Federal Register, Volume 76 Issue 235 (Wednesday, December 7, 2011)

[Federal Register Volume 76, Number 235 (Wednesday, December 7, 2011)]
[Proposed Rules]
[Pages 76492-76539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-30578]

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Vol. 76

Wednesday,

No. 235

December 7, 2011

Part II

Department of Commerce

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Economic Development Administration

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13 CFR Parts 300, 301, 302, et al.

Economic Development Administration Regulatory Revision; Proposed Rule

Federal Register / Vol. 76 , No. 235 / Wednesday, December 7, 2011 /
Proposed Rules

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DEPARTMENT OF COMMERCE

Economic Development Administration

13 CFR Parts 300, 301, 302, 303, 304, 305, 306, 307, 308, 310, 311,
and 314

[Docket No.: 110726429-1418-01]
RIN 0610-AA66

Economic Development Administration Regulatory Revision

AGENCY: Economic Development Administration, U.S. Department of
Commerce.

ACTION: Notice of proposed rulemaking; request for public comment.

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SUMMARY: Through this notice of proposed rulemaking (``NPRM''), the
Economic Development Administration (``EDA''), U.S. Department of
Commerce (``DOC''), proposes and requests comments on updates to the
agency's regulations implementing the Public Works and Economic
Development Act of 1965, as amended (``PWEDA''). On February 1, 2011,
EDA published a notice requesting comments on improving the
regulations. A 70-day public comment period followed from February 1,
2011 through April 11, 2011, during which EDA received approximately
170 comments. In addition, EDA conducted an internal review of its
regulations. This NPRM addresses and incorporates public comments and
agency staff suggestions to present an updated set of proposed
regulations that reflects the agency's current practices and policies
in administering its economic development assistance programs. For
convenience, the full text of EDA's regulations as amended is available
on EDA's Web site at http://www.eda.gov/ gov/.

DATES: Written comments on this NPRM must be received by EDA's Office
of Chief Counsel no later than 5 p.m. Eastern Time on February 6, 2012.

ADDRESSES: Comments on the NPRM may be submitted through any of the
following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Web Site: http://www.eda.gov/. EDA has created an
online feature for submitting comments. Follow the instructions at
http://www.eda.gov/.
Mail: Economic Development Administration, Office of Chief
Counsel, Suite D-100, U.S. Department of Commerce, 1401 Constitution
Avenue NW., Washington, DC 20230. Please indicate ``Comments on EDA's
regulations'' and Docket No. 110726429-1418-01 on the envelope.

FOR FURTHER INFORMATION CONTACT: Jamie Lipsey, Attorney Advisor, Office
of Chief Counsel, Economic Development Administration, U.S. Department
of Commerce, Room D-100, 1401 Constitution Avenue NW., Washingtonm, DC
20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION:

Background

EDA leads the Federal economic development agenda by making
strategic grants-based investments. EDA's regulations, codified at 13
CFR chapter III, provide the framework through which the agency
administers its economic development assistance programs. EDA's
programs are built on two key pillars: innovation and regional
collaboration. Innovation--the process by which individuals and
organizations generate new ideas and put them into practice--is the
foundation of American economic growth and national competitiveness.
Innovation is the key element to creating new and better jobs and a
resilient economy. Regional collaboration also is essential; and
Regions that work together to leverage resources and build upon their
unique comparative assets are better poised for economic success. This
strategic framework builds on EDA's successful history of helping rural
and urban communities leverage their unique assets by providing
``bottom up'' investments in infrastructure, planning, and technical
assistance that promote regional collaboration, innovation, and
regional innovation clusters. EDA's investments are designed to spur
innovation and investment at the local level, by providing the tools
and the flexibility to build the effective public-private partnerships
required for long-term success.
EDA currently is updating the agency's regulations to ensure they
reflect and incentivize innovation and collaboration and is committed
to ensuring that public feedback helps shape the revised regulations.
On February 1, 2011, pursuant to Executive Order 13563 ``Improving
Regulation and Regulatory Review'', EDA published a notice in the
Federal Register (76 FR 5501) requesting public comments on how the
agency's regulations can better facilitate more effective economic
development assistance programs that advance an innovative economy.
Under the February 1, 2011 notice, comments were due no later than
March 9, 2011; however, EDA published a second notice (76 FR 12616) on
March 8, 2011 to extend the comment deadline until April 11, 2011,
allowing for a total comment period of 70 days. EDA received
approximately 170 public comments from approximately 71 commenters. In
addition, EDA conducted an internal review of its regulations and
received approximately 55 suggestions from agency staff.
EDA now publishes this NPRM to incorporate and respond to both
public and agency staff comments and suggestions and to propose a
revised set of regulations that reflects EDA's current practices and
policies in administering its economic development assistance programs.
For the most part, comments received express opinions on 13 CFR parts
300 through 307 and 314. Capitalized terms used but not otherwise
defined in this NPRM have the meanings ascribed to them in EDA's
current regulations (see, e.g., Sec. Sec. 300.3, 303.2, 307.8, 313.2,
314.1, and 315.2). For convenience, the full text of EDA's regulations
as amended is available on EDA's Web site at http://www.eda.gov/ gov/.

Overview of Comments Received and Proposed Changes

EDA's goal is to help communities and Regions transform their
economies towards economic prosperity through innovation,
entrepreneurship, and public-private partnerships. Since February 1,
2011, EDA has taken a critical and comprehensive look-back at its
regulations to reduce burdens by removing outmoded provisions and
streamlining and clarifying requirements. EDA requested both public and
internal comments on the regulations and has received a number of
helpful suggestions that the agency believes make sense and should be
put into practice. Therefore, through this NPRM, EDA proposes
intelligent and intuitive revisions to provide additional flexibilities
to the agency's stakeholders and support current best practices, while
protecting taxpayer dollars and the Federal Interest in EDA-assisted
property. These changes are designed to provide greater flexibility and
local control to EDA's Recipients and to make the regulations easier to
navigate and apply.
As a result of the regulatory revision effort, EDA plans to
substantially improve its regulations by removing outdated provisions;
streamlining burdensome or unnecessary requirements; and including
provisions that increase flexibility, encourage creative collaboration
and the effective leveraging of resources, and clarify agency
requirements. Regulatory

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provisions EDA proposes to remove include:
Outmoded and overly prescriptive membership requirements
related to Comprehensive Economic Development Strategy (``CEDS'')
Strategy Committees and District Organization governing bodies to help
ensure EDA's requirements adapt effectively to the unique qualities of
all communities and Regions. See proposed revisions to Sec. Sec.
303.6(b)(1) and 304.2(c)(2).
The requirement that a disaster-related application must
be submitted within 18 months of the relevant disaster declaration to
receive a 100 percent grant rate. Applications still must be submitted
in an efficient, timely manner, but EDA proposes to remove the
regulatory deadline to provide additional flexibility in appropriate
situations. See proposed revisions to Table 2 in Sec. 301.4(b)(5).
The unnecessary requirement that an RLF Recipient request
EDA to subordinate its interest when seeking EDA's approval to sell or
securitize an RLF portfolio. See proposed revisions to Sec. 307.19.
Ways the regulations have been streamlined include:
Modernizing the CEDS requirements from a laundry-list of
items to four essential planning elements. EDA will provide further
content information to stakeholders through the publication of updated
CEDS guidelines, which will be grounded in best practices and developed
in collaboration with our economic development and research partners.
We expect these changes to enhance local control and allow EDA's
planning partners to focus on strategies, performance, and outputs. See
proposed revisions to Sec. 303.7(b).
Streamlining and clarifying EDA's Property release
requirements. See proposed revisions to Sec. 314.10.
Flexibility has been infused throughout the regulations in a number
of ways, including:
Providing that EDA may provide a grant rate of up to 80
percent to incentivize projects that encourage broad, innovative
Regional planning. See proposed revisions to Table 2 in Sec.
301.4(b)(5).
Removing unnecessary restrictions on the RLF program to
enhance operations in uncertain economic conditions. See proposed
revisions to Sec. Sec. 307.17(b)(6) and 307.18(a)(1).
Setting out EDA's flexibilities with respect to
subordinating the agency's interest in Project Property and updating
EDA's Property regulations to help Recipients better take advantage of
financing tools widely available in today's market--including New
Markets Tax Credit (``NMTC'') arrangements. These provisions provide
flexibilities while protecting the Federal Interest. See proposed
revisions to Sec. 314.6.
Setting out EDA's authority to accept an instrument other
than a recorded statement to protect the Federal Interest under certain
circumstances. See proposed revisions to Sec. 314.8.
We have included and enhanced provisions to facilitate coordination
and the leveraging of Federal investments through:
The updated evaluation criteria, which incentivize the
leveraging of resources and collaboration among all levels of
government and the public and private sectors. See proposed revisions
to Sec. 301.8.
The description of Infrastructure at Sec. 301.11, which
provides that EDA, through appropriate Federal Funding Opportunity
(``FFO'') announcements, will advance interagency collaboration by
funding Projects that demonstrate the leveraging of Federal, State, and
other resources.
Providing that EDA may provide a grant rate of up to 80
percent to incentivize Projects that demonstrate effective leveraging
of other Federal Agency resources. See proposed revisions to Table 2 in
Sec. 301.4(b)(5).
Providing that RLF Recipients may use any Federal loan to
meet private leveraging requirements. See proposed revisions to Sec.
307.15(d).
This NPRM also proposes a number of clarifications, including:
A definition of Regional Innovation Clusters or RICs to
define this important economic development strategy. See proposed
revisions to Sec. 300.3.
Examples of innovation- and entrepreneurship-related
infrastructure under the proposed description of ``Infrastructure'' at
Sec. 301.11.
A description of EDA's improved grant review and selection
process. See proposed revisions to Sec. 301.7.
Updates to the data requirements that Eligible Applicants
follow to demonstrate economic distress to better reflect the types and
content of available data sources. See proposed revisions to Sec.
301.3(a)(4).
A revised accountability provision, which clarifies EDA's
performance expectations and reporting requirements. See proposed
revisions to Sec. 302.16.
Adding subparts to EDA's regulations at part 303 to
clarify the distinctions between EDA's Planning investments and
reorganizing the RLF regulations under part 307 so that all RLF
requirements are easy to find under ``Subpart B--Revolving Loan Fund
Program.''
Clarifying EDA's Property regulations and adding helpful
headings to help stakeholders navigate them. See proposed revisions to
Sec. Sec. 314.3, 314.6, and 314.7.
Although this is not strictly a regulatory issue, EDA currently is
examining ways to streamline and rationalize its application
requirements. EDA expects that its new application requirements will
help applicants focus on the competitiveness of their proposed
strategies and reduce the cost of applying for EDA assistance, while
maintaining accountability for taxpayer dollars.
The following is a thematic summary of most comments received in
response to the February 1, 2011 request for comments. A more detailed
analysis is provided below under ``Part-by-Part Analysis of Comments
Received and Proposed Changes.''

Regional Innovation Clusters and Innovation and Entrepreneurship-
Related Infrastructure

EDA received five comments suggesting that EDA provide a definition
for the phrase ``regional innovation cluster,'' which is an economic
development technique designed to spark job creation and help
communities and Regions become more competitive in the global economy.
This NPRM adds a definition of ``Regional Innovation Clusters or RICs''
in EDA's set of regulatory definitions at Sec. 300.3. In addition, EDA
has emphasized the importance of using projects and techniques that
advance effective innovation ecosystems in Regions throughout the U.S.
and help communities support promising entrepreneurs and small
businesses. EDA proposes a new regulation at Sec. 301.11 to provide
some examples of innovation- and entrepreneurship-related
infrastructure Projects. Further, this NPRM proposes to specify
reserved part 311 as a holding place for any regulations that may be
necessary to implement the America COMPETES Reauthorization Act of 2010
(Pub. L. 111-358). Please see the sections below titled ``Part 300--
General Information'' and ``Part 301--Eligibility, Investment Rate and
Application Requirements'' for more detailed information.

EDA's Distress Criteria and Match Requirements

EDA received several comments suggesting that EDA reform its
Investment Rate framework. EDA understands that communities and Regions
face challenging economic

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conditions; however, it is the agency's experience that the current
Investment Rate determination structure encourages communities to
collaborate and prioritize their needs and appropriately marshals
resources to distressed Regions. By ensuring that communities have
``skin in the game,'' EDA's Investment Rate framework reinforces the
need for local buy-in and participation, which improves economic
development outcomes. In addition, the current structure provides EDA
with needed flexibility to appropriately increase the EDA share based
on Special Need and distress considerations. Therefore, EDA does not
propose adjusting its Investment Rate framework through this NPRM.
However, this NPRM does provide for an Investment Rate of up to 80
percent to encourage Projects that involve broad Regional planning and
coordination and for Projects that effectively leverage other Federal
resources. In addition, this NPRM contains a number of provisions
designed to smooth connections between EDA and other Federal Agencies
to ensure that stakeholders can effectively leverage Federal resources;
including specifying that any Federal loan may meet an RLF's private
leveraging requirements. Please see the sections below titled ``Part
301--Eligibility, Investment Rate and Application Requirements'' and
``Part 307--Economic Adjustment Assistance Investments'' for more
information.

Comprehensive Economic Development Strategies, Economic Development
Districts, and EDA's Planning Program

EDA received a number of comments on the regulations governing its
Planning program, the requirements of CEDS, and Economic Development
Districts (``EDDs''). Several comments suggest that EDA provide
additional flexibilities with respect to the composition of CEDS
Strategy Committees and District Organizations' governing bodies. EDA
agrees and proposes revisions to Sec. Sec. 303.6(b)(1) and 304.2(c)(2)
to shift the focus from membership requirements to performance and
outcomes, by maintaining the requirement that Strategy Committees and
District Organization governing bodies represent the main economic
interests of the Region, but no longer require a majority or membership
threshold from any type of economic stakeholder. EDA proposes new
language to clarify that these organizations must demonstrate the
capacity to effectively undertake planning processes and implement
strategies, as applicable. EDA expects that these changes will provide
communities and Regions the flexibility to establish planning
organizations that reflect and work most effectively for their unique
make-up and priorities. In accord with best practices, EDA expects that
the private sector will be strongly represented on both Strategy
Committees and District Organization governing bodies.
Several comments suggest that EDA simplify and streamline the
content requirements of CEDS. EDA agrees with the commenters and
proposes changes to Sec. 303.7(b) to remove the ``laundry list''
elements of CEDS and replace them with four essential planning
elements. EDA will publish CEDS guidelines that incorporate best
practice recommendations of EDA's planning and research partners.
Commenters suggest increased coordination with District
Organizations in a variety of ways. Some commenters suggest that EDA
ensure that all implementation projects are tied to the CEDS, while
others request that EDA require coordination between Eligible
Applicants and the relevant District Organization. EDA values its
relationship with its stakeholders, but does not make these changes
because of the requirements of PWEDA. Under sections 201(b)(3) and
209(b)(2) of PWEDA (42 U.S.C. 3141 and 3149, respectively), all grants
awarded under EDA's Public Works and Economic Adjustment Assistance
programs must be consistent with a relevant CEDS. PWEDA does not impose
this requirement upon its other programs. EDA strongly encourages
collaboration and coordination amongst District Organizations and other
stakeholders, but EDA is not authorized to impose such requirements.
Please see the sections below titled ``Part 303--Planning Investments
and Comprehensive Economic Development Strategies'' and ``Part 304--
Economic Development Districts'' for more information.

Revolving Loan Fund Program

EDA received numerous comments on the agency's revolving loan fund
(``RLF'') program, several of which recommend that EDA set a time limit
for releasing the Federal Interest in RLF grants. EDA understands that
some RLF awards have been operating for a considerable length of time,
some for as many as three decades, but EDA currently is not authorized
to release its interest in RLF awards. EDA continues to work to achieve
the necessary authorities. In addition, commenters opine that the RLF
program reporting requirements are too burdensome. The semi-annual
reporting requirement for the RLF program is in place to address an
audit report by the DOC's Office of Inspector General (``OIG''), which
recommended that EDA undertake more rigorous oversight of the RLF
program to ensure the financial integrity and sustainability of the
program. Because the reporting requirements are designed to address
past program issues and ensure the viability and transparency of the
program, EDA declines to make wholesale changes, but intends to
continue to improve the Recipient reporting system to make it more
user-friendly. In addition, six comments suggest the establishment of
an RLF task force to address program issues and improve communications
between EDA and program stakeholders. EDA currently is in the process
of establishing an internal RLF task force and expects it to begin
meeting in the very near future. Please see the section below titled
``Part 307--Economic Adjustment Assistance Investments'' for more
information.

Property Management Updates

EDA received several comments that offered ways to make the
agency's Property management regulations more flexible and adaptive to
today's economy. For example, some commenters suggest that EDA should
subordinate its interest when a Project warrants, require a lien only
on the value of the Federal Interest, and make necessary changes to
facilitate the agency's participation in Projects involving NMTC
arrangements and other types of financing. EDA agrees, and proposes
clarifying changes to its encumbrances regulation at Sec. 314.6 to set
out EDA's subordination flexibilities. EDA also amends its recorded
statement requirement at Sec. 314.8 to allow EDA to accept alternative
instruments to protect the Federal Interest in certain situations.
Please see the section below titled ``Part 314--Property'' for more
information.

Non-Regulatory Comments

EDA received a number of comments related to agency policy and
process rather than EDA's regulations. For instance, several comments
opined on the agency's mission and direction, two of which request that
EDA continue to fund traditional infrastructure. One commenter
specifically notes that EDA should fund infrastructure to help smaller
communities connect more effectively to telecommunications networks and
electric grids. On the other hand, another comment suggests that EDA
allocate more funding to ``programs and services that create jobs and
less on infrastructure.'' Whether the scope of work of an EDA
Investment

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includes basic infrastructure, such as road upgrades, or business
incubation technical assistance, EDA's goals remains the same:
advancing the community's or Region's economic development strategy and
building the capacity to create and retain jobs. EDA funds a variety of
Projects to provide a broad portfolio of assistance through which
Eligible Applicants can strategically meet their needs. Another comment
encourages EDA to ``consider the funding of operations for business
incubator projects for the start-up phase.'' EDA generally avoids
funding operations for Projects that provide business incubation,
acceleration, and similar services because the agency expects Projects
to be self-sustaining. To this end, proposed application requirements
for Projects to construct a business, technology, or other type of
incubator or accelerator, as set out in Sec. 301.10(d) of this NPRM,
are designed to help EDA ensure that these Investments will continue
creating jobs once the Project period expires. However, EDA may
consider an application that proposes certain eligible business
incubation activities performed by an Eligible Recipient.
We received one comment noting a disconnect between EDA's
encouragement of ``public-private partnerships'' and the agency's
regulatory framework that ``makes it hard to fund a project where a
private entity expects to earn a profit.'' EDA acknowledges that
private sector profit is essential to sustained economic growth and job
creation; however, profit for a particular entity cannot be an
objective under the terms of an EDA award. EDA's goal is not to replace
private sector investment, but to spark economic development Projects
that would not happen otherwise by leveraging private investment more
efficiently. EDA believes the public and private sectors must work
together to achieve vibrant Regional economies and encourages
appropriate partnerships through its evaluation criteria, which are
proposed in this NPRM at Sec. 301.8. However, such partnerships must
meet EDA's conflicts-of-interest requirements as set out at Sec.
302.17. See the discussion under ``Part 302--General Terms and
Conditions for Investment Assistance'' for more information.
EDA also received two comments stating that EDA's ``[f]ield
representatives in the states are absolutely necessary.'' EDA agrees,
and the agency's Economic Development Representatives (``EDRs'') serve
every State.
EDA received several comments on its award approval process. One
commenter suggests that the agency ``[s]treamline submittal and
reporting procedures for smaller grants ($100,000 or less).'' EDA
understands the commenter's concern; however, EDA is responsible for
ensuring all requirements are met and for tracking performance on all
of its awards, and so must require certain submittals and reports to
ensure Federal funds are used efficiently and effectively. However, as
noted above, EDA is reviewing its application requirements to reduce
burdens and ensure efficiency for all Eligible Applicants. Two
commenters suggest that ``the amount of time it takes to get an EDA
grant approved'' is excessive. EDA recently undertook a comprehensive
effort to improve the agency's award selection processes to shorten the
amount of time between application and final award approval, while
maintaining EDA's excellent customer service. The new award selection
process that went into effect on October 14, 2010, greatly enhances
transparency and competitiveness and significantly reduces the time it
takes for EDA to evaluate an application. EDA now considers
applications in quarterly funding cycles. Applications still are
accepted on an ongoing basis, but instead of funding Projects on a
piecemeal basis, EDA now competitively evaluates all applications
received during a particular funding cycle. As a result, Eligible
Applicants that submit a complete application by a funding cycle
deadline are notified of EDA's selection decision within 20 business
days of the deadline. Please see EDA's Web site at http://www.eda.gov/PDF/Process%20Improvement%20Nov%204,%202010%20Webinar.pdf for more
information on EDA's new award selection process.
EDA received one comment stating that the new award approval
process ``worked'' to make EDA's ``programs more user friendly and
efficient.'' However, EDA received another comment requesting that EDA
``return to the rolling submission of grant requests.'' The commenter
suggests that the new process ``fails communities'' that seek to
attract new businesses and prospects because such prospects are
``unwilling to wait until the next submittal deadline to decide if a
community can provide adequate water pressure or sewer capacity.''
EDA's new process is designed to speed up the approval process and
provide Eligible Applicants with feedback earlier. Under the new
process, EDA still accepts applications on a rolling basis and
generally provides feedback on an application within 15 business days
of application receipt. Although EDA makes awards on a quarterly basis,
those awards are made much more efficiently. EDA believes that the new
process provides Eligible Applicants and their stakeholders increased
certainty, but welcomes additional comments.
The commenter also suggests that the new process ``favors mega-
projects that would succeed without EDA's assistance.'' While the new
process is designed to be competitive, EDA is committed to helping
distressed communities flourish, and is not interested in assisting
Projects that would succeed in any case. In fact, one criterion on
which EDA evaluates every application is the extent to which it assists
economically distressed and underserved communities. Two commenters
state that ``EDA should not depend solely on a strict standard
application and point grading system.'' While EDA's staff works hard
with communities as they develop their applications, evaluating
submitted applications in a standard manner is the only way to achieve
objective, data-driven results. Two commenters suggest that
``[r]estricting projects to those that are shovel ready [is] likely to
eliminate promising projects in need of some extra funding to become a
reality.'' EDA is committed to providing its limited resources to
distressed communities so they can spark job creation and positive
economic change as efficiently as possible. Waiting on projects that
are not yet ready for implementation would be a disservice to
communities across the U.S. EDA works closely with communities as they
develop projects that are ready for consideration.
EDA received five comments requesting that EDA provide
``conditional grants of funding using written documentation that lists
the conditions and timeframe for meeting requirements * * *.'' Through
the new award selection process, EDA attempts to strike a balance
between cost efficiency and certainty for Eligible Applicants. Under
the new process, an Eligible Applicant that submits an application
sufficiently in advance of a funding cycle deadline receives an initial
project analysis on the application's fit with EDA's priorities using
the evaluation criteria set out in the relevant FFO and completeness,
which lets the Eligible Applicant know what additional materials must
be submitted before a funding cycle deadline. EDA cannot make a
conditional award before a complete application is received because it
is very difficult to competitively evaluate such applications. EDA
strongly encourages Eligible Applicants to work with EDA

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staff as early as possible to help ensure successful outcomes. In
addition, as noted above, EDA is reviewing its application requirements
to streamline them and ensure they are efficient and cost-effective for
communities.
EDA received one comment suggesting that the ``very rigid legal
interpretation of scope of work compliance * * * be relaxed'' as
``frequently innovation efficiencies emerge after project work has
begun, but these efficiencies, and the related potential for over
delivering the project are not allowed because they were not
specifically identified in the original project scope of work.'' EDA
understands that new efficiencies and synergies may emerge as a Project
moves forward, and EDA staff work closely with Recipients to ensure
that useful changes to a Project's scope of work can be implemented.
However, EDA must be careful to maintain the competitiveness and
transparency of its grant process and ensure that any proposed changes
do not affect the nature and justification of the Project as originally
proposed.
EDA received one comment requesting that EDA no longer use
www.grants.gov for application submissions. Application submission
through www.grants.gov is a requirement across the Federal government
and is designed to reduce paperwork, while making the application
process simpler and more efficient. Numerous improvements have been
made to www.grants.gov over the past several years, which have greatly
improved system performance.
One commenter suggests that ``EDA consider establishing a state-by-
state grant formula.'' EDA is uniquely effective because the agency can
encourage Regional collaboration across State borders and work directly
with communities in implementing economic development plans. EDA works
closely with its State partners, and State coordination is required
under EDA's ``Inter-governmental review of projects'' regulation (Sec.
302.9). Therefore, EDA has not revised its regulations based on this
comment.
EDA received several comments on post-award issues. One commenter
suggests that EDA measure jobs created using a count of ``pay checks to
people * * * instead of the constant debate of what a job is and is
not.'' EDA will consider the comment in developing performance
measures; however often EDA is constrained by government-wide guidance
and requirements with respect to performance measures, including how to
count jobs. The agency received five comments requesting that it no
longer collect information for individual background screenings using
Form CD-346 (Applicant for Funding Assistance). EDA is required to
perform this due diligence step in accordance with DOC policy, which
recently was changed to require Form CD-346 from additional types of
Eligible Applicants. EDA apologizes for any inconvenience, but is not
authorized to change the requirement.
We received one comment suggesting that EDA had imposed ``arbitrary
caps on [facilities and administrative] F&A reimbursement'' creating
``a[n] unsustainable financial burden for research institutions.'' The
commenter particularly cites EDA's FY 2010 i6 Challenge competition,
which resulted in six Economic Adjustment Assistance Investments under
part 307. EDA is uncertain of the precise circumstances behind the
comment, but in general, if facilities and administrative costs (also
referred to as indirect costs) are included in a project budget, EDA
may accept the Eligible Applicant's approved ``Facilities and
Administrative Cost Rate Agreement.'' Nonetheless, EDA is responsible
for taxpayer dollars and ensuring that Projects generate effective
economic impacts. Every EDA Project represents an important opportunity
to create jobs and improve the quality of life in Regions across the
U.S; therefore, EDA looks carefully at Project budgets to maximize the
use of funds for direct program costs and EDA staff may work with
Recipients to negotiate effective budgets. Also, note that under the
University Center program, Sec. 306.6(d) requires that 80 percent of
EDA funding be allocated to direct costs of Program delivery.
One commenter suggests that ``it is important [for stakeholders] to
have more dialogue with senior officials within the EDA so they can
hear from the field, in addition to the internal management teams.''
The commenter goes on to tell of an experience with ``a very well
structured round table with the Assistant Secretary'' that was
coordinated by EDA's Philadelphia regional office, and comments that
``more of these need to occur.'' EDA believes that stakeholder input
and feedback is invaluable. Forums that facilitate dialogue between
EDA's senior management and economic development practitioners in the
field, including face-to-face meetings, teleconferences, and webinars,
are a high priority and EDA coordinates as many as possible. Over the
past year, each region held a conference to share innovative ideas and
best practices. We hope to continue to offer these conferences as a
venue to bring together practitioners, EDA staff and leadership, and
experts to continue the important dialogue about how to continue to
improve our nation's economy. Senior management from both Headquarters
and the regional offices frequently are out in the field gathering
information and requesting feedback and ideas. We welcome additional
suggestions for useful dialogue opportunities.

Part-by-Part Analysis of Comments Received and Proposed Changes

Specifically, this NPRM proposes the following revisions to EDA's
regulations:

Part 300--General Information

Part 300 of the regulations states EDA's mission and highlights the
policies and practices that EDA employs in order to attract private
capital investments and new and better jobs to those Regions
experiencing substantial and persistent economic distress. EDA seeks to
help Regions become more competitive in an innovative economy. To
facilitate these goals, this NPRM introduces several new terms and
revises existing terms to assist readers in better understanding EDA's
requirements and ensure clarity, consistency, and technical precision.
EDA proposes revising Sec. 300.1, which introduces EDA and sets
out the agency's mission, by inserting the term ``new and better jobs''
in place of the phrase ``higher-skill, higher-wage jobs.'' The current
use of the phrase ``higher-skill, higher-wage jobs'' may cause
confusion and suggest that EDA is only interested in ``high tech'' jobs
or jobs that require particular skill sets. The phrase ``new and
better'' is qualitative enough to adapt to all communities. EDA also
revises Sec. 300.2, which provides information on EDA's Headquarters
and regional offices, to replace the address ``14th Street and
Constitution Avenue NW.'' with the more precise address ``1401
Constitution Avenue NW.'' in Sec. 300.2(a). This NPRM revises the
first sentence of Sec. 300.2(b) to replace the phrase ``Web site''
with the word ``Web site'' for consistency with EDA's current
convention, the word ``notice'' with ``applicable announcement'' to
provide greater clarity on the type of funding announcement that EDA
issues, and the word ``published'' with ``issued'' to better describe
how EDA makes such announcements public. In addition, we propose
removing the word ``annually,'' as EDA may issue several funding
announcements throughout the year.
This NPRM proposes several clarifying revisions to the
``Definitions'' section of EDA's regulations at Sec. 300.3.

[[Page 76497]]

First, EDA proposes revising the definitions of ``Cooperative
Agreement'' and ``Grant'' in Sec. 300.3 to specify that EDA may
administer a cooperative agreement or a grant under a statute other
than PWEDA. In both definitions, EDA removes the phrase ``under PWEDA''
and replaces the phrase ``the activities contemplated in an agreement
between the parties'' with the phrase ``a purpose or activity
authorized under PWEDA or another statute'' to provide greater clarity
and improve sentence structure.
EDA proposes a minor change to the definition of ``Eligible
Recipient'' to delete an unnecessary reference to ``of part 306.'' We
also propose revising the definition of ``Federal Funding Opportunity''
or ``FFO,'' by replacing the phrase ``the notice EDA publishes
annually'' with the phrase ``an announcement EDA publishes during the
fiscal year,'' as EDA may issue several funding announcement throughout
the fiscal year. In addition, for clarity, EDA proposes revising the
first sentence of the definition by replacing the phrase ``Web site''
with ``Web site'' and the word ``describes'' with ``provides;'' adding
the word ``funding'' before the word ``amounts;'' replacing the phrase
``particular application procedures'' with the phrase ``application and
programmatic requirements;'' and replacing the phrase ``special
circumstances and other relevant information concerning EDA's
Investment programs for the year'' with the phrase ``special
circumstances, and other information concerning a specific competitive
solicitation for EDA's economic development assistance programs.'' EDA
also corrects a grammatical error in the second sentence of the
definition by replacing the phrase ``EDA may also'' with ``EDA also
may.''
EDA proposes minor punctuation and capitalization corrections to
the definition of ``Federally Declared Disaster'' to remove the hyphens
between ``Federally'' and ``Declared'' and ``Presidentially'' and
``Declared'' and to capitalize ``Federally.'' We also propose revising
the definition of ``Indian Tribe'' to replace the phrase ``any Indian
tribe, band, nation, pueblo, or other organized group or community,
including * * *'' with the phrase ``an entity on the list of recognized
tribes published pursuant to the Federally Recognized Indian Tribe List
Act of 1994 (Pub. L. 103-454) (25 U.S.C. 479a et seq.), as amended,
and* * * '' This revision does not affect EDA's relationship with
Indian Tribes in any way, but provides greater clarity and ensures the
regulation comports with the definitions of other Federal Agencies,
including the U.S. Department of the Interior. In addition, we propose
removing an unnecessary reference to ``an EDA'' from the definition of
``Investment'' or ``Investment Assistance.'' We also propose replacing
``costs'' with the singular ``cost'' in the definition of ``Investment
Rate.''
With respect to the definition of ``Local Share'' or ``Matching
Share,'' we received one comment requesting that EDA ``allow for
Federal funds that are designated to local state agencies, to be
considered as eligible matching funds for EDA funding.'' EDA is working
to address this issue by ensuring that Federal Agency resources can be
leveraged efficiently and effectively, but is not authorized to allow
all Federal funds provided to States to be used as Matching Share
because of the requirements of appropriations law. All Federal funds
are appropriated for particular purposes, as mandated by Congress and
set out in the relevant authorizing statute, appropriation, or other
Congressional statement of intent. For another Federal Agency's funds
to be used to match an EDA award, there must be such a statement of
Congressional intent. In some cases Congress has indicated that other
Federal funds may be used to meet EDA's match requirement. For
instance, currently one of the uses to which Community Development
Block Grant (``CDBG'') funds provided by the U.S. Department of Housing
and Urban Development ``HUD'' may be put is ``payment of the non-
Federal share required in connection with a Federal grant-in-aid
program'' undertaken as part of HUD's Community Development program.
See 42 U.S.C. 5305(a)(9). In addition, section 205 of PWEDA (42 U.S.C.
3145) authorizes EDA to supplement a grant awarded under another
designated Federal program. EDA must determine that Federal funds may
be used as match for another Federal grant each time funds from another
Federal Agency are requested to be all or a portion of the Matching
Share, including when the Federal funds are made available to a State.
In addition, we received three comments regarding costs that may be
considered as Local Share or Matching Share. Two suggest that EDA
consider certain pre-award costs ``to verify eligibility for EDA
funds'' as a portion of the Matching Share and the third comment sets
out the commenter's own experience in which the agency did not allowed
a particular Recipient to use purchased property as Matching Share. All
costs under an award are determined in accordance with relevant Federal
cost principles, as set out in the following Office of Management and
Budget (``OMB'') Circulars: Circular No. A-122 titled ``Cost Principles
for Nonprofit Organizations'' (2 CFR part 230); Circular No. A-21
titled ``Cost Principles for Education Institutions'' (2 CFR part 220);
and Circular No. A-87 titled ``Cost Principles for State, Local and
Indian Tribal Governments'' (2 CFR part 225). EDA, in its sole
discretion, may accept certain eligible costs, including pre-award
costs and Recipient-provided property, as Matching Share or reimburse
them consistent with the EDA-approved Investment Rate. For pre-award
costs related to contracts for goods and services to be used as
Matching Share, such contracts must have been procured in accordance
with Federal competitive procurement requirements as set out at 15 CFR
14.43 or 24.36, as applicable. EDA is uncertain of the precise
circumstances behind the comment with respect to property used as
Matching Share, but we encourage all Eligible Applicants to work with
EDA staff early in the application process to ensure costs are
allowable. We propose non-substantive revisions to the definition of
``Local Share'' or ``Matching Share'' to replace plural references with
singular ones for better sentence structure. Accordingly, we replace
``Recipients'' with ``a Recipient,'' ``third parties'' with ``third
party,'' and ``other Federal agencies'' with ``another Federal
agency.''
In the definition of ``Presidentially Declared Disaster,'' we
correct a punctuation error by removing the hyphen between
``Presidentially'' and ``Declared.'' With respect to the definition of
``PWEDA,'' we propose removing the unnecessary phrase ``including the
comprehensive amendments made by the Economic Development
Reauthorization Act of 2004 (Pub. L. 108-373, 118 Stat. 1756).''
EDA proposes removing the definition of ``Private Sector
Representative'' to reflect proposed changes to the membership
requirements applicable to CEDS Strategy Committees and District
Organization governing bodies. Under current Sec. 303.6(a), a CEDS
Strategy Committee must include Private Sector Representatives as a
majority of its membership and under Sec. 304.2(c)(2), the governing
body of a District Organization must include at least one Private
Sector Representative. Under this NPRM, EDA proposes removing CEDS
Strategy Committee and District Organization governing body membership
threshold requirements; and proposes instead to focus on

[[Page 76498]]

program processes and outputs. Because the defined term ``Private
Sector Representative'' is used largely in the context of these
membership threshold requirements, EDA proposes to remove the
definition. See also the proposed changes to parts 303 and 304.
EDA corrects a grammatical error in the third sentence of the
definition of ``Region'' or ``Regional'' by replacing the phrase ``may
also'' with ``also may.''
In response to five comments the agency received that support a
definition of regional innovation cluster, this NPRM includes a
definition of ``Regional Innovation Clusters'' or ``RICs'' after the
definition of ``Regional Commission'' in Sec. 300.3. One comment
requests EDA to ensure that the definition does not exclude communities
that may lack the resources to form a RIC from partnering with
communities that do have that capacity. Another comment notes that EDA
should ``make sure [the] reader understands the vertical integration of
the cluster and [that] it is not just a conglomerate of like [North
American Industry Classification System] NAICS [codes].'' Other
comments express concern regarding the implications of RICs, including
two that question how RICs will work as a strategy for isolated
communities ``where the nearest town could be 90 to 167 miles away''
and in communities that ``are not accessible by roads and lack many
essential infrastructure and program needs.'' In addition, two comments
warn that ``[r]egionalism and collaboration are two words espoused at
most conferences, however, there is a real need to look at these
concepts and adjust as needed for particular projects'' and that
``while `regionalism' is the buzz word * * * revitalization and
progress must begin locally before it ever reaches a regional stage.''
One commenter goes on to note, ``government funds should not be awarded
unless there are identifiable [benchmarks] to incorporate these
concepts.'' Another comment states that ``EDA should be willing to fund
existing programs that have successful track records just as much as
new programs with promising projections.''
EDA thanks the commenters for their thoughtful responses and will
endeavor to ensure the proposed definition of RICs addresses these
concerns. EDA is striving to create a highly flexible and inclusive RIC
framework that works for all types of Regions. EDA recognizes that RIC
participants can and should have strategic partnerships outside of the
RIC's geographic Region and the definition emphasizes that a RIC can
cross jurisdictional boundaries. EDA's RIC-based programs are designed
to increase the capacity of distressed communities to establish a RIC
and take advantage of the resources of existing RICs. Also, EDA has
tried to craft the definition to emphasize vertical integration while
remaining flexible by defining RICs as ``networks of similar,
synergistic, or complementary entities'' that ``have active channels
for business transactions and communication.'' EDA believes RICs can be
integral to successful economic development strategies for many
communities and continues to develop performance measures and goals to
help assess the impact of RICs and build a portfolio of best practices.
Also, RICs are just one strategy amongst EDA's array of policy and
program options that can be tailored to meet communities' needs.
Through the RIC framework, EDA will work closely to articulate a
strategy that incorporates the attributes and challenges of all types
of communities, from densely populated to very rural. We invite
additional constructive comments on ways to improve the definition.
Last, EDA proposes revising the definition of ``Trade Act'' to
include a reference to the statutory citation for the Trade Adjustment
Assistance for Communities program. Therefore, in the definition of
Trade Act, the phrase ``chapters 3 and 5'' is revised to read as
``chapters 3, 4, and 5.'' Finally, EDA adds the phrase ``for purposes
of EDA,'' to clarify that the definition of ``Trade Act'' is specific
to EDA and its programs.

