[Federal Register Volume 88, Number 21 (Wednesday, February 1, 2023)]
[Rules and Regulations]
[Pages 6609-6615]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-01126]



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 Rules and Regulations
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 This section of the FEDERAL REGISTER contains regulatory documents 
 having general applicability and legal effect, most of which are keyed 
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  Federal Register / Vol. 88, No. 21 / Wednesday, February 1, 2023 / 
Rules and Regulations  

[[Page 6609]]



DEPARTMENT OF AGRICULTURE

Rural Utilities Service

7 CFR Part 1777

[Docket No. RUS-21-WATER-0017]
RIN 0572-AC55


Section 306C Water and Waste Disposal (WWD) Loans and Grants

AGENCY: Rural Utilities Service, USDA.

ACTION: Final rule with request for comment.

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

SUMMARY: The Rural Utilities Service (RUS), an agency of the Rural 
Development mission area within the U.S. Department of Agriculture 
(USDA), hereinafter referred to as the Agency or RUS, is issuing a 
final rule with comment to revise the Section 306C WWD Loans and Grants 
program regulations to implement changes recommended by Government 
Accountability Office (GAO) Audit Report GAO 18-309, ``Drinking Water 
and Wastewater Infrastructure Opportunities Exist to Enhance Federal 
Agency Needs Assessment and Coordination on Tribal Projects'' (Audit 
Report) issued on May 15, 2018, and available at: https://www.gao.gov/products/gao-18-309. The Agency is also implementing other changes to 
clarify terminology and policies, update scoring criteria, and allow 
the program to run more efficiently.

DATES: 
    Effective date: This final rule is effective May 2, 2023.
    Comment date: Comments are due April 3, 2023.

ADDRESSES: You may submit comments, identified by docket number RUS-21-
Water-0017 and Regulatory Information Number (RIN) number 0572-AC55 
through https://www.regulations.gov.
    Instructions: All submissions received must include the Agency name 
and docket number or RIN for this rulemaking. All comments received 
will be posted without change to https://www.regulations.gov, including 
any personal information provided.
    Docket: For access to the docket to read background documents or 
comments received, go to https://www.regulations.gov.

ADDRESSES: Additional information about Rural Development and its 
programs is available on the internet at https://www.rd.usda.gov/programs-services. Information specific to this program may be found on 
the internet at: https://www.rd.usda.gov/programs-services/water-environmental-programs

FOR FURTHER INFORMATION CONTACT: Charles Stephens, Assistant 
Administrator, Water and Environmental Programs, Rural Utilities 
Service, U.S. Department of Agriculture, 1400 Independence Avenue SW, 
Washington, DC 20250; email: [email protected]; telephone: 
(202) 619-8500.

SUPPLEMENTARY INFORMATION:

I. Executive Orders/Acts

Executive Orders 12866 and 13563 Classification

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches to maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility.
    This rule has been determined to be not significant for purposes of 
Executive Order 12866 and, therefore, has not been reviewed by the 
Office of Management and Budget.

Catalog of Federal Domestic Assistance

    The Catalog of Federal Domestic Assistance (CFDA) number, also 
known as Assistance Listing number, assigned to the program is 10.770, 
Water and Waste Facility Loans and Grants to Alleviate Health Risks. 
The CFDA is available on the internet at https://sam.gov/content/assistance-listings. The Government Printing Office (GPO) prints and 
sells the CFDA to interested buyers. For information about purchasing 
the CFDA from GPO, call the Superintendent of Documents at 202-512-1800 
or toll free at 866-512-1800, or access GPO's on-line bookstore at: 
U.S. Government Bookstore https://bookstore.gpo.gov/.

Executive Order 12372--Intergovernmental Consultation

    This program is subject to the provisions of Executive Order 12372 
which requires intergovernmental consultation with State and local 
officials. Rural Development will conduct intergovernmental 
consultation using RD Instruction 1970-I, ``Intergovernmental Review,'' 
available in any Agency office, or at https://www.rd.usda.gov/sites/default/files/1970i.pdf and in 2 CFR part 415, subpart C. Note that not 
all States have chosen to participate in the intergovernmental review 
process. A list of participating States is available at: https://www.whitehouse.gov/omb/office-federal-financial-management/. 
Applications from Federally Recognized Indian Tribes are not subject to 
this requirement.

Paperwork Reduction Act

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

National Environmental Policy Act

    In accordance with the National Environmental Policy Act of 1969, 
Public Law 91-190, this final rule has been reviewed in accordance with 
7 CFR part 1970 (``Environmental Policies and Procedures''). The Agency 
has determined that (1) this action meets the criteria established in 7 
CFR 1970.53(f); (2) no extraordinary circumstances exist; and (3) the 
action is not ``connected'' to other actions with potentially 
significant impacts, is not considered a ``cumulative action'' and is 
not precluded by 40 CFR 1506.1. Therefore, the Agency has determined 
that the action does not have a significant effect on the human 
environment, and therefore neither an Environmental Assessment nor an 
Environmental Impact Statement is required.

