[Federal Register Volume 79, Number 217 (Monday, November 10, 2014)]
[Notices]
[Pages 66692-66694]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26612]


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DEPARTMENT OF AGRICULTURE

Rural Utilities Service


Project Financing Loans, Grants, and Loan Guarantees

AGENCY: Rural Utilities Service, USDA.

ACTION: Request for Information and Notice of Listening Session.

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SUMMARY: The Rural Utilities Service (RUS) seeks public comments on 
implementing the provisions of Section 6019 of the Agricultural Act of 
2014 (2014 Farm Bill) relating to water and waste disposal direct and 
guaranteed loans. RUS is requesting written comments regarding the 
Section 6019 provisions and their relation to project financing 
requirements. This public input will allow all affected stakeholders to 
contribute to the development of agency procedures for implementing 
these provisions that will continue to support the agency's mission of 
facilitating the development of affordable, reliable utility 
infrastructure to improve the quality of life and promote economic 
development in rural America.
    As part of our implementation of the 2014 Farm Bill, RUS will be 
hosting a listening session. The listening session will provide an 
opportunity for stakeholders and other interested parties to offer 
their comments, concerns or requests regarding the implementation of 
these provisions. Instructions regarding registering for and attending 
the listening session are in the SUPPLEMENTARY INFORMATION of this 
notice.

DATES: Written Comments: Interested parties must submit written 
comments on or before January 9, 2015.
    Listening Session: The listening session will be on Wednesday, 
December 10, 2014, and will begin at 1:00 p.m. and is scheduled to end 
by 3:00 p.m. All Participants must register by Monday, December 8, 
2014. See the SUPPLEMENTARY INFORMATION section for additional guidance 
and information on the listening session.

ADDRESSES: Submit comments in either paper or electronic format by the 
following methods:
     Federal eRulemaking Portal at http://www.regulations.gov. 
Follow instructions for submitting comments.
     Postal Mail/Commercial Delivery: Please send your comment 
addressed to Michele Brooks, Director, Program Development and 
Regulatory Analysis, USDA Rural Development, 1400 Independence Avenue, 
STOP 1522, Room 5159, Washington, DC 20250- 1522.
    Listening Session: The listening session will be held in Room 5141-
S of the South Agriculture Building at 14th and Independence Avenue 
SW., Wing 1, Washington, DC 20250. We invite you to participate in the 
listening session. The listening session is open to all members of the 
public who register.

FOR FURTHER INFORMATION CONTACT: Pamela Bennett, USDA--Rural Utilities 
Service, 1400 Independence Avenue SW., Stop 1570, Washington, DC 20250-
1570, telephone (202) 720-9639 or email to [email protected].

SUPPLEMENTARY INFORMATION: 

Background

    RUS provides long term financing to rural communities for the 
development of water and waste disposal infrastructure under the Water 
and Waste Disposal (WWD) program. The WWD program is authorized under 
Section 306 of the Consolidated Farm and Rural Development Act 7 U.S.C. 
1926 et seq. (CONACT), to provide financing in the form of loans, 
grants, and loan guarantees to eligible applicants, including cities, 
towns, and unincorporated areas with no more than 10,000 inhabitants. 
This financial assistance is intended to reach communities in greatest 
need and to provide reasonable user costs for rural residents, 
businesses and other rural users.
    Section 6019 of the 2014 Farm Bill (Pub. L. 113-79) amended Section 
333 of the CONACT to require RUS to encourage, to the maximum extent 
practicable, private or cooperative lenders to finance rural water and 
waste disposal facilities. The section directs the agency to achieve 
this requirement through the following five provisions: (A) Maximizing 
the use of loan guarantees to finance eligible projects in rural 
communities in which the population exceeds 5,500; (B) maximizing the 
use of direct loans to finance eligible projects if there is a material 
impact on the rate payers when compared to a loan guarantee; (C) 
establishing and applying a ``materiality standard'' to determine when 
to maximize direct loans as directed in (B); (D) requiring projects 
that require interim financing in excess of $500,000 to initially seek 
financing from private or cooperative lenders; and (E) determining if 
an existing direct loan borrower can refinance with a private or 
cooperative lender prior to RUS providing a new direct loan.
    RUS regulations for Water and Waste Disposal Programs guaranteed 
loans, direct loans and loan servicing are found in 7 CFR Parts 1779, 
1780, and

