Rural Development: Patchwork of Federal Water and Sewer Programs Is
Difficult to Use (Briefing Report, 04/13/95, GAO/RCED-95-160BR).

Pursuant to a congressional request, GAO provided information on federal
rural development programs, focusing on: (1) federal programs providing
assistance to rural areas for water and wastewater facility
construction; (2) the programs' objectives and eligibility criteria; (3)
problems rural areas have in dealing with these programs; and (4) group
views concerning the possible consolidation or elimination of some
programs.

GAO found that: (1) there are 17 different programs administered by
eight federal agencies designed to help rural areas construct, expand,
or repair water or wastewater facilities; (2) the 17 programs have the
common objectives of improving rural areas' economy and infrastructure
and helping rural areas achieve healthy living conditions; (3)
eligibility criteria for the programs vary considerably, such as the
minimum age and maximum population requirements; (4) rural areas face
difficulties in utilizing the programs, including coordinating funding
from programs with differing timetables, contending with duplicative
requirements when multiple programs are used to finance projects, and
coping with requirements that hold small projects to the same standards
as large projects; and (5) groups representing rural areas agree that
federal rural assistance needs to be reformed to give states and local
areas more involvement, although they are concerned that state
governments may not respond to communities' needs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-160BR
     TITLE:  Rural Development: Patchwork of Federal Water and Sewer 
             Programs Is Difficult to Use
      DATE:  04/13/95
   SUBJECT:  Federal aid programs
             Rural economic development
             Wastewater management
             Federal/state relations
             Regional development programs
             Community development
             Block grants
             Economically depressed areas
             Community development programs
             Water supply management
IDENTIFIER:  Water and Waste Disposal Grant
             Water and Waste Disposal Loan Program
             Community Development Block Grant
             Rural Community Assistance Program
             RDA Water and Waste Disposal Systems for Rural Communities 
             Program
             Emergency Community Water Assistance Grant
             Small Cities Community Development Block Grant
             FmHA Rural Housing Site Loan Program
             FmHA Very Low Income Housing Repair Loans and Grants Program
             Blue Ridge (GA)
             EPA Capitalization Grant
             EDA Grant
             EDA Special Economic Development and Adjustment Assistance 
             Program
             Dept. of the Interior Economic and Political Development of 
             the Territories Program
             HHS Surplus Property Utilization Program
             Franklin County (GA)
             Taylor County (GA)
             
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Cover
================================================================ COVER


Briefing Report to the Chairman, Committee on the Budget, U.S. 
Senate

April 1995

RURAL DEVELOPMENT - PATCHWORK OF
FEDERAL WATER AND SEWER PROGRAMS
IS DIFFICULT TO USE

GAO/RCED-95-160BR

Rural Development


Abbreviations
=============================================================== ABBREV

  ARC - Appalachian Regional Commission
  CDBG - Community Development Block Grant
  COSCDA - Council of State Community and Development Agencies
  DOI - Department of the Interior
  EDA - Economic Development Administration
  EPA - Environmental Protection Agency
  FmHA - Farmers Home Administration
  HHS - Department of Health and Human Services
  HUD - Department of Housing and Urban Development
  NACo - National Association of Counties
  NADO - National Association of Development Organizations
  NGA - National Governors' Association
  RDA - Rural Development Administration
  RDC - Regional Development Center
  RCAP - Rural Community Assistance Program
  RIC - Rural Information Center
  USDA - United States Department of Agriculture

Letter
=============================================================== LETTER


B-260991

April 13, 1995

The Honorable Pete V.  Domenici
Chairman, Committee on the Budget
United States Senate

Dear Mr.  Chairman: 

This briefing report responds to your request that we provide
additional information on issues raised in our report entitled Rural
Development:  Patchwork of Federal Programs Needs to Be
Reappraised.\1 Specifically, you asked us to provide information on
the (1) federal programs providing assistance to rural areas for
constructing, expanding, or repairing water and wastewater
facilities; (2) similarities and differences in the programs'
objectives and eligibility criteria; (3) problems rural areas have
encountered in dealing with these federal programs; and (4) views of
groups representing rural areas concerning the possible consolidation
or elimination of some of these programs. 

On April 6, 1995, we briefed your office on these issues.  This
briefing report summarizes the information we presented in that
briefing. 

In summary, we identified 17 different programs, administered by
eight federal agencies, that are designed specifically for, or that
may be used by, rural areas for constructing, expanding, or repairing
water and wastewater facilities.  Overall, the 17 programs have the
common objectives of improving the economy of rural areas by
improving their infrastructure and of helping rural residents achieve
basic, healthy living conditions.  While the programs' objectives are
closely aligned, eligibility criteria vary considerably.  For
example, one program requires applicants to be low-income, elderly
individuals, while other programs specify the maximum population for
a town. 

As we previously reported, because of the complexity and number of
programs available, each with its somewhat different application
requirements, many rural areas are unable to apply for and administer
federal grants or loans without using a consultant.  In addition to
this overarching problem, our discussions with rural areas disclosed
other difficulties that hamper rural areas' ability to utilize the
programs.  These difficulties include (1) coordinating funding from
federal programs whose timetables for awarding loans and grants
differed, (2) contending with duplicative application and
administrative requirements when multiple programs are used for
project financing, and (3) coping with federal requirements that hold
very small projects to the same standards as large projects. 

Groups representing rural areas--the National Rural Development
Partnership, the Council of State Community and Development Agencies,
the National Association of Development Organizations, the National
Association of Counties, and the National Governors'
Association--generally agree that the current system of federal
assistance needs reform.  They all call for a process that would give
states and local areas much more involvement, but some express
concern that state governments may not be any more responsive to the
needs of local communities than the federal government has been. 

Section 1 of this briefing report provides additional information on
the federal programs providing assistance to rural areas for water
and wastewater facilities.  Section 2 discusses the similarities and
differences in the programs' objectives and eligibility criteria. 
Section 3 describes some of the problems rural areas have encountered
in dealing with the federal water and wastewater facilities programs. 
Section 4 presents comments from groups representing rural areas
concerning the possible consolidation or elimination of these
programs. 