Regulatory Flexibility Act

    RUS certifies that this proposed rule will not have a significant 
economic

[[Page 6610]]

impact on a substantial number of small entities, as defined in the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). The RUS Water and 
Waste low-interest loan and grant programs provide funds to eligible 
entities with a focus on promoting public water and waste access at 
reasonable user costs throughout rural America. RUS borrowers, as a 
result of obtaining federal financing, receive economic benefits that 
exceed any direct economic costs associated with complying with RUS 
regulations and requirements.

Executive Order 12988--Civil Justice Reform

    This rule has been reviewed under Executive Order 12988. In 
accordance with this rule: (1) unless otherwise specifically provided, 
all State and local laws that conflict with this rule will be 
preempted; (2) no retroactive effect will be given to this rule except 
as specifically prescribed in the rule; and (3) administrative 
proceedings of the National Appeals Division of the Department of 
Agriculture (7 CFR part 11) must be exhausted before bringing suit in 
court that challenges action taken under this rule.

Executive Order 13132--Federalism

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

Executive Order 13175--Consultation and Coordination With Indian Tribal 
Governments

    This executive order imposes requirements on the Agency in the 
development of regulatory policies that have tribal implications or 
preempt tribal laws. The Agency has determined that the rule may have a 
substantial direct effect on one or more Indian tribe(s) or on either 
the relationship or the distribution of powers and responsibilities 
between the Federal Government and Indian tribes. Thus, this rule is 
subject to the requirements of Executive Order 13175. GAO, during the 
preparation of their Audit Report described in the SUMMARY section of 
this notice, sought and received input from 22 Tribes. As part of the 
Agency's consultation process, the Agency hosted two listening sessions 
on November 30, 2021 and December 1, 2021. No substantive comments were 
received from Tribes during the listening sessions. If tribal leaders 
are interested in government-to-government consultation with the Agency 
on this rule, they are encouraged to contact RD's Tribal Coordinator 
at: [email protected]. RD will work with the USDA Office of Tribal 
Relations to ensure meaningful consultation is provided where changes, 
additions, and modifications identified herein are not expressly 
mandated by Congress.

E-Government Act Compliance

    Rural Development is committed to the E-Government Act, which 
requires Government agencies in general to provide the public the 
option of submitting information or transacting business electronically 
to the maximum extent possible.

Civil Rights Impact Analysis

    Rural Development has reviewed this rule in accordance with USDA 
Regulation 4300-4, ``Civil Rights Impact Analysis,'' to identify any 
major civil rights impacts the rule might have on program participants 
on the basis of age, race, color, national origin, sex, disability, 
marital or familial status. Based on the review and analysis of the 
rule and all available data, issuance of this Final Rule is not likely 
to negatively impact low and moderate-income populations, minority 
populations, women, Indian tribes or persons with disability, by virtue 
of their age, race, color, national origin, sex, disability, or marital 
or familial status.

USDA Non-Discrimination Statement

    In accordance with Federal civil rights laws and USDA civil rights 
regulations and policies, the USDA, its Mission Areas, agencies, staff 
offices, employees, and institutions participating in or administering 
USDA programs are prohibited from discriminating based on race, color, 
national origin, religion, sex, gender identity (including gender 
expression), sexual orientation, disability, age, marital status, 
family/parental status, income derived from a public assistance 
program, political beliefs, or reprisal or retaliation for prior civil 
rights activity, in any program or activity conducted or funded by USDA 
(not all bases apply to all programs). Remedies and complaint filing 
deadlines vary by program or incident.
    Program information may be made available in languages other than 
English. Persons with disabilities who require alternative means of 
communication to obtain program information (e.g., Braille, large 
print, audiotape, American Sign Language) should contact the 
responsible Mission Area, agency, or staff office; the USDA TARGET 
Center at (202) 720-2600 (voice and TTY); or the 711 Relay Service.
    To file a program discrimination complaint, a complainant should 
complete a Form AD-3027, USDA Program Discrimination Complaint Form, 
which can be obtained online at https://www.usda.gov/sites/default/files/documents/ad-3027.pdf from any USDA office, by calling (866) 632-
9992, or by writing a letter addressed to USDA. The letter must contain 
the complainant's name, address, telephone number, and a written 
description of the alleged discriminatory action in sufficient detail 
to inform the Assistant Secretary for Civil Rights (ASCR) about the 
nature and date of an alleged civil rights violation. The completed AD-
3027 form or letter must be submitted to USDA by:
    (1) Mail: U.S. Department of Agriculture, Office of the Assistant 
Secretary for Civil Rights, 1400 Independence Avenue SW, Washington, DC 
20250-9410; or
    (2) Fax: (833) 256-1665 or (202) 690-7442; or
    (3) Email: [email protected].

