[Federal Register Volume 64, Number 87 (Thursday, May 6, 1999)]
[Rules and Regulations]
[Pages 24476-24482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-11256]



[[Page 24475]]

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Part V





Department of Agriculture





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Rural Housing Service



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Rural Business-Cooperative Service



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Rural Utilities Service



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Farm Service Agency



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7 CFR Parts 1940 and 1944



Processing Requests for Farm Labor Housing (LH) Loans and Grants; Final 
Rule



Notice of Funds Availability (NOFA) for Section 514 Farm Labor Housing 
Loans and Section 516 Farm Labor Housing Grants for Off-farm Housing; 
Notice

  Federal Register / Vol. 64, No. 87 / Thursday, May 6, 1999 / Rules 
and Regulations  

[[Page 24476]]



DEPARTMENT OF AGRICULTURE

Rural Housing Service
Rural Business-Cooperative Service
Rural Utilities Service
Farm Service Agency

7 CFR Parts 1940 and 1944

RIN 0575-AC19


Processing Requests for Farm Labor Housing (LH) Loans and Grants

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

ACTION: Final rule.

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

SUMMARY: The Rural Housing Service (RHS), formerly Rural Housing and 
Community Development Service (RHCDS), a successor Agency to the 
Farmers Home Administration (FmHA), amends its regulations for the Farm 
Labor Housing (LH) program. This action is taken to implement an annual 
competitive funding cycle for off-farm proposals that will be announced 
elsewhere in this Federal Register. The intended outcome is to improve 
the effectiveness and efficiency of the application process and enable 
the Agency to process applications in a more efficient and timely 
manner. This rule also implements the provision of Public Law 105-276, 
enacted October 21, 1998, that permits as an eligible LH borrower 
entity a limited partnership with a nonprofit general partner.

EFFECTIVE DATE: June 7, 1999.

FOR FURTHER INFORMATION CONTACT: Linda Armour, Senior Loan Specialist, 
Multi-Family Housing Processing Division, Rural Housing Service, U.S. 
Department of Agriculture, Room 5349--South Building, Stop 0781, 1400 
Independence Avenue, SW, Washington, DC 20250-0781, telephone (202) 
720-1604 (voice) or (800) 877-8339 (TDD-Federal Information Relay 
Service).

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.

Paperwork Reduction Act

    The information collection requirements contained in this 
regulation have been previously approved by the Office of Management 
and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and have 
been assigned OMB control number 0575-0045, in accordance with the 
Paperwork Reduction Act of 1995. Under the Paperwork Reduction Act of 
1995, no persons are required to respond to a collection of information 
unless it displays a valid OMB number. The valid OMB control number 
assigned to the collection of information in these final regulations is 
displayed at the end of the affected section of the regulation. This 
rule does not impose any additional burden on the public.
    The new competitive application process should increase the number 
of applications each year, and only those applicants selected for 
further processing for funding within the fiscal year will need to 
submit a full application. The net effect is no new information 
collection requirements from those approved by OMB.

Civil Justice Reform

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. In accordance with this rule: (1) All state and local 
laws and regulations that are in conflict with this rule will be 
preempted; (2) except as specifically provided, no retroactive effect 
will be given to this rule; and (3) administrative proceedings in 
accordance with 7 CFR part 11 must be exhausted before bringing suit in 
court challenging action taken under this rule.

Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 
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, RHS 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 1 year. When 
such a statement is needed for a rule, section 205 of the UMRA 
generally requires RHS 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. Therefore, this rule is not subject 
to the requirements of sections 202 and 205 of the UMRA.

National Performance Review

    This regulatory action is being taken in part as a result of the 
National Performance Review program to eliminate unnecessary 
regulations and improve those that remain in force.

Programs Affected

    The affected program is listed in the Catalog of Federal Domestic 
Assistance under Number 10.405, Farm Labor Housing Loans and Grants.

Intergovernmental Consultation

    For the reasons set forth in the Final Rule related Notice to 7 CFR 
part 3015, subpart V, this program is subject to Executive Order 12372 
which requires intergovernmental consultation with State and local 
officials. RHS has conducted intergovernmental consultation in the 
manner delineated in RD Instruction 1940-J.

Environmental Impact Statement

    This document has been reviewed in accordance with 7 CFR part 1940, 
subpart G, ``Environmental Program.'' It is the determination of RHS 
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, Public 
Law 91-190, an Environmental Impact Statement is not required.

Regulatory Flexibility Act

    This rule has been reviewed with regard to the requirements of the 
Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has 
determined and certified by signature of this document that this rule 
will not have a significant economic impact on a substantial number of 
small entities since this rulemaking action does not involve a new or 
expanded program nor does it require any more action on the part of a 
small business than required of a large entity.

Background

    The farm labor housing program has two authorities in Title V of 
the Housing Act of 1949: section 514 (42 U.S.C. 1484) for loans and 
section 516 (42 U.S.C. 1486) for grants. As provided by the authorizing 
statute, section 514 loans are subsidized to borrowers to a one percent 
interest rate. The program also has tenant subsidies (rental 
assistance, or RA) available through section 521 (42 U.S.C. 1490a). 
Both ``on-farm'' and ``off-farm'' housing are financed by the LH 
program. Occupancy in both is restricted to United States citizens or 
aliens legally admitted for permanent residence.

