[Federal Register Volume 64, Number 85 (Tuesday, May 4, 1999)]
[Notices]
[Pages 23978-23980]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10830]



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Part III





Department of Commerce





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Economic Development Administration



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National Technical Assistance--Request for Proposals (RFP); Notice

  Federal Register / Vol. 64, No. 85 / Tuesday, May 4, 1999 / Notices  

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DEPARTMENT OF COMMERCE

Economic Development Administration
[Docket No. 990323079-9079-01]
RIN 0610-ZA10


National Technical Assistance--Request for Proposals (RFP)

AGENCY: Economic Development Administration (EDA), Department of 
Commerce (DoC).

ACTION: Notice of Availability of Funds.

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SUMMARY: EDA solicits proposals for National Technical Assistance 
projects, under 13 CFR Part 307, Subpart C (64 FR 5347) to undertake 
and report on securitization of economic development loans from 
revolving loan funds. EDA anticipates making three to five awards from 
a total of $1.0 million available, subject to available funding in 
fiscal year 1999.

DATES: Prospective applicants are advised that EDA will conduct a pre-
proposal conference on May 18, 1999, at 2:00 p.m. in the Department of 
Commerce, Herbert C. Hoover Building, 14th and Constitution Avenue, NW, 
Washington, DC 20230, Room 1412, at which time questions on this RFP 
can be answered. Potential applicants are encouraged to provide written 
questions (See Address section below) by May 11, 1999. Prospective 
applicants unable to attend this pre-proposal conference may 
participate by telephone conference. Teleconference information may be 
obtained by calling (202) 482-4085 between 8:30-5:00 EDT on May 17, 
1999.
    EDA will also conduct pre-proposal conferences during the EDA 
regional conferences in Boca Raton, FL (June 7-9, 1999), Dallas, TX 
(June 4, 1999), and Long Beach, CA (April 27-29, 1999). To find out the 
specific location and time of a regional pre-proposal conference, 
contact David F. Witschi (202) 482-2659 or John J. McNamee (202) 482-
4085.
    Initial proposals for funding under this program will be accepted 
through June 21,1999. Initial proposals received after 5:00 p.m. EDT in 
Room 7019, on June 21, 1999, will not be considered for funding. By 
July 2, 1999, EDA will advise successful proponents to submit full 
applications (containing complete proposals as part of the 
application), OMB Control Number 0610-0094. Completed applications must 
be submitted to EDA by July 16, 1999. EDA will make awards under this 
RFP no later than September 30, 1999.

ADDRESSES: Send initial proposals to John J. McNamee, Director, 
Research and National Technical Assistance Division, Economic 
Development Administration, Room 7019, U.S. Department of Commerce, 
Washington, DC 20230.

FOR FURTHER INFORMATION CONTACT: David F. Witschi, (202) 482-2659 or 
John J. McNamee (202) 482-4085.

SUPPLEMENTARY INFORMATION:

I. Introduction

A. Authority

    The Public Works and Economic Development Act of 1965, as amended 
(Pub. L. 89-136, 42 U.S.C. 3121 et seq.), including the comprehensive 
amendments by the Economic Development Administration Reform Act of 
1998 (Pub. L. 105-393) (PWEDA) authorizes EDA to make grants for, among 
other things, demonstrations of innovative activities or strategic 
economic development investments (42 U.S.C. 3147). Pub. L. 105-277 
makes funds available for this program.

B. Catalog of Federal Domestic Assistance

    11.303 Economic Development-Technical Assistance Program.

C. Program Description

    For a description of this program see PWEDA and 13 CFR Chapter III, 
Part 307 (64 FR 5347).

II. Area of Special Emphasis

    EDA invites proposals to design, undertake, and evaluate 
transactions demonstrating securitization of economic development loans 
in a variety of EDA-funded Revolving Loan Fund (RLF) portfolios. For 
the purposes of this project, EDA defines securitization transactions 
to include sales of loans, pledging the future income stream of a loan, 
and similar secondary market activities. This demonstration program is 
designed to generate successful transactions that can serve as models 
for use by federal, state, or nonprofit entities for future 
transactions. At this time, EDA does not endorse or indicate any 
preference for any particular securitization technique or method. EDA 
does recognize, however, in viewing this as a demonstration program, 
that the cost of completing a transaction may be higher and the return 
to participating RLFs lower than would eventually be expected once 
securitization of economic development loans becomes a more established 
practice.