II. Background

    Rural Development is a mission area within USDA comprised of the 
RUS, Rural Housing Service, and Rural Business-Cooperative Service. 
Rural Development's mission is to increase economic opportunity and 
improve the quality of life for all rural Americans. Rural Development 
meets its mission by providing loans, loan guarantees, grants and 
contracts through more than 40 programs aimed at creating and improving 
housing, business, and infrastructure throughout rural America.
    The Water and Waste Facility Loans and Grants to Alleviate Health 
Risks program was established by Section 306C of the Consolidated Farm 
and Rural Development Act (ConAct). The ConAct established the program 
to provide loans and grants to low-income communities in eligible areas 
which face significant health risks, and lack access to safe, reliable 
drinking water and waste disposal facilities and services. For the 
purpose of this program, eligible projects include those that primarily 
benefit members of federally recognized Tribes, or are within areas 
recognized as a Colonia before October 1, 1989, that are located in a 
city, town, or unincorporated area with a population of no more than 
10,000 residents.

[[Page 6611]]

    A Government Accountability Office (GAO) Audit Report, GAO 18-309, 
``Drinking Water and Wastewater Infrastructure Opportunities Exist to 
Enhance Federal Agency Needs Assessment and Coordination on Tribal 
Projects'' issued on May 15, 2018, and available at: https://www.gao.gov/products/gao-18-309 recommended that the Agency implement 
scoring criteria for the Native American funding within the Section 
306C WWD Loans and Grants program, similar to those that currently 
exist for the Colonias. The specific scoring criteria cited provide 
additional points for projects that increase access to clean drinking 
water and reduce health risks. In addition to those changes, the Agency 
is updating the regulation to include current policies and procedures, 
and clarify terminology, including the per capita income and 
unemployment criteria.

III. Discussion of the Rule

    This section discusses the key changes to the regulation.
    To conform to Section 306C of the ConAct, the Agency has updated 
the name of Part 1777 to Water and Waste Facility Loans and Grants to 
Alleviate Health Risks. Key terms have been updated for consistency 
with other regulations and directives. The structure of Part 1777 has 
been reworked to provide easier usability by customers and to 
differentiate the different requirements of loans and grants that are 
for public infrastructure versus those for individuals.
    As Section 306C governs the implementation of multiple fund 
allocations, including Tribal and Colonias allocations, Sec.  1777.1(d) 
was revised to clarify that funds specifically appropriated for Tribes 
through this part will only be awarded to Tribes and entities serving 
Tribal members.
    Per statute, Tribal entities eligible for Section 306D, ``Water 
Systems for Rural Native Villages in Alaska Program'' are not eligible 
to receive grant funding under this program. That statutory restriction 
is included at Sec.  1777.1(e) to ensure applicants are aware of all 
requirements and restrictions.
    Section 1777.4, ``Definitions'' was modified to update and conform 
definitions now used in part 1777.
    Section 1777.11 was revised to update the section name and to 
include regulatory cross references to the appropriate regulations that 
govern application/processing of loans and servicing of loans for 
public infrastructure projects.
    Section 1777.12 was modified as follows:
    (a) The title of the section was changed to ``Public 
Infrastructure--Eligibility''; and only provides information pertaining 
to loans and grants for facilities;
    (b) The introductory text of paragraph (a) was re-worded to clarify 
which paragraphs apply only to Tribal funding under Section 306C and 
removes the reference to preapplications as the Agency no longer 
requires them. Additionally, ``. . . RUS Assistant Administrator for 
Water and Environmental Program . . .'' was added to indicate who may 
begin the process of using a source other than the current American 
Community Survey (ACS);
    (c) Paragraph (a)(1) was revised by specifying ``United States 
Department of Commerce, United States Census Bureau.''
    (d) Paragraph (a)(3) was added to clarify that if an applicant is 
not a Federally Recognized Tribe, the project may still be considered 
eligible if more than 50 percent of the users in the project area are 
members of a Federally Recognized Tribe. Also, for applicants that are 
not Tribes, but are proposing to serve a Tribal area, a resolution or 
letter of support from the tribe is now required.
    Section 1777.13 now contains requirements for how funds for public 
infrastructure projects may be used. The project priority and scoring 
information previously located in this section is moved to Sec.  
1777.14 for public infrastructure projects and to Sec.  1777.33 for 
projects benefitting individuals and scoring has been updated to 
reflect current practice. In order to address the recommendation of the 
GAO audit to make scoring consistent between Colonia and Tribal 
applicants, points for access and health risks are now applied 
consistently to all project applications in Sec.  1777.14(c)(5) and 
Sec.  1777.33(c)(8).
    Section 1777.15 has been added to provide rates and terms for 
public infrastructure loans. This information was previously found at 
Sec.  1777.31.
    Sections 1777.30 through 1777.34 now cover individual loan and 
grant eligibility, use of funds, administration of funds and rates and 
terms. These sections have been updated to document current process and 
practices.
    Section 1777.42 was reworded for clarity.
    Section 1777.43, Exception Authority, was added to allow the 
Administrator of Rural Utilities Service to make an exception to any 
requirement or provision of this part that is not inconsistent with 
statute or other applicable laws and is in the best interest of the 
government.