[[Page 66693]]

1782, respectively. These regulations currently address topics 
discussed in Section 6019 of the 2014 Farm Bill provisions, including 
but not limited to requirements for documenting need for RUS financing 
in lieu of credit elsewhere, graduation of loans, and interim 
financing. RUS is analyzing the Section 6019 provisions and identifying 
how current regulations may need to be revised. The agency is also 
considering how to minimize the impact to rural end users of the 
implementation of the 2014 Farm Bill Section 6019 provisions.
    RUS invites interested parties including but not limited to rural 
water systems, trade associations, consumer groups, financing and 
lending institutions, and individuals to comment on the questions and 
potential requirements proposed herein. RUS requests that stakeholders 
provide, in writing, any information or analysis they believe to be 
relevant to the implementation of the 2014 Farm Bill provisions. By 
further notice in the Federal Register, RUS may terminate, limit, or 
otherwise modify the process of obtaining information from interested 
parties. RUS encourages interested parties to review the 2014 Farm Bill 
in its entirety.

Request for Comment

    Stakeholder input is vital to ensure that implementation of the 
provisions of Section 6019 of the 2014 Farm Bill continue to support 
the agency's mission, including ensuring that new regulations and 
policies do not overly burden the agency's borrowers and their 
customers. The following questions and discussion items are posed to 
guide stakeholder comments. RUS welcomes pertinent comments that are 
beyond the scope of these questions. RUS is requesting comment and 
discussion on the following topics:
    Maximizing Loan Guarantees. Provision A of Section 6019 of the 2014 
Farm Bill directs the agency to ``maximize the use of'' loan guarantees 
for projects that will serve rural communities with populations greater 
than 5,500. RUS has an existing regulation for loan guarantees where 
the Agency guarantees quality loans for the construction or improvement 
of water and waste projects serving the financially needy communities 
in rural areas (7 CFR 1779). In addition, RUS has an existing 
regulatory requirement that applicants must certify in writing, and the 
Agency shall determine and document, that the applicant is unable to 
finance the proposed project from their own resources or through 
commercial credit at reasonable rates and terms (7 CFR 1780.7(d)). The 
agency currently does not limit its guaranteed program or test for 
credit to those communities with populations of greater than 5,500. The 
agency requests responses and comments on the following questions:
    1. To what degree do the agency's existing regulations fulfill the 
requirements of this section? What, if any, modifications are needed to 
fully address the requirements of Provision A?
    2. Should RUS require all eligible applicants with a population 
exceeding 5,500 to apply for a guaranteed loan prior to applying for a 
direct loan or grant?
    3. If not, what criteria should the agency apply in determining 
whether applicants should be required to first apply through the 
guaranteed program?
    4. How should the agency handle applicants that do not want to seek 
commercial credit or guaranteed loans when they are eligible for the 
agency's direct loan and grant program?
    5. Are there any other limiting factors or conditions (financial 
ratios, minimum loan amounts or other), beyond the 5,500 population 
required by Provision A of Section 6019, that the agency should screen 
