[Federal Register Volume 59, Number 144 (Thursday, July 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-18410]


[Federal Register: July 28, 1994]


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DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

7 CFR Part 1703


Rural Economic Development Loan and Grant Program

AGENCY: Rural Electrification Administration, USDA.

ACTION: Proposed rule.

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SUMMARY: The Rural Electrification Administration (REA) is proposing to 
amend its recently published rule for the Rural Economic Development 
Loan and Grant Program by adding a new provision to the selection of 
projects to be funded under the existing rule. The new provision will 
enhance the potential of funding for applications from areas that: Were 
recently designated by the President as natural disaster areas; have 
experienced severe economic dislocation due to the loss, removal, or 
closing of a major source of employment; have experienced long-term and 
severe economic deterioration, demonstrated by severe unemployment or a 
high percentage of population out-migration; and have been designated 
as a Rural Empowerment Zone or Rural Enterprise Community.

DATES: Written comments must be received by REA or carry a postmark or 
equivalent no later than August 29, 1994.

ADDRESSES: Submit an original and three copies of all written comments 
to Blaine D. Stockton, Jr., Assistant Administrator, Economic 
Development and Technical Services, Rural Electrification 
Administration, Room 4025, South Building, U.S. Department of 
Agriculture, 14th and Independence Avenue SW., Washington, DC 20250-
1500 (7 CFR part 1700). The public may inspect written comments on this 
proposed rule in room 4025 of the South Building between 8:30 a.m. and 
5 p.m. on official workdays (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Blaine D. Stockton, Jr., Assistant 
Administrator, Economic Development and Technical Services, Rural 
Electrification Administration, telephone number (202) 720-9552.

SUPPLEMENTARY INFORMATION: This proposed rule has been determined to be 
not significant for purposes of Executive Order 12866 and therefore has 
not been reviewed by the Office of Management and Budget. This proposed 
rule has been reviewed under Executive Order 12778, Civil Justice 
Reform. This proposed rule: (1) Will not preempt any State or local 
laws, regulations, or policies; (2) Will not have any retroactive 
effect; and (3) Will not require administrative proceedings before 
parties may file suit challenging the provisions of this rule.
    In compliance with the Regulatory Flexibility Act, the 
Administrator certifies that this action would not have a significant 
economic impact on a substantial number of small entities as defined in 
the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Based on current 
and historical funding levels for this program and a projected average 
size loan and/or grant in the range of $300,000 to $400,000, it is 
estimated that 50 to 60 loans and/or grants will be made nationwide 
each year under the existing rule. Applicants whose rural development 
projects are enhanced by this action are projected to be less numerous, 
and therefore, the proposed rule will have a limited impact upon small 
businesses. Since credit will be channeled to areas which are generally 
underdeveloped and financially depressed, job creation and economic 
development resulting from newly emerging businesses and community 
facilities funded by REA will not pose undue competition or other 
adverse effects upon existing businesses. Therefore, this proposed rule 
will have no effect upon businesses or entities other than those to be 
funded through this program.
    In compliance with the Office of Management and Budget (OMB) 
regulations (5 CFR part 1320) implementing the Paperwork Reduction Act 
of 1980 (Pub. L. 96-511) and section 3504 of that Act, the information 
collection and recordkeeping requirements contained in this proposed 
rule have been approved by OMB under control number 0572-0090.
    Comments concerning these requirements should be directed to the 
Office of Information and Regulatory Affairs of OMB, Attention: Desk 
Officer for USDA, room 3201, NEOB, Washington, DC 20503.
    The Administrator has determined that this proposed rule will not 
significantly affect the quality of the human environment as defined by 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq). 
Therefore, this action does not require an environmental impact 
statement or assessment.
    The program is subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials, with the exception of applications for Project Feasibility 
Studies.
    This program is listed in the Catalog of Federal Domestic 
Assistance under No. 10.854, Rural Economic Development Loans and 
Grants. This catalog is available on a subscription basis from the 
Superintendent of Documents, United States Government Printing Office, 
Washington, DC 20402-9325.