List of Subjects for 7 CFR 1777

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

0
For the reasons discussed in the preamble, the Agency revises 7 CFR 
part 1777 to read as follows:

PART 1777--WATER AND WASTE FACILITY LOANS AND GRANTS TO ALLEVIATE 
HEALTH RISKS

Sec.
1777.1 General.
1777.2 [Reserved]
1777.3 Objective.
1777.4 Definitions.
1777.5-1777.10 [Reserved]
1777.11 Public infrastructure--Making, processing, and servicing 
loans and grants.
1777.12 Public infrastructure--Eligibility.
1777.13 Public infrastructure--Use of funds.
1777.14 Public infrastructure--Application processing and scoring.
1777.15 Public infrastructure--Rates and terms.
1777.16-1777.29 [Reserved]
1777.30 Individual loans and grants--Making, processing, and 
servicing loans and grants.
1777.31 Individual loan and grant eligibility.
1777.32 Individual loans and grants--Use of funds.
1777.33 Individual loans and grants--Administration of funds.
1777.34 Individual loans--Rates and terms.
1777.35-1777.41 [Reserved]
1777.42 Delegation of authority.
1777.43 Exception authority.
1777.44 Availability of forms and regulations.
1777.45-1777.99 [Reserved]
1777.100 OMB control number.

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


Sec.  1777.1  General.

    (a) This part outlines Rural Utilities Service (RUS) policies and 
procedures for making Water and Waste Facility loans and grants 
authorized under Section 306C of the Consolidated Farm and Rural 
Development Act (7 U.S.C. 1926(c)), as amended.
    (b) Agency officials will maintain liaison with officials of other 
federal, Tribal, state, regional, and local development agencies to 
coordinate related programs to achieve rural development objectives.
    (c) Agency officials will cooperate with appropriate Tribal and 
state agencies in making loans and/or grants

[[Page 6612]]

that support Tribal and state strategies for rural area development.
    (d) Funds specifically appropriated for Tribal members in 
accordance with this part will be considered for use by Federally 
Recognized Tribes regardless of whether State development strategies 
include Tribes and their reservations. Tribal members residing on such 
reservations must have an equal opportunity to participate in this 
program.
    (e) Entities eligible for a grant under the 306D Water Systems for 
Rural and Native Villages in Alaska Program are not eligible to receive 
grant assistance under this regulation from funds appropriated for 
Tribal members as referenced in paragraph (d) of this section.
    (f) Federal statutes provide for extending the Agency's financial 
programs without regard to race, color, religion, sex, national origin, 
marital status, age, or physical/mental handicap (provided the 
participant possesses the capacity to enter into legal contracts).


Sec.  1777.2  [Reserved]


Sec.  1777.3  Objective.

    The objective of the Section 306C Water and Waste Facility Loans 
and Grants to Alleviate Health Risks program is to provide water and 
waste disposal facilities and services to low-income rural areas whose 
residents are experiencing a significant health risk due to the fact 
that a significant proportion of the community's residents do not have 
access to, or are not served by, adequate affordable water supply 
systems or waste disposal facilities.


Sec.  1777.4  Definitions.