--------------------
\1 GAO/RCED-94-165, July 28, 1994. 


---------------------------------------------------------- Letter :0.1

To determine which federal programs provide grants, loans, technical
assistance, or other resources to rural areas for water and
wastewater facilities, we searched the 1994 Catalog of Federal
Domestic Assistance, reviewed program descriptions, and contacted
agency staff.  We also used the Catalog to determine each program's
objectives and eligibility requirements. 

To determine what problems rural areas encounter in availing
themselves of the programs, we reviewed pertinent documentation and
met with selected rural areas and organizations that had assisted
rural areas with the programs.  We also solicited written comments
from groups representing rural areas concerning requirements imposed
by the multiple federal programs for water and wastewater facilities. 

We performed our work during February and March 1995 in accordance
with generally accepted government auditing standards. 

We did not obtain written agency comments on a draft of this briefing
report.  However, we discussed a draft of the report with the Acting
Assistant Administrator, Water and Waste-Rural Utilities Service,
U.S.  Department of Agriculture; the Director, Community Development,
Appalachian Regional Commission; and the Director, National Rural
Development Partnership, National Office.  These officials generally
concurred with the information presented in the briefing report. 

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this briefing report
until 30 days from the date of this letter.  At that time, we will
send copies of this briefing report to the Senate and House
Committees on Agriculture, interested Members of Congress, and the
Secretary of Agriculture.  We will also make copies available to
others upon request. 

Please contact me at (202) 512-5138 if you or your staff have any
questions.  Major contributors to this briefing report are listed in
appendix III. 

Sincerely yours,

John W.  Harman
Director, Food and
 Agriculture Issues


BRIEFING SECTION 1 FEDERAL
AGENCIES AND OTHERS THAT CAN
ASSIST RURAL AREAS WITH WATER AND
WASTEWATER FACILITIES
============================================================== Letter 



   (See figure in printed
   edition.)



      FEDERAL AGENCIES AND
      ORGANIZATIONS THAT CAN
      ASSIST RURAL AREAS WITH
      WATER AND WASTEWATER
      FACILITIES
---------------------------------------------------------- Letter :0.2

The 1994 Catalog of Federal Domestic Assistance cites eight federal
agencies with programs that are either designed specifically for, or
that may be used by, rural areas for assistance in constructing water
and/or wastewater facilities.  The federal agencies include the
following: 

  U.S.  Department of Agriculture's (USDA) Rural Development
     Administration (RDA),\2

  USDA's Farmers Home Administration (FmHA),\3

  Appalachian Regional Commission (ARC),

  Department of Housing and Urban Development (HUD),

  Department of Commerce's Economic Development Administration (EDA),

  Environmental Protection Agency (EPA),

  Department of Health and Human Services (HHS), and

  Department of the Interior (DOI). 

In addition, we identified other organizations that assist rural
areas in identifying, applying for, and administering program grants,
loans, and technical assistance.  Included among such organizations
are

  Regional Development Centers (RDCs),

  Rural Information Center (RIC),

  Rural Community Assistance Program (RCAP), and

  Private firms. 

Appendix II contains a general description of these organizations. 



   (See figure in printed
   edition.)



--------------------
\2 In 1994, USDA reorganized, and RDA's water and wastewater facility
programs were transferred to the Rural Utilities Service.  This
report continues to refer to RDA since the period covered by our
review was prior to the reorganization. 

\3 In the 1994 reorganization of USDA, FmHA's housing loan program
was transferred to the Rural Housing and Community Development
Service.  This report continues to refer to FmHA since the period
covered by our review was prior to the reorganization. 


      SEVENTEEN PROGRAMS PROVIDE
      ASSISTANCE TO RURAL AREAS
      FOR WATER AND WASTEWATER
      FACILITIES
---------------------------------------------------------- Letter :0.3

The Catalog of Federal Domestic Assistance cites 17 programs, spread
among eight federal agencies, that either are specifically designed
to provide assistance to rural areas for water and/or wastewater
facilities or may be used for that purpose.  Table 1.1 lists these
programs by agency. 



                          Table 1.1
           
               Programs That Provide Water and
             Wastewater Facilities Assistance to
                         Rural Areas

Agency                         Program name
-----------------------------  -----------------------------
RDA                            Water and Waste Disposal
                               Systems for Rural Communities

                               Technical Assistance and
                               Training Grants

                               Emergency Community Water
                               Assistance Grants

                               Rural Development Grants

                               Water and Waste Disposal
                               Loans and Grants

FmHA                           Rural Housing Site Loans

                               Very Low-Income Housing
                               Repair Loans and Grants

ARC                            Appalachian Supplements to
                               Federal Grant-in-Aid

HUD                            Community Development Block
                               Grants/Small Cities Program

                               Community Development Block
                               Grants/States Program

                               Indian Community Development
                               Block Grant Program

EPA                            Capitalization Grants for
                               State Revolving Funds

EDA                            Economic Development--Grants
                               for Public Works and
                               Development Facilities

                               Special Economic Development
                               and Adjustment Assistance
                               Program--Sudden and Severe
                               Dislocation

DOI                            Economic and Political
                               Development of the
                               Territories and the Trust
                               Territory of the Pacific
                               Islands

HHS                            Surplus Property Utilization

                               Community Services Block
                               Grant--Discretionary Awards
------------------------------------------------------------

BRIEFING SECTION 2 PRIMARY
OBJECTIVES AND ELIGIBILITY
CRITERIA OF FEDERAL WATER AND
WASTEWATER PROGRAMS FOR RURAL
AREAS
============================================================== Letter 



   (See figure in printed
   edition.)



      PROGRAMS SHARE COMMON
      OBJECTIVES, BUT HAVE
      DIFFERENT ELIGIBILITY
      CRITERIA
---------------------------------------------------------- Letter :0.4

For the 17 programs we reviewed, the most common objective is to
improve the economy of rural areas by creating an infrastructure to
support economic growth.\4 Closely aligned to that mission are the
other major objectives:  (1) helping low- and moderate-income
individuals achieve basic, healthy living conditions and (2)
identifying technical solutions to rural communities' water and
wastewater problems. 

