[Federal Register Volume 62, Number 66 (Monday, April 7, 1997)]
[Rules and Regulations]
[Pages 16465-16473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8743]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service
Farm Service Agency

7 CFR Parts 1901, 1940, 1951, 2003, and 3570

RIN 0575-AC10


Community Facilities Grant Program

AGENCY: Rural Housing Service, Rural Business-Cooperative Service, 
Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Rural Housing Service (RHS), formerly the Rural Housing 
and Community Development Service (RHCDS), a successor agency to the 
Farmers Home Administration (FmHA), promulgates a new regulation for 
Community Facilities Grants (CFG). This action implements legislation 
which authorizes grants for developing essential community facilities. 
RHS also amends its existing regulations that are to be utilized in 
administering Community Facilities grants. The intended effect of this 
action is to publish regulations and application processing procedures 
to implement this new grant program.

DATES: These interim regulations are effective April 7, 1997. Comments 
must be received on or before June 6, 1997.

ADDRESSES: Submit written comments in duplicate to the Director, 
Regulations and Paperwork Management Division, Rural Housing Service, 
U.S. Department of Agriculture, Stop 0743, 1400 Independence Ave. SW., 
Washington, DC 20250-0743. Comments may also be submitted via the 
Internet by addressing them to ``[email protected]'' and must 
contain ``Grants'' in the Subject. All comments will be made available 
for public inspection during regular work hours at the above address.

FOR FURTHER INFORMATION CONTACT: Jennifer Barton, Loan Specialist, 
Community Programs Division, Rural Housing Service, U.S. Department of 
Agriculture, Stop 3222, South Agriculture Building, 1400 Independence 
Avenue SW., Washington, DC 20250-3222, telephone (202) 720-1504.

SUPPLEMENTARY INFORMATION:

Classification

    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.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It has been determined that this 
action does not constitute a major Federal action significantly 
affecting the quality of the human environment and, in accordance with 
the National Environmental Policy Act of 1969, Pub. L. 91-190, an 
Environmental Impact Statement is not required.

Civil Justice Reform

    This interim rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. In accordance with this rule: All State and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division in accordance with 7 CFR 
part 11 must be exhausted before bringing suit in court challenging 
action taken under this rule.

[[Page 16466]]

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Pub. 
L. 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, the 
Agency generally must prepare a written statement, including a cost-
benefit analysis, for proposed and final rules with ``Federal 
Mandates'' that may result in expenditures to State, local, or tribal 
governments, in the aggregate, or to the private sector, of $100 
million or more in any one year. When such a statement is needed for a 
rule, section 205 of the UMRA generally requires the Agency to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, more cost-effective, or least burdensome alternative 
that achieves the objectives of the rule.
    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the UMRA) for State, local, and tribal 
governments or the private sector. Thus, today's rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

Regulatory Flexibility Act

    Pursuant to the Regulatory Flexibility Act, 5 U.S.C. Sec. 605(b), 
the Rural Housing Service (RHS) certifies that this rule will not have 
a significant economic impact on a substantial number of small entities 
due to the small amount of funds being infused into the economy. 
Because it also will not require small entities to do more than large 
entities to participate in the program, a Regulatory Flexibility 
Analysis has not been prepared.

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, the Agency 
announces its intention to seek Office of Management and Budget (OMB) 
approval of new reporting and recordkeeping requirements. These 
requirements have been approved by emergency clearance by OMB under OMB 
Control Number 0575-0173.
    The Agency offers direct and guaranteed loans for the development 
of essential community facilities in rural areas. This rule will add a 
CFG program to the services currently available. Many rural communities 
have experienced significant economic stress over the years. The 
economies of most rural communities were dependent upon the 
agricultural sector. In many cases, the problems caused by the 
structural changes in agriculture have been exacerbated by other 
factors such as isolation, inadequate child care, closing of many small 
manufacturing plants, and lack of health care. At the same time, 
rapidly developing technology, such as telecommunications, has brought 
new opportunities. Unfortunately, many rural communities have suffered 
such severe economic constraints for so long that they are unable to 
provide their residents with the basic services needed to improve their 
quality of life. The Community Facilities (CF) programs assist these 
poorest rural communities with financial resources to develop or 
improve health care facilities, child care centers, schools, libraries, 
fire and rescue buildings and equipment, town halls, street 
improvements, and so on. When these basic services become available to 
residents, the community becomes stronger and better equipped to 
continue its economic and community development efforts.
    The information requested by the Agency is vital to making prudent 
lending, monitoring, and servicing decisions. The Agency must determine 
that the applicant is eligible and the project is financially feasible 
before making a loan or awarding a grant. Annual audits and certain 
other management reports are required to ensure that the project 
remains viable and that the services are being provided. Other 
information may be required for servicing loans.
    The public burden for the CF loan programs has been previously 
approved by OMB. The Agency intends to establish a new information 
collection docket for 7 CFR part 3570, subpart B, which will contain 
only those additional items required for the CF grant program.

