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Agriculture - PDF 1

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									                                                                                7
                                                                                Parts 1600 to 1899
                                                                                Revised as of January 1, 2004



                                                                                Agriculture

                                                                                Containing a codification of documents
                                                                                of general applicability and future effect

                                                                                As of January 1, 2004

                                                                                With Ancillaries

                                                                                Published by:
                                                                                Office of the Federal Register
                                                                                National Archives and Records
                                                                                Administration


                                                                                A Special Edition of the Federal Register




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                                                          Table of Contents
                                                                                                                                                Page
                                 Explanation ................................................................................................     v



                                 Title 7:


                                           Subtitle B—Regulations of the Department of Agriculture (Contin-
                                             ued)


                                              Chapter XVI—Rural Telephone Bank, Department of Agriculture                                          5


                                              Chapter XVII—Rural Utilities Service, Department of Agriculture                                     17


                                              Chapter XVIII—Rural Housing Service, Rural Business-Coopera-
                                                tive Service, Rural Utilities Service, and Farm Service Agency,
                                                Department of Agriculture ..........................................................            1157


                                 Finding Aids:


                                           Material Approved for Incorporation by Reference ............................                        1195


                                           Table of CFR Titles and Chapters .......................................................             1205


                                           Alphabetical List of Agencies Appearing in the CFR .........................                         1223


                                           List of CFR Sections Affected .............................................................          1233




                                                                                            iii



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                                                                   Cite this Code:              CFR

                                                                   To cite the regulations in
                                                                    this volume use title,
                                                                    part and section num-
                                                                    ber. Thus, 7 CFR
                                                                    1600.1 refers to title 7,
                                                                    part 1600, section 1.




                                                                                          iv



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                                                                               Explanation
                                    The Code of Federal Regulations is a codification of the general and permanent
                                 rules published in the Federal Register by the Executive departments and agen-
                                 cies of the Federal Government. The Code is divided into 50 titles which represent
                                 broad areas subject to Federal regulation. Each title is divided into chapters
                                 which usually bear the name of the issuing agency. Each chapter is further sub-
                                 divided into parts covering specific regulatory areas.
                                    Each volume of the Code is revised at least once each calendar year and issued
                                 on a quarterly basis approximately as follows:
                                      Title 1 through Title 16..............................................................as of January 1
                                      Title 17 through Title 27 .................................................................as of April 1
                                      Title 28 through Title 41 ..................................................................as of July 1
                                      Title 42 through Title 50 .............................................................as of October 1
                                     The appropriate revision date is printed on the cover of each volume.
                                 LEGAL STATUS
                                    The contents of the Federal Register are required to be judicially noticed (44
                                 U.S.C. 1507). The Code of Federal Regulations is prima facie evidence of the text
                                 of the original documents (44 U.S.C. 1510).
                                 HOW TO USE THE CODE OF FEDERAL REGULATIONS
                                    The Code of Federal Regulations is kept up to date by the individual issues
                                 of the Federal Register. These two publications must be used together to deter-
                                 mine the latest version of any given rule.
                                    To determine whether a Code volume has been amended since its revision date
                                 (in this case, January 1, 2004), consult the ‘‘List of CFR Sections Affected (LSA),’’
                                 which is issued monthly, and the ‘‘Cumulative List of Parts Affected,’’ which
                                 appears in the Reader Aids section of the daily Federal Register. These two lists
                                 will identify the Federal Register page number of the latest amendment of any
                                 given rule.
                                 EFFECTIVE AND EXPIRATION DATES
                                    Each volume of the Code contains amendments published in the Federal Reg-
                                 ister since the last revision of that volume of the Code. Source citations for
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                                 Register and date of publication. Publication dates and effective dates are usu-
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                                 OMB CONTROL NUMBERS
                                   The Paperwork Reduction Act of 1980 (Pub. L. 96–511) requires Federal agencies
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                                                                                          v



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                                 Many agencies have begun publishing numerous OMB control numbers as amend-
                                 ments to existing regulations in the CFR. These OMB numbers are placed as
                                 close as possible to the applicable recordkeeping or reporting requirements.
                                 OBSOLETE PROVISIONS
                                    Provisions that become obsolete before the revision date stated on the cover
                                 of each volume are not carried. Code users may find the text of provisions in
                                 effect on a given date in the past by using the appropriate numerical list of
                                 sections affected. For the period before January 1, 2001, consult either the List
                                 of CFR Sections Affected, 1949–1963, 1964–1972, 1973–1985, or 1986–2000, published
                                 in 11 separate volumes. For the period beginning January 1, 2001, a ‘‘List of CFR
                                 Sections Affected’’ is published at the end of each CFR volume.
                                 INCORPORATION BY REFERENCE
                                    What is incorporation by reference? Incorporation by reference was established
                                 by statute and allows Federal agencies to meet the requirement to publish regu-
                                 lations in the Federal Register by referring to materials already published else-
                                 where. For an incorporation to be valid, the Director of the Federal Register
                                 must approve it. The legal effect of incorporation by reference is that the mate-
                                 rial is treated as if it were published in full in the Federal Register (5 U.S.C.
                                 552(a)). This material, like any other properly issued regulation, has the force
                                 of law.
                                    What is a proper incorporation by reference? The Director of the Federal Register
                                 will approve an incorporation by reference only when the requirements of 1 CFR
                                 part 51 are met. Some of the elements on which approval is based are:
                                    (a) The incorporation will substantially reduce the volume of material pub-
                                 lished in the Federal Register.
                                    (b) The matter incorporated is in fact available to the extent necessary to
                                 afford fairness and uniformity in the administrative process.
                                    (c) The incorporating document is drafted and submitted for publication in
                                 accordance with 1 CFR part 51.
                                    Properly approved incorporations by reference in this volume are listed in the
                                 Finding Aids at the end of this volume.
                                    What if the material incorporated by reference cannot be found? If you have any
                                 problem locating or obtaining a copy of material listed in the Finding Aids of
                                 this volume as an approved incorporation by reference, please contact the agency
                                 that issued the regulation containing that incorporation. If, after contacting the
                                 agency, you find the material is not available, please notify the Director of the
                                 Federal Register, National Archives and Records Administration, Washington DC
                                 20408, or call (202) 741–6010.
                                 CFR INDEXES AND TABULAR GUIDES
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                                 volume, revised annually as of January 1, entitled CFR INDEX AND FINDING AIDS.
                                 This volume contains the Parallel Table of Statutory Authorities and Agency
                                 Rules (Table I). A list of CFR titles, chapters, and parts and an alphabetical
                                 list of agencies publishing in the CFR are also included in this volume.
                                    An index to the text of ‘‘Title 3—The President’’ is carried within that volume.
                                    The Federal Register Index is issued monthly in cumulative form. This index
                                 is based on a consolidation of the ‘‘Contents’’ entries in the daily Federal Reg-
                                 ister.
                                    A List of CFR Sections Affected (LSA) is published monthly, keyed to the
                                 revision dates of the 50 CFR titles.

                                                                                          vi



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                                 REPUBLICATION OF MATERIAL
                                   There are no restrictions on the republication of material appearing in the
                                 Code of Federal Regulations.
                                 INQUIRIES
                                   For a legal interpretation or explanation of any regulation in this volume,
                                 contact the issuing agency. The issuing agency’s name appears at the top of
                                 odd-numbered pages.
                                   For inquiries concerning CFR reference assistance, call 202–741–6000 or write
                                 to the Director, Office of the Federal Register, National Archives and Records
                                 Administration, Washington, DC 20408 or e-mail info@fedreg.nara.gov.
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                                                                                                           RAYMOND A. MOSLEY,
                                                                                                                            Director,
                                                                                                         Office of the Federal Register.
                                     January 1, 2004.




                                                                                          vii



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                                                                                 THIS TITLE

                                    Title 7—AGRICULTURE is composed of fifteen volumes. The parts in these vol-
                                 umes are arranged in the following order: parts 1–26, 27–52, 53–209, 210–299, 300–
                                 399, 400–699, 700–899, 900–999, 1000–1199, 1200–1599, 1600–1899, 1900–1939, 1940–1949, 1950–
                                 1999, and part 2000 to end. The contents of these volumes represent all current
                                 regulations codified under this title of the CFR as of January 1, 2004.

                                   The Food and Nutrition Service current regulations in the volume containing
                                 parts 210–299, include the Child Nutrition Programs and the Food Stamp Program.
                                 The regulations of the Federal Crop Insurance Corporation are found in the vol-
                                 ume containing parts 400–699.

                                   All marketing agreements and orders for fruits, vegetables and nuts appear
                                 in the one volume containing parts 900–999. All marketing agreements and orders
                                 for milk appear in the volume containing parts 1000–1199. Part 900—General Regu-
                                 lations is carried as a note in the volume containing parts 1000–1199, as a conven-
                                 ience to the user.




                                                                                          ix



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                                                                                          x
                                                                                                                                      CFRORDR.FRM</GPH>




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                                               Title 7—Agriculture
                                                               (This book contains parts 1600 to 1899)




                                 SUBTITLE B—REGULATIONS OF THE DEPARTMENT OF AGRICULTURE
                                                      (CONTINUED)
                                                                                                                                      Part

                                 CHAPTER XVI—Rural            Telephone Bank, Department of Agri-
                                     culture ...............................................................................          1600
                                 CHAPTER XVII—Rural            Utilities Service, Department of Agri-
                                     culture ...............................................................................          1700
                                 CHAPTER XVIII—Rural    Housing Service, Rural Business-Co-
                                     operative Service, Rural Utilities Service, and Farm
                                     Service Agency, Department of Agriculture ......................                                 1806




                                                                                          1



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                                           Subtitle B—Regulations of
                                              the Department of
                                            Agriculture (Continued)




                                                                                          3



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                                           CHAPTER XVI—RURAL TELEPHONE BANK,
                                              DEPARTMENT OF AGRICULTURE

                                 Part                                                                                                 Page
                                 1600            General information ................................................                   7
                                 1610            Loan policies ...........................................................             10




                                                                                          5



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                                             PART 1600—GENERAL                                cial agency business or effectively pre-
                                                INFORMATION                                   determine official actions, the term
                                                                                              Meeting does not include:
                                 MEETINGS OF THE BOARD OF DIRECTORS OF THE                      (1) Deliberations to determine wheth-
                                          RURAL TELEPHONE BANK                                er a meeting or portions of a meeting
                                                                                              will be open or closed or whether infor-
                                 Sec.
                                 1600.1 General.                                              mation pertaining to closed meetings
                                 1600.2 Definitions.                                          will be disclosed;
                                 1600.3 Open meetings.                                          (2) Calling a meeting at a date earlier
                                 1600.4 Scheduling of meetings.                               than announced as provided in § 1600.5;
                                 1600.5 Public announcement of meetings.                        (3) Changing the subject matter of a
                                 1600.6 Bases for closing a meeting to the                    publicly announced meeting as pro-
                                     public.                                                  vided in § 1600.5;
                                 1600.7 Procedures for closing a meeting to
                                     the public.
                                                                                                (4) Disposition of Board business by
                                 1600.8 Transcript, recording or minutes;                     circulation of materials to individual
                                     availability to the public.                              Board members;
                                                                                                (5) Staff briefings of Board members;
                                   AUTHORITY: 7 U.S.C. 941 et seq.; Pub. L. 103–
                                 354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).                   (6) Informal background discussions
                                                                                              among Board members and staff which
                                   SOURCE: 56 FR 49134, Sept. 27, 1991, unless                clarify issues and expose varying views;
                                 otherwise noted.
                                                                                              or
                                  MEETINGS OF THE BOARD OF DIRECTORS                            (7) Sessions with individuals from
                                    OF THE RURAL TELEPHONE BANK                               outside the Bank where Board mem-
                                                                                              bers listen to a presentation and may
                                 § 1600.1 General.                                            elicit additional information.
                                    The purpose of this part is to effec-                       Open to public observation means the
                                 tuate the provisions of the Government                       right of any member of the public to
                                 in the Sunshine Act. This part applies                       attend and observe, but not participate
                                 to the deliberations of a quorum of the                      or interfere in any way in an open
                                 Directors of the Bank required to take                       meeting of the Board.
                                 action on behalf of the Bank where                           § 1600.3 Open meetings.
                                 such deliberations determine or result
                                 in the joint conduct or disposition of                          (a) Except as provided for in § 1600.6
                                 official Bank business. Any delibera-                        every portion of every meeting of the
                                 tion to which this part applies is here-                     Board shall be open to public observa-
                                 inafter in this part referred to as a                        tion. Observation does not include par-
                                 meeting of the Board of Directors.                           ticipation or disruptive conduct by ob-
                                                                                              servers, and persons engaging in such
                                 § 1600.2 Definitions.                                        conduct will be removed from the
                                    As used in this part:                                     meeting. Documents being considered
                                    Board means Board of Directors of                         at meetings of the Board may be ob-
                                 the Rural Telephone Bank (Bank).                             tained subject to the exemptions set
                                    Director means an individual who is a                     forth in § 1600.8.
                                 member of the Board.                                            (b) Board members shall not jointly
                                    Legal Counsel means the legal counsel                     conduct or dispose of official Board
                                 of the Bank.                                                 business other than in accordance with
                                    Meeting means the deliberations (in-                      this part.
                                 cluding those conducted by conference                           (c) The Secretary of the Board shall
                                 telephone call or by any other method)                       be responsible for assuring that ample
                                 among a quorum of the Directors,                             space, sufficient visibility, and ade-
                                 where such deliberations determine or                        quate acoustics are provided for public
                                 result in joint conduct of official busi-                    observation of meetings of the Board.
                                 ness of the Board. For purposes of this
                                 part, each item on the agenda of a                           § 1600.4 Scheduling of meetings.
                                 meeting is considered a meeting or a                            A decision to hold a meeting of the
                                 portion of a meeting. To the extent                          Board should be made as provided in
                                 that the discussions do not result in                        the bylaws of the Bank and at least ten
                                 the beginning of deliberations or                            days prior to the scheduled meeting
                                 achieve a consensus on a matter of offi-                     date in order for the Secretary of the

                                                                                          7



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                                 § 1600.5                                                              7 CFR Ch. XVI (1–1–04 Edition)

                                 Bank to give the public notice required                        (d) The time or place of a meeting
                                 by § 1600.5. Special meetings of the                         may be changed following the public
                                 Board may be held on less than ten                           announcement required by paragraph
                                 days notice if a majority of the Board                       (a) of this section only if the Secretary
                                 determines by a recorded vote that                           publicly announces such change at the
                                 Bank business requires that the special                      earliest practicable time. The subject
                                 meeting be held on less than ten days                        matter of a meeting, or the determina-
                                 notice. After public announcement of a                       tion of the Board to open or close a
                                 meeting of the Board under the provi-                        meeting, or portion of a meeting, to
                                 sions of § 1600.5, the subject matter                        the public, may be changed following
                                 thereof, or the determination to open                        the public announcement required by
                                 or close a meeting, or portion thereof,                      this section only if:
                                 may only be changed if a majority of                           (1) A majority of the Directors deter-
                                 the Directors determines by a recorded                       mines by a recorded vote that business
                                 vote that business so requires and that                      so requires and that no earlier an-
                                 no earlier announcement of the change                        nouncement of the change was pos-
                                 is possible.                                                 sible; and
                                                                                                (2) The Secretary publicly announces
                                 § 1600.5 Public announcement of meet-                        such change and the vote of each Direc-
                                      ings.                                                   tor upon such change at the earliest
                                    (a) Except as otherwise provided in                       practicable time.
                                 this section, public announcement of                           (e) The earliest practicable time, as
                                 open meetings and meetings or por-                           used in this subsection, means as soon
                                 tions thereof closed under § 1600.7 will                     as possible, which should in few, if any,
                                 be made at least seven days in advance                       instances be later than the commence-
                                 of each meeting. Except to the extent                        ment of the meeting or portion in ques-
                                 that such information is determined to                       tion.
                                 be exempt from disclosure under                                (f) Each person interested in attend-
                                 § 1600.6, each such public announcement                      ing an open meeting of the Board
                                 will state the time, place, and subject                      should notify the Assistant Secretary
                                 matter of the meeting, whether it is to                      of the Board at least one business day
                                 be open or closed to the public, and the                     prior to the open meeting of their in-
                                 name and telephone number of the offi-                       tention to attend the meeting. Any
                                 cial designated to respond to requests                       person who fails to do so may not be
                                 for information about the meeting.                           accommodated if there is insufficient
                                 Each such announcement shall be sub-                         space in the meeting room.
                                 mitted for publication in the FEDERAL
                                 REGISTER. Copies of the announcement                         § 1600.6 Bases for closing a meeting to
                                 shall also be mailed to holders of Class                           the public.
                                 B and Class C Bank stock.                                       (a) A portion or portions of a Board
                                    (b) If a meeting is closed, the Board                     meeting may be closed to the public
                                 may omit from the announcement in-                           and any information pertaining to such
                                 formation usually included, if and to                        meeting otherwise required by § 1600.3
                                 the extent that it finds that disclosure                     to be disclosed to the public may be
                                 would be likely to have any of the con-                      withheld, where the Board determines
                                 sequences listed in § 1600.6.                                that public disclosure of information to
                                    (c) Where a majority of the Board                         be discussed at such meetings is likely
                                 members determine by recorded vote                           to:
                                 that Bank business requires that a                              (1) Disclose matters that are:
                                 meeting be called on less than ten days                         (i) Specifically authorized under cri-
                                 notice, public announcement shall be                         teria established by an Executive Order
                                 made at the earliest practicable time.                       to be kept secret in the interests of na-
                                 Such announcement will state the                             tional defense or foreign policy; and
                                 time, place, and the subject matter of                          (ii) In fact properly classified pursu-
                                 the meeting, whether it is to be open or                     ant to such Executive Order.
                                 closed to the public, and the name and                          (2) Relate solely to the internal per-
                                 telephone number of the official des-                        sonnel rules and practices of the Bank;
                                 ignated to respond to requests for in-                          (3) Disclose matters specifically ex-
                                 formation about the meeting.                                 empted from disclosure by statute