Although the programs' objectives are similar, their eligibility
criteria are significantly different.  For instance, FmHA's Very
Low-Income Housing Repair Loans and Grants Program provides grants to
low-income, elderly homeowners for repairs to their home's water or
waste disposal system, but other programs require the applicant to be
a state, municipality, nonprofit business, or Indian tribe. 
Population size is also sometimes a factor.  For example, RDA's Water
and Waste Disposal Systems for Rural Communities Program and FmHA's
Rural Housing Site Loan Program are generally available only in areas
with a population of 10,000 or less; RDA's Emergency Community Water
Assistance Grants are for areas with a population of less than
15,000; and RDA's Rural Development Grants Program is available to
any community outside a city with a population of 50,000 or less. 

BRIEFING SECTION 3

--------------------
\4 Since the Community Development Block Grant Program has multiple
objectives, the number of program objectives (23) is greater than the
number of programs (17). 


PROBLEMS RURAL AREAS HAVE IN USING
FEDERAL WATER AND WASTEWATER
PROGRAMS
============================================================== Letter 



   (See figure in printed
   edition.)



      EXPERIENCE IN THREE RURAL
      AREAS UNDERSCORE
      DIFFICULTIES IN USING
      FEDERAL PROGRAMS
---------------------------------------------------------- Letter :0.5

According to federal and state officials and private groups that help
rural areas obtain federal assistance, rural areas experience
difficulty in identifying, comprehending, and using the multiplicity
of federal programs.  Our July 1994 report highlighted the fact that
rural areas have difficulty in identifying the federal program(s)
they should apply to for needed assistance because of these programs'
complexity and number.\5

For those federal programs that assist rural communities with their
water and wastewater facility needs, we also found that (1)
differences among the agencies in their timetables for grant and loan
awards can delay needed financing, which in turn delays project
construction; (2) the need to seek funding from multiple sources can
require the applicant to duplicate essentially similar processes,
which increases overall project costs; and (3) requiring small
projects to meet the same standards as large projects can delay the
development of small but important projects. 

The difficulties three rural areas in Georgia--the town of Blue
Ridge, Franklin County, and Taylor County--experienced in accessing
water and wastewater programs exemplify the problems local
communities have in dealing with federal rural development programs. 
These difficulties echoed problems identified in our earlier report. 
Also, according to the Director of the National Rural Development
Partnership, as well as other members of the partnership, these
problems are pervasive, occurring in all states. 



   (See figure in printed
   edition.)



--------------------
\5 Rural Development:  Patchwork of Federal Programs Needs to Be
Reappraised (GAO/RCED-94-165, July 28, 1994). 


      DIFFERING TIMETABLES FOR
      GRANTS AND LOANS DELAYED
      BLUE RIDGE PROJECT
---------------------------------------------------------- Letter :0.6

Federal programs' timetables for processing applications and awarding
grants and loans are sometimes different.  Consequently, applications
for assistance from different agencies must be closely coordinated to
avoid project delays.  The experience of Blue Ridge, Georgia, in
obtaining Appalachian Regional Commission (ARC) and Rural Development
Administration (RDA) funding for its wastewater treatment project, as
described by the RDC representative, illustrates this difficulty. 
The town's immediate incentive for completing the project was to
increase employment opportunities:  A textile manufacturer had agreed
to expand operations and hire about 100 people, within a year of the
project's completion.  The project's total cost was an estimated $4.1
million.  The community sought an ARC grant of $0.3 million, with RDA
to provide a $2.7 million grant and a $1.1 million loan.  In December
1993, RDA told town officials that the project was eligible for
funding, pending completion of the town's application.  ARC approved
the project for funding in April 1994. 

The RDA process allows project approval to stand from one fiscal year
to the next without reapplication.  Once final approval is given, the
limiting factor is the availability of funds.  In contrast, the ARC
process dictates that funds be committed for projects by September 30
or the project must be resubmitted for funding during the next fiscal
year. 

In 1994, two problems arose that delayed the project.  First,
environmental concerns about the project required that a new site be
selected.  Second, in May 1994, town officials expressed concerns
about the sewer rates the users would have to pay.  Although these
issues were resolved by the summer of 1994, RDA no longer had grant
funds, and new funds would not be available until October 1.  Because
the ARC timetable requires that funds be committed by September 30,
Blue Ridge would have had to resubmit the project for funding during
fiscal year 1995.  However, ARC was able to reallocate funds from
other projects and, by December 1994, all funding was secured. 
However, this coordination problem has delayed project completion
from Spring 1996 to Spring 1997. 



   (See figure in printed
   edition.)



      DEALING WITH MULTIPLE
      AGENCIES DELAYED FRANKLIN
      COUNTY PROJECT AND INCREASED
      COSTS
---------------------------------------------------------- Letter :0.7

Franklin County's experience in obtaining funds for its water and
sewer project illustrates how having to deal with multiple agencies
to finance a project can result in excessive costs and delays.  In
1989, a developer proposed building a 36,000-square-foot truck stop
and service center that would employ about 185 people.  To solidify
the proposal, the county needed to revamp its water and sewer system,
at an estimated cost of about $1.8 million.  Franklin County
contracted with an engineering firm with experience in applying for
and administering federal and state grants and loans, as well as in
designing water and sewer projects. 

Franklin County sought the project's funds from a variety of sources
that had different application requirements.  The county got approval
for a $200,000 Community Development Block Grant (CDBG) from the
Department of Housing and Urban Development.  The CDBG funds,
however, could not be provided until total financing was arranged. 
The county then received approval for a $200,000 ARC grant but was
told it would have to wait 6 months to receive the funds.  The
Georgia Environmental Protection Division approved a grant for
$150,000, but it wanted assurance that all other financing had been
secured before it would provide funds.  The Georgia Environmental
Facilities Authority approved two loans totaling $690,000, and EDA
then approved a $555,000 grant.  The project was finally completed in
1994--5 years after it was proposed. 