Public Burden in 7 CFR Part 3570, Subpart B

    At this time, the Agency is requesting OMB clearance of the 
following burden:
    Form RD 3570-3, ``Agreement for Administrative Requirements for 
Community Facilities Grants.'' This document serves as the contract 
between the Agency and the grantee. The agreement sets forth the rights 
and responsibilities of both parties to the grant. The grantee reads 
and signs the form.
    Paragraph 3570.11(c). This paragraph requires grant applicants to 
certify, in writing, that they are unable to finance the proposed 
project from their own resources, through commercial credit at 
reasonable rates and terms, or other funding sources without CFG 
program assistance. This helps meet the statutory intent that these 
grants are awarded only to the neediest rural communities who have no 
other financial resources.
    Estimate of Burden: Public reporting burden for this collection is 
estimated to range from 15 minutes to 1 hour per response.
    Respondents: Associations, public entities, nonprofit corporations, 
and federally recognized Indian tribes seeking CFG funding to provide 
essential community facilities to the residents of the poorest rural 
communities.
    Estimated Number of Respondents: 200.
    Estimated Number of Responses per Respondent: 1.7.
    Estimated Total Annual Burden on Respondents: 234 hours.
    The subject regulation is published for public review and comment. 
Additional copies of the interim rule or copies of the referenced forms 
may be obtained from Barbara Williams, Regulations and Paperwork 
Management Division, at (202) 720-9734. Comments are invited on: (a) 
whether the proposed collection of information is necessary for the 
proper performance of the functions of the Agency, including whether 
the information will have practical utility; (b) the accuracy of the 
Agency's estimate of the burden of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (c) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology.
    All responses to this notice will be summarized, included in the 
request for OMB approval, and will become a matter of public record. 
Comments should be submitted to the Desk Officer for Agriculture, 
Office of Information and Regulatory Affairs, Office of Management and 
Budget, Washington, D.C. 20503, and to Barbara Williams, Regulations 
and Paperwork Management Division, U.S. Department of Agriculture, 
Rural Housing Service, Stop 0743, 1400 Independence Avenue SW., 
Washington, D.C. 20250. A comment to OMB is best assured of having its 
full effect if OMB receives it within 30 days of publication of this 
rule.

Intergovernmental Review

    This program is listed in the Catalog of Federal Domestic 
Assistance under number 10.766 and is subject to the

[[Page 16467]]

provisions of Executive Order 12372 which requires intergovernmental 
consultation with State and local officials. The Agency has conducted 
intergovernmental consultation in the manner delineated in RD 
Instruction 1940-J.

Discussion of Interim Rule

    It is the policy of the Department that rules relating to public 
property, loans, grants, benefits, or contracts shall be published for 
public comment not withstanding the exemption of 5 U.S.C. 553 with 
respect to such rules.
    The purpose of this rule is to implement section 763 of Pub. L. 
104-127 which amends section 306(a) of the Consolidated Farm and Rural 
Development Act (CONACT). This statutory amendment created Community 
Facilities (CF) grants, and specifically authorized up to $10 million 
per fiscal year for this program. In creating the CF grant program, 
Congress recognized that many rural poverty-stricken communities are 
not eligible for RHS's direct or guaranteed CF loan programs and, 
therefore, have no access to assistance for essential community 
facilities such as health care, public safety, and fire protection 
services.
    Due to the recent natural disasters that have occurred in the 
southern and midwestern areas, many of our poorest rural communities 
are faced with devastation. Many communities are in emergency 
situations as a result of the tornadoes and flooding and need 
assistance in restoring basic services to their residents. These grant 
funds will help at a time when they are the most needed.

Background

    However, this action is to comply with public law and any delay 
would be contrary to the public interest. Comments are being solicited 
on this interim final rule and will be considered in development of the 
final rule. The Department is making this action effective immediately 
upon publication in the Federal Register.
    The CF grant program will work in conjunction with the CF loan 
programs. For those poverty-stricken communities, the grant program 
will provide the minimum amount sufficient for feasibility purposes to 
bridge the gap enabling communities to afford the Agency's loan 
programs. Failure to implement this rule as quickly as possible denies 
access to this essential program for these communities.
    There is no historical data available to quantify benefits. 
However, the benefit to be derived from the program is the opportunity 
to invest in essential community facilities in rural areas, thereby 
improving the availability and expertise of services in rural 
communities so rural residents can enjoy an improved quality of life.
    The interim rule describes the procedures for applying for and 
obtaining this grant assistance. The Agency is providing for public 
comment to allow those who wish to suggest alternative rule provisions 
or courses of action in implementing this program an opportunity to 
express their views.
    CFG funds shall be awarded to eligible associations, units of 
general local government, nonprofit corporations, and federally 
recognized Indian tribes. These same applicants are eligible to apply 
for other CF financial assistance.
    The statute requires that CFG funds be used to provide the Federal 
share of the cost of developing specific essential community facilities 
in rural areas. The amount of the CFG funds for a facility shall not 
exceed 75 percent of the cost of developing the facility and provide 
for a graduated scale for the amount of the Federal share, with higher 
Federal shares for facilities in communities that have lower community 
population and income levels. The Agency has developed a scale to 
predetermine grant funding percentages based on population, project 
location, and the income of the community being served by the facility. 
The Agency has further determined that to better utilize limited funds 
available under the program, the maximum amount of grant assistance is 
further limited to the minimum amount sufficient for feasibility 
purposes to provide for facility operation and this amount shall not 
exceed 50 percent of a State's annual allocation or $50,000, whichever 
is greater.