                                                                                          8



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                                 Rural Telephone Bank, USDA                                                                           § 1600.7

                                 (other than the Freedom of Informa-                          that this shall not apply in any in-
                                 tion Act, 5 U.S.C. 552), provided that                       stance where the content or nature of
                                 such statute:                                                the proposed action has already been
                                   (i) Requires that the matters be with-                     disclosed to the public or where the
                                 held from the public in such a manner                        Board is required by law to make such
                                 as to leave no discretion on the issue;                      disclosure on its own initiative prior to
                                 or                                                           taking final action on such proposal; or
                                   (ii) Establishes particular criteria for                     (10) Specifically concern the Board’s
                                 withholding or refers to particular                          participation in a civil action or pro-
                                 types of matters to be withheld.                             ceeding, an action in a foreign court or
                                   (4) Disclose trade secrets and com-                        international tribunal, or an arbitra-
                                 mercial or financial information ob-                         tion, or the initiation, conduct, or dis-
                                 tained from a person and privileged or                       position by the Board of a particular
                                 confidential;                                                case of formal agency adjudication pur-
                                   (5) Involve accusing any person of a                       suant to the procedures in 5 U.S.C. 554
                                 crime, or formally censuring any per-                        or otherwise involving a determination
                                 son;                                                         on the record after opportunity for a
                                   (6) Disclose information of a personal                     hearing.
                                 nature where disclosure would con-                             (b) Any Board meeting or portion
                                 stitute a clearly unwarranted invasion                       thereof, which may be closed, or any
                                 of personal privacy;                                         information which may be withheld
                                   (7) Disclose investigatory records                         under paragraph (a) of this section, will
                                 compiled for law enforcement purposes,                       not be closed or withheld, respectively,
                                 or information which if written would                        in any case where the Board finds the
                                 be contained in such records, but only                       public interest requires otherwise.
                                 to the extent that the production of
                                 such records or information would:                           § 1600.7 Procedures for closing a meet-
                                   (i) Interfere with enforcement pro-                             ing to the public.
                                 ceedings;                                                       (a) A majority of all Directors may
                                   (ii) Deprive a person of a right to a                      vote to close a meeting or withhold in-
                                 fair trial or to an impartial adjudica-                      formation pertaining to that meeting.
                                 tion;                                                        A separate vote shall be taken with re-
                                   (iii) Constitute an unwarranted inva-                      spect to any action under § 1600.6(a). A
                                 sion of personal privacy;                                    majority of the Board may act by tak-
                                   (iv) Disclose the identity of a con-                       ing a single vote with respect to a se-
                                 fidential source, and, in the case of a                      ries of meetings, a portion or portions
                                 record compiled by a criminal enforce-                       of which are proposed to be closed to
                                 ment authority in the course of a                            the public, or with respect to any infor-
                                 criminal investigation, or by an agency                      mation concerning such series of meet-
                                 conducting a lawful national security                        ings, so long as each meeting in such
                                 intelligence investigation, confidential                     series involves the same particular sub-
                                 information furnished only by the con-                       ject matter and is scheduled to be held
                                 fidential source;                                            no more than thirty days after the ini-
                                   (v) Disclose investigative techniques                      tial meeting in such series. The vote of
                                 and procedures; or                                           each Director participating in such
                                   (vi) Endanger the life or physical                         vote shall be recorded and no proxy
                                 safety of law enforcement personnel.                         shall be allowed.
                                   (8) Disclose information contained in                         (b) Whenever any person whose inter-
                                 or related to examination, operating,                        ests may be directly affected by a por-
                                 or condition reports prepared by, on be-                     tion of the Board’s meeting requests
                                 half of, or for the use of the Bank or                       that the Board close such portion to
                                 any other agency responsible for the                         the public on the basis of exemptions
                                 regulation or supervision of financial                       in paragraph (a)(5), (a)(6), or (a)(7) of
                                 institutions;                                                § 1600.6, the Board, upon request of any
                                   (9) Disclose information the pre-                          one of its members, will vote whether
                                 mature disclosure of which would be                          or not to close such portion of the
                                 likely to significantly frustrate imple-                     meeting. The vote of each Director par-
                                 mentation of a proposed action of the                        ticipating in such vote shall be re-
                                 Board or of another agency, except                           corded and no proxy shall be allowed.

                                                                                          9



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                                 § 1600.8                                                                7 CFR Ch. XVI (1–1–04 Edition)

                                   (c) Before every Board meeting                                (b) The retention period for the
                                 closed on the basis of one or more of                         records required by paragraph (a) of
                                 the exemptions in § 1600.6(a), the Legal                      this section will be for a period of at
                                 Counsel will publicly certify that, in                        least two years after the particular
                                 Counsel’s opinion, the meeting may be                         Board meeting or until one year after
                                 closed to the public and shall state                          the conclusion of any Board proceeding
                                 each relevant exemption.                                      with respect to which the meeting or
                                   (d) Within one business day after any                       portion thereof was held, whichever oc-
                                 vote taken pursuant to paragraph (a),                         curs later.
                                 (b), or (c) of this section, the Board will                     (c) The Secretary of the Board will
                                 make publicly available a written copy                        make promptly available to the public
                                 of the vote, reflecting the vote of each                      the transcript, electronic recording,
                                 Board member. Except to the extent                            transcription of the recording, or min-
                                 that such information is exempt from                          utes of the discussion of any item on
                                 disclosure, if a meeting or portion of a                      the agenda of a Board meeting, except
                                 meeting is to be closed to the public,                        for such item or items of such discus-
                                 the Board will make publicly available                        sion as the Board determines to con-
                                 within one business day after the re-                         tain information which may be with-
                                 quired vote a full written explanation                        held on the basis of one or more of the
                                 of its action, together with a list of all                    exemptions in § 1600.6.
                                 persons expected to attend the meeting                          (d) Requests for public inspection of
                                 and their affiliation.                                        electronic recording, transcripts or
                                                                                               minutes of Board meetings shall be
                                 § 1600.8 Transcript, recording or min-                        made to the Assistant Secretary of the
                                      utes; availability to the public.                        Board of Directors of the Rural Tele-
                                    (a) The Secretary of the Board will                        phone Bank, room 4051-South Building,
                                 maintain the following records for each                       U.S. Department of Agriculture, 14th
                                 Board meeting, or portion thereof                             Street and Independence Avenue SW.,
                                 which is closed to the public pursuant                        Washington, DC 20250. Requests for in-
                                 to a vote under § 1600.7:                                     spection or copies of transcripts shall
                                    (1) A copy of the Legal Counsel’s cer-                     specify the date of the meeting, the
                                 tification required by § 1600.7;                              name of the agenda and the agenda
                                    (2) A copy of a statement from the                         item number; this information will ap-
                                 presiding officer which sets forth the                        pear in the notice of the meeting.
                                 time and place of the closed meeting or                         (e) The transcripts, minutes, or tran-
                                 portion thereof and a list of persons                         scriptions of electronic recordings of a
                                 present; and                                                  Board meeting will disclose the iden-
                                    (3) A complete verbatim transcript or                      tity of each speaker, and will be fur-
                                 electronic recording adequate to record                       nished to any person at the actual cost
                                 fully the proceedings of each Board                           of transcription or duplication.
                                 meeting or portion of a meeting, ex-
                                 cept that in the case of a meeting or                              PART 1610—LOAN POLICIES
                                 portion of a meeting closed to the pub-
                                 lic on the basis of exemptions in para-                       Sec.
                                 graph (a)(8) or (a)(10) of § 1600.6, the                      1610.1 General.
                                 Secretary of the Board will maintain                          1610.2 Definitions.
                                 either a transcript, electronic record-                       1610.3 Loan authorizations.
                                 ing, or a complete set of minutes. Such                       1610.4 Loan applications.
                                 minutes shall fully and clearly describe                      1610.5 Minimum Bank loan.
                                 all matters discussed and shall provide                       1610.6 Concurrent Bank and RUS cost-of-
                                                                                                   money loans.
                                 a full and accurate summary of actions                        1610.7 Acquisition of certain exchange fa-
                                 taken and the reasons therefor, includ-                           cilities.
                                 ing a description of each of the views                        1610.8 Adoption of applicable RUS policy.
                                 expressed on any item and the record                          1610.9 Class B stock.
                                 of all roll-call vote reflecting the vote                     1610.10 Determination of interest rate on
                                 of each member of the question. All                               Bank loans.
                                 documents considered in connection                            1610.11 Prepayments.
                                 with any action will be identified in                           AUTHORITY: 7 U.S.C. 941 et seq.; Pub. L. 103–
                                 such minutes.                                                 354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

                                                                                          10



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                                 Rural Telephone Bank, USDA                                                                             § 1610.6
                                   SOURCE: 38 FR 17184, June 29, 1973, unless                    RUS cost-of-money-loan means a loan
                                 otherwise noted.                                              made under section 305(d)(2) of the Act
                                   EDITORIAL NOTE: Nomenclature changes to                     bearing an interest rate as determined
                                 part 1610 appear at 59 FR 66439, Dec. 27, 1994.               under 7 CFR 1735.31(c). RUS cost-of-
                                                                                               money loans are made concurrently
                                 § 1610.1     General.                                         with Bank loans.
                                   Loans made by the Governor of the                             TIER (Times Interest Earned Ratio)
                                 Rural Telephone Bank (the ‘‘Bank’’)                           means the ratio of the borrower’s net
                                 will be made in conformance with title                        income (after taxes) plus interest ex-
                                 IV of the Rural Electrification Act of                        pense, all divided by interest expense.
                                 1936 (the ‘‘Act’’), as amended (7 U.S.C.                      For the purpose of this calculation, all
                                 941 et seq.), and this part 1610. Loans are                   amounts will be annual figures and in-
                                 made under section 408(a)(1) of the Act                       terest expense will include only inter-
                                 for purposes of section 201 of the Act.                       est on debt with a maturity greater
                                 Loans are also made for purposes of                           than one year.
                                 section 408(a)(2) of the Act. The Bank
                                 will give preference to the use of loan                       [58 FR 66252, Dec. 20, 1993, as amended at 59
                                 funds for purposes set forth in section                       FR 66439, Dec. 27, 1994]
                                 408(a)(2) of the Act to the extent that it
                                 has completed applications for such                           § 1610.3   Loan authorizations.
                                 loans.                                                          The aggregate amount of loans made
                                 [38 FR 17184, June 29, 1973, as amended at 58
                                                                                               will not exceed the amount authorized
                                 FR 66252, Dec. 20, 1993]                                      by the Board of Directors (the
                                                                                               ‘‘Board’’) of the Bank.
                                 § 1610.2     Definitions.
                                                                                               [38 FR 17184, June 29, 1973. Redesignated at 58
                                   As used in this part:                                       FR 66252, Dec. 20, 1993]
                                   Act means the Rural Electrification
                                 Act of 1936, as amended (7 U.S.C. 901 et                      § 1610.4   Loan applications.
                                 seq.).                                                          No application for a loan will be con-
                                   Appropriated means funds appro-                             sidered for approval by the Bank until
                                 priated based on subsidy.                                     it has been reviewed by RUS and the
                                   Bank means the Rural Telephone                              Governor has determined, based on
                                 Bank, an agency and instrumentality                           such review, the eligibility of the ap-
                                 of the United States within the United                        plicant for a Bank loan and the amount
                                 States Department of Agriculture.                             thereof. Loan application forms are
                                   Borrower means any organization                             available from RUS on request. No fees
                                 which has an outstanding telephone                            or charges are assessed for Bank loans.
                                 loan made by the Bank or RUS, or
                                 guaranteed by RUS, or which is seek-                          [58 FR 66252, Dec. 20, 1993]
                                 ing such financing.
                                   Governor means the Governor of the                          § 1610.5   Minimum Bank loan.
                                 Bank.                                                           A Bank loan will not be made unless
                                   REA means the Rural Electrification                         the applicant qualifies for a Bank loan
                                 Administration, formerly an agency of                         of at least $50,000.
                                 the United States Department of Agri-
                                 culture and predecessor agency to RUS                         [38 FR 17184, June 29, 1973. Redesignated at 58
                                 with respect to administering certain                         FR 66252, Dec. 20, 1993]
                                 electric and telephone loan programs.
                                                                                               § 1610.6 Concurrent Bank            and     RUS
                                   RUS means the Rural Utilities Serv-                             cost-of-money loans.
                                 ice, an agency of the United States De-
                                 partment of Agriculture established                             (a) The Bank makes loans, under sec-
                                 pursuant to Section 232 of the Federal                        tion 408 of the Act, concurrently with
                                 Crop Insurance Reform and Depart-                             RUS cost-of-money loans made under
                                 ment of Agriculture Reorganization                            section 305(d)(2) of the Act. To qualify
                                 Act of 1994 (Pub.L. 103–354, 108 Stat.                        for concurrent Bank and RUS cost-of-
                                 3178), successor to REA with respect to                       money loans on or after November 1,
                                 administering certain electric and tele-                      1993, a borrower must meet each of the
                                 phone programs. See 7 CFR 1700.1.                             following requirements:

                                                                                          11



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                                 § 1610.7                                                                 7 CFR Ch. XVI (1–1–04 Edition)

                                   (1) The average number of proposed                          § 1610.7 Acquisition        of     certain   ex-
                                 subscribers per mile of line in the serv-                         change facilities.
                                 ice area of the borrower is not more                            In the interest of making optimum
                                 than 15, or the borrower has a projected                      use of the Bank’s loan funds, a Bank
                                 TIER (including the proposed loans) of                        loan for the acquisition of exchange fa-
                                 at least 1.0, but not greater than 5.0, as                    cilities under section 408(a)(2) of the
                                 determined by the feasibility study                           Act (7 U.S.C. 948(a)(2)) will not be rec-
                                 prepared in connection with the loans,                        ommended by the Governor for ap-
                                 see 7 CFR part 1737, subpart H; and                           proval by the Secretary of Agriculture
                                   (2) The Administrator of RUS has ap-                        unless the Governor determines that
                                 proved and the borrower is partici-                           the acquisition is reasonably necessary
                                 pating in a telecommunications mod-                           to improve the efficiency, effective-
                                 ernization plan for the state, see 7 CFR                      ness, or financial stability of the bor-
                                 part 1751, subpart B.                                         rower’s telephone system, that the lo-
                                   (b) The loan amounts from each pro-                         cation and character of the proposed
                                 gram (Bank, including amounts for                             acquisition are such that the acquisi-
                                                                                               tion is reasonably necessary to accom-
                                 class B stock, and RUS cost-of-money)
                                                                                               plish such improvement, and that the
                                 will be proportionate to the total
                                                                                               amount of the requested loan for such
                                 amount of funds appropriated for the
                                                                                               acquisition is reasonably justified by
                                 fiscal year for Bank loans and RUS                            the nature and scope of the improve-
                                 cost-of-money loans. To determine the                         ment which the acquisition would ef-
                                 Bank portion, the total loan amount                           fect.
                                 will be multiplied by the ratio of Bank
                                 funds appropriated for the fiscal year                        § 1610.8 Adoption of applicable RUS
                                 to the sum of RUS cost-of-money and                               policy.
                                 Bank funds appropriated for the fiscal                          The policies embodied in 7 CFR part
                                 year in which the loan is approved. The                       1610, in all parts of 7 CFR chapter XVII
                                 same method would be used to cal-                             except those identified below, will be
                                 culate the RUS cost-of-money portion                          utilized by the Governor in carrying
                                 (see 7 CFR 1735.31(b)). If during the fis-                    out the Bank’s loan program to the ex-
                                 cal year the amount of funds appro-                           tent that such policies are consistent
                                 priated changes, the ratio will be ad-                        with title IV of the Act (7 U.S.C. 941 et
                                 justed accordingly and applied only to                        seq.) and to the extent that policies in
                                 those loans approved afterwards.                              7 CFR chapter XVII are consistent with
                                   (c) The actual rate of interest on the                      7 CFR part 1610. The parts of 7 CFR
                                 Bank loan shall be determined as pro-                         chapter XVII applicable solely to the
                                 vided in § 1610.10; the RUS cost-of-                          Electric Program and thus exceptions
                                 money loan shall bear interest at a                           to this section are parts 1710 through
                                 rate equal to the current cost of money                       1734 inclusive.
                                 to the Federal Government, on the                             [55 FR 39397, Sept. 27, 1990]
                                 date of advance of funds to the bor-
                                 rower, for loans of similar maturity,                         § 1610.9   Class B stock.
                                 but not more than 7 percent per year                            Borrowers receiving loans from the
                                 (see 7 CFR 1735.31(c)).                                       Bank shall be required to invest in
                                   (d) Generally, no more than 10 per-                         class B stock at 5 percent of the total
                                 cent of lending authority from appro-                         amount of loan funds advanced. Bor-
                                 priations in any fiscal year for Bank                         rowers may purchase class B stock by:
                                 and RUS cost-of-money loans may be                              (1) Paying an amount (using their
                                 loaned to a single borrower. The Bank                         own general funds) equal to 5 percent
                                 will publish by notice in the FEDERAL                         of the amount, exclusive of the amount
                                 REGISTER the dollar limit that may be                         for class B stock, of each loan advance,
                                                                                               at the time of such advance; or
                                 loaned to a single borrower in that par-
                                                                                                 (2) Requesting that funds for the pur-
                                 ticular fiscal year based on approved
                                                                                               chase of class B stock be included in
                                 Bank and RUS lending authority.
                                                                                               the loan. If funds for class B stock are
                                 [58 FR 66252, Dec. 20, 1993, as amended at 62                 included in a loan, the funds for class B
                                 FR 46869, Sept. 5, 1997]                                      stock shall be advanced in an amount