Franklin County had to prepare six different loan/grant applications
because there was no standard application package and none of the
agencies would accept the application used for another agency.  Three
different environmental impact reports also had to be prepared before
financing could be secured.  According to an official of the
engineering firm that performed the administrative work for the
project, one report would have cost the county about $8,000, whereas
the three reports cost about $16,000.  He also said construction of
the water and sewer project was delayed by about 1 year because the
county had to deal with multiple agencies. 



   (See figure in printed
   edition.)



      TAYLOR COUNTY'S SMALL
      PROJECT REQUIRED TO MEET
      STANDARDS DESIGNED FOR LARGE
      PROJECTS
---------------------------------------------------------- Letter :0.8

In May 1991, Taylor County wanted to extend a water main from a
nearby water source to serve 20 residents who were not on the water
system.  The county proposed a project that involved installing a
6-inch line about 1 mile down the rights-of-way of existing roads. 
An engineer estimated the project would cost $118,555 and take about
60 days to complete.  The county approached FmHA for a loan/grant,
and began the pre-application process.  As with larger projects, this
process required the county to

  print a public notice for 3 consecutive days,

  identify any businesses and major developments that would benefit
     from the project,

  provide a map of the area and describe present use,

  provide air quality data,

  provide data on water quality,

  indicate the types and quantities of solid wastes,

  describe the available transportation facilities,

  indicate the major sources of noise,

  identify any historic/archeological resources,

  identify any wildlife and endangered species,

  describe energy supplies available to the project,

  identify construction methods to be employed,

  describe any toxic, hazardous, or radioactive substances

  disclose any objections made to the project,

  describe any alternatives to the project,

  identify any permits of an environmental nature, and

  identify any other federal programs being used to fund the project. 

Taylor County met all these requirements and completed the
pre-application process after 1 year.  At that time, after having
spent about $3,800, the county officials decided that they did not
want to proceed with the project because they believed the rates
charged would be excessive. 


SECTION 4 VIEWS OF GROUPS
REPRESENTING RURAL AREAS
============================================================== Letter 



   (See figure in printed
   edition.)



      GROUPS REPRESENTING RURAL
      INTERESTS PROVIDED THEIR
      VIEWS ON FEDERAL PROGRAMS
---------------------------------------------------------- Letter :0.9

In January 1995, we asked the National Rural Development Partnership
to respond to our 1994 report by developing a position paper on the
possible consolidation and/or elimination of federal rural economic
development and infrastructure programs.  Accordingly, 12 members of
the Partnership produced a position paper entitled Consultation on
Alternatives to A Patchwork of Federal Rural Development Programs. 

At our invitation, other groups representing rural areas submitted
statements clarifying or expanding the views expressed in the
position paper.  These groups included the Council of State Community
and Development Agencies (COSCDA), the National Association of
Development Organizations (NADO), the National Association of
Counties (NACo), and the National Governors' Association (NGA). 

These groups generally agreed that the current system of federal
assistance needs reform.  They all called for involving states and
local officials much more in the process of allocating federal funds
to rural areas, but they differed somewhat on how to foster this
involvement.  Partnership members favored a block grant approach that
gives governors more control over the distribution of federal funds
to rural areas in their state.  Distribution in states should be
tailored to the particular problems of a rural area.  In contrast,
COSCDA questioned several aspects of the block grant concept.  COSCDA
questioned whether block grants should be allocated on the basis of a
formula or a competition, or whether they should be a combination of
formula and competitive funding.  Furthermore, COSCDA asked how a
block grant could be designed to, among other things, encompass the
various objectives, eligibility criteria, and intended beneficiaries
of the programs that would be consolidated under a block grant. 

NADO and NACo agree in their concern that under a block grant
scenario, the states may take funds previously available to local
communities and use them for state-directed projects and/or state
administration.  They believe that funds should flow through states,
not to states, and that guarantees are needed to ensure that local
governments will be active partners in the allocation of funds.  NGA
responded that the federal government should consolidate individual
federal rural development programs into fewer, more flexible programs
to provide states with development grants, loans, research grants,
and technology transfer support for rural development. 

This section presents the views of each of these groups in more
detail. 



   (See figure in printed
   edition.)



      NATIONAL RURAL DEVELOPMENT
      PARTNERSHIP
--------------------------------------------------------- Letter :0.10

The National Rural Development Partnership, created in 1991, has as
its objective the promotion of (1) innovative and strategic
approaches to rural development and (2) collaboration among federal
and state agencies involved in rural development.  It also helps
identify and resolve intergovernmental and interagency impediments. 
The partnership's members are drawn from federal agencies involved in
rural development, the 39 state rural development councils, and
national organizations such as COSCDA, NADO, NACo, and NGA. 

In its response to our request for its views, the Partnership
reported, "The need for federal resources and federal partnerships is
vital to rural development, but the current system does not
effectively offer either.  Meaningful reform is needed, which must go
well beyond a simple repackaging of the current programs." The
Partnership further held that a new federal approach was needed that
would support the strategies of rural areas and assist them in
achieving their goals.  The Partnership offered the following
framework for a new federal rural policy: 

  States should be encouraged to build sustainable communities. 

  Federal funds should be allocated as block grants to states on the
     basis of the needs of rural areas. 

  Decisions on fund allocation within the states should rest with the
     governors and rural areas. 

  Accountability for use of federal funds should focus on outcomes,
     not inputs, and performance, not compliance. 

  The use of block grants should be made more flexible.  This could
     yield savings in administrative costs; savings and efficiency
     could be maximized with multiyear funding. 



   (See figure in printed
   edition.)



      COUNCIL OF STATE COMMUNITY
      AND DEVELOPMENT AGENCIES
--------------------------------------------------------- Letter :0.11

COSCDA is primarily concerned with promoting states' common interests
for comprehensive community and economic development.  Founded in
1974, COSCDA has 50 members who are the directors or staff of state
community affairs agencies. 