Eligibility

    Grants may be made to associations, federally recognized Indian 
Tribes, nonprofit corporations, and public bodies serving rural areas. 
Rural area determinations will be made to ascertain the eligibility of 
the applicant and the proposed facility. The procedure established in 
this rule to determine eligible grant areas is based on density 
requirements used by the Agency in other programs.
    In accordance with section 306(a)(19)(B)(ii) of the CONACT, CFG 
funds may be used to pay up to 75 percent of the cost to develop the 
essential community facility. The remaining 25 percent becomes the 
applicant's responsibility. Other funding participation through either 
leveraging, local fundraising, other CF financial assistance, or 
applicant contribution will enable CFG funds to reach a broader range 
of rural economic development efforts. The 25 percent requirement must 
be in accordance with 7 CFR part 3015, ``Uniform Federal Assistance 
Regulations,'' 7 CFR part 3016, ``Uniform Administrative Requirements 
for Grants and Cooperative Agreements to State and Local Governments,'' 
or 7 CFR part 3019, ``Uniform Administrative Requirements for Grants 
and Agreements with Institutions of Higher Education, Hospitals, and 
Other Non-Profit Organizations,'' as applicable. Under 7 CFR parts 
3015, 3016, and 3019, matching funds, with certain exceptions, cannot 
come from another Federal grant program.
    No Federal funds for this program will be granted to an applicant 
who has an outstanding delinquent Federal debt until the delinquent 
account has been paid in full. Funds will not be granted to an 
applicant if an outstanding judgment has been obtained by the United 
States in a Federal Court (other than in the United States Tax Court), 
which has been recorded, unless it has been paid in full or otherwise 
satisfied.
    Definitions referenced in the interim final rule are based on 
working definitions used by the Agency or other Federal agencies for 
similar programs. The term ``rural'' and ``rural area'' and 
``primarily'' were taken from related program regulations also under 
authority of the CONACT. The essential community facility must be 
located in a rural area and serve primarily rural areas. ``Rural'' and 
``Rural Area'' in this context means a city, town, or unincorporated 
area that has a population of 25,000 inhabitants or less. ``Primarily'' 
refers to the majority of the residents and businesses being served by 
the facility which must be at least 51 percent rural.

Application Process

    Since the Agency is adding CFG funds to the services it currently 
offers, applicants need only submit one application to apply for CF 
financial assistance. Application requirements include submission of an 
``Application for Federal Assistance'' and other supporting 
documentation which is consistent with each program. The application 
process is a two-stage procedure to determine applicant eligibility, 
project priority status, and funding availability. The supporting 
documentation required is necessary for the Agency to determine if the 
applicant is eligible, if the proposed grant purposes are eligible, and 
to help the

[[Page 16468]]

Agency select the best applications for funding.

Project Selection

    With respect to the CFG program, section 306(a)(19)(B)(iii) of the 
CONACT requires use of a graduated scale so that rural communities with 
low populations and low income levels receive more funds. The type of 
graduation used is left to the Agency to determine. Therefore, the 
Agency has determined that eligible projects are those located in rural 
communities with populations of 25,000 or less and serving primarily 
rural communities where the median household income of the area to be 
served is below the higher of the poverty line or 80 percent of the 
State nonmetropolitan median household income. Population and income 
are used to determine how much grant assistance an applicant is 
eligible for and to assign points to prioritize projects for funding 
selections. The Agency has developed graduated scales using the above 
criteria. Using these graduated scales, the rural communities with low 
populations and low income levels have the greatest chance of being 
selected for funding and will get the highest share of grant funds.
    Projects will be selected based on a priority point system, set out 
in the regulation. Preference is given to projects located in rural 
areas with low populations and low income levels. A project located in 
a rural community with a population of 5,000 or less will receive 30 
points, one with between 5,001 and 15,000 residents will be given 20 
points, and one with up to the maximum 25,000 population will be 
awarded 10 points. A similar scale has been designed for the median 
household income of the project's service area. Eligible communities 
will have incomes below the poverty line or specific percentages of 
their State's nonmetropolitan median household income. Thirty points 
will be assigned to those projects serving communities with median 
household incomes below the higher of the poverty line or 60 percent of 
the Statewide figure, 20 points to those projects serving communities 
with median household incomes below the higher of the poverty line or 
70 percent of the Statewide figure, and 10 points to those projects 
serving communities with median household incomes below the higher of 
the poverty line or 80 percent of the Statewide figure. Points will be 
added if the project is for health care or public safety and is 
identified in the State strategic plan. In cases of special need, 
discretionary points may be given for situations such as geographic 
distribution of grant funds, loss of a community facility due to an 
accident or natural disaster, or for any projects leveraging funds from 
other sources. The Agency believes that this system will ensure that 
CFG assistance is awarded to the neediest, most rural communities as 
required by the authorizing legislation.
    After each project has been rated, points will be totaled and 
ranked with all other applications in the State so that grants are 
awarded competitively. This selection method is considered the best 
method for the CFG program due to the large number of applications 
expected and the limited grant funds available.
    The Agency monitors and evaluates each project it approves in 
accordance with 7 CFR parts 3015, 3016, and 3019. Monitoring typically 
involves site visits by Agency personnel, telephone conversations, and 
evaluation of the grantee's written activity reports. Activity reports 
are used to evaluate projects and must be in a measurable form. 
Termination of grant provisions is in accordance with 7 CFR parts 3015, 
3016, and 3019. These provisions are consistent with other Agency 
programs.