A. Background

    Current estimates suggest that there may be as many as several 
thousand RLFs involved in economic development lending with total 
assets of several billion dollars. These RLFs have been created over 
the past 20 years with funding from a variety of federal, state, and 
nonprofit sources. EDA alone has capitalized more than 400 RLFs, with 
nearly $700 million in assets (See 13 CFR Part 308 (64 CFR 5347) for a 
program description). EDA RLFs are located throughout the country and 
are managed by states, local units of government, Economic Development 
Districts and nonprofit organizations engaged in economic development. 
To date, only a handful of secondary market transactions involving RLF-
sourced economic development loans have been undertaken. EDA is 
interested in expanding the secondary market for economic development 
loans as a cost-effective and fiscally sound means of leveraging the 
capital available to RLFs. Until greater experience is gained in making 
actual transactions, the costs of securitization will remain high and 
economic development loans will draw little interest from potential 
investors. This demonstration project will allow EDA and other entities 
involved in economic development lending to gain experience, expertise 
and knowledge required to develop securitization standards, guidelines 
and other requirements necessary to make securitization an effective 
and fiscally sound strategy for funding economic development. The 
demonstration program will also stimulate further interest in economic 
development loan programs by the secondary investment community.

B. Scope of Work

    The successful applicant(s) will:
    (1) Propose an actual securitization transaction that includes 
loans from an EDA-funded RLF. EDA will not consider proposals limited 
to feasibility studies or examination of hypothetical transactions. The 
proposal need not identify specific buyers and sellers, but it should 
describe how buyers and sellers will be determined.
    (2) Make a sincere, good faith effort to complete the proposed 
transaction.
    (3) Include a plan to ensure competitive pricing.
    (4) Address the impact the securitization may have on RLF 
borrowers.
    (5) Provide information generated by the transaction to assist EDA 
and others in their efforts to:
     Identify those characteristics of loans and loan funds 
that influence the success or failure of securitization efforts.

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     Identify the different range of securitization approaches 
available, as well as their relative benefits, costs and possible 
markets.
     Develop RLF loan documentation standards as well as 
standards for critical RLF organizational procedures and practices.
     Identify and quantify the importance of specific factors 
that contribute to any discount of the loans securitized. These factors 
may include reduced profitability and increased risk of the loans due 
to: (a) Economic development lending policies; (b) actual performance 
characteristics of the RLF loans and borrowers; (c) the quality of 
documentation, underwriting standards and loan servicing practices of 
the RLF lender(s); and/or (d) the scarcity of actuarial information on 
economic development lending.
     Determine if securitization is influencing subsequent loan 
selection, evaluation, servicing, or other fund management practices. 
EDA anticipates this will include a program of voluntary follow-on 
monitoring after the project is completed.
     Address the effect of discounted transactions (especially 
if repeated) on the ability of the RLF to sustain itself.
    While information gathered from each transaction may be different, 
this information is expected to help other RLFs interested in preparing 
portfolios for future securitization. The information gathered in the 
demonstration program is expected to be disseminated by EDA to the 
broader economic development lending community.
    (6) Prepare a final report documenting lessons learned from the 
securitization that may help future securitization participants.

C. Additional Requirements

    The successful applicant(s) must:
    (1) Demonstrate that each participating RLF needs, and can utilize, 
further capitalization within a reasonable time frame.
    (2) Propose securitization methods or techniques that are generally 
expected to be replicable.
    (3) Not use federal funds for loan guarantees or other activities 
designed to influence market prices by artificially enhancing the 
credit-worthiness of loans to be sold.
    (4) Describe how transaction proceeds will be used and disbursed. 
In the case of an EDA-funded RLF, any net proceeds of a securitization 
(after transactions costs are paid) must be applied toward new loans in 
accordance with the original lending plan of the RLF or a subsequent 
plan approved by EDA.
    Successful applicant(s) will incorporate one or more of the 
following features in the proposed securitization(s). (Note: 
incorporation of all features is not required and, in fact, several of 
the following are mutually exclusive.) A proposed securitization may:
    (1) Be limited to the loans of a single RLF, or be subregional, 
regional or national in scope.
    (2) Involve loans from both urban and rural RLFs; Economic 
Development District operated RLFs; community based organization RLFs; 
and RLFs sponsored by other federal, state, and local government 
agencies. RLFs funded by non-EDA sources are responsible for securing 
appropriate and timely approvals of their funding agencies before a 
transaction is completed.
    (3) Demonstrate innovative techniques for loan pooling from 
different RLF portfolios. This is intended to encourage willing and 
qualified RLFs to participate, regardless of portfolio size.
    (4) Be transacted either by public offering or private placement.
    (5) Use credit enhancement techniques provided they do not require 
an additional federal subsidy.
    (6) Include rating of issues by recognized rating services.