Background

    REA published a final rule amending the Rural Economic Development 
Loan and Grant Program on March 14, 1994, (59 FR 11702) establishing 
procedures to approve and administer grants and grants in conjunction 
with zero-interest loans. REA is proposing this action to enhance the 
funding potential of Rural Economic Development Loan and Grant 
applications from economically devastated areas. REA intends to 
encourage applications from those rural communities where an acute need 
for economic development assistance is shown. The Administrator will 
have the discretion to designate special economic status under the 
Rural Economic Development Loan and Grant Program selection factors, 
adding up to 25 points to an applicant's score if at least one of the 
four following conditions exists in one or more county(ies) to be 
served by the proposed project.
    The first condition involves the designation of an area by the 
President of the United States as a natural disaster area. REA 
recognizes the crucial role of economic development organizations in 
rebuilding communities devastated by natural disasters. This proposed 
amendment would increase the possibility of selection of loans and 
grants from areas so designated by the President.
    The second condition is marked by economic dislocation, where the 
loss, removal, or closing of a major source or sources of employment in 
the most recent 3-year period has caused an increase of 2 percentage 
points or more in the area's unemployment rate compared with the period 
immediately before the dislocation. REA wishes to assist rural 
communities where the loss of a major employer(s) has caused an 
increase of 2 percentage points or more in the area's unemployment rate 
in the most recent 3-year period, including areas which have 
experienced military base closings due to U.S. Department of Defense 
budget cuts. REA also wishes to assist rural communities where there 
has been an increase of 2 percentage points or more in the area's 
unemployment rate in the most recent 3-year period as a result of 
Federal regulatory restrictions, including logging curtailment due to 
environmental restrictions of the U.S. Forest Service. REA has proposed 
the 2-percent rise in unemployment threshold and the 3-year time span 
based on criteria as currently utilized by the U.S. Department of 
Commerce Economic Development Administration (EDA) in its designation 
of redevelopment areas (13 CFR 302.5).
    The third condition is a state of chronic or long-term economic 
deterioration, marked by severe unemployment and out-migration. REA 
wants to make rural development resources more accessible to 
communities which have experienced long-term economic decline; thus, it 
has consulted with the USDA Economic Research Service (ERS) to 
determine the appropriate criteria for chronic or long-term economic 
deterioration. To receive special economic status under the third 
condition, applicants must document that local unemployment has been 
equal to or over 1.5 times the national average during 4 out of the 
most recent 5 years. The applicant, when calculating recent years' 
unemployment percentages, should compare county statistics with the 
national average unemployment for the corresponding year. For example, 
if the applicant provides unemployment statistics for 1989, 
calculations must compare the county's 1989 unemployment with the 
national average for 1989, and the 1990 county unemployment statistics 
with the National average for 1990, etc. REA believes that using 
unemployment statistics for 4 out of the 5 most recent years 
sufficiently documents a sustained or long-term unemployment problem.
    However, REA is aware that unemployment statistics alone do not 
provide a complete picture of the severity of economic deterioration. 
In areas where unemployed persons tend to migrate from, loss of 
population statistics are more accurate in determining long-term 
economic deterioration. Therefore, as an alternative to indicate 
special economic status, the applicant must show a 15% loss of 
population due to out-migration over the most recent 10-year decennial 
census. For example, borrowers applying during the year of the 
publication of this rule seeking special economic status under this 
condition would compare the 1980 Census to the 1990 Census in order to 
establish that a 15% loss of population has occurred. A threshold of 
15% population loss over 10-year period is indicative of a local 
economic situation which is acutely severe. Further, by taking into 
consideration both unemployment and out-migration, as proposed in this 
rule, a reasonable percentage of rural areas suffering from conditions 
of severe economic stagnation will be eligible for special economic 
status. County and National unemployment statistics will be based on 
those of the Bureau of Labor Statistics. Information showing the loss 
of population due to out-migration over the most recent 10-year 
decennial census will be based on the U.S. Bureau of the Census data.
    The fourth condition involves the designation of an area as a Rural 
Empowerment Zone or Rural Enterprise Community under the Empowerment 
Zone Program, the provisions of which were published at 59 FR 2686 
(January 18, 1994) (to be codified at 7 CFR part 25) implementing 
Section 13301 of the Omnibus Reconciliation Act of 1993, Public Law 
103-66, 26 U.S.C. 1391-1393. To coordinate rural development efforts 
with the Empowerment Zone Program, REA is proposing to give special 
economic status under the Rural Economic Development Loan and Grant 
Program to those areas designated as Rural Empowerment Zones or Rural 
Enterprise Communities. This provision will parallel efforts of other 
agencies in the Department of Agriculture in the Empowerment Zone 
Program and serve to increase rural development opportunities in those 
areas so designated.
    As a result of this proposed rule, REA encourages its borrowers to 
bring REA rural economic development resources to bear upon communities 
afflicted with the above economic conditions, utilizing zero-interest 
loans and grants and revolving loan funds to secure needed community 
infrastructure and/or to stimulate local economic development.
    Finally, three changes are proposed to clarify the final rule which 
was published March 14, 1994, amending the Rural Economic Development 
Loan and Grant Program. The final rule established procedures for 
administering grants and made several revisions with regard to eligible 
purposes for loan and grant funding. This proposed rule modifies the 
existing regulation in three areas as follows.
    First, this proposed rule reinstates the prohibition on funding 
community antenna television systems or facilities which was in effect 
prior to March 14, 1994, and eliminated by the March 14, 1994, final 
rule. In eliminating the prohibition, it was not REA's intent to fund 
projects solely for the purpose of establishing cable television 