Miscellaneous

    Recipients are subject to all applicable Federal laws, Federal and 
United States Department of Agriculture (USDA) policies, regulations, 
and procedures applicable to Federal financial assistance. Requirements 
concerning civil rights, the environment, debarment and suspension, 
etc., have been listed in this rule. These restrictions are consistent 
with other Agency programs.

List of Subjects

7 CFR Part 1901

    Civil rights, Compliance reviews, Fair housing, Minority groups.

7 CFR Part 1940

    Administrative practice and procedure, Agriculture, Allocations, 
Grant Programs--Housing and community development, Loan programs--
Agriculture, Rural areas.

7 CFR Part 1951

    Account servicing, Grant programs--Housing and community 
development, Reporting requirements, Rural areas.

7 CFR Part 2003

    Organization and functions (government agencies).

7 CFR Part 3570

    Accounting, Administrative practice and procedure, Conflicts of 
interests, Environmental impact statements, Fair housing, Grant 
programs--Housing and community development, Loan programs--Housing and 
community development, Rural areas, Subsidies.
    Therefore, chapters XVIII and XXXV of title 7, Code of Federal 
Regulations, are amended as follows:

PART 1901--PROGRAM-RELATED INSTRUCTIONS

    1. The authority citation for part 1901 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 40 U.S.C. 442; 42 U.S.C. 
1480, 2942.

Subpart E--Civil Rights Compliance Requirements

    2. Section 1901.204 is amended by adding a paragraph (a)(28) to 
read as follows:


Sec. 1901.204  Compliance reviews.

    (a) * * *
    (28) Community Facilities Grants in part 3570, subpart B, of this 
title.
* * * * *

PART 1940--GENERAL

    3. The authority citation for part 1940 continues to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart L--Methodology and Formulas for Allocation of Loan and 
Grant Program Funds

    4. Section 1940.592 is added to read as follows:


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.

[[Page 16469]]

    (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.

PART 1951--SERVICING AND COLLECTIONS

    5. The authority citation for part 1951 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480.

Subpart E--Servicing of Community and Insured Business Programs 
Loans and Grants


Sec. 1951.201  [Amended]

    6. Section 1951.201 is amended by adding the words ``and grants'' 
after the words ``Community Facility loans.''

PART 2003--ORGANIZATION

    7. The authority citation for part 2003 is revised to read as 
follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 42 U.S.C. 1480; Public 
Law 100-82.

Subpart A--[Amended]

    8. Exhibit A of subpart A, paragraph 2, under the heading of 
Assistant Administrator--Community and Business Programs is amended by 
adding the words ``and grants'' after the words ``community facility 
loans.''
    9. Chapter XXXV, title 7, Code of Federal Regulations is amended by 
adding a new part 3570 to read as follows:

PART 3570--COMMUNITY PROGRAMS

Subpart A--[Reserved]

Subpart B--Community Facilities Grant Program

Sec.
3570.51  General.
3570.52  Purpose.
3570.53  Definition.
3570.54  Equal opportunity and fair housing.
3570.55-3570.56  [Reserved]
3570.57  Authorities, delegations, and redelegation.
3570.58-3570.59  [Reserved]
3570.60  Processing preapplications, applications, and completing 
grant dockets.
3570.61  Eligibility for grant assistance.
3570.62  Use of grant funds.
3570.63  Limitations.
3570.64  Determining the maximum grant assistance.
3570.65  Project selection priorities.
3570.66  [Reserved]
3570.67  Applications determined ineligible.
3570.68-3570.69  [Reserved]
3570.70  Other considerations.
3570.71  Application review, approval and obligation of funds.
3570.72-3570.75  [Reserved]
3570.76  Planning and performing development.
3570.77-3570.79  [Reserved]
3570.80  Grant closing and delivery of funds.
3570.81-3570.82  [Reserved]
3570.83  Audits.
3570.84  Grant servicing.
3570.85  Programmatic changes.
3570.86  Subsequent grants.
3570.87  Grant suspension, termination, and cancellation.
3570.88  Management assistance.
3570.89  [Reserved]
3570.90  Exception authority.
3570.91  Regulations.
3570.92  [Reserved]
3570.93  Regional Commission grants.
3570.94  Forms and exhibits
3570.95-3570.99  [Reserved]
3570.100  OMB control number.

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989.

Subpart A--[Reserved]

Subpart B--Community Facilities Grant Program


Sec. 3570.51  General.