Part 301--Eligibility, Investment Rate and Application Requirements

Part 301 sets forth eligibility criteria, the maximum allowable
Investment Rates, and application requirements common to all PWEDA-
enumerated programs (excluding Community Trade Adjustment Assistance at
part 313 and Trade Adjustment Assistance for Firms (``TAAF'') at part
315). In general, subpart A of part 301 presents an overview of EDA's
eligibility requirements; subpart B addresses applicant eligibility;
subpart C addresses Regional economic distress level requirements;
subpart D sets forth maximum allowable Investment Rates and Matching
Share requirements; and subpart E addresses application requirements,
as well as the evaluation criteria used by EDA in selecting Projects.
EDA revises the table of contents of part 301 to include a reference to
new Sec. 301.11--Infrastructure, which is described below.
We propose clarifying changes to Sec. 301.1 to simplify the
provision and ensure it better reflects EDA's application process. We
remove the phrase ``an applicant and the Project proposed by the
applicant must satisfy each of'' so that the provision's introductory
text simply and clearly reads ``In order to receive EDA Investment
Assistance, the following requirements must be met.'' In addition, to
better reflect EDA's application selection process, we propose
relocating the phrase ``EDA must select the Eligible Applicant's
Project'' from Sec. 301.1(d) to new Sec. 301.1(f) and rephrase it
slightly to read ``EDA must select the Eligible Applicant's proposed
Project.''
EDA received one comment on the agency's economic distress level
requirements, which are set out at Sec. 301.3. The commenter expresses
concern that one of the economic distress criteria to demonstrate
eligibility for EDA's Public Works and Economic Adjustment Assistance
programs may disproportionately exclude rural communities where
``smaller job loss numbers become huge in today's economy.'' The
commenter urges ``EDA to consider lowering the dislocation job
requirement.'' The regulation at Sec. 301.3 tracks the requirements of
section 301 of PWEDA (42 U.S.C. 3161), which requires that a Project be
located in a Region that meets one or more of the following economic
distress criteria in order to be eligible for EDA assistance:
An unemployment rate that is, for the most recent 24-month
period for which data are available, one percentage point greater than
the national unemployment rate;
Per capita income that is, for the most recent period for
which data are available, 80 percent or less of the national average
per capita income; or
A ``Special Need,'' as determined by EDA.
EDA does not have the authority to adjust these requirements, but
recognizes the devastation that loss of a significant number of jobs
has on a smaller community. If a Region does not meet the statistical
economic distress criteria set out by PWEDA, EDA may be authorized to
provide assistance through its Special Need criteria as defined at
Sec. 300.3, which provide the flexibility to address a variety of
sudden and severe economic dislocations.
In response to an internal comment from EDA staff, EDA proposes
changes to Sec. 301.3(a)(4) to reduce confusion regarding data sources
for demonstrating economic distress. The proposed text recognizes that
the U.S. Census Bureau's American Community Survey (``ACS''), which is
EDA's default data source for determining distress

[[Page 76499]]

levels, does not include 24-month unemployment data. For clarity, EDA
proposes to insert the heading Data requirements to demonstrate
economic distress levels to Sec. 301.3(a)(4). For distress levels
based on per capita income, the regulation provides that EDA still will
base its determination on ACS data, and EDA proposes making the first
sentence of Sec. 301.3(a)(4)(i) specific to per capita income by
removing the reference to ``the unemployment rate or * * *'' EDA also
relocates the clause that currently concludes the first sentence of
Sec. 301.3(a)4)(i), which sets out the requirement that data
correspond to the geographic area upon which the Eligible Applicant is
basing eligibility, to be the final sentence of the provision. EDA
appropriately rephrases the sentence to remove the unnecessary word
``either'' so that the sentence begins ``The required data must be for
the Region * * *'' The remainder of the sentence remains unchanged. EDA
proposes a second sentence specific to distress levels based upon the
unemployment rate that reads ``For economic distress levels based upon
the unemployment rate, EDA will base its determination upon the most
recent data published by the Bureau of Labor Statistics (``BLS''),
within the U.S. Department of Labor.'' EDA proposes revising the
sentence of the provision that currently begins ``Where a recent ACS is
not available,'' by replacing that introductory phrase with a
clarifying introductory clause that reads ``For eligibility based upon
either per capita income requirements or the unemployment rate, when
the ACS or BLS data, as applicable, are not the most recent Federal
data available.'' The remainder of the sentence remains unchanged.
In addition to the changes to Sec. 301.3(a)(4), EDA makes a non-
substantive change to Sec. 301.3(a)(1) to remove the parentheses from
around the phrase ``or more.'' For clarity and better sentence
structure in Sec. 301.3(a)(2), EDA replaces the phrase ``economic
distress criteria of paragraph (a)(1) of this section'' with ``economic
distress criteria described in paragraph (a)(1) of this section'' and
the phrase ``is also'' with ``also is.'' This NPRM also proposes
removing repetitive numerical references by replacing ``twenty-four
(24) month'' with ``24-month'' and ``one (1)'' with ``one'' in Sec.
301.3(a)(1)(i); replacing ``eighty (80)'' with ``80'' in Sec.
301.3(a)(1)(ii); and replacing ``one (1)'' with ``one'' in Sec.
301.3(c)(1).
EDA received 17 comments regarding the agency's Investment Rate
requirements, which are set out at Sec. 301.4 and provide the
framework for the proportion of total Project costs EDA may provide. In
general, Sec. 301.4 provides that an Eligible Applicant may be
eligible for a 50 percent grant rate. Applicants experiencing
relatively higher levels of distress or that are subject to a Special
Need may be eligible for a higher grant rate, up to 80 percent. See
Sec. 300.3 for the definition of ``Special Need.'' Several comments
express concern regarding the 50 percent Investment Rate and suggest
additional flexibilities to establish higher rates, particularly for
EDA's Planning awards and Projects in distressed communities. In
addition, one internal comment suggests that EDA establish standard
Investment Rates for certain Recipients of Planning awards;
specifically 75 percent for District Organizations and 100 percent for
Indian Tribes.
The general Investment Rate requirements in Sec. 301.4(b)(1)
implement section 204 of PWEDA (42 U.S.C. 3144), which requires a 50
percent baseline share plus an additional amount up to 80 percent
``based on the relative needs of the area.'' EDA is not authorized to
set particular Investment Rates for Planning awards, but the agency is
authorized to provide higher maximum Investment Rates for all types of
awards based on a Region's distress level, as set out in Table 1 of
Sec. 301.4(b)(1)(ii). In addition, in accordance with Table 2 in Sec.
301.4(b)(5), EDA may establish an Investment Rate of up to 100 percent
for special Projects, including Projects of Indian Tribes.
Two commenters suggest that EDA restore ``EDA's local match rate
requirements to the pre-2005 levels'' and two commenters support EDA's
inclusion of ``the revised Federal-local cost share provisions included
in S. 2778 by the U.S. Senate Committee on Environment and Public Works
during the 111th Congress.'' EDA understands that communities and
Regions face challenging economic conditions; however, it is the
agency's experience that the current Investment Rate determination
structure encourages communities to collaborate and prioritize their
needs and appropriately marshals resources to distressed Regions. By
ensuring that communities have ``skin in the game,'' EDA's Investment
Rate framework reinforces the need for local buy-in and participation,
which improves economic development outcomes. In addition, the current
structure provides EDA with needed flexibility to appropriately
increase the EDA share based on Special Need and distress
considerations. Therefore, EDA does not propose adjusting its
Investment Rate framework through this NPRM. However, this NPRM does
provide additional flexibilities for higher Investment Rates,
specifically, up to 80 percent to encourage Projects that involve broad
Regional planning and coordination, and Projects that effectively
leverage other Federal resources. Also, this NPRM contains a number of
provisions designed to smooth connections between EDA and other Federal
Agencies to ensure that stakeholders can effectively leverage Federal
resources; including specifying that any Federal loan may meet an RLF's
private leveraging requirements.
In response to an internal comment, EDA proposes syntax changes to
Sec. 301.4(b)(1), which sets out the general requirements with regards
to Investment Rates, to clarify that EDA's grant rates generally must
be determined in accordance with Table 1 of Sec. 301.4(b)(1)(ii). EDA
proposes splitting the initial sentence of the provision into two
clearer sentences. In the first sentence of the provision, EDA replaces
the phrase ``shall, after the application of Table 1'' with the phrase
``shall be determined in accordance with Table 1.'' EDA proposes ending
the sentence at the word ``subsection.'' To begin the second sentence
of the provision, EDA proposes adding the phrase ``The maximum EDA
investment rate shall'' before the clause that begins with the phrase
``not exceed the sum of.'' In addition, EDA removes use of the
variables (x) and (y) in the second sentence for clarity. These
revisions do not change EDA's current practice and only clarify the
regulation to reflect the requirements of PWEDA. In addition, EDA
proposes removing the second sentence of Sec. 301.4(b)(3)(iii), to
allow the Assistant Secretary to delegate authority to grant a waiver
of the requirement that for Planning Investments under part 303, the
Investment Rate shall be the maximum allowable under Table 1 of Sec.
301.4(b)(1)(ii). In addition, in Sec. 301.4(c), EDA replaces the
phrase ``Federal Funding Opportunity notices'' with ``Federal Funding
Opportunity announcements'' for increased clarity.
Six comments suggest that EDA use its grant rates ``to re-establish
Federal incentives for regional collaboration of local governments and
other related entities through the national network of Economic
Development Districts.'' Regional collaboration in planning and
implementing economic development projects is a key indicator of
success, and EDA agrees that such efforts should be incentivized.
Therefore, EDA revises Table 2 of Sec. 301.4(b)(5) to authorize an
Investment Rate of up to 80 percent for

[[Page 76500]]

Projects that involve broad Regional planning and coordination with
other entities outside the Eligible Applicant's political jurisdiction
or area of authority, under special circumstances as determined by EDA.
In general, to demonstrate broad Regional planning and coordination,
Eligible Applicants must demonstrate costs necessary for such efforts
that would not ordinarily have been incurred in the course of their
usual planning and Project efforts; for example, new maps and analyses
because of the expanded Regional coverage. Also, EDA proposes revising
Table 2 to incentivize Projects that effectively leverage other Federal
Agency resources with a maximum grant rate of up to 80 percent. Note
that EDA also incentivizes broad Regional collaboration through its
evaluation criteria as set out at Sec. 301.8.
Two comments recommend that EDA waive match for FEMA-declared
disasters. EDA agrees that maximum flexibility is necessary in disaster
situations, and therefore also amends Table 2 of Sec. 301.4(b)(5) to
clarify that EDA may provide up to a 100 percent grant rate when ``EDA
receives appropriations under section 703 of PWEDA (42 U.S.C. 3233),''
which authorizes disaster economic recovery activities. EDA proposes a
second revision to remove a deadline that applies to disaster
applications. Under the current regulation, to be eligible for a 100
percent grant rate, an application for a Project to address a
Presidentially Declared Disaster must be submitted within 18 months of
the disaster declaration. EDA believes that the 18 month requirement
may be unduly restrictive, and revises the provision to provide that
EDA may provide a maximum Investment Rate of 100 percent for ``Projects
to address and implement post-disaster economic recovery efforts in
Presidentially Declared Disaster areas in a timely manner.'' EDA
expects that communities will respond to disasters expeditiously, and
the phrase ``in a timely manner'' gives EDA the flexibility to set time
limits appropriate to a disaster scenario.
This NPRM proposes removing repetitive numerical references
throughout Sec. 301.4 by replacing ``Fifty (50)'' with ``50'' and
``thirty (30)'' with ``30'' in Sec. 301.4(b)(1); ``one (1)'' with
``one'' in Sec. 301.4(b)(1)(ii); all instances of ``twenty-four (24)
month'' with ``24-month'' and ``1 percentage point '' with ``one
percentage point'' in Table 1 in (b)(1)(ii); ``eighty (80)'' with
``80'' in Sec. 301.4(b)(2); ``fifty (50)'' with ``50'' in Sec.
301.4(b)(3)(i); ``eighty (80)'' with ``80'' in Sec. 301.4(b)(3)(ii),
and ``one hundred (100)'' with ``100'' in Sec. 301.4(b)(4).
We propose clarifying revisions to Sec. 301.6, which sets out the
requirements for EDA to provide assistance to supplement another
Federal grant, to correct capitalization errors in the section heading
so that it reads ``Supplementary Investment Assistance'' instead of
``Supplementary investment assistance.'' We also revise the beginning
of the first sentence of Sec. 301.6(a) to read ``Pursuant to a request
made by an Eligible Applicant, EDA Investment Assistance may supplement
a grant'' instead of ``Pursuant to a request by an Eligible Applicant,
EDA Investment Assistance may supplement grants'' and replace the
phrase ``any Federal grant program'' with ``a Federal grant program''
in the second sentence. We also revise the beginning of the first
sentence of Sec. 301.6(b) to read ``For a Project that meets the
economic distress criteria provided in Sec. 301.3(a)'' instead of
``For Projects located in Regions meeting the criteria of Sec.
301.3(a)'' and remove the unnecessary reference to ``EDA'' immediately
before the phrase ``Investment Assistance.'' For clarity, in the second
sentence of Sec. 301.6(b), we replace the phrase ``the combination of
EDA Investment and other Federal funds'' with the phrase ``the EDA
Investment and other Federal funds together'' and insert the word
``that'' after provided.
This NPRM revises and reformats Sec. 301.7(a) for clarity and to
reflect EDA's improved grant-making process under the agency's Public
Works and Economic Adjustment Assistance programs, which is designed to
provide greater transparency and faster feedback to Eligible
Applicants. EDA continues to accept applications on a continuing basis,
but in general competitively evaluates all applications received in
quarterly funding cycles. Note that in cases of extremely urgent
distress, EDA may evaluate and select an award outside of the usual
funding cycles. Also, applications under EDA's Planning, Local
Technical Assistance, University Center, and Research and Evaluation
programs are not subject to the funding cycle deadlines. Therefore, EDA
proposes revising the first sentence of the provision by removing the
second use of the phrase ``Investment Assistance'' immediately
preceding ``application,'' as it is unnecessary. EDA clarifies the
second sentence of Sec. 301.7(a) to specify that EDA's application,
Form ED-900, is available electronically from www.grants.gov instead of
on EDA's Web site. In addition, we revise the third sentence of the
provision to add the introductory phrase ``In general;'' remove the
words ``competitive and'' immediately before ``continuing;'' and
replace the concluding phrase ``to respond to market forces in Regional
economies'' with the clause ``and competitively evaluates all
applications received in quarterly funding cycles throughout the fiscal
year.'' For better sentence structure and to reduce confusion, we
propose revising the fourth sentence of the provision so that it reads
``Subject to the availability of funds, the timing in which EDA
receives complete and competitive applications affects EDA's ability to
participate in a given Project,'' instead of ``The timing with which
competitive investment opportunities arise, as determined by the
criteria set forth in Sec. 301.8, paired with the availability of
funds in a given fiscal year, will affect EDA's ability to participate
in any given Project.'' In the fifth sentence of the provision, EDA
replaces the phrase ``using the criteria set forth in Sec. 301.8''
with the phrase ``in accord with the criteria set forth in the
applicable FFO and in Sec. 301.8'' to clarify that a published FFO may
contain specific evaluation criteria. In addition, in Sec.
301.7(a)(1), EDA replaces the phrase ``upon corrections'' with ``after
corrections are made'' for better sentence structure.
EDA revises Sec. 301.8 to set out EDA's updated evaluation
criteria. As set out in Sec. 301.8(a) through (f), EDA will evaluate
applications on the extent to which they:
Ensure collaborative Regional innovation;
Leverage public-private partnerships;
Advance national strategic priorities;
Enhance global competitiveness;
Encourage environmentally sustainable development; and
Support economically distressed and underserved
communities.
EDA also proposes minor changes within the introductory text to
Sec. 301.8 to replace the phrase ``EDA statutory and regulatory
requirements'' with ``EDA's statutory and regulatory requirements'' in
the first sentence of the provision; replace ``applicant'' with
``Eligible Applicant'' in the second sentence; and add the introductory
clause ``In addition to criteria set out in the applicable FFO'' and
replace ``one (1)'' with ``one'' in the third sentence.
EDA received eight comments regarding the evaluation criteria. One
comment requests ``that EDA establish preferential selection criteria
recognizing communities that are impacted by Defense Department actions
such as base realignment and

[[Page 76501]]

closure (BRAC), specifically base closure and mission growth.'' EDA
does not enumerate this as an evaluation criterion because Projects
involving communities impacted by military base closures or
realignments, as well as defense contractor reductions-in-force and
U.S. Department of Energy defense-related funding reductions, are
considered under EDA's Special Need criterion for eligibility. See also
the definition of ``Special Need'' as set out in Sec. 300.3 and the
distress requirements of Sec. 301.3(a). The evaluation criteria are
geared towards selecting applications that best demonstrate the ability
to help the impacted community grow the local economy effectively,
create new and better jobs, and coherently engage local partners.
A second comment suggests that EDA's evaluation criteria ``should
favor awards to regions with developing clusters that need help rather
than rewarding established clusters that will continue to grow on their
own.'' EDA's proposed evaluation criteria incentivize RICs, and the
agency's programs are designed to assist distressed communities;
therefore, EDA anticipates helping Regions nurture developing clusters.
Depending on the unique circumstances facing a Region, leveraging an
established cluster may be the most effective strategy to aid a
distressed Region. Another commenter requests that EDA not so heavily
favor distressed communities in order to allow healthier communities to
access its grant assistance. EDA's mission is to help distressed
communities become competitive, productive, and strong; and Congress
mandates that appropriated funds meet those goals. EDA encourages
healthy communities to mentor and share best practices with distressed
communities to help develop robust Regional economies across the U.S.
In addition, EDA's Research and National Technical Assistance programs
provide tools and resources that all types of communities are
encouraged to access. See http://www.eda.gov/Research/Research.xml for
more information.
Two comments suggest that EDA support sustainable development
through ``grant guidelines that reward communities for sustainable
development strategies such as locating new development on previously
developed land or close to existing activity centers and near
transportation choices'' and ensure that the agency's rules and
regulations do not contribute to development sprawl. EDA encourages
such Projects through the evaluation criterion (set out at Sec.
301.8(e)) that highlights environmentally sustainable development, and
an application that includes elements of place-based development may
meet EDA's ``sustainable development'' evaluation criterion. EDA
strongly encourages Projects that enhance the environment and advance
economic development goals and welcomes comments that offer specific
ways the agency can incentivize sustainable development practices.
Another commenter suggests that ``EDA consider evaluating * * *
projects * * * on the extent to which they engage the full spectrum of
key participants,'' and illustrates the point by citing research on the
creation of innovation networks. EDA realizes that having the right
stakeholders at the table is crucial to a coordinated, efficient
economic development program, and through its evaluation criteria set
out at Sec. 301.8, EDA encourages collaborative Regional innovation
and public-private partnerships. In addition, through the agency's
initiatives to encourage commercialization and technology transfer,
including the i6 Challenge competitions, EDA encourages partnerships
that engage the full spectrum of necessary stakeholders, from research
and development to marketing and commercialization.
Two comments suggest that EDA should not focus on Projects with
indicia of success (i.e., high matching levels, clear leadership, etc.)
to avoid ``funding projects that do not need government assistance.''
One of the commenters notes that ``EDA should continue to make sure
that projects have sound business plans for sustainability, but rural
projects should not be held to the same economic thresholds for
economic benefit because they do not have the population base and
economy to support rural projects as urban projects do.'' EDA is
accountable for Federal funds, and to ensure that they go the furthest
and provide the most benefit, EDA does assess the feasibility and job
creation potential of Projects. However, EDA is sensitive to the unique
economic condition of individual communities and Regions. While EDA
ensures that Recipients are accountable for individual Project goals,
EDA does not require any particular output or benefit threshold, and
seeks to incentivize results that work for and are proportionate to
each community. See also EDA's revised accountability provision at
Sec. 302.16.
EDA received one overarching comment requesting that the agency
adopt and announce specific award and match amounts, eligible areas,
and project types. PWEDA and the agency's implementing regulations
provide an adaptable framework within which EDA helps communities
assess their present economic environment, envision their future goals
and develop economic development plans accordingly, and deploy
resources appropriate to effect those plans. EDA's assistance also
allows Regions to adapt to changing economic landscapes and needs.
Adopting specific requirements would stymie EDA from meeting the
current needs of distressed Regions and helping to implement the most
effective economic development strategies. Therefore, EDA declines to
make this change.
This NPRM proposes to amend Sec. 301.9 to remove the phrase ``for
further consideration'' in paragraph (a), which relates to a concept
specific to EDA's application selection process that was in place prior
to October 14, 2010. In addition, EDA proposes minor changes to replace
the phrase ``based on'' with ``in accord with'' in Sec. 301.9(a)(2)
and rephrase Sec. 301.9(b) to read ``EDA will endeavor to notify
applicants as soon as practicable regarding whether their applications
are selected for funding'' instead of ``EDA will endeavor to notify
applicants regarding whether their applications are selected as soon as
practicable.''
EDA proposes removing the word ``construction'' from the first
sentence of Sec. 301.10(c). The use of ``construction'' is confusing
as CEDS are required for all Projects under parts 305 and 307,
including non-construction implementation Projects under part 307. Note
that a CEDS is not a requirement for Strategy Grant Projects and a
Project located in a Special Impact Area, as specified under Sec.
301.10(c)(1) and (2). In addition, we propose minor changes to
capitalize ``Federal'' in Sec. 301.10(b) to adhere to the
capitalization convention of the regulations, replace the word ``of''
with the phrase ``stated in'' in the third sentence of Sec. 301.10(c),
and replace ``Projects'' with ``A Project'' in Sec. 301.10(c)(2). In
response to an internal comment from EDA staff, EDA proposes amending
Sec. 301.10 by adding new paragraph (d) to clarify the application
requirements for the construction of business, technology, or other
types of incubators or accelerators. Because these types of
construction Investments are designed to catalyze growth in innovative
sectors, EDA proposes requiring a feasibility study to evaluate the
need for the Project and an operational plan based on industry best
practices to ensure the Project's longevity. EDA will provide
additional information on these requirements in an applicable FFO. The
information provided by such documents is crucial in helping EDA ensure
that Federal

[[Page 76502]]

funds are put to their best use. The third sentence of new Sec.
301.10(d) also provides that EDA may require a Recipient to demonstrate
that a feasibility study has been conducted by an impartial third
party, as determined by EDA.
This NPRM also adds a new section at Sec. 301.11 to clarify that
EDA funds a broad spectrum of construction and non-construction
infrastructure to meet a community's strategic goals, from basic assets
to innovation- and entrepreneurship-related infrastructure. Each EDA
Investment is designed to meet a community where it is and help it
reach its highest economic development potential. Paragraph (a) of the
proposed provision provides some examples of innovation- and
entrepreneurship-related infrastructure, including business incubation,
business acceleration, venture development organizations, proof of
concept centers, and technology transfer. Before this NPRM, these terms
had not been delineated within the framework of EDA's regulations.
Paragraph (b) of the proposed provision provides that EDA will seek to
fund Projects that effectively leverage Federal resources and restates
EDA's statutory restriction on providing funds to any for-profit
entity. Proposed Sec. 301.11 is intended to help clarify these terms
and is not intended to be restrictive or exclusive.

Part 302--General Terms and Conditions for Investment Assistance

Part 302 sets forth the general terms and conditions for EDA
Investment Assistance, including environmental reviews of Projects;
relocation assistance and land acquisition requirements; inter-
governmental review of Projects; and Recipients' reporting,
recordkeeping, post-approval, and civil rights requirements.
EDA proposes a minor change to the third sentence of Sec. 302.1 to
clarify that environmental information may be obtained from the
individual serving as the Environmental Officer in the appropriate
regional office. EDA also capitalizes ``Project'' in the second
sentence, and replaces the word ``can'' with ``may'' and removes ``as''
immediately before ``listed'' in the third sentence. We propose small
changes to Sec. 302.3 to replace the word ``any'' with ``an''
immediately preceding the phrase ``EDA-administered program'' in the
first sentence of the provision and to remove the unnecessary phrase
``but is not limited to'' in the second sentence. We also propose
removing the unnecessary phrases ``but not limited to'' from Sec. Sec.
302.6 and 302.8. In addition, the agency proposes non-substantive
changes to Sec. 302.9(a), which sets out the requirements for inter-
governmental reviews of Projects, to replace ``fifteen (15)'' with
``15'' in the first sentence of the provision and ``Eligible
Applicants'' with ``the Eligible Applicant'' and ``their'' with ``its''
in the second sentence of the provision. In addition, EDA proposes to
make the regulation easier to read by separately listing the
documentation required when a Recipient either does or does not receive
comments from an Authority as subsections (1) and (2) under paragraph
(a). In Sec. 302.9(b), EDA makes a grammatical correction by replacing
the phrase ``must also'' with ``also must.'' EDA also proposes a minor
change by replacing the phrase ``Web site'' with ``website'' in Sec.
302.11.
This NPRM also proposes updating Sec. 302.10, which implements
section 606 of PWEDA (42 U.S.C. 3216) and sets out requirements
regarding entities that expedite applications to EDA and restrictions
on the employment of certain EDA employees by Eligible Applicants.
Section 606(2) of PWEDA (42 U.S.C. 3216) sets out a post-employment
restriction that requires ``businesses'' to refrain from offering
employment to or employing certain EDA employees for a period of two
years after an award of Investment Assistance. The purpose of the post-
employment restriction is to prevent situations in which an Eligible
Applicant uses or appears to use its employment practices to influence
EDA and DOC employees with award decision-making authority. EDA
recently made a policy decision to provide greater flexibility in the
application of the post-employment restriction, specifically addressing
Eligible Applicants where there is a greater chance of such undue
influence. In general, such Eligible Applicants are smaller
organizations or organizations that lack standard hiring procedures.
Therefore, in the context of the post-employment restriction, EDA has
determined that ``businesses'' means Eligible Applicants that are: (1)
Non-profit organizations; (2) District Organizations of an EDA-
designated EDD; and (3) for-profit organizations. In addition, EDA
retains the flexibility to require another type of Eligible Applicant
to execute an agreement to abide by the above-described post-employment
restriction on a case-by-case basis; for example when an institution of
higher education implements the EDA scope of work or activities related
to the EDA scope of work through a separate non-profit organization.
EDA proposes revising Sec. 302.10 to reflect its updated policies.
Currently, both the expediter requirements and post-employment
restriction are combined in Sec. 302.10. EDA proposes to restructure
the regulation so that Sec. 302.10(a) incorporates the expediter
requirements, which remain substantively unchanged, and Sec. 302.10(b)
incorporates the updated post-employment restriction. Accordingly, EDA
revise the heading of Sec. 302.10 to read ``Attorneys' and
consultants' fees, employment of expediters, and post-employment
restriction'' instead of ``Attorneys' and consultants' fees; employment
of expediters and administrative employees,'' adds the heading
Employment of expediters to revised Sec. 302.10(a), and the heading
Post-employment restriction to revised Sec. 302.10(b). EDA makes minor
clarifying corrections, replacing two instances of the word
``applications'' with ``an application'' or ``the application,'' as
applicable, in the second sentence of proposed Sec. 302.10(a) and
removing two repetitive numerical references from proposed Sec.
302.10(b), replacing ``two-year (2)'' with ``two-year'' and ``one-year
(1)'' with ``one-year.''
EDA received two comments requesting that EDA relax or waive the
wage rate requirements of the Davis-Bacon Act (40 U.S.C. 3142 et seq.),
which apply to contractors and subcontractors performing on Federally
funded or assisted contracts in excess of $2,000 for the construction,
alteration, or repair (including painting and decorating) of public
buildings or public works. The Davis-Bacon Act requires contractors and
subcontractors to pay any laborers and mechanics employed under the
contract (or subcontract) no less than the locally prevailing wages and
fringe benefits for corresponding work on similar projects in the area.
Section 602 of PWEDA (42 U.S.C. 3212) provides that Davis-Bacon applies
to all ``projects assisted by the Secretary under this Act.''
Therefore, EDA cannot waive the wage rate requirements. Accordingly,
the regulation at Sec. 302.13 implements the Davis-Bacon requirement.
EDA provides guidance and works closely with Recipients to ensure that
the Davis-Bacon requirements and responsibilities are clear under the
terms of an award of financial assistance.
This NPRM makes a clarifying revision to the heading of Sec.
302.15 by inserting the word ``made'' immediately after the word
``certifications.'' This NPRM revises Sec. 302.16 to set out EDA's
accountability and performance expectations, along with its reporting

[[Page 76503]]

requirements. Accordingly, EDA revises the heading of the provision to
read ``Accountability'' instead of ``Reports by Recipients.'' EDA also
adds new paragraph (d) to clarify that EDA expects Recipients to use
good faith efforts to meet Project goals and set out the consequences
for failure to undertake such efforts. This provision is not punitive
and is not intended to discourage accurate reporting; EDA understands
that at times, circumstances beyond a Recipient's control will prevent
the fulfillment of Project goals. Its purpose is to underscore the
importance that a Recipient undertake the Project scope of work in good
faith and with integrity. EDA works closely with its partners to make
sure they have the tools and resources necessary to achieve the best
economic outcomes possible. Also, EDA adds paragraph headings to Sec.
302.16 to help the reader navigate the provision; specifically adding
the header General to paragraph (a); Data on Project effectiveness to
paragraph (b); Reporting Project service benefits to paragraph (c); and
Consequences for failure to undertake good faith efforts to new
paragraph (d). We propose removing a repetitive numerical reference in
paragraph (a) by replacing ``ten (10)'' with ``ten.'' In the first
sentence of paragraph (b) of the provision, EDA proposes adding the
phrase ``and meeting Project goals'' immediately following the phrase
``including alleviation of economic distress'' with the parenthetical,
inserting ``as amended'' following the reference to the Government
Performance and Results Act of 1993 (``GPRA''), and adding a citation
for the GPRA, specifically, Public Law 103-62.
EDA received three comments on the agency's conflicts-of-interest
requirements, which are set out at Sec. 302.17. Under EDA's policy,
Eligible Applicants must avoid the appearance of or actual conflicts-
of-interest, which generally exist when an Interested Party of a
Recipient participates in a matter that has a direct and predictable
effect on the Interested Party's personal or financial interests. EDA
defines ``Interested Party'' as ``any officer, employee or member of
the board of directors or other governing board of the Recipient,
including any other parties that advise, approve, recommend or
otherwise participate in the business decisions of the Recipient, such
as agents, advisors, consultants, attorneys, accountants or
shareholders. An Interested Party also includes the Interested Party's
Immediate Family and other persons directly connected to the Interested
Party by law or through a business arrangement.'' See Sec. 300.3. The
comments suggest that EDA reevaluate and relax the conflicts-of-
interest requirements. One commenter details how EDA's conflicts-of-
interest policy impacted a Project and was particularly concerned with
the ``vague'' standard of an apparent conflict-of-interest and how the
requirement impacts the ability of small communities to attract ``well-
informed and motivated residents to run for locally elected offices.''
EDA's requirements comport with the requirements of other Federal
Agencies, including DOC's requirements set out at 15 CFR 24.36(b) or
14.42, as applicable, and are designed to maintain public trust in the
efficiency and effectiveness of the agency's grant assistance. EDA does
not intend for its conflicts-of-interest policy to burden or penalize
communities or to halt innovative economic development projects, but
does believe that the policy is extremely important to the integrity
and transparency of EDA's programs. EDA staff work closely with
Eligible Applicants to identify conflicts-of-interest issues early on
and develop solutions that will keep Projects on track. This NPRM does
not propose substantive changes to Sec. 302.17, but EDA welcomes
constructive comments on ways to balance the agency's fiduciary and
transparency responsibilities with the goal of implementing economic
development projects. Note that this NPRM does make minor grammatical
corrections by replacing ``may also'' with ``also may'' in the third
sentence of Sec. 302.17(a), replacing ``shall also'' with ``also
shall'' in Sec. 302.17 (b)(2), and removing ``also'' from Sec.
302.17(c)(2). We replace ``two (2)'' with ``two'' in Sec.
302.17(c)(3).
EDA received one comment that the agency's post-approval
requirements regulation (Sec. 302.18) is confusing in that it does not
specifically apply to all EDA awards. This NPRM proposes revising the
regulation by removing paragraph (b), which applies only to EDA's
Economic Adjustment Assistance Investments, in its entirety. We
maintain paragraph (a) in substance, but remove the unnecessary
lettered designation and revise the provision to clarify that post-
approval requirements apply to all EDA awards. EDA also replaces the
phrase ``special terms'' with ``special award conditions'' to comport
with EDA's usual terminology.
EDA received an internal comment suggesting that EDA specify in the
regulations that the requirements under the Americans with Disabilities
Act (``ADA'') (42 U.S.C. 12101 et seq.) apply to EDA Projects. The
civil rights requirements applicable to Recipients and Other Parties
are set out at Sec. 302.20. Section 302.20 specifies that
discrimination is prohibited by a Recipient or Other Party with respect
to a Project receiving Investment Assistance under PWEDA or by an
entity receiving Adjustment Assistance under the Trade Act, in
accordance with a list of enumerated authorities. While EDA agrees that
it should be clear that the ADA applies to EDA Projects, we note that
the enumerated list set out at Sec. 302.20 includes section 504 of the
Rehabilitation Act of 1973, as amended (29 U.S.C. 794), which prohibits
discrimination on the basis of disabilities. In addition, the
requirements of the ADA are applicable to all EDA Recipients by virtue
of the DOC's Financial Assistance Standard Terms and Conditions, which
apply to all non-construction awards, and EDA's Standard Terms and
Conditions for Construction Projects, which apply to all construction
awards. Because discrimination on the basis of disability already is
prohibited with respect to EDA Projects, we decline to make the change.
EDA makes non-substantive changes in Sec. 302.20(b)(1) by replacing
``fifteen (15)'' with ``15,'' making a minor grammatical correction by
replacing ``is also'' with ``also is,'' and replacing the final usage
of the term ``Investment Assistance'' immediately following the phrase
``EDA's final disbursement of'' with ``award'' for simplicity.

