related economic base.
e. Assist landowners and State and Federal agencies in the
reclamation of abandoned surface-mined lands. This reclamation will help
eliminate safety, health, and environmental problems.
f. Assist in planning for the extraction of coal and other
nonrenewable resources in such manner as to facilitate restoration. This
restoration would reestablish or enhance food, fiber, or forest
productivity or contribute to other beneficial uses of the land as
mining is completed in defined areas as sites.
g. Advocate among Federal agencies:
(1) The retention of important farmlands, rangelands, forest lands,
and wetlands, whenever proposed conversions to other uses (a) are caused
or encouraged by actions or programs of a Federal agency or (b) require
licensing or approval by a Federal agency, unless other needs clearly
override the benefits derived from retention of such lands; and
(2) Actions that reduce the risk of flood loss and soil erosion;
that minimize impacts of floods on human safety, health, and welfare;
that preserve natural flood-control and other beneficial functions and
values of wetlands and flood plains; and that reduce future need for
expensive manmade flood-control systems, disaster-relief assistance, or
Federal rehabilitation assistance in the event of flooding.
4. Abbreviations
USDA--U.S. Department of Agriculture.
NRE--Natural Resources and Environment Committee.
5. Definitions
Complete definitions for the terms farmlands, forest lands,
rangelands, wetlands, and flood plains are found in appendix A.
6. Responsibilities
a. The Office of the Secretary is responsible for (1) encouraging,
assisting, and coordinating efforts of other Federal departments and
agencies to implement policies and procedures supportive of the
objectives of this regulation; (2) resolving issues and acting on
recommendations raised to the Secretary's Policy and Coordination
Council by the Departmental committees; and (3) raising unresolved
issues and recommending actions to the appropriate Cabinet Council.
b. The NRE Committee, created under the Secretary's memorandum dated
July 22, 1981, will provide departmentwide leadership for the
implementation of this policy statement. In implementing this policy,
the NRE Committee will:
(1) Recommend Departmental guidelines to the Secretary and schedule
reviews of each agency's procedures for implementation;
(2) Monitor implementation of this policy;
(3) Encourage, support, and provide guidance to State- and local-
level USDA committees in implementing this policy;
(4) Coordinate the work of USDA agencies in carrying out the
provisions of this regulation; and
(5) Advise the Secretary annually as to progress and problems
encountered.
c. Each USDA agency will review and make the necessary
administrative changes in existing and proposed rules, regulations,
guides, practices, or policies and propose needed legislative changes to
bring agency programs into compliance with the provisions of this
regulation.
d. Each USDA agency having programs that will be affected by this
regulation shall develop implementing procedures, consistent with the
guidelines provided by the NRE Committee, and shall provide to all
offices of the agency copies of this policy statement,
[[Page 52]]
Departmental guidelines, and agency procedures to implement this policy.
e. USDA agencies will encourage State and local governments and
individual landholders to retain important farmlands, rangelands, forest
lands, and wetlands and to avoid encroachments on flood plains when
practicable alternatives exist to meet developmental needs. Appropriate
agencies will assist State and local governments, citizens groups, and
individual landholders in identifying options and determining
alternative land use values as the basis for making judicious choices in
meeting growth and development needs.
f. USDA agencies will encourage other Federal, State, and local
government agencies to exchange information on plans or projects that
may impact on important farmlands, rangelands, forest lands, wetlalds,
or flood plains and to involve appropriate USDA agencies early in the
planning process. USDA agencies will participate in a timely manner at
appropriate stages in the planning process on Federal or federally
assisted projects or activities when requested. Where opportunity for
such participation is not forthcoming, the Department may intercede,
consistent with policy contained in this regulation, at appropriate
stages in the decisionmaking process through review and comments on
plans, as provided for in authorized administrative review procedures
for such projects, activities, or actions.
g. When land held either in public or private ownership will be
directly affected by USDA actions, the implementing agency will notify
the affected landholders at the earliest time practicable of the
proposed action and provide such landholders an opportunity to review
the elements of the action and to comment on the action's feasibility
and alternatives to it.
h. Agencies of USDA will assure that their actions, investments, and
programs on non-Federal lands will conform, to the extent practicable,
with the uses permitted under land use regulations adopted by State or
local governments.
i. When land use regulations or decisions are inconsistent with USDA
policies and procedures for the protection of important farmlands,
rangelands, forest lands, wetlands, or flood plains, USDA agencies shall
not assist in actions that would convert these lands to other uses or
encroach upon flood plains, unless (1) there is a demonstrated,
significant need for the project, program, or facility, and (2) there
are no practicable alternative actions or sites that would avoid the
conversion of these lands or, if conversion is unavoidable, reduce the
number of acres to be converted or encroached upon directly and
indirectly.
7. Appendix A--Definitions
The following definitions apply to this Departmental Regulation.
1. important farmlands \1\
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\1\ 7 CFR 657.5.
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a. Prime Farmlands \1\
(1) General Criteria. Prime farmland is land that has the best
combination of physical and chemical characteristics for producing food,
feed, forage, fiber, and oilseed crops and is also available for these
uses (the land could be cropland, pastureland, rangeland, forest land,
or other land, but not urban built-up land or water). It has the soil
quality, growing season, and moisture supply needed to produce,
economically, sustained high yields of crops when treated and managed,
including water management, according to acceptable farming methods. In
general, prime farmlands have an adequate and dependable water supply
from precipitation or irrigation, a favorable temperature and growing
season, acceptable acidity or alkalinity, acceptable salt and sodium
content, and few or no rocks. They are permeable to water and air. Prime
farmlands are not excessively erodible or saturated with water for a
long period of time, and they either do not flood frequently or are
protected from flooding. Examples of soils that qualify as prime
farmland are Palouse silt loam, 0- to 7-percent slopes; Brookston silty
clay loam, drained; and Tama silty clay loam, 0- to 5-percent slopes.
(2) Specific Criteria. Prime farmlands must meet all the following
criteria. Terms used in this section are defined in these USDA
publications: ``Soil Taxonomy, Agriculture Handbook 436,'' ``Soil Survey
Manual, Agriculture Handbook 18,'' ``Rainfall-Erosion Losses from
Cropland, Agriculture Handbook 282,'' ``Wind Erosion Forces in the
United States and Their Use in Predicting Soil Loss, Agriculture
Handbook 346,'' and ``Saline and Alkali Soils, Agriculture Handbook
60.''
(a) The soils have:
1. Aquic, udic, ustic, or xeric moisture regimes and sufficient
available water capacity within a depth of 40 inches, or in the root
zone (root zone is the part of the soil that is penetrated by plant
roots) if the root zone is less than 40 inches deep, to produce the
commonly grown cultivated crops (cultivated crops include but are not
limited to grain, forage, fiber, oilseed, sugar beets, sugarcane,
vegetables, tobacco, orchard, vineyard, and bush fruit crops) adapted to
the region in 7 or more years out of 10; or
2. Xeric or ustic moisture regimes in which the available water
capacity is limited, but the area has a developed irrigation water
supply that is dependable (a dependable water supply is one in which
enough water is
[[Page 53]]
available for irrigation in 8 out of 10 years for the crops commonly
grown) and of adequate quality; or
3. Acidic or torric moisture regimes, and the area has a developed
irrigation water supply that is dependable and of adequate quality; and
(b) The soils have a temperature regime that is frigid, mesic,
thermic, or hyperthermic (pergelic and cryic regimes are excluded).
These are soils that, at a depth of 20 inches, have a mean annual
temperature higher than 32 degrees Fahrenheit. In addition, the mean
summer temperature at this depth in soils with an 0 horizon is higher
than 47 degrees Fahrenheit; in soils that have no 0 horizon, the mean
summer temperature is higher than 59 degrees Fahrenheit; and
(c) The soils have a pH between 4.5 and 8.4 in all horizons within a
depth of 40 inches or in the root zone if the root zone is less than 40
inches deep; and
(d) The soils either have no water table or have a water table that
is maintained at a sufficient depth during the cropping season to allow
cultivated crops common to the area to be grown; and
(e) The soils can be managed so that in all horizons within a depth
of 40 inches or in the root zone if the root zone is less than 40 inches
deep, during part of each year the conductivity of the saturation
extract is less than 4 mmhoc/cm and the exchangeable sodium percentage
is less than 15; and
(f) The soils are not flooded frequently during the growing season
(less often than once in 2 years); and
(g) The product of K (erodibility factor) times the percent slope is
less than 2.0, and the product of I (soils erodibility) times C
(climatic factor) does not exceed 60; and
(h) The soils have a permeability rate of at least 0.06 inch per
hour in the upper 20 inches, and the mean annual soil temperature at a
depth of 20 inches is less than 59 degrees Fahrenheit or higher; and
(i) Less that 10 percent of the surface layer (upper 6 inches) in
these soils consists of rock fragments coarser than 3 inches.
b. Unique Farmland \1\
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\1\ See footnote 1 on previous page.
---------------------------------------------------------------------------
(1) General Criteria. Unique farmland is land other than prime
farmland that is used for the production of specific high-value food and
fiber crops. It has the special combination of soil quality, location,
growing season, and moisture supply needed to produce, economically,
sustained high-quality and/or high yields of a specific crop when
treated and managed according to acceptable farming methods. Examples of
such crops are citrus, tree nuts, olives, cranberries, fruit, and
vegetables.
(2) Specific Characteristics. Unique farmland is used for a specific
high-value food or fiber crop. It has a moisture supply that is adequate
for the specific crop; the supply is from stored moisture,
precipitation, or a developed irrigation system. It combines favorable
factors of soil quality, growing season, temperature, humidity, air
drainage, elevation, aspect, or other conditions, such as nearness to
market, that favor the growth of a specific food or fiber crop.
c. Additional Farmland of Statewide Importance 1
This is land, in addition to prime and unique farmlands, that is of
statewide importance for the production of food, feed, fiber, forage,
and oilseed crops. Criteria for defining and delineating this land are
to be determined by the appropriate State agency or agencies. Generally,
additional farmlands of statewide importance include those that are
nearly prime farmland and that economically produce high yields of crops
when treated and managed according to acceptable farming methods. Some
may produce as high a yield as prime farmlands if conditions are
favorable. In some States, additional farmlands of statewide importance
may include tracts of land that have been designated for agriculture by
State law.
d. Additional Farmland of Local Importance 1
In some local areas, there is concern for certain additional
farmlands for the production of food, feed, fiber, forage, and oilseed
crops, even though these lands are not identified as having national or
statewide importance. Where appropriate, these lands are to be
identified by the local agency or agencies concerned.
2. prime forest lands \2\
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\2\ Prime Forest Land Definition and Criteria, U.S. Forest Service,
May 26, 1977.
---------------------------------------------------------------------------
Because of the multiple use of forested lands, several categories,
e.g., timber, wildlife, and recreation, may be developed. For purposes
of this regulation only, the following timberland definitions will
apply.
a. Prime Timberland \2\
Prime timberland is land that has soil capable of growing wood at
the rate of 85 cubic feet or more/acre/year (at culmination of mean
annual increment) in natural stands and is not in urban or built-up land
uses or water. Generally speaking, this is land currently in forest, but
does not exclude qualifying lands that could realistically be returned
to forest. Delineation of these lands will be in accordance with
national criteria.
[[Page 54]]
b. Unique Timberland \2\
Unique timberlands are lands that do not qualify as prime timberland
on the basis of producing less than 85 cubic feet/acre/year, but are
growing sustained yields of specific high-value species or species
capable of producing specialized wood products under a silvicultural
system that maintains soil productivity and protects water quality.
Delineation of these lands will be in accordance with national criteria.
c. Timberland of Statewide Importance \2\
This is land, in addition to prime and unique timberlands, that is
of statewide importance for the growing of wood. Criteria for defining
and delineating these lands are to be determined by State forestry
planning committees or appropriate State organizations.
d. Timberlands of Local Importance \2\
In some local areas, there is concern for certain additional forest
lands for the growing of wood, even though these lands are not
identified as having national or statewide importance. Where
appropriate, these lands are to be identified by a local agency or
agencies concerned.
3. wetlands \3\
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\3\ Definitions contained in Executive Orders 11988 and 11990.
---------------------------------------------------------------------------
Wetlands are those areas that are inundated by surface or ground
water with a frequency sufficient to support and, under normal
circumstances, do or would support a prevalence of vegetative or aquatic
life that requires saturated or seasonally saturated soil conditions for
growth and reproduction. Wetlands generally include swamps, marshes,
bogs, and similar areas, such as sloughs, potholes, wet meadows, river
overflows, mudflats, and natural ponds.
4. flood plains \3\
The term flood plain means the lowland and relatively flat areas
adjoining inland and coastal waters, including floodprone areas of
offshore islands, including, at a minimum, those that are subject to a
1-percent or greater chance of flooding in any given year.
5. prime rangeland \4\
---------------------------------------------------------------------------
\4\ USDA proposed definition for intradepartmental use only.
---------------------------------------------------------------------------
Prime rangeland is rangeland which, because of its soil, climate,
topography, vegetation, and location, has the highest quality or value
for grazing animals. The (potential) natural vegetation is palatable,
nutritious, and available to the kinds of herbivores common to the area.
Exhibit B to Subpart G of Part 1940--Development and Implementation of
Natural Resource Management Guide
1. The State Director shall complete the natural resource management
guide within 12 months from the effective date of this subpart and issue
the guide as a State supplement after prior approval by the
Administrator. A summary of the basic content, purposes, and uses of the
guide is contained in Sec. 1940.305 of this subpart. The guide shall be
prepared in draft form and be provided for review and comment to USDA
agencies, appropriate Federal and State agencies, State and regional
review agencies assigned the consulation requirements of Executive Order
12372, as well as interested localities, groups, and citizens. Also at
least one public information meeting shall be held on the draft which
shall be followed by a 30-day period for the submission of public
comments. Public notification of this meeting shall be made in the same
manner as the notification process for a scoping meeting. (See Sec.
1940.320(c) of this subpart). Additionally, the public shall be informed
that copies of the draft guide will be made available from the State
Office upon request. After completion of this public review, the draft
will be revised as necessary in light of the comments received and
provided as a final draft State Supplement to the Administrator for
review and approval. Any concerns and comments of the Administrator will
be addressed by the State Director and the guide completed. Upon the
Administrator's approval and the fulfillment of the requirements of
paragraph 4. of this exhibit, the natural resource management guide
shall then become part of any program investment strategies developed by
the State Director for the purpose of addressing the rural needs of the
State. Although a 12-month period has been established for the
completion of a natural resource management guide, this deadline is not
to be construed as curtailing or postponing the implementation of
existing environmental laws, regulations, Executive orders or the
Departmental Regulation 9500-3, Land Use Policy, with respect to
individual project reviews, nor giving anyone any rights or claims with
respect to the completion or content of the guide.
2. The natural resource management guide needs to be developed in
full recognition of its role as an internal Agency planning tool and
with sensitivity to the Agency's mission.
3. After the Administrator approves the natural resource management
guide, it will become effective 4 months from that date. This interim
period shall be used to inform local, State, and Federal agencies,
localities, organizations, and interested citizens of the content of the
guide. In this manner, those
[[Page 55]]
parties intending to seek FmHA or its successor agency under Public Law
103-354 assistance or to coordinate FmHA or its successor agency under
Public Law 103-354 assistance programs with their own programs will be
able to gain for their planning needs an understanding of our guide.
4. Completed natural resource management guides shall be reviewed
every 2 years and updated by the State Director to reflect newly
identified geographical areas of concern or policy revisions at the
lational, State, regional or local level. They will also be revised, as
necessary, through appropriate guidance from the Administrator.
Revisions shall be transmitted to the Administrator for postapproval and
shall be considered approved if either no comments are raised by the
Administrator within 30 days of receipt of the State Director's
transmittal letter or the administrator specifically approves them
before the 30 days expire. Public review of a revision will not be
required. However, if in the opinion of the State Director the proposed
revision will substantially change the previously adopted natural
resource management guide, a public review shall be conducted of the
revision in the same manner as that described in paragraph 1 of this
exhibit for the development of the original guide. Such review shall
occur prior to the transmittal of the revision to the Administrator. If
the State Director believes that at the expiration of any 2-year review
period there is need to update the guide, a statement to this effect
shall be filed with the Administrator.
5. The foundation for the natural resource management guide is the
identification of the types of land uses or environmental factors
deserving attention and their geographical location within the State. An
inventory or listing shall be developed, therefore, of the important
land uses within the State. This inventory will be accomplished by
assembling existing data and information compiled by those Federal,
State, and local agencies that have jurisdiction or expertise regarding
the land uses or environmental factors. At a minimum, the inventory
shall consist of available documents, listings, maps, or graphic
materials describing the location of the following:
a. National Register of Historic Places to include monthly
supplements as designated by the Department of the Interior (DOI), and
the State Historic Preservation Plans. This list is issued as a State
supplement to subpart F or part 1901 of this chapter;
b. Rivers designated as part of the Wild and Scenic Rivers System
and rivers under study for inclusion in the system, as published by DOI;
c. Important farmlands;
d. Prime rangelands.
e. Prime forestlands;
f. Wetland inventory;
g. Floodplain inventory as issued by the Federal Emergency
Management Administration;
h. Endangered Species and Critical Habitats as listed or proposed
for listing by the Department of Commerce (DOC) and DOI;
i. Sole source aquifer recharge areas as designated by the
Environmental Protection Agency (EPA);
j. Air Quality Control Regions as designated by EPA;
k. National Registry of Natural Landmarks at published by DOI;
l. Coastal Barrier Resources System;
m. State inventories or planning documents identifying important
land uses, particularly those not covered by the above items, such as
wildlife refuges, important habitats, and areas of high water quality,
or scenic or recreational value;
n. Agricultural districts or other similar zoning classifications
for agricultural land protection; and
o. Coastal Zone Management Areas.
6. The Administrator shall be responsible for assisting State
Directors in obtaining listings and inventories of resources protected
by Federal statutes and regulations. The State Director has the
responsibility for assembling documents on important environmental
resources or areas identified in State and substate laws, regulations,
plans, and policies.
7. Development of the inventory by the State Director will require
consultation and assistance from a variety of agencies and experts. This
consultation should begin with Department agencies and be accomplished
through appropriate, State-level USDA committees. The objective should
be to determine the land classification data that has been compiled and
that which is in the process of being compiled either by USDA agencies
or their counterparts at the state level. The Memorandum of
Understanding executed in May 1979 between the Soil Conservation Service
(SCS) and FmHA or its successor agency under Public Law 103-354 should
be utilized as the basis for seeking SCS's assistance in this data
collection effort. (See FmHA Instruction 2000-D, exhibit A, which is
available in any FmHA or its successor agency under Public Law 103-354
Office.) Direct contacts should then be made with State agencies, in
particular with the appropriate office of State planning, to determine
the availability of State inventories and State land use policies and
priorities. Similar discussions should be held with substate regional
planning agencies and clearinghouses with assistance being provided in
this effort by District Directors. County Supervisors shall contact
local officials and shall be responsible for being familiar with and for
assembling similar inventories, land use policies, or protective
requirements developed by the local government agencies
[[Page 56]]
within the supervisor's territorial jurisdiction.
8. Another important element of the natural resource management
guide shall be the examination of any major environmental impacts on the
State or a substate area resulting from the cumulative effects of FmHA
or its successor agency under Public Law 103-354-assisted project over
the last several years. In this examination, particular emphasis should
be given to the cumulative impacts of water resource projects such as
irrigation systems. This should be done in consultation with experts
within the appropriate State agencies and the U.S. Geological Survey.
The housing programs should also be given a particular emphasis with
respect to their cumulative impacts. More detailed guidance on the
accomplishment of this cumulative impact section of the natural resource
management guide, as well as the overall content of the guide, shall be
provided by the Administrator. In preparing the State's natural resource
management guide and in assembling inventories of critical resources,
Agency staff should not lose sight of the basic purposes of this effort.
The development of lengthy and complex guides and the amassing of huge
inventories is not our goal. In the end, the material must be useable
and serve as a tool for better decisionmaking. The basic purposes of
this guide and inventory, then, are to provide a basis for developing
comprehensive, statewide, rural development investment strategies that
(i) do not conflict with Federal, State, and local mandates to preserve
and protect important land and environmental resources, (ii) that do not
create short- or long-term development pressures which would lead to the
unnecessary conversion of these resources, and (iii) which effectively
support and enhance Federal, State, and local plans to preserve these
resources.
Exhibit C to Subpart G of Part 1940--Implementation Procedures for the
Farmland Protection Policy Act; Executive Order 11988, Floodplain
Management; Executive Order 11990, Protection of Wetlands; and
Departmental Regulation 9500-3, Land Use Policy
1. Background. The Subtitle I of the Agriculture and Food Act of
1981, Pub. L. 97-98, created the Farmland Protection Policy Act. The Act
requires the consideration of alternatives when an applicant's proposal
would result in the conversion of important farmland to nonagricultural
uses. The Act also requires that Federal programs, to the extent
practicable, be compatible with State, local government, and private
programs and policies to protect farmland. The Soil Conservation Service
(SCS), as required by the Act, has promulgated implementation procedures
for the Act at 7 CFR part 658 which are hereafter referred to as the SCS
rule. This rule applies to all federal agencies. The Departmental
Regulation 9500-3, Land Use Policy (the Departmental Regulation), also
requires the consideration of alternatives but is much broader than the
Act in that it addresses the conversion of land resources other than
farmland. The Departmental Regulation is included as exhibit A to this
subpart and affects only USDA agencies. For additional requirements that
apply to some Farmer Program loans and guarantees and loans to an Indian
Tribe or Tribal Corporation and that cover the conservation of wetlands
and highly erodible land, see exhibit M of this subpart.
2. Implementation. Each proposed lease or disposal of real property
by FmHA or its successor agency under Public Law 103-354 and application
for financial assistance or subdivision approval will be reviewed to
determine if it would result in the conversion of a land resource
addressed in the Act, Executive Orders, or Departmental Regulation and
as further specified below. Those actions that are determined to result
in the lease, disposal or financing of an existing farm, residential,
commercial or industrial property with no reasonably foreseeable change
in land use and those actions that solely involve the renovation of
existing structures or facilities would require no further review.\1\
Since these actions have no potential to convert land uses, this finding
would simply be made by the preparer in completing the environmental
assessment for the action. Also, actions that convert important farmland
through the construction of on-farm structures necessary for farm
operations are exempt from the farmland protection provisions of this
exhibit. For other actions, the following implementation steps must be
taken:
---------------------------------------------------------------------------
\1\ See special procedures in item 3 of this exhibit if the existing
structure or real property is located in a floodplain or wetland.
---------------------------------------------------------------------------
a. Determine whether important land resources are involved. The Act
comes into play whenever there is a potential to affect important
farmland. The Departmental Regulation covers important farmland as well
as the following land resources: prime forest land, prime rangeland,
wetlands and floodplains. Hereafter, these land resources are referred
to collectively as important land resources. Definitions for these land
resources are contained in the appendix to the Departmental Regulation.
The SCS rule also defines important farmland for purposes of the Act.
Since the SCS's definition of prime farmland differs from the
Departmental Regulation's definition, both definitions must be
[[Page 57]]
used and if either or both apply, the provisions of this exhibit must be
implemented. It is important to note the definition of important
farmland in both the SCS rule and the Departmental Regulation because it
includes not only prime and unique farmland but additional farmland that
has been designated by a unit of State or local government to be of
statewide or local importance and such designation has been concurred in
by the Secretary acting through SCS. In completing the environmental
assessment or Form FmHA or its successor agency under Public Law 103-354
1940-22, ``Environmental Checklist For Categorical Exclusions,'' the
preparer must determine if the project is either located in or will
affect one or more of the land resources covered by the SCS rule or the
Departmental Regulation. Methods for determining the location of
important land resources on a project-by-project basis are discussed
immediately below. As reflected several times in this discussion, SCS
personnel can be of great assistance in making agricultural land and
natural resource evaluation, particularly when there is no readily
available documentation of important land resources within the project's
area of environmental impact. It should be remembered that FmHA or its
successor agency under Public Law 103-354 and SCS have executed a
Memorandum of Understanding in order to facilitate site review
assistance. (See FmHA Instruction 2000-D, exhibit A, available in any
FmHA or its successor agency under Public Law 103-354 office.)
(1) Important Farmland, Prime Forest Land, Prime Rangeland--The
preparer of the environmental review document will review available SCS
important farmland maps to determine if the general area within which
the project is located contains important farmland. Because of the large
scale of the important farmland maps, the maps should be used for
general review purposes only and not to determine if sites of 40 acres
or less contain important farmland. If the general area contains
important farmland or if no important farmland map exists for the
project area, the preparer of the environmental review will request
SCS's opinion on the presence of important farmland by completing Form
AD-1006, ``Farmland Conversion Impact Rating,'' according to its
instructions, and transmitting it to the SCS local field office having
jurisdiction over the project area. This request will also indicate that
SCS's opinion is needed regarding the application to the project site of
both definitions of prime farmland, the one contained within its rule
and the one contained within the Departmental Regulation. SCS's opinion
is controlling with respect to the former definition and advisory with
respect to the latter. No request need be sent to SCS for an action
meeting one of the exemptions contained in item number 2 of this
exhibit.
(2) Floodplain--Review the most current Flood Insurance Rate Map or
Flood Insurance Study issued for the project area by the Federal
Emergency Management Administration (FEMA). Information on the most
current map available or how to obtain a map free of charge is available
by calling FEMA's toll free number 800-638-6620. When more specific
information is needed on the location of a floodplain, for example, the
project site may be near the boundary of a floodplain; or for assistance
in analyzing floodplain impacts, it is often helpful to contact FEMA's
regional office staff. Exhibit J of this subpart contains a listing of
these regional offices and the appropriate telephone numbers.
If a FEMA floodplain map has not been prepared for a project area,
detailed assistance is normally available from the following agencies:
The U.S. Fish and Wildlife Service (FWS), SCS, Corps of Engineers, U.S.
Geological Survey (USGS), or appropriate regional or State agencies
established for flood prevention purposes.
(3) Wetlands--FWS is presently preparing wetland maps for the
nation. Each FWS regional office has a staff member called a Wetland
Coordinator. These individuals can provide updated information
concerning the status of wetland mapping by FWS and information on State
and local wetland surveys. Exhibit K of this subpart contains a listing
of Wetland Coordinators arranged by FWS regional office and geographical
area of jurisdiction. If the proposed project area has not been
inventoried, information can be obtained by using topographic and soils
maps or aerial photographs. State-specific lists of wetland soils and
wetland vegetation are also available from the FWS Regional Wetland
coordinators. A site visit can disclose evidence of vegetation typically
associated with wetland areas. Also, the assistance of FWS field staff
in reviewing the site can often be the most effective means. Because of
the unique wetland definition used in exhibit M of this subpart, SCS
wetland determinations are required for implementing the wetland
conservation requirements of that exhibit.
b. Findings (1) Scope--Although information on the location and the
classification of important land resources should be gathered from
appropriate expert sources, as well as their views on possible ways to
avoid or reduce the adverse effects of a proposed conversion, it must be
remembered that it is FmHA or its successor agency under Public Law 103-
354's responsibility to weigh and judge the feasibility of alternatives
and to determine whether any proposed land use change is in accordance
with the implementation requirements of the Act and the Departmental
Regulation. Consequently, after
[[Page 58]]
reviewing as necessary, the project site, applicable land classification
data, or the results of consultations with appropriate expert agenices,
the FmHA or its successor agency under Public Law 103-354 preparer must
determine, as the second implementation step, whether the applicant's
proposal:
(a) Is compatible with State, unit or local government, and private
programs and policies to protect farmland; and
(b) Either will have no effect on important land resources; or
(c) If there will be a direct or indirect conversion of such a
resource, (i) whether practicable alternatives exist to avoid the
conversion; and
(d) If there are no alternatives, whether there are practicable
measures to reduce the amount of the conversion.
(2) Determination of No Effect-- If the preparer determines that
there is no potential for conversion and that the proposal is
compatible, this determination must be so documented in the
environmental assessment for a Class II action or the appropriate
compliance blocks checked in the Class I assessment or Checklist for
Categorical Exclusions based on whichever document is applicable to the
action being reviewed.
(3) Determination of Effect or Incompatibility-- Whenever the
preparer determines that an applicant's proposal may result in the
direct or indirect conversion of an important land resource or may be
incompatible with State, unit of local government, or private programs
and policies to protect farmland, the following further steps must be
taken.
(a) Search for Practicable Alternatives \2\--In consultation with
the applicant and the interested public, the preparer will carefully
analyze the availability of practicable alternatives that avoid the
conversion or incompatibility Possible alternatives include:
---------------------------------------------------------------------------
\2\ When the action involves the disposal of real property
determined not suitable for disposition to persons eligible for FmHA or
its successor agency under Public Law 103-354's financial assistance
programs, the consideration of alternatives is limited to those that
would result in the best price.
---------------------------------------------------------------------------
(i) The selection of an alternative site;
(ii) The selection of an alternative means to meet the applicant's
objectives; or
(iii) The denial of the application, i.e., the no-action
alternative.
When the resource that may be converted is important farmland, the
preparer will follow the Land Evaluation and Site Assessment (LESA)
point system contained within the SCS rule in order to evaluate the
feasibility of alternatives. When the proposed site receives a total
score of less than 160 points, no additional sites need to be evaluated.
Rather than use the SCS LESA point system, the State Director has the
authority to use State or local LESA systems that have been approved by
the governing body of such jurisdiction and the SCS state
conservationist. After this authority is exercised, it must be used for
all applicable FmHA or its successor agency under Public Law 103-354
actions within the jurisdiction of that approved LESA system.
(b) Inform the Public--The Department Regulation requires us in
section 6, Responsibilities, to notify the affected landholders at the
earliest time practicable of the proposed action and to provide them an
opportunity to review the elements of the action and to comment on the
action's feasibility and alternatives to it. This notification
requirement only applies to Class I and Class II actions and not to
categorical exclusions that lose their status as an exclusion for any of
the reasons stated in Sec. 1940.317(e) of this subpart. The
notification will be published and documented in the manner specified in
Sec. 1940.331 of this subpart and will contain the following
information:
(i) A brief description of the application or proposal and its
location;
(ii) The type(s) and amount of important land resources to be
affected;
(iii) A statement that the application or proposal is available for
review at an FmHA or its successor agency under Public Law 103-354 field
office (specify the one having jurisdiction over the project area); and
(iv) A statement that any person interested in commenting on the
application or proposal's feasibility and alternatives to it may do so
by providing such comments to FmHA or its successor agency under Public
Law 103-354 within 30 days following the date of publication. (Specify
the FmHA or its successor agency under Public Law 103-354 office
processing the application or proposal for receipt of comments.)
Further consideration of the application or proposal must be delayed
until expiration of the public comment period. Consequently, publication
of the notice as early as possible in the review process is both in the
public's and the applicant's interest. Any comments received must be
considered and addressed in the subsequent Agency analysis of
alternatives and mitigation measures. It should be understood that
scheduling a public information meeting is not required but may be
helpful based on the number of comments received and types of issues
raised.
(c) Determine Whether Practicable Alternative Exists--(i)
Alternative exists--If the preparer concludes that a practicable
alternative exists, the preparer will complete step 2b(3)(e)(ii) of this
exhibit and transmit the assessment for the approving official's review
in the manner specified in Sec. 1940.316 of this subpart. If the
findings of this review are similar to the preparer's recommendation,
FmHA or its successor agency under
[[Page 59]]
Public Law 103-354 will inform the applicant of such findings and
processing of the application will be discontinued. Should the applicant
still desire to pursue the proposal, the applicant is certainly free to
do so but not with the further assistance of FmHA or its successor
agency under Public Law 103-354. Should the applicant be interested in
amending the application to reflect the results of the alternative
analysis, the preparer will work closely with the applicant to this end.
Upon receipt of the amended application, the preparer must reinstitute
this implementation process at that point which avoids the duplication
of analysis and data collection undertaken in the original review
process.
If the results of the approving official(s) review differs from the
preparer's recommendations, the former will ensure that the findings are
appropriately documented in step 2b(3)(e)(ii) of this exhibit and any
remaining consideration given to mitigation measures, step 2b(3)(d) of
this exhibit.
(ii) No Practicable Alternative Exists--On the other hand, if the
preparer concludes that there is no practicable alternative to the
conversion, the preparer must then continue with step 2b(3)(d) of this
exhibit, immediately below.
(d) Search for Mitigation Measures-- Once the preparer determines
that there is no practicable alternative to avoiding the conversion or
incompatibility, including the no-action alternative, all practicable
measures for reducing the direct and indirect amount of the conversion
must be included in the application. Some examples of mitigation
measures would include reducing the size of the project which thereby
reduces the amount of the important land resource to be converted. This
is a particularly effective mitigation measure when the resource is
present in a small area, as is often the case with wetlands or
floodplains. A corresponding method of mitigation would be to maintain
the project size or number of units but decrease the amount of land
affected by increasing the density of use. Finally, mitigation can go as
far as the selection of an alternative site. For example, in a housing
market area composed almost entirely of important farmland, any new
proposed subdivision site would result in conversion. However, a
proposed site within or contiguous to an existing community has much
less conversion potential, especially indirect potential, than a site a
mile or two from the community. The LESA system can also be used to
identify mitigation measures when the conversion of important farmland
cannot be avoided.
(e) Document Findings-- Upon completion of the above steps, a
written summary of the steps taken and the reasons for the
recommendations reached shall be included in the environmental
assessment along with either one of the following recommendations as
applicable. The following example assumes that important farmland is the
affected resource and that the inappropriate phrase within the brackets
would be deleted.
(i) The application would result in the direct or indirect
conversion of important farmland and (is/is not) compatible with State,
unit of local government, or private programs and policies to protect
farmland. It is recommended that FmHA or its successor agency under
Public Law 103-354 determine, based upon the attached analysis, that
there is no practicable alternative to this and that the application
contains all practicable measures for reducing the amount of conversion
(or limiting the extent of any identified incompatibility.)
(ii) The application would result in direct or indirect conversion
of important farmland and (is/is not) incompatible with State, unit of
local government, or private programs and policies to protect farmland.
It is recommended that FmHA or its successor agency under Public Law
103-354 determine, based upon the attached analysis, that there is a
practicable alternative to this action, and the processing of this
application be discontinued.
(f) Implement findings--The completed environmental assessment and
the Agency's determination of compliance with the Act, the Departmental
Regulation and Executive orders will be processed and made according to
Sec. 1940.316 of this subpart. Whenever this determination is as stated
in step 2b(3)(e)(i) above, the action will be so structured as to ensure
that any recommended mitigation measures are accomplished. See Sec.
1940.318(g) of this subpart. Whenever the determination is as stated in
step 2b(3)(e)(ii) above, the applicant shall be so informed and
processing of the application discontinued. Any further FmHA or its
successor agency under Public Law 103-354 involvement will be as
specified in Item 2b(3)(c)(i) of this exhibit.
3. Special Procedures and Considerations When a Floodplain or
Wetland Is the Affected Resource Under Executive Order 11988 and 11990.
a. Scope. (1) Geographical Area--The geographical area that must be
considered when a floodplain is affected varies with the type of action
under consideration. Normally the implementation procedures beginning in
Item 2a of this exhibit are required when the action will impact,
directly or indirectly, the 100-year floodplain. However, when the
action is determined by the preparer to be a critical action, the
minimum floodplain of concern is the 500-year floodplain. A critical
action is an action which, if located or carried out within a
floodplain, poses a greater than normal risk for flood-caused loss of
life or property. Critical actions include but are not limited to
actions which create or extend the useful life of the following
facilities:
[[Page 60]]
(a) Those facilities which produce, use, or store highly volatile,
flammable, explosive, toxic or water-reactive materials;
(b) Schools, hospitals, and nursing homes which are likely to
contain occupants who may not be sufficiently mobile to avoid the loss
of life or injury during flood and storm events;
(c) Emergency operation centers or data storage centers which
contain records or services that any become lost or inoperative during
flood and storm events; and
(d) Multi-family housing facilities designed primarily (over 50
percent) for handicapped individuals.
(2) Threshold of Impact--The Executive orders differ from the Act
and the Departmental Regulation in that the Executive orders'
requirements apply not only to the conversion of floodplains or wetlands
but to any impacts upon them. Impacts are defined as changes in the
natural values and functions of a wetland or floodplain. Therefore,
there would be an impact to a floodplain whenever either (a) the action
or its related activities would be located within a floodplain, or (b)
the action through its indirect impacts has the potential to result in
development within a floodplain. The only exception to this statement is
when the preparer determines that the locational impact is minor to the
extent that the floodplain's or wetland's natural values and functions
are not affected.
b. Treatment of Existing Structures. (1) Non-FmHA or its Successor
Agency under Public Law 103-354-Owned Properties--The Executive orders
can apply to actions that are already located in floodplains or
wetlands; that is, where the conversion has already occurred. The
implementation procedures beginning in item 2a of this exhibit must be
accomplished for any action located in a floodplain or wetland and
involving either (a) the purchase of an existing structure or facility
or (b) the rehabilitation, renovation, or adaptive reuse of an existing
structure or facility when the work to be done amounts to a substantial
improvement. A substantial improvement means any repair, reconstruction,
or improvement of a structure the cost of which equals or exceeds 50
percent of the market value of the structure either (a) before the
improvement or repair is started, or (b) if the structure has been
damaged, and is being restored, before the damage occurred. The term
does not include (a) any project for improvement of a structure to
comply with existing State or local health sanitary or safety code
specifications which are solely necessary to assure safe living
conditions or (b) any alteration of a structure listed on the National
Register of Historic Places or a State Inventory of Historic Places.
(2) FmHA or its Successor Agency under Public Law 103-354-Owned Real
Property--The requirement in paragraph 3 b (1) immediately above also
applies to any substantial improvements made to FmHA or its successor
agency under Public Law 103-354-owned real property with the exception
of the public notice requirements of this exhibit. Irrespective of any
improvements, whenever FmHA or its successor agency under Public Law
103-354 real property located in a floodplain or wetland is proposed for
lease or sale, the official responsible for the conveyance must
determine if the property can be safely used. If not, the property
should not be sold or leased. Otherwise, the conveyance must specify
those uses that are restricted under identified Federal, State, and
local floodplains or wetlands regulations as well as other appropriate
restrictions, as determined by the FmHA or its successor agency under
Public Law 103-354 official responsible for the conveyance, to the uses
of the property by the leasee or purchaser and any successors, except
where prohibited by law. Appropriate restrictions will be developed in
consultation with the U.S. Fish and Wildlife Service (FWS) as specified
in the Memorandum of Understanding with FWS contained in subpart LL of
part 2000 of this chapter. Applicable restrictions will be incorporated
into quitclaim deeds with the consent and approval of the Regional
Attorney, Office of the General Counsel. Upon application by the owner
of any property so affected and upon determination by the appropriate
FmHA or its successor agency under Public Law 103-354 official that the
condition for which a deed restriction was imposed no longer exists, the
restriction clause may be released. A listing of any restrictions shall
be included in any notices announcing the proposed sale or lease of the
property. At the time of first inquiry, prospective purchasers must be
informed of the property's location in a floodplain or wetland and the
use restrictions that will apply. A written notification to this effect
must be provided to the prospective purchaser who must acknowledge the
receipt of the notice. See Item 3 d of this exhibit and subpart C of
part 1955 of this chapter for guidance on the proper formats to be used
with respect to notices and deed restrictions. The steps and analysis
conducted to comply with the requirements of this paragraph must be
documented in the environmental review document for the proposed lease
or sale.
c. Mitigation measures. (1) Alternative Sites--As with the Act and
the Departmental Regulation, the main focus of the review process must
be to locate an alternative that avoids the impact to a floodplain or
wetland. When this is not practicable, mitigation measures must be
developed to reduce the impact which in the case of a floodplain or
wetland can include finding another site, i.e., a safer site. The latter
would be a site at a higher elevation within the floodplain and/or
exposed to lower velocity floodflows.
[[Page 61]]
(2) Nonstructural Mitigation Measures--Mitigation measures under the
Executive orders are intended to serve the following three purposes:
reduce the risks to human safety, reduce the possible damage to
structures, and reduce the disruption to the natural values and
functions of floodplains and wetlands. More traditional structural
measures, such as filling in the floodplain, cannot accomplish these
three purposes and, in fact, conflict with the third purpose.
Nonstructural flood protection methods, consequently, must be given
priority consideration. These methods are intended to preserve, restore,
or imitate natural hydrologic conditions and, thereby, eliminate or
reduce the need for structural alteration of water bodies or their
associated floodplains and wetlands. Such methods may be either physical
or managerial in character. Nonstructural flood protection methods are
measures which:
(a) Control the uses and occupancy of floodplains and wetlands,
e.g., floodplain zoning and subdivision regulations;
(b) Preserve floodplain and wetland values and functions through
public ownership; e.g., fee title, easements and development rights;
(c) Delay or reduce the amount of runoff from paved surfaces and
roofed structures discharged into a floodway, e.g., construction of
detention basins and use of flow restricting barriers on roofs;
(d) Maintain natural rates of infiltration in developed or
developing areas, e.g., construction of seepage or recharge basins and
minimization of paved areas;
(e) Protect streambanks and shorelines with vegetative and other
natural cover, e.g., use of aquatic and water-loving woody plants;
(f) Restore and preserve floodplain and wetland values and functions
and protect life and property through regulation, e.g., flood-proofing
building codes which require all structures and installations to be
elevated on stilts above the level of the base flood; and
(g) Control soil erosion and sedimentation, e.g., construction of
sediment basins, stabilization of exposed soils with sod and
minimization of exposed soil.
(3) Avoid Filling in Floodplains--As indicated above, the Executive
orders place a major emphasis on not filling in floodplains in order to
protect their natural values and functions. Executive Order 11988 states
``agencies shall, wherever practicable, elevate structures above the
base flood level rather than filling in the land.''
(d) Additional Notification Requirement. (1) Final Notice--Where it
is not possible to avoid an impact to a floodplain or wetland and after
all practicable mitigation measures have been identified and agreed to
by the prospective applicant, a final notice of the proposed action must
be published. This notice will either be part of the notice required for
the completion of a Class II assessment or a separate notice if a Class
I assessment or an EIS has been completed for the action. The notice
will be published and distributed in the manner specified in Sec.
1940.331 of this subpart and contain the following information.
(a) A description of the proposd action, its location, and the
surrounding area;
(b) A description of the floodplain or wetland impacts and the
mechanisms to be used to mitigate them;
(c) A statement of why the proposed action must be located in a
floodplain or a wetland;
(d) A description of all significant facts considered in making this
determination;
(e) A statement indicating whether the actions conform to applicable
State or local floodplain protection standards; and
(f) A statement listing other involved agencies and individuals.
(2) Private Party Notification--For all actions to be located in
floodplains or wetlands in which a private party is participating as an
applicant, purchaser, or financier, it shall be the responsibility of
the approving official to inform in writing all such parties of the
hazards associated with such locations.
4. The Relationship of the Executive Orders to the National Flood
Insurance Program. The National Flood Insurance Program establishes the
floodplain management criteria for participating communities as well as
the performance standards for building in floodplains so that the
structure is protected against flood risks. As such, flood insurance
should be viewed only as a financial mitigation measure that must be
utilized only after FmHA or its successor agency under Public Law 103-
354 determines that there is no practicable alternative for avoiding
construction in the floodplain and that all practicable mitigation
measures have been included in the proposal. That is, for a proposal to
be located in the floodplain, it is not sufficient simply to require
insurance. The Agency's flood insurance requirements are explained in
subpart B of part 1806 of this chapter (FmHA Instruction 426.2). It
should be understood that an applicant proposing to build in the
floodplain is not even eligible for FmHA or its successor agency under
Public Law 103-354 financial assistance unless the project area is
participating in the National Flood Insurance Program.
[53 FR 36262, Sept. 19, 1988]
Exhibit D to Subpart G of Part 1940--Implementation Procedures for the
Endangered Species Act
1. FmHA or its successor agency under Public Law 103-354 shall
implement the consultation procedures required under Section 7 of the
Endangered Species Act as specified
[[Page 62]]
in 50 CFR 402. It is important to note that these consultation
procedures apply to the disposal of real property by FmHA or its
successor agency under Public Law 103-354 and to all FmHA or its
successor agency under Public Law 103-354 applications for financial
assistance and subdivision approval, including those applications which
are exempt from environmental assessments. (See Sec. 1940.310.) Unless
repeated in this paragraph, the definitions for the terms utilized are
found in 50 CFR 402.02.
2. State Directors shall ensure that State, District, and County
Offices maintain current publications of listed and proposed species as
well as critical habitats found in their respective jurisdictions.
3. When an application to FmHA or its successor agency under Public
Law 103-354 involves financial assistance or permit approval from
another Federal agency(s), the FmHA or its successor agency under Public
Law 103-354 reviewer shall work with the other Agency to determine a
lead Agency for the consultation process. When FmHA or its successor
agency under Public Law 103-354 is not the lead Agency, the reviewer
shall ensure that the lead Agency informs the approporiate Area Manager,
U.S. Fish and Wildlife Service (FWS), or Regional Director, National
Marine Fisheries Service (NMFS), of FmHA or its successor agency under
Public Law 103-354's involvement.
4. Each disposal action, application for financial assistance or
subdivision approval shall be reviewed by the FmHA or its successor
agency under Public Law 103-354 official responsible for completing
environmental assessments in order to determine if the proposal either
may affect a listed species or critical habitat or is likely to
jeopardize the continued existence of a proposed species or result in
the destruction or adverse modification of a proposed critical habitat.
a. For applications subject to environmental assessments, this
review shall be accomplished as part of the assessment.
b. For those applications that are excluded from an environmental
assessment, this review shall be documented as part of Form FmHA or its
successor agency under Public Law 103-354 1940-22, ``Environmental
Checklist For Categorical Exclusions,'' and shall be accomplished as
early as possible after receipt of the application and prior to approval
of the application.
c. For applications subject to an environmental impact statement,
FmHA or its successor agency under Public Law 103-354 shall request from
the Area Manager, FWS, and the Regional Director, NMFS, a list of the
proposed and listed species that may be in the area of the proposal.
Within 30 days, the FWS and NMFS will respond to FmHA or its successor
agency under Public Law 103-354 with this list. FmHA or its successor
agency under Public Law 103-354 shall then conduct, as part of the
process of preparing the draft environmental impact statement, a
biological assessment of these species to determine which species are in
the area of the proposal and how they may be affected. This biological
assessment should be completed within 180 days or a time mutually agreed
upon between FmHA or its successor agency under Public Law 103-354 and
FWS or NMFS. Upon completion of the biological assessment, if FmHA or
its successor agency under Public Law 103-354 determines either that the
proposal may affect a listed species or critical habitat or is likely to
jeopardize the continued existence of proposed species or result in the
destruction or adverse modification of proposed critical habitat, the
formal consultation procedures shall be initiated as specified in
paragraph 7b below. To the extent practical, these procedures shall be
concluded and their results reflected in the draft EIS. For all draft
EISs in which FmHA or its successor agency under Public Law 103-354
determines there will be no effect upon a listed or proposed species or
critical habitat and FWS or NMFS indicated the presence of such species
upon the initial inquiry, a copy of the draft shall be provided to that
agency for review and comment.
5. As indicated in paragraph 4 above, the focus of this review
process is to determine if the proposal will affect a listed species or
critical habitat or is likely to jeopardize the continued existence of a
proposed species or result in the destruction or adverse modification of
a proposed critical habitat. Because this impact terminology is specific
to the Act, it is important to understand its meaning.
a. To jeopardize the continued existence of a species means to
engage in a project which reasonably would be expected to reduce the
reproduction, numbers, or distribution of a listed species to such an
extent as to appreciably reduce the likelihood of the survival and
recovery of that species in the wild. The level of reduction necessary
to constitute jeopardy would be expected to vary among listed species.
b. The destruction or adverse modification of a critical habitat
means a direct or indirect alteration of critical habitat which
appreciably diminishes the value of that habitat for survival and
recovery of a listed species. Such alterations include but are not
limited to those diminishing the following requirements for:
(i) Space for individual and population growth and for normal
behavior;
(ii) Food, water, air, light, minerals, or other nutritional or
physiological requirements;
(iii) Cover or shelter;
(iv) Sites for breeding, reproduction, or rearing of offspring; and
[[Page 63]]
(v) Habitats that are protected from disturbances or are
representative of the geographical distribution of listed species.
6. It is also important to note that the consultation procedures
differ when the subject of the consultation is a listed species or
critical habitat as opposed to a proposed species or critical habitat.
The latter are defined as those that the Secretary of Interior or
Commerce are considering for listing and have so proposed through
notification in the Federal Register. When listed species or critical
habitats are invloved, FmHA or its successor agency under Public Law
103-354 shall initiate formal consultation procedures whenever it
determines that a proposed project may affect them, either beneficially
or adversely. For proposed species or critical habitats, FmHA or its
successor agency under Public Law 103-354 shall first determine if the
proposed project is likely to jeopardize the continued existence of
proposed species or result in the destruction or adverse modification of
proposed critical habitat. Whenever this determination is made, FmHA or
its successor agency under Public Law 103-354 shall confer with the
appropriate agency identified in paragraph 7 of this exhibit and, in so
doing, shall focus on (i) determining the status of the listing process,
and (ii) attempting to cooperatively develop alternatives or measures
for inclusion in the project that avoid or mitigate the identified
adverse impacts. The results of this process shall be documented in the
environmental review being done for the proposed project and, if this
review is an environmental assessment, shall be an important factor in
determining the need for an environmental impact statement. No action
shall be taken by the approving official on the application unitl the
requirement to confer on proposed species or critical habitat has been
completed. Paragraphs 7 through 9 of this exhibit outline the formal
consultation procedure for listed species or critical habitats.
7. In initiating the review process for a project, the list of
species and critical habitats, including proposed, shall be examined to
determine the potential for impacts. Projects planned within established
communities are less likely to affect listed or proposed species or
their critical habitat. Projects to be located in remote areas, heavily
forested areas and/or previously undisturbed areas are more likely to
affect these species. For projects located in such areas, the reviewer
shall, at a minimum, discuss the project's potential impact on listed or
proposed species with officials of the appropriate State wildlife
protection agency or the Area Manager, FWS, or the Regional Director,
NMFS, as appropriate. The latter organization generally has
responsibility for marine species. The specific list of species under
NMFS's jurisdiction can be found at 50 CFR 222.23(a) and 227.4. Such
discussions shall be considered as informal consultations and are not a
substitute for the required consultation process outlined below.
a. Whenever the reviewer, after reviewing the list and contacting
appropriate experts, formally determines that the proposal will have no
effect on a listed or proposed species or its critical habitat, these
review procedures are completed, unless new information comes to light
as discussed in paragraph 9 of this exhibit, or consultation is
requested by the appropriate Area Manager, FWS, or Regional Director,
NMFS.
b. If the reviewer determines there may be an effect on a listed
species or a critical habitat or is unable to make a clear
determination, the reviewer shall so inform the SEC (assuming the
reviewer is not the SEC). The latter shall either (i) convey a written
request for consultation, along with available information to the
appropriate Area Manager, FWS or Regional Director, NMFS, for the
Federal region where the proposal will be carried out, or (ii) request
Program Support Staff (PSS) to perform such consultation. FmHA or its
successor agency under Public Law 103-354 shall initiate this formal
consultation process and not the applicant. See paragraph 4.c. of this
exhibit for initiating consultation where an environmental impact
statement is being done for the application. Until the consultation
process is completed, as outlined in 50 CFR 402.04, FmHA or its
successor agency under Public Law 103-354 shall not approve the
application. Should the need for consultation be identified after
application approval, FmHA or its successor agency under Public Law 103-
354 shall refrain from making any irreversible or irretrievable
commitment of resources which would foreclose the consideration of
modifications or alternatives to the identified activity or program.
8. Several possible responses may result from initiation of the
formal consultation process with each requiring further specific
actions.
a. Whenever the Area Manager, FWS, or Regional Director, NMFS,
informs FmHA or its successor agency under Public Law 103-354 that
insufficient information exists to conclude the consultation process,
the SEC with assistance as feasible from the FWS or NMFS and State
sources of expertise shall then obtain additional information and
conduct, as needed, biological surveys or studies to determine how the
proposal may affect listed species or their critical habitat. The cost
and performance of such studies shall be handled in the same manner as
in the preparation of an Environmental Impact Statement. (See Sec.
1940.336 of this subpart.)
b. Whenever the Area Manager, FWS, or Regional Director, NMFS,
responds that the proposal will either promote the conservation of a
listed species or is not likely to jeopardize the continued existence of
a listed
[[Page 64]]
or proposed species or result in the destruction or adverse modification
of its critical habitat, the FmHA or its successor agency under Public
Law 103-354 reviewer shall formally make a similar determination,
attaching the response as documentation. This concludes the formal
consultation process unless new information comes to light as discussed
in paragraph 9 of this exhibit.
c. Whenever the results of the consultation process include
recommendations by the Area Manager, FWS, or Regional Director, NMFS,
for modifications to the project which would enhance the conservation
and protection of a listed species or its critical habitat, the State
Director shall review these recommendations and require that they be
incorporated into the project as either design changes or special
conditions to the offer of assistance. If the State Director does not
believe the recommendations can be so adopted, the Administrator shall
be requested to review the recommendations and to assist in the further
resolution of the matter.
d. Whenever the appropriate Area Manager, FWS, or Regional Director,
NMFS, determines that the proposal is likely to jeopardize the continued
existence of a listed species or result in the destruction or adverse
modification of its critical habitat, the FmHA or its successor agency
under Public Law 103-354 applicant shall be so informed and the project
denied on this basis. However, if the State Director believes that
funding or approval of the application is (i) of national, regional, or
great local significance, and (ii) that there are no reasonable and
prudent alternatives to avoiding the listed species impact, the State
Director can request the Administrator, through PSS, to review the
proposal and the results of the consultation process. Based upon this
review, the Administrator shall either inform the State Director that a
request for an exemption from section 7 of the Endangered Species Act is
not warranted and the application shall be denied or, if the
Administrator believes it is warranted, shall request an exemption from
the Endangered Species Committee established by section 7(e) of the Act.
No action shall be taken by the State Director on the application until
the Administrator informs the State Director of the results of the
exemption request.
9. Once completed, the consultation process shall be reinitiated by
FmHA or its successor agency under Public Law 103-354 or upon request of
the appropriate Area Manager, FWS, or Regional Director, NMFS, if:
a. New information or modification of the proposal reveals impacts
that may affect listed or proposed species or their habitats; or
b. A new species is listed that may be affected by the proposal.
10. In completing the above compliance procedures, particularly when
consulting with the referenced agencies, formally or informally, the
preparer of the environmental review document will request information
on whether any Category I or Category II species may be present within
the project area. These are candidate species; they are presently under
consideration for listing under section 4 of the Endangered Species Act.
Category I species are those for which FWS currently has substantial
date on hand to support the biological appropriateness of proposing to
list the species as endangered or threatened. Currently data are being
gathered concerning essential habitat needs and, for some species, data
concerning the precise boundaries of critical habitat designations.
Development and publication of proposed rules on such species is
anticipated. Category II comprises species for which information now in
the possession of the FWS indicates that proposing to list the species
as endangered or threatened is possibly appropriate but for which
conclusive data on biological vulnerability and threat(s) are not
currently available to presently support proposed rules. Whenever a
Category I or II species may be affected, the preparer of the
environmental review document will determine if the proposed project is
likely to jeopardize the continued existence of the species. Whenever
this determination is made, the same compliance procedures specified in
paragraph 6 of this exhibit for a proposed species will be followed. The
purpose of the requirements of this paragraph is to comply with the
National Environmental Policy Act as well as Departmental Regulation
9500-4, Fish and Wildlife Policy, which specifies that USDA agencies
will avoid actions which may cause a species to become threatened or
endangered.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
Exhibit E to Subpart G of Part 1940--Implementation Procedures for the
Wild and Scenic Rivers Act
1. Each application for financial assistance or subdivision approval
as well as the proposed disposal of real property by FmHA or its
successor agency under Public Law 103-354 shall be reviewed to determine
if it will affect a river or portion of it which is either included in
the National Wild and Scenic Rivers System, designated for potential
addition to the system, or identified in the Nationwide Inventory
prepared by the National Park Service (NPS) in the Department of the
Interior. The Nationwide Inventory identifies those river segments that,
after preliminary review, appear to qualify for inclusion in the system.
(For purposes of this subpart, river segments in the Nationwide
Inventory
[[Page 65]]
shall be treated the same as segments within the system with the
exception of paragraph 8.) For applications subject to environmental
assessments, the review shall be accomplished as part of the assessment.
For applications that are excluded from an environmental assessment,
this review shall be documented as part of Form FmHA or its successor
agency under Public Law 103-354 1940-22, ``Environmental Checklist For
Categorical Exclusions,'' within the reviewing office and shall be
accomplished as early as possible after receipt of the application and
prior to approval of the application. The FmHA or its successor agency
under Public Law 103-354 official responsible for completing the
environmental assessment shall accomplish this review. (See Sec.
1940.316 of this subpart.)
2. In order to effectively implement this review, State Directors
shall ensure that State, District and County Offices maintain current
listings of rivers within their respective States that are included in
or designated for potential addition to the system as well as those
identified in the Nationwide Inventory prepared by NPS.
3. For applications for water resources projects, as defined in
Sec. 1940.302(i) of this subpart, the purpose of this review shall be
to determine whether the proposal would have a direct and adverse effect
on the values which served as the basis for the river's inclusion in the
system or designation for potential addition. For other applications,
the purpose of the review shall be to determine if the proposal would
invade the river area or unreasonably diminish the scenic, recreational,
and fish and wildlife values present in the area. To make these
determinations, the reviewer shall consult with the appropriate regional
office of NPS if the proposal (i) would be located within one-quarter
mile of the banks of the river, (ii) involves withdrawing water from the
river or discharging water to the river via a point source, or (iii)
would be visible from the river. The appropriate regional office of the
Forest Service (FS) shall be contacted under similar circumstances when
the effected river is on FS lands. Consultation shall be initiated by a
written request for comments on the potential impacts accompanied by a
description of the project and its location. The reviewer shall consult
in other instances when the likelihood of an impact on a river in the
system is identified as part of the environmental review. When the
reviewer determines there is no potential impact on such a river, the
documentation of this determination concludes the review process, unless
reinitiation is required under paragraph 10 of this exhibit. In all
other cases, the review is completed as specified below in paragraphs 4
through 9 of this exhibit.
4. If the review is at the County or District Office level, the
reviewer can request the State Director (see Sec. 1940.307 of this
subpart) to perform the above consultation. The State Director can in
turn make a similar request of the National Office. If not requested to
perform the consultation for applications approvable at the County and
District Office levels, the SEC shall be informed whenever NPS or FS
advises that there is a potential for an adverse impact on a river
within the system or that protective measures need to be included or
designed into the proposal. In all cases, consultation shall be
initiated by FmHA or its successor agency under Public Law 103-354 and
not the applicant. Until consultation is complete, FmHA or its successor
agency under Public Law 103-354 shall not approve the application.
Should the need for consultation be identified after application
approval, FmHA or its successor agency under Public Law 103-354 shall,
if still within its power at the time of identification, refrain from
making any irreversible or irretrievable commitments of resources which
would foreclose the consideration of modifications or alternatives to
the project.
5. If NPS or FS advises there is no potential for an adverse effect
as described in paragraph 3 of this exhibit, this review process is
concluded, unless the need to reinitiate arises. (See paragraph 10 of
this exhibit.)
6. Whenever the results of the consultation process include
recommendations by NPS or FS to modify the proposal in order to avoid an
adverse effect, as described in paragraph 3 above, the State Director
shall review these recommendations and require that they be incorporated
into the project as either design changes or special conditions to the
offer of assistance. If the State Director does not believe that the
Regional Director's recommendations can be so adopted, the Administrator
shall be requested to review the recommendations and to assist in the
further resolution of the matter.
7. If NPS or FS advises that the proposal will have an unavoidable
adverse effect, as described in paragraph 3 of this exhibit, on a river
segment which is either included in the National Wild and Scenic Rivers
System or designated for potential addition to the system, the FmHA or
its successor agency under Public Law 103-354 applicant will be informed
by the reviewing office and the application denied on this basis.
However, if the State Director disagrees with this determination, the
State Director can request the Administrator to review the proposal and
attempt to further resolve the matter. The specific reasons for
disagreement along with supporting documentation must be included in
such a request. Based upon a review of this request, the Administrator
shall either inform the State Director that no further consultation is
warranted and the application shall be denied or shall request the
headquarters staff of NPS or FS to further review the matter. No action
shall be taken
[[Page 66]]
by the State Director on the application until the Administrator informs
the State Director of the results of this further review and
consultation.
8. If NPS or FS advises that the proposal will have an adverse
effect, as described in paragraph 3 of this exhibit, on a river segment
identified in the Nationwide Inventory, the reviewer shall further
consult with NPS or FS in order to formulate adequate measures or
modification to avoid or mitigate the potential adverse effect. The
purposes of such measures or modifications is to ensure that the
proposal does not effectively foreclose the designation of a wild,
scenic, or recreational river segment. Once concurrence is reached and
documented with NPS or FS regarding modifications, the State Director
shall require that they be incorporated into the proposal as either
design changes or special conditions to the offer of assistance. If the
State Director is not able to reach an agreement with NPS or FS on
appropriate modifications, the Administrator shall be requested to
assist in the further resolution of the matter.
9. If an application involves financial assistance or permit
approval from another Federal Agency, the FmHA or its successor agency
under Public Law 103-354 reviewer shall work with the other agency(s) to
determine a lead Agency for the consultation process. When FmHA or its
successor agency under Public Law 103-354 is not the lead Agency, the
reviewer shall ensure that the lead Agency informs NPS or FS of FmHA or
its successor agency under Public Law 103-354's involvement.
10. Once completed, the consultation process shall be reinitiated by
FmHA or its successor agency under Public Law 103-354 if new information
or modification of the proposal reveals impacts to a river within the
System or Nationwide Inventory.
Exhibit F to Subpart G of Part 1940--Implementation Procedures for the
Coastal Barrier Resources Act
1. The Act applies to barrier islands that Congress has designated
for inclusion in the Coastal Barrier Resources System. Since coastal
barriers are only found in East and Gulf Coast States, no other State
Offices fall under the requirements of the Act and, therefore, need be
concerned with these implementation procedures.
2. On coastal barriers that are included in the system, the Act
prohibits any new expenditures or new financial assistance by the
Federal Government. There are some limited exceptions that are contained
in Section 6 of the Act and listed in exhibit L of this subpart.
Consequently, all of the following actions must be reviewed by the
environmental reviewer to determine if they would be located within the
System: any application for financial assistance, any proposed direct
expenditure of FmHA or its successor agency under Public Law 103-354
funds for construction or maintenance purposes, any request for
subdivision approval, and any proposed disposal of real property that
includes any form of financial assistance or subsidy to the purchaser.
The boundaries of the system can be determined by reviewing a series of
maps passed with the legislation and distributed by the Department of
the Interior. Each State Director is responsible for ensuring that those
field offices having components of the system within their jurisdictions
are aware of the system's boundaries therein.
3. Exhibit L lists the six categories of exceptions, that is, those
actions that may be taken within the system. No exception may be
implemented, however, without first consulting with the Secretary of the
Interior. It should also be noted that the sixth category is more
limited than the first five. Besides meeting the consultation
requirement for this sixth category, the sponsoring Agency must also
determine whether the proposed exception is consistent with the purposes
of the Act.
4. For those actions that are reviewed and determined not to be
within the System, the environmental reviewer must document this result
by checking the appropriate compliance blocks on either Form FmHA or its
successor agency under Public Law 103-354 1940-22, ``Environmental
Checklist for Categorical Exclusions,'' or Form FmHA or its successor
agency under Public Law 103-354 1940-21, ``Environmental Assessment for
Class I actions,'' or by so stating this result in the environmental
assessment for Class II Actions (exhibit H), depending upon whichever
format is applicable to the action under review.
5. For those actions that would be located within the system, one of
the following two steps must be taken:
a. If the environmental reviewer concludes that the action does not
meet the criteria for an exception, as listed in exhibit L, the reviewer
shall so inform the approving official and a final determination made in
the manner indicated in Sec. 1940.316 of this subpart. If this
determination is consistent with the environmental reviewer's
conclusion, the action must be denied by the approving official and the
affected applicant or party informed of the reason for denial. If it is
determined that the action may qualify for an exception, the steps
identified in Item b immediately below must be implemented prior to a
decision on this question.
b. If the environmental reviewer concludes that the proposed action
may meet the exception criteria, the approving official must be so
informed. Whenever the approving official agrees or makes a similar
determination as a result of the review conducted in Item a immediately
above, consultation shall be
[[Page 67]]
initiated with the Secretary of the Interior by either the State
Director or the Administrator for a National Office activity. FmHA or
its successor agency under Public Law 103-354 shall request the
Secretary's views as to whether the exception criteria are met and shall
provide the Secretary with the following information:
(1) A detailed description of the action and its location;
(2) A description of the affected environment within the System and
the impacts of the proposed action;
(3) The applicable exception criteria and FmHA or its successor
agency under Public Law 103-354's reasons for believing they apply to
this action; and
(4) If a Section 6(a)(6) exception is claimed, FmHA or its successor
agency under Public Law 103-354's reasons for believing the action to be
consistent with the purposes of the Act.
Should the Secretary concur in the exception criteria being met,
that portion of the environmental assessment relating to compliance with
the Act shall be completed and the corresponding documentation attached.
Should the Secretary not concur, a final decision on the approval or
denial of the action must be made by the Administrator.
Exhibit G to Subpart G of Part 1940 [Reserved]
Exhibit H to Subpart G of Part 1940--Environmental Assessment for Class
II Actions
In completing this assessment, it is important to understand the
comprehensive nature of the impacts which must be analyzed.
Consideration must be given to all potential impacts associated with the
construction of the project, its operation and maintenance, the
operation of all identified primary beneficiaries, and the attainment of
the project's major objectives, whether they be an increased housing
stock, community improvement, economic development, or greater
agricultural productivity. This last category, the attainment of the
project's major objectives, often induces or supports changes in
population densities, land uses, community services, transportation
systems and resource consumption. The scope of the assessment is
broadened even further when there are related activities involved. The
impacts of these activities must also be assessed.
The preparer will consult as indicated in Sec. 1940.318(b) of this
subpart with appropriate experts from Federal, State, and local
agencies, universities, and other organizations or groups whose views
could be helpful in the assessment of potential impacts. In so doing,
each discussion which is utilized in reaching a conclusion with respect
to the degree of an impact will be summarized in the assessment as
accurately as possible and include the name, title, phone number, and
organization of the individual contacted, plus the date of contact.
Related correspondence should be attached to the assessment.
The FmHA or its successor agency under Public Law 103-354
environmental assessment shall be prepared in the following format. It
shall address the listed items and questions and contain as attachments
the indicated descriptive materials, as well as the environmental
information submitted by the applicant, Form FmHA or its successor
agency under Public Law 103-354 1940-20, ``Request for Environmental
Information.''
The assessment has been designed to cover the wide variety of
projects and environments with which the Agency deals. Consequently, not
every issue or potential impact raised in the assessment may be relevant
to each project. The purpose of the format is to give the preparer an
understanding of a standard range of impacts, environmental factors, and
issues which may be encountered. In preparing an assessment, each topic
heading identified by a Roman numeral and each environmental factor
listed under topic heading IV, such as air quality, for example, must be
addressed.
The amount of analysis and material that must be provided will
depend upon the type and size of the project, the environment in which
it is located, and the range and complexity of the potential impacts.
The amount of analysis and detail provided, therefore, must be
commensurate with the magnitude of the expected impact. The analysis of
each environmental factor (i.e., water quality) must be taken to the
point that a conclusion can be reached and supported concerning the
degree of the expected impact with respect to that factor.
For example, a small community center may not require detailed
information on air emissions or solid waste management, but an
industrial facility would. Similarly, an irrigation project for a
farming operation would concentrate on such factors as water quality and
fish and wildlife, rather than land use changes. The extension of a
water or sewer system or the approval of a subdivision, on the other
hand, would have to give close attention to all factors, with potential
land use changes being a particularly important one.
I. Project Description and Need
Identify the name, project number, location, and specific elements
of the project along with their sizes, and, when applicable, their
design capacities. Indicate the purpose of the project, FmHA or its
successor agency under Public Law 103-354's position regarding the need
for it, and the extent or area of land to be considered as the project
site.
[[Page 68]]
II. Primary Beneficiaries and Related Activities
Identify any existing businesses or major developments that will
benefit from the project and those which will expand or locate in the
area because of the project. Specify by name, product, service, and
operations involved.
Identify any related activities which are defined as interdependent
parts of a FmHA or its successor agency under Public Law 103-354 action.
Such undertakings are considered interdependent parts whenever they
either make possible or support the FmHA or its successor agency under
Public Law 103-354 action or are themselves induced or supported by the
FmHA or its successor agency under Public Law 103-354 action or another
related activity. These activities may have been completed in the very
recent past and are now operational, or they may reasonably be expected
to be accomplished in the near future. Related activities may or may not
be federally permitted or assisted. When they are, identify the involved
Federal Agency(s).
In completing the remainder of the assessment, it must be remembered
that the impacts to be addressed are those which stem from the project,
the primary beneficiaries, and the related activities.
III. Description of Project Area
Describe the project site and its present use. Describe the
surrounding land uses; indicate the directions and distances involved.
The extent of the surrounding land to be considered depends on the
extent of the impacts of the project, its related activities, and the
primary beneficiaries. Unique or sensitive areas must be pointed out.
These include residential, schools, hospitals, recreational, historical
sites, beaches, lakes, rivers, parks, floodplains, wetlands, dunes,
estuaries, barrier islands, natural landmarks, unstable soils, steep
slopes, aquifer recharge areas, important farmlands and forestlands,
prime rangelands, endangered species habitats or other delicate or rare
ecosystems.
Attach adequate location maps of the project area, as well as (1) a
U.S. Geological Survey ``15 minute'' (``7\1/2\ minute,'' if available,)
topographic map which clearly delineates the area and the location of
the project elements, (2) the Department of Housing and Urban
Development's floodplain map(s) for the project area, (3) site photos,
(4), if completed, a standard soil survey for the project, and (5), if
available, an aerial photograph of the site. When necessary for
descriptive purposes or environmental analysis, include land use maps or
other graphic information. All graphic materials shall be of high
quality resolution.
IV. Environmental Impact
1. Air Quality. Discuss, in terms of the amounts and types of
emissions to be produced, all aspects of the project including
beneficiaries' operations and known indirect effects (such as increased
motor vehicle traffic) which will affect air quality. Indicate the
existing air quality in the area. Indicate if topographical or
meteorological conditions hinder or affect the dispersal of air
emissions. Evaluate the impact on air quality given the types and
amounts of projected emissions, the existing air quality, and
topographical and meterological conditions. Discuss the project's
consistency with the State's air quality implementation plan for the
area, the classification of the air quality control region within which
the project is located, and the status of compliance with air quality
standards within that region. Cite any contacts with appropriate experts
and agencies which must issue necessary permits.
2. Water Quality. Discuss, in terms of amounts and types of
effluents, all aspects of the project including primary beneficiaries'
operations and known indirect effects which will affect water quality.
Indicate the existing water quality of surface and/or underground water
to be affected. Evalute the impacts of the project on this existing
water quality. Indicate if an aquifer recharge area is to be adversely
affected. If the project lies within or will affect a sole source
aquifer recharge area as designated by EPA, contact the appropriate EPA
regional office to determine if its review is necessary. If it is,
attach the results of its review.
Indicate the source and available supply of raw water and the extent
to which the additional demand will affect the raw water supply.
Describe the wastewater treatment system(s) to be used and indicate
their capacity and their adequacy in terms of the degree of treatment
provided. Discuss the characteristics and uses of the receiving waters
for any sources of discharge. If the treatment systems are or will be
inadequate or overloaded, describe the steps being taken for necessary
improvements and their completion dates. Compare such dates to the
completion date of the FmHA or its successor agency under Public Law
103-354 project. Analyze the impacts on the receiving water during any
estimated period of inadequate treatment.
Discuss the project's consistency with the water quality planning
for the area, such as EPA's Section 208 area-wide waste treatment
management plan. Discuss the project's consistency with applicable State
water quality standards to include a discussion of whether or not the
project would either impair any such standard or fail to meet
antidegradation requirements for point or
[[Page 69]]
nonpoint sources. Describe how surface runoff is to be handled and the
effect of erosion on streams.
Evaluate the extent to which the project may create shortages for or
otherwise adversely affect the withdrawal capabilities of other present
users of the raw water supply, particularly in terms of possible human
health, safety, or welfare problems.
For projects utilizing a groundwater supply, evaluate the potential
for the project to exceed the safe pumping rate for the aquifer to the
extent that it would (1) adversely affect the pumping capability of
present users, (2) increase the likelihood of brackish or saltwater
intrusion, thereby decreasing water quality, or (3) substantially
increase surface subsidence risks.
For projects utilizing a surface water supply, evaluate the
potential for the project to (1) reduce flows below the minimum required
for the protection of fish and wildlife or (2) reduce water quality
standards below those established for the stream classification at the
point of withdrawal or the adjacent downstream section.
Cite contacts with appropriate experts and agencies that must issue
necessary permits.
3. Solid Waste Management. Indicate all aspects of the project
including primary beneficiaries' operations, and known indirect effects
which will necessitate the disposal of solid wastes. Indicate the kinds
and expected quantities of solid wastes involved and the disposal
techniques to be used. Evaluate the adequacy of these techniques
especially in relationship to air and water quality. Indicate if
recycling or resource recovery programs are or will be used. Cite any
contacts with appropriate experts and agencies that must issue necessary
permits.
4. Land Use. Given the description of land uses as previously
indicated, evaluate (a) the effect of changing the land use of the
project site and (b) how this change in land use will affect the
surrounding land uses and those within the project's area of
environmental impact. Particularly address the potential impacts to
those unique or sensitive areas discussed under Section III, Description
of Project Area, which are not covered by the specific analyses required
in Sections V-XI. Describe the existing land use plan and zoning
restrictions for the project area. Evaluate the consistency of the
project and its impacts on these plans. For all actions subject to the
requirements of exhibit M of this subpart indicate (a) whether or not
highly erodible land, wetland or converted wetland is present, (b) if
any exemption(s) applies to the requirements of exhibit M, (c) the
status of the applicant's eligibility for an FmHA or its successor
agency under Public Law 103-354 loan under exhibit M and (d) any steps
the applicant must take prior to loan approval to retain or retain its
eligibility. Attach a completed copy of Form SCS-CPA-26, ``Highly
Erodible Land and Wetland Conservation Determination,'' for the action.