entities to compete with existing cable television providers. Rather, 
the prohibition was lifted to allow REA flexibility to fund projects 
that provide a clear economic benefit to distressed rural areas, with 
an emphasis toward programming to provide specific educational and/or 
medical services. REA has received a number of inquiries regarding 
innovative proposals to transmit educational and medical programming in 
conjunction with wireless cable television services. For economically 
depressed areas with limited resources to maintain a system dedicated 
solely to educational and/or medical programming, a joint venture fully 
utilizing the transmitting capacity of community antenna television 
systems is a novel approach to providing needed distance educational 
and/or medical services, while providing economic development in areas 
without a cable television carrier.
    Accordingly, REA proposes through this proposed rule to revise 
Sec. 1703.20, Ineligible uses of zero-interest loans and grants, to 
reinstate the prohibition on funding community antenna television 
systems or facilities. However, Sec. 1703.17(d) of this proposed rule 
will provide the Administrator the discretion to fund community antenna 
television systems or facilities for select projects which meet all of 
the following criteria: (1) The proposed community antenna television 
system or facility is established in cooperation with a local 
educational and/or medical entity or entities to provide educational 
and/or medical programming which addresses specific needs of rural 
residents; (2) services to be provided by the proposed community 
antenna television systems or facilities are not available in the area 
to be served, or services are not being provided by the existing 
television programming carrier at an affordable cost to residents; and, 
(3) such community antenna systems or facilities will not present undue 
competition for existing television programming carriers in the area. 
The proposed rule requires the Borrower to clearly document the 
economic benefit to the proposed area to be served in accordance with 
the existing regulation, and meet the above three tests as provided in 
the proposed rule. Notwithstanding this, however, the Administrator 
will reserve the right to deny any application which proposes cable 
television and, in the Administrator's judgment, does not meet the 
three regulatory tests in the proposed rule.
    Second, REA proposes to revise the provisions for disbursement of 
grant funds to REA borrowers under the revolving loan provisions. The 
final rule published on March 14, 1994, Sec. 1703.22(e), requires funds 
to be disbursed on a reimbursement basis. This disbursement provision 
requires REA Borrowers to fund projects using their own funds and 
request reimbursement from REA. REA believes this provision minimizes 
grant processing and disbursement time to comply with departmental 
regulations covering administration of grant funds, and it minimizes 
the possibility for unintended uses of grant funds. REA believes this 
disbursement provision should be the primary method of disbursement: 
thus it will be maintained as the general method for grant fund 
disbursement under the grant provisions for revolving loan funds. Based 
on the lack of comments on the disbursement provisions from REA 
Borrowers pertaining to the March 14 final rule, REA believes that most 
Borrowers have the financial resources to initially fund projects under 
the reimbursement method.
    However, in some cases, borrowers with limited financial resources, 
or for other extraordinary reasons, may be unable to fund projects 
using their own resources under the reimbursement method. Under these 
circumstances, borrowers with limited resources in needy areas could be 
precluded from participating in the grant program to establish 
revolving loan funds. Therefore, REA proposes to revise 
Sec. 1703.22(e), to allow the Administrator to authorize disbursement 
under a special reimbursement method. Under this method, a Borrower may 
provide REA invoices from project owners and, if authorized as an 
approved purpose for grant fund disbursement, REA may disburse grant 
funds to the Borrower for immediate release to the project owner. Under 
this method, grant funds may be requisitioned at any time; however, the 
minimum grant requisition will be $50,000 or the total amount of the 
revolving fund, whichever is less.
    Borrowers desiring to use this method should be cautioned however, 
that invoices from contractors or other entities performing contract 
services for project owners generally request payment within 30 days. 
Although REA will diligently strive to process payment within 30 days 
of requisition, REA encourages Borrowers to notify project owners of 
possible delays in processing disbursement requests. Because of the 
additional administrative requirements this special disbursement method 
may impose upon REA and the possible inconvenience to project owners 
and entities performing services, REA desires to use this special 
disbursement method only under extraordinary circumstances.
    Third, REA proposes to revise the definition of ``Rural economic 
development'' which was added in the final rule published March 14, 
1994. This definition, currently worded as ``job creation or 
preservation or community facilities improvement projects in rural 
areas (underline, emphasis added)'', serves the intended purpose of 
defining a broad category of projects which may be funded by REA 
Borrowers using non-Federal revolving loan funds. However, REA's 
definition of a rural area is based on the statutory definition set 
forth in section 13 of the Rural Electrification (RE) Act. A rural area 
is defined as not including an urban area as defined by the Bureau of 
the Census. An urban area is defined as ``1. Places of 2,500 or more 
persons incorporated as cities, villages, boroughs (except in Alaska 
and New York), and towns (except in the six New England States, New 
York, and Wisconsin), but excluding the rural portions of `extended 
cities.' 2. Census designated places of 2,500 or more persons. 3. Other 
territory, incorporated or unincorporated, included in urbanized 
areas.'' The definition may unduly restrict funding of rural 
development projects to those physically located in rural areas rather 
than those projects which benefit rural areas in accordance with the 
purpose and policy of the rural economic development loan and grant 
program set forth in Secs. 1703.10 and 1703.11.
    Therefore, to clarify REA's intent in defining rural economic 
development and restore flexibility in funding projects in accordance 
with the established history and procedures of the rural economic 
development loan and grant program, the definition of ``Rural economic 
development'' in Sec. 1703.12 has been changed to read: ``job creation 
or preservation or community facilities improvement projects that 
clearly demonstrate significant benefits to rural areas.