Part 303--Planning Investments and Comprehensive Economic Development
Strategies

Part 303 sets forth regulations governing EDA's Planning program,
through which the agency provides assistance to help Eligible
Applicants create strategies or plans to stimulate and guide the
economic development efforts of a community or Region. EDA has three
distinct types of Planning Investments: (1) Partnership Planning; (2)
State Planning; and (3) short-term Planning. Through EDA's Partnership
Planning Investments, the agency facilitates the development,
implementation, revision, or replacement of CEDS. EDA provides
Partnership Planning awards to Planning Organizations (e.g., District
Organizations) serving EDA-designated EDDs (as defined in Sec. 300.3)
throughout the U.S. The EDDs are recognized by the State(s) in which
they reside as multi-jurisdictional councils of governments, regional
commissions, or planning and development centers. Further information
on EDDs may be found on EDA's Web site at http://www.eda.gov/

[[Page 76504]]

PDF/EDD%20List--030410.pdf. The Partnership Planning awards enable
Planning Organizations to manage and coordinate the development and
implementation of CEDS to address the unique needs of their respective
Regions. The CEDS are central to EDA's economic development
initiatives, and a proposed Project must be consistent with a relevant
CEDS before EDA makes a competitive award under the Public Works or
Economic Adjustment Assistance programs under parts 305 or 307.
Finally, part 303 sets forth the requirements for State and short-term
Planning Investments, which can help distressed Regions strategize to
create and retain new and better jobs and respond quickly and
effectively to sudden economic dislocations.
In response to a suggestion from EDA staff, this NPRM proposes
adding subparts to part 303 to better organize and clarify the
distinctions between EDA's Planning Investments. General requirements
that apply to all Planning Investments are set out at Sec. Sec. 303.1
thorough 303.5 and included under new ``Subpart A--General.''
Requirements specific to Partnership Planning Investments are set out
at Sec. Sec. 303.6 and 303.7 under new ``Subpart B--Partnership
Planning Assistance.'' Similarly, requirements specific to State plans
and short-term Planning Investments, Sec. Sec. 303.8 and 303.9,
respectively, are included under new ``Subpart C--State and Short-Term
Planning Assistance.''
This NPRM proposes revising the heading of Sec. 303.1 from
``Purpose and scope'' to ``Overview of EDA's Planning Program'' to
clarify the content of the provision. In the final sentence of the
introductory text to Sec. 303.1, EDA proposes to replace the phrase
``Private Sector Representatives'' with ``the private sector.'' As
noted above under ``Part 300--General Information'' this NPRM proposes
to remove ``Private Sector Representative'' as a defined term; however,
EDA expects that the private sector will remain actively involved in
Regions' planning processes. We also propose adding ``non-profit
organization'' and ``educational institutions'' to the list of entities
that EDA expects will be active participants in the planning process.
EDA also proposes minor changes to Sec. 303.1 to move the phrase
``short-term Planning Investments'' after ``State plans'' to comport
with the order of the regulations, and to replace the phrase ``higher-
skill, higher-wage jobs'' with ``new and better jobs.'' EDA capitalizes
``Regional'' in the second sentence for consistency in the use of
defined terms. In Sec. 303.3, EDA proposes minor textual changes to
paragraph (a)(5) by replacing the phrase ``higher-skill, higher wage''
with ``new and better'' and to paragraph (c) by replacing ``shall
also'' with ``also shall.'' In Sec. 303.4(a), EDA proposes replacing
the sentence ``Planning Investments shall function in conjunction with
any other available Federal, State or local planning assistance to
ensure adequate and effective planning and economical use of funds''
with ``Planning Investments shall be coordinated with and effectively
leverage any other available Federal, State, or local planning
assistance and private sector investments'' for better sentence
structure and to emphasize the importance of public-private
partnerships. EDA also removes a redundant numerical reference from
Sec. 303.4(c), replacing ``thirty-six (36) month'' with ``36-month.''
As noted above, this NPRM proposes incorporating all Partnership
Planning provisions under new ``Subpart B--Partnership Planning
Assistance'' for increased clarity. Because the Partnership Planning
Investments and CEDS process are closely linked, EDA proposes
restructuring Sec. 303.6, which currently sets out the process
requirements for developing a CEDS, to incorporate a description of
Partnership Planning along with the CEDS process requirements.
Accordingly, this NPRM revises the heading of Sec. 303.6 to read
``Partnership Planning and the EDA-funded CEDS process'' to better
specify the intent of the provision. EDA proposes a description of
Partnership Planning Investments at new Sec. 303.6(a), which this NPRM
titles Partnership Planning overview, and incorporates CEDS Strategy
Committee and process requirements, which are currently set out under
Sec. 303.6(a) through (e), under Sec. 303.6(b), which this NPRM
titles CEDS process. EDA also appropriately renumbers proposed Sec.
303.6(b). EDA proposes subparagraph headings within Sec. 303.6(b) to
serve as guideposts to help the reader more easily navigate the
provision. Accordingly, headings to proposed Sec. 303.6(b)(1) through
(b)(5) are added to read as follows: CEDS Strategy Committee, Public
notice and comment, Reports and updates, Inadequate CEDS, and Regional
Commission notification, respectively.
EDA received five public comments suggesting that the agency
provide increased flexibility with regard to the membership
requirements of CEDS Strategy Committees, the requirements of which
currently are set out at Sec. 303.6(a) and that this NPRM proposes
relocating to Sec. 303.6(b)(1) as stated above. Currently, a CEDS
Strategy Committee must represent the main economic interests of the
Region, and must include Private Sector Representatives as a majority
of its membership. For the CEDS process and the resulting strategy to
be effective, the Strategy Committee must reflect all key stakeholders
from across the Region. However, EDA wishes to provide flexibility for
all types of communities and Regions, and therefore, under this NPRM,
EDA proposes to maintain the requirement that a Strategy Committee
represent the main economic interests of the Region, including the
private sector, public officials, community leaders, private
individuals, representatives of workforce development boards,
institutions of higher education, and minority and labor groups, but no
longer requires a majority or membership threshold from any type of
economic stakeholder. In addition, EDA proposes to add the clause ``and
others who can contribute to and benefit from improved economic
development in the Region'' to revised Sec. 303.6(b)(1) to address any
stakeholders that EDA's list may miss. Although EDA proposes to remove
the membership threshold, the capability of each Strategy Committee to
undertake a Regional planning process remains of principal importance.
Accordingly, EDA adds the sentence ``In addition, the Strategy
Committee must demonstrate the capacity to undertake a collaborative
and effective planning process.'' EDA will provide guidance to
implement this requirement. EDA expects that every Strategy Committee
will include strong private sector representation unless such
representation is proscribed by State law.
One public comment and an internal comment from EDA staff suggest
that EDA reform its regulations to ``emphasize broader and ongoing
multi-stakeholder input in the planning process.'' The current public
review and comment requirement, as set out at Sec. 303.6(b)(2),
requires simply that CEDS be made available to the public for comment
for at least 30 days before submission to EDA. EDA believes that public
input is crucial to a Regional planning process and agrees that the
requirement should contain further details. EDA proposes revising the
regulation to combine existing Sec. 303.6(b)(1) and (b)(2) into
revised Sec. 303.6(b)(2), which sets out revised public comment
requirements. Under the revised requirements, before submission of a
CEDS to EDA, the Planning Organization must provide the public and
appropriate governments and interest groups with adequate notice and
opportunity to comment on

[[Page 76505]]

the CEDS. For maximum flexibility, EDA maintains the requirement that
the comment period be for at least 30 days, but goes on to specify that
the Planning Organization must make the CEDS available appropriately,
electronically and otherwise, throughout the comment period. The
Planning Organization also must make the CEDS available in hardcopy
upon request. Finally, the provision states that EDA may require the
Planning Organization to provide any comments received on the CEDS and
demonstrate how the comments were resolved. The proposed regulation is
designed to be flexible enough to work for all communities, while
providing ample guidance to gather public input.
The remainder of the CEDS process requirements remain substantively
the same, and are incorporated under Sec. 303.6(b)(3)-(5). This NPRM
also removes a repetitive numerical reference, replacing ``five (5)''
with ``five'' in proposed Sec. 303.6(b)(3)(ii).
EDA proposes textual changes to the introductory text of Sec.
303.7(b), which frames the process and participation expectations of
CEDS and introduces the content requirements. EDA revises the heading
of Sec. 303.7(b) to read ``Strategy requirements'' instead of
``Technical requirements'' to emphasize that CEDS are strategy
documents and replaces the word ``continuing'' with the phrase
``comprehensive and continuous'' in the first sentence of Sec.
303.7(b)(1). EDA proposes a second sentence to EDA highlight that CEDS
must be consistent with section 302 of PWEDA (42 U.S.C. 3162), which
sets out the requirements for CEDS, and that CEDS must promote Regional
economic resiliency and be unique and responsive to the relevant
Region.
EDA received several comments, both public and internal, on the
content requirements of CEDS, which currently are set out at Sec.
303.7(b)(1)-(10). One commenter recommends that EDA ``support regional
and local planning and economic visioning efforts that take into
account local and regional assets.'' Another commenter suggests that
EDA ensure the Planning program encourages ``strategic doing'' by
``funding strategic planning activities that begin with an initial
survey of regional assets, stakeholders, and opportunities and provide
a framework for activities for ongoing networking and feedback.'' EDA's
Planning program and the requirements of CEDS accomplish those goals by
creating an ongoing planning process that begins by evaluating current
Regional baselines, setting a vision for competitiveness and
innovation, and establishing a strategy tailored to reach the Region's
goals.
Several comments suggest that the current CEDS content requirements
are counterproductive in that they create ``a situation in which the
CEDS must be used as a place to dump data and becomes a lengthy
narrative * * * of limited value to businesses and economic development
practitioners'' and that ``plan writers spend most of their time trying
to check off its boxes rather than focus on a plan that is truly
relevant to the unique circumstances and assets of any given region.''
The commenters suggest various ways to streamline CEDS, including four
that suggest adopting the National Association of Development
Organizations' (``NADO'') Peer Standards of Excellence. One of the
comments suggests that the amount of background materials required in
CEDS should be reduced to ``[a]llow EDDs to focus CEDS on specific
strategies (put the S back in CEDS), rather than a comprehensive
narrative of the region.'' EDA received several comments that focus on
the ``project list'' aspect of CEDS in current Sec. 303.7(b)(5), which
requires that CEDS include ``[a] section listing all suggested Projects
and the projected numbers of jobs to be created as a result thereof.''
Two comments request that EDA eliminate this requirement, suggesting
that it encourages the making of project laundry lists instead of
catalyzing strategic thinking. Four comments suggest that any required
CEDS project list should be meaningful in the EDA selection process,
and one comment recommends that any project not included in a CEDS
should not be considered for funding by EDA. One comment states that
``[o]nly in rare and unusual circumstances should projects not
prioritized in the CEDS be supported without a full CEDS amendment
including public review of project priorities.''
EDA agrees with its stakeholders that the list of CEDS requirements
may be counterproductive for many Regions and therefore proposes
significantly streamlining Sec. 303.7(b) from ten detailed
specifications to four essential planning elements set out at Sec.
303.7(b)(1)(i) through (iv): (1) A summary of economic development
conditions of the Region; (2) an in-depth analysis of economic and
community strengths, weaknesses, opportunities, and threats (commonly
known as a ``SWOT'' analysis); (3) strategies and an implementation
plan to build upon the Region's strengths and opportunities and resolve
the weaknesses and threats facing the Region, which should not be
inconsistent with applicable State and local economic development or
workforce development strategies; and (4) performance measures used to
evaluate the Planning Organization's successful development and
implementation of the CEDS. Lists of specific projects, including
prioritized lists, will not be required in the CEDS, but may be used by
the Planning Organization to illustrate the implementation of the CEDS.
EDA neither encourages nor discourages such project lists in order to
provide Planning Organizations the maximum flexibility to create
strategies most suited to their Region.
EDA recognizes that economic development planning is a dynamic
field and best practices are constantly evolving. Therefore, EDA will
publish and periodically update specific CEDS content guidelines, which
will be based on best practices developed in collaboration with the
agency's cutting edge planning and economic development partners as
well as on leading edge research. For example, EDA expects that the
relevant guidelines will include NADO's Peer Standards of Excellence,
which are strategic principles that ensure accountability and
performance, while allowing for Regional flexibility and creativity.
Transformative CEDS take the form of effective, agile strategies, not
static lists of requirements and projects. The development and
maintenance of a CEDS requires Planning Organizations to undertake an
iterative process of gathering data and community input and adapting
the strategy to the facts on the ground. EDA expects that these changes
will ensure that CEDS remain relevant economic development strategies
by allowing Planning Organizations to focus on inclusive planning
processes and positive economic development results.
With respect to the comment suggesting that EDA implementation
projects must be tied to the CEDS of EDDs, EDA already requires that
Projects under the agency's Public Works and Economic Adjustment
Assistance programs be consistent with a relevant CEDS, per the
requirements of sections 201 and 209 of PWEDA (42 U.S.C. 3141 and 3149,
respectively).
Other comments suggest discrete changes, including requiring an
analysis of RICs in the CEDS document and modernizing ``CEDS data sets
* * * to include relevant 21st Century global knowledge economy
indicators and measures at the regional level.'' EDA thanks the
commenters and expects that these comments will be addressed through
the CEDS guidelines that EDA

[[Page 76506]]

publishes incorporating the best practices of its economic development
and research partners.
EDA received two public comments and an internal comment regarding
the agency's consideration of a CEDS developed independent of EDA
assistance, as set out at Sec. 303.7(c). EDA-funded CEDS must adhere
to the requirements of Sec. 303.7(b), but the agency may accept a non-
EDA funded strategy as a CEDS at the agency's discretion. Both public
and internal comments suggest that consistent requirements should apply
to both EDA-funded and non-EDA funded CEDS. EDA is currently reviewing
the issue, and expects to address the requirements of non-EDA funded
CEDS in published CEDS guidelines.
As noted above, State and short-term Planning requirements are
incorporated under new ``Subpart C--State and Short-Term Planning
Assistance.'' In addition, this NPRM proposes minor changes to the
first sentence of Sec. 303.9(a), replacing the phrase ``may also''
with ``also may,'' for better sentence structure, and to Sec. 303.9(b)
to remove the unnecessary phrase ``but are not limited to.''
In addition, EDA received two comments stating that
``[d]ocumentation on how to prepare CEDS Updates, Government
Performance and Results Act reports, and CEDS Annual Performance
reports is ambiguous or unclear and results in a disparity among
reports of EDDs.'' Clearer guidance on what EDA expects in these
documents is an identified need. Accordingly, EDA currently is
evaluating its Planning program and expects to issue updated guidance
in the near future.

Part 304--Economic Development Districts

Part 304 on Economic Development Districts, which also may be
referred to as a ``District'' or an ``EDD'' in Sec. 300.3, sets forth
the Regional eligibility requirements that must be satisfied in order
for EDA to consider a District Organization's request to designate a
Region as an EDD, including submission of an EDA-approved CEDS, and the
District Organization's formation and organizational requirements. This
part also contains provisions relating to termination and performance
evaluations of District Organizations.
EDA corrects a punctuation error in Sec. 304.1(c) by adding a
colon (``:'') at the end of the phrase ``Has an EDA-approved CEDS
that.'' In addition, we remove a redundant numerical reference by
replacing ``one (1)'' with ``one'' in Sec. 304.1(a) and, for better
sentence structure, replace ``must also'' with ``also must'' in Sec.
304.2(c)(1) and ``shall also'' with ``also shall'' in Sec.
304.2(c)(4)(i).
Section 304.2(c)(2) sets out the requirements for governing bodies
(sometimes known as ``policy boards'') of District Organizations.
Currently, the governing body of a District Organization must be
broadly representative of the principal economic interests of the
Region and, unless prohibited by State or local law, must include:
At least one Private Sector Representative;
At least one or more Executive Directors of Chambers of
Commerce, or representatives of institutions of post-secondary
education, workforce development groups, or labor groups, all of which
must comprise in the aggregate a minimum of 35 percent of the District
Organization's governing body; and
A simple majority of its membership who are elected
officials and/or employees of a general purpose unit of State, local,
or Indian tribal government who have been appointed to represent the
government.
EDA received four public comments suggesting that the regulations
should provide ``[i]ncreased flexibility for governance structure and
local control of EDD policy boards.'' EDA agrees that District
Organizations should be focused on implementing a dynamic and effective
planning process for the Region instead of meeting and maintaining
membership thresholds. Therefore, we propose revisions to Sec.
304.2(c)(2) to remove the current membership thresholds, but maintain
the requirement that governing bodies demonstrate that they are broadly
representative of the principal economic interests of the Region,
including the private sector, public officials, community leaders,
representatives of workforce development boards, institutions of higher
education, minority and labor groups, and private individuals. Although
EDA proposes to remove the membership thresholds, the capability of
each governing body to implement the relevant CEDS remains of principal
importance. Accordingly, EDA adds the sentence ``In addition, the
governing body must demonstrate the capacity to implement the EDA-
approved CEDS.'' EDA will provide guidance to implement this
requirement. EDA expects that every District Organization governing
body will include strong private sector representation unless such
representation is proscribed by State law.
EDA makes conforming changes to Sec. 304.2(c)(2) to remove the
provisions that allow the Assistant Secretary to waive the Private
Sector Representative requirement upon a Region's showing of its
inability to locate such a representative and the prohibition on the
Assistant Secretary's delegation of this waiver authority.
Also with respect to District Organization governing body
membership requirements, one commenter suggests that EDA ``expand its
list of representatives able to be members of an EDD Board to include
Executive Directors of Economic Development Corporations in addition to
Chambers of Commerce directors.'' One internal comment suggests that
EDA specify that the simple majority requirement can be met by special
purpose as well as general purpose units of government and a second
internal comment suggests that EDA reduce the 35 percent requirement to
25 percent to better fit with local board composition requirements. EDA
agrees, but as EDA has revised the membership requirements of District
Organization governing bodies to remove membership thresholds, these
changes are no longer necessary.
In response to an internal comment, EDA revises Sec. 304.2(c)(4)
to require that governing bodies of District Organizations meet at
least twice a year, instead of only once a year. EDA hopes that
requiring at least two meetings a year will increase public
participation in District Organization operations and help to provide
increased insight into the importance of these organizations.
EDA corrects a typographical error in Sec. 304.4(a)(3), replacing
the phrase ``on this chapter'' with ``of this chapter.'' In addition,
this NPRM removes redundant numerical references by replacing ``sixty
(60)'' with ``60'' in Sec. 304.3(b), two instances of ``three (3)''
with ``three'' in Sec. 304.4(a), and ``one (1)'' with ``one'' in Sec.
304.4(b).
EDA received six comments suggesting that the agency require
greater coordination between Eligible Applicants and District
Organizations. Commenters provide a variety of coordination
recommendations; two suggest that EDA not fund projects that are not
included in a CEDS, three suggest that EDA ``require coordination with
Districts for projects submitted by those outside the District but
proposing activities that affect a District's communities,'' and one
suggests requiring a letter of consistency from the relevant District
Organization for all projects. EDA strongly values its partnerships
with District Organizations of EDDs. However, EDA does not make these
changes because of the requirements of PWEDA. Under sections

[[Page 76507]]

201(b)(3) and 209(b) of PWEDA (42 U.S.C. 3141 and 3149, respectively),
all grants awarded under EDA's Public Works and Economic Adjustment
Assistance programs must be consistent with a relevant CEDS. PWEDA does
not impose this requirement upon its other programs.
EDA received two comments that recommend restoring the 10 percent
bonus for Eligible Applicants that demonstrate active participation
with the relevant District Organization. The Economic Development
Administration Reauthorization Act of 2004 (Pub. L. 108-373) removed
former section 403 of PWEDA, which authorized up to a 10 percent
``bonus'' for certain Projects as an incentive for coordination with
District Organizations. Because such use of appropriated funds is not
authorized under PWEDA, EDA is unable to reinstate the bonus.
EDA also received two comments suggesting that the agency provide
additional financial resources to District Organization planners and
staff and provide ``access to regularly scheduled professional
development opportunities to [ensure] that their skill sets are at peak
performance'' and that they are the ``best economic development
professionals in a region.'' One commenter suggests that EDA's
University Center program be ``encouraged to provide * * * professional
development for District Organizations to improve and enhance their
professional capacity.'' EDA endeavors to fulfill the budget
requirements and needs of all of its District Organizations across the
U.S. The agency strongly encourages District Organization planners and
staff to seek out and take advantage of professional development
opportunities; and the agency strives to be a part of this by providing
regional conferences and webinars throughout the year and by providing
practitioner tools. See http://www.eda.gov/Research/Research.xml.
In addition, EDA agrees that collaborations across programs are
essential to leveraging constrained resources and continually seeks
ways to ensure its programs coordinate effectively. For example, in
EDA's FY 2011 University Center program competition, EDA specified that
the agency encourages University Center Projects that ``present a clear
plan for collaborating with and assisting other EDA investment
partners, recipients, and stakeholders, including EDA-funded Economic
Development Districts'' and Projects that ``offer a full range of
economic development research and technical assistance services to EDA
regional partners (e.g., District Organizations * * *).'' See section
I.B. of EDA's FY 2011 University Center FFO dated March 31, 2011.
Finally, one comment suggests that District Organizations provide
``grant-writing support'' to rural regions and that EDA provide
``additional resources to support this function'' and an internal
comment suggests that EDA ``identify ways to compensate or provide
financial incentives for District Organizations that help design and
process successful EDA applications.'' As noted above, EDA supports
such collaborations and strives to provide the resources to make them
happen.

Part 305--Public Works and Economic Development Investments

Part 305 provides information about EDA's Public Works and Economic
Development Investments. Section 305.1 explains the purpose and scope
of these Investments. Section 305.2 specifies the scope of activities
eligible for consideration under a Public Works Investment and sets
forth a list of determinations that EDA must reach in order to award a
Public Works Investment. Specific application requirements are set
forth in Sec. 305.3, and Sec. 305.4 provides the requirements for
Public Works Investments awarded solely for design and engineering
work.
EDA proposes a minor change to Sec. 305.1 to replace the phrase
``higher-skill, higher-wage job opportunities'' with ``new and better
job opportunities'' in the last sentence of the provision. EDA also
replaces the phrase ``the creation of new, or the retention of
existing'' with the phrase ``to create new or retain existing'' in the
second sentence of the provision for better sentence structure. Section
305.2(c) sets out the requirement that not more than 15 percent of
EDA's appropriations made available for Public Works Investments be
used in any one State. We received an internal comment suggesting that
EDA revise Sec. 305.2(c) by replacing the phrase ``Not more than
fifteen (15) percent of the annual appropriations made available to EDA
to fund Public Works Investments'' with the phrase ``Not more than
fifteen (15) percent of EDA's total annual appropriations to fund
Public Works Investments.'' The comment raises the question of whether
EDA's regular annual appropriations include special or supplemental
appropriations that may be used for Public Works Investments. We have
examined the law on this topic and, since an agency's annual
appropriations include both regular annual and any special or
supplemental appropriations, the requested change does not add anything
to the phrase and therefore we decline to make it. However, EDA
proposes non-substantive revisions to Sec. 305.2(c) to remove
repetitive numerical references, replacing ``fifteen (15)'' with ``15''
and ``one (1)'' with ``one.''
Section 305.5 sets out the requirements for a request and EDA's
determination that a District Organization may administer a Project on
behalf of another Recipient. Section 305.5(b) provides that EDA may
approve such a request either by approving the application in which the
request is made or through a separate specific written approval. We
received an internal comment suggesting that the reference to the
separate specific written approval be removed; however, we decline to
make the change as we believe the regulation is clear and that the
additional language gives EDA's regional offices needed flexibility. In
addition, we received two internal comments suggesting that the
regulation be clarified with respect to whether competition is required
when a District Organization administers a Project. PWEDA envisions a
special role for District Organizations of EDDs as Regional economic
development planners and leaders, and we believe the current
regulations reflects that role. Therefore, we decline to make the
change.
EDA received one public comment and an internal staff comment with
respect to the alternate construction procurement methods set out at
Sec. 305.6(a). The commenters recommend that ``construction management
at risk'' not be allowed as an alternate construction procurement
method because such contracts are contrary to the Government-wide
competitive procurement requirements (see DOC's regulations at 15 CFR
14.43 and 24.36, as applicable). We have considered the commenters'
concern; but determined that EDA's regulation is consistent with DOC's
requirements, which prescribe the procurement requirements applicable
to Federal grant assistance, and decline to make the requested change.
However, in response to another internal comment from EDA staff, we
propose revising the first sentence of Sec. 305.6(a) to clarify that
use of an alternate procurement method is subject to EDA's approval by
adding the phrase ``shall seek EDA's prior written approval to''
immediately following ``Recipients.'' EDA believes that this approval
step will help ensure that Recipients follow correct procedures and
that the maximum amount of Project costs are allowable under applicable
regulations and Federal cost principles. Also, to provide additional
clarity on the content

[[Page 76508]]

of the justification a Recipient must provide to use an alternate
procurement method, we propose the clause ``, including a brief
analysis of the appropriateness and benefits of using the method to
successfully execute the Project and the Recipient's experience in
using the method'' to Sec. 305.6(a)(1). For better sentence structure,
EDA replaces the introductory phrase ``These methods include but are
not limited to'' with ``These alternate methods may include'' in the
second sentence of Sec. 305.6(a). In addition, in Sec. 305.6(b), EDA
proposes replacing the phrase ``procurement standards'' with
``procedures and standards'' for consistency with the content of the
DOC regulations at 15 CFR parts 14 and 24.
EDA proposes revisions to Sec. 305.8 to improve sentence
construction by replacing ``may also'' with ``also may'' in the second
sentence of Sec. 305.8(a) and replacing ``and/or'' with ``or'' and
``is also'' with ``also is'' in Sec. 305.8(c). In response to an
internal comment from EDA staff, we propose to add a regulatory
provision regarding procedures with respect to bid overrun, the
omission of which appears to simply have been an oversight.
Accordingly, we propose revising the heading of Sec. 305.10, which
currently only addresses construction contract bid underrun procedures,
to read ``Bid underrun and overrun.'' We incorporate the existing
provision regarding procedures in case of bid underrun under new
paragraph (a), titled Underrun. We add a new paragraph (b) titled
Overrun to set out EDA's procedures in case of an overrun at
construction contract bid opening. In general, the proposed provision
provides that in case of an overrun at the construction contract bid
opening, the Recipient may take deductive alternatives if provided for
in the bid documents, reject all bids and re-advertise, or augment the
Matching Share. If the Recipient demonstrates to EDA's satisfaction
that the above options are not feasible and the Project cannot be
completed otherwise, the Recipient may submit a written request to EDA
for additional funding, which will be at EDA's sole discretion and
considered in accord with EDA's competitive process requirements. The
new provision on bid overrun does not add to or change current
requirements; it simply clarifies EDA's existing practice.
EDA received an internal comment suggesting that EDA specify that
underrun amounts be transferred to the contingencies line item. EDA
agrees that the current provision regarding bid underrun does not
reflect EDA's procedures and revises proposed Sec. 305.10(a) to
provide that the Recipient must contact EDA immediately to determine
correct procedures by replacing the phrase ``the Recipient will notify
EDA to determine whether Investment funds should be deobligated from
the Project'' with the phrase ``the Recipient shall notify EDA
immediately to determine relevant procedures.''
EDA received one comment requesting that EDA streamline its
contract approval procedures, suggesting that the agency adopt a pre-
approval system or ``some dollar limit or some other threshold'' that
triggers EDA's review. Section 305.11 requires EDA to ``determine that
the award of all contracts necessary for design and construction of the
Project facilities is in compliance with the terms and conditions of
the Investment award in order for the costs to be eligible for EDA
reimbursement.'' EDA's contract review is intended to help Recipients
navigate various Federal requirements, including DOC's regulations (see
15 CFR parts 14 and 24, as applicable) and relevant OMB cost principles
(see 2 CFR parts 220, 225, and 230, as applicable), and help EDA
determine whether it can reimburse specific Project costs. EDA's review
is not intended to be burdensome and staff makes every effort to
expedite the process. As the regulation is in the interest of both the
agency and Recipients, EDA does not propose a substantive change.

Part 306--Training, Research and Technical Assistance

Part 306 sets out the requirements for EDA's Local and National
Technical Assistance and Research Investments. Both Local and National
Technical Assistance Investments help Recipients fill the knowledge and
information gaps that may prevent leaders in the public and non-profit
sectors in economically distressed Regions from making optimal
decisions on local economic development issues. Through the Research
program, EDA invests in research and technical assistance-related
Projects to promote competitiveness and innovation in distressed rural
and urban Regions.
EDA received two comments on part 306. One comment states that
``[c]oordinated regional research networks can provide local political,
economic development and business leaders with an understanding of the
regional economic context in which they operate, set policy, attract
investment and attract and retain jobs,'' and suggests that
``[r]esearch dollars ought to be invested in building coordinated
broad-based regional efforts that provide for better dissemination and
application of research findings to improve the life of Midwest
residents and the competitiveness of Midwest employers.'' EDA has
invested extensively in RIC research and capacity building, including
the Know Your Region project, which provides resources to help
practitioners across the nation implement effective Regional economic
development strategies. Please see the Know Your Region Web site at
http://www.knowyourregion.org/about for more information. See EDA's Web
site at http://www.eda.gov/AboutEDA/RIC/ for more information on EDA's
RIC efforts.
The second comment recommends that Technical Assistance program
awards ``be reserved for the EDDs to conduct feasibility studies,
management and operation plans, and CEDS coordination to [ensure] that
any investment targeted [at] RICs [includes] measures that will address
the five core evaluation criteria of EDA and create value-added
outcomes for the region.'' An EDD is one of the Eligible Recipients
listed in section 3 of PWEDA (42 U.S.C. 3122). EDA is not authorized to
reserve Technical Assistance program funds for any particular group of
Eligible Recipients. Therefore, we decline to make a change to the
regulations; however, EDA continues to support District Organizations
of EDDs in their efforts to advance new and established RICs.
We make several non-substantive changes to part 306, including
rephrasing Sec. 306.1(a) to read ``Local and National Technical
Assistance Investments may be awarded to'' instead of ``Local and
National Technical Assistance Investments may.'' In addition, we
propose italicizing the parenthetical ``(``University Centers'')'' in
the final sentence of Sec. 306.4. This NPRM also removes repetitive
numerical references from part 306 by replacing the phrase ``twelve
(12) to eighteen (18)'' with ``12 to 18'' in Sec. 306.3(a); ``eighty
(80)'' with ``80'' in Sec. 306.6(d); two instances of ``three (3)''
with ``three'' in Sec. 306.7(a)(1); and ``one (1)'' with ``one'' in
Sec. 306.7(c). EDA proposes no other revisions to part 306.