    (a) This subpart outlines Rural Housing Service (RHS) policies and 
authorizations and sets forth procedures for making essential Community 
Facilities (CF) grants authorized under section 306(a)(19) of the 
Consolidated Farm and Rural Development Act (7 U.S.C. 1926(a)(19)).
    (b) Funds allocated for use in accordance with this subpart are 
also to be considered for use by Native American tribes within a State 
regardless of whether State development strategies include Indian 
reservations within the State's boundaries. Native American tribes 
residing on such reservations must have equal opportunity along with 
other rural residents to participate in the benefits of these programs.
    (c) Any processing or servicing activity conducted pursuant to this 
subpart involving authorized assistance to Agency employees, members of 
their families, close relatives, or business or close personal 
associates is subject to the provisions of part 1900, subpart D, of 
this title. Applications for assistance are required to identify any 
relationship or association with an RHS employee.
    (d) Copies of all forms referenced in this subpart are available in 
the Agency's National Office or any Rural Development field office.
    (e) An outstanding judgment obtained against an applicant by the 
United States in a Federal Court (other than in the United States Tax 
Court) shall cause the applicant to be ineligible to receive any grant 
or loan until the judgment is paid in full or otherwise satisfied. 
Agency grant funds may not be used to satisfy the judgment.
    (f) Grants made under this subpart will be administered under, and 
are subject to parts 3015, 3016, and 3019 of this title, as 
appropriate, and established Agency guidelines.
    (g) The income data used to determine median household income must 
be that which accurately reflects the income of the population to be 
served by the proposed facility. The median household income of the 
service area and the nonmetropolitan median household income for the 
State will be determined using income data from the most recent 
decennial Census of the United States.


Sec. 3570.52  Purpose.

    The purpose of the Community Facilities grant program is to assist 
in the development of essential community facilities in rural areas. 
The Agency will authorize grant funds on a graduated basis. Eligible 
applicants located in small communities with low populations and low 
median household incomes may receive a higher percentage of grant 
funds. The amount of grant funds provided for a facility shall not 
exceed 75 percent of the cost of developing the facility.


Sec. 3570.53  Definitions.

    Agency. The Rural Housing Service (RHS), an agency of the U.S. 
Department of Agriculture, or a successor agency.
    Approval Official. An official who has been delegated loan or grant 
approval authorities within applicable programs, subject to certain 
dollar limitations.
    Community facility (CF) (essential). The term ``facility'' refers 
to both the physical structure financed and the resulting service 
provided to rural residents. An essential community facility must:
    (1) Serve a function customarily provided by a local unit of 
government;
    (2) Be a public improvement needed for the orderly development of a 
rural community;

[[Page 16470]]

    (3) Not include private affairs or commercial or business 
undertakings (except for limited authority for industrial parks);
    (4) Be within the area of jurisdiction or operation for the public 
bodies eligible to receive assistance or a similar local rural service 
area of a not-for-profit corporation; and
    (5) Be located in a Rural area, county, or multi-county area 
depending on the type of essential community facility.
    Grantee. An entity with whom the Agency has entered into a grant 
agreement under this program.
    Instructions. Agency internal procedure available in any Rural 
Development Office and variously referred to as Rural Development 
Instruction, RD Instruction, and FmHA Instruction.
    Nonprofit Corporations. Any organization or entity that is eligible 
for RHS financial assistance in accordance with 7 CFR 
Sec. 1942.17(b)(1)(B)(ii).
    Processing office. The office designated by the State program 
official to accept and process applications for CF projects.
    Project cost. The cost of completing the proposed community 
facility. (Facilities previously constructed will not be considered in 
determining project costs.) Total project costs will include only those 
costs eligible for CF assistance.
    Poverty line. The level of income for a family of four, as defined 
in section 673(2) of the Community Services Block Grant Act (42 U.S.C. 
9902(2)).
    Public body. Any State, county, city, township, incorporated town 
or village, borough, authority, district, economic development 
authority, or Native American tribe on a Federal or State reservation, 
or other federally recognized Indian tribe in rural areas.
    RHS. The Rural Housing Service, an agency of the United States 
Department of Agriculture, or a successor agency.
    Rural areas. The terms ``rural'' and ``rural area'' mean any city, 
town, or unincorporated area with a population of 25,000 inhabitants or 
less according to the latest decennial Census of the United States.
    RUS. The Rural Utilities Service, an agency of the United States 
Department of Agriculture, or a successor agency.
    Service area. The area reasonably expected to be served by the 
facility financed by the Agency.
    State. The term ``State'' means each of the 50 States, the 
Commonwealth of Puerto Rico, Guam, the Virgin Islands of the United 
States, American Samoa, the Commonwealth of the Northern Mariana 
Islands, the Marshall Islands, the Republic of Palau, and the Federated 
States of Micronesia.
    State Director. The term ``State Director'' means, with respect to 
a State, the Director of the Rural Development State Office.
    Statewide nonmetropolitan median household income. The median 
household income of all rural areas of a State.
    Strategic plan. A plan developed by each State for Rural 
Development initiatives and the type of assistance required. Plans 
shall identify goals, methods, and benchmarks for measuring success in 
carrying out the plan.


Sec. 3570.54  Equal opportunity and fair housing.

    The Agency will administer the program in accordance with equal 
opportunity and fair housing legislation and applicable Executive 
Orders. Federal statutes provide for extending RHS financial assistance 
without regard to race, color, religion, sex, national origin, age, 
disability, and marital or familial status. The participant must 
possess the capacity to enter into legal contracts under State and 
local statutes. All activities under this subpart shall be accomplished 
in accordance with title VI of the Civil Rights Act of 1964, the Civil 
Rights Act of 1968 (Fair Housing Act), the Rehabilitation Act of 1973, 
and all other Federal laws and Executive Orders prohibiting 
discrimination in Federal programs. To file a complaint, write the 
Secretary of Agriculture, U.S. Department of Agriculture, 1400 
Independence Avenue SW., Washington, DC 20250, or call 1-800-245-6340 
(voice) or (202) 720-1127 (TDD).