In response to our request for their views, COSCDA provided comments
in a report entitled Brainstorming on Block Grants.  This report
addresses the possibilities of putting into block grants programs for
rural development, community facilities and infrastructure, and
housing.  It poses the following questions for each of the scenarios
it presents: 

  Should the block grants be devolved entirely to states or should
     there be entitlement components? 

  Should block grants be allocated strictly according to a formula or
     to competitive bidding, or should they be a mixture of the two? 

  How can the design of a block grant reconcile all the different
     characteristics of the various programs, such as eligible
     applicants, eligible activities, matching requirements, types of
     assistance, and targeted populations? 



   (See figure in printed
   edition.)



      NATIONAL ASSOCIATION OF
      DEVELOPMENT ORGANIZATIONS
--------------------------------------------------------- Letter :0.12

NADO's goals are to (1) promote economic development, focusing
primarily on rural areas and small towns; (2) serve as a forum for
communication and education; and (3) provide technical assistance to
its members.  Founded in 1967, NADO has 280 members drawn primarily
from multicounty planning and development agencies. 

In response to our request for its views on consolidation and/or
elimination of federal rural economic and infrastructure programs,
NADO stated: 

     "Rural economic development and infrastructure programs have the
     greatest effectiveness when they help meet locally established
     goals.  While state government is physically closer to local
     communities than the federal government, the state level is not
     the same as the local level.  We question whether state
     governments can or will be any more responsive to the needs of
     local communities than the federal government has been."

NADO recommends that the Congress investigate ways to reduce mandates
or other impediments that interfere with the effective coordination
and delivery of existing programs.  If block grants are to be
pursued, it believes that the following issues need to be addressed: 

  Certain guarantees that local governments will be an active partner
     need to be built into any block grant program. 

  Funds should flow through states, not to states.  Local communities
     should have a real voice in the use and allocation of block
     grant funds, as well as in the creation of new federal block
     grant programs. 

  Ensure that states will not take funds previously available to
     local communities and use them for state-directed projects
     and/or state-level administration. 

  Block grant funding should be used in accordance with state law,
     rather than administered solely by the governor. 



   (See figure in printed
   edition.)



      NATIONAL ASSOCIATION OF
      COUNTIES
--------------------------------------------------------- Letter :0.13

NACo provides research and reference services for county officials
and represents county officials at the national level.  One of its
committees is concerned with agriculture and rural affairs.  Founded
in 1935, NACo has 1,750 members who are primarily elected and
appointed county governing officials and their deputies. 

According to NACo's Director of Public Policy, NACo agrees with
NADO's position. 



   (See figure in printed
   edition.)



      NATIONAL GOVERNORS'
      ASSOCIATION
--------------------------------------------------------- Letter :0.14

NGA represents governors at the national level to inform the federal
government of the needs and views of the states.  The Association
also provides technical assistance to the governors and serves as a
vehicle for sharing information.  Founded in 1908, NGA has 55
members, including the governors of the 50 states, and
representatives from Guam, American Samoa, the U.S.  Virgin Islands,
the Northern Mariana Islands, and the Commonwealth of Puerto Rico. 

In response to our request, NGA stated that the states need a federal
policy that clearly defines rural and economic development
initiatives and goals.  This policy should include more effective
targeting of federal resources through greater reliance on states,
increased flexibility for states in using federal programs, and
improved coordination between federal programs and state services. 
NGA believes the federal government should take the following
actions: 

  Consolidate individual federal rural development programs into
     fewer, more flexible programs that provide states with
     development grants, loans, research grants, and technology
     transfer support for rural development. 

  Continue support for the Partnership, which can help to more
     effectively target both state and federal resources. 

  Permit states to utilize regional partnerships when using federal
     rural development programs.  Federal programs should permit
     flexibility for "cross-border" uses and joint strategic
     planning. 

  Give the Secretary of Agriculture the authority to ensure that all
     federal efforts can be coordinated at the state level.  USDA
     needs greater authority as a lead agency to enforce coordination
     to promote greater efficiency. 


OBJECTIVES, TYPE OF ASSISTANCE,
AND ELIGIBILITY CRITERIA OF WATER
AND WASTEWATER PROGRAMS FOR RURAL
AREAS
=========================================================== Appendix I

This appendix presents information on the objectives, type of
assistance, eligibility criteria, and intended beneficiaries of the
water and wastewater programs we reviewed.  This information is based
upon information contained in the 1994 Catalog of Federal Domestic
Assistance. 

RURAL DEVELOPMENT ADMINISTRATION WATER AND WASTE DISPOSAL SYSTEMS FOR
RURAL COMMUNITIES

Objectives.  The program's objectives are to provide basic human
amenities, alleviate health hazards, and promote the orderly growth
of the nation's rural areas by meeting their need for new and
improved water and waste disposal facilities. 

Type of assistance.  Grants, direct loans, and guaranteed/insured
loans. 

Eligibility criteria.  Eligible applicants include rural communities,
nonprofit corporations, and Indian tribes.  The service area cannot
include any area in any city or town with a population of more than
10,000.  Eligible applicants may reside in rural areas of the United
States, the Commonwealth of Puerto Rico, the Virgin Islands, Guam,
the Northern Mariana Islands, American Samoa, and to the extent the
Secretary determines feasible and appropriate, the Trust Territory of
the Pacific Islands. 

The recipient must (1) be unable to finance the proposed project from
its own resources or through commercial credit at reasonable rates
and terms and (2) have the legal authority necessary for
constructing, operating, and maintaining the proposed facility or
service and for obtaining, giving security for, and repaying the
proposed loan.  Recipients must develop plans that comply with state
and local health and pollution regulations and other requirements. 

Intended beneficiaries.  The program is targeted to farmers,
ranchers, rural residents, rural businesses, and other users in
eligible applicant areas. 

RURAL DEVELOPMENT ADMINISTRATION TECHNICAL ASSISTANCE AND TRAINING
GRANTS

Objectives.  This program provides assistance in (1)identifying and
evaluating solutions to water and waste disposal problems in rural
areas, (2) preparing applications, and (3) improving operations and
maintenance of water and waste disposal facilities in rural areas. 