5. Transportation. Describe available facilities such as highways
and rail. Discuss whether the project will result in an increase in
motor vehicle traffic and the existing roads' ability to safely
accommodate this increase. Indicate if additional traffic control
devices are to be installed. Describe new traffic patterns which will
arise because of the project. Discuss how these new traffic patterns
will affect the land uses described above, especially residential,
hospitals, schools, and recreational. Describe the consistency of the
project's transportation impacts with the transportation plans for the
area and any air quality control plans. Cite any contact with
appropriate experts.
6. Natural Environment. Indicate all aspects of the project
including construction, beneficiaries' operations, and known indirect
effects which will affect the natural environment including wildlife,
their habitats, and unique natural features. Cite contacts with
appropriate experts. If an area listed on the National Registry of
Natural Landmarks may be affected, consult with the Department of
Interior and document these consultations and any agreements reached
regarding avoidance or mitigation of potential adverse impacts.
7. Human Population. Indicate the number of people to be relocated
and arrangements being made for this relocation. Discuss how impacts
resulting from the project such as changes in land use, transportation
changes, air emissions, noise, odor, etc. will affect nearby residents
and users of the project area and surrounding areas. Discuss whether the
proposal will accommodate any population increases and, if so, describe
the potential impacts of these increases on the area's public and
community services such as schools, health care, social services, and
fire protection. Cite contacts with appropriate experts.
8. Construction. Indicate the potential effects of construction of
the project on air quality, water quality, noise levels, solid waste
disposal, soil erosion and siltation. Describe the measures that will be
employed to limit adverse effects. Give particular consideration to
erosion, stream siltation, and clearing operations.
9. Energy Impacts. Indicate the project's and its primary
beneficiaries' effects on the area's existing energy supplies. This
discussion should address not only the direct energy utilization, but
any major indirect utilization resulting from the siting of the project.
Describe the availability of these supplies to the project site. Discuss
whether the project will utilize a large share of the remaining capacity
of an energy supply or will create a shortage of such supply. Discuss
any steps to be taken to conserve energy.
[[Page 70]]
10. Discuss any of the following areas which may be relevant: noise,
vibrations, safety, seismic conditions, fire-prone locations, radiation,
and aesthetic considerations. Cite any disucssion with appropriate
experts.
V. Coastal Zone Management Act*
---------------------------------------------------------------------------
* Complete only if coastal or Great Lakes State.
---------------------------------------------------------------------------
Indicate if the project is within or will impact a coastal area
defined as such by the State's approved Coastal Zone Management Program.
If so, consult with the State agency responsible for the Program to
determine the project's consistency with it. The results of this
coordination shall be included in the assessment and considered in
completing the environmental impact determination and environmental
findings (Item XXI below).
VI. Compliance With Advisory Council on Historic Preservation's
Regulations
In this Section, the environmental reviewer shall detail the steps
taken to comply with the above regulations as specified in subpart F of
part 1901 of this chapter. First, indicate that the National Register of
Historic Places, including its monthly supplements, has been reviewed
and whether there are any listed properties located within the area to
be affected by the project. Second, indicate the steps taken such as
historical/archeological surveys to determine if there are any
properties eligible for listing located within the affected area.
Summarize the results of the consultation with the State Historic
Preservation Officer (SHPO) and attach appropriate documentation of the
SHPO's views. Discuss the views of any other experts contacted. Based
upon the above review process and the views of the SHPO, state whether
or not an eligible or listed property will be affected.
If there will be an effect, discuss all of the steps and protective
measures taken to complete the advisory Council's regulations. Describe
the affected property and the nature of the effect. Attach to the
assessment the results of the coordination process with the Advisory
Council on Historic Preservation.
VII. Compliance With the Wild and Scenic Rivers Act
Indicate whether the project will affect a river or portion of it
which is either included in the National Wild and Scenic Rivers System
or designated for potential addition to the system. This analysis shall
be conducted through discussions with the appropriate regional office of
the National Park Service or the Forest Service when its lands are
involved, as well as the appropriate State agencies having
implementation authorities. See exhibit E for specific implementation
instructions for this Act. A summary of discussions held or any required
formal coordination shall be included in the assessment and considered
in completing the environmental impact determination and environmental
findings (Item XXI below).
VIII. Compliance With the Endangered Species Act
Indicate whether the project will either (1) affect a listed
endangered or threatened species or critical habitat or (2) adversely
affect a proposed critical habitat for an endangered or threatened
species or jeopardize the continued existence of a proposed endangered
or threatened species. This analysis will be conducted in consultation
with the Fish and Wildlife Service and the National Marine Fisheries
Service, when appropriate. Any formal or informal consultations
conducted with these agencies as well as any State wildlife protection
agency will also address impacts to Category I and Category II species.
See exhibit D of this subpart for specific implementation instructions.
The results of any required coordination shall be included in the
assessment along with any completed biological opinion and mitigation
measures to be required for the project. These factors shall be
considered in completing the environmental impact determination.
IX. Compliance With Farmland Protection Policy Act and Departmental
Regulation 9500-3, Land Use Policy
Indicate whether the project will either directly or indirectly
convert an important land resource(s) identified in the Act or
Departmental Regulation, other than floodplains or wetlands which should
be addressed below in Item X of this exhibit. If a conversion may
result, determine if there is a practicable alternative to avoiding it.
If there is no such alternative, determine whether all practicable
mitigation measures are included in the project. Document as an
attachment these determinations and the steps taken to inform the
public, locate alternatives, and mitigate potential adverse impacts. See
exhibit C of this subpart for specific implementation guidance.
X. Compliance With Executive Order 11988, Floodplain Management, and
Executive Order 11990, Protection of Wetlands
Indicate whether the project is either located within a 100-year
floodplain (500-year floodplain for a critical action) or a wetland or
will impact a floodplain or wetland. If so, determine if there is a
practicable alternative project or location. If there is no such
alternative, determine whether all practicable mitigation measures are
included in the project and document as an attachment these
determinations and the steps taken to
[[Page 71]]
inform the public, locate alternatives, and mitigate potential adverse
impacts. See the U.S. Water Resources Council's Floodplain Management
Guidelines for more specific guidance as well as exhibit C of this
subpart.
XI. Compliance With Coastal Barrier Resources Act
Indicate whether the project is located within the Coastal Barrier
Resources System. If so, indicate whether or not the project meets an
exception criteria under the Act and the results of any consultation
with the Secretary of the Interior regarding its qualification as an
exception. See exhibit F of this subpart for specific implementation
instructions as well as exhibit L for a listing of the exception
criteria. (Those States not having any components of the system within
their jurisdiction need not reference this item in their assessments.)
XII. State Environmental Policy Act
Indicate if the proposed project is subject to a State environmental
policy act or similar regulation. Summarize the results of compliance
with these requirements and attach available documentation. (See Sec.
1940.328 of this subpart for further guidance.)
XIII. Consultation Requirements of Executive Order 12372,
Intergovernmental Review of Federal Programs
Attach the comments of State, regional, or local agencies (if this
review process is required for the project) and respond to all comments
that deal with the subject matters discussed in this assessment format
or are otherwise of an environmental nature.
XIV. Environmental Analysis of Participating Federal Agency
Indicate if another Federal Agency is participating in the project
either through the provision of additional funds, a companion project,
or a permit review authority. Summarize the results of the involved
Agency's environmental impact analysis and attach available
documentation. (See Sec. 1940.318(d) of this subpart for further
guidance.)
XV. Reaction to Project
Discuss any negative comments or public views raised about the
project and the consideration given to these comments. Indicate whether
a public hearing or public information meeting has been held either by
the applicant or FmHA or its successor agency under Public Law 103-354
to include a summary of the results and any objections raised. Indicate
any other examples of the community's awareness of the project, such as
newspaper articles or public notifications.
XVI. Cumulative Impacts
Summarize the cumulative impacts of this project and the related
activities. Give particular attention to land use changes and air and
water quality impacts. Summarize the results of the environmental impact
analysis done for any of these related activities and/or your discussion
with the sponsoring agencies. Attach available documentation of the
analysis.
XVII. Adverse Impact
Summarize the potential adverse impacts of the proposal as pointed
out in the above analysis.
XVIII. Alternatives
Discuss the feasibility of alternatives to the project and their
environmental impacts. These alternatives should include (a) alternative
locations, (b) alternative designs, (c) alternative projects having
similar benefits, and (d) no project. If alternatives have been fully
discussed above in any of Items VI through X, simply reference that
discussion.
XIX. Mitigation Measures
Describe any measures which will be taken or required by FmHA or its
successor agency under Public Law 103-354 to avoid or mitigate the
identified adverse impacts. Analyze the environmental impacts and
potential effectiveness of the mitigation measures. Such measures shall
be included as special requirements or provisions to the offer of
financial assistance or other appropriate approval document, if this
action does not involve financial assistance.
XX. Consistency With FmHA or Its Successor Agency Under Public Law 103-
354 Environmental Policies
Discuss the project's consistencies and inconsistencies with the
Agency's environmental policies and the State Office's Natural Resource
Management Guide. See Sec. Sec. 1940.304 and 1940.305 for a discussion
of these policies and exhibit B for a discussion of the guide.
XXI. Environmental Determinations
The following recommendations shall be completed:
a. Based on an examination and review of the foregoing information
and such supplemental information attached hereto, I recommend that the
approving official determine that this project will have () a
significant effect on the quality of the human environment and an
Environmental Impact Statement must be prepared; will not have
() a significant effect on the quality of the human
environment.
[[Page 72]]
b. I recommend that the approving official make the following
compliance determinations for the below-listed environmental
requirements.
Not in compliance In compliance
. ................... . Clean Air Act.
. ................... . Federal Water Pollution
Control Act.
. ................... . Safe Drinking Water Act--
Section 1424(e).
. ................... . Endangered Species Act.
. ................... . Coastal Barrier
Resources Act.
. ................... . Coastal Zone Management
Act--Section 307(c) (1)
and (2).
. ................... . Wild and Scenic Rivers
Act.
. ................... . National Historic
Preservation Act.
. ................... . Archeological and
Historic Preservation
Act.
. ................... . Subpart B, Highly
Erodible Land
Conservation
. ................... . Subpart C, Wetland
Conservation, of the
Food Security Act.
. ................... . Executive Order 11988,
Floodplain Management.
. ................... . Executive Order 11990,
Protection of Wetlands.
. ................... . Farmland Protection
Policy Act.
. ................... . Departmental Regulation
9500-3, Land Use
Policy.
. ................... . State Office Natural
Resource Management
Guide.
c. I have reviewed and considered the types and degrees of adverse
environmental impacts identified by this assessment. I have also
analyzed the proposal for its consistency with FmHA or its successor
agency under Public Law 103-354 environmental policies, particularly
those related to important farmland protection, and have considered the
potential benefits of the proposal. Based upon a consideration and
balancing of these factors, I recommend from an environmental standpoint
that the project
------ be approved.
------ not be approved because of the attached reasons.
Signature of preparer*__________________________________________________
---------------------------------------------------------------------------
*See Sec. 1940.316 of this subpart for listing of officials
responsible for preparing assessment.
---------------------------------------------------------------------------
Date____________________________________________________________________
Title___________________________________________________________________
State Environmental Coordinator's Review (When required by Sec.
1940.316 of this subpart)
I have reviewed this environmental assessment and supporting
documentation. Following are my positions regarding its adequacy and the
recommendations reached by the preparer. For any matter in which I do
not concur, my reasons are attached as exhibit ----.
Do not concur Concur
. ................... . Adequate Assessment.
. ................... . Environmental Impact
Determination.
. ................... . Compliance
Determinations.
. ................... . Project Recommendation.
Signature of State Environmental Coordinator____________________________
Date____________________________________________________________________
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
Exhibit I to Subpart G of Part 1940--Finding of No Significant
Environmental Impact
SUBJECT: Finding of No Significant Environmental Impact and Necessary
Environmental Findings for (insert name, location, and any
identification number of project).
TO: Project File.
The attached environmental assessment has been completed for the
subject proposal by the FmHA or its successor agency under Public Law
103-354 environmental reviewer. After reviewing the assessment and the
supporting materials attached to it, I find that the subject proposal
will not significantly affect the quality of the human environment.
Therefore, the preparation of an environmental impact statement is not
necessary.
I also find that the assessment properly documents the proposal's
status of compliance with the environmental laws and requirements listed
therein.
Insert signature and title of approving official as specified in
Sec. 1940.316 of this subpart. --------(Date).
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 36266, Sept. 19, 1988]
Exhibit J to Subpart G of Part 1940--Locations and Telephone Numbers of
Federal Emergency Management Administration's Regional Offices
------------------------------------------------------------------------
Federal region Location FTS No.* Commercial No.
------------------------------------------------------------------------
I................ Boston, MA.............. 223-4741 (617) 223-4741
II............... New York, NY............ 264-8980 (212) 264-8980
III.............. Philadelphia, PA........ 597-9416 (215) 597-9416
[[Page 73]]
IV............... Atlanta, GA............. 257-2400 (404) 881-2400
V................ Chicago, IL............. 353-1500 (312) 353-1500
VI............... Dallas, TX.............. 749-9201 (817) 387-5811
VII.............. Kansas City, MO......... 758-5912 (816) 374-5912
VIII............. Denver, CO.............. 234-2553 (303) 234-2553
IX............... San Francisco, CA....... 556-8794 (415) 556-8794
X................ Seattle, WA............. 396-0284 (206) 481-8800
------------------------------------------------------------------------
*This is the main number for the regional office. For floodplain
information, ask for the Natural and Technological Hazards Division.
Exhibit K to Subpart G of Part 1940--Locations and Telephone Numbers of
U.S. Fish and Wildlife Service's Wetland Coordinators
The U.S. Fish and Wildlife Service (FWS) is presently preparing the
National Wetlands Inventory. Each regional office of the FWS has named a
staff member as a Wetland Coordinator. These individuals can provide
updated information concerning existing State and local wetland surveys
and Federal inventories. Listed below are the FWS regional offices and
their areas of responsibility.
Region I
Portland, OR--FTS 429-6154; Commercial (503) 231-6154.
Areas Covered: California, Hawaii, Idaho, Nevada, Oregon, Washington,
U.S. Pacific Trust, Territories and Possessions.
Region II
Albuquerque, NM--FTS 474-3152; Commercial (505) 766-2914.
Areas Covered: Arizona, New Mexico, Oklahoma, Texas.
Region III
Twin Cities, MN--FTS 725-3593; Commercial (612) 725-3593.
Areas Covered: Illinois, Indiana, Michigan, Minnesota, Ohio, Wisconsin.
Region IV
Atlanta, GA--FTS 242-6343; Commercial (404) 221-6343.
Areas Covered: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana,
Mississippi, North Carolina, Panama Canal Zone, Puerto Rico, South
Carolina, Tennessee, Virgin Islands.
Region V
Newton Corner, MA--FTS 829-9379; Commercial (617) 965-5100, Ext. 379.
Areas Covered: Connecticut, Delaware, District of Columbia, Maine,
Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia.
Region VI
Denver, CO--FTS 234-5586; Commercial (303) 234-5586.
Areas Covered: Colorado, Iowa, Kansas, Missouri, Montana, Nebraska,
North Dakota, South Dakota, Utah, Wyoming.
Alaska Area Office
Anchorage, AK--Commercial (907) 263-3403.
National Office
St. Petersburg, FL--FTS 826-3624; Commercial (813) 893-3624.
Exhibit L to Subpart G of Part 1940--Exceptions to Restrictions of
Coastal Barrier Resources Act
Section 6 Exceptions*
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*Quoted from section 6 of the Act, Pub. L. 97-348.
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(a) Notwithstanding section 5, the appropriate Federal officer,
after consultation with the Secretary, may make Federal expenditures or
financial assistance available within the Coastal Barrier Resources
System for--
(1) Any use or facility necessary for the exploration, extraction,
or transportation of energy resources which can be carried out only on,
in, or adjacent to coastal water areas because the use or facility
requires access to the coastal water body;
(2) The maintenance of existing channel improvements and related
structures, such as jetties, and including the disposal of dredge
materials related to such improvements;
(3) The maintenance, replacement, reconstruction, or repair, but not
the expansion, of publicly owned or publicly operated roads, structures,
or facilities that are essential links in a larger network or system;
(4) Military activities essential to national security;
(5) The construction, operation, maintenance, and rehabilitation of
Coast Guard facilities and access thereto; and
(6) Any of the following actions or projects, but only if the making
available of expenditures or assistance therefor is consistent with the
purposes of this Act:
(A) Projects for the study, management, protection and enhancement
of fish and wildlife resources and habitats, including, but not limited
to, acquisition of fish and wildlife habitats and related lands,
stabilization projects for fish and wildlife habitats, and recreational
projects.
(B) The establishment, operation, and maintenance of air and water
navigation aids and devices, and for access thereto.
(C) Projects under the Land and Water Conservation Fund Act of 1965
(16 U.S.C.
[[Page 74]]
4601-4 through 11) and the Coastal Zone Management Act of 1972 (16
U.S.C. 1452 et seq.).
(D) Scientific research, including but not limited to aeronautical,
atmospheric, space, geologic, marine, fish and wildlife and other
research, development and applications.
(E) Assistance for emergency actions essential to the saving of
lives and the protection of property and the public health and safety,
if such actions are performed pursuant to sections 305 and 306 of the
Disaster Relief Act of 1974 (42 U.S.C. 5145 and 5146) and section 1362
of the National Flood Insurance Act of 1968 (42 U.S.C. 4103) and are
limited to actions that are necessary to alleviate the emergency.
(F) The maintenance, replacement, reconstruction, or repair, but not
the expansion, of publicly owned or publicly operated roads, structures,
or facilities.
(G) Nonstructural projects for shoreline stabilization that are
designed to mimic, enhance, or restore natural stabilization systems.
(b) For purposes of subsection (a)(2), a channel improvement or a
related structure shall be treated as an existing improvement or an
existing related structure only if all, or a portion, of the moneys for
such improvement or structure was appropriated before the date of the
enactment of this Act.
Exhibit M to Subpart G of Part 1940--Implementation Procedures for the
Conservation of Wetlands and Highly Erodible Land Affecting Farmer
Program Loans and Loans to Indian Tribes and Tribal Corporations
1. Background. This exhibit implements the requirements of Subtitle
B, Highly Erodible Land Conservation, and Subtitle C, Wetland
Conservation, of Title XII of the Food Security Act of 1985, Pub. L. 99-
198. The purposes of these Subtitles are to: Reduce soil loss due to
wind and water erosion; protect the Nation's long term capability to
produce food and fiber; reduce sedimentation; improve water quality;
assist in preserving the Nation's wetlands; create better habitat for
fish and wildlife through improved food and cover; and curb production
of surplus commodities by removing certain incentives for persons to
produce agricultural commodities on highly erodible land or converted
wetland.
2. Applicability. The provisions of this exhibit apply to insured
and guaranteed Farmer Program loans and loans to Indian Tribes and
Tribal Corporations, subordinations, transfers and assumptions of such
loans and leases and credit sales of inventory property. For the purpose
of this exhibit, ``Farmer Program loans'' means Farm Operating Loans,
Farm Ownership Loans, Emergency Loans, and Soil and Water Loans. As used
in this exhibit, the word loan is meant to include guarantee as well.
Applicant means an applicant for either an insured or guaranteed loan
and borrower means a recipient of either an insured or guaranteed loan.
3. FmHA or its successor agency under Public Law 103-354 prohibited
activities. Unless otherwise exempted by the provisions of this exhibit,
the proceeds of any Farmer Program loan or loan to an Indian Tribe or
Tribal Corporation made or guaranteed by FmHA or its successor agency
under Public Law 103-354 will not be used either (a) for a purpose that
will contribute to excessive erosion of highly erodible land, or (b) for
a purpose that will contribute to conversion of wetlands to produce an
agricultural commodity. (See Sec. 12.2(a)(1) of subpart A of part 12 of
subtitle A of title 7, which is attachment 1 of this exhibit and is
available in any FmHA or its successor agency under Public Law 103-354
office, for the definition of an agricultural commodity.) Consequently,
any applicant proposing to use loan proceeds for an activity
contributing to either such purpose, will not be eligible for the
requested loan. Any borrower that uses loan proceeds in a manner that
contributes to either such purpose will be in default on the loan.
a. U.S. Department of Agriculture (USDA) definitions. In
implementing this exhibit, FmHA or its successor agency under Public Law
103-354 will use the USDA's definitions of the terms found at Sec. 12.2
of subpart A of part 12 of subtitle A of title 7 (attachment 1 of this
exhibit which is available in any FmHA or its successor agency under
Public Law 103-354 office).
b. Highly erodible land conservation. FmHA or its successor agency
under Public Law 103-354 will conclude that excessive erosion of highly
erodible land results or would result whenever (1) a field on which
highly erodible land is predominant, as determined by the Soil
Conservation Service (SCS), is or would be used to produce an
agricultural commodity without conformance to a conservation system
approved either by SCS or the appropriate conservation district, as
evidenced by a statement from SCS, and (2) such field is not exempt from
the provisions of this exhibit.
c. Wetland conservation. FmHA or its successor agency under Public
Law 103-354 will conclude that a conversion of wetlands to produce an
agricultural commodity has occurred or will occur whenever, as
determined by SCS, (1) a wetland has or will be drained, dredged,
filled, leveled, or otherwise manipulated (including any activity that
results in impairing or reducing the flow, circulation, or reach of
water) that makes possible the production of an agricultural commodity
without further application of the manipulations described herein if (a)
such production
[[Page 75]]
would not have been possible but for such action and (b) before such
action such land was wetland and was neither highly erodible land nor
highly erodible cropland; and (2) neither the affected wetland nor the
activity affecting the wetland is exempt from the provisions of this
exhibit.
d. Use of loan proceeds. To use loan proceeds for a purpose that
contributes to either the excessive erosion of highly erodible land or
the conversion of wetlands to produce an agricultural commodity means
that loan proceeds will or have been used in a way that contributes to
either excessive erosion of highly erodible land or the conversion of
wetlands to produce an agricultural commodity by paying the costs of any
of the following:
(1) The purchase of the affected land;
(2) Necessary planning, feasibility, or design studies;
(3) Obtaining any necessary permits;
(4) The purchase, contract, lease or renting of any equipment or
materials necessary to carry out the land modification or conversion to
include all associated operational costs such as fuel and equipment
maintenance costs;
(5) Any labor costs;
(6) The planting, cultivating, harvesting, or marketing of any
agricultural commodity produced on nonexempt highly erodible land to
include any associated operational or material costs such as fuel, seed,
fertilizer, and pesticide costs;
(7) Within the crop year in which the wetland conversion was
completed plus the next ten crop years thereafter, the planting,
cultivating, harvesting, or marketing of any agricultural commodity
produced on the affected land to include any associated operational or
materials costs such as fuel, seed, fertilizer and pesticide costs; or
(8) For the same time period as in subparagraph 3d(7) above, any
costs associated with using for on-farm purposes an agricultural
commodity grown on the affected land.
(9) Additionally, if loan proceeds will be or have been substituted
to pay other costs at anytime during the life of the loan so that non-
loan funds can be used to pay any of the above costs, it is deemed that
loan proceeds will be or have been used for a purpose that contributes
to the prohibited activities described in this paragraph.
4. Prohibited activities under other USDA financial assistance
programs. Unless otherwise exempted, a person becomes ineligible for a
variety of USDA financial assistance programs if that person produces in
any crop year an agricultural commodity on either a field on which
highly erodible land is predominant or a converted wetland. This
ineligibility extends to any commodity produced during the crop year
that the prohibited action occurs. The programs for which the person
would be ineligible include price support payments, farm storage
facility loans, disaster payments, crop insurance, payments made for the
storage of an agricultural commodity, and payments received under a
Conservation Reserve Program Contract. Farmer Program applicants and
borrowers and applicants for, and borrowers of, loans to Indian Tribes
and Tribal Corporations, therefore, can be affected not only by the FmHA
or its successor agency under Public Law 103-354 prohibited activities
but also by the broad USDA sweep of the Subtitles B and C restrictions.
Should such an applicant rely or plan to rely on any of these other USDA
financial assistance programs as a source of funds to repay its FmHA or
its successor agency under Public Law 103-354 loan(s) and then fail to
meet the other program(s)' eligibility criteria related to wetland or
highly erodible land conservation, repayment ability to FmHA or its
successor agency under Public Law 103-354 or the lender of and FmHA or
its successor agency under Public Law 103-354 guaranteed loan may be
jeopardized. Consequently, those applicants who are applying for a loan
and those borrowers who receive a loan after the effective date of
Subtitles B and C, as designated in part 12 of subtitle A of title 7,
and who include in their projected sources of repayment, potential funds
from any USDA program subject to some form of Subtitle B or C
restrictions will have to demonstrate as part of their applications, and
for borrowers, as part of their farm plan of operation, their ability to
meet the other program(s)' eligibility criteria. Failure to meet the
criteria will require the applicant or borrower either to document an
alternative, equivalent source of revenues or, if possible, agree to
undertake any steps necessary to gain eligibility for the other
program(s). See paragraph 6 of this exhibit for a discussion of such
steps.
5. Applicant's responsibilities.
a. Required information. Every applicant for a Farmer Program loan
or a loan to an Indian Tribe or Tribal Corporation will be required to
provide the following information and, as applicable, certification as
part of the application for financial assistance. An application will
not be considered to be complete until this information and
certification are provided to FmHA or its successor agency under Public
Law 103-354. Once an applicant has provided FmHA or its successor agency
under Public Law 103-354 with information from SCS on the presence of
any highly erodible land, wetland, or converted wetland this information
need not be provided again for a subsequent loan unless there is either
a change in the property upon which FmHA or its successor agency under
Public Law 103-354 loan proceeds will be applied or a change in the
previous information, such as a change in the status of an exemption.
There is a continuing responsibility
[[Page 76]]
on FmHA or its successor agency under Public Law 103-354 borrowers using
other USDA financial assistance programs for repayment purposes to
provide the County Supervisor with an executed copy of any similar
certification required by the other USDA agency at the time of each
required certification.
(1) A statement from the SCS indicating whether or not the
applicant's farm property or properties contain either highly erodible
land, wetland, or converted wetland and, if so, whether or not the
applicant qualifies for a particular exemption to the provisions of this
exhibit and as further detailed in paragraph 11 below. The property or
properties will be listed and described in accordance with the
Agriculture Stabilization and Conservation Service's (ASCS) farm records
system. SCS's execution of Form SCS-CPA-26, ``Highly Erodible Land and
Wetland Conservation Determination,'' is necessary to meet this
information requirement.
(2) If either highly erodible land, wetland, or converted wetland is
present, the applicant's properly executed original or carbon copy of
Form AD-1026, ``Highly Erodible Land and Wetland Conservation
Certification.''
b. Required actions. If at any time during the application review
process any of the information or basis for an applicant's certification
changes, the applicant (or the lender in the case of a guaranteed loan)
must immediately notify FmHA or its successor agency under Public Law
103-354. If an applicant intends to produce an agricultural commodity on
a nonexempt field on which highly erodible land is predominant, the
applicant must develop a conservation system approved by SCS or the
appropriate conservation district, demonstrate that it is or will be in
compliance with the system at the time the field is to be used, and
provide SCS's concurrence with this position.
6. FmHA or its successor agency under Public Law 103-354's
application review. The FmHA or its successor agency under Public Law
103-354 County Supervisor will review the information provided by the
applicant from SCS regarding the presence of any highly erodible land,
wetland, or converted wetland and any possible exemptions and take the
actions warranted by the presence of one or more of the circumstances
described below. In carrying out these actions, FmHA or its successor
agency under Public Law 103-354 will consider the technical decisions
rendered by the SCS and the ASCS, as assigned to these agencies by
subparts A, B, and C of part 12 of subtitle A of title 7 and further
explained in this exhibit, to be final and controlling in the remaining
FmHA or its successor agency under Public Law 103-354 decisionmaking
process for this exhibit. It must also be understood that the definition
of a wetland used by SCS in implementing this exhibit applies only to
this exhibit and not to other wetland protection provisions of subpart G
of part 1940.
a. No highly erodible land, wetland, or converted wetland present.
The requested loan can be approved under the provisions of this exhibit
and, except for documenting this result in accordance with paragraph 8
of this exhibit, no further action is required.
b. Converted wetland present. The County Supervisor will consult
with the applicant (and lender, in the case of a guaranteed loan) and
the appropriate local office of the ASCS in order to determine if the
converted wetland qualifies for the exemption specified in subparagraph
c (1) of paragraph 11 of this exhibit. If so, no further action is
necessary with respect to the converted wetland except for documenting
the result. If the converted wetland does not qualify for an exemption,
the County Supervisor will complete one or both of the following steps
as the identified circumstances dictate.
(1) Step one. Review both the date that the wetland was converted
and the proposed use of loan proceeds in order to determine if loan
proceeds will be used for a prohibited activity as defined in
subparagraph d of paragraph 3 of this exhibit. If not, the County
Supervisor will so document this as specified in paragraph 8 of this
exhibit; complete step two immediately below; and, if an insured loan
will be approved, notify the applicant in writing, coincident with the
transmittal of Form FmHA or its successor agency under Public Law 103-
354 1940-1, ``Request For Obligation of Funds,'' and by using Form
Letter 1940-G-1, ``Notification of The Requirements of exhibit M of FmHA
Instruction 1940-G,'' that the loan approval instruments will contain
compliance requirements affecting the applicant's converted wetland. If
loan proceeds will be used for a prohibited activity, the applicant (and
lender, in the case of a guaranteed loan) will be advised of the
applicant's ineligibility for the FmHA or its successor agency under
Public Law 103-354 loan being requested. The applicant (and lender, in
the case of a guaranteed loan) will be advised of any modifications to
the application that could cure the ineligibility. Not growing an
agricultural commodity on the converted wetland would cure the
ineligibility, but the substitution of non-FmHA or its successor agency
under Public Law 103-354 funds to grow an agricultural commodity on the
converted wetland would not.
(2) Step two. The County Supervisor will review the applicant's
sources of loan repayment to determine if they include funds from a USDA
financial assistance program(s) subject to wetland conservation
restrictions. If so, the County Supervisor will implement the actions in
subparagraph e of this paragraph.
c. Highly erodible land or wetland present. The County Supervisor
will discuss with the
[[Page 77]]
applicant (and lender, in the case of a guaranteed loan) and review the
intended uses of the FmHA or its successor agency under Public Law 103-
354 loan proceeds as evidenced in any relevant application materials.
(1) Proceeds to be used for prohibited activity. If proceeds would
be used for a prohibited activity, the applicant (and lender, in the
case of a guaranteed loan) will be advised of its ineligibility for the
FmHA or its successor agency under Public Law 103-354 loan. The
applicant (and lender, in the case of a guaranteed loan) will be
informed of any modifications to its application that could cure the
ineligibility, including financially feasible eligible loan purposes
that could be helpful in implementing a conservation plan or installing
a conservation system, should either be an appropriate cure.
Substitution of non-FmHA or its successor agency under Public Law 103-
354 monies to accomplish the prohibited activity would not cure the
ineligibility, but actual elimination of the activity from the
applicant's farm plan of operation would.
(2) Proceeds not to be used for a prohibited activity. If loan
proceeds are not planned to be used for a prohibited activity, the
County Supervisor will perform the following tasks:
(a) Document the above determination in the applicant's file as
specified in paragraph 8 of this exhibit.
(b) If an insured loan will be approved and the requirements of
subparagraph c (2)(c) of this paragraph do not apply, notify the
applicant in writing, coincident with the transmittal of Form FmHA or
its successor agency under Public Law 103-354 1940-1, ``Request For
Obligation of Funds,'' and by using Form Letter 1940-G-1, ``Notification
of The Requirements of Exhibit M of FmHA Instruction 1940-G,'' that the
loan approval instruments will contain compliance requirements affecting
the applicant's highly erodible land and/or wetland.
(c) Review the term of the proposed loan and take the following
actions, as applicable.
(i) Loan term exceeds January 1, 1990, but not January 1, 1995. If
the term of the proposed loan expires within this period and the
applicant intends to produce an agricultural commodity on highly
erodible land that is exempt from the restrictions of this exhibit until
either 1990 or two years after the SCS has completed a soil survey for
the borrower's land, whichever is later, the County Supervisor will
determine if it is financially feasible for the applicant, prior to loss
of the exemption, to actively apply a conservation plan approved by SCS
or the appropriate conservation district. See Sec. 12.23 of subpart A
of part 12 of subtitle A of title 7, which is attachment 1 of this
exhibit and is available in any FmHA or its successor agency under
Public Law 103-354 office, for a definition of actively applying a
conservation plan. Prior to loan approval, the applicant, the lender,
(if a guaranteed loan is involved), FmHA or its successor agency under
Public Law 103-354 and SCS will resolve any doubts as to what extent
production would be able to continue under application of a conservation
plan and as to the financial implications on loan repayment ability from
both the potential costs of actively applying the conservation plan and
the potential loss of revenues from any reduced acreage production base.
The loan approval official will determine the financial implications of
actively applying a conservation plan to the applicant's highly erodible
land by developing a projected farm plan of operation or other farm
financial projections that reflect adequate repayment on the full
scheduled installments for all debt obligations at the time the
conservation plan is being actively applied. If in making this
determination, loan repayment ability cannot be demonstrated, FmHA or
its successor agency under Public Law 103-354 will deny the loan
application. If loan repayament ability can be demonstrated and an
insured loan will be approved, the applicant will be advised in writing,
coincident with the transmittal of Form FmHA or its successor agency
under Public Law 103-354 1940-1, ``Request For Obligation of Funds,''
and using Form Letter 1940-G-1, ``Notification of The Requirements of
Exhibit M of FmHA Instruction 1940-G,'' that the loan approval
instruments will contain compliance requirements affecting the
applicant's highly erodible land. The applicant will also be advised
that a statement from the SCS issued prior to either January 1, 1990, or
two years after the SCS has completed a soil survey of the applicant's
land (whichever is later) and stating that the applicant is actively
applying an approved conservation plan will be considered adequate
demonstration of compliance on the highly erodible land affected by the
1990 deadline.
(ii) Loan term exceeds January 1, 1995. If the term of the proposed
loan would exceed this date and the borrower intends to produce an
agricultural commodity on highly erodible land that is exempt from the
restrictions of the exhibit up until that date (see subparagraph b (4)
of paragraph 11 of this exhibit) the County Supervisor will determine if
it is financially feasible for the applicant, after January 1, 1985, to
produce an agricultural commodity on the highly erodible land in
compliance with a conservation system approved by SCS or the appropriate
conservation district. Prior to loan approval, the applicant, the lender
(if a guaranteed loan is involved), FmHA or its successor agency under
Public Law 103-354 and SCS will resolve any doubts as to what extent
production would be able to continue under a conservation system and as
to the financial implications on loan repayment ability from both the
potential costs of the conservation
[[Page 78]]
system and the potential loss of revenues from any reduced acreage
production base. The loan approval official will determine the financial
implications of compliance with a conservation system using the
financial projection method(s) indicated in subparagraph c (2)(c)(i) of
this paragraph. If loan repayment ability cannot be demonstrated, the
application will be denied. If loan repayment ability can be
demonstrated and an insured loan will be approved, the applicant will be
advised in writing, coincident with the transmittal of Form 1940-1,
``Request for Obligation of Funds,'' and using Form Letter 1940-G-1,
``Notification of The Requirements of Exhibit M of FmHA Instruction
1940-G,'' that the loan approval instruments will contain compliance
requirements affecting the applicant's highly erodible land. The
applicant will also be advised that a statement from SCS issued prior to
January 1, 1995, and stating that the applicant is in compliance with an
approved conservation system will be considered adequate demonstration
of compliance.
(d) Implement the actions in subparagraph e of this paragraph if the
applicant plans to repay a portion of the loan with funds from a USDA
financial assistance program subject to wetland or highly erodible land
conservation restrictions.
d. Highly erodible land present that was or is planted in alfalfa.
If the applicant plans to cultivate highly erodible land for the purpose
of producing an agricultural commodity and that highly erodible land
during each of the 1981 to 1985 crop years was planted in alfalfa in a
crop rotation determined by SCS to be adequate for the protection of
highly erodible land, the applicant is exempt until June 1, 1988, from
the requirement to fully implement an approved conservation system on
the highly erodible land. The County Supervisor, following procedures
similar to those indicated in subparagraph c (2)(c)(i) of this
paragraph, will determine if it is financially feasible for the
applicant to apply a conservation system to the highly erodible land
prior to the loss of the exemption on June 1, 1988. If loan repayment
ability cannot be demonstrated, the application will be denied. If loan
repayment ability can be demonstrated and an insured loan will be
approved, the applicant will be advised in writing that the loan
approval instruments will contain compliance requirements affecting the
applicant's highly erodible land. The applicant will also be advised
that a statement from SCS issued prior to June 1, 1988 and stating that
the applicant is in compliance with an approved conservation system will
be considered adequate demonstration of compliance with this
requirement.
e. Highly erodible land, wetland, or converted wetland present and
applicant intends to use the USDA financial assistance program(s),
including crop insurance, to repay FmHA or its successor agency under
Public Law 103-354 loan. The County Supervisor will consult with the
applicant (and lender, in the case of a guaranteed loan) and the other
USDA agency(s) to determine if the applicant is eligible for the
latter's financial assistance. If not eligible, the applicant will have
to demonstrate that an alternative source(s) of repayment will be
available in order for further processing of the application to proceed.
7. Required provisions in loan approval documents.
a. Insured loans.
(1) Promissory Notes. For all loans to which this exhibit applies,
all promissory notes must contain the provision indicated below: (Form
FmHA or its successor agency under Public Law 103-354 1940-17,
``Promissory Note,'' has been revised so that the language will no
longer be inserted as an addendum, but the following provision must be
inserted as an addendum to Form FmHA or its successor agency under
Public Law 103-354 440-22, ``Promissory Note (Association or
Organization),'' if the loan is being made to an Indian Tribe or a
Tribal Corporation.)
``Addendum for Highly Erodible Land and Wetland Conservation''
Addendum to promissory note dated ---------------- in the amount of
$------------ at an annual interest rate of ---- percent. This agreement
supplements and attaches to the above note.
Borrower recognizes that the loan described in this note will be in
default should any loan proceeds be used for a purpose that will
contribute to excessive erosion of highly erodible land or to the
conversion of wetlands to produce an agricultural commodity, as further
explained in 7 CFR part 1940, subpart G, exhibit M. If (1) the term of
the loan exceeds January 1, 1990, but not January 1, 1995, and (2)
Borrower intends to produce an agricultural commodity on highly erodible
land that is exempt from the restrictions of exhibit M until either
January 1, 1990 or two years after the U.S. Soil Conservation Service
(SCS) has completed a soil survey for the Borrower's land, whichever is
later, the Borrower further agrees that, prior to the loss of the
exemption from the highly erodible land conservation restrictions found
in 7 CFR part 12, Borrower must demonstrate that Borrower is actively
applying on that land which has been determined to be highly erodible a
conservation plan approved by the SCS or the appropriate conservation
district in accordance with SCS's requirements. Furthermore, if the term
of the loan exceeds January 1, 1995, Borrower further agrees that
Borrower must demonstrate prior to January 1, 1995, that any production
after that date of an agricultural commodity on highly erodible land
will be done in compliance with a conservation system approved by SCS or
[[Page 79]]
the appropriate conservation district in accordance with SCS's
requirements.
________________________________________________________________________
(Name of Borrower)
________________________________________________________________________
(Signature of Executive Official)
________________________________________________________________________
(Signature of Attesting Official)
(2) Mortgages, deeds of trust and security agreements. State
Directors will consult with the Office of General Counsel and ensure
that for all loans to which this exhibit applies a covenant is included
in all mortgages, deeds of trust, and security agreements which reads as
indicated below. Form FmHA or its successor agency under Public Law 103-
354 440-15, ``Security Agreement (Insured Loans to Individuals),'' and
Form FmHA or its successor agency under Public Law 103-354 440-4,
``Security Agreement (Chattels and Crops),'' have been revised
accordingly. Equivalent forms required in State supplements must be
similarly revised.
[For mortgages or deeds of trust:]
``Borrower further agrees that the loan(s) secured by this
instrument will be in default should any loan proceeds be used for a
purpose that will contribute to excessive erosion of highly erodible
land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit
M.''
[For security agreements:]
``Default shall also exist if any loan proceeds are used for a
purpose that will contribute to excessive erosion of highly erodible
land or to the conversion of wetlands to produce an agricultural
commodity, as further explained in 7 CFR part 1940, subpart G, exhibit
M.''
b. Guaranteed loans.
(1) Form FmHA or its successor agency under Public Law 103-354 449-
14, ``Conditional Commitment for Guarantee,'' and Form FmHA or its
successor agency under Public Law 103-354 1980-15, ``Conditional
Commitment for Contract of Guarantee (Line of Credit).'' These forms
must contain a condition that includes the following provisions:
(a) Informs the lender that FmHA or its successor agency under
Public Law 103-354's commitment is conditioned upon loan proceeds not
being used for a purpose that will contribute to excessive erosion of
highly erodible land or to the conversion of wetlands to produce an
agricultural commodity, as explained in this exhibit;
(b) Informs the lender of the lender's monitoring responsibilities
under paragraph 10 of this exhibit; and;
(c) Requires the lender, for all borrowers having highly erodible
land, wetland, or converted on their farm properties, to include
provisions in its loan instruments similar to those contained in
subparagraphs a (1) and (2) of this paragraph.
(2) Lender's loan and security instruments. These instruments must
be modified as specified in subparagraph b(1)(c) of this paragraph.
8. Required FmHA or its successor agency under Public Law 103-354
documentation. The actions taken and determinations made by FmHA or its
successor agency under Public Law 103-354 to comply with the provisions
of this exhibit will be documented as part of the environmental review
of the application. All actions subject to this exhibit will undergo at
a minimum the completion of Form FmHA or its successor agency under
Public Law 103-354 1940-22, ``Environmental Checklist for Categorical
Exclusions.'' On the reverse of this form, the preparer will document as
applicable (a) whether or not highly erodible land, wetland, or
converted wetland is present, (b) if any exemption(s) applies, (c) the
status of the applicant's eligibility for an FmHA or its successor
agency under Public Law 103-354 loan under this exhibit, and (d) any
steps the applicant must take prior to loan approval to retain or regain
its eligibility. If the application under review meets the definition of
a Class I action as defined in Sec. 1940.311 of this subpart, the above
documentation will be included as an exhibit to Form FmHA or its
successor agency under Public Law 103-354 1940-21, ``Environmental
Assessment for Class I Action.'' If the application meets the definition
of a Class II action as defined in Sec. 1940.312 of this subpart, the
required documentation will be included within the Class II assessment
under the discussion of land use impacts. See paragraph IV.4. of exhibit
H of this subpart. Once an applicant's farm property has undergone an
environmental review covering the provisions of this exhibit, the County
Supervisor reviewing a subsequent loan request need not require the
applicant to obtain further site information from SCS as long as there
is no change in the farm property to be affected or any applicable
exemptions.
9. Borrowers' responsibilities. In addition to complying with any
loan requirements resulting from FmHA or its successor agency under
Public Law 103-354's implementation of this exhibit, a borrower must
within ten days of receipt inform, in writing, the lender of a
guaranteed loan and the County Supervisor for an insured loan of any
ineligibility determinations received from other USDA agencies for
violations of wetland or highly erodible land conservation restrictions.
A borrower also has the responsibility to consult with the lender or
County Supervisor, as applicable, if at any time the borrower is
uncertain as to the borrower's duties and responsibility under the loan
provisions.
[[Page 80]]
10. FmHA or its successor agency under Public Law 103-354 and lender
monitoring. As an element of insured loan servicing, to include
development of a farm plan of operation for an upcoming crop year,
scheduled farm visits, or other contracts with borrowers, FmHA or its
successor agency under Public Law 103-354 staff will review and analyze
the borrower's compliance with the provisions of this exhibit and any
related loan requirements. If at anytime FmHA or its successor agency
under Public Law 103-354 becomes aware of the borrower's violation of
these provisions or related loan requirements, the borrower will be
informed that the affected loan(s) is in default. In addition to
directly monitoring borrowers, the County Supervisor will receive and
review the monitoring results of other USDA agencies having restrictions
on wetland and highly erodible land conservation. Whenever these results
indicate that a borrower may have violated the loan conditions, the
County Supervisor will further analyze the matter and respond, as
indicated in this paragraph, should a violation be determined. Lenders
of FmHA or its successor agency under Public Law 103-354 guaranteed
loans must also monitor compliance as part of their servicing
responsibilities.
11. Exemptions and determining their applicability. Following is a
list of exemptions from the provisions of this exhibit as well a
description of how FmHA or its successor agency under Public Law 103-354
will apply the exemptions to a proposed loan or activity under a loan.
This list is intended to provide guidance on implementing the exemptions
contained in subparts A, B, and C of part 12 of subtitle A of title 7
(attachment 1 of this exhibit which is available in any FmHA or its
successor agency under Public Law 103-354 office) and does not modify or
limit any of those exemptions.
a. Exemption from wetland and highly erodible land conservation. Any
loan which was closed prior to December 23, 1985, or any loan for which
either Form FmHA or its successor agency under Public Law 103-354 1940-
1, ``Request for Obligation of Funds,'' Form FmHA or its successor
agency under Public Law 103-354 449-14, ``Conditional Commitment for
Guarantee,'' or Form FmHA or its successor agency under Public Law 103-
354 1980-15, ``Conditional Commitment for Contract of Guarantee (Line of
Credit),'' was executed prior to December 23, 1985, is exempt from the
provisions of this exhibit.
b. Exemptions from highly erodible land conservation. The following
exemptions exist from the restrictions on highly erodible land
conservation. Whenever the County Supervisor is required to consult with
another USDA agency in applying these exemptions, the County
Supervisor's review of a properly completed Form SCS-CPA-26 will be
considered adequate consultation if the needed information is presented
on the form and no questions are raised by the FmHA or its successor
agency under Public Law 103-354 review.
(1) Any land upon which an agricultural commodity was planted before
December 23, 1985, is exempt for that particular planting. The County
Supervisor will consult with the appropriate local ASCS office in
applying this exemption and the ASCS determination is controlling for
purposes of this exhibit.
(2) Any land planted with an agricultural commodity during a crop
year beginning before December 23, 1985, is exempt for that particular
planting. FmHA or its successor agency under Public Law 103-354 will
consult with the ASCS State Executive Director and the latter's position
will be controlling in determining the date that the crop year began.
(3) Any land that during any one of the crop years of 1981 through
1985 was either (a) cultivated to produce an agricultural commodity, or
(b) set aside, diverted or otherwise not cropped under a program
administered by USDA to reduce production of an agricultural commodity,
is exempt until the later of January 1, 1990, or the date that is two
years after the date that the SCS has completed a soil survey of the
land. To apply this exemption, the County Supervisor will consult with
ASCS to determine from the latter's records whether or not the land was
cultivated or set aside during the required period. The ASCS
determination will be controlling. However, the date of completion for
any SCS soil survey will be determined by SCS and used by the County
Supervisor.
(4) Beginning on January 1, 1990, or two years after SCS has
completed a soil survey for the land, whichever is later, and extending
to January 1, 1995, any land that qualified for the exemption in
subparagraph b (3) of this paragraph is further exempt if a person is
actively applying to it a conservation plan that is based on the local
SCS technical guide and properly approved by the appropriate SCS
conservation district or the SCS. To apply this exemption as well as the
exemptions specified in subparagraphs b (5), (6), (7), and (8) of this
paragraph, the County Supervisor will consult with the appropriate local
SCS office and the SCS position will be controlling.
(5) Highly erodible land within a conservation district and under a
conservation system that has been approved by a conservation district
after the district has determined that the conservation system is in
conformity with technical standards set forth in the SCS technical guide
for such district is exempt.
(6) Highly erodible land not within a conservation district but
under a conservation system determined by SCS to be adequate for the
production of a specific agricultural commodity or commodities on any
highly
[[Page 81]]
erodible land is exempt for the production of that commodity or
commodities.
(7) Highly erodible land that is planted in reliance on a SCS
determination that such land was not highly erodible is exempt. The
exemption is lost, however, for any agricultural commodity planted after
SCS determines that such land is highly erodible land.
(8) Highly erodible land planted or to be planted in an agricultural
commodity that was planted in alfalfa during each of the 1981 and 1985
crop years in a crop rotation determined by SCS to be adequate for the
protection of highly erodible land is exempt until June 1, 1988, from
the requirement that the highly erodible land be planted in compliance
with an approved conservation system.
c. Exemptions from wetland conservation. The following exemptions
exist from the restrictions on wetland conservation. Whenever the County
Supervisor is required to consult with another USDA agency in applying
these exemptions, the County Supervisor's review of a properly completed
Form SCS-CPA-26 will be considered adequate consultation if the needed
information is presented on the form and no questions are raised by the
FmHA or its successor agency under Public Law 103-354 review.
(1) A converted wetland is exempt if the conversion of such wetland
was completed or commenced before December 23, 1985. The County
Supervisor will consult with ASCS whose determination as to when
conversion of a wetland commenced will be final for FmHA or its
successor agency under Public Law 103-354 purposes. Additionally, the
County Supervisor will request evidence of ASCS's consultation with the
U.S. Fish and Wildlife Service on each commenced determination reached
for an FmHA or its successor agency under Public Law 103-354 applicant
or borrower. SCS will determine if a wetland is a converted wetland
using the criteria contained in Sec. 12.32 of subpart C of part 12 of
subtitle A of title 7 (attachment 1 of this exhibit which is available
in any FmHA or its successor agency under Public Law 103-354 office).
Under these criteria, however, a converted wetland determined to be
exempt may not always remain exempt. The criteria include the provision
that if crop production is abandoned on a converted wetland and the land
again meets the wetland criteria, that land has reverted to a wetland
and is no longer exempt. For purposes of FmHA or its successor agency
under Public Law 103-354 inventory farm properties, crop production will
be considered to have been abandoned on a converted wetland either at
the earlier of the time the former owner so abandoned crop production or
at the time FmHA or its successor agency under Public Law 103-354 caused
crop production to be abandoned after the property came into FmHA or its
successor agency under Public Law 103-354's inventory. While in its
inventory FmHA or its successor agency under Public Law 103-354 will not
lease the converted wetland for the purpose of producing an agricultural
commodity. Whether or not the wetland criteria are met on the abandoned
land will be determined by SCS immediately before FmHA or its successor
agency under Public Law 103-354's lease or sale of the property.
(2) The following are not considered to be a wetland under the
provisions of this exhibit: (a) An artificial lake, pond, or wetland
created by excavating or diking non-wetland to collect and retain water
for purposes such as water for livestock, fish production, irrigation
(including subsurface irrigation), a settling basin, colling, rice
production, or flood control; (b) a wet area created by a water delivery
system, irrigation, irrigation system, or application of water for
irrigation and (c) lands in Alaska identified by SCS as having a
predominance of permafrost soils. The County Supervisor will consult
with SCS regarding the application of this exemption as well as the
remaining exemptions in this paragraph and the SCS position will be
controlling.
(3) A wetland is exempt if the production of an agricultural
commodity is possible (a) as a result of a natural condition, such as
drought, and (b) without action by the producer that destroys a natural
wetland characteristic. This exemption is lost whenever condition (a) or
(b) no longer exists.
(4) Production of an agricultural commodity on a converted wetland
is exempt is SCS determines that the effect of such action, individually
and in connection with all other similar actions authorized in the area
by USDA agencies, on the hydrological and biological aspect of wetland
is minimal.
12. Appeals. Any applicant or borrower that is directly and
adversely affected by an administrative decision made by FmHA or its
successor agency under Public Law 103-354 under this exhibit may appeal
that decision under the provisions of subpart B of part 1900 of this
chapter (see especially Sec. 1900.55).
13. Working with other USDA agencies.
a. Coordination. FmHA or its successor agency under Public Law 103-
354 State Directors will consult with SCS State Conservationists and
ASCS State Executive Directors to assess and coordinate loan processing
workloads in order to minimize delays in responding to FmHA or its
successor agency under Public Law 103-354 requests for site information
or for the application of the exemptions contained in paragraph 11 of
this exhibit. State Directors will ensure that FmHA or its successor
agency under Public Law 103-354 field staff understand and can use the
ASCS farm records system and will request ASCS training as needed. Also,
management systems for sharing the information discussed in subparagraph
b of this paragraph will be established.
[[Page 82]]
b. Information exchange. FmHA or its successor agency under Public
Law 103-354 State Directors will develop with ASCS State Executive
Directors a system for FmHA or its successor agency under Public Law
103-354 to routinely receive notification whenever a violation has
occurred under ASCS's wetland and highly erodible land conservation
restrictions. FmHA or its successor agency under Public Law 103-354
State Directors will in turn provide to any interested USDA agency the
following information:
(1) Upon request, copies of site information or exemption decision
made by SCS for FmHA or its successor agency under Public Law 103-354
application reviews;
(2) Upon request, copies of exemption decisions made by FmHA or its
successor agency under Public Law 103-354; and
(3) Notice of any violations of the provisions of this exhibit
identified by FmHA or its successor agency under Public Law 103-354 as a
result of the monitoring activities identified in paragraph 10 of this
exhibit.
14. Relationship of the requirements of this exhibit to the wetland
protection requirements of exhibit C of this subpart. The provisions of
this exhibit determine (a) whether or not an applicant for a Farmer
Program insured or guaranteed loan or a loan to an Indian Tribe or
Tribal Corporation is eligible to be considered for such a loan, and (b)
whether or not a recipient of such a loan is properly using the loan
proceeds with respect to the requirements of this exhibit. On the other
hand, the requirements in exhibit C of this subpart regarding wetland
protection cover all FmHA or its successor agency under Public Law 103-
354 loan and grant programs and address not questions of eligibility but
the potential environmental impacts of a proposed action on a wetland
and alternatives to the action. Consequently, those applications covered
by this exhibit and which may be approved under this exhibit must also
meet the requirements of exhibit C of this subpart. For example, an
application covered by this exhibit (M) that proposed to convert a
wetland into a tree farm would be exempt from this exhibit (M) because
trees are not an agricultural commodity, i.e., there is no conversion in
order to produce an agricultural commodity. However, before FmHA or its
successor agency under Public Law 103-354 could make the loan, the
requirements of exhibit C of this subpart would have to be met to
include an FmHA or its successor agency under Public Law 103-354 finding
that no practicable alternative exists to the conversion of the wetland.
In summary, any proposed wetland conversion that is not prohibited by
this exhibit (M) must next meet the requirements of exhibit C of this
subpart before FmHA or its successor agency under Public Law 103-354
approval of the requested financial assistance could be provided.
[53 FR 7333, Mar. 8, 1988, as amended at 53 FR 14778, April 26, 1988]
Subpart H [Reserved]
Subpart I_Truth in Lending_Real Estate Settlement Procedures
Source: 48 FR 4, Jan. 3, 1983, unless otherwise noted.
Sec. 1940.401 Truth in lending.
(a) General. This section provides instructions for compliance with
the Truth in Lending Act, as implemented by Regulation Z of the Federal
Reserve System, to assure that individual Rural Housing (RH) applicants
are informed of:
(1) The cost and terms of credit, and
(2) Their right to cancel certain credit transactions resulting in a
lien or mortgage on their home.
(b) Scope. This section applies to all individuals who apply for
loans, assumptions, or credit sales (hereafter described as
transactions) for household purposes.
(1) Special rules for the right to cancel transactions not for
purchase, acquisition or initial construction of a home broaden the
scope of this section to include individuals who have an ownership
interest in, and reside in as a principal dwelling, property which will
be security for a mortgage, even though they may not execute the
promissory note or assumption agreement. Such persons have the right to
receive credit disclosures and the notice of the right to cancel and may
cancel the transaction.
(2) This section does not apply to:
(i) Applicants who are corporations, associations, cooperatives,
public bodies, partnerships, or other organizations;
(ii) Individual applicants for multiple family housing transactions
(rural rental or labor housing), unless for a two-family dwelling in
which the applicants will reside, and other business and commercial type
loans; or
(iii) Applicants involved in credit transactions primarily for
agricultural purposes.
[[Page 83]]
(c) Disclosure of the cost and terms of credit--(1) Form and
content. Form FmHA or its successor agency under Public Law 103-354
1940-41, ``Truth in Lending Disclosure Statement,'' will be used to
provide the following required disclosures:
(i) Annual percentage rate;
(ii) Finance charge;
(iii) Amount financed;
(iv) Total of payments;
(v) Total sale price (required for credit sales only);
(vi) Payment schedule;
(vii) A separate itemization of the amount financed, if the
applicant requests it. Normally this required disclosure will have been
met in transactions subject to the Real Estate Settlement Procedures Act
(RESPA) by providing the applicant with Form FmHA or its successor
agency under Public Law 103-354 440-58, ``Estimate of Settlement
Costs'';
(viii) The lender's identity;
(ix) Prepayment or late payment penalties;
(x) Security interest;
(xi) Insurance requirements;
(xii) Assumption policy; and
(xiii) Referral to other loan documents.
(2) Timing, use of estimates and required redisclosure. (i) In
transactions for the purchase or construction of a home subject to
RESPA, Form FmHA or its successor agency under Public Law 103-354 1940-
41, completed using ``good faith'' estimates based on the best
information available, will be delivered or placed in the mail to the
applicant no later than three (3) business days after receipt of a
written application in the County Office.
(ii) In transactions not subject to RESPA, such as RH Section 502
transactions for repairs or refinancing or RH Section 504 transactions,
Form FmHA or its successor agency under Public Law 103-354 1940-41,
completed using the actual terms of the transaction, will be delivered
to each applicant (and in transactions which are subject to
cancellation, each non-applicant with the right to cancel) at the time
of loan approval.
(iii) In the event of a change in rates and terms between the time
of initial disclosure and closing, whereby the annual percentage rate
varies by more than one-eighth of one percent, redisclosure must be
made. This may be done by entering the changes on all copies of the
initial Form FmHA or its successor agency under Public Law 103-354 1940-
41, or by preparing a new Form FmHA or its successor agency under Public
Law 103-354 1940-41. When required, redisclosure may be made at the time
the transaction is approved or at the time of the change, but the form
must be delivered to the applicant before the signing of the promissory
note or assumption agreement.
(3) Special instructions for assumption, reamortization, refinancing
and multiple transactions. (i) Assumptions, within the scope of
paragraph (b) of this section, at new rates and terms or of existing
obligations which were for purchase, acquisition or initial construction
of a residence, require new credit disclosure before the assumption
occurs. Since assumptions are not subject to RESPA, early disclosure is
not required.
(ii) Reamortization, as described in 7 CFR part 3550, when the
borrower is in default or delinquent, does not require new credit
disclosure. In all other cases reamortization requires new credit
disclosure.
(iii) Refinancing of debts in accordance with 7 CFR part 3550,
though not subject to RESPA or early disclosure, does require credit
disclosure at the time the transaction is approved.
(iv) Multiple transactions.
(A) When a subsequent loan is financed along with another
transaction and both transactions require credit disclosure, a separate
Form FmHA or its successor agency under Public Law 103-354 1940-41 will
be prepared for each transaction.
(B) Transactions with multiple advances will be treated as one
transaction for the purpose of credit disclosure, in accordance with the
Forms Manual Insert (FMI) for Form FmHA or its successor agency under
Public Law 103-354 1940-41.
(d) Notice of the right to cancel. The right to cancel applies only
to transactions within the scope of paragraph (b) of this section, which
are not for purchase, acquisition or initial construction of and which
result in a
[[Page 84]]
mortgage on an individual's principal residence, such as RH Section 502
transactions for refinancing, repairs or rehabilitation or RH Section
504 transactions.
(1) Form and Content. Form FmHA or its successor agency under Public
Law 103-354 1940-43, ``Notice of Right to Cancel'', will be used to
notify individuals of their right to cancel those transactions, within
the scope of paragraphs (b) and (d) of this section, which result in a
mortgage on their principal residence except when the transaction is for
its purchase or initial construction. This notice will identify the
transaction and disclose the following:
(i) The acquisition of a security interest in the individual's
principal residence.
(ii) The individual's right to cancel the transaction.
(iii) How to exercise the right to cancel the transaction, with a
form for that purpose.
(iv) The effects of cancellation.
(v) The date the cancellation period expires.
(2) Timing. (i) Two copies of Form FmHA or its successor agency
under Public Law 103-354 1940-43, and one copy of Form FmHA or its
successor agency under Public Law 103-354 1940-41, in accordance with
the FMI's, will be given to each individual entitled to cancel, not
later than loan closing.
(ii) Any entitled individual may cancel the transaction until
midnight of the third business day following whichever of the following
events occurs last:
(A) The date the transaction is closed.
(B) The date Truth in Lending credit disclosures were made.
(C) The date notice of the right to cancel was received.
(3) Disbursement of funds. In a transaction subject to cancellation
funds will not be disbursed, other than to a designated attorney or
title insurance company preparatory to closing, until:
(i) Forms FmHA 1940-43 have been given to the appropriate
individuals,
(ii) The three-day cancellation period has expired, and
(iii) The loan approval official is reasonably assured that the
transaction has not been cancelled. This assurance may be obtained by:
(A) Waiting a reasonable period of time after the expiration of the
cancellation period to allow for the delivery of a mailed notice, or
(B) Obtaining a written statement from each individual entitled to
cancel that the right has not been exercised.
(iv) This delay in disbursing funds may be waived in cases of a
bonafide personal financial emergency, which must be met within the
cancellation period, when the individual submits a signed and dated
statement describing the nature of the emergency and waiving the right
to cancel. Such a statement must be signed by all individuals entitled
to cancel.
(4) Effects of cancellation. (i) When an individual cancels a
transaction, the mortgage securing the transaction becomes void and the
borrower will not be liable for any amount, including any finance
charge.
(ii) Within twenty (20) calendar days after receipt of a notice of
cancellation the loan approval official will:
(A) Notify all interested parties of the cancellation;
(B) Return, and/or request the return of any money or property given
to anyone in connection with the transaction; and
(C) Take the necessary action to terminate the mortgage.
(iii) Once evidence has been presented to the borrower that the
mortgage has been terminated, the borrower must return any funds
advanced by FmHA or its successor agency under Public Law 103-354 to the
FmHA or its successor agency under Public Law 103-354 County Office or
surrender any property at his/her residence within twenty (20) calendar
days.
(e) Advertisements. An advertisement is defined as a commercial
message in any medium that promotes, directly or indirectly, a credit
transaction. Advertisements for credit sales of Government inventory
property, within the scope of paragraph (b) of this section, are subject
to the following requirements.
(1) If an advertisement states specific credit terms, it shall state
only those terms that actually are or will be arranged or offered.
[[Page 85]]
(2) If an advertisement states a rate of finance charge, it shall
state the rate as an annual percentage rate, using that term.
(3) Terms requiring additional disclosures.
(i) If any of the following terms is set forth in an advertisement:
(A) The amount or percentage of any down payment,
(B) The number of payments or period of repayment,
(C) The amount of any payment, or
(D) The amount of any finance charge,
(ii) The advertisement must also state:
(A) The amount or percentage of down payment,
(B) The terms of repayment, and
(C) The annual percentage rate, using that term.
[48 FR 4, Jan. 3, 1983, as amended at 60 FR 55123, Oct. 27, 1995; 67 FR
78328, Dec. 24, 2002]
Sec. Sec. 1940.402-1940.405 [Reserved]
Sec. 1940.406 Real estate settlement procedures.
(a) General. This section provides the instructions for compliance
with the Real Estate Settlement Procedures Act (RESPA), as amended, and
Regulation X of the Department of Housing and Urban Development.
(b) Scope. (1) This section applies to loans and credit sales,
including Section 502 Rural Housing, 1-4 family Rural Rental Housing, 1-
4 family Labor Housing, and Farm Ownership involving tracts of less than
25 acres, whether made to an individual, corporation, partnership,
association or other entity, which meet the following requirements:
(i) The proceeds of the loan or the credit extended are used in
whole or in part to finance the purchase and transfer of title of the
property to be mortgaged by the borrower, and
(ii) The loan or credit sale is secured by a first lien covering
real estate on which is located a structure designed principally for the
occupancy of from 1-4 families, or on which a structure designed
principally for the occupancy of from 1-4 families is to be constructed
using proceeds of the loan.
(2) Exempt transactions include:
(i) Loans for repairs, improvements, or refinancing if the proceeds
are not used to finance the purchase of the property.
(ii) Loans to finance the construction of a 1-4 family structure if
the tract of land is already owned by the applicant/borrower.
(iii) Assumptions or transfers.
(c) Action required. (1) The information booklet entitled
``Settlement Costs'' will either be given to the applicant at the time
the completed application is received, or mailed to the applicant no
later than three (3) business days after receipt of the application in
the County Office.
(i) Form FmHA or its successor agency under Public Law 103-354 440-
58, ``Estimate of Settlement Costs,'' is to be used to provide a ``good
faith'' statement of estimated closing costs. Form FmHA or its successor
agency under Public Law 103-354 440-58 will be completed by the County
Supervisor and mailed or delivered to the applicant with the Settlement
Costs booklet. Costs will vary between geographic areas; therefore,
information supplied on this form must be based upon (A) the County
Supervisor's best estimate of charges the borrower will pay for each
service in connection with the transaction, or (B) a range of charges at
which such service is available to the borrower from all providers in
the area.
(ii) Form FmHA or its successor agency under Public Law 103-354 440-
58 does not replace Truth in Lending forms. Appropriate forms listed in
Sec. 1940.401 will be used for Truth in Lending purposes.
(2) Form FmHA or its successor agency under Public Law 103-354 1940-
59, ``Settlement Statement,'' will be completed as indicated in the form
and FMI by the designated attorney or title company for all transactions
described in paragraph (b) of this section. The purpose of this form is
to provide a uniform settlement statement prescribed by RESPA.
(i) During the business day immediately preceding the date of
settlement, the closing agent, if requested by
[[Page 86]]
the applicant, must permit the applicant to inspect the settlement
statement, completed for those items which are then known to the closing
agent.
(ii) A copy will be given to both the borrower and seller at the
time of closing or settlement or will be mailed as soon as practicable
if the borrower or seller are not present at closing.
Subparts J-K [Reserved]
Subpart L_Methodology and Formulas for Allocation of Loan and Grant
Program Funds
Source: 50 FR 24180, June 10, 1985, unless otherwise noted.
Sec. 1940.551 Purpose and general policy.
(a) The purpose of this subpart is to set forth the methodology and
formulas by which the Administrator of the Farmers Home Administration
(FmHA) or its successor agency under Public Law 103-354 allocates
program funds to the States. (The term State means any of the States of
the United States, the Commonwealth of Puerto Rico, any territory or
possession of the United States, or the Western Pacific Areas.)
(b) The formulas in this subpart are used to allocate program loan
and grant funds to State Offices so that the overall mission of the
Agency can be carried out. Considerations used when developing the
formulas include enabling legislation, congressional direction, and
administration policies. Allocation formulas ensure that program
resources are available on an equal basis to all eligible individuals
and organizations.
(c) The actual amounts of funds, as computed by the methodology and
formulas contained herein, allocated to a State for a funding period are
distributed to each State Office by an exhibit to this subpart. The
exhibit is available for review in any FmHA or its successor agency
under Public Law 103-354 State Office. The exhibit also contains
clarifications of allocation policies and provides further guidance to
the State Directors on any suballocation within the State. FmHA or its
successor agency under Public Law 103-354 will publish a Notice of
Availability of Rural Housing funds in the Federal Register each year.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988; 55
FR 29560, July 20, 1990; 56 FR 66960, Dec. 27, 1991]
Sec. 1940.552 Definitions.
(a) Amount available for allocation. Funds appropriated or otherwise
made availiable to the Agency for use in authorized programs. On
occasion, the allocation of funds to States may not be practical for a
particular program due to funding or administrative constraints. In
these cases, funds will be controlled by the National Office.
(b) Basic formula criteria, data source and weight. Basic formulas
are used to calculate a basic state factor as a part of the methodology
for allocating funds to the States. The formulas take a number of
criteria that reflect the funding needs for a particular program and
through a normalization and weighting process for each of the criteria
calculate the basic State Factor (SF). The data sources used for each
criteria is believed to be the most current and reliable information
that adequately quantifies the criterion. The weight, expressed as a
percentage, gives a relative value to the importance of each of the
criteria.
(c) Basic formula allocation. The result of multiplying the amount
available for allocation less the total of any amounts held in reserve
or distributed by base or administrative allocation times the basic
State factor for each State. The basic formula allocation (BFA) for an
individual State is equal to:
BFA=(Amount available for allocation-NO reserve-Total base and
administrative allocations)xSF.
(d) Transition formula. A formula based on a proportional amount of
previous year allocation used to maintain program continuity by
preventing large fluctuations in individual State allocations. The
transition formula limits allocation shifts to any particular State in
the event of changes from year to year of the basic formula, the basic
criteria, or the weights given the criteria. The transition formula
first checks whether the current year's
[[Page 87]]
basic formula allocation is within the transition range (+ or -
percentage points of the proportional amount of the previous year's
BFA).
[GRAPHIC] [TIFF OMITTED] TC14NO91.000
If the current year's State BFA is not within this transition range, the
State formula allocation is changed to the amount of the transition
range limit closest to the BFA amount. After having performed this
transition adjustment for each State, the sum of the funds allocated to
all States will differ from the amount of funds available for BFA. This
difference, whether a positive or negative amount, is distributed to all
States receiving a formula allocation by multiplying the difference by
the SF. The end result is the transition formula allocation. The
transition range will not exceed 40% (20%), but
when a smaller range is used it will be stated in the individual program
section.
(e) Base allocation. An amount that may be allocated to each State
dependent upon the particular program to provide the opportunity for
funding at least one typical loan or grant in each FmHA or its successor
agency under Public Law 103-354 State, District, or County Office. The
amount of the base allocation may be determined by criteria other than
that used in the basic formula allocation such as agency historic data.
(f) Administrative allocations. Allocations made by the
Administrator in cases where basic formula criteria information is not
available. This form of allocation may be used when the Administrator
determines the program objectives cannot be adequately met with a
formula allocation.
(g) Reserve. An amount retained under the National Office control
for each loan and grant program to provide flexibility in meeting
situations of unexpected or justifiable need occurring during the fiscal
year. The Administrator may make distributions from this reserve to any
State when it determined necessary to meet a program need or agency
objective. The Administrator may retain additional amounts to fund
authorized demonstration programs. When such demonstration programs
exist, the information is outlined in exhibit A of this subpart
(available in any FmFA State Office).
(h) Pooling of funds. A technique used to ensure that available
funds are used in an effective, timely and efficient manner. At the time
of pooling those funds within a State's allocation for the fiscal year
or portion of the fiscal year, depending on the type of pooling, that
have not been obligatedf by the State are placed in the National Office
reserve. The Administrator will establish the pooling dates for each
affected program.
(1) Mid-year: This pooling addresses the need to partially
redistribute funds based on use/demand. Mid-year pooling occurs near the
midpoint of the fiscal year.
(2) Year-end: This pooling is used to ensure maximum use of program
funds on a national basis. Year-end pooling usually occurs near the
first of August.
(3) Emergency: The Administrator may pool funds at any time that it
is determined the conditions upon which the initial allocation was based
have changed to such a degree that it is necessary to pool funds in
order to efficiently carry out the Agency mission.
(i) Availability of the allocation. Program funds are made available
to the Agency on a quarterly basis. In the high demand programs, it is
necessary that specific instructions by given to the State Offices
regarding the amount which is available for obligation during each
quarter.
[[Page 88]]
(j) Suballocation by the State Director. Dependent upon the
individual program for which funds are being allocated, the State
Director may be directed or given the option of suballocating the State
allocation to District or County Offices. When suballocating the State
Director may retain a portion of the funds in a State Office reserve to
provide flexibility in situations of unexpected or justified need. When
performing a suballocation the State Director will use the same formula,
criteria and weights as used by the National Office.
(k) Other documentation. Additional instructions given to field
offices regarding allocations.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. Sec. 1940.553-1940.554 [Reserved]
Sec. 1940.555 Insured Farm Operating loan funds.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria, data source and weight are:
(1) A = Farm operators with sales of $2,500 to $39,999 and less than
200 days work off farm. Source: U.S. Census of Agriculture. 15%
(2) B = Farm operators with sales of $40,000 or more and less than
200 days work off farm. Source: U.S. Census of Agriculture. 35%
(3) C = Tenant farm operators. Source: U.S. Census of Agriculture.
20%
(4) D = Three year average net farm income. Source: USDA Economic
Research Service. 15% This criterion is the inverse of the division of
the State mean net farm income by the National mean net farm income.
This inverse is used because the need for assistance is inversely
proportional to the level of net income. Limits of .5 and 1.5 are placed
in this result to limit the influence on the allocation.
(5) E=Value of farm nonreal estate assets. Source: USDA Economic
Research Service. 15%
The basic allocation formula is a two-step process. In step one, each
criterion is converted to that State's percentage of a National total,
multiplied by the weighting factor and summed to arrive at a State
Factor: Aa + Bb + Cc + Dd +Ee = STATE FACTOR where A, B, C, D, and E
represent selected Criteria expressed as a State Percentage of the U.S.
total and a, b, c, d, and e represent the Weight expressed as a
percentage, given to the selected criterion. The weight assigned each
criterion is constant for all States. The State Factor represents the
percentage of the total allocation by basic formulas that a State is to
receive and is the sum of the weighted criteria percentage for each
State. The basic formula allocation is the final step.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. Not
used.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions participating in the formula allocation process
do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Subobligation by the State Director. See Sec. 1940.552(j) of
this subpart. Suballocations by the State Director are optional.
(k) Other documentation. See Sec. 1940.552(k) of this subpart.
Sec. 1940.556 Guaranteed Farm Operating loan funds.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria, data source and weight are:
(1) A = Farm operators with sales of $2,500 to $39,999 and less than
200 days work off farm. Source: U.S. Census of Agriculture. 15%
(2) B = Farm operators with sales of $40,000 or more and less than
200 days work off farm. Source: U.S. Census of Agriculture. 35%
[[Page 89]]
(3) C = Tenant farm operators. Source: U.S. Census of Agriculture.