    The following definitions apply to this part:
    Agency. The Rural Utilities Service or its successors.
    Applicant. The entity that has applied for assistance under this 
part. The entity may be a public body such as municipality, county, 
district, authority or other political subdivisions of a state, an 
organization operated on a not-for-profit basis such as an association, 
cooperative or private corporation, or a Federally Recognized Tribe as 
defined in the Federally Recognized Indian Tribal List Act of 1994 
(Pub. L. 103-454, 108 Stat. 4791-4792). An entity operated on a not-
for-profit basis must be controlled by a local public body or bodies or 
have a broadly based ownership by or membership of people of the local 
community.
    Colonia. Any identifiable community designated in writing by a 
state, county or Federally Recognized Tribe in which it is located; 
determined to be a Colonia on the basis of objective criteria including 
lack of potable water supply, lack of adequate sewage systems, and lack 
of decent, safe, and sanitary housing, inadequate roads and drainage; 
and existed and was generally recognized as a Colonia before October 1, 
1989. Colonia's eligible areas include the entire county where more 
than half of the area of the county is within 150 miles of the United 
States and Mexico border. The county governing body, state, or Tribal 
government must designate the respective communities in the county as 
Colonia. The individual Colonia still must meet all other 
qualifications. If only some of the counties within the 150-mile area 
are designated and a county is later designated, written evidence of 
Colonia designation must be placed in the respective files.
    Cooperative. A cooperative formed specifically for the purpose of 
the installation, expansion, improvement, or operation of water supply 
or waste disposal facilities or systems.
    Individual. The recipient of financial assistance for improvements 
to a private dwelling to facilitate the use of the water or waste 
disposal system.
    Median household income. The income data used in this part to 
determine median household income must be that which most accurately 
reflects the income of the service area. The median household income of 
the service area and the Statewide Nonmetropolitan Median Household 
Income will be determined by 5-year income data from the United States 
Department of Commerce, United States Census Bureau, American Community 
Survey (ACS) or, if needed, other Census Bureau data. If there is 
reason to believe that the census data is not an accurate 
representation of the median household income within the area to be 
served, the reasons will be documented and the applicant may furnish, 
or the Agency may obtain, additional information regarding such median 
household income. Information will consist of reliable data from local, 
regional, State, Tribal or Federal sources, or from a survey conducted 
by a reliable impartial source.
    Rural areas. Includes any city, town, or unincorporated area with a 
population not in excess of 10,000 inhabitants in any of the 50 States 
of the United States, the Commonwealth of Puerto Rico, the U.S. Virgin 
Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana 
Islands, the Republic of Palau, the Federated States of Micronesia, and 
the Republic of the Marshall Islands, according to the most recently 
implemented decennial census of the United States. If the applicable 
population figure cannot be obtained from the most recently implemented 
decennial census, the RUS Assistant Administrator for Water and 
Environmental Programs will determine the applicable population figure 
based on available population data.
    Statewide Nonmetropolitan Median Household Income (SNMHI). Median 
household income of a state's nonmetropolitan counties and portions of 
metropolitan counties outside of cities, towns or places of 50,000 or 
more population. The SNMHI is set by the RUS Water and Environmental 
Program. The nonmetropolitan median household income of the State may 
only be updated on a national basis by the RUS National Office.
    Tribe. Federally Recognized Tribes as defined in the Federally 
Recognized Indian Tribal List Act of 1994 (Pub. L. 103-454, 108 Stat. 
4791-4792), as well as Tribal organizations, enterprises, authorities 
and utilities that are duly established pursuant to the Constitution 
and bylaws of such Tribe.


Sec. Sec.  1777.5 through 1777.10  [Reserved]


Sec.  1777.11  Public infrastructure--Making, processing, and servicing 
loans and grants.

    Unless specifically modified by this part, loans and grants will be 
made and processed in accordance with 7 CFR 1780, ``Water and Waste 
Loans and Grants'' and serviced in accordance with 7 CFR 1782, 
``Servicing of Water and Waste Programs.''


Sec.  1777.12   Public infrastructure--Eligibility.

    (a) The provisions of paragraphs (a)(1), (2), and (3) of this 
section apply to applications submitted by all eligible entities except 
for Colonias. The facility financed under this part must provide water 
and/or waste disposal services to rural areas where, on the date the 
application is received by the Agency, the:
    (1) Per capita income of the residents is not more than 70 percent 
of the most recently USDA implemented national average per capita 
income, as determined by 5-year income data from the United States 
Department of Commerce, United States Census Bureau, ACS or, if needed, 
other Census Bureau data. If the RUS Assistant Administrator for Water 
and Environmental Program (WEP) has reason to believe that the ACS or 
other Census Bureau data does not accurately represent the per capita 
income of the residents, the reasons will be documented and the 
applicant may furnish, or the Agency may obtain,

[[Page 6613]]

additional information regarding such per capita income data. 
Information must consist of reliable data from local, regional, state, 
Tribal or Federal sources or from a survey conducted by a reliable 
impartial source, and,
    (2) Unemployment rate of the residents is not less than 125 percent 
of the most recent national average unemployment rate, as determined by 
the Bureau of Labor Statistics.
    (3) Projects for which the applicant is not a Federally Recognized 
Tribe, but which will benefit Tribal members, may be considered 
eligible for funds under this part if the applicant provides acceptable 
documentation and certifies that more than 50 percent of the users in 
the project service area are members of Tribes. In such cases, funds 
awarded under this part cannot exceed the applicable percentage of the 
total eligible project cost. If the applicant is not a Tribe, the 
applicant must solicit a resolution or letter of consent in support of 
the application from the benefiting Tribe.
    (b) Residents of the rural area to be served must be experiencing a 
significant health risk due to the fact that a significant proportion 
of the community's residents do not have access to, or are not served 
by, adequate, affordable, water supply systems and/or waste disposal 
facilities. The Agency's records must clearly document and support this 
determination. The following requirements regarding the documentation 
must be followed:
    (1) The originating documentation must come from an independent 
third-party source that has the experience in specifying the health or 
sanitary problem that currently exists.
    (2) The documentation must state specifically the health or 
sanitary problems that exist. General statements of problems or support 
for the project are not acceptable.
    (3) Current users of the facility, and not future or possible 
users, must be experiencing the current health or sanitary problem.
    (4) If no facility exists, documentation must include specific 
health and sanitary problems associated with individual facilities that 
currently exist to warrant the health and sanitary determination.
    (5) In instances where eligible applicants are proposing to finance 
water or waste disposal infrastructure improvements addressing health 
and sanitary problems and that will help alleviate overcrowding or lack 
of housing, the applicant must provide adequate plans that reasonably 
demonstrate that the new housing development will be fully financed and 
will be completed once the infrastructure is completed.


