[Federal Register Volume 71, Number 158 (Wednesday, August 16, 2006)]
[Notices]
[Pages 47165-47168]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-6970]


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DEPARTMENT OF AGRICULTURE

Rural Telephone Bank


Determination of the 2005 Fiscal Year Interest Rates on Rural 
Telephone Bank Loans

AGENCY: Rural Telephone Bank, USDA.

ACTION:  Notice of 2005 fiscal year interest rates determination.

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SUMMARY: In accordance with 7 CFR 1610.10, the Rural Telephone Bank 
(Bank) fiscal year 2005 cost of money rates have been established as 
follows: 6.18% and 5.00% for advances from the liquidating account and 
financing account, respectively (fiscal year is the period beginning 
October 1 and ending September 30).
    All loan advances made during fiscal year 2005 under Bank loans 
approved in fiscal years 1988 through 1991 shall bear interest at the 
rate of 6.18% (the liquidating account rate). All loan advances made 
during fiscal year 2005 under Bank loans approved during or after 
fiscal year 1992 shall bear interest at the rate of 5.00% (the 
financing account rate).
    The calculation of the Bank's cost of money rates for fiscal year 
2005 for the liquidating account and the financing account are provided 
in Tables 1 and 2. Since the calculated rates are greater than or equal 
to the minimum rate (5.00%) allowed under 7 U.S.C. 938(b)(3)(A), the 
cost of money rates for the liquidating account and financing account 
are set at 6.18% and 5.00%, respectively. The methodology required to 
calculate the cost of money rates is established in 7 CFR 1610.10(c).

FOR FURTHER INFORMATION CONTACT: Jonathan P. Claffey, Deputy Assistant 
Governor, Rural Telephone Bank, STOP 1590--Room 5151, 1400 Independence 
Avenue, SW., Washington, DC 20250-1590. Telephone: (202) 720-9556.

SUPPLEMENTARY INFORMATION: The Federal Credit Reform Act of 1990 (2

[[Page 47166]]

U.S.C. 661a, et seq.) implemented a system to reform the budgetary 
accounting and management of Federal credit programs. Bank loans 
approved on or after October 1, 1991, are accounted for in a different 
manner than Bank loans approved prior to fiscal year 1992. As a result, 
the Bank must calculate two cost of money rates: (1) The cost of money 
rate for advances made from the liquidating account (advances made 
during fiscal year 2005 on loans approved prior to October 1, 1991) and 
(2) the cost of money rate for advances made from the financing account 
(advances made during fiscal year 2005 on loans approved on or after 
October 1, 1991).
    The cost of money rate methodology is the same for both accounts. 
It develops a weighted average rate for the Bank's cost of money 
considering total fiscal year loan advances; the excess of fiscal year 
loan advances over amounts received in the fiscal year from the 
issuance of Class A, B, and C stock, debentures and other obligations; 
and the costs to the Bank of obtaining funds.
    During fiscal year 2005, the Bank was authorized to pay the 
following dividends: The dividend on Class A stock as 2.00% as 
established in 7 U.S.C. 946(c); no dividends were payable on Class B 
stock in accordance with 7 U.S.C. 946(d); and the dividend on Class C 
stock was established by the Bank at 5.74%.

Dissolution of the Bank

    At its quarterly meeting on August 4, 2005, the Board of Directors 
(the ``Board'') approved a resolution to dissolve the Bank. On November 
10, 2005, the liquidation and dissolution process was initiated with 
the signing of the 2006 Agriculture Appropriations bill by President 
Bush, which contained a provision lifting the restriction on the 
retirement of more than 5 percent of the Class A stock held by the 
Government.
    In accordance with the Board's resolution and the terms of the Loan 
Transfer Agreement between the Bank and the Government, dated August 4, 
2005, the Bank's liquidating account loan portfolio was transferred to 
the Government on October 1, 2005. As a result of that transfer, there 
will be no more advances of liquidating account loan funds. Therefore, 
this is the last notice that will report an interest rate for 
liquidating account loan advances.
    The dissolution of the Bank will not affect future advances of 
financing account loan funds. Requests for financing account advances 
will continue to be processed by employees of USDA Rural Development's 
Telecommunications Program, just as they were while the Bank remained 
in operation. The terms and conditions of the financing account loans 
will not change, nor will the method for determining the interest 
rates, including the determination of the cost of money rates after the 
end of the fiscal year. The only significant change to the financing 
account advances is that effective October 1, 2005, no Class B stock in 
the Bank will be purchased with a financing account loan advance.