List of Subjects in 7 CFR Part 1703

    Community development, Grant programs--housing and community 
development, Loan programs--housing and community development, 
Reporting and recordkeeping requirements, Rural areas.
    For the reasons set out in the preamble, chapter XVII of title 7 of 
the Code of Federal Regulations is proposed to be amended as follows:

PART 1703--RURAL DEVELOPMENT

    1. The authority citation for 7 CFR part 1703 continues to read as 
follows:

    Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.

Subpart B--Rural Economic Development Loan and Grant Program

    2. In Sec. 1703.12 of this subpart B, the following definition is 
revised to read as follows:


Sec. 1703.12  Definitions.

* * * * *
    Rural economic development--job creation or preservation or 
community facilities improvement projects that clearly demonstrate 
significant benefits to rural areas.
* * * * *
    3. In Sec. 1703.17, paragraph (d) is added to read as follows:


Sec. 1703.17  Uses of zero-interest loans and grants.

* * * * *
    (d) Zero-interest loans and grants may be used for community 
antenna television systems or facilities. The borrower will document 
that such facilities provide a tangible economic benefit to the 
proposed service area in accordance with Sec. 1703.46 of this subpart. 
Notwithstanding this, the Administrator reserves the right to deny any 
proposal for community antenna television systems or facilities. 
Community antenna television systems or facilities will be considered 
for funding in accordance with Sec. 1703.46 and this section only when 
all of the following conditions exist:
    (1) The proposed community antenna television system or facility is 
established in cooperation with a local educational and/or medical 
entity(ies) to provide educational and/or medical programming which 
addresses specific needs of rural residents;
    (2) Services to be provided by the proposed community antenna 
television systems or facilities are not available in the area to be 
served, or services are not being provided by the existing television 
programming carrier at an affordable cost to residents; and
    (3) Such community antenna systems or facilities will not present 
undue competition for existing television programming carriers in the 
area.
    4. In Sec. 1703.20, paragraphs (a)(10) and (a)(11) are redesignated 
as paragraphs (a)(11) and (a)(12) and a new paragraph (a)(10) is added 
to read as follows:


Sec. 1703.20  Ineligible uses of zero-interest loans and grants.