Part 307--Economic Adjustment Assistance Investments

Part 307 sets out the requirements for awards under EDA's Economic
Adjustment Assistance program, which can provide a wide-range of
technical assistance, planning, and infrastructure assistance in
Regions experiencing adverse economic changes that may occur suddenly
or over time, including strategy development, infrastructure

[[Page 76509]]

construction, and revolving loan fund (``RLF'') capitalization. Subpart
A of part 307 details the general requirements for Economic Adjustment
Assistance awards, and subpart B sets out requirements specific to the
RLF program.
Through this NPRM, EDA proposes reorganizing part 307 to help
clarify award requirements and incorporate all RLF program requirements
under subpart B, which EDA proposes renaming the ``Revolving Loan Fund
Program.'' Currently, certain RLF application and post-approval
requirements are set out under subpart A of part 307, which may make
them difficult to locate. For example, RLF-specific application review
requirements are set out at Sec. 307.4(c)(2) and RLF post-approval
requirements are set out under Sec. 307.6(d), both of which currently
are under subpart A. To eliminate confusion, this NPRM incorporates the
RLF application review and post-approval requirements under new Sec.
307.7 titled ``Revolving Loan Fund award requirements'' in subpart B.
In addition, EDA proposes non-substantive changes by removing the
unnecessary phrase ``but not limited to'' from the first sentence of
Sec. 307.1 and removing the hyphen from the phrase ``Federally
Declared Disasters'' in Sec. 307.1(b).
In EDA's interim final rule (``IFR'') published in the Federal
Register on October 22, 2008 (73 FR 62858), EDA made revisions to
clarify that it no longer allows RLF Recipients to use RLF Capital to
guarantee loans. As stated in the 2008 IFR, while the authority for RLF
Recipients to guarantee loans with RLF Capital has been used extremely
infrequently throughout the four-decade history of the RLF program, EDA
determined that loan guaranties are too risky and of limited utility,
since, unlike Federal guaranties that are backed by the full faith and
credit of the United States, RLF loan guaranties are backed only by the
assets in the RLF. Therefore, in response to an internal comment from
EDA staff, this NPRM proposes a minor revision to Sec. 307.3(b)(2) to
remove a reference to ``loan guaranties'' that was inadvertently missed
in the last revision to the regulations.
Through the RLF program, EDA assists Regions affected by a variety
of types of distress, including Regions that are Presidentially
Declared Disaster areas, by supplying businesses and entrepreneurs with
the gap financing necessary to start or expand their businesses.
Currently, EDA's regulation at Sec. 307.4(c)(2) specifies that EDA
will review applications to capitalize or recapitalize an RLF to assess
the need for a new or expanded public financing tool to enhance other
business assistance programs and services targeting economic sectors
and locations described in the CEDS. However, the provision fails to
reference how EDA will assess RLF applications to address
Presidentially Declared Disaster areas. Therefore, EDA proposes
revisions to the text of new Sec. 307.7(a)(1)(ii) to specify that EDA
will review disaster-related RLF applications to assess the need to
provide appropriate support for post-disaster economic recovery efforts
in Presidentially Declared Disaster areas. In order to consolidate
award requirements in a single section, this NPRM proposes relocating
the remainder of text in connection with Economic Adjustment Assistance
post-approval requirements, which currently are set out at Sec.
307.6(a) through (c), to Sec. 307.4(b) and (c) of subpart A, titled
Strategy Grants and Implementation Grants, respectively. We also revise
Sec. 307.4(d) to refer the reader to Sec. 307.7 for RLF award
requirements and relocate the sentence specifying that funding priority
considerations for Economic Adjustment Assistance may be set forth in
an FFO from Sec. 307.4(d) to Sec. 307.4(a) and revise it to add a
reference to RLF Grants. Note that these revisions do not change the
requirements applicable to Economic Adjustment Assistance awards; they
simply make part 307 easier to navigate. EDA also proposes conforming
changes to the table of contents of part 307 to appropriately renumber
the regulations affected by reorganizing part 307.
We received an internal comment suggesting that EDA replace the
term ``CEDS'' with ``strategy'' throughout part 307. We decline to make
the change because sections 209 and 302 of PWEDA (42 U.S.C. 3149 and
3162, respectively) refer to the requirement of a ``comprehensive
economic development strategy,'' and we believe the current language is
helpful in that it encourages the creation of CEDS, yet allows for
alternatives when necessary.
EDA received an internal comment from EDA staff requesting that the
``Application requirements'' provision as set out at Sec. 307.5
provide greater specificity in what is required in an application for
Economic Adjustment Assistance. Section 307.5 provides guidance that
follows the requirements of PWEDA and other regulations. Because of the
flexibility inherent in the regulation and other tools available to
provide specificity in application requirements, including FFOs, we
decline to make the requested change. However, we welcome further
constructive comments on needed adjustments.
We received another internal comment suggesting changes to Sec.
307.4(c)(i), which states that EDA will review Economic Adjustment
Assistance implementation applications to ensure the applicable CEDS
meets the requirements of Sec. 303.7. The suggested change appears to
suggest that CEDS are not required for non-construction implementation
grants. However, CEDS are required for all Economic Adjustment
Assistance implementation grants, whether they are construction or non-
construction, and therefore we decline to make the change.
EDA received an internal comment suggesting that Sec. 307.6 should
be revised and that subsections (a) and (c) should be removed as
Economic Adjustment Assistance post-approval requirements are set out
in current Sec. 302.18. EDA believes that the cross-references in
current Sec. 307.6 provide useful information for the various types of
Economic Adjustment Assistance Projects. In addition, this NPRM
proposes changes to current Sec. 302.18 to remove the specific
reference to Economic Adjustment Assistance post-approval requirements,
making the cross-references even more salient. However, as noted above,
through this NPRM, we propose relocating the provisions of Sec. 307.6
to relevant portions of part 307. Accordingly, the text of current
Sec. 307.6(a) is relocated to Sec. 307.4(b); the text of current
Sec. 307.6(b) is relocated to Sec. 307.4(c)(2); the text of current
Sec. 307.6(c) is relocated to Sec. 307.4(c)(3); and the text of Sec.
307.6(d) is relocated to redesignated Sec. 307.7(b).
We propose revising the heading of ``Subpart B--Special
Requirements for Revolving Loan Funds and Use of Grant Funds'' to read
``Subpart B--Revolving Loan Fund Program'' for simplicity and to
comport with the convention of the subpart setting out requirements for
the University Center program in part 306. This NPRM proposes
redesignating current Sec. 307.7 as Sec. 307.6 and incorporating
redesignated Sec. 307.6 under Subpart B. EDA also makes a minor change
to the first sentence of redesignated Sec. 307.6 to improve sentence
structure, replacing ``may also'' with ``also may.'' As noted above,
EDA also proposes new Sec. 307.7 to set out RLF award requirements
under Subpart B.
In response to an internal comment, EDA also proposes amending
Sec. 307.9(a)(2) to clarify the existing requirement that the RLF
Recipient is responsible for complying with applicable environmental
laws as set out at Sec. 307.10, which means the Recipient must adopt
compliance

[[Page 76510]]

procedures and ensure that borrowers adhere to relevant environmental
laws and regulations. In addition, in the second sentence of Sec.
307.9(c)(2), EDA adds the word ``consolidation'' between the word
``merger'' and the phrase ``or change in the EDA-approved lending area
under Sec. 307.18'' to comport with the proposed revisions to Sec.
307.18(b) to more precisely use the terms ``consolidation'' and
``merger.'' Note that these revisions do not add to or change existing
requirements. EDA proposes minor, non-substantive changes to Sec.
307.9(b)(2)(ii) by replacing ``EDA policies and requirements'' with
``EDA's policies and requirements'' and Sec. 307.9(b)(3) by replacing
``shall also'' with ``also shall'' in the second sentence, Sec.
307.9(c)(1) by replacing ``five (5)'' with ``five,'' Sec. 307.10(a) by
removing the unnecessary phrase ``but not limited to'' in the second
sentence and replacing ``must also'' with ``also must'' in the third
sentence, Sec. 307.10(b) by adding the clarifying word
``Accordingly,'' to the beginning of the second sentence, Sec.
307.11(b) and (e) by replacing three instances of ``thirty (30)'' with
``30,'' and to Sec. 307.11(f)(2) by replacing ``twenty (20)'' with
``20.'' In addition, EDA corrects capitalization errors by revising the
paragraph heading of Sec. 307.11(d) to read Interest-bearing account
instead of Interest-bearing Account and replacing ``federal'' with
``Federal'' in Sec. 307.12(b). EDA also removes an unnecessary
parenthetical reference to ``(an ``EDA funds account'')'' in Sec.
307.11(d), as that phrase is not used elsewhere in the regulations. In
addition, EDA removes additional repetitive numerical references by
replacing two instances of ``six-month (6)'' with ``six-month'' in
Sec. 307.12(a)(1) and (a)(2) and one instance of ``three-year (3)''
with ``three-year'' and two instances of ``three (3) years'' with
``three years'' in Sec. 307.13(a), (b)(2), and (b)(3).
Nine comments express concern with EDA's RLF reporting
requirements, which are set out at Sec. 307.14. Most comments suggest
that RLF reporting is overly burdensome and request that EDA ``pursue
some more flexible options to minimize the reporting burdens for RLF
intermediaries with a proven track record.'' EDA has made numerous
improvements to the RLF program in response to the OIG's report titled
Aggressive EDA Leadership and Oversight Needed to Correct Persistent
Problems in the RLF Program (March 2007), including establishing a
framework for ensuring compliance with RLF reporting requirements. In
response to the OIG's recommendations, RLF Recipients must report to
EDA on a semi-annual basis in order to maintain the proper operational
and financial integrity of RLF awards established with assistance from
EDA. In April 2010, EDA successfully launched the Revolving Loan Fund
Management System (``RLFMS''), which is the agency's central electronic
management system for the program. The RLFMS greatly enhances EDA's
ability to manage the RLF program in a consistent, cohesive manner, and
provides a medium for record-keeping and clear communication between
agency staff and RLF Recipients. Semi-annual reports must be submitted
electronically through RLFMS, which has significantly reduced paperwork
and made reporting more efficient.
In addition, EDA has taken steps to make the RLF reporting form
more effective and user-friendly. In June 2008, EDA issued the revised
RLF semi-annual reporting form (Form ED-209) to replace the former
semi-annual and annual reporting forms. Form ED-209 collects more
useful information and has additional data fields to allow EDA to
exercise more rigorous oversight of the RLF program. In the agency's
IFR published in the Federal Register on October 22, 2008 (73 FR
62858), EDA noted that the new Form ED-209 will reduce the average
paperwork burden for each RLF report from 12 hours to 2.9 hours. This
significant decrease results from the elimination of duplicative fields
and EDA's successful launch of RLFMS on April 1, 2010.
EDA received an internal comment from EDA staff suggesting that the
agency no longer require submission of the RLF Income and Expense
Statement (Form ED-209I), which is required of any RLF Recipient that
uses either 50 percent or more (or more than $100,000) of RLF Income
for administrative costs in a six-month Reporting Period. See Sec.
307.14(c). EDA surveyed agency staff members, and some reported that
Form ED-209I is helpful as it does provide useful information and
serves as an incentive for RLF Recipients to avoid high administrative
costs. Therefore EDA declines to remove the requirement wholesale, but
understands that in certain cases, particularly for RLFs that are
smaller and may have relatively less RLF Income, proportionately higher
administrative costs may be unavoidable. Therefore, EDA provides
additional language to Sec. 307.14(c) to provide that EDA may waive
the requirement to submit Form ED-209I for small RLFs as determined by
EDA. EDA expects to make such a determination on a case-by-case basis
and will provide guidance on requesting a waiver. Because EDA recently
changed the RLF reporting requirements to address management and
oversight issues and to ensure the administrative integrity and
sustainability of the RLF program, this NPRM does not make any further
substantive changes to Sec. 307.14. This NPRM does propose removing
repetitive numerical references from Sec. 307.14(c), replacing ``fifty
(50)'' with ``50'' and ``six-month (6)'' with ``six-month.''
In response to an EDA staff comment, EDA proposes a revision to
Sec. 307.15(b)(1), which sets out the requirement that an accountant
certify to the adequacy of an RLF Recipient's accounting system before
EDA can disburse funds. The current regulation requires that the
certification be made by ``an independent accountant familiar with the
RLF Recipient's accounting system.'' This provision has raised concerns
in past programmatic audits, and therefore, this NPRM proposes new
language to require that the certification be made by ``a qualified
independent accountant who preferably has audited the RLF Recipient in
accordance with OMB Circular A-133 requirements.'' EDA received another
internal comment suggesting that the phrase ``board of directors''
should be changed to ``Loan Administration Board'' in Sec.
307.15(b)(2)(iii) to comport with previous regulations, FFOs, and EDA-
approved RLF Plans. We decline to make this change because the term
``board of directors'' as used in the regulations is a generic term
used to refer to the body of elected or appointed members who jointly
oversee the activities of the RLF. In practice, the body sometimes has
a different name, such as board of trustees, board of governors, board
of managers, or executive board.
An internal comment suggests revising Sec. 307.15(d) to clarify
that private investment is not limited to a 12-month period before loan
approval. We note that the January 27, 2010 final rule (75 FR 4259 at
4261) added the phrase ``within twelve (12) months of approval of an
RLF loan'' to Sec. 307.15(d)(1) to clarify that RLF operators may
count as private leveraging any funds invested from private sources
within 12 months before or after the RLF loan is made, rather than just
12 months before the loan is made. We believe that this previous
revision addresses any private leveraging undertaken short of the 12-
month limit. Please also see the full discussion on the provision in
the January 27, 2010 final rule.
In response to another internal comment, EDA proposes revising
Sec. 307.15(d)(1)(iii) to provide that any

[[Page 76511]]

Federally guaranteed loan may leverage an RLF portfolio by inserting
the phrase ``a Federal loan, including'' in between ``the guaranteed
portions of'' and ``the U.S. Small Business Administration's.'' This
change provides Recipients with greater flexibility in meeting the RLF
leveraging requirement with Federal resources. Currently, certain Small
Business Administration (``SBA'') loans are the only Federal loans that
may meet the leveraging requirement. In addition, we propose to
reference U.S. Department of Agriculture loans as an example of a type
of Federal loan that can be used as leverage, as many RLF stakeholders
may have experience with such loans. EDA expects that these revisions
will provide needed flexibility for RLF Recipients to meet RLF
leveraging requirements in challenging economic conditions and will
further incentivize the leveraging of Federal investments.
EDA also removes redundant numerical references by replacing
``sixty (60)'' with ``60'' in Sec. 307.15(b)(1), two instances of
``four (4)'' with ``four'' in Sec. 307.15(c)(1), ``fourteen (14) with
``14'' and ``ten (10)'' with ``ten'' in Sec. 307.15(c)(2), ``twelve
(12)'' with ``12'' in Sec. 307.15 (d)(1), and ``ninety (90)'' with
``90'' in Sec. 307.15(d)(1)(iii).
EDA received an internal comment requesting the deletion of Sec.
307.16(c)(1)(i), which sets out an exception to EDA's capitalization
utilization standard of 75 percent of RLF Capital in the case of an RLF
Recipient that anticipates making large loans relative to the size of
its RLF Capital base. The commenter notes that the exception provision
is incorrectly worded and should be removed ``because it gives tacit
approval to make loans in excess of 25 percent of the capital base to a
single borrower.'' Upon consideration, EDA agrees to remove the
provision, as it is incorrectly phrased as an ``exception.'' The
relevant RLF Plan sets out the minimum and maximum amounts that the RLF
Recipient may loan, and the Recipient must request EDA's approval (with
appropriate justification) for any deviation from the prescribed
procedures and amounts contained in the Plan. Therefore, the provision
in Sec. 307.16(c)(1)(i) is a deviation from the rule, rather than an
exception. In all cases, the Recipient must (a) adhere to prudent and
appropriate underwriting standards and practices, and (b) seek EDA's
approval for any variation below the capital utilization standard set
of 75 percent. Accordingly, EDA will consider the qualitative aspects
of a requested deviation. The capitalization utilization standard of 75
percent is EDA's required floor. Therefore, this NPRM proposes to
remove Sec. 307.16(c)(1)(i) and replace the phrase ``The following
exceptions apply:'' in paragraph (c)(1) with the introductory phrase
``except that'' and the text of current Sec. 307.16(c)(1)(ii). As the
removal of Sec. 307.16(c)(1)(i) makes a list unnecessary, EDA
incorporates the contents of existing (c)(1)(ii) under (c)(1).
In response to an internal comment, EDA proposes a clarifying
amendment in Sec. 307.16(d)(1)(i) to replace the phrase ``business
plan'' with the correct defined term ``RLF Plan'' and corrects a
grammatical error by removing the unnecessary second use of the word
``and'' in the subparagraph. EDA also proposes removing redundant
numerical references by replacing ``three (3)'' with ``three'' in the
second sentence of Sec. 307.16(a)(1), ``forty-five (45)'' with ``45''
in Sec. 307.16(a)(2)(i), ``seventy-five (75)'' with ``75'' in Sec.
307.16(c)(1), and ``two (2)'' with ``two'' in the first sentence of
Sec. 307.16(c)(2)(i). This NPRM also revises Sec. 307.16(d)(1) to
remove the unnecessary parenthetical phrase ``(as defined in Sec.
314.5 of this chapter),'' as that phrase already appears in Sec.
307.16(c)(2)(i).
Generally, RLF Capital cannot be used to refinance existing debt.
However, under Sec. 307.17(b)(6)(ii), EDA may allow the RLF Recipient
to use RLF Capital to purchase the rights of a prior lien holder during
a foreclosure action, if such action is necessary to prevent
significant loss on an RLF loan. Currently, to make such use of RLF
Capital, the RLF Recipient must demonstrate that there is a high
probability that the sale of assets will result in compensation
sufficient to cover the RLF's costs, plus a reasonable portion of the
outstanding loan within 18 months of the refinancing. In response to a
comment from EDA staff, this NPRM proposes a small change to Sec.
307.17(b)(6)(ii) to provide greater flexibility in uncertain economic
conditions by changing the 18-month time limit to ``a reasonable time,
as determined by EDA.'' This NPRM also proposes to remove a repetitive
numerical reference from Sec. 307.17(c), replacing ``three (3)'' with
``three'' in the first sentence.
Also in response to an internal comment from EDA staff, this NPRM
proposes revisions to Sec. 307.18(a) to allow EDA to approve the
addition of a new lending area (at the request of an RLF Recipient)
before the full amount of the RLF Grant is disbursed to the Recipient.
This change will provide EDA with needed flexibilities to respond to
changing economic conditions and to quickly provide assistance in
distressed areas. To effect this amendment, we remove Sec.
307.18(a)(1)(i), which requires that ``EDA shall have disbursed the
full amount of its Investment Assistance to the RLF Recipient'' before
new lending areas may be added, and renumber the remainder of the
subparagraph accordingly, redesignating subsections Sec.
307.18(a)(1)(ii) through (vii) as Sec. 307.17(a)(1)(i) through (vi).
Also, as all RLF loans must be in accordance with the relevant RLF
Plan, we propose a clarifying change to remove the phrase ``to
implement and assist economic activity'' from the first sentence of
Sec. 307.18(a)(1). EDA proposes minor changes to correct a
capitalization error in the heading of Sec. 307.18(a)(1), revising it
to read Addition of lending areas instead of Addition of Lending Areas;
remove the unnecessary phrase ``an additional'' from the second
sentence of Sec. 307.18(a)(1); replace the term ``fulfill'' with
``meet'' and the phrase ``Economic Adjustment Investments'' with
``Economic Adjustment Assistance Investments'' in redesignated Sec.
307.18(a)(1)(i); and, at the suggestion of EDA staff, replace the term
``RLF Grant award agreement'' in redesignated Sec. 307.18(a)(1)(v)
with the term ``financial assistance award'' for increased clarity and
consistency.
EDA received four comments suggesting that ``EDA should use its
existing authority to allow for shared management, marketing, and
administration of RLFs for underperforming loan funds.'' EDA believes
these comments suggest allowing an RLF Recipient to contract with a
third party to carry out certain tasks such as shared management,
marketing, and administration of RLFs, or obtaining EDA's approval to
merge an underperforming RLF award with another award to form a single
RLF award. EDA currently may authorize both of these actions. If the
RLF Recipient contracts with a third party to undertake these tasks,
the contract must be procured in accordance with Federal competitive
procurement requirements as set out at 15 CFR 14.43 or 24.36, as
applicable. In addition, under Sec. 307.18(b)(2), EDA may approve the
merger of two or more RLF awards into a single RLF award. This
authority can and has been used to address underperforming RLF awards.
In addition, in response to an EDA staff comment, this NPRM proposes
textual revisions to Sec. 307.18(b) to more precisely use the terms
``consolidation'' and ``merger.'' For purposes of the RLF program, a
``consolidation'' under Sec. 307.18(b)(1) occurs when a single RLF
Recipient that has multiple RLF awards requests, and EDA approves, the

[[Page 76512]]

consolidation of the multiple awards into a single RLF. In contrast, a
``merger'' under Sec. 307.18(b)(2) occurs when two or more RLF
Recipients request, and EDA approves, the merger of their respective
RLF awards to form a single RLF award. Accordingly, EDA revises the
heading of Sec. 307.18 to read ``Addition of lending areas;
consolidation and merger of RLFs'' instead of ``Addition of lending
areas; merger of RLFs'' and the heading of Sec. 307.18(b) to read
Consolidation and merger of RLFs instead of Merger of RLFs. In
addition, EDA replaces ``merger'' with ``consolidation'' in Sec.
307.18(b)(1)(ii) and (b)(1)(iii) and ``consolidate'' with ``merge'' in
Sec. 307.18(b)(2). These revisions do not change existing
requirements; they merely clarify terminology. Finally, we propose
removing repetitive numerical references, replacing ``one (1)'' with
``one'' and ``two (2)'' with ``two'' in both Sec. 307.18(b)(1) and
(b)(2).
Section 307.19 sets out the requirements for an RLF Recipient to
sell or securitize RLF loans, which may be an important and efficient
way of infusing an RLF with new RLF Capital. Under Sec. 307.19, EDA
may approve a Sale or Securitization of all or a portion of an RLF loan
portfolio, provided that: (a) The RLF Recipient uses all proceeds from
any Sale or Securitization to make additional RLF loans; (b) the RLF
Recipient requests that EDA subordinate the agency's interest in all or
a portion of the RLF loan portfolio to be sold or securitized; and (c)
any Sale or Securitization in which an RLF Recipient may participate
complies with the Securities Act of 1933, the Securities Exchange Act
of 1934, and any rule or regulation made public by the Securities and
Exchange Commission. EDA received an internal comment suggesting the
deletion of Sec. 307.19(b), which sets out the subordination request
requirement. The comment notes that subordination of the agency's
interest could ``greatly affect the value of the portfolio, having an
adverse consequence on the sale'' of all or a portion of the RLF
Recipient's RLF loan portfolio. In considering the comment and the
provision, EDA notes that the agency's interest is in the proportional
dollar amount of the RLF Capital base. EDA has no interest per se upon
the conclusion of a Sale or Securitization, at which point its interest
is limited to the cash proceeds received upon the Sale or
Securitization, which the Recipient must use to make additional loans.
Worded differently, EDA's interest in the RLF loan portfolio, in
relation to the RLF Capital base, is alive only up to the point of a
Sale or Securitization. If, after seeking EDA's approval, the Recipient
sells a portion of its loan portfolio, there is no ``interest'' for EDA
to subordinate. In all cases, EDA, considering the Recipient's request,
will evaluate the provisions or conditions to the proposed Sale or
Securitization vis-[agrave]-vis dictated conformance to standards and
market practices. Accordingly, this NPRM eliminates paragraph (b) in
Sec. 307.19 and re-alphabetizes paragraphs (c) and (d) as (b) and (c),
respectively. The commenter also suggests that EDA delete the reference
to Securitizations in an effort to streamline the regulations. Although
RLF portfolio Securitizations may not happen frequently, EDA declines
to make this revision because the agency wishes to maintain maximum
flexibility in an RLF Recipient's ability to raise additional RLF
Capital.
Two internal comments suggest that EDA remove the references to
specific situations that may result in partial liquidation or
disallowance of a portion of an RLF Grant as set out at Sec.
307.20(a)(1) through (5) and suspension or termination of an RLF Grant
for cause as set out in Sec. 307.21(a)(1)(i) through (x). EDA declines
to make these changes as the agency believes it is important to specify
circumstances that merit partial liquidation, disallowance, suspension,
and termination and because the language addressing circumstances that
may warrant termination for cause were added to the regulations through
the October 22, 2008 IFR at the recommendation of the OIG (73 FR
62858). However, EDA proposes removing the unnecessary phrases ``but
are not limited to'' from the final sentence of Sec. 307.20(a) and
``but not limited to'' from Sec. 307.21(a)(1). We also remove
redundant numerical references in Sec. 307.20, replacing ``one hundred
and twenty (120)'' with ``120'' in Sec. 307.20(a)(1), ``twelve (12)''
with ``12'' in Sec. 307.20(a)(2), and ``one (1)'' with ``one'' in
Sec. 307.20(c)(3). EDA also proposes small changes by italicizing the
acronym ``SEFA'' and capitalizing the first instance of ``Federal'' in
Sec. 307.21(a)(1)(viii).
EDA received nine comments requesting that EDA ``fully defederalize
RLFs within the constraints of the current law.'' One commenter notes
the success of specific RLF Grants in meeting program goals of job
creation and investment leveraging and goes on to state ``[t]he
continued requirement by EDA regarding reporting and guidelines seems
ludicrous given the excellent performance record.'' EDA appreciates
that some stakeholders may be frustrated with Federal requirements on
RLF Grants that have been operating for several years, some for as many
as three decades. EDA realizes the value of these grants and wishes to
reduce burdens on the successful RLFs operating across the country;
however, EDA currently is not authorized to release its Federal
Interest in RLF awards. EDA's authority to release its interest after
20 years (section 601(d) of PWEDA, 42 U.S.C. 3211) applies to Real
Property and tangible Personal Property only, and does not apply to RLF
awards, which exist in theoretic perpetuity so long as borrowers repay
loans and the RLF Recipient continues to makes new loans. Although EDA
currently does not have authority to release its interest in RLF
awards, EDA is engaged in an ongoing effort to revise its authorities
to provide greater flexibility for RLF Recipients.
EDA received two comments stating that the requirements of ``Davis-
Bacon should not apply to borrowers of RLF dollars'' because such loans
are ``not grant proceeds, and the company [or relevant borrower] must
repay these loans with non-tax dollars.'' The wage rate requirements
under the Davis-Bacon Act (40 U.S.C. 3142 et seq.) apply to contractors
and subcontractors performing on Federally funded or assisted contracts
in excess of $2,000 for the construction, alteration, or repair
(including painting and decorating) of public buildings or public
works. Under the Davis-Bacon Act, contractors and subcontractors must
pay any laborers and mechanics employed under the contract (or
subcontract) no less than the locally prevailing wages and fringe
benefits for corresponding work on similar projects in the area.
Section 602 of PWEDA (42 U.S.C. 3212) makes the Davis-Bacon wage
requirements mandatory in all ``projects assisted by the Secretary
under [PWEDA].'' See also Sec. 302.13. Therefore, Recipients and any
RLF borrower, contractor, or subcontractor must comply with Davis-Bacon
prevailing wage rate requirements where RLF funds under an EDA award
are used for construction work.
EDA received six comments suggesting EDA establish ``an RLF
Advisory Committee of RLF practitioners to assist in the development of
a more streamlined and user-friendly RLF reporting system and
process.'' EDA has identified the need to create an internal RLF task
force to improve communications and resolve program issues, and
currently is in the process of establishing one. EDA expects that the
task force will consist of Headquarters staff and RLF

[[Page 76513]]

administrators from each of the agency's six regional offices.

Part 308--Performance Incentives

Part 308 sets out EDA's performance incentives for Recipients. When
a Project is constructed under projected cost, EDA may allow the
Recipient to use the excess funds to either increase the Investment
Rate of the Project to the maximum percentage allowable under Sec.
301.4 for which the Project was eligible at the time of the Investment
award, or further improve the Project consistent with its purpose. The
terms for performance awards under EDA's Public Works and Economic
Adjustment Assistance programs are set out in Sec. 308.2 and the terms
for performance awards under EDA's Planning program are set out under
Sec. 308.3.
EDA did not receive any comments on part 308, but capitalizes
``Federal'' in Sec. 308.3(a)(3) to adhere to the capitalization
convention of the regulations and removes repetitive numerical
references throughout the part by replacing use of ``ten (10)'' with
``ten'' in Sec. 308.2(a), ``one (1)'' with ``one'' in Sec. 308.2(b)
and Sec. 308.3(a)(2), ``three (3)'' with ``three'' in Sec. 308.2(c),
two references to ``one-hundred (100)'' with ``100'' in Sec. 308.2(d)
and Sec. 308.3(b), and ``five (5)'' with ``five'' in Sec. 308.3(a).

Part 309--Redistributions of Investment Assistance

Part 309 sets out EDA's policies regarding redistributing grant
funds in the form of subgrants, loans, or other appropriate assistance.
Information with respect to redistributions of Investment funds for
Planning, Public Works, and Training, Research, and Technical
Assistance Investments is presented in Sec. 309.1. Specifically, Sec.
309.1(a) provides that a Recipient under any program governed by parts
303, 305, and 306 may directly expend the Investment Assistance, or,
with prior EDA approval, redistribute such funds in the form of a
subgrant to another Eligible Recipient that qualifies for EDA
Investment Assistance under the same program part as the Recipient. All
subgrants must be subject to the same terms and conditions applicable
to the Recipient under the original Investment award. Subsection
309.1(b) stipulates that Investment Assistance received under parts 303
or 305 may not be redistributed to a for-profit entity.
Section 309.2 addresses redistributions under part 307 for Economic
Adjustment Assistance Investments. This section reads similarly to
Sec. 309.1. However, a Recipient under part 307 may redistribute
Investment funds to another Eligible Recipient in the form of a grant
or to a non-profit and private for-profit entity in the form of a loan
or other appropriate assistance under subpart B of part 307. EDA did
not receive any comments on and does not propose any revisions to part
309.

Part 310--Special Impact Areas

Part 310 implements section 214 of PWEDA (42 U.S.C. 3154), which
authorizes the Assistant Secretary to waive the CEDS requirements of
section 302 of PWEDA (42 U.S.C. 3162) for a Project that will fulfill a
``pressing need'' of the Region or prominently address or alleviate
Regional underemployment or unemployment. Section 310.1 outlines the
process for designating a Region as a Special Impact Area and Sec.
310.2 defines what may be considered a pressing need. EDA did not
receive any comments on part 310.
This NPRM proposes revising Sec. Sec. 310.1 and 310.2(b) and (c)
to replace ``Recipient'' with ``Applicant,'' in order to clarify that
designations under part 310 occur at the application stage. In
addition, this NPRM proposes minor, non-substantive changes to Sec.
310(a)(6) to replace ``Federally-Declared Disaster area'' with
``Federally Declared Disaster area'' and Sec. 310.2(b) to replace the
percentage symbol (``%'') with the word ``percent'' for consistency
with the rest of the regulations and to remove a repetitive numerical
reference, replacing ``twenty-four (24) month'' with ``24-month.''

Part 311--America COMPETES

EDA proposes revising the heading of reserved part 311 to read
``America COMPETES'' in preparation for any regulations necessary to
implement the ``America Competes Reauthorization Act of 2010''
(``COMPETES'') (Pub. L. 111-358, January 4, 2011). EDA currently does
not propose regulations to implement COMPETES.

Part 312--[Reserved]

Part 313--Community Trade Adjustment Assistance

Part 313 sets forth regulations to implement the Trade Adjustment
Assistance for Communities program authorized under chapter 4 of title
II of the Trade Act of 1974, as amended (19 U.S.C. 2371 et seq.) EDA
did not receive any comments on and does not propose any revisions to
part 313.

Part 314--Property

Part 314 sets forth the rules governing Property acquired or
improved, in whole or in part, with EDA Investment Assistance. Through
the February 1, 2011 Federal Register notice, EDA sought comments on
how the Property regulations could be improved to provide needed
flexibilities to encourage innovative economic development projects,
while still protecting taxpayer dollars and the Federal Interest. EDA
received a number of helpful comments in this regard specifically
recommending that EDA provide flexibility both to the Recipient to deal
with grant-assisted Real Property and to enhance EDA's ability to work
with new forms of financing to support job creation in distressed
communities. This NPRM sets forth proposed amendments to help reach
these goals, along with additional revisions designed to streamline
EDA's requirements.
EDA proposes to amend the table of contents to part 314 to
eliminate subparts A through D. EDA proposes this format change because
the entire part contains only ten sections and dividing the ten
sections into four subparts hinders comprehension. Because of the
elimination of the subparts, EDA revises the section heading for Sec.
314.8 to read ``Recorded Statement for Real Property'' instead of
simply ``Recorded Statement'' as additional context is needed to
clarify that Sec. 314.8 sets out recorded statement requirements for
Real Property. Similarly, as Sec. 314.9 concerns the requirements for
recordation of Personal Property interests, the section heading is
revised to read ``Recorded Statement for Personal Property.'' These
changes are designed to help the reader more easily navigate part 314
and are not substantive.
EDA proposes a non-substantive revision to remove the unnecessary
phrase ``but not limited to'' from the definition of ``Real Property''
in Sec. 314.1. We received an internal comment on Sec. 314.2, which
sets out the legal tenants of EDA's Federal Interest in Project
Property, suggesting that EDA should consider ``parity consideration
(as opposed to subordination)'' to ``be fair to other funders.'' EDA's
regulations do not preclude this option; however, to make this clearer,
EDA proposes clarifications to its encumbrances regulation (Sec.
314.6) to specify the agency's authority to accept a shared first lien
position. See proposed Sec. 314.6(b)(1) below titled Shared first lien
position.
Section 314.3, titled Authorized Use of Property, provides the
circumstances under which Recipients may use Property acquired or
improved, in whole or in part, with Investment Assistance. An internal
comment noted that EDA's regulations did not refer to the terms and
conditions of the award

[[Page 76514]]

as the reference point for determining the purpose of a given Project.
Therefore, EDA proposes dividing Sec. 314.3(a) into two clearer
sentences and replacing the phrase ``only for the authorized purpose of
the Project'' with the phrase ``only for authorized Project purposes as
set out in the terms and conditions of the Investment Assistance.'' The
prohibition on disposing of or encumbering Project Property without
EDA's prior written authorization is now the second sentence in the
provision. Also, in response to an internal comment from an EDA
employee, this NPRM adds the clause ``during the Estimated Useful Life
of the Project'' to both Sec. 314.3(a) and (b) to clarify that EDA's
use restrictions apply only during the Estimated Useful Life of Project
Property.
We received another internal comment suggesting that the
regulations setting out the authorized and unauthorized uses of Project
Property (Sec. Sec. 314.3 and 314.4, respectively) should be ``relaxed
so as not to deter or discourage developers from the opportunity to
make a fair recovery on their investments when they sell or lease the
non-public rights-of-way.'' EDA believes Sec. Sec. 314.3 and 314.4
appropriately articulate the authorized and unauthorized uses of
Property funded or improved by EDA assistance. EDA is proposing
clarifications to its title regulation as set out at 314.7(c), which
may provide needed clarification and certainty to help address this
comment. In addition, we propose minor changes to add a reference to
EDA's proposed accountability provision (Sec. 302.16) to Sec.
314.4(c) and remove the unnecessary phrases ``but not limited to'' from
Sec. Sec. 314.3(c) and 314.4(c). In addition, EDA proposes removing
two repetitive numerical references from Sec. 314.5(b), replacing
``fifty (50) percent'' with ``50 percent.''
EDA received five comments suggesting various flexibilities with
respect to the agency's Property encumbrance requirements set out at
Sec. 314.6. By way of background, as trustee of appropriated taxpayer
dollars, EDA safeguards the public's interest in award assets by taking
and retaining a security interest (the Federal Interest) in Property
purchased or improved with grant funds. In general, Property must
remain unencumbered and the Recipient must hold title to the Property
for its Estimated Useful Life. In some instances, the regulations at
Sec. 314.6 have proved particularly challenging for public-private
partnerships. Two of the comments suggest that EDA should be amenable
to subordinating the Federal Interest if the Project will not move
forward without such action and the Recipient has a strong financial
standing in the community and a proven history of meeting its
obligations. In such circumstances, the Recipient's agreement to return
the grant funds in the event of default should be sufficient. EDA
understands the comment and by-and-large agrees. EDA in fact added
flexibility to this section in the IFR published on October 22, 2008
(73 FR 62858) to take into consideration the difference in risks posed
by Recipients that are governmental bodies and Recipients that are non-
profit organizations. The 2008 IFR also clarified that a key factor in
determining whether to subordinate the Federal Interest is whether the
Recipient requesting the subordination poses a relatively lower risk
because it has demonstrated stability over time. See paragraph
(b)(3)(iv) of Sec. 314.6, which includes one of the requirements for
EDA to accept an encumbrance, namely that EDA determine that there is a
reasonable expectation that the Recipient will not default on its
obligations. One of the comments also recommends that when a Project is
designed to help a community adjust to the departure of a significant
employer, it is critically important that EDA act expeditiously and
allow alternate mechanisms when a lender is unwilling to subordinate
its interest to EDA. The agency agrees that timeliness is important and
is adding flexibility depending on whether the request for EDA to
subordinate is made prior to, contemporaneous with, or after the EDA
Grant award. In addition, see the discussion set out below regarding
new flexibility in Sec. 314.8 regarding forms of security as
alternatives to mortgages, such as execution of a letter of credit or
escrow agreement in EDA's favor.
Similarly, a third comment suggests that EDA should consider
compromising its lien position in certain cases because a bank
sometimes cannot afford to take less than a first lien position when
there simply is not sufficient equity coverage. In such circumstances,
it is important for EDA to agree to a second position in order to
engender more economic development opportunities. As noted above, EDA
agrees and has added additional flexibility to Sec. 314.6 (see
discussion below). The fourth comment suggests that EDA require a first
position lien only on the portion of the Project financed by EDA,
allowing the Recipient to encumber the remainder of the equity in
Project Property to obtain additional capital. This comment appears to
suggest that EDA should consider subordinating its interest in real
estate after issuance of the Grant to allow the Recipient to obtain
additional financing, which could then enable the Recipient to finance
more job-creating projects. EDA's ability to revise the regulations to
accommodate this comment is constrained by legal considerations. To the
extent the terms and conditions of the award do not contemplate
consideration of subordination subsequent to the Grant award, which is
EDA's current practice, the agency would need to demonstrate the
financial benefit to the Federal government in agreeing to subordinate
its interest. Federal law prohibits EDA from agreeing to cede the
Federal Interest in Property without receiving fair compensation in
return unless specifically authorized by statute. The Supreme Court
established this principle in Royal Indemnity Co. v. United States, 313
U.S. 289, 294 (1941), in what is sometimes referred to as the ``quid
pro quo'' doctrine. The Royal Indemnity Court held that the:

[p]ower to release or otherwise dispose of the rights and property
of the United States is lodged in the Congress by the Constitution.
Art. IV, Sec. 3, Cl. 2. Subordinate officers of the United States
are without that power, save only as it has been conferred upon them
by Act of Congress or is to be implied from other powers so granted.