[[Page 24477]]

    On-farm housing is financed with section 514 loans to a farmer or 
farm entity. Housing built is typically a single family dwelling unit, 
and occupancy is restricted to farmworkers or a farmworker family with 
at least one member of the household employed by the farm. No tenant 
subsidies are available.
    Off-farm housing proposals, which may be financed with both section 
514 loans and section 516 grants, are typically designed like 
conventional apartment complexes; however, occupancy is restricted to 
farmworker households. Rental assistance is typically available to 
occupants to assure unit affordability.
    On October 29, 1998, the Agency published a proposed rule in the 
Federal Register (63 FR 57932) to change to an annual competitive 
funding cycle from the current system of accepting and processing off-
farm labor housing proposals on a first-come, first-served basis. These 
regulation changes do not affect on-farm housing loan requests, which 
will continue to be accepted and processed on a first-come, first-
served basis.

Discussion of Comments

    Fifteen commentors responded during the comment period, three of 
whom submitted duplicate letters. An additional comment was received 
after the comment period had closed, expressing support of another 
commentor's letter, making a total of sixteen responses. Commentors 
included State agencies, farm labor housing technical assistance 
providers, nonprofit groups, developers, and RHS field staff. The 
Agency wishes to thank all respondents for their thorough and 
constructive comments and suggestions. We have carefully considered all 
comments in developing this final rule.

The comments we received are summarized and discussed below by 
topic.

Annual Competitive Funding Cycle

    The majority of commentors agreed with the Agency's proposal to 
adopt an annual competitive funding cycle, with only two commentors 
opposing this alternative to the current first-come, first-served 
application process. The Agency is implementing the annual competitive 
funding cycle as proposed.
    Two commentors, while agreeing with the annual competitive process, 
felt that the proposed 60-to 90-day application period was too short, 
and offered suggestions for ways to give applicants more time to 
complete and submit their loan requests. The first commentor suggested 
that the Agency issue the notice of funding earlier in the year, based 
on preliminary appropriations estimates, before funds actually become 
available. The notice would specify that funds were subject to the 
amount of the final appropriations. The second commentor suggested that 
the Agency accept applications and issue letters of commitment in FY 
1999 for FY 2000 funds; FY 1999 funds could then be used to fund 
applications on hand for which the Agency has already issued an AD-622, 
``Notice of Preapplication Review Action'', inviting a formal 
application. A third commentor on this issue offered an opposing 
opinion, stating that the Agency should not announce the availability 
of funds prior to the appropriation of funds because funding levels can 
vary from year to year.
    The Agency feels that the funding announcement can be made as soon 
as there is reasonable assurance of funding levels. The funding notice 
will be published in the Federal Register as quickly as possible 
thereafter to allow the maximum application period.
    Several commentors stated that a minimum of 90 days should be 
allowed for the application cycle to allow smaller or inexperienced 
applicants time to complete their applications. We agree that a 90-day 
Notice of Funds Availability (NOFA) is preferable and will make every 
effort to accommodate this recommendation by publishing NOFA as soon as 
funding levels are known. The Agency will also attempt to ensure, 
through outreach efforts, that potential applicants are aware of the 
program's annual funding cycle so that preliminary groundwork can be 
done prior to the Agency's funding announcement.

Three-Stage Application Process

    The Agency proposed adopting a three-stage application process with 
a preliminary proposal stage. The majority of commentors were opposed 
to this and recommended retaining the current two-stage process. They 
noted that the preliminary stage was nearly as extensive as the 
Agency's current first stage (preapplication) requirements and 
unnecessarily complicated the process. Two commentors also noted that, 
if the applicant is applying for other funds to leverage with RHS 
funds, the information required in the Agency's current preapplication 
stage is generally required by the other lenders. Based on these 
comments, the Agency has decided to retain the current two-stage 
application process.

Description of Proposed Financing

    Three respondents commented on the provisions of 
Sec. 1944.170(a)(2)(ii), ``Description of proposed financing.'' One 
questioned whether the requirement that leveraged funds not exceed the 
cost of 100 percent LH loan financing was realistic. Based on our 
experience with the section 515 Rural Rental Housing program, we have 
found this to be a realistic requirement, with many applicants 
obtaining grants, deferred loans, or 1 percent loans. We have modified 
this provision, however, to indicate that this condition applies only 
if RHS Rental Assistance is being provided. Regarding the provisions 
for donated land, one commentor felt that the requirement that site 
costs cannot exceed the cost of purchasing and developing an 
alternative site was too inflexible, citing instances where no other 
site is available or the site is mandated by local conditions. The 
Agency agrees there may be exceptional cases; however, these will be 
handled on a case-by-case exception basis. A third commentor objected 
to the requirement that the funding dates of leveraged funds permit 
funding within the current funding cycle, noting that this was not 
appropriate for on-going operating subsidies. The same commentor also 
noted that, for many leveraged sources, the funds may be committed but 
not actually received in the funding cycle. The Agency feels there is 
merit to these criticisms and has modified the language for this 
requirement accordingly.