for prior to referring borrowers to cooperative and commercial lenders 
for guaranteed loans?
    6. What barrier(s), if any, to participation in the Water and Waste 
Disposal Guaranteed Loan Program exist for eligible rural entities? Can 
they be addressed through implementation of Section 6019?
    7. Are there any other issues not mentioned in items 1through 6 
that should be considered in implementing this provision of Section 
6019?
    Materiality Standard. Provisions B and C of Section 6019 of the 
2014 Farm Bill directs RUS to establish a materiality standard for 
assessing the impact on ratepayers in determining when the agency 
should use direct loans or loan guarantees. WWD Program regulations, 7 
CFR Part 1780, require the agency to provide loan and grant funds for 
water and waste projects serving the most financially needy 
communities. The existing regulations further require the agency to 
provide financial assistance that results in reasonable user costs for 
rural residents, rural businesses, and other rural users. The agency 
presently uses the median household income of the service area as well 
as a comparison of at least 3 similar systems cost to ensure reasonable 
user costs to the ratepayers. The agency requests comment on the 
following topics:
    8. To what degree do the agency's existing regulations fulfill the 
requirements of this section? What, if any, modifications are needed to 
fully address the requirements of Provisions B and C?
    9. Should the agency apply Provisions B and C only for eligible 
projects in rural communities in which the population exceeds 5,500 to 
ensure a standard approach in assessing the impact on rate payers?
    10. What factors should be considered in determining the 
materiality standard described in Section 6019? For those factors, what 
is to be considered a material difference in cost to rate payers?
    11. How should RUS define the level of impact to ratepayers at 
which the agency will use a direct loan rather than loan guarantee? 
Should it be based on a set dollar increase, a percentage of median 
household income, or some other approach? If an applicant qualifies for 
the agency's grant, should this exclude the applicant from this 
provision?
    12. Under what circumstances should an applicant that is eligible 
for the direct loan program be allowed to seek a direct agency loan if 
they meet or exceed the materiality threshold?
    13. What is the best way to ensure the availability of accurate and 
timely information regarding rates and terms of lenders participating 
in the guaranteed program so that the impact on rate payers of direct 
versus guaranteed loans can be assessed?
    14. Are there any other issues not mentioned in items 8 through 13 
that should be considered in implementing this provision of Section 
6019?
    Interim Financing: Provision D of Section 6019 of the 2014 Farm 
Bill directs the agency to require potential borrowers to seek 
financing from private or cooperative lenders for projects requiring 
greater than $500,000 in interim financing. RUS's existing regulation 
allows for interim financing for all loans exceeding $500,000, where 
funds can be borrowed at reasonable interest rates on an interim basis 
from commercial sources for the construction period (7 CFR 1780.39(d)). 
The agency requests comment on the following topics:
    15. To what degree do the agency's existing regulations fulfill the 
requirements of this section? What, if any, modifications are needed to 
fully address the requirements of Provision D?
    16. In your opinion what constitutes ``reasonable interest rates?''

[[Page 66694]]