20%
(4) D = Three year average net farm income. Source: USDA Economic
Research Service. 15%. This criterion is the inverse of the division of
the State mean net farm income by the National mean net farm income.
This inverse is used because the need for assistance is inversely
proportional to the level of net income. Limits of .5 and 1.5 are placed
in this result to limit the influence on the allocation.
(5) E = Value of farm nonreal estate assets. Source: USDA Economic
Research Service. 15%
The basic allocation formula is a two-step process. In step one, each
criterion is converted to the State's percentage of a National total,
multiplied by the weighting factor and summed to arrive at a State
Factor: Aa + Bb + Cc + Dd + Ee = State Factor Where A, B, C, D, and E
represent selected Criteria expressed as a State Percentage of the U.S.
total and a, b, c, d, and e represent Weight expressed as a percentage,
given to the selected criterion. The weight assigned each criterion is
constant for all States. The State Factor represents the percentage of
the total allocation by basic formulas that a State is to receive and is
the sum of the weighted criteria percentage for each State. The basic
formula allocation is the final step.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. Not
used.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions participating in the formula allocation process
do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Suballocations by the State Director are optional.
(k) Other Documentation. See Sec. 1940.552(k) of this subpart.
Sec. 1940.557 Insured Farm Ownership loan funds.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria, data source and weight are:
(1) A = Farm operators with sales of $2,500 to $39,999 and less than
200 days work off farm. Source: U.S. Census of Agriculture. 15%
(2) B = Farm operators with sales of $40,000 or more and less than
200 days work off farm. Source: U.S. Census of Agriculture. 35%
(3) C = Tenant farm operations. Source: U.S. Census of Agriculture.
25%
(4) D = Three-year average net farm income. Source: USDA Economic
Research Service. 15%. This criterion is the inverse of the division of
the State mean net farm income by the National mean net farm income.
This inverse is used because the need for assistance is inversely
proportional to the level of net income. Limits of .5 and 1.5 are placed
in this result to limit the influence of the allocation.
(5) E = Value of farm real estate assets. Source: USDA Economic
Research Service. 10%.
The basic allocation formula is a two-step process. In step one, each
criterion is converted to that State's percentage of a National total,
multiplied by the weighting factor and summed to arrive at a State
Factor: Aa + Bb + Cc + Dd +Ee = State Factor where A, B, C, D, and E
represent selected Criteria expressed as a State Percentage of the U.S.
total and a, b, c, d, and e represent Weight expressed as a percentage,
given to the selected criterion. The weight assigned each criterion is
constant for all States. The State Factor represents the percentage of
the total allocation by basic formulas that a State is to receive and is
the sum of the weighted criteria percentage for each State. The basic
formula allocation is the final step.
[[Page 90]]
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
transition range is plus or minus 15%.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions participating in the formula allocation process
do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.522(h) of this subpart.
(i) Availability of the allocation. A portion of the allocation will
be targeted to the State's rural socially disadvantaged population. The
amount of the targeted funds for each state is equal to the State's
rural socially disadvantaged population divided by the State's total
rural population multiplied by the State's total fiscal year Insured
Farm Ownership allocation. Source of data is U.S. Census 1980.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Suballocations by the State Director are optional.
(k) Other documentation. See Sec. 1940.552(k) of this subpart.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. 1940.558 Guaranteed Farm Ownership loan funds.
(a) Amount available for allocation. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria, data source and weight are:
(1) A = Farm operators with sales of $2,500 to $39,999 and less than
200 days work off farm. Source: U.S. Census of Agriculture. 15%
(2) B = Farm operators with sales of $40,000 or more and less than
200 days work off farm. Source: U.S. Census of Agriculture. 35%
(3) C = Tenant farm operations. Source: U.S. Census of Agriculture.
25%
(4) D = Three year average net farm income. Source: USDA Economic
Research Service. 15%. This criterion is the inverse of the division of
the State mean net farm income by the National mean net farm income.
This inverse is used because the need for assistance is inversely
proportional to the level of net income. Limits of .5 and 1.5 are placed
in this result to limit the influence on the allocation.
(5) E = Value of farm real estate assets. Source: USDA Economic
Research Service. 10%
The basic allocation formula is a two-step process. In step one, each
criterion is converted to that State's percentage of a National total,
multiplied by the weighting factor and summed to arrive at a State
Factor: Aa + Bb + Cc +Dd + Ee = State Factor where A, B, C, D, and E
represent selected Criteria expressed as a State Percentage of the U.S.
total and a, b, c, d, and e represent the Weight expressed as a
percentage, given to the selected criterion. The weight assigned each
criterion is constant for all States. The State Factor represents the
percentage of the total allocation by basic formulas that a State is to
receive and is the sum of the weighted criteria percentage for each
State. The basic formula allocation is the final step.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. Not
used.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations: See Sec. 1940.552(f) of this
subpart. Jurisdictions participating in the formula allocation process
do not have administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Suballocations by the State Director are optional.
(k) Other documentation. See Sec. 1940.552(k) of this subpart.
[[Page 91]]
Sec. 1940.559 Farmer Programs and Indian Land Acquisition
appropriations not allocated by State.
(a) Emergency Disaster. State allocations are not made since it is
impossible to predict occurrences. Obligating documents may be submitted
to the Finance Office as loans are approved in designated areas. This
type loan is available only in areas designated as disaster areas.
Designations may be by a single county, multiple of counties or areas,
depending upon scope and severity.
(b) Soil and Water. Funds are not allocated to States. Program size
does not permit equitable distribution. Obligation of funds are on a
first-come, first-served basis, subject to availability.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. 1940.560 Guarantee Rural Rental Housing Program.
When funding levels are under $100,000,000, all funds will be held
in a National Office reserve and made available administratively in
accordance with the Notice of Funding Availability (NOFA) and program
regulations. When program levels are sufficient for a nationwide
program, funds are allocated based upon the following criteria and
weights.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart .
Each factor will receive a weight respectively of 40%, 40% and 20%.
The criteria used in the basic formula are:
(1) State's percentage of National rural population,
(2) State's percentage of the National number of rural households
between 50 and 115 percent of the area median income, and
(3) State's percentage of National average cost per unit. Data
source for the first two of these criterion are based on the latest
census data available. The third criterion is based on the cost per unit
data using the applicable maximum per unit dollar amount limitations
under section 207(c) of the National Housing Act, which can be obtained
from the Department of Housing and Urban Development. The percentage
representing each criterion is multiplied by the weight assigned and
totaled to arrive at a State factor.
State Factor = (criterion No. 1 x weight of 40%)+ (criterion No. 1 x
weight of 40%)+ (criterion No. 1 x weight of 20%)
(c) Basic formula allocation. See Sec. 1940.552(c).
(d) Transition formula. See Sec. 1940.552(d).
(e) Base allocation. See Sec. 1940.552(e). Jurisdictions receiving
administrative allocations do not receive base allocations.
(f) Administrative allocations. See Sec. 1940.552(f). Jurisdictions
receiving formula allocations do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.552(h).
(i) Availability of the allocation. See Sec. 1940.552(i).
(j) Suballocation by the State Director. See Sec. 1940.552(j).
(k) Other documentation. Not applicable.
[63 FR 39458, July 22, 1998]
Sec. Sec. 1940.561-1940.562 [Reserved]
Sec. 1940.563 Section 502 non-subsidized guaranteed Rural Housing
(RH) loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552 (b) of this subpart. The criteria used in the basic formula
are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population in places of
less than 2,500 population,
(3) State's percentage of the national number of rural households
between 80 and 100 percent of the area median income, and
(4) State's percentage of the national number of rural renter
households paying more than 35 percent of income for rent.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage
[[Page 92]]
representing each criterion is multiplied by the weight factor and
summed to arrive at a basic State factor (SF) as follows:
SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for Section 502 guaranteed RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Annually, the Administrator will advise State Director's
whether or not suballocation within the State Office jurisdiction will
be required for the guaranteed Housing program.
(k) Other documentation. Not applicable.
[56 FR 10509, Mar. 13, 1991]
Sec. 1940.564 Section 502 subsidized guaranteed Rural Housing loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population in places of
less than 2,500 population,
(3) State's percentage of the national number of rural households
below 80 percent of the area median income, and
(4) State's percentage of the national number of rural renter
households paying more than 35 percent of income for rent.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF) as follows:
SF = (criterion 1 x weight of 30%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 30%) + (criterion 4 x weight of 30%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 502 guaranteed RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administration allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. Annually, the Administrator will advise
[[Page 93]]
State Director's whether or not suballocation within the State Office
jurisdiction will be required for the guaranteed Housing program.
(k) Other documentation. Not applicable.
[56 FR 10509, Mar. 13, 1991]
Sec. 1940.565 Section 502 subsidized Rural Housing loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population,
(3) State's percentage of the National rural population in places of
less than 2,500 population,
(4) State's percentage of the National number of rural households
between 50 and 80 percent of the area median income, and
(5) State's percentage of the National number of rural households
below 50 percent of the area median income.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF)
SF = (criterion 1 x weight of 25%) + (criterion 2 x weight of 10%) +
(criterion 3 x weight of 15%) + (criterion 4 x weight of 30%) +
(criterion 5 x weight of 20%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for Section 502 subsidized RH loans is plus or
minus 15.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. The State Director will suballocate funds to the District
Offices and may, at his/her option, suballocate to the County Offices.
The State Director will use the same basic formula criteria, data source
and weight for suballocating funds within the State as used by the
National Office in allocating to the States as described in Sec.
1940.565 (b) and (c) of this section. The suballocations to District or
County Offices will not be reduced or restricted unless written approval
is received from the National Office in response to a written request
from the State Director. The State Director's request must include the
reasons for the requested action (e.g., high housing inventory and/or
high housing delinquency).
(k) Other documentation. The percentage distribution of funds to the
States by income levels is based on prevailing legislation.
Sec. 1940.566 Section 504 Housing Repair loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b). The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units, and
(2) State's percentage of the National number of rural households
below 50 percent of area median income.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage
[[Page 94]]
representing each criterion is multiplied by the weight factor and
summed to arrive at a basic State factor (SF).
SF = (criterion No. 1 x weight of 50%) + (criterion No. 2 x weight of
50%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 504 Housing Repair Loans is plus or
minus 15.
(e) Base allocation. Not used.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. At the option of the State Director, section 504 loan
funds may be suballocated to the District Offices. When performing a
suballocation, the State Director will use the same basic formula
criteria, data source and weight for suballocating funds within the
State as used by the National Office in allocating to the States as
described in Sec. 1940.566 (b) and (c) of this section.
(k) Other documentation. Not applicable.
Sec. 1940.567 Section 504 Housing Repair grants.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart. The criteria used in the basic formula are:
(1) State's percentage of the National number of rural occupied
substandard units,
(2) State's percentage of the National rural population 62 years and
older, and
(3) State's percentage of the National number of rural households
below 50 percent of area median income.
Data source for each of these criteria is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight factor and summed to arrive at a
basic State factor (SF).
SF = (criterion No. 1 x weight of 33\1/3\%) + (criterion No. 2 x weight
of 33\1/3\%) + (criterion No. 3 x weight of 33\1/3\%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range used for section 504 Housing Repair grants is plus or
minus 15.
(e) Base allocation. Not used.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(1) Mid-year: If used in a particular fiscal year, available funds
unobligated as of the pooling date are pooled and redistributed based on
the formula used to allocate funds initially.
(2) Year-end: Pooled funds are placed in a National Office reserve
and are available as determined administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. At the option of the State Director, section 504 grant
funds may be suballocated to the District Offices. When performing a
suballocation, the State Director will use the same basic formula
criteria, data source and weight for suballocating funds within the
State as used by the National Office in allocating to the States as
described in Sec. 1940.567 (b) and (c) of this section.
(k) Other documentation. Not applicable.
[[Page 95]]
Sec. 1940.568 Single Family Housing programs appropriations not
allocated by State.
The following program funds are kept in a National Office reserve
and are available as determined administratively:
(a) Section 523 Self-Help Technical Assistance Grants.
(b) Section 523 Land Development Fund.
(c) Section 524 Rural Housing Site Loans.
(d) Section 509 Compensation for Construction Defects.
(e) Section 502 Nonsubsidized Funds.
Sec. 1940.569-1940.574 [Reserved]
Sec. 1940.575 Section 515 Rural Rental Housing (RRH) loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
The criteria used in the basic formula area:
(1) State's percentage of National rural population,
(2) State's percentage of National number of rural occupied
substandard units, and
(3) State's percentage of National rural families with incomes below
the poverty level.
Data source for each of these criterion is based on the latest census
data available. Each criterion is assigned a specific weight according
to its relevance in determining need. The percentage representing each
criterion is multiplied by the weight assigned and summed to arrive at a
State factor (SF).
SF = (criterion No. 1 x weight of 33\1/3\%) + (criterion No. 2 x weight
of 33\1/3\%) + (criterion No. 3 x weight of 33\1/3\%)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.522(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[53 FR 26229, July 12, 1988]
Sec. 1940.576 Rental Assistance (RA) for new construction.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.575(b) of this subpart.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[53 FR 26229, July 12, 1988]
Sec. 1940.577 Rental Assistance (RA) for existing projects.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart. RA appropriated for existing projects will first be used to
replace contracts expiring each fiscal year and for the first few months
of the following fiscal year. This is done to assure continued RA
funding. RA units not needed for replacement purposes will be used for
existing multiple family housing projects experiencing servicing
problems.
[[Page 96]]
(b) Basic formula criteria, data source and weight. No formula or
weighted criteria is used to allocate replacement RA. The basic
allocation for replacement RA will be made based on the following:
(1) Criteria. This allocation is based on the estimated need to
replace RA contracts expiring from the depletion of funds.
(2) Date source. The most accurate and current information available
from FmHA or its successor agency under Public Law 103-354 computerized
data sources.
(c) Basic formula allocation. While no formula will be used, the
basic allocation will be made to each State according to the need
determined using the basic criteria.
(d) Transition formula. Not applicable.
(e) Base allocation. Not applicable.
(f) Administrative allocation. Not applicable.
(g) Reserve. See Sec. 1940.552(g) of this subpart. The National
Office maintains a reserve adequate to compensate for the differences
between actual and projected replacement activity. Units will be
administratively distributed for existing housing to either satisfy
previously unidentified replacement needs or address servicing
situations. Units will be distributed to any State when the
Administrator determines that additional allocations are necessary and
appropriate.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Units
will be pooled at the Administrator's discretion.
(i) Obligation of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart.
(k) Other documentation. Not applicable.
[49 FR 3727, Jan. 30, 1984, as amended at 53 FR 26229, July 12, 1988]
Sec. 1940.578 Housing Preservation Grant (HPG) program.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.575(b) of this subpart.
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart.
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart.
(g) Reserve. See Sec. 1940.552(g) of this subpart.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds
may be pooled after all HPG applications have been received and HPG fund
demand by State has been determined. Pooled funds will be combined with
the National Office reserve to fund eligible projects. Remaining HPG
funds will be available for distribution for use under the Section 504
program.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart.
(j) Suballocation by the State Director. Not applicable.
(k) Other documentation. Funds for the HPG program will be available
for a limited period each fiscal year. Due to the requirements by law to
allocate funds on a formula basis to all States and to have a
competitive selection process for HPG project selection, FmHA or its
successor agency under Public Law 103-354 will announce opening and
closing dates for receipt of HPG applications. After the closing date,
FmHA or its successor agency under Public Law 103-354 will review and
evaluate the proposals, adjust State allocations as necessary to comply
with the law and program demand, and redistribute remaining unused HPG
resources for use under Section 504 (as required by statute).
[53 FR 26229, July 12, 1988]
Sec. 1940.579 Multiple Family Housing appropriations not allocated
by State.
Funds are not allocated to States. The following program funds are
kept in a National Office reserve and are available as determined
administratively:
(a) Section 514 Farm Labor Housing Loans.
(b) Section 516 Farm Labor Housing Grants.
[64 FR 24480, May 6, 1999]
[[Page 97]]
Sec. Sec. 1940.580-1940.584 [Reserved]
Sec. 1940.585 Community Facility loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) Data source for each of these criterion is based on the latest
census data available. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion is multiplied by the weight factor and
summed to arrive at a State factor (SF). The SF cannot exceed .05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
States receiving administrative allocations do not receive formula
allocations.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range for the transition formula equals 30 percent (15%).
(e) Base allocation. See Sec. 1940.552(e) of this subpart. States
receiving administrative allocations do not receive base allocations.
(f) Administrative allocation. See Sec. 1940.552(f) of this
subpart. States participating in the formula base allocation procedures
do not receive administrative allocations.
(g) Reserve. See Sec. 1940.552(g) of this subpart. States may
request funds by forwarding a completed copy of guide 26 of subpart A of
part 1942 of this chapter (available in any FmHA or its successor agency
under Public Law 103-354 office), to the National Office. Generally, a
request for additional funds will not be honored unless the State has
insufficient funds to obligate the loan requested.
(h) Pooling of funds. See Sec. 1940.552(h) of this subpart. Funds
are generally pooled at mid-year and year-end. Pooled funds will be
placed in the National Office reserve and will be made available
administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. The allocation of funds is made available for States to
obligate on an annual basis although the Office of Management and Budget
apportions it to the Agency on a quarterly basis.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. State Director has the option to suballocate to District
Offices.
(k) Other documentation. Not applicable.
[50 FR 24180, June 10, 1985, as amended at 58 FR 54485, Oct. 22, 1993]
Sec. Sec. 1940.586-1940.587 [Reserved]
Sec. 1940.588 Business and Industry Guaranteed and Direct Loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) Data source for each of these criterion is based on the latest
census data available. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion is multiplied by the weight factor and
summed to arrive at a State factor (SF). The SF cannot exceed .05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. The transition formula is not used for B&I
Guaranteed and Direct Loans.
[[Page 98]]
(e) Base allocations. See Sec. 1940.552(e) of this subpart.
Jurisdictions receiving administrative allocations do not receive base
allocations.
(f) Administrative allocations. See Sec. 1940.552(f) of this
subpart. Jurisdictions receiving formula allocations do not receive
initial administrative allocations.
(g) Reserve. See Sec. 1940.552(g). States may request reserve funds
from the B&I reserve when all of the state allocation has been obligated
or will be obligated to the project for which the request is made.
(h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near
fiscal year-end. Pooled funds will be placed in a reserve and made
available on a priority basis to all States.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. There is a 6-day waiting period from the time project funds are
reserved to the time they are obligated.
(j) Suballocation by the State Director. Suballocation by the State
Director is authorized for this program.
[50 FR 24180, June 10, 1985, as amended at 58 FR 54486, Oct. 22, 1993;
68 FR 14528, Mar. 26, 2003]
Sec. 1940.589 Rural Business Enterprise Grants.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) Data source for each of these criterion is based on the latest
census data available. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion is multiplied by the weight factor and
summed to arrive at a State factor (SF). The SF cannot exceed .05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
(d) Transition formula. See Sec. 1940.552(d) of this subpart. The
percentage range for the transition equals 30 percent (15%).
(e) Base allocation. See Sec. 1940.552(e) of this subpart.
(f) Administrative allocation. Not used.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near
fiscal year-end. Pooled funds will be placed in the National Office
reserve and will be made available administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. The allocation of funds is made available for States to
obligate on an annual basis although the Office of Management and Budget
apportions funds to the Agency on a quarterly basis.
(j) Suballocation by the State Director. See Sec. 1940.552(j) of
this subpart. State Director has the option to suballocate to District
Offices.
[53 FR 26230, July 12, 1988, as amended at 57 FR 33099, July 27, 1992;
58 FR 54486, Oct. 22, 1993; 68 FR 14528, Mar. 26, 2003; 69 FR 5264, Feb.
4, 2004]
Sec. 1940.590 [Reserved]
Sec. 1940.591 Community Program Guaranteed loans.
(a) Amount available for allocations. See Sec. 1940.552(a) of this
subpart.
(b) Basic formula criteria, data source and weight. See Sec.
1940.552(b) of this subpart.
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) Data source for each of these criterion is based on the latest
census data available. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion
[[Page 99]]
is multiplied by the weight factor and summed to arrive at a State
factor (SF). The SF cannot exceed .05.
SF = (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 25
percent) + (criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c) of this subpart.
States receiving administrative allocations do not receive formula
allocations.
(d) Transition formula. The transition formula for Community Program
Guaranteed loans is not used.
(e) Base allocation. See Sec. 1940.552(e) of this subpart. States
receiving administrative allocations do not receive base allocations.
(f) Administrative allocation. See 1940.552(f) of this subpart.
States participating in the formula base allocation procedures do not
receive administrative allocations.
(g) Reserve. See Sec. 1940.522(g) of this subpart. States may
request funds by forwarding a request following the format found in
guide 26 of subpart A of part 1942 of this chapter (available in any
FmHA or its successor agency under Public Law 103-354 office), to the
National Office. Generally, a request for additional funds will not be
honored unless the State has insufficient funds from the State's
allocation to obligate the loan requested.
(h) Pooling of funds. See Sec. 1940.522(h) of this subpart. Funds
are generally pooled at mid-year and year-end. Pooled funds will be
placed in the National Office reserve and will be made available
administratively.
(i) Availability of the allocation. See Sec. 1940.552(i) of this
subpart. The allocation of funds is made available for States to
obligate on an annual basis although the Office of Management and Budget
apportions it to the Agency on a quarterly basis.
(j) Suballocation by State Director. See Sec. 1940.552(j) of this
subpart. State Director has the option to suballocate to District
Offices.
(k) Other documentation. Not applicable.
[55 FR 11134, Mar. 27, 1990, as amended at 58 FR 54486, Oct. 22, 1993]
Sec. 1940.592 Community facilities grants.
(a) Amount available for allocations. See Sec. 1940.552(a).
(b) Basic formula criteria, data source, and weight. See Sec.
1940.552(b).
(1) The criteria used in the basic formula are:
(i) State's percentage of National rural population--50 percent.
(ii) State's percentage of National rural population with income
below the poverty level--50 percent.
(2) Data source for each of these criterion is based on the latest
census data available. Each criterion is assigned a specific weight
according to its relevance in determining need. The percentage
representing each criterion is multiplied by the weight factor and
summed to arrive at a State factor (SF).
SF (criterion (b)(1)(i) x 50 percent) + (criterion (b)(1)(ii) x 50
percent)
(c) Basic formula allocation. See Sec. 1940.552(c). States
receiving administrative allocations do not receive formula allocations.
(d) Transition formula. The transition formula for Community
Facilities Grants is not used.
(e) Base allocation. See Sec. 1940.552(e). States receiving
administrative allocations do not receive base allocations.
(f) Administrative allocation. See Sec. 1940.552(f). States
participating in the formula base allocation procedures do not receive
administrative allocations.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.522(h). Funds will be pooled at
midyear and yearend. Pooled funds will be placed in the National Office
reserve and will be made available administratively.
(i) Availability of the allocation. See Sec. 1940.552(i).
(j) Suballocation by State Director. See Sec. 1940.552(j).
(k) Other documentation. Not applicable.
[62 FR 16468, Apr. 7, 1997]
Sec. 1940.593 Rural Business Opportunity Grants.
(a) Amount available for allocations. See Sec. 1940.552(a).
(b) Basic formula criteria, data source, and weight. See Sec.
1940.552(b).
[[Page 100]]
(1) The criteria used in the basic formula are:
(i) State's percentage of national rural population--50 percent.
(ii) State's percentage of national rural population with incomes
below the poverty level--25 percent.
(iii) State's percentage of national nonmetropolitan unemployment--
25 percent.
(2) The data source for each criterion is based on the latest census
data available. The percentage representing each criterion is multiplied
by the weight factor and added to arrive at a State Factor (SF). The SF
cannot exceed .05.
SF = (criterion (b)(1)(i) x 50 percent) +
(criterion (b)(1)(ii) x 25 percent) +
(criterion (b)(1)(iii) x 25 percent)
(c) Basic formula allocation. See Sec. 1940.552(c).
(d) Transition formula. The transition formula is not used for Rural
Business Opportunity Grants (RBOG).
(e) Base allocation. See Sec. 1940.552(e).
(f) Administrative allocation. The administrative allocation is not
used for RBOG.
(g) Reserve. See Sec. 1940.552(g).
(h) Pooling of funds. See Sec. 1940.552(h). Funds are pooled near
fiscal year-end. Pooled funds will be placed in the National Office
reserve and will be made available administratively.
(i) Availability of the allocation. See Sec. 1940.552(i). The
allocation of funds is made available to States on an annual basis.
(j) Suballocation by the State Director. Suballocation by the State
Director is authorized for this program.
[68 FR 14528, Mar. 26, 2003; 68 FR 17153, Apr. 8, 2003]
Sec. Sec. 1940.594-1940.600 [Reserved]
Exhibit A to Subpart L of Part 1940 [Reserved]
Exhibit B to Subpart L of Part 1940--Section 515 Nonprofit Set Aside
(NPSA)
I. Objective: To provide eligible nonprofit entities with a
reasonable opportunity to utilize section 515 funds.
II. Background: The Cranston-Gonzalez National Affordable Housing
Act of 1990 established the statutory authority for the section 515 NPSA
funds.
III. Eligible entities. Amounts set aside shall be available only
for nonprofit entities in the State, which may not be wholly or
partially owned or controlled by a for-profit entity. An eligible entity
may include a partnership, including a limited partnership, that has as
its general partner a nonprofit entity or the nonprofit entity's for-
profit subsidiary which will be receiving low-income housing tax credits
authorized under section 42 of the Internal Revenue Code of 1986. For
the purposes of this exhibit, a nonprofit entity is an organization
that:
A. Will own an interest in a project to be financed under this
section and will materially participate in the development and the
operations of the project; and
B. Is a private organization that has nonprofit, tax exempt status
under section 501(c)(3) or section 501(c)(4) of the Internal Revenue
Code of 1986; and
C. Has among its purposes the planning, development, or management
of low-income housing or community development projects; and
D. Is not affiliated with or controlled by a for-profit
organization; and
E. May be a consumer cooperative, Indian tribe or tribal housing
authority.
IV. Nondiscrimination. Rural Development reemphasizes the
nondiscrimination in use and occupancy and location requirements of 7
CFR 3560.104.
V. Amount of Set Aside. See Attachment 1 of this exhibit (available
in any FmHA or its successor agency under Public Law 103-354 State
Office):
A. Small State Allocation Set Aside (SSASA). The allocation for
small States has been reserved and combined to form the SSASA, as shown
in Attachment 1 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office). The definition of small
State is included in Attachment 1 of this exhibit (available in any FmHA
or its successor agency under Public Law 103-354 State Office).
B. Large State Allocation Set Aside (LSASA). The allocation for
large States has been reserved in the amounts shown in Attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office). The definition of large State is included in
Attachment 1 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office).
C. NPSA Rental Assistance (RA). NPSA RA has been reserved in the
National Office as shown in Attachment 1 of this exhibit (available in
any FmHA or its successor agency under Public Law 103-354 State Office).
VI. Access to NPSA funds and RA. RA is available and may be
requested, as needed, with eligible loan requests. NPSA funds and
[[Page 101]]
RA should be requested by the State Director using a format similar to
Attachment 2 of this exhibit (available in any FmHA or its successor
agency under Public Law 103-354 State Office). Funds are available as
follows:
A. SSASA: The SSASA is available to any SSASA State on a first-come-
first-served basis until pooling. See Attachment 3 of this exhibit
(available in any FmHA or its successor agency under Public Law 103-354
State Office) for information regarding pooling.
B. LSASA: LSASA states may request LSASA funds up to the amount the
state contributed to LSASA until pooling. See Attachment 3 of this
exhibit (available in any FmHA or its successor agency under Public Law
103-354 State Office) for information regarding pooling.
VII. General Information on priority/processing of Preapplications.
A. Preapplications/applications for assistance from eligible
nonprofit entities under this subpart must continue to meet all loan
making requirements of 7 CFR part 3560, subpart B.
B. A separate processing list will be maintained for NPSA loan
requests.
C. The State Director may issue Form AD-622, ``Notice of
Preapplication Review Action'', requesting a formal application to the
highest ranking preapplication(s) from eligible nonprofit entities
defined in paragraph III of this exhibit as follows:
1. LSASA. In LSASA States, AD-622s may not exceed 150 percent of the
amount the State contributed to the LSASA. No single Form AD-622 may
exceed the amount of funds the State contributed to LSASA.
2. SSASA. In SSASA States, AD-622s should not exceed the greater of
$750,000 or 150 percent of the amount the State contributed to the
SSASA; except that the State Director in a SSASA State may request
authorization to issue a Form AD-622, in an amount in excess of $750,000
if additional funds are necessary to finance an average-size proposal
based upon average construction costs in the state. For example, if the
average size proposal currently being funded in the state is 24 units,
and the average construction cost in the state is $35,000 per unit, the
state may request authorization to issue an AD-622 for $840,000. The
State Director will submit such requests to the National Office
including data reflecting average size/cost projects in the State. No
single Form AD-622 may exceed the amount of funds the State may receive
from SSASA.
D. All AD-622s issued for proposals to be funded from NPSA will be
subject to the availability of NPSA funds. Form AD-622 should contain
the following or similar language: ``This Form AD-622 is issued subject
to the availability of Nonprofit Set-Aside (NPSA) funds.''
E. If a preapplication requesting NPSA funds has sufficient priority
points to compete with non-NPSA loan requests based upon the District or
State allocation (as applicable), the preapplication will be maintained
on both the NPSA and non-NPSA rating/ranking lists.
F. Provisions for providing preference to loan requests from
nonprofit organizations is contained in 7 CFR 3560.56. Limited
partnerships, with a nonprofit general partner, do not qualify for
nonprofit preference.
VIII. Exception authority. The Administrator, or his/her designee,
may, in individual cases, make an exception to any requirements of this
exhibit which are not inconsistent with the authorizing statute, if he/
she finds that application of such requirement would adversely affect
the interest of the Government or adversely affect the intent of the
authorizing statute and/or Rural Rental Housing program or result in an
undue hardship by applying the requirement. The Administrator, or his/
her designee, may exercise this authority upon the request of the State
Director, Assistant Administrator for Housing, or Director of the Multi-
Family Housing Processing Division. The request must be supported by
information that demonstrates the adverse impact or effect on the
program. The Administrator, or his/her designee, also reserves the right
to change pooling dates, establish/change minimum and maximum fund usage
from NPSA, or restrict participation in the set aside.
[58 FR 38950, July 21, 1993, as amended at 69 FR 69104, Nov. 26, 2004]
Exhibit C to Subpart L of Part 1940--Housing in Underserved Areas
I. Objective
A. To improve the quality of affordable housing by targeting funds
under Rural Housing Targeting Set Aside (RHTSA) to designated areas that
have extremely high concentrations of poverty and substandard housing
and have severe, unmet rural housing needs.
B. To provide for the eligibility of certain colonias for rural
housing funds.
II. Background
The Cranston-Gonzalez National Affordable Housing Act of 1990
(herein referred to as the ``Act'') requires that Farmers Home
Administration (FmHA) or its successor agency under Public Law 103-354
set aside section 502, 504, 514, 515, and 524 funds for assistance in
targeted, underserved areas. An appropriate amount of section 521 new
construction rental assistance (RA) is set aside for use with seciton
514 and 515 loan programs. Under the Act, certain colonias are now
eligible for FmHA or its successor agency under Public Law 103-354
housing assistance.
[[Page 102]]
III. Colonias
A. Colonia is defined as any identifiable community that:
1. Is in the State of Arizona, California, New Mexico or Texas;
2. Is in the area of the United States within 150 miles of the
border between the United States and Mexico, except that the term does
not include any standard metropolitan statistical area that has a
population exceeding 1 million;
3. Is designated by the State or county in which it is located as a
colonia;
4. Is determined to be a colonia on the basis of objective criteria,
including lack of potable water supply, lack of adequate sewage systems,
and lack of decent, safe, and sanitary housing; and
5. Was in existence and generally recognized as a colonia before
November 28, 1990.
B. Requests for housing assistance in colonias have priority as
follows:
1. When the State did not obligate its allocation in one or more of
its housing programs during the previous 2 fiscal years (FYs), priority
will be given to requests for assistance, in the affected program(s),
from regularly allocated funds, until an amount equal to 5 percent of
the current FY program(s) allocation is obligated in colonias. This
priority takes precedence over other processing priority methods.
2. When the State did obligate its allocation in one or more of its
housing programs during the previous 2 FYs, priority will be given to
requests for assistance, in the affected program(s), from RHTSA funds,
until an amount equal to 5 percent of the current FY program(s)
allocation is obligated in colonias. This priority takes precedence over
other processing priority methods.
C. Colonias may access pooled RHTSA funds as provided in paragraph
IV G of this exhibit.
IV. RHTSA
A. Amount of Set Aside. Set asides for RHTSA, from the current FY
allocations, are established in attachment 1 of this exhibit (available
in any FmHA or its successor agency under Public Law 103-354 State
Office).
B. Selection of Targeted Counties--1. Eligibility. Eligible counties
met the following criteria: (1) 20 percent or more of the county
population is at, or below, poverty level; (2) 10 percent or more of the
occupied housing units are substandard; and (3) the average funds
received on a per capita basis in the county, during the previous 5 FYs,
were more than 40 percent below the State per capita average during the
same period. Data from the most recent available Census was used for all
three criteria, with criteria (2) and (3) based on the FmHA or its
successor agency under Public Law 103-354 rural area definition.
2. Selection. The Act requires that 100 of the most underserved
counties be initially targeted for RHTSA funds. In establishing the 100
counties, those with 28 percent or more of their population at, or
below, poverty level and 13 percent or more of their occupied housing
units substandard, have preference. If less than 100 counties meet this
criteria, the remaining counties meeting the criteria in paragraph IV B
1 of this exhibit will be ranked, based upon a total of their
substandard housing and poverty level percentages. The highest-ranking
counties are then selected until the list reaches 100. The remaining
counties are eligible for pool funds only.
C. State RHTSA Levels. In the section 502, 504, and 515 programs,
each State's RHTSA level will be based on its number of eligible
counties, with each county receiving a pro rata share of the total funds
available. In order to ensure that a meaningful amount of assistance is
available to each State, minimum funding levels may be established. When
minimum levels are established, they are set forth on Attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office).
D. Use of Funds. To maximize the assistance to targeted counties,
allocated program funds should be used in addition to RHTSA funds, where
possible. The State Director has the discretion to determine the most
effective delivery of RHTSA funds among the targeted counties within
his/her jurisdiction. The 100 counties listed in attachment 2 of this
exhibit (available in any FmHA or its successor agency under Public Law
103-354 State Office) are eligible for RHTSA funding consideration
immediately. Colonias are also eligible for RHTSA funds as described in
paragraph III of this exhibit.
E. National Office RHTSA Reserve. A limited National Office reserve
is available on an individual case basis when the State is unable to
fund a request from its regular or RHTSA allocation. The amount of the
reserve, and the date it can be accessed and any conditions thereof, if
applicable, are contained in attachment 1 of this exhibit (available in
any FmHA or its successor agency under Public Law 103-354 State Office).
F. Requests for Funds and RA. All RHTSA funds are reserved in the
National Office and requests for these funds and/or RA units must be
submitted by the State Director, using the applicable format shown on
attachment 4 or 5 of this exhibit (available in any FmHA or its
successor agency under Public Law 103-354 State Office). The State
Director is responsible for notifying the Director of Single Family
Housing Processing Division (SFHPD) or Multi-Family Housing Processing
Division (MFHPD) of any RHTSA
[[Page 103]]
funds and RA units authorized, but not obligated, by RHTSA pooling date.
G. Pooling. Unused RHTSA funds and RA will be pooled. Pooling dates
and any pertinent information thereof are available on attachment 1 of
this exhibit (available in any FmHA or its successor agency under Public
Law 103-354 State Office). Pooled funds will be available on a first-
come, first-served basis to all eligible colonias and all counties
listed on attachments 2 and 3 of this exhibit (available in any FmHA or
its successor agency under Public Law 103-354 State Office). Pooled
RHTSA funds will remain available until the year-end pooling date.
H.-I. [Reserved]
J. Requests for Assistance. Requests for assistance in targeted
counties must meet all loan making requirements of the applicable
program Instructions, except as modified for colonias in paragraph III
of this exhibit. For section 515, States may:
1. Issue Form AD-622, ``Notice of Preapplication Review Action,'' up
to 150 percent of the amount shown in attachment 1 of this exhibit
(available in any FmHA or its successor agency under Public Law 103-354
State Office).
2. All AD-622s issued for applicants in targeted counties will be
annotated, in Item 7, under ``Other Remarks,'' with the following:
``Issuance of this AD-622 is contingent upon receiving funds from the
Rural Housing Targeting Set Aside (RHTSA). Should RHTSA funds be
unavailable, or the county in which this project will be located is no
longer considered a targeted county, this AD-622 will no longer be
valid. In these cases, the request for assistance will need to compete
with other preapplications in non-targeted counties, based upon its
priority point score.''
V. [Reserved]
[57 FR 3924, Feb. 3, 1992]
Subparts M-S [Reserved]
Subpart T_System for Delivery of Certain Rural Development Programs
Source: 57 FR 11559, Apr. 6, 1992, unless otherwise noted.
Sec. 1940.951 General.
This subpart sets forth Farmers Home Administration (FmHA) or its
successor agency under Public Law 103-354 policies and procedures for
the delivery of certain rural development programs under a rural
economic development review panel established in eligible States
authorized under sections 365, 366, 367, and 368 of the Consolidated
Farm and Rural Development Act (7 U.S.C. 1921 et seq.), as amended.
(a) If a State desires to participate in this pilot program, the
Governor of the State may submit an application to the Under Secretary
for Small Community and Rural Development, U.S. Department of
Agriculture, room 219-A, Administration Building, Washington, DC 20250
in accordance with Sec. 1940.954 of this subpart.
(b) The Under Secretary shall designate not more than five States in
which to make rural economic development review panels applicable during
any established time period for the purpose of reviewing and ranking
applications submitted for funding under certain rural development
programs. The following time periods have been established for
participation in this pilot program:
First period--Balance of fiscal year (FY) 1992 to September 30, 1993;
Second period--October 1, 1993 to September 30, 1994;
Third period--October 1, 1994 to September 30, 1995; and
Fourth period--October 1, 1995 to September 30, 1996.
The State will be bound by the provisions of this pilot program only
during the established time period(s) for which the State is designated.
If a designated State does not remain an eligible State during the
established time period(s) for which the State was designated, the State
will not be eligible to participate in this program and cannot revert to
the old ranking and applicant selection process.
(c) Assistance under each designated rural development program shall
be provided to eligible designated States for qualified projects in
accordance with this subpart.
(d) Federal statutes provide for extending FmHA or its successor
agency under Public Law 103-354 financially supported programs without
regard to race, color, religion, sex, national origin, marital status,
age, familial status, or physical/mental handicap (provided the
participant possesses the capacity to enter into legal contracts.)
[[Page 104]]
Sec. 1940.952 [Reserved]
Sec. 1940.953 Definitions.
For the purpose of this subpart:
Administrator. The Administrator of FmHA or its successor agency
under Public Law 103-354.
Area plan. The long-range development plan developed for a local or
regional area in a State.
Designated agency. An agency selected by the Governor of the State
to provide the panel and the State Coordinator with support for the
daily operation of the panel.
Designated rural development program. A program carried out under
sections 304(b), 306(a), or subsections (a) through (f) and (h) of
section 310B of the Consolidated Farm and Rural Development Act (7
U.S.C. 1926(a)), as amended, or under section 1323 of the Food Security
Act of 1985, for which funds are available at any time during the FY
under such section, including, but not limited to, the following:
(1) Water and Waste Disposal Insured or Guaranteed Loans;
(2) Development Grants for Community Domestic Water and Waste
Disposal Systems;
(3) Technical Assistance and Training Grants;
(4) Emergency Community Water Assistance Grants;
(5) Community Facilities Insured and Guaranteed Loans;
(6) Business and Industry Guaranteed Loans;
(7) Industrial Development Grants;
(8) Intermediary Relending Program;
(9) Drought and Disaster Relief Guaranteed Loans;
(10) Disaster Assistance for Rural Business Enterprises;
(11) Nonprofit National Rural Development and Finance Corporations.
Designated State. A State selected by the Under Secretary, in
accordance with Sec. 1940.954 of this subpart, to participate in this
program.
Eligible State. With respect to a FY, a State that has been
determined eligible in accordance with Sec. 1940.954 (e) of this
subpart.
Nondesignated State. A State that has not been selected to
participate in this pilot program.
Qualified project. Any project: (1) For which the designated agency
has identified alternative Federal, State, local or private sources of
assistance and has identified related activities in the State; and
(2) To which the Administrator is required to provide assistance.
State. Any of the fifty States.
State coordinator. The officer or employee of the State appointed by
the Governor to carry out the activities described in Sec. 1940.957 of
this subpart.
State Director. The head of FmHA or its successor agency under
Public Law 103-354 at the local level charged with administering
designated rural development programs.
State rural economic development review panel or ``panel''. An
advisory panel that meets the requirements of Sec. 1940.956 of this
subpart.
Under Secretary. In the U.S. Department of Agriculture, the Under
Secretary for Small Community and Rural Development.
Sec. 1940.954 State participation.
(a) Application. If a State desires to participate in this pilot
program, the Governor may submit an original and one copy of Standard
Form (SF) 424.1, ``Application for Federal Assistance (For Non-
construction),'' to the Under Secretary. The five States designated by
the Under Secretary to participate in the first established time period
will be selected from among applications received not later than 60
calendar days from the effective date of this subpart. If a designated
State desires to participate in additional time periods, applications
are not required to be resubmitted; however, the Governor must notify
the Under Secretary, in writing, no later than July 31 of each FY, and
the State must submit evidence of eligibility requirements each FY in
accordance with Sec. 1940.954 (e)(2) of this subpart. Beginning in FY
1993, applications must be submitted to the Under Secretary no later
than July 31 if a State desires to be selected to fill vacancies that
occur when designated States do not roll over into another established
time period. States should include the following information with SF
424.1:
[[Page 105]]
(1) A narrative signed by the Governor including reasons for State
participation in this program and reasons why a project review and
ranking process by a State panel will improve the economic and social
conditions of rural areas in the State. The narrative will also include
the time period(s) for which the State wishes to participate.
(2) A proposal outlining the method for meeting all the following
eligibility requirements and the timeframes established for meeting each
requirement:
(i) Establishing a rural economic development review panel in
accordance with Sec. 1940.956 of this subpart. When established, the
name, title, and address of each proposed member should be included and
the chairperson and vice chairperson should be identified.
(ii) Governor's proposed designation of a State agency to support
the State coordinator and the panel. The name, address, and telephone
number of the proposed agency's contact person should be included.
(iii) Governor's proposed selection of a State coordinator in
accordance with Sec. 1940.957 of this subpart, including the title,
address, and telephone number.
(iv) Development of area development plans for all areas of the
State that are eligible to receive assistance from designated rural
development programs.
(v) The review and evaluation of area development plans by the panel
in accordance with Sec. 1940.956 of this subpart.
(vi) Development of written policy and criteria used by the panel to
review and evaluate area plans in accordance with Sec. 1940.956 of this
subpart.
(vii) Development of written policy and criteria the panel will use
to evaluate and rank applications in accordance with Sec. 1940.956 of
this subpart.
(3) Preparation of a proposed budget that includes 3 years
projections of income and expenses associated with panel operations. If
funds from other sources are anticipated, sources and amounts should be
identified.
(4) Development of a financial management system that will provide
for effective control and accountability of all funds and assets
associated with the panel.
(5) A schedule to coordinate the submission, review, and ranking
process of preapplications/applications in accordance with Sec.
1940.956(a) of this subpart.
(6) Other information provided by the State in support of its
application.
(b) Selecting States. The Under Secretary will review the
application and other information submitted by the State and designate
not more than five States to participate during any established time
period.
(c) Notification of selection. (1) The Under Secretary will notify
the Governor of each State whether or not the State has been selected
for further consideration in this program. If a State has been selected,
the notification will include the additional information that the
Governor must submit to the Under Secretary in order for the State to
meet eligibility requirements in accordance with paragraph (d) of this
section.
(2) A copy of the notification to the Governor will be submitted to
the Administrator along with a copy of the State's application and other
material submitted in support of the application.
(d) Determining State eligibility. (1) The Governor will provide the
Under Secretary with evidence that the State has complied with the
eligibility requirements of paragraph (a)(2) of this section not later
than September 1, 1992, for the first established time period and not
later than September 1 for each of the remaining established time
periods.
(2) The Under Secretary will review the material submitted by the
Governor in sufficient detail to determine if a State has complied with
all eligibility requirements of this subpart. The panel will not begin
reviewing and ranking applications until the Governor has been notified
in writing by the Under Secretary that the State has been determined
eligible and is designated to participate in this program. A copy of the
notification will be sent to the Administrator. The Under Secretary's
decision is not appealable.
(e) Eligibility requirements. (1) With respect to this subpart, the
Under Secretary may determine a State to be an
[[Page 106]]
eligible State provided all of the following apply not later than
October 1 of each FY:
(i) The State has established a rural economic development review
panel that meets the requirements of Sec. 1940.956 of this subpart;
(ii) The Governor has appointed an officer or employee of the State
government to serve as State coordinator to carry out the
responsibilities set forth in Sec. 1940.957 of this subpart; and
(iii) The Governor has designated an agency of the State government
to provide the panel and State coordinator with support for the daily
operation of the panel.
(2) If a State is determined eligible initially and desires to
participate in additional time periods established for this program, the
Governor will submit documents and information not later than September
1 of each subsequent FY in sufficient detail for the Under Secretary to
determine, prior to the beginning of the additional time period, that
the State is still in compliance with all eligibility requirements of
this subpart.
Sec. 1940.955 Distribution of program funds to designated States.
(a) States selected to participate in the first established time
period will receive funds from designated rural development programs
according to applicable program regulations until the end of FY 1992, if
necessary for States to have sufficient time to meet the eligibility
requirements of this subpart, and to be designated to participate in
this program. No funds will be administered under this subpart to an
ineligible State.
(b) If a State becomes an eligible State any time prior to the end
of FY 1992, any funds remaining unobligated from a State's FY 1992
allocation, may be administered under this subpart.
(c) Beginning in FY 1993 and for each established time period
thereafter, all designated rural development program funds received by a
designated State will be administered in accordance with Sec. Sec.
1940.961 through 1940.965 of this subpart, provided the State is
determined eligible prior to the beginning of each FY in accordance with
Sec. 1940.954 of this subpart. No assistance will be provided under any
designated rural development program in any designated State that is not
an eligible State.
Sec. 1940.956 State rural economic development review panel.
(a) General. In order for a State to become or remain an eligible
State, the State must have a rural economic development panel that meets
all requirements of this subpart. Each designated State will establish a
schedule whereby the panel and FmHA or its successor agency under Public
Law 103-354 will coordinate the submission, review, and ranking process
of preapplications/applications. The schedule will be submitted to the
Under Secretary for concurrence and should consider the following:
(1) Timeframes should assure that applications selected for funding
from the current FY's allocation of funds can be processed by FmHA or
its successor agency under Public Law 103-354 and funds obligated prior
to the July 15 pooling established in Sec. 1940.961(c) of this subpart;
(2) Initial submission of preapplications/applications from FmHA or
its successor agency under Public Law 103-354 to the panel and any
subsequent submissions during the first year;
(3) How often during each FY thereafter should FmHA or its successor
agency under Public Law 103-354 submit preapplications/applications to
the panel for review and ranking;
(4) Number of working days needed by the panel to review and rank
preapplications/applications;
(5) Number of times during the FY the panel will submit a list of
ranked preapplications/applications to FmHA or its successor agency
under Public Law 103-354 for funding consideration;
(6) Consider the matching of available loan and grant funds to
assure that all allocated funds will be used;
(7) How to consider ranked preapplications/applications at the end
of the FY that have not been funded; and
(8) How to consider requests for additional funds needed by an
applicant to complete a project that already has funds approved; i.e.,
construction bid cost overrun.
[[Page 107]]
(b) Duties and responsibilities. The panel is required to advise the
State Director on the desirability of funding applications from funds
available to the State from designated rural development programs. In
relation to this advice, the panel will have the following duties and
responsibilities:
(1) Establish policy and criteria to review and evaluate area plans
and to review and rank preapplications/applications. (i) Area plan. The
panel will develop a written policy and criteria to use when evaluating
area plans. The criteria to be used when evaluating area plans will
assure that the plan includes, as a minimum, the technical information
included in Sec. 1940.959 of this subpart. The criteria will be in
sufficient detail for the panel to determine that the plan is
technically and economically adequate, feasible, and likely to succeed
in meeting the stated goals of the plan. The panel will give weight to
area-wide or regional plans and comments submitted by intergovernmental
development councils or similar organizations made up of local elected
officials charged with the responsibility for rural area or regional
development. A copy of the policy and evaluating criteria will be
provided to FmHA or its successor agency under Public Law 103-354.
(ii) Applications. The panel will annually review the policy and
criteria used by the panel to evaluate and rank preapplications/
applications in accordance with this subpart. The panel will assure that
the policy and criteria are consistent with current rural development
needs, and that the public has an opportunity to provide input during
the development of the initial policy and criteria. The Governor will
provide a copy of the initial policy and criteria established by the
panel when submitting evidence of eligibility in accordance with Sec.
1940.954 of this subpart. Annually, thereafter, and not later than
September 1 of each FY, the State coordinator will send the Under
Secretary evidence that the panel has reviewed the established policy
and criteria. The State coordinator will also send the Under Secretary a
copy of all revisions.
(A) The policy and criteria used to rank applications for business
related projects will include the following, which are not necessarily
in rank order:
(1) The extent to which a project stimulate rural development by
creating new jobs of a permanent nature or retaining existing jobs by
enabling new small businesses to be started, or existing businesses to
be expanded by local or regional area residents who own and operate the
businesses.
(2) The extent to which a project will contribute to the enhancement
and the diversification of the local or regional area economy.
(3) The extent to which a project will generate or retain jobs for
local or regional area residents.
(4) The extent to which a project will be carried out by persons
with sufficient management capabilities.
(5) The extent to which a project is likely to become successful.
(6) The extent to which a project will assist a local or regional
area overcome severe economic distress.
(7) The distribution of assistance to projects in as many areas as
possible in the State with sensitivity to geographic distribution.
(8) The technical aspects of the project.
(9) The market potential and marketing arrangement for the projects.
(10) The potential of such project to promote the growth of a rural
community by improving the ability of the community to increase the
number of persons residing in the community and by improving the quality
of life for these persons.
(B) The policy and criteria used to rank preapplications/
applications for infrastructure and all other community facility-type
projects will include the following which are not necessarily in rank
order:
(1) The extent to which the project will have the potential to
promote the growth of a rural community by improving the quality of life
for local or regional residents.
(2) The extent to which the project will affect the health and
safety of local or regional area residents.
(3) The extent to which the project will improve or enhance cultural
activities, public service, education, or transportation.
[[Page 108]]
(4) The extent to which the project will affect business
productivity and efficiency.
(5) The extent to which the project will enhance commercial business
activity.
(6) The extent to which the project will address a severe loss or
lack of water quality or quantity.
(7) The extent to which the project will correct a waste collection
or disposal problem.
(8) The extent to which the project will bring a community into
compliance with Federal or State water or waste water standards.
(9) The extent to which the project will consolidate water and waste
systems and utilize management efficiencies in the new system.
(2) Review and evaluate area plans. Each area plan submitted for a
local or regional area will be reviewed and evaluated by the panel.
After an area plan has been reviewed and evaluated in accordance with
established policy and criteria:
(i) The panel will accept any area plan that meets established
criteria unless the plan is incompatible with any other area plan for
that area that has been accepted by the panel; or
(ii) The panel will return any area plan that is technically or
economically inadequate, not feasible, is unlikely to be successful, or
is not compatible with other panel-accepted area plans for that area.
When an area plan is returned, the panel will include an explanation of
the reasons for the return and suggest alternative proposals.
(iii) The State coordinator will notify the State Director, in
writing, of the panel's decision on each area plan reviewed.
(3) Review and rank preapplications/applications. The panel will
review, rank, and transmit a ranked list of preapplications/applications
according to the schedule prepared in accordance with paragraph (a) of
this section, and the following:
(i) Review preapplications/applications. The panel will review each
preapplication/application for assistance to determine if the project to
be carried out is compatible with the area plan in which the project
described in the preapplication/application is proposed, and either:
(A) Accept any preapplication/application determined to be
compatible with such area plan; or
(B) Return to the State Director any preapplication/application
determined not to be compatible with such area plan. The panel will
notify the applicant when preapplication/applications are returned to
the State Director.
(ii) Rank preapplications/applications. The panel will rank only
those preapplications/applications that have been accepted in accordance
with paragraph (b)(3)(i)(A) of this section. The panel will consider the
sources of assistance and related activities in the State identified by
the designated agency. Applications will be ranked in accordance with
the written policy and criteria established in accordance with paragraph
(b)(1)(ii) of this section and the following:
(A) Priority ranking for projects addressing health emergencies. In
addition to the criteria established in paragraph (b)(1)(ii) of this
section, preapplications/applications for projects designed to address a
health emergency declared so by the appropriate Federal or State agency,
will be given priority by the panel.
(B) Priority based on need. If two or more preapplications/
applications ranked in accordance with this subpart are determined to
have comparable strengths in their feasibility and potential for growth,
the panel will give priority to the applications for projects with the
greatest need.
(C) If additional ranking criteria for use by a panel are required
in any designated rural development program regulation, the panel will
give consideration to the criteria when ranking preapplications/
applications submitted under that program.
(iii) Transmit list of ranked preapplications/applications. After
the preapplications/applications have been ranked, the panel will submit
a list of all preapplications/applications received to the State
coordinator. The list will clearly indicate each preapplication/
application accepted for funding and will list preapplications/
applications in the order established
[[Page 109]]
for funding according to priority ranking by the panel. The list will
not include a preapplication/application that is to be returned to the
applicant in accordance with paragraph (b)(3)(i)(B) of this section. The
State coordinator will send a copy of the list to the State Director for
further processing of the preapplication/application in accordance with
Sec. 1940.965 of this subpart. Once the panel has ranked and submitted
the list to FmHA or its successor agency under Public Law 103-354 and
the State Director has selected a preapplication/application for
funding, the preapplication/application selected will not be replaced
with a preapplication/application received at a later date that may have
a higher ranking.
(4) Public availability of list. If requested, the State coordinator
will make the list of ranked preapplications/applications available to
the public and will include a brief explanation and justification of why
the project preapplications/applications received their priority
ranking.
(c) Membership--(1) Voting members. The panel will be composed of
not more than 16 voting members who are representatives of rural areas.
The 16 voting members will include the following:
(i) One of whom is the Governor of the State or the person
designated by the Governor to serve on the panel, on behalf of the
Governor, for that year;
(ii) One of whom is the director of the State agency responsible for
economic and community development or the person designated by the
director to serve on the panel, on behalf of the director, for that
year:
(iii) One of whom is appointed by a statewide association of banking
organizations;
(iv) One of whom is appointed by a statewide association of
investor-owned utilities;
(v) One of whom is appointed by a statewide association of rural
telephone cooperatives;
(vi) One of whom is appointed by a statewide association of
noncooperative telephone companies;
(vii) One of whom is appointed by a statewide association of rural
electric cooperatives;
(viii) One of whom is appointed by a statewide association of health
care organizations;
(ix) One of whom is appointed by a statewide association of existing
local government-based planning and development organizations;
(x) One of whom is appointed by the Governor of the State from
either a statewide rural development organization or a statewide
association of publicly-owned electric utilities, neither of which is
described in any of paragraphs (c)(1)(iii) through (ix);
(xi) One of whom is appointed by a statewide association of
counties;
(xii) One of whom is appointed by a statewide association of towns
and townships, or by a statewide association of municipal leagues, as
determined by the Governor;
(xiii) One of whom is appointed by a statewide association of rural
water districts;
(xiv) The State director of the Federal small business development
center or, if there is no small business development center in place
with respect to the State, the director of the State office of the Small
Business Administration;
(xv) The State representative of the Economic Development
Administration of the Department of Commerce; and
(xvi) One of whom is appointed by the State Director from among the
officers and employees of FmHA or its successor agency under Public Law
103-354.
(2) Nonvoting members. The panel will have not more than four
nonvoting members who will serve in an advisory capacity and who are
representatives of rural areas. The four nonvoting members will be
appointed by the Governor and include:
(i) One from names submitted by the dean or the equivalent official
of each school or college of business, from colleges and universities in
the State;
(ii) One from names submitted by the dean or the equivalent official
of each school or college of engineering, from colleges and universities
in the State;
(iii) One from names submitted by the dean or the equivalent
official, of each school or college of agriculture,
[[Page 110]]
from colleges and universities in the State; and
(iv) The director of the State agency responsible for extension
services in the State.
(3) Qualifications of panel members appointed by the Governor. Each
individual appointed to the panel by the Governor will be specially
qualified to serve on the panel by virtue of the individual's technical
expertise in business and community development.
(4) Notification of selection. Each statewide organization that
selects an individual to represent the organization on the panel must
notify the Governor of the selection.
(5) Appointment of members representative of statewide organization
in certain cases. (i) If there is no statewide association or
organization of the entities described in paragraph (c)(1) of this
section, the Governor of the State will appoint an individual to fill
the position or positions, as the case may be, from among nominations
submitted by local groups of such entities.
(ii) If a State has more than one of any of the statewide
associations or organizations of the entities described in paragraph
(c)(1) of this section, the Governor will select one of the like
organizations to name a member to serve during no more than one
established time period. Thereafter, the Governor will rotate selection
from among the remaining like organizations to name a member.
(d) Failure to appoint panel members. The failure of the Governor, a
Federal agency, or an association or organization described in paragraph
(c) of this section, to appoint a member to the panel as required under
this subpart, shall not prevent a State from being determined an
eligible State.
(e) Panel vacancies. A vacancy on the panel will be filled in the
manner in which the original appointment was made. Vacancies should be
filled prior to the third panel meeting held after the vacany occurred.
The State coordinator will notify the State Director, in writing, when
the vacancy is filled or if the vacancy will not be filled.
(f) Chairperson and vice chairperson. The panel will select two
members of the panel who are not officers or employees of the United
States to serve as the chairperson and vice chairperson of the panel.
The term shall be for 1 year.
(g) Compensation to panel members--(1) Federal members. Except as
provided in Sec. 1940.960 of this subpart, each member of the panel who
is an officer or employee of the Federal Government may not receive any
compensation or benefits by reason of service on the panel, in addition
to that which is received for performance of such officer or employee's
regular employment.
(2) NonFederal members. Each nonfederal member may be compensated by
the State and/or from grant funds established in Sec. 1940.968 of this
subpart.
(h) Rules governing panel meetings--(1) Quorum. A majority of voting
members of the panel will constitute a quorum for the purpose of
conducting business of the panel.
(2) Frequency of meetings. The panel will meet not less frequently
than quarterly. Frequency of meetings should be often enough to assure
that applications are reviewed and ranked for funding in a timely
manner.
(3) First meeting. The State coordinator will schedule the first
panel meeting and will notify all panel members of the location, date,
and time at least seven days prior to the meeting. Subsequent meetings
will be scheduled by vote of the panel.
(4) Records of meetings. The panel will keep records of the minutes
of the meetings, deliberations, and evaluations of the panel in
sufficient detail to enable the panel to provide interested agencies or
persons the reasons for its actions.
(i) Federal Advisory Committee Act. The Federal Advisory Committee
Act shall not apply to any State rural economic development review
panel.
(j) Liability of members. The members of a State rural economic
development review panel shall not be liable to any person with respect
to any determination made by the panel.
Sec. 1940.957 State coordinator.
The Governor will appoint an officer or employee of State government
as State coordinator in order for a State to become and remain an
eligible State under this subpart. The State coordinator will have the
following duties and responsibilities:
[[Page 111]]
(a) Manage, operate, and carry out the instructions of the panel;
(b) Serve as liaison between the panel and the Federal and State
agencies involved in rural development;
(c) Coordinate the efforts of interested rural residents with the
panel and ensure that all rural residents in the State are informed
about the manner in which assistance under designated rural development
programs is provided to the State pursuant to this subpart, and if
requested, provide information to State residents; and
(d) Coordinate panel activities with FmHA or its successor agency
under Public Law 103-354.
Sec. 1940.958 Designated agency.
The Governor will appoint a State agency to provide the panel and
the State coordinator with support for the daily operation of the panel.
In addition to providing support, the designated agency is responsible
for identifying:
(a) Alternative sources of financial assistance for project
preapplications/applications reviewed and ranked by the panel, and
(b) Related activities within the State.
Sec. 1940.959 Area plan.
Each area plan submitted to the panel for review in accordance with
Sec. 1940.956 of this subpart shall identify the geographic boundaries
of the area and shall include the following information:
(a) An overall development plan for the area with goals, including
business development and infrastructure development goals, and time
lines based on a realistic assessment of the area, including, but not
limited to, the following:
(1) The number and types of businesses in the area that are growing
or declining;
(2) A list of the types of businesses that the area could
potentially support;
(3) The outstanding need for water and waste disposal and other
public services or facilities in the area;
(4) The realistic possibilities for industrial recruitment in the
area;
(5) The potential for development of tourism in the area;
(6) The potential to generate employment in the area through
creation of small businesses and the expansion of existing businesses;
and
(7) The potential to produce value-added agricultural products in
the area.
(b) An inventory and assessment of the human resources of the area,
including, but not limited to, the following:
(1) A current list of organizations in the area and their special
interests;
(2) The current level of participation of area residents in rural
development activities and the level of participation required for
successful implementation of the plan;
(3) The availability of general and specialized job training in the
area and the extent to which the training needs of the area are not
being met;
(4) A list of area residents with special skills which could be
useful in developing and implementing the plan; and
(5) An analysis of the human needs of the area, the resources in the
area available to meet those needs, and the manner in which the plan, if
implemented, would increase the resources available to meet those needs.
(c) The current degree of intergovernmental cooperation in the area
and the degree of such cooperation needed for the successful
implementation of the plan.
(d) The ability and willingness of governments and citizens in the
area to become involved in developing and implementing the plan.
(e) A description of how the governments in the area apply budget
and fiscal control processes to the plan. This process is directed
toward costs associated with carrying out the planned development. When
plans are developed, the financial condition of all areas covered under
the plan should be fully recognized and planned development should
realistically reflect the area's immediate and long-range financial
capabilities.
(f) The extent to which public services and facilities need to be
improved to achieve the economic development and quality of life goals
of the plan. At
[[Page 112]]
a minimum, the following items will be considered:
(1) Law enforcement;
(2) Fire protection;
(3) Water, sewer, and solid waste management;
(4) Education;
(5) Health care;
(6) Transportation;
(7) Housing;
(8) Communications; and
(9) The availability of and capability to generate electric power.
(g) Existing area or regional plans are acceptable provided the plan
includes statements that indicate the degree to which the plan has met
or is meeting all the requirements in paragraphs (a) through (f) of this
section.
Sec. 1940.960 Federal employee panel members.
(a) The State Director will appoint one FmHA or its successor agency
under Public Law 103-354 employee to serve as a voting member of the
panel established in Sec. 1940.956(c)(1) of this subpart.
(b) The Administrator may appoint, temporarily and for specific
purposes, personnel from any department or agency of the Federal
Government as nonvoting panel members, with the consent of the head of
such department or agency, to provide official information to the panel.
The member(s) appointed shall have expertise to perform a duty described
in Sec. 1940.956(b) of this subpart that is not available among panel
members.
(c) Federal panel members will be paid per diem or otherwise
reimbursed by the Federal Government for expenses incurred each day the
employee is engaged in the actual performance of a duty of the panel.
Reimbursement will be in accordance with Federal travel regulations.
Sec. 1940.961 Allocation of appropriated funds.
(a) Initial allocations. (1) Each FY, from sums appropriated for
direct loans, loan guarantees, or grants for any designated rural
development program, funds will be allocated to designated States in
accordance with FmHA Instruction subpart L of part 1940, exhibit A,
attachment 4, of this chapter (available in any FmHA or its successor
agency under Public Law 103-354 State or District Office).
(2) Each FY, and normally within 30 days after the date FmHA or its
successor agency under Public Law 103-354 receives an appropriation of
designated rural development program funds, the Governor of each
designated State will be notified of the amounts allocated to the State
under each designated program for such FY. The Governor will also be
notified of the total amounts appropriated for the FY for each
designated rural development program.
(3) The State Director will fund projects from a designated State's
allocation of funds, according to appropriate program regulations giving
great weight to the order in which the preapplications/applications for
projects are ranked and listed by the panel in accordance with Sec.
1940.956(b)(3) of this subpart.
(b) Reserve. A percentage of the National Office reserve established
in subpart L of part 1940 of this chapter will be used to establish a
reserve for designated States that is separate and apart from that of
nondesignated States. The percent reserved will be based upon the same
criteria used in subpart L of part 1940 of this chapter to allocate
program funds.
(c) Pooling. (1) On July 15 of each FY, and from time to time
thereafter during the FY, as determined appropriate, unobligated funds
will be pooled from among the designated States. Pooled funds will be
made a part of the reserve established for designated States and will
revert to National Office control.
(2) Funds pooled from designated States can be requested by
designated States, pursuant to subsection (d) of this section. The
designated States' pool; however, will not be available to nondesignated
States until September 1 of each year.
(d) Request for funds. (1) Designated States may request designated
States' reserve funds, and funds for other designated rural development
programs controlled by the National Office, as shown in FmHA Instruction
subpart L of part 1940, exhibit A, attachment 4, of this chapter, in
accordance with applicable program regulations.
[[Page 113]]
(2) Designated States may request funds from the nondesignated
reserve account when:
(i) All allocated and reserve funds to designated states have been
used, or
(ii) Sufficient funds do not remain in any designated State
allocation and in the designated States' reserve account to fund a
project.
Sec. 1940.962 Authority to transfer direct loan amounts.
(a) Transfer of funds. If the amounts allocated to a designated
State for direct Water and Waste Disposal or Community Facility loans
for a FY are not sufficient to provide the full amount requested for a
project in accordance with this subpart, the State Director may transfer
part or all of the funds allocated to the State, from one program to
another, subject to paragraphs (b) and (c) of this section.
(b) Limitation on amounts transferred. (1) Amounts transferred
within a designated State. The amount of direct loan funds transferred
from a program under this section shall not exceed the amount left
unobligated after obligating the full amount of assistance requested for
each project that ranked higher in priority on the panel's list.
(2) Amounts transferred on a National basis. The amount of direct
loan funds transferred in a FY, among the designated States, from a
program under this subpart (after accounting for any offsetting
transfers into such program) shall not exceed $9 million, or an amount
otherwise authorized by law.
(c) National Office concurrence. The State Director may transfer
direct loan funds authorized in this section, after requesting and
receiving concurrence from the National Office. If permitted by law, the
National Office will concur in requests on a first-come-first-served
basis.
Sec. 1940.963 Authority to transfer guaranteed loan amounts.
(a) Transfer of funds. If the amounts allocated to a designated
State for guaranteed Water and Waste Disposal, Community Facility, or
Business and Industry loans for a FY are not sufficient to provide the
full amount requested for a project in accordance with this subpart, the
State Director may transfer part or all of the funds allocated to the
State, from one program to another, subject to paragraphs (b) and (c) of
this section.
(b) Limitation on amounts transferred. The amount of guaranteed loan
funds transferred from a program under this section shall not exceed the
amount left unobligated after obligating the full amount of assistance
requested for each project that ranked higher in priority on the panel's
list.
(c) National Office concurrence. The State Director may transfer
guaranteed loan funds authorized in this section, after requesting and
receiving concurrence from the National Office. If permitted by law, the
National Office will concur in requests on a first-come-first-served
basis.
Sec. 1940.964 [Reserved]
Sec. 1940.965 Processing project preapplications/applications.
Except for the project review and ranking process established in
this subpart, all requests for funds from designated rural development
programs will be processed, closed, and serviced according to applicable
FmHA or its successor agency under Public Law 103-354 regulations,
available in any FmHA or its successor agency under Public Law 103-354
office.
(a) Preapplications/applications. All preapplications/applications
on hand that have not been selected for further processing will be
submitted initially to the panel for review and ranking.
Preapplications/applications on hand that had been selected for further
processing prior to the time a State was selected to participate in this
program may be funded by FmHA or its successor agency under Public Law
103-354 without review by the panel. Pre ap pli ca tions/applications
selected for further processing by FmHA or its successor agency under
Public Law 103-354 will not exceed the State's previous year's funding
level. The State Director will provide the State coordinator a list of
preapplications/applications that are in process and will be considered
for funding without review by the panel. This list will be provided at
the same time preapplications/applications
[[Page 114]]
are initially submitted to the State coordinator in accordance with
paragraph (d) of this section.
(b) FmHA or its successor agency under Public Law 103-354 review.
Pre ap pli ca tions/applications will be reviewed in sufficient detail
to determine eligibility and, if applicable, determine if the applicant
is able to obtain credit from other sources at reasonable rates and
terms. Normally, within 45 days after receiving a complete pre ap pli ca
tion/application, FmHA or its successor agency under Public Law 103-354
will notify the applicant of the eligibility determination. A copy of
all notifications will be sent to the State coordinator.
(c) Applicant notification. The notification to eligible applicants
will contain the following statements:
Your application has been submitted to the State coordinator for
review and ranking by the State rural economic development review panel.
If you have questions regarding this review process, you should contact
the State coordinator. The address and telephone number are: (insert).
You will be notified at a later date of the decision reached by the
panel and whether or not you can proceed with the proposed project.
You are advised against incurring obligations which cannot be
fulfilled without FmHA or its successor agency under Public Law 103-354
funds.
These statements should be included in notifications to applicants with
pre ap pli ca tions/applications on hand that had not been selected for
further processing prior to the time a State was selected to participate
in this program.
(d) Information to State coordinator. FmHA or its successor agency
under Public Law 103-354 will forward a copy of the preapplication/
application and other information received from the applicant to the
State coordinator according to a schedule prepared in accordance with
Sec. 1940.956(a) of this subpart. The State coordinator will be advised
that no further action will be taken on preapplications/applications
until they have been received and ranked by the panel, and a priority
funding list has been received from the State. Applications forwarded to
the State coordinator will be reviewed and ranked for funding in
accordance with Sec. 1940.956 of this subpart.
(e) The FmHA or its successor agency under Public Law 103-354 review
of priority funding list. FmHA or its successor agency under Public Law
103-354 will review the list of ranked applications received from the
State coordinator and determine if projects meet the requirements of the
designated rural development program under which the applicant seeks
assistance. Any project that does not meet program regulations will be
removed from the list. Applicants will be notified of the decision
reached by the panel and whether or not the applicant should proceed
with the project. FmHA or its successor agency under Public Law 103-354
will provide a copy of all notifications to the State coordinator. The
decisions of the panel are not appealable.
(f) Obligation of funds. FmHA or its successor agency under Public
Law 103-354 will provide funds for projects whose application remains on
the list, subject to available funds. Consideration will be given to the
order in which the applications were ranked and prioritized by the
panel. If FmHA or its successor agency under Public Law 103-354 proposes
to provide assistance to any project without providing assistance to all
projects ranked higher in priority by the panel than the project to be
funded, 10 days prior to requesting an obligation of funds, the State
Director will submit a report stating reasons for funding such lower
ranked project to the following:
(1) Panel.
(2) National Office. The National Office will submit a copy of the
notification to:
(i) Committee on Agriculture of the House of Representatives,
Washington, DC.
(ii) Committee on Agriculture, Nutrition, and Forestry of the
Senate, Washington, DC.
Sec. Sec. 1940.966-1940.967 [Reserved]
Sec. 1940.968 Rural Economic Development Review Panel Grant (Panel
Grant).
(a) General. Panel Grants awarded will be made from amounts
appropriated for grants under any provision of section 306(a) of the
CONACT (7
[[Page 115]]
U.S.C 1926(a)), not to exceed $100,000 annually to each eligible State.
This section outlines FmHA or its successor agency under Public Law 103-
354's policies and authorizations and sets forth procedures for making
grants to designated States for administrative costs associated with a
State rural economic development review panel.
(b) Objective. The objective of the Panel Grant program is to make
grant funds available annually to each designated State to use for
administrative costs associated with the State rural economic
development review panels meeting requirements of Sec. 1940.956 of this
subpart.
(c) Authorities, delegations, and redelegations. The State Director
is responsible for implementing the authorities in this section and to
issue State supplements redelegating these authorities to appropriate
FmHA or its successor agency under Public Law 103-354 employees. Grant
approval authorities are contained in subpart A of part 1901 of this
chapter.
(d) Joint funds. FmHA or its successor agency under Public Law 103-
354 grant funds may be used jointly with funds furnished by the grantee
or grants from other sources.
(e) Eligibility. A State designated by the Under Secretary to
participate in this program is eligible to receive not more than
$100,000 annually under this section. A State must become and remain an
eligible State in order to receive funds under this section.
(f) Purpose. Panel Grant funds may be used to pay for reasonable
administrative costs associated with the panel, including, but not
limited to, the following:
(1) Travel and lodging expenses;
(2) Salaries for State coordinator and support staff;
(3) Reasonable fees and charges for professional services necessary
for establishing or organizing the panel. Services must be provided by
individuals licensed in accordance with appropriate State accreditation
associations;
(4) Office supplies, and
(5) Other costs that may be necessary for panel operations.
(g) Limitations. Grant funds will not be used to:
(1) Pay costs incurred prior to the effective date of the grant
authorized under this subpart;
(2) Recruit preapplications/applications for any designated rural
development loan or grant program or any loan or grant program;
(3) Duplicate activities associated with normal execution of any
panel member's occupation;
(4) Fund political activities;
(5) Pay costs associated with preparing area development plans;
(6) Pay for capital assets; purchase real estate, equipment or
vehicles; rent, improve, or renovate office space; or repair and
maintain State or privately owned property;
(7) Pay salaries to panel members; or
(8) Pay per diem or otherwise reimburse panel members unless
distance traveled exceed 50 miles.
(h) Other considerations--(1) Equal opportunity requirements. Grants
made under this subpart are subject to title VI of the Civil Rights Act
of 1964 as outlined in subpart E of part 1901 of this chapter.
(2) Environmental requirements. The policies and regulations
contained in subpart G of part 1940 of this chapter apply to grants made
under this subpart.