This ruling established that no Federal government agent can give
up something of value without receiving equal value in return absent
express authority to do so. Hence, in order to give EDA authority to
release its interest at the request of a Recipient, EDA either needs to
receive fair value in return or obtain additional discretion from
Congress under PWEDA to release the Federal Interest in such
circumstances. Nonetheless, in appropriate circumstances, such as when
the appraised value of the Property substantially exceeds the amount of
EDA's Investment, there would appear to be little risk for EDA to
accept a subordinate position, provided the value of the Property
continues to cover the risk of default. The agency will consider adding
flexibility in the terms and conditions of the Investment Assistance to
enable EDA to consider requests for subordination once a Grant award
has been made. In such cases, EDA would not be ceding a vested
government property interest, but simply exercising discretion built in
at the time of the award.
The fifth comment suggests that EDA should reform its financing
framework to help Projects take advantage of New Markets Tax Credit
(``NMTC'') programs. Because NMTC arrangements generally

[[Page 76515]]

are in place over a seven-year period, Projects involving the tax
credits raise novel issues about whether EDA will subordinate its
interest at a time subsequent to the initial award decision. EDA's
regulations currently do not contemplate the possibility that EDA would
presently agree to agree in the future to subordinate its interest. In
a time of severe budgetary constraints at all three levels of
government (Federal, State, and local), EDA agrees that it must explore
additional ways to leverage current levels of assistance.
In light of these comments, EDA amends Sec. 314.6 to provide
additional flexibility in subsection (b), which sets out exceptions to
the general rule that Property must be free of encumbrances. For
clarity, EDA is reordering subsection (b) to set out appropriate
requirements that apply based on the point in time when a Recipient
requests EDA to agree to subordinate the Federal Interest; namely,
whether the Recipient already has mortgaged the Project Property before
EDA's award decision, or is making the request for subordination
simultaneously with EDA's award decision or after the award decision
already has been made. EDA relocates existing paragraph (b)(1) and
redesignates it as (b)(3) as provided below. EDA also proposes adding
new paragraph (b)(1), titled Shared first lien position, to set out
EDA's authority to enter into an inter-creditor agreement under which
EDA and another lien holder share a first lien position. In light of
the requirements applicable to requests for subordination, whenever
possible, EDA ordinarily will prefer to subordinate its first lien
position to a shared first-lien position with a lender pursuant to an
inter-creditor agreement. EDA revises the paragraph heading of current
paragraph (b)(2), which concerns encumbrances in connection with water,
sewer, and other utility projects, to read Utility encumbrances.
As noted above, EDA clarifies its requirements for subordinating
the Federal Interest based on when the subordination is requested under
proposed paragraphs (b)(3) through (b)(5). Current paragraph (b)(1) is
re-designated as paragraph (b)(3) and is amended to add the heading
Pre-existing encumbrances and to delete the phrase ``Recipient-owned
Property that is subject to an encumbrance'' and substitute the phrase
``Encumbrances already in place'' for increased clarity and ease of
comprehension.
Under current Sec. 314.6(b)(3), EDA can consider requests to
subordinate its interest, provided that: (1) There is good cause; (2)
all proceeds from the other financing will be used only for the Project
or related activities; (3) the grantor or lender will not provide funds
without the security of a lien on the Property; and (4) there is a
reasonable expectation that the Recipient will not default on its
obligations. As drafted, this paragraph is unclear whether it requires
an Eligible Applicant to request subordination prior to the Grant award
decision or whether it also applies after EDA has awarded funds to the
Recipient, or both. To provide clarity, EDA adds a new paragraph (b)(4)
with the heading Encumbrances proposed proximate to Project approval,
which sets out requirements applicable to requests for subordination
made contemporaneously with the Grant award decision. New paragraph
(b)(4) provides that upon an Applicant's request, EDA may subordinate
its interest in conjunction with the Grant decision when EDA determines
that: (1) There is good cause and legal authority to waive the general
requirement; (2) all the proceeds will be used to enhance Project
Property or for related activities or other activities consistent with
the purpose of EDA's programs; (3) the grantor or lender will not
provide funds without the security of a lien; (4) the terms and
conditions of the encumbrance are satisfactory to EDA; and (5) the risk
of the encumbrance is acceptable based on a number of factors,
including the approximate value of the Project Property at the time the
encumbrance is requested and the financial strength of the Recipient.
The list of determinations that EDA must make to subordinate its
interest are similar to the existing list as set out at current Sec.
314.6(b)(3); however, EDA has added the requirement that the terms and
conditions are satisfactory to the agency. In addition, EDA proposes to
revise the text of paragraph (b)(4)(i) to add the clause ``and legal
authority'' to indicate that EDA may waive the restriction against
encumbrances if it finds there is both ``good cause'' to waive the
restriction and legal authority to waive. EDA is making this change
because of the need to review such requests in light of the ``quid pro
quo'' principle noted above. In paragraph (b)(4)(ii), EDA is broadening
its authority to facilitate the availability of the equity in Project
Property provided the request is consistent with the mission of the
agency. Accordingly, EDA adds the phrase ``or other activities that EDA
determines are authorized under PWEDA'' to ensure that to the extent
equity is used to support other economic development projects, such
projects are consistent with EDA's programs. In addition, EDA adds a
new requirement designated as paragraph (b)(4)(v)(C) to require the
submission of an appraisal so that EDA can weigh the risk to the
Federal Interest if the agency agrees to subordinate at a time that may
be several years after the original award decision.
In addition, EDA designates each of the requirements under
paragraph (b)(4)(v) with the letters ``A'' through ``D,'' to improve
the organization of the provision. The introductory text to paragraph
(b)(4) also specifies that the kind of ``debt'' that may be the subject
of a subordination request includes ``time or maturity-limited debt
that finances the Project Property.'' EDA includes this phrase to
better accommodate NMTC and other financing mechanisms, which may
require EDA to agree to subordinate its interest at a future date when
needed to support the financial structure of the tax credits, which
often require refinancing at the conclusion of the credit allowance
period (see the NMTC program Web page on the U.S. Department of the
Treasury's Web site at http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=5).
The text of current paragraph (b)(3) is re-designated as (b)(5).
This NPRM proposes to revise re-designated paragraph (b)(5) to provide
additional flexibility to waive the prohibition on encumbrances
subsequent to the grant award. This new flexibility is intended to
address the comment regarding the possible use by a Recipient of the
equity in grant-assisted Property to sponsor additional economic
development. As amended, this paragraph will enable a Recipient to
request EDA agree to subordinate its interest when the appraised value
of the Real Property provides ample collateral for the EDA award even
if EDA takes a second lien position. This NPRM adds the heading
Encumbrances proposed after Project approval to new Sec. 314.6(b)(5)
and amends the introductory text to read, ``Encumbrances proposed to be
incurred after Project approval where all of the following are met:''
Similar to the requirements set out at revised paragraph (b)(4),
revised paragraph (b)(5) provides that EDA may subordinate its interest
after grant award when EDA determines that: (1) There is good cause and
legal authority to waive the general requirement; (2) all the proceeds
will be used to enhance Project Property or for related activities or
other activities consistent with the purpose of EDA's programs; (3) the
grantor or lender will not provide funds without the security of a
lien; (4) the terms and conditions of the encumbrance are satisfactory
to EDA;

[[Page 76516]]

and (5) the risk of the encumbrance is acceptable based on a number of
factors, including the approximate value of the Project Property at the
time the encumbrance is requested, and the financial strength of the
Recipient.
Several internal comments noted that EDA's title regulation at
Sec. 314.7 ``is dense and the source of much confusion.'' One
commenter suggests that the provision ``should be more specific about
how the Recipient and private property owners are to comply [with
certain portions of the provision].'' EDA agrees and proposes a number
of changes to streamline the requirements and make them more readily
understandable, including providing paragraph and subparagraph headings
to act as guideposts as the reader navigates the regulation. To this
effect, EDA proposes to revise the heading of Sec. 314.7(a) to read
General title requirement instead of simply General and to add a
heading to Sec. 314.7(b)(1) to read Disclosure of encumbrances. Within
Sec. 314.7(c), EDA also adds subparagraph headings as guideposts for
explaining the exceptions to the general title requirement.
Accordingly, the following headings are added to Sec. 314.7(c)(1)
through (c)(5): Real Property acquisition, Leasehold interests,
Railroad right-of-way construction, Public highway construction, and
Construction of Recipient-owned facilities to serve Recipient or
privately owned Real Property, respectively. EDA expects that these
headings will help the reader locate information more efficiently and
make the regulation easier to understand. We also propose removing the
unnecessary phrase ``but not limited to'' from Sec. 314.7(b)(1).
With one exception noted below, EDA does not propose substantive
changes to the exceptions to the agency's general title requirement;
however, EDA proposes adding the substance of Sec. 314.7(c)(6) to
Sec. 314.7(c)(5) and then removing Sec. 314.7(c)(6). EDA proposes
this revision because subsections (c)(5) and (6) address analogous
situations where the EDA-approved purpose of a Project is to construct
facilities that benefit Real Property owned by the Recipient (Sec.
314.7(c)(5)) or privately owned Real Property (Sec. 314.7(c)(6)),
where the benefited Real Property ultimately will be sold or leased to
private parties in order to spur economic development. The requirements
of the two provisions are similar, and, as set out in revised Sec.
314.7(c)(5)(i), in both cases the Recipient or private Owner must
demonstrate that the Recipient or Owner holds title prior to
disbursement of EDA funds; the Recipient must provide assurances that
the Project and the development of the Real Property to be served by
the Project will be completed in accordance with the terms of the
Investment Assistance; during the Estimated Useful Life, the sale or
lease of the Project or of Real Property to be served by the Project
must be for Adequate Consideration and the terms and conditions of the
Project must continue to be fulfilled; and the Recipient must agree
that any failure to complete the Project or the development of the Real
Property to be served by the Project constitutes a failure on behalf of
the Recipient. This NPRM also makes conforming changes to paragraph
(c)(5)(i) of Sec. 314.7 to clarify that these provisions apply to both
Recipients and private Owners.
The one substantive change to Sec. 314.7 affects an identical
provision currently set out in sub-paragraph (i)(D) of Sec.
314.7(c)(5) and 314.7(c)(6). In response to a suggestion by EDA staff,
this NPRM proposes removing the provision in Sec. 314.7(c)(5)(i)(D),
which provides that 10 years after an award is made, EDA may waive the
requirement that a sale of Project Property during the Estimated Useful
Life be for Adequate Consideration and that the purpose of the award
continue to be fulfilled. This provision is inconsistent with EDA's
policy on Estimated Useful Life and causes confusion in situations
involving the sale of Property. When EDA added the provision in the IFR
published on August 11, 2005 (70 FR 47002), EDA invited the public to
comment on whether the new provision would be useful. At the time, EDA
received no comments on the provision and since the provision was
added, EDA has never had occasion to use it. Accordingly, EDA proposes
removing the phrase in Sec. 314.7(c)(5)(i)(D) that reads ``; provided,
however, that EDA may waive this provision for any sale or lease
occurring after the ten (10) year anniversary of the award date of the
Investment Assistance.'' In addition, EDA removes the unnecessary
phrase ``but not limited to'' from Sec. 314.7(c)(5)(i) and one
repetitive numerical reference from Sec. 314.7(c)(5)(i)(E), replacing
``five (5) year'' with ``five-year.''
The current regulation at Sec. 314.7(c)(5) refers to both the
authorized scope of work and the Property that is to be benefitted by
the scope of work as the ``Project.'' In certain circumstances, the
failure to distinguish between the ``Project'' supported by the EDA
grant, such as water and sewer infrastructure leading to an industrial
park, and the real estate underlying that industrial park which is
connected by that infrastructure, makes it difficult to comprehend
exactly what the regulation requires. This broader interpretation of
what constitutes the ``Project'' is inconsistent with the definition of
``Project'' in Sec. 300.3, which defines the term to mean the
``proposed or authorized activity (or activities) the purpose of which
fulfills EDA's mission and program requirements as set forth in PWEDA
and this chapter and which may be funded in whole or in part by EDA
Investment Assistance.'' This NPRM proposes revisions to Sec.
314.7(c)(5) to distinguish between these two different concepts by
clarifying that the Recipient is responsible for completing the
Project, which indicates the activities to be completed under the EDA-
approved scope of work and supported by the grant, and in appropriate
situations, also is responsible for ensuring that the development of
land and improvements on the Real Property to be served by or that
provides the economic justification for the Project is completed in
accordance with the terms and conditions of the Investment Assistance.
The revisions refer to Real Property to be benefitted by the Project as
``the development of land and improvements on the Real Property to be
served by or that provides the economic justification for the
Project.'' The revisions insert this clause with appropriate phrasing
into Sec. 314.7(c)(5)(i)(C), (D), and (E).
This NPRM proposes adding a useful heading that reads Additional
conditions on sale or lease to Sec. 314.7(c)(5)(i), which sets out the
existing requirement that EDA may condition the sale or lease of
Recipient or Privately owned Real Property improved or benefitted by a
Project on the satisfaction of additional EDA requirements by the
Recipient, Owner, purchaser, or lessee, as appropriate. This NPRM also
proposes removing the unnecessary phrase ``but not limited to'' from
Sec. 314.7(c)(5)(ii). In addition, under current Sec.
314.7(c)(6)(i)(B), when an authorized use of the Project is to
construct facilities to benefit privately owned Real Property, the
Recipient and Owner must agree to use the Real Property improved or
benefitted by the EDA Investment Assistance only for authorized uses of
the Project and consistent with the terms and conditions of the
Investment Assistance. EDA proposes to relocate this requirement to new
Sec. 314.7(c)(5)(iii), titled with a descriptive heading that reads
Agreement between Recipient and Owner. For clarity, EDA also proposes
relocating the statement currently set out at Sec. 314.7(c)(5)(i)(F)
and (c)(6)(i)(F)

[[Page 76517]]

that EDA may deem that a violation of Sec. 314.7(c)(5) constitutes an
Unauthorized Use of Project Property as new Sec. 314.7(c)(5)(iv).
EDA received one comment suggesting that the agency not require a
Recipient to hold title in all cases, allowing ``long term or low cost
leases for important community projects.'' EDA recognizes that it is
not always realistic for the Recipient to hold title, and the agency's
exception to the title requirement set out at Sec. 314.7(c)(2), titled
Leasehold interests, allows EDA to determine that a long-term leasehold
interest for at least as long as the Estimated Useful Life of Project
Real Property may meet the title requirement in certain circumstances.
In light of the elimination of the subpart B designation, EDA
amends the heading of Sec. 314.8 by adding the phrase ``for Real
Property'' after the word ``statement'' to clarify that this section
sets out recordation requirements specifically for Real Property. In
addition, EDA proposes adding new paragraph (d) to provide that EDA may
choose to accept an alternate instrument to protect EDA's interest in
Project Property, such as an escrow agreement or a letter of credit.
EDA seeks comments from economic development practitioners on whether
this language will help facilitate innovative Projects.
In light of the removal of the subpart C heading for Personal
Property, the phrase ``Recorded statement'' in the heading of Sec.
314.9 is replaced with the phrase ``Recorded statement for Personal
Property'' to clarify that the requirements of the regulation apply
only to Personal Property. In response to an internal comment, EDA
proposes to amend the first sentence in Sec. 314.9 to better explain
the form of the security interest EDA requires with respect to Personal
Property. Accordingly, the phrase ``security interest'' is replaced
with the phrase ``Uniform Commercial Code Financing Statement (Form
UCC-1, as provided by State law)'' in the first sentence of the
provision. In addition, EDA proposes removing the unnecessary phrase
``but not limited to'' following the word ``including'' in the first
sentence of the provision.
EDA received two public comments regarding the length of EDA's
interest in Project Property. One commenter suggests that EDA's ``20
year lien position on real estate deals'' is too long in today's
economy and another commenter suggests that EDA ``choose estimated
useful lives for facility projects that would increase the potential
for effective and profitable economic development over the short and
long term * * * based on factual circumstances, replacement policies,
or industry practices.'' The commenter recommends that Recipients
``would be responsible for delineating the reasons for a shorter useful
life based on certain material criteria established by the EDA.'' EDA
has carefully reviewed its authorities and regulations and determined
that it has the flexibility to set an Estimated Useful Life for its
Investments based on the expected level of effort to create jobs. As
the Federal Interest normally is coterminous with the useful life of
Project Property, EDA's interest generally will be extinguished at the
expiration of a Project's useful life. The Economic Development
Administration and Appalachian Regional Development Reform Act of 1998
(Pub. L. 105-393) added section 601(d) to PWEDA (42 U.S.C. 3211) to
allow EDA to release its interest in Real or Personal Property after 20
years. This amendment was designed to provide EDA with additional
flexibilities to release its interest in Project Property, particularly
as some Projects implicated 40-year Estimated Useful Lives, not to
mandate a minimum 20-year useful life for all Project Property. EDA's
current general practice is to establish an Estimated Useful Life of 20
years for new construction and 15 years for rehabilitation, although
EDA may establish an Estimated Useful Life of more or less than those
timeframes when appropriate depending on the circumstances of a
particular Investment.
While EDA understands the comment, EDA's regulations currently do
not prescribe the appropriate length of the Estimated Useful Life of
Project Property, which EDA establishes on a case-by-case basis by
means of a special award condition. As this matter is better handled on
a case-by-case basis, EDA does not need to address the matter by
regulation.
In addition, EDA received an internal comment suggesting that EDA
revise Sec. 314.10, which sets out the procedures for releasing EDA's
Property interest, ``by providing some relief of the 20-year period
under certain circumstances, such as providing relief if the project
met or exceeded its projected performance after 9 years (which is the
last year EDA reports on project performance for purposes of the
Government Performance Results Act) or reducing the value of the
residual Federal Interest over time.'' Section 314.10(a) currently
provides that at the request of a Recipient and before the expiration
of the Estimated Useful Life of a Project, EDA may release its interest
in Project Property 20 years after the Investment Assistance was
awarded. As noted above, EDA has the authority to set an Estimated
Useful Life commensurate with job creation and economic development
expectations of a particular Project. Once EDA establishes the
Estimated Useful Life and secures the Federal Interest for its
duration, EDA obtains the benefit of that security for the entire
Estimated Useful Life. EDA is constrained by law from ceding something
of value without obtaining equal value in return unless expressly
authorized by statute. EDA is able to release its interest after 20
years because section 601(d)(2) of PWEDA provides such specific
authority. Accordingly, EDA declines to make the textual change to
Sec. 314.10 requested by the commenter.
However, with a view to providing Recipients greater flexibility to
deal with Project Property, EDA is proposing revisions to Sec. 314.10
to streamline procedures for the release of the Federal Interest in
connection with EDA-assisted Property. This NPRM reorganizes Sec.
314.10 to add new Sec. 314.10(a), which provides additional
information regarding EDA's practice in establishing the Estimated
Useful Life of Projects. This paragraph notes specifically EDA's
historical practice before 1999 in establishing Estimated Useful Lives
for periods of 40 years or more. Since 1999, EDA typically establishes
useful lives between 15 and 20 years, depending on the nature of the
asset. Current paragraph (a) is redesignated as new paragraph (d). EDA
proposes to delete current paragraph (b), which announced the release
of the Federal Interest with the Local Public Works and Capital
Investment program that EDA conducted from 1976 until 1978, in its
entirety. Since the regulation that added this provision in February
1999 was a simple announcement of the release, there is no current need
to repeat the provision in the proposed rule. EDA replaces the content
of paragraph (b) with a new paragraph to set out the general rule that
upon written request, EDA may release the Federal Interest in Project
Property at the expiration of the Project's Estimated Useful Life,
provided that the Recipient has made a good faith effort to fulfill the
terms and conditions of the award, as determined by EDA. Accordingly,
EDA revises the heading of Sec. 314.10(b) to read Release of Property
after the expiration of the Estimated Useful Life instead of Exception.
This NPRM proposes to remove and relocate certain portions of the
content of current paragraph (c) and revises the paragraph to provide
that EDA can release its interest before the expiration of the
Estimated Useful Life of Project

[[Page 76518]]

Property only if it receives compensation for the fair market value of
the Federal Interest. Accordingly, EDA revises the heading of Sec.
314.10(c) to read Release prior to expiration of the Estimated Useful
Life instead of Unauthorized Use. This paragraph refers to a similar
statement in Sec. 314.4, but repeats it here in order to place all of
the provisions relating to release of the Federal Interest in the same
regulation. Please see below for a detailed explanation of content
revisions to current Sec. 314.10(c). EDA also redesignates current
Sec. 314.10(a), which details the process for EDA's release of the
Federal Interest before the expiration of the Estimated Useful Life but
at least 20 years after date of award, as Sec. 314.10(d). EDA adds a
clarifying heading to read Release of certain Property after 20 years
and the introductory phrase ``In accord with section 601(d)(2) of
PWEDA'' to redesignated paragraph (d). Also, EDA adds the clause ``that
exceeds 20 years'' immediately following the phrase ``before the
expiration of the Estimated Useful Life of a Project'' to further
clarify EDA's practice. Additionally, EDA removes one repetitive
numerical reference in newly designated Sec. 314.10(d) by replacing
``twenty (20)'' with ``20.''
EDA is removing the content of current paragraph (c)(1)(ii) of
Sec. 314.10, which provides that notwithstanding the release of the
Federal Interest, Project Property may not be used for inherently
religious activities prohibited by applicable Federal law. EDA included
this subsection in the regulation in 1999 to address the legal
requirements of and Tilton v. Richardson, (403 U.S. 672 (1971)), which
held with respect to a grant program to support the construction of
educational facilities and notwithstanding express statutory authority
to release the Federal government's interest in grant property 20 years
after the date of the award that, if such property had value, it
remained subject to the requirements of the Establishment Clause of the
First Amendment to the U.S. Constitution (U.S. Const. amend. I). Since
Tilton was announced, the courts have made a number of important
distinctions to Establishment Clause jurisprudence. Importantly, the
Office of Legal Counsel (``OLC'') at the U.S. Department of Justice
issued an opinion in a question regarding the Old North Church, which
is the historic property where Robert Newman hung lanterns to alert
Paul Revere of oncoming British troops; Revere's warnings to colonial
militias led to the battles of Lexington and Concord (2003 WL 21246893
(O.L.C.) (April 30, 2003)). The OLC opinion discusses whether the
Government retains the flexibility to assist religious institutions to
carry out secular purposes in certain circumstances. In the Old North
Church opinion, OLC distinguished the grant program under its review,
the U.S. Department of the Interior's Save America's Treasures program,
from the educational program under review in Tilton. OLC concluded that
there was no Constitutional bar to the use of historic preservation
grants for the preservation of historic properties that satisfy the
generally applicable criteria for funding under the program. The
opinion may be found on the OLC Web site at http://www.justice.gov/olc/OldNorthChurch.htm.
The transactional analysis at the heart of the opinion suggests
that the prohibition currently set out at Sec. 314.10(c)(1)(ii) may
not be required and may, to the contrary, serve to disfavor religious
institutions from full participation in EDA's economic development
assistance programs by treating them as less than equal in their
ability to obtain a release of the Federal Interest. Similar to OLC's
analysis of the legal effect of providing support for improvements to
the historic church of Paul Revere in return for guaranteed public
access, EDA does not make Investments to improve properties to ensure
their availability as educational resources as was the case with the
buildings at the heart of Tilton. Rather, the purpose of an EDA
Investment is to support the job-creating activities of the Recipient
to help counter the economic distress of the Region. It is entirely
appropriate that EDA establish a reasonable timeframe in which it
expects a Recipient to pursue its efforts to create jobs. As EDA
reports on the performance of its programs for purposes of the GPRA at
the third, sixth, and ninth anniversaries of the date of the award, it
makes sense for EDA to secure its Investment by using the concept of
Estimated Useful Life to ensure EDA receives the benefit of its bargain
in making the funding decision. As noted above, EDA typically
establishes an Estimated Useful Life of between 15 and 20 years, well
in excess of the nine-year GPRA reporting timeframe. Inasmuch as EDA
programs support the construction of economic development related
Projects, such as a job training facility or business incubation
center, there would appear to be less potential concern on
Establishment Clause grounds.
While EDA is removing the provisions currently set out in Sec.
314.10(c)(1)(ii), the agency need not decide the underlying legal issue
as part of this regulation. New paragraph (e) includes an important
limitation that a release of the Federal Interest is not automatic, but
requires EDA's express approval. In determining whether to agree to
release the Federal Interest, this paragraph provides expressly that
EDA may not approve a release if the agency lacks legal authority to do
so, including governing Establishment Clause law; if the Recipient has
not performed in accordance with the terms and conditions of the
Investment or has used Project Property in violation of Sec. Sec.
314.3 or 314.4; or other such factors as EDA deems appropriate. With
this reservation of authority, EDA will review its legal authority to
release the Federal Interest at the time of the request. In general,
EDA will not release the Federal Interest in the case of a Recipient's
poor or non-performance under the terms and conditions of the
Investment Assistance or the Recipient's violation of the terms and
conditions applicable to the Investment Assistance. EDA may refuse to
release its interest if EDA determines that the Recipient has failed to
carry out the scope of work or a portion thereof under the Investment
Assistance (e.g., if the Recipient constructs a building to be used as
a training center, but does not obtain necessary State and local
permits and approvals so that the building can be used for the purpose
authorized under the Investment Assistance). In addition, EDA may
refuse to release its interest if EDA determines that the Recipient has
used Project Property for an unauthorized use in violation of
Sec. Sec. 314.3 or 314.4. For example, if the Recipient's incidental
use of Project Property under Sec. 314.3(f) does interfere with the
scope of the Project or violates applicable law, including the
requirement that Project Property not be used in violation of
nondiscrimination requirements or for inherently religious activities
prohibited by applicable Federal law. If EDA determines it is legally
constrained from releasing the Federal Interest, all Project
requirements will continue to apply until EDA determines that all
requirements and expectations of the Investment Assistance have been
fulfilled.
However, notwithstanding any release of the Federal Interest under
Sec. 314.10, in accordance with DOC's regulations at 15 CFR part 8,
compliance with nondiscrimination requirements is a continuing
obligation. Therefore, EDA is retaining the content of Sec.
314.10(c)(1)(i).

[[Page 76519]]

EDA proposes relocating the provision to new paragraph Sec.
314.10(e)(3).
In addition to comments regarding specific regulatory provisions,
EDA received three comments with respect to EDA's overall policies
regarding property management. One commenter suggests that EDA consider
``[p]articipating mortgages and joint ventures for buildings. * * *
[w]inners could offset losers and result in new opportunities and
profit.'' EDA assumes that the commenter is suggesting that EDA enter
into participating mortgages with its Recipients. Generally speaking, a
participating mortgage is a mortgage loan under which the lender is
entitled to share in the rental or resale proceeds from a property
owned by the borrower or mortgagor. EDA lacks the authority to make a
regulatory change to carry out this suggestion because PWEDA does not
authorize profit as part of an EDA award, and all award benefits accrue
to the community in terms of job creation and economic diversification.
Under current government-wide procedures, however, any income generated
under the Project generally is directed to accomplish further Project
objectives. See also the requirements of ``program income'' at 15 CFR
14.24 or 24.25, as applicable.
EDA received two comments suggesting that EDA create an
``alternate'' mechanism to provide a ``gap financing vehicle which
could be a letter of credit or the like that would be sufficient to a
bank'' for critical, time-sensitive Projects. While complex Projects
that incorporate a variety of financing types may take a longer time to
be approved, EDA is committed to acting on applications in an
expeditious manner and recently converted its grant processes to a
quarterly cycle with award decisions to be made within 20 business days
of each funding cycle deadline. EDA's statutory authority, PWEDA, does
not permit EDA to make financial assistance available through a letter
of credit. Accordingly, EDA is unable to provide an applicant with an
irrevocable ``promise to pay'' by issuing such a document in advance of
EDA's approval process.

Part 315--Trade Adjustment Assistance for Firms

Part 315 sets forth regulations to implement the TAAF program
authorized under chapters 3 and 5 of title II of the Trade Act of 1974,
as amended (19 U.S.C. 2341 et seq.) EDA did not receive any comments on
and does not propose any revisions to part 315.

Classification

Prior notice and opportunity for public comment are not required
for rules concerning public property, loans, grants, benefits, and
contracts (5 U.S.C. 553(a)(2)). Because prior notice and an opportunity
for public comment are not required pursuant to 5 U.S.C. 553, or any
other law, the analytical requirements of the Regulatory Flexibility
Act (5 U.S.C. 601 et seq.) are inapplicable. Therefore, a regulatory
flexibility analysis has not been prepared.

Executive Order No. 12866

The Office of Management and Budget (OMB) has determined that this
proposed rule is significant for purposes of Executive Order 12866.

Congressional Review Act

This NPRM is not major under the Congressional Review Act (5 U.S.C.
801 et seq.)

Executive Order No. 13132

Executive Order 13132 requires agencies to develop an accountable
process to ensure ``meaningful and timely input by State and local
officials in the development of regulatory policies that have
federalism implications.'' ``Policies that have federalism
implications'' is defined in Executive Order 13132 to include
regulations that have ``substantial direct effects on the 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.'' It has been determined that this proposed rule does
not contain policies that have federalism implications.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.)
(``PRA'') requires that a Federal agency consider the impact of
paperwork and other information collection burdens imposed on the
public and, under the provisions of PRA section 3507(d), obtain
approval from OMB for each collection of information it conducts,
sponsors, or requires through regulations. Notwithstanding any other
provision of law, no person is required to respond to, nor shall any
person be subject to a penalty for failure to comply with a collection
of information subject to the PRA unless that collection displays a
currently valid OMB Control Number.
The following table provides a complete list of the collections of
information (and corresponding OMB Control Numbers) set forth in this
proposed rule. These collections of information are necessary for the
proper performance and functions of EDA.

------------------------------------------------------------------------
Part or section of this Form/title/OMB
proposed rule Nature of request control number
------------------------------------------------------------------------
301.2; 301.10................. With an application ED-900,
for Investment Application for
Assistance, a non- Investment
profit Eligible Assistance
Applicant must (0610-0094)
include a resolution
passed by an
authorized
representative of a
political subdivision
of a State.
301.3(a); 301.10; 305.3(a)(1). An Eligible Applicant ED-900,
must substantiate Application for
Regional eligibility Investment
and justify the Assistance
requested EDA (0610-0094)
Investment Assistance
based on, for
example, the
unemployment rate,
per capita income
levels, or a Special
Need (as determined
by EDA) in the Region
in which the Project
will be located. The
Eligible Applicant
also must identify
and submit to EDA the
source of data used
to substantiate
Regional eligibility
(e.g., ACS or BLS
data, other Federal
data for the Region
in which the Project
will be located, or
data available
through the State
government).
301.4(b)(1)(i); 305.3(a)(1)... An Eligible Applicant ED-900,
must provide Application for
information on the Investment
severity of the Assistance
Region's unemployment (0610-0094)
and its duration, the
per capita income
levels, and extent of
the Region's
unemployment or
outmigration.
301.4(b)(4)................... An Eligible Applicant ED-900,
for a Project under Application for
part 306 must provide Investment
information to show Assistance
that the Project (0610-0094)
merits an increase to
the Investment Rate
because of the
Project's
infeasibility without
such an increase, or
because the Project
will be of no or only
incidental benefit to
the Eligible
Applicant.