Environmental Review

    Two commentors recommended that the Agency require Form RD 1940-20, 
``Request for Environmental Information,'' at the initial application 
stage and consider requiring a Phase I Environmental Review at this 
stage. The Agency agrees that the environmental process should begin 
with the initial loan request. Form RD 1940-20 is required with the 
preapplication submission, and Agency staff will be required to conduct 
a site visit to establish preliminary site eligibility and to identify 
potential environmental concerns. In coordination with the 
environmental site review, Agency staff will be required to conduct a 
civil rights impact analysis in accordance with RD Instruction 2006-P.

Appraisal Requirements

    One commentor noted that Sec. 1944.169(a)(1) requires appraisals to 
be performed by RHS employees and questioned whether this precluded 
contract appraisals. We agree that the

[[Page 24478]]

Agency may wish to use contract appraisers in some instances and have 
changed the wording in this section to remove the reference to RHS 
employees.

Loan Selection Criteria

    The Agency proposed awarding points in nine different loan 
selection categories: (1) the presence and extent of leveraged 
assistance; (2) units to be built in communities with a high need for 
farmworker housing; (3) proposals in support of an Agency initiative 
announced in Notice of Funds Availability (NOFA); (4) proposals with 
support services; (5) proposals with a minimum ten percent private 
agriculture producer leveraged funds; (6) projects whose occupants will 
derive the highest percentage of income from on-farm agriculture work; 
(7) proposals in market areas not previously served by LH projects; (8) 
seasonal, temporary, or migrant housing; and (9) for FY 1999 and FY 
2000, proposals that were issued an AD-622, ``Notice of Preapplication 
Review Action,`` inviting a formal application, or had been reviewed 
and authorized by the National Office prior to October 29, 1998 (the 
date the proposed rule was published in the Federal Register). The 
comments on each category are discussed below:
    The presence and extent of leveraged assistance, and proposals with 
a minimum ten percent private agriculture producer leveraged funds. The 
majority of commentors felt that the two criteria dealing with 
leveraged assistance should be combined into one, both to simplify the 
process and to preclude giving too much weight to leveraged assistance. 
In addition, commentors felt that the Agency should establish point 
ranges for percentages of leveraging, rather than the proposed method 
of comparing applications to each other. The Agency agrees with both of 
these suggestions and has adopted them in this rule.
    High-need areas for farmworker housing. Seven commentors objected 
to the proposed loan score factor for projects that would be located in 
high need areas for farmworker housing as identified in the state 
Consolidated Plan or state needs assessment. It was noted that many 
states do not identify farmworker housing needs at all, or do not give 
these needs any special priority. Several commentors noted that the 
Agency should rely on the market analysis to determine need and demand. 
Because of the strong opposition by commentors, and in the absence of 
uniformly available data or state plans, the Agency is not adopting 
this factor.
    Agency initiative. Five comments were received on the proposal to 
award zero to twenty points for an optional Agency initiative announced 
in NOFA. One commentor suggested that the Agency announce any 
initiative well in advance of NOFA and keep the same initiative for 
more than one year. Three commentors noted that, since applicants would 
not be able to plan ahead for the initiative, twenty points gave it too 
much weight. Another commentor objected to the range of scores, feeling 
that the proposal would either comply with the initiative or not. The 
Agency appreciates these comments and concerns and will take them into 
consideration in developing any Agency initiatives. In addition, we 
have modified the point score for this factor so that ten points will 
be awarded to proposals that support the Agency initiative and zero 
points for those that do not.
    Supportive services. Commentors expressed a variety of opinions on 
the proposal to award five points for one supportive service and ten 
points for two or more. One commentor supported this factor as 
proposed, while two others felt the Agency needed to better define 
supportive services and should differentiate between simple and more 
complex services. One suggested using a range of points for each 
service based on the financial investment or value. One commentor noted 
that a services package should be required of all multi-family housing 
and updated every few years. Another commented that services should not 
be required on-site if they are available in close proximity to the 
housing and the service providers have committed that the services are 
available, accessible, and affordable to farmworkers and their 
families. Still another commentor suggested a change in regulations to 
make the provision of services an eligible operating expense. Although 
the suggestions varied, all commentors agreed that a supportive 
services package is critical to the successful operation of multi-
family housing. Based on this and the lack of consensus on a fair way 
to distinguish between services in awarding points, the Agency has 
decided not to use this as a loan scoring factor but, instead, will 
require a supportive services plan as part of the application. Services 
may be provided on-site or through cooperative agreements with service 
providers in the community. At the initial application stage, letters 
of intent from service providers will be acceptable documentation.
    Highest percentage of income from on-farm agricultural work. Five 
respondents commented on this factor. All five objected to its 
inclusion in the loan selection criteria, pointing out the difficulty 
in projecting future occupancy and the lack of reliable data. One of 
the commentors further noted that this factor is more appropriate as a 
preliminary eligibility assessment. The Agency feels these are valid 
criticisms and, therefore, has not adopted this factor in the final 
rule.
    Market areas not previously served by LH projects. We received two 
comments on this loan scoring factor. Both recommended that the Agency 
modify this category to reflect the degree of need for farmworker 
housing in the market area based on the number of farmworker households 
and available housing units. We considered this suggestion but decided 
against adopting it because of the difficulty in obtaining accurate 
data on farmworker housing needs. We agree, however, that housing 
should go to areas of greatest need based on the market analysis, which 
may or may not have existing LH units. Therefore, we have not adopted 
this factor in the final rule.
    Seasonal, temporary, or migrant housing. The proposed rule provided 
that five points would be awarded for proposals with up to 50 percent 
of its units serving seasonal, temporary, or migrant farmworkers, and 
ten points for 51 percent or more. Three commentors felt that more 
weight should be given to this factor, with one noting that this factor 
should be on a par with leveraged assistance to help accomplish a 
balanced program. Two of these commentors suggested a point range of 
zero to twenty points, based on the percentage of units serving 
seasonal, temporary, or migrant farmworkers. As mentioned above (under 
the heading ``The presence and extent of leveraged assistance and 
proposals with a minimum 10 percent private agriculture producer 
leveraged funds''), the two proposed leveraging factors have been 
combined into one, reducing the maximum points for leveraging from 
forty to twenty. Few applications will receive the maximum twenty 
points, so we do not believe leveraging will arbitrarily outweigh other 
factors. With limited program funds, we have attempted to balance the 
need for leveraging with other Agency objectives. Therefore, we have 
retained the points for seasonal, temporary, or migrant housing as 
proposed.
    Loan requests that have been issued an AD-622. The proposed rule 
provided that, for Fiscal Years 1999 and 2000, ten points would be 
awarded to applications or loan requests that had been issued an AD-
622, ``Notice of Preapplication Review Action,'' inviting a formal 
application, or had been authorized by the National Office prior