(3) Management assistance. Grantees will be provided management
assistance as necessary to assure that grant funds are used for eligible
purposes for the successful operation of the panel. Grants made under
this subpart will be administered under and are subject to the U.S.
Department of Agriculture regulations, 7 CFR, parts 3016 and 3017, as
appropriate.
(4) Drug-free work place. The State must provide for a drug-free
workplace in accordance with the requirements of FmHA Instruction 1940-M
(available in any FmHA or its successor agency under Public Law 103-354
office). Just prior to grant approval, the State must prepare and sign
Form AD-1049, ``Certification Regarding Drug-Free Workplace Requirements
(Grants) Alternative I--For Grantees Other Than Individuals.''
(i) Application processing. (1) The State Director shall assist the
State in application assembly and processing.
[[Page 116]]
Processing requirements should be discussed during an application
conference.
(2) After the Governor has been notified that the State has been
designated to participate in this program and the State has met all
eligibility requirements of this subpart, the State may file an original
and one copy of SF 424.1 with the State Director. The following
information will be included with the application:
(i) State's financial or in-kind resources, if applicable, that will
maximize the use of Panel Grant funds;
(ii) Proposed budget. The financial budget that is part of SF 424.1
may be used, if sufficient, for all panel income and expense categories;
(iii) Estimated breakdown of costs, including costs to be funded by
the grantee or from other sources;
(iv) Financial management system in place or proposed. The system
will account for grant funds in accordance with State laws and
procedures for expending and accounting for its own funds. Fiscal
control and accounting procedures of the State must be sufficient to
permit preparation of reports required by Federal regulations and permit
the tracing of funds to a level of expenditures adequate to establish
that grant funds are used solely for authorized purposes;
(v) Method to evaluate panel activities and determine if objectives
are met;
(vi) Proposed Scope-of-Work detailing activities associated with the
panel and time frames for completion of each task, and
(vii) Other information that may be needed by FmHA or its successor
agency under Public Law 103-354 to make a grant award determination.
(3) The applicable provisions of Sec. 1942.5 of subpart A of part
1942 of this chapter relating to preparation of loan dockets will be
followed in preparing grant dockets. The docket will include at least
the following:
(i) Form FmHA or its successor agency under Public Law 103-354 400-
4, ``Assurance Agreement;''
(ii) Scope-of-work prepared by the applicant and approved by FmHA or
its successor agency under Public Law 103-354;
(iii) Form FmHA or its successor agency under Public Law 103-354
1940-1, ``Request for Obligation of Funds,'' with exhibit A, and
(iv) Certification regarding a drug-free workplace in accordance
with FmHA Instruction 1940-M (available in any FmHA or its successor
agency under Public Law 103-354 office).
(j) Grant approval, obligation of funds, and grant closing. (1) The
State Director will review the application and other documents to
determine whether the proposal complies with this subpart.
(2) Exhibit A (available from any FmHA or its successor agency under
Public Law 103-354 State Office), shall be attached to and become a
permanent part of Form FmHA or its successor agency under Public Law
103-354 1940-A and the following paragraphs will appear in the comment
section of that form:
The Grantee understands the requirements for receipt of funds under
the Panel Grant program. The Grantee assures and certifies that it is in
compliance with all applicable laws, regulations, Executive Orders, and
other generally applicable requirements, including those set out in FmHA
or its successor agency under Public Law 103-354 7 CFR, part 1940,
subpart T, and 7 CFR, parts 3016 and 3017, including revisions through
------ (date of grant approval). The Grantee further agrees to use grant
funds for the purposes outlined in the Scope-of-Work approved by FmHA or
its successor agency under Public Law 103-354. Exhibit A is incorporated
as a part hereof.
(3) Grants will be approved and obligated in accordance with the
applicable parts of Sec. 1942.5(d) of subpart A of part 1942 of this
chapter.
(4) An executed copy of the Scope-of-Work will be sent to the State
coordinator on the obligation date, along with a copy of Form FmHA or
its successor agency under Public Law 103-354 1940-1 and the required
exhibit. FmHA or its successor agency under Public Law 103-354 will
retain the original of Form FmHA or its successor agency under Public
Law 103-354 1940-1 and the exhibit.
(5) Grants will be closed in accordance with the applicable parts of
subpart A of part 1942 of this chapter, including Sec. 1942.7. The
grant is considered closed on the obligation date.
[[Page 117]]
(6) A copy of Form FmHA or its successor agency under Public Law
103-354 1940-1, with the required exhibit, and the Scope-of-Work will be
submitted to the National Office when funds are obligated.
(7) If the grant is not approved, the State coordinator will be
notified in writing of the reason(s) for rejection. The notification
will state that a review of the decision by FmHA or its successor agency
under Public Law 103-354 may be requested by the State under subpart B
of part 1900 of this chapter.
(k) Fund disbursement. Grant funds will be disbursed on a
reimbursement basis. Requests for funds should not exceed one advance
every 30 days. The financial management system of the State shall
provide for effective control and accountability of all funds, property,
and assets.
(1) SF 270, ``Request for Advance or Reimbursement,'' will be
completed by the State coordinator and submitted to the State Director
not more frequently than monthly.
(2) Upon receipt of a properly completed SF 270, the State Director
will request funds through the Automated Discrepancy Processing System.
Ordinarily, payment will be made within 30 days after receipt of a
properly prepared request for reimbursement.
(3) States are encouraged to use minority banks (a bank which is
owned by at least 50 percent minority group members) for the deposit and
disbursement of funds. A list of minority owned banks can be obtained
from the Office of Minority Business Enterprises, Department of
Commerce, Washington, DC 20230.
(l) Title. Title to supplies acquired under this grant will vest,
upon acquisition, in the State. If there is a residual inventory of
unused supplies exceeding $5,000 in total aggregate fair market value
upon termination or completion of the grant awarded, and if the supplies
are not needed for any other federally sponsored programs, the State
shall compensate FmHA or its successor agency under Public Law 103-354
for its share.
(m) Costs. Costs incurred under this grant program are subject to
cost principles established in Office of Management and Budget Circular
A-87.
(n) Budget changes. Rebudgeting within the approval direct cost
categories to meet unanticipated requirements which do not exceed 10
percent of the current total approved budget shall be permitted. The
State shall obtain prior approval from the State Director for any
revisions which result in the need for additional funding.
(o) Programmatic changes. The State shall obtain prior written
approval from the State Director for any change to the scope or
objectives for which the grant was approved or for contracting out or
otherwise obtaining services of a third party to perform activities
which are central to the purposes of the grant. Failure to obtain prior
approval of changes to the scope can result in suspension or termination
of grant funds.
(p) Financial reporting. SF 269, ``Financial Status Report,'' and a
Project Performance Report are required on a quarterly basis. The
reports will be submitted to the State Director not later than 30 days
after the end of each quarter. A final SF 269 and Project Performance
Report shall be due 90 days after the expiration or termination of grant
support. The final report may serve as the last quarterly report. The
State coordinator will constantly monitor performance to ensure that
time schedules are met, projected work by time periods is accomplished,
and other performance objectives are achieved. Program outlays and
income will be reported on an accrual basis. 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 established objectives were not met;
(3) Problems, delays, or adverse conditions which will affect the
ability to meet the objectives of the grant during established time
periods. This disclosure must include a statement of the action taken or
planned to resolve the situation; and
(4) Objectives and timetable established for the next reporting
period.
[[Page 118]]
(q) Audit requirements. Audit reports will be prepared and submitted
in accordance with Sec. 1942.17(q)(4) of subpart A of part 1942 of this
chapter. The audit requirements only apply to the year(s) in which grant
funds are received. Audits must be prepared in accordance with generally
accepted government auditing standards using publication, ``Standards
for Audits of Governmental Organizations, Programs, Activities and
Functions.''
(r) Grant cancellation. Grants which have been approved and funds
obligated may be cancelled by the grant approval official in accordance
with Sec. 1942.12 of subpart A of part 1942 of this chapter. The State
Director will notify the State coordinator that the grant has been
cancelled.
(s) Grant servicing. Grants will be serviced in accordance with
subparts E and O of part 1951 of this chapter.
(t) Subsequent grants. Subsequent grants will be processed in
accordance with the requirements of this subpart for each additional
time period a State is designated to participate in this program.
Sec. 1940.969 Forms, exhibits, and subparts.
Forms, exhibits, and subparts of this chapter (all available in any
FmHA or its successor agency under Public Law 103-354 office) referenced
in this subpart, are for use in establishing a State economic
development review panel and for administering the Panel Grant program
associated with the panel.
Sec. 1940.970 [Reserved]
Sec. 1940.971 Delegation of authority.
The authority authorized to the State Director in this subpart may
be redelegated.
Sec. Sec. 1940.972-1940.999 [Reserved]
Sec. 1940.1000 OMB control number.
The collection of information requirements contained in this
regulation has been approved by the Office of Management and Budget and
assigned OMB control number 0575-0145. Public reporting burden for this
collection of information is estimated to vary from 30 minutes to 48
hours per response with an average of 4 hours per response, including
the time for reviewing instructions, searching existing data sources,
gathering and maintaining the data needed, and completing and reviewing
the collection of information. Send comments regarding this burden
estimate or any other aspect of this collection of information,
including suggestions for reducing this burden, to Department of
Agriculture, Clearance Officer, OIRM, Room 404-W, Washington, DC 20250;
and to the Office of Information and Regulatory Affairs, Office of
Management and Budget, Washington, DC 20503.
PART 1941_OPERATING LOANS--Table of Contents
Subpart A_Operating Loan Policies, Procedures, and Authorizations
Sec.
1941.1 Introduction.
1941.2 Objectives.
1941.3 Management assistance.
1941.4 Definitions.
1941.5 [Reserved]
1941.6 Credit elsewhere.
1941.7-1941.10 [Reserved]
1941.11 Applications.
1941.12 Eligibility requirements.
1941.13 Rural youth.
1941.14-1941.15 [Reserved]
1941.16 Loan purposes.
1941.17 Loan limitations.
1941.18 Rates and terms.
1941.19 Security.
1941.20-1941.22 [Reserved]
1941.23 General provisions.
1941.24 [Reserved]
1941.25 Appraisals.
1941.26-1941.28 [Reserved]
1941.29 Relationship between FSA loans, direct and guaranteed.
1941.30-1941.31 [Reserved]
1941.32 Catastrophic Risk Protection (CAT) insurance requirement.
1941.33 Loan approval or disapproval.
1941.34 [Reserved]
1941.35 Actions after loan approval.
1941.36-1941.37 [Reserved]
1941.38 Loan closing.
1941.39-1941.41 [Reserved]
1941.42 Loan servicing.
1941.43-1941.49 [Reserved]
1941.50 State supplements.
Exhibit A to Subpart A--Processing Guide--Insured Operating Loans
Exhibit B to Subpart A [Reserved]
Exhibit C to Subpart A--Controlled Substance
[[Page 119]]
Subpart B_Closing Loans Secured by Chattels
1941.51 Purpose.
1941.52-1941.53 [Reserved]
1941.54 Promissory note.
1941.55-1941.56 [Reserved]
1941.57 Security instruments.
1941.58-1941.59 [Reserved]
1941.60 Purchase money security interest.
1941.61-1941.62 [Reserved]
1941.63 Lien search.
1941.64-1941.66 [Reserved]
1941.67 Additional requirements for perfecting security interests.
1941.68-1941.70 [Reserved]
1941.71 Fees.
1941.72-1941.74 [Reserved]
1941.75 Retention and use of security agreements.
1941.76-1941.78 [Reserved]
1941.79 Future advance and after-acquired property clauses.
1941.80-1941.83 [Reserved]
1941.84 Title clearance and closing requirements.
1941.85-1941.87 [Reserved]
1941.88 Insurance.
1941.89-1941.91 [Reserved]
1941.92 Check delivery.
1941.93 [Reserved]
1941.94 Supervised bank accounts.
1941.95 [Reserved]
1941.96 Changes in use of loan funds.
Authority: 5 U.S.C. 301 and 7 U.S.C. 1989.
Source: 43 FR 55883, Nov. 29, 1978, unless otherwise noted.
Subpart A_Operating Loan Policies, Procedures, and Authorizations
Source: 53 FR 35684, Sept. 14, 1988, unless otherwise notes.
Editorial Note: Nomenclature changes to subpart A appear at 68 FR
7696, Feb. 18, 2003.
Sec. 1941.1 Introduction.
This subpart contains regulations for making initial and subsequent
direct Operating (OL) and Youth (OL-Y) loans. OL loans may be made to
eligible farmers and ranchers and entities that will manage and operate
not larger than family farms. Youth loans may be made to rural youth to
conduct modest projects in connection with their participation in 4-H,
Future Farmers of America, and similar organizations. It is the policy
of Farm Service Agency (FSA) or its successor agency under Public Law
103-354 to make loans to any qualified applicant without regard to race,
color, religion, sex, national origin, marital status, age or physical/
mental handicap provided the applicant can execute a legal contract. Any
processing or servicing activity conducted pursuant to this subpart
involving authorized assistance to Agency or its successor agency under
Public Law 103-354 employees, members of their families, known close
relatives, or business or close personal associates, is subject to the
provisions of subpart D of part 1900 of this chapter. Applicants for
this assistance are required to identify any known relationship or
association with an Agency or its successor agency under Public Law 103-
354 employee. See exhibit A of subpart A of part 1943 of this chapter
for making OL loans to entrymen on unpatented public lands. Agency or
its successor agency under Public Law 103-354 forms are available in any
Agency or its successor agency under Public Law 103-354 office.
[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 226, Jan. 5, 1993; 58
FR 48282, Sept. 15, 1993; 61 FR 35925, July 9, 1996; 68 FR 7696, Feb.
18, 2003]
Sec. 1941.2 Objectives.
The basic objective of the OL loans program is to provide credit and
management assistance to farmers and ranchers to become operators of
family-sized farms or continue such operations when credit is not
available elsewhere. FmHA or its successor agency under Public Law 103-
354 assistance enables family-farm operators to use their land, labor
and other resources and to improve their living and financial conditions
so that they can obtain credit elsewhere. The objective of the OL loan
program for rural youth is to provide credit for rural youths to
establish and operate income-producing projects of modest size in
connection with their participation in 4-H clubs, Future Farmers of
America, and similar organizations.
Sec. 1941.3 Management assistance.
As provided in subpart B of part 1924 of this chapter, management
assistance will be provided to all borrowers to the extent necessary to
achieve the objectives of the loan.
[[Page 120]]
Sec. 1941.4 Definitions.
As used in this subpart, the following definitions apply:
Additional security. Any security beyond that which is required to
adequately secure the loan.
Agency. The Farm Service Agency, its county and State committees and
their personnel, and any successor agency.
Approval official. A field official who has been delegated loan and
grant approval authorities within applicable loan programs, subject to
the dollar limitation contained in tables available in any FmHA or its
successor agency under Public Law 103-354 office.
Beginning farmer or rancher. A beginning farmer or rancher is an
individual or entity who:
(a) Meets the loan eligibility requirements for OL loan assistance
in accordance with Sec. 1941.12 of this subpart.
(b) Has not operated a farm or ranch, or who has operated a farm or
ranch for not more than 10 years. This requirement applies to all
members of an entity.
(c) Will materially and substantially participate in the operation
of the farm or ranch.
(1) In the case of a loan made to an individual, individually or
with the immediate family, material and substantial participation
requires that the individual provide substantial day-to-day labor and
management of the farm or ranch, consistent with the practices in the
county or State where the farm is located.
(2) In the case of a loan made to an entity, all members must
materially and substantially participate in the operation of the farm or
ranch. Material and substantial participation requires that the members
provide some amount of the management, or labor and management necessary
for day-to-day activities, such that if the members did not provide
these inputs, operation of the farm or ranch would be seriously
impaired.
(d) Agrees to participate in any loan assessment, borrower training,
and financial management programs required by FmHA or its successor
agency under Public Law 103-354 regulations.
(e) Except for OL loan purposes, does not real farm or ranch
property or who, directly or through interests in family farm entities,
owns real farm or ranch property, the aggregate acreage of which does
not exceed 30 percent of the average farm or ranch acreage of the farms
or ranches in the county where the property is located. If the farm is
located in more than one county, the average farm acreage of the county
where the applicant's residence is located will be used in the
calculation. If the applicant's residence is not located on the farm or
if the applicant is an entity, the average farm acreage of the county
where the major portion of the farm is located will be used. The average
county farm or ranch acreage will be determined from the most recent
Census of Agriculture developed by the U.S. Department of Commerce,
Bureau of the Census. State Directors will publish State supplements
containing the average farm or ranch acreage by county.
(f) Demonstrates that the available resources of the applicant and
spouse (if any) are not sufficient to enable the applicant to enter or
continue farming or ranching on a viable scale.
(g) In the case of an entity:
(1) All the members are related by blood or marriage.
(2) All the stockholders in a corporation are eligible beginning
farmers or ranchers.
Borrower. An individual or entity which has outstanding obligations
to the FmHA or its successor agency under Public Law 103-354 under any
Farmer Programs loan(s), without regard to whether the loan has been
accelerated. A borrower includes all parties liable for the FmHA or its
successor agency under Public Law 103-354 debt, including collection-
only borrowers, except for debtors whose total loans and accounts have
been voluntarily or involuntarily foreclosed or liquidated, or who have
been discharged of all FmHA or its successor agency under Public Law
103-354 debt.
Cooperative. An entity which has farming as its purpose and whose
members have agreed to share the profits of the farming enterprise. The
entity
[[Page 121]]
must be recognized as a farm cooperative by the laws of the State(s) in
which the entity will operate a farm.
Corporation. For the purpose of this regulation, a private domestic
corporation created and organized under the laws of the State(s) in
which the entity will operate a farm.
Cosigner. A party who joins in the execution of a promissory note to
assure its repayment. The cosigner becomes jointly and severally liable
to comply with the terms of the note. In the case of an entity
applicant, the cosigner cannot be a member, partner, joint operator, or
stockholder of the entity.
Entity. Cooperative, corporation, partnership, joint operation,
trust, or limited liability company.
Family farm. A farm which:
(a) Produces agricultural commodities for sale in sufficient
quantities so that it is recognized in the community as a farm rather
than a rural residence.
(b) Provides enough agricultural income by itself, including rented
land, or together with any other dependable income, to enable the
borrower to:
(1) Pay necessary family and operating expenses;
(2) Maintain essential chattel and real property; and
(3) Pay debts.
(c) Is managed by:
(1) The borrower when a loan is made to an individual.
(2) The members responsible for operating the farm when a loan is
made to an entity.
(d) Has a substantial amount of the labor requirements for the farm
enterprise provided by:
(1) The borrower and family members for a loan made to an
individual.
(2) The members responsible for operating the farm, along with the
families of these individuals, for a loan made to an entity.
(e) May use a reasonable amount of full-time hired labor and
seasonal labor during peakload periods.
Farm. A tract or tracts of land, improvements, and other
appurtenances considered to be farm property which is used or will be
used in the production of crops or livestock, including the production
of fish under controlled conditions, for sale in sufficient quantities
so that the property is recognized as a farm rather than a rural
residence. It may also include a residence which, although physically
separate from the farm acreage, is ordinarily treated as part of the
farm in the local community.
Feasible plan. A feasible plan is a plan based upon the applicant/
borrower's records that show the farming operation's actual production
and expenses. These records will be used along with realistic
anticipated prices, including farm program payments when available, to
determine that the income from the farm operation, along with any other
reliable off farm income, will provide the income necessary for an
applicant/borrower to at least be able to:
(a) Pay all operating expenses and all taxes which are due during
the projected farm budget period;
(b) Meet necessary payments on all debts; and
(c) Provide living expenses for the family members of an individual
borrower or a wage for the farm operator in the case of an entity
borrower which is in accordance with the essential family needs. Family
members include the individual borrower of farm operator in the case of
an entity, and the immediate members of the family who reside in the
same household.
Financially viable operation. A financially viable operation is one
which, with FmHA or its successor agency under Public Law 103-354
assistance, is projected to improve its financial condition over a
period of time to the point that the operator can obtain commercial
credit without further FmHA or its successor agency under Public Law
103-354 direct or guaranteed assistance. Such an operation must generate
sufficient income to: Meet annual operating expenses and debt payments
as they become due, meet basic family living expenses to the extent they
are not met by dependable nonfarm income, provide for replacement of
capital items, and provide for long-term financial growth. This
definition only applies when considering a term limit waiver under Sec.
1941.12.
[[Page 122]]
Fish. Any aquatic gilled animal commonly known as ``fish,'' as well
as mollusks or crustaceans (or other invertebrates) produced under
controlled conditions (that is, feeding, tending, harvesting, and such
other activities as are necessary to properly raise and market the
products) in ponds, lakes, streams, or similar holding areas.
Joint operation. Individuals who have agreed to operate a farm or
farms together as a business unit. The real and personal property is
owned separately or jointly by the individuals. A husband and wife who
want to apply for a loan together will be considered a joint operation.
Limited resources applicant. An applicant who is a farmer or rancher
and is an operator of a small or family farm (a small farm is a marginal
family farm), including a new operator, with a low income who
demonstrates a need to maximize farm or ranch income. A limited resource
applicant must meet the eligibility requirements for a farm ownership or
operating loan but, due to low income, cannot pay the regular interest
rate on such loans. Due to the complex nature of the problems facing
this applicant, special help will be needed and more supervisory
assistance will be required to assure reasonable prospects for success.
The applicant may face such problems as underdeveloped managerial
ability, limited eduction, low-producing farm due to lack of development
or improved production practices and other related factors. The
applicant will not have nor expect to obtain, without the special help
and a low-interest loan, the income needed to have a reasonable standard
of living when compared to other residents of the community.
Majority interest. Any individual or combination of individuals
owning more than a 50 percent interest in a cooperative, corporation,
joint operation, or partnership.
Nonfarm enterprise. Any nonfarm business enterprise, including
recreation, which is closely associated with the farm operation and
located on or adjacent to the farm and provides income to supplement
farm income. This may include, but is not limited to, such enterprises
as raising earthworms, exotic birds, tropical fish, dogs, and horses for
nonfarm purposes, welding shops, road stands, boarding horses and riding
stables.
Partnership. An entity consisting of individuals who have agreed to
operate a farm. This entity must be recognized as a partnership by the
laws of the State(s) in which the partnership will operate a farm and
must be authorized to own both real and personal property and to incur
debt in its own name.
Presidentially-designated emergency. A major disaster or emergency
designated by the President under the Robert T. Stafford Disaster Relief
and Emergency Assistance Act (42 U.S.C. 5121 et seq.).
Primary security. Any real estate and/or chattel security which is
required to adequately secure the loan. This is not to be confused with
``basic security,'' as defined in Sec. 1962.4 of subpart A of part 1962
of this chapter.
Related by blood or marriage. As used in this subpart, individuals
who are connected to one another as husband, wife, parent, child,
brother, or sister.
Rural youth. A person who has reached the age of 10 but has not
reached the age of 21 and does not reside in any city or town with a
population of more than 10,000 inhabitants.
Rural youth projects. Modest projects initiated, developed, and
carried out by rural youths participating in 4-H or Future Farmers of
America, or similar organizations. Projects must produce enough income
to meet expenses and debt repayment.
Security. Property of any kind subject to a real or personal
property lien. Any references to collateral or security property shall
be considered a reference to the term ``security.''
State or United States. The United States itself, any of the fifty
States, the Commonwealth of Puerto Rico, the Virgin Islands of the
United States, Guam, American Samoa, and the Commonwealth of the
Northern Mariana Islands.
[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 26680, May 5, 1993; 58
FR 48283, Sept. 15, 1993; 61 FR 35925, July 9, 1996; 62 FR 9353, Mar. 3,
1997; 68 FR 7696, Feb. 18, 2003; 69 FR 5262, Feb. 4, 2004]
[[Page 123]]
Sec. 1941.5 [Reserved]
Sec. 1941.6 Credit elsewhere.
The applicant shall certify in writing on the appropriate forms, and
the County Supervisor shall verify and document, that adequate credit is
not available, with or without a guarantee or subordination, to finance
the applicant's actual needs at reasonable rates and terms, taking into
consideration prevailing private and cooperative rates and terms in the
community in or near where the applicant resides for loans for similar
purposes and periods of time.
(a) If the County Supervisor receives letters or other written
evidence from a lender(s) indicating that the applicant is unable to
obtain satisfactory credit, this will be included in the loan docket.
(b) If the applicant cannot qualify for the needed credit from the
lender(s) contacted, but one or more of them has indicated they would
provide credit with an FmHA or its successor agency under Public Law
103-354 guarantee, or the County Supervisor determines that the
applicant can obtain a guaranteed loan, the applicant will be advised to
file an application with that lender(s) so that a guaranteed OL request
can be processed by the lender(s) for consideration by FmHA or its
successor agency under Public Law 103-354.
(c) Property and interest in property owned and income received by
an individual applicant, or an entity applicant and all of its members
as individuals will be considered and used by an applicant in obtaining
credit from other sources.
(d) Applicants and borrowers will be encouraged to supplement
operating loans with credit from other credit sources to the extent
economically feasible and in accordance with sound financial management
practices.
[43 FR 55883, Nov. 29, 1978, as amended at 68 FR 7697, Feb. 18, 2003]
Sec. Sec. 1941.7-1941.10 [Reserved]
Sec. 1941.11 Applications.
Applications will be received and processed as provided in subpart A
of part 1910 of this chapter, with consideration given to the
requirements in exhibit M of subpart G of part 1940 of this chapter.
Sec. 1941.12 Eligibility requirements.
In accordance with the Food Security Act of 1985 (Pub. L. 99-198),
after December 23, 1985, if an individual or any member of an entity is
convicted under Federal or State law of planting, cultivating, growing,
producing, harvesting, or storing a controlled substance (see 21 CFR
part 1308, which is exhibit C of this subpart and is available in any
FmHA or its successor agency under Public Law 103-354 office, for the
definition of ``controlled substance'') prior to loan approval in any
crop year, the individual or entity shall be ineligible for a loan for
the crop year in which the individual or member of the entity was
convicted and the four succeeding crop years. Applicants will attest on
Form FmHA or its successor agency under Public Law 103-354 410-1,
``Application for FmHA Services,'' that as individuals or that its
members, if an entity, have not been convicted of such crime after
December 23, 1985. A decision to reject an application for this reason
is not appealable. In addition, the following requirements must be met:
(a) An individual must:
(1) Be a citizen of the United States, a United States non-citizen
national, or a qualified alien under applicable Federal immigration
laws. United States non-citizen nationals and qualified aliens must
provide the appropriate documentation as to their immigration status as
required by the United States Department of Homeland Security, Bureau of
Citizenship and Immigration Services.
(2) Possess the legal capacity to incur the obligations of the loan.
(3) Except for youth loans, have sufficient applicable educational
and/or on the job training or farming experience in managing and
operating a farm or ranch (1 year's complete production and marketing
cycle within the last 5 years) which indicates the managerial ability
necessary to assure reasonable prospects of success in the proposed plan
of operation.
(4) Be unable to obtain sufficient credit elsewhere to finance
actual needs at reasonable rates and terms,
[[Page 124]]
taking into consideration prevailing private and cooperative rates and
terms in the community in or near which the applicant resides for loans
for similar purposes and periods of time.
(5) Except for youth loans, be the owner-operator or tenant-operator
of not larger than a family farm after the loan is closed. In the case
of a limited resource applicant see Sec. 1941.4 of this subpart.
(6)(i) Have not executed a promissory note for a direct OL loan in
more than 6 different calendar years prior to the calendar year that the
requested direct OL loan will close. This eligibility restriction
applies to anyone who signs the promissory note. Youth loans are not
counted as direct OL loans for the purpose of this paragraph. This
limitation does not apply to farmers or ranchers when their land is
subject to the jurisdiction of an Indian tribe, the loan is secured by
one or more security instruments subject to the jurisdiction of Indian
tribe, and the test for credit requirement in Sec. 1941.6 is met. On a
case-by-case basis, a one-time waiver to this eligibility restriction
may also be granted for a period of two years if the following
conditions are met:
(A) The applicant has a financially viable operation;
(B) The applicant applied for commercial credit from at least two
commercial sources;
(C) The applicant was unable to obtain a commercial loan (including
an Agency-guaranteed loan); and
(D) The applicant has successfully completed, or will complete
within one year, borrower training.
(ii) This determination is not subject to administrative appeal.
(7) Transition rule. An applicant is eligible for new direct OL
loans for 3 additional years if as of April 4, 1996, the applicant, or
anyone who will execute the promissory note, had direct OL loans closed
in 4 or more separate years prior to the year in which the new direct OL
loan is closed. The 4 previous years' direct OL loans, as well as the 3
additional years of new direct OL loans, may be in non-consecutive
years.
(8) Agency loss. (i) Except as provided in paragraph (a)(8)(ii) of
this section, the applicant, and anyone who will execute the promissory
note, has not caused the Agency a loss by receiving debt forgiveness on
all or a portion of any direct or guaranteed loan made under the
authority of the CONACT by debt write-down or write-off; compromise,
adjustment, reduction, or charge-off under the provisions of section 331
of the CONACT; discharge in bankruptcy; or through payment of a
guaranteed loss claim.
(ii) The applicant may receive a direct OL loan to pay annual farm
and ranch operating and family living expenses, provided the applicant
meets all other requirements for the loan, if the applicant and anyone
who will execute the promissory note:
(A) Received a write-down under section 353 of the CONACT;
(B) Is current on payments under a confirmed reorganization plan
under chapter 11, 12, or 13 of title 11 of the United States Code; or
(C) Received debt forgiveness on not more than one occasion after
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the
applicant operates. Only applicants who were current on all existing
direct and guaranteed FSA loans prior to the beginning date of the
incidence period of a Presidentially-designated emergency and received
debt forgiveness on that debt within three years after the designation
of such emergency meet this exception.
(9) Not be delinquent on any non-tax Federal debt or FSA guaranteed
debt. This restriction will not apply if the Federal delinquency is
cured on or before the loan closing date.
(b) An entity must:
(1) Be unable to obtain sufficient credit elsewhere to finance
actual needs at reasonable rates and terms, taking into account
prevailing private and cooperative rates and terms in or near the
community for loans for similar purposes and periods of time. This
applies to the entity and all of its members, as individuals.
(2) Be controlled by farmers or ranchers engaged primarily and
directly in farming or ranching in the United States, after the loan is
made.
[[Page 125]]
(3) Be the owner-operator or tenant-operator of not larger than a
family farm after the loan is closed.
(4) Consist of members who are individuals and not entities.
(5) If the members holding a majority interest are related by blood
or marriage, they must meet the following requirements:
(i) The majority interest of the entity must be held by members who
are citizens of the United States, United States non-citizen nationals,
or qualified aliens under applicable Federal immigration laws. United
States non-citizen nationals and qualified aliens must provide the
appropriate documentation as to their immigration status as required by
the United States Department of Homeland Security, Bureau of Citizenship
and Immigration Services.
(ii) They must have sufficient applicable educational and/or on the
job training or farming experience in managing and operating a farm or
ranch (1 year's complete production and marketing cycle within the last
5 years) which indicates the managerial ability necessary to assure
reasonable prospects of success in the proposed plan of operation.
(iii) At least one member must operate the family farm.
(iv) The entity must operate the farm and be authorized to do so in
the State(s) in which the farm is located.
(6) If the members holding a majority interest are not related by
blood or marriage:
(i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this
section must be met.
(ii) They and the entity itself must operate the family farm.
(7) If applying as a limited resource applicant, as defined in Sec.
1941.4 of this subpart:
(i) The requirements of paragraphs (b)(5)(i), (ii) and (iv) of this
section must be met by the entity and all its members.
(ii) The entity and all the members must own or operate a small or
family farm and at least one member must operate the farm.
(8) If each member's ownership interest does not exceed the family
farm definition limits, their collective interests can exceed the family
farm definition limits only if:
(i) all of the members of the entity are related by blood or
marriage,
(ii) all of the members are or will be operators of the entity, and
(iii) The majority interest holders of the entity meet the
requirements of paragraphs (b)(5)(i), (ii) and (iv) of this section.
(9)(i) Have no member of the entity who has executed a promissory
note for direct OL loans closed in more than 6 different calendar years
prior to the calendar year that the requested direct OL loan will close.
This eligibility restriction applies to anyone who signs the promissory
note. Youth loans are not counted as direct OL loans for the purpose of
this paragraph. This limitation does not apply to farmers or ranchers
when their land is subject to the jurisdiction of an Indian tribe, the
loan is secured by one or more security instruments subject to the
jurisdiction of an Indian tribe, and the test for credit requirement in
Sec. 1941.6 is met. On a case-by-case basis, a one-time waiver to this
eligibility restriction may also be granted for a period of two years if
the following conditions are met:
(A) The applicant has a financially viable operation;
(B) The applicant applied for commercial credit from at least two
commercial sources;
(C) The applicant was unable to obtain a commercial loan (including
an Agency-guaranteed loan); and
(D) The applicant has successfully completed, or will complete
within one year, borrower training.
(ii) This determination is not subject to administrative appeal.
(10) Transition rule. An applicant is eligible for new direct OL
loans for 3 additional years if as of April 4, 1996, the applicant, or
anyone who will execute the promissory note, had direct OL loans closed
in 4 or more separate years prior to the year in which the new direct OL
is closed. The 4 previous years' OL loans, as well as the 3 additional
years of new direct OL loans, may be in non-consecutive years.
(11) Agency loss. (i) Except as provided in paragraph (b)(11)(ii) of
this section, the applicant, and anyone who will execute the promissory
note, has not
[[Page 126]]
caused the Agency a loss by receiving debt forgiveness on all or a
portion of any direct or guaranteed loan made under the authority of the
CONACT by debt write-down or write-off; compromise, adjustment,
reduction, or charge-off under the provisions of section 331 of the
CONACT; discharge in bankruptcy; or through payment of a guaranteed loss
claim.
(ii) The applicant may receive a direct OL loan to pay annual farm
and ranch operating and family living expenses, provided the applicant
meets all other requirements for the loan, if the applicant and anyone
who will execute the promissory note:
(A) Received a write-down under section 353 of the CONACT;
(B) Is current on payments under a confirmed reorganization plan
under chapter 11, 12, or 13 of title 11 of the United States Code; or
(C) Received debt forgiveness on not more than one occasion after
April 4, 1996, resulting directly and primarily from a Presidentially-
designated emergency for a county or contiguous county in which the
applicant operates. Only applicants who were current on all existing
direct and guaranteed FSA loans prior to the beginning date of the
incidence period of a Presidentially-designated emergency and received
debt forgiveness on that debt within three years after the designation
of such emergency meet this exception.
(12) Not be delinquent on any non-tax Federal debt or FSA guaranteed
debt. This restriction will not apply if the Federal delinquency is
cured on or before the loan closing date. This eligibility restriction
applies to the entity and all of its members.
(c) Borrower training. Except for applicants for youth loans, all
applicants must agree to meet the training requirements of Sec. 1924.74
of subpart B of part 1924 of this chapter unless a waiver is granted in
accordance with that section. In the case of an entity, any individual
member holding a majority interest in the operation or who is operating
the farm must agree to complete the training or qualify for the waiver
on behalf of the entity. However, if one entity member is solely
responsible for financial or production management, then only that
entity member will be required to complete the training in that area for
the entity or qualify for a partial waiver. If the financial and
production functions of the farming operation are shared, the knowledge
and skills of the individual(s) with the responsibility of production
and/or financial management of the operation will be considered in the
aggregate for granting a waiver or requiring that training be completed.
If a waiver is not granted, these individuals will be required to
complete the training in accordance with their responsibilities. If the
applicant has previously been required to obtain training, the applicant
must be enrolled in and attending, or have satisfactorily completed, the
training required.
[53 FR 35684, Sept. 14, 1988, as amended at 55 FR 21527, May 25, 1990;
56 FR 3971, Feb. 1, 1991; 58 FR 69199, Dec. 30, 1993; 62 FR 9354, Mar.
3, 1997; 62 FR 28618, May 27, 1997; 68 FR 7697, Feb. 18, 2003; 68 FR
62223, Nov. 3, 2003; 69 FR 5262, Feb. 4, 2004]
Sec. 1941.13 Rural youth.
If otherwise eligible, a rural youth who applies for an OL loan must
be recommended by a project advisor such as a 4-H club advisor,
vocational teacher, home economics teacher, county extension agent, or
other organizational sponsor or advisor. In addition, a youth who has
not reached the age of majority under State law must obtain a written
recommendation from a parent or guardian. All recommendations will be
filed with the application in the borrower's case file.
Sec. Sec. 1941.14-1941.15 [Reserved]
Sec. 1941.16 Loan purposes.
An applicant who obtained a write-down under direct or guaranteed
loan authorities is restricted to the purposes listed under paragraphs
(c), (g), and (h) of this section. An applicant who qualifies for a Low-
Documentation operating loan under Sec. 1910.4(c)(1)(iii)(A) of subpart
A of part 1910 may use loan funds for all authorized loan purposes
except paragraph (i) of this section. An applicant who qualifies for a
Lo-Doc loan under Sec. 1910.4(c)(1)(iii)(B) 7 CFR may only use the loan
funds for purposes listed under paragraphs (c) and (h) of this section.
[[Page 127]]
All other eligible applicants may request OL funds for any of the
following purposes:
(a) Payment of costs associated with reorganizing a farm or ranch to
improve its profitability.
(b) Purchase of livestock, including poultry, and farm or ranch
equipment, including quotas and bases, and cooperative stock for credit,
production, processing or marketing purposes.
(c) Payment of annual operating expenses, examples of which include,
but are not exclusively limited to feed, seed, fertilizer, pesticides,
farm or ranch supplies, cooperative stock, and cash rent.
(d) Payment of costs associated with land and water development for
conservation or use purposes.
(e) Payment of loan closing costs.
(f) Payment of costs associated with complying with Federal or
State-approved standards under the Occupational Safety and Health Act of
1970 (29 U.S.C. 655 and 667). This purpose is limited to applicants who
demonstrate that compliance with the standards will cause them
substantial economic injury.
(g) Payment of training costs required or recommended by the Agency.
(h) Payment of farm, ranch, or home needs, including family
subsistence. A portion of the loan is available to the borrower for use
outside of a supervised bank account. This portion is the lesser of:
(1) 10 percent of the OL loan;
(2) $5,000; or
(3) The amount needed to meet the subsistence needs of the family
for a 3-month period.
(i) Refinancing debts if the applicant has had direct or guaranteed
OL loans refinanced (refinanced does not mean restructured) 4 times or
less and one of the following conditions is met:
(1) The need for refinancing was caused by a qualifying disaster
declared by the President or designated by the Secretary; or
(2) The debts to be refinanced are owed to a non-USDA creditor.
[62 FR 9354, Mar. 3, 1997; 62 FR 28618, May 27, 1997, as amended 66 FR
1573, Jan. 9, 2001]
Sec. 1941.17 Loan limitations.
An OL loan will not be approved:
(a) If the total outstanding insured OL principal balance, including
the new loan, owed by the applicant will exceed $200,000 at loan
closing.
(b) If the total outstanding youth loan principal balance will
exceed $5,000 at loan closing.
(c) For the purchase of real estate, making principal payments on
real estate, or refinancing of any debts incurred for the purchase of
real estate.
(d) For any purpose that will contribute to excessive erosion of
highly erodible land or to convert wetlands to produce an agricultural
commodity as further explained in exhibit M of subpart G of part 1940 of
this chapter. Refer to subpart LL of part 2000 of this chapter,
``Memorandum of Understanding Between FmHA or its successor agency under
Public Law 103-354 and the U.S. Fish and Wildlife Service,'' for
assistance in implementation.
(e) If the purpose of the loan is to finance a nonfarm enterprise.
[53 FR 35684, Sept. 14, 1988, as amended at 58 FR 48286, Sept. 15, 1993;
62 FR 9354, Mar. 3, 1997; 68 FR 62224, Nov. 3, 2003]
Sec. 1941.18 Rates and terms.
(a) Rates. Upon request of the applicant, the interest rate charged
by the Agency or its successor agency under Public Law 103-354 will be
the lower of the interest rates in effect at the time of loan approval
or loan closing. If an applicant does not indicate a choice, the loan
will be closed at the interest rate in effect at the time of loan
approval. Interest rates are specified in exhibit B of the Agency
Instruction 440.1 (available in the Agency or its successor agency under
Public Law 103-354 office) for the type of assistance involved. A lower
rate may be established for a limited resource applicant subject to the
following:
(1) An applicant will receive the lower rate provided:
(i) The applicant meets the conditions of the definition for a
limited resource applicant set forth in Sec. 1941.4 of this subpart.
(ii) The Farm and Home Plan and/or Nonagricultural Enterprise
Analysis, when appropriate, indicates that installments at the higher
rate, along with other debts, cannot be paid during the period of the
plan.
[[Page 128]]
(2) A borrower with Limited Resource interest rates will be reviewed
each year at the time the analysis is conducted (see Sec. 1924.55 of
subpart B of part 1924 of this chapter) and at any time a servicing
action such as consolidation, rescheduling or deferral is taken to
determine what interest rate should be charged. The rate may be
increased in increments of whole numbers until it reaches the current
regular interest rate for the loan at the time of the rate increase.
(See Sec. 1951.25 of subpart A of part 1951 of this chapter.)
(b) Terms. (1) The final maturity date for each loan cannot exceed 7
years from the date of the promissory note. The first installment must
be scheduled for payment within 18 months of loan closing.
(2) Loan funds used to pay annual operating expenses or bills
incurred for such purposes for the crop year being financed will
normally be scheduled for payment within 12 months, but no later than 18
months, from the date the loan is closed when marketing plans extend
beyond 12 months. When an OL loan for annual production purposes is
scheduled for repayment in one installment, the installment must fall
due no later than 18 months from the date of loan closing. Individual
marketing circumstance may warrant repayment schedules which are longer
than 18 months. Such factors as establishing a new enterprise,
developing a farm, purchasing feed while feed crops are being
established, marketing plans, or during recovery from a disaster or
economic reverses, can be considered as reasons for a longer repayment
period on loans for annual operating purposes. When longer than normal
repayment terms are used for annual operating purposes, crops and/or
livestock produced for sale will not be considered sufficient security.
The County Supervisor may use Form FmHA or its successor agency under
Public Law 103-354 440-9, ``Supplementary Payment Agreement,'' for
borrowers who receive substantial income from which payment is to be
made before their installment due date.
(3) Advances for purposes other than annual operating expenses will
be scheduled for payment over the minimum period necessary considering
the applicant's ability to pay and the useful life of the security, but
not in excess of 7 years.
(4) When conditions warrant, installment scheduled in accordance
with paragraph (b)(3) of this section may include equal, unequal, or
balloon installments. In each case warranting balloon installments,
there must be adequate collateral for the loan at the time the balloon
payment is due. Circumstances which warrant balloon installments are
factors such as establishing a new enterprise, developing a farm,
purchasing feed while crops are being established or during recovery
from a disaster, or economic reverses. In no case will annual crops be
used as the sole collateral securing a balloon installment. A loan with
a balloon installment must be adequately secured by hard security, which
may include foundation stock, farm equipment and/or real estate. The
amount of the balloon installment should not exceed that which the
borrower could reasonably expect to pay during a maximum additional 7-
year period.
[53 FR 35684, Sept. 14, 1988, as amended at 55 FR 21527, May 25, 1990;
57 FR 18676, Apr. 30, 1992; 57 FR 37400, Aug. 19, 1992; 61 FR 35925,
July 9, 1996; 68 FR 62224, Nov. 3, 2003]
Sec. 1941.19 Security.
Primary security must be available for the loan. Any additional
security available up to and including 150 percent of the loan amount
also will be taken. Security in excess of 150 percent of the loan amount
will only be taken when it is not practical to separate the property,
i.e., same type of livestock (dairy cows, brood sows). In cases when a
loan is being made in conjunction with a servicing action, the security
requirements as stated in subpart S of part 1951 of this chapter will
prevail. In unusual cases, the loan approval official may require a
cosigner in accordance with Sec. 1910.3 (d) of subpart A of part 1910
of this chapter or a pledge of security from a third party. A pledge of
security is preferable to a cosigner.
(a) Chattels. (1) The loan must be secured by a first lien on all
property or products acquired, produced, or refinanced with loan funds.
(2) If the security for the loan under paragraph (a)(1) of this
section is not
[[Page 129]]
at least equal to 150 percent of the loan amount, the best lien
obtainable will be taken on other chattel security owned by the
applicant, if available, up to the point that security for the loan at
least equals 150 percent of the loan amount.
(i) When there are several alternatives available (cattle,
machinery), any one of which will meet the security requirements of this
section, the approval official generally has the discretion to select
the best alternative for obtaining security.
(ii) When alternatives exist and the applicant has a preference as
to the property to be taken for security, however, the approval official
will honor the preference so long as the requirements of paragraphs
(a)(1) and (2) of this section are met.
(3) To comply with the 150 percent requirement, security values will
be established as follows:
(i) For the purposes of loan making only, the security value of the
crop and/or livestock production is presumed to be 100 percent of the
amount loaned for annual operating and family living expenses listed on
Form FmHA or its successor agency under Public Law 103-354 431-2, ``Farm
and Home Plan,'' or other acceptable plan of operation.
(ii) The specific livestock and/or equipment to be taken as
security, along with the value of the security, will be documented in
the case file. This information will be obtained from values established
in accordance with Sec. 1941.25 of this subpart.
(b) Real estate. The loan approval official will require a lien on
all or part of the applicant's real estate as security when chattel
security alone is not at least equal to 150 percent of the amount of the
loan. Different lien positions on real estate are considered separate
and identifiable collateral. Real estate taken as security, along with
its value established in accordance with Sec. 1941.25 of this subpart,
will be documented in the case file. If the applicant disagrees with the
values established, FmHA or its successor agency under Public Law 103-
354 will accept an appraisal from the applicant, obtained at the
applicant's expense, if the appraisal meets all FmHA or its successor
agency under Public Law 103-354 requirements.
(1) Security may also include assignments of leases or leasehold
interests having mortgageable value, revenues, royalties from mineral
rights, patents and copyrights, and pledges of security by third
parties.
(2) Advice on obtaining security will be received from OGC when
necessary.
(c) Exceptions. The County Supervisor will clearly document in the
file when security is not taken for any of the following reasons:
(1) A lien will not be taken on property when it will prevent the
applicant, or members of an entity applicant, from obtaining operating
credit from other sources.
(2) A lien will not be taken on property that could have significant
environmental problems/costs (e.g., known or suspected underground
storage tanks or hazardous wastes, contingent liabilities, wetlands,
endangered species, historic properties). Guidance is provided in part
II, item H of exhibit A of FmHA Instruction 1922-E (available in any
FmHA or its successor agency under Public Law 103-354 office) as to the
action to be taken when the appraiser indicates that the property is
subject to any hazards, detriments or limiting conditions.
(3) A lien will not be taken on property that cannot be made subject
to a valid lien.
(4) A lien will not be taken on the applicant's personal residence
and appurtenances, when the residence is located on a separate parcel
and the farm tract(s) being used for collateral, in addition to any
crops or chattels, meet the security requirement of at least equal to
150 percent of the loan.
(5) A lien will not be taken on subsistence livestock; cash or
special cash collateral accounts to be used for the farming operation or
for necessary living expenses; all types of retirement accounts;
personal vehicles necessary for family living or farm operating
purposes; household goods; and small tools and small equipment, such as
hand tools, power lawn mowers, and other similar items not needed for
security purposes.
(6) When title to a livestock or crop enterprise is held by a
contractor
[[Page 130]]
under a written contract or the enterprise is to be managed by the
applicant under a share lease or share agreement, an assignment of all
or part of the applicant's share of the income will be taken. A form
approved by OGC will be used to obtain the assignment.
(7) A lien will not be taken on timber or the marginal land for a
loan for planting softwood timber trees on marginal land in conjunction
with a softwood timber (ST) loan.
(d) Assignment on income in Uniform Commercial Code (UCC) States.
The County Supervisor will determine whether or not such an assignment
will be taken. In UCC States, an assignment of livestock or crop income
constitutes a security agreement on income. The share lease, share
agreement, or contract will be described specifically as ``Contract
Rights'' or ``Contract Rights in Livestock or Crops,'' (or as
``Accounts'' or ``Accounts in Livestock or Crops,'' if required by a
State supplement), and so forth, in paragraph 1(b) of the financing
statement.
(e) Insurance. See Sec. 1941.88 of subpart B of this part for
insurance requirements.
(f) Special security requirements. When OL loans are made to
eligible entities that consist of members who are presently indebted for
an OL loan(s) as individual(s), or when OL loans are made to eligible
individuals who are members of an entity which is presently indebted for
an OL loan(s), security must consist of:
(1) Chattel and/or real estate security that is separate and
identifiable from the security pledged to the Agency for any other farm
credit programs direct or guaranteed loan(s).
(2) Different lien positions on real estate are considered separate
and identifiable collateral.
(3) The outstanding amount of loans made may not exceed the value of
the collateral used.
[53 FR 35684, Sept. 14, 1988, as amended at 54 FR 47959, Nov. 20, 1989;
56 FR 67480, Dec. 31, 1991; 57 FR 18676, Apr. 30, 1992; 59 FR 22961, May
4, 1994; 59 FR 25799, May 18, 1994; 61 FR 35925, July 9, 1996]
Sec. Sec. 1941.20-1941.22 [Reserved]
Sec. 1941.23 General provisions.
(a) Compliance requirements. The following will apply as
appropriate:
(1) Environmental assessments and statements. Subpart G of part 1940
of this chapter should be referred to for these requirements. The State
Environmental Coordinator should be consulted for assistance in
preparing any required statements.
(2) Equal opportunity and nondiscrimination requirements. In
accordance with title V of Pub. Law 93-495, the Equal Credit Opportunity
Act, FmHA or its successor agency under Public Law 103-354 will not
discriminate against any applicant on the basis of race, color,
religion, sex, national origin, marital status, age or physical/mental
handicap provided the applicant can execute a legal contract, with
respect to any aspect of a credit transaction.
(3) National Historic Preservation Act of 1966. If a loan will
affect any district, site, building, structure, or object that has been
included in the National Register of Historic Places as maintained by
the Department of Interior in accordance with the National Historic
Preservation Act of 1966, or if the undertaking may affect properties
having scientific, prehistorical, historical, or archaeological
significance, the provisions of subpart F of part 1901 of this chapter
will apply.
(b) Other considerations. (1) FmHA or its successor agency under
Public Law 103-354 employees will not guarantee repayment of advances
from other credit sources, either personally or on behalf of applicants,
borrowers, or FmHA or its successor agency under Public Law 103-354.
(2) An applicant will be advised that compliance with all applicable
special laws and regulations is required.
(3) An applicant must have acceptable tenure arrangements. Unless
the loan approval official determines otherwise, each applicant will
obtain a satisfactory written lease. A copy of the lease will be filed
in the County Office case file.
[53 FR 35684, Sept. 14, 1988, as amended at 68 FR 62224, Nov. 3, 2003]
[[Page 131]]
Sec. 1941.24 [Reserved]
Sec. 1941.25 Appraisals.
(a) Except as provided in paragraph (a)(5) of this section, real
estate appraisals will be completed by an FmHA or its successor agency
under Public Law 103-354 employee, or a contractor authorized to make
farm appraisals. Chattel and real estate appraisals will be made on
forms in accordance with Sec. 761.7 of this title and, in the case of
an appraisal of mineral rights' the appropriate Agency form (available
in each Agency State Office) or other format that contains the same
information, to determine market value and borrower equity in the
following instances:
(1) When an initial loan is made, a chattel appraisal is required on
all chattel property owned by the applicant, and on chattel property to
be acquired when the item can be specifically identified.
(2) When a subsequent loan is made, a chattel appraisal is required
when:
(i) Refinancing chattel debt.
(ii) The existing chattel appraisal is more than 2 years old.
(3) A real estate appraisal is not required when real estate is
taken as additional security, as defined in Sec. 1941.4 of this
subpart. However, the County Supervisor will document in the running
record the estimated market value of the additional security and the
basis for the estimate.
(4) A real estate appraisal is required when real estate is taken as
primary security, as defined in Sec. 1941.4, and the amount of the loan
to be secured by the real estate exceeds $50,000.
(5) Other real estate appraisals completed by other State-certified
general appraisers may be used providing such appraisals meet the
ethics, competency, departure provisions, etc., and Sections I and II of
the Uniform Standards of Professional Appraisal Practices, and contain a
mineral rights appraisal as set out in paragraph (a) of this section.
Prior to acceptance, the appraisal must have an acceptable desk review
(technical) completed by an FmHA or its successor agency under Public
Law 103-354 designated review appraiser.
(6) A new real estate appraisal is not required if the latest
appraisal report available is not over 1 year old, unless the approval
official requests a new appraisal, or unless significant changes in the
market value of real estate have occurred in the area within the 1-year
period.
(b) Real estate appraiser qualifications. The contractor, when he/
she is not the appraiser, is responsible for substantiating the
appraiser's qualifications. The contractor will obtain FmHA or its
successor agency under Public Law 103-354's concurrence that the
appraiser has the necessary qualifications and experience before the
contractor will utilize the appraiser in any appraisal work. The
contractor/appraiser completing the report must be State-certified
general.
[53 FR 35684, Sept. 14, 1988, as amended at 57 FR 18676, Apr. 30, 1992;
58 FR 26680, May 5, 1993; 58 FR 48286, Sept. 15, 1993; 59 FR 16772, Apr.
8, 1994; 59 FR 25800, May 18, 1994; 64 FR 62568, Nov. 17, 1999; 69 FR
30999, June 2, 2004]
Sec. Sec. 1941.26-1941.28 [Reserved]
Sec. 1941.29 Relationship between FSA loans, direct and guaranteed.
(a) An eligible emergency loan (EM) applicant's total credit needs
will be satisfied under the EM loan authorities, to the extent possible,
before OL loan assistance is considered.
(b) A direct OL may be made to a guaranteed loan borrower provided
the requirements of 7 CFR 761.8 and all other loan requirements are met.
(c) An direct OL loan may be made to refinance a guaranteed OL loan
when the following conditions are met:
(1) The circumstances resulting in the need to refinance were beyond
the borrower's control.
(2) Refinancing is in the best interest of the Government and the
borrower.
(3) The guaranteed OL loan must be completely paid off at the time
the direct OL loan is closed.
[53 FR 36240, Sept. 19, 1988, as amended at 55 FR 21527, May 25, 1990;
58 FR 44747, Aug. 25, 1993; 66 FR 7568, Jan. 24, 2001]
[[Page 132]]
Sec. Sec. 1941.30-1941.31 [Reserved]
Sec. 1941.32 Catastrophic Risk Protection (CAT) insurance requirement.
Applicants must comply with the CAT insurance requirement no later
than loan closing by either:
(1) Obtaining at least the CAT level of coverage, if available, for
each crop of economic significance as defined by the Federal Crop
Insurance Corporation, or,
(2) By waiving eligibility of emergency crop loss assistance in
connection with the uninsured crop. FSA emergency (EM) loss loan
assistance is not considered emergency crop loss assistance for the
purpose of the crop insurance waiver on the uninsured crop.
[62 FR 9355, Mar. 3, 1997]
Sec. 1941.33 Loan approval or disapproval.
(a) Loan approval authority. Initial and subsequent loans may be
approved as authorized by subpart A of part 1901 of this chapter,
provided the total direct operating loan principal balance at loan
closing does not exceed $200,000.
(b) Loan approval action. (1) The loan approval official must
approve or disapprove applications within the deadlines set out in Sec.
1910.4 of subpart A of part 1910 of this chapter. The loan approval
official is responsible for reviewing the docket to determine whether
the proposed loan complies with established policies and all pertinent
regulations. When reviewing the docket and before approving the loan,
the loan approval official will determine that:
(i) The Agency has certified the applicant eligible,
(ii) Funds are requested for authorized purposes,
(iii) The proposed loan is based on a feasible farm operating plan.
(iv) The security is adequate,
(v) Necessary supervision is planned, and
(vi) All other pertinent requirements have been met or will be met.
(2) When approving the loan, the approval official will:
(i) Indicate on all copies of Form FmHA or its successor agency
under Public Law 103-354 1940-1, ``Request for Obligation of Funds,''
any conditions required by Agency or its successor agency under Public
Law 103-354 regulations that must be met for loan closing;
(ii) Specify all security requirements;
(iii) Indicate special conditions or agreements needed with prior
lienholders when appropriate;
(iv) Indicate that approval is subject to satisfactory title
evidence when required, if such evidence has not been obtained; and
(v) Send a signed copy of Form FmHA or its successor agency under
Public Law 103-354 1940-1 to the borrower on the date of loan approval.
(c) Loan disapproval. The loan approval official must approve or
disapprove applications within 60 days after receiving a complete
application, as set out in Sec. 1910.4 of subpart A of part 1910 of
this chapter. The following actions will be taken when a loan is
disapproved:
(1) The reasons for disapproval will be indicated on Form FmHA or
its successor agency under Public Law 103-354 1940-1 by the loan
approval official. The reasons may be in a letter or the running record
if this form has not been completed. Suggestions of how to remedy the
disapprovals should be included.
(2) The County Supervisor will notify the applicant in writing of
the action taken, and include any suggestions that could result in
favorable action. The applicant will be notified, in writing, of the
opportunity to appeal.
(3) Items furnished by the applicant during docket processing will
be returned.
(4) The County Supervisor will notify any other interested parties
of the disapproval.
[53 FR 35664, Sept. 14, 1988, as amended at 54 FR 11366, Mar. 20, 1989;
57 FR 18676, Apr. 30, 1992; 58 FR 48282, Sept. 15, 1993; 61 FR 35925,
July 9, 1996; 68 FR 62224, Nov. 3, 2003]
Sec. 1941.34 [Reserved]
Sec. 1941.35 Actions after loan approval.
(a) Requesting check. If the County Supervisor is reasonably certain
that the loan can be closed within 20 working days from the date of the
check, loan funds may be requested at the time of loan approval through
the State Office terminal system. If funds
[[Page 133]]
are not requested when the loan is approved, advances in the amount
needed will be requested through the County Office computer terminal
system. Each advance will be limited to an amount which can be used
promptly, usually within 60 days from the date of the check. Loan funds
must be provided to the applicant(s) within 15 days after loan approval,
unless the applicant(s) agrees to a longer period. If no funds are
available within 15 days of loan approval, funds will be provided to the
applicant as soon as possible and within 15 days after funds become
available, unless the applicant(s) agrees to a longer period. If a
longer period is agreed upon by the applicant(s), the same will be
documented in the case file by the County Supervisor.
(b) Cancellation of loan check and/or obligation. If, for any
reason, a loan check or obligation will be canceled, the County
Supervisor will notify the State Office and the Finance Office of loan
cancellation by using Form 1940-10, ``Cancellation of U.S. Treasury
Check and/or Obligation.'' If a check received in the County Office is
to be canceled, the check will be returned as prescribed in FmHA
Instruction 2018-D (available in any FmHA or its successor agency under
Public Law 103-354 office).
(c) Cancellation of advances. When an advance is to be cancelled the
County Supervisor must take the following actions:
(1) Complete and distribute Form FmHA or its successor agency under
Public Law 103-354 1940-10.
(2) When necessary, prepare and excute a subsitute promissory note
reflecting the revised total of the loan and the revised repayment
schedule. When it is not necessary to obtain a substitute promissory
note, the County Supervisor will show on Form FmHA or its successor
agency under Public Law 103-354 440-57 the revised amount of the loan
and the revised repayment schedule.
(d) Increase or decrease in loan amount. If it becomes necessary to
increase or decrease the amount of the loan prior to closing, the County
Supervisor will request that all distributed docket forms be returned to
the County Office for reprocessing unless the change is minor and
replacement forms can be promptly completed and submitted.
[53 FR 35684, Sept. 14, 1988, as amended at 54 FR 39727, Sept. 28, 1989;
59 FR 54788, Nov. 2, 1994]
Sec. Sec. 1941.36-1941.37 [Reserved]
Sec. 1941.38 Loan closing.
Operating loans will be closed in accordance with subpart B of part
1941 of this chapter.
Sec. Sec. 1941.39-1941.41 [Reserved]
Sec. 1941.42 Loan servicing.
Loans will be serviced in accordance with subpart A of part 1962 of
this chapter and/or subpart S of part 1951 of this chapter.
Sec. Sec. 1941.43-1941.49 [Reserved]
Sec. 1941.50 State supplements.
State supplements will be issued as necessary to implement this
subpart.
Exhibit A to Subpart A of Part 1941--Processing Guide--Insured Operating
Loans
This exhibit outlines the basic steps involved in processing a loan
application and identifies the FmHA or its successor agency under Public
Law 103-354 forms which should be considered for use at each step.
Consult the appropriate Forms Manual Insert (FMI) for instructions
for completion, distribution, and procedural references for each form.
Application Processing
a. applicant interview
Review applicant's proposed plan of operation in view of authorized
loan purposes and limitations on loans.
Begin running case record.
Provide applicant with FmHA or its successor agency under Public Law
103-354 forms to be completed and returned which are needed to determine
eligibility. Be sure applicant understands the purposes of the forms and
knows who must complete them.
Advise applicant of other information that must be given to FmHA or
its successor agency under Public Law 103-354.
When appropriate, have applicant contact other creditors as possible
credit sources for financing, or participating in the financing, of the
proposed operation.
The following FmHA or its successor agency under Public Law 103-354
forms will be made available to the applicant or will be
[[Page 134]]
used by the County Supervisor. Forms designated with an ``x'' are always
required and those designated with an ``*'' are to be used when
appropriate.
------------------------------------------------------------------------
Form No Name
------------------------------------------------------------------------
410-1......................... Application for FHA Services..... (x)
1910-5........................ Request for Verification of (*)
Employment.
410-9......................... Statement Required by the Privacy (*)
Act.
410-10........................ Privacy Act Statement to (*)
References.
1910-11....................... Applicant Certification, Federal (x)
Collection Policies for Consumer
or Commercial Debts.
431-1......................... Long-Time Farm and Home Plan..... (*)
431-2......................... Farm and Home Plan............... (x)
431-4......................... Business Analysis-- (*)
Nonagricultural Enterprise.
440-32........................ Request for Statement of Debts (*)
and Collateral.
1940-51....................... Crop-Share-Cash Farm Lease....... (*)
1940-53....................... Cash Farm Lease.................. (*)
1940-55....................... Livestock-Share-Farm Lease....... (*)
1940-56....................... Annual Supplement to Farm Lease.. (*)
------------------------------------------------------------------------
b. field visit
Notify applicant of planned visit and its purpose.
Evaluate the resources available to the applicant and determine
whether or not they adequately fulfill the requirements of the proposed
plan of operation.
Obtain information needed to complete required appraisals (chattel
and real estate).
Hold landlord-tenant meeting, if necessary, to reach an agreement on
the terms of the lease, resolve any problems, etc.; record in running
case record.
Determine security requirements and record in running case record.
The following FmHA or its successor agency under Public Law 103-354
forms will be used as appropriate:
------------------------------------------------------------------------
Form No. Name
------------------------------------------------------------------------
440-13 Report of lien search.............. *
440-21 Appraisal of chattel property...... *
1922-1 Appraisal report-farm tract........ *
1922-2 Supplemental report-irrigation, *
drainage, levee, and minerals.
1922-3 Map of property.................... *
1922-10 Appraiser's worksheet-farm tract... *
2006-9 Notice of visit or meeting......... *
------------------------------------------------------------------------
c. eligibility determination
Obtain all needed application forms, and other information from the
applicant; assist the applicant in completing these forms and in
obtaining needed information, as necessary.
Request copy of deed or other evidence of title, when needed.
Schedule meeting with county committee, review application and
determine eligibility.
Inform applicant of the results of committee action.
The following FmHA or its successor agency under Public Law 103-354
forms will be used as appropriate in accomplishing the above actions:
------------------------------------------------------------------------
Form No. Name
------------------------------------------------------------------------
403-1........................ Debt Adjustment Agreement......... (*)
440-2........................ County Committee Certification or (x)
Recommendation.
------------------------------------------------------------------------
Docket Preparation
Obtain all information from the applicant, prior lienholder(s),
landlord(s), etc., needed for the loan docket to be prepared.
Check to make sure all security requirements have been met or will
be met by loan closing.
Prepare a loan narrative, for running record.
The following FmHA or its successor agency under Public Law 103-354
forms will be completed and utilized as necessary in preparing the loan
docket for approval:
------------------------------------------------------------------------
Form No. Name
------------------------------------------------------------------------
400-4......................... Assurance Agreement............. (*)
1927-8........................ Agreement with Prior Lienholder. (*)
1940-1........................ Request for Obligation of Funds. (*)
440-4......................... Security Agreement (Chattels and (*)
Crops).
440-9......................... Supplementary Payment Agreement. (*)
1940-20....................... Request For Environmental (*)
Information.
440-25/440A25................. Financing Statement............. (*)
440-26........................ Consent and Subordination (*)
Agreement.
1940-21, 1940-22, or Exhibit Environmental Review............ (*)
H, Subpart G of Part 1940.
441-5......................... Subordination Agreement......... (*)
441-8......................... Assignment of Proceeds from the (*)
Sale of Products.
441-10........................ Nondisturbance Agreement........ (*)
441-12........................ Agreement for Disposition of (*)
Jointly Owned Property.
441-13........................ Division of Income and (*)
Nondisturbance Agreement.
441-17........................ Certification of Obligation to (*)
Landlord.
441-18........................ Consent to Payment of Proceeds (*)
from Sale of Farm Products.
441-25........................ Assignment of Proceeds from the (*)
Sale of Dairy Products and
Release of Security Interest.
------------------------------------------------------------------------
Loan Approval and Closing
a. loan approval
File financing statement or chattel mortgage, and obtain a lien
search.
Request preliminary title opinion when appropriate.
Record loan closing conditions in the running record.
Execute and distribute all forms necessary for loan approval.
[[Page 135]]
b. loan closing
Request needed legal services.
Arrange for loan closing by county office, escrow agent, designated
attorney, or other authorized loan closing agent; furnish loan closing
agent with appropriate instructions, forms, and other needed information
for loan closing.
The following FmHA or its successor agency under Public Law 103-354
forms will be used by the County Office in addition to those forms
listed under docket preparation which must be executed by the borrower
or other party:
------------------------------------------------------------------------
Form No. Name
------------------------------------------------------------------------
400-6.......................... Compliance Statement............ (*)
402-1.......................... Deposit Agreement............... (*)
402-2.......................... Statement of Deposits and (*)
Withdrawals.
427-1 (State).................. Real Estate Mortgage or Deed of (*)
Trust for ----------.
1927-9......................... Preliminary Title Opinion....... (*)
1940-17........................ Promissory Note................. (x)
------------------------------------------------------------------------
(7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; sec. 10, Pub. L. 93-357,
88 Stat. 392; 7 CFR 2.23; 7 CFR 2.70)
[43 FR 55883, Nov. 29, 1978]
Editorial Note: For Federal Register citations affecting exhibit A
to subpart A of part 1941, see the List of CFR Sections Affected, which
appears in the Finding Aids section of the printed volume and on GPO
Access.
Exhibit B to Subpart A of Part 1941 [Reserved]
Exhibit C to Subpart A of Part 1941--Controlled Substance
(Note: Exhibit C referenced in this subpart is available in any FmHA
or its successor agency under Public Law 103-354 office.)
[53 FR 35684, Sept. 14, 1988]
Subpart B_Closing Loans Secured by Chattels
Sec. 1941.51 Purpose.
This subpart prescribes Farmers Home Administration (FmHA) or its
successor agency under Public Law 103-354 policies, procedures, and
authorizations for closing direct loans secured by chattels. These loans
are considered closed on the date the promissory note is executed.
[43 FR 55883, Nov. 29, 1978, as amended at 58 FR 48282, Sept. 15, 1993]
Sec. Sec. 1941.52-1941.53 [Reserved]
Sec. 1941.54 Promissory note.
(a) Executing the note. Form FmHA or its successor agency under
Public Law 103-354 1940-17, ``Promissory Note,'' will be executed and
dated following receipt of the loan check in the county office and prior
to the first withdrawal of loan funds from the supervised bank account
or delivery of the loan check to the borrower.
(b) Signatures--(1) Individuals. Only the applicant is required to
sign the promissory note. Any other signatures needed to assure the
required security will be obtained as provided in State supplements. A
cosigner will be required only when it has been determined that the
applicant cannot possibly meet the repayment requirements for the loan
request. Persons who are minors (except a youth obtaining a youth loan),
mental incompetents, or noncitizens will not execute a promissory note.
Except when a person has pledged only property as security for a loan,
the purpose and effect of signing a promissory note or other evidence of
indebtedness for a loan made or insured by FmHA or its successor agency
under Public Law 103-354 is to incur individual personal liability
regardless of any State law to the contrary. A youth executing a
promissory note shall incur full personal liability for the indebtedness
evidenced by such note.
(2) Entities. The promissory note(s) will be executed so as to
evidence liability of the entity as well as individual liability of all
members of the entity.
[43 FR 55883, Nov. 29, 1978, as amended at 51 FR 13448, Apr. 21, 1986;
53 FR 35691, Sept. 14, 1988; 58 FR 48286, Sept. 15, 1993; 68 FR 7697,
Feb. 18, 2003]
Sec. Sec. 1941.55-1941.56 [Reserved]
Sec. 1941.57 Security instruments.
Security instruments referred to in this subpart are financing
statements, security agreements, chattel mortgages, and similar lien
instruments. To obtain a security interest in chattels and crops in
States which have adopted the Uniform Commercial Code (UCC), both a
financing statement and a security agreement are required, although
[[Page 136]]
only the financing statement must be filed or recorded in public
records. See paragraph (g) of this section for filing or recording
instructions. In Louisiana a Chattel Mortgage and Crop Pledge or Crop
Pledge, as appropriate, is required to obtain a security interest in
chattels and crops.
(a) Executing security instruments by borrowers. State supplements
will be issued, as necessary, to carry out the provisions of this
paragraph. In order to close the loan and obtain the desired lien,
security instruments will be executed by appropriate entity officials,
on behalf of an entity borrower. Any other signatures needed to assure
the required security will be obtained as provided in State supplements.
A cosigner will be required only when it has been determined that the
applicant cannot possibly meet the security requirements for the loan
request.
(b) Undivided interests. An applicant obtaining a loan to finance an
undivided interest in security or to refinance debts on an undivided
interest in such property will secure the loan with a lien on the
undivided interest in the property. All individuals having an undivided
interest in the security will execute Form FmHA or its successor agency
under Public Law 103-354 441-12, ``Agreement for Disposition of Jointly-
Owned Property'', unless a written agreement to the same affect as this
form has already been signed.
(c) Security instrument forms. (1) Form FmHA or its successor agency
under Public Law 103-354 440-25, ``Financing Statement,'' or Form FmHA
or its successor agency under Public Law 103-354 440A-25, ``Financing
Statement (Carbon-Interleaved)''; and Form FmHA or its successor agency
under Public Law 103-354 440-4, ``Security Agreement (Chattels and
Crops),'' will be used to obtain security interests in chattel property
in States which have adopted the Uniform Commercial Code (UCC), unless a
State supplement requires the use of other forms.
(2) Form FmHA or its successor agency under Public Law 103-354 440-4
LA, ``Chattel Mortgage and Crop Pledge (Louisiana),'' or Form FmHA or
its successor agency under Public Law 103-354 440-4A LA, ``Crop Pledge
(Louisiana),'' will be used in the State of Louisiana.
(3) Other forms will be used as provided in State supplements in
Puerto Rico, Guam, American Samoa and the Northern Mariana Islands.
(d) Taking security instruments--(1) Financing statement. A
financing statement is effective for 5 years from the date of filing and
as long thereafter as it is continued by filing a continuation
statement.
(i) Initial loan. A financing statement will be required for every
initial loan except when a filed financing statement covering the
applicants property is still effective, covers all types of chattel
property that will serve as security for the initial loan, and describes
the land on which crops and fixtures are or will be located.
(ii) Subsequent loan. A financing statement will not be required
unless the filed financing statement is not effective, does not cover
all types of chattel property that will serve as security for the
subsequent loan, or does not describe the land on which crops or
fixtures are or will be located. If the loan debt is being secured for
the first time, however, the procedure for securing initial loans stated
in paragraph (d)(1)(i) of this section will be followed.
(2) Security Agreements--(i) Initial loan. When an initial loan is
made to an applicant, including to a paid-in-full borrower, a new
security agreement will be required in all cases. The security agreement
will be executed not later than the first withdrawal of loan funds from
the supervised bank account or delivery of the loan check to the
borrower.
(ii) Subsequent loan. An additional security agreement will be
required if property which is to serve as security for the debt is not
described either specifically or in the printed form of the previous
security agreement, or if an additional agreement it is needed to obtain
or maintain a security interest in crops.
(A) An additional security agreement may also be executed to reflect
significant changes in security.
(B) An additional security agreement is not necessary if the
existing security agreement covers all types of chattels
[[Page 137]]
that will serve as security for the subsequent loan, describes the land
on which the crops or fixtures are or will be located, and was executed
within 1 year before the crops which are offered as security became
growing crops.
When determined necessary by OGC, a State supplement will be issued to
further explain when a security agreement covering crops will be
required.
(e) Describing collateral in security instruments. (1) Financing
statements describe certain types of collateral. If items of collateral
not covered in the printed form of the financing statement are to serve
as security, they should be described by type or specifically
identified.
(2) Generally, animals, birds, fish, etc., should be described by
groups in the security agreement. The serial or other identification
numbers of major items of equipment should be listed in the security
agreement. If a security interest is to be taken in property such as
inventory, supplies, recreation or other nonfarm equipment, or fixtures
which cannot be readily described under the column headings of items 2
or 3 of Form FmHA or its successor agency under Public Law 103-354 440-
4, an appropriate description of such property will be inserted in item
2 or 3 below the other property, without regard to the column headings.
(3) The advice of the Office of the General Counsel (OGC) will be
obtained as to how to describe in financing statements and security
agreements items such as grazing permits, milk bases, and membership or
stock in cooperative associations. The property to be described in
security instruments should be reconciled with any existing security
instruments and with Form FmHA or its successor agency under Public Law
103-354 462-1, ``Record of the Disposition of Security Property.''
(4) After the initial security agreement is executed, and after the
borrower obtains all the property which FmHA or its successor agency
under Public Law 103-354 wants specifically described, by item, in the
security agreement, a new security agreement will be executed.