Secs. 3570.55-3570.59  [Reserved]


Sec. 3570.60  Processing preapplications, applications, and completing 
grant dockets.

    (a) Preapplications and applications for grants will be developed 
in accordance with applicable portions of Secs. 1942.2, 1942.104, 
1942.105, and 1980.851 of this title. For combination proposals, only 
one preapplication package and one application package should be 
prepared and submitted.
    (b) Financial information contained in preliminary engineering and 
architectural reports will be prepared without considering grant 
assistance.
    (c) The application package will be reviewed by the processing 
office for eligibility, the maximum amount of grant funds allowable, 
and scored for selection priority.


Sec. 3570.61  Eligibility for grant assistance.

    The essential community facility must primarily serve rural areas 
with populations of 25,000 or less, where the median household income 
in the areas to be served by the proposed facility is below the higher 
of the poverty line or 80 percent of the State nonmetropolitan median 
household income.
    (a) Eligible applicant. An applicant must be:
    (1) A public body, such as a municipality, county, district, 
authority, or other political subdivision of a State;
    (2) A nonprofit corporation or an association. Applicants other 
than utility-type applicants 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:
    (i) Association with, or controlled by, a local public body or 
bodies, or broadly based ownership and control by members of the 
community; or
    (ii) Substantial public funding through taxes, revenue bonds, or 
other local Government sources or substantial voluntary community 
funding, such as would be obtained through a community-wide funding 
campaign; or
    (3) A federally recognized Indian tribe on a Federal or State 
reservation.
    (b) Eligible facilities. Essential community facilities:
    (1) Must be located in rural areas, except for utility-type 
services, such as telecommunications or hydroelectric, serving both 
rural and nonrural areas. In such cases, RHS funds may be used to 
finance only that portion serving rural areas, regardless of facility 
location.
    (2) Must be necessary for orderly community development and 
consistent with the State's strategic plan.
    (c) Credit elsewhere. Applicants must be unable to finance the 
proposed project from their own resources, through commercial credit at 
reasonable rates and terms, or other funding sources without grant 
assistance under this subpart and certify to such status in writing.
    (d) Economic feasibility. All projects financed under the 
provisions of this section must be based on satisfactory sources of 
revenues. The amount of CF grant assistance must be the minimum amount 
sufficient for feasibility purposes which will provide for facility 
operation and maintenance, reasonable reserves, and debt repayment.
    (e) Legal authority and responsibility. Each applicant must have, 
or will obtain, the legal authority necessary for construction, 
operation, and maintenance of the proposed facility. The applicant 
shall be responsible for operating, maintaining, and managing

[[Page 16471]]

the facility and providing for its continued availability and use at 
reasonable rates and terms. This responsibility shall be the 
applicant's even though the facility may be operated, maintained, or 
managed by a third party under contract or management agreement.


Sec. 3570.62  Use of grant funds.

    Grant funds up to 75 percent of the cost of developing specific 
essential community facilities in rural areas may be used:
    (a) To supplement financial assistance authorized in accordance 
with part 1942, subparts A and C, and part 1980, subpart I of this 
title. Funding for the balance of the project shall consist of other CF 
financial assistance, applicant contribution, or loans and grants from 
other sources.
    (b) To assist in developing essential community facilities in rural 
areas as contained in Secs. 1942.17(d)(1), 1942.112, and 1980.813 of 
this title.


Sec. 3570.63  Limitations.

    (a) Grant funds may not be used to:
    (1) Pay any annual recurring costs, including purchases or rentals 
that are generally considered to be operating and maintenance expenses;
    (2) Construct or repair electric generating plants, electric 
transmission lines, or gas distribution lines to provide services for 
commercial sale;
    (3) Refinance existing indebtedness;
    (4) Pay interest;
    (5) Pay for facilities located in cities or towns in excess of 
25,000, except as noted in Sec. 3570.61(b)(1);
    (6) Pay any costs of a project when the median household income of 
the population to be served by the proposed facility is above the 
higher of the poverty line or 80 percent of the nonmetropolitan median 
household income of the State;
    (7) Pay project costs when other loan funding for the project is 
not equal to, or less than, the current intermediate interest rate for 
CF loans (as contained in part 1810, subpart A, Exhibit B of this 
title, available in any Rural Development office);
    (8) Pay an amount greater than 75 percent of the cost to develop 
the facility;
    (9) Pay costs to construct facilities to be used for commercial 
rental where the applicant has no control over tenants and services 
offered;
    (10) Construct facilities primarily for the purpose of housing 
State, Federal, or quasi-Federal agencies; and
    (11) Pay for any purposes restricted by Secs. 1942.17(d)(2), 
1942.112(b), and 1980.814 of this title.
    (b) Grant assistance will be provided on a graduated scale with 
higher grant funds going to small communities with the lowest median 
household income.
    Grant assistance is limited to the following percentages of 
eligible project costs:
    (1) 75 percent when the proposed project is:
    (i) Located in a rural community having a population of 5,000 or 
less; and
    (ii) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 60 
percent of the State nonmetropolitan median household income.
    (2) 55 percent when the proposed project is:
    (i) Located in a rural community having a population of 15,000 or 
less; and
    (ii) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 70 
percent of the State nonmetropolitan median household income.
    (3) 35 percent when the proposed project is:
    (i) Located in a rural community having a population of 25,000 or 
less; and
    (ii) The median household income of the population to be served by 
the proposed facility is below the higher of the poverty line or 80 
percent of the State nonmetropolitan median household income.
    (4) Grant assistance cannot exceed the applicable percentages 
contained in this section and may be further limited due to the 
availability of grant funds or by the maximum grant assistance 
allowable determined in accordance with Sec. 3570.64.