                                                                                          12



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                                 Rural Telephone Bank, USDA                                                                       § 1610.10

                                 equal to 5 percent of the amount, ex-                         year as specified in section 406(c) of the
                                 clusive of the amount for class B stock,                      Act, which product is divided by the
                                 of each loan fund advance, at the time                        aggregate of the amounts advanced by
                                 of such advance.                                              the Bank during the fiscal year.
                                 [56 FR 26596, June 10, 1991]                                    (2) The aggregate of all amounts re-
                                                                                               ceived by the Bank during the fiscal
                                 § 1610.10 Determination of interest                           year from the issuance of Class B
                                      rate on Bank loans.                                      stock, multiplied by the rate at which
                                    (a) All loan fund advances made on or                      dividends are payable by the Bank dur-
                                 after December 22, 1987 under Bank                            ing the fiscal year as specified in sec-
                                 loans approved on or after October 1,                         tion 406(d) of the Act, which product is
                                 1987, shall bear interest at the rate de-                     divided by the aggregate of the
                                 termined as established below, but not                        amounts advanced by the Bank during
                                 less than 5 percent per annum.                                the fiscal year. Section 406(d) provides
                                    (b) The interest rate for the period                       that ‘‘No dividends shall be payable on
                                 beginning on the date the advance is                          Class B stock.’’ The ‘‘amounts received
                                 made and ending at the close of the fis-                      by the Bank during the fiscal year
                                 cal year in which the advance is made                         from the issuance of Class B stock’’
                                 shall be the average yield on the date                        means the amount of cash received
                                 of advance on outstanding marketable                          during the fiscal year for the purchase
                                 obligations of the United States having                       of Class B stock, plus the amount ad-
                                 a final maturity comparable to the                            vanced to borrowers by the Bank dur-
                                 final maturity of the advance. The in-                        ing the fiscal year for such purchases,
                                 terest rate shall be determined to the                        less any Class B stock that is rescinded
                                 nearest 0.01 percent.                                         during the fiscal year.
                                    (1) For this determination, the Bank                         (3) The aggregate of all amounts re-
                                 will use yields on actively traded                            ceived by the Bank during the fiscal
                                 Treasury issues adjusted to constant                          year from the issuance of Class C
                                 maturities obtained from the Federal                          stock, multiplied by the rate at which
                                 Reserve statistical release (‘‘Treasury
                                                                                               dividends are payable by the Bank dur-
                                 rate’’). In accordance with standard
                                                                                               ing the fiscal year as specified in sec-
                                 Treasury procedures, the rate in effect
                                                                                               tion 406(e) of the Act, which product is
                                 for any given day is the rate set at the
                                                                                               divided by the aggregate of the
                                 close of business on the preceding day.
                                                                                               amounts advanced by the Bank during
                                 The 30-year Treasury rate will be ap-
                                                                                               the fiscal year.
                                 plied to all advances with a final matu-
                                 rity of at least 30 years from date of                          (4) The amounts received by the
                                 advance. A straight-line interpolation                        Bank during the fiscal year from each
                                 between other Treasury rates will be                          issue of telephone debentures and other
                                 used to determine the rate applicable                         obligations of the Bank, multiplied, re-
                                 for advances with final maturities of                         spectively, by the rates at which inter-
                                 less than 30 years.                                           est is payable by the Bank during the
                                    (2) The Bank will notify the borrower                      fiscal year to holders of each issue,
                                 in writing of the interest rate that ap-                      each of which product is divided, re-
                                 plies to each advance.                                        spectively, by the aggregate of the
                                    (c) After the fiscal year in which the                     amounts advanced by the Bank during
                                 advance is made, the interest rate ap-                        the fiscal year.
                                 plied to the advance will be the sum of                         (5) The amount by which the aggre-
                                 the calculations made in paragraphs (c)                       gate of the amounts advanced by the
                                 (1) through (5) of this section. This in-                     Bank during the fiscal year exceeds the
                                 terest rate determination shall be                            aggregate of the amount received by
                                 made by the Governor within 30 days of                        the Bank from the issuance of Class A
                                 the end of each fiscal year and shall be                      stock, Class B stock, Class C stock, and
                                 determined to the nearest 0.01 percent.                       telephone debentures and other obliga-
                                    (1) The aggregate of all amounts re-                       tions of the Bank during the fiscal
                                 ceived by the Bank during the fiscal                          year, multiplied by the historic cost of
                                 year from the issuance of Class A                             money rate as of the close of the imme-
                                 stock, multiplied by the rate of return                       diately preceding fiscal year, which
                                 payable by the Bank during the fiscal                         product is divided by the aggregate of

                                                                                          13



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                                 § 1610.10                                                                              7 CFR Ch. XVI (1–1–04 Edition)

                                 the amounts advanced by the Bank                                                (e) If the Bank, pursuant to section
                                 during the fiscal year.                                                       407(b) of the Act, issues telephone de-
                                   (6) As used in paragraph (c)(5) of this                                     bentures to refinance outstanding tele-
                                 section, the term ‘‘historic cost of                                          phone debentures or other obligations,
                                 money rate as of the close of the imme-                                       the Bank shall reduce the interest rate
                                 diately preceding fiscal year,’’ means                                        charged on each advance of Bank loan
                                 the sums of the results of the following                                      funds made during the fiscal year(s) in
                                 calculations: The amounts advanced by                                         which the refinanced debentures or
                                 the Bank in each fiscal year during the                                       other    obligations   were    originally
                                 period beginning with fiscal year 1974                                        issued. The reduction shall be for the
                                 and ending with the immediately pre-                                          period beginning on the issue date of
                                 ceding fiscal year, multiplied, respec-                                       the refinancing debentures and ending
                                 tively, by the cost of money rate for                                         on the date the advance matures or is
                                 the fiscal year (as set forth in Table I                                      completely prepaid, whichever is ear-
                                 for fiscal years 1974 through 1987, and                                       lier. This reduction shall be in addition
                                 as determined by the Governor in para-                                        to any other interest rate reduction re-
                                 graphs (c) (1) through (5) of this section                                    quired by section 408(b)(3) of the Act.
                                 for fiscal years after fiscal year 1987),                                     The interest rate shall be reduced by
                                 with each product then divided by the                                         the amount which fully reflects that
                                 aggregate of the amounts advanced by                                          percentage of the funds saved by the
                                 the Bank from the beginning of fiscal                                         Bank as a result of the refinancing
                                 year 1974 through the end of the fiscal                                       which is equal to the percentage rep-
                                 year just ended.                                                              resentation of the advance of all ad-
                                                                                                               vances made during the fiscal year(s)
                                                                    TABLE I                                    involved. In no case, however, shall the
                                   For advances                                                                interest rate be reduced to less than 5
                                                                    The cost of money rate shall be:
                                 made in fiscal year:                                                          percent per annum. The interest rate
                                 1974   ......................   5.01   percent.
                                                                                                               reduction for each advance shall be de-
                                 1975   ......................   5.85   percent.                               termined as follows:
                                 1976   ......................   5.33   percent.                                 (1) The funds saved by the Bank as a
                                 1977   ......................   5.00   percent.                               result of the refinancing shall be com-
                                 1978   ......................   5.87   percent.
                                                                                                               puted.
                                 1979   ......................   5.93   percent.
                                 1980   ......................   8.10   percent.                                 (2) The advance shall be divided by
                                 1981   ......................   9.46   percent.                               the total of all advances made during
                                 1982   ......................   8.39   percent.                               the fiscal year(s) involved, and stated
                                 1983   ......................   6.99   percent.
                                                                                                               to the nearest .01 percent.
                                 1984   ......................   6.55   percent.
                                 1985   ......................   5.00   percent.                                 (3) The percentage in paragraph (e)(2)
                                 1986   ......................   5.00   percent.                               of this section is multiplied by the
                                 1987   ......................   5.00   percent.                               amount in paragraph (e)(1) of this sec-
                                   In this table, ‘‘fiscal year’’ means the 12-month period end-               tion to determine the savings for a par-
                                 ing on September 30 of the designated year.                                   ticular advance. The interest rate on
                                   (d) A borrower with a Bank loan ap-                                         that advance is then reduced to fully
                                 proved on or after October 1, 1987, and                                       reflect the savings over the remaining
                                 before December 22, 1987, and with                                            amortization period of the loan from
                                 funds not fully advanced as of Decem-                                         which the advance was made.
                                 ber 22, 1987, may until the next advance                                        (f) Within 60 days after the issue date
                                 under the loan or March 21, 1988, which-                                      described in paragraph (e) of this sec-
                                 ever is later, elect to have the interest                                     tion, the Governor shall amend the
                                 rate specified in the loan commitment                                         loan documentation for each advance
                                 apply to the unadvanced portion in lieu                                       described in paragraph (e) of this sec-
                                 of the rate which would otherwise                                             tion, as necessary, to reflect any inter-
                                 apply as set forth in § 1610.10(a). A bor-                                    est rate reduction applicable to the ad-
                                 rower making such an election shall                                           vance by reason of paragraph (e) of this
                                 contact, in writing, the applicable Area                                      section, and shall notify each affected
                                 Office of RUS. The Governor shall then                                        borrower of the reduction.
                                 adjust the interest rate that applies to                                        (g) Within 5 days of determining the
                                 the unadvanced portion of the loan ac-                                        cost of money rate for a fiscal year, the
                                 cordingly.                                                                    Governor shall:

                                                                                                          14



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                                 Rural Telephone Bank, USDA                                                                        § 1610.11

                                   (1) Cause the determination to be                           cordance with the terms thereof, in-
                                 published in the FEDERAL REGISTER in                          cluding payment of the premium as
                                 accordance with section 552 of title 5,                       provided therein.
                                 United States Code, and                                         (b) A borrower may prepay part or all
                                   (2) Furnish a copy of the determina-                        of a Bank loan made on or after No-
                                 tion to the Comptroller General of the                        vember 1, 1993, by paying the out-
                                 United States.                                                standing principal and any accrued in-
                                   (h) A borrower should not wait until
                                                                                               terest without being required to pay a
                                 the end of the fiscal year to submit a
                                                                                               prepayment premium.
                                 requisition for an advance of loan funds
                                 if it wants the advance made in that                            (c) Borrowers that qualify to issue a
                                 fiscal year. Borrower requisitions sub-                       refunding note or notes in accordance
                                 mitted late in the fiscal year may not                        with 7 CFR 1735.43, Payments on loans,
                                 be processed in that fiscal year because                      shall not be required to pay a prepay-
                                 of workload and other factors.                                ment premium on all payments made
                                                                                               in accordance with the new payment
                                 [53 FR 36783, Sept. 22, 1988; 53 FR 39014, Oct.
                                                                                               schedule.
                                 4, 1988]
                                                                                               [58 FR 66252, Dec. 20, 1993, as amended at 62
                                 § 1610.11 Prepayments.                                        FR 46869, Sept. 5, 1997]
                                    (a) Bank loans approved before No-
                                 vember 1, 1993, may be prepaid in ac-




                                                                                          15



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VerDate jul<14>2003   02:36 Jan 18, 2004   Jkt 203021   PO 00000   Frm 00016   Fmt 8010   Sfmt 8010   Y:\SGML\203021T.XXX   203021T
                                           CHAPTER XVII—RURAL UTILITIES SERVICE,
                                              DEPARTMENT OF AGRICULTURE


                                   EDITORIAL NOTE: Nomenclature changes to Chapter XVII appear at 59 FR 66440, Dec. 27, 1994.

                                 Part                                                                                                  Page
                                 1700            General information ................................................                   19
                                 1703            Rural development ..................................................                   24
                                 1710            General and pre-loan policies and procedures com-
                                                   mon to electric loans and guarantees ..................                              90
                                 1714            Pre-loan policies and procedures for insured elec-
                                                   tric loans ..............................................................           130
                                 1717            Post-loan policies and procedures common to in-
                                                   sured and guaranteed electric loans .....................                           136
                                 1718            Loan security documents for electric borrowers .....                                  186
                                 1721            Post-loan policies and procedures for insured elec-
                                                   tric loans ..............................................................           227
                                 1724            Electric engineering, architectural services and de-
                                                   sign policies and procedures .................................                      231
                                 1726            Electric system construction policies and proce-
                                                   dures .....................................................................         246
                                 1728            Electric standards and specifications for materials
                                                   and construction ..................................................                 273
                                 1730            Electric system operations and maintenance .........                                  297
                                 1735            General policies, types of loans, loan require-
                                                   ments—telecommunications program ..................                                 301
                                 1737            Pre-loan policies and procedures common to in-
                                                   sured and guaranteed telecommunications loans                                       325
                                 1738            Rural broadband access loans and loan guarantees                                      340
                                 1741            Pre-loan policies and procedures for insured tele-
                                                   phone loans [Reserved]
                                 1744            Post-loan policies and procedures common to guar-
                                                   anteed and insured telephone loans .....................                            351
                                 1748            Post-loan policies and procedures for insured tele-
                                                   phone loans [Reserved]
                                 1751            Telecommunications system planning and design
                                                   criteria, and procedures .......................................                    377
                                 1753            Telecommunications system construction policies
                                                   and procedures .....................................................                382
                                                                                          17



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                                                                                                       7 CFR Ch. XVII (1–1–04 Edition)

                                 Part                                                                                                  Page
                                 1755            Telecommunications standards and specifications
                                                  for materials, equipment and construction ..........                                  419
                                 1757            Telephone systems operations and maintenance
                                                  [Reserved]
                                 1767            Accounting requirements for RUS electric bor-
                                                  rowers ...................................................................            775
                                 1770            Accounting requirements for RUS telephone bor-
                                                  rowers ...................................................................            966
                                 1773            Policy on audits of RUS borrowers .........................                            987
                                 1775            Technical assistance and training grants ...............                              1002
                                 1777            Section 306C WWD loans and grants ........................                            1008
                                 1778            Emergency and imminent community water assist-
                                                  ance grants ...........................................................              1012
                                 1779            Water and waste disposal programs guaranteed
                                                  loans .....................................................................          1017
                                 1780            Water and waste loans and grants ...........................                          1039
                                 1781            Resource Conservation and Development (RCD)
                                                  loans and Watershed (WS) loans and advances .....                                    1078
                                 1785            Loan account computations, procedures and poli-
                                                  cies for electric and telephone borrowers .............                              1096
                                 1786            Prepayment of RUS guaranteed and insured loans
                                                  to electric and telephone borrowers .....................                            1098
                                 1788            RUS fidelity and insurance requirements for elec-
                                                  tric and telecommunications borrowers ..............                                 1128
                                 1789            Use of consultants funded by borrowers ..................                             1133
                                 1792            Compliance with other Federal statutes, regula-
                                                  tions, and Executive orders ..................................                       1138
                                 1794            Environmental policies and procedures ..................                              1140




                                                                                          18



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                                             PART 1700—GENERAL                                 May 7, 1971. The Administrator of RUS
                                                INFORMATION                                    serves as the Bank’s chief executive
                                                                                               with the title of Governor.
                                                 Subpart A—General                               (c) The Secretary of Agriculture
                                                                                               (Secretary) established the Rural Utili-
                                 Sec.                                                          ties Service (RUS) on October 20, 1994,
                                 1700.1 General.                                               pursuant to the Department of Agri-
                                 1700.2 Availability of information.
                                                                                               culture Reorganization Act of 1994, (7
                                 1700.3 Requests under the Freedom of Infor-
                                     mation Act.                                               U.S.C. 6941 et seq.). RUS was assigned
                                 1700.4 Public comments on proposed rules.                     responsibility for administering elec-
                                 1700.5–1700.24 [Reserved]                                     tric and telecommunications loan and
                                                                                               loan guarantee programs previously
                                    Subpart B—Agency Organization and                          administered by REA, including pro-
                                                Functions                                      grams of the Rural Telephone Bank
                                 1700.25 Office of the Administrator.                          (RTB), and water and waste loans and
                                 1700.26 Deputy Administrators.                                grants previously administered by the
                                 1700.27 Electric Program.                                     Rural Development Administration,
                                 1700.28 Telecommunications Program.                           along with other functions as the Sec-
                                 1700.29 Water and Environmental Programs.                     retary determined appropriate. The
                                 1700.30 Distance Learning and Telemedicine                    rights, interests, obligations, duties,
                                     Loan and Grant Program.
                                 1700.31 Program Accounting and Regulatory
                                                                                               and contracts previously vested in REA
                                     Analysis.                                                 were transferred to, and vested in RUS.
                                 1700.32 Financial Services Staff.
                                 1700.33–1700.49 [Reserved]                                    § 1700.2 Availability of information.
                                                                                                  (a) The offices of RUS are located in
                                    Subpart C—Loan and Grant Approval                          the South Building of the United
                                                Authorities                                    States Department of Agriculture at
                                 1700.50–1700.52 [Reserved]                                    1400 Independence Avenue, SW, Wash-
                                 1700.53 Persons serving as Acting Adminis-                    ington, DC 20250–1500. Hours of oper-
                                     trator.                                                   ation are from 8:15 AM to 4:45 PM,
                                 1700.54 Electric Program.                                     Eastern time on Federal Government
                                 1700.55 Telecommunications Program.                           business days.
                                 1700.56 Water and Environmental Programs.                        (b) Information about RUS is avail-
                                 1700.57 Distance Learning and Telemedicine
                                     Loan and Grant Program.                                   able for public inspection and copying
                                                                                               as required by the Freedom of Informa-
                                   AUTHORITY: 5 U.S.C. 301, 552; 7 U.S.C. 901 et               tion Act, 5 U.S.C. 552 et seq. Informa-
                                 seq., 1921 et seq., 6941 et seq.; 7 CFR 2.7.
                                                                                               tion about availability and costs of
                                   SOURCE: 63 FR 16085, Apr. 2, 1998, unless                   agency publications and other agency
                                 otherwise noted.                                              materials is available from the Direc-
                                                                                               tor, Program Development and Regu-
                                             Subpart A—General                                 latory Analysis, Rural Utilities Serv-
                                                                                               ice, United States Department of Agri-
                                 § 1700.1 General.                                             culture, Room 4034–S, 1400 Independ-
                                    (a) The Rural Electrification Admin-                       ence Avenue, SW, STOP 1522, Wash-
                                 istration (REA) was established by Ex-                        ington, DC 20250–1522. Phone 202–720–
                                 ecutive Order No. 7037 on May 11, 1935.                       0736. FAX 202–720–4120.
                                 Statutory authority was provided by                              (c) RUS issues indexes of publications
                                 the Rural Electrification Act of 1936                         in conformance with the Freedom of
                                 (RE Act) (7 U.S.C. 901). The RE Act es-                       Information Act and Department of
                                 tablished REA as a lending agency                             Agriculture regulations at 7 CFR part
                                 with responsibility for developing a                          1. Many RUS issuances, including regu-
                                 program for rural electrification.                            lations, delegations of authority for
                                    (b) On October 28, 1949, the RE Act                        headquarters and field staff, and other
                                 was amended to authorize REA to                               documents, are available on the world
                                 make loans to improve and extend tele-                        wide web at http://www.usda.gov/rus.
                                 phone service in rural areas. The Rural                       Single hard copies of publications,
                                 Telephone Bank (RTB), an agency of                            forms, forms of basic loan and security
                                 the United States, was established by                         instruments, and other materials are
                                 amendment to the RE Act, approved                             available either directly from RUS,