Sources and Costs of Funds--Liquidating Account

    In accordance with 7 U.S.C. 946(a), the Bank did not issue Class A 
stock in fiscal year 2005. There were no net issuances of Class B stock 
because the rescissions of loan funds advanced for Class B stock 
exceeded the amount of issuances. The amount received by the Bank in 
fiscal year 2005 from the issuance of Class C stock was $8,048.
    The Bank did not issue debentures or any other obligations related 
to the liquidating account in fiscal year 2005. Consequently, no cost 
was incurred related to the issuance of debentures subject to 7 U.S.C. 
948(b)(3)(D).
    The excess of fiscal year 2005 loan advances from the liquidating 
account over amounts received from issuance of stocks, debentures, and 
other obligations amounted to $794,953. The cost associated with this 
excess is the historic cost of money rate as defined in 7 U.S.C. 
948(b)(3)(D)(v). The calculation of the Bank's historic cost of money 
rate for advances from the liquidating account is also provided in 
Table 1. The methodology required to perform this calculation is 
described in 7 CFR 1610.10(c). The cost of the money rates for fiscal 
years 1974 through 1987 are defined in 7 U.S.C. 948(b) and are listed 
in 7 CFR 1610.10(c) and Table 1 herein.

Sources and Costs of Funds--Financing Account

    In accordance with 7 U.S.C. 946(a), the Bank did not issue Class A 
stock in fiscal year 2005. Advances for the purchase of Class B stock 
and cash purchases for Class B stock were $4,570,841. There were 
rescissions of loan funds advanced for Class B stock in the amount of 
$8,967; therefore, the amount received by the Bank from the issuance of 
Class B stock, per 7 CFR 1610.10(c), was $4,561,874. The Bank did not 
receive any amounts in fiscal year 2005 from the issuance of Class C 
Stock.
    During fiscal year 2005, issuance of debentures or any other 
obligations related to advances from the financing account were 
$91,416,689 at an interest rate of 5.250%.
    The excess of fiscal year 2005 loan advances from the financing 
account over amounts received from issuance of stocks, debentures, and 
other obligations amounted to $8,967. The cost associated with this 
excess is the historic cost of money rate as defined in 7 U.S.C. 
948(b)(3)(D)(v). The Bank's cost of money rate for advances from the 
financial account is provided in Table 2. The methodology required to 
perform this calculation is described in 7 CFR 1610.10(c).

    Dated: August 11, 2006.
James M. Andrew,
Governor, Rural Telephone Bank.

                           Rural Telephone Bank Cost of Money Rate--Liqudating Account
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                                                                                                         (c)/
                FY 2005 source of bank funds                   (a) Amount    (b) Cost   (c) (a)x(b)    Advances
                                                                  ($)          (%)           ($)         (%)
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Issuance of Class A Stock...................................  ...........         2.00  ...........       0.0000
Issuance of Class B Stock...................................  ...........         0.00  ...........       0.0000
Issuance of Class C Stock...................................        8,048         5.74          462       0.0575
Issuance of Debentures and Other Obligations................  ...........         0.00  ...........       0.0000
Excess of Total Advances Over Issuances.....................      794,953         6.19       49,194       6.1263
                                                             -------------
    Total FY 2005 Advances..................................      803,001
    Calculated cost of money rate =.........................  ...........  ...........  ...........         6.18
    Minimum rate allowable =................................  ...........  ...........  ...........         5.00
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[[Page 47167]]