Sec.  1777.13  Public infrastructure--Use of funds.

    (a) Funds may be used to:
    (1) Develop, construct, repair, replace and/or enlarge new and/or 
existing wells, reservoirs, transmission lines, treatment plants, and/
or other sources of potable water.
    (2) Construct, extend, repair, replace and/or enlarge new and/or 
existing waterlines and other necessary system components.
    (3) Develop, construct, repair, replace and/or enlarge new and/or 
existing waste disposal, treatment, and other associated facilities.
    (4) Construct, extend, repair, replace and/or enlarge new and/or 
existing collection lines and/or other necessary system components.
    (5) Any other cost associated with resolving a significant health 
risk by granting the community access to an adequate affordable water 
supply system and/or waste disposal facility.
    (b) Grants can be made up to 100 percent of eligible project costs.


Sec.  1777.14  Public infrastructure--Application processing and 
scoring.

    (a) General. RUS may retain funds at the National Office or may 
allocate funds to Rural Development (RD) State Offices. Funds allocated 
to RD State Offices that remain unobligated may be pooled at the 
National Office's discretion and made available to any RD State Offices 
with eligible applications on a case-by-case basis. The application and 
supporting information submitted with it will be used to determine 
applicant eligibility and scoring for available funds. Applicants that 
do not receive an award will be advised of their appeal rights in 
accordance with 7 CFR part 11. Paragraph (c) of this section indicates 
items and conditions which will be considered in selecting applications 
for funding. When ranking eligible applications for consideration of 
limited funds, Agency officials will consider the scoring criteria met 
by each application and the degree to which those criteria are met.
    (b) Agency review. Applications should be submitted in accordance 
with 7 CFR 1780. For funds retained at RUS National Office, 
applications will be processed, scored, and reviewed for funding 
priority by the processing office and then submitted for consideration 
to the RUS National Office. It is preferred that applications be 
submitted electronically through RD Apply or its successor platforms. 
Where electronic application is not feasible, an application can be 
submitted physically to the local processing office. Information 
relating to the local processing office may be found at 
www.rd.usda.gov. For funds allocated to RD state offices, the 
respective office will process, score, and fund projects with the 
available allocation. Projects that cannot be fully funded within the 
allocation will be considered in accordance with funds retained at the 
RUS National Office on a project-by-project basis. The Agency reserves 
the right to make no award if: no funding is received, or all 
applications are ineligible, incomplete, or do not meet the established 
program objectives and priorities. The Agency may determine that the 
application is:
    (1) Eligible and selected for funding,
    (2) Eligible but offered less funds than requested,
    (3) Eligible but not selected for funding due to ranking of all 
applications by score, or
    (4) Ineligible for funding.
    (c) Scoring. The criteria in paragraphs (c)(1) through (6) of this 
section will be used to rank applications and in selecting projects for 
funding.
    (1) Population. The proposed project will primarily serve a rural 
area having a population:
    (i) Not in excess of 1,000--25 points.
    (ii) Between 1,001 and 2,500--15 points.
    (iii) Between 2,501 and 5,500--5 points.
    (2) Income. The median household income of population to be served 
by the proposed project is:
    (i) Not in excess of 50 percent of the SNMHI--30 points.
    (ii) More than 50 percent and not in excess of 60 percent of the 
SNMHI income--20 points.
    (iii) More than 60 percent and not in excess of 70 percent of the 
SNMHI--15 points.
    (3) Joint financing. The amount of funds, other than RUS funds, 
committed to the proposed project is:
    (i) Fifty percent or more--15 points.
    (ii) Twenty to forty-nine percent--10 points.
    (iii) Five to nineteen percent--5 points.
    (4) Colonia. (See definition in Sec.  1777.4). The proposed project 
will provide water or waste disposal services to the residents of a 
recognized Colonia--25 points.
    (5) Access and health risks. (i) A service area that lacks access 
to both water and waste disposal facilities, resulting in a significant 
health risk--50 points.
    (ii) A service area that lacks access to either water or waste 
disposal facilities,

[[Page 6614]]

resulting in a significant health risk--40 points.
    (iii) A service area that has access to water and waste disposal 
facilities but has a significant health risk--20 points.
    (6) Discretionary. (i) State Director or designee with loan and 
grant approval authority in certain cases, and when a written 
justification is prepared, may assign up to 15 points for 
administrative and programmatic priorities for items including, but not 
limited to, natural disasters, priority coordination between RUS and 
other agencies, including leveraged funding or other initiatives 
identified by the administration, to assist those projects that are the 
most cost effective, or to projects located in areas experiencing high 
unemployment and poverty rates and severe health risks.
    (ii) RUS Administrator may assign up to 15 additional points that 
will be considered in the total points for items including, but not 
limited to, the geographic distribution of funds nationally and within 
the state, and the severity of health risks.