                                                                                          19



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                                 § 1700.3                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                 from the Superintendent of Docu-                              by Assistant Administrators for the
                                 ments, U.S. Government Printing Of-                           electric program, telecommunications
                                 fice, Washington DC 20402, or from an-                        program, the water and environmental
                                 other source as identified. Costs for                         programs, and program accounting and
                                 these publications are established in                         regulatory analysis, and by other staff
                                 conformance with 7 CFR part 1.                                offices. The work of the agency is car-
                                                                                               ried out as described in this part.
                                 § 1700.3 Requests under the Freedom
                                      of Information Act.
                                                                                               § 1700.26   Deputy Administrators.
                                    Department of Agriculture proce-
                                 dures for requests for official records                         Deputy Administrators aid and assist
                                 under the Freedom of Information Act                          the Administrator. The Deputy Admin-
                                 are found at 7 CFR part 1. Requests                           istrator, Program Policy and Tele-
                                 must be in writing and may be sub-                            communications, provides overall pol-
                                 mitted in person or by mail to United                         icy direction to all RUS programs and
                                 States Department of Agriculture,                             directs and coordinates the tele-
                                 Rural Development, Room 0164–S, 1400                          communications programs. The Deputy
                                 Independence Avenue, SW, STOP 0742,                           Administrator, Water and Environ-
                                 Washington, DC 20250–0742; or by FAX                          mental Programs, directs and coordi-
                                 to 202–720–1915. As set forth in 7 CFR                        nates the agency’s water and waste dis-
                                 1.16, fees may be charged for processing                      posal programs. The Deputy Adminis-
                                 of requests for records. An appeal of                         trators review agency policies in these
                                 the agency determination concerning                           areas and, as necessary, implement
                                 the request for official records shall be                     changes, and participate with the Ad-
                                 made in writing to the Administrator,                         ministrator and other officials in plan-
                                 Rural Utilities Service, United States                        ning and formulating the programs and
                                 Department of Agriculture, Room 4051–                         activities of the agency, including the
                                 S, 1400 Independence Avenue, SW,                              making and servicing of loans and
                                 STOP 1510, Washington, DC 20250–1500.                         grants.
                                 § 1700.4 Public comments on proposed                          § 1700.27   Electric Program.
                                     rules.
                                                                                                 RUS, through the Electric Program,
                                    RUS requires that all persons sub-                         makes loans and loan guarantees for
                                 mitting comments to a proposed rule
                                                                                               rural electrification and the furnishing
                                 or other document published by the
                                                                                               of electric service to persons in rural
                                 agency in the FEDERAL REGISTER sub-
                                                                                               areas.
                                 mit, in hard copy, a signed original and
                                 three copies of their comments to the                           (a) The Assistant Administrator, Elec-
                                 address shown in the preamble to the                          tric Program, directs and coordinates
                                 proposed rule. Copies of comments sub-                        the rural electrification programs, par-
                                 mitted are available to the public in                         ticipating with the Administrator, and
                                 conformance with 7 CFR part 1.                                others, in planning and formulating
                                                                                               the programs and activities of the
                                 §§ 1700.5–1700.24         [Reserved]                          agency, and performs other activities
                                                                                               as the Administrator may prescribe
                                   Subpart B—Agency Organization                               from time to time.
                                            and Functions                                        (b) Primary point of contact with bor-
                                                                                               rowers.Two regional divisions, one for
                                 § 1700.25 Office of the Administrator.                        the Northern Region and one for the
                                    The Administrator, who also serves                         Southern Region, are the primary
                                 as Governor of the RTB, is appointed                          points of contact between RUS and its
                                 by the President, with the advice and                         electric distribution borrowers. Each
                                 consent of the Senate. The Under Sec-                         office administers the rural electric
                                 retary, Rural Development delegated                           program for its assigned geographical
                                 to the Administrator, in 7 CFR part 2,                        area through headquarters staff and
                                 responsibility for administering the                          general field representatives. The
                                 programs and activities of RUS and                            Power Supply Division is the primary
                                 RTB. The Administrator is aided di-                           point of contact between RUS and its
                                 rectly by Deputy Administrators and                           electric power supply borrowers.

                                                                                          20



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                                 Rural Utilities Service, USDA                                                                      § 1700.30

                                   (c) Staff office.The Electric Staff Divi-                   acceptable for use in RUS financed
                                 sion is responsible for engineering as-                       telecommunications systems. The Ad-
                                 pects of RUS’ standards, specifications                       vanced Telecommunications Services
                                 and other requirements for design, con-                       office prepares analyses of loan making
                                 struction, and technical operation and                        activities and the business and regu-
                                 maintenance of RUS borrowers’ elec-                           latory environment of RUS borrowers
                                 tric systems. The Electric Staff Divi-                        and recommends policies and proce-
                                 sion oversees the activities of Tech-                         dures.
                                 nical Standards Committees ‘‘A’’ and
                                                                                               [63 FR 16085, Apr. 2, 1998; 63 FR 18307, Apr. 15,
                                 ‘‘B’’, Electric, which determine wheth-                       1998]
                                 er engineering specifications, drawings,
                                 material and equipment are acceptable                         § 1700.29 Water       and     Environmental
                                 for use in RUS borrowers’ electric sys-                           Programs.
                                 tems. The Office of the Assistant Ad-
                                 ministrator prepares analyses of loan                           RUS, through the Water and Envi-
                                 making activities and the business and                        ronmental Programs, provides loan and
                                 regulatory environment of RUS bor-                            grant funds for water and waste dis-
                                 rowers and recommends policies and                            posal projects serving the most finan-
                                 procedures.                                                   cially needy rural communities.
                                                                                                 (a) The Assistant Administrator, Water
                                 § 1700.28 Telecommunications         Pro-                     and Environmental Programs, develops
                                      gram.                                                    and institutes plans, procedures, and
                                    RUS and RTB, through the Tele-                             policies for the effective, efficient, and
                                 communications Program, make loans                            orderly management of Water and En-
                                 and loan guarantees to furnish and im-                        vironmental Programs responsibilities;
                                 prove telecommunications service in                           provides leadership to ensure execution
                                 rural areas.                                                  of policies and procedures by the Water
                                    (a) The Assistant Administrator, Tele-                     and Waste Disposal programs and sup-
                                 communications Program, directs and co-                       port functions; and performs other ac-
                                 ordinates the rural telecommuni-                              tivities as the Administrator or Deputy
                                 cations programs, including the dis-                          Administrator may prescribe from
                                 tance learning and telemedicine pro-                          time to time.
                                 gram, and in conjunction with the Ad-                           (b) Primary point of contact. The State
                                 ministrator and Deputy Administrator,                         Rural Development Offices are the pri-
                                 and others, the planning and formu-                           mary points of contact between RUS
                                 lating of programs and activities of the                      and loan and grant recipients.
                                 agency, and performs other activities                           (c) The Engineering and Environmental
                                 as the Administrator may prescribe                            Staff is responsible for engineering
                                 from time to time.                                            staff activities at all stages of Water
                                    (b) Primary point of contact with bor-                     and Waste Disposal programs imple-
                                 rowers.Area offices are the primary                           mentation, including review of prelimi-
                                 points of contact between RUS and all                         nary engineering plans and specifica-
                                 telecommunications       program     bor-                     tions, procurement practices, contract
                                 rowers. Each office administers the                           awards, construction monitoring, and
                                 rural telecommunications program for                          system operation and maintenance.
                                 its assigned geographical area with as-                       This staff develops agency engineering
                                 sistance of field representatives lo-                         practices, policies, guidelines, and
                                 cated in areas assigned to them.                              technical data relating to the construc-
                                    (c) Staff offices.The Telecommuni-                         tion and operation of water and waste
                                 cations Staff Division is responsible for                     disposal systems, and for implementing
                                 engineering aspects of design, con-                           the National Environmental Policy
                                 struction, and technical operation and                        Act, and other environmental require-
                                 maintenance of rural telecommuni-                             ments as they apply to all agency pro-
                                 cations systems and facilities, includ-                       grams and activities.
                                 ing the activities of Technical Stand-
                                 ards Committees ‘‘A’’ and ‘‘B’’, Tele-                        § 1700.30 Distance Learning and Tele-
                                 communications,       which    determine                          medicine Loan and Grant Program.
                                 whether engineering specifications,                             RUS, through the Telecommuni-
                                 drawings, material, and equipment are                         cations Program, makes grants and

                                                                                          21



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                                 § 1700.31                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 loans to furnish and improve telemedi-                        the form of proposed and final rules
                                 cine services and distance learning                           and notices and RUS bulletins and staff
                                 services in rural areas.                                      instructions.
                                    (a) The Assistant Administrator, Tele-
                                 communications Program, directs and co-                       § 1700.32   Financial Services Staff.
                                 ordinates the distance learning and                             The Financial Services Staff evalu-
                                 telemedicine program.                                         ates the financial condition of finan-
                                    (b) Primary point of contact with bor-                     cially troubled borrowers in order to
                                 rowers. The area offices, described in                        protect the Government’s interests.
                                 § 1700.28(b) support the distance learn-
                                 ing and telemedicine program. Each of-                        §§ 1700.33–1700.49   [Reserved]
                                 fice administers the distance learning
                                 and telemedicine program for its as-
                                 signed geographical area with assist-
                                                                                                   Subpart C—Loan and Grant
                                 ance of field representatives located in                             Approval Authorities
                                 areas assigned to them.
                                                                                               §§ 1700.50–1700.52   [Reserved]
                                 [63 FR 16085, Apr. 2, 1998; 63 FR 18307, Apr. 15,
                                 1998]                                                         § 1700.53 Persons serving as Acting Ad-
                                                                                                   ministrator.
                                 § 1700.31 Program      Accounting    and
                                      Regulatory Analysis.                                       The following persons are authorized,
                                                                                               in descending order, to act for the Ad-
                                    RUS, through Program Accounting                            ministrator when he or she is not on
                                 and Regulatory Analysis, monitors and                         official duty in the Washington, DC,
                                 administers applicable regulations,                           Metropolitan Area, is sick, has re-
                                 RUS policy, and accounting require-                           signed, or is deceased. That is, if the
                                 ments. The staffs assist the Assistant                        first person on the list is also not on
                                 Administrator with respect to manage-                         official duty in the Washington, DC,
                                 ment, information systems, budgets,                           Metropolitan Area, is sick, has re-
                                 and other such matters.                                       signed, or is deceased, the second per-
                                    (a) The Assistant Administrator, Pro-                      son on the list is authorized to act for
                                 gram Accounting and Regulatory Anal-                          the Administrator and so on down the
                                 ysis, directs and coordinates program                         list. Persons on this list may not re-
                                 accounting and financial services with                        delegate the authority to act as the
                                 respect to electric and telecommuni-                          Administrator. The Administrator may
                                 cations borrowers and directs and co-                         in his or her discretion in writing, on a
                                 ordinates the regulatory actions of the                       case-by-case basis, delegate authority
                                 agency.                                                       to act as Administrator in his or her
                                    (b) This division monitors borrowers’                      absence outside of this specified order.
                                 accounting operations in order to en-                           (1) Deputy Administrator, Program
                                 sure compliance with applicable statu-                        Policy and Telecommunications.
                                 tory and regulatory requirements and
                                                                                                 (2) Deputy Administrator, Water and
                                 with the requirements of the Office of
                                                                                               Environmental Programs.
                                 Management and Budget.
                                                                                                 (3) Assistant Administrator, Electric
                                    (c) The two regional branches (the
                                                                                               Program.
                                 Northern Region and the Southern Re-
                                 gion) work directly with borrowers.                             (4) Assistant Administrator, Tele-
                                 Each regional office has a staff of head-                     communications Program.
                                 quarters and field accountants. The                             (5) Assistant Administrator, Water
                                 Technical Accounting and Auditing                             and Environmental Programs.
                                 Staff monitors industry developments,                           (6) Assistant Administrator, Program
                                 including the standards of the Finan-                         Accounting and Regulatory Analysis.
                                 cial Accounting Standards Board, and
                                                                                               § 1700.54   Electric Program.
                                 recommends Agency policies and pro-
                                 cedures.                                                        (a) Administrator: The authority to
                                    (d) Program Development and Regu-                          approve the following loans, loan guar-
                                 latory Analysis directs and administers                       antees, and lien accommodations and
                                 the preparation, clearance, processing,                       subordinations of liens is reserved to
                                 and distribution of RUS submissions to                        the Administrator:
                                 the Office of the Federal Register in                           (1) All discretionary hardship loans.

                                                                                          22



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                                 Rural Utilities Service, USDA                                                                    § 1700.55

                                   (2) All loans, loan guarantees, and                           (c) Directors, Regional Divisions, have
                                 lien accommodations and subordina-                            the authority to approve, for distribu-
                                 tions of liens to finance operating                           tion borrowers:
                                 costs.                                                          (1) Loans, loan guarantees, and lien
                                   (3) All loans, loan guarantees, and                         accommodations and subordinations of
                                 lien accommodations and subordina-                            liens in amounts not exceeding
                                 tions of liens of more than $20,000,000                       $15,000,000 except for those approvals
                                 for distribution borrowers or more                            reserved to the Administrator.
                                 than $50,000,000 for power supply bor-                          (2) All certifications and findings re-
                                 rowers.                                                       quired by the RE Act or other applica-
                                   (4) All loans, loan guarantees, and                         ble laws and regulations, the imposing
                                 lien accommodations and subordina-                            and releasing of conditions precedent
                                 tions of liens for distribution borrowers                     to the advance of loan funds, and all se-
                                 that are members of a power supply                            curity instruments, loan contracts, and
                                 borrower that is in default of its obli-                      all other documents relating to the del-
                                 gations to the Government or that is                          egations set forth in paragraph (c)(1) of
                                 currently assigned to the Financial                           this section.
                                 Services Staff, unless otherwise deter-                         (d) Director, Power Supply Division,
                                 mined by the Administrator.                                   has the authority to approve for power
                                   (5) All loans, loan guarantees, and                         supply borrowers:
                                 lien accommodations and subordina-                              (1) Loans, loan guarantees, and lien
                                 tions of liens that require an Environ-                       accommodations and subordinations of
                                 mental Impact Statement.                                      liens in amounts not exceeding
                                   (6) Certifications and findings re-                         $30,000,000, except for those approvals
                                 quired by the RE Act or other applica-                        reserved to the Administrator.
                                 ble laws and regulations, the placing                           (2) All certifications and findings re-
                                 and releasing of conditions precedent                         quired by the RE Act or other applica-
                                 to the advance of funds, and all secu-                        ble laws and regulations, the placing
                                 rity instruments, loan contracts, and                         and releasing of conditions precedent
                                 all other necessary documents relating                        to the advance of funds, and all secu-
                                 to the authorities reserved in this sec-                      rity instruments, loan contracts or all
                                 tion.                                                         other documents relating to the dele-
                                   (7) Execution of all loan contracts,                        gations set forth in paragraph (d)(1) of
                                 security instruments, and all other                           this section.
                                 documents in connection with loans,
                                 loan guarantees, and lien accommoda-                          § 1700.55 Telecommunications           Pro-
                                 tions approved by the Administrator.                              gram.
                                   (b) The Assistant Administrator, Elec-                        (a) Administrator: The authority to
                                 tric Program, has the authority to ap-                        approve the following loans, loan guar-
                                 prove the following loans, loan guaran-                       antees, and lien accommodations is re-
                                 tees, and lien accommodations and sub-                        served to the Administrator:
                                 ordinations of liens, except for those                          (1) All loans, loan guarantees, and
                                 approvals reserved to the Adminis-                            lien accommodations and subordina-
                                 trator:                                                       tions of liens to finance operating
                                   (1) Loans, loan guarantees, and lien                        costs.
                                 accommodations and subordinations of                            (2) All loans, loan guarantees, or lien
                                 liens for distribution borrowers in                           accommodations and subordinations of
                                 amounts not exceeding $20,000,000.                            liens of $25,000,000 or more.
                                   (2) Loans, loan guarantees, and lien                          (3) Loans and loan guarantees with
                                 accommodations and subordinations of                          acquisition costs of $5,000,000 or more.
                                 liens for power supply borrowers in                             (4) Loans and loan guarantees con-
                                 amounts not exceeding $50,000,000.                            taining funds to refinance outstanding
                                   (3) Execution of all loan contracts,                        debt of more than $5,000,000.
                                 security instruments, and all other                             (5) All loan contracts, security in-
                                 documents in connection with loans,                           struments, and all other documents to
                                 loan guarantees, and lien accommoda-                          be executed in connection with loans
                                 tions approved by the Assistant Ad-                           and loan guarantees approved by the
                                 ministrator, Electric Program.                                Administrator.

