[Federal Register Volume 59, Number 207 (Thursday, October 27, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-26418]


[[Page Unknown]]

[Federal Register: October 27, 1994]


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DEPARTMENT OF AGRICULTURE
Rural Electrification Administration

7 CFR Part 1703

RIN 0572-AB04

 

Rural Economic Development Loan and Grant Program: Empowerment 
Zones

AGENCY: Rural Electrification Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Electrification Administration (REA) hereby amends 
its regulation for the Rural Economic Development Loan and Grant 
Program by adding a provision which 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; or have been designated as a Rural 
Empowerment Zone or Rural Enterprise Community.

EFFECTIVE DATE: This regulation is effective on November 28, 1994.

FOR FURTHER INFORMATION CONTACT: Lawrence L. Bryant, Jr., Chief, 
Planning Branch, Rural Development Assistance Staff, Rural 
Electrification Administration, Room 2237, South Building, U.S. 
Department of Agriculture, 14th and Independence Avenue, SW., 
Washington, DC 20250-1500 (202) 690-3594.

SUPPLEMENTARY INFORMATION: This rule has been determined to be not 
significant for purposes of Executive Order 12866 and therefore has not 
been reviewed by the Office of Management and Budget. This rule has 
been reviewed under Executive Order 12778, Civil Justice Reform. This 
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 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 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 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 10102, NEOB, Washington, DC, 20503.
    The Administrator has determined that this rule will not 
significantly affect the quality of the human environment as defined by 
the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.). 
Therefore, this action does not require an environmental impact 
statement or assessment.
    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

    On February 15, 1989, REA published the final rule, 7 CFR 1709, 
subpart B, in the Federal Register (54 FR 6867) that implemented the 
Rural Economic Development Loan and Grant Program, also known as the 
Cushion of Credit Payments Program, established by Section 313 of the 
Rural Electrification Act of 1936, as amended (Act). This program 
provides funds to Act borrowers for the promotion of rural economic 
development and job creation projects. On September 27, 1990, REA 
changed the designation of this rule from 7 CFR part 1709 to part 1703 
(55 FR 39393) and on September 25, 1992, published an amendment (57 FR 
44314) to refine and improve the structure of the rule. On March 14, 
1994, REA published a final rule (59 FR 11702) establishing procedures 
to approve and administer grants and grants in conjunction with zero-
interest loans.
    On July 28, 1994, a proposed rule was published (59 FR 38378) to 
amend the rule to enhance the funding potential of Rural Economic 
Development Loan and Grant Program (REDLGP) applications from 
economically devastated areas. This constitutes the finalization of 
that proposed rule.

Synopsis

    This rule amends the Rural Economic Development Loan and Grant 
Program as follows:
     The Administrator will have the discretion to designate 
special economic status under the REDLGP selection factors, adding up 
to 25 points to an applicant's score if at least one of the four 
conditions outlined in Sec. 1703.46(g)(7) has occurred.
     The prohibition on funding community antenna television 
systems or facilities has been reinstated except in special cases as 
outlined in Sec. 1703.17(d).
     The provision for disbursement of grant funds has been 
revised to allow REA Borrowers with limited financial resources, or for 
other reasons, to receive funds based on invoices from project owners 
rather than committing their own funds under the reimbursement 
provision. This arrangement will require prior REA approval. See 
Sec. 1703.22(e).
     The definition of ``Rural economic development'' has been 
revised to clarify REA policy on funding projects located outside rural 
areas as defined in Section 13 of the Rural Electrification (RE) Act 
but which provide significant benefits to rural areas.