(f) Executing security instruments by County Office employees. The
County Supervisor and any County Office employee authorized by the
County Supervisor may execute on behalf of the Government any legal
instruments necessary to obtain or preserve security for loans. This
includes financing statements, security agreements, chattel mortgages
and similar lien instruments, as well as severance agreements, consent
and subordination agreements, affidavits and acknowledgments.
(g) Filing or recording security instruments. (1) Ordinarily, in
States which have adopted the UCC, financing statements may be delivered
by hand or mailed to the filing officers for filing or recording when
the loan is approved. However, when this is not practical, the financing
statement may be filed at a later date, but not later than the first
withdrawal of loan funds from the supervised bank account or delivery of
the loan check to the borrower. If crops or other property of the
borrower are located or will be located in a State other than that of
the borrower's residence, the County Office servicing the loan will
contact the County Office in the other State for information as to the
security instruments to be used and the place(s) of filing or recording
in the other State. The financing statement will be filed or recorded as
required by State supplements.
(2) Security agreements will not be filed or recorded unless
required by State supplements. Form FmHA or its successor agency under
Public Law 103-354 440-4 LA or Form FmHA or its successor agency under
Public Law 103-354 440-4A LA will be filed or recorded in Louisiana as
provided by State supplements.
[43 FR 55883, Nov. 29, 1978, as amended at 50 FR 27415, July 3, 1985; 51
FR 13448, Apr. 21, 1986; 53 FR 35691, Sept. 14, 1988; 68 FR 7697, Feb.
18, 2003]
Sec. Sec. 1941.58-1941.59 [Reserved]
Sec. 1941.60 Purchase money security interest.
A purchase money security interest will take priority over an
earlier perfected security interest if a security agreement is taken and
a financing statement is filed before the purchaser receives possession
of the property or
[[Page 138]]
within 10 days thereafter, subject to the following limitations:
(a) Motor vehicles. For motor vehicles required to be licensed, any
action necessary to obtain perfection in the particular State, such as
having the security interest noted on the certificate of title, must be
taken before the purchaser receives possession or within 10 days. In
some States, it is not necessary to file a financing statement to
perfect a security interest in such motor vehicles; however, FmHA or its
successor agency under Public Law 103-354 will always require both a
security agreement and a financing statement. A State supplement will be
issued, if necessary to set out the procedure for obtaining a lien on a
motor vehicle, motorboat, or any special type of security.
(b) Farm equipment. A purchase money security interest in farm
equipment costing $2,500 or less (other than fixtures or motor vehicles
required to be licensed), will take priority over an earlier perfected
security interest if a security agreement is obtained, even though a
financing statement is not executed or filed. FmHA or its successor
agency under Public Law 103-354, however, will always file a financing
statement. State supplements will be issued, as necessary, to further
explain the requirements for complying with this section.
(c) Inventory. A purchase money security interest in inventory will
take priority over an earlier perfected security interest, provided:
(1) A security agreement is taken and a financing statement is filed
not later than the time the purchaser receives possession of the
property, and
(2) Before the purchaser takes possession of the property, written
notice is given to the party holding the earlier perfected interest that
the purchase money creditor has acquired or expects to acquire a
purchase money security interest in the inventory, which must by
described by item or type. When determined necessary by OGC, a State
supplement will be issued to further explain the requirements for
perfecting a purchase money security interest in inventory.
(d) Fixtures. A security interest taken in goods before they become
fixtures has priority over a security interest in the real estate to
which they are attached. A security interest taken in goods after they
become fixtures is valid against all persons later acquiring an interest
in the real estate. It is not valid against persons who had an interest
in the real estate when the goods become fixtures, unless they execute a
consent disclaimer or Form FmHA or its successor agency under Public Law
103-354 440-26, ``Consent and Subordination Agreement''.
(e) Crops. A security interest taken in crops not more than 3 months
before the crops are planted or otherwise become growing crops, has
priority over an earlier perfected security interest, if the obligation
underlying the earlier interest was due more than 6 months before the
crops became growing crops.
[43 FR 55883, Nov. 29, 1978, as amended at 54 FR 47959, Nov. 20, 1989]
Sec. Sec. 1941.61-1941.62 [Reserved]
Sec. 1941.63 Lien search.
(a) Required lien searches. (1) A lien search will be obtained at a
time that assures that the security instruments give the Government the
required security, usually at the time the financing statement (mortgage
or crop pledge in Louisiana) is filed or recorded. Lien searches may be
obtained after the financing statement is filed, but never after the
delivery of the loan check or the first withdrawal of loan funds from
the supervised bank account. Form FmHA or its successor agency under
Public Law 103-354 440-13, ``Report of Lien Search,'' or other lien
search forms will be used.
(2) Under the UCC, lien searches are necessary in making subsequent
loans if an additional financing statement is required; i.e., when crops
or fixtures to be taken as security are or will be located on land not
described in the existing financing statement, or when property not
covered by the financing statement is to be taken as security for the
loan.
(3) Lien searches also may be obtained in connection with processing
applications when the County Supervisor determines such searches are
necessary on an individual case basis.
[[Page 139]]
(4) Although a lien search is not always required for youths who are
minors (as defined in State supplements), the County Supervisor may
determine that a search is necessary to assure the Government obtains
the required security interest.
(b) Responsibility for obtaining lien searches. (1) Applicants
should obtain and pay for lien searches. FmHA or its successor agency
under Public Law 103-354 County Office employees may make lien searches
(at no cost to the applicant) in exceptional cases, such as when no
other person is available to provide such a service, or when experience
has shown that using the service available would lead to an undue delay
in closing the loan and the delay would cause undue hardship to the
borrower.
(2) The State Director will issue a State supplement setting forth
the requirements for lien searches, including the records to be searched
and the periods to be covered.
(3) The applicant should be informed of County Clerks, local
attorneys or other persons who will conduct lien searches at a
reasonable cost. The applicant will select the lien searcher. The cost
of a lien search can be paid from the proceeds of loan checks.
Sec. Sec. 1941.64-1941.66 [Reserved]
Sec. 1941.67 Additional requirements for perfecting security interests.
If necessary because of provisions in State statutes, leases, land
purchase contracts, or real estate mortgages commonly in use, State
Directors will issue State supplements which tell how to obtain a
subordination agreement, certification of obligation to landlord,
disclaimer, and consent and subordination agreement to perfect security
interest.
(a) Form FmHA or its successor agency under Public Law 103-354 441-
5, ``Subordination Agreement.'' This form will be used if a
subordination agreement is required by FmHA or its successor agency
under Public Law 103-354 on crops, livestock, farm equipment, or other
chattels. If Form FmHA or its successor agency under Public Law 103-354
441-5 is not legally sufficient, a form recommended by OGC will be used.
The time to be covered by the subordination agreement generally will be
equal to the repayment period of the loan or for the unexpired period of
the lease if the borrower is a tenant, but as a minimum will be for the
year for which the loan is made.
(b) Form FmHA or its successor agency under Public Law 103-354 441-
17, ``Certification of Obligation to Landlord.'' This form may be used
instead of obtaining a subordination agreement if:
(1) It appears that the applicant is not financially obligated to
the landlord except for rent for the lease year and will not incur other
obligations to the landlord during that year, and
(2) A State supplement authorizing the use of Form FmHA or its
successor agency under Public Law 103-354 441-17 in such cases has been
issued.
(c) Form FmHA or its successor agency under Public Law 103-354 440-
26, ``Consent and Subordination Agreement.'' Unless otherwise provided
by a State supplement, this form rather than a severance agreement will
be used in UCC States when a security interest is taken in property
after it has become a fixture.
(1) If a debt on an item which has already become a fixture is being
refinanced, consent and subordination agreements will be signed before
releasing loan funds to the creditor. In all other cases in which a
security interest is being taken on an item that already has become a
fixture, consent and subordination agreements will be signed no later
than the time of loan closing.
(2) Consent and subordination agreements will be taken only in those
cases in which the fixture is placed on the real estate before the
financing statement and security agreement covering the fixture have
been executed, or before the financing statement is filed, or before the
request for obligation of funds is signed by the loan approving
official.
[43 FR 55883, Nov. 29, 1978, as amended at 54 FR 47959, Nov. 20, 1989]
Sec. Sec. 1941.68-1941.70 [Reserved]
Sec. 1941.71 Fees.
The borrower will pay all fees for filing or recording financing
statements, mortgages, or other legal instruments
[[Page 140]]
and will pay all notary and lien search fees incident to loan
transactions. Payment will be made from personal funds or from the
proceeds of the loan. Whenever FmHA or its successor agency under Public
Law 103-354 employees accept cash to pay for filing or recording fees or
for the cost of making a lien search, Form FmHA or its successor agency
under Public Law 103-354 440-12, ``Acknowledgment of Payment for
Recording, Lien Search, and Releasing Fees,'' will be executed. FmHA or
its successor agency under Public Law 103-354 employees will make it
clear to the borrower that any fee so accepted is not received by the
Government as a payment on the borrower's debt, but is accepted only for
paying the recording, filing, or lien search fees on behalf of the
borrower.
Sec. Sec. 1941.72-1941.74 [Reserved]
Sec. 1941.75 Retention and use of security agreements.
Original executed security agreements will not be altered or
destroyed, and will remain in the case file when new security agreements
are taken. Changes in security property will be noted only on the work
copy. When an additional security agreement covering all collateral for
the debt is taken, the work copy of the previous security agreement may
be destroyed.
Sec. Sec. 1941.76-1941.78 [Reserved]
Sec. 1941.79 Future advance and after-acquired property clauses.
The future advance and after-acquired property clauses of security
agreements will be considered valid in all respects in UCC States unless
otherwise provided in a State supplement.
(a) Future advance clause. A properly prepared, executed, and filed
or recorded FmHA or its successor agency under Public Law 103-354
financing statement and a properly prepared and executed FmHA or its
successor agency under Public Law 103-354 security agreement give FmHA
or its successor agency under Public Law 103-354 a security interest in
the property described. This security interest covers future loans,
advances, and expenditures, as well as any other FmHA or its successor
agency under Public Law 103-354 debts evidenced by notes and any
advances or expenditures for debts evidenced by such notes. However,
when a borrower's indebtedness is paid in full, a new security agreement
must be taken in all cases to secure an initial loan made following the
payment in full.
(b) After-acquired property clause. After a security interest is
acquired in certain property, any property (except fixtures) acquired
which is of the same type as that described in the financing statement
and security agreement will also serve as security for the debt. The
after-acquired property clause in the security agreement will encumber
crops grown on the land described in the security agreement and
financing statement, provided the crops are planted or otherwise become
growing crops within 1 year of the execution date of the security
agreement, or within such other period as provided in a State
supplement. FmHA or its successor agency under Public Law 103-354 after-
acquired security interests take priority over other security interests
perfected after the FmHA or its successor agency under Public Law 103-
354 financing statement is filed, except as stated in Sec. 1941.60.
(c) State supplements. A State supplement concerning future advance
and after-acquired property clauses will set forth requirements for
filing or recording security instruments in that State. This will assist
County Supervisors in other States who request such information in
accordance with Sec. 1941.57(g). A State supplement will also be issued
when OGC determines that it is needed to reflect any amendments made to
a State's UCC.
Sec. Sec. 1941.80-1941.83 [Reserved]
Sec. 1941.84 Title clearance and closing requirements.
(a) For loans over $10,000, title clearance is required when real
estate is taken as primary security.
(b) For loans of $10,000 or less, and loans for which real estate is
taken as primary security, a certification of ownership and verification
of equity in real estate is required. Certification of ownership may be
in the form of a notarized affidavit which is signed by the
[[Page 141]]
applicant, names the record owner of the real estate in question and
lists the balances due on all known debts against the real estate.
Whenever the County Supervisor is uncertain of the record owner or debts
against the estate security, a title search will be required.
(c) Title clearance is not required when real estate is taken as
additional security, as defined in Sec. 1941.4 of this subpart.
(d) When real estate is taken as primary security, as defined in
Sec. 1941.4 of this subpart, title clearance and loan closing
requirements will be carried out in accordance with subpart B of part
1927 of this chapter.
(e) If any prior liens against the real estate offered as security
contain provisions (such as future advance clauses not limited to a
specific amount) that could jeopardize either the security position of
the Government or the applicant's ability to meet the obligations of the
prior liens and FmHA or its successor agency under Public Law 103-354
loan, the prior lienholders involved must agree in writing, before the
loan is closed, to modify, waive, or subordinate such objectionable
provisions.
(f) If a lien is to be taken on real estate which is already subject
to a lien, and if State law allows a prior lienholder to foreclose on a
loan (under power of sale or otherwise) without notifying a junior
lienholder of the foreclosure proceedings, the prior lienholders must
agree, in writing, to give FmHA or its successor agency under Public Law
103-354 advance notice of all foreclosure proceedings and of any
assignment of the mortgage.
(g) Each real estate lien will be taken on Form FmHA or its
successor agency under Public Law 103-354 1927-1 (State), ``Real Estate
Mortgage or Deed of Trust for ------------,'' unless a state supplement
requires the use of another form.
(h) If the real estate offered as security is held under a purchase
contract, the following conditions must exist:
(1) The applicant must be able to provide a mortgageable interest in
the real estate.
(2) The applicant and the purchase contract holder must agree, in
writing, that any insurance proceeds received to compensate for real
estate losses will be used only to replace or repair the damaged real
estate. If necessary, the applicant will negotiate with the purchase
contract holder to arrive at a new contract without any provisions
objectionable to either FmHA or its successor agency under Public Law
103-354 or the lender.
(3) If a satisfactory contract of sale cannot be negotiated or if
the purchase contract holder refuses to agree to apply the insurance
proceeds toward the repair or replacement of the real estate and wants
to retain some of the proceeds as an extra payment on the balance owned,
the applicant will make every effort to refinance the existing purchase
contract.
(4) The purchase contract must not be subject to summary
cancellation on default and must not contain any other provisions which
might jeopardize either the Government's security position or the
borrower's ability to repay the loan.
(5) The contract holder must agree, in writing, to give the
Government notice of any breach by the purchaser, and must also agree to
give the Government the option to rectify the conditions which amount to
a breach within 30 days. The 30 days begin to run on the day the
Government receives the written notice of the breach.
[51 FR 13448, Apr. 21, 1986, as amended at 56 FR 67480, Dec. 31, 1991;
58 FR 26680, May 5, 1993]
Sec. Sec. 1941.85-1941.87 [Reserved]
Sec. 1941.88 Insurance.
(a) Catastrophic Risk Protection (CAT) insurance requirement.
Applicants must obtain at least the CAT level of crop insurance of
coverage for each crop of economic significance, as defined by the
Federal Crop Insurance Corporation, if such coverage is offered. The
applicant can meet this requirement by either:
(1) Obtaining at least the CAT level of coverage or,
(2) Waiving eligibility for emergency crop loss assistance in
connection with the uninsured crop. EM loss loan assistance is not
considered emergency crop loss assistance for purposes of this waiver.
[[Page 142]]
(b) Crops. Crop insurance is a good management tool. Loan approval
officials will, therefore, during the loan making process, encourage all
borrowers who grow crops to obtain and maintain Federal Crop Insurance
Corporation (FCIC) crop insurance or multi-peril crop insurance, if it
is available.
(1) When OL loan funds are to be used as the primary source of
financing for the ensuing year's crop production expenses, and such
crop(s) will serve as security for the loan, and crop insurance is
purchased by the borrower, FmHA or its successor agency under Public Law
103-354 requires and ``Assignment of Indemnity'' on the borrower's crop
insurance policy(ies).
(2) When FmHA or its successor agency under Public Law 103-354 is
not the primary lender for annual crop production expenses, but has or
will have a security interest in the crop(s), and the applicant has
purchased or will purchase crop insurance, an ``Assignment of
Indemnity'' is taken by FmHA or its successor agency under Public Law
103-354, if the primary lender chooses not to do so.
(3) When the payment of crop insurance premiums is not required
until after harvest, the premiums may be paid by releasing insured
crop(s) sale proceeds, but not withstanding the limits in Sec. Sec.
1962.17 and 1962.29(b) of subpart A of part 1962 of this chapter. If the
borrower's crop losses are sufficient to warrant an indemnity payment,
the premium due will be deducted by the insurance carrier from such
payment.
(c) Chattels and real estate. Chattel property that secures OL loans
must be covered by hazard insurance unless the Agency determines that
coverage is not readily available or the benefit of the coverage is less
than its cost. When insured, chattel property must at least be covered
at its tax or cost depreciated value, whichever is less. Real property
must be covered by general hazard and flood insurance in accordance with
subparts A and B of part 1806 of this chapter.
(d) Public liability and property damage. Borrowers should be
advised of the possibilities of incurring liability and encouraged to
obtain public liability and property damage insurance, including
insurance on a customer's property in the custody of the borrower.
(e) Mortgage clause. When insurance is required on property serving
as security, Form FmHA or its successor agency under Public Law 103-354
426-2, ``Property Insurance Mortgage Clause (Without Contribution),'' or
a standard mortgage clause in general use in the area will be attached
to or printed in the policy and will show the United States of America
(Farmers Home Administration or its successor agency under Public Law
103-354) as mortgagee or secured party.
[43 FR 55883, Nov. 29, 1978, as amended at 47 FR 33486, Aug. 3, 1982; 53
FR 35691, Sept. 14, 1988; 58 FR 26680, May 5, 1993; 62 FR 9355, Mar. 3,
1997; 62 FR 28618, May 27, 1997]
Sec. Sec. 1941.89-1941.91 [Reserved]
Sec. 1941.92 Check delivery.
The County Supervisor will receive and deliver loan checks. On
receipt of a loan check, and after arrangements have been completed for
loan closing, the applicant will be promptly notified on Form FmHA or
its successor agency under Public Law 103-354 440-8, ``Notice of Check
Delivery.'' Loan funds will be disbursed in accordance with subpart A of
part 1902 of this chapter.
[43 FR 55883, Nov. 29, 1978, as amended at 58 FR 26681, May 5, 1993]
Sec. 1941.93 [Reserved]
Sec. 1941.94 Supervised bank accounts.
If a supervised bank account is required, loan funds will be
deposited following loan closing. Supervised bank accounts will be
established in accordance with subpart A of part 1902 of this chapter.
[53 FR 35692, Sept. 14, 1988]
Sec. 1941.95 [Reserved]
Sec. 1941.96 Changes in use of loan funds.
(a) Approval of changes. County Supervisors, or their delegates, are
authorized to approve changes in the purposes for which loan funds are
to be used provided:
(1) The change is consistent with authorities, policies and
limitations for making loans, and
[[Page 143]]
(2) The change will not adversely affect either the workings of an
on-going operation or the Government's interest.
(b) Recording changes. When changes are made in the use of loan
funds, the installments on Form FmHA or its successor agency under
Public Law 103-354 1940-17, ``Promissory Note,'' will not be revised.
When funds loaned for the purchase of capital goods are to be used for
annual recurring production expenses, the funds will be repaid in
accordance with the terms for such uses in subpart A of this part.
Appropriate changes with respect to the repayments will be made in table
K of Form FmHA or its successor agency under Public Law 103-354 431-2,
``Farm and Home Plan,'' also on Form FmHA or its successor agency under
Public Law 103-354 1962-1, ``Agreement for the Use of Proceeds/Release
of Chattel Security,'' and initialed by the borrower. Appropriate
notations will be made in the ``Supervisory and Servicing Actions''
section of the Management System Card.
[43 FR 55883, Nov. 29, 1978, as amended at 45 FR 16166, Mar. 13, 1980;
53 FR 35692, Sept. 14, 1988; 54 FR 47959, Nov. 20, 1989]
PART 1942_ASSOCIATIONS--Table of Contents
Subpart A_Community Facility Loans
Sec.
1942.1 General.
1942.2 Processing applications.
1942.3 Preparation of appraisal reports.
1942.4 Borrower contracts.
1942.5 Application review and approval.
1942.6 Preparation for loan closing.
1942.7 Loan closing.
1942.8 Actions subsequent to loan closing.
1942.9 Planning, bidding, contracting, and constructing.
1942.10-1942.11 [Reserved]
1942.12 Loan cancellation.
1942.13 Loan servicing.
1942.14 Subsequent loans.
1942.15 Delegation and redelegation of authority.
1942.16 State supplements and guides.
1942.17 Community facilities.
1942.18 Community facilities--Planning, bidding, contracting,
constructing.
1942.19 Information pertaining to preparation of notes or bonds and bond
transcript documents for public body applicants.
1942.20 Community Facility Guides.
1942.21 Statewide nonmetropolitan median household income.
1942.22-1942.49 [Reserved]
1942.50 OMB control number.
Subpart B [Reserved]
Subpart C_Fire and Rescue and Other Small Community Facilities Projects
1942.101 General.
1942.102 Nondiscrimination.
1942.103 Definitions.
1942.104 Application processing.
1942.105 Environmental review.
1942.106 Intergovernmental review.
1942.107 Priorities.
1942.108 Application docket preparation and review.
1942.109-1942.110 [Reserved]
1942.111 Applicant eligibility.
1942.112 Eligible loan purposes.
1942.113 Rates and terms.
1942.114 Security.
1942.115 Reasonable project costs.
1942.116 Economic feasibility requirements.
1942.117 General requirements.
1942.118 Other Federal, State, and local requirements.
1942.119 Professional services and borrower contracts.
1942.120-1942.121 [Reserved]
1942.122 Actions prior to loan closing and start of construction.
1942.123 Loan closing.
1942.124-1942.125 [Reserved]
1942.126 Planning, bidding, contracting, constructing, procuring.
1942.127 Project monitoring and fund delivery.
1942.128 Borrower accounting methods, management reports and audits.
1942.129 Borrower supervision and servicing.
1942.130-1942.131 [Reserved]
1942.132 Subsequent loans.
1942.133 Delegation and redelegation of authority.
1942.134 State supplements and guides.
1942.135-1942.149 [Reserved]
1942.150 OMB control number.
Subparts D-F [Reserved]
Subpart G_Rural Business Enterprise Grants and Television Demonstration
Grants
1942.301 Purpose.
1942.302 Policy.
1942.303 Authorities, delegation, and redel-egation.
1942.304 Definitions.
1942.305 Eligibility and priority.
1942.306 Purposes of grants.
1942.307 Limitations on use of grant funds.
1942.308 Regional Commission grants.
1942.309 [Reserved]
[[Page 144]]
1942.310 Other considerations.
1942.311 Application processing.
1942.312 [Reserved]
1942.313 Plan to provide financial assistance to third parties.
1942.314 Grants to provide financial assistance to third parties,
television demonstration projects, and technical assistance
programs.
1942.315 Docket preparation and Letter of Conditions.
1942.316 Grant approval, fund obligation and third party financial
assistance.
1942.317-1942.320 [Reserved]
1942.321 Subsequent grants.
1942.322-1942.347 [Reserved]
1942.348 Exception authority.
1942.349 Forms, guides, and attachments.
1942.350 OMB control number.
Guide 1 to Subpart G--Project Management Agreement Between the --------
-- Regional Commission and the Farmers Home Administration or
Its Successor Agency Under Public Law 103-354, Department of
Agriculture
Guide 2 to Subpart G--Resolution
Subpart H [Reserved]
Authority: 5 U.S.C. 301; 7 U.S.C. 1989.
Subpart A_Community Facility Loans
Source: 50 FR 7296, Feb. 22, 1985, unless otherwise noted.
Sec. 1942.1 General.
(a) This subpart outlines the policies and procedures for making and
processing insured loans for Community Facilities except fire and rescue
and other small essential community facility loans and water and waste
disposal facilities. This subpart applies to Community Facilities loans
for fire and rescue and other small essential community facility loans
only as specifically provided for in subpart C of this part. Water and
waste loans are provided for in part 1780 of this title. The Agency
shall cooperate fully with State and local agencies in making loans to
assure maximum support to the State strategy for rural development.
State Directors and their staffs shall maintain coordination and liaison
with State agency and substate planning districts. Funds allocated for
use under this subpart are also for the use of Indian tribes within the
State, regardless of whether State development strategies include Indian
reservations within the State's boundaries. Indians residing on such
reservations must have equal opportunity to participate in the benefits
of these programs as compared with other residents of the State. Federal
statues provide for extending Agency financial programs without regard
to race, color, religion, sex, national origin, marital status, age, or
physical/mental handicap. The participants must possess the capacity to
enter into legal contracts under State and local statutes. Any
processing or servicing activity conducted pursuant to this subpart
involving authorized assistance to Agency employees, members of their
families, known close relatives, or business or close personal
associates, is subject to the provisions of subpart D of part 1900 of
this chapter. Applicants for this assistance are required to identify
any known relationship or association with an Agency employee.
(b) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes are eligible to apply for and are
encouraged to participate in this program. Such tribes might not be
subject to State and local laws or jurisdiction. However, any
requirements of this subpart that affect applicant eligibility, the
adequacy of FmHA or its successor agency under Public Law 103-354's
security or the adequacy of service to users of the facility and all
other requirements of this subpart must be met.
(c) Loans sold without insurance by FmHA or its successor agency
under Public Law 103-354 to the private sector will be serviced in the
private sector and will not be serviced under this subpart. The
provisions of this subpart are not applicable to such loans. Future
changes to this subpart will not be made applicable to such loans.
(d) The District Office will normally be the entry point for
preapplications and serve as a local point. Applications will be filed
with the District Office and loans will be processed to the maxium
extent possible by the District Office staff. The applicant's governing
body should designate one person to coordinate the activities of its
engineer,
[[Page 145]]
architect, attorney, and any other professional employees and to act as
contact person during loan processing. FmHA or its successor agency
under Public Law 103-354 personnel should make every effort to involve
the applicant's contact person when meeting with the applicant's
professional consultants and/or agents. The State Office staff will
monitor community programs loanmaklng and servicing, and will provide
assistance to District Office personnel to the extent necessary to
assure that the activities are being accomplished in an orderly manner
consistent with FmHA or its successor agency under Public Law 103-354
regulations.
[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 38908, Oct. 20, 1987; 52
FR 43725, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987; 57 FR 21193, May
19, 1992; 58 FR 226, Jan. 5, 1993; 62 FR 33510, June 19, 1997; 68 FR
65830, Nov. 24, 2003]
Sec. 1942.2 Processing applications.
(a) Preapplications. (1) The District Office may handle initial
inquiries and provide basic information about the program. They are to
provide the preappllcation, SF 424.2, ``Application for Federal
Assistance (For Construction).'' The District Director will assist
applicants as needed in completing SF 424.2, and in filing written
notice of intent and priority recommendation with the appropriate
clearinghouse. The District Director will inform the applicant that it
may be necessary to apply for credit from commercial sources. It will be
explained that if credit for the project is available from commercial
sources at reasonable rates and terms the applicant is not eligible for
FmHA or its successor agency under Public Law 103-354 financing. The
District Director will meet with the applicant, whenever appropriate to
discuss FmHA or its successor agency under Public Law 103-354
preapplication processing. Guidance and assistance will be provided by
the State Director, as needed, for orderly application processing. The
District Director will determine that the preapplication is property
completed and fully reviewed. The District Director will then forward to
the State Director:
(i) Eligibility determination and recommendations.
(ii) One copy of SF 424.2.
(iii) State intergovernmental review comments and recommendations
(clearinghouse comments).
(iv) Priority recommendations.
(v) Supporting documentation necessary to make an eligibility
determination such as financial statements, audits, or copies of
organizational documents or existing debt instruments. The District
Director will advise applicants on what documents are necessary.
Applicants should not be required to expend significant amounts of money
or time developing supporting documentation at the preapplication stage.
(2) The State Director will review each SF 424.2 along with other
information that is deemed necessary to determine whether financing from
commercial sources at reasonable rates and terms is available. If credit
elsewhere is indicated, the State Director will instruct the District
Director to so inform the applicant and recommend the applicant apply to
commercial sources for financing. Projects may be funded jointly with
other lenders provided the requirements of Sec. 1942.17 (g) of this
subpart are met. Joint financing occurs when two or more lenders make
separate loans to supply the funds required by one applicant for a
project.
(i) In order to provide a basis for referral of preapplications of
only those applicants who may be able to finance projects through
commercial sources, State Directors should maintain liaison with
representatives of banks, investment bankers, financial advisors, and
other lender representatives in the State. State Directors with their
assistance, should maintain criteria for determining preapplications
which should be referred to commercial lenders. A list of lender
representatives interested in receiving such referrals should be
maintained.
(ii) The State Director shall maintain a working relationship with
the State Office or official that has been designated as the single
point of contact for the intergovernmental review process and give full
consideration to their comments when selecting preapplications to be
processed.
[[Page 146]]
(iii) The State Director will review the District Director's
eligibility determination and recommendations in sufficient time for the
District Director's use in preparing and issuing Form AD-622.
(iv) Form AD-622 will be prepared by the District Director within
forty-five (45) calendar days from receipt of the preapplication by FmHA
or its successor agency under Public Law 103-354, stating the results of
the review action. The original will be signed and delivered to the
applicant with a copy to the State Director.
(3) For preapplications eligible for FmHA or its successor agency
under Public Law 103-354 funding which have the necessary priority to
compete with similar preapplications, FmHA or its successor agency under
Public Law 103-354 will issue Form AD-622 inviting an application
containing the following statement:
You are advised against taking any actions or incurring any
obligations which would either limit the range of alternatives to be
considered, or which would have an adverse effect on the environment.
Satisfactory completion of the environmental review process must occur
prior to the issuance of the letter of conditions.
(4) The following statement must be added to Form AD-622 when
notifying preapplicants who are eligible, but do not have the priority
necessary for further consideration at this time:
You are advised against incurring obligations which would limit the
range of alternatives to be considered, or which cannot be fulfilled
without FmHA or its successor agency under Public Law 103-354 funds
until the funds are actually made available. Therefore, you should
refrain from such actions as initiating engineering and legal work,
taking actions which would have an adverse effect on the environment,
taking options on land rights, developing detailed plans and
specifications, or inviting construction bids until notified by Farmers
Home Administration (FmHA) or its successor agency under Public Law 103-
354 to proceed.
(b) Environmental review. Environmental requirements will be
documented in accordance with subpart G of part 1940 of this chapter and
submitted to the State Director. Starting with the earliest discussions
with prospective applicants or review of preapplications and continuing
throughout application processing, environmental issues must be
considered. This should provide flexibility to consider alternatives to
the project and develop methods to mitigate identified adverse
environmental impacts. Documentation of the appropriate environmental
review should be completed as soon as possible; however, the State
Director will ensure that the appropriate environmental review is
completed prior to issuing the letter of conditions.
(c) Applications. The District Director should assist the applicant
in application assembly and processing.
(1) State Directors should have applications in process representing
approximately 150 percent of the current State allocation.
(2) The application docket will include SF 424.2, and related forms,
materials, and information. The application will be assembled in
accordance with guide 15 of this subpart or State guides developed under
Sec. 1942.16 of this subpart.
(3) When an applicant is notified to proceed with an application,
the District Director should arrange for a conference with the applicant
to provide copies of appropriate appendices and forms; furnish guidance
necessary for orderly application processing; and to initiate a
processing checklist for establishing a time schedule for completing
items using Form FmHA or its successor agency under Public Law 103-354
1942-39, ``Processing Check List (Other Than Public Bodies),'' or Form
FmHA or its successor agency under Public Law 103-354 1942-40,
``Processing Check List (Public Bodies),'' or other checklist adopted
for use in the State. The District Director will confirm decisions made
at this conference by letter to the applicant and by a copy of the
processing checklist. The original and a copy of the processing
checklist will be retained in the District Office and a copy will be
forwarded to the State Office. The original and copy of the checklist
retained in the District Office will be kept current as application
processing actions are taken. The copy will be sent to the State Office
to use in updating its copy of this form. The State Office will then
return the
[[Page 147]]
District Office's copy. As the application is being processed, and the
need develops for additional conferences, the District Director will
arrange with the applicant for such conference to extend and update the
processing checklist.
(d) Review of decision. If at any time prior to loan approval it is
decided that favorable action will not be taken on a preapplication or
application, the District Director will notify the applicant in writing
of the reasons why the request was not favorably considered. The
notification to the applicant will state that a review of this decision
by FmHA or its successor agency under Public Law 103-354 may be
requested by the applicant under subpart B of part 1900 of this chapter.
The following statement will also be made on all notifications of
adverse action.
The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, age (provided that the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income is derived from any public
assistance program; or because the applicant has in good faith exercised
any right under the Consumer Credit Protection Act. The Federal agency
that administers compliance with this law is the Federal Trade
Commission, Equal Credit Opportunity, Washington, DC 20580.
(e) Joint funding. FmHA or its successor agency under Public Law
103-354 may finance projects jointly with funds from other sources, such
as, commercial/private lenders, Federal agencies, State and local
Governments, etc. Other departments, agencies, and executive
establishments of the Federal Government may participate and provide
financial and technical assistance jointly with FmHA or its successor
agency under Public Law 103-354 to any applicant to whom FmHA or its
successor agency under Public Law 103-354 is providing assistance. The
amount of participation by the other department, agency, or executive
establishment shall only be limited by its authorities except that any
limitation on joint participation itself is superseded by section 125 of
Pub. L. 95-334 (Section 347, Consolidated Farm and Rural Development
Act, as amended).
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988; 54
FR 47197, Nov. 13, 1989; 55 FR 13503 and 15304, Apr. 11, 1990; 57 FR
21194, May 19, 1992; 61 FR 6309, Feb. 20, 1996]
Sec. 1942.3 Preparation of appraisal reports.
When the loan approval official requires an appraisal, Form FmHA or
its successor agency under Public Law 103-354 422-10, ``Appraisal
Report--Water and Waste Disposal Systems,'' may be used with appropriate
supplements. Form FmHA or its successor agency under Public Law 103-354
442-10 may be modified as appropriate or other appropriate format may be
used for facilities other than water and waste disposal. Appraisal
reports prepared for use in connection with the purchase of existing
essential community facilities or when required by Sec. 1942.17
(g)(2)(iii)(B)(2), (g)(3)(iii)(B)(2), and (j)(4) of this subpart, may be
prepared by the FmHA or its successor agency under Public Law 103-354
engineer/architect or, if desired by the State Director, some other
qualified appraiser. The loan approval official may require an applicant
to provide an appraisal prepared by an independent qualified appraiser;
however, the loan approval official must determine that the appraised
value shown in such reports reflects the present market value.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6786, Mar. 3, 1988]
Sec. 1942.4 Borrower contracts.
The State Director will, with assistance as necessary by the Office
of the General Counsel (OGC), concur in agreements between borrowers and
third parties such as contracts for professional and technical services
and contracts for the purchase of water or treatment of waste. State
Directors are expected to work closely with representatives of
engineering and architectural societies, bar associations, commercial
lenders, accountant associations, and others in developing standard
forms of agreements, where needed, and other such matters in
[[Page 148]]
order to expedite application processing, minimize referrals to OGC, and
resolve problems which may arise.
Sec. 1942.5 Application review and approval.
(a) Procedures for review. Ordinarily FmHA or its successor agency
under Public Law 103-354 staff review will proceed as applications are
being developed. An overall review of the applicant's financial status,
including a review of all assets and liabilities, will be a part of the
docket review process by the staff and approval officials. The
engineering/architect reports and associated data are to be reviewed by
the FmHA or its successor agency under Public Law 103-354 staff engineer
or architect, as appropriate, as soon as available but prior to the
District Director's completion of the project summary. During the review
the District Director in all cases will make certain that no low income
or minority community within the service area has been omitted or
discouraged from participating in the proposed project. The District
Director will also determine how the service area was defined to assure
that gerrymandering of specific communities or areas has not occurred.
The findings should be documented in the running record. Prior to
presenting the assembled application to the approval official, the
assembled application ordinarily will be processed in the following
sequence:
(1) The Rural Development manager will complete the project summary,
including written analysis and recommendations, and will prepare a draft
letter of conditions listing all the requirements that the applicant
must agree to meet within a specific time.
(i) Requirements listed in letters of conditions will include the
following unless inappropriate due to the particular type of funding or
entity involved: Maximum amount of loan and/or grant which may be
considered, scheduling of payments, term of loan and any deferment of
principal which may be allowed, reserve requirements, compliance with
section 504 of the Rehabilitation Act of 1973, number of users (members)
and verification required, contributions rates and charges, interim
financing, disbursement of funds, security requirements, graduation
requirements, debt collection policies execution of Form FmHA or its
successor agency under Public Law 103-354 1910-11, ``Application
Certification, Federal Collection Policies for Consumer or Commercial
Debts,'' organization, business operations, insurance and bonding
(including applicant/borrower and contractor), construction contract
documents and bidding, accounts, records, and audit reports required
(including requirements of OMB Circulars A-128 and A-110), adoption of
Form FmHA or its successor agency under Public Law 103-354 1942-47,
``Loan Resolution (Public Resolution),'' for public bodies or Form FmHA
or its successor agency under Public Law 103-354 1942-9, ``Loan
Resolution (Security Agreement),'' for other than public bodies, closing
instructions, and other requirements.
(ii) Each letter of conditions will contain the following
paragraphs:
This letter establishes conditions which must be understood and
agreed to by you before further consideration may be given to the
application. Any changes in the project cost, source of funds, scope of
services, or any other significant changes in the project or applicant
must be reported to and approved by FmHA or its successor agency under
Public Law 103-354 by written amendment to this letter. Any changes not
approved by FmHA or its successor agency under Public Law 103-354 shall
be cause for discontinuing processing of the application.
This letter is not to be considered as loan approval or as
representation to the availability of funds. The docket may be completed
on the basis of a loan not to exceed $------.
If FmHA or its successor agency under Public Law 103-354 makes the
loan, you may make a written request that the interest rate be the lower
of the rate in effect at the time of loan approval or the time of loan
closing. If you do not request the lower of the two interest rates, the
interest rate charged will be the rate in effect at the time of loan
approval. The loan will be considered approved on the date a signed copy
of Form FmHA or its successor agency under Public Law 103-354 1940-1,
``Request for Obligation of Funds,'' is mailed to you. If you want the
lower of the two rates, your written request should be submitted to FmHA
or its successor agency under Public Law 103-354 as soon as practical.
In order to avoid possible delays in loan closing such a request should
ordinarily be submitted at least 30 calendar days before loan closing.
[[Page 149]]
Please complete and return the attached Form FmHA or its successor
agency under Public Law 103-354 1942-46, ``Letter of Intent to Meet
Conditions,'' if you desire that further consideration be given your
application.
(iii) Rural Development Managers may add the following:
If the conditions set forth in this letter are not met within ------
days from the date hereof, FmHA or its successor agency under Public Law
103-354 reserves the right to discontinue the processing of the
application.
(2) The State staff engineer or architect, as appropriate, will
include a written analysis and recommendations on the project summary.
(3) The Chief, Community Programs or Community and Business
Programs, will review the assembled application and include in the
project summary a written analysis and recommendations, including the
availability of other credit and other eligibility determinations. The
draft letter of conditions will be reviewed and any necessary
modifications made.
(b) Project requiring National Office review. Prior National Office
review is required for certain proposals (See subpart A of part 1901 of
this chapter).
(1) The Rural Development Manager should assemble applications for
the National Office review in the following order from top to bottom and
forward them to the State Director for review and recommedation prior to
submission to the National Office:
(i) Transmittal memorandum including:
(A) Recommendation.
(B) Date of expected obligation.
(C) Any unusual circumstances.
(ii) Copies of the following:
(A) Proposed letter of conditions.
(B) Applicable State Intergovernmental review comments (FmHA
Instruction 1940-J, available in any FmHA or its successor agency under
Public Law 103-354 office).
(C) Community Facilities Project Summary.
(D) Preliminary architectural or engineering report.
(E) Form FmHA or its successor agency under Public Law 103-354 442-
3, ``Balance Sheet,'' or a financial statement or audit that includes a
balance sheet.
(F) For other essential community facility loan applicants whose
proposals do not meet the assured income or tax based security
requirements of Sec. 1942.17 (g)(2)(iii) and (g)(3)(iii) of this
subpart, financial information for the last five years of operation will
be submitted if available. The type of financial information to be
submitted should be determined based on what is available and the
following order of preference:
(1) Complete audits;
(2) Unaudited financial statements including balance sheets and
statements of income and expenses;
(3) Lists of income and expenses.
(G) For other essential community facility loans secured under
paragraph (b)(1)(ii)(F) of this section, submit a detailed explanation
of the proposed security; evidence that the application cannot be
processed and the loan secured under paragraph (b)(1)(ii)(F) of this
section; evidence supporting the efforts by the applicant in persuading
appropriate public bodies to provide the proposed facility and services
and the results, and comments of the Regional Attorney concurring in the
applicants' legal authority to give the proposed security.
(H) Financial Feasibility Report when required by Sec. 1942.17
(h)(1).
(I) Proposed lease agreements, management agreements, or other
agreements when facility management will be provided by other than the
applicant.
(J) Other forms and documents on which there are specific questions.
(K) Environmental impact analysis and documentation.
(2) For applications to be reviewed in the State or field, at least
those items in paragraph (b)(1)(ii) of this section, should be
available.
(c) For all applications. All letters of conditions will be
addressed to the applicant, signed by the Rural Development Manager or
other Agency representative designated by the State Director, and
delivered to the applicant. Upon signing the letter of conditions, the
Rural Development Manager will send two copies of the letter of
conditions and two copies of the project summary to the State Director.
The State Director will immediately send
[[Page 150]]
one copy of the project summary and a copy of the letter of conditions
to the National Office, Attention: Community Programs. The Rural
Development Manager, with assistance as needed from the State Office,
will discuss the requirements of the letter of conditions with the
applicant's representatives and afford them an opportunity to execute
Form RD 1942-46.
(1) The letter of conditions should not ordinarily be issued unless
the State Director expects to have adequate funds in the State
allocation to fund the project within the next 12 months based on
historic allocations or other reliable projections.
(2) If the applicant declines to execute Form FmHA or its successor
agency under Public Law 103-354 1942-46, the Rural Development Manager
will immediately notify the State Director and provide complete
information as to the reasons for such declination.
(3) If the applicant accepts the letter of conditions, the Rural
Development Manager will forward the executed Form RD 1942-46 and a
signed and an unsigned copy of Form RD 1940-1 to the State Director.
(d) Loan approval and obligating funds. Loans will be approved under
this subpart and subpart A of part 1901 of this chapter (available in
any FmHA or its successor agency under Public Law 103-354 office). The
loan will be considered approved on the date the signed copy of Form
FmHA or its successor agency under Public Law 103-354 1940-1 is mailed
to the applicant. The State Director or designee may request an
obligation of funds when available within their State allocation and
according to the following:
(1) Form FmHA or its successor agency under Public Law 103-354 1940-
1, authorizing funds to be reserved, may be executed by the loan
approval official providing the applicant has the legal authority to
contract for a loan and to enter into required agreements and has signed
Form FmHA or its successor agency under Public Law 103-354 1940-1.
(2) If approval was concurred in by the National Office, a copy of
the concurring memorandum will be attached to the original of Form FmHA
or its successor agency under Public Law 103-354 1940-1.
(3) The State Director or designee will request an obligation of
loan and/or grant funds via the FmHA or its successor agency under
Public Law 103-354 Field Office terminal system after signing Form FmHA
or its successor agency under Public Law 103-354 1940-1. The requesting
official will furnish security identification as necessary. The
requesting official will record the date, time of request, and their
initials on the original Form FmHA or its successor agency under Public
Law 103-354 1940-1.
(4) The obligation date and date the applicant is notified of loan
and/or grant approval is six working days from the date funds are
reserved unless an exception is granted by the National Office.
(5) Immediately after verifying that funds have been reserved,
utilizing the FmHA or its successor agency under Public Law 103-354
Field Office terminal system status inquiry function, the State Director
or designee will notify by telephone, the Legislative Affairs and Public
Information Staff in the National Office as required by FmHA Instruction
2015-C, ``Announcement of Approval of Loans, Grants, or Guaranteed Loans
for Rural Project,'' (available in any FmHA or its successor agency
under Public Law 103-354 State Office).
(6) Loan approval and applicant notification will be accomplished by
the State Director or designee by mailing to the applicant on the
obligation date a copy of Form FmHA or its successor agency under Public
Law 103-354 1940-1 which has been previously signed by the applicant and
loan approval official. The date the applicant is notified is also the
date the interest rate at loan approval is established. The State
Director or designee will record the date of applicant notification and
the interest rate in effect at that time on the original of Form FmHA or
its successor agency under Public Law 103-354 1940-1 and include it as a
permanent part of the District Director project file with a copy placed
in the State Office file.
(7) If a transfer of obligation of funds is necessary, complete Form
FmHA or its successor agency under Public Law 103-354 450-10, ``Advice
of Borrower's
[[Page 151]]
Change of Address, Name, Case Number, or Loan Number,'' and process via
the FmHA or its successor agency under Public Law 103-354 Field Office
terminal system. An obligation of funds established for an applicant may
be transferred to a different (substituted) applicant provided:
(i) The substituted applicant is eligible to receive the assistance
approved for the original applicant; and
(ii) The substituted applicant bears a close and genuine
relationship to the original applicant (such as two organizations that
are controlled by the same individuals); and
(iii) The need for and scope of the project and the purpose(s) for
which FmHA or its successor agency under Public Law 103-354 funds will
be used remain substantially unchanged.
[50 FR 7296, Feb. 22, 1985, as amended at 50 FR 33332, Aug. 19, 1985; 50
FR 43378, Oct. 25, 1985; 53 FR 6787, Mar. 3, 1988; 54 FR 47196-47197,
Nov. 13, 1989; 63 FR 16089, Apr. 2, 1998; 67 FR 60584, Sept. 27, 2002;
67 FR 63019, Oct. 9, 2002]
Sec. 1942.6 Preparation for loan closing.
(a) Obtaining closing instructions. Completed dockets will be
reviewed by the State Director. The information required by OGC will be
transmitted to OGC with a request for closing instructions. Upon receipt
of the closing instructions from OGC, the State Director will forward
them along with any appropriate instructions to the District Director.
Upon receipt of closing instructions, the District Director will discuss
with the applicant and its architect or engineer, attorney, and other
appropriate representatives, the requirements contained therein and any
actions necessary to proceed with closing.
(b) Verification of users and other funds. (1) In connection with a
loan for a utility type project to be secured by a pledge of user fees
or revenues, the District Director will authenticate the number of users
prior to loan closing or the commencement of construction, whichever
occurs first. Such individual will review each signed user agreement and
check evidence of cash contributions. If during the review any
indication is received that all signed users may not connect to the
system, there will be such additional investigation made as deemed
necessary to determine the number of users who will connect to the
system. The District Director will record the determination in a
memorandum to the State Director.
(2) In all cases the availability and amounts of other funds to be
used in the project will be verified by FmHA or its successor agency
under Public Law 103-354.
(c) Initial compliance review. An initial compliance review should
be completed under subpart E of part 1901 of this chapter.
(d) Ordering loan checks. Checks will not be ordered until:
(1) The applicant has complied with approval conditions and closing
instructions, except for those actions which are to be completed on the
date of loan closing or subsequent thereto; and
(2) The applicant is ready to start construction or funds are needed
to pay interim financing obligations.
(e) Multiple advances of FmHA or its successor agency under Public
Law 103-354 funds. When FmHA or its successor agency under Public Law
103-354 provides loan funds during the construction period using interim
(temporary) instruments described in Sec. 1942.19(g) of this subpart,
the following action will be taken prior to the issuance of the
permanent instruments:
(1) The Finance Office will be notified of the anticipated date for
retirement of the interim instruments and issuance of permanent
instruments of debt.
(2) The Finance Office will prepare a statement of account including
accrued interest through the proposed date of retirement and also show
the daily interest accrual. The statement of account and the interim
financing instruments will be forwarded to the District Director.
(3) The District Director will collect interest through the actual
date of the retirement and obtain the permanent instrument(s) of debt in
exchange for the interim financing instruments. The permanent
instruments and the cash collection will be forwarded to the Finance
Office immediately, except that
[[Page 152]]
for promissory notes and single instrument bonds fully registered as to
principal and interest, the original will be retained in the District
Office and a copy will be forwarded to the Finance Office. In developing
the permanent instruments, the sequence of preference set out in Sec.
1942.19(e) of this subpart will be followed.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 53
FR 26589, July 14, 1988]
Sec. 1942.7 Loan closing.
Loans will be closed in accordance with the closing instructions
issued by the OGC and Sec. 1942.17(o) of this subpart and as soon as
possible after receiving the check.
(a) Authority to execute, file, and record legal instruments. Area
Office employees are authorized to execute and file or record any legal
instruments necessary to obtain or preserve security for loans.
(b) Preparation of mortgages. Unless otherwise required by State law
or unless an exception is approved by the State Director with advice of
the OGC, only one mortgage will be taken even though the indebtedness is
to be evidenced by more than one instrument.
(c) Source of funds for insured loans. All loans will be made from
the Rural Development Insurance Fund (RDIF).
(d) Unused funds. Obligated funds planned for project development
which remain after all authorized costs have been provided for will be
disposed of in accordance with Sec. 1942.17(p)(6) of this subpart.
(e) Loan disbursements. Whenever a loan disbursement is received,
lost, or destroyed, the Rural Development Manager will take appropriate
actions outlined in Rural Development Instruction 2018-D.
(f) Supervised bank accounts. Supervised bank accounts will be
handled under subpart A of part 1902 of this chapter.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988; 59
FR 54788, Nov. 2, 1994; 68 FR 61331, Oct. 28, 2003; 70 FR 19253, Apr.
13, 2005]
Sec. 1942.8 Actions subsequent to loan closing.
(a) Mortgages. Real estate or chattel mortages or security
instruments will be delivered to the recording office for recordation or
filing, as appropriate. A copy of such instruments will be delivered to
the borrower. The original instrument, if returnable after recording or
filing, will be retained in the borrower's case folder.
(b) Notes and bonds. When the debt instrument is a promissory note
or single instrument bond fully registered as to principal and interest,
a conformed copy will be sent to the Finance Office immediately after
loan closing and the original instrument will be stored in the District
Office. When other types of bonds are used, the original bond(s) will be
forwarded to the Finance Office immediately after loan closing.
(c) Multiple advances--bond(s). When temporary paper, such as bond
anticipation notes or interim receipts, is used to conform with the
multiple advance requirement, the original temporary paper will be
forwarded to the Finance Office after each advance is made to the
borrower. The borrower's case number will be entered in the upper
righthand corner of such paper by the District Office. The permanent
debt instrument(s) should be forwarded to the Finance Office as soon as
possible after the last advance is made except that for promissory notes
and single instrument bonds fully registered as to principal and
interest, the original will be retained in the District Office and a
copy will be forwarded to the Finance Office.
(d) Bond registration record. Form FmHA or its successor agency
under Public Law 103-354 442-28, ``Bond Registration Book,'' may be used
as a guide to assist borrowers in the preparation of a bond registration
book in those cases where a registration book is required and a book is
not provided in connection with the printing of the bonds.
(e) Disposition of title evidence. All title evidence other than the
opinion of title, mortgage title insurance policy, and water stock
certificates will be returned to the borrower when the loan has been
closed.
[[Page 153]]
(f) Material for State Office. When the loan has been closed, the
District Director will submit to the State Director:
(1) The complete docket; and
(2) A statement covering information other than the completion of
legal documents showing what was done in carrying out loan closing
instructions.
(g) State Office review of loan closing. The State Director will
review the District Director's statement concerning loan closing, the
security instruments, and other documents used in closing to determine
whether the transaction was closed properly. All material submitted by
the District Director, including the executed contract documents (if
required by OGC) with the certification of the borrower's attorney,
along with a statement by the State Director that all administrative
requirements have been met, will be referred to OGC for post-closing
review. OGC will review the submitted material to determine whether all
legal requirements have been met. OGC's review of FmHA or its successor
agency under Public Law 103-354's standard forms will be only for proper
execution thereof, unless the State Director brings specific questions
or deviations to the attention of OGC. It is not expected that facility
development including construction will be held up pending receipt of
the opinion from OGC. When the opinion from OGC is received, the State
Director will advise the District Director of any deficiencies that must
be corrected and return all material that was submitted for review.
(h) Safeguarding bond shipments. FmHA or its successor agency under
Public Law 103-354 personnel will follow the procedures for safeguarding
mailings and deliveries of bonds and coupons outlined in FmHA
Instruction 2018-E (available in any FmHA or its successor agency under
Public Law 103-354 office), whenever they mail or deliver these items.
(i) Water stock certificates. Water stock certificates will be filed
in the loan docket in the District Office.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]
Sec. 1942.9 Planning, bidding, contracting, and constructing. [See
Sec. Sec. 1942.17(p) and 1942.18]
(a) Review of construction plans and specifications. All plans and
specifications will be submitted as soon as available to the State
Office for review and comments.
(b) Contract approval. The State Director or designee is responsible
for approving all construction contracts using legal advice and guidance
of OGC as necessary. The use of a contracting method under Sec.
1942.18(l) of this subpart exceeding $100,000 must be concurred in by
the National Office. Procurement under Sec. 1942.18(l) of this subpart
will not be considered when an FmHA or its successor agency under Public
Law 103-354 grant is involved. When an applicant requests such
concurrence, the State Director will submit the following to the
National Office:
(1) State Director's and FmHA or its successor agency under Public
Law 103-354 engineer/architect's comments and recommendations, and when
noncompetitive negotiation is proposed, submit an evaluation of previous
work of the proposed construction firm.
(2) Regional attorney's opinion and comments regarding the legal
adequacy of the proposed procurement method and proposed contract
documents.
(3) Copy of owner's written request and description of the
procurement method proposed.
(4) Copy of the proposed contract.
(c) Bid irregularities. Any irregularities in the bids received or
other matters pertaining to the contract award having legal implications
will be cleared with OGC before the State Director consents to the
contract award.
(d) Noncompliance. State Directors, upon receipt of information
indicating borrowers or their officers, employees, or agents are not
performing in compliance with Sec. 1942.18(j)(1) of this subpart, may
request the Regional Office of the Inspector General (OIG) to
investigate the matter and provide a report. The State Director is
responsible for resolving the issue.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]
[[Page 154]]
Sec. Sec. 1942.10-1942.11 [Reserved]
Sec. 1942.12 Loan cancellation.
Loans which have been approved and obligations which have been
established may be canceled before closing as follows:
(a) Form Rural Development 1940-10, ``Cancellation of U.S. Treasury
Check and/or Obligation.'' The Rural Development Manager or State
Director may prepare and execute Form Rural Development 1940-10,
Cancellation of U.S. Treasury Check and/or Obligation, in accordance
with the Forms Manual Insert (FMI). If the disbursement has been
received or is subsequently received in the Area Office, the Rural
Development Manager will return it as prescribed in Rural Development
Instruction 2018-D.
(b) Notice of cancellation. If the docket has been forwarded to
Office of General Counsel that office will be notified of the
cancellation by copy of Form Rural Development 1940-10. Any application
for title insurance, if ordered, will be cancelled. The borrower's
attorney and engineer/architect, if any, should be notified of the
cancellation. The Rural Development Manager may provide the borrower's
attorney and engineer/architect with a copy of the notification to the
applicant. The State Director will notify the Director of Legislative
Affairs and Public Information by telephone or electronic mail and give
the reasons for such cancellation.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 26589, July 14, 1988; 54
FR 39727, Sept. 28, 1989; 59 FR 54788, Nov. 2, 1994; 70 FR 19254, Apr.
13, 2005]
Sec. 1942.13 Loan servicing.
Loans will be serviced under subpart E of part 1951 of this chapter.
Sec. 1942.14 Subsequent loans.
Subsequent loans will be processed under this subpart.
Sec. 1942.15 Delegation and redelegation of authority.
The State Director is responsible for implementing the authorities
in this subpart and for issuing State supplements redelegating
authorities. Loan and grant approval authority is in Subpart A of Part
1901 of this chapter. Except for loan and grant approval authority,
Rural Development Manager may redelegate their duties to qualified staff
members.
[70 FR 19254, Apr. 13, 2005]
Sec. 1942.16 State supplements and guides.
State Directors will obtain National Office clearance for all State
supplements and guides under FmHA Instruction 2006-B (available in any
FmHA or its successor agency under Public Law 103-354 office).
(a) State supplements. State Directors may supplement this subpart
to meet State and local laws and regulations and to provide for orderly
application processing and efficient service to applicants. State
supplements shall not contain any requirements pertaining to bids,
contract awards, and materials more restrictive than those in Sec.
1942.18 of this subpart.
(b) State guides. State Directors may develop guides for use by
applicants if the guides to this subpart are not adequate. State
Directors may prepare guides for items needed for the application; items
necessary for the docket; and items required prior to loan closing or
start of construction.
Sec. 1942.17 Community facilities.
(a) General. This section includes information and procedures
specifically designed for use by applicants, including their
professional consultants and/or agents who provide such assistance and
services as architectural, engineering, financial, legal, or other
services related to application processing and facility planning and
development. This section is made available as needed for such use. It
includes FmHA or its successor agency under Public Law 103-354 policies
and requirements pertaining to loans for community facilities. It
provides applicants with guidance for use in proceeding with their
application. FmHA or its successor agency under Public Law 103-354 shall
cooperate fully with appropriate State agencies to give maximum support
of the State's strategies for development of rural areas.
(b) Eligibility. Financial assistance to areas or communities
adjacent to, or
[[Page 155]]
closely associated with, nonrural areas is limited by Sec. 1942.17(c)
of this subpart.
(1) Applicant. (i) A public body, such as a municipality, county,
district, authority, or other political subdivision of a state.
(A) Loans for water or waste disposal facilities will not be made to
a city or town with a population in excess of 10,000 inhabitants,
according to the latest decennial Census of the United States.
(B) Loans for essential community facilities will not be made to a
city or town with a population in excess of 20,000 inhabitants according
to the latest decennial Census of the United States.
(ii) An organization operated on a not-for-profit basis, such as an
association, cooperative, and private corporation. Applicants organized
under the general profit corporation laws may be eligible if they
actually will be operated on a not-for-profit basis under their charter,
bylaws, mortgage, or supplemental agreement provisions as may be
required as a condition of loan approval. Essential community facility
applicants other than utility-type must have significant ties with the
local rural community. Such ties are necessary to ensure to the greatest
extent possible that a facility under private control will carry out a
public purpose and continue to primarily serve rural areas. Ties may be
evidenced by items such as:
(A) Association with or controlled by a local public body or bodies,
or broadly based ownership and controlled by members of the community.
(B) Substantial public funding through taxes, revenue bonds, or
other local Government sources, and/or substantial voluntary community
funding, such as would be obtained through a community-wide funding
campaign.
(iii) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes.
(2) Facility. (i) Facilities must be located in rural areas, except
for utility-type services such as water, sewer, natural gas, or
hydroelectric, serving both rural and non-rural areas. In such cases,
FmHA or its successor agency under Public Law 103-354 funds may be used
to finance only that portion serving rural areas, regardless of facility
location.
(ii) Essential community facilities must primarily serve rural
areas.
(iii) For water or waste disposal facilities, the terms rural and
rural area will not include any area in any city or town with a
population in excess of 10,000 inhabitants, according to the latest
decennial Census of the United States.
(iv) For essential community facilities, the terms rural and rural
area will not include any area in any city or town with a population in
excess of 20,000 inhabitants, according to the latest decennial Census
of the United States.
(3) Credit elsewhere. Applicants must certify in writing and FmHA or
its successor agency under Public Law 103-354 shall determine and
document that the applicant is unable to finance the proposed project
from their own resources or through commercial credit at reasonable
rates and terms.
(4) Legal authority and responsibility. Each applicant must have or
will obtain the legal authority necessary for constructing, operating,
and maintaining the proposed facility or service and for obtaining,
giving security for, and repaying the proposed loan. The applicant shall
be responsible for operating, maintaining, and managing the facility,
and providing for its continued availability and use at reasonable rates
and terms. This responsibility shall be exercised by the applicant even
though the facility may be operated, maintained, or managed by a third
party under contract, management agreement, or written lease. Leases may
be used when this is the only feasible way to provide the service and is
the customary practice. Management agreements should provide for at
least those items listed in guide 24 of this subpart (available in any
FmHA or its successor agency under Public Law 103-354 office). Such
contracts, management agreements, or leases must not contain options or
other provisions for transfer of ownership.
(5) Refinancing FmHA or its successor agency under Public Law 103-
354 debt. FmHA or its successor agency under Public Law 103-354 shall
require an agreement that if at any time it shall
[[Page 156]]
appear to the Government that the borrower is able to refinance the
amount of the indebtedness then outstanding, in whole or in part, by
obtaining a loan for such purposes from responsible cooperative or
private credit sources, at reasonable rates and terms for loans for
similar purposes and periods of time, the borrower will, upon request of
the Government, apply for and accept such loan in sufficient amount to
repay the Government and will take all such actions as may be required
in connection with such loan.
(6) Expanded eligibility for timber-dependent communities in Pacific
Northwest. In the Pacific Northwest, defined as an area containing
national forest covered by the Federal document entitled, ``Forest Plan
for a Sustainable Economy and a Sustainable Environment,'' dated July 1,
1993; the population limits contained Sec. 1942.17(b) are expanded to
include communities with not more than 25,000 inhabitants until
September 30, 1998, if:
(i) Part or all of the community lies within 100 miles of the
boundary of a national forest covered by the Federal document entitled,
``Forest Plan for a Sustainable Economy and a Sustainable Environment,''
dated July 1, 1993; and
(ii) The community is located in a county in which at least 15
percent of the total primary and secondary labor and proprietor income
is derived from forestry, wood products, or forest-related industries
such as recreation and tourism.
(c) Priorities--(1) Truly rural areas. FmHA or its successor agency
under Public Law 103-354 program assistance will be directed toward
truly rural areas and rural communities. Normally, priority will not be
given to preapplications for projects that will serve other than truly
rural areas. Truly rural areas are areas other than densely settled
areas or communities adjacent to, or closely associated with, a city or
town with a population exceeding 10,000 residents for water or waste
disposal assistance, or 20,000 residents for essential community
facility assistance. When determining whether a rural area or rural
community is adjacent to, or closely associated with, a city or town
with a population exceeding 10,000 residents for water and waste
disposal, or 20,000 residents for essential community facility
assistance, minor open spaces such as those created by physical or legal
barriers, commercial or industrial development, parks, areas reserved
for convenience or appearance, or narrow strips of cultivated land, will
be disregarded. An area or community shall be considered adjacent to or
closely related with a nonrural area when it constitutes for general,
social, and economic purposes a single community having a contiguous
boundary.
(2) Project selection process. The following paragraphs indicate
items and conditions which must be considered in selecting
preapplications for further development. When ranking eligible
preapplications for consideration for limited funds, FmHA or its
successor agency under Public Law 103-354 officials must consider the
priority items met by each preapplication and the degree to which those
priorities are met, and apply good judgement.
(i) Preapplications. The preapplication and supporting information
submitted with it will be used to determine the proposed project's
priority for available funds.
(ii) State Office review. All preapplications will be reviewed and
scored and Form AD-622, ``Notice of Preapplication Review Action,''
issued within the time limits in Sec. 1942.2(a)(2)(iv) of this subpart.
When considering authorizing the development of an application for
funding, the State Director should consider the remaining funds in the
State allocation, and the anticipated allocation of funds for the next
fiscal year as well as the amount of time necessary to complete that
application. Applicants whose preapplications are found to be ineligible
will be so advised. These applicants will be given adverse notice
through Form AD-622 and advised of their appeal rights under subpart B
of part 1900 of this chapter. Those applicants with eligible lower
scoring preapplications which obviously cannot be funded within an
eighteen month period of time, and are not within 150 percent of the
State's allocation, should be notified that funds are not available; and
requested to advise whether
[[Page 157]]
they wish to have their preapplication maintained in an active file for
future consideration. The State Director may request an additional
allocation of funds from the National Office for such preapplications.
Such requests will be considered along with all others on hand.
(iii) Selection priorities. The priorities described below will be
used by the State Director to rate preapplications. The priorities
should be applied to water and waste disposal or community facilities
preapplications as directed. The format found in part I of guide 26 of
this subpart should be followed in scoring each preapplication. A copy
of the score sheet should be placed in the case file for future
reference.
(A) Population priorities. The following priorities apply to both
Water and Waste Disposal and Community Facilities preapplications.
Points will be distributed as indicated.
(1) The proposed project is located in a rural community having a
population not in excess of 2,500--25 points.
(2) The proposed project is located in a rural community having a
population not in excess of 5,500--20 points. (Points under this
priority should not be assigned to a preapplication if points were
assigned under paragraph (c)(2)(iii) (A)(1) of this section.)
(B) Health priorities. Points will be distributed as indicated.
(1) Water and Waste Disposal preapplications only. The proposed
project is:
(i) Needed to alleviate the sudden unexpected diminution or
deterioration of a water supply, or to meet health or sanitary standards
which pertain to a community's water supply--25 points.
(ii) Required to correct an inadequate waste disposal system due to
unexpected occurrences, or to meet health or sanitary standards which
pertain to a community's waste disposal system--25 points.
(2) Community Facility preapplication only. The proposed project is
required either to correct a health or sanitary problem, or to meet a
health or sanitary standard--25 points.
(C) Income priorities. The following priorities apply to both Water
and Waste Disposal and Community Facilities preapplications. Points will
be distributed as indicated. The median income of the population to be
served by the proposed facility is:
(1) Less than the poverty line for a family of four, as defined in
Section 673(2) of the Community Services Block Grant Act (42 U.S.C.
9902(2)), or less than 80 percent of the statewide nonmetropolitan
median household income--25 points.
(2) Equal to or more than the poverty line and between 80% and 100%,
inclusive, of the State's nonmetropolitan median household income--20
points.
(D) Other factors. Points will be distributed as indicated.
(1) Water and Waste Disposal preapplications only. The proposed
project will: merge ownership, management, and operation of smaller
facilities providing for more efficient management and economical
service; and/or enlarge, extend, or otherwise modify existing facilities
to provide service to additional rural residents--10 points.
(2) Community Facilities preapplications only. The purpose of the
proposed project is to construct, enlarge, extend or otherwise improve
the following types of facilities. (Select only the factor most
applicable to the proposed project.)
(i) Public safety--10 points. (Examples include police services and
fire, rescue and ambulance services as authorized by subpart C of this
part 1942.)
(ii) Health care--5 points. (Examples include clinics, nursing
homes, convalescent facilities, and hospital projects designed to make
the facility conform with life/safety codes, medicare and medicaid
requirements, and minor expansions needed to meet the immediate
requirements of the community. Points under this authority should not be
awarded to a preapplication if points were awarded under Sec.
1942.17(c)(2)(iii)(B)(2) of this subpart.)
(3) Water and Waste Disposal and Community Facilities
preapplications.
(i) Applicant is a public body or Indian tribe--5 points.
(ii) Project is located in a ``truly rural area'' as described in
Sec. 1942.17(c)(1) of this subpart--10 points.
[[Page 158]]
(iii) Amount of joint financing committed to the project is:
(a) 20% or more private, local or state funds except federal funds
channeled through a state agency--10 points.
(b) 5%-19% private, local or state funds except federal funds
channeled through a state agency--5 points.
(E) In certain cases the State Director may assign up to 15 points
to a preapplication, in addition to those that may be scored under
paragraphs (c)(2)(iii) (A) through (D), of this section. These points
are primarily intended to address an unforeseen exigency or emergency,
such as the loss of a community facility due to accident or natural
disaster or the loss of joint financing if FmHA or its successor agency
under Public Law 103-354 funds are not committed in a timely fashion.
However, the points may also be awarded to projects in order to improve
compatibility/coordination between FmHA or its successor agency under
Public Law 103-354's and other agencies' selection systems and to assist
those projects that are the most cost effective. A written justification
must be prepared and placed in the project file each time the State
Director assigns these points.
(iv) Results of State Office review. After completing the review,
the State Director will normally select the eligible preapplications
with the highest scores for further processing. In cases where
preliminary cost estimates indicate that an eligible, high scoring
preapplication is unfeasible or would require an amount of funding from
FmHA or its successor agency under Public Law 103-354 that exceeds
either 25 percent of a State's current annual allocation or an amount
greater than that remaining in the State's allocation, the State
Director may instead select the next lower scoring preapplication(s) for
futher processing provided the high scoring applicant is notified of
this action and given an opportunity to revise the proposal and resubmit
it. If it is found that there is no effective way to reduce costs, the
State Director, after consultation with applicant, may submit a request
for an additional allocation of funds for the proposed project to the
National Office. The request should be submitted during the fiscal year
in which obligation is anticipated. Such request will be considered
along with all others on hand. A written justification must be prepared
and placed in the project file when an eligible preapplication with a
higher rating is not selected for further processing. The State Director
will notify the District Director of the results of the review action.
The State Director will return the preapplication information with an
authorization for the District Director to prepare and issue Form AD-622
in accordance with Sec. 1942.2(a)(2)(iv) of this subpart. Priority will
be given to those preapplications and applications for funding which
meet criteria in Sec. 1942.17(c)(2)(iii)(A) (1) or (2); and the
criteria in Sec. 1942.17(c) (2)(iii)(B)(1) (i) or (ii) or (B)(2) of
this subpart.
(v) Application development. Applications should be developed
expeditiously following good management practices. Applications that are
not developed in a reasonable period of time taking into account the
size and complexity of the proposed project may be removed from the
State's active file. Applicants will be consulted prior to taking such
action.
(vi) Project obligations. To ensure efficient use of resources,
obligations should occur in a timely fashion throughout the fiscal year.
Projects may be obligated as their applications are completed and
approved.
(vii) Requests for additional funding. All requests for additional
allocations of funds submitted to the National Office must follow the
formats found in parts I and II of guide 26. In selecting projects for
funding at the National Office level, additional points may be scored
based on the priority assigned to the project by the State Office. These
points will be scored in the manner shown below. Only the three highest
priority projects can score points. In addition, the Administrator may
assign up to 15 additional points to account for items such as
geographic distribution of funds and emergency conditions caused by
economic problems or natural disasters.
------------------------------------------------------------------------
Priority Points
------------------------------------------------------------------------
1....................................................... 5
[[Page 159]]
2....................................................... 3
3....................................................... 1
------------------------------------------------------------------------
(viii) Cost overruns. A preapplication may receive consideration for
funding before others at the State Office level or at the National
Office level, if funds are not available in the State Office, when it is
a subsequent request for a previously approved project which has
encountered cost overruns due to high bids or unexpected construction
problems that cannot be reduced by negotiations, redesign, use of bid
alternatives, rebidding or other means.
(d) Eligible loan purposes. (1) Funds may be used:
(i) To construct, enlarge, extend, or otherwise improve water or
waste disposal and other essential community facilities providing
essential service primarily to rural residents and rural businesses.
Rural businesses would include facilities such as educational and other
publicly owned facilities.
(A) Water or waste disposal facilities include water, sanitary
sewerage, solid waste disposal, and storm waste-water facilities.
(B) Essential community facilities are those public improvements
requisite to the beneficial and orderly development of a community
operated on a nonprofit basis including but not limited to:
(1) Health services;
(2) Community, social, or cultural services;
(3) Transportation facilities, such as streets, roads, and bridges;
(4) Hydroelectric generating facilities and related connecting
systems and appurtenances, when not eligible for Rural Electrification
Administration (REA) financing;
(5) Supplemental and supporting structures for other rural
electrification or telephone systems (including facilities such as
headquarters and office buildings, storage facilities, and maintenance
shops) when not eligible for Rural Electrification Administration
financing;
(6) Natural gas distribution systems; and
(7) Industrial park sites, but only to the extent of land
acquisition and necessary site preparation, including access ways and
utility extensions to and throughout the site. Funds may not be used in
connection with industrial parks to finance on-site utility systems, or
business and industrial buildings.
(C) Otherwise improve includes but is not limited to the following:
(1) The purchase of major equipment, such as solid waste collection
trucks and X-ray machines, which will in themselves provide an essential
service to rural residents;
(2) The purchase of existing facilities when it is necessary either
to improve or to prevent loss of service;
(3) Payment of tap fees and other utility connection charges as
provided in utility purchase contracts prepared under Sec. 1942.18(f)
of this subpart.
(ii) To construct or relocate public buildings, roads, bridges,
fences, or utilities, and to make other public improvements necessary to
the successful operation or protection of facilities authorized in
paragraph (d)(1)(i) of this section.
(iii) To relocate private buildings, roads, bridges, fences, or
utilities, and other private improvements necessary to the successful
operation or protection of facilities authorized in paragraph (d)(1)(i)
of this section.
(iv) To pay the following expenses, but only when such expenses are
a necessary part of a loan to finance facilities authorized in
paragraphs (d)(1)(i), (d)(1)(ii) and (d)(1)(iii) of this section.
(A) Reasonable fees and costs such as legal, engineering,
architectural, fiscal advisory, recording, environmental impact
analyses, archeological surveys and possible salvage or other mitigation
measures, planning, establishing or acquiring rights.
(B) Interest on loans until the facility is self-supporting, but not
for more than three years unless a longer period is approved by the
National Office; interest on loans secured by general obligation bonds
until tax revenues are available for payment, but not for more than two
years unless a longer period is approved by the National Office; and
interest on interim financing, including interest charges on interim
financing from sources other than FmHA or its successor agency under
Public Law 103-354.
[[Page 160]]
(C) Costs of acquiring interest in land; rights, such as water
rights, leases, permits, rights-of-way; and other evidence of land or
water control necessary for development of the facility.
(D) Purchasing or renting equipment necessary to install, maintain,
extend, protect, operate, or utilize facilities.
(E) Initial operating expenses for a period ordinarily not exceeding
one year when the borrower is unable to pay such expenses.
(F) Refinancing debts incurred by, or on behalf of, a community when
all of the following conditions exist:
(1) The debts being refinanced are a secondary part of the total
loan;
(2) The debts are incurred for the facility or service being
financed or any part thereof;
(3) Arrangements cannot be made with the creditors to extend or
modify the terms of the debts so that a sound basis will exist for
making a loan.
(G) Prepay costs for which FmHA or its successor agency under Public
Law 103-354 grant funds were obligated provided there is:
(1) No conflict with the loan resolution, State statutes, or any
other loan requirements; and
(2) Full documentation showing that:
(i) Loan funds will only be utilized on a temporary basis; and
(ii) All FmHA or its successor agency under Public Law 103-354 loan
funds are restored at a later date for purpose(s) for which they were
obligated.