                     Rural Telephone Bank Historical Cost of Money Rate--Liquidating Account
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                                                                                                       (c)/Total
                     Fiscal year                      (a) Cost of    (b) advances    (c) (a)x(b)  ($)   Advances
                                                       money  (%)         ($)                             (%)
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FY 1974.............................................         5.01       111,022,574         5,562,231      0.231
FY 1975.............................................         5.85       130,663,197         7,643,797      0.318
FY 1976.............................................         5.33        99,915,066         5,325,473      0.221
FY 1977.............................................         5.00        80,907,425         4,045,371      0.168
FY 1978.............................................         5.87       142,297,190         8,352,845      0.347
FY 1979.............................................         5.93       130,540,067         7,741,026      0.322
FY 1980.............................................         8.10       199,944,235        16,195,483      0.673
FY 1981.............................................         9.46       148,599,372        14,057,501      0.584
FY 1982.............................................         8.39       112,232,127         9,416,275      0.391
FY 1983.............................................         6.99        93,402,836         6,528,858      0.271
FY 1984.............................................         6.55        90,450,549         5,924,511      0.246
FY 1985.............................................         5.00        72,583,394         3,629,170      0.151
FY 1986.............................................         5.00        71,582,383         3,579,119      0.149
FY 1987.............................................         5.00        51,974,938         2,598,747      0.108
FY 1988.............................................         5.00       119,488,367         5,974,418      0.248
FY 1989.............................................         5.00        97,046,947         4,852,347      0.202
FY 1990.............................................         5.00       107,694,991         5,384,750      0.224
FY 1991.............................................         5.43       163,143,075         3,858,669      0.368
FY 1992.............................................         6.14        84,940,822         5,215,366      0.217
FY 1993.............................................         6.05        84,605,366         5,118,625      0.213
FY 1994.............................................         6.15        54,530,897         3,353,650      0.139
FY 1995.............................................         6.04        35,967,133         2,172,415      0.090
FY 1996.............................................         6.05        30,965,187         1,873,394      0.078
FY 1997.............................................         5.98        32,602,587         1,949,635      0.081
FY 1998.............................................         5.96        20,673,798         1,232,158      0.051
FY 1999.............................................         6.01        17,796,518         1,069,571      0.044
FY 2000.............................................         6.01        10,436,622           627,241      0.026
FY 2001.............................................         5.95         6,638,107           394,967      0.016
FY 2002.............................................         6.51         1,864,500           121,379      0.005
FY 2003.............................................         6.05           604,800            36,590      0.002
FY 2004.............................................         6.18           880,504            54,415      0.002
                                                                  ------------------
    Total advances..................................  ...........     2,405,995,574  ................  .........
                                                                                                      ----------
    Cost of money...................................  ...........  ................  ................       6.19
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                           Rural Telephone Bank Cost of Money Rate--Financing Account
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                                                                                                         (c)/
                FY 2005 source of bank funds                   (a) Amount    (b) Cost   (c) (a)x(b)    Advances
                                                                  ($)          (%)           ($)         (%)
----------------------------------------------------------------------------------------------------------------
Issuance of Class A Stock...................................  ...........         2.00  ...........       0.0000
Issuance of Class B Stock...................................    4,561,874         0.00  ...........       0.0000
Issuance of Class C Stock...................................  ...........        5.740  ...........       0.0000
Issuance of Debentures and Other Obligations*...............   91,416,689        5.250    4,799,659       5.0003
Excess of Total Advances Over Issuances.....................        8,967        5.956          534       0.0006
                                                             -------------                          ------------
    Total FY 2005 Advances..................................  945,987,530
    Calculated cost of money rate =.........................  ...........  ...........  ...........         5.00
    Minimum rate allowable =................................  ...........  ...........  ...........        5.00
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* RTB borrowed $99,306,000 from the financing account in FY 2005; the remaining funds will be used to cover
  other obligations of the fund.


                      Rural Telephone Bank Historical Cost of Money Rate--Financing Account
----------------------------------------------------------------------------------------------------------------
                                                                                                       (c)/Total
                     Fiscal year                      (a) Cost of    (b) Advances    (c) (a)x(b)  ($)   Advances
                                                       money  (%)         ($)                             (%)
----------------------------------------------------------------------------------------------------------------
FY 1992.............................................         7.38         4,056,250           299,351      0.055
FY 1993.............................................         6.35        23,839,200         1,513,789      0.278
FY 1994.............................................         6.40        56,838,902         3,637,690      0.669
FY 1995.............................................         6.88        37,161,517         2,556,712      0.470
FY 1996.............................................         6.42        44,536,621         2,859,251      0.526
FY 1997.............................................         6.54        34,368,726         2,247,715      0.413
FY 1998.............................................         5.71        34,446,458         1,966,893      0.362
FY 1999.............................................         5.54        38,685,732         2,143,190      0.394

[[Page 47168]]

 
FY 2000.............................................         6.05        31,401,867         1,899,813      0.349
FY 2001.............................................         5.17        55,405,896         2,864,485      0.527
FY 2002.............................................         6.05        60,232,919         3,644,092      0.670
FY 2003.............................................         5.67        55,835,695         3,165,884      0.582
FY 2004.............................................         5.36        67,074,751         3,595,207      0.661
                                                                  ------------------
    Total advances..................................  ...........       543,884,534  ................  .........
    Cost of money...................................  ...........  ................  ................       5.96
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[FR Doc. 06-6970 Filed 8-15-06; 8:45 am]
BILLING CODE 3410-15-M