Comments

    REA received seven comments regarding this regulation, which were 
taken into consideration in preparing this final rule. Comments were 
received from the following:
    (1) Minnesota Rural Electric Association.
    (2) Riverside County Economic Development Agency, Riverside, 
California.
    (3) City of Hollister, California.
    (4) Maine Ambulatory Care Coalition, Manchester, Maine.
    (5) Crown Economic Development Corporation, Hanford, California.
    (6) Merced County Board of Supervisors, Merced, California.
    (7) Community Development Division, Fresno, California.
    Of the comments received, one commenter suggested that REA accept 
``local'' unemployment data, if available, instead of county-wide data 
because of significant variances in larger counties. We recognize that 
large geographical counties are at a disadvantage if only countywide 
data is accepted. Therefore the use, where appropriate, of State-
published information, would be a reasonable alternative and have 
amended Sec. 1703.46(g)(7)(iii) is hereby amended to allow the REA 
Administrator to consider State-published statistics, provided by the 
applicant, in those situations where the Census material is clearly not 
representative of the project location. However, the data must be 
verifiable and part of a recognized database which reflects information 
for other areas within the State.
    One community expressed concern that requiring disbursement of 
funds up front and awaiting reimbursement could be a hardship on small 
rural communities. However, this requirement does not actually impact 
community government entities because the reimbursement policy is 
applicable only in cases where REA Borrowers receive grants to 
establish revolving loan funds. This final rule provides special 
arrangements only for REA Borrowers establishing revolving loan funds, 
who are unable to fund projects using the reimbursement method.
    Another comment was that REA's definition of ``rural'' in this rule 
was too broad and would allow reviewers to fund projects not directly 
benefiting rural communities. The commenter suggested that the funds 
either be restricted to the 2500 population limit or controlled by 
organizations from such communities, that at least 70 percent of the 
funds be spent in communities under 2500 and that the urban entity 
provide at least 60 percent in matching funds. All REDLGP applications 
are reviewed by the REA staff and selected based on the evaluation 
criteria outlined in Sec. 1703.46, much of which is based on benefit to 
rural areas. Moreover, REA borrowers serve primarily rural areas, and 
they are well-suited to determine that the final benefits are directed 
toward the local community. As discussed previously in this preamble, 
the rule has been revised to allow projects which are not located in 
rural areas. However, those projects must result in significant benefit 
to rural areas.
    Another recommendation was to assign bonus points to areas 
``nominated'' by State and local governments for designation as Rural 
Empowerment Zones or Rural Enterprise Communities as well as those 
areas primarily designated by USDA as Rural Empowerment Zones or Rural 
Enterprise Communities. It was suggested that these communities be 
rewarded for the development of the plans and partnerships required by 
the nominating process and receive a portion of the points they would 
have received if actually designated as Rural Empowerment Zones or 
Rural Enterprise Communities. REA recognizes that community strategic 
planning is a key component of the Empowerment initiative, however, 
this additional planning aspect will directly benefit the communities 
in other ways such as allowing them to realize and unlock their own 
potential to partnership with the private sector and other federal and 
state entities. The strategic planning process also improves the 
applicant's overall REDLGP application which should be reflected under 
the normal evaluation criteria.

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 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 of this subpart and this 
section only when all of the following conditions exist:
    (1) The proposed community antenna television system or facility is 
established in cooperation with a local educational and/or medical 
entity(ies) to provide educational and/or medical programming which 
addresses specific needs of rural residents;
    (2) Services to be provided by the proposed community antenna 
television systems or facilities are not available in the area to be 
served, or services are not being provided by the existing television 
programming carrier at an affordable cost to residents; and
    (3) Such community antenna systems or facilities will not present 
undue competition for existing television programming carriers in the 
area.
    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 greater than 1.5 times the 
National average unemployment percentage from 4 out of the last 5 
years, starting with the most current statistics available. The 
applicant, when calculating recent years' unemployment percentages, 
should compare county statistics with the National Average unemployment 
for the corresponding year. Statistics on unemployment will be based on 
figures provided by the U.S. Bureau of Labor Statistics. However, the 
Administrator may, at his discretion, also consider verifiable, 
published State statistical data provided by the applicant in 
situations where county-wide statistical data is not representative of 
local conditions. Such statistical data must be part of a recognized 
database which reflects information for other areas within the State;
    (B) A 15% loss of population due to out-migration over the most 
recent 10-year decennial census, based on the U.S. Bureau of the Census 
decennial data;
    (iv) A designation as a Rural Empowerment Zone or Rural Enterprise 
Community by the Empowerment Zone Program authorized by Section 13301 
of the Omnibus Reconciliation Act of 1993, Public Law 103-66 (107 Stat. 
312), 26 U.S.C. 1391-1393.
    (h) * * *
    (11) Special economic status--25 points.
* * * * *
    Dated: October 19, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-26418 Filed 10-26-94; 8:45 am]
BILLING CODE 3410-15-P