(v) To pay obligations for construction incurred before loan
approval. Construction work should not be started and obligations for
such work or materials should not be incurred before the loan is
approved. However, if there are compelling reasons for proceeding with
construction before loan approval, applicants may request FmHA or its
successor agency under Public Law 103-354 approval to pay such
obligations. Such requests may be approved if FmHA or its successor
agency under Public Law 103-354 determines that:
(A) Compelling reasons exist for incurring obligations before loan
approval; and
(B) The obligations will be incurred for authorized loan purposes;
and
(C) Contract documents have been approved by FmHA or its successor
agency under Public Law 103-354; and
(D) All environmental requirements applicable to FmHA or its
successor agency under Public Law 103-354 and the applicant have been
met; and
(E) The applicant has the legal authority to incur the obligations
at the time proposed, and payment of the debts will remove any basis for
any mechanic, material, or other liens that may attach to the security
property. FmHA or its successor agency under Public Law 103-354 may
authorize payment of such obligations at the time of loan closing. FmHA
or its successor agency under Public Law 103-354's authorization to pay
such obligations, however, is on the condition that it is not committed
to make the loan; it assumes no responsibility for any obligations
incurred by the applicant; and the applicant must subsequently meet all
loan approval requirements. The applicant's request and FmHA or its
successor agency under Public Law 103-354 authorization for paying such
obligations shall be in writing. If construction is started without FmHA
or its successor agency under Public Law 103-354 approval, post approval
in accordance with this section may be considered.
(2) Funds may not be used to finance:
(i) On-site utility systems or business and industrial buildings in
connection with industrial parks.
(ii) Facilities to be used primarily for recreation purposes.
(iii) Community antenna television services or facilities.
(iv) Electric generation or transmission facilities or telephone
systems, except as provided in paragraph (d)(1)(i)(B)(4), or
(d)(1)(i)(B)(5) of this section; or extensions to serve a particular
essential community facility as provided in paragraph (d)(1)(ii) or
(d)(1)(iii) of this section.
(v) Facilities which are not modest in size, design, and cost.
(vi) Loan or grant finder's fees.
(vii) Projects located within the Coastal Barriers Resource System
that do not qualify for an exception as defined in section 6 of the
Coastal Barriers Resource Act, Pub. L. 97-348.
[[Page 161]]
(viii) New combined sanitary and storm water sewer facilities.
(ix) That portion of a water and/or waste disposal facility normally
provided by a business or industrial user.
(e) Facilities for public use. All facilities financed under the
provisions of this subpart shall be for public use.
(1) Utility-type service facilities will be installed so as to serve
any user within the service area who desires service and can be feasibly
and legally served. Applicants and borrowers must obtain written
concurrence of the FmHA or its successor agency under Public Law 103-354
prior to refusing service to such user. Upon failure to provide service
which is reasonable and legal, such user shall have direct right of
action against the applicant/borrower. A notice of the availability of
this service should be given by the applicant/borrower to all persons
living within the area who can feasibly and legally be served by the
phase of the project being financed.
(i) If a mandatory hookup ordinance will be adopted, the required
bond ordinance or resolution advertisement will be considered adequate
notification.
(ii) When any portion of the income will be derived from user fees
and a mandatory hookup ordinance will not be adopted, each potent user
will be afforded an opportunity to request service by signing a Users
Agreement.
Those declining service will be afforded an opportunity to sign a
statement to such effect. FmHA or its successor agency under Public Law
103-354 has guides available for these purposes in all FmHA or its
successor agency under Public Law 103-354 offices.
(2) In no case will boundaries for the proposed service area be
chosen in such a way that any user or area will be excluded because of
race, color, religion, sex, marital status, age, handicap, or national
origin.
(3) This does not preclude:
(i) Financing or constructing projects in phases when it is not
practical to finance or construct the entire project at one time; and
(ii) Financing or constructing facilities where it is not
economically feasible to serve the entire area, provided economic
feasibility is determined on the basis of the entire system and not by
considering the cost of separate extensions to or parts thereof; the
applicant publicly announces a plan for extending service to areas not
initially receiving service from the system; and potential users located
in the areas not to be initially served receive written notice from the
applicant that service will not be provided until such time as it is
economically feasible to do so, and
(iii) Extending services to industrial areas when service is made
available to users located along the extensions.
(4) The State Director will determine that, when feasibly and
legally possible, inequities within the proposed project's service area
for the same type service proposed (i.e., water or waste disposal) will
be remedied by the owner on or before completion of the project that
includes FmHA or its successor agency under Public Law 103-354 funding.
Inequities are defined as flagrant variations in availability, adequacy
or quality of service. User rate schedules for portions of existing
systems that were developed under different financing, rates, terms or
conditions, as determined by the State Director, do not necessarily
constitute inequities.
(5) Before a loan is made to an applicant other than a public body,
for other than utility type projects, the articles of incorporation or
loan agreement will include a condition similar to the following:
In the event of dissolution of this corporation, or in the event it
shall cease to carry out the objectives and purposes herein set forth,
all business, property, and assets of the corporation shall go and be
distributed to one or more nonprofit corporations or public bodies as
may be selected by the board of directors of this corporation and
approved by at least 75 percent of the users or members to be used for,
and devoted to, the purpose of a community facility project or other
purpose to serve the public welfare of the community. In no event shall
any of the assets or property, in the event of dissolution thereof, go
or be distributed to members, directors, stockholders, or others having
financial or managerial interest in the corporation either for the
reimbursement of any sum subscribed, donated or contributed by such
members or for any other purposes, provided that nothing herein shall
prohibit the corporation from paying its just debts.
(f) Rates and terms--(1) General. Each loan will bear interest at
the rate prescribed in RD Instruction 440.1, exhibit
[[Page 162]]
B (available in any Rural Development office). The interest rates will
be set by Rural Development at least for each quarter of the fiscal
year. All rates will be adjusted to the nearest one-eighth of 1 percent.
The applicant may submit a written request prior to loan closing that
the interest rate charged on the loan be the lower of the rate in effect
at the time of loan approval or the rate in effect at the time of loan
closing. If the interest rate is to be that in effect at loan closing,
the interest rate charged on a loan involving multiple advances of Rural
Development funds, using temporary debt instruments, shall be that in
effect on the date when the first temporary debt instrument is issued.
If no written request is received from the applicant prior to loan
closing, the interest rate charged on the loan will be the rate in
effect at the time of loan approval.
(2) Poverty line rate. The poverty line interest rate will not
exceed 5 per centum per annum. The provisions of paragraph (f)(2)(i) of
this section do not apply to health care and related facilities that
provide direct health care to the public. Otherwise, all loans must
comply with the following conditions:
(i) The primary purpose of the loan is to upgrade existing
facilities or construct new facilities required to meet applicable
health or sanitary standards. Documentation will be obtained from the
appropriate regulatory agency with jurisdiction to establish the
standard, to verify that a bonafide standard exists, what that standard
is, and that the proposed improvements are needed and required to meet
the standard; and
(ii) The median household income of the service area is below the
poverty line for a family of four, as defined in section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)), or below 80
percent of the Statewide nonmetropolitan median household income.
(3) Intermediate rate. The intermediate interest rate will be set at
the poverty line rate plus one-half of the difference between the
poverty line rate and the market rate, not to exceed 7 percent per
annum. It will apply to loans that do not meet the requirements for the
poverty line rate and for which the median household income of the
service area is below the poverty line or not more than 100 percent of
the nonmetropolitan median household income of the State.
(4) Market rate. The market interest rate will be set using as
guidance the average of the Bond Buyer Index for the four weeks prior to
the first Friday of the last month before the beginning of the quarter.
The market rate will apply to all loans that do not qualify for a
different rate under paragraph (f)(2) or (f)(3) of this section. It may
be adjusted as provided in paragraph (f)(5) of this section.
(5) Prime farmland. For essential community facilities loans, the
rate indicated by paragraphs (f)(2), (f)(3) or (f)(4) of this section
will be increased by two per centum per annum if the project being
financed will involve the use of, or construction on, prime or unique
farmland in accordance with FmHA Instruction 440.1, exhibits B and J
(available in any FmHA or its successor agency under Public Law 103-354
office).
(6) Income determination. The income data used to determine median
household income should be that which most accurately reflects the
income of the service area. The service area is that area reasonably
expected to be served by the facility being financed by FmHA or its
successor agency under Public Law 103-354. The median household income
of the service area and the nonmetropolitan median household income of
the State will be determined from income data from the most recent
decennial census of the U.S. If there is reason to believe that the
census data is not an accurate representation of the median household
income within the area to be served, the reasons will be documented and
the applicant may furnish, or FmHA or its successor agency under Public
Law 103-354 may obtain, additional information regarding such median
household income. Information will consist of reliable data from local,
regional, State or Federal sources or from a survey conducted by a
reliable impartial source. The nonmetropolitan median household income
of the State may only be updated on a national basis by the FmHA or its
successor agency under Public Law 103-354
[[Page 163]]
National Office. This will be done only when median household income
data for the same year for all Bureau of the Census areas is available
from the Bureau of the Census or other reliable sources. Bureau of the
Census areas would include areas such as: Counties, County Subdivisions,
Cities, Towns, Townships, Boroughs, and other places.
(7) Repayment terms. The loan repayment period shall not exceed the
useful life of the facility, State statute or 40 years from the date of
the note(s) or bond(s), whichever is less. Where FmHA or its successor
agency under Public Law 103-354 grant funds are used in connection with
an FmHA or its successor agency under Public Law 103-354 loan, the loan
will be for the maximum term permitted by this subpart, State statute,
or the useful life of the facility, whichever is less, unless there is
an exceptional case where circumstances justify making an FmHA or its
successor agency under Public Law 103-354 loan for less than the maximum
term permitted. In such cases, the reasons must be fully documented. In
all cases, including those in which the FmHA or its successor agency
under Public Law 103-354 is jointly financing with another lender, the
FmHA or its successor agency under Public Law 103-354 payments of
principal and interest should approximate amortized installments.
(i) Principal payments may be deferred in whole or in part for a
period not to exceed 36 months following the date the first interest
installment is due. If for any reason it appears necessary to permit a
longer period of deferment, the State Director may authorize such
deferment with the prior approval of the National Office. Deferments of
principal will not be used to:
(A) Postpone the levying of taxes or assessments.
(B) Delay collection of the full rates which the borrower has agreed
to charge users for its services as soon as major benefits or the
improvements are available to those users.
(C) Create reserves for normal operation and maintenance.
(D) Make any capital improvements except those approved by FmHA or
its successor agency under Public Law 103-354 determined to be essential
to the repayment of the loan or to the obtaining of adequate security
thereof.
(E) Accelerate the payment of other debts.
(ii) Payment date. Loan payments will be scheduled to coincide with
income availability and be in accordance with State law. If consistent
with the foregoing, monthly payments will be required and will be
enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or semiannual payments will be
used. Insofar as practical monthly payments will be scheduled one full
month following the date of loan closing; or semiannual or annual
payments will be scheduled six or twelve full months, respectively,
following the date of loan closing or any deferment period. Due dates
falling on the 29th, 30th or 31st day of the month will be avoided.
(g) Security. Loans will be secured by the best security position
practicable in a manner which will adequately protect the interest of
FmHA or its successor agency under Public Law 103-354 during the
repayment period of the loan. Specific requirements for security for
each loan will be included in a letter of conditions.
(1) Joint financing security. For projects utilizing joint
financing, when adequate security of more than one type is available,
the other lender may take one type of security with FmHA or its
successor agency under Public Law 103-354 taking another type. For
projects utilizing joint financing with the same security to be shared
by FmHA or its successor agency under Public Law 103-354 and another
lender, FmHA or its successor agency under Public Law 103-354 will
obtain at least a parity position with the other lender. A parity
position is to ensure that with joint security, in the event of default,
each lender will be affected on a proportionate basis. A parity position
will conform with the following unless an exception is granted by the
National Office:
(i) Terms. It is not necessary for loans to have the same repayment
terms to meet the parity requirements. Loans made by other lenders
involved in joint
[[Page 164]]
financing with FmHA or its successor agency under Public Law 103-354 for
facilities should be scheduled for repayment on terms similar to those
customarily used in the State for financing such facilities.
(ii) Use of trustee or other similar paying agent. The use of a
trustee or other similar paying agent by the other lender in a joint
financing arrangement is acceptable to FmHA or its successor agency
under Public Law 103-354. A trustee or other similar paying agent will
not normally be used for the FmHA or its successor agency under Public
Law 103-354 portion of the funding unless required to comply with State
law. The responsibilities and authorities of any trustee or other
similar paying agent on projects that include FmHA or its successor
agency under Public Law 103-354 funds must be clearly specified by
written agreement and approved by the FmHA or its successor agency under
Public Law 103-354 State Director and Regional Attorney. FmHA or its
successor agency under Public Law 103-354 must be able to deal directly
with the borrower to enforce the provisions of loan and grant agreements
and perform necessary servicing actions.
(iii) Regular payments. In the event adequate funds are not
available to meet regular installments on parity loans, the funds
available will be apportioned to the lenders based on the respective
current installments of principal and interest due.
(iv) Disposition of Property. Funds obtained from the sale or
liquidation of secured property or fixed assets will be apportioned to
the lenders on the basis of the pro rata amount loaned, but not to
exceed their respective outstanding balances; provided, however, funds
obtained from such sale or liquidation for a project that included FmHA
or its successor agency under Public Law 103-354 grant funds will be
apportioned as may be required by the grant agreement.
(v) Protective advances. Protective advances are payments made by a
lender for items such as insurance or taxes, to protect the financial
interest of the lender, and charged to the borrower's loan account. To
the extent consistent with State law and customary lending practices in
the area, repayment of protective advances made by either lender, for
the mutual protection of both lenders, should receive first priority in
apportionment of funds between the lenders. To ensure agreement between
lenders, efforts should be made to obtain the concurrence of both
lenders before one lender makes a protective advance.
(2) Public bodies. Loans to such borrowers will be evidenced by
notes, bonds, warrants, or other contractual obligations as may be
authorized by relevant State statutes and by borrower's documents,
resolutions, and ordinances.
(i) Utility-type facilities such as water and sewer systems, natural
gas distribution systems, electric systems, etc., will be secured by:
(A) The full faith and credit of the borrower when the debt is
evidenced by general obligation bonds; and/or
(B) Pledges of taxes or assessments; and/or
(C) Pledges of facility revenue and, when it is the customary
financial practice in the State, liens will be taken on the interest of
the applicant in all land, easements, rights-of-way, water rights, water
purchase contracts, water sales contracts, sewage treatment contracts,
and similar property rights, including leasehold interest, used or to be
used in connection with the facility whether owned at the time the loan
is approved or acquired with loan funds; and/or
(D) In those cases involving water and waste disposal projects where
there is a substantial number of other than full-time users and facility
costs result in a higher than reasonable rate for such full-time users,
the loan will be secured by the full faith and credit of the borrower or
by an assignment or pledge of taxes or assessments from public bodies or
other organizations having the authority to issue bonds or pledge such
taxes or assessments.
(ii) Solid waste systems. The type of security required will be
based on State law and what is determined adequate to protect the
interest of the United States during the repayment period of the loan.
(iii) Other essential community facilities other than utility type,
such as those
[[Page 165]]
for public health and safety, social, and cultural needs and the like
will meet the following security requirements:
(A) Such loans will be secured by one or a combination of the
following and in the following order of preference:
(1) General obligation bonds.
(2) Assessments.
(3) Bonds which pledge other taxes.
(4) Bonds pledging revenues of the facility being financed when such
bonds provide for the mandatory levy and collection of taxes in the
event revenues later become insufficient to properly operate and
maintain the facility and to retire the loan.
(5) Assignment of assured income which will be available for the
life of the loan, from such sources as insurance premium rebates, income
from endowments, irrevocable trusts, or commitments from industries,
public bodies, or other reliable sources.
(6) Liens on real and chattel property when legally permissible and
an assignment of the borrowers income from applicants who have been in
existence and are able to present evidence of a financially successful
operation of a similar facility for a period of time sufficient to
indicate project success. National Office concurrence is required when
the applicant has been in existence for less than five years or has not
operated on a financially successful basis for five years immediately
prior to loan application.
(7) Liens on real and chattel property when legally permissible and
an assignment of income from an organization receiving Health and Human
Services (HHS) operating grants under the ``Memorandum of Understanding
Between Health Resources and Services Administration, U.S. Department of
Health and Human Services and Farmers Home Administration or its
successor agency under Public Law 103-354, U.S. Department of
Agriculture'' (see FmHA Instruction 2000-T, available in any FmHA or its
successor agency under Public Law 103-354 office.)
(8) Liens on real and chattel property when legally permissible and
an assignment of income from an organization proposing a facility whose
users receive reliable income from programs such as social security,
supplemental security income (SSI), retirement plans, long-term
insurance annuities, medicare or medicaid. Examples are homes for the
handicapped or institutions whose clientele receive State or local
government assistance.
(9) When the applicant cannot meet the criteria in paragraph
(g)(2)(iii)(A) (1) through (8) of this section, such proposals may be
considered when all the following are met:
(i) The applicant is a new organization or one that has not operated
the type of facility being proposed.
(ii) There is a demonstration of exceptional community support such
as substantial financial contributions, and aggressive leadership in the
formation of the organization and proposed project which indicates a
commitment of the entire community.
(iii) The State Director has determined that adequate and dependable
revenues will be available to meet all operation expenses, debt
repayment, and the required reserve.
(iv) Prior National Office review and concurrence is obtained.
(B) Real estate and chattel property taken as security in accordance
with paragraphs (g)(2)(iii)(A) (6) through (9) of this section:
(1) Ordinarily will include the property that is used in connection
with the facility being financed; and
(2) Will have an as-developed present market value determined by a
qualified appraiser equal to or exceeding the amount of the loan to be
obtained plus any other indebtedness against the proposed security; and
(3) May have one of the lien requirements deleted when the loan
approval official determines that the loan will be adequately secured
with a lien on either the real estate or chattel property.
(C) When security is not available in accordance with paragraphs
(g)(2)(iii)(A) (1) through (5) of this section and State law precludes
securing the loan with liens on real or chattel property, the loan will
be secured in the best manner consistent with State law and customary
security taken by private lenders in the State, such as revenue bonds,
and any other security the loan approval official determines necessary
for a sound loan. Such loans
[[Page 166]]
will otherwise meet the requirements of (g)(2)(iii)(A) (6) through (9)
of this section as appropriate.
(3) Other-than-public bodies. Loans to other-than-public body
applicants will be secured as follows:
(i) Utility-type facilities eligible for FmHA or its successor
agency under Public Law 103-354 assistance under paragraph (d) of this
section such as water and sewer systems, natural gas distribution
systems, electric systems, etc., will be secured as follows:
(A) Assignments of borrower income will be taken and perfected by
filing, if legally permissable; and
(B) A lien will be taken on the interest of the applicant in all
land, easements, rights-of-way, water rights, water purchase contracts,
water sales contracts, sewage treatment contracts and similar property
rights, including leasehold interest, used, or to be used in connection
with the facility whether owned at the time the loan is approved or
acquired with loan funds. In unusual circumstances where it is not
feasible to obtain a lien on such land (such as land rights obtained
from Federal or local government agencies, and from railroads) and the
loan approval official determines that the interest of FmHA or its
successor agency under Public Law 103-354 otherwise is secured
adequately, the lien requirement may be omitted as to such land rights.
(C) When the loan is approved or the acquisition of real property is
subject to an outstanding lien indebtedness, the next highest priority
lien obtainable will be taken if the loan approval official determines
that the loan is adequately secured.
(D) Other security. Promissory notes from individuals, stock or
membership subscription agreements, individuals member's liability
agreements, or other evidences of debt, as well as mortgages or other
security instruments encumbering the private property of members of the
association may be pledged or assigned to FmHA or its successor agency
under Public Law 103-354 as additional security in any case in which the
interest of FmHA or its successor agency under Public Law 103-354 will
not be otherwise adequately protected.
(E) In those cases where there is a substantial number of other than
full-time users and facility costs result in a higher than reasonable
rate for such full-time users, the loan will be secured by an assignment
or pledge of general obligation bonds, taxes, or assessments from public
bodies or other organizations having the authority to issue bonds or
pledge such taxes, or assessments.
(ii) Solid waste systems. The type of security required will be
based on State law and what is determined adequate to protect the
interest of the United States during the repayment period of the loan.
(iii) Essential community facilities other than utility type such as
those for public health and safety, social, and cultural needs and the
like will meet the following security requirements:
(A) Such loans will be secured by one or a combination of the
following and in the following order of preference:
(1) An assignment of assured income that will be available for the
life of the loan, from sources such as insurance premium rebates, income
from endowments, irrevocable trusts, or commitments from industries,
public bodies, or other reliable sources.
(2) Liens on real and chattel property with an assignment of income
from applicants who have been in existence and are able to present
evidence of a financially successful operation of a similar facility for
a period of time sufficient to indicate project success. National Office
concurrence is required when the applicant has been in existence for
less than five years or has not operated on a financially successful
basis for at least the five years immediately prior to loan application.
(3) Liens on real and chattel property and an assignment of income
from an organization receiving HHS operating grants under the
``Memorandum of Understanding Between Health Resources and Services
Administration, U.S. Department of Health and Human Services and Farmers
Home Administration or its successor agency under Public Law 103-354,
U.S. Department of Agriculture'' (see FmHA Instruction 2000-T, available
in any FmHA or its successor agency under Public Law 103-354 office).
[[Page 167]]
(4) Liens on real and chattel property when legally permissible and
an assignment of income from an organization proposing a facility whose
users receive reliable income from programs such as social security,
supplemental security income (SSI), retirement plans, long-term
insurance annuities, medicare or medicaid. Examples are homes for the
handicapped or institutions whose clientele receive State or local
government assistance.
(5) When the applicant cannot meet the criteria in paragraphs
(g)(3)(iii)(A) (1) through (4) of this section, such proposals may be
considered when all the following are met:
(i) The applicant is a new organization or one that has not operated
the type of facility being proposed.
(ii) There is a demonstration of exceptional community support such
as substantial financial contributions, and aggressive leadership in the
formation of the organization and proposed project which indicates a
commitment of the entire community.
(iii) The State Director has determined that adequate and dependable
revenues will be available to meet all operation expenses, debt
repayment, and the required reserve.
(iv) Prior National Office review and concurrence is obtained.
(6) Additional security may be taken as determined necessary by the
loan approval official.
(B) Real estate and chattel property taken as security:
(1) Ordinarily will include the property that is used in connection
with the facility being financed; and
(2) Will have an as-developed present market value determined by a
qualified appraiser equal to or exceeding the amount of the loan to be
obtained plus any other indebtedness against the proposed security; and
(3) May have one of the lien requirements deleted when the loan
approval official determines that the loan will be adequately secured
with a lien on either the real estate or the chattel property.
(h) Economic feasibility requirements. All projects financed under
the provisions of this section must be based on taxes, assessments,
revenues, fees, or other satisfactory sources of revenues in an amount
sufficient to provide for facility operation and maintenance, a
reasonable reserve, and debt payment. An overall review of the
applicant's financial status, including a review of all assets and
liabilities, will be a part of the docket review process by the FmHA or
its successor agency under Public Law 103-354 staff and approval
official. If the primary use of the facility is by business and the
success or failure of the facility is dependent on the business, then
the economic viability of that business must be assessed. The number of
users for a rural business will be based on equivalent dwelling units,
which is the level of service provided to a typical rural residential
dwelling.
(1) Financial feasibility reports. All applicants will be expected
to provide a financial feasibility report prepared by a qualified firm
or individual. These financial feasibility reports will normally be:
(i) Included as part of the preliminary engineer/architectural
report using guides 6 through 10 as applicable; or
(ii) Prepared by a qualified firm or individual not having a direct
interest in the management or construction of the facility using guide 5
when:
(A) The project will significantly affect the applicant's financial
operations and is not a utility-type facility but is dependent on
revenues from the facility to repay the loan; or
(B) It is specifically requested by FmHA or its successor agency
under Public Law 103-354.
(2) Applicants for loans for utility-type facilities dependent on
users fees for debt payment shall base their income and expense forecast
on realistic user estimates in accordance with the following:
(i) In estimating the number of users and establishing rates or fees
on which the loan will be based for new systems and for extensions or
improvements to existing systems, consideration should be given to the
following:
(A) An estimated number of maximum initial users should not be used
when setting user fees and rates since it may be several years before
all residents in the community will need the
[[Page 168]]
services provided by the system. In establishing rates a realistic
number of initial users should be employed.
(B) User agreements from individual vacant property owners will not
be considered when determining project feasibility unless:
(1) The owner has plans to develop the property in a reasonable
period of time and become a user of the facility; and
(2) The owner agrees in writing to make a monthly payment at least
equal to the proportionate share of debt service attributable to the
vacant property until the property is developed and the facility is
utilized on a regular basis. A bond or escrowed security deposit must be
provided to guarantee this monthly payment and to guarantee an amount at
least equal to the owner's proportionate share of construction costs. If
a bond is provided, it must be executed by a surety company that appears
on the Treasury Department's most current list (Circular 570, as
amended) and be authorized to transact business in the State where the
project is located. The guarantee shall be payable jointly to the
borrower and the Farmers Home Administration or its successor agency
under Public Law 103-354; and
(3) Such guarantee will mature not later than 4 years from the date
of execution and will be finally due and payable upon default of a
monthly payment or at maturity, unless the property covered by the
guarantee has been developed and the facility is being utilized on a
regular basis.
(C) Income from other vacant property owners will be considered only
as extra income.
(ii) Realistic user estimates will be established as follows:
(A) Meaningful potential user cash contributions. Potential user
cash contributions are required except:
(1) For users presently receiving service, or
(2) Where FmHA or its successor agency under Public Law 103-354
determines that the potential users as a whole in the applicant's
service area cannot make cash contributions, or
(3) Where State statutes or local ordinances require mandatory use
of the system and the applicant or legal entity having such authority
agrees in writing to enforce such statutes, or ordinances.
(B) The amount of cash contributions required in paragraph
(h)(2)(ii)(A) of this section will be set by the applicant and concurred
in by FmHA or its successor agency under Public Law 103-354.
Contribtions should be an amount high enough to indicate sincere
interest on the part of the potential user, but not so high as to
preclude service to low income families. Contributions ordinarily should
be an amount approximating one year's minimum user fee, and shall be
paid in full before loan closing or commencement of construction,
whichever occurs first. Once economic feasibility is ascertained based
on a demonstration of meaningful potential user cash contributions, the
contribution, membership fee or other fees that may be imposed are not a
requirement of FmHA or its successor agency under Public Law 103-354
under this section. However, borrowers do have an additional
responsibility relating to generating sufficient revenues as set forth
in paragraph (n)(2)(iii) of this section.
(C) Enforceable user agreement. Except for users presently receiving
service, an enforceable user agreement with a penalty clause is required
unless State statutes or local ordinances require mandatory use of the
system and the applicant or legal entity having such authority agrees in
writing to enforce such statutes or ordinances.
(iii) In those cases where all or part of the borrower's debt
payment revenues will come from user fees, applicants must provide a
positive program to encourage connection by all users as soon as service
is available. The program will be available for review and approval by
FmHA or its successor agency under Public Law 103-354 before loan
closing or commencement of construction, whichever occurs first. Such a
program shall include:
(A) An aggressive information program to be carried out during the
construction period. The borrower should send written notification to
all signed users at least three weeks in advance of the date service
will be available, stating the date users will be expected
[[Page 169]]
to have their connections completed, and the date user charges will
begin.
(B) Positive steps to assure that installation services will be
available. These may be provided by the contractor installing the
system, local plumbing companies, or local contractors.
(C) Aggressive action to see that all signed users can finance their
connections. This might require collection of sufficient user
contributions to finance connections. Extreme cases might necessitate
additional loan funds for this purpose; however, loan funds should be
used only when absolutely necessary and when approved by FmHA or its
successor agency under Public Law 103-354 prior to loan closing.
(3) Utility-type facilities for new developing communities or areas.
Developers are normally expected to provide utility-type facilities in
new or developing areas and such facilities shall be installed in
compliance with appropriate State statutes and regulations. FmHA or its
successor agency under Public Law 103-354 financing will be considered
to an eligible applicant in such cases when failure to complete
development would result in an adverse economic condition for the rural
area (not the community being developed); the proposal is necessary to
the success of an area development plan; and loan repayment can be
assured by:
(i) The applicant already having sufficient assured revenues to
repay the loan; or
(ii) Developers providing a bond or escrowed security deposit as a
guarantee sufficient to meet expenses attributable to the area in
question until a sufficient number of the building sites are occupied
and connected to the facility to provide enough revenues to meet
operating, maintenance, debt service, and reserve requirements. Such
guarantees from developers will meet the requirements in paragraph
(h)(2)(i)(B) of this section; or
(iii) Developers paying cash for the increased capital cost and any
increased operating expenses until the developing area will support the
increased costs; or
(iv) The full faith and credit of a public body where the debt is
evidenced by general obligation bonds; or
(v) The loan is to a public body evidenced by a pledge of tax
assessments; or
(vi) The user charges can become a tax lien upon the property being
served and income from such lien can be collected in sufficient time to
be used for its intended purposes.
(i) Reserve requirements. Provision for the accumulation of
necessary reserves over a reasonable period of time will be included in
the loan documents and in assessments, tax levies, or rates charged for
services. In those cases where statutes providing for extinguishing
assessment liens of public bodies when properties subject to such liens
are sold for delinquent State or local taxes, special reserves will be
established and maintained for the protection of the borrower's
assessment lien.
(1) General obligation or special assessment bonds. Ordinarily, the
requirements for reserves will be considered to have been met if general
obligation or other bonds which pledge the full faith and credit of the
political subdivision are used, or special assessment bonds are used,
and if such bonds provide for the annual collection of sufficient taxes
or assessments to cover debt service, operation and maintenance, and a
reasonable amount for emergencies and to offset the possible nonpayment
of taxes or assessments by a percentage of the property owners, or a
statutory method is provided to prevent the incurrence of a deficiency.
(2) Other than general obligation or special assessment bonds. Each
borrower will be required to establish and maintain reserves sufficient
to assure that loan installments will be paid on time, for emergency
maintenance, for extensions to facilities, and for replacement of short-
lived assets which have a useful life significantly less than the
repayment period of the loan. It is expected that borrowers issuing
bonds or other evidences of debt pledging facility revenues as security
will ordinarily plan their reserve to provide for a total reserve in an
amount at least equal to one average loan installment. It is also
expected the ordinarily such reserve will be accumulated at the rate of
at least one-tenth of the total each year until the desired level is
reached.
[[Page 170]]
(j) General requirements--(1) Membership authorization. For
organizations other than public bodies, the membership will authorize
the project and its financing except that the State Director may, with
the concurrence of OGC, accept the loan resolution without such
membership authorization when State statutes and the organization's
charter and bylaws do not require such authorization; and
(i) The organization is well established and is operating with a
sound financial base; or
(ii) For utility-type projects the members of the organization have
all signed an enforceable user agreement with a penalty clause and have
made the required meaningful user cash contribution, except for members
presently receiving service or when State statutes or local ordinances
require mandatory use of the facility.
(2) Planning, bidding, contracting, constructing. (See Sec.
1942.18).
(3) Insurance and fidelity bonds. The purpose of FmHA or its
successor agency under Public Law 103-354's insurance and fidelity bond
requirements is to protect the government's financial interest based on
the facility financed. The requirements below apply to all types of
coverage determined necessary. The National Office may grant exceptions
to normal requirements when appropriate justification is provided
establishing that it is in the best interest of the applicant/borrower
and will not adversely affect the government's interest.
(i) General. (A) Applicants must provide evidence of adequate
insurance and fidelity bond coverage by loan closing or start of
construction, whichever occurs first. Adequate coverage in accordance
with this section must then be maintained for the life of the loan. It
is the responsibility of the applicant/borrower and not that of FmHA or
its successor agency under Public Law 103-354 to assure that adequate
insurance and fidelity bond coverage is maintained.
(B) Insurance and fidelity bond requirements by FmHA or its
successor agency under Public Law 103-354 shall normally not exceed
those proposed by the applicant/borrower if the FmHA or its successor
agency under Public Law 103-354 loan approval or servicing official
determines that proposed coverage is adequate to protect the
government's financial interest. Applicants/borrowers are encouraged to
have their attorney, consulting engineer/architect, and/or insurance
provider(s) review proposed types and amounts of coverage, including any
deductible provisions. If the FmHA or its successor agency under Public
Law 103-354 official and the applicant/borrower cannot agree on the
acceptability of coverage proposed, a decision will be made by the State
Director.
(C) The use of deductibles, i.e., an initial amount of each claim to
be paid by the applicant/borrower, may be allowed by FmHA or its
successor agency under Public Law 103-354 providing the applicant/
borrower has financial resources which would likely be adequate to cover
potential claims requiring payment of the deductible.
(D) Borrowers must provide evidence to FmHA or its successor agency
under Public Law 103-354 that adequate insurance and fidelity bond
coverage is being maintained. This may consist of a listing of policies
and coverage amounts in yearend reports submitted with management
reports required under Sec. 1942.17(q)(2) or other documentation. The
borrower is responsible for updating and/or renewing policies or
coverage which expire between submissions to FmHA or its successor
agency under Public Law 103-354. Any monitoring of insurance and
fidelity bond coverage by FmHA or its successor agency under Public Law
103-354 is solely for the benefit of FmHA or its successor agency under
Public Law 103-354, and does not relieve the applicant/borrower of its
obligation under the loan resolution to maintain such coverage.
(ii) Fidelity bond. Applicants/borrowers will provide fidelity bond
coverage for all persons who have access to funds. Coverage may be
provided either for all individual positions or persons, or through
``blanket'' coverage providing protection for all appropriate
[[Page 171]]
employees and/or officials. An exception may be granted by the State
Director when funds relating to the facility financed are handled by
another entity and it is determined that the entity has adequate
coverage or the government's interest would otherwise be adequately
protected.
(A) The amount of coverage required by FmHA or its successor agency
under Public Law 103-354 will normally approximate the total annual debt
service requirements for the FmHA or its successor agency under Public
Law 103-354 loans.
(B) Form FmHA or its successor agency under Public Law 103-354 440-
24, ``Position Fidelity Schedule Bond'' may be used. Similar forms may
be used if determined acceptable to FmHA or its successor agency under
Public Law 103-354. Other types of coverage may be considered acceptable
if it is determined by FmHA or its successor agency under Public Law
103-354 that they fulfill essentially the same purpose as a fidelity
bond.
(iii) Insurance. The following types of coverage must be maintained
in connection with the project if appropriate for the type of project
and entity involved:
(A) Property insurance. Fire and extended coverage will normally be
maintained on all structures except as noted in paragraphs
(j)(3)(iii)(A) (1) and (2) below. Ordinarily, FmHA or its successor
agency under Public Law 103-354 should be listed as mortgagee on the
policy when FmHA or its successor agency under Public Law 103-354 has a
lien on the property. Normally, major items of equipment or machinery
located in the insured structures must also be covered. Exceptions:
(1) Reservoirs, standpipes, elevated tanks, and other structures
built entirely of noncombustible materials if such structures are not
normally insured.
(2) Subsurface lift stations except for the value of electrical and
pumping equipment therein.
(B) Liability and property damage insurance, including vehicular
coverage.
(C) Malpractice insurance. The need and requirements for malpractice
insurance will be carefully and thoroughly considered in connection with
each health care facility financed.
(D) Flood insurance. Facilities located in special flood- and
mudslide-prone areas must comply with the eligibility and insurance
requirements of subpart B of part 1806 of this chapter (FmHA Instruction
426.2).
(E) Worker's compensation. The borrower will carry worker's
compensation insurance for employees in accordance with State laws.
(4) Acquisition of land, easements, water rights, and existing
facilities. Applicants are responsible for acquisition of all property
rights necessary for the project and will determine that prices paid are
reasonable and fair. FmHA or its successor agency under Public Law 103-
354 may require an appraisal by an independent appraiser or FmHA or its
successor agency under Public Law 103-354 employee.
(i) Title for land, rights-of-way, easements, or existing
facilities. The applicant must certify and provide a legal opinion
relative to the title to rights-of-way and easements. Form FmHA or its
successor agency under Public Law 103-354 442-21, ``Rights-of-Way
Certificate,'' and Form FmHA or its successor agency under Public Law
103-354 442-22, ``Opinion of Counsel Relative to Rights-of-Way,'' may be
used.
(A) Rights-of-way and easements. Applicants are responsible for and
will obtain valid, continuous and adequate rights-of-way and easements
needed for the construction, operation, and maintenance of the facility.
Form FmHA or its successor agency under Public Law 103-354 442-20,
``Right-of-Way Easement,'' may be used. When a site is for major
structures for utility-type facilities such as a reservoir or pumping
station and the applicant is able to obtain only a right-of-way or
easement on such a site rather than a fee simple title, the applicant
will furnish a title report thereon by the applicant's attorney showing
ownership of the land and all mortgages or other lien defects,
restrictions, or encumbrances, if any. It is the responsibility of the
applicant to obtain and record such releases, consents or subordinations
to such property rights from holders of outstanding liens or other
instruments as may be
[[Page 172]]
necessary for the construction, operation, and maintenance of the
facility and give FmHA or its successor agency under Public Law 103-354
the required security.
(B) Title for land or existing facilities. Title to land essential
to the successful operation of facilities or title to facilities being
purchased, must not contain any restrictions that will adversely affect
the suitability, successful operation, security value, or
transferability of the facility. Title opinions must be provided by the
applicant's attorney. The opinions must be in sufficient detail to
assess marketability of the property. Form FmHA or its successor agency
under Public Law 103-354 1927-9, ``Preliminary Title Opinion,'' and Form
FmHA or its successor agency under Public Law 103-354 1927-10, ``Final
Title Opinion,'' may be used to provide the required title opinions. If
other forms are used they must be reviewed and approved by FmHA or its
successor agency under Public Law 103-354 and OGC.
(1) In lieu of receiving title opinions from the applicant's
attorney, the applicant may use a title insurance company. If a title
insurance company is used, the company must provide FmHA or its
successor agency under Public Law 103-354 a title insurance binder,
disclosing all title defects or restrictions, and include a commitment
to issue a title insurance policy. The policy should be in an amount at
least equal to the market value of the property as improved. The title
insurance binder and commitment should be provided to FmHA or its
successor agency under Public Law 103-354 prior to requesting closing
instructions. FmHA or its successor agency under Public Law 103-354 will
be provided a title insurance policy which will insure FmHA or its
successor agency under Public Law 103-354's interest in the property
without any title defects or restrictions which have not been waived by
FmHA or its successor agency under Public Law 103-354.
(2) The loan approval official may waive title defects or
restrictions, such as utility easements, that do not adversely affect
the suitability, successful operation, security value, or
transferability of the facility. If the District Director is the loan
approval official and is unable to waive the defect or restriction, the
title opinion or title insurance binder will be forwarded to the State
Director. If the State Director, with the advice of the OGC, determines
that the defect or restriction cannot be waived, the defect or
restriction must be removed.
(ii) Water rights. When legally permissible, an assignment will be
taken on water rights owned or to be acquired by the applicant. The
following will be furnished as applicable:
(A) A statement by the applicant's attorney regarding the nature of
the water rights owned or to be acquired by the applicant (such as
conveyance of title, appropriation and decree, application and permit,
public notice and appropriation and use).
(B) A copy of a contract with another company or municipality to
supply water; or stock certificates in another company which represents
the right to receive water.
(iii) Land purchase contract: (A) A land purchase contract (known in
some areas as a contract for deed) is an agreement between two or more
parties which obligates the purchaser to pay the purchase price, gives
the purchaser the rights of immediate possession, control, and
beneficial use of the property, and entitles the purchaser to a deed
upon paying all or a specified part of the purchase price.
(B) Applicants may obtain land through land purchase contracts when
all of the following conditions are met:
(1) The applicant has exhausted all reasonable means of obtaining
outright fee simple title to the necessary land.
(2) The applicant cannot obtain the land through condemnation.
(3) There are not other suitable sites available.
(4) National Office concurrence is obtained in accordance with
paragraph (j)(4)(iii)(D)(2) of this section.
(C) The land purchase contract must provide for the transfer of
ownership by the seller without any restrictions, liens or other title
defects. The contract must not contain provisions for future advances
(except for taxes, insurance, or other costs needed to protect the
security), summary cancellations, summary forfeiture, or other
[[Page 173]]
clauses that may jeopardize the Government's interest or the purchaser's
ability to pay the FmHA or its successor agency under Public Law 103-354
loan. The contract must provide that if the purchaser fails to make
payment that FmHA or its successor agency under Public Law 103-354 will
be given at least 90 days written notice with an option to cure the
default before the contract can be cancelled, terminated or foreclosed.
Then FmHA or its successor agency under Public Law 103-354 must have the
option of making the payment and charging it to the purchaser's account,
making the payment and taking over the ownership of the purchase
contract, or taking any other action necessary to protect the
Government's interest.
(D) Prior to loan closing or the beginning of construction,
whichever occurs first, the following actions must be taken in the order
listed below:
(1) The land purchase contract and any appropriate title opinions
must be reviewed by the Regional Attorney to determine if they are
legally sufficient to protect the interest of the Government.
(2) The land purchase contract, the Regional Attorney's comments,
and the State Director's recommendations must be submitted to the
National Office for concurrence.
(3) The land purchase contract must be recorded.
(5) Lease agreements. Where the right of use or control of real
property not owned by the applicant/borrower is essential to the
successful operation of the facility during the life of the loan, such
right will be evidenced by written agreements or contracts between the
owner(s) of the property and the applicant/borrower. Lease agreements
shall not contain provisions for restricted use of the site of facility,
forfeiture or summary cancellation clauses and shall provide for the
right to transfer and lease without restriction. Lease agreements will
ordinarily be written for a term at least equal to the term of the loan.
Such lease contracts or agreements will be approved by the FmHA or its
successor agency under Public Law 103-354 loan approval official with
the advice and counsel of the Regional Attorney, OGC, as to the legal
sufficiency of such documents. A copy of the lease contract or agreement
will be included in the loan docket.
(6) Notes and bonds. Notes and bonds will be completed on the date
of loan closing except for the entry of subsequent multiple advances
where applicable. The amount of each note will be in multiples of not
less than $100. The amount of each bond will ordinarily be in multiples
of not less than $1,000.
(i) Form FmHA or its successor agency under Public Law 103-354 440-
22, ``Promissory Note (Association or Organization),'' will ordinarily
be used for loans to nonpublic bodies.
(ii) Section 1942.19 contains instructions for preparation of notes
and bonds evidencing indebtedness of public bodies.
(7) Environmental requirements. Environmental requirements will be
documented by FmHA or its successor agency under Public Law 103-354 in
accordance with subpart G part 1940 of this chapter. The applicant will
provide any information required.
(8) Health care facilities. The applicant will be responsible for
obtaining the following documents:
(i) A statement from the responsible State agency certifying that
the proposed health care facility is not inconsistent with the State
Medical Facilities Plan.
(ii) A statement from the responsible State agency or regional
office of the Department of Health and Services certifying that the
proposed facility meets the standards in Sec. 1942.18(d)(4).
(9) Public information. Applicants should inform the general public
regarding the development of any proposed project. Any applicant not
required to obtain authorization by vote of its membership or by public
referendum, to incur the obligations of the proposed loan or grant, will
hold at least one public information meeting. The public meeting must be
held after the preapplication is filed and not later than loan approval.
The meeting must give the citizenry an opportunity to become acquainted
with the proposed project and to comment on such items as economic and
environmental impacts, service area, alternatives to the project, or any
other issue identified by FmHA or its successor agency under
[[Page 174]]
Public Law 103-354. The applicant will be required, at least 10 days
prior to the meeting, to publish a notice of the meeting in a newspaper
of general circulation in the service area, to post a public notice at
the applicant's principal office, and to notify FmHA or its successor
agency under Public Law 103-354. The applicant will provide FmHA or its
successor agency under Public Law 103-354 a copy of the published notice
and minutes of the public meeting. A public meeting is not normally
required for subsequent loans which are needed to complete the financing
of the project.
(10) Service through individual installation. Community owned water
or waste disposal systems may provide service through individual
installations or small clusters of users within the applicant's service
area. When individual installations or small clusters are proposed, the
loan approval official should consider items such as: quantity and
quality of the individual installations that may be developed; cost
effectiveness of the individual facility compared with the initial and
long term user cost on a central system; health and pollution problems
attributable to individual facilities; operational or management
problems peculiar to individual installations; and permit and regulatory
agency requirements.
(i) Applicants providing service through individual facilities must
meet the eligibility requirements in Sec. 1942.17(b).
(ii) FmHA or its successor agency under Public Law 103-354 must
approve the form of agreement between the owner and individual users for
the installation, operation and payment for individual facilities.
(iii) If taxes or assessments are not pledged as security, owners
providing service through individual facilities must obtain security as
necessary to assure collection of any sum the individual user is
obligated to pay the owner.
(iv) Notes representing indebtedness owed the owner by a user for an
individual facility will be scheduled for payment over a period not to
exceed the useful life of the individual facility or the loan, whichever
is shorter. The interest rate will not exceed the interest rate charged
the owner on the FmHA or its successor agency under Public Law 103-354
indebtedness.
(v) Owners providing service through individual or cluster
facilities must obtain:
(A) Easements for the installation and ingress to and egress from
the facility; and
(B) An adequate method for denying service in the event of
nonpayment of user fees.
(11) Funds from other sources. FmHA or its successor agency under
Public Law 103-354 loan funds may be used along with or in connection
with funds provided by the applicant or from other sources. Since
``matching funds'' is not a requirement for FmHA or its successor agency
under Public Law 103-354 loans, shared revenues may be used with FmHA or
its successor agency under Public Law 103-354 funds for project
construction.
(k) Other Federal, State, and local requirements. Each application
shall contain the comments, necessary certifications and recommendations
of appropriate regulatory or other agency or institution having
expertise in the planning, operation, and management of similar
facilities. Proposals for facilities financed in whole or in part with
FmHA or its successor agency under Public Law 103-354 funds will be
coordinated with appropriate Federal, State, and local agencies in
accordance with the following:
(1) Compliance with special laws and regulations. Except as provided
in paragraph (k)(2) of this section applicants will be required to
comply with Federal, State, and local laws and any regulatory commission
rules and regulations pertaining to:
(i) Organization of the applicant and its authority to construct,
operate, and maintain the proposed facilities;
(ii) Borrowing money, giving security therefore, and raising
revenues for the repayment thereof;
(iii) Land use zoning; and
(iv) Health and sanitation standards and design and installation
standards unless an exception is granted by FmHA or its successor agency
under Public Law 103-354.
(2) Compliance exceptions. If there are conflicts between this
subpart and
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state or local laws or regulatory commission regulations, the provisions
of this subpart will control.
(3) State Pollution Control or Environmental Protection Agency
Standards. Water and waste disposal facilities will be designed,
installed, and operated in such a manner that they will not result in
the pollution of water in the State in excess of established standards
and that any effluent will conform with appropriate State and Federal
Water Pollution Control Standards. A certification from the appropriate
State and Federal agencies for water pollution control standards will be
obtained showing that established standards are met.
(4) Consistency with other development plans. FmHA or its successor
agency under Public Law 103-354 financed facilities will not be
inconsistent with any development plans of State, multijurisdictional
areas, counties, or municipalities in which the proposed project is
located.
(5) State agency regulating water rights. Each FmHA or its successor
agency under Public Law 103-354 financed facility will be in compliance
with appropriate State agency regulations which have control of the
appropriation, diversion, storage and use of water and disposal of
excess water. All of the rights of any landowners, appropriators, or
users of water from any source will be fully honored in all respects as
they may be affected by facilities to be installed.
(6) Civil Rights Act of 1964. All borrowers are subject to, and
facilities must be operated in accordance with, title VI of the Civil
Rights Act of 1964 and subpart E of part 1901 of this chapter,
particularly as it relates to conducting and reporting of compliance
reviews. Instruments of conveyance for loans and/or grants subject to
the Act must contain the covenant required by Sec. 1901.202(e) of
subpart E of part 1901 of this chapter.
(7) Title IX of the Education Amendments of 1972. No person in the
United States shall, on the basis of sex, be excluded from participation
in, be denied the benefits of, or be subjected to discrimination under
any education program or education activity receiving FmHA or its
successor agency under Public Law 103-354 financial assistance except as
otherwise provided for in the Education Amendments of title IX. The FmHA
or its successor agency under Public Law 103-354 State Director will
provide guidance and technical assistance to carry out the intent of
this paragraph.
(8) Section 504 of the Rehabilitation Act of 1973. Under section 504
of the Rehabilitation Act of 1973, as amended (29 U.S.C. 794), no
handicapped individual in the United States shall, solely by reason of
their handicap, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or
activity receiving FmHA or its successor agency under Public Law 103-354
financial assistance.
(9) Age Discrimination Act of 1975. This Act provides that no person
in the United States shall on the basis of age, be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under any program or activity receiving Federal financial
assistance. This Act also applies to programs or activities funded under
the State and Local Fiscal Assistance Act of 1972 (31 U.S.C. 1221 et.
seq.). This Act does not apply to: (i) age distinctions contained in
Federal, State or local statutes or ordinances adopted by an elected,
general purpose legislative body which provide benefits or assistance
based on age; (ii) establish criteria for participation in age-related
terms; (iii) describe intended beneficiaries or target groups in age-
related terms; and, (iv) any employment practice of any employer,
employment agency, labor organization, or any labor-management joint
apprenticeship training program except for any program or activity
receiving Federal financial assistance for public service employment
under the Comprehensive Employment and Training Act of 1974 (CETA) (29
U.S.C. 801 et. seq.).
(l) Professional services and contracts related to the facility--(1)
Professional services. Applicants will be responsible for providing the
services necessary to plan projects including design of facilities,
preparation of cost and income estimates, development of proposals for
organization and financing, and overall
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operation and maintenance of the facility. Professional services of the
following may be necessary: Engineer, architect, attorney, bond counsel,
accountant, auditor, appraiser, and financial advisory or fiscal agent
(if desired by applicant). Contracts or other forms of agreement between
the applicant and its professional and technical representatives are
required and are subject to FmHA or its successor agency under Public
Law 103-354 concurrence. Form FmHA or its successor agency under Public
Law 103-354 1942-19, ``Agreement for Engineering Services,'' may be used
when appropriate. Guide 20, ``Agreement for Engineering Services (FmHA
or its successor agency under Public Law 103-354/EPA--Jointly Funded
Projects)'' may be used on projects jointly funded by FmHA or its
successor agency under Public Law 103-354 and EPA. Guide 14 may be used
in the preparation of the legal services agreement.
(2) Bond counsel. Unless otherwise provided by Sec. 1942.19(b),
public bodies are required to obtain the service of recognized bond
counsel in the preparation of evidence of indebtedness.
(3) Contracts for other services. Contracts or other forms of
agreements for other services including management, operation, and
maintenance will be developed by the applicant and presented to FmHA or
its successor agency under Public Law 103-354 for review and approval.
Management agreements should provide at least those items in guide 24.
(4) Fees. Fees provided for in contracts or agreements shall be
reasonable. They shall be considered to be reasonable if not in excess
of those ordinarily charged by the profession for similar work when FmHA
or its successor agency under Public Law 103-354 financing is not
involved.
(m) Applying for FmHA or its successor agency under Public Law 103-
354 loans--(1) Preapplication. Applicants desiring loans will file SF
424.2 and comments from the appropriate A-95 clearinghouse agency
normally with the appropriate FmHA or its successor agency under Public
Law 103-354 County Office. The County Supervisor will immediately
forward all documents to the District Office. The District Director has
prime responsibility for all community program loan making and servicing
activities within the District.
(2) Preapplication review. Upon receipt of the preapplication, FmHA
or its successor agency under Public Law 103-354 will tentatively
determine eligibility including the likelihood of credit elsewhere at
reasonable rates and terms and availability of FmHA or its successor
agency under Public Law 103-354 loan funds. The determination as to
availability of other credit will be made after considering present
rates and terms available for similar proposals (not necessarily based
upon rates and terms available from FmHA or its successor agency under
Public Law 103-354); the repayment potential of the applicant; long-term
cost to the applicant; and average user or other charges. In those cases
where FmHA or its successor agency under Public Law 103-354 determines
that loans at reasonable rates and terms should be available from
commercial sources, FmHA or its successor agency under Public Law 103-
354 will notify the applicant so that it may apply for such financial
assistance. Such applicants may be reconsidered for FmHA or its
successor agency under Public Law 103-354 loans upon their presenting
satisfactory evidence of inability to obtain commercial financing at
reasonable rates and terms.
(3) Incurring obligations. Applicants should not proceed with
planning nor obligate themselves for expenditures until authorized by
FmHA or its successor agency under Public Law 103-354.
(4) Results of preapplication review. After FmHA or its successor
agency under Public Law 103-354 has reviewed the preapplication material
and any additional material that may be requested, Form AD-622 will be
sent to the applicant. Ordinarily the review will not exceed 45 days.
(5) Application conference. Before starting to assemble the
application and after the applicant selects its professional and
technical representatives, it should arrange with FmHA or its successor
agency under Public Law 103-354 for an application conference to provide
a basis for orderly application
[[Page 177]]
assembly. FmHA or its successor agency under Public Law 103-354 will
provide applicants with a list of documents necessary to complete the
application. Guide 15 may be used for this purpose. Applications will be
filed with the District Office.
(6) Application completion and assembling. This is the
responsibility of the applicant with guidance from FmHA or its successor
agency under Public Law 103-354. The applicant may utilize their
professional and technical representatives or other competent sources.
(7) Review of decision. If an application is rejected, the applicant
may request a review of this decision under subpart B of part 1900 of
this chapter.
(n) Actions prior to loan closing and start of construction--(1)
Excess FmHA or its successor agency under Public Law 103-354 loan and
grant funds. If there is a significant reduction in project cost, the
applicant's funding needs will be reassessed before loan closing or the
start of construction, whichever occurs first. In such cases applicable
FmHA or its successor agency under Public Law 103-354 forms, the letter
of conditions, and other items will be revised. Decreases in FmHA or its
successor agency under Public Law 103-354 funds will be based on revised
project costs and current number of users, however, other factors
including FmHA or its successor agency under Public Law 103-354
regulations used at the time of loan/grant approval will remain the
same. Obligated loan or grant funds not needed to complete the proposed
project will be deobligated.
(2) Loan resolutions. Loan resolutions will be adopted by both
public and other-than-public bodies using Form FmHA or its successor
agency under Public Law 103-354 1942-47, ``Loan Resolution (Public
Bodies),'' or Form FmHA or its successor agency under Public Law 103-354
1942-9, ``Loan Resolution (Security Agreement).'' These resolutions
supplement other provisions in this subpart. The applicant will agree:
(i) To indemnify the Government for any payments made or losses
suffered by the Government on behalf of the association. Such
indemnification shall be payable from the same source of funds pledged
to pay the bonds or any other legally permissible source.
(ii) To comply with applicable local, State and Federal laws,
regulations, and ordinances.
(iii) To provide for the receipt of adequate revenues to meet the
requirements of debt service, operation and maintenance, establishment
of adequate reserves, and to continually operate and maintain the
facility in good condition. Except for utility-type facilities, free
service use may be permitted. If free services are extended no
distinctions will be made in the extension of those services because of
race, color, religion, sex, national origin, marital status, or physical
or mental handicap.
(iv) To acquire and maintain such insurance coverage including
fidelity bonds, as may be required by the Government.
(v) To establish and maintain such books and records relating to the
operation of the facility and its financial affairs and to provide for
required audit thereof in such a manner as may be required by the
Government and to provide the Government without its request, a copy of
each such audit and to make and forward to the Government such
additional information and reports as it may, from time to time,
require.
(vi) To provide the Government at all reasonable times, access to
all books and records relating to the facility and access to the
property of the system so that the Government may ascertain that the
association is complying with the provisions hereof and of the
instruments incident to the making or insuring of the loan.
(vii) To provide adequate service to all persons within the service
area who can feasibly and legally be served and to obtain FmHA or its
successor agency under Public Law 103-354's concurrence prior to
refusing new or adequate services to such persons. Upon failure of the
applicant to provide services which are feasible and legal, such person
shall have a direct right of action against the applicant organization.
(viii) To have prepared on its behalf and to adopt an ordinance or
resolution for the issuance of its bonds or notes or other debt
instruments or other such
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items and in such forms as are required by State statutes and as are
agreeable and acceptable to the Government.
(ix) To refinance the unpaid balance, in whole or in part, of its
debt upon the request of the Government if at any time it should appear
to the Government that the association is able to refinance its bonds by
obtaining a loan for such purposes from responsible cooperative or
private sources at reasonable rates and terms.
(x) To provide for, execute, and comply with Form FmHA or its
successor agency under Public Law 103-354 400-4, ``Assurance
Agreement,'' and Form FmHA or its successor agency under Public Law 103-
354 400-1, ``Equal Opportunity Agreement,'' including an ``Equal
Opportunity Clause,'' which is to be incorporated in or attached as a
rider to each construction contract and subcontract in excess of
$10,000.
(xi) To place the proceeds of the loan on deposit in a manner
approved by the Government. Funds may be deposited in institutions
insured by the State or Federal Government as invested in readily
marketable securities backed by the full faith and credit of the United
States. Any income from these accounts will be considered as revenues of
the system.
(xii) Not to sell, transfer, lease, or otherwise encumber the
facility or any portion thereof or interest therein, and not to permit
others to do so, without the prior written consent of the Government.
(xiii) Not to borrow any money from any source, enter into any
contract or agreement, or incur any other liabilities in connection with
making enlargements, improvements or extensions to, or for any other
purpose in connection with the facility (exclusive of normal
maintenance) without the prior written consent of the Government if such
undertaking would involve the source of funds pledged to repay the debt
to FmHA or its successor agency under Public Law 103-354.
(xiv) That upon default in the payments of any principal and accrued
interest on the bonds or in the performance of any covenant or agreement
contained herein or in the instruments incident to making or insuring
the loan, the Government, at its option, may:
(A) Declare the entire principal amount then outstanding and accrued
interest, due and payable;
(B) For the account of the association (payable from the source of
funds pledged to pay the bonds or notes or any other legally
permissiable source), incur and pay reasonable expenses for repair,
maintenance and operation of the facility and such other reasonable
expenses as may be necessary to cure the cause of default; and/or
(C) Take possession of the facility, repair, maintain and operate,
or otherwise dispose of the facility. Default under the provisions of
the resolution or any instrument incident to the making or insuring of
the loan may be construed by the Government to constitute default under
any other instrument held by the Government and executed or assumed by
the association and default under any such instrument may be construed
by the Government to constitute default hereunder.
(3) Interim financing. In all loans exceeding $50,000, where funds
can be borrowed at reasonable interest rates on an interim basis from
commercial sources for the construction period, such interim financing
will be obtained so as to preclude the necessity for multiple advances
of FmHA or its successor agency under Public Law 103-354 funds. Guide 1
or guide 1a, as appropriate, may be used to inform the private lender of
FmHA or its successor agency under Public Law 103-354's commitment. When
interim commercial financing is used, the application will be processed,
including obtaining construction bids, to the stage where the FmHA or
its successor agency under Public Law 103-354 loan would normally be
closed, that is immediately prior to the start of construction. The FmHA
or its successor agency under Public Law 103-354 loan should be closed
as soon as possible after the disbursal of all interim funds. Interim
financing may be for a fixed term provided the fixed term does not
extend beyond the time projected for completion of construction. For
this purpose, a fixed term is when the interim lender cannot be repaid
prior to the end of the
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stipulated term of the interim instruments. When an FmHA or its
successor agency under Public Law 103-354 Water and Waste Disposal grant
is included, any interim financing involving a fixed term must be for
the total FmHA or its successor agency under Public Law 103-354 loan
amount. Multiple advances may be used in conjunction with interim
commercial financing when the applicant is unable to obtain sufficient
funds through interim commercial financing in an amount equal to the
loan. The FmHA or its successor agency under Public Law 103-354 loan
proceeds (including advances) will be used to retire the interim
commercial indebtedness. Before the FmHA or its successor agency under
Public Law 103-354 loan is closed, the applicant will be required to
provide FmHA or its successor agency under Public Law 103-354 with
statements from the contractor, engineer, architect, and attorney that
they have been paid to date in accordance with their contracts or other
agreements and, in the case of the contractor, that any suppliers and
subcontractors have been paid. If such statements cannot be obtained,
the loan may be closed provided:
(i) Statements to the extent possible are obtained;
(ii) The interest of FmHA or its successor agency under Public Law
103-354 can be adequately protected and its security position is not
impaired; and
(iii) Adequate provisions are made for handling the unpaid accounts
by withholding or escrowing sufficient funds to pay such claims.
(4) Obtaining closing instructions. After loan approval, the
completed docket will be reviewed by the State Director. The information
required by OGC will be transmitted to OGC with request for closing
instructions. Upon receipt of the closing instructions from OGC, the
State Director will forward them along with any appropriate instructions
to the District Director. Upon receipt of closing instructions, the
District Director will discuss with the applicant and its architect or
engineer, attorney, and other appropriate representatives, the
requirements contained therein and any actions necessary to proceed with
closing.
(5) Applicant contribution. An applicant contributing funds toward
the project cost shall deposit these funds in its construction account
on or before loan closing or start of construction, whichever occurs
first. Project costs paid prior to the required deposit time with
applicant funds shall be appropriately accounted for.
(6) Evidence of and disbursement of other funds. Applicants
expecting funds from other sources for use in completing projects being
partially financed with FmHA or its successor agency under Public Law
103-354 funds will present evidence of the commitment of these funds
from such other sources. This evidence will be available before loan
closing, or the start of construction, whichever occurs first.
Ordinarily, the funds provided by the applicant or from other sources
will be disbursed prior to the use of FmHA or its successor agency under
Public Law 103-354 loan funds. If this is not possible, funds will be
disbursed on a pro rata basis. FmHA or its successor agency under Public
Law 103-354 funds will not be used to pre-finance funds committed to the
project from other sources.
(o) Loan closing--(1) Closing instructions. Loans will be closed in
accordance with the closing instructions issued by OGC.
(2) Obtaining insurance and fidelity bonds. Required property
insurance policies, liability insurance policies, and fidelity bonds
will be obtained by the time of loan closing or start of construction,
whichever occurs first.
(3) Distribution of recorded documents. The originals of the
recorded deeds, easements, permits, certificates of water rights,
leases, or other contracts and similar documents which are not to be
held by FmHA or its successor agency under Public Law 103-354 will be
returned to the borrower. The original mortgage(s) and water stock
certificates, if any, if not required by the recorder's office will be
retained by FmHA or its successor agency under Public Law 103-354.
(4) Review of loan closing. In order to determine that the loan has
been properly closed the loan docket will be reviewed by the State
Director and OGC.
(p) Project monitoring and fund delivery during construction--(1)
Coordination
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of funding sources. When a project is jointly financed, the State
Director will reach any needed agreement or understanding with the
representatives of the other source of funds on distribution of
responsibilities for handling various aspects of the project. These
responsibilities will include supervision of construction, inspections
and determinations of compliance with appropriate regulations concerning
equal employment opportunities, wage rates, nondiscrimination in making
services or benefits available, and environmental compliance. If any
problems develop which cannot be resolved locally, complete information
should be sent to the National Office for advice.
(2) Multiple advances. In the event interim commercial financing is
not legally permissible or not available, multiple advances of FmHA or
its successor agency under Public Law 103-354 loan funds are required.
An exception to this requirement may be granted by the National Office
when a single advance is necessitated by State law or public exigency.
Multiple advances will be used only for loans in excess of $50,000.
Advances will be made only as needed to cover disbursements required by
the borrower over a 30-day period. Advances should not exceed 24 in
number nor extend longer than two years beyond loan closing. Normally,
the retained percentage withheld from the contractor to assure
construction completion will be included in the last advance.
(i) Section 1942.19 contains instructions for making multiple
advances to public bodies.
(ii) Advances will be requested by the borrower in writing. The
request should be in sufficient amounts to pay cost of construction,
rights-of-way and land, legal, engineering, interest, and other expenses
as needed. The applicant may use Form FmHA or its successor agency under
Public Law 103-354 440-11, ``Estimate of Funds Needed for 30 Day Period
Commencing ------,'' to show the amount of funds needed during the 30-
day period.
(iii) FmHA or its successor agency under Public Law 103-354 loan
funds obligated for a specific purpose, such as the paying of interest,
but not needed at the time of loan closing will remain in the Finance
Office until needed unless State statutes require all funds to be
delivered to the borrower at the time of closing. Loan funds may be
advanced to prepay costs under paragraph (d)(1)(iv)(G) of this section.
If all funds must be delivered to the borrower at the time of closing to
comply with State statutes, funds not needed at loan closing will be
handled as follows:
(A) Deposited in an appropriate borrower account, such as the debt
service account, or
(B) Deposited in a supervised bank account under paragraph (p)(3)(i)
of this section.
(3) Use and accountability of funds--(i) Supervised bank account.
FmHA or its successor agency under Public Law 103-354 loan funds and any
funds furnished by the applicant/borrower to supplement the loan
including contributions to purchase major items of equipment, machinery,
and furnishings may be deposited in a supervised bank account if
determined necessary as provided in subpart A of part 1902 of this
chapter. When FmHA or its successor agency under Public Law 103-354 has
a Memorandum of Understanding with another agency that provides for the
use of supervised bank accounts, or when FmHA or its successor agency
under Public Law 103-354 is the primary source of funds for a project
and has determined that the use of a supervised bank account is
necessary, project funds from other sources may also be deposited in the
supervised bank account. FmHA or its successor agency under Public Law
103-354 shall not be accountable to the source of the other funds nor
shall FmHA or its successor agency under Public Law 103-354 undertake
responsibility to administer the funding program of the other entity.
Supervised bank accounts should not be used for funds advanced by an
interim lender.
(ii) Other than supervised bank account. If a supervised bank
account is not used, arrangements will be agreed upon for the prior
concurrence by FmHA or its successor agency under Public Law 103-354 of
the bills or vouchers upon which warrants will be drawn, so that the
payments from loan funds can be controlled and FmHA or its successor
agency under Public Law
[[Page 181]]
103-354 records kept current. If a supervised bank account is not used,
use Form FmHA or its successor agency under Public Law 103-354 402-2,
``Statement of Deposits and Withdrawals,'' or similar form to monitor
funds. Periodic reviews of nonsupervised accounts shall be made by FmHA
or its successor agency under Public Law 103-354 at the times and in the
manner as FmHA or its successor agency under Public Law 103-354
prescribes in the conditions of loan approval. State laws regulating the
depositories to be used shall be complied with.
(iii) Use of minority owned banks. Applicants are encouraged to use
minority banks (a bank which is owned at least 50 percent by minority
group members) for the deposit and disbursement of funds. A list of
minority owned banks can be obtained from the Office of Minority
Business Enterprise, Department of Commerce, Washington, DC 20230 and is
also available in all FmHA or its successor agency under Public Law 103-
354 offices.
(4) Development inspections. The District Director will be
responsible for monitoring the construction of all projects being
financed, wholly or in part, with FmHA or its successor agency under
Public Law 103-354 funds. Technical assistance will be provided by the
State Director's staff. Project monitoring will include construction
inspections and a review of each project inspection report, each change
order and each partial payment estimate and other invoices such as
payment for engineering/architectural and legal fees and other materials
determined necessary to effectively monitor each project. These
activities will not be performed on behalf of the applicant/borrower,
but are solely for the benefit of FmHA or its successor agency under
Public Law 103-354 and in no way are intended to relieve the applicant/
borrower of corresponding obligations to conduct similar monitoring and
inspection activities. Project monitoring will include periodic
inspections to review partial payment estimates prior to their approval
and to review project development in accordance with plans and
specifications. Each inspection will be recorded using Form FmHA or its
successor agency under Public Law 103-354 1924-12, ``Inspection
Report.'' The original Form FmHA or its successor agency under Public
Law 103-354 1924-12 will be filed in the project case folder and a copy
furnished to the State Director. The State Director will review
inspection reports and will determine that the project is being
effectively monitored. The District Director is authorized to review and
accept partial payment estimates prepared by the contractor and approved
by the borrower, provided the consulting engineer or architect, if one
is being utilized for the project, has approved the estimate and
certified that all material purchased or work performed is in accordance
with the plans and specifications, or if a consulting engineer or
architect is not being utilized, the District Director has determined
that the funds requested are for authorized purposes. If there is any
indication that construction is not being completed in accordance with
the plans and specifications or that any other problems exist, the
District Director should notify the State Director immediately and
withhold all payments on the contract.
(5) Payment for construction. Each payment for project costs must be
approved by the borrower's governing body. Payment for construction must
be for amounts shown on payment estimate forms. Form FmHA or its
successor agency under Public Law 103-354 1924-18, ``Partial Payment
Estimate,'' may be used for this purpose or other similar forms may be
used with the prior approval of the State Director or designee. However,
the State Director or designee cannot require a greater reporting burden
than is required by Form FmHA or its successor agency under Public Law
103-354 1924-18. Advances for contract retainage will not be made until
such retainage is due and payable under the terms of the contract. The
review and acceptance of project costs, including construction partial
payment estimates by FmHA or its successor agency under Public Law 103-
354, does not attest to the correctness of the amounts, the quantities
shown, or that the work has been performed under the terms of agreements
or contracts.
[[Page 182]]
(6) Use of remaining funds. Funds remaining after all costs incident
to the basic project have been paid or provided for will not include
applicant contributions. Applicant contributions will be considered as
funds initially expended for the project. Funds remaining, with
exception of applicant contributions, may be considered in direct
proportion to the amount obtained from each source. Remaining funds will
be handled as follows:
(i) Agency loan and/or grant funds. Remaining funds may be used for
purposes authorized by paragraph (d) of this section, provided the use
will not result in major changes to the facility design or project and
that the purposes of the loan and/or grant remains the same.
(A) On projects that only involve an FmHA or its successor agency
under Public Law 103-354 loan and no FmHA or its successor agency under
Public Law 103-354 grant, funds that are not needed will be applied as
an extra payment on the FmHA or its successor agency under Public Law
103-354 indebtedness unless other disposition is required by the bond
ordinance, resolution, or State statute.
(B) On projects that involve an FmHA or its successor agency under
Public Law 103-354 grant, all remaining FmHA or its successor agency
under Public Law 103-354 funds will be considered to be grant funds up
to the full amount of the grant. Grant funds not expended under
paragraph (p)(6)(i) of this section will be deobligated.
(ii) Funds from other sources. Funds remaining from other sources
will be handled according to rules, regulations and/or the agreement
governing their participation in the project.
(q) Borrower accounting methods, management reporting and audits--
(1) Accounting methods and records--(i) Method of accounting and
financial statements. Financial statements must be prepared on the
accrual basis of accounting unless State statutes or regulatory agencies
provide otherwise, or an exception is made by FmHA or its successor
agency under Public Law 103-354. This requirement is for accrual basis
financial statements and not for accrual basis accounting systems.
Organizations may keep their books on an accounting basis other than
accrual and then make adjustments so that the financial statements are
presented on the accrual basis.
(ii) Approval requirement. Before loan closing or start of
construction, whichever is first, each borrower shall provide to, and
obtain approval from the FmHA or its successor agency under Public Law
103-354 loan approval official for its accounting and financial
reporting system, including the agreement with its auditor, if an
auditor is required.
(iii) Record retention. Each borrower shall retain all records,
books, and supporting material for 3 years after the issuance of the
audit reports and financial statements. Upon request, this material will
be made available to FmHA or its successor agency under Public Law 103-
354, the Comptroller General, or to their representatives.
(2) Management reports. These reports will furnish the management
with a means of evaluating prior decisions and serve as a basis for
planning future operations and financial conditions. In those cases
where revenues from multiple sources are pledged as security for an FmHA
or its successor agency under Public Law 103-354 loan, two reports will
be required; one for the project being financed by FmHA or its successor
agency under Public Law 103-354 and one combining the entire operation
of the borrower. In those cases where FmHA or its successor agency under
Public Law 103-354 loans are secured by general obligation bonds or
assessments and the borrower combines revenues from all sources, one
management report combining all such revenues will suffice. The
following management data will be submitted by the borrower to the FmHA
or its successor agency under Public Law 103-354 District Director.
(i) Financial information. (A) Form FmHA or its successor agency
under Public Law 103-354 442-2, ``Statement of Budget, Income and
Equity,'' which includes Schedule 1, ``Statement of Budget, Income and
Equity'' and Schedule 2, ``Projected Cash Flow.''
(B) Prior to the beginning of each fiscal year, two copies, with
data entered in column three only of Schedule 1, page one, ``Annual
Budget'' and all of
[[Page 183]]
Schedule 2, will be submitted to the District Director. Twenty (20) days
after the end of each of the first three quarters of each year, two
copies with all information furnished on Schedule 1 will be submitted.
For the fourth quarter of each year, submit together with the year-end
financial requirements of paragraphs (q) (4) and (5) of this section.
More frequent submissions may be required by FmHA or its successor
agency under Public Law 103-354 when necessary. The submission dates to
the District Director will be 90 days following year-end for audited
statements and 60 days following year-end for unaudited statements. The
fourth quarter submission may serve the dual purpose of management
report and year-end financial requirement for Statement of Income.
(ii) Additional information. (A) A list of the names and addresses
of all members of the governing body as appropriate, also indicating the
officers and their terms of office, will be included with the other
information required at the end of the year.
(B) Borrowers delinquent on payment to FmHA or its successor agency
under Public Law 103-354 or experiencing financial problems, will
develop a positive action plan to resolve financial problems. The plan
will be reviewed with FmHA or its successor agency under Public Law 103-
354 and updated at least quarterly. Guide 22 may be used for developing
a positive action plan.
(3) Substitute for management reports. When FmHA or its successor
agency under Public Law 103-354 loans are secured by the general
obligation of the public body or tax assessments which total 100 percent
of the debt service requirements, the State Director may authorize an
annual audit to substitute for other management reports if the audit is
received within 90 days following the period covered by the audit.
(4) Audits. All audits are to be performed in accordance with
generally accepted government auditing standards (GAGAS), using the
publication, ``Standards for Audit of Governmental Organizations,
Programs, Activities and Functions,'' developed by the Comptroller
General of the United States in 1981, and any subsequent revisions. In
addition, the audits are also to be performed in accordance with various
Office of Management and Budget (OMB) Circulars and FmHA or its
successor agency under Public Law 103-354 requirements as specified in
the separate sections of this subpart.
