[Federal Register Volume 74, Number 3 (Tuesday, January 6, 2009)]
[Rules and Regulations]
[Pages 393-395]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-31255]



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 Rules and Regulations
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  Federal Register / Vol. 74, No. 3 / Tuesday, January 6, 2009 / Rules 
and Regulations  

[[Page 393]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1780

RIN 0572-AC11


Amending the Water and Waste Program Regulations

AGENCY: Rural Utilities Service, USDA.

ACTION: Direct final rule.

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

SUMMARY: The Rural Utilities Service (RUS), an agency delivering the 
United States Department of Agriculture's (USDA) Rural Development 
Utilities Programs, hereinafter referred to as Rural Development or the 
Agency, is amending its regulations to administer the Water and Waste 
Loan and Grant Programs. This action implements provisions of the 2008 
Farm Bill for interest rates on direct loans and modifies the interest 
rate structure currently being used for the direct loan program. 
Interest rates on loans subject to 5 or 7 percent interest rate 
limitations (poverty and intermediate rates, respectively) will adjust 
with changes in the market rate. The poverty and intermediate interest 
rates will be established at rates equal to a percentage of current 
market yields for outstanding municipal obligations. The intended 
effect of the amendment is to make part 1780 current with statutory 
authority. No adverse comments are expected.

DATES: This rule will become effective February 20, 2009 without 
further action unless the Agency receives written adverse comments or 
written notices of intent to submit adverse comments on or before 
February 5, 2009. If the Agency receives adverse comments or notices, 
the Agency will publish a timely notice in the Federal Register 
withdrawing the rule. Comments received will be considered under the 
proposed rule published in this edition of the Federal Register in the 
proposed rule section. A second public comment period will not be held. 
Written comments must be received by the Agency or carry a postmark or 
equivalent no later than February 5, 2009.

ADDRESSES: You may submit comments to this rule by any of the following 
methods:
     Federal eRulemaking Portal: Go to http://www.regulations.gov. In the ``Search Documents'' box, enter RUS-08-
Water-0005, check the box under the Search box labeled ``Select to find 
documents accepting comments or submissions'', and click on the GO>> 
key. To submit a comment, choose ``Send a comment or submission'' under 
the Docket Title. In order to submit your comment, the information 
requested on the ``Public Comment and Submission Form'' must be 
completed. (If you click on the hyperlink of the docket when the search 
returns it, you will see the docket details. Click on the yellow 
balloon to receive the ``Public Comment and Submission Form''.) 
Information on using Regulations.gov, including instructions for 
accessing documents, submitting comments, and viewing the docket after 
the close of the comment period, is available through the site's ``How 
to Use this Site'' link.
     Postal Mail/Commercial Delivery: Please send your comment 
addressed to Michele Brooks, Director, Program Development and 
Regulatory Analysis, USDA Rural Development, STOP 1522, Room 5159, 1400 
Independence Avenue, Washington, DC 20250-1522.
    Other Information: Additional information about Rural Development 
and its programs is available at http://www.rurdev.usda.gov/index.html.

FOR FURTHER INFORMATION CONTACT: Cheryl Francis, Loan Specialist, Water 
and Environmental Programs, USDA Rural Development, 1400 Independence 
Avenue, STOP 1570, Room 2229 South Building, Washington, DC 20250-1570. 
Telephone: (202) 720-9589; Fax: (202) 690-0649; e-mail: 
[email protected].

SUPPLEMENTARY INFORMATION:

Executive Order 12866

    This rule has been determined to be not significant and was not 
reviewed by the Office of Management and Budget (OMB) under Executive 
Order 12866, Regulatory Planning and Review.

E-Government Act Compliance

    The Agency is committed to complying with the E-Government Act, to 
promote the use of the Internet and other information technologies to 
provide increased opportunities for citizen access to Government 
information and services, and for other purposes.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number assigned 
to the water and waste loan and grant program is 10.760, Water and 
Waste Disposal Systems for Rural Communities. The Catalog is available 
on the Internet and the General Services Administration's (GSA) free 
CFDA Web site at http://www.cfda.gov. The CFDA Web site also contains a 
PDF file version of the Catalog that, when printed, has the same layout 
as the printed document that the Government Printing Office (GPO) 
provides. GPO prints and sells the CFDA to interested buyers. For 
information about purchasing the Catalog of Federal Domestic Assistance 
from GPO, call the Superintendent of Documents at 202-512-1800 or toll 
free at 866-512-1800, or access GPO's on-line bookstore at http://bookstore.gpo.gov.

Executive Order 12372

    The program is subject to the provisions of Executive Order 12372, 
which requires intergovernmental consultation with State and local 
officials. Consultation will be completed at the time of the action 
performed.