                                                                                          23



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                                 § 1700.56                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                   (b) Assistant Administrator, Tele-                            (2) The number selected from each
                                 communications Program, has the au-                           state for financial assistance for grant
                                 thority to approve the following loans,                       approval and loans or grants approved.
                                 loan guarantees, and lien accommoda-                            (3) Extension of principal and inter-
                                 tions, except for those approvals re-                         est repayments for rural development
                                 served to the Administrator:                                  purposes.
                                   (1) Loans, loan guarantees, and lien                          (4) Loan contracts, security instru-
                                 accommodations and subordinations of                          ments, and all other documents to be
                                 liens not to exceed $25,000,000 except for                    executed in connection with loans and
                                 those reserved to the Administrator.                          loan guarantees approved by the Ad-
                                   (2) Loans and loan guarantees with                          ministrator.
                                 acquisition costs where the acquisition                         (b) Assistant Administrator, Tele-
                                 portion of the loan is less than                              communications Program, has the au-
                                 $5,000,000.                                                   thority to approve the following loans
                                   (3) Loans and loan guarantees includ-                       and lien accommodations and subordi-
                                                                                               nations of liens:
                                 ing refinancing amounts that do not
                                                                                                 (1) Loans, that do not also include re-
                                 exceed $5,000,000.
                                                                                               quests for grant funds, except for those
                                   (4) Distance learning and telemedi-
                                                                                               reserved to the Administrator.
                                 cine loans and loan guarantees that do
                                                                                                 (2) Loan contracts, security instru-
                                 not exceed $5,000,000.                                        ments, and all other documents to be
                                   (5) Loan contracts, security instru-                        executed in connection with loans and
                                 ments, and other documents to be exe-                         loan guarantees approved by the As-
                                 cuted in connection with loans and                            sistant Administrator, Telecommuni-
                                 loan guarantees approved by the As-                           cations Program.
                                 sistant Administrator, Telecommuni-
                                 cations Program.
                                                                                                PART 1703—RURAL DEVELOPMENT
                                   (c) Area Directors have the authority
                                 to approve the following loans, loan                                     Subpart A [Reserved]
                                 guarantees, and lien accommodations,
                                 except for those approvals reserved to                        Subpart B—Rural Economic Development
                                 the Administrator:                                                    Loan and Grant Program
                                   (1) Loans, loan guarantees, and lien
                                 accommodations and subordinations of                          Sec.
                                                                                               1703.10 Purpose.
                                 liens of less than $10,000,000.                               1703.11 Policy.
                                   (2) Loans and loan guarantees with                          1703.12 Definitions.
                                 acquisition costs of less than $2,000,000.                    1703.13 Source of funds.
                                   (3) Loans and loan guarantees includ-                       1703.14 Disposition of funds in the sub-
                                 ing refinancing amounts of less than                              account.
                                 $2,000,000.                                                   1703.15 [Reserved]
                                                                                               1703.16 Eligibility.
                                   (4) Any modifications in the method
                                                                                               1703.17 Uses of zero-interest loans and
                                 of carrying out loan purposes.                                    grants.
                                                                                               1703.18 Types of projects eligible for grant
                                 § 1700.56 Water           and      Environmental                  funding.
                                     Programs.                                                 1703.19 General requirements for grant fund-
                                   The State Rural Development Offices                             ing.
                                 have the responsibility for making and                        1703.20 Ineligible uses of zero-interest loans
                                                                                                   and grants.
                                 servicing water and waste loans and
                                                                                               1703.21 Limitations on the use of zero-inter-
                                 grants.                                                           est loan and grant funds.
                                                                                               1703.22 Revolving loan program.
                                 § 1700.57 Distance Learning and Tele-                         1703.23 Supplemental funds requirements
                                     medicine Loan and Grant Program.                              for zero-interest loans and grants.
                                   (a) Administrator: The authority to                         1703.24 [Reserved]
                                 approve the following loans and lien                          1703.25 Significance of RUS financing to the
                                                                                                   total project cost.
                                 accommodations is reserved to the Ad-                         1703.26 [Reserved]
                                 ministrator:                                                  1703.27 Owner’s equity in the project.
                                   (1) Grants or loan and grant combina-                       1703.28 Maximum and minimum sizes of a
                                 tions.                                                            zero-interest loan or grant application.

                                                                                          24



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                                 Rural Utilities Service, USDA                                                                         Pt. 1703
                                 1703.29 Terms of zero-interest loan repay-                    1703.123 Nonapproved purposes for grants.
                                     ment.                                                     1703.124 Maximum and minimum grant
                                 1703.30 Approval of agreements.                                   amounts.
                                 1703.31 Transfer of employment or business.                   1703.125 Completed application.
                                 1703.32 Environmental requirements.                           1703.126 Criteria for scoring grant applica-
                                 1703.33 Other considerations.                                     tions.
                                 1703.34 Applications.                                         1703.127 Application selection provisions.
                                 1703.35 Section of the application covering                   1703.128 Submission of applications.
                                     the selection factors.                                    1703.129 Appeals.
                                 1703.36 Section of the application covering
                                     the project description.                                  Subpart F—Distance Learning and Tele-
                                 1703.37 Section of the application covering                      medicine Combination Loan and
                                     the environmental impact of the project.                     Grant Program
                                 1703.38–1703.44 [Reserved]
                                 1703.45 Review and analysis of applications.                  1703.130 Use of combination loan and grant.
                                 1703.46 Documenting the evaluation and se-                    1703.131 Approved purposes for a combina-
                                     lection of applications for zero-interest                     tion loan and grant.
                                     loans and grants.                                         1703.132 Nonapproved purposes for a com-
                                 1703.47–1703.57 [Reserved]                                        bination loan and grant.
                                 1703.58 Post selection period.                                1703.133 Maximum and minimum amounts.
                                 1703.59 Final application processing and                      1703.134 Completed application.
                                     legal documents.                                          1703.135 Application selection provisions.
                                 1703.60 [Reserved]                                            1703.136 Submission of applications.
                                 1703.61 Disbursement of zero-interest loan                    1703.137 Appeals.
                                     and grant funds.                                          1703.138–1703.139 [Reserved]
                                 1703.62–1703.65 [Reserved]
                                 1703.66 Review and other requirements.                            Subpart G—Distance Learning and
                                 1703.67 Changes in project objective or
                                                                                                      Telemedicine Loan Program
                                     scope.
                                 1703.68 Loan and grant termination provi-                     1703.140 Use of loan funds.
                                     sions.                                                    1703.141 Approved purposes for loans.
                                 1703.69–1703.79 [Reserved]                                    1703.142 Nonapproved purposes for loans.
                                                                                               1703.143 Maximum and minimum amounts.
                                      Subpart C—Rural Business Incubator                       1703.144 Completed application.
                                              Program [Reserved]                               1703.145 Application selection provisions.
                                                                                               1703.146 Submission of applications.
                                 1703.80–1703.99    [Reserved]                                 1703.147 Appeals.
                                 Subpart D—Distance Learning and Tele-                            Subpart H—Deferments of RUS Loan
                                    medicine Loan and Grant Program—                            Payments for Rural Development Projects
                                    General
                                                                                               1703.300 Purpose.
                                 1703.100 Purpose.                                             1703.301 Policy.
                                 1703.101 Policy.                                              1703.302 Definitions and rules of construc-
                                 1703.102 Definitions.                                             tion.
                                 1703.103 Applicant eligibility and allocation                 1703.303 Eligibility criteria for deferment of
                                     of funds.                                                     loan payments.
                                 1703.104 [Reserved]                                           1703.304 Restrictions on the deferment of
                                 1703.105 Processing of selected applications.                     loan payments.
                                 1703.106 Disbursement of loans and grants.                    1703.305 Requirements for deferment of loan
                                 1703.107 Reporting and oversight require-                         payments.
                                     ments.                                                    1703.306 Limitation on funds derived from
                                 1073.108 Audit requirements.                                      the deferment of loan payments.
                                 1703.109 Grant and loan administration.                       1703.307 Uses of the deferments of loan pay-
                                 1703.110 Changes in project objectives or                         ments.
                                     scope.                                                    1703.308 Amount of deferment funds avail-
                                 1703.111 Grant and loan termination.                              able.
                                 1703.112 Expedited       telecommunications                   1703.309 Terms of repayment of deferred
                                     loans.                                                        loan payments.
                                 1703.113–1703.119 [Reserved]                                  1703.310 Environmental considerations.
                                                                                               1703.311 Application       procedures      for
                                       Subpart E—Distance Learning and                             deferment of loan payments.
                                         Telemedicine Grant Program                            1703.312 RUS review requirements.
                                                                                               1703.313 Compliance with other regulations.
                                 1703.120    [Reserved]
                                 1703.121    Approved purposes for grants.                       AUTHORITY: 7 U.S.C. 901 et seq. and 950aaa et
                                 1703.122    Matching contributions.                           seq.

                                                                                          25



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                                 § 1703.10                                                             7 CFR Ch. XVII (1–1–04 Edition)
                                   SOURCE: 54 FR 6870, Feb. 15, 1989, unless                   gram with other rural economic devel-
                                 otherwise noted. Redesignated at 55 FR 39394,                 opment programs.
                                 Sept. 27, 1990.
                                                                                               § 1703.12 Definitions.
                                            Subpart A [Reserved]                                  Act—the Rural Electrification Act of
                                                                                               1936, as amended (7 U.S.C. 901 et seq.).
                                 Subpart B—Rural Economic Devel-                                  Administrator— the Administrator of
                                    opment Loan and Grant Pro-                                 the Rural Utilities Service or the Ad-
                                    gram                                                       ministrator’s designee.
                                                                                                  Approved purpose—a purpose that the
                                                                                               Administrator has specifically ap-
                                   SOURCE: 57 FR 44317, Sept. 25, 1992, unless
                                                                                               proved in the letter of agreement cov-
                                 otherwise noted.
                                                                                               ering the use of the RUS zero-interest
                                 § 1703.10      Purpose.                                       loan and/or grant funds provided to the
                                                                                               borrower.
                                   (a) This subpart sets forth RUS’s                              Borrower—an entity that has out-
                                 policies and procedures for making                            standing RUS and/or Rural Telephone
                                 zero-interest loans and grants to bor-                        Bank (RTB) loan(s) or loan guar-
                                 rowers in accordance with the cushion                         antee(s) for an electric or telephone
                                 of credit payments program authorized                         purpose under the provisions of the
                                 in section 313 of the Act (7 U.S.C. 940c).                    Act.
                                   (b) The zero-interest loans and grants                         Business incubator—a facility in
                                 are provided for the purpose of pro-                          which small businesses can share prem-
                                 moting rural economic development                             ises, support staff, computers, software
                                 and job creation projects.                                    or hardware, telecommunications ter-
                                                                                               minal equipment, machinery, jani-
                                 § 1703.11      Policy.
                                                                                               torial services, utilities, or other over-
                                   (a) It is RUS’s policy that borrowers                       head expenses, and where such busi-
                                 use the Rural Economic Development                            nesses can receive technical assistance,
                                 Loan and Grant Program to promote                             financial advice, business planning
                                 projects that will result in a sustain-                       services or other support. The business
                                 able increase in the productivity of                          incubator program, however, does not
                                 economic resources in rural areas and                         necessarily have to involve the sharing
                                 thereby lead to a higher level of in-                         of premises.
                                 come for rural citizens.                                         Cushion of credit payment—a vol-
                                   (b) It is RUS’s policy that borrowers                       untary unscheduled payment made
                                 promote economic development in                               after October 1, 1987, on an RUS note,
                                 rural areas and job creation projects                         which is credited to the cushion of
                                 that:                                                         credit account of a borrower.
                                   (1) Are based on sound economic and                            Demonstration Project—a project for
                                 financial analyses; and                                       which the owner agrees in writing to
                                   (2) Take a long-term perspective.                           provide RUS, if requested, with de-
                                   (c) It is RUS’s policy to direct the                        tailed information on the steps it takes
                                 funds under this program to projects                          in organizing and operating the
                                 which are located in, or will primarily                       project, will permit RUS and RUS’s
                                 benefit, those rural areas that are ex-                       guests to make reasonable visits to the
                                 periencing the greatest economic hard-                        project, and honor any other reason-
                                 ship.                                                         able RUS request to disseminate infor-
                                   (d) It is RUS’s policy to encourage                         mation on the project. Examples of in-
                                 economic development in rural areas                           formation include a description of in-
                                 and job creation projects without re-                         corporation procedures, types of fi-
                                 gard to service area.                                         nancing obtained, permits required by
                                   (e) It is RUS’s policy to encourage                         governments, amount of time required
                                 borrowers to make cushion of credit                           for various stages of the project,
                                 payments.                                                     sources of technical assistance from
                                   (f) It is RUS’s policy to maintain liai-                    government programs, private founda-
                                 sons with officials of other Federal,                         tions or trade organizations, any expe-
                                 state, regional and local rural develop-                      riences or lessons that the owner wish-
                                 ment agencies to coordinate this pro-                         es to share with the public and other

                                                                                          26



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                                 Rural Utilities Service, USDA                                                                    § 1703.12

                                 information which will assist RUS in                          questing RUS funds, as determined by
                                 promoting similar projects. It will not                       the Administrator.
                                 require the disclosure of trade secrets                         Project    feasibility studies—studies,
                                 or proprietary techniques.                                    analyses, designs, reports, manuals,
                                   Electric or telephone purpose—a pur-                        guides, literature, or other forms of
                                 pose that:                                                    creating and/or disseminating informa-
                                   (1) The Administrator or Governor of                        tion for use in evaluating or developing
                                 the RTB is authorized to finance under                        a proposed project. For example, it
                                 sections 2, 4, 5, 201, 305, and 408 of the                    would include market research and en-
                                 Act; or                                                       vironmental studies.
                                   (2) Is characterized as furnishing,                           REA means the Rural Electrification
                                 generating or transmitting electric en-                       Administration formerly an agency of
                                 ergy or other activities involved in pro-                     the United States Department of Agri-
                                 viding electricity, or is characterized                       culture and predecessor agency to RUS
                                 as providing telephone service. It will                       with respect to administering certain
                                 include electric and telephone facilities                     electric and telephone loan programs.
                                 and equipment used in connection with                           Reasonable loan servicing charges—
                                 providing such a service. It will not in-                     charges for expenses the borrower in-
                                 clude a relatively insignificant amount                       curs to service a loan provided to an-
                                 of customer premises equipment, as de-                        other entity unaffiliated with the bor-
                                 termined by the Administrator.                                rower using the proceeds of the RUS
                                   Job creation—creation of jobs in rural                      zero-interest loan. The charges over
                                 areas. This includes the implementa-                          the life of the loan for routine loan
                                 tion of a project in close enough prox-                       servicing expenses must not exceed an
                                 imity to rural areas so that it is likely                     amount equal to the sum of one per-
                                 that the majority of the jobs created                         cent per year of the outstanding prin-
                                 will be held by rural residents.                              cipal on the first day of each year on
                                   Letter of agreement—a legal document                        the borrower’s RUS zero-interest loan.
                                 executed by the Administrator and the                         The charges for extraordinary expenses
                                 borrower that contains certain terms,                         associated with collection of delin-
                                 conditions, requirements and under-                           quent payments or other similar ex-
                                 standings applicable to the zero-inter-                       penses must receive the prior approval
                                 est loan and/or grant, as determined by                       of the Administrator.
                                 the Administrator.                                              Revolving loan program—a program es-
                                   Letter of credit—a commitment from a                        tablished and operated by the Bor-
                                 financial institution satisfactory to                         rower, using grant funds, the Bor-
                                 the Administrator to honor a draft                            rower’s contribution and loan repay-
                                 drawn on the RUS borrower should the                          ments to make loans to businesses or
                                 RUS borrower fail to pay on a zero-in-                        others for rural economic development
                                 terest loan.                                                  and job creation purposes.
                                   Pass-through-grant—a grant that the                           RTB—the Rural Telephone Bank, es-
                                 borrower makes to another entity that                         tablished as a body corporate and an
                                 will own or undertake the project using                       instrumentality of the United States,
                                 the proceeds of the RUS grant.                                to obtain supplemental funds from non-
                                   Pass-through-loan—a loan that the                           Federal sources and utilize them in
                                 borrower makes to another entity that                         making loans, for the purposes of fi-
                                 will own or undertake the project using                       nancing, or refinancing, the construc-
                                 the proceeds of the RUS zero-interest                         tion, improvement, expansion, acquisi-
                                 loan.                                                         tion, and operation of telephone lines,
                                   Project—an undertaking that devel-                          facilities, or systems, for RUS Bor-
                                 ops the economy of a rural area or re-                        rowers financed under sections 201 and
                                 sults in job creation. As used in sub-                        408 of the Act.
                                 part B, the term ‘‘project’’ includes                           Rural area—a rural area as defined in
                                 both direct undertakings by borrowers                         section 13 of the Act.
                                 as well as those sponsored by other                             Rural economic development—job cre-
                                 parties using the proceeds of pass-                           ation or preservation or community fa-
                                 through-loans or pass-through-grants.                         cilities improvement projects that
                                 It is the component or phase of the un-                       clearly demonstrate significant bene-
                                 dertaking for which the borrower is re-                       fits to rural areas.