[[Page 76520]]

301.5; 301.10................. An Eligible Applicant ED-900,
must provide Application for
information to show Investment
that Matching Share Assistance
funds will be (0610-0094)
available for the
Project.
301.10(c)..................... An Eligible Applicant ED-900,
for a Project under Application for
parts 305 or 307 must Investment
include with its Assistance
application for (0610-0094)
Investment Assistance
a CEDS acceptable to
EDA (pursuant to part
303) or otherwise
incorporate by
reference a current
CEDS that EDA
approves for the
proposed Project.
301.10(d)..................... An Eligible Applicant ED-900,
for a Project to Application for
construct a business, Investment
technology, or other Assistance
type of incubator or (0610-0094)
accelerator, must
include a feasibility
study demonstrating
the need for the
Project and an
operational plan
based on industry
best practices
demonstrating the
Eligible Applicant's
plan for ongoing
successful operations.
302.7(a)...................... Recipients must submit Award Amendment
requests for Request (0610-
amendments to 0102)
Investment awards in
writing to EDA for
approval and provide
information and
documentation as EDA
deems necessary.
302.9(a)...................... An Eligible Applicant ED-900,
must furnish comments Application for
on the Project from Investment
the relevant Assistance
governmental (0610-0094)
authority in the
Region or proof of
efforts to obtain
comments if none were
provided by the
governmental
authority.
302.10(a)..................... An Eligible Applicant ED-900,
must certify to EDA Application for
the names of any Investment
persons engaged by or Assistance
on behalf of the (0610-0094)
Eligible Applicant
for the purpose of
expediting Investment
Assistance
applications made to
EDA.
302.14(a)..................... Recipients shall keep Audits of
records of the amount States, Local
and disposition of Governments,
awards of Investment and Non-Profit
Assistance, the total Organizations,
cost of the Project, OMB Circular A-
the amount and nature 133
of the portion of the
Project costs
provided by other
sources and other
records that would
facilitate an
effective audit.
302.15........................ An Eligible Applicant ED-900,
must certify (and Application for
submit evidence Investment
thereof satisfactory Assistance
to EDA) that it meets (0610-0094)
the requirements for
receiving Investment
Assistance.
302.16(b)..................... Recipients are GPRA Performance
required to submit Validation
reports consisting of Forms (0610-
data-specific 0098)
evaluations of the
Project's
effectiveness.
302.16(c)..................... EDA may require a Project Service
Recipient to provide Map (0610-0102)
a ``Project service
map'' and other
information in order
to determine which
segments of the
Region are being
assisted with the
Investment Assistance.
302.20(d)..................... Recipients and Other ED-900,
Parties must submit Application for
written assurances to Investment
EDA that they will Assistance
comply with (0610-0094)
nondiscrimination
laws and regulations.
303.9(c)...................... Eligible Applicants GPRA Performance
for short-term Validation
Planning Investment Forms (0610-
Assistance must 0098)
provide performance
measures acceptable
to EDA, and provide
EDA with progress
reports during the
term of the Planning
Investment.
304.1; 304.4(a)............... To have a Region Comprehensive
certified as an EDD, Economic
a District Development
Organization must Strategies and
submit information Planning
showing that the Investments
Region contains at (0610-0093)
least one area
subject to the
relevant economic
distress criteria, is
able to foster
development on a
larger scale than in
a single area, has an
EDA-approved CEDS,
and obtains
commitments from a
majority of the
relevant counties and
States.
304.2(c)(2); 304.4(b)......... The District ED-900,
Organization must Application for
demonstrate that its Investment
governing body is Assistance
broadly (0610-0094);
representative of the Comprehensive
principal economic Economic
interests of the Development
Region. Strategies and
Planning
Investments
(0610-0093)
304.2(c)(4)................... The District Comprehensive
Organization must Economic
notify the public of Development
its annual meetings, Strategies and
its decisions, the Planning
results of programs, Investments
and as reasonably (0610-0093)
requested, the
results of audited
statements, annual
budgets, and minutes
of public meetings.
305.2(b); 305.3(a)(3)......... An Eligible Applicant ED-900,
must show that a Application for
Public Works Project Investment
will promote: the Assistance
growth of industrial (0610-0094);
or commercial plants, Construction
the creation of long- Investments
term employment (0610-0096)
opportunities
primarily for low-
income families, and
the fulfillment of
the Region's pressing
needs.
305.4(c)...................... In order to receive ED-900,
any portion of the Application for
Investment Assistance Investment
for design and Assistance
engineering work, an (0610-0094);
Eligible Applicant Construction
must submit and Investments
certify information (0610-0096)
that documents
compliance with
Investment award
requirements of all
design and
engineering contracts.
305.5......................... In order to allow a ED-900,
District Organization Application for
to administer the Investment
Project for another Assistance
Recipient, the (0610-0094);
Recipient must make Construction
this request and Investments
submit information to (0610-0096)
EDA showing that the
Recipient does not
have the current
staff capacity to
administer the
Project, the District
Organization would be
more effective than
another local
business or
organization, the
District Organization
would not subcontract
the work, and the
costs of District
Organization
administration will
not exceed allowable
costs were the
Recipient
administering it.

[[Page 76521]]

305.6......................... A Recipient shall seek ED-900,
EDA's prior written Application for
approval to use an Investment
alternate Assistance
construction (0610-0094);
procurement method to Construction
the traditional Investments
design/bid/build. If (0610-0096)
an alternate method
is used, the
Recipient must submit
to EDA for approval a
construction services
procurement plan and
the Recipient must
use a design
professional to
oversee the process.
305.7......................... The Recipient may use ED-900,
``in-house forces'' Application for
for design, Investment
construction, Assistance
inspection, legal (0610-0094);
services, or other Construction
work on the Project Investments
if it submits a (0610-0096)
sufficient
justification to EDA.
305.8(a); 305.8(b)............ Recipients of EDA ED-900,
construction awards Application for
must obtain prior Investment
approval for the use Assistance
of furnished (0610-0094);
equipment and Construction
materials. Requests Investments
must show that costs (0610-0096)
claimed for furnished
equipment and
materials are
competitive with
local market costs
for similar equipment
and materials.
305.9......................... An EDA construction ED-900,
award Recipient must Application for
submit information to Investment
EDA regarding why Assistance
phasing is necessary, (0610-0094);
a description of the Construction
phasing, related Investments
costs and schedules, (0610-0096)
and certification
that the Recipient
will pay for overruns
and that it is
capable of paying for
incurred costs before
the first
disbursement.
305.10(a)..................... If at the construction Construction
contract bid opening, Investments
the lowest responsive (0610-0096)
bid is less than
total Project cost,
the Recipient will
notify EDA to
determine relevant
procedures.
305.10(b)..................... In case of an overrun Construction
at construction Investments
contract bid opening, (0610-0096)
the Recipient may
take deductive
alternatives if
provided for in the
bid documents, reject
all bids and re-
advertise if there is
a rational basis to
believe that such
action will result in
a lower bid, or
augment the Matching
Share by an amount
sufficient to cover
the excess cost. If
EDA determines that
these options are not
feasible, the
Recipient may submit
a written request for
additional EDA
funding.
305.11........................ Recipients may issue a Construction
notice permitting Investments
construction under (0610-0096)
contract to commence
prior to an EDA
determination of
award compliance and
eligibility for cost
reimbursement, but
will proceed at their
own risk until EDA
review and
concurrence. The EDA
regional office may
request information
from the Recipient to
make a determination
of award compliance.
305.12........................ EDA requires a Construction
Recipient to erect a Investments
Project sign or signs (0610-0096)
at the Project
construction site to
indicate that the
Federal government is
participating in the
Project. The regional
office will provide
mandatory
specifications for
Project signage.
305.13........................ Recipients involved in Construction
a contract change Investments
order must submit (0610-0096)
them to EDA for
review.
306.2......................... EDA selects Projects ED-900,
for Local and Application for
National Technical Investment
Assistance based on Assistance
the criteria in part (0610-0094)
301 and the extent to
which the Eligible
Applicant
demonstrates that the
Project will achieve
more specific
objectives in the
Region (as set forth
in Sec. 306.2) and
meets the criteria in
the applicable FFO.
306.5......................... EDA provides ED-900,
Investment Assistance Application for
to University Center Investment
Projects based on the Assistance
selection criteria in (0610-0094)
part 301, the
competitive selection
process outlined in
the applicable FFO,
and the extent to
which the Eligible
Applicant
demonstrates other
more specific,
related criteria.
307.5(a)...................... Each application for ED-900,
Economic Adjustment Application for
Assistance must Investment
include or Assistance
incorporate by (0610-0094)
reference (if so
approved by EDA) a
CEDS.
307.9......................... All RLF Recipients RLF Standard
must submit to EDA an Terms and
RLF Plan. Conditions
(0610-0095)
307.11(a)..................... Prior to the RLF Standard
disbursement of EDA Terms and
funds, RLF Recipients Conditions
must provide in a (0610-0095)
form acceptable to
EDA evidence of
fidelity bond
coverage and evidence
of certification in
accordance with Sec.
307.15(b)(1).
307.11(e)..................... If the Recipient RLF Standard
receives Grant funds Terms and
and the RLF loan Conditions
disbursement is (0610-0095)
subsequently delayed
beyond 30 days, the
Recipient must notify
the applicable grants
officer and return
such non-disbursed
funds to EDA.
307.13(a)..................... RLF Recipients must RLF Standard
maintain Closed Loan Terms and
files and all related Conditions
documents, books of (0610-0095)
account, computer
data files, and other
records over the term
of the Closed Loan
and for a three-year
period from the date
of final disposition
of such Closed Loan.
307.13(b)..................... RLF Recipients must RLF Standard
maintain adequate Terms and
accounting records to Conditions
substantiate the (0610-0095)
amount of RLF Income
expended for eligible
administrative costs
and retain records of
administrative
expenses incurred for
activities and
equipment relating to
the operation of the
RLF.
307.14(a)..................... All RLF Recipients ED-209, Semi-
must submit semi- Annual Report
annual reports in (0610-0095)
electronic format to
EDA, unless EDA
approves a paper
submission.

[[Page 76522]]

307.14(b)..................... All RLF Recipients ED-209, Semi-
must certify as part Annual Report
of the semi-annual (0610-0095)
report that the RLF ED-209A, Annual
is operating in Report (0610-
accordance with the 0095)
RLF Plan, and
describe any
modifications to the
RLF Plan to ensure
effective use of the
RLF.
307.14(c)..................... An RLF Recipient using ED-209I, Income
either fifty percent and Expense
or more (or more than Statement (0610-
$100,000) of RLF 0095)
Income for
administrative costs
in a 12-month
reporting period must
submit a completed
Income and Expense
Statement annually to
the appropriate EDA
regional office. EDA
may waive this
requirement for an
RLF Grant with a
small RLF Capital
Base.
307.15(b)(1).................. Within 60 days prior RLF Standard
to the initial Terms and
disbursement of EDA Conditions
funds, a qualified (0610-0095)
independent
accountant who
preferably has
audited the RLF
Recipient in
accordance with OMB
Circular A-133
requirements, shall
certify to EDA and
the Recipient that
such system is
adequate to identify,
safeguard, and
account for all RLF
operations.
307.15(b)(2).................. Prior to the RLF Standard
disbursement of any Terms and
EDA funds, an RLF Conditions
Recipient must (0610-0095)
certify that standard
loan documents
necessary for lending
are in place and that
these documents have
been reviewed by its
legal counsel for
adequacy and
compliance with the
terms and conditions
of the Grant and
applicable State and
local law.
307.16(b)..................... Recipients must RLF Standard
promptly notify EDA Terms and
in writing of any Conditions
condition that may (0610-0095)
adversely affect
their ability to meet
prescribed schedule
deadlines. Recipients
must submit a written
request for continued
use of Grant funds
beyond a missed
deadline for
disbursement of RLF
funds.
307.19........................ With prior approval RLF Standard
from EDA, a Recipient Terms and
may enter into a Sale Conditions
or Securitization of (0610-0095)
all or a portion of
its RLF loan
portfolio.
307.21(b)..................... EDA may approve a RLF Standard
request from a Terms and
Recipient to Conditions
terminate an RLF (0610-0095)
Grant.
part 310...................... Upon the application Comprehensive
of an Eligible Economic
Applicant, EDA may Development
designate the Region Strategies and
which the Project Planning
will serve as a Investments
Special Impact Area (0610-0093)
and waive the CEDS
requirement if the
Eligible Applicant
demonstrates that its
proposed Project will
directly fulfill a
pressing need and
assist in preventing
excessive
unemployment.
314.3(f)...................... With EDA's prior Property
written approval, a Management 0610-
Recipient may 0103
undertake an
incidental use of
Property that does
not interfere with
the scope of the
Project or the
economic purpose for
which the Investment
was made, provided it
satisfies the
conditions set forth
in Sec. 314.3(f).
314.6(b)...................... In order to use EDA- ED-900,
funded Property to Application for
secure a mortgage or Investment
deed of trust or Assistance
encumber the (0610-0094);
Property, the Construction
Recipient must Investments
provide information (0610-0096)
that satisfies one or
more of the
exceptions set forth
in Sec. 314.6(b).
314.7(a) and (c).............. The Recipient must ED-900,
provide information Application for
that satisfies EDA Investment
that the Recipient Assistance
has title to the Real (0610-0094);
Property and all Construction
easements, rights-of- Investments
way, permits, or long- (0610-0096)
term leases, unless
it can provide
information proving
it meets an exception
to the rule.
314.7(b)...................... The Recipient must ED-900,
provide information Application for
regarding all Investment
encumbrances on the Assistance
Real Property to EDA. (0610-0094);
Construction
Investments
(0610-0096)
314.8......................... Recipients must ED-900,
execute a lien, Application for
covenant, or other Investment
statement of EDA's Assistance
interest in all (0610-0094);
Property acquired or Construction
improved with EDA Investments
Investment Assistance (0610-0096)
and record it in the
proper jurisdiction.
314.9......................... Recipients must ED-900,
execute a security Application for
interest or other Investment
statement of EDA's Assistance
interest in Personal (0610-0094);
Property acquired or Construction
improved by EDA funds Investments
and record the (0610-0096)
interest in
accordance with
applicable law.
314.10........................ If a Recipient wishes Property
for EDA to release Management 0610-
its Real Property or 0103
tangible Personal
Property interest
before or after the
expiration of the
Property's Estimated
Useful Life, it must
submit a request for
such release to EDA.
EDA's release is not
automatic and may
require some action
on behalf of the
Recipient.
315.5(b)...................... Current or prospective ED-900,
TAACs must submit Application for
either a new or Investment
amended application Assistance
to EDA, along with a (0610-0094)
proposed budget,
narrative scope of
work, and other
information as may be
requested by EDA.
315.5(c)...................... TAACs must submit GPRA Performance
information regarding Validation Form
performance to be (0610-0098)
evaluated by EDA.
315.6(a)(1); 315.7; 315.8..... Firms must provide ED-840P,
specific information Petition by a
to EDA in order to be Firm for
certified for Certification
participation in the of Eligibility
TAAF program. to Apply for
Trade
Adjustment
Assistance
(0610-0091)

[[Page 76523]]

315.6(a)(2); 315.6(a)(3); A Certified Firm must ED-840P,
315.16. submit an Adjustment Petition by a
Proposal to EDA for Firm for
approval. If EDA Certification
approves the of Eligibility
Adjustment Proposal, to Apply for
the Firm may then Trade
request Adjustment Adjustment
Assistance from the Assistance
TAAC. (0610-0091)
315.9......................... In order to have a ED-840P,
public hearing, a Petition by a
Person with a Firm for
Substantial Interest Certification
in an accepted of Eligibility
petition for TAAF to Apply for
certification must Trade
submit a request that Adjustment
follows this Assistance
section's procedures. (0610-0091)
315.12........................ Each TAAC shall keep GPRA Performance
records disclosing Validation Form
the use of all TAAF (0610-0098)
funds.
------------------------------------------------------------------------

List of Subjects

13 CFR Part 300

Distressed region, Financial assistance, Headquarters, Regional
offices.

13 CFR Part 301

Applicant and application requirements, Economic distress levels,
Eligibility requirements, Grant administration, Grant programs,
Investment rates.

13 CFR Part 302

Civil rights, Conflicts-of-interest, Environmental review, Federal
policy and procedures, Fees, Inter-governmental review, Post-approval
requirements, Pre-approval requirements, Project administration,
Reporting and audit requirements.

13 CFR Part 303

Award and application requirements, Comprehensive economic
development strategy, Planning, Short-term planning investments, State
plans.

13 CFR Part 304

District modification and termination, Economic development
district, Organizational requirements, Performance evaluations.

13 CFR Part 305

Award and application requirements, Economic development, Public
works, Requirements for approved projects.

13 CFR Part 306

Award and application requirements, Performance evaluations,
Research, Technical assistance, Training, University centers.

13 CFR Part 307

Award and application requirements, Economic adjustment assistance,
Income, Liquidation, Merger, Pre-loan requirements, Record and
reporting requirements, Revolving loan fund, Sales and securitizations,
Termination.

13 CFR Part 308

Performance awards, Planning performance awards.

13 CFR Part 310

Excessive unemployment, Special impact area, Special need.

13 CFR Part 311

America COMPETES.

13 CFR Part 314

Authorized use, Federal interest, Federal share, Property, Property
interest, Release, Title.

Regulatory Text

For reasons stated in the preamble, this NPRM proposes amending
title 13, chapter III of the Code of Federal Regulations as follows:

PART 300--GENERAL INFORMATION

1. The authority citation for part 300 continues to read as
follows:

Authority: 42 U.S.C. 3121; 42 U.S.C. 3122; 42 U.S.C. 3211;
Department of Commerce Organization Order 10-4.

2. Revise Sec. 300.1 to read as follows:

Sec. 300.1 Introduction and mission.

EDA was created by Congress pursuant to the Public Works and
Economic Development Act of 1965 to provide financial assistance to
both rural and urban distressed communities. EDA's mission is to lead
the Federal economic development agenda by promoting innovation and
competitiveness, preparing American regions for growth and success in
the worldwide economy. EDA will fulfill its mission by fostering
entrepreneurship, innovation, and productivity through Investments in
infrastructure development, capacity building, and business development
in order to attract private capital investments and new and better jobs
to Regions experiencing substantial and persistent economic distress.
EDA works in partnership with distressed Regions to address problems
associated with long-term economic distress as well as to assist those
Regions experiencing sudden and severe economic dislocations, such as
those resulting from natural disasters, conversions of military
installations, changing trade patterns, and the depletion of natural
resources. EDA Investments generally take the form of Grants to or
Cooperative Agreements with Eligible Recipients.
3. Revise Sec. 300.2 to read as follows:

Sec. 300.2 EDA Headquarters and regional offices.

(a) EDA's Headquarters Office is located at: U.S. Department of
Commerce, Economic Development Administration, 1401 Constitution Avenue
NW., Washington, DC 20230.
(b) EDA has regional offices throughout the United States and each
regional office's contact information may be found on EDA's Internet
Web site at http://www.eda.gov or in the applicable announcement of
Federal Funding Opportunity issued by EDA. Please contact the
appropriate regional office to learn about EDA Investment opportunities
in your Region.
4. Amend Sec. 300.3 to:
a. Revise the definition of Cooperative Agreement, paragraph (7) of
the definition of Eligible Recipient, and the definition of Federal
Funding Opportunity or FFO, Federally-Declared Disaster, Grant, Indian
Tribe, Investment or Investment Assistance, Investment Rate, Local
Share or Matching Share, Presidentially-Declared Disaster, PWEDA,
Region or Regional, and Trade Act;
b. Add a definition of Regional Innovation Clusters or RICs in
alphabetical order; and
c. Remove the definition of Private Sector Representative.

Sec. 300.3 Definitions.

* * * * *
Cooperative Agreement means the financial assistance award of EDA
funds to an Eligible Recipient where substantial involvement is
expected between EDA and the Eligible Recipient in carrying out a
purpose or activity authorized under PWEDA or another statute. See 31
U.S.C. 6305.
* * * * *

[[Page 76524]]

Eligible Recipient * * *
(7) Private individual or for-profit organization, but only for
Training, Research, and Technical Assistance Investments pursuant to
Sec. 306.1(d)(3) of this chapter.
* * * * *
Federal Funding Opportunity or FFO means an announcement EDA
publishes during the fiscal year at http://www.grants.gov and on EDA's
Internet Web site at http://www.eda.gov that provides the funding
amounts, application and programmatic requirements, funding priorities,
special circumstances, and other information concerning a specific
competitive solicitation for EDA's economic development assistance
programs. EDA also may periodically publish FFOs on specific programs
or initiatives.
Federally Declared Disaster means a Presidentially Declared
Disaster, a fisheries resource disaster pursuant to section 312(a) of
the Magnuson-Stevens Fishery Conservation and Management Act, as
amended (16 U.S.C. 1861a(a)), or other Federally declared disasters
pursuant to applicable law.
Grant means the financial assistance award of EDA funds to an
Eligible Recipient under which the Eligible Recipient bears
responsibility for carrying out a purpose or activity authorized under
PWEDA or another statute. See 31 U.S.C. 6304.
* * * * *
Indian Tribe means an entity on the list of recognized tribes
published pursuant to the Federally Recognized Indian Tribe List Act of
1994, as amended (Pub. L. 103-454) (25 U.S.C. 479a et seq.), and any
Alaska Native Village or Regional Corporation (as defined in or
established under the Alaska Native Claims Settlement Act (43 U.S.C.
1601 et seq.). This term includes the governing body of an Indian
Tribe, non-profit Indian corporation (restricted to Indians), Indian
authority, or other non-profit Indian tribal organization or entity;
provided that the Indian tribal organization or entity is wholly owned
by, and established for the benefit of, the Indian Tribe or Alaska
Native Village.
* * * * *
Investment or Investment Assistance means a Grant or Cooperative
Agreement entered into by EDA and a Recipient.
Investment Rate means, as set forth in Sec. 301.4 of this chapter,
the amount of the EDA Investment in a particular Project expressed as a
percentage of the total Project cost.
Local Share or Matching Share means the non-EDA funds and any In-
Kind Contributions that are approved by EDA and provided by a Recipient
or third party as a condition of an Investment. The Matching Share may
include funds from another Federal Agency only if authorized by statute
that allows such use, which may be determined by EDA's reasonable
interpretation of such authority.
Presidentially Declared Disaster means a major disaster or
emergency declared under the Robert T. Stafford Disaster Relief and
Emergency Assistance Act, as amended (42 U.S.C. 5121 et seq.).
* * * * *
PWEDA means the Public Works and Economic Development Act of 1965,
as amended (42 U.S.C. 3121 et seq.).
* * * * *
Region or Regional means an economic unit of human, natural,
technological, capital, or other resources, defined geographically.
Geographic areas comprising a Region need not be contiguous or defined
by political boundaries, but should constitute a cohesive area capable
of undertaking self-sustained economic development. For the limited
purposes of determining economic distress levels and Investment Rates
pursuant to part 301 of this chapter, a Region also may comprise a
specific geographic area defined solely by its level of economic
distress, as set forth in Sec. Sec. 301.3(a)(2) and 301.3(a)(3) of
this chapter.
* * * * *
Regional Innovation Clusters or RICs means networks of similar,
synergistic, or complementary entities that support a single industry
sector and its various supply chains. In general, RICs:
(1) Are based on a geographic area that may cross municipal,
county, and other jurisdictional boundaries;
(2) May include catalysts of innovation and drivers of Regional
economic growth, such as universities, government research centers, and
other research and development resources;
(3) Have active channels for business transactions and
communication; and
(4) Depend upon specialized infrastructure, labor markets, and
services that build on the unique competitive assets of a location,
including talent, technology, services, and hard and soft
infrastructure, to spur innovation, job creation, and business
expansion.
* * * * *
Trade Act, for purposes of EDA, means title II, chapters 3, 4, and
5, of the Trade Act of 1974, as amended (19 U.S.C. 2341 et seq.).
* * * * *

PART 301--ELIGIBILITY, INVESTMENT RATE AND APPLICATION REQUIREMENTS

5. The authority section for part 301 continues to read as follows:

Authority: 42 U.S.C. 3121; 42 U.S.C. 3141-3147; 42 U.S.C. 3149;
42 U.S.C. 3161; 42 U.S.C. 3175; 42 U.S.C. 3192; 42 U.S.C. 3194; 42
U.S.C. 3211; 42 U.S.C. 3233; Department of Commerce Delegation Order
10-4.

6. Amend Sec. 301.1 to:
a. Revise the introductory text and paragraphs (d) and (e); and
b. Add new paragraph (f) to read as follows:

Sec. 301.1 Overview of eligibility requirements.

In order to receive EDA Investment Assistance, the following
requirements must be met:
* * * * *
(d) The Eligible Applicant must satisfy the formal application
requirements set forth in subpart E of this part;
(e) The Project must meet the general requirements set forth in
part 302 (General Terms and Conditions for Investment Assistance) and
the specific program requirements (as applicable) set forth in part 303
(Planning Investments and Comprehensive Economic Development
Strategies), part 304 (Economic Development Districts), part 305
(Public Works and Economic Development Investments), part 306
(Training, Research and Technical Assistance Investments), or part 307
(Economic Adjustment Assistance Investments) of this chapter; and
(f) EDA must select the Eligible Applicant's proposed Project.
7. Revise paragraphs (a)(1), (a)(2), (a)(4) introductory text,
(a)(4)(i), and (c)(1) of Sec. 301.3 to read as follows:

Sec. 301.3 Economic distress levels.

(a) Part 305 (Public Works and Economic Development Investments)
and part 307 (Economic Adjustment Assistance Investments).
(1) Except as otherwise provided by this paragraph (a), for a
Project to be eligible for Investment Assistance under parts 305 or 307
of this chapter, the Project must be located in a Region that, on the
date EDA receives an application for Investment Assistance, is subject
to one or more of the following economic distress criteria:
(i) An unemployment rate that is, for the most recent 24-month
period for which data are available, at least one percentage point
greater than the national average unemployment rate;
(ii) Per capita income that is, for the most recent period for
which data are

[[Page 76525]]

available, 80 percent or less of the national average per capita
income; or
(iii) A Special Need, as determined by EDA.
(2) A Project located within an Economic Development District,
which is located in a Region that does not meet the economic distress
criteria described in paragraph (a)(1) of this section, also is
eligible for Investment Assistance under parts 305 or 307 of this
chapter if EDA determines that the Project will be of ``substantial
direct benefit'' to a geographic area within the District that meets
the criteria of paragraph (a)(1) of this section. For this purpose, a
Project provides a ``substantial direct benefit'' if it provides
significant employment opportunities for unemployed, underemployed or
low-income residents of the geographic area within the District.
* * * * *
(4) Data requirements to demonstrate economic distress levels. EDA
will determine the economic distress levels pursuant to this subsection
at the time EDA receives an application for Investment Assistance as
follows:
(i) For economic distress levels based upon per capita income
requirements, EDA will base its determination upon the most recent
American Community Survey (``ACS'') published by the U.S. Census
Bureau. For economic distress levels based upon the unemployment rate,
EDA will base its determination upon the most recent data published by
the Bureau of Labor Statistics (``BLS''), within the U.S. Department of
Labor. For eligibility based upon either per capita income requirements
or the unemployment rate, when the ACS or BLS data, as applicable, are
not the most recent Federal data available, EDA will base its decision
upon the most recent Federal data from other sources (including data
available from the Census Bureau and the Bureaus of Economic Analysis,
Labor Statistics, Indian Affairs, or any other Federal source
determined by EDA to be appropriate). If no Federal data are available,
an Eligible Applicant must submit to EDA the most recent data available
from the State. The required data must be for the Region where the
Project will be located (paragraph (a)(1) of this section), the
geographic area where substantial direct Project benefits will occur
(paragraph (a)(2) of this section), or the geographic area of poverty
or high unemployment (paragraph (a)(3) of this section), as applicable.
* * * * *
(c) * * *
(1) Contain at least one geographic area that fulfills the economic
distress criteria set forth in paragraph (a)(1) of this section and is
identified in an approved CEDS; and
* * * * *
8. Revise paragraphs (b)(1) introductory text, (b)(1)(ii), (b)(2),
(b)(3)(i) through (iii), (b)(4) introductory text, (b)(5), and (c) of
Sec. 301.4 as follows:

Sec. 301.4 Investment rates.

* * * * *
(b) Maximum Investment Rate--
(1) General rule. Except as otherwise provided by this paragraph
(b) or paragraph (c) of this section, the maximum EDA Investment Rate
for all Projects shall be determined in accordance with Table 1 in
paragraph (b)(1)(ii) of this subsection. The maximum EDA Investment
Rate shall not exceed the sum of 50 percent, plus up to an additional
30 percent based on the relative needs of the Region in which the
Project is located, as determined by EDA.
* * * * *
(ii) Table 1. Table 1 of this paragraph sets forth the maximum
allowable Investment Rate for Projects located in Regions subject to
certain levels of economic distress. In cases where Table 1 produces
divergent results (i.e., where Table 1 produces more than one maximum
allowable Investment Rate based on the Region's levels of economic
distress), the higher Investment Rate produced by Table 1 shall be the
maximum allowable Investment Rate for the Project.

Table 1
------------------------------------------------------------------------
Maximum
allowable
Projects located in Regions in which: investment
rates
(percentage)
------------------------------------------------------------------------
(A) The 24-month unemployment rate is at least 225% of 80
the national average; or...............................
(B) The per capita income is not more than 50% of the 80
national average.......................................
(C) The 24-month unemployment rate is at least 200% of 70
the national average; or...............................
(D) The per capita income is not more than 60% of the 70
national average.......................................
(E) The 24-month unemployment rate is at least 175% of 60
the national average; or...............................
(F) The per capita income is not more than 65% of the 60
national average.......................................
(G) The 24-month unemployment rate is at least one 50
percentage point greater than the national average; or.
(H) The per capita income is not more than 80% of the 50
national average.......................................
------------------------------------------------------------------------

(2) Projects subject to a Special Need. EDA shall determine the
maximum allowable Investment Rate for Projects subject to a Special
Need (as determined by EDA pursuant to Sec. 301.3(a)(1)(iii)) based on
the actual or threatened overall economic situation of the Region in
which the Project is located. However, unless the Project is eligible
for a higher Investment Rate pursuant to paragraph (b)(5) of this
section, the maximum allowable Investment Rate for any Project subject
to a Special Need shall be 80 percent.
(3) * * *
(i) The minimum Investment Rate for Projects under part 303 of this
chapter shall be 50 percent.
(ii) Except as otherwise provided in paragraph (b)(3)(iii) of this
section or in paragraph (b)(5) of this section, the maximum allowable
Investment Rate for Projects under part 303 of this chapter shall be
the maximum allowable Investment Rate set forth in Table 1 for the most
economically distressed county or other equivalent political unit
(e.g., parish) within the Region. The maximum allowable Investment Rate
shall not exceed 80 percent.
(iii) In compelling circumstances, the Assistant Secretary may
waive the application of the first sentence in paragraph (b)(3)(ii) of
this section.
(4) Projects under part 306. Except as otherwise provided in
paragraph (b)(5) of this section, the maximum allowable Investment Rate
for Projects under part 306 of this chapter shall generally be
determined based on the relative needs (as determined under paragraph
(b)(1) of this section) of the Region which the

[[Page 76526]]

Project will serve. As specified in section 204(c)(3) of PWEDA, the
Assistant Secretary has the discretion to establish a maximum
Investment Rate of up to 100 percent where the Project:
* * * * *
(5) Special Projects. Table 2 of this paragraph sets forth the
maximum allowable Investment Rate for certain special Projects as
follows:

Table 2
------------------------------------------------------------------------
Maximum
allowable
Projects investment
rates
(percentage)
------------------------------------------------------------------------
Projects that involve broad Regional planning and 80
coordination with other entities outside the Eligible
Applicant's political jurisdiction or area of
authority, under special circumstances determined by
EDA....................................................
Projects that effectively leverage other Federal Agency
resources..............................................
Projects of Indian Tribes............................... 100
Projects for which EDA receives appropriations under 100
section 703 of PWEDA (42 U.S.C. 3233) and Projects to
address and implement post-disaster economic recovery
efforts in Presidentially Declared Disaster areas in a
timely manner..........................................
Projects of States or political subdivisions of States 100
that the Assistant Secretary determines have exhausted
their effective taxing and borrowing capacity, or
Projects of non-profit organizations that the Assistant
Secretary determines have exhausted their effective
borrowing capacity.....................................
Projects under parts 305 or 307 that receive performance 100
awards pursuant to Sec. 308.2 of this chapter........
Projects located in a District that receive planning 100
performance awards pursuant to Sec. 308.3 of this
chapter................................................
------------------------------------------------------------------------

(c) Federal Funding Opportunity announcements may provide
additional Investment Rate criteria and standards to ensure that the
level of economic distress of a Region, rather than a preference for a
geographic area or a specific type of economic distress, is the primary
factor in allocating Investment Assistance.
9. Revise the section heading, paragraph (a) introductory text and
paragraph (b) of Sec. 301.6 to read as follows:

Sec. 301.6 Supplementary Investment Assistance.

(a) Pursuant to a request made by an Eligible Applicant, EDA
Investment Assistance may supplement a grant awarded in another
``designated Federal grant program,'' if the Eligible Applicant
qualifies for financial assistance under such program, but is unable to
provide the required non-Federal share because of the Eligible
Applicant's economic situation. For purposes of this section, a
``designated Federal grant program'' means a Federal grant program
that:
* * * * *
(b) For a Project that meets the economic distress criteria
provided in Sec. 301.3(a), the Investment Assistance, combined with
funds from a designated Federal grant program, may be at the maximum
allowable Investment Rate, even if the designated Federal grant program
has a lower grant rate. If the designated Federal grant program has a
grant rate higher than the maximum EDA Investment Rate, the EDA
Investment and other Federal funds together may exceed the EDA
Investment Rate, provided that the EDA share of total funding does not
exceed the maximum allowable Investment Rate.
10. Revise paragraph (a) of Sec. 301.7 as follows:

Sec. 301.7 Investment Assistance application.

(a) The EDA Investment Assistance process begins with the
submission of an application. The Application for Investment Assistance
(Form ED-900 or any successor form) may be obtained electronically from
http://www.grants.gov or from the appropriate regional office. In
general, EDA accepts applications on a continuing basis and
competitively evaluates all applications received in quarterly funding
cycles throughout the fiscal year. Subject to the availability of
funds, the timing in which EDA receives complete and competitive
applications affects EDA's ability to participate in a given Project.
EDA will evaluate all applications in accord with the criteria set
forth in the applicable FFO and in Sec. 301.8 and will:
(1) Return the application to the applicant for specified
deficiencies and suggest resubmission after corrections are made; or
(2) Deny the application for specifically stated reasons and notify
the applicant.
* * * * *
11. Revise Sec. 301.8 to read as follows:

Sec. 301.8 Application evaluation criteria.

EDA will screen all applications for the feasibility of the budget
presented and conformance with EDA's statutory and regulatory
requirements. EDA will assess the economic development needs of the
affected Region in which the proposed Project will be located (or will
service), as well as the capability of the Eligible Applicant to
implement the proposed Project. In addition to criteria set out in the
applicable FFO, EDA will consider the degree to which an Investment in
the proposed Project will satisfy one or more of the following
criteria:
(a) Ensures collaborative Regional innovation. The Investment will
support the development and growth of innovation clusters based on
existing Regional competitive strengths. Such initiatives must engage
stakeholders; facilitate collaboration among urban, suburban, and rural
(including Tribal) areas; provide stability for economic development
through long-term intergovernmental and public/private collaboration;
and support the growth of existing and emerging industries.
(b) Leverages public-private partnerships. The Investment will use
both public and private sector resources and leverage complementary
investments by other government/public entities or non-profit
organizations.
(c) Advances national strategic priorities. The Investment will
encourage job growth and business expansion in clean energy; green
technologies; sustainable manufacturing; information technology
infrastructure; communities severely impacted by automotive industry
restructuring; natural disaster mitigation and resiliency; access to
capital for small- and medium-sized and ethnically diverse enterprises;
and innovations in science, health care, and alternative fuel
technologies.
(d) Enhances global competitiveness. The Investment will support
high-growth businesses and innovation-based entrepreneurs to expand and
compete in global markets.

[[Page 76527]]

(e) Encourages environmentally sustainable development. The
Investment will encompass best practices in ``environmentally
sustainable development,'' broadly defined to include projects that
enhance environmental quality and develop and implement green products,
processes, and buildings as part of the green economy.
(f) Supports economically distressed and underserved communities.
The Investment will strengthen diverse communities that have suffered
disproportionate economic and job losses or are rebuilding to become
more competitive in the global economy.
12. Revise Sec. 301.9 to read as follows:

Sec. 301.9 Application selection criteria.

(a) EDA will review completed application materials for compliance
with the requirements set forth in PWEDA, this chapter, the applicable
FFO, and other applicable Federal statutes and regulations. From those
applications that meet EDA's technical and legal requirements, EDA will
select applications based on the:
(1) Availability of funds;
(2) Competitiveness of the applications in accord with the criteria
set forth in Sec. 301.8; and
(3) Funding priority considerations identified in the applicable
FFO.
(b) EDA will endeavor to notify applicants as soon as practicable
regarding whether their applications are selected for funding.
13. Amend Sec. 301.10 to revise paragraphs (b), (c) introductory
text, and (c)(2), and add paragraph (d) to read as follows:

Sec. 301.10 Formal application requirements.