Sec. 3570.64  Determining the maximum grant assistance.

    (a) Responsibility. State Directors are responsible for determining 
the applicant's eligibility for grant assistance. A ``Worksheet for 
Computing Maximum Grant Assistance'' (available in any Rural 
Development office) will be used to record the maximum allowable grant 
for each Community Facilities project.
    (b) Maximum grant assistance. Grant assistance cannot exceed the 
lower of:
    (1) Qualifying percentage of eligible project cost determined in 
accordance with Sec. 3570.63(b);
    (2) Minimum amount sufficient to provide for economic feasibility 
as determined in accordance with Sec. 3570.61(d); or
    (3) Either 50 percent of the annual State allocation or $50,000, 
whichever is greater, unless an exception is made by the RHS 
Administrator in accordance with Sec. 3570.90.


Sec. 3570.65  Project selection priorities.

    Applications are scored on a priority basis. Points will be 
distributed as follows:
    (a) Population priorities. The proposed project is located in a 
rural community having a population of:
    (1) 5,000 or less--30 points;
    (2) Between 5,001 and 15,000--20 points; or
    (3) Between 15,001 and 25,000--10 points.
    (b) Income priorities. The median household income of the 
population to be served by the proposed project is:
    (1) Below the higher of the poverty line or 60 percent of the State 
nonmetropolitan median household income--30 points;
    (2) Below the higher of the poverty line or 70 percent of the State 
nonmetropolitan median household income--20 points; or
    (3) Below the higher of the poverty line or 80 percent of the State 
nonmetropolitan median household income--10 points.
    (c) Other priorities. Points will be assigned for one or more of 
the following initiatives:
    (1) Project is identified in the State strategic plan--10 points;
    (2) Project is for health care--10 points;
    (3) Project is for public safety--10 points.
    (d) Discretionary. (1) The State Director may assign up to 15 
points to a project, in addition to those that may be scored under 
paragraphs (a) through (c), of this section. These points are to 
address unforeseen exigencies or emergencies, such as the loss of a 
community facility due to an accident or natural disaster or the loss 
of joint financing if Agency funds are not committed in a timely 
fashion. In addition, the points will award projects benefitting from 
the leveraging of funds in order to improve compatibility and 
coordination between the Agency and other agencies' selection systems 
and for those projects that are the most cost effective.
    (2) In selecting projects for funding at the National Office level, 
additional points will be awarded based on the priority assigned to the 
project by the State Office. These points will be awarded in the manner 
shown below. Only the three highest priority projects for a State will 
be awarded points. The Administrator may assign up to 30 additional 
points to account for geographic distribution of funds,

[[Page 16472]]

emergency conditions caused by economic problems or natural disasters, 
and leveraging of funds.

------------------------------------------------------------------------
                            Priority                              Points
------------------------------------------------------------------------
1..............................................................        5
2..............................................................        3
3..............................................................        1
------------------------------------------------------------------------

Secs. 3570.66-3570.69  [Reserved]


Sec. 3570.70  Other considerations.

    Each application must 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 as required by part 1942, subparts A 
and C, and part 1980, subpart I, of this title. Proposals for 
facilities financed in whole or in part with Agency funds must be 
coordinated with appropriate Federal, State, and local agencies as 
required by the following:
    (a) Intergovernmental review.
    (b) Civil rights compliance requirements.
    (c) Environmental requirements.
    (d) Governmentwide debarment and suspension.
    (e) Restrictions on lobbying.
    (f) Excess capacity or transfer of employment.
    (g) National Historic Preservation Act of 1966.
    (h) Uniform Relocation Assistance and Real Property Acquisition.
    (i) Floodplains and wetlands.
    (j) Flood or mudslide hazard area precautions.
    (k) Civil Rights Impact Analysis.


Secs. 3570.71-3570.75  [Reserved]


Sec. 3570.76  Planning and performing development.

    Planning and performing development will be handled in accordance 
with Secs. 1942.9, 1942.18, and 1942.126 of this title.


Secs. 3570.77-3570.79  [Reserved]


Sec. 3570.80  Grant closing and delivery of funds.