Sec.  1777.15  Public infrastructure--Rates and terms.

    Public infrastructure loans will bear interest at not more than the 
maximum rate of 5 percent per annum. The rates and terms will be in 
accordance with 7 CFR 1780 Water and Waste Loans and Grants.


Sec. Sec.  1777.16 through 1777.29  [Reserved]


Sec.  1777.30  Individual loans and grants--Making, processing, and 
servicing loans and grants.

    Funding appropriated, designated, or otherwise approved to be 
delivered in accordance with the individual provisions of this part may 
be awarded directly to the individual(s) by this Agency or another 
designated Agency, such as United States Department of Agriculture's 
Rural Housing Service (RHS), or to the public water supply system and/
or waste disposal facility for administration, including Tribes and 
Tribal organizations. When loan or grant funding is transferred to RHS, 
funding will be administered in accordance with subpart C of 7 CFR 3550 
and other applicable provisions.


Sec.  1777.31  Individual loan and grant eligibility.

    (a) When loan awards are made by RUS to individuals, the 
individuals must meet the applicable requirements of paragraphs (a)(1) 
through (5) of this section:
    (1) Must demonstrate adequate ability to repay the loan;
    (2) Have an ownership interest in the dwelling to be improved or 
connected to the system, and the dwelling must be located in an 
eligible, rural area;
    (3) At the time of loan approval, the household's 12-month adjusted 
income must not be more than the statewide nonmetro median household 
income for the state or territory in which the individual resides, 
according to the most recent decennial census. Adjusted income is used 
to determine program eligibility and the amount of payment subsidy for 
which the household qualifies. Adjusted income is annual income less 
any of the following deductions for which the household is eligible:
    (i) For each household member, except the head of household or 
spouse, who is under 18 years of age, 18 years of age or older with a 
disability, or a full-time student, the amount determined pursuant to 
section 501(b)(5) of the Housing Act of 1949, as amended.
    (ii) A deduction of reasonable expenses for the care of minor 12 
years of age or under that:
    (A) Enable a family member to work or to further a member's 
education;
    (B) Are not reimbursed or paid by another source; and
    (C) In the case of expenses to enable a family member to work do 
not exceed the amount of income earned by the family member enabled to 
work.
    (iii) Expenses related to the care of household members with 
disabilities that:
    (A) Enable a family member to work;
    (B) Are not reimbursed from insurance or another source; and
    (C) Are in excess of three percent of the household's annual 
income.
    (iv) For any elderly family, a deduction in the amount determined 
pursuant to section 501(b)(5) of the Housing Act of 1949, as amended.
    (v) For elderly households only, a deduction for household medical 
expenses that are not reimbursed from insurance or another source and 
which in combination with any expenses related to the care of household 
members with disabilities described in paragraph (a)(3)(iii) of this 
section, are in excess of three percent of the household's annual 
income;
    (4) Must not be delinquent on any Federal debt; and,
    (5) Are unable to pay for the costs of improvements without the 
loan.
    (b) Grants may be made to individuals who meet all applicable 
requirements of paragraphs (b)(1) through (4) of this section:
    (1) Have an ownership interest in the dwelling to be connected to 
the system or improved and located in an eligible, rural area;
    (2) At the time of grant approval, meet the income requirements 
established within item (a)(3) of this part;
    (3) Must not be delinquent on any Federal debt; and
    (4) Are unable to pay for the costs of improvements without a 
grant.


Sec.  1777.32  Individual loans and grants--Use of funds.

    (a) Prior to awarding funds to a public water supply and/or waste 
disposal system, the approval official must determine that this is a 
practical and economical method of connecting individuals to the 
community water and/or waste disposal system. Funds awarded pursuant to 
this section can only be used for loans to individuals, and awarded 
grant funds can only be used for grants to individuals.
    (b) Funds may be used to:
    (1) Extend service lines to residence.
    (2) Connect service lines to residence's plumbing.
    (3) Pay reasonable charges or fees for connecting to a community 
water and/or waste disposal system.
    (4) Pay for necessary installation of plumbing and related fixtures 
within dwellings lacking such facilities.
    (5) Construction and/or partitioning off a portion of dwelling for 
a bathroom only if such bathroom is modest in design and size as 
determined by the Agency.
    (6) Pay reasonable costs for closing abandoned septic tanks and 
water wells when necessary to protect the health and safety of 
recipients of a grant in paragraphs (b)(1) or (b)(2) of this section 
and is required by Tribal, local or applicable law.


Sec.  1777.33  Individual loans and grants--Administration of funds.