Executive Order 12988

    This rule has been reviewed under Executive Order 12988, Civil 
Justice Reform. The Agency has determined that this rule meets the 
applicable standards provided in section 3 of the Executive Order. 
Additionally, (1) 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 the rule; and (3) administrative appeal procedures, if 
any, must be exhausted before litigation against the Department or its 
agencies may be initiated, in accordance with the regulations of the 
National Appeals Division of USDA at 7 CFR part 11.

[[Page 394]]

Executive Order 13132, Federalism

    The policies contained in this rule do not have any substantial 
direct effect on states, on the relationship between the national 
government and the states, or on the distribution of power and 
responsibilities among the various levels of government. Nor does this 
final rule impose substantial direct compliance costs on state and 
local governments. Therefore, consultation with states is not required.

Regulatory Flexibility Act Certification

    Under section 605(b) of the Regulatory Flexibility Act, 5 U.S.C. 
605(b), the Agency certifies that this rule will not have a significant 
economic impact on a substantial number of small entities. The 
amendments reflect only statutory changes that Congress has mandated 
and over which the Agency has no discretion. They also involve minimal 
procedural matters on other agreements already negotiated.

Unfunded Mandates

    This rule contains no Federal mandates (under the regulatory 
provisions of Title II of the Unfunded Mandates Reform Act of 1995) for 
State, local, and tribal governments or the private sector. Thus, this 
rule is not subject to the requirements of sections 202 and 205 of the 
Unfunded Mandates Reform Act of 1995.

National Environmental Policy Act Certification

    This final rule has been examined under Agency environmental 
regulations at 7 CFR part 1794. The Administrator has determined that 
this action is not a major Federal action significantly affecting the 
environment. Therefore, in accordance with the National Environmental 
Policy Act of 1969 (42 U.S.C. 4321 et seq.), an Environmental Impact 
Statement or Assessment is not required.

Information Collection and Recordkeeping Requirements

    This rule contains no new reporting or recordkeeping burdens under 
OMB control number 0572-0121 that would require approval under the 
Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35).

Background

    The water and waste loan and grant program is authorized by the 
Consolidated Farm and Rural Development Act (CONACT), (7 U.S.C. 1921 et 
seq.), as amended. The program provides loan and grant funds for water 
and waste disposal projects serving the most financially needy rural 
communities. Financial assistance should result in reasonable user 
costs for rural residents, rural businesses, and other rural users. The 
program is limited to rural areas and small towns with a population of 
10,000 or less.
    The direct loan program has a three-tier interest rate structure, 
commonly known as the poverty, intermediate, and market rates. The 
poverty and intermediate rates are available to customers least able to 
afford high interest rates. The poverty rate should be the lowest rate. 
However, the market rate was lower than the poverty rate (inverted 
rates) 11 out of 23 quarters from fiscal year 2003 through 2008. The 
inverted rates meant that the customers eligible for poverty and 
intermediate rate loans would repay their loans at rates higher than 
those that the market rate customers would pay. The inverted rates were 
inconsistent with section 307(a)(3)(A) of the CONACT, which stipulated 
that interest rates on loans be lower than the current market yield for 
outstanding municipal obligations.
    The Food, Conservation and Energy Act of 2008 (Farm Bill) (Pub. L. 
110-234) amends section 307(a)(3) of the CONACT (7 U.S.C. 1927(a)(3)). 
The amendments ensure that the poverty and intermediate rates are tied 
to the market rate. As percentages of the market rate, they will always 
be lower than the market rate. The poverty rate is set at 60 percent of 
the market rate, and the intermediate rate is set at 80 percent of the 
market rate. This interest rate change applies to loans approved after 
May 22, 2008. The change does not apply to a loan for a specific 
project that has been approved, but not closed on or before May 22, 
2008. The interest rates of those loans will be determined by the rate 
structure that existed before the enactment of the Farm Bill. To 
conform to the Farm Bill's provisions, the water and waste loan and 
grant regulation, 7 CFR Part 1780, is being amended.
    The interest rate changes will provide for a tiered interest rate 
structure, providing for the lowest interest rates to the lowest income 
communities. The new rate structure will allow the Agency to provide 
the neediest communities with financial assistance that will result in 
reasonable user costs for their users.
    The poverty and intermediate interest rates have statutory 
limitations, established by the CONACT in section 307(a)(3). The 
poverty rate cannot exceed five percent, and the intermediate rate 
cannot exceed seven percent. As explained above, the market rate cannot 
exceed the current market yield for outstanding municipal obligations 
in accordance with the Omnibus Reconciliation Act of 1981. Regardless 
of whether the interest rates must be determined by the approval date 
of a loan--on or before May 22, 2008, or on or after May 23, 2008--
these statutory limitations are in effect.
    Loans approved at each level of interest rates must meet certain 
requirements under the water and waste regulation. All loans approved 
at the poverty rate must comply with the following conditions:
    (1) The primary loan purpose will be to upgrade existing facilities 
or construct new facilities required to meet applicable health or 
sanitary standards, and
    (2) The median household income of the service area is below the 
poverty level for a family of four, or below 80 percent of the 
statewide nonmetropolitan median household income.
    The intermediate interest rate applies to loans that do not meet 
the requirements for the poverty rate and for which the median 
household income of the service area is not more than 100 percent of 
the nonmetropolitan median household income of the State. The market 
rate applies to all loans that do not qualify for a poverty or 
intermediate interest rate.
    The three-tier interest rate structure existed on May 22 as 
follows:
    (1) Poverty Interest Rate. The poverty rate was set at 4.500 
percent regardless of fluctuations in the market rate, subject to the 
statutory limit of five percent.
    (2) Intermediate Interest Rate. The intermediate rate was set at 
one-half of the difference of the poverty rate and the market rate.
    (3) The market interest rate is based on the 11-Bond Index, 
published by Bond Buyer for general obligation bonds. The calculation 
uses the average yield of the four weeks prior to the first Friday of 
the last month before the beginning of a quarter.
    The poverty and intermediate interest rates will be determined 
based on the approval date of the loan under amendments to the water 
and waste regulation. For a loan for a specific project that has been 
approved, but not closed on or before May 22, the rate structure in 
effect at that time will determine the rates. For loans approved on or 
after May 23, 2008, the percentage of market rate will be used to 
determine the poverty and intermediate interest rates.
    The following table summarizes the interest rates:

[[Page 395]]



----------------------------------------------------------------------------------------------------------------
                                         On or before May 22,     On or after May 23,
                                                 2008                     2008                 Limitations
----------------------------------------------------------------------------------------------------------------
Poverty Rate.........................  4.50%..................  60% of market rate.....  5.00%.
Intermediate Rate....................  4.50% + 0.5 (Market      80% of market rate.....  7.00%.
                                        Rate less Poverty
                                        Rate).
Market Rate..........................  Average of 11 Bond       Average of 11 Bond       Less than the current
                                        Index for the 4 weeks    Index for the 4 weeks    market yield for
                                        prior to the first       prior to the first       outstanding municipal
                                        Friday before the        Friday before the        obligations.
                                        beginning of the new     beginning of the new
                                        quarter.                 quarter.
----------------------------------------------------------------------------------------------------------------

    These amendments are not published for proposed rulemaking because 
they merely reflect changes in statutory authority enacted by the Farm 
Bill. They make only minor technical corrections to the regulations, 
which do not involve matters of agency discretion. The Farm Bill leaves 
no discretion to the agency for setting interest rates. Notice and 
public comment, therefore, are impractical, unnecessary, and contrary 
to the public interest.

List of Subjects in 7 CFR Part 1780

    Community development, Community facilities, Grant programs--
housing and community development, Reporting and recordkeeping 
requirements, Rural areas, Waste treatment and disposal, Water supply, 
Watersheds.


0
For reasons set forth in the preamble, chapter XVII of title 7 of the 
Code of Federal Regulations is amended as follows:

PART 1780--WATER AND WASTE LOANS AND GRANTS

0
1. The authority citation for part 1780 continues to read as follows:

    Authority: 5 U.S.C. 301; 7 U.S.C. 1989; 16 U.S.C. 1005.

Subpart A--General Policies and Requirements

0
2. Amend Sec.  1780.13 to add paragraph (a)(3) and to revise the 
introductory text of paragraph (b) and (c) to read as follows:


Sec.  1780.13  Rates and terms.

    (a) * * *
    (3) For a loan for a specific project that has been approved, but 
not closed on or before May 22, 2008, the rate structure in effect at 
that time will determine the interest rates. For loans approved on or 
after May 23, 2008, a percentage of the market rate will be used to 
determine the poverty and intermediate interest rates.
    (b) Poverty rate. The poverty interest rate will not exceed 5 per 
centum per annum. Loans approved on or after May 23, 2008, will have 
the poverty interest rate set at 60 percent of the market rate. All 
poverty rate loans must comply with the following conditions:
* * * * *
    (c) Intermediate rate. The intermediate interest rate will not 
exceed 7 percent per annum. For a loan for a specific project that has 
been approved, but not closed on or before May 22, 2008, the 
intermediate rate is the poverty rate plus one-half of the difference 
between the poverty rate and the market rate, not to exceed 7 percent 
per annum. Loans approved on or after May 23, 2008, will have the 
intermediate interest rate set at 80 percent of the market rate. The 
intermediate interest rate will apply to loans that do not meet the 
requirements for the poverty rate and for which the median household 
income of the service area is not more than 100 percent of the 
nonmetropolitan median household income of the State.
* * * * *

    Dated: October 20, 2008.
James M. Andrew,
Administrator, Rural Utilities Service.
[FR Doc. E8-31255 Filed 1-5-09; 8:45 am]
BILLING CODE 3410-15-P