(i) Audits based upon Federal financial assistance received. The
following requirements shall apply to audits of the years in which funds
are received by the borrower.
(A) Local governments and Indian tribes. These organizations are to
be audited in accordance with this subpart and OMB Circular A-128, with
copies of the audits being forwarded by the borrower to the FmHA or its
successor agency under Public Law 103-354 District Director and the
appropriate Federal cognizant agency. The Circular is available in any
FmHA or its successor agency under Public Law 103-354 office. For years
in which an audit is not required by OMB Circular A-128, see paragraph
(q)(4)(ii) of this section.
(1) Cognizant agency. (i) ``Cognizant agency'' means the Federal
agency assigned by OMB to carry out the responsibilities described in
OMB Circular A-128. Within the Department of Agriculture (USDA), OIG is
designated as the cognizant agency.
(ii) Cognizant agency assignments. Smaller borrowers not assigned a
cognizant agency by OMB should contact the Federal agency that provided
the most funds. When USDA is designated as the cognizant agency or when
it has been determined by the borrower that FmHA or its successor agency
under Public Law 103-354 provided the major portion of Federal financial
assistance, the appropriate USDA OIG Regional Inspector General shall be
contacted. FmHA or its successor agency under Public Law 103-354 and the
borrower shall coordinate all proposed audit plans with appropriate USDA
OIG. A list of OIG contact persons is attached to FmHA Instruction 1942-
A as exhibit B (available in any FmHA or its successor agency under
Public Law 103-354 office).
(2) Audit requirements. It is not intended that audits required by
this subpart be separate and apart from audits performed in accordance
with
[[Page 184]]
State and local laws. To the extent feasible, the audit work should be
done in conjunction with those audits.
(i) Local governments and Indian tribes that receive $100,000 or
more a year in Federal financial assistance shall have an audit for that
year in accordance with OMB Circular A-128.
(ii) Local governments and Indian tribes that receive between
$25,000 and $100,000 a year in Federal financial assistance shall have
an audit made in accordance with OMB Circular A-128 or in accordance
with FmHA or its successor agency under Public Law 103-354 audit
requirements. This is an option of the local government or Indian tribe.
If the election is made to have an audit performed in accordance with
FmHA or its successor agency under Public Law 103-354 requirements, the
audit shall be in accordance with paragraph (q)(4)(i)(B) of this
section.
(iii) Local governments and Indian tribes that receive less then
$25,000 a year in Federal financial assistance shall be exempt from both
OMB Circular A-128 audits and FmHA or its successor agency under Public
Law 103-354 audit requirements, except for those based upon annual gross
income which may apply in paragraph (q)(4)(ii) of this section. However,
any audits performed shall be governed by the requirements prescribed by
State or local law or regulation.
(iv) Public hospitals and public colleges and universities may be
excluded from OMB Circular A-128 audit requirements. However, in this
case audits shall be made in accordance with paragraph (q)(4)(i)(B) of
this section.
(3) Fraud, abuse, and illegal acts. If the auditor becomes aware of
any indication of fraud, abuse, or illegal acts in FmHA or its successor
agency under Public Law 103-354 financed projects, prompt written notice
shall be given to the appropriate USDA OIG Regional Inspector General
and the District Director.
(B) Nonprofit organizations and others. These organizations are to
be audited in accordance with FmHA or its successor agency under Public
Law 103-354 requirements and OMB Circular A-110, ``Uniform Requirements
for Grants to Universities, Hospitals, and Other Nonprofit
Organizations.'' These requirements also apply to public hospitals and
public colleges and universities if they are excluded from the audits of
paragraph (q)(4)(i)(A) of this section.
(1) Audits shall be annual unless otherwise prohibited and supplied
to the FmHA or its successor agency under Public Law 103-354 District
Director as soon as possible but in no case later than 150 days
following the period covered by the audit.
(2) Audit requirements. (i) Borrowers which receive $25,000 or more
a year in Federal financial assistance shall have an audit. Also, refer
to paragraph (q)(4)(ii) of this section for additional audit
requirements.
(ii) Borrowers which receive less than $25,000 a year in Federal
financial assistance shall be exempt from audits except for the audits
based upon annual gross income which may apply in paragraph (q)(4)(ii)
of this section.
(iii) Indications of fraud, abuse and illegal acts shall be
processed in accordance with paragraph (q)(4)(i)(A)(3) of this section.
(ii) Audits based upon annual gross income. The following annual
gross income audit reguirements shall apply to all borrowers (local
government, Indian tribes, and nonprofit organizations) for all years
except the ones in which there is an audit requirement based upon the
amount of Federal assistance received as required by paragraphs
(q)(4)(i)(A) and (q)(4)(i)(B) of this section. Audits shall be on an
annual basis unless otherwise prohibited and shall be supplied to FmHA
or its successor agency under Public Law 103-354 as soon as possible but
in no case later than 150 days following the period covered by the
audit.
(A) Gross annual income of $500,000 or more and an unpaid loan
balance exceeding $100,000. (1) Local governments and Indian tribes
shall have audits made in accordance with State or local law or
regulation or regulatory agency requirements. If no such requirements
exist, audits shall be made in accordance with OMB Circular A-110 and
paragraphs (q)(4)(i)(B)(1) and (2)(iii) of this section.
(2) All other organizations shall have audits in accordance with OMB
Circular A-110 and paragraph (q)(4)(i)(B)(1) and (2)(iii) of this
section.
[[Page 185]]
(B) Gross annual income of less than $500,000. For borrowers that
have a gross annual income of less than $500,000, the requirements for
audits shall be at the discretion of the State Director. However, when
audits are required, they shall be in accordance with paragraph
(q)(4)(ii)(A) of this section.
(5) Borrowers exempt from audits. All borrowers who are exempt from
audits, will, within 60 days following the end of each fiscal year,
furnish the FmHA or its successor agency under Public Law 103-354 with
annual financial statements, consisting of a verification of the
organization's balance sheet and statement of income and expense by an
appropriate official of the organization. Forms FmHA 442-2 and 442-3 may
be used. For borrowers using Form FmHA or its successor agency under
Public Law 103-354 442-2, the dual purpose of fourth quarter management
reports, when required, and annual statements of income will be met with
this one submission.
(r) FmHA or its successor agency under Public Law 103-354 actions
for borrower supervision and servicing--(1) Management assistance and
management reports. Management assistance will be based on such factors
as observation of borrower operations and review of the periodic
financial reports. The amount and type of assistance provided will be
that needed to assure borrower success and compliance with its
agreements with FmHA or its successor agency under Public Law 103-354.
(i) The District Director is responsible for obtaining all
management report data from the borrower, promptly reviewing it and
making any necessary recommendations to the borrower within 40 calendar
days. However, after receiving management reports for borrowers whose
FmHA or its successor agency under Public Law 103-354 indebtedness
exceeds $1,000,000 and for delinquent and problem case borrowers, the
District Director will forward them with comments to the State Director
for review.
(ii) District Director reviews of borrower operations. (A) A review
of the borrower's total operational and management practices, including
records and accounts to be maintained, will be made between the
beginning of the ninth and the end of the eleventh full month of the
first year of operation. A report will be made to the State Director by
sending a copy of Form FmHA or its successor agency under Public Law
103-354 442-4, ``District Director Report.'' Earlier reviews will be
made when needed to resolve operational and management problems that may
arise.
(B) Subsequent reviews will be made for all delinquent and other
borrowers having financial problems and reported to the State Director
by a copy of Form FmHA or its successor agency under Public Law 103-354
442-4. These borrowers will adopt a positive action plan (see guide 22).
The plan will be reviewed quarterly by the District Director until the
delinquency is eliminated or other servicing actions are recommended.
(C) The District Director may, after the end of the borrower's third
fiscal year of operation, exempt it from submitting management reports
provided it:
(1) Is current on its loan payments.
(2) Is meeting the conditions of its agreements with FmHA or its
successor agency under Public Law 103-354.
(3) Has demonstrated its ability to successfully operate and manage
the organization and has not obtained subsequent loans in the last 3
years which have significantly altered the scope of the project.
(4) Has the State Director's written concurrence for all borrowers
whose FmHA or its successor agency under Public Law 103-354 indebtedness
exceeds $1,000,000.
(D) Borrowers qualifying for this exemption will still be required
to submit a copy of their audits or annual financial statements.
(E) Ordinarily and exception will not be made to the requirement for
the borrower to submit a copy of its annual budget.
(F) The District Director or State Director may reinstate the
requirements for submission of periodic management reports for those
borrowers who became delinquent or otherwise are not carrying out their
agreements with FmHA or its successor agency under
[[Page 186]]
Public Law 103-354 or require more frequent submission of management
reports. This requirement will be reinstated for borrowers receiving a
subsequent loan which will significantly alter the scope of the project.
(G) The District Director may accept management reports which are
not prepared on page 1 of Form FmHA or its successor agency under Public
Law 103-354 442-2 Schedule 1 but contain like information. However, page
2 of this form must be used by all borrowers required to furnish
management reports.
(iii) The State Director is responsible for:
(A) The review of the District Director's submission for all
borrowers whose indebtedness exceeds $1,000,000. The State Director will
forward comments to the District Director in order that a response, if
necessary, can be sent to the borrower within 40 calendar days after the
borrower's submission of its management reports.
(B) The review of all delinquent and problem case borrower
management reports. Ordinarily, review findings and instructions
regarding further management assistance will be determined, and provided
to the District Office within 20 calendar days of submission for
delinquent and problem borrowers.
(C) Forwarding to the National Office copies of review findings,
instructions for further assistance, and positive action plans on
delinquent borrowers and borrowers experiencing financial problems, at
same time the findings and instructions are provided to the District
Office.
(2) Audits and financial statements--(i) The District Director is
responsible for obtaining all audit reports and financial statements
from the borrower. Those received from borrowers whose FmHA or its
successor agency under Public Law 103-354 indebtedness exceeds
$1,000,000 and from delinquent and problem case borrowers will be
promptly reviewed and forwarded to the State Director with appropriate
comments.
(ii) The District Director is responsible for the review of audits
and financial statements and for recommendations and instructions for
borrower assistance. For borrowers required to have audits, in
accordance with paragraph (q)(4)(i)(A) of this section, the District
Director is also responsible for any necessary follow up required
because of audit resolution items received from the cognizant agencies.
(iii) The State Director is responsible for the review of audits of
borrowers whose indebtedness exceeds $1,000,000 and delinquent and
problem case borrowers. The State Director may recommend to the District
Director any necessary actions to be taken.
(3) Security inspections. A representative of the borrower will
ordinarily accompany the District Director during each inspection.
(i) Post construction inspection. The District Director will inspect
each facility between the beginning of the ninth and the end of the
eleventh full month of the first year of operation. This will normally
coincide with the District Director's review of the borrower's total
operational and management practices described in paragraph
(r)(1)(ii)(A) of this section. The results of this inspection will be
reported to the State Director on Form FmHA or its successor agency
under Public Law 103-354 1924-12. Earlier inspections will be made when
operational or other problems indicate a need. The State Director will
provide guidance to the District Director to assure that action will be
taken to correct project deficiencies.
(ii) Subsequent inspections. The District Director will make
subsequent inspections of borrower security property and facilities
during each third year after the post construction inspection. The
results of this inspection will be reported to the State Director on
Form FmHA or its successor agency under Public Law 103-354 1924-12.
(iii) Special inspections. The District Director may request, or the
State Director may determine, the need for a member of the State staff
to make certain security inspections. In such cases, the State Director
will detail a staff member to make such inspections.
(iv) Follow-up inspections. If any inspection discloses deficiencies
or exceptions, or otherwise indicates a need for subsequent inspections
prior to the third year, the State Director will prescribe the type and
frequency of follow-
[[Page 187]]
up inspections. These inspections will be made until all deficiencies
and exceptions have been corrected.
(4) Civil rights compliance reviews will be performed under subpart
E of part 1901 of this chapter for the life of the loan.
(5) Other loan servicing actions will be in accordance with subparts
E and O of part 1951 of this chapter.
[50 FR 7296, Feb. 22, 1985]
Editorial Note: For Federal Register citations affecting Sec.
1942.17, see the List of CFR Sections Affected, which appears in the
Finding Aids section of the printed volume and on GPO Access.
Sec. 1942.18 Community facilities--Planning, bidding, contracting,
constructing.
(a) General. This section is specifically designed for use by owners
including the professional or technical consultants and/or agents who
provide assistance and services such as architectural, engineering,
inspection, financial, legal or other services related to planning,
bidding, contracting, and constructing community facilities. These
procedures do not relieve the owner of the contractual obligations that
arise from the procurement of these services. For this section, an owner
is defined as an applicant, borrower, or grantee.
(b) Technical services. Owners are responsible for providing the
engineering or architectural services necessary for planning, designing,
bidding, contracting, inspecting, and constructing their facilities.
Services may be provided by the owner's ``in house'' engineer or
architect or through contract, subject to FmHA or its successor agency
under Public Law 103-354 concurrence. Architects and engineers must be
licensed in the State where the facility is to be constructed.
(c) Preliminary reports. Preliminary architectural and engineering
reports must conform with customary professional standards. Preliminary
report guidelines for water, sanitary sewer, solid waste, storm sewer,
and other essential community facilities are available from FmHA or its
successor agency under Public Law 103-354.
(d) Design policies. Facilities financed by FmHA or its successor
agency under Public Law 103-354 will be designed and constructed in
accordance with sound engineering and architectural practices, and must
meet the requirements of Federal, State and local agencies.
(1) Natural resources. Facility planning should be responsive to the
owner's needs and should consider the long-term economic, social and
environmental needs as set forth in this section. FmHA or its successor
agency under Public Law 103-354's environmental considerations are under
subpart G of part 1940 of this chapter.
(i) Floodplains and wetlands. Facilities must avoid, to the extent
possible, the long- and short-term adverse impacts associated with the
occupancy and modification of floodplains and wetlands, and avoid direct
or indirect support of floodplain and wetland development whenever there
is a practicable alternative. This subject is more fully discussed in
Executive Order 11988, Executive Order 11990, and Water Resources
Council's Floodplain Management Guidelines (43 FR 6030) which is
available in all FmHA or its successor agency under Public Law 103-354
offices. Facilities located in special flood and mudslide prone areas
must comply with FmHA or its successor agency under Public Law 103-354's
eligibility and insurance requirements in subpart B of part 1806 of this
chapter (FmHA Instruction 426.2).
(ii) Coastal Zone Management. Facilities shall be designed and
constructed in a manner consistent with approved State management
programs, under the Coastal Zone Management Act of 1972 (Pub. L. 92-583
section 307 (c)(1) and (2)) as supplemented by the Department of
Commerce regulations 15 CFR part 930.
(iii) Wild and Scenic Rivers. Facilities shall be designed and
constructed in order that designated wild and scenic rivers be preserved
in free-flowing condition and that they and their immediate environments
be protected for the benefit and enjoyment of present and future
generations under the Wild and Scenic Rivers Act of 1978 (Pub. L. 95-
625).
(iv) Endangered species. Facilities shall be designed and
constructed in a manner to conserve, to the extent practicable, the
various endangered and
[[Page 188]]
threatened species of fish or wildlife and plants, and will not
jeopardize their continued existence and will not result in destruction
or modification of the habitat of species in the Endangered Species Act
of 1973 (Pub. L. 93-205).
(2) Historic preservation. Facilities should be designed and
constructed in a manner which will contribute to the preservation and
enhancement of sites, structures, and objects of historical,
architectural, and archaeological significance. All facilities must
comply with the National Historic Preservation Act of 1966 (16 U.S.C
470) as supplemented by 36 CFR part 800 and Executive Order 11593,
``Protection and Enhancement of the Cultural Environment.'' subpart F of
part 1901 of this chapter sets forth procedures for the protection of
Historic and Archaeological Properties.
(3) Architectural barriers. All facilities intended for or
accessible to the public or in which physically handicapped persons may
be employed or reside must be developed in compliance with the
Architectural Barriers Act of 1968 (Pub. L. 90-480) as implemented by
the General Services Administration regulations 41 CFR 101-19.6 and
section 504 of the Rehabilitation Act of 1973 (Pub. L. 93-112) as
implemented by 7 CFR parts 15 and 15b.
(4) Health Care Facilities. The proposed facility must meet the
minimum standards for design and construction contained in the American
Institute of Architects Press Publication No. ISBN 0-913962-96-1,
``Guidelines for Construction and Equipment of Hospital and Medical
Facilities,'' 1987 Edition. The facility must also meet the life/safety
aspects of the 1985 edition of the National Fire Protection Association
(NFPA) 101 Life Safety Code, or any subsequent code that may be
designated by the Secretary of HHS. All publications referenced in this
section are available in all FmHA or its successor agency under Public
Law 103-354 State Offices. Under Sec. 1942.17(j)(8)(ii) of this
subpart, a statement by the responsible regulatory agency that the
facility meets the above standards will be required. Any exceptions must
have prior National Office concurrence.
(5) Energy conservation. Facility design should consider cost
effective energy saving measures or devices.
(6) Lead base paints. Lead base paints shall not be used in
facilities designed for human habitation. Owners must comply with the
Lead Base Paints Poisoning and Prevention Act of 1971 (42 U.S.C. 4801)
and the National Consumer Health Information and Health Promotion Act of
1976 (Pub. L. 94-317) with reference to paint specifications used
according to exhibit H of subpart A of part 1924 of this chapter.
(7) Fire protection. Water facilities must have sufficient capacity
to provide reasonable fire protection to the extent practicable.
(8) Growth capacity. Facilities must have sufficient capacity to
provide for reasonable growth to the extent practicable.
(9) Water conservation. Owners are encouraged, when economically
feasible, to incorporate water conservation practices into a facility's
design. For existing water systems, evidence must be provided showing
that the distribution system water losses do not exceed reasonable
levels.
(10) Water quality. All water facilities must meet the requirements
of the Safe Drinking Water Act (Pub. L. 93-523) and provide water of a
quality that meets the current Interim Primary Drinking Water
Regulations (40 CFR part 141).
(11) Combined sewers. New combined sanitary and storm water sewer
facilities will not be financed by FmHA or its successor agency under
Public Law 103-354. Extensions to existing combined systems can only be
financed when separate systems are impractical.
(12) Compliance. All facilities must meet the requirements of
Federal, State, and local agencies having the appropriate jurisdiction.
(13) Dam safety. Projects involving any artificial barrier which
impounds or diverts water, or the rehabilitation or improvement of such
a barrier, should comply with the provisions for dam safety as discussed
in the Federal Guidelines for Dam Safety (Government Printing Office
stock No. 041-001-00187-5) as prepared by the Federal Coordinating
Council for Science, Engineering and Technology.
[[Page 189]]
(14) Pipe. All pipe used shall meet current American Society for
Testing Materials (ASTM) or American Water Works Association (AWWA)
standards.
(15) Water system testing. For new water systems or extensions to
existing water systems, leakage shall not exceed 10 gallons per inch of
pipe diameter per mile of pipe per 24 hours when tested at 1\1/2\ times
the working pressure or rated pressure of the pipe, whichever is
greater.
(16) Metering devices. Water facilities financed by FmHA or its
successor agency under Public Law 103-354 will have metering devices for
each connection. An exception to this requirement may be granted by the
FmHA or its successor agency under Public Law 103-354 State Director
when the owner demonstrates that installation of metering devices would
be a significant economic detriment and that environmental consideration
would not be adversely affected by not installing such devices.
(17) Seismic safety. (i) All new building construction shall be
designed and constructed in accordance with the seismic provisions of
one of the following model building codes or the latest edition of that
code providing an equivalent level of safety to that contained in latest
edition of the National Earthquake Hazard Reduction Program's (NEHRP)
Recommended Provisions for the Development of Seismic Regulations for
New Building (NEHRP Provisions):
(A) 1991 International Conference of Building Officials (ICBO)
Uniform Building Code;
(B) 1993 Building Officials and Code Administrators International,
Inc. (BOCA) National Building Code; or
(C) 1992 Amendments to the Southern Building Code Congress
International (SBCCI) Standard Building Code.
(ii) The date, signature, and seal of a registered architect or
engineer and the identification and date of the model building code on
the plans and specifications will be evidence of compliance with the
seismic requirements of the appropriate building code.
(e) Construction contracts. Contract documents must be sufficiently
descriptive and legally binding in order to accomplish the work as
economically and expeditiously as possible.
(1) Standard construction contract documents are available from FmHA
or its successor agency under Public Law 103-354. When FmHA or its
successor agency under Public Law 103-354's standard construction
contract documents are used, it will normally not be necessary for the
Office of the General Counsel (OGC) to perform a detailed legal review.
If the construction contract documents utilized are not in the format of
guide forms previously approved by FmHA or its successor agency under
Public Law 103-354, OGC's review of the construction contract documents
will be obtained prior to their use.
(2) Contract review and approval. The owner's attorney will review
the executed contract documents, including performance and payment
bonds, and will certify that they are adequate, and that the persons
executing these documents have been properly authorized to do so. The
contract documents, bids bonds, and bid tabulation sheets will be
forwarded to FmHA or its successor agency under Public Law 103-354 for
approval prior to awarding. All contracts will contain a provision that
they are not in full force and effect until they have been approved by
FmHA or its successor agency under Public Law 103-354. The FmHA or its
successor agency under Public Law 103-354 State Director or designee is
responsible for approving construction contracts with the legal advice
and guidance of the OGC when necessary.
(3) Separate contracts. Arrangements which split responsibility of
contractors (separate contracts for labor and material, extensive
subcontracting and multiplicity of small contracts on the same job),
should be avoided whenever it is practical to do so. Contracts may be
awarded to suppliers or manufacturers for furnishing and installing
certain items which have been designed by the manufacturer and delivered
to the job site in a finished or semifinished state such as
perfabricated buildings and lift stations. Contracts may also be awarded
for material delivered to the job site and installed by a patented
process or method.
(f) Utility purchase contracts. Applicants proposing to purchase
water or
[[Page 190]]
other utility service from private or public sources shall have written
contracts for supply or service which are reviewed and approved by the
FmHA or its successor agency under Public Law 103-354 State Director or
designee. To the extent practical, FmHA or its successor agency under
Public Law 103-354 review and approval of such contracts should take
place prior to their execution by the owner. Form FmHA or its successor
agency under Public Law 103-354 442-30, ``Water Purchase Contract,'' may
be used when appropriate. If the FmHA or its successor agency under
Public Law 103-354 loan will be repaid from system revenues, the
contract will be pledged to FmHA or its successor agency under Public
Law 103-354 as part of the security for the loan. Such contracts will:
(1) Include a commitment by the supplier to furnish, at a specified
point, an adequate quantity of water or other service and provide that,
in case of shortages, all of the supplier's users will proportionately
share shortages. If it is impossible to obtain a firm commitment for
either an adequate quantity or sharing shortages proportionately, a
contract may be executed and approved provided adequate evidence is
furnished to enable FmHA or its successor agency under Public Law 103-
354 to make a determination that the supplier has adequate supply and/or
treatment facilities to furnish its other users and the applicant for
the foreseeable future; and
(i) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or
(ii) A suitable alternative supply could be arranged within the
repayment ability of the borrower if it should become necessary; or
(iii) Prior approval is obtained from the National Office. The
following information should be submitted to the National Office:
(A) Transmittal memorandum including:
(1) Alternative supplies considered; and
(2) Recommendations and comments; and
(3) Any other necessary supporting information.
(B) Copies of the following:
(1) Proposed letter of conditions; and
(2) Form FmHA or its successor agency under Public Law 103-354 442-
7, ``Operating Budget''; and
(3) Form FmHA or its successor agency under Public Law 103-354 442-
3, ``Balance Sheet''; and
(4) Preliminary Engineering Report; and
(5) Proposed Contract.
(C) Owner and FmHA or its successor agency under Public Law 103-354
engineer's comments and recommendations.
(D) Documentation and statement from the supplier that it has an
adequate supply and treatment facilities available to meet the needs of
its users and the owner for the foreseeable future.
(2) Set out the ownership and maintenance responsibilities of the
respective parties including the master meter if a meter is installed at
the point of delivery.
(3) Specify the initial rates and provide some kind of escalator
clause which will permit rates for the association to be raised or
lowered proportionately as certain specified rates for the supplier's
regular customers are raised or lowered. Provisions may be made for
altering rates in accordance with the decisions of the appropriate State
agency which may have regulatory authority.
(4) Run for a period of time which is at least equal to the
repayment period of the loan. State Directors may approve contracts for
shorter periods of time if the supplier cannot legally contract for such
period, or if the owner and supplier find it impossible or impractical
to negotiate a contract for the maximum period permissible under State
law, provided:
(i) The supplier is subject to regulations of the Federal Energy
Regulatory Commission or other Federal or State agency whose
jurisdiction can be expected to prevent unwarranted curtailment of
supply; or
(ii) The contract contains adequate provisions for renewal; or
(iii) A determination is made that in the event the contract is
terminated,
[[Page 191]]
there are or will be other adequate sources available to the owner that
can feasibly be developed or purchased.
(5) Set out in detail the amount of connection or demand charges, if
any, to be made by the supplier as a condition to making the service
available to the owner. However, the payment of such charges from loan
funds shall not be approved unless FmHA or its successor agency under
Public Law 103-354 determines that it is more feasible and economical
for the owner to pay such a connection charge than it is for the owner
to provide the necessary supply by other means.
(6) Provide for a pledge of the contract to FmHA or its successor
agency under Public Law 103-354 as part of the security for the loan.
(7) Not contain provisions for:
(i) Construction of facilities which will be owned by the supplier.
This does not preclude the use of money paid as a connection charge for
construction to be done by the supplier.
(ii) Options for the future sale or transfer. This does not preclude
an agreement recognizing that the supplier and owner may at some future
date agree to a sale of all or a portion of the facility.
(g) Sewage treatment and bulk water sales contracts. Owners entering
into agreements with private or public parties to treat sewage or supply
bulk water shall have written contracts for such service and all such
contracts shall be subject to FmHA or its successor agency under Public
Law 103-354 concurrence. Paragraph (f) of this section should be used as
a guide to prepare such contracts.
(h) Performing construction. Owners are encouraged to accomplish
construction through contracts with recognized contractors. Owners may
accomplish construction by using their own personnel and equipment
provided the owners possess the necessary skills, abilities and
resources to perform the work and provided a licensed engineer or
architect prepares design drawings and specifications and inspects
construction and furnishes inspection reports as required by paragraph
(o) of this section. For other than utility-type facilities, inspection
services may be provided by individuals as approved by the FmHA or its
successor agency under Public Law 103-354 State Director. In either
case, the requirements of paragraph (j) of this section apply. Payments
for construction will be handled under Sec. 1942.17(p)(5) of this part.
(i) Owner's contractual responsibility. This subpart does not
relieve the owner of any contractual responsibilities under its
contract. The owner is responsible for the settlement of all
contractural and administrative issues arising out of procurements
entered into in support of a loan or grant. These include, but are not
limited to: source evaluation, protests, disputes, and claims. Matters
concerning violation of laws are to be referred to the local, State, or
Federal authority as may have jurisdiction.
(j) Owner's procurement regulations. Owner's procurement regulations
must comply with the following standards:
(1) Code of conduct. Owners shall maintain a written code or
standards of conduct which shall govern the performance of their
officers, employees or agents engaged in the award and administration of
contracts supported by FmHA or its successor agency under Public Law
103-354 funds. No employee, officer or agent of the owner shall
participate in the selection, award, or administration of a contract
supported by FmHA or its successor agency under Public Law 103-354 funds
if a conflict of interest, real or apparent, would be involved. Examples
of such conflicts would arise when: the employee, officer or agent; any
member of their immediate family; their partner; or an organization
which employs, or is about to employ, any of the above; has a financial
or other interest in the firm selected for the award.
(i) The owner's officers, employees or agents shall neither solicit
nor accept gratuities, favors or anything of monetary value from
contractors, potential contractors, or parties of subagreements.
(ii) To the extent permitted by State or local law or regulations,
the owner's standards of conduct shall provide for penalties, sanctions,
or other disciplinary actions for violations of such standards by the
owner's officers, employees, agents, or by contractors or their agents.
[[Page 192]]
(2) Maximum open and free competition. All procurement transactions,
regardless of whether by sealed bids or by negotiation and without
regard to dollar value, shall be conducted in a manner that provides
maximum open and free competition. Procurement procedures shall not
restrict or eliminate competition. Examples of what are considered to be
restrictive of competition include, but are not limited to: Placing
unreasonable requirements on firms in order for them to qualify to do
business; noncompetitive practices between firms; organizational
conflicts of interest; and unnecessary experience and bonding
requirements. In specifying material(s), the owner and its consultant
will consider all materials normally suitable for the project
commensurate with sound engineering practices and project requirements.
For a water or waste disposal facility, FmHA or its successor agency
under Public Law 103-354 shall consider fully any recommendation made by
the loan applicant or borrower concerning the technical design and
choice of materials to be used for such a facility. If FmHA or its
successor agency under Public Law 103-354 determines that a design or
material, other than those that were recommended should be considered by
including them in the procurement process as an acceptable design or
material in the water or waste disposal facility, FmHA or its successor
agency under Public Law 103-354 shall provide such applicant or borrower
with a comprehensive justification for such a determination. The
justification will be documented in writing.
(3) Owner's review. Proposed procurement actions shall be reviewed
by the owner's officials to avoid the purchase of unnecessary or
duplicate items. Consideration should be given to consolidation or
separation of procurement items to obtain a more economical purchase.
Where appropriate, an analysis shall be made of lease versus purchase
alternatives, and any other appropriate analysis to determine which
approach would be the most economical. To foster greater economy and
efficiency, owners are encouraged to enter into State and local
intergovernmental agreements for procurement or use of common goods and
services.
(4) Solicitation of offers, whether by competitive sealed bids or
competitive negotiation, shall:
(i) Incorporate a clear and accurate description of the technical
requirements for the material, product, or service to be procured. The
description shall not, in competitive procurements, contain features
which unduly restrict competition. The description may include a
statement of the qualitative nature of the material, product or service
to be procured, and when necessary shall set forth those minimum
essential characteristics and standards to which it must conform if it
is to satisfy its intended use. Detailed product specifications should
be avoided if at all possible. When it is impractical or uneconomical to
make a clear and accurate description of the technical requirements, a
``brand name or equal'' description may be used to define the
performance or other salient requirements of a procurement. The specific
features of the named brands which must be met by offerors shall be
clearly stated.
(ii) Clearly specify all requirements which offerors must fulfill
and all other factors to be used in evaluating bids or proposals.
(5) Small, minority, and women's businesses and labor surplus area
firms. (i) affirmative steps should be taken to assure that small and
minority businesses are utilized when possible as sources of supplies,
equipment, construction and services. Affirmative steps shall include
the following:
(A) Include qualified small and minority businesses on solicitation
lists.
(B) Assure that small and minority businesses are solicited whenever
they are potential sources.
(C) When economically feasible, divide total requirements into
smaller tasks or quantities so as to permit maximum small and minority
business participation.
(D) Where the requirement permits, establish delivery schedules
which will encourage participation by small and minority businesses.
(E) Use the services and assistance of the Small Business
Administration and
[[Page 193]]
the Office of Minority Business Enterprise of the Department of
Commerce.
(F) If any subcontracts are to be let, require the prime contractor
to take the affirmative steps in paragraphs (j)(5)(i) (A) through (E) of
this section.
(ii) Owners shall take similar appropriate affirmative action in
support of women's businesses.
(iii) Owners are encouraged to procure goods and services from labor
surplus areas.
(iv) Owners shall submit a written statement or other evidence to
FmHA or its successor agency under Public Law 103-354 of the steps taken
to comply with paragraphs (j)(5)(i) (A) through (F), (j)(5)(ii), and
(j)(5)(iii) of this section.
(6) Contract pricing. Cost plus a percentage of cost method of
contracting shall not be used.
(7) Unacceptable bidders. The following will not be allowed to bid
on, or negotiate for, a contract or subcontract related to the
construction of the project:
(i) An engineer or architect as an individual or firm who has
prepared plans and specifications or who will be responsible for
monitoring the construction;
(ii) Any firm or corporation in which the owner's architect or
engineer is an officer, employee, or holds or controls a substantial
interest;
(iii) The governing body's officers, employees, or agents;
(iv) Any member of the immediate family or partners in paragraphs
(j)(7)(i), (j)(7)(ii), or (j)(7)(iii) of this section; or
(v) An organization which employs, or is about to employ, any person
in paragraph (j)(7)(i), (j)(7)(ii), (j)(7)(iii) or (j)(7)(iv) of this
section.
(8) Contract award. Contracts shall be made only with responsible
parties possessing the potential ability to perform successfully under
the terms and conditions of a proposed procurement. Consideration shall
include but not be limited to matters such as integrity, record of past
performance, financial and technical resources, and accessibility to
other necessary resources. Contracts shall not be made with parties who
are suspended or debarred.
(k) Procurement methods. Procurement shall be made by one of the
following methods: small purchase procedures; competitive sealed bids
(formal advertising); competitive negotiation; or noncompetitive
negotiation. Competitive sealed bids (formal advertising) is the
preferred procurement method for construction contracts.
(1) Small purchase procedures. Small purchase procedures are those
relatively simple and informal procurement methods that are sound and
appropriate for a procurement of services, supplies or other property,
costing in the aggregate not more than $10,000. If small purchase
procedures are used for a procurement, written price or rate quotations
shall be obtained from an adequate number of qualified sources.
(2) Competitive sealed bids. In competitive sealed bids (formal
advertising), sealed bids are publicly solicited and a firm-fixed-price
contract (lump sum or unit price) is awarded to the responsible bidder
whose bid, conforming with all the material terms and conditions of the
invitation for bids, is lowest, price and other factors considered. When
using this method the following shall apply:
(i) At a sufficient time prior to the date set for opening of bids,
bids shall be solicited from an adequate number of qualified sources. In
addition, the invitation shall be publicly advertised.
(ii) The invitation for bids, including specifications and perinent
attachments, shall clearly define the items or services needed in order
for the bidders to properly respond to the invitation under paragraph
(j)(4) of this section.
(iii) All bids shall be opened publicly at the time and place stated
in the invitation for bids.
(iv) A firm-fixed-price contract award shall be made by written
notice to that responsible bidder whose bid, conforming to the
invitation for bids, is lowest. When specified in the bidding documents,
factors such as discounts and transportation costs shall be considered
in determining which bid is lowest.
(v) Any or all bids may be rejected by the owner when it is in their
best interest.
[[Page 194]]
(3) Competitive negotiation. In competitive negotiations, proposals
are requested from a number of sources and the Request for Proposal is
publicized. Negotiations are normally conducted with more than one of
the sources submitting offers. Competitive negotiation may be used if
conditions are not appropriate for the use of formal advertising and
where discussions and bargaining with a view to reaching agreement on
the technical quality, price, other terms of the proposed contract and
specifications may be necessary. If competitive negotiation is used for
a procurement, the following requirements shall apply:
(i) Proposals shall be solicited from an adequate number of
qualified sources to permit reasonable competition consistent with the
nature and requirements of the procurement. The Request for Proposal
shall be publicized and reasonable requests by other sources to compete
shall be honored to the maximum extent practicable.
(ii) The Request for Proposal shall identify all significant
evaluation factors, including price or cost where required, and their
relative importance.
(iii) The owner shall provide mechanisms for technical evaluation of
the proposals received, determination of responsible offerors for the
purpose of written or oral discussions, and selection for contract
award.
(iv) Award may be made to the responsible offeror whose proposal
will be most advantageous to the owner, price and other factors
considered. Unsuccessful offerors should be promptly notified.
(v) Owners may utilize competitive negotiation procedures for
procurement of architectural/engineering and other professional
services, whereby competitors' qualifications are evaluated and the most
qualified competitor is selected, subject to negotiations of fair and
reasonable compensation.
(4) Noncompetitive negotiation. Noncompetitive negotiation is
procurement through solicitation of a proposal from only one source, or
after solicitation of a number of sources competition is determined
inadequate. Noncompetitive negotiation may be used when the award of a
contract is not feasible under small purchase, competitive sealed bids
(formal advertising) or competitive negotiation procedures.
Circumstances under which a contract may be awarded by noncompetitive
negotiations are limited to the following:
(i) The item is available only from a single source; or
(ii) There exists a public exigency or emergency and the urgency for
the requirement will not permit a delay incident to competitive
solicitation; or
(iii) After solicitation of a number of sources, competition is
determined inadequate; or
(iv) No acceptable bids have been received after formal advertising;
or
(v) The procurement of architectural/engineering and other
professional services.
(vi) The aggregate amount does not exceed $50,000.
(5) Additional procurement methods. Additional innovative
procurement methods may be used by the owner with prior written approval
of the FmHA or its successor agency under Public Law 103-354 National
Office.
(l) Contracting methods. The services of the consulting engineer or
architect and the general construction contractor shall normally be
procured from unrelated sources in accordance with paragraph (j)(7) of
this section. Procurement methods which combine or rearrange design,
inspection or construction services (such as design/build or
construction management) may be used with FmHA or its successor agency
under Public Law 103-354 written approval. If the contract amount
exceeds $100,000, National Office prior concurrence must be obtained
under Sec. 1942.9(b) of this subpart. This method cannot be used when
an FmHA or its successor agency under Public Law 103-354 grant is
involved. The owner should request FmHA or its successor agency under
Public Law 103-354 approval by providing at least the following
information to FmHA or its successor agency under Public Law 103-354:
(1) The owner's written request to use an unconventional contracting
method with a description of the proposed method.
[[Page 195]]
(2) A proposed scope of work describing in clear, concise terms the
technical requirements for the contract. It should include items such
as:
(i) A nontechnical statement summarizing the work to be performed by
the contractor and the results expected.
(ii) The sequence in which the work is to be performed and a
proposed construction schedule.
(3) A proposed firm-fixed-price contract for the entire project
which provides that the contractor shall be responsible for:
(i) Any extra cost which may result from errors or omissions in the
services provided under the contract.
(ii) Compliance with all Federal, State, and local requirements
effective on the contract execution date.
(4) Where noncompetitive negotiation is proposed, an evaluation of
the contractor's performance on previous similar projects in which the
contractor acted in a similar capacity.
(5) A detailed listing and cost estimate of equipment and supplies
not included in the construction contract but which are necessary to
properly operate the facility.
(6) Evidence that a qualified construction inspector who is
independent of the contractor has or will be hired.
(7) Preliminary plans and outline specifications. However, final
plans and specifications must be completed and reviewed by FmHA or its
successor agency under Public Law 103-354 prior to the start of
construction.
(8) The owner's attorney's opinion and comments regarding the legal
adequacy of the proposed contract documents and evidence that the owner
has the legal authority to enter into and fulfill the contract.
(m) Contracts awarded prior to preapplications. Owners awarding
construction or other procurement contracts prior to filing a pre-
application with FmHA or its successor agency under Public Law 103-354
must comply with the following:
(1) Evidence. Provide conclusive evidence that the contract was
entered into without intent to circumvent the requirements of FmHA or
its successor agency under Public Law 103-354 regulations. The evidence
will consist of at least the following:
(i) The lapse of a reasonable period of time between the date of
contract award and the date of filing the preapplication which clearly
indicates an irreconcilable failure of previous financial arrangements;
or
(ii) A written statement explaining initial plans for financing the
project and reasons for failure to obtain the planned credit.
(2) Modifications. Modify the outstanding contract to conform with
the provisions of this subpart. Where this is not possible,
modifications will be made to the extent practicable and, as a minimum,
the contract must comply with all State and local laws and regulations
as well as statutory requirements and executive orders related to the
FmHA or its successor agency under Public Law 103-354 financing. When
all construction is complete and it is impracticable to modify the
contracts, the owner must provide the certification required by
paragraph (m)(4) of this section.
(3) Consultant's certification. Provide a certification by an
engineer or architect that any construction performed complies fully
with the plans and specifications.
(4) Owner's certification. Provide a certification by the owner that
the contractor has complied with all statutory and executive
requirements related to FmHA or its successor agency under Public Law
103-354 financing for construction already performed even though the
requirements may not have been included in the contract documents.
(n) Contract provisions. In addition to provisions defining a sound
and complete contract, any recipient of FmHA or its successor agency
under Public Law 103-354 funds shall include the following contract
provisions or conditions in all contracts:
(1) Remedies. Contracts other than small purchases shall contain
provisions or conditions which will allow for administrative,
contractual, or legal remedies in instances where contractors violate or
breach contract terms, and provide for such sanctions and penalties as
may be appropriate. A realistic liquidated damage provision should also
be included.
[[Page 196]]
(2) Termination. All contracts exceeding $10,000, shall contain
provisions for termination by the owner including the manner by which it
will be affected and the basis for settlement. In addition, such
contracts shall describe conditions under which the contract may be
terminated for default as well as conditions when the contract may be
terminated because of circumstances beyond the control of the
contractor.
(3) Surety. In all contracts for construction or facility
improvements awarded exceeding $100,000, the owner shall require bonds,
a bank letter of credit or cash deposit in escrow assuring performance
and payment, each in the amount of 100 percent of the contract cost. The
surety will normally be in the form of performance bonds and payment
bonds; however, when other methods of surety may be necessary, bid
documents must contain provisions for such alternative types of surety.
The use of surety other than performance bonds and payment bonds
requires concurrence by the National Office after submission of a
justification by the State Director together with the proposed form of
escrow agreement or letter of credit. For contracts of lesser amounts,
the owner may require surety. When a surety is not provided, contractors
will furnish evidence of payment in full for all materials, labor, and
any other items procured under the contract. Form FmHA or its successor
agency under Public Law 103-354 1924-10, ``Release by Claimants,'' and
Form FmHA or its successor agency under Public Law 103-354 1924-9,
``Certificate of Contractor's Release,'' may be obtained at the local
FmHA or its successor agency under Public Law 103-354 office and used
for this purpose. The United States, acting through the Farmers Home
Administration or its successor agency under Public Law 103-354, will be
named as co-obligee on all surety unless prohibited by State law.
Companies providing performance bonds and payment bonds must hold a
certificate of authority as an acceptable surety on Federal bonds as
listed in Treasury Circular 570 as amended and be legally doing business
in the State where the facility is located.
(4) Equal Employment Opportunity. All contracts awarded in excess of
$10,000 by owners shall contain a provision requiring compliance with
Executive Order 11246, entitled, ``Equal Employment Opportunity,'' as
amended by Executive Order 11375, and as supplemented by Department of
Labor regulations 41 CFR part 60.
(5) Anti-kickback. All contracts for construction shall include a
provision for compliance with the Copeland ``Anti-Kickback'' Act (18
U.S.C. 874). This Act provides that each contractor shall be prohibited
from inducing, by any means, any person employed in the construction,
completion, or repair of public work, to give up any part of the
compensation to which they are otherwise entitled. The owner shall
report all suspected or reported violations to FmHA or its successor
agency under Public Law 103-354.
(6) Records. All negotiated contracts (except those of $2,500 or
less) awarded by owners shall include a provision to the effect that the
owner, FmHA or its successor agency under Public Law 103-354, the
Comptroller General of the United States, or any of their duly
authorized representatives, shall have access to any books, documents,
papers, and records of the contractor which are directly pertinent to a
specific Federal loan program for the purpose of making audits,
examinations, excerpts, and transcriptions. Owners shall require
contractors to maintain all required records for three years after
owners make final payments and all other pending matters are closed.
(7) State Energy Conservation Plan. Contracts shall recognize
mandatory standards and policies relating to energy efficiency which are
contained in the State energy conservation plan issued in compliance
with the Energy Policy and Conservation Act (Pub. L. 94-163).
(8) Change orders. The construction contract shall require that all
contract change orders be approved in writing by FmHA or its successor
agency under Public Law 103-354.
(9) FmHA or its successor agency under Public Law 103-354
concurrence. All contracts must contain a provision that they shall not
be effective unless and until the FmHA or its successor agency under
Public Law 103-354 State Director or designee concurs in writing.
[[Page 197]]
(10) Retainage. All construction contracts shall contain adequate
provisions for retainage. No payments will be made that would deplete
the retainage nor place in escrow any funds that are required for
retainage nor invest the retainage for the benefit of the contractor.
The retainage shall not be less than an amount equal to 10 percent of an
approved partial payment estimate until 50 percent of the work has been
completed. If the job is proceeding satisfactory at 50 percent
completion, further partial payments may be made in full, however,
previously retained amounts shall not be paid until construction is
substantially complete. Additional amounts may be retained if the job is
not proceeding satisfactorily, but in no event shall the total retainage
be more than 10 percent of the value of the work completed.
(11) Other compliance requirements. Contracts in excess of $100,000
shall contain a provision which requires compliance with all applicable
standards, orders, or requirements issued under section 306 of the Clean
Air Act (42 U.S.C. 1857(h)), section 508 of the Clean Water Act (33
U.S.C. 1368), Executive Order 11738, and Environmental Protection Agency
(EPA) regulations 40 CFR part 15, which prohibit the use under non-
exempt Federal contracts, grants or loans of facilities included on the
EPA List of Violating Facilities. The provision shall require reporting
of violations to FmHA or its successor agency under Public Law 103-354
and to the U.S. Environmental Protection Agency, Assistant Administrator
for Enforcement. Solicitations and contract provisions shall include the
requirements of 40 CFR part 15.4(c) as set forth in guide 18 of this
subpart which is available in all FmHA or its successor agency under
Public Law 103-354 offices.
(o) Contract administration. Owners shall be responsible for
maintaining a contract administration system to monitor the contractors'
performance and compliance with the terms, conditions, and
specifications of the contracts.
(1) Preconstruction conference. Prior to beginning construction, the
owner will schedule a preconstruction conference where FmHA or its
successor agency under Public Law 103-354 will review the planned
development with the owner, its architect or engineer, resident
inspector, attorney, contractor(s), and other interested parties. The
conference will thoroughly cover applicable items included in Form FmHA
or its successor agency under Public Law 103-354 1924-16, ``Record of
Preconstruction Conference,'' and the discussion and agreements will be
documented. Form FmHA or its successor agency under Public Law 103-354
1924-16 may be used for this purpose.
(2) Monitoring reports. Each owner will be required to monitor and
provide reports to FmHA or its successor agency under Public Law 103-354
on actual performance during construction for each project financed, or
to be financed, in whole or in part with FmHA or its successor agency
under Public Law 103-354 funds to include:
(i) A comparison of actual accomplishments with the construction
schedule established for the period. The partial payment estimate may be
used for this purpose.
(ii) A narrative statement giving full explanation of the following:
(A) Reasons why established goals were not met.
(B) Analysis and explanation of cost overruns or high unit costs and
how payment is to be made for the same.
(iii) If events occur between reports which have a significant
impact upon the project, the owner will notify FmHA or its successor
agency under Public Law 103-354 as soon as any of the following
conditions are met:
(A) Problems, delays, or adverse conditions which will materially
affect the ability to attain program objectives or prevent the meeting
of project work units by established time periods. This disclosure shall
be accompanied by a statement of the action taken, or contemplated, and
any Federal assistance needed to resolve the situation.
(B) Favorable developments or events which enable meeting time
schedules and goals sooner than anticipated or producing more work units
than originally projected or which will result in cost underruns or
lower unit costs than originally planned and which may result in less
FmHA or its successor
[[Page 198]]
agency under Public Law 103-354 assistance.
(3) Inspection. Full-time resident inspection is required for all
construction unless a written exception is made by FmHA or its successor
agency under Public Law 103-354 upon written request of the owner.
Unless otherwise agreed, the resident inspector will be provided by the
consulting architect/engineer. Prior to the preconstruction conference,
the architect/engineer will submit a resume of qualifications of the
resident inspector to the owner and to FmHA or its successor agency
under Public Law 103-354 for acceptance in writing. If the owner
provides the resident inspector, it must submit a resume of the
inspector's qualifications to the project architect/engineer and FmHA or
its successor agency under Public Law 103-354 for acceptance in writing
prior to the preconstruction conference. The resident inspector will
work under the general supervision of the project architect/engineer. A
guide format for preparing daily inspection reports (Guide 11 of this
subpart) and Form FmHA or its successor agency under Public Law 103-354
1924-18, ``Partial Payment Estimate,'' are available on request from
FmHA or its successor agency under Public Law 103-354.
(4) Inspector's daily diary. The resident inspector will maintain a
record of the daily construction progress in the form of a daily diary
and daily inspection reports as follows:
(i) A complete set of all daily construction records will be
maintained and the original set furnished to the owner upon completion
of construction.
(ii) All entries shall be legible and shall be made in ink.
(iii) Daily entries shall include but not be limited to the date,
weather conditions, number and classification of personnel working on
the site, equipment being used to perform the work, persons visiting the
site, accounts of substantive discussions, instructions given to the
contractors, directions received, all significant or unusual happenings
involving the work, any delays, and daily work accomplished.
(iv) The daily entries shall be made available to FmHA or its
successor agency under Public Law 103-354 personnel and will be reviewed
during project inspections.
(5) Prefinal inspections. A prefinal inspection will be made by the
owner, resident inspector, project architect or engineer,
representatives of other agencies involved, the District Director and a
FmHA or its successor agency under Public Law 103-354 State Office staff
representative, preferably the State Staff architect or engineer.
Prefinal inspections may be made without FmHA or its successor agency
under Public Law 103-354 State Office staff participation if the State
Director or a designee determines that the facility does not utilize
complicated construction techniques, materials or equipment for
facilities such as small fire stations, storage buildings or minor
utility extensions, and that an experienced District Office staff
representative will be present. The inspection results will be recorded
on Form FmHA or its successor agency under Public Law 103-354 1924-12,
``Inspection Report,'' and a copy provided to all appropriate parties.
(6) Final inspection. A final inspection will be made by FmHA or its
successor agency under Public Law 103-354 before final payment is made.
(7) Change is development plans. (i) Changes in development plans
may be approved by FmHA or its successor agency under Public Law 103-354
when requested by owners, provided:
(A) Funds are available to cover any additional costs; and
(B) The change is for an authorized loan purpose; and
(C) It will not adversely affect the soundness of the facility
operation or FmHA or its successor agency under Public Law 103-354's
security; and
(D) The change is within the scope of the contract.
(ii) Changes will be recorded on Form FmHA or its successor agency
under Public Law 103-354 1924-7, ``Contract Change Order,'' or, other
similar forms may be used with the prior approval of the State Director
or designee. Regardless of the form, change orders must be approved by
the FmHA or its successor agency under Public Law 103-354 State Director
or a designated representative.
[[Page 199]]
(iii) Changes should be accomplished only after FmHA or its
successor agency under Public Law 103-354 approval on all changes which
affect the work and shall be authorized only by means of contract change
order. The change order will include items such as:
(A) Any changes in labor and material and their respective cost.
(B) Changes in facility design.
(C) Any decrease or increase in quantities based on final
measurements that are different from those shown in the bidding
schedule.
(D) Any increase or decrease in the time to complete the project.
(iv) All changes shall be recorded on chronologically numbered
contract change orders as they occur. Change orders will not be included
in payment estimates until approved by all parties.
[50 FR 7296, Feb. 22, 1985, as amended at 52 FR 8035, Mar. 13, 1987; 53
FR 6791, Mar. 3, 1988; 54 FR 14334, Apr. 11, 1989; 54 FR 18883, May 3,
1989; 61 FR 65156, Dec. 11, 1996]
Sec. 1942.19 Information pertaining to preparation of notes or bonds
and bond transcript documents for public body applicants.
(a) General. This section includes information for use by public
body applicants in the preparation and issuance of evidence of debt
(bonds, notes, or debt instruments, herein referred to as bonds). This
section is made available to applicants as appropriate for application
processing and loan docket preparation.
(b) Policies related to use of bond counsel. Preparation of the
bonds and the bond transcript documents will be the responsibility of
the applicant. Public body applicants will obtain the services and
opinion of recognized bond counsel with respect to the validity of a
bond issue, except as provided in (b) (1) through (3) below. The
applicant normally will be represented by a local attorney who will
obtain the assistance of a recognized bond counsel firm which has
experience in municipal financing with such investors as investment
dealers, banks, and insurance companies.
(1) Issues of $250,000 or less. At the option of the applicant for
issues of $250,000 or less, bond counsel may be used for the issuance of
a final opinion only and not for the preparation of the bond transcript
and other documents when the applicant, FmHA or its successor agency
under Public Law 103-354, and bond counsel have agreed in advance as to
the method of preparation of the bond transcript documents. Under such
circumstances the applicant will be responsible for the preparation of
the bond transcript documents.
(2) Issues of $50,000 or less. At the option of the applicant and
with the prior approval of the FmHA or its successor agency under Public
Law 103-354 State Director, the applicant need not use bond counsel if:
(i) The amount of the issue does not exceed $50,000 and the
applicant recognizes and accepts the fact that processing the
application may require additional legal and administrative time.
(ii) There is a significant cost saving to the applicant
particularly with reference to total legal fees after determining what
bond counsel would charge as compared with what the local attorney will
charge without bond counsel.
(iii) The local attorney is able and experienced in handling this
type of legal work.
(iv) The applicant understands that, if it is required by FmHA or
its successor agency under Public Law 103-354 to refinance its loan
pursuant to the statutory refinancing requirements, it will probably
have to obtain at its expense a bond counsel's opinion at that time.
(v) All bonds will be prepared in accordance with this regulation
and will conform as nearly as possible to the preferred methods of
preparation stated in paragraph (e) of this section but still be
consistent with State law.
(vi) Many matters necessary to comply with FmHA or its successor
agency under Public Law 103-354 requirements such as land rights,
easements, and organizational documents will be handled by the
applicant's local attorney. Specific closing instructions will be issued
by the Office of the General Counsel of the U.S. Department of
Agriculture for the guidance of FmHA or its successor agency under
Public Law 103-354.
(3) For loans of less than $500,000. The applicant shall not be
required to use
[[Page 200]]
bond counsel in a straight mortgage-note situation where competitive
bidding is not required for the sale of the debt instrument, unless a
complicated financial situation exists with the applicant. In addition,
if there is a known backlog in a particular OGC regional office the
applicant will be advised of such backlog and it will be suggested to
the applicant that the appointment of bond counsel may be more
expeditious. However, it will be the decision of the applicant whether
or not to appoint bond counsel. The applicant must comply with (b)(2)
(iii) through (vi) of this section.
(c) Bond transcript documents. Any questions with respect to FmHA or
its successor agency under Public Law 103-354 requirements should be
discusesd with the FmHA or its successor agency under Public Law 103-354
representatives. The bond counsel (or local counsel where no bond
counsel is involved) is required to furnish at least two complete sets
of the following to the applicant, who will furnish one complete set to
FmHA or its successor agency under Public Law 103-354:
(1) Copies of all organizational documents.
(2) Copies of general incumbency certificate.
(3) Certified copies of minutes or excerpts therefrom of all
meetings of the applicant's governing body at which action was taken in
connection with the authorization and issuance of the bonds.
(4) Certified copies of documents evidencing that the applicant has
complied fully with all statutory requirements incident to calling and
holding of a favorable bond election, if such an election is necessary
in connection with bond issuance.
(5) Certified copies of the resolution or ordinances or other
documents, such as the bond authorizing resolutions or ordinance and any
resolution establishing rates and regulating the use of the improvement,
if such documents are not included in the minutes furnished.
(6) Copies of official Notice of Sale and affidavit of publication
of Notice of Sale where a public sale is required by State statute.
(7) Specimen bond, with any attached coupons.
(8) Attorney's no-litigation certificate.
(9) Certified copies of resolutions or other documents pertaining to
the bond award.
(10) Any additional or supporting documents required by bond
counsel.
(11) For loans involving multiple advances of FmHA or its successor
agency under Public Law 103-354 loan funds a preliminary approving
opinion of bond counsel (or local counsel if no bond counsel is
involved) if a final unqualified opinion cannot be obtained until all
funds are advanced. The preliminary opinion for the entire issue shall
be delivered on or before the first advance of loan funds and state that
the applicant has the legal authority to issue the bonds, construct,
operate and maintain the facility, and repay the loan subject only to
changes during the advance of funds such as litigation resulting from
the failure to advance loan funds, and receipt of closing certrificates.
(12) Preliminary approving opinion, if any, and final unqualified
approving opinion of recognized bond counsel (or local counsel if no
bond counsel is involved) including opinion regarding interest on bonds
being exempt from Federal and any State income taxes. On approval of the
Administrator, a final opinion may be qualified to the extent that
litigation is pending relating to Indian claims that may affect title to
land or validity of the obligation. It is permissible for such opinions
to contain language referring to the last sentence of section 306(a)(1)
or to section 309A(h) of the Consolidated Farm and Rural Development Act
[7 U.S.C. 1926(a)(1) or 1929a(h)], and providing that if the bonds
evidencing the indebtedness in question are required by the Federal
Government and sold on an insured basis from the Agriculture Credit
Insurance Fund, or the Rural Development Insurance Fund, the interest on
such bonds will be included in gross income for the purpose of the
Federal income tax statutes.
(d) Interim financing from commercial sources during construction
period for loans of $50,000 or more. In all cases
[[Page 201]]
where it is possible for funds to be borrowed at current market interest
rates on an interim basis from commercial sources, such interim
financing will be obtained so as to preclude the necessity for multiple
advances of FmHA or its successor agency under Public Law 103-354 funds.
(e) Permanent instruments for FmHA or its successor agency under
Public Law 103-354 loans to repay interim commercial financing. FmHA or
its successor agency under Public Law 103-354 loans will be evidenced by
the following types of instruments chosen in accordance with the
following order of preference:
(1) First preference--Form FmHA or its successor agency under Public
Law 103-354 440-22, ``Promissory Note (Association or Organization)''.
If legally permissible use Form FmHA or its successor agency under
Public Law 103-354 440-22 for insured loans.
(2) Second preference--single instruments with amortized
installments. If Form FmHA or its successor agency under Public Law 103-
354 440.22 is not legally permissible, use a single instrument providing
for amortized installments. Show the full amount of the loan on the face
of the document and provide for entering the date and amount of each
FmHA or its successor agency under Public Law 103-354 advance on the
reverse thereof or on an attachment to the instrument. Form FmHA or its
successor agency under Public Law 103-354 440-22 should be followed to
the extent possible. When principal payment is deferred, no attempt
should be made to compute in dollar terms the amount of interest due on
these installment dates. Rather the instrument should provide that
``interest only'' is due on these dates. The appropriate amortized
installment computed as follows will be shown due on the installment
date thereafter.
(i) Annual payments--Subtract the due date of the last annual
interest only installment from the due date of the final installment to
determine the number of annual payments applicable. When there are no
interest only installments, the number of annual payments will equal the
number of years over which the loan is amortized. Then multiply the
amount of the note by the applicable amortization factor shown in FmHA
or its successor agency under Public Law 103-354 Amortization Tables and
round to the next higher dollar. Example of Computation of Annual
Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 annual payments
$100,000.00 x .05929 = $5,929.00 annual payment due
(ii) Semiannual payments--Multiply by two the number of years
between the due date of the last annual interest only installment and
the due date of the final installment to determine the correct number of
semiannual periods applicable. When there are no interest only
installments, multiply by two the number of years over which the loan is
amortized. Then multiply the amount of the note by the applicable
amortization factor shown in FmHA or its successor agency under Public
Law 103-354 Amortization Tables and round to the next higher dollar.
Example of Computation of Semiannual Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 2 = 76 semiannual periods
$100,000.00 x .02952 = $2,952.00 semiannual payment due
(iii) Monthly payments--Multiply by twelve the number of years
between the due date of the last annual interest only installment and
the final installment to determine the number of monthly payments
applicable. When there are no interest only installments, multiply by
twelve the number of years over which the loan is amortized. Then
multiply the amount of the note by the applicable amortization factor
shown in FmHA or its successor agency under
[[Page 202]]
Public Law 103-354 Amortization Tables and round to the next higher
dollar. Example of Computation of Monthly Payment:
Date of Loan Closing: 7-5-1976
Amount of Loan: $100,000.00
Interest Rate: 5%
Amortization Period: 40 years
Interest Only Installments: 7-5-1977 and 7-5-1978
First Regular Installment: 7-5-1979
Final Installment: 7-5-2016
Computation:
2016 - 1978 = 38 x 12 = 456 monthly payments
$100,000.00 x .00491 = $491.00 monthly payment due
(3) Third preference--single instrument with installments of
principal plus interest. If a single instrument with amortized
installments is not legally permissible, use a single instrument
providing for installments of principal plus interest accrued on the
unmatured principal balance. The principal should be in an amount best
adapted to making principal retirement and interest payments which
closely approximate equal installments of combined interest and
principal as required by the first two preferences.
(i) The repayment terms concerning interest only installments
described in paragraph (e)(2) of this section, ``Second perference''
applies.
(ii) The instrument shall contain in substance the following
provisions:
(A) A statement of principal maturities and due dates.
(B) Payments made on indebtedness evidenced by this instrument shall
be applied to the interest due through the next installment due date and
the balance to principal in accordance with the terms of the bond.
Payments on delinquent accounts will be applied in the following
sequence:
(1) Billed delinquent interest,
(2) Past due interest installments,
(3) Past due principal installments,
(4) Interest installment due, and
(5) Principal installment due.
Extra payments and payments made from security depleting sources shall
be applied to the principal last to come due or as specified in the bond
instrument.
(4) Fourth preference--serial bonds with installments of principal
plus interest. If instruments described under the first, second, and
third preferences are not legally permissible, use serial bonds with a
bond or bonds delivered in the amount of each advance. Bonds will be
delivered in the order of their numbers. Such bonds will conform with
the minimum requirements of paragraph (h) of this section. Rules for
application of payments on serial bonds will be the same as those for
principal installment single bonds as set out in the preceding paragraph
(e)(3) of this section.
(f) Multiple advances of FmHA or its successor agency under Public
Law 103-354 funds using permanent instruments. Where interim financing
from commercial sources is not available, FmHA or its successor agency
under Public Law 103-354 loan proceeds will be disbursed on an ``as
needed by borrower'' basis in amounts not to exceed the amount needed
during 30-day periods.
(g) Multiple advances of FmHA or its successor agency under Public
Law 103-354 funds using temporary debt instrument. When none of the
instruments described in paragraph (e) of this section are legally
permissible or practical, a bond anticipation note or similar temporary
debt instrument may be used. The debt instrument will provide for
multiple advance of FmHA or its successor agency under Public Law 103-
354 loan funds and will be for the full amount of the FmHA or its
successor agency under Public Law 103-354 loan. The instrument will be
prepared by bond counsel (or local counsel if bond counsel is not
involved) and approved by the State Director and OGC. At the same time
FmHA or its successor agency under Public Law 103-354 delivers the last
advance, the borrower will deliver the permanent bond instrument and the
canceled temporary instrument will be returned to the borrower. The
approved debt instrument will show at least the following:
(1) The date from which each advance will bear interest.
(2) The interest rate.
(3) A payment schedule providing for interest on outstanding
principal at least annually.
(4) A maturity date which shall be no earlier than the anticipated
issuance date of the permanent instrument(s).
[[Page 203]]
(h) Minimum bond specifications. The provisions of this paragraph
are minimum specifications only, and must be followed to the extent
legally permissible.
(1) Type and denominations. Bond resolutions or ordinances will
provide that the instrument(s) be either a bond representing the total
amount of the indebtedness or serial bonds in denominations customarily
accepted in municipal financing (ordinarily in multiples of not less
than $1000). Single bonds may provide for repayment of principal plus
interest or amortized installments; amortized installments are
preferable from the standpoint of FmHA or its successor agency under
Public Law 103-354. Coupon bonds will not be used unless required by
State statute.
(i) To compute the value of each coupon when the bond denomination
is consistent:
(A) Multiply the amount of the loan or advance by the interest rate
and divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the
number of days from the date of advance or last installment date to the
next installment date.
(C) Divide the interest computed in (B) by the number of bonds
securing the advance; this is the individual coupon amount.
(ii) to compute the value of each coupon when the bond denomination
varies:
(A) Multiply the denomination of the bond by the interest rate and
divide the product by 365 days.
(B) Multiply the daily accrual factor determined in (A) by the
number of days from the date of advance or last installment date to the
next installment due date; this is the individual coupon amount.
(2) Bond registration. Bonds will contain provisions permitting
registration as to both principal and interest. Bonds purchased by FmHA
or its successor agency under Public Law 103-354 will be registered in
the name of ``United States of America, Farmers Home Administration or
its successor agency under Public Law 103-354,'' and will remain so
registered at all times while the bonds are held or insured by the
United States. The address of FmHA or its successor agency under Public
Law 103-354 for registration purposes will be that of the appropriate
FmHA or its successor agency under Public Law 103-354 State Office.
(3) Size and quality. Size of bonds and coupons should conform to
standard practice. Paper must be of sufficient quality to prevent
deterioration through ordinary handling over the life of the loan.
(4) Date of bond. Bonds will preferably be dated as of the day of
delivery, however, may be dated another date at the option of the
borrower and subject to approval by FmHA or its successor agency under
Public Law 103-354. If the date of delivery is other than the date of
the bond, the date of delivery will be stated in the bond. In all cases,
interest will accrue from the date of delivery of the funds.
(5) Payment date. Loan payments will be scheduled to coincide with
income availability and be in accordance with State law. If consistent
with the foregoing, monthly payments will be required and will be
enumerated in the bond, other evidence of indebtedness, or other
supplemental agreement. However, if State law only permits principal
plus interest (P&I) type bonds, annual or semiannual P&I bonds will be
used. Insofar as practical monthly payments will be scheduled one full
month following the date of loan closing; or semiannual or annual
payments will be scheduled six or twelve full months, respectively,
following the date of loan closing or any deferment period. Due dates
falling on the 29th, 30th or 31st day of the month will be avoided.
(6) [Reserved]
(7) Redemptions. Bonds should contain customary redemption
provisions, subject, however, to unlimited right of redemption without
premium of any bonds held by FmHA or its successor agency under Public
Law 103-354 except to the extent limited by the provisions under the
``Third Preference'' and ``Fourth Preference'' in paragraph (e) of this
section.
(8) Additional revenue bonds. Parity bonds may be issued to complete
the project. Otherwise, parity bonds may not be issued unless the net
revenues
[[Page 204]]
(that is, unless otherwise defined by the State statute, gross revenues
less essential operation and maintenance expense) for the fiscal year
preceding the year in which such parity bonds are to be issued, were 120
percent of the average annual debt service requirements on all bonds
then outstanding and those to be issued; provided, that this limitation
may be waived or modified by the written consent of bondholders
representing 75 percent of the then outstanding principal indebtedness.
Junior and subordinate bonds may be issued in accordance with the loan
agreement.
(9) Scheduling of FmHA or its successor agency under Public Law 103-
354 payments when joint financing is involved. In all cases in which
FmHA or its successor agency under Public Law 103-354 is participating
with another lender in the joint financing of the project to supply
funds required by one applicant, the FmHA or its successor agency under
Public Law 103-354 payments of principal and interest should approximate
amortized installments.
(10) Precautions. The following types of provisions in debt
instruments should be avoided.
(i) Provisions for the holder to manually post each payment to the
instrument.
(ii) Provisions for returning the permanent or temporary debt
instrument to the borrower in order that it, rather than FmHA or its
successor agency under Public Law 103-354, may post the date and amount
of each advance or repayment on the instrument.
(iii) Defeasance provisions in loan or bond resolutions. When a bond
issue is defeased, a new issue is sold which supersedes the contractual
provisions of the prior issue, including the refinancing requirement and
any lien on revenues. Since defeasance in effect precludes FmHA or its
successor agency under Public Law 103-354 from requiring graduation
before the final maturity date, it represents a violation of the
statutory refinancing requirement, therefore it is disallowed.
(iv) Provisions that amend convenants contained in Forms FmHA 1942-
47, ``Loan Resolution (Public Bodies),'' or FmHA 1942-9, ``Loan
Resolution Security Agreement.''
(11) Multiple Loan Instruments. The following will be adhered to
when preparing debt instruments:
(i) When more than one loan type is used in financing a project,
each type of loan will be evidenced by a separate debt instrument or
series of debt instruments.
(ii) Loan funds obligated in different fiscal years and those
obligated with different interest rates or terms in the same fiscal year
will be evidenced by separate debt instruments.
(iii) Loan funds obligated for the same loan type in the same fiscal
year at the same interest rate and term may be combined in the same debt
instrument; provided the borrower has been notified on Form FmHA or its
successor agency under Public Law 103-354 1940-1, ``Request for
Obligation of Funds'', of the action.
(i) Bidding by FmHA or its successor agency under Public Law 103-
354. Bonds offered for public sale shall be offered in accordance with
State law, in such a manner to encourage public bidding. FmHA or its
successor agency under Public Law 103-354 will not submit a bid at the
advertised sale unless required by State law, nor will reference to FmHA
or its successor agency under Public Law 103-354's rates and terms be
included. If no acceptable bid is received, FmHA or its successor agency
under Public Law 103-354 will negotiate the purchase of the bonds.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6791, Mar. 3, 1988; 54
FR 18883, May 3, 1989; 56 FR 29168, June 26, 1991; 68 FR 61331, Oct. 28,
2003]
Sec. 1942.20 Community Facility Guides.
(a) The following documents are attached and made part of this
subpart and may be used by FmHA or its successor agency under Public Law
103-354 officials in administering this program.
(1) Guide 1 and 1a--Guide Letter for Use in Informing Private Lender
of FmHA or its successor agency under Public Law 103-354's Commitment.
(2) Guide 2--Water Users Agreement.
(3) Guide 3--Service Declination Statement.
(4) Guide 4--Bylaws.
(5) Guide 5--Financial Feasibility Report.
[[Page 205]]
(6) Guide 6--Preliminary Architectural Feasibility Report.
(7) Guide 7--Preliminary Engineering Report Water Facility.
(8) Guide 8--Preliminary Engineering Report Sewerage Systems.
(9) Guide 9--Preliminary Engineering Report Solid Waste Disposal
Systems.
(10) Guide 10--Preliminary Engineering Report Storm Waste-Water
Disposal.
(11) Guide 11--Daily Inspection Report.
(12) Guide 12--Memorandum of Understanding Between the Economic
Development Administration--Department of Commerce and the Farmers Home
Administration or its successor agency under Public Law 103-354--
Department of Agriculture Pertaining to EDA Public Works Projects
Assisted by an FmHA or its successor agency under Public Law 103-354
Loan.
(13) Guide 13--Memorandum of Understanding Between the Economic
Development Administration--Department of Commerce and the Farmers Home
Administration or its successor agency under Public Law 103-354--
Department of Agriculture Regarding Supplementary Grant Assistance for
the Construction of Public Works and Development Facilities.
(14) Guide 14--Legal Services Agreement.
(15) Guide 15--Community Facility Borrower's Application.
(16) Guide 16--Community Facility Loan Docket.
(17) Guide 17--Construction Contract Documents--Short Form.
(18) Guide 18--FmHA or its successor agency under Public Law 103-354
Supplemental General Conditions.
(19) Guide 19--Construction Contract Documents.
(20) Guide 20--Agreement for Engineering Services (FmHA or its
successor agency under Public Law 103-354/EPA Jointly Funded Projects).
(21) Guide 21--Review of Audit Reports.
(22) Guide 22--Delinquent Accounts Positive Action Plan.
(23) Guide 23--Agreement for Joint Use of Electric System Poles.
(24) Guide 24--Minimum Suggested Contents of Management Agreements.
(25) Guide 25--Joint Policy Statement Between EPA and FmHA or its
successor agency under Public Law 103-354.
(26) Guide 26--Community Programs Project Selection Criteria.
(27) Exhibit A--Circular No. A-128.
(28) Exhibit B--Department of Agriculture Regional Inspector General
(OIG).
(b) These guides and exhibits are for use by FmHA or its successor
agency under Public Law 103-354 officials, applicants and applicant's
officials and/or agents on certain matters related to the planning,
development, and operation of essential community facilities which
involve the use of loans and/or grants from FmHA or its successor agency
under Public Law 103-354. This includes activities related to applying
for and obtaining such financial assistance. These guides and exhibits
are not published in the Federal Register, however, they are available
in any FmHA or its successor agency under Public Law 103-354 office.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 6787, Mar. 3, 1988]
Sec. 1942.21 Statewide nonmetropolitan median household income.
Statewide nonmetropolitan median household income means the median
household income of the State's nonmetropolitan counties and portions of
metropolitan counties outside of cities, towns or places, of 50,000 or
more population.
[69 FR 65519, Nov. 15, 2004]
Sec. Sec. 1942.22-1942.49 [Reserved]
Sec. 1942.50 OMB control number.
The reporting and recordkeeping requirements contained in this
regulation have been approved by the Office of Management and Budget
(OMB) and have been assigned OMB control number 0575-0015. Public
reporting burden for this collection of information is estimated to vary
from five minutes to 15 hours per response, with an average of 2.7 hours
per response, including time for reviewing instructions, searching
existing data sources, gathering and maintaining the data needed, and
completing and reviewing the collection of information. Send comments
regarding
[[Page 206]]
this burden estimate or any other aspect of this collection of
information, including suggestions for reducing this burden to the
Department of Agriculture, Clearance Officer, OIRM, Ag Box 7630,
Washington, DC 20250; and to the Office of Management and Budget,
Paperwork Reduction Project (OMB 0575-0015), Washington, DC
20503.
[60 FR 11019, Mar. 1, 1995]
Subpart B [Reserved]
Subpart C_Fire and Rescue and Other Small Community Facilities Projects
Source: 52 FR 43726, Nov. 16, 1987, unless otherwise noted.
Sec. 1942.101 General.
This subpart provides the policies and procedures for making and
processing insured Community Facilities (CF) loans for facilities that
will primarily provide fire or rescue services and other small essential
community facility projects and applies to fire and rescue and other
Community Facilities loans for projects costing $300,000 and under. Any
processing or servicing activity conducted pursuant to this subpart
involving authorized assistance to Rural Development employees, members
of their families, known close relatives, or business or close personal
associates, is subject to the provisions of subpart D of part 1900 of
this chapter. Applicants for this assistance are required to identify
any known relationship or association with a Rural Development employee.
Community Facilities loans for other types of facilities, and those
costing in excess of $300,000, are defined in subpart A of this part.
[68 FR 65830, Nov. 24, 2003]
Sec. 1942.102 Nondiscrimination.
(a) Federal statutes provide for extending Farmers Home
Administration (FmHA) or its successor agency under Public Law 103-354
financial programs without regard to race, color, religion, sex,
national origin, marital status, age, or physical/mental handicap. The
participants must possess the capacity to enter into legal contracts
under State and local statutes.