    (a) General. For applications submitted by water or waste disposal 
systems or other eligible entities to benefit individuals, the amount 
of loan and grant funds approved by the Agency will be based on the 
need documented in the executed loan and grant documents between the 
Agency and the entity. The loan and grant documents include but are not 
limited to items such as the purpose, how funds will be used, proposed 
application process for individuals, construction requirements, and the 
control and disbursement of funds. Construction requirements must meet 
applicable building codes, statutes and regulations.
    (b) Review. The loan and grant documents executed between RUS and 
the entity will set forth the procedures and regulations for making and

[[Page 6615]]

servicing loans and grants made by the water or waste disposal systems, 
or other eligible entity, to individuals. The entity is responsible 
for:
    (1) Understanding all provisions of the loan and grant documents; 
and
    (2) Servicing loans and grants in the manner outlined in the 
executed loan and grant documents.
    (c) Scoring. For applications submitted by water or waste disposal 
systems or other eligible entities to benefit individuals, the criteria 
in paragraphs (c)(1) through (9) of this section will be used to rank 
applications and in selecting projects for funding.
    (1) Lending experience. Degree of expertise and successful 
experience in making and servicing loans to individuals. Up to 15 
points.
    (2) Operational experience. Degree of expertise and experience in 
operating and maintaining water or waste disposal system. Up to 15 
points.
    (3) Work plan. Extent to which the work plan demonstrates a well 
thought out, comprehensive approach to accomplishing the objectives of 
this part, clearly defines who will be served by the project, and 
appears likely to be sustainable. Up to 15 points.
    (4) Population. The system after the proposed project will 
primarily serve a rural area having a population:
    (i) Not in excess of 1,000--25 points.
    (ii) Between 1,001 and 2,500--15 points.
    (iii) Between 2,501 and 5,500--5 points.
    (5) Income. The median household income of population to be served 
by the proposed project is:
    (i) Not in excess of 50 percent of the SNMHI--30 points.
    (ii) More than 50 percent and not in excess of 60 percent of the 
SNMHI income--20 points.
    (iii) More than 60 percent and not in excess of 70 percent of the 
SNMHI--15 points.
    (6) Joint financing. The amount of funds, other than RUS funds, 
committed to the proposed project is:
    (i) Fifty percent or more--15 points.
    (ii) Twenty to forty-nine percent--10 points.
    (iii) Five to nineteen percent--5 points.
    (7) Colonia. (See definition in Sec.  1777.4). The proposed project 
will provide water or waste disposal services to the residents of a 
recognized Colonia--25 points.
    (8) Access and health risks. (i) A service area that lacks access 
to both water and waste disposal facilities, resulting in a significant 
health risk--50 points.
    (ii) A service area that lacks access to either water or waste 
disposal facilities, resulting in a significant health risk--40 points.
    (iii) A service area that has access to water and waste disposal 
facilities but has a significant health risk--20 points.
    (9) Discretionary. (i) State Director or designee with loan and 
grant approval authority in certain cases, and when a written 
justification is prepared, may assign up to 15 points for 
administrative and programmatic priorities for items including, but not 
limited to, natural disasters, funding or priority coordination between 
RUS and other agencies, including leveraged funding, for award to 
applicants under this program, to assist those projects that are the 
most cost effective, or to projects located in areas experiencing high 
unemployment and poverty rates and severe health risks.
    (ii) RUS Administrator may assign up to 15 additional points that 
will be considered in the total points for items including, but not 
limited to, the geographic distribution of funds nationally and within 
the state, and the severity of health risks. Any funds transferred to 
RHS for individual assistance will be administered following the 
provisions established in their governing statutes, regulations or 
policy. However, funds cannot be used to make improvements to the 
residence, except for the improvements authorized by Sec.  1777.32. 
Funds cannot be used to pay individuals for their own labor. RUS 
transferred funds to RHS that remain after providing individual loans 
and grants will be returned to RUS or its successors.


Sec.  1777.34  Individual loans--Rates and terms.

    Individual loans will bear interest at not more than the maximum of 
5 percent per annum, or the Federal Financing Bank or other Agency 
designated source, on loans of a similar term at the time such loans 
are made. The term will not exceed the estimated useful life of the 
eligible improvements financed or as determined by tribal or state law 
or statute, whichever is less.


Sec. Sec.  1777.35 through 1777.41  [Reserved]


Sec.  1777.42  Delegation of authority.

    The Administrator may delegate approval authority under this 
section, to the Assistant Administrator, WEP in accordance with 7 CFR 
1780.


Sec.  1777.43  Exception authority.

    The Administrator may, in individual cases, make an exception to 
any requirement or provision of this part which is not inconsistent 
with the authorizing statute or other applicable law and is determined 
to be in the Government's interest.


Sec.  1777.44  Availability of forms and regulations.

    Information on forms and regulations are available online from the 
Agency website.


Sec. Sec.  1777.45 through 1777.99  [Reserved]


Sec.  1777.100  OMB control number.

    The reporting and recordkeeping requirements contained in this part 
have been approved by the Office of Management and Budget and assigned 
OMB control number 0572-0121.

Andrew Berke,
Administrator, Rural Utilities Service.
[FR Doc. 2023-01126 Filed 1-31-23; 8:45 am]
BILLING CODE 3410-15-P