* * * * *
(b) Identify the sources of funds, both eligible Federal and non-
EDA, and In-Kind Contributions that will constitute the required
Matching Share for the Project (see the Matching Share requirements
under Sec. 301.5); and
(c) For Projects under parts 305 or 307 of this chapter, include a
CEDS acceptable to EDA pursuant to part 303 of this chapter or
otherwise incorporate by reference a current CEDS that EDA approves for
the Project. The requirements stated in the preceding sentence shall
not apply to:
* * * * *
(2) A Project located in a Region designated as a Special Impact
Area pursuant to part 310 of this chapter.
(d) Projects that propose the construction of a business,
technology, or other type of incubator or accelerator, must include a
feasibility study demonstrating the need for the Project and an
operational plan based on industry best practices demonstrating the
Eligible Applicant's plan for ongoing successful operations. EDA will
provide further guidance in the applicable FFO. EDA may require the
Recipient to demonstrate that the feasibility study has been conducted
by an impartial third party, as determined by EDA.
14. Add Sec. 301.11 to subpart E of part 301 to read as follows:

Sec. 301.11 Infrastructure.

(a) EDA will fund both construction and non-construction
infrastructure necessary to meet a Region's strategic economic
development goals and needs, which in turn results in job creation.
This includes infrastructure to develop and upgrade basic economic
development assets as described in Sec. Sec. 305.1 and 305.2 of this
chapter, such as utility facilities, as well as infrastructure that
supports innovation and entrepreneurship. The following are examples of
innovation- and entrepreneurship-related infrastructure that support
job creation:
(1) Business Incubation. Business incubation includes both physical
facilities and business support services to advance the successful
development of start-up companies by providing entrepreneurs with an
array of targeted resources and services.
(2) Business Acceleration. Business acceleration includes both
physical facilities and an array of business support services to help
new and existing businesses develop new processes or products, get
products and services to market more efficiently, expand market
opportunities, or increase sales and exports.
(3) Venture Development Organization. A venture development
organization (``VDO'') works to ensure that Regional economies operate
as smoothly and efficiently as possible in support of innovation-based
entrepreneurship. A VDO may make strategic investments of time, talent,
and other resources toward innovation, entrepreneurship, and technology
to help nurture and grow promising companies and ideas, thereby
promoting and taking advantage of the innovation assets of a Region and
addressing the needs of the high-growth, innovation-oriented start-up
companies in the Region.
(4) Proof of Concept Center. A proof of concept center serves as a
hub of collaborative and entrepreneurial activity designed to
accelerate the commercialization of innovations into the marketplace.
Such centers support innovation-based, high growth entrepreneurship
through a range of services, including technology and market
evaluation, business planning and mentorship, network development, and
early stage access to capital.
(5) Technology Transfer. Technology transfer is the process of
transferring scientific findings from one organization to another for
the purpose of further development and commercialization. The process
typically includes: Identifying new technologies; protecting
technologies through patents and copyrights; and forming development
and commercialization strategies, such as marketing and licensing, for
existing private sector companies or creating start-up companies based
on the technology.
(b) In general, successful Projects, including innovation- and
entrepreneurship-related infrastructure, require the engagement of a
broad range of Regional stakeholders and resources. Therefore through
appropriate FFOs, EDA will seek to advance interagency coordination by
funding Projects that demonstrate effective leveraging of other Federal
Agency resources based on a Region's strategic economic development
goals and needs. For all types of Projects, EDA assistance may not be
used to provide direct venture capital to a for-profit entity because
of the restrictions set out in section 217 of PWEDA (42 U.S.C. 3154c)
and part 309 of this chapter. Nonetheless, EDA may consider an
application more competitive if it includes measures to address the
need to provide entrepreneurs with access to early stage capital
outside of the proposed EDA Project budget. See Sec. 301.8(b).

PART 302--GENERAL TERMS AND CONDITIONS FOR INVESTMENT ASSISTANCE

15. The authority citation for part 302 continues to read as
follows:

Authority: 19 U.S.C. 2341 et seq.; 42 U.S.C. 3150; 42 U.S.C.
3152; 42 U.S.C. 3153; 42 U.S.C. 3192; 42 U.S.C. 3193; 42 U.S.C.
3194; 42 U.S.C. 3211; 42 U.S.C. 3212; 42 U.S.C. 3216; 42 U.S.C.
3218; 42 U.S.C. 3220; 42 U.S.C. 5141; Department of Commerce
Delegation Order 10-4.

16. Revise Sec. 302.1 to read as follows:

Sec. 302.1 Environment.

EDA will undertake environmental reviews of Projects in accordance
with the requirements of the National Environmental Policy Act of 1969,
as amended (Pub. L. 91-190; 42 U.S.C. 4321 et seq., as implemented
under 40 CFR chapter V) (``NEPA''), and all applicable Federal
environmental statutes, regulations, and Executive Orders. These
authorities include the

[[Page 76528]]

implementing regulations of NEPA requiring EDA to provide public notice
of the availability of Project-specific environmental documents, such
as environmental impact statements, environmental assessments, findings
of no significant impact, and records of decision, to the affected or
interested public, as specified in 40 CFR 1506.6(b). Depending on the
Project's location, environmental information concerning specific
Projects may be obtained from the individual serving as the
Environmental Officer in the appropriate EDA regional office listed in
the applicable FFO.
17. Revise the introductory text of Sec. 302.3 to read as follows:

Sec. 302.3 Project servicing for loans, loan guaranties and
Investment Assistance.

EDA will provide Project servicing to borrowers who received EDA
loans or EDA-guaranteed loans and to lenders who received EDA loan
guaranties under an EDA-administered program. Project servicing
includes loans made under PWEDA prior to the effective date of the
Economic Development Administration Reform Act of 1998, the Trade Act,
and the Community Emergency Drought Relief Act of 1977 (Pub. L. 95-31;
42 U.S.C. 5184 note).
* * * * *
18. Revise Sec. 302.6 to read as follows:

Sec. 302.6 Additional requirements; Federal policies and procedures.

Recipients are subject to all Federal laws and to Federal,
Department, and EDA policies, regulations, and procedures applicable to
Federal financial assistance awards, including 15 CFR part 14, the
Uniform Administrative Requirements for Grants and Cooperative
Agreements with Institutions of Higher Education, Hospitals, Other Non-
Profit and Commercial Organizations, and 15 CFR part 24, the Uniform
Administrative Requirements for Grants and Cooperative Agreements to
State and Local Governments, as applicable.
19. Revise Sec. 302.8 to read as follows:

Sec. 302.8 Pre-approval Investment Assistance costs.

Project activities carried out before approval of Investment
Assistance shall be carried out at the sole risk of the Eligible
Applicant. Such activity is subject to the rejection of the
application, the disallowance of costs, or other adverse consequences
as a result of non-compliance with EDA or Federal requirements,
including procurement requirements, civil rights requirements, Federal
labor standards, or Federal environmental, historic preservation, and
related requirements.
20. Revise Sec. 302.9 to read as follows:

Sec. 302.9 Inter-governmental review of projects.

(a) When an Eligible Applicant is not a State, Indian Tribe, or
other general purpose governmental authority, the Eligible Applicant
must afford the appropriate general purpose local governmental
authority (the ``Authority'') in the Region a minimum of 15 days to
review and comment on a proposed Project under EDA's Public Works and
Economic Development program or a proposed construction Project or RLF
Grant under EDA's Economic Adjustment Assistance program. Under these
programs, the Eligible Applicant shall furnish the following with its
application:
(1) If no comments are received from the Authority, a statement of
efforts made to obtain such comments; or
(2) If comments are received from the Authority, a copy of the
comments and a statement of any actions taken to address such comments.
(b) As required by 15 CFR part 13 and Executive Order 12372,
``Intergovernmental Review of Federal Programs,'' as amended, if a
State has adopted a process under Executive Order 12372 to review and
coordinate proposed Federal financial assistance and direct Federal
development (commonly referred to as the ``single point of contact
review process''), all Eligible Applicants also must give State and
local governments a reasonable opportunity to review and comment on the
proposed Project, including review and comment from area-wide planning
organizations in metropolitan areas, as provided for in 15 CFR part 13.
21. Revise Sec. 302.10 to read as follows:

Sec. 302.10 Attorneys' and consultants' fees, employment of
expediters, and post-employment restriction.

(a) Employment of expediters. Investment Assistance awarded under
PWEDA shall not directly or indirectly reimburse any attorneys' or
consultants' fees incurred in connection with obtaining Investment
Assistance and contracts under PWEDA. Such Investment Assistance shall
not be awarded to any Eligible Applicant, unless the owners, partners,
or officers of the Eligible Applicant certify to EDA the names of any
attorneys, agents, and other persons engaged by or on behalf of the
Eligible Applicant for the purpose of expediting an application made to
EDA in connection with obtaining Investment Assistance under PWEDA and
the fees paid or to be paid to the person(s) for expediting the
application.
(b) Post-employment restriction. (1) In general, any Eligible
Applicant that is a non-profit organization, District Organization, or
for-profit entity, for the two-year period beginning on the date on
which the Investment Assistance under PWEDA is awarded to the Eligible
Applicant, must refrain from employing, offering any office or
employment to, or retaining for professional services any person who,
on the date on which the Investment Assistance is awarded or within the
one-year period ending on that date:
(i) Served as an officer, attorney, agent, or employee of the
Department; and
(ii) Occupied a position or engaged in activities that the
Assistant Secretary determines involved discretion with respect to the
award of Investment Assistance under PWEDA.
(2) In addition to the types of Eligible Applicants noted in this
paragraph (b), EDA may require another Eligible Applicant to execute an
agreement to abide by the above-described post-employment restriction
on a case-by-case basis; for example, when an institution of higher
education implements activities under or related to the Investment
Assistance through a separate non-profit organization or association.
22. Revise Sec. 302.11 to read as follows:

Sec. 302.11 Economic development information clearinghouse.

Pursuant to section 502 of PWEDA, EDA maintains an economic
development information clearinghouse on its Internet Web site at
http://www.eda.gov.
23. Revise the heading of Sec. 302.15 to read as follows:

Sec. 302.15 Acceptance of certifications made by Eligible Applicants.

* * * * *
24. Revise Sec. 302.16 to read as follows:

Sec. 302.16 Accountability.

(a) General. Each Recipient must submit reports to EDA at intervals
and in the manner that EDA shall require, except that EDA shall not
require any report to be submitted more than ten years after the date
of closeout of the Investment Assistance.
(b) Data on Project effectiveness. Each report must contain a data-
specific evaluation of the effectiveness of the Investment Assistance
provided in fulfilling the Project's purpose (including alleviation of
economic distress and meeting Project goals) and in meeting the
objectives of PWEDA. Data used by a Recipient in preparing reports
shall be accurate and verifiable as determined by EDA, and from
independent sources (whenever

[[Page 76529]]

possible). EDA will use this data and report to fulfill its performance
measurement reporting requirements under the Government Performance and
Results Act of 1993, as amended (Pub. L. 103-62) and to monitor
internal, Investment, and Project performance through an internal
performance measurement system.
(c) Reporting Project service benefits. To enable EDA to determine
the economic development effect of a Project that provides service
benefits, EDA may require the Recipient to submit a Project service map
and information from which to determine whether services are provided
to all segments of the Region being assisted.
(d) Consequences for failure to undertake good faith efforts. (1)
The Recipient must undertake good faith efforts to fulfill the purpose
of the Project as set out in the terms and conditions of the Investment
Assistance and must report regularly on Project goals. In the event
that EDA determines that the Recipient is failing to make good faith
efforts to meet these goals, or otherwise is failing to meets its
obligations under the Investment Assistance, EDA shall take necessary
actions to protect EDA's interest in the Project, including the
following:
(i) Discontinue disbursement of funds pending correction;
(ii) Suspend the Investment Assistance;
(iii) Terminate the Investment Assistance;
(iv) Require reimbursement of the EDA share of the Project; or
(v) Institute formal Government-wide debarment and suspension
proceedings against the Recipient.
(2) Before making a determination under this subsection, EDA shall
provide the Recipient with reasonable notice and opportunity to
respond. A determination under this subsection is final and cannot be
appealed.
25. Revise paragraphs (a), (b)(2), and (c)(2) and (3) of Sec.
302.17 to read as follows:

Sec. 302.17 Conflicts of interest.

(a) General. It is EDA's and the Department's policy to maintain
the highest standards of conduct to prevent conflicts of interest in
connection with the award of Investment Assistance or its use for
reimbursement or payment of costs (e.g., procurement of goods or
services) by or to the Recipient. A conflict of interest generally
exists when an Interested Party participates in a matter that has a
direct and predictable effect on the Interested Party's personal or
financial interests. A conflict also may exist where there is an
appearance that an Interested Party's objectivity in performing his or
her responsibilities under the Project is impaired. For example, an
appearance of impairment of objectivity may result from an
organizational conflict where, because of other activities or
relationships with other persons or entities, an Interested Party is
unable to render impartial assistance, services, or advice to the
Recipient, a participant in the Project, or to the Federal government.
Additionally, a conflict of interest may result from non-financial gain
to an Interested Party, such as benefit to reputation or prestige in a
professional field.
(b) * * *
(2) An Interested Party also shall not, directly or indirectly,
solicit or accept any gift, gratuity, favor, entertainment, or other
benefit having monetary value, for himself or herself or for another
person or entity, from any person or organization which has obtained or
seeks to obtain Investment Assistance from EDA.
* * * * *
(c) * * *
(2) A Recipient of an RLF Grant shall not lend RLF funds to an
Interested Party; and
(3) Former board members of a Recipient of an RLF Grant and members
of his or her Immediate Family shall not receive a loan from such RLF
for a period of two years from the date that the board member last
served on the RLF's board of directors.
26. Revise Sec. 302.18 to read as follows:

Sec. 302.18 Post-approval requirements.

A Recipient must comply with all financial, performance, progress
report, and other requirements set forth in the terms and conditions of
the Investment Assistance, including any special award conditions and
applicable Federal cost principles (collectively, ``Post-Approval
Requirements''). A Recipient's failure to comply with Post-Approval
Requirements may result in the disallowance of costs, termination of
the Investment Assistance award, or other adverse consequences to the
Recipient.
27. Revise paragraph (b)(1) of Sec. 302.20 to read as follows:

Sec. 302.20 Civil rights.

* * * * *
(b) Definitions.
(1) For purposes of this section, an ``Other Party'' means an
``other party subject to this part,'' as defined in 15 CFR 8.3(l), and
includes an entity which (or which is intended to) creates and/or saves
15 or more permanent jobs as a result of Investment Assistance;
provided that such entity also is either specifically named in the
application as benefiting from the Project, or is or will be located in
an EDA building; port; facility; or industrial, commercial, or business
park constructed or improved in whole or in part with Investment
Assistance prior to EDA's final disbursement of award funds.
* * * * *

PART 303--PLANNING INVESTMENTS AND COMPREHENSIVE ECONOMIC
DEVELOPMENT STRATEGIES

28. The authority citation for part 303 continues to read as
follows:

Authority: 42 U.S.C. 3143; 42 U.S.C. 3162; 42 U.S.C. 3174; 42
U.S.C. 3211; Department of Commerce Organization Order 10-4.

29. Designate Sec. Sec. 303.1 through 303.5 as subpart A and add a
heading for subpart A to read as follows:

Subpart A--General

30. Revise the section heading and introductory text of Sec. 303.1
to read as follows:

Sec. 303.1 Overview of EDA's Planning Program.

The purpose of EDA Planning Investments is to provide support to
Planning Organizations for the development, implementation, revision,
or replacement of Comprehensive Economic Development Strategies, and
for related State plans and short-term Planning Investments designed to
create and retain new and better jobs, particularly for the unemployed
and underemployed in the nation's most economically distressed Regions.
EDA's Planning Investments support partnerships with District
Organizations, Indian Tribes, community development corporations, non-
profit Regional planning organizations, and other Eligible Recipients.
Planning activities supported by these Investments must be part of a
continuous process involving the active participation of the private
sector, public officials, non-profit organizations, educational
institutions, and private citizens, and include:
* * * * *
31. Revise paragraphs (a)(5) and (c) of Sec. 303.3 to read as
follows:

Sec. 303.3 Application requirements and evaluation criteria.

(a) * * *
(5) Feasibility of the proposed scope of work to create and retain
new and better jobs through implementation of the CEDS.
* * * * *
(c) For Planning Investment awards to a State, the Assistant
Secretary also

[[Page 76530]]

shall consider the extent to which the State will integrate and
coordinate its CEDS with local and Economic Development District plans.
* * * * *
32. Revise paragraphs (a) and (c) of Sec. 303.4 to read as
follows:

Sec. 303.4 Award requirements.

(a) Planning Investments shall be coordinated with and effectively
leverage any other available Federal, State, or local planning
assistance and private sector investments.
* * * * *
(c) EDA will provide a Planning Investment for the period of time
required to develop, revise or replace, and implement a CEDS, generally
in 36-month renewable Investment project periods.
33. Designate Sec. Sec. 303.6 and 303.7 as subpart B and add a
heading for subpart B to read as follows:

Subpart B--Partnership Planning Assistance

34. Revise Sec. 303.6 to read as follows:

Sec. 303.6 Partnership Planning and the EDA-funded CEDS process.

(a) Partnership Planning overview. Partnership Planning Investments
support a nationwide network of Planning Organizations to provide
comprehensive economic development planning services to distressed
Regions. EDA makes Partnership Planning Investments to enable Planning
Organizations to manage and coordinate the development and
implementation of CEDS to address the unique needs of their respective
Regions.
(b) CEDS process. If EDA awards Investment Assistance to a Planning
Organization to develop, revise, or replace a CEDS, the Planning
Organization must follow the procedures set forth in this section:
(1) CEDS Strategy Committee. The Planning Organization must appoint
a Strategy Committee. The Strategy Committee must represent the main
economic interests of the Region, including the private sector, public
officials, community leaders, private individuals, representatives of
workforce development boards, institutions of higher education,
minority and labor groups, and others who can contribute to and benefit
from improved economic development in the relevant Region. In addition,
the Strategy Committee must demonstrate the capacity to undertake a
collaborative and effective planning process. The Strategy Committee
representing Indian Tribes or States may vary.
(2) Public notice and comment. The Planning Organization must
develop and submit to EDA a CEDS that complies with the requirements of
Sec. 303.7. Before submission of the CEDS to EDA, the Planning
Organization must provide the public and appropriate governments and
interest groups in the relevant Region with adequate notice of and
opportunity to comment on the CEDS. The comment period shall be at
least 30 days and the Planning Organization shall make the CEDS readily
available through appropriate means of distribution, electronically and
otherwise, throughout the comment period. The Planning Organization
also shall make the CEDS available in hardcopy upon request. EDA may
require the Planning Organization to provide any comments received and
demonstrate how the comments were resolved.
(3) Reports and updates.
(i) After obtaining EDA approval of the CEDS, the Planning
Organization must submit annually an updated CEDS performance report to
EDA.
(ii) The Planning Organization must submit a new or revised CEDS to
EDA at least every five years, unless EDA or the Planning Organization
determines that a new or revised CEDS is required earlier due to
changed circumstances.
(iii) Any updated CEDS performance report that results in a change
of the requirements set forth in Sec. 303.7(b)(1)(iii) of the EDA-
accepted CEDS or any new or revised CEDS, must be available for review
and comment by the public in accordance with paragraph (b)(2) of this
section.
(4) Inadequate CEDS. If EDA determines that implementation of the
CEDS is inadequate, it will notify the Planning Organization in writing
and the Planning Organization shall submit to EDA a new or revised
CEDS.
(5) Regional Commission notification. If any part of a Region is
covered by one or more of the Regional Commissions as set forth in
section 404 of PWEDA, the Planning Organization shall ensure that a
copy of the CEDS is provided to the Regional Commission(s).
35. Revise paragraph (b) of Sec. 303.7 to read as follows:

Sec. 303.7 Requirements for Comprehensive Economic Development
Strategies.

* * * * *
(b) Strategy requirements. (1) A CEDS must be the result of a
comprehensive and continuous economic development planning process,
developed with broad-based and diverse public and private sector
participation. Consistent with section 302 of PWEDA, each CEDS must
promote Regional economic resiliency and be unique and responsive to
the relevant Region. Each CEDS must include:
(i) A summary of economic development conditions of the Region;
(ii) An in-depth analysis of economic and community strengths,
weaknesses, opportunities, and threats (commonly known as a ``SWOT''
analysis);
(iii) Strategies and an implementation plan to build upon the
Region's strengths and opportunities and resolve the weaknesses and
threats facing the Region, which should not be inconsistent with
applicable State and local economic development or workforce
development strategies; and
(iv) Performance measures used to evaluate the Planning
Organization's successful development and implementation of the CEDS.
(2) EDA will publish and periodically update specific CEDS content
guidelines.
* * * * *
36. Designate Sec. Sec. 303.8 and 303.9 as subpart C and add a
heading for subpart C to read as follows:

Subpart C--State and Short-Term Planning Assistance

37. Revise paragraphs (a) introductory text and (b) of Sec. 303.9
to read as follows:

Sec. 303.9 Requirements for short-term Planning Investments.

(a) In addition to providing support for CEDS and State plans, EDA
also may provide Investment Assistance to support short-term planning
activities. EDA may provide such Investment Assistance to:
* * * * *
(b) Eligible activities may include updating a portion of a CEDS,
economic analysis, development of economic development policies and
procedures, and development of economic development goals.
* * * * *

PART 304--ECONOMIC DEVELOPMENT DISTRICTS

38. The authority citation for part 304 continues to read as
follows:

Authority: 42 U.S.C. 3122; 42 U.S.C. 3171; 42 U.S.C. 3172; 42
U.S.C. 3196; Department of Commerce Organization Order 10-4.

39. Revise paragraph (a) and the introductory text to paragraph (c)
of Sec. 304.1 to read as follows:

Sec. 304.1 Designation of Economic Development Districts: Regional
eligibility.

* * * * *
(a) Contains at least one geographic area that is subject to the
economic

[[Page 76531]]

distress criteria set forth in Sec. 301.3(a)(1) of this chapter and is
identified in an approved CEDS;
* * * * *
(c) Has an EDA-approved CEDS that:
* * * * *
40. Revise paragraphs (c)(1), (c)(2), and (c)(4)(i) of Sec. 304.2
to read as follows:

Sec. 304.2 District Organizations: Formation, organizational
requirements and operations.

* * * * *
(c) Organization and governance.
(1) Each District Organization must meet the requirements of this
paragraph (c) concerning membership composition, the maintenance of
adequate staff support to perform its economic development functions,
and its authorities and responsibilities for carrying out economic
development functions. The District Organization's board of directors
(or other governing body) also must meet these requirements.
(2) The District Organization must demonstrate that its governing
body is broadly representative of the principal economic interests of
the Region, including the private sector, public officials, community
leaders, representatives of workforce development boards, institutions
of higher education, minority and labor groups, and private
individuals. In addition, the governing body must demonstrate the
capacity to implement the EDA-approved CEDS.
* * * * *
(4) * * *
(i) The District Organization must hold meetings open to the public
at least twice a year and also shall publish the date and agenda of
such meetings sufficiently in advance to allow the public a reasonable
time to prepare in order to participate effectively.
* * * * *
41. Revise paragraph (b) introductory text of Sec. 304.3 to read
as follows:

Sec. 304.3 District modification and termination.

* * * * *
(b) Termination. EDA may, upon 60 days prior written notice to the
District Organization, member counties, and other areas determined by
EDA and each affected State, terminate a Region's designation as an
Economic Development District when:
* * * * *
42. Revise paragraphs (a) introductory text, (a)(3), and (b) of
Sec. 304.4 to read as follows:

Sec. 304.4 Performance evaluations.

(a) EDA shall evaluate the management standards, financial
accountability and program performance of each District Organization
within three years after the initial Investment award and at least once
every three years thereafter, so long as the District Organization
continues to receive Investment Assistance. EDA's evaluation shall
assess:
* * * * *
(3) The implementation of the CEDS, including the District
Organization's performance and contribution towards the retention and
creation of employment, as set forth in Sec. 303.7 of this chapter.
(b) For peer review, EDA shall ensure the participation of at least
one other District Organization in the performance evaluation on a
cost-reimbursement basis.

PART 305--PUBLIC WORKS AND ECONOMIC DEVELOPMENT INVESTMENTS

43. The authority citation for part 305 continues to read as
follows:

Authority: 42 U.S.C. 3211; 42 U.S.C. 3141; Department of
Commerce Organization Order 10-4.

44. Revise Sec. 305.1 to read as follows:

Sec. 305.1 Purpose and scope.

Public Works and Economic Development Investments (``Public Works
Investments'') intend to help the nation's most distressed communities
revitalize, expand, and upgrade their physical infrastructure to
attract new industry, encourage business expansion, diversify local
economies, and generate or retain long-term private sector jobs and
investments. The primary goal of these Investments is to create new or
retain existing, long-term private sector job opportunities in
communities experiencing significant economic distress as evidenced by
chronic high unemployment, underemployment, low per capita income,
outmigration, or a Special Need. These Investments also intend to
assist communities in attracting private capital investment and new and
better job opportunities and to promote the successful long-term
economic recovery of a Region.
45. Revise paragraph (c) of Sec. 305.2 to read as follows:

Sec. 305.2 Award requirements.

* * * * *
(c) Not more than 15 percent of the annual appropriations made
available to EDA to fund Public Works Investments may be made in any
one State.
46. Revise paragraphs (a) introductory text, (a)(1), and (b) of
Sec. 305.6 to read as follows:

Sec. 305.6 Allowable methods of procurement for construction
services.

(a) Recipients shall seek EDA's prior written approval to use
alternate construction procurement methods to the traditional design/
bid/build procedures (including lump sum or unit price-type
construction contracts). These alternate methods may include design/
build, construction management at risk, and force account. If an
alternate method is used, the Recipient shall submit to EDA for
approval a construction services procurement plan and the Recipient
must use a design professional to oversee the process. The Recipient
shall submit the plan to EDA prior to advertisement for bids and shall
include the following, as applicable:
(1) Justification for the proposed method for procurement of
construction services, including a brief analysis of the
appropriateness and benefits of using the method to successfully
execute the Project and the Recipient's experience in using the method;
* * * * *
(b) For all procurement methods, the Recipient must comply with the
procedures and standards set forth in 15 CFR parts 14 or 24, as
applicable.
47. Revise paragraphs (a) and (c) of Sec. 305.8 to read as
follows:

Sec. 305.8 Recipient-furnished equipment and materials.

* * * * *
(a) EDA must approve any use of Recipient-furnished equipment and
materials. EDA may require that major equipment items be subject to a
lien in favor of EDA and also may require a statement from the
Recipient regarding expected useful life and salvage value of such
equipment;
* * * * *
(c) Acquisition of Recipient-furnished equipment or materials under
this section also is subject to the requirements of 15 CFR parts 14 or
24, as applicable.
48. Revise Sec. 305.10 to read as follows:

Sec. 305.10 Bid underrun and overrun.

(a) Underrun. If at the construction contract bid opening, the
lowest responsive bid is less than the total Project cost, the
Recipient shall notify EDA immediately to determine relevant
procedures.
(b) Overrun.
(1) In the case of an overrun at the construction contract bid
opening, the Recipient may:
(i) If provided for in the bid documents, take deductive
alternatives

[[Page 76532]]

to eliminate certain Project elements in case of insufficient funds in
the exact order shown on the invitation for bid until at least one of
the responsive bids, less deductive alternative(s), results in a price
within the budget for that item of work;
(ii) Reject all bids and re-advertise if there is a rational basis
to expect that re-advertising will result in a lower bid; or
(iii) Augment the Matching Share by an amount sufficient to cover
the excess cost. The Recipient must furnish a letter to EDA identifying
the source of the additional funds and confirming that the Matching
Share meets the requirements of Sec. 301.5 of this chapter.
(2) If the Recipient demonstrates to EDA's satisfaction that the
options listed in paragraph (b)(1) of this section are not feasible and
the Project cannot be completed otherwise, the Recipient may submit a
written request to EDA for additional funding in accordance with
applicable EDA guidance. The award of additional Investment Assistance
is at EDA's sole discretion and will be considered in accord with EDA's
competitive process requirements. EDA's consideration of a request for
additional Investment Assistance does not indicate approval.

PART 306--TRAINING, RESEARCH AND TECHNICAL ASSISTANCE INVESTMENTS

49. The authority citation for part 306 continues to read as
follows:

Authority: 42 U.S.C. 3147; 42 U.S.C. 3196; 42 U.S.C. 3211;
Department of Commerce Organization Order 10-4.

50. Revise paragraph (a) introductory text of Sec. 306.1 to read
as follows:

Sec. 306.1 Purpose and scope.

(a) Local and National Technical Assistance Investments may be
awarded to:
* * * * *
51. Revise paragraph (a) of Sec. 306.3 to read as follows:

Sec. 306.3 Application requirements.

(a) EDA will provide Investment Assistance under this subpart for
the period of time required to complete the Project's scope of work,
generally not to exceed 12 to 18 months.
* * * * *
52. Revise Sec. 306.4 to read as follows:

Sec. 306.4 Purpose and scope.

The University Center Economic Development Program is intended to
help improve the economies of distressed Regions. Institutions of
higher education have many assets, such as faculty, staff, libraries,
laboratories, and computer systems that can address local economic
problems and opportunities. With Investment Assistance, institutions of
higher education establish and operate research centers (``University
Centers'') that provide technical assistance to public and private
sector organizations with the goal of enhancing local economic
development.
53. Revise paragraph (d) of Sec. 306.6 to read as follows:

Sec. 306.6 Application requirements.

* * * * *
(d) At least 80 percent of EDA funding must be allocated to direct
costs of program delivery.
54. Revise paragraphs (a)(1) and (c) of Sec. 306.7 to read as
follows:

Sec. 306.7 Performance evaluations of University Centers.

(a) * * *
(1) Evaluate each University Center within three years after the
initial Investment award and at least once every three years
thereafter, so long as such University Center continues to receive
Investment Assistance; and
* * * * *
(c) For peer review, EDA shall ensure the participation of at least
one other University Center in the performance evaluation on a cost-
reimbursement basis.

PART 307--ECONOMIC ADJUSTMENT ASSISTANCE INVESTMENTS

55. The authority citation of part 307 continues to read as
follows:

Authority: 42 U.S.C. 3211; 42 U.S.C. 3149; 42 U.S.C. 3161; 42
U.S.C. 3162; 42 U.S.C. 3233; Department of Commerce Organization
Order 10-4.

56. Revise the introductory text and paragraph (b) of Sec. 307.1
to read as follows:

Sec. 307.1 Purpose.

The purpose of Economic Adjustment Assistance Investments is to
address the needs of communities experiencing adverse economic changes
that may occur suddenly or over time, including those caused by:
* * * * *
(b) Federally Declared Disasters;
* * * * *
57. Revise paragraph (b)(2) of Sec. 307.3 as follows:

Sec. 307.3 Use of Economic Adjustment Assistance Investments.

* * * * *
(b) * * *
(2) Provision of business or infrastructure financing through the
capitalization of Recipient-administered Revolving Loan Funds
(``RLFs''), which may include loans and interest rate buy-downs to
facilitate business lending activities;
* * * * *
58. Amend Sec. 307.4 to:
a. Revise paragraphs (a), (b), (c)(2), and (d); and
b. Add paragraph (c)(3) to read as follows:

Sec. 307.4 Award requirements.

(a) General. EDA will select Economic Adjustment Assistance
Projects in accordance with part 301 of this chapter and the additional
criteria provided in paragraphs (b), (c), and (d) of this section, as
applicable. Funding priority considerations for Economic Adjustment
Assistance, including RLF Grants, may be set forth in an FFO.
(b) Strategy Grants. EDA will review Strategy Grant applications to
ensure that the proposed activities conform to the CEDS requirements
set forth in Sec. 303.7 of this chapter. Strategy Grants shall comply
with the applicable provisions of part 303 of this chapter.
(c) * * *
(2) Implementation Grants involving construction shall comply with
the provisions of subpart B of part 305 of this chapter.
(3) Implementation Grants that do not involve construction shall
comply with the applicable provisions of subpart A of part 306 of this
chapter.
(d) See Sec. 307.7 for RLF award requirements.

Sec. 307.6 [Removed]

59. Remove Sec. 307.6.
60. Revise the heading of subpart B to read as follows:

Subpart B--Revolving Loan Fund Program

61. Redesignate Sec. 307.7 as Sec. 307.6 and revise newly
redesignated Sec. 307.6 to read as follows:

Sec. 307.6 Revolving Loan Funds established for business lending.

Economic Adjustment Assistance Grants to capitalize or recapitalize
RLFs most commonly fund business lending, but also may fund public
infrastructure or other authorized lending activities. The requirements
in this subpart B apply to RLFs established for business lending
activities. Special award conditions may contain appropriate
modifications of these requirements to accommodate non-business RLF
awards.
62. Add Sec. 307.7 to read as follows:

[[Page 76533]]

Sec. 307.7 Revolving Loan Fund award requirements.

(a) For Eligible Applicants seeking to capitalize or recapitalize
an RLF, EDA will review applications for the following, as applicable:
(1) Need for a new or expanded public financing tool to:
(i) Enhance other business assistance programs and services
targeting economic sectors and locations described in the CEDS; or
(ii) Provide appropriate support for post-disaster economic
recovery efforts in Presidentially Declared Disaster areas;
(2) Types of financing activities anticipated; and
(3) Capacity of the RLF organization to manage lending activities,
create networks between the business community and other financial
providers, and implement the CEDS.
(b) RLF Grants shall comply with the requirements set forth in this
part and in the following publications:
(1) EDA's RLF Standard Terms and Conditions; and
(2) The Compliance Supplement to OMB Circular A-133. The Compliance
Supplement is available via the Internet at http://www.omb.gov.
63. Revise paragraphs (a)(2), (b)(2)(ii), (b)(3), (c)(1), and
(c)(2) of Sec. 307.9 to read as follows:

Sec. 307.9 Revolving Loan Fund Plan.

* * * * *
(a) * * *
(2) Part II of the Plan titled ``Operational Procedures'' must
serve as the RLF Recipient's internal operating manual and set out
administrative procedures for operating the RLF consistent with
``Prudent Lending Practices,'' as defined in Sec. 307.8, the RLF
Recipient's environmental review and compliance procedures as set out
in Sec. 307.10, and EDA's conflicts of interest rules set out in Sec.
302.17 of this chapter.
(b) * * *
(2) * * *
(ii) Financing policies and portfolio standards that are consistent
with EDA's policies and requirements; and
(3) The Plan must demonstrate an adequate understanding of
commercial loan portfolio management procedures, including loan
processing, underwriting, closing, disbursements, collections,
monitoring, and foreclosures. It also shall provide sufficient
administrative procedures to prevent conflicts of interest and to
ensure accountability, safeguarding of assets, and compliance with
Federal and local laws.
(c) * * *
(1) An RLF Recipient must update its Plan as necessary in
accordance with changing economic conditions in the Region; however, at
a minimum, an RLF Recipient must submit an updated Plan to EDA every
five years.
(2) An RLF Recipient must notify EDA of any change(s) to its Plan.
Any material modification, such as a merger, consolidation, or change
in the EDA-approved lending area under Sec. 307.18, a change in
critical management staff, or a change to the strategic purpose of the
RLF, must be submitted to EDA for approval prior to any revision of the
Plan. If EDA approves the modification, the RLF Recipient must submit
an updated Plan to EDA in electronic format, unless EDA approves a
paper submission.
64. Revise paragraphs (a) and (b) of Sec. 307.10 to read as
follows:

Sec. 307.10 Pre-loan requirements.