    (a) The Agency's policy is that grant funds will not be disbursed 
from the Treasury until they are actually needed by the applicant and 
all borrower funds and other CF financial assistance are expended.
    (1) Agency or other loan funds will be disbursed before the 
disbursal of any Agency grant funds except when:
    (i) Interim financing of the total estimated amount of loan funds 
needed during construction is arranged;
    (ii) All interim funds have been disbursed; and
    (iii) Agency grant funds are needed before any other loan can be 
closed.
    (2) If grant funds are available from other agencies and are 
transferred for disbursement by RHS, these grant funds will be 
disbursed in accordance with the agreement governing such other 
agencies' participation in the project.
    (3) Any grant funds remaining will be handled in accordance with 
Sec. 1942.17(p)(6) of this title.
    (b) If the grant is made in connection with other CF financial 
assistance, grant closing must occur simultaneously with loan closing.
    (c) Agency grant funds will be disbursed in accordance with 
Secs. 1942.17(p)(2) and 1942.123 of this title.
    (d) Payment for construction will be made in accordance with 
Secs. 1942.17(p)(5) and 1942.127 of this title.
    (e) An ``Agreement for Administrative Requirements for Community 
Facilities Grants'' will be signed by the grantee. For grants that 
supplement Agency loan funds, the grant should be closed simultaneously 
with the closing of the loan. However, when grant funds will be 
disbursed before loan closing, as provided in paragraph (a)(1) of this 
section, the grant will be closed not later than the delivery date of 
the first advance of grant funds.


Secs. 3570.81-3570.82  [Reserved]


Sec. 3570.83  Audit requirements.

    Audits will be conducted in accordance with Sec. 1942.17(q)(4) of 
this title. The audit requirements apply only to the years in which 
grant funds are received. Audits must be prepared in accordance with 
Generally Accepted Government Auditing Standards (GAGAS) using the 
publication, ``Standards for Audit of Governmental Organizations, 
Programs, Activities, and Functions.''


Sec. 3570.84  Grant servicing.

    Grants will be serviced in accordance with part 1951, subparts E 
and O of this title.


Sec. 3570.85  Programmatic changes.

    The grantee shall obtain prior approval for any change to the 
objectives of the project. (For construction projects, a material 
change in approved space utilization or functional layout shall be 
considered such a change.) Failure to obtain prior approval of changes 
to the approved project or budget can result in suspension, refund, or 
termination of grant funds.


Sec. 3570.86  [Reserved]


Sec. 3570.87  Grant suspension, termination, and cancellation.

    Grants may be suspended or terminated for cause or convenience in 
accordance with parts 3015, 3016, or 3019 of this title, as applicable.


Sec. 3570.88  Management assistance.

    Grant recipients will be supervised, to the extent necessary, to 
ensure that facilities are constructed in accordance with approved 
plans and specifications and to ensure that funds are expended for 
approved purposes.


Sec. 3570.89  [Reserved]


Sec. 3570.90  Exception authority.

    The Administrator may, in individual cases, make an exception to 
any non-statutory requirement or provision of this subpart if the 
Administrator determines that application of the requirement or 
provision would adversely affect the Government's financial interest 
and shows how the adverse impact will be eliminated or minimized if the 
exception is made. Requests for exceptions must be made in writing by 
the approval official.


Sec. 3570.91  Regulations.

    Grants under this part will be in accordance with parts 3015, 3016, 
or 3019, as applicable, of this title and any conflicts between those 
parts and this part will be resolved in favor of the applicable parts 
3015, 3016, or 3019, as applicable.


Sec. 3570.92  [Reserved]


Sec. 3570.93  Regional Commission Grants.

    (a) Grants are sometimes made by Federal Regional Commissions for 
projects eligible for RHS assistance. RHS has agreed to administer such 
funds in a manner similar to administering RHS assistance.
    (b) The transfer of funds from a Regional Commission to RHS will be 
based on specific applications determined to be eligible for an 
authorized purpose in accordance with the requirements of RHS and the 
Regional Commission.
    (c) The Appalachian Regional Commission (ARC) is authorized under 
the Appalachian Regional Development Act of 1965, as amended, to serve 
the Appalachian region. ARC grants are handled in accordance with the 
ARC Agreement (RUS Bulletin 1780-25) which applies to all ARC grants 
administered by RHS. Therefore, a separate Project Management Agreement 
between RHS and ARC is not needed for each ARC grant.

[[Page 16473]]

    (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 RHS for each Commission grant administered by RHS (guide 1 of part 
1942, subpart G). The agreement should be prepared by the RHS 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.
    (e) When the Agency has funds in the project, no charge will be 
made for administering grant funds.
    (f) When RHS has no loan or grant funds in the project, an 
administrative charge will be made pursuant to the Economy Act of 1932, 
as amended (31 U.S.C. 1535). A fee of 5 percent of the first $50,000 
and 1 percent of any amount over $50,000 will be paid RHS by the 
commission.


Secs. 3570.94-3570.99  [Reserved]


Sec. 3570.100  OMB control number.

    According to the Paperwork Reduction Act of 1995, no persons are 
required to respond to a collection of information unless it displays a 
valid OMB control number. The valid OMB control number for this 
information collection is 0575-0173.

    Dated: March 28, 1997.
Inga Smulkstys,
Deputy Under Secretary, Operations and Management, Rural Development.

    Dated: March 28, 1997.
Dallas R. Smith,
Acting Under Secretary, Farm and Foreign Agricultural Service.
[FR Doc. 97-8743 Filed 4-4-97; 8:45 am]
BILLING CODE 3410-XV-U