Type of assistance.  Project grants. 

Eligibility criteria.  Tax-exempt, private nonprofit organizations
are eligible for this program.  Applicants must have proven ability,
background, experience, legal authority, and capacity to provide
technical assistance and/or training on a regional basis. 

Intended beneficiaries.  This program is designed to provide
assistance to entities that may be eligible for water and waste
disposal loans and grants, such as municipalities, counties,
districts, water or sewer authorities and other political
subdivisions of a state; associations, cooperatives or private
corporations operated on a not-for-profit basis; and Indian tribes on
federal and state reservations and other federally recognized Indian
tribes. 

RURAL DEVELOPMENT ADMINISTRATION EMERGENCY COMMUNITY WATER ASSISTANCE
GRANTS

Objectives.  This program provides financial assistance to rural
communities that have experienced a significant decline in their
quantity or quality of water.  Funds can be used to obtain adequate
quantities of water that meet the standards of the Safe Drinking
Water Act. 

Type of assistance.  Project grants. 

Eligibility criteria.  Public entities, private nonprofit
corporations, political subdivisions of a state, and Indian tribes
may be eligible for this program. 

Intended beneficiaries.  The program is intended to benefit those who
meet the eligibility criteria. 

RURAL DEVELOPMENT ADMINISTRATION RURAL DEVELOPMENT GRANTS

Objectives.  This program is intended to facilitate the development
of small and emerging private businesses and industry in order to
boost employment and improve the economy in rural communities.  Water
and wastewater treatment projects may be funded under this program. 

Type of assistance.  Grants. 

Eligibility criteria.  Eligible applicants are public bodies and
nonprofit corporations serving rural areas, including Indian tribes
on federal and state reservations.  For purposes of this program, a
rural area is defined as all areas in a state that are not within the
outer boundary of any city having a population of 50,000 or more,
according to the latest decennial census of the United States.  Areas
having a population of not more than 25,000 are given priority in
funding decisions. 

Intended beneficiaries.  This program, for water and wastewater
facilities, is primarily targeted to private businesses that (1) will
employ 50 or fewer new employees and (2) have less than $1 million in
projected gross revenue. 

RURAL DEVELOPMENT ADMINISTRATION WATER AND WASTE DISPOSAL LOANS AND
GRANTS

Objectives.  This program provides financial assistance for building
water and waste disposal facilities and services in low-income rural
communities whose residents face significant health risks. 

Type of assistance.  Project grants; direct loans. 

Eligibility criteria.  Local governments, federally recognized Indian
tribes, U.S.  territories and possessions, and nonprofit associations
can receive assistance under this program.  Except for rural areas
known as "Colonias" along the U.S./Mexican border, the projects
funded under this program must primarily provide water and/or waste
disposal services to residents of a county where the per capita
income of the residents does not exceed 70 percent of the most recent
national average per capita income, as determined by the Department
of Commerce, and where the residents' unemployment rate is not less
than 125 percent of the most recent national average unemployment
rate, as determined by the Bureau of Labor Statistics.  In addition,
residents must face significant health risks because they do not have
access to an affordable community water and/or waste disposal system. 

Intended beneficiaries.  This program is targeted to public entities
such as towns and counties, private nonprofit corporations;
cooperatives, political subdivisions of a state, and Indian tribes. 

FARMERS HOME ADMINISTRATION RURAL HOUSING SITE LOANS

Objectives.  This program is intended to provide affordable housing
sites.  It provides these sites by providing financial assistance to
public or private nonprofit organizations so that they can purchase
and develop land in rural areas.  This land is subdivided into
building sites and sold for the cost of developing the site. 
Purchasers include families eligible for low- and very low-income
loans, and cooperatives. 

Type of assistance.  Direct loans. 

Eligibility criteria.  Private or public nonprofit organizations are
eligible for program funds if they provide developed sites to
qualified borrowers for the cost of developing the site.  The site
must be located in sparsely populated areas, towns of 10,000 or less,
and certain locations with up to 25,000 citizens.  Applicants from
towns with populations of 10,000 to 25,000 need to have their
eligibility determined on a case-by-case basis.  Assistance is
available to eligible applicants in the 50 states, the Commonwealth
of Puerto Rico, the U.S.  Virgin Islands, Guam, and the Northern
Mariana Islands. 

Intended beneficiaries.  Low- and very low-income families are the
targeted population for this program. 

FARMERS HOME ADMINISTRATION VERY LOW-INCOME HOUSING REPAIR LOANS AND
GRANTS

Objectives.  This program is intended to give very low-income rural
homeowners an opportunity to make essential repairs to their home,
including water and waste disposal systems, that will make the home
safe and/or remove health hazards that threaten the family or the
community. 

Type of assistance.  The program provides both direct loans and
project grants.  Grant funds may only be used to repair the
foundation, roof, or basic structure; build or repair water and waste
disposal systems; and weatherize the home. 

Eligibility criteria.  Applicants must own and occupy a home in a
rural area and be a citizen of the United States or a legal resident. 
Loan recipients must have sufficient income to repay the loan.  Grant
recipients must be 62 years of age or older and be unable to repay
any assistance received as a grant.  An applicant's income may not
exceed the very low-income limit specified in FmHA's instructions. 
These limits range from $8,450 to $22,050 per household, depending on
an area's median income. 

Intended beneficiaries.  Very low-income owner-occupants in rural
areas whose homes need repairs to address safety or health hazards
are the target beneficiary population. 

APPALACHIAN REGIONAL COMMISSION (ARC) APPALACHIAN SUPPLEMENTS TO
FEDERAL GRANT-IN-AID (COMMUNITY DEVELOPMENT)

Objectives.  This program is intended to meet the basic needs of
local areas and to assist in job creation in the private sector by
funding such facilities as water and sewer systems, sewage treatment
plants, and industrial sites.  It is also intended to provide basic
water and sewer facilities in designated "distressed" counties. 
Grants may supplement other federal grants or, when sufficient
federal funds are unavailable, this program may fund an entire
project. 

Type of assistance.  Project grants. 