                                                                                          27



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                                 § 1703.13                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                   Rural economic development account—a                        § 1703.14 Disposition of funds in the
                                 federally insured account into which                              subaccount.
                                 the borrower deposits any advances of                            Zero-interest loans and grants will be
                                 zero-interest loan funds from RUS                             made during each fiscal year to the full
                                 until the borrower disburses the funds.                       extent of the amounts held in the sub-
                                   RUS means the Rural Utilities Serv-                         account subject only to limitations im-
                                 ice, an agency of the United States De-                       posed by law. For administrative pur-
                                 partment of Agriculture established                           poses, the Administrator will make a
                                 pursuant to Section 232 of the Federal                        determination of the fiscal year-end
                                 Crop Insurance Reform and Depart-                             amount held in the subaccount as of a
                                 ment of Agriculture Reorganization                            date prior to, but as near as practicable
                                 Act of 1994 (Pub. L. 103–354, 108 Stat.                       to, the end of the fiscal year.
                                 3178), successor to REA with respect to
                                                                                               § 1703.15   [Reserved]
                                 administering certain electric and tele-
                                 phone programs. See 7 CFR 1700.1.                             § 1703.16 Eligibility.
                                   Scope of work—a detailed plan, which                           Zero-interest loans and grants may
                                 has been approved by the Adminis-                             be made to any borrower that is not de-
                                 trator, covering the work to be per-                          linquent on any outstanding Federal
                                 formed by the loan and/or grant recipi-                       debt or in bankruptcy proceedings.
                                 ent using the loan and/or grant funds.                        However, a zero-interest loan or grant
                                   Significant stockholder—an owner or                         will not be made to a borrower during
                                 holder of five percent or more of the                         any period in which the Administrator
                                 common stock (or shares) or five per-                         has determined that no additional fi-
                                 cent or more of the preferred stock (or                       nancial assistance of any nature should
                                 shares) of the RUS borrower.                                  be provided to the borrower pursuant
                                   Subaccount—the rural economic de-                           to any provision of the Act. The deter-
                                 velopment subaccount created by sec-                          mination to suspend eligibility for as-
                                 tion 313 of the Act.                                          sistance under this subpart will be
                                   Technical assistance—analysis of fa-                        based on one or more of the following
                                 cilities or processes, managerial, finan-                     factors:
                                                                                                  (a) The borrower’s demonstrated un-
                                 cial and operational consultation by
                                                                                               willingness to exercise diligence in re-
                                 independent qualified entities to assist
                                                                                               paying RUS loans or loan guarantees
                                 project owners to identify and evaluate
                                                                                               that results in the Administrator being
                                 problems or potential problems and                            unable to find that a loan, or loan
                                 provide training to enable project own-                       guaranteed by RUS, would be repaid
                                 ers to successfully implement, manage,                        within the time agreed;
                                 operate and maintain viable projects.                            (b) The borrower’s demonstrated un-
                                   Tribal    government—The    governing                       willingness to meet requirements in
                                 body or a governmental agency of any                          RUS’s legal documents or regulations;
                                 Indian tribe, band, nation, or other or-                      or
                                 ganized group or community (including                            (c) Other actions on the part of the
                                 any Native village as defined in 43                           borrower that thwart the achievement
                                 U.S.C. 1602) certified by the Secretary                       of the objectives of the RUS program.
                                 of the Interior as eligible for the spe-
                                 cial programs and services provided                           § 1703.17 Uses of zero-interest loans
                                                                                                    and grants.
                                 through the Bureau of Indian Affairs.
                                                                                                  (a) Zero-interest loans and grants
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59                must be used exclusively to promote
                                 FR 11706, Mar. 14, 1994; 59 FR 53930, Oct. 27,                rural economic development and/or job
                                 1994; 59 FR 66440, Dec. 27, 1994]
                                                                                               creation projects, including, but not
                                 § 1703.13      Source of funds.                               limited to, project feasibility studies,
                                                                                               start-up costs, business incubator
                                   Funds provided under this program                           projects, and other reasonable expenses
                                 come from interest differential credits                       for the purpose of fostering rural eco-
                                 to the subaccount and appropriated                            nomic development.
                                 amounts made available to the sub-                               (b) The Administrator will give pref-
                                 account.                                                      erence to providing funds under this

                                                                                          28



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                                 Rural Utilities Service, USDA                                                                    § 1703.18

                                 subpart for projects other than busi-                         § 1703.18 Types of projects eligible for
                                 ness incubator projects to the extent                             grant funding.
                                 funds are available to borrowers for
                                                                                                 Grants may be made for the fol-
                                 business incubator projects from a
                                                                                               lowing purposes:
                                 rural business incubator fund adminis-
                                 tered by the Administrator in accord-                           (a) The establishment and operation
                                 ance with section 502 of the Act (7                           of a revolving loan program by Bor-
                                 U.S.C. 950aa–1).                                              rowers in accordance with § 1703.22;
                                   (c) Zero-interest loans and grants                            (b) Project feasibility studies to as-
                                 may be used for Projects that enhance                         sist for-profit and non-profit entities in
                                 rural economic development by pro-                            conjunction with a loan for an author-
                                 viding advanced telecommunications                            ized project. Feasibility studies will in-
                                 services and computer networks for                            clude management assistance, con-
                                 medical and educational services, as                          sultation, and research for planning in-
                                 follows: (1) For telecommunications                           dividual projects that the Borrower has
                                 end use and/or transmission facilities;                       determined will benefit the rural com-
                                 and (2) Other portions of the project,                        munity. Feasibility studies which may
                                 such as modifications to buildings nec-                       be financed under this section must be
                                 essary to accommodate telecommuni-                            performed by qualified entities subject
                                 cations equipment for medical care and                        to § 1703.19, General requirements for
                                 other services, public or private edu-                        grant funding. Feasibility studies must
                                 cation, and employment training.                              address the important aspects of
                                   (d) Zero-interest loans and grants                          project assessment and planning to en-
                                 may be used for community antenna                             sure, to the extent practicable, the suc-
                                 television systems or facilities. The                         cess of projects. These include the mar-
                                 borrower will document that such fa-                          ket, technical, economic, financial, and
                                 cilities provide a tangible economic                          managerial issues related to project
                                 benefit to the proposed service area in                       feasibility. Feasibility studies may be
                                 accordance with § 1703.46 of this sub-                        funded in connection with viable
                                 part. Notwithstanding this, the Admin-                        projects as a reimbursement to the
                                 istrator reserves the right to deny any                       project owner for expenses incurred
                                 proposal for community antenna tele-                          during the initial planning stages of
                                 vision systems or facilities. Commu-                          the project prior to project funding by
                                 nity antenna television systems or fa-                        RUS;
                                 cilities will be considered for funding                         (c) The acquisition of technical as-
                                 in accordance with § 1703.46 of this sub-                     sistance in conjunction with projects
                                 part and this section only when all of                        funded with zero-interest loans to en-
                                 the following conditions exist:                               able for-profit and non-profit entities
                                   (1) The proposed community antenna                          to obtain analysis of facilities and
                                 television system or facility is estab-                       processes, managerial, financial and
                                 lished in cooperation with a local edu-                       operational consultation. Grant funds
                                 cational and/or medical entity(ies) to                        may also be used in conjunction with
                                 provide educational and/or medical                            zero-interest loans to enable non-profit
                                 programming which addresses specific                          business incubators to provide tech-
                                 needs of rural residents;                                     nical assistance. Technical assistance
                                   (2) Services to be provided by the pro-                     will enable project owners to identify
                                 posed community antenna television                            and evaluate problems or potential
                                 systems or facilities are not available                       problems and provide training in order
                                 in the area to be served, or services are                     that they may ultimately implement,
                                 not being provided by the existing tele-                      manage, operate and maintain viable
                                 vision programming carrier at an af-                          projects which are financed with zero-
                                 fordable cost to residents; and                               interest loan funds. Technical assist-
                                   (3) Such community antenna systems                          ance financed under this section must
                                 or facilities will not present undue                          be performed by qualified entities
                                 competition for existing television pro-                      which are independent of the project
                                 gramming carriers in the area.                                owner subject to § 1703.19, General re-
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59                quirements for grant funding;
                                 FR 11706, Mar. 14, 1994; 59 FR 53930, Oct. 27,                  (d) Business incubators established
                                 1994]                                                         by non-profit organizations to assist in

                                                                                          29



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                                 § 1703.19                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 developing emerging enterprises. Busi-                        and for-profit entities. Pass-through
                                 ness incubators funded in conjunction                         grant funding for projects under
                                 with zero-interest loans will include                         § 1703.18 (d) and (e) will be available
                                 those facilities in which single or mul-                      only for non-profit entities.
                                 tiple businesses may use premises, sup-                          (c) All projects funded with zero-in-
                                 port staff, computer software, hard-                          terest loans and grants will require
                                 ware, telecommunications equipment,                           supplemental funding in accordance
                                 machinery, janitorial services, utili-                        with § 1703.23. For grants made under
                                 ties, or other overhead facilities. Grant                     § 1703.18(a), the portion eligible for RUS
                                 funding may also be provided to allow                         funding may be fully funded with grant
                                 business incubators to provide feasi-                         funds. For all other grants funded
                                 bility studies and technical assistance                       under § 1703.18, the portion of project
                                 in accordance with paragraphs (b) and                         costs eligible for RUS funding may be
                                 (c) of this section;                                          funded up to 20 percent with grant
                                   (e) Community development assist-                           funds.
                                 ance to non-profit entities and public                           (d) Grant funding will be provided
                                 bodies     for    employment     creation                     only to the extent necessary for a fea-
                                 projects, or other projects which pro-                        sible project. A feasible project is a
                                 vide needed community facilities and                          project which expects to generate suffi-
                                 services;                                                     cient income to pay operating expenses
                                   (f) Facilities and equipment to pub-                        and debts and compensate for deprecia-
                                 lic, for-profit and non-profit entities to                    tion of equipment and facilities for the
                                 provide education and training to rural                       project which is to be funded by RUS.
                                 residents to facilitate economic devel-                       Depreciation must be based on allow-
                                 opment. Equipment and facilities may                          able depreciation schedules as set forth
                                 be funded to enable rural businesses to                       by the United States Internal Revenue
                                 provide educational and job enhance-                          Service. Borrowers whose analyses of
                                 ment skills to employees;                                     projects show feasibility without grant
                                   (g) Facilities and equipment to pub-                        funds should not apply for grant fund-
                                 lic, for-profit and non-profit entities to                    ing. Borrowers requesting pass-through
                                 provide medical care to rural residents.                      grant funds will base grant funding re-
                                 Equipment and facilities may be fund-                         quests on borrower projected income
                                 ed to enable eligible entities to provide                     and expense projections for the project,
                                 medical training and related profes-                          and documentation regarding deprecia-
                                 sional health care skills to rural health                     tion of the equipment and facilities for
                                 care providers;                                               the project. The Administrator will de-
                                   (h) Projects which utilize advanced                         termine whether the Borrower’s projec-
                                 telecommunications and/or computer                            tions of income, expenses and deprecia-
                                 networks to facilitate medical or edu-                        tion are reasonable.
                                 cational services or job training in ac-                         (e) For projects that project insuffi-
                                 cordance with paragraphs (f) and (g) of                       cient operating revenue the first two
                                 this section.                                                 years to show feasibility, borrowers
                                 [59 FR 11706, Mar. 14, 1994, as amended at 59                 should first consider the deferral provi-
                                 FR 38341, July 28, 1994]                                      sions set forth in § 1703.29(b) before de-
                                                                                               termining the appropriate level of re-
                                 § 1703.19 General requirements for                            quested grant funding. Zero-interest
                                      grant funding.                                           loan and grant funding will be ap-
                                    (a) Grants made under § 1703.18(a), es-                    proved in accordance with paragraph
                                 tablishment and operation of a revolv-                        (d) of this section based on the option
                                 ing loan program by Borrowers, will be                        which results in the lowest required
                                 limited to Borrowers and can be made                          grant percentage.
                                 without zero-interest loans. Grants                              (f) The owner of the pass-through
                                 made under § 1703.18 (b) through (h) will                     project that receives grant funds will
                                 be made only in conjunction with zero-                        be encouraged to commit that the
                                 interest loans, and on a pass-through                         project will be a demonstration
                                 basis.                                                        project.
                                    (b) Pass-through grant funding for                            (g) Borrowers or project owners must
                                 projects under § 1703.18 (b), (c), (f), (g)                   demonstrate the availability and com-
                                 and (h) will be available for non-profit                      mitment of other sources of funding

                                                                                          30



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                                 Rural Utilities Service, USDA                                                                    § 1703.20

                                 needed to complete a project in addi-                         corporation with more than 5 percent
                                 tion to RUS loan and/or grant funds,                          of its stock held by one legal person,
                                 prior to the first advance of RUS funds.                      its subsidiary or an affiliate, would or-
                                   (h) Feasibility studies and/or tech-                        dinarily be able to own or manage a
                                 nical assistance funded with grants                           project operated on a non-profit basis
                                 under § 1703.18 (b) and (c) must be per-                      only;
                                 formed by entities which are inde-                               (2) For any costs incurred on the
                                 pendent of the Borrower and qualified                         project:
                                 to provide such services. The project                            (i) Prior to receipt of the Borrower’s
                                 owner, if deemed qualified in accord-                         completed application by RUS during
                                 ance with this paragraph, may furnish                         an application period unless the Ad-
                                 a feasibility study under § 1703.18(b).                       ministrator has specifically approved
                                 Entities furnishing technical assist-                         such usage in writing; or
                                 ance under § 1703.18(c), must be inde-                           (ii) For site development, the de-
                                 pendent of the project owner. To be                           struction or alteration of buildings, or
                                 deemed qualified, entities providing                          other activities that would adversely
                                 feasibility studies and/or technical as-                      affect the environment or limit the
                                 sistance must:                                                choice of reasonable alternatives prior
                                   (1) Provide sufficient documentation                        to satisfying the requirements of
                                 evidencing their proven ability, back-                        § 1703.32;
                                 ground and experience to furnish such                            (3) By the Borrower to purchase or
                                 services; and                                                 lease any real property, materials,
                                   (2) Provide sufficient documentation                        equipment, or services from its sub-
                                 evidencing their legal authority and                          sidiary, an affiliate, or significant
                                 capacity to furnish such services.                            stockholders, officers, managers or di-
                                 [59 FR 11706, Mar. 14, 1994]                                  rectors of the Borrower, or close rel-
                                                                                               atives thereof, where the purchase or
                                 § 1703.20 Ineligible uses of zero-inter-                      lease has not been fully disclosed to
                                      est loans and grants.                                    the Administrator and received the Ad-
                                    (a) Zero-interest loans and grants                         ministrator’s prior written approval;
                                 must not be used:                                                (4) By the recipient of a pass-
                                    (1) To fund or assist projects of which                    through-loan or pass-through-grant to
                                 any director, officer, general manager                        purchase or lease any real property,
                                 or significant stockholder of the Bor-                        materials, equipment, or services from
                                 rower, or close relative thereof, is an                       the Borrower, its subsidiary, an affil-
                                 owner, stockholder, partner or direc-                         iate of the Borrower, or significant
                                 tor, or which would, in the judgment of                       stockholders, officers, managers or di-
                                 the Administrator, create a conflict of                       rectors of the Borrower, or close rel-
                                 interest or the appearance of a conflict                      atives thereof, where the purchase or
                                 of interest. The Borrower must disclose                       lease has not been fully disclosed to
                                 to the Administrator information re-                          the Administrator and received the Ad-
                                 garding any conflict of interest, poten-                      ministrator’s prior written approval;
                                 tial conflict of interest or any appear-                         (5) To pay off or refinance existing
                                 ance of a conflict of interest. The Ad-                       indebtedness incurred prior to receipt
                                 ministrator will determine whether                            of the Borrower’s completed applica-
                                 there is a conflict of interest or wheth-                     tion by RUS or for refinancing or re-
                                 er any potential conflict of interest or                      paying a loan made under the Act or a
                                 appearance of a conflict of interest                          program administered by the Adminis-
                                 may adversely affect RUS’s interests.                         trator;
                                 A Borrower organized as, or consisting                           (6) For any electric or telephone pur-
                                 of a cooperative, widely held mutual                          pose, as determined by the Adminis-
                                 corporation, tribal government, munic-                        trator;
                                 ipal power corporation, public power                             (7) For the Borrower’s electric or
                                 district, or a similar widely held orga-                      telephone operations or for any oper-
                                 nization would ordinarily be able to                          ations affiliated with the Borrower un-
                                 have an ownership interest in or man-                         less the Administrator has specifically
                                 age a project operated on either a for-                       informed the Borrower in writing that
                                 profit or non-profit basis. A Borrower                        the operations are part of the approved
                                 organized as a closely held, for-profit                       purposes;