    (a) * * *
    (10) For community antenna television systems or facilities except 
as provided in Sec. 1703.17(d) of this subpart;
* * * * *
    5. In Sec. 1703.22, paragraphs (e) introductory text, (e)(1), 
(e)(3) and (e)(4) are revised to read as follows:


Sec. 1703.22  Revolving loan program.

* * * * *
    (e) Disbursement of grant funds. Borrowers are not authorized to 
commence projects to be funded under this section until those projects 
have been submitted for authorization in accordance with paragraph 
(c)(1) of this section, or the projects have been submitted for 
authorization subsequent to grant approval in accordance with paragraph 
(e)(2) of this section. REA grant funds will be disbursed on a 
reimbursement basis. However, upon written justification by borrowers 
and approval by the Administrator, borrowers unable to fund projects 
under reimbursement provisions, for financial or other extraordinary 
reasons, may receive grant funds under the special disbursement method 
by submitting unpaid invoices from project owners, and grant funds will 
be disbursed to borrowers and passed directly to project owners. In 
either case, REA grant funds will be disbursed in accordance with the 
provisions of 7 CFR Part 3015, Uniform Federal Assistance Regulations, 
the applicable requirements of this subpart, the administrative 
provisions outlined in paragraph (g) of this section, and the following 
requirements:
    (1) Only projects authorized by REA in accordance with paragraphs 
(c)(1) and (e)(2) of this section, for which adequate documentation is 
submitted, including receipts for expenditures under the reimbursement 
method or unpaid invoices under the special disbursement method, as 
applicable, and certification of approved purposes, will be considered 
for disbursement;
* * * * *
    (3) Under the reimbursement method, grant funds requisitioned for 
individual projects in increments of less than $100,000, or less than 
25 percent of the amount approved for the revolving loan fund, 
whichever is less, may be disbursed semi-annually. Submission periods 
for requisitioning grant funds on a semi-annual disbursement basis will 
be 14 days commencing from the 6-month anniversary date of grant 
approval. Grant funds under the special disbursement method will be 
requisitioned in accordance with the applicable provision in paragraph 
(e)(4) of this section;
    (4) For the reimbursement method, grant funds requisitioned for 
individual projects in increments of $100,000 or greater, or at least 
25 percent of the amount approved for the revolving loan fund, 
whichever is less, may be submitted for disbursement at any time. Under 
the special disbursement method, grant funds of less than $100,000 may 
be requisitioned for disbursement at any time. However, the minimum 
requisition will be $50,000, or the total grant award, whichever is 
less.
* * * * *
    6. In Sec. 1703.46, the period at the end of paragraph (h)(10)(iii) 
is removed and a semicolon is added in its place and paragraphs (g)(7) 
and (h)(11) are added to read as follows:


Sec. 1703.46  Documenting the evaluation and selection of applications 
for zero-interest loans and grants.

* * * * *
    (g) Other selection factors. * * *
* * * * *
    (7) Special Economic Status. The Administrator has the discretion 
to designate special economic status (up to 25 points) to applications 
submitted by borrowers that have documented one or more of the 
following four conditions in one or more county(ies) to be served by 
the proposed project:
    (i) A designation of disaster area by the President of the United 
States which has been so designated within three years prior to 
applying to REA;
    (ii) The loss, removal, or closing of a major source or sources of 
employment in the last 3 years which causes an increase of 2 percentage 
points or more in the area's most recent unemployment rate compared 
with the period immediately before the dislocation;
    (iii) Chronic or long-term economic deterioration, documented by 
one or both of the following conditions:
    (A) An unemployment level equal to or over 1.5 times the National 
average unemployment percentage from 4 out of the last 5 years, 
starting with the most current statistics available. The applicant, 
when calculating recent years' unemployment percentages, should compare 
county statistics with the National Average unemployment for the 
corresponding year. Statistics on unemployment will be based on figures 
provided by the Bureau of Labor Statistics;
    (B) A 15% loss of population due to out-migration over the most 
recent 10-year decennial census, based on the U.S. Bureau of the Census 
decennial data;
    (iv) A designation as a Rural Empowerment Zone or Rural Enterprise 
Community by the Empowerment Zone Program authorized by Section 13301 
of the Omnibus Reconciliation Act of 1993, Public Law 103-66 (107 Stat. 
312), 26 U.S.C. 1391-1393.
    (h) * * *
    (11) Special economic status--25 points.
* * * * *
    Dated: July 20, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-18410 Filed 7-27-94; 8:45 am]
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