    17. Should the impact on rate payers be considered in determining 
what is reasonable?
    18. In cases where an applicant initially seeks interim financing 
from private or cooperative lenders and those lenders indicate a 
willingness to provide financing, does this provision of 6019 prevent 
the applicant from seeking and obtaining other non-private or non-
cooperative lenders interim financing when doing so would result in a 
reduction in the overall project cost?
    19. Provision D requires the applicant to seek interim financing 
from private or cooperative lenders. Should applicants/borrowers still 
have the option to decline offers for interim financing? In what 
instances should this be allowed?
    20. Are there any other issues not mentioned in items 15 through 19 
that should be considered in implementing this provision of Section 
6019?
    Referral to Private or Cooperative Lenders. Provision E of Section 
6019 of the 2014 Farm Bill directs the Agency to determine if an 
existing direct loan borrower can refinance their direct loan with a 
private or cooperative lender, including with a loan guarantee, prior 
to RUS providing a new direct loan. This language is consistent with 
RUS's existing regulatory and servicing requirements. Applicants must 
certify in writing and the Agency shall determine and document that the 
applicant is unable to finance the proposed project from their own 
resources or through commercial credit at reasonable rates and terms (7 
CFR 1780.8(d)). In addition, if at any time, it appears to the 
Government that the borrower is able to refinance the amount of 
indebtedness then outstanding, in whole or in part, by obtaining a loan 
for such purposes from responsible cooperative or private credit 
sources, at reasonable rates and terms, the borrower will, upon request 
of the Government, apply for and accept such loan (7 CFR 1782.11). The 
agency requests comment on the following topics:
    21. To what degree do the agency's existing regulations fulfill the 
requirements of this section? What, if any, modifications are needed to 
fully address the requirements of Provision E?
    22. What process should be used by the agency to refer eligible 
applicants to other lenders?
    23. What minimum information should be required of the applicant to 
ensure that the costs of the referral are not overly burdensome on 
rural communities?
    24. What should the agency do if a potential borrower, who is 
eligible for the program, does not want to refinance older loans or use 
an outside lender?
    25. Does Provision E exclude those existing borrowers who are 
seeking a new loan that would qualify for an agency grant?
    26. What documentation should the agency require of the borrower if 
they claim they are unable to refinance with a private or cooperative 
lender, including with a loan guarantee?
    27. How should the agency handle cases where a private or 
cooperative lender indicates a willingness to refinance agency loans, 
but the applicant believes that refinancing would be detrimental to 
their operations and cause an undue burden on their rate payers?
    28. Do commercial and cooperative banks have a threshold 
(population, dollars, financial ratios or other) at which they would 
not consider projects as candidates for refinancing?
    29. Are there any other issues not mentioned in items 21 through 28 
that should be considered in implementing this provision of Section 
6019?

Listening Session

    The RUS will hold the Section 6019 Listening Session on Wednesday, 
December 10, 2014, to receive comments from stakeholders and the 
public. Oral comments received from this listening session will be 
documented. All attendees of this listening session who submit oral 
comments are requested to submit a written copy to help RUS accurately 
capture public input. In addition, stakeholders and the public who do 
not wish to attend or speak at the listening session are invited to 
submit written comments which must be received by the date indicated in 
the DATES section above.
    At the listening session, the focus is for RUS to hear from the 
public. This is not a discussion with RUS officials or a question and 
answer session. As noted above, the purpose is to receive public input 
that RUS can consider in order to implement the provisions of Section 
6019 of the 2014 Farm Bill. RUS is interested in receiving input on all 
aspects of the implementation of these provisions.
    The listening session will begin with brief opening remarks from 
Agency leadership in Rural Development. Individual speakers providing 
oral comments are requested to be succinct (no more than five minutes) 
as we do not know at this time how many participants there will be. We 
request that speakers providing oral comments also provide a written 
copy of their comments. See the ADDRESSES section above for information 
about submitting written comments. All stakeholders and interested 
members of the public are welcome to register to provide oral comments; 
however, if necessary due to time constraints, a limited number will be 
selected on a first come, first serve basis.

Instructions for Attending the Listening Session

    Space for attendance at the listening session is limited. Due to 
USDA headquarters security and space requirements, all persons wishing 
to attend the listening session in person or via phone must send an 
email to [email protected] by Monday, December 8, 2014, to 
register. Registrations will be accepted until maximum capacity is 
reached. Once registered, you will receive an email on how to access 
the listening session remotely. To register, provide the following 
information:

 First Name
 Last Name
 Organization
 Title
 Email
 Phone Number
 City
 State
 Indicate if you will attend in person and if you wish to 
provide oral comments.

    Upon arrival at the USDA South Building, registered persons must 
provide valid photo identification in order to enter the building. 
Visitors must enter the South Building on the Independence Side, 4th 
Wing. Please allow extra time to get through security. Additional 
information about the listening session, agenda, and directions to get 
to the listening session, will be available at the USDA Farm Bill Web 
site http://www.usda.gov/wps/portal/usda/usdahome?navid=farmbill.

    Dated: November 4, 2014.
Jasper Schneider,
Acting Administrator, Rural Utilities Service.
[FR Doc. 2014-26612 Filed 11-7-14; 8:45 am]
BILLING CODE P