                                                                                          31



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                                 § 1703.21                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                    (8) To pay the salaries of any em-                         bursed to the Borrower in accordance
                                 ployee or owner of the Borrower, its                          with § 1703.61(b).
                                 subsidiaries, or affiliates. This restric-                      (c) A borrower may not make a profit
                                 tion does not prohibit the use of loan                        from any zero-interest loan or grant
                                 or grant funds for printing and similar                       provided from the subaccount, with the
                                 costs for project feasibility studies it                      exception of the $500 interest income
                                 has prepared, commissioned or pur-                            exclusion in paragraph (d) of this sec-
                                 chased if specifically approved by the                        tion.
                                 Administrator. This restriction is sub-                         (d) The Borrower may not requisition
                                 ject to the operating expense allowance                       zero-interest loan funds unless those
                                 for revolving loan funds set forth in                         funds are deposited into the Borrower’s
                                 § 1703.22 (a)(6);                                             RUS construction fund trustee ac-
                                    (9) To fund feasibility studies and                        count. The Borrower will be required to
                                 technical assistance as set forth in                          set up a separate Federally insured ac-
                                 § 1703.18 independently of projects                           count called the Rural Economic De-
                                 which are funded under the zero-inter-                        velopment Account, if loan funds are
                                 est loan and grant program;                                   not expected to be disbursed within
                                    (10) For community antenna tele-                           two months after receipt from RUS.
                                 vision systems or facilities except as                        All interest earned on temporarily de-
                                 provided in § 1703.17(d) of this subpart;                     posited zero-interest loan funds in ex-
                                    (11) For proposed projects located in                      cess of $500 per 12-month period must
                                 areas covered by the Coastal Barrier                          be used for approved purposes or re-
                                 Resources Act (16 U.S.C. 3501 et seq.); or                    turned to RUS. Interest earned in ex-
                                    (12) For anything other than an ap-                        cess of $500 per 12 month period and re-
                                 proved purpose.                                               turned to RUS will not be used to re-
                                    (b) [Reserved]                                             duce the Borrower’s principal indebted-
                                                                                               ness. Grant funds will be disbursed by
                                 [59 FR 11707, Mar. 14, 1994, as amended at 59                 RUS in accordance with 7 CFR parts
                                 FR 53930, Oct. 27, 1994]                                      3015 and 3016, and § 1703.61(b).
                                                                                                 (e) The borrower may not condition
                                 § 1703.21 Limitations on the use of
                                     zero-interest loan and grant funds.                       the receipt of the proceeds of a zero-in-
                                                                                               terest loan or grant under this subpart
                                   (a) A borrower may not charge inter-                        with the requirement that the recipi-
                                 est for the use of the proceeds of the                        ent take electric or telephone service
                                 zero-interest loan provided under this                        from the borrower.
                                 program; however, it may charge rea-
                                 sonable loan servicing charges, reason-                       [57 FR 44317, Sept. 25, 1992, as amended at 59
                                 able legal fees involved in providing                         FR 11708, Mar. 14, 1994]
                                 the RUS funds to the recipient, and the
                                                                                               § 1703.22   Revolving loan program.
                                 amount paid for an irrevocable letter
                                 of credit made payable to RUS and                               Grant funds under this section will
                                 issued on behalf of the borrower that                         be provided only to RUS Borrowers on
                                 guarantees repayment of an RUS zero-                          a non pass-through basis. RUS Bor-
                                 interest loan, all as determined by the                       rowers will, in turn, provide loans to
                                 Administrator. A borrower may require                         foster rural economic development in
                                 the recipient of a pass-through-loan to                       accordance with this subpart and the
                                 provide and/or obtain adequate secu-                          specific requirements of this section.
                                 rity for the zero-interest loan funds.                          (a) General. Grant funds disbursed to
                                   (b) A borrower must calculate any                           RUS Borrowers to establish revolving
                                 costs to charge in connection with the                        loan programs under this section are
                                 use of grant funds under this program                         subject to the following requirements:
                                 for the project and must temporarily                            (1) The uses, restrictions and limita-
                                 deposit the grant funds in accordance                         tions for zero-interest loans set forth
                                 with 7 CFR parts 3015, Uniform Federal                        in §§ 1703.17, 1703.20 and 1703.21 respec-
                                 Assistance Regulations, and 3016, Uni-                        tively;
                                 form Administrative Requirements for                            (2) Loans made by RUS Borrowers
                                 Grants and Cooperative Agreements to                          initially lending grant funds disbursed
                                 State and Local Governments, as ap-                           by RUS are limited to types of projects
                                 propriate. Grant funds will be dis-                           specified in § 1703.18 (d), (e), (f), (g) and

                                                                                          32



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                                 Rural Utilities Service, USDA                                                                    § 1703.22

                                 (h). Loans may also be made for feasi-                        tional funding will be deemed as Fed-
                                 bility studies and technical assistance                       eral funds and accounted for in accord-
                                 in accordance with § 1703.18 (b) and (c),                     ance with paragraph (h)(1)(i)(A) of this
                                 respectively, but only for those types                        section for electric borrowers or para-
                                 of projects specified in this paragraph                       graph (h)(1)(ii)(A) of this section for
                                 (a)(2). Loans made from repayments of                         telephone borrowers, as appropriate;
                                 the initial loans made by RUS Bor-                              (iv) At the Borrower’s option, all or a
                                 rowers may be used for any rural eco-                         portion of the additional funding may
                                 nomic development purpose in accord-                          be retained as non-Federal funds, for
                                 ance with a prior agreement between                           any    rural   economic    development
                                 the Borrower and RUS;                                         project(s), subject to paragraph (g) of
                                    (3) All other requirements relevant to                     this section and RUS concurrence. Ad-
                                 zero-interest pass-through loans and                          ditional funding committed as non-
                                 grants outlined in this subpart, except                       Federal will be accounted for in ac-
                                 the minimum size of a zero-interest                           cordance with paragraph (h)(1)(i)(E) of
                                 loan as specified in § 1703.28(f);                            this section for electric borrowers or
                                    (4) The initial loans made from the                        paragraph (h)(1)(ii)(E) of this section
                                 revolving loan fund using the grant                           for telephone borrowers, as appro-
                                 funds must carry an interest rate of                          priate;
                                 zero percent; however, loans made from                          (6) Grant funds will only be provided
                                 repayments of the initial loan may                            to an RUS Borrower for a revolving
                                 carry an interest rate in accordance                          loan program when a proposed budget
                                 with prior agreement with RUS. In ei-                         submitted to RUS demonstrates and
                                 ther case, the Borrower may charge                            the Borrower agrees in writing that no
                                 reasonable loan servicing fees;                               more than 10 percent of grant funds re-
                                    (5) The Borrower will provide a board                      ceived are used to cover operating ex-
                                 resolution certifying a commitment to                         penses of the revolving loan program.
                                 provide and maintain additional fund-                         Operating expenses include the costs of
                                 ing to the revolving loan fund in an                          administering the revolving loan fund
                                 amount no less than 20 percent of the                         and the provision of technical assist-
                                 RUS grant approved. The Borrower will                         ance to project owners. All proceeds in
                                 provide documentation that the addi-                          excess of those needed to cover author-
                                 tional funding has been deposited in                          ized expenses, as described above, must
                                 the        appropriate     account      in                    revert to the revolving fund and be
                                 § 1703.22(h)(1) prior to grant disburse-                      available for re-lending for eligible
                                 ment. This requirement does not per-                          projects. Budgets which reflect ex-
                                 tain to supplemental funding require-                         penses incurred in operating the fund
                                 ments for individual projects as set                          must be submitted to RUS annually;
                                 forth in § 1703.23. Additional funding re-                      (7) The Borrower may charge reason-
                                 quired in this paragraph pertains only                        able loan servicing charges. For pur-
                                 to borrowers establishing revolving                           poses of this section, loan servicing
                                 loan funds, with the following provi-                         charges must not exceed an amount
                                 sions:                                                        equal to the sum of one percent per
                                    (i) Use of additional funding is sub-                      year of the outstanding principal on
                                 ject to requirements set forth in para-                       the first day of each year on each
                                 graph (b) of this section and with RUS                        project owner’s zero-interest loan
                                 concurrence;                                                  which is made from the RUS grant pro-
                                    (ii) Individual projects funded under                      ceeds;
                                 this section are subject to supple-                             (8) The Borrower will submit docu-
                                 mental funds requirements set forth in                        mentation indicating that potential
                                 § 1703.23;                                                    projects which are eligible for funding
                                    (iii) At the Borrower’s option with                        have sufficiently progressed in the
                                 RUS concurrence, all or a portion of                          planning stage to allow grant funding
                                 the additional funding may be used to                         approved for a revolving loan program
                                 assist project owners receiving funding                       to be requisitioned by the Borrower,
                                 from Federal grant funds under this                           disbursed by RUS, and loaned to recipi-
                                 section to meet their supplemental                            ents within 3 years of the date of grant
                                 funding requirements set forth in                             approval by RUS. Grant funds that
                                 § 1703.23 of this subpart. Such addi-                         have not been requisitioned within 3

                                                                                          33



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                                 § 1703.22                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 years will be cancelled, unless the Ad-                         (4) The application process and meth-
                                 ministrator has approved an extension                         od of disposition of the funds to the
                                 in writing. Grant funds will be dis-                          project owner; and
                                 bursed by RUS in accordance with                                (5) A procedure for monitoring the
                                 paragraphs (d) and (g) of this section;                       project owner’s accomplishments and
                                   (9) If the revolving loan program is                        reporting requirements by the project
                                 terminated, further disbursement of                           owner’s management.
                                 grant funds will be cancelled. Repay-                           (c) The Borrower’s scope of work. Bor-
                                 ments of loans made using grant funds                         rowers applying for grant funding
                                 which have been disbursed will be used                        under this section must submit a scope
                                 in accordance with the Borrower’s                             of work to RUS. Applications for
                                 rural development plan;                                       grants under this section will be evalu-
                                   (10) Payment of creditors which pro-                        ated for funding based on the Bor-
                                 vide interim or construction financing                        rower’s rural development plan in para-
                                 to a viable project for eligible purposes                     graph (b) of this section and the scope
                                 as set forth in § 1703.18 of this subpart                     of work. The scope of work must con-
                                 may be authorized. Refinancing for the                        tain the following items:
                                 sole purpose of replacing higher inter-                         (1) Documented need for grant funds.
                                 est conventional financing with zero-                         The Borrower must identify a suffi-
                                 interest revolving loan funds is not au-                      cient number of rural development
                                 thorized.
                                                                                               projects of the type specified in § 1703.18
                                   (b) The Borrower’s rural development                        (d), (e), (f), (g), and (h) which are cur-
                                 plan. RUS requires that the revolving                         rently being planned requiring zero-in-
                                 loan program be administered in ac-
                                                                                               terest loans equal to the amount of
                                 cordance with a rural development
                                                                                               grant assistance requested from RUS.
                                 plan, developed by the Borrower and
                                                                                               These projects may be supported with a
                                 approved by RUS. The plan must be of
                                                                                               community facilities plan, or other de-
                                 sufficient detail to provide RUS with a
                                                                                               velopment plan, prepared by local com-
                                 complete understanding of what the
                                                                                               munity leaders in cooperation with the
                                 Borrower intends to accomplish by ad-
                                 ministering a revolving loan program.                         Borrower. For each project, the Bor-
                                 The rural development plan will pro-                          rower will submit information required
                                 vide the mechanics of how the revolv-                         under § 1703.34;
                                 ing loan funds will be disbursed to the                         (2) Documented authority and ability
                                 project owner. The rural development                          of the Borrower to administer a revolv-
                                 plan must outline the Borrower’s plans                        ing rural development loan program in
                                 for administering the revolving loan                          accordance with the provisions of this
                                 program, during the initial period                            subpart. The Borrower must provide a
                                 when RUS grant funds are lent by the                          complete listing of all personnel re-
                                 Borrower and after the revolving fund                         sponsible for administering this pro-
                                 becomes non-Federal in accordance                             gram along with a statement of their
                                 with paragraph (g) of this section. The                       qualifications and experience;
                                 plan must outline the following:                                (3) Documented ability of the Bor-
                                   (1) Specific objectives for the revolv-                     rower to commit financial resources
                                 ing loan program, revolving loan oper-                        under the control of the Borrower to
                                 ating procedures, lending parameters,                         assist in the establishment of a rural
                                 maximum and minimum loan amount,                              development revolving loan program.
                                 and types of projects to be funded;                           This should include a statement of the
                                   (2) Documentation of Borrower’s co-                         sources of funding for the administra-
                                 ordination of lending activities with                         tion of the Borrower’s operations, as
                                 other local entities that provide fi-                         well as financial and technical assist-
                                 nancing for rural economic develop-                           ance for projects;
                                 ment projects. Such documentation                               (4) Documentation that the Borrower
                                 will indicate that the Borrower will                          has secured commitments of signifi-
                                 not compete with, but supplement                              cant financial support from public
                                 other sources of legal financing;                             agencies and/or private organizations
                                   (3) Eligibility criteria if other than                      for supplemental funding to support a
                                 outlined in this subpart;                                     rural development loan program;

                                                                                          34



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                                 Rural Utilities Service, USDA                                                                    § 1703.22

                                   (5) A list of proposed fees and other                       section, may be authorized for funding
                                 charges the Borrower will assess the                          subsequent to grant approval. A
                                 projects it funds; and                                        project which is authorized for funding
                                   (6) The Borrower’s rural development                        under this paragraph will be considered
                                 policy for non-Federal funds in accord-                       for disbursement at the first allowable
                                 ance with paragraphs (b) and (g) of this                      time period after project authorization
                                 section.                                                      in accordance with paragraphs (e)(3)
                                   (d) Grant processing and approval. Ap-                      and (e)(4) of this section. Project au-
                                 plications for grants to establish re-                        thorization after grant approval is sub-
                                 volving loan funds will be reviewed in                        ject to the following requirements:
                                 accordance with §§ 1703.45 and 1703.46,                         (i) The project meets the specific ob-
                                 and with the Borrower’s rural develop-                        jectives for the Borrower’s revolving
                                 ment plan and scope of work outlined                          loan program as outlined in paragraph
                                 in paragraphs (b) and (c) of this sec-                        (b)(1) of this section;
                                 tion. Grants will be processed in ac-                           (ii) The Borrower presents evidence
                                 cordance with §§ 1703.58 and 1703.59.                         that the project requested for author-
                                   (e) Disbursement of grant funds. Bor-                       ization can be funded prior to projects
                                 rowers are not authorized to commence                         which were authorized prior to grant
                                 projects to be funded under this section                      approval in accordance with paragraph
                                 until those projects have been sub-                           (b)(1) of this section; and
                                 mitted for authorization in accordance                          (iii) RUS approves the project for
                                 with paragraph (c)(1) of this section, or                     funding in accordance with § 1703.34;
                                 the projects have been submitted for                            (3) Under the reimbursement method,
                                 authorization subsequent to grant ap-                         grant funds requisitioned for individual
                                 proval in accordance with paragraph                           projects in increments of less than
                                 (e)(2) of this section. RUS grant funds                       $100,000, or less than 25 percent of the
                                 will be disbursed on a reimbursement                          amount approved for the revolving loan
                                 basis. However, upon written justifica-                       fund, whichever is less, may be dis-
                                 tion by borrowers and approval by the                         bursed semi-annually. Submission peri-
                                 Administrator, borrowers unable to                            ods for requisitioning grant funds on a
                                 fund projects under reimbursement                             semi-annual disbursement basis will be
                                 provisions, for financial or other ex-                        14 days commencing from the 6-month
                                 traordinary reasons, may receive grant                        anniversary date of grant approval.
                                 funds under the special disbursement                          Grant funds under the special disburse-
                                 method by submitting unpaid invoices                          ment method will be requisitioned in
                                 from project owners, and grant funds                          accordance with the applicable provi-
                                 will be disbursed to borrowers and                            sion in paragraph (e)(4) of this section;
                                 passed directly to project owners. In ei-                       (4) For the reimbursement method,
                                 ther case, RUS grant funds will be dis-                       grant funds requisitioned for individual
                                 bursed in accordance with the provi-                          projects in increments of $100,000 or
                                 sions of 7 CFR Part 3015, Uniform Fed-                        greater, or at least 25 percent of the
                                 eral Assistance Regulations, the appli-                       amount approved for the revolving loan
                                 cable requirements of this subpart, the                       fund, whichever is less, may be sub-
                                 administrative provisions outlined in                         mitted for disbursement at any time.
                                 paragraph (g) of this section, and the                        Under the special disbursement meth-
                                 following requirements:                                       od, grant funds of less than $100,000
                                   (1) Only projects authorized by RUS                         may be requisitioned for disbursement
                                 in accordance with paragraphs (c)(1)                          at any time. However, the minimum
                                 and (e)(2) of this section, for which ade-                    requisition will be $50,000, or the total
                                 quate documentation is submitted, in-                         grant award, whichever is less.
                                 cluding receipts for expenditures under                         (f) Reporting requirements. (1) The Bor-
                                 the reimbursement method or unpaid                            rower must maintain financial man-
                                 invoices under the special disburse-                          agement systems and retain financial
                                 ment method, as applicable, and cer-                          records in accordance with 7 CFR part
                                 tification of approved purposes, will be                      3015, Uniform Federal Assistance Regu-
                                 considered for disbursement;                                  lations.
                                   (2) A project which was not sub-                              (2) Borrower records must include an
                                 mitted prior to grant approval in ac-                         accurate accounting and source docu-
                                 cordance with paragraph (c)(1) of this                        mentation to support each transaction