Eligibility criteria.  States, their subdivisions and
instrumentalities, and private nonprofit agencies are eligible for
this program. 

Intended beneficiaries.  Residents of the designated states and
counties of Appalachia are eligible for program funds. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT COMMUNITY DEVELOPMENT
BLOCK GRANTS/SMALL CITIES PROGRAM

Objectives.  The primary objective of this program is to develop
viable communities by providing decent housing, a suitable living
environment, and expanding economic opportunities, principally for
persons of low and moderate income.  Rural areas in the states of New
York and Hawaii can also receive funds under this program since HUD
continues to administer the Small Cities Program for the areas of
those states that are not automatically entitled to grants, within
the jurisdictions of those states. 

Type of assistance.  Project grants. 

Eligibility criteria.  Eligible applicants are local governments,
including counties, except for metropolitan cities, urban counties,
or units participating in an urban county's Community Development
Block Grant (CDBG) program, and certain Indian tribes. 

Intended beneficiaries.  The principal beneficiaries of CDBG funds
are low- and moderate-income persons.  For nonmetropolitan areas, low
and moderate income is generally defined as 80 percent of the median
income for nonmetropolitan areas of the state, as adjusted by family
size. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT COMMUNITY DEVELOPMENT
BLOCK GRANTS/STATES PROGRAM

Objectives.  This program's objectives include that of developing
viable rural communities by providing decent housing, a suitable
living environment, and expanding economic opportunities, principally
for persons with low and moderate income. 

Type of assistance.  Formula grants. 

Eligibility criteria:  Funds go to state governments, which must
distribute them to local governments that do not receive entitlement
grants.  Large cities receive CDBG grants as an entitlement. 

Intended beneficiaries.  The principal beneficiaries of CDBG funds
are low- and moderate-income persons.  For nonmetropolitan areas, low
and moderate income is generally defined as 80 percent of the median
income for nonmetropolitan areas of the state, as adjusted by family
size. 

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT HOUSING INDIAN COMMUNITY
DEVELOPMENT BLOCK GRANT PROGRAM

Objectives.  Unlike the other CDBG programs, this program targets
Indian communities.  It provides assistance to Indian tribes and
Alaskan Native Villages in order to develop viable Indian
communities. 

Type of assistance.  Project grants. 

Eligibility criteria.  This program provides funding to any Indian
tribe, band, group, or nation, including Alaskan Indians, Aleuts, and
Eskimos; and any Alaskan Native Village that is eligible for
assistance under the Indian Self-Determination and Education
Assistance Act, or which had been eligible under the State and Local
Fiscal Assistance Act of 1972. 

Intended beneficiaries.  The principal beneficiaries of CDBG funds
are low- and moderate-income persons.  For nonmetropolitan areas, low
and moderate income is generally defined as 80 percent of the median
income for nonmetropolitan areas of the state, as adjusted by family
size. 

ENVIRONMENTAL PROTECTION AGENCY CAPITALIZATION GRANTS FOR STATE
REVOLVING FUNDS

Objectives.  This program is designed to help finance construction of
municipal wastewater treatment facilities and implementation of other
water quality management activities.  It does so by creating state
revolving funds through capitalization grants to states to provide a
long-term source of state financing for wastewater projects. 

Type of assistance:  Capitalization grants based upon formula. 

Eligibility criteria.  Eligible recipients for this program include
states, territories, and possessions of the United States, including
the District of Columbia.  Indian tribes are not eligible to receive
capitalization grants. 

Intended beneficiaries.  Local communities, pairs or groups of
communities, state, interstate agencies, and Indian tribes are
eligible for loans and other financial assistance (but not grants)
for wastewater treatment facilities.  If specified in approved state
nonpoint source management programs and comprehensive conservation
and management plans, these entities are also eligible for
assistance. 

ECONOMIC DEVELOPMENT ADMINISTRATION (EDA) ECONOMIC
DEVELOPMENT--GRANTS FOR PUBLIC WORKS AND DEVELOPMENT FACILITIES

Objectives.  This program provides grants to promote long-term
economic development and assist in the construction of public works
and development facilities.  These facilities must be needed to
initiate and encourage the creation or retention of permanent jobs in
the private sector in areas experiencing severe economic distress. 

Type of assistance.  Project grants. 

Eligibility criteria.  Eligible entities under this program include
states, cities, counties, and other political subdivisions, Indian
tribes, the Federated States of Micronesia, the Republic of the
Marshall Islands, commonwealths and territories of the U.S.  flag,
and private or public nonprofit organizations or associations
representing a redevelopment area or a designated Economic
Development Center.  For-profit corporations and associations are not
eligible. 

Intended beneficiaries.  This program is intended to benefit local
economies, unemployed and underemployed persons, and/or members of
low-income families by creating new jobs or by helping to retain
jobs. 

EDA SPECIAL ECONOMIC DEVELOPMENT AND ADJUSTMENT ASSISTANCE
PROGRAM--SUDDEN AND SEVERE ECONOMIC DISLOCATION AND LONG-TERM
ECONOMIC DETERIORATION

Objectives.  This program is intended to assist state and local areas
develop and/or implement strategies designed to address adjustment
problems resulting from sudden and severe economic dislocation. 
These dislocations may be caused by plant closings, military base
closures and defense contract cutbacks, and natural disasters.  This
program is also designed to help areas experiencing long-term
economic deterioration. 

Type of assistance.  Project grants. 

Eligibility criteria.  Eligible entities for this program include
states, cities, counties or other political subdivisions of a state;
a consortia of such political subdivisions; public or private
nonprofit organizations representing redevelopment areas designated
under the Public Works and Economic Development Act of 1965, Economic
Development Districts established under Title IV of the act, or
Indian tribes. 

Intended Beneficiaries.  This program is designed to target
geographic areas, usually counties, or groups of counties, that meet
either the long-term and/or sudden and severe eligibility criteria. 
The statistical factors used to determine long-term eligibility are
(1) very high unemployment; (2) low per capita income; and (3)
chronic distress.  For sudden and severe eligibility, the economic
dislocation must exceed certain job loss thresholds for the area. 