[[Page 24479]]

to October 29, 1998 (the date the proposed rule was published). Five 
respondents commented on this issue. Two agreed with this provision, 
with one stressing support for the two-year limitation. One commentor 
disagreed with this provision, stating that each proposal should 
compete on its own merits. Another commentor felt that proposals with 
an AD-622 should not have to compete with other proposals, since they 
were developed under the previous regulations. The fifth commentor 
suggested funding only those proposals with AD-622s in fiscal year 1999 
and implementing the new process in fiscal year 2000.
    Commentors were divided on this issue and, after considering the 
comments and arguments on both sides, the Agency has decided to 
implement this measure as proposed, i.e., to give preference to loan 
requests that were issued an AD-622 or authorized by the National 
Office by awarding points for two funding cycles. However, to address 
the concerns of commentors who felt AD-622s should be given more 
consideration, we have increased the number of points from ten to 
fifteen.

Other Suggested Loan Selection Criteria

    Several commentors suggested other loan selection criteria for the 
Agency's consideration. Two commentors suggested project readiness and 
development team experience; others suggested cost effectiveness and 
construction quality. The Agency considered these and similar criteria 
in drafting the proposed rule; however, we found it impossible to 
develop standards for factors that require subjective judgments, such 
as an assessment of quality or experience. In addition, we were 
concerned that the readiness to proceed factor could result in delays 
or obstacles by communities that oppose the development of farm labor 
housing. Therefore, we have not adopted these suggestions.

Point-score Ties

    The proposed rule provided that, in case of point-score ties for 
requests from the same State, the proposal with the most supportive 
services would be given priority, with further same-State ties 
determined by lottery. One commentor objected to these tie breakers, 
proposing instead that, with limited funds and the emphasis on 
leveraging, primary priority be given to requests that are the most 
cost effective and have the most leveraged assistance, with secondary 
priority to requests with the greatest market need for LH units. The 
same commentor felt the regulation should also address point-score ties 
between requests from different States. With regard to the ``most 
supportive services'', we are not adopting this loan scoring factor in 
the final rule, so it is no longer appropriate as a tie breaker (see 
discussion above under ``Loan Selection Criteria''). With regard to the 
suggested tie breakers, we believe it would be difficult to obtain 
reliable and objective data to establish ``most cost effective'' and 
``greatest market need''. We agree, however, that there is merit to 
using the actual percentage of leveraged assistance as a tie-breaker. 
In addition, the Agency believes there is merit to giving a preference 
to applications to develop units in states that have no existing RHS-
financed off-farm LH units. Therefore, the actual percentage of 
leveraged assistance will be used as a tie-breaker for point-score ties 
within the State; in the case of point-score ties in the National 
ranking, preference will be given to applications in States that have 
no existing RHS-financed off-farm LH units. In the event of further 
point-score ties at the National level, preference will be given to 
States that have not been selected in the current cycle.

Geographic Diversity

    The proposed rule provided that the Agency could select a lower 
scoring loan request over one with a higher score in order to achieve 
geographic diversity. Five commentors strongly objected to this 
provision, stating that it undermined the objectivity of the point 
system. We agree that the selection process should be fair and 
objective and, therefore, we have not adopted this provision in the 
final rule.