D. Costs

    Ordinarily, the applicant is expected to provide a 50% nonfederal 
share of project costs. However, the Assistant Secretary may waive the 
required 50% matching share of the total project costs, provided the 
applicant can demonstrate: (1) the project is not feasible without, and 
the project merits such a waiver, or (2) the project is addressing 
major causes of distress in the area serviced and requires the unique 
characteristics of the applicant, which will not participate if it must 
provide all or part of a 50 percent nonfederal share, or (3) the 
project is for the benefit of local, state, regional, or national 
economic development efforts, and will be of no or only incidental 
benefit to the recipient (See 13 CFR 307.9; 64 FR 5429).
    For the purposes of this demonstration project, EDA funds may be 
used to pay for:
     Professional fees associated with the transaction, 
including, but not limited to, financial advisors, trustee and legal 
expenses and for the cost to perform due diligence. In the event a 
transaction is completed successfully, such costs are expected to be 
recovered from the transaction proceeds, and may be retained by the 
applicant and/or participating RLFs for uses approved by EDA. Such 
reuse of EDA funds should be described in the proposal (See item C (4) 
above).
     Organizational and administrative fees and expenses, 
including direct salaries of applicant staff involved with the 
securitization.
     Other costs normally eligible under EDA's Technical 
Assistance Program.

E. Timing

    Each project will begin on the date specified in the grant award, 
which shall be on or before September 30, 1999. Each securitization 
transaction must be completed no later than nine months after the date 
of approval of the grant. A final report and evaluation must be 
submitted to EDA within 90 days of completion of the securitization 
transaction.

F. Briefings and Workshops

    Each award includes a requirement that the applicant conduct a 
total of up to three briefings or training workshops for individuals 
and organizations interested in the results of this project. Potential 
applicants should be aware that the completion dates set forth below 
are for completed transactions and submission of the final written 
report. Briefings/workshops will take place no later than one year 
after submission of the final report. Locations and dates of the 
briefings/workshops are at EDA's discretion. Most likely, this will 
include one briefing in Washington, DC, with the other briefings/
workshops held in conjunction with one or more of EDA's regional 
conferences.

III. How to Apply

A. Eligible Applicants

    See EDA's interim final rule at 13 CFR 300.2 (64 FR 5347). Eligible 
applicants are as follows: areas meeting requirements under 13 CFR 
301.2; Economic Development Districts; Indian tribes; consortiums of 
Indian Tribes; states, cities or other political subdivisions of a 
state; consortiums of political subdivisions of states; institutions of 
higher education, consortiums of institutions of higher education; 
public or private nonprofit organizations or associations acting in 
cooperation with officials of a political subdivision of a state, for-
profit organizations, and private individuals.
    A lead applicant may have one or more other eligible applicants as 
co-applicants. Where appropriate, applicants should identify in advance 
professional financial and/or legal consultants who will participate in 
the

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project under contract. Such contracts are subject to procurement 
requirements as set forth in 15 CFR Part 14 (63 FR 47155) or 15 CFR 
Part 24, as applicable.

B. Proposal Submission Procedures

    Initial proposals submitted by potential applicants should include: 
(1) a description of how the applicant(s) intend(s) to carry out the 
scope of work; (2) a proposed budget and accompanying narrative; (3) 
resumes/qualifications of key staff, and (4) a proposed time line. EDA 
will not accept proposals submitted by FAX. Proposals received after 
5:00 p.m. EDT in Room 7019, on June 21, 1999, at the address provided 
above, will not be considered.

IV. Selection Process and Evaluation Criteria

    Proposals will receive initial review by EDA to assure that they 
meet all requirements of this announcement and requirements under 13 
CFR Chapter III (64 FR 5347), including eligibility and relevance to 
the specified project as described herein. All proposals must:
    (1) Meet EDA's statutory and regulatory requirements;
    (2) Propose an actual securitization; and
    (3) Document a structure that ensures an arms-length transaction 
between the seller and the purchaser.
    EDA will carry out its selection process using the following 
criteria:
    (1) The quality of a proposal's response to the scope of work 
proposed; and
    (2) The ability of the prospective applicant to successfully carry 
out the proposed activities. If an initial proposal is selected, EDA 
will invite the proponent(s) to submit a full proposal and supply the 
applicant(s) with an Application for Federal Assistance.
    From the full proposals and applications, EDA will select the 
applicant(s) it deems most qualified and cost-effective. EDA 
anticipates that more full proposals and applications will be received 
than will eventually be funded.

V. Additional Information and Requirements

    See 64 FR 9221, Part III for additional information and 
requirements (available on the internet at http://www.doc.gov/eda/html/
notice.htm, under the heading ``Economic Development Programs-
Availability of Funds'').

    Dated: April 26, 1999.
Phillip A. Singerman,
Assistant Secretary for Economic Development.
[FR Doc. 99-10830 Filed 5-3-99; 8:45 am]
BILLING CODE 3510-24-P