(a) RLF Recipients must adopt procedures to review the impacts of
prospective loan proposals on the physical environment. The Plan must
provide for compliance with applicable environmental laws and other
regulations, including parts 302 and 314 of this chapter. The RLF
Recipient also must adopt procedures to comply, and ensure that
potential borrowers comply, with applicable environmental laws and
regulations.
(b) RLF Recipients must ensure that prospective borrowers,
consultants, or contractors are aware of and comply with the Federal
statutory and regulatory requirements that apply to activities carried
out with RLF loans. Accordingly, RLF loan agreements shall include
applicable Federal requirements to ensure compliance and RLF Recipients
must adopt procedures to diligently correct instances of non-
compliance, including loan call stipulations.
* * * * *
65. Revise paragraphs (b), (d), (e), and (f)(2) of Sec. 307.11 to
read as follows:

Sec. 307.11 Disbursement of funds to Revolving Loan Funds.

* * * * *
(b) Timing of request for disbursements. An RLF Recipient shall
request disbursements of Grant funds only to close a loan or disburse
RLF funds to a borrower. The RLF Recipient must disburse the RLF funds
to a borrower within 30 days of receipt of the Grant funds. Any Grant
funds not disbursed within the 30 day period shall be refunded to EDA
pursuant to paragraph (e) of this section.
* * * * *
(d) Interest-bearing account. All grant funds disbursed by EDA to
the RLF Recipient for loan obligations incurred but not yet disbursed
to an eligible RLF borrower must be deposited and held in an interest-
bearing account by the Recipient until an RLF loan is made to a
borrower.
(e) Delays. If the RLF Recipient receives Grant funds and the RLF
loan disbursement is subsequently delayed beyond 30 days, the RLF
Recipient must notify the applicable grants officer and return such
non-disbursed funds to EDA. Grant funds returned to EDA shall be
available to the RLF Recipient for future draw-downs. When returning
prematurely drawn Grant funds, the RLF Recipient must clearly identify
on the face of the check or in the written notification to the
applicable grants officer ``EDA,'' the Grant award number, the words
``Premature Draw,'' and a brief description of the reason for returning
the Grant funds.
(f) * * *
(2) When an RLF has a combination of In-Kind Contributions and cash
Local Share, the cash Local Share and the Grant funds will be disbursed
proportionately as needed for lending activities, provided that the
last 20 percent of the Grant funds may not be disbursed until all cash
Local Share has been expended. The full amount of the cash Local Share
shall remain for use in the RLF.
66. Revise paragraphs (a)(1), (a)(2), and (b) introductory text of
Sec. 307.12 to read as follows:

Sec. 307.12 Revolving Loan Fund Income.

(a) * * *
(1) Such RLF Income and the administrative costs are incurred in
the same six-month Reporting Period;
(2) RLF Income that is not used for administrative costs during the
six-month Reporting Period is made available for lending activities;
* * * * *
(b) Compliance guidance. When charging costs against RLF Income,
RLF Recipients must comply with applicable Federal cost principles and
audit requirements as found in:
* * * * *
67. Revise paragraphs (a) introductory text, (b)(2), and (b)(3) of
Sec. 307.13 to read as follows:

Sec. 307.13 Records and retention.

(a) Closed Loan files and related documents. The RLF Recipient
shall maintain Closed Loan files and all related documents, books of
account, computer data files, and other records over the term of the
Closed Loan and for a three-year period from the date of final
disposition of such Closed Loan. The

[[Page 76534]]

date of final disposition of a Closed Loan is the date:
* * * * *
(b) * * *
(2) Retain records of administrative expenses incurred for
activities and equipment relating to the operation of the RLF for three
years from the actual submission date of the last semi-annual report
that covers the Reporting Period in which such costs were claimed.
(3) Make available for inspection retained records, including those
retained for longer than the required period. The record retention
periods described in this section are minimum periods and such
prescription does not limit any other record retention requirement of
law or agreement. In no event will EDA question claimed administrative
costs that are more than three years old, unless fraud is at issue.
68. Revise paragraph (c) of Sec. 307.14 to read as follows:

Sec. 307.14 Revolving Loan Fund semi-annual report and Income and
Expense Statement.

* * * * *
(c) RLF Income and Expense Statement. An RLF Recipient using either
50 percent or more (or more than $100,000) of RLF Income for
administrative costs in a six-month Reporting Period must submit to EDA
a completed Income and Expense Statement (Form ED-209I or any successor
form) for that Reporting Period in electronic format, unless EDA
approves a paper submission. EDA may waive this requirement for an RLF
Grant with a small RLF Capital base, as determined by EDA.
69. Revise paragraphs (b)(1), (c)(1), (c)(2), and (d)(1)
introductory text, and (d)(1)(iii) of Sec. 307.15 to read as follows:

Sec. 307.15 Prudent management of Revolving Loan Funds.

* * * * *
(b) * * *
(1) Within 60 days prior to the initial disbursement of EDA funds,
a qualified independent accountant who preferably has audited the RLF
Recipient in accordance with OMB Circular A-133 requirements, shall
certify to EDA and the RLF Recipient that such system is adequate to
identify, safeguard, and account for all RLF Capital, outstanding RLF
loans, and other RLF operations.
* * * * *
(c) * * *
(1) General rule. An RLF Recipient may make loans to eligible
borrowers at interest rates and under conditions determined by the RLF
Recipient to be appropriate in achieving the goals of the RLF. The
minimum interest rate an RLF Recipient may charge is four percentage
points below the lesser of the current money center prime interest rate
quoted in the Wall Street Journal, or the maximum interest rate allowed
under State law. In no event shall the interest rate be less than the
lower of four percent or 75 percent of the prime interest rate listed
in the Wall Street Journal.
(2) Exception. Should the prime interest rate listed in the Wall
Street Journal exceed 14 percent, the minimum RLF interest rate is not
required to be raised above 10 percent if doing so compromises the
ability of the RLF Recipient to implement its financing strategy.
(d) * * *
(1) RLF loans must leverage private investment of at least two
dollars for every one dollar of such RLF loans. This leveraging
requirement applies to the RLF portfolio as a whole rather than to
individual loans and is effective for the duration of the RLF's
operation. To be classified as leveraged, private investment must be
made within 12 months of approval of an RLF loan, as part of the same
business development project, and may include:
* * * * *
(iii) The non-guaranteed portions and 90 percent of the guaranteed
portions of a Federal loan, including the U.S. Small Business
Administration's 7(A) loans and 504 debenture loans and U.S. Department
of Agriculture loans.
* * * * *
70. Revise paragraphs (a)(1), (a)(2)(i), (c)(1), (c)(2)(i), (d)(1)
introductory text, and (d)(1)(i) of Sec. 307.16 to read as follows:

Sec. 307.16 Effective utilization of Revolving Loan Funds.

(a) * * *
(1) RLF loan activity must be sufficient to draw down Grant funds
in accordance with the schedule prescribed in the award conditions for
loan closings and disbursements to eligible RLF borrowers. The schedule
usually requires that the RLF Recipient lend the entire amount of the
initial RLF Capital base within three years of the Grant award.
(2) * * *
(i) Closed Loans approved prior to the schedule deadline will
commence and complete disbursements within 45 days of the deadline;
* * * * *
(c) * * *
(1) During the Revolving Phase, RLF Recipients must manage their
repayment and lending schedules to provide that at all times at least
75 percent of the RLF Capital is loaned or committed, except that EDA
may require an RLF Recipient with an RLF Capital base in excess of $4
million to adopt a Plan that maintains a proportionately higher
percentage of its funds loaned.
(2) * * *
(i) Sequestration of excess funds. If the RLF Recipient fails to
satisfy the capital utilization standard for two consecutive Reporting
Periods, EDA may require the RLF Recipient to deposit excess funds in
an interest-bearing account. The portion of interest earned on the
account holding excess funds attributable to the Federal Share (as
defined in Sec. 314.5 of this chapter) of the RLF Grant shall be
remitted to the U.S. Treasury. The RLF Recipient must obtain EDA's
written authorization to withdraw any sequestered funds.
* * * * *
(d) * * *
(1) EDA shall monitor the RLF Recipient's loan default rate to
ensure proper protection of the Federal Share of the RLF property, and
request information from the RLF Recipient as necessary to determine
whether it is collecting loan repayments and complying with the
financial obligations under the RLF Grant. Such information may
include:
(i) A written analysis of the RLF Recipient's portfolio, which
shall consider the Recipient's RLF Plan, loan and collateral policies,
loan servicing and collection policies and procedures, the rate of
growth of the RLF Capital base, and
* * * * *
71. Revise paragraphs (b)(6)(ii) and (c) of Sec. 307.17 to read as
follows:

Sec. 307.17 Uses of capital.

* * * * *
(b) * * *
(6) * * *
(ii) RLF Capital will finance the purchase of the rights of a prior
lien holder during a foreclosure action which is necessary to preclude
a significant loss on an RLF loan. RLF Capital may be used for this
purpose only if there is a high probability of receiving compensation
from the sale of assets sufficient to cover an RLF's costs plus a
reasonable portion of the outstanding RLF loan within a reasonable
period of time, as determined by EDA, following the date of
refinancing.
(c) Compliance and Loan Quality Review. To ensure that the RLF
Recipient makes eligible RLF loans consistent with its RLF Plan or such
other purposes approved by EDA, EDA

[[Page 76535]]

may require an independent third party to conduct a compliance and loan
quality review for the RLF Grant every three years. The RLF Recipient
may undertake this review as an administrative cost associated with the
RLF's operations provided the requirements set forth in Sec. 307.12
are satisfied.
* * * * *
72. Amend Sec. 307.18 to revise the section heading, the heading
of paragraph (b), and paragraphs (a)(1), (b)(1) introductory text,
(b)(1)(ii), (b)(1)(iii), and (b)(2) introductory text to read as
follows:

Sec. 307.18 Addition of lending areas; consolidation and merger of
RLFs.

(a)(1) Addition of lending areas. An RLF Recipient shall make loans
only within its EDA-approved lending area, as set forth and defined in
the RLF Grant and the Plan. An RLF Recipient may add a lending area (an
``Additional Lending Area'') to its existing lending area to create a
new merged lending area (the ``New Lending Area'') only with EDA's
prior written approval and subject to the following provisions and
conditions:
(i) The Additional Lending Area must meet the economic distress
criteria for Economic Adjustment Assistance Investments under this part
and in accordance with Sec. 301.3(a) of this chapter;
(ii) Prior to EDA's disbursement of additional funds to the RLF
Recipient (for example, through a recapitalization), EDA shall
determine a new Investment Rate for the New Lending Area based on the
criteria set forth in Sec. 301.4 of this chapter;
(iii) The RLF Recipient must demonstrate that the Additional
Lending Area is consistent with its CEDS, or modify its CEDS for any
such Additional Lending Area, in accordance with Sec. 307.9(b)(1);
(iv) The RLF Recipient shall modify its Plan to incorporate the
Additional Lending Area and revise its lending strategy, as necessary;
(v) The RLF Recipient shall execute an amended financial assistance
award, as necessary; and
(vi) The RLF Recipient fulfills any other conditions reasonably
requested by EDA.
* * * * *
(b) Consolidation and merger of RLFs--
(1) Single RLF Recipient. An RLF Recipient with more than one EDA-
funded RLF Grant may consolidate two or more EDA-funded RLFs into one
surviving RLF with EDA's prior written approval and provided:
* * * * *
(ii) It demonstrates a rational basis for undertaking the
consolidation (for example, the lending area(s) and borrower criteria
identified in different RLF Plans are compatible, or will be
compatible, for all RLFs to be consolidated);
(iii) It amends and consolidates its Plan to account for the
consolidation of RLFs, including items such as the New Lending Area
(including any Additional Lending Area(s)), its lending strategy, and
borrower criteria;
* * * * *
(2) Multiple RLF Recipients. Two or more RLF Recipients may merge
their EDA-funded RLFs into one surviving RLF with EDA's prior written
approval and provided:
* * * * *
73. Amend Sec. 307.19 to remove paragraph (b), redesignate
paragraphs (c) and (d) as paragraphs (b) and (c), and revise newly
designated paragraph (c) to read as follows:

Sec. 307.19 RLF loan portfolio Sales and Securitizations.

* * * * *
(c) Except as provided in paragraph (b), no provision of this
section supersedes or otherwise affects the application of the
``securities laws'' (as such term is defined in section 3(a)(47) of the
Exchange Act) or the rules, regulations or orders issued by the
Commission or a self-regulatory organization under the Commission.
74. Revise paragraphs (a) introductory text, (a)(1), (a)(2), and
(c)(3) of Sec. 307.20 to read as follows:

Sec. 307.20 Partial liquidation; liquidation upon termination.

(a) Partial liquidation or disallowance of a portion of an RLF
Grant. If the RLF Recipient engages in certain problematic practices,
EDA may disallow a corresponding proportion of the Grant or direct the
RLF Recipient to transfer loans to an RLF Third Party for liquidation.
Problematic practices for which EDA may disallow a portion of an RLF
Grant and recover the pro-rata Federal Share (as defined in Sec. 314.5
of this chapter) include the RLF Recipient:
(1) Having RLF loans that are more than 120 days delinquent;
(2) Having excess cash sequestered for 12 months or longer and EDA
has not approved an extension request;
* * * * *
(c) * * *
(3) EDA may enter into an agreement with the RLF Third Party to
liquidate the assets of one or more RLFs or RLF Recipients;
* * * * *
75. Revise paragraphs (a)(1) introductory text and (a)(1)(viii) of
Sec. 307.21 to read as follows:

Sec. 307.21 Termination of Revolving Loan Funds.

(a)(1) EDA may suspend or terminate an RLF Grant for cause,
including the RLF Recipient's failure to:
* * * * *
(viii) Comply with the audit requirements set forth in OMB Circular
A-133 and the related Compliance Supplement, including reference to the
correctly valued EDA RLF Federal expenditures in the Schedule of
Expenditures of Federal Awards (``SEFA''), timely submission of audit
reports to the Federal Audit Clearinghouse, and the correct designation
of the RLF as a ``major program'' (as that term is defined in OMB
Circular A-133);
* * * * *

PART 308--PERFORMANCE INCENTIVES

76. The authority citation for part 308 continues to read as
follows:

Authority: 42 U.S.C. 3151; 42 U.S.C. 3154a; 42 U.S.C. 3154b;
Department of Commerce Delegation Order 10-4.

77. Revise paragraphs (a), (b) introductory text, (c), and (d) of
Sec. 308.2 to read as follows:

Sec. 308.2 Performance awards.

(a) A Recipient of Investment Assistance under parts 305 or 307 of
this chapter may receive a performance award in connection with an
Investment made on or after the date of enactment of section 215 of
PWEDA in an amount not to exceed 10 percent of the amount of the
Investment award.
(b) To receive a performance award, a Recipient must demonstrate
Project performance in one or more of the areas listed in this
paragraph, weighted at the discretion of the Assistant Secretary:
* * * * *
(c) A Recipient may receive a performance award no later than three
years following the Project's closeout.
(d) A performance award may fund up to 100 percent of the cost of
an eligible Project or any other authorized activity under PWEDA. For
the purpose of meeting the non-Federal share requirement of PWEDA or
any other statute, the amount of a performance award shall be treated
as non-Federal funds.
* * * * *

[[Page 76536]]

78. Revise paragraphs (a) introductory text, (a)(2), (a)(3), and
(b) of Sec. 308.3 to read as follows:

Sec. 308.3 Planning performance awards.

(a) A Recipient of Investment Assistance awarded on or after the
date of enactment of section 216 of PWEDA for a Project located in an
EDA-funded Economic Development District may, at the discretion of the
Assistant Secretary, receive a planning performance award in an amount
not to exceed five percent of the amount of the applicable Investment
award if EDA determines before closeout of the Project that:
* * * * *
(2) The Project demonstrated exceptional fulfillment of one or more
components of, and is otherwise in accordance with, the applicable
CEDS, including any job creation or job retention requirements; and
(3) The Recipient demonstrated exceptional collaboration with
Federal, State, and local economic development entities throughout the
development of the Project.
(b) The Recipient shall use the planning performance award to
increase, up to 100 percent, the Federal share of the cost of a Project
under this chapter.
* * * * *

PART 310--SPECIAL IMPACT AREAS

79. The authority citation for part 310 continues to read as
follows:

Authority: 42 U.S.C. 3154; Department of Commerce Organization
Order 10-4.

80. Revise the introductory text of Sec. 310.1 to read as follows:

Sec. 310.1 Special Impact Area.

Upon the application of an Eligible Applicant, and with respect to
that Eligible Applicant's Project only, the Assistant Secretary may
designate the Region which the Project will serve as a Special Impact
Area if the Eligible Applicant demonstrates that its proposed Project
will:
* * * * *
81. Revise paragraphs (a)(6), (b), and (c) introductory text of
Sec. 310.2 to read as follows:

Sec. 310.2 Pressing need; alleviation of unemployment or
underemployment.

(a) * * *
(6) Has been designated as a Federally Declared Disaster area; or
* * * * *
(b) For purposes of this part, excessive unemployment exists if the
24-month unemployment rate is at least 225 percent of the national
average or the per capita income is not more than 50 percent of the
national average. A Region demonstrates excessive underemployment if
the employment of a substantial percentage of workers in the Region is
less than full-time or at less skilled tasks than their training or
abilities would otherwise permit. Eligible Applicants seeking a Special
Impact Area designation under this criterion must present appropriate
and compelling economic and demographic data.
(c) Eligible Applicants may demonstrate the provision of useful
employment opportunities by quantifying and evidencing the Project's
prospective:
* * * * *
82. Revise the heading of reserved part 311 to read as follows:

PART 311--AMERICA COMPETES [RESERVED]

PART 314--PROPERTY

83. The authority citation for part 314 continues to read as
follows:

Authority: 42 U.S.C. 3211; Department of Commerce Organization
Order 10-4.

84. Amend part 314 so that Sec. Sec. 314.1 through 314.6 are no
longer designated as subpart A. and remove the heading ``Subpart A--
General.''
85. Revise the definition of Real Property in Sec. 314.1 to read
as follows:

Sec. 314.1 Definitions.

* * * * *
Real Property means any land, whether raw or improved, and includes
structures, fixtures, appurtenances, and other permanent improvements,
excluding moveable machinery and equipment. Real Property includes land
that is improved by the construction of Project infrastructure such as
roads, sewers, and water lines that are not situated on or under the
land, where the infrastructure contributes to the value of such land as
a specific purpose of the Project.
* * * * *
86. Revise paragraphs (a), (b), and (c) of Sec. 314.3 to read as
follows:

Sec. 314.3 Authorized Use of Property.

(a) During the Estimated Useful Life of the Project, the Recipient
or Owner must use any Property acquired or improved in whole or in part
with Investment Assistance only for authorized Project purposes as set
out in the terms and conditions of the Investment Assistance. Such
Property must not be Disposed of or encumbered without EDA's prior
written authorization.
(b) Where EDA and the Recipient determine during the Estimated
Useful Life of the Project that Property acquired or improved in whole
or in part with Investment Assistance is no longer needed for the
original purpose of the Investment Assistance, EDA, in its sole
discretion, may approve the use of such Property in other Federal grant
programs or in programs that have purposes consistent with those
authorized by PWEDA and by this chapter.
(c) Where EDA determines that the authorized purpose of the
Investment Assistance is to develop Real Property to be leased or sold,
such sale or lease is permitted provided it is for Adequate
Consideration and the sale is consistent with the authorized purpose of
the Investment Assistance and with all applicable Investment Assistance
requirements, including nondiscrimination and environmental compliance.
* * * * *
87. Revise paragraph (c) of Sec. 314.4 to read as follows:

Sec. 314.4 Unauthorized Use of Property.

* * * * *
(c) Where the Disposition, encumbrance, or use of any Property
violates paragraphs (a) or (b) of this section, EDA may assert its
interest in the Property to recover the Federal Share for the Federal
government and may take such actions as authorized by PWEDA and this
chapter, including the actions provided in Sec. Sec. 302.3, 302.16,
and 307.21 of this chapter. EDA may pursue its rights under paragraph
(a) of this section and this paragraph (c) to recover the Federal
Share, plus costs and interest. When the Federal government is fully
compensated for the Federal Share, the Federal Interest is extinguished
as provided in Sec. 314.2(b), and EDA will have no further interest in
the ownership, use, or Disposition of the Property.
88. Revise paragraph (b) of Sec. 314.5 to read as follows:

Sec. 314.5 Federal Share.

* * * * *
(b) The Federal Share excludes that portion of the current fair
market value of the Property attributable to acquisition or
improvements before or after EDA's participation in the Project, which
are not included in the total Project costs. For example, if the total
Project costs are $100, consisting of $50 of Investment Assistance and
$50 of Matching Share, the Federal Share is 50 percent. If the Property
is disposed of when its current fair market is $250, the Federal Share
is $125 (i.e., 50 percent of

[[Page 76537]]

$250). If $10 is spent to put the Property into salable condition, the
Federal Share is $120 (i.e., 50 percent of ($250-$10)).
89. Revise paragraph (b) of Sec. 314.6 to read as follows:

Sec. 314.6 Encumbrances.

* * * * *
(b) Exceptions. Subject to EDA's approval, which will not be
unreasonably withheld or unduly delayed, paragraph (a) of this section
does not apply in the following circumstances:
(1) Shared first lien position. EDA, at its discretion, may approve
an encumbrance on Project Property where a lien holder and EDA enter
into an inter-creditor agreement pursuant to which EDA and the other
lien holder share a first lien position on terms satisfactory to EDA.
(2) Utility encumbrances. Encumbrances arising solely from the
requirements of a pre-existing water or sewer facility or other utility
encumbrances, which by their terms extend to additional Property
connected to such facilities.
(3) Pre-existing encumbrances. Encumbrances already in place at the
time EDA approves the Project, where EDA determines that the
requirements of Sec. 314.7(b) of this chapter are met.
(4) Encumbrances proposed proximate to Project approval.
Encumbrances required to secure debt, including time and maturity-
limited debt, that finances the Project Property at the same proximate
time that EDA approves the Project when all of the following are met:
(i) EDA, in its sole discretion, determines that there is good
cause and legal authority to waive paragraph (a) of this section;
(ii) All proceeds secured by the encumbrance on the Property shall
be available only to the Recipient and shall be used only for the
Project for which the Investment Assistance applies, for related
activities of which the Project is an essential part, or other
activities that EDA determines are authorized under PWEDA;
(iii) A grantor or lender will not provide funds without the
security of a lien on the Property;
(iv) The terms and conditions of the encumbrance are satisfactory
to EDA; and
(v) There is a reasonable expectation, as determined by EDA, that
the Recipient will not default on its obligations. In determining
whether an expectation is reasonable for purposes of this paragraph,
EDA shall take into account whether:
(A) A Recipient that is a non-profit organization is joined in the
Project with a co-Recipient that is a public body and all co-Recipients
are jointly and severally responsible;
(B) The non-profit organization is financially strong and is an
established organization with sufficient organizational life to
demonstrate stability over time;
(C) The approximate value of the Project Property so that the total
amount of all debt plus the Federal share of cost as reflected on the
EDA Investment award, and any amendments as applicable, does not exceed
the value of the Project Property as improved; and
(D) Such other factors as EDA deems appropriate.
(5) Encumbrances proposed after Project approval. Encumbrances
proposed to be incurred after Project approval where all of the
following are met:
(i) EDA, in its sole discretion, determines that there is good
cause and legal authority to waive paragraph (a) of this section;
(ii) All proceeds secured by the encumbrance on the Property shall
be available only to the Recipient and shall be used only for the
Project for which the Investment Assistance applies, for related
activities of which the Project is an essential part, or other
activities that EDA determines are authorized under PWEDA;
(iii) A grantor or lender will not provide funds without the
security of a lien on the Property;
(iv) The terms and conditions of the encumbrance are satisfactory
to EDA; and
(v) There is a reasonable expectation, as determined by EDA, that
the Recipient will not default on its obligations. In determining
whether an expectation is reasonable for purposes of this paragraph,
EDA shall take into account whether:
(A) A Recipient that is a non-profit organization is joined in the
Project with a co-Recipient that is a public body and all co-Recipients
are jointly and severally responsible;
(B) The non-profit organization is financially strong and is an
established organization with sufficient organizational life to
demonstrate stability over time;
(C) The Recipient's equity in the Project Property based on the
appraised value of the Project Property at the time the encumbrance is
requested so that the total amount of all debt plus the Federal share
of cost as reflected on the EDA Investment award, and any amendments as
applicable, does not exceed the value of the Project Property as
improved; and
(D) Such other factors as EDA deems appropriate.
* * * * *
90. Amend part 314 so that Sec. Sec. 314.7 and 314.8 are no longer
designated as subpart B, and remove the heading ``Subpart B--Real
Property.''
91. Amend Sec. 314.7 to:
a. Revise paragraph (a), the heading of (b), paragraphs (b)(1)
introductory text, (c)(1) introductory text, (c)(2) introductory text,
(c)(3), (c)(4) introductory text, and (c)(5); and
b. Remove paragraph (c)(6) to read as follows:

Sec. 314.7 Title.

(a) General title requirement. The Recipient must hold title to the
Real Property required for a Project at the time the Investment
Assistance is awarded or as provided by paragraph (c) of this section
and must maintain title at all times during the Estimated Useful Life
of the Project, except in those limited circumstances as provided in
paragraph (c) of this section. The Recipient also must furnish
evidence, satisfactory in form and substance to EDA, that title to Real
Property required for a Project (other than property of the United
States) is vested in the Recipient and that any easements, rights-of-
way, State or local government permits, long-term leases, or other
items required for the Project have been or will be obtained by the
Recipient within an acceptable time, as determined by EDA.
(b) Disclosure of encumbrances.
(1) The Recipient must disclose to EDA all encumbrances, including
the following:
* * * * *
(c) * * *
(1) Real Property acquisition. Where the acquisition of Real
Property required for a Project is contemplated as part of an
Investment Assistance award, EDA may determine that an agreement for
the Recipient to purchase the Real Property will be acceptable for
purposes of paragraph (a) of this section if:
* * * * *
(2) Leasehold interests. EDA may determine that a long-term
leasehold interest for a period not less than the Estimated Useful Life
of the Real Property required for a Project will be acceptable for
purposes of paragraph (a) of this section if:
* * * * *
(3) Railroad right-of-way construction. When a Project includes
construction within a railroad's right-of-way or over a railroad
crossing, EDA may find it acceptable for the work to be completed

[[Page 76538]]

by the railroad and for the railroad to continue to own, operate, and
maintain that portion of the Project, if required by the railroad; and
provided that, the construction is a minor but essential component of
the Project.
(4) Public highway construction. When the Project includes
construction on a public highway the owner of which is not the
Recipient, EDA may allow the Project to be constructed in whole or in
part in the right-of-way of such public highway, provided that:
* * * * *
(5) Construction of Recipient-owned facilities to serve Recipient
or privately owned Real Property.
(i) General. At EDA's discretion, when an authorized purpose of the
Project is to construct Recipient-owned facilities to serve Recipient
or privately owned Real Property, including industrial or commercial
parks, for sale or lease to private parties, such ownership, sale, or
lease, as applicable, is permitted so long as:
(A) In cases where an authorized purpose of the Project is to sell
Real Property, the Recipient or Owner, as applicable, provides evidence
sufficient to EDA that it holds title to the Real Property required for
such Project prior to the disbursement of any portion of the Investment
Assistance and will retain title until the sale of the Property;
(B) In cases where an authorized purpose of the Project is to lease
Real Property, the Recipient or Owner, as applicable, provides evidence
sufficient to EDA that it holds title to the Real Property required for
such Project prior to the EDA disbursement of any portion of the
Investment Assistance and will retain title for the entire Estimated
Useful Life of the Project;
(C) The Recipient provides adequate assurances that the Project and
the development of land and improvements on the Recipient or privately
owned Real Property to be served by or that provides the economic
justification for the Project will be completed according to the terms
of the Investment Assistance;
(D) The sale or lease of any portion of the Project or of Real
Property served by the Project or that provides the economic
justification for the Project during the Project's Estimated Useful
Life must be for Adequate Consideration and the terms and conditions of
the Investment Assistance and the purpose(s) of the Project must
continue to be fulfilled after such sale or lease; and
(E) The Recipient agrees that EDA may deem the termination,
cessation, abandonment, or other failure on behalf of the Recipient,
Owner, purchaser, or lessee (as the case may be) to complete the
Project or the development of land and improvements on Real Property
served by or that provides the economic justification for the Project
by the five-year anniversary of the award date of the Investment
Assistance constitutes a failure on behalf of the Recipient to use the
Real Property for the economic purposes justifying the Project.
(ii) Additional conditions on sale or lease. EDA also may condition
the sale or lease on the satisfaction by the Recipient, Owner,
purchaser, or lessee (as the case may be) of any additional
requirements that EDA may impose, including EDA's pre-approval of the
sale or lease.
(iii) Agreement between Recipient and Owner. In addition to
paragraphs (c)(5)(i) and (ii) of this section, when an authorized
purpose of the Project is to construct facilities to serve privately
owned Real Property, the Recipient and the Owner must agree to use the
Real Property improved or benefited by the EDA Investment Assistance
only for the authorized purposes of the Project and in a manner
consistent with the terms and conditions of the EDA Investment
Assistance for the Estimated Useful Life of the Project.
(iv) Unauthorized Use and compensation of Federal Share. EDA may
deem that a violation of this paragraph (c)(5) by the Recipient, Owner,
purchaser, or lessee (as the case may be) constitutes an Unauthorized
Use of the Real Property and the Recipient must agree to compensate EDA
for the Federal government's Federal Share of the Project in the case
of such Unauthorized Use.
92. Amend Sec. 314.8 to revise the section heading and add
paragraph (d) to read as follows:

Sec. 314.8 Recorded statement for Real Property.

* * * * *
(d) In extraordinary circumstances and at EDA's sole discretion,
EDA may choose to accept another instrument to protect EDA's interest
in Project Property, such as an escrow agreement or letter of credit,
provided that EDA determines such instrument is adequate and a recorded
statement in accord with paragraph (a) of this section is not
reasonably available. The terms and provisions of the relevant
instrument shall be satisfactory to EDA in EDA's sole judgment. The
costs and fees for escrow services and letters of credit shall be paid
by the Recipient.
93. Amend part 314 so that Sec. 314.9 is no longer designated as
subpart C, and remove the heading ``Subpart C--Personal Property.''
94. Revise Sec. 314.9 to read as follows:

Sec. 314.9 Recorded statement for Personal Property.

For all Projects which EDA determines involve the acquisition or
improvement of significant items of Personal Property, including ships,
machinery, equipment, removable fixtures, or structural components of
buildings, the Recipient shall execute a Uniform Commercial Code
Financing Statement (Form UCC-1, as provided by State law) or other
statement of EDA's interest in the Personal Property, acceptable in
form and substance to EDA, which statement must be perfected and placed
of record in accordance with applicable law, with continuances re-filed
as appropriate. Whether or not a statement is required by EDA to be
recorded, the Recipient must hold title to the Personal Property
acquired or improved as part of the Project, except as otherwise
provided in this part.
95. Amend part 314 so that Sec. 314.10 is no longer designated as
subpart D, and remove heading ``Subpart D--Release of EDA's Property
Interest.''
96. Revise Sec. 314.10 to read as follows:

Sec. 314.10 Procedures for release of EDA's Property interest.

(a) General. As provided in Sec. 314.2 of this chapter, the
Federal Interest in Property acquired or improved with Investment
Assistance extends for the duration of the Estimated Useful Life of the
Project. While EDA determines the length of the Estimated Useful Life
at the time of Investment award, in recent years, the length generally
extends for 15 to 20 years, depending on the nature of the improvement.
Prior to 1999, the Estimated Useful Life of some Projects, such as
water and wastewater Projects, could extend for 40 years or more. Upon
request of the Recipient, EDA will release the Federal Interest in
Project Property upon expiration of the Estimated Useful Life as
established in the terms and conditions of the Investment Assistance
and in accord with the requirements of this section and part. This
section provides procedures to govern the manner of obtaining a release
of the Federal Interest.
(b) Release of Property after the expiration of the Estimated
Useful Life. At the expiration of a Project's Estimated Useful Life and
upon the written request of a Recipient, the Assistant Secretary may
release the Federal Interest in Project Property if EDA determines that
the Recipient has

[[Page 76539]]

made a good faith effort to fulfill all terms and conditions of the
Investment Assistance. The determination provided for in this paragraph
shall be established at the time of the Recipient's written request and
shall be based, at least in part, on the facts and circumstances
provided in writing by the Recipient. For a Project in which a Recorded
Statement as provided for in Sec. Sec. 314.8 and 314.9 of this chapter
has been recorded, EDA will provide for the release by executing an
instrument in recordable form. The release will terminate the
Investment as of the date of its execution and satisfy the Recorded
Statement.
(c) Release prior to expiration of the Estimated Useful Life. If
the Recipient will no longer use the Project Property in accord with
the requirements of the terms and conditions of the Investment within
the time period of the Estimated Useful Life, EDA will determine if
such use by the Recipient constitutes an Unauthorized Use of Property
and require compensation for the Federal Interest as provided in Sec.
314.4 and this part. EDA may release the Federal Interest in connection
with such Property upon receipt of full payment in compensation of the
Federal Interest.
(d) Release of certain Property after 20 years. In accord with
section 601(d)(2) PWEDA, upon the request of a Recipient and before the
expiration of the Estimated Useful Life of a Project that exceeds 20
years, EDA may release any Real Property or tangible Personal Property
interest held by EDA, in connection with Investment Assistance after
the date that is 20 years after the date on which the Investment
Assistance was awarded.
(e) Limitations and Covenant of Use.
(1) EDA's release of the Federal Interest pursuant to this section
is not automatic; it requires EDA's approval, which will not be
withheld except for good cause or as otherwise required by law, as
determined in EDA's sole discretion. As deemed appropriate, EDA may
require the Recipient to take some action as a condition of the
release.
(2) In determining whether to release the Federal Interest, EDA
will review EDA's legal authority to release its interest, including
governing Establishment Clause law; the Recipient's performance under
and conformance with the terms and conditions of the Investment
Assistance; any use of Project Property in violation of Sec. Sec.
314.3 or 314.4 of this part; and other such factors as EDA deems
appropriate.
(3) Notwithstanding any release of the Federal Interest under this
section, a Recipient must ensure that Project Property is not used in
violation of nondiscrimination requirements. See Department of Commerce
regulations at 15 CFR part 8. Accordingly, upon the release of the
Federal Interest, the Recipient must execute a covenant of use that
prohibits use of Real Property or tangible Personal Property for any
purpose that would violate the nondiscrimination requirements set forth
in Sec. 302.20 of this chapter.
(i) With respect to Real Property, the Recipient must record a
covenant under this subsection in the jurisdiction where the Real
Property is located in accordance with Sec. 314.8.
(ii) With respect to items of tangible Personal Property, the
Recipient must perfect and record a covenant under this subsection in
accordance with applicable law, with continuances re-filed as
appropriate, in accordance with Sec. 314.9.

Dated: November 21, 2011.
John Fernandez,
Assistant Secretary for Economic Development, Economic Development
Administration.
[FR Doc. 2011-30578 Filed 12-6-11; 8:45 a.m.]
BILLING CODE 3510-24-P