DEPARTMENT OF THE INTERIOR ECONOMIC AND POLITICAL DEVELOPMENT OF THE
TERRITORIES AND THE TRUST TERRITORY OF THE PACIFIC ISLANDS

Objectives.  This program is intended to promote the economic,
social, and political development of the territories, leading toward
greater self-government for each of them. 

Type of assistance.  Project grants. 

Eligibility criteria.  Eligible applicants are the U.S.  territories
of Guam, the U.S.  Virgin Islands, American Samoa, the Northern
Mariana Islands; the Trust Territory of the Pacific Islands; and the
freely associated States of the Federated States of Micronesia and
the Republic of the Marshall Islands. 

Intended beneficiaries.  The beneficiaries are those entities meeting
the eligibility criteria. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES SURPLUS PROPERTY UTILIZATION

Objectives.  This program is designed to convey or lease all surplus
federal real properties made available by the disposal agency that
are needed and can be used by eligible organizations and institutions
to carry out health programs, including the development of water and
wastewater facilities. 

Type of assistance.  This program sells, exchanges, or donates
federal property and goods. 

Eligibility criteria.  Eligible entities for this program include
states, their political subdivisions and instrumentalities;
tax-supported public health institutions, and nonprofit institutions. 

Intended beneficiaries.  This program is designed to aid anyone
attending, working with or for, or served by the eligible applicants. 
Therefore, beneficiaries may include hospitals, public health
clinics, water and sewer systems, institutions for the rehabilitation
of the mentally or physically handicapped, health research
institutions, homeless assistance facilities, and other institutions
with basic health programs. 

DEPARTMENT OF HEALTH AND HUMAN SERVICES COMMUNITY SERVICES BLOCK
GRANT--DISCRETIONARY AWARDS

Objectives.  This program is designed to support program activities
of national or regional significance that alleviate the causes of
poverty in distressed communities.  The program activities must
promote (1) full-time permanent jobs for low-income residents of the
assisted area; (2) income and/or ownership opportunities for
low-income community members; (3) a better standard of living for
rural low-income individuals in terms of housing or water and
wastewater treatment; (4) the implementation of projects, including
projects proposing new and innovative strategies for addressing the
special needs of migrants and seasonal farm workers; and (5) national
or regional programs designed to provide instructional activities for
low-income youth. 

Type of assistance.  Direct payments for specified use. 

Eligibility criteria.  For economic development projects, eligibility
is restricted to private, locally initiated, nonprofit community
development corporations (or affiliates of such corporations)
governed by a board consisting of residents of the community and
business and civic leaders.  For all other projects, the Secretary is
authorized to make direct grants to states, cities, counties, and
private nonprofit organizations. 

Intended beneficiaries.  The ultimate program beneficiaries are
specific segments of low-income individuals or families, as
identified by the assisted projects.  The official poverty line
established by the Director of the Office of Management and Budget,
published annually by HHS, is used as a criterion of eligibility in
this program. 


STAKEHOLDERS WHO ASSIST RURAL
AREAS
========================================================== Appendix II

This appendix provides information on the different types of entities
that rural areas can call upon to identify and help access and
administer federal programs for rural assistance. 

Rural Community Assistance Program

The Rural Community Assistance Program is the oldest nonprofit
organization in the United States providing small rural communities
with training and on-site technical assistance in a variety of areas. 
These areas include water and wastewater treatment, solid waste
disposal, and related issues concerning environmental health and
rural development.  The program has a national office and six
regional offices with over 150 field staff in all 50 states, the
Commonwealth of Puerto Rico, and the U.S.  Virgin Islands.  The
program receives funds from a variety of sources, such as USDA, HHS,
and nonprofit organizations.  Its services are free to the small
communities it assists. 

Regional Development Centers

Regional Development Centers (or Economic Development Districts, as
they are known in some states) are multicounty, special- purpose
districts that promote the economic development of their member
counties.  Center activities include preparing economic development
plans for the district as a whole, as well as assisting member
counties and communities with their applications for assistance from
federal (or state) programs.  Typically, a center's activities are
overseen by a board of directors composed of county commissioners and
other elected officials from the counties served.  Center operations
are funded by local taxes, and centers often also receive some state
funds and federal planning funds from the Economic Development
Administration.  In addition, other federal agencies often contract
with centers to manage specific federal programs, such as Job
Training Partnership Act. 

Rural Information Center

The Rural Information Center serves as an information clearinghouse
on topics important to rural areas, such as economic revitalization
programs, local government planning, and rural health programs and
services.  The center was created in 1987 as a joint project of
USDA's Extension Service and National Agricultural Library.  The
center's information and referral services are available to a wide
range of organizations and individuals, including local, state,
federal officials; health professionals; and rural electric and
telephone cooperatives.  Users can access the center through an 800
telephone number, an electronic bulletin board, and the Internet. 

Private Firms

A large number of for-profit firms and individuals help rural
communities obtain federal and other assistance for water and
wastewater treatment projects.  Engineering firms, for example, not
only assist rural communities with the engineering design and
construction of water and wastewater facilities but also often help
rural officials identify funding sources, prepare the applications,
and coordinate with the regional development centers and the
supporting federal and state agencies. 

Individual consultants or consulting firms also help rural
communities identify funding sources, prepare the necessary
applications, and coordinate with Rural Development Centers and
federal and state agencies.  However, they may also provide other
assistance, such as helping local officials manage the loan or grant
funds the community receives and ensuring that any reporting or other
program requirements are met.  Costs related to project engineering
are usually paid with program funds.  Application and other
administrative costs are usually paid from community funds, but some
federal programs allow the community to use a certain amount of these
funds to pay for administrative costs. 


MAJOR CONTRIBUTORS TO THIS
BRIEFING REPORT
========================================================= Appendix III

FOOD AND AGRICULTURE ISSUES

Robert C.  Summers, Assistant Director
John K.  Boyle, Project Leader
Frank C.  Smith
Sara Bingham
Carol Herrnstadt Shulman