Statutory Amendments

    Public Law 105-276, enacted October 21, 1998, included two 
amendments to the Farm Labor Housing (LH) program. The first extends 
eligibility for low-income housing tax credit financing to the LH 
program by adding as eligible borrowers for section 514 loans ``any 
nonprofit limited partnership in which the general partner is a 
nonprofit entity''. This wording is interpreted by the Agency to mean 
``any limited partnership in which the general partner is a nonprofit 
entity.'' We have included this provision in the final rule and will 
interpret ``nonprofit limited partnership'' to mean ``any limited 
partnership in which the general partner is a nonprofit entity.'' This 
will be consistent with the wording found in section 515(w) (42 U.S.C. 
1485(w)). The second LH legislative amendment provides that rental 
assistance payments may be used for project operating costs in housing 
for migrant farmworkers financed under section 514 or section 516. This 
provision is not included in this rule because of the need to make 
changes to the Agency's project management regulations and automated 
systems but will be included in the Agency's reinvented regulation, 
which is scheduled to be published as a proposed rule in fall of 1999.

Implementation Proposal

    Under the annual competitive system that is being implemented with 
this rule, the amount of available funds and application deadlines will 
be announced each funding cycle in the Federal Register through a NOFA. 
Loan requests received by the application deadline will be reviewed and 
selected based on objective criteria in accordance with the revised 
regulations. Loan requests not selected for funding will be returned to 
the applicant.
    Applications on hand are subject to the new competitive process. In 
fiscal years 1999 and 2000, points will be awarded to applications on 
hand that were issued an AD-622 inviting a formal application or that 
had been reviewed and authorized by the National Office as of October 
29, 1998 (the publication date of the proposed rule). A new proposal 
that ranks higher under the selection criteria than an existing 
application will take priority over the existing one.
    Agency staff were directed by the proposed rule to return proposals 
on hand that had not been issued an AD-622 or reviewed and authorized 
by the National Office as of October 29, 1998 (the publication date of 
the proposed rule). Loan requests thus returned may, of course, be 
submitted for consideration during the application period announced in 
NOFA.

List of Subjects

7 CFR Part 1940

    Administrative practice and procedure, Agriculture, Grant 
programs--housing and community development, Loan programs--
agriculture, Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1944

    Grant programs--housing and community development, Loan programs--
housing and community development, Migrant labor, Nonprofit 
organizations, Public housing, Rent subsidies, Reporting and 
recordkeeping requirements.

    Therefore, chapter XVIII, title 7, Code of Federal Regulations is 
amended to read as follows:

[[Page 24480]]

PART 1940--GENERAL

    1. The authority citation for part 1940 is revised to read as 
follows:

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

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

    2. Revise section 1940.579 to read as follows:


Sec. 1940.579  Multiple Family Housing appropriations not allocated by 
State.

    Funds are not allocated to States. The following program funds are 
kept in a National Office reserve and are available as determined 
administratively:
    (a) Section 514 Farm Labor Housing Loans.
    (b) Section 516 Farm Labor Housing Grants.

PART 1944--HOUSING

    3. The authority citation for part 1944 continues to read as 
follows:

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

Subpart D--Farm Labor Housing Loan and Grant Policies, Procedures, 
and Authorizations

    4. Amend section 1944.153 in the definition of ``Domestic farm 
laborer'' by revising the words ``FmHA or its successor agency under 
Public Law 103-354'' to read ``Rural Housing Service''; in the 
definition of ``Farm owner'' by revising the words ``subpart A of part 
1944 of this chapter'' to read ``this section''; in the definition of 
``Self-employed'' by revising the words ``FmHA or its successor agency 
under Public Law 103-354'' to read ``Rural Housing Service'' and the 
words ``District or State Director'' to read ``Loan Official or State 
Director''; and by adding in alphabetical order definitions to read as 
follows:


Sec. 1944.153  Definitions.

    Agency. The Rural Housing Service, an agency of the U.S. Department 
of Agriculture which administers section 514 loans and section 516 
grants.
* * * * *
    Farm. A tract or tracts of land, improvements, and other 
appurtenances considered to be farm property which is used or will be 
used in the production of crops or livestock, including the production 
of fish under controlled conditions, for sale in sufficient quantities 
so that the property is recognized as a farm rather than a rural 
residence. It may also include a residence which, although physically 
separate from the farm acreage, is ordinarily treated as part of the 
farm in the local community.
* * * * *
    HUD. The U.S. Department of Housing and Urban Development.
* * * * *
    LH. Farm Labor Housing.
* * * * *
    MFH. Multi-Family Housing.
* * * * *
    NOFA. Notice of Funds Availability.
* * * * *
    Off-Farm Labor Housing. Housing for farm laborers regardless of the 
farm where they work.
    On-Farm Labor Housing. Housing for farm laborers specific to the 
farm where they work.
* * * * *
    RHS. Rural Housing Service.
* * * * *
    5. Amend section 1944.157 to revise paragraphs (a)(1) and (a)(3) to 
read as follows:


Sec. 1944.157  Eligibility requirements.