(b) Indian tribes on Federal and State reservations and other
Federally recognized Indian tribes are eligible to apply for and are
encouraged to participate in this program. Such tribes might not be
subject to State and local laws or jurisdiction. However, any
requirements of this subpart that affect applicant eligibility, the
adequacy of FmHA or its successor agency under Public Law 103-354's
security or the adequacy of service to users of the facility and all
other requirements of this subpart must be met.
Sec. 1942.103 Definitions.
Agency. The Rural Housing Service (RHS), an agency of the U.S.
Department of Agriculture.
Approval official. An official who has been delegated loan or grant
approval authorities within applicable programs, subject to certain
dollar limitations.
Construction. The act of building or putting together a facility
that is a part of, or physically attached to, real estate. This does not
include procurement of major equipment even though the equipment may be
custom built to meet the owner's requirements.
Owner. An applicant or borrower.
Processing office. The office designated by the State program
official to accept and process applications for Community Facilities
projects.
Regional Attorney or OGC. The head of a Regional Office of the
General Counsel (OGC).
Small Community Facilities projects. Community Facilities loans
costing $300,000 and under.
[68 FR 65830, Nov. 24, 2003]
Sec. 1942.104 Application processing.
(a) General. Prospective applicants should request assistance by
filing SF 424.2, ``Application for Federal Assistance (For
Construction),'' with the Local or Area Rural Development Office. When
practical, approval officials should meet with prospective applicants
before an application is filed to discuss eligibility and Rural
Development requirements and processing procedures. Throughout loan
processing, Rural Development should confer with
[[Page 207]]
applicant officials as needed to ensure that applicant officials
understand the current status of the processing of their application,
what steps and determinations are necessary, and what is required from
them. Rural Development should assist the applicant as needed and
generally try to develop and maintain a cooperative working relationship
with the applicant.
(b) Unfavorable decision. If, at any time prior to loan approval, it
is decided that favorable action will not be taken on an application,
the approval official will notify the applicant, in writing, of the
reasons why the request was not favorably considered. The notification
to the applicant will state that a review of this decision by Rural
Development may be requested by the applicant in accordance with subpart
B of part 1900 of this chapter. The following statement will also be
made on all notifications of adverse action:
The Federal Equal Credit Opportunity Act prohibits creditors from
discriminating against credit applicants on the basis of race, color,
religion, national origin, sex, marital status, age (provided that the
applicant has the capacity to enter into a binding contract); because
all or part of the applicant's income is derived from any public
assistance program; or because the applicant has in good faith exercised
any right under the Consumer Credit Protection Act. The Federal agency
that administers compliance with this law is the Federal Trade
Commission, Equal Credit Opportunity, Washington, DC 20580.
[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989;
55 FR 13504, Apr. 11, 1990; 68 FR 65830, Nov. 24, 2003; 68 FR 69001,
Dec. 11, 2003]
Sec. 1942.105 Environmental review.
FmHA or its successor agency under Public Law 103-354 must conduct
and document an environmental review for each proposed project in
accordance with subpart G of part 1940 of this chapter. The review
should be completed as soon as possible after receipt of an application.
The loan approving official must determine an adequate environmental
review has been completed before requesting an obligation of funds.
Sec. 1942.106 Intergovernmental review.
(a) Loans under this subpart are subject to intergovernmental review
in accordance with subpart J of part 1940 of this chapter.
(b) State intergovernmental review agencies that have selected
community facility loans as a program they want to review may not be
interested in reviewing proposed loans for fire and rescue facilities.
In such cases, the State Director should obtain a letter from the State
single point of contact exempting fire and rescue loans from
intergovernmental consultation review. A copy of the letter should be
placed in the case file for each fire and rescue facility application in
lieu of completing the intergovernmental review process.
(c) When an application is filed and adverse comments are not
expected, the District Director should proceed with application
processing pending intergovernmental review. The loan should not be
obligated until any required review process has been completed.
(d) Funds allocated for use under this subpart are also for the use
of eligible Indian tribes within the State, regardless of whether State
development strategies include Indian reservations. Eligible Indian
tribes must have equal opportunity to participate in the program as
compared with other residents of the State.
[52 FR 43726, Nov. 16, 1987, as amended at 61 FR 6309, Feb. 20, 1996]
Sec. 1942.107 Priorities.
(a) Eligible applications must be selected for processing in
accordance with Sec. 1942.17(c) of subpart A of this part 1942.
(b) The District Director must score each eligible application in
accordance with Sec. 1942.17(c)(2)(iii) of subpart A of this part 1942.
The District Director must then notify the State Director of the score,
proposed loan amount, and other pertinent data. The State Director
should determine as soon as possible if the project has sufficient
priority for further processing and notify the District Director.
Normally, this
[[Page 208]]
consultation should be handled by telephone and documented in the
running record.
(c) Applicants who appear eligible but do not have the priority
necessary for further consideration at this time should be notified that
funds are not available, requested to advise whether they wish to have
their application maintained for future consideration and given the
following notice:
You are advised against incurring obligations which would limit the
range of alternatives to be considered, or which cannot be fulfilled
without FmHA or its successor agency under Public Law 103-354 funds
until the funds are actually made available. Therefore, you should
refrain from such actions as initiating engineering and legal work,
taking actions which would have an adverse effect on the environment,
taking options on land rights, developing detailed plans and
specifications, or inviting construction bids until notified by Farmers
Home Administration (FmHA) or its successor agency under Public Law 103-
354 to proceed.
Sec. 1942.108 Application docket preparation and review.
(a) Guides. Application dockets should be developed in accordance
with Sec. 1942.2(c) of subpart A of this part 1942.
(b) [Reserved]
(c) Budgets. All applicants must complete Form FmHA or its successor
agency under Public Law 103-354 442-7, ``Operating Budget,'' except as
provided in this paragraph. Applicants with annual incomes not exceeding
$100,000 may, with concurrence of the District Director, use Form FmHA
or its successor agency under Public Law 103-354 1942-52, ``Cash Flow
Projection,'' instead of Form FmHA or its successor agency under Public
Law 103-354 442-7. Projections should be provided for the current year
and each year thereafter until the facility is expected to have been in
operation for a full year and a full annual installment paid on the
loan.
(d) Letter of conditions. The District Director should prepare and
issue a letter of conditions in accordance with Sec. 1942.5 (a)(1) and
(c) of subpart A of this part 1942.
(e) Organizational review. As early in the application process as
practical, the approval official should obtain copies of organization
documents from each applicant and forward them through the State Office
to the Regional Attorney for review and comments. The Regional
Attorney's comments should be received and considered before obligation
of funds.
(f) National Office review. Applications that require National
Office review will be submitted in accordance with Sec. 1942.5(b) of
subpart A of this part 1942.
(g) State Office review. The State Office must monitor fire and
rescue and other small community facility project loanmaking and
servicing and provide guidance, assistance, and training as necessary to
ensure the activities are accomplished in an orderly manner consistent
with the Agency's regulations. The processing office should request
advice and assistance from the State Office as needed. The State
Director may require all or part of a specific application docket to be
submitted to the State Office for review at any time. The State Director
may determine that one or more of the processing office staffs do not
have adequate training and expertise to routinely complete application
dockets without State Office review. In such cases, the State Director
should establish guidelines by memorandum or by State supplement to the
subpart for the necessary State Office reviews.
(h) Loan approval and fund obligation. Loans must be approved and
obligated in accordance with Sec. 1942.5(d) of subpart A of this part
1942 and subpart A of part 1901 of this chapter.
[52 FR 43726, Nov. 16, 1987, as amended at 54 FR 47197, Nov. 13, 1989;
67 FR 60854, Sept. 27, 2002; 68 FR 65830, Nov. 24, 2003]
Sec. Sec. 1942.109-1942.110 [Reserved]
Sec. 1942.111 Applicant eligibility.
(a) General. Loans under this subpart are subject to the provisions
of Sec. 1942.17(b) of subpart A of this part 1942.
(b) Credit elsewhere determinations. The approval official must
determine whether financing from commercial sources at reasonable rates
and terms is available. If credit elsewhere is indicated, the approval
official should inform the applicant and recommend the applicant apply
to commercial sources
[[Page 209]]
for financing. To provide a basis for referral of only those applicants
who may be able to finance projects through commercial sources, approval
officials should maintain liaison with representatives of lenders in the
area. The State Director should keep approval officials informed
regarding lenders outside the area who might make loans in the area.
Approval officials should maintain criteria for determining applications
that should be referred to commercial lenders and maintain a list of
lender representatives interested in receiving such referrals.
(c) Public use. Loans under this subpart are subject to the
provisions of Sec. 1942.17(e) of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987, as amended at 68 FR 65830, Nov. 24, 2003]
Sec. 1942.112 Eligible loan purposes.
(a) Funds may be used:
(1) To construct, enlarge, extend, or otherwise improve essential
community facilities primarily providing fire or rescue services
primarily to rural residents and rural business. Rural businesses would
include facilities such as educational and other publicly owned
facilities. ``Otherwise improve'' includes but is not limited to the
following:
(i) The purchase of major equipment, such as fire trucks and
ambulances, which will, in themselves, provide an essential service to
rural residents.
(ii) The purchase of existing facilities when it is necessary either
to improve or to prevent a loss of service.
(iii) The construction or development of an essential community
facility requisite to the beneficial and orderly development of a
community operated on a nonprofit basis in accordance with Sec.
1942.17(d) of this subpart. This subpart includes those projects meeting
the definition of a small community facility project.
(2) To pay the following expenses, but only when such expenses are a
necessary part of a loan to finance facilities authorized in paragraph
(a)(1) of this section:
(i) Reasonable fees and costs such as legal, engineering,
architectural, fiscal advisory, recording, environmental impact
analyses, archaeological surveys and possible salvage or other
mitigation measures, planning, establishing or acquiring rights.
(ii) Interest on loans until the facility is self-supporting but not
for more than 3 years unless a longer period is approved by the National
Office; interest on loans secured by general obligation bonds until tax
revenues are available for payment, but not for more than 2 years unless
a longer period is approved by the National Office; and interest on
interim financing, including interest charges on interim financing from
sources other than FmHA or its successor agency under Public Law 103-
354.
(iii) Costs of acquiring interest in land, rights such as water
rights, leases, permits, rights-of-way, and other evidence of land or
water control necessary for development of the facility.
(iv) Purchasing or renting equipment necessary to install, maintain,
extend, protect, operate, or utilize facilities.
(v) Initial operating expenses for a period ordinarily not exceeding
1 year when the borrower is unable to pay such expenses.
(vi) Refinancing debts incurred by, or on behalf of, a community
when all of the following conditions exist:
(A) The debts being refinanced are a secondary part of the total
loan;
(B) The debts are incurred for the facility or service being
financed or any part thereof; and
(C) Arrangements cannot be made with the creditors to extend or
modify the terms of the debts so that a sound basis will exist for
making a loan.
(3) To pay obligations for construction or procurement incurred
before loan approval. Construction work or procurement actions should
not be started and obligations for such work or materials should not be
incurred before the loan is approved. However, if there are compelling
reasons for proceeding with construction or procurement before loan
approval, applicants may request FmHA or its successor agency under
Public Law 103-354 approval to pay such obligations. Such requests may
be approved if FmHA or its successor agency under Public Law 103-354
determines that:
[[Page 210]]
(i) Compelling reasons exist for incurring obligations before loan
approval; and
(ii) The obligations will be incurred for authorized loan purposes;
and
(iii) Contract documents have been approved by FmHA or its successor
agency under Public Law 103-354; and
(iv) All environmental requirements applicable to FmHA or its
successor agency under Public Law 103-354 and the applicant have been
met; and
(v) The applicant has the legal authority to incur the obligations
at the time proposed, and payment of the debts will remove any basis for
any mechanic, material or other liens that may attach to the security
property. FmHA or its successor agency under Public Law 103-354 may
authorize payment of such obligations at the time of loan closing. FmHA
or its successor agency under Public Law 103-354's authorization to pay
such obligations, however, is on the condition that it is not committed
to make the loan; it assumes no responsibility for any obligations
incurred by the applicant; and the applicant must subsequently meet all
loan approval requirements. The applicant's request and FmHA or its
successor agency under Public Law 103-354 authorization for paying such
obligations shall be in writing. If construction or procurement is
started without FmHA or its successor agency under Public Law 103-354
approval, post approval in accordance with this section may be
considered.
(b) Funds may not be used to finance:
(1) Facilities which are not modest in size, design, and cost.
(2) Loan finder's fees.
(3) Projects located within the Coastal Barriers Resource system
that do not qualify for an exception as defined in section 6 of the
Coastal Barriers Resource Act, Pub. L. 97-348.
[52 FR 43726, Nov. 16, 1987, as amended at 57 FR 21195, May 19, 1992; 68
FR 65831, Nov. 24, 2003]
Sec. 1942.113 Rates and terms.
Rates and terms for loans under this subpart are as set out in Sec.
1942.17(f) of subpart A of this part 1942.
Sec. 1942.114 Security.
Specific requirements for security for each loan will be included in
the letter of conditions. Loans must be secured by the best security
position practicable, in a manner which will adequately protect the
interest of FmHA or its successor agency under Public Law 103-354 during
the repayment period of the loan, and in accordance with the following;
(a) Security must include one of the following:
(1) A pledge of revenue and a lien on all real estate and major
equipment purchased or developed with the FmHA or its successor agency
under Public Law 103-354 loan; or
(2) General obligation bonds or bonds pledging other taxes.
(b) Additional security may be required as determined necessary by
the loan approval official. In determining the need for additional
security the loan approval official should carefully consider:
(1) The estimated market value of real estate and equipment
security.
(2) The adequacy and dependability of the applicant's revenues,
based on the applicant's financial records, the project financial
feasibility report, and the project budgets.
(3) The degree of community commitment to the project, as evidenced
by items such as active broad based membership, aggressive leadership,
broad based fund drives, or contributions by local public bodies.
(c) Additional security may include, but is not limited to, the
following:
(1) Liens on additional real estate or equipment.
(2) A pledge of revenues from additional sources.
(3) An assignment of assured income in accordance with Sec.
1942.17(g)(3)(iii)(A)(1) of subpart A of this part 1942.
(d) Review and approval or concurrence in the State Office is
required if the security will not include a pledge of taxes and the
applicant cannot provide evidence of the financially successful
operation of a similar facility for the 5 years immediately prior to
loan application.
[[Page 211]]
(e) Review and concurrence in the National Office is required if the
security will not include a pledge of taxes, the applicant cannot
provide evidence of the financially successful operation of a similar
facility for the 5 years immediately prior to loan application, and the
amount of the loan will exceed $250,000.
(f) Loans under this subpart are subject to the provisions of Sec.
1942.17(g)(1) of subpart A of this part 1942, regarding security for
projects utilizing joint financing.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.115 Reasonable project costs.
Applicants are responsible for determining that prices paid for
property rights, construction, equipment, and other project development
are reasonable and fair. FmHA or its successor agency under Public Law
103-354 may require an appraisal by an independent appraiser or FmHA or
its successor agency under Public Law 103-354 employee.
Sec. 1942.116 Economic feasibility requirements.
All projects financed under this section must be based on taxes,
assessments, revenues, fees, or other satisfactory sources of revenues
in an amount sufficient to provide for facility operation and
maintenance, a reasonable reserve, and debt payment. An overall review
of the applicant's financial status, including a review of all assets
and liabilities, will be a part of the docket review process by the FmHA
or its successor agency under Public Law 103-354 staff and approval
official. All applicants will be expected to provide a financial
feasibility report. These financial feasibility reports will normally
be:
(a) Included as part of the preliminary engineer/architectural
report using guide 6 to subpart A of this part 1942 (available in any
FmHA or its successor agency under Public Law 103-354 Office), or
(b) Prepared by the applicant using Form FmHA or its successor
agency under Public Law 103-354 1942-54, ``Applicant's Feasibility
Report.''
Sec. 1942.117 General requirements.
(a) Reserve requirements. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (i) of subpart A of this part 1942.
(b) Membership authorization. The membership of organizations other
than public bodies must authorize the project and its financing except
the District Director may, with the concurrence of the State Director
(with advice of OGC as needed), accept the loan resolution without such
membership authorization when State statutes and the organization
charter and bylaws do not require such authorization.
(c) Insurance and bonding. Loans under this subpart are subject to
the provisions of Sec. 1942.17(j)(3) of subpart A of this part 1942.
(d) Acquisition of land and rights. Loans under this subpart are
subject to the provisions of Sec. 1942.17(j)(4) of subpart A of this
part 1942.
(e) Lease agreements. Loans under this subpart are subject to the
provisions of Sec. 1942.17(j)(5) of subpart A of this part 1942.
(f) Notes and bonds. Loans under this subpart are subject to the
provisions of Sec. Sec. 1942.17(j)(6) and 1942.19 of subpart A of this
part 1942.
(g) Public Information. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (j)(9) of subpart A of this part 1942.
(h) Joint funding. Loans under this subpart are subject to the
provisions of Sec. Sec. 1942.2 (e) and 1942.17 (j)(11) of subpart A of
this part 1942.
Sec. 1942.118 Other Federal, State, and local requirements.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17 (k) of subpart A of this part 1942.
(b) An initial compliance review should be completed under subpart E
of part 1901 of this chapter.
Sec. 1942.119 Professional services and borrower contracts.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17 (l) of subpart A of this part 1942.
(b) The District Director will, with assistance as necessary by the
State Director and OGC, concur in agreements between borrowers and third
[[Page 212]]
parties such as contracts for professional and technical services. The
State Director may require State Office review of such documents in
accordance with Sec. 1942.108 (g) of this subpart. State Directors are
expected to work closely with representatives of engineering and
architectural societies, bar associations, commercial lenders,
accountant associations, and others in developing standard forms of
agreements, where needed, and other matters to expedite application
processing, minimize referrals to OGC, and resolve problems which may
arise. Standard forms should be reviewed by and approved by OGC.
Sec. Sec. 1942.120-1942.121 [Reserved]
Sec. 1942.122 Actions prior to loan closing and start of construction.
(a) Excess FmHA or its successor agency under Public Law 103-354
loan funds. Loans under this subpart are subject to the provisions of
Sec. 1942.17 (n)(1) of subpart A of this part 1942.
(b) Loan resolutions. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (n)(2) of subpart A of this part 1942.
(c) Interim financing. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (n)(3) of subpart A of this part 1942.
(d) Applicant contribution. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (n)(5) of subpart A of this part 1942
this chapter.
(e) Evidence of and disbursement of other funds. Loans under this
subpart are subject to the provisions of Sec. 1942.17 (n)(6) of subpart
A of this part 1942.
(f) Assurance agreement. All applicants must execute Form FmHA or
its successor agency under Public Law 103-354 400-4, ``Assurance
Agreement,'' at or before loan closing.
Sec. 1942.123 Loan closing.
(a) Ordering loan checks. Checks will not be ordered until:
(1) Form FmHA or its successor agency under Public Law 103-354 440-
57, ``Acknowledgement of Obligated Funds/Check Request,'' has been
received from the Finance Office.
(2) The applicant has complied with approval conditions and any
closing instructions, except for those actions which are to be completed
on the date of loan closing or subsequent thereto.
(3) The applicant is ready to start construction or funds are needed
to pay interim financing obligations.
(b) Public bodies and Indian tribes. (1) After loan approval the
completed docket will be reviewed by the State Director. The information
required by OGC will be transmitted to OGC with a request for closing
instructions. Upon receipt of the closing instructions from OGC, the
State Director will forward them along with any appropriate instructions
to the District Director. Upon receipt of closing instructions, the
District Director will discuss with the applicant and its architect or
engineer, attorney, and other appropriate representatives, the
requirements contained therein and any actions necessary to proceed with
closing.
(2) Loans will be closed in accordance with the closing instructions
issued by OGC and Sec. 1942.19 of subpart A of this part 1942.
(c) Organizations other than public bodies and Indian tribes.
District Directors are authorized to close loans to organizations other
than public bodies and Indian tribes without closing instructions from
OGC. State Directors, in consultation with OGC, should develop standard
closing procedures and forms as needed. Assistance with loan closing and
a certification regarding the validity of the note and mortgage or other
debt instruments should be provided by the applicant's attorney.
Appropriate title opinion or title insurance is required as provided in
Sec. 1942.17 (j)(4)(i)(B) of subpart A of this part 1942.
(d) Authority to execute, file, and record legal instruments.
District Office employees are authorized to execute and file or record
any legal instruments necessary to obtain or preserve security for
loans. This includes, as appropriate, mortgages and other lien
instruments, as well as affidavits, acknowledgements, and other
certificates.
(e) Mortgages. Unless otherwise required by State law or unless an
exception is approved by the State Director
[[Page 213]]
with advice of the OGC, only one mortgage will be taken even though the
indebtedness is to be evidenced by more than one instrument. The real
estate or chattel mortgages or security instruments will be delivered to
the recording office for recordation or filing, as appropriate. A copy
of such instruments will be delivered to the borrower. The original
instrument, if returnable after recording or filing, will be retained in
the borrower's case folder.
(f) Notes and bonds. When the debt instrument is a note or single
instrument bond fully registered as to principal and interest a
conformed copy will be sent to the Finance Office immediately after loan
closing and the original instrument will be stored in the District
Office. When other types of bonds are used, the original bond(s) will be
forwarded to the Finance Office immediately after loan closing.
(g) Disposition of title evidence. All title evidence other than the
opinion of title and mortgage title insurance policy, will be returned
to the borrower when the loan has been closed.
(h) Multiple advances. When temporary paper, such as bond
anticipation notes or interim receipts, is used to conform with the
multiple advance requirement, the original temporary paper will be
forwarded to the Finance Office after each advance is made to the
borrower. The borrower's case number will be entered in the upper right-
hand corner of such paper by the Distict Office. The permanent debt
instrument(s) should be forwarded to the Finance Office as soon as
possible after the last advance is made, except that for notes and
single instrument bonds fully registered as to principal and interest
the original will be retained in the District Office and a copy will be
forwarded to the Finance Office. The following actions will be taken
prior to issuance of the permanent instruments:
(1) The Finance Office will be notified of the anticipated date for
the retirement of the interim instruments and the issuance of permanent
instruments of debt.
(2) The Office of the Deputy Chief Financial Officer will prepare a
statement of account including accrued interest through the proposed
date of retirement and also show the daily interest accrual. The
statement of account and the interim financing instruments will be
forwarded to the Rural Development Manager.
(3) The Rural Development Manager will collect interest through the
actual date of the retirement and obtain the permanent instrument(s) of
debt in exchange for the interim financing instruments. The permanent
instruments and the cash collection will be forwarded to the Office of
the Deputy Chief Financial Officer immediately, except that for notes
and single instrument bonds fully registered as to principal and
interest the original will be retained in the Area Office and a copy
will be forwarded to the Office of the Deputy Chief Financial Officer.
In developing the permanent instruments, the sequence of preference set
out Sec. 1942.19(e) of Subpart A of Part 1942 of this chapter will be
followed.
(i) Bond registration record. Form FmHA or its successor agency
under Public Law 103-354 442-28, ``Bond Registration Book,'' may be used
as a guide to assist borrowers in the preparation of a bond registration
book in those cases where a registration book is required and a book is
not provided in connection with the printing of the bonds.
(j) Loan disbursements. Whenever a loan disbursement is received,
lost, or destroyed, the Rural Development Manager will take the
appropriate actions outlined in Rural Development Instruction 2018-D.
(k) Safeguarding bond shipments. FmHA or its successor agency under
Public Law 103-354 personnel will follow the procedures for safeguarding
mailings and deliveries of bonds and coupons outlined in FmHA
Instruction 2018-E (available in any FmHA or its successor agency under
Public Law 103-354 office), whenever they mail or deliver these items.
(l) Review of loan closing. When the loan has been closed, the Rural
Development Manager will submit the completed loan closing documents and
a statement showing what was done in closing the loan to the State
Director. The State Director will review the documents and the Rural
Development
[[Page 214]]
Manager's statement to determine whether the transaction was closed
properly. For loans to public bodies or Indian tribes the State Director
will forward all documents, along with a statement that all
administrative requirements have been met, to the Regional Attorney. The
Regional Attorney will review the submitted material to determine
whether all legal requirements have been met. The Regional Attorney
should review Rural Development standard forms only for proper
execution, unless the State Director brings attention to specific
questions. Facility development should not be held up pending receipt of
the Regional Attorney opinion. When the review of the State Director has
been completed, and for public bodies and Indian tribes the Regional
Attorney's opinion has been received, the State Director must advise the
Rural Development Manager of any deficiencies that must be corrected and
return all material that was submitted for review.
(m) Loan cancellation. Loans under this subpart are subject to the
provisions of Sec. 1942.12 of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987, as amended at 59 FR 54788, Nov. 2, 1994; 70
FR 19254, Apr. 13, 2005]
Sec. Sec. 1942.124-1942.125 [Reserved]
Sec. 1942.126 Planning, bidding, contracting, constructing, procuring.
(a) General. This section provides procedures and requirements for
planning, bidding, contracting, constructing and procuring facilities
financed under this subpart. These procedures do not relieve the owner
of contractual obligations that arise from procurement of services.
(b) Technical services. Owners are responsible for providing the
engineering or architectural services necessary for planning, designing,
bidding, contracting, inspecting and constructing their facilities.
Services may be provided by the owner's ``in-house'' engineer or
architect or through contract, subject to FmHA or its successor agency
under Public Law 103-354 concurrence. Architects and engineers must be
licensed in the State where the facility is to be located.
(1) Preliminary reports. A preliminary architectural or engineering
report conforming with customary professional standards is required for
all construction, except that FmHA or its successor agency under Public
Law 103-354 may waive the requirement for a preliminary architectural/
engineering report or accept a brief report if the cost of the
construction does not exceed $100,000. Guide 6 to subpart A of this part
1942 (available in any FmHA or its successor agency under Public Law
103-354 office) may be used.
(2) Final reports. Detailed final plans and specifications are
required for all construction and must receive FmHA or its successor
agency under Public Law 103-354 concurrence. When negotiated procurement
is used for construction costing not more than $100,000 the final plans
and specifications may be provided by the contractor who submits the
successful proposal. The plans and specifications must be prepared by or
under the supervision of an architect or engineer who is licensed in the
State where the facility is to be located and should include all
materials and work to be provided under the contract. Some work and
material may be omitted from the contract provided the owner furnishes
detailed cost estimates for whatever is needed to fully complete the
facility and will complete the facility in accordance with paragraph (e)
of this section and the small purchase procedures set out in Sec.
1942.18(k)(1) of subpart A of this part 1942. In such cases, FmHA or its
successor agency under Public Law 103-354 may determine that it is not
necessary to require the applicant to hire a consulting architect/
engineer; however, if a second contract that does not qualify for small
purchase procedures is needed to complete the facility, the owner must
provide for an architect/engineer to design the entire facility. When
the contractor provides the plans and specifications, the contract will
be considered a design/build procurement method under Sec. 1942.18(1)
of subpart A of this part 1942.
(3) Major equipment. An architect/engineer is not required for major
equipment if FmHA or its successor agency under Public Law 103-354
determines the owner has the ability to develop an
[[Page 215]]
adequate request for proposal and evaluate the proposals received or can
obtain adequate assistance from other sources, such as State or Federal
agencies or trade associations.
(c) Design policies. Facilities financed by FmHA or its successor
agency under Public Law 103-354 must be designed and constructed in
accordance with sound engineering and architectural practices, and must
meet the requirements of Federal, State and local agencies. All
facilities intended for or accessible to the public or in which
physically handicapped persons may be employed or reside must be
developed in compliance with the Architectural Barriers Act of 1968
(Pub. L. 90-480) as implemented by the General Services Administration
regulations 41 CFR 101-19.6 and section 504 of the Rehabilitation Act of
1973 (Pub. L. 93-112) as implemented by 7 CFR parts 15 and 15b.
(d) Construction contracts. Contract documents must be sufficiently
descriptive and legally binding to accomplish the work as economically
and expeditiously as possible.
(1) Standard construction contract documents. When standard
construction contract documents available from FmHA or its successor
agency under Public Law 103-354 are used, or when the amount of the
contract does not exceed $100,000, it will normally not be necessary for
the Regional Attorney to perform a detailed legal review. If
construction contract documents used are not in the format of guide
forms approved by FmHA or its successor agency under Public Law 103-354,
and the contract amount exceeds $100,000, the Regonal Attorney must
review the documents before their use.
(2) Contract review and approval. The owner's attorney will review
executed contract documents, including performance and payment bonds,
and certify that they are adequate, legal and binding, and that the
persons executing the documents have been authorized to do so. The
contract documents, bid bonds, and bid tabulation sheets will be
forwarded to FmHA or its successor agency under Public Law 103-354 for
approval prior to awarding. All contracts will contain a provision that
they are not in full force and effect until they have been approved by
FmHA or its successor agency under Public Law 103-354. The FmHA or its
successor agency under Public Law 103-354 District Director is
responsible for approving construction contracts with advice and
guidance of the State Director and Regional Attorney when necessary.
(3) Separate contracts. Arrangements which split responsibility of
contractors (separate contracts for labor and material, extensive
subcontracting and multiplicity of small contracts on the same job)
should be avoided whenever it is practical to do so. Contracts may be
awarded to suppliers or manufacturers for furnishing and installing
certain items which have been designed by the manufacturer and delivered
to the job site in a finished or semifinished state such as
prefabricated buildings. Contracts may also be awarded for material
delivered to the job site and installed by a patented process or method.
(e) Performing construction. Owners are encouraged to accomplish
construction through contracts with recognized contractors. Owners may
accomplish construction by using their own personnel and equipment
provided the owners possess the necessary skills, abilities and
resources to perform the work and provided a licensed engineer or
architect prepares design drawings and specifications and inspection is
provided in accordance with paragraph (l)(3) of this section.
(f) Owner's contractual responsibility. Loans under this subpart are
subject to the provisions of Sec. 1942.18(i) of subpart A of this part
1942.
(g) Owner's procurement regulations. Loans under this subpart are
subject to the provisions of Sec. 1942.18(j) of subpart A of this part
1942.
(h) Procurement methods. Unless the FmHA or its successor agency
under Public Law 103-354 National Office gives prior written approval of
another method, procurement must be made by one of the following
methods:
(1) Small purchase procedures as provided in Sec. 1942.18(k)(1) of
subpart A of this part 1942.
(2) Competitive sealed bids as provided in Sec. 1942.18(k)(2) of
subpart A of this part 1942. Competitive sealed bids is the preferred
procurement method of
[[Page 216]]
construction projects, except for buildings costing $100,000 or less
when the owner desires to use a ``preengineered'' or ``packaged''
building.
(3) Competitive negotiation as provided in Sec. 1942.18(k)(3) of
subpart A of this part 1942. Competitive negotiation is the preferred
procurement method of buildings not exceeding $100,000 in cost when the
owner desires to use a ``pre- engineered'' or ``packaged'' building and
for major equipment.
(4) Noncompetitive negotiation as provided in Sec. 1942.18(k)(4) of
subpart A of this part 1942.
(i) Contracting methods. Loans under this subpart are subject to the
provisions of Sec. 1942.18(1) of subpart A of this part 1942.
(j) Contracts awarded prior to preapplications. Loans under this
subpart are subject to the provisions of Sec. 1942.18(m) of subpart A
of this part 1942.
(k) Construction Contract provisions. Construction contracts for
loans under this subpart are subject to the provisions of Sec.
1942.18(n) of subpart A of this part 1942. Construction contracts for
loans under this subpart are also subject to the provisions of Sec.
1901.205 of subpart E of part 1901 of this chapter, regarding
nondiscrimination in construction, except that guides 18 and 17 or 19 to
subpart A of this part 1942 of this chapter will normally be used
instead of Form FmHA or its successor agency under Public Law 103-354
1924-5, ``Invitation for Bid (Construction Contract),'' and Form FmHA or
its successor agency under Public Law 103-354 1924-6, ``Construction
Contract.'' When guide 18 is used with a design/build type contract,
section 4, ``Conflict of Interest,'' may need revision.
(l) Construction contract administration. Owners shall be
responsible for maintaining a contract administration system to monitor
the contractors' performance and compliance with the terms, conditions,
and specifications of the contracts.
(1) Preconstruction conference. Prior to beginning construction the
owner will schedule a preconstruction conference where FmHA or its
successor agency under Public Law 103-354 will review the planned
development with the owner, its architect or engineer, project
inspector, attorney, contractor(s), and other interested parties. The
conference will thoroughly cover applicable items included in Form FmHA
or its successor agency under Public Law 103-354 1924-16, ``Record of
Preconstruction Conference,'' and the discussions and agreements will be
documented. Form FmHA or its successor agency under Public Law 103-354
1924-16 may be used for this purpose.
(2) Monitoring reports. Each owner will be required to monitor and
provide reports to FmHA or its successor agency under Public Law 103-354
on actual performance during construction for each project financed, or
to be financed, in whole or in part with FmHA or its successor agency
under Public Law 103-354 funds. The reports are to include:
(i) A comparison of actual accomplishments with the construction
schedule established for the period. The partial payment estimate may be
used for this purpose.
(ii) A narrative statement giving full explanation of the following:
(A) Reasons why established goals were not met.
(B) Analysis and explanation of cost overruns or high unit costs and
how payment is to be made for the same.
(iii) If events occur between reports which have a significant
impact upon the project, the owner will notify FmHA or its successor
agency under Public Law 103-354 as soon as any of the following
conditions are known:
(A) Problems, delays, or adverse conditions which will materially
affect the ability to attain program objectives or prevent the meeting
of project work units by established time periods. This disclosure shall
be accompanied by a statement of the action taken, or contemplated, and
any Federal assistance needed to resolve the situation.
(B) Favorable developments or events which enable meeting time
schedules and goals sooner than anticipated or producing more work units
than originally projected or which will result in cost underruns or
lower unit costs than originally planned and which may result in less
FmHA or its successor agency under Public Law 103-354 assistance.
[[Page 217]]
(3) Inspection. The borrower must provide for inspection of all
construction. When the borrower enters into an agreement for technical
services with an engineer/architect, the agreement should provide for
general engineering/architectural inspection of the construction work.
When no such agreement exists, or FmHA or its successor agency under
Public Law 103-354 or the borrower determines the inspection services of
the engineer/architect may not be sufficient, the owner must provide a
project inspector. Prior to the preconstruction conference, the borrower
must submit a r[eacute]sum[eacute] of qualifications of the project
inspector to FmHA or its successor agency under Public Law 103-354 for
acceptance in writing. The project inspector will be responsible for
making inspections necessary to protect the borrower's interest and for
providing written inspection reports to the borrower with copies to the
FmHA or its successor agency under Public Law 103-354 District Director.
guide 11 of subpart A of this part 1942 (available in any FmHA or its
successor agency under Public Law 103-354 office) may be used as a guide
format for inspection reports. For new buildings, additions to existing
buildings, and rehabilitation of existing buildings, the project
inspector should make inspections at the following stages of
construction and at other stages of construction as determined by the
District Director and the borrower. Inspections by FmHA or its successor
agency under Public Law 103-354 are solely for its benefit as lender.
(i) An initial inspection should be made just prior to or during the
placement of concrete footings or monolithic footings and floor slabs.
At this point, foundation excavations are complete, forms or trenches
and steel are ready for concrete placement and the subsurface
installation is roughed in. If the building design does not include
concrete footings the initial inspection should be made just after or
during the placement of poles or other foundation materials.
(ii) An inspection should be made when the building is enclosed,
structural members are still exposed, roughing in for heating, plumbing
and electrical work is in place and visible, and wall insulation and
vapor barriers are installed.
(iii) A final inspection should be made when all development of the
structure has been completed and the structrure is ready for its
intended use.
(4) Prefinal inspections. A prefinal inspection will be made by the
owner, project inspector, owner's architect or engineer, representatives
of other agencies involved, and the District Director. The inspection
results will be recorded on Form FmHA or its successor agency under
Public Law 103-354 1924-12, ``Inspection Report,'' and a copy provided
to all interested parties, including the FmHA or its successor agency
under Public Law 103-354 State Director.
(5) Final inspection. A final inspection will be made by FmHA or its
successor agency under Public Law 103-354 before final payment is made.
(6) Changes in development plans. (i) Changes in development plans
may be approved by FmHA or its successor agency under Public Law 103-354
when requested by owners, provided:
(A) Funds are available to cover any additional costs; and
(B) The change is for an authorized loan purpose; and
(C) It will not adversely affect the soundness of the facility
operation or FmHA or its successor agency under Public Law 103-354's
security; and
(D) The change is within the scope of the contract; and
(E) Any applicable requirements of subpart G of part 1940 of this
chapter have been met.
(ii) Changes will be recorded on Form FmHA or its successor agency
under Public Law 103-354 1924-7, ``Contract Change Order,'' or other
similar forms may be used with the prior approval of the District
Director. Regardless of the form, change orders must be approved by the
FmHA or its successor agency under Public Law 103-354 District Director.
(iii) Changes should be accomplished only after FmHA or its
successor agency under Public Law 103-354 approval on all changes which
affect the work and shall be authorized only by means of contract change
order. The change order will include items such as:
[[Page 218]]
(A) Any changes in labor and material and their respective cost.
(B) Changes in facility design.
(C) Any decrease or increase in quantities based on final
measurements that are different from those shown in the bidding
schedule.
(D) Any increase or decrease in the time to complete the project.
(iv) All changes shall be recorded on chronologically numbered
contract change orders as they occur. Change orders will not be included
in payment estimates until approved by all parties.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.127 Project monitoring and fund delivery.
(a) Coordination of funding sources. When a project is jointly
financed, the District Director will reach any needed agreement or
understanding with the representatives of the other source of funds on
distribution of responsibilities for handling various aspects of the
project. These responsibilities will include supervision of
construction, inspections and determination of compliance with
appropriate regulations concerning equal employment opportunities, wage
rates, nondiscrimination in making services or benefits available, and
environmental compliance. If any problems develop which cannot be
resolved locally, complete information should be sent to the State
Office for advice.
(b) Multiple advances. Loans under this subpart are subject to the
provisions of Sec. 1942.17 (p)(2) of subpart A of this part 1942.
(c) Use and accountability of funds. Loans under this subpart are
subject to the provisions of Sec. 1942.17 (p)(3) of subpart A of this
part 1942.
(d) Development inspections. Loans under this subpart are subject to
the provisions of Sec. 1942.17(p)(4) of subpart A of this part 1942.
(e) Payment for project costs. Each payment for project costs must
be approved by the borrower's governing body.
(1) Construction. Payment for construction must be for amounts shown
on payment estimate forms. Form FmHA or its successor agency under
Public Law 103-354 1924-18, ``Partial Payment Estimate,'' may be used
for this purpose or other similar forms may be used with the prior
approval of the District Director. However, the District Director cannot
require more reporting burden than is required by Form FmHA or its
successor agency under Public Law 103-354 1924-18. Advances for contract
retainage will not be made until such retainage is due and payable under
the terms of the contract. The review and acceptance of project cost,
including construction partial payment estimates, by FmHA or its
successor agency under Public Law 103-354 does not attest to the
correctness of the amounts, the quantities shown, or that the work has
been performed under the terms of agreements or contracts.
(2) Major equipment. Payment for major equipment should generally
coincide with delivery of the usable equipment, along with any necessary
title or certifications, to the borrower. Borrowers may not use FmHA or
its successor agency under Public Law 103-354 loan funds to make
deposits on equipment not ready for delivery. If a borrower purchases a
truck chassis from one supplier and another supplier will complete the
development of a fire or rescue vehicle, FmHA or its successor agency
under Public Law 103-354 may release funds to pay for the chassis when
title to the chassis is transferred to the borrower.
(f) Use of remaining funds. Loans under this subpart are subject to
the provisions of Sec. 1942.17 (p)(6) of subpart A of this part 1942.
[52 FR 43726, Nov. 16, 1987; 52 FR 47097, Dec. 11, 1987]
Sec. 1942.128 Borrower accounting methods, management reports and audits.
(a) Loans under this subpart are subject to the provisions of Sec.
1942.17(q) of subpart A of this part 1942 except as provided in this
section.
(b) Borrowers with annual incomes not exceeding $100,000 may, with
concurrence of the District Director, use Form FmHA or its successor
agency under Public Law 103-354 1942-53, ``Cash Flow Report,'' instead
of page one of schedule one and schedule two of Form FmHA or its
successor agency under
[[Page 219]]
Public Law 103-354 442-2, ``Statement of Budget, Income, and Equity.''
When used for budgeting, the cash statement should be projected for the
upcoming fiscal year. When used for quarterly or annual reports, the
cash flow report should include current year projections and actual data
for the prior year, the quarter just ended, and the current year to
date.
Sec. 1942.129 Borrower supervision and servicing.
Loans under this subpart are subject to the provisions of Sec.
1942.17(r) of subpart A of this part 1942 and subpart E of part 1951 of
this chapter.
Sec. Sec. 1942.130-1942.131 [Reserved]
Sec. 1942.132 Subsequent loans.
Subsequent loans will be processed under this subpart.
Sec. 1942.133 Delegation and redelegation of authority.
Loan approval authority is in subpart A of part 1901 of this
chapter. State Directors may delegate approval authority to District
Directors to approve fire and rescue loans regardless of whether
authority to approve other community facility loans is delegated. Except
for loan approval authority, District Directors may redelegate their
duties to qualified staff members.
Sec. 1942.134 State supplements and guides.
State Directors will obtain National Office clearance for all State
supplements and guides under FmHA Instruction 2006-B (available in any
FmHA or its successor agency under Public Law 103-354 Office).
(a) State supplements. State Directors may supplement this subpart
to meet State and local laws and regulations and to provide for orderly
application processing and efficient service to applicants. State
supplements shall not contain any requirements pertaining to bids,
contract awards, and materials more restrictive than those in this
subpart.
(b) State guides. State Directors may develop guides for use by
applicants if the guides to this subpart and subpart A of part 1942 are
not adequate. State Directors may prepare guides for items needed for
the application; items necessary for the docket; and items required
prior to loan closing or construction starts.
Sec. Sec. 1942.135-1942.149 [Reserved]
Sec. 1942.150 OMB control number.
The collection of information requirements in this regulation have
been approved by the Office of Management and Budget and have been
assigned OMB control number 0575-0120.
Subparts D-F [Reserved]
Subpart G_Rural Business Enterprise Grants and Television Demonstration
Grants
Authority: 7 U.S.C. 1989; delegation of authority by the Secretary
of Agriculture, 7 CFR 2.23; delegation of authority by the Assistant
Secretary for Rural Development, 7 CFR 2.70; 5 U.S.C. 301.
Source: 45 FR 73637, Nov. 6, 1980, unless otherwise noted.
Sec. 1942.301 Purpose.
This subpart outlines Farmers Home Administration (FmHA) or its
successor agency under Public Law 103-354 policies and authorizations
and sets forth procedures for making grants to finance and facilitate
development of private business enterprises. Any processing or servicing
activity conducted pursuant to this subpart involving authorized
assistance to FmHA or its successor agency under Public Law 103-354
employees, members of their families, known close relatives, or business
or close personal associates, is subject to the provisions of subpart D
of part 1900 of this chapter. Applicants for this assistance are
required to identify any known relationship or association with an FmHA
or its successor agency under Public Law 103-354 employee.
[53 FR 30247, Aug. 11, 1988, as amended at 58 FR 226, Jan. 5, 1993]
Sec. 1942.302 Policy.
(a) The grant program will be used to support the development of
small and emerging private business enterprises in rural areas.
[[Page 220]]
(b) FmHA or its successor agency under Public Law 103-354 officials
will maintain liaison with officials of other federal, state, regional
and local development agencies to coordinate related programs to achieve
rural development objectives.
(c) FmHA or its successor agency under Public Law 103-354 officials
shall cooperate with appropriate State agencies in making grants that
support State strategies for rural area development.
(d) Funds allocated for use in accordance with this subpart are also
to be considered for use of Indian tribes within the State regardless of
whether State development strategies include Indian reservations within
the State's boundaries. Indians residing on such reservations must have
equal opportunity along with other rural residents to participate in the
benefits of these programs. This includes equal application of outreach
activities of FmHA or its successor agency under Public Law 103-354
County and District Offices.
[53 FR 30247, Aug. 11, 1988]
Sec. 1942.303 Authorities, delegation, and redelegation.
The State Director is responsible for implementing the authorities
contained in this subpart and to issue State supplements redelegating
these authorities to appropriate FmHA or its successor agency under
Public Law 103-354 employees. Grant approval authorities are contained
in subpart A of part 1901 of this chapter.
Sec. 1942.304 Definitions.
Project. For rural business enterprise grants, the result of the use
of program funds, i.e., a facility whether constructed by the applicant
or a third party from a loan made with grant funds, technical
assistance, startup operating costs, or working capital. A revolving
fund established in whole or in part with grant funds will also be
considered a project for the purpose of Intergovernmental and
Environmental Review under Sec. 1942.310 (b) and (c), of this subpart
as well as the specific uses of the revolving funds. For television
demonstration grants, television programming developed on issues of
importance to farmers and rural residents.
Regional Commission grants. Grants made from funds made available to
FmHA or its successor agency under Public Law 103-354 by the Appalachian
Regional Commission (ARC) or other Federal Regional Commissions
designated under title V of the Public Works and Economic Development
Act of 1965.
Rural and Rural Area. Any area other than a city or town that has a
population of greater than 50,000 inhabitants and the urbanized area
contiguous and adjacent to such a city or town according to the latest
decennial census of the United States.
Rural Business Enterprise (RBE) grants. Grants made to finance and
facilitate development of small and emerging private business
enterprises in rural areas. Grants are made from FmHA or its successor
agency under Public Law 103-354 funds under authority of the
Consolidated Farm and Rural Development Act, as amended, sec. 310B(c) (7
U.S.C. 1932).
Small and emerging private business enterprise. Any private business
which will employ 50 or fewer new employees and has less than $1 million
in projected gross revenues.
Technical Assistance. A function performed for the benefit of a
private business enterprise and which is a problem solving activity,
such as market research, product and/or service improvement, feasibility
study, etc.
Television demonstration program. Grants made for television
programming developed to demonstrate the effectiveness of providing
information on agriculture and other issues of importance to farmers and
other rural residents. Grants are made from FmHA or its successor agency
under Public Law 103-354 funds under authority of the Consolidated Farm
and Rural Development Act, as amended, sec. 310B(j) (7 U.S.C. 1932).
[57 FR 33099, July 27, 1992, as amended at 66 FR 27014, May 16, 2001; 67
FR 77908, Dec. 20, 2002]
Sec. 1942.305 Eligibility and priority.
(a) Eligibility. (1) RBE grants may be made to public bodies and
private nonprofit corporations serving rural areas.
[[Page 221]]
Public bodies include States, counties, cities, townships, and
incorporated town and villages, boroughs, authorities, districts, and
Indian tribes on Federal and State reservations and other Federally
recognized Indian Tribal groups in rural areas.
(2) The end result of the project must finance or develop a small
and emerging private business enterprise. The small business receiving
assistance must meet the definition contained in Sec. 1942.304.
However, if the small and emerging private business enterprise is an
eligible nonprofit entity or other tax-exempt organization located in a
city, town or unincorporated area with a population of 5,000 or less and
has a principal office on land of an existing or former Native American
reservation, the small and emerging private business enterprise is
exempt from meeting the definition contained in Sec. 1942.304.
(3) Regional Commission Grant applicants must meet eligibility
requirements of the Regional Commission and also of the Agency, in
accordance with paragraph (a)(1) of this section, for the Agency to
administer the Regional Commission Grant under this subpart.
(4) Television demonstration grants may be made to statewide,
private, nonprofit, public television systems whose coverage is
predominantly rural. An eligible applicant must be organized as a
private, nonprofit, public television system, licensed by the Federal
Communications Commission, and operated statewide and within a coverage
area that is predominantly rural.
(b) Project selection process. The following paragraphs indicate
items and conditions which must be considered in selecting RBE
applications for further development. When ranking eligible RBE
applications for consideration for limited funds, FmHA or its successor
agency under Public Law 103-354 officials must consider the priority
items met by each RBE application and the degree to which those
priorities are met, and apply good judgment. Due to the small number of
applicants eligible for television demonstration grants, such applicants
will not compete for priority points against RBE applicants.
(1) Applications. The application and supporting information
submitted with it will be considered in determining the proposed
project's priority for available funds.
(2) State Office review. All applications will be reviewed and
scored for funding priority. Eligible applicants that cannot be funded
should be advised by the State Director that funds are not available,
and requested to advise whether they wish to have their application
maintained in an active file for future consideration.
(3) Selection priorities. The priorities described below will be
used by the State Director to rate applications. Points will be
distributed as indicated in paragraphs (b)(3) (i) through (iv) of this
section. A copy of the score sheet should be placed in the case file for
future reference.
(i) Population. Proposed project(s) will primarily be located in a
community of (1) between 15,000 and 25,000 population--5 points, (2)
between 5,000 and 15,000 population--10 points, (3) under 5,000
population--15 points.
(ii) Economic conditions. (A) Proposed project(s) will primarily be
located in areas where the unemployment rate (1) exceeds the State rate
by 25% or more--20 points, (2) exceeds the State rate by less than 25%--
10 points, (3) is equal to or less than the State rate--0 points.
(B) Proposed project(s) will primarily be located in areas where
Median Household Income (MHI) as prescribed by section 673(2) of the
Community Services Block Grant Act (42 U.S.C. 9902(2)) for a family of 4
for the State is: (1) Less than poverty line--25 points, (2) more than
poverty line but less than 85% of State MHI--15 points, (3) between 85%
and 100% of State MHI--10 points, (4) equal or greater than State MHI--0
points.
(iii) Experience. Applicant has evidence of at least 5 years of
successful experience in the type of activity proposed in the
application for funds under this subpart. Evidence of successful
experience may be (1) a description of experience supplied and certified
by the applicant, or (2) a letter of support from appropriate local
elected officials explaining the applicant's experience. Experience--10
points
(iv) Other. (A) Applicant has evidence that small business
development will
[[Page 222]]
occur by startup or expansion as a result of the activities to be
carried out under the grant. Written evidence of commitment by small
business must be provided to FmHA or its successor agency under Public
Law 103-354--25 points.
(B) Applicant has evidence of substantial commitment of funds from
nonfederal sources for proposed project. An authorized representative of
the source organization of the nonfederal funds must provide evidence
that the funds are available and will be used for the proposed project.
More than 50 percent of the project costs from nonfederal sources--15
points; more than 25 percent, but less than 50 percent of project costs
from nonfederal sources--10 points; between 5 percent and 25 percent of
project costs from nonfederal sources--5 points.
(C) For a grant to establish a revolving fund, the applicant
provides evidence to FmHA or its successor agency under Public Law 103-
354 through loan applications or letters from businesses that the loans
are needed by small emerging businesses in the proposed project area--25
points.
(D) The anticipated development, expansion, or furtherance of
business enterprises as a result of the proposed project will create
and/or save jobs associated with the affected businesses. The number of
jobs must be evidenced by a written commitment from the business to be
assisted. One job per each $10,000 or less in grant funds expended--10
points. One job per each $25,000 to $10,000 in grant funds expended--5
points.
(E) The proposed grant project is consistent with, and does not
duplicate, economic development activities for the project area under an
existing community or economic development plan covering the project
area. If no local plan is in existence for the project area, an areawide
plan may be used. The plan used must be adopted by the appropriate
governmental officials/entities as the area's community or economic
development plan. Appropriate plan references and copies of appropriate
sections of the plan, as well as evidence of plan adoption by
appropriate governmental officials, should be provided to FmHA or its
successor agency under Public Law 103-354. Project is reflected in a
plan--5 points.
(F) Grant projects utilizing funds available under this subpart of
less than $100,000--25 points, $100,000 to $200,000--15 points, more
than $200,000 but not more than $500,000--10 points.
(G) The project will assist a small and emerging private business
enterprise as described in Sec. 1942.305 (a)(2) of this subpart--10
points.
(v) Discretionary. In certain cases, when a grant is an initial
grant for funding under this subpart and is not more than $500,000, FmHA
or its successor agency under Public Law 103-354 may assign up to 50
points in addition to those that may be assigned in paragraphs (b)(3)(i)
through (iv) of this section. Use of these points must include a written
justification, such as geographic distribution of funds, criteria which
will result in substantial employment improvement, mitigation of
economic distress of a community through the creation or saving of jobs,
or emergency situations. For grants of less than $100,000--50 points;
$100,000 to $200,000--30 points; more than $200,000, but not more than
$500,000--20 points.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30247, Aug. 11, 1988; 55
FR 134, Jan. 3, 1990; 57 FR 33099, July 27, 1992; 57 FR 35627, Aug. 10,
1992; 67 FR 77908, Dec. 20, 2002]
Sec. 1942.306 Purposes of grants.
(a) Grant funds may be used to finance and/or develop small and
emerging private business enterprises in rural areas including, but not
limited to, the following:
(1) Acquisition and development of land, easements and rights-of-
way.
(2) Construction, conversion, enlargement, repairs or modernization
of buildings, plants, machinery, equipment, access streets and roads,
parking areas, utilities, and pollution control and abatement
facilities.
(3) Loans for startup operating cost and working capital.
(4) Technical assistance for private business enterprises.
(5) Reasonable fees and charges for professional services necessary
for the planning and development of the project including packaging.
Services
[[Page 223]]
must be provided by individuals licensed in accordance with appropriate
State accreditation associations.
(6) Refinancing of debts exclusive of interest incurred by or on
behalf of an association before an application for a grant when all of
the following exist:
(i) The debts were incurred for the facility or part thereof or
service to be installed or improved with the grant, and
(ii) Arrangements cannot be made with the creditors to extend or
modify the terms of the existing debt.
(7) Providing financial assistance to third parties through a loan.
(8) Training, when necessary, in connection with technical
assistance.
(9) Production of television programs to provide information on
issues of importance to farmers and rural residents.
(10) Create, expand, and operate rural distance learning networks or
rural learning programs, that provide educational instruction or job
training instruction related to potential employment or job advancement
for adult students.
(b) Grants, except grants for television demonstration programs, may
be made only when there is a reasonable prospect that they will result
in development of small and emerging private business enterprises.
(c) FmHA or its successor agency under Public Law 103-354 grant
funds may be used jointly with funds furnished by the grantee or from
other sources including FmHA or its successor agency under Public Law
103-354 loan funds. Pursuant to Pub. L. 95-334, other departments,
agencies, and executive establishments of the Federal Government may
participate and provide financial and technical assistance jointly with
FmHA or its successor agency under Public Law 103-354. The amount of
participation by the other department, agency, or executive
establishment shall only be limited by its authorities other than
authorities which impose restrictions on joint financing.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30248, Aug. 11, 1988; 57
FR 33100, July 27, 1992; 59 FR 26587, May 23, 1994]
Sec. 1942.307 Limitations on use of grant funds.
(a) Funds will not be used:
(1) To produce agriculture products through growing, cultivation and
harvesting either directly or through horizontally integrated livestock
operations except for commercial nurseries, timber operations or limited
agricultural production related to technical assistance projects.
(2) To finance comprehensive areawide type planning. This does not
preclude the use of grant funds for planning for a given project.
(3) For loans by grantees when the rates, terms and charges for
those loans are not reasonable or would be for purposes not eligible
under Sec. 1942.306 of this subpart.
(4) For programs operated by cable television systems.
(5) To fund a part of a project which is dependent on other funding
unless there is a firm commitment of the other funding to ensure
completion of the project.
(6) To pay for technical assistance as defined in this subpart which
duplicates assistance provided to implement an action plan funded by the
Forest Service (FS) under the National Forest-Dependent Rural
Communities Economic Diversification Act for 5 continuous years from the
date of grant approval by the FS. To avoid duplicate assistance, the
grantee shall coordinate with FS and Rural Business-Cooperative Service
(RBS) to ascertain if a grant has been made in a substantially similar
geographical or defined local area in a State for technical assistance
under the above program. The grantee will provide documentation to FS
and RBS regarding the contact with each agency. Under its program, the
FS assists rural communities dependent upon national forest resources by
establishing rural forestry and economic diversification action teams
which prepare action plans. Action plans are intended to provide
opportunities to promote economic diversification and enhance local
economies dependent upon national forest resources.
(b) At least 51 percent of the outstanding interest in the project
has membership or is owned by those who are either citizens of the
United States
[[Page 224]]
or reside in the United States after being legally admitted for
permanent residence.
[53 FR 30248, Aug. 11, 1988, as amended at 55 FR 135, Jan. 3, 1990; 57
FR 33100, July 27, 1992; 60 FR 52839, Oct. 11, 1995]
Sec. 1942.308 Regional Commission grants.
(a) Grants are sometimes made by Federal Regional Commissions for
projects eligible for FmHA or its successor agency under Public Law 103-
354 assistance. FmHA or its successor agency under Public Law 103-354
has agreed to administer such funds in accordance with FmHA or its
successor agency under Public Law 103-354 regulations and the
requirements of the commission.
(b) The transfer of funds from a Regional Commission to FmHA or its
successor agency under Public Law 103-354 will be based on specific
applications determined to be eligible for an authorized purpose in
accordance with the requirements of FmHA or its successor agency under
Public Law 103-354 and the Regional Commission.
(c) ARC is authorized under the Appalachian Regional Development Act
of 1965 (40 U.S.C. 1-405), as amended, to serve the Appalachian region.
ARC grants are handled in accordance with the ARC Agreement which
applies to all ARC grants administered by the Agency. Therefore, a
separate Project Management Agreement between the Agency and ARC is not
needed for each ARC grant.
(d) Other Federal Regional Commissions are those authorized under
title V of the Public Works and Economic Development Act of 1965. Grants
by these commissions are handled in accordance with a separate Project
Management Agreement between the respective Regional Commission and FmHA
or its successor agency under Public Law 103-354 for each Commission
grant administered by FmHA or its successor agency under Public Law 103-
354 (Guide 1 of this subpart). The agreement should be prepared by the
FmHA or its successor agency under Public Law 103-354 State Director and
the appropriate Commission official when the State Director receives a
notice from the Commission of the amount of the grant to be made.
[45 FR 73637, Nov. 6, 1980, as amended at 62 FR 33510, June 19, 1997]
Sec. 1942.309 [Reserved]
Sec. 1942.310 Other considerations.
(a) Civil rights compliance requirements. All grants made under this
subpart are subject to the requirements of title VI of the Civil Rights
Act of 1964, which prohibits discrimination on the bases of race, color,
and national origin as outlined in subpart E of part 1901 of this
chapter. In addition, the grants made under this subpart are subject to
the requirements of section 504 of the Rehabilitation Act of 1973, which
prohibits discrimination on the basis of handicap, the requirements of
the Age Discrimination Act of 1975, which prohibits discrimination on
the basis of age and title III of the Americans with Disabilities Act,
Public Law 101-336, which prohibits discrimination on the basis of
disability by private entities in places of public accommodations. When
FmHA or its successor agency under Public Law 103-354 is administering a
Federal Regional Commission grant and no FmHA or its successor agency
under Public Law 103-354 RBE/television demonstration grant funds are
involved, the Federal Regional Commission may make its own determination
of compliance with the above Acts, unless FmHA or its successor agency
under Public Law 103-354 is designated compliance review
responsibilities. FmHA or its successor agency under Public Law 103-354
shall in all cases be made aware of any findings of discrimination or
noncompliance with the requirements of the above Acts.
(b) Environmental requirements--(1) General applicability. Unless
specifically modified by this section, the requirements of subpart G of
part 1940 of this chapter apply to this subpart. FmHA or its successor
agency under Public Law 103-354 will give particular emphasis to
ensuring compliance with the environmental policies contained in
Sec. Sec. 1940.303 and 1940.304 in subpart G of part 1940 of this
chapter. Although the purpose of the grant program established by this
subpart is to improve business, industry and employment in
[[Page 225]]
rural areas, this purpose is to be achieved, to the extent practicable,
without adversely affecting important environmental resources of rural
areas such as important farmlands and forest lands, prime rangelands,
wetlands and floodplains. Prospective recipients of grants, therefore,
must consider the potential environmental impacts of their applications
at the earliest planning stages and develop plans, grants and projects
that minimize the potential to adversely impact the environment.
(2) Technical assistance. The application for a technical assistance
project is generally excluded from FmHA or its successor agency under
Public Law 103-354's environmental review process by Sec.
1940.310(e)(1) of subpart G of part 1940 of this chapter. However, as
further specified in Sec. 1940.330 of subpart G of part 1940 of this
chapter, the grantee for a technical assistance grant, in the process of
providing technical assistance, must consider the potential
environmental impacts of the recommendations provided to the recipient
of the technical assistance.
(3) Applications for Direct Construction Project. The application by
a potential grantee who intends to directly use grant funds for a
nontechnical assistance project, such as a construction project, shall
be reviewed and processed under the applicable requirements of subpart G
of part 1940 of this chapter.
(4) Applications for Grants to Provide Financial Assistance to Third
Party Recipients. As part of the preapplication, the applicant must
provide a complete Form FmHA or its successor agency under Public Law
103-354 1940-20, ``Request for Environmental Information,'' for each
project specifically identified in its plan to provide financial
assistance to third parties who will undertake eligible projects with
such assistance. FmHA or its successor agency under Public Law 103-354
will review the preapplication, supporting materials and any required
Forms FmHA 1940-20 and initiate a Class II assessment for the
preapplication. This assessment will focus on the potential cumulative
impacts of the projects as well as any environmental concerns or
problems that are associated with individual projects and that can be
identified at this time from the information submitted. Because FmHA or
its successor agency under Public Law 103- 354's approval of this type
of grant application does not constitute FmHA or its successor agency
under Public Law 103-354's commitment to the use of grant funds for any
identified third party projects (see Sec. 1942.316 of this subpart), no
public notification requirements for a Class II assessment will apply to
the preapplication. After the grant is approved, each third party
project to be assisted under the grant will undergo the applicable
environmental review and public notification requirements in subpart G
of part 1940 of this chapter, prior to FmHA or its successor agency
under Public Law 103-354 providing its consent to the grantee to assist
the third party project. If the preapplication reflects only one
specific project which is specifically identified as the third party
recipient for financial assistance, FmHA or its successor agency under
Public Law 103-354 may perform the appropriate environmental assessment
in accordance with the requirements of subpart G of part 1940 of this
chapter, and forego initiating a Class II assessment with no public
notification. However, the applicant must be advised that if the
recipient or project changes after the grant is approved, the project to
be assisted under the grant will undergo the applicable environmental
review and public notification requirements in subpart G of part 1940 of
this chapter.
(5) Combined Applications. Whenever an applicant files a
preapplication that includes a direct construction project and a plan to
provide financial assistance to third parties who will undertake
eligible projects, the following environmental requirements will apply.
(i) The proposed direct construction project(s) will be reviewed
under the requirements of paragraph (b)(3) of this section prior to
authorization of the application.
(ii) The plan to provide financial assistance to thrid parties will
be reviewed and processed under the requirements of paragraph (b)(4) of
this
[[Page 226]]
section. Additionally, the Class II assessment required for the plan
shall address and analyze the cumulative impacts of all proposed
projects, direct or third party, identified within the preapplication.
(c) Excess capacity or transfer of employment. (1) If a proposed
grant is for more than $1 million and will increase direct employment by
more than 50 employees, the applicant will be requested to provide a
written indication to FmHA or its successor agency under Public Law 103-
354 which will enable FmHA or its successor agency under Public Law 103-
354 to determine that the proposal will not result in a project which is
calculated to, or likely to, result in:
(i) The transfer of any employment or business activity from one
area to another (this limitation shall not prohibit assistance for the
expansion of an existing business entity through the establishment of a
new branch, affiliate, or subsidiary of such entity if the expansion
will not result in an increase in the unemployment in the area of
original location or in any other area where such entity conducts
business operations unless there is reason to believe that such
expansion is being established with the intention of closing down the
operations of the existing business entity in the area of its original
location or in any other area where it conducts such operations), or
(ii) An increase in the production of goods, materials, or
commodities or the availability of services or facilities in the area,
when there is not sufficient demand for such goods, materials,
commodities, services, or facilities, to employ the efficient capacity
of existing competitive commercial or industrial enterprises, unless
such financial or other assistance will not have an adverse effect upon
existing competitive enterprises in the area. The applicant's written
indication will consist of a resolution from the applicant and Form FmHA
or its successor agency under Public Law 103-354 449-22, ``Certificate
of Non-Relocation and Market and Capacity Information Report,'' from
each existing and future occupant of the site. The applicant may use
guide 2 of this subpart as an example in preparing the resolution.
Future occupants of the site must be certified by Department of Labor
(DOL) as outlined in paragraph (c)(3) of this section for a period of 3
years after the initial certification by DOL.
(2) The State Director will check each document for completeness and
accuracy and, submit nine copies of each to the National Office for
forwarding to DOL. The submittal to the National Office should be
accompanied by a cover memorandum giving the amount and purpose of the
grant. Information should not be submitted directly to DOL from the
applicant or the State Office.
(3) Grants shall not be made if the Secretary of Labor certifies
within 30 days after the matter has been submitted by the Secretary of
Agriculture that the provisions of Sec. 1942.310(c)(1) of this subpart
have not been complied with. Information for obtaining this
certification will be submitted in writing by the applicant to FmHA or
its successor agency under Public Law 103-354. The information will be
submitted to DOL by the FmHA or its successor agency under Public Law
103-354 National Office. Grant approval may be given and funds may be
obligated subject to the DOL certification being received provided FmHA
or its successor agency under Public Law 103-354 has made its own
separate determinations of (c)(1)(i) and (ii) of this section when the
project is in excess of $1 million and affects over 50 employees.
(4) When a grant is being administered for a Federal Regional
Commission and no FmHA or its successor agency under Public Law 103-354
grant funds are being used, the requirements for DOL determinations may
be waived upon written request from the Commission. If the Commission so
desires, the request will be included in the letter from the Commission
to FmHA or its successor agency under Public Law 103-354 that gives
notice of transfer of funds and conditions under which the funds are to
be made available to the grantee. In such cases the letter of conditions
from FmHA or its successor agency under Public Law 103-354 to the
grantee will not include the requirement for DOL determinations.
(d) Management assistance. Grant recipients will be supervised as
necessary
[[Page 227]]
to assure that projects are completed in accordance with approved plans
and specifications and that funds are expended for approved purposes.
Grants made under this subpart will be administered under and are
subject to 7 CFR part 3015, 7 CFR part 3016, and 7 CFR part 3017, as
appropriate, and established FmHA or its successor agency under Public
Law 103-354 guidelines.
(e) National Historic Preservation Act of 1966. All projects will be
in compliance with the National Historic Preservation Act of 1966 in
accordance with subpart F of part 1901 of this chapter.
(f) Uniform Relocation and Real Property Acquisition Policies Act.
All projects must comply with the requirements set forth in title 7,
subtitle A, part 21 of the Code of Federal Regulation.
(g) Floodplains and wetlands. All projects must comply with
Executive Order 11988 ``Floodplain Management'' and Executive Order
119900 ``Protection of Wetlands.''
(h) Flood or mudslide hazard area precautions. If the grantee
financed project is in a flood or mudslide area, then flood or mudslide
insurance must be provided.
(i) Termination of Federal requirements. Once the grantee has
provided assistance to projects from a revolving fund, in an amount
equal to the grant provided by FmHA or its successor agency under Public
Law 103-354, the requirements imposed on the grantee shall not be
applicable to any new projects thereafter financed from the revolving
fund. Such new projects shall not be considered as being derived from
Federal funds.
(7 U.S.C. 1989; 42 U.S.C. 1480; 5 U.S.C. 301; sec. 10, Pub. L. 93-357,
88 Stat. 392; 7 CFR 2.23; 7 CFR 2.70)
[45 FR 73637, Nov. 6, 1980, as amended at 47 FR 54423, Dec. 3, 1982; 49
FR 3760, Jan. 30, 1984; 53 FR 30248, Aug. 11, 1988; 55 FR 135, Jan. 3,
1990; 57 FR 33100, 33101, July 27, 1992]
Sec. 1942.311 Application processing.
(a) Preapplications and applications. (1) The application review and
approval procedures outlined in Sec. 1942.2 of subpart A of part 1942
of this chapter will be followed as appropriate. The State Director
should assist the applicant in application assembly and processing. The
applicant shall use SF 424.1, ``Application for Federal Assistance (For
Non-Construction),'' or SF 424.2, ``Application for Federal Assistance
(For Construction),'' as applicable, when requesting financial
assistance under this program.
(2) Each application for assistance will be carefully reviewed in
accordance with the priorities established in Sec. 1942.305(b)(3) of
this subpart. A priority rating will be assigned to each application.
Applications selected for funding will be based on the priority rating
assigned each application and the total funds available. All
applications submitted for funding should contain sufficient information
to permit FmHA or its successor agency under Public Law 103-354 to
complete a thorough priority rating.
(b) Review of decision. When the District Director is informed that
favorable action will not be taken on a preapplication or application,
the applicant will be notified in writing of the reasons why the request
was not favorably considered. The notification to the applicant will
state that a review of this decision by FmHA or its successor agency
under Public Law 103-354 may be requested by the applicant in accordance
with subpart B of part 1900 of this chapter.
[45 FR 73637, Nov. 6, 1980, as amended at 50 FR 33332, Aug. 19, 1985; 53
FR 30249, Aug. 11, 1988; 55 FR 135, Jan. 3, 1990; 57 FR 33101, July 27,
1992]
Sec. 1942.312 [Reserved]
Sec. 1942.313 Plan to provide financial assistance to third parties.
(a) For applications involving establishment of a revolving fund to
provide financial assistance to third parties the applicant shall
develop a plan which outlines the purpose and administration of the
fund. The plan will include:
(1) Planned projects to be financed.
(2) Sources of all non RBE funds.
(3) Amount of technical assistance (if any).
(4) Purpose of the loans.
(5) Number of jobs to be created/saved with each project.
(6) Project priority and length of time involved in completion of
each project.
[[Page 228]]
(7) Other information required by the State Office.
(b) Each third party project receiving funds will be reviewed for
eligibility. When the applicant does not have a list of projects to be
completed, the applicant should advise the FmHA or its successor agency
under Public Law 103-354 at the time a preapplication is submitted.
[55 FR 135, Jan. 3, 1990, as amended at 57 FR 33101, July 27, 1992]
Sec. 1942.314 Grants to provide financial assistance to third parties,
television demonstration projects, and technical assistance programs.
For applications involving a purpose other than a construction
project to be owned by the applicant, the applicant shall develop a
Scope of Work. The Scope of Work will be used to measure the performance
of the grantee. As a minimum, the Scope of Work should contain the
following:
(a) The specific purposes for which grant funds will be utilized,
i.e., Technical Assistance, Revolving Fund, etc.
(b) Timeframes or dates by which action surrounding the use of funds
will be accomplished.
(c) Who will be carrying out the purpose for which the grant is made
(key personnel should be identified).
(d) How the grant purposes will be accomplished.
(e) Documentation regarding the availability and amount of other
funds to be used in conjunction with the funds from the RBE/television
demonstration program.
(f) For grants involving a revolving fund the scope of work should
include those items listed in paragraphs (a) through (e) of this section
as well as the following:
(1) Information which will establish/identify the need for the
revolving loan fund.
(2) Financial statements which will demonstrate the financial
ability of the applicant to administer the revolving loan fund. As a
minimum the financial statements will include:
(i) Balance sheet
(ii) Income statement
(3) Detail on the applicants experience in operating a revolving
loan fund.
(g) For technical assistance and television demonstration program
projects, the scope of work should include a budget based on the budget
contained in the application, modified or revised as appropriate, which
includes salaries, fringe benefits, consultant costs, indirect costs,
and other appropriate direct costs for the project.
[55 FR 135, Jan. 3, 1990, as amended at 57 FR 33101, July 27, 1992]
Sec. 1942.315 Docket preparation and Letter of Conditions.
(a) The applicable provisions of Sec. 1942.5 of subpart A of part
1942 of this chapter relating to preparation of loan dockets will be
followed in preparing grant dockets.
(b) The State Director or the State Director's designated
representative will prepare a Letter of Conditions outlining the
conditions under which the grant will be made. It will include those
matters necessary to assure that the proposed development is completed
in accordance with approved plans and specifications, that grant funds
are expended for authorized purposes, and that the terms of the Scope of
Work and requirements as prescribed in parts 3015 and 3016 of 7 CFR are
complied with. The Letter of Conditions will be addressed to the
applicant, signed by the State Director or other designated FmHA or its
successor agency under Public Law 103-354 representative, and mailed or
handed to appropriate applicant officials. Each Letter of Conditions
will contain the following paragraphs.
``This letter established conditions which must be understood and
agreed to by you before further consideration may be given to the
application.''
``This letter is not to be considered as grant approval nor as a
representation as to the availability of funds. The docket may be
completed on the basis of a grant not to exceed $------.''
``Please complete and return the attached Form FmHA or its successor
agency under Public Law 103-354 1942-46, `Letter of Intent to Meet
Conditions,' if you desire further consideration be given your
application.''
Other items in the Letter of Conditions should include those
relative to: Maximum amount of grant, contributions, final plans and
specifications,
[[Page 229]]
construction contract documents and bidding, required project audit,
evidence of compliance with all applicable Federal, State, and local
requirements, closing instructions, DOL certifications, compliance with
any required environmental mitigation measures, and other requirements
including those of Regional Commissions when a grant is being made by a
Regional Commission.
[50 FR 7296, Feb. 22, 1985, as amended at 53 FR 30249, Aug. 11, 1988; 57
FR 33101, July 27, 1992]
Sec. 1942.316 Grant approval, fund obligation and third party financial
assistance.
(a) Grant approval. FmHA or its successor agency under Public Law
103-354 State Directors are authorized to approve grants made in
accordance with this subpart and subpart A of part 1901 of this chapter.
(b) Fund obligation and approval announcement. Funds will be
obligated and approval announcement made in accordance with the
provisions of Sec. 1942.5(d) of subpart A of part 1942 of this chapter.
(c) Third party financial assistance. Approval of a grant to an
applicant who will use grant funds to provide financial assistance to a
third party does not constitute approval of the projects financed by the
grantee. The review, approval and disbursement of funds for specific
projects financed by grantees will be completed in accordance with
applicable sections of this subpart.
[45 FR 73637, Nov. 6, 1980, as amended at 47 FR 36413, Aug. 20, 1982; 53
FR 30250, Aug. 11, 1988]
Sec. Sec. 1942.317-1942.320 [Reserved]