                                                                                          35



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                                 § 1703.22                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 involving the revolving loan fund.                              (g) Non-Federal funds. Once all RUS-
                                 Records are subject to a rural eco-                           derived grant funds have been utilized
                                 nomic loan review as set forth in                             by the Borrower to fund rural develop-
                                 § 1703.66(g).                                                 ment projects according to the provi-
                                    (3) SF–269, ‘‘Financial Status Re-                         sions of this section and the applicable
                                 port,’’ and a revolving loan program                          provisions of this subpart, loans made
                                 activity report will be required of all                       by the Borrower thereafter from repay-
                                 Borrowers on an annual basis. Reports                         ments to the revolving loan fund shall
                                 will be submitted no later than 90 days                       not be considered as being derived from
                                 after December 31 of each year. The                           Federal funds and the requirements of
                                 program activity report will contain an                       these regulations will not be imposed
                                 aggregate list of projects funded, the                        on the Borrower or project owners.
                                 amount funded for each project, the                           However, the Borrower will, as a condi-
                                 project repayment schedule, a brief de-                       tion for receiving a grant under this
                                 scription of each project, the project                        section, agree to the following condi-
                                 objectives, whether or not the project                        tions:
                                 has been completed, and the projected                           (1) To maintain a revolving loan ac-
                                 number of jobs created or saved by                            count to promote rural economic de-
                                 each project. Reports under this para-                        velopment in accordance with the Bor-
                                 graph will be required until all grant                        rower’s rural development plan for
                                 funds have been disbursed and projects                        non-Federal funds submitted in accord-
                                 completed.                                                    ance with paragraph (b) of this section;
                                    (4) A performance report will be re-                         (2) To maintain the additional fund-
                                 quired for each project funded on an                          ing supplied by the Borrower in accord-
                                 annual basis. Performance reports will                        ance with paragraph (a)(5) of this sec-
                                 be due no later than 90 days after De-                        tion and interest earnings within the
                                 cember 31 of each year. Performance                           revolving loan fund;
                                 reports will be submitted until one                             (3) Approval may be granted by the
                                 year after project completion. Project                        Administrator to terminate the revolv-
                                 performance reports will contain the                          ing loan program, or modify the re-
                                 following:                                                    quirements set forth in paragraphs
                                    (i) A comparison of actual accom-                          (g)(1) and (g)(2) of this section, upon
                                 plishments during the reporting period                        written request and justification by
                                 to the objectives established for the                         the Borrower. Should the Borrower ter-
                                 project and, if not attained, reasons                         minate the revolving loan program
                                 why established objectives were not                           without obtaining approval by the RUS
                                 met;                                                          Administrator, the Borrower will re-
                                    (ii) Problems, delays, or adverse con-                     turn the amount of the original grant
                                 ditions which will materially affect at-                      to RUS.
                                 tainment of planned project objectives,                         (h) Administrative provisions. The re-
                                 prevent the meeting of time schedules                         quirements of this paragraph set forth
                                 or objectives, or preclude the attain-                        the procedures for accounting, requisi-
                                 ment of project work elements during                          tioning and disbursement of Federal
                                 established time periods. This disclo-                        funds, those funds initially disbursed
                                 sure shall be accompanied by a state-                         for projects which may be funded in ac-
                                 ment of the action taken or con-                              cordance with an approved rural devel-
                                 templated to resolve the situation;                           opment plan and scope of work sub-
                                    (iii) Projected accomplishments for                        mitted by the Borrower. Disbursement
                                 the next reporting period, if applicable;                     of grant funds will be approved on a re-
                                 and                                                           imbursement basis after the grant
                                    (iv) Status of compliance with any                         agreement is executed by RUS and the
                                 special conditions for project funding,                       Borrower, the applicable provisions of
                                 if applicable.                                                this subpart are met, subject to dis-
                                    (5) Borrowers must report and remit                        bursement restrictions in paragraph (e)
                                 interest earned on advances of grant                          of this section, and the requirements in
                                 funds deposited in interest accounts to                       paragraphs (h) (1) through (3) of this
                                 RUS on a quarterly basis in accordance                        section.
                                 with 7 CFR part 3015, Uniform Federal                           (1) Accounting requirements. Account-
                                 Assistance Regulations.                                       ing will be performed in accordance

                                                                                          36



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                                 Rural Utilities Service, USDA                                                                     § 1703.22

                                 with 7 CFR part 1767, Accounting Re-                          ment Non-Federal Revolving Funds.’’
                                 quirements for RUS Electric Bor-                              The Borrower will debit this account
                                 rowers, or 7 CFR part 1770, Accounting                        with any additional funds deemed non-
                                 Requirements for RUS Telephone Bor-                           Federal from the borrower as required
                                 rowers, as appropriate. The Borrower                          by paragraph (a)(5)(iv) of this section,
                                 will maintain accounts for the revolv-                        cash received from the repayment of
                                 ing funds as follows:                                         loans made from accounts in para-
                                    (i) RUS electric Borrowers. (A) A gen-                     graphs        (h)(1)(i)(B),     (h)(1)(i)(C),
                                 eral ledger Account 131.13, ‘‘Cash-Gen-                       (h)(1)(i)(F), and (h)(1)(i)(G) of this sec-
                                 eral—Economic Development Grant                               tion. The Borrower will credit this ac-
                                 Funds.’’ The Borrower will debit this                         count to reflect loans made for rural
                                 account in an amount equal to the                             economic development projects from
                                 amount of the grant received from                             non-Federal funds from accounts speci-
                                 RUS, any additional funds deemed Fed-                         fied in paragraphs (h)(1)(i)(F) and
                                 eral from the Borrower as required by                         (h)(1)(i)(G) of this section.
                                 paragraph (a)(5)(iii) of this section, and                       (F) A general ledger Account 124.2,
                                 all other funds advanced for the                              ‘‘Other Investments—Non-Federal Eco-
                                 project, regardless of the source, if con-                    nomic Development Loans.’’ The Bor-
                                 trolled by the Borrower. The Borrower                         rower will debit this account in the
                                 will credit this account for all expendi-                     amount of non-Federal funds the Bor-
                                 tures made with Federal funds on be-                          rower advances to non-associated orga-
                                 half of the rural development project.                        nizations for authorized rural economic
                                    (B) A general ledger Account 124.1,                        development projects. For each debit
                                 ‘‘Other    Investments—Federal        Eco-                    in this account, a corresponding credit
                                 nomic Development Loans.’’ The Bor-                           will be made in Account 131.14, in para-
                                 rower will debit this account in the                          graph (h)(1)(i)(E) of this section. This
                                 amount of Federal funds the Borrower                          account will be credited with repay-
                                 advances to non-associated organiza-                          ments of loans made from non-Federal
                                 tions for authorized rural economic de-                       economic development funds.
                                 velopment projects. For each debit in                            (G) A general ledger Account 123.4,
                                 this account, a corresponding credit                          ‘‘Investment in Associated Compa-
                                 will be made in Account 131.13 in para-                       nies—Non-Federal Economic Develop-
                                 graph (h)(1)(i)(A) of this section. This                      ment Loans.’’ The Borrower will debit
                                 account will be credited with repay-                          this account in the amount of non-Fed-
                                 ments of loans made with Federal eco-                         eral funds the Borrower advances to as-
                                 nomic development grant funds.                                sociated organizations for authorized
                                    (C) A general ledger Account 123.3,                        rural economic development projects.
                                 ‘‘Investment in Associated Compa-                             For each debit in this account, a cor-
                                 nies—Federal Economic Development                             responding credit will be made in Ac-
                                 Loans.’’ The Borrower will debit this                         count 131.14, in paragraph (h)(1)(i)(E) of
                                 account in the amount of Federal funds                        this section. This account will be cred-
                                 the Borrower advances to associated                           ited with repayments of loans made
                                 organizations for authorized rural eco-                       from non-Federal economic develop-
                                 nomic development projects. For each                          ment funds.
                                 debit in this account, a corresponding                           (H) A general ledger Account 171
                                 credit will be made in Account 131.13 in                      ‘‘Interest and Dividends Receivable.’’
                                 paragraph (h)(1)(i)(A) of this section.                       The Borrower will debit this account
                                 This account will be credited with re-                        with the amount of interest earned on
                                 payments of loans made with Federal                           the revolving loan fund. The Borrower
                                 economic development grant funds.                             will credit this account and debit the
                                    (D) Account 421, ‘‘Miscellaneous Non-                      appropriate cash account when the
                                 operating Income.’’ The Borrower will                         cash is received.
                                 credit this account in the amount of                             (I) A general ledger Account 419, ‘‘In-
                                 grant funds disbursed by RUS resulting                        terest and Dividend Income.’’ The Bor-
                                 from an approved requisition request in                       rower will credit this account with the
                                 accordance with paragraph (h)(2) of                           amount of interest earned on the re-
                                 this section.                                                 volving loan fund.
                                    (E) A general ledger Account 131.14,                          (ii) RUS telephone Borrowers. (A) A
                                 ‘‘Cash-General—Economic          Develop-                     general ledger Account 1130.4, ‘‘Cash—

                                                                                          37



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                                 § 1703.22                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                 General Fund—Economic Development                             velopment       Non-Federal     Revolving
                                 Grant Funds (Class A Companies)’’, or                         Funds (Class A Companies)’’, or Ac-
                                 Account 1120.14, ‘‘Cash-General Fund—                         count 1120.15, ‘‘Cash—General Fund—
                                 Economic Development Grant Funds                              Economic Development Non-Federal
                                 (Class B Companies).’’ The Borrower                           Revolving Funds (Class B Companies)’’,
                                 will debit the appropriate account in                         as appropriate. The Borrower will debit
                                 an amount equal to the amount of the                          the appropriate account with any addi-
                                 grant received from RUS, any addi-                            tional funds deemed non-Federal from
                                 tional funds deemed Federal from the                          the Borrower as required by paragraph
                                 Borrower       required   by    paragraph                     (a)(5) of this section, cash received
                                 (a)(5)(iii) of this section, and all other                    from the repayment of loans made
                                 funds advanced for the project, regard-                       from       accounts      in    paragraphs
                                 less of the source, if controlled by the                      (h)(1)(ii)(B), (h)(1)(ii)(C), (h)(1)(ii)(F),
                                 Borrower. The Borrower will credit the                        and (h)(1)(ii)(G) of this section. The
                                 appropriate account for all expendi-                          Borrower will credit the appropriate
                                 tures made with Federal funds on be-                          account to reflect loans made for rural
                                 half of the rural development project.                        economic development projects from
                                   (B) A general ledger Account 1402.4,                        non-Federal funds from accounts speci-
                                 ‘‘Other Investments in Nonaffiliated                          fied in paragraphs (h)(1)(ii)(F) and
                                 Companies—Federal Economic Devel-                             (h)(1)(ii)(G) of this section.
                                 opment Grant Loans.’’ The Borrower                               (F) A general ledger Account 1402.5,
                                 will debit this account in the amount                         ‘‘Other Investments in Nonaffiliated
                                 of Federal funds the Borrower advances                        Companies-Non-Federal Economic De-
                                 to nonaffiliated organizations for au-                        velopment Grant Loans.’’ The Bor-
                                 thorized rural economic development                           rower will debit this account in the
                                 projects. For each debit in this ac-                          amount of non-Federal funds the Bor-
                                 count, a corresponding credit will be                         rower advances to nonaffiliated organi-
                                 made in the appropriate account in                            zations for authorized rural economic
                                 paragraph (h)(1)(ii)(A) of this section.                      development projects. For each debit
                                 This account will be credited with re-                        in this account, a corresponding credit
                                 payments of loans made from Federal                           will be made in the appropriate ac-
                                 economic development grant funds.                             count in paragraph (h)(1)(ii)(E) of this
                                   (C) A general ledger Account 1401.1,                        section. This account will be credited
                                 ‘‘Other Investments in Affiliated Com-                        with repayments of loans made from
                                 panies—Federal Economic Develop-                              non-Federal economic development
                                 ment Grant Loans.’’ The Borrower will                         funds.
                                 debit this account in the amount of                              (G) A general ledger Account 1401.2,
                                 Federal funds the Borrower advances                           ‘‘Other Investments in Affiliated Com-
                                 to affiliated organizations for author-                       panies—Non-Federal Economic Devel-
                                 ized    rural    economic     development                     opment Grant Loans.’’ The Borrower
                                 projects. For each debit in this ac-                          will debit this account in the amount
                                 count, a corresponding credit will be                         of non-Federal funds the Borrower ad-
                                 made in the appropriate account in                            vances to affiliated organizations for
                                 paragraph (h)(1)(ii)(A) of this section.                      authorized rural economic develop-
                                 This account will be credited with re-                        ment projects. For each debit in this
                                 payments of loans made from Federal                           account, a corresponding credit will be
                                 economic development grant funds.                             made in the appropriate account in
                                   (D) Account 7360, ‘‘Other Non-oper-                         paragraph (h)(1)(ii)(E) of this section.
                                 ating Income (Class A Companies)’’, or                        This account will be credited with re-
                                 Account 7300, Non-operating Income                            payments of loans made from non-Fed-
                                 and Expense (Class B Companies), as                           eral economic development funds.
                                 appropriate. The Borrower will credit                            (H) A general ledger Account 1210,
                                 these accounts, as appropriate, in the                        ‘‘Interest and Dividends Receivable.’’
                                 amount of grant funds disbursed by                            The Borrower will debit this account
                                 RUS resulting from an approved req-                           with the amount of interest earned on
                                 uisition request in accordance with                           the revolving fund loan. The borrower
                                 paragraph (h)(2) of this section.                             will credit this account and debit the
                                   (E) A general ledger Account 1130.5,                        appropriate cash account when the
                                 ‘‘Cash—General Fund—Economic De-                              cash is received.

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                                 Rural Utilities Service, USDA                                                                    § 1703.28

                                    (I) A general ledger Account 7320,                         rower’s completed application may be
                                 ‘‘Interest Income (Class A Compa-                             used to satisfy this requirement. Sup-
                                 nies)’’, or Account 7300.2, ‘‘Interest In-                    plemental financing must be verified
                                 come (Class B Companies)’’, as appro-                         and committed to the project in form
                                 priate. The Borrower will credit this                         and substance satisfactory to the Ad-
                                 account with the amount of interest                           ministrator before RUS will advance
                                 earned on the revolving fund loans.                           any funds.
                                    (2) Requisition requirements. Grant
                                 funds may be requisitioned by RUS                             § 1703.24   [Reserved]
                                 Borrowers in accordance with disburse-
                                                                                               § 1703.25 Significance of RUS financ-
                                 ment requirements in paragraph (e) of                             ing to the total project cost.
                                 this section. Borrowers will be fully re-
                                 imbursed for funds expended for ap-                              Selection of applications will be
                                 proved projects funded. For each com-                         based on a preference for applications
                                 pleted project, the Borrower will sub-                        requesting RUS financing which will be
                                 mit the following for reimbursement:                          at least equal to 5 percent of the total
                                    (i) Standard Form 270, ‘‘Request for                       project costs, as determined by the Ad-
                                 Advance of Reimbursement’’;                                   ministrator. Projects costs will be
                                    (ii) Copies of cancelled checks and                        based on the amount that would be
                                 other verifiable source records sup-                          spent over the first 2 years after the
                                 porting the transactions; and                                 first advance of RUS funds for the com-
                                    (iii) Certification and evidence that                      ponent or phase of the undertaking for
                                 the project costs to be reimbursed are                        which the borrower is requesting RUS
                                 for a project which has been authorized                       funds, as determined by the Adminis-
                                 by RUS and are authorized costs for                           trator. The Administrator may deter-
                                                                                               mine that a component or phase, espe-
                                 that project.
                                                                                               cially actions necessary to initiate a
                                    (3) RUS review. Requisition requests
                                                                                               larger project, constitute a distinct
                                 will be evaluated for compliance with
                                                                                               project for the purposes of this section.
                                 loan purposes previously submitted by
                                 the Borrower for project authorization                        § 1703.26   [Reserved]
                                 in accordance with paragraphs (c)(1) or
                                 (e)(2) of this section, compliance with                       § 1703.27 Owner’s equity in the project.
                                 the Borrower’s rural development plan,                           The Administrator may require, as a
                                 accounting documentation submitted                            condition to RUS financing, that the
                                 in paragraph (h)(1) of this section, and                      owner(s) of the project invest equity
                                 the cancelled checks and source                               capital if determined to be financially
                                 records submitted.                                            necessary, based on an RUS financial
                                 [59 FR 11708, Mar. 14, 1994, as amended at 59                 analysis and sound lending practices.
                                 FR 38341, July 28, 1994; 59 FR 53931, Oct. 27,
                                 1994]                                                         § 1703.28 Maximum         and    minimum
                                                                                                    sizes of a zero-interest loan or grant
                                 § 1703.23 Supplemental funds require-                              application.
                                     ments for zero-interest loans and                            (a) The maximum size of an applica-
                                     grants.                                                   tion that will be considered for funding
                                    The Administrator will not select an                       under this subpart during a fiscal year
                                 application unless the project will re-                       will be 3 percent of the projected total
                                 ceive supplemental funds in an amount                         amount available for the zero-interest
                                 at least equal to 20 percent of the RUS                       loans or grants under section 313 of the
                                 zero-interest loan and grant to be pro-                       Act during that fiscal year, rounded to
                                 vided to the project, as determined by                        the nearest $10,000. This determination
                                 the Administrator. Supplemental funds                         will be made by the Administrator for
                                 as used in this section may come from                         each fiscal year.
                                 the project owner in the form of equity                          (b) Regardless of the projected total
                                 funds, private sources, state and local                       amount that will be available, the
                                 government sources, other Federal                             maximum size may not be lower than
                                 Government sources, the borrower or                           $200,000.
                                 other sources. Only supplemental funds                           (c) The projected total amount avail-
                                 that will be provided to the project                          able during a particular fiscal year is
                                 after the date RUS receives the bor-                          calculated as the sum of the projected

                                                                                          39



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                                 § 1703.29                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 amount that will be credited to the                           until one year after the date of the
                                 subaccount during a particular fiscal                         RUS note. Ordinarily, if the Adminis-
                                 year from the interest differential cal-                      trator considers the project to be a
                                 culation based on the RUS borrowers’                          start-up project, the first repayment of
                                 cushion of credit levels at the time the                      principal will not begin until 2 years
                                 Administrator makes the determina-                            after the date of the RUS note. Loans
                                 tion and any amounts appropriated for                         must be repaid under terms set forth in
                                 that fiscal year for zero-interest loans                      RUS’s legal documents.
                                 or grants made under section 313 of the                         (c) Unless the Administrator has spe-
                                 Act.                                                          cifically approved