    (a) * * *
    (1) Be a farmowner, family farm partnership, family farm 
corporation, or an association of farmers whose farming operations 
demonstrate a need for farm labor housing, or an organization, as these 
terms are defined in Sec. 1944.153, which will own the housing and 
operate it on a nonprofit basis; or a nonprofit limited partnership in 
which the general partner is a nonprofit entity.
* * * * *
    (3) Provide from its own resources the borrower contribution 
required by Sec. 1944.160 and have sufficient initial operating capital 
to pay costs such as property and liability insurance premiums, 
fidelity bond premiums if required, utility hookup deposits, 
maintenance equipment, movable furnishings and equipment, printing 
lease forms, and other initial expenses. LH loans made to nonprofit 
organizations and to State or local public agencies or political 
subdivisions thereof may include up to 2 percent of the development 
cost for initial operating expenses.
* * * * *
    6. Add section 1944.160 to read as follows:


Sec. 1944.160  Off-farm loan limits.

    (a) For all applicants, including its members, who will be 
receiving any benefits from Low-Income Housing Tax Credits (LIHTC), the 
amount of the RHS loan will be limited to no more than 95 percent of 
the total development cost or 95 percent of the security value, 
whichever is less.
    (b) For all applicants, including its members, not receiving any 
benefits from LIHTC, who are nonprofit entities or State or local 
public agencies, the amount of the RHS loan will be limited to the 
total development cost or the security value, whichever is less, plus 
the 2 percent initial operating capital.
    (c) For all other applicants, including its members, not receiving 
any benefits from LIHTC, the amount of the RHS loan will be limited to 
no more than 97 percent of the development cost or the security value, 
whichever is less.
    7. Amend section 1944.164 in the introductory text of paragraph (d) 
in the first sentence to revise the words ``District Director'' to read 
``Loan Official'' and the words ``FmHA or its successor agency under 
Public Law 103-354'' to read ``RHS''; in paragraph (d)(1)(i) by 
revising the words ``FmHA or its successor agency under Public Law 103-
354'' to read ``RHS''; and to revise paragraph (b) to read as follows:


Sec. 1944.164  Limitations and conditions.

* * * * *
    (b) Maximum amount of grant. The amount of any grant may not exceed 
the lesser of:
    (1) Ninety percent of the total development cost; or
    (2) That portion of the total cash development cost which exceeds 
the sum of any amount the applicant can provide from its own resources 
plus the amount of a loan which the applicant will be able to repay, 
with interest, from income from rentals which low-income farmworker 
families can be reasonably expected to be able to pay. The availability 
of rental assistance and HUD section 8 subsidies will be considered in 
determining the rentals that farmworkers will pay.
* * * * *
    8. Amend section 1944.169 to revise paragraph (a)(1) to read as 
follows:


Sec. 1944.169  Technical, legal, and other services.

    (a) * * *
    (1) An appraisal is required when real estate is taken as security. 
The appraisal must be made in accordance with the Uniform Standards of 
Professional Appraisal Practices (available in any Rural Development 
office).
* * * * *
    9. Amend section 1944.170 to redesignate paragraph (c) as paragraph 
(f); in newly redesignated paragraph (f)(5)(i) to revise the reference 
``Sec. 1944.164(b)(2)'' to read ``Sec. 1944.164(b)'', in newly 
redesignated paragraph (f)(5)(ii)(B) to revise the words ``an LH loan'' 
to read ``a LH loan''; in newly redesignated paragraph

[[Page 24481]]

(f)(5)(ii)(C) to revise the reference ``paragraph (c)(5)(ii)(A)'' to 
read ``paragraph (f)(5)(ii)(A)''; to remove newly redesignated 
paragraph (f)(7); to revise the section heading, the introductory text, 
and paragraphs (a) and (b); and to add new paragraphs (c) through (e) 
to read as follows:


Sec. 1944.170  Preapplication requirements and processing.

    A two-stage application process is used. In stage one, applicants 
submit a preapplication, which is used to determine preliminary 
eligibility and feasibility. Preapplications selected for further 
processing will be invited to submit an application. The preapplication 
consists of SF-424.2, ``Application for Federal Assistance (For 
Construction)'' and the information listed in exhibit A-1 or A-2 of 
this subpart, as applicable. Preapplications for off-farm new 
construction loans and grants will be accepted and processed in 
accordance with this section when NOFA is announced in the Federal 
Register. Applicants are advised to read the notice carefully for any 
restrictions on loan or grant amounts. Preapplications for repair and 
rehabilitation of existing off-farm LH units and new units of on-farm 
housing may be submitted any time during the year and will be processed 
on a first-come, first-served basis in accordance with subpart L of 
part 1940 of this chapter.
    (a) Preapplications for new units in off-farm facilities. (1) The 
Agency will publish NOFA annually in the Federal Register with 
deadlines for submitting preapplications. The notice will include the 
amount of funds available, any limit on the amount of individual loan 
and grant requests, any limit on the amount of funds that any one State 
may receive, and the loan scoring criteria.
    (2) The preapplication must be submitted in accordance with NOFA 
and consists of SF-424.2, ``Application for Federal Assistance (For 
Construction)'', and the information required by exhibit A-1 of this 
subpart. The preapplication will be used by the Agency to determine 
preliminary eligibility and to score and rank proposals.
    (b) Preliminary eligibility assessment of preapplications received 
in response to NOFA. The Agency will make a preliminary eligibility 
assessment using the following criteria:
    (1) The preapplication was received by the submission deadline 
specified in NOFA;
    (2) The preapplication is complete as specified in NOFA;
    (3) The applicant is an eligible entity and is not currently 
debarred, suspended, or delinquent on any Federal debt; and
    (4) The proposal is for authorized purposes.
    (c) Scoring and ranking off-farm preapplications. The Agency will 
score and rank off-farm preapplications for new units that meet the 
criteria of paragraph (b) of this section.
    (1) The following criteria will be used to score project proposals:
    (i) The presence and extent of leveraged assistance, including 
donated land, for the units that will serve program-eligible tenants, 
calculated as a percentage of the RHS total development cost (TDC). RHS 
TDC excludes non-RHS eligible costs such as a developer's fee. 
Leveraged assistance includes, but is not limited to, funds for hard 
construction costs, Section 8 or other non-RHS tenant subsidies, and 
state or federal funds. A minimum of ten percent leveraged assistance 
is required to earn points. (0 to 20 points)
    (A) To count as leveraged funds for purpose of the selection 
criteria:
    (1) A commitment of funds must be received within a timeframe that 
permits processing of the loan request within the current funding cycle 
(the latest commitment date for leveraged funds will be announced in 
NOFA); and
    (2) If RHS RA is being provided, the interest cost to the project 
using leveraged loan funds may not exceed the cost of 100 percent LH 
loan financing.
    (B) For donated land to be scored as leveraged assistance, all of 
the following conditions must be met.
    (1) Based on a preliminary review, the land is suitable and meets 
Agency requirements. Final site acceptance is subject to a completed 
environmental review.
    (2) Site development costs do not exceed what they would be to 
purchase and develop an alternative site.
    (3) The overall cost of the project is reduced by the donation of 
the land.
    (C) Points for leveraged assistance will be awarded in accordance 
with the following table. Percentages will be rounded to the nearest 
whole number, rounding up at .50 and above and down at .49 and below. 
For example, 25.50 becomes 26; 25.49 becomes 25. If the total 
percentage of leveraged assistance is less than ten percent, and it 
includes donated land, two points will be awarded for the donated land.

------------------------------------------------------------------------
                          Percentage                             Points
------------------------------------------------------------------------
75 or more...................................................         20
60-74........................................................         18
50-59........................................................         16
40-49........................................................         12
30-39........................................................         10
20-29........................................................          8
10-19........................................................          5
0-9..........................................................          0
Donated land in proposals with less than ten percent total             2
 leveraged assistance........................................
------------------------------------------------------------------------

    (ii) The loan request is in support of an Agency initiative 
announced in NOFA. (10 points)
    (iii) Seasonal, temporary, or migrant housing. (5 points for up to 
and including 50 percent of the units; 10 points for 51 percent or 
more)
    (iv) For Fiscal Year 1999 and Fiscal Year 2000 funding cycles, 
outstanding applications or requests that were issued an AD-622, 
``Notice of Preapplication Review Action,'' inviting a formal 
application, or had been reviewed and authorized by the National Office 
prior to October 29, 1998. (15 points)
    (2) The Agency will rank preapplications by point score. For point-
score ties within the State, rank order will be determined by giving 
first preference to the application with the greatest actual percentage 
of leveraged assistance. In case of further same-State ties, rank order 
will be determined by lottery.
    (d) Selection of preapplications for further processing. (1) States 
will make a preliminary eligibility and feasibility assessment, score 
and rank the preapplications, and provide this information to the 
National Office with their review comments.
    (2) The National Office will rank the preapplications nationwide. 
In case of point-score ties in the National ranking, first preference 
will be given to a preapplication to develop units in a state that does 
not have existing RHS-financed off-farm LH units; second preference to 
a preapplication from a State that has not yet been selected in the 
current funding cycle. In the event there are multiple preapplications 
in either category, one preapplication from each State (the highest 
State-ranked) will compete by computer-based random lottery. If 
necessary, the process will be completed until all same-pointed 
preapplications are selected or funds are exhausted.
    (3) The Agency will not select a preapplication for a new LH loan 
in an area with competing or problem projects when:
    (i) The Agency has selected another LH proposal in the same market 
area for further processing;

[[Page 24482]]

    (ii) A previously authorized or approved Agency, HUD, or similar 
assisted MFH project in the same market area serving farmworkers has 
not been completed or reached its projected occupancy level; or
    (iii) An existing Agency, HUD, or similar assisted MFH project in 
the same market area serving farmworkers is experiencing high vacancy 
levels, unless such vacancy is planned as part of the occupancy cycle 
of a seasonally-operated migrant farmworker facility.
    (4) If any selected preapplications cannot meet the processing 
deadlines established by the Agency to enable processing and fund 
obligation within the current funding cycle, or if requested leveraged 
funds are not committed within the timeframe established in NOFA, the 
Agency will select the next ranked preapplication for processing.
    (e) Notification to applicants. States will notify all applicants 
of the results of the selection process.
    (1) Applicants selected for further processing will be notified and 
processed in accordance with this section and Sec. 1944.171.
    (2) Project proposals not selected for further processing, 
including incomplete proposals or those that failed to meet NOFA 
requirements, or those that could not be reached because of 
insufficient funds, will be returned to the applicant with the reason 
they were not selected.
* * * * *
    10. Exhibit A to subpart D is amended by revising the first 
paragraph to read as follows:

Exhibit A to Subpart D--Labor Housing Loan and Grant Application 
Handbook

Introduction

    The section 514 Labor Housing loan and section 516 Labor Housing 
grant programs are administered by the Rural Development's Rural 
Housing Service (RHS), herein referred to as the Agency. Interested 
parties are advised to contact any Rural Development office 
processing Labor Housing (LH) loans and grants to obtain information 
on program and application requirements prior to developing an 
application. Notice of Funds Availability (NOFA) for off-farm 
facilities will be announced annually in the Federal Register, along 
with application requirements and the deadline for applying. 
Requests received during the application period will be selected 
competitively, based on the objective selection criteria in the 
regulation and announced in the NOFA. Applications for on-farm 
facilities are accepted any time during the year and are funded on a 
first-come, first-served basis, based on the availability of funds.
* * * * *
    11. Exhibit A-1 to subpart D is amended by revising paragraphs 
I.A.1 and I.A.3, the introductory text of paragraph I.B., paragraph 
I.B.3, the text of paragraph I.B.6 preceding the note, paragraph I.C., 
and paragraph I.E. to read as follows:

Exhibit A-1 to Subpart D--Information To Be Submitted by Organizations 
and Associations of Farmers for Labor Housing Loan or Grant

    I. Information to be submitted with SF 424.2 (for preapplication 
submission).
    A. * * *
    1. Financial Statement--A current, dated, and signed financial 
statement showing assets and liabilities with information on the 
repayment schedule and status of all debts. If the applicant is an 
association of farmers, a current financial statement will also be 
required from each member who holds an interest in the association 
in excess of 10 percent. If the applicant is a limited partnership, 
financial statements are required from each general partner who 
holds an interest in the organization, and from each limited partner 
who will have 10 percent or more ownership. The financial statement 
must reflect sufficient financial capacity to meet the initial 
operating capital requirements. Loan or grant funds may be used to 
provide the required initial operating capital for nonprofit 
entities and State or local public agencies. If the applicant is a 
limited partnership, the financial statement must also demonstrate 
sufficient capacity to meet the applicant's equity contribution.
* * * * *
    3. If a Labor Housing (LH) grant is requested, the applicant 
should provide a statement on their projected use of Rental 
Assistance (RA) and their need for a LH grant. This statement should 
include preliminary estimates of the rents required with and without 
a grant and the relative need for a grant if RA is provided to 
supplement market rents for eligible farmworkers. [LH grants and RA 
are not available to associations of farmers; LH grants are not 
available to limited partnerships.]
* * * * *
    B. * * *
    A preliminary survey should be conducted to identify the supply 
and demand for LH in the market area. The market area must be 
clearly identified and may include only the area from which tenants 
can reasonably be drawn for the proposed project. The applicant must 
provide documentation to justify need within the intended market 
area. The market survey should address or include the following 
items:
* * * * *
    3. General information concerning the type of labor intensive 
crops grown in the area and prospects for continued demand for farm 
laborers (i.e., prospects for mechanization, etc.). Information may 
be available from the local U.S. Department of Agriculture (USDA) 
Cooperative, State, Research, Education and Extension Service office 
or from the Farm Service Agency.
* * * * *
    6. A description of the units proposed, including number, type, 
size, rental rates, amenities such as carpets and drapes, related 
facilities such as a laundry room or community room and other 
facilities providing supportive services in connection with the 
housing and the needs of the prospective tenants such as a health 
clinic or day care facility; estimated development timeline; 
estimated total development cost and applicant contribution. If the 
application includes leveraged funds, include documentation of the 
dollar amount, source, and commitment status.
* * * * *

C. Environmental Information

    The applicant will complete Form RD 1940-20, ``Request for 
Environmental Information,'' along with a description of anticipated 
environmental issues or concerns.
* * * * *

E. Additional Information

    1. Evidence of site control such as an option or sales contract; 
a map and description of the proposed site, including the 
availability of water, sewer, and utilities, and proximity to 
community facilities and services such as shopping, schools, 
transportation, doctors, dentists, and hospitals.
    2. Preliminary plans and specifications, including plot plans, 
building layouts, and type of construction and materials.
    3. A supportive services plan describing services that will be 
provided on-site or made available to tenants through cooperative 
agreements with service providers in the community, such as a health 
clinic or day care facility. Off-site services must be accessible 
and affordable to farmworkers and their families. Letters of intent 
from service providers are acceptable documentation at the 
preapplication stage.
* * * * *
    Dated: April 29, 1999.
Jill Long Thompson,
Under Secretary, Rural Development.
[FR Doc. 99-11256 Filed 5-5-99; 8:45 am]
BILLING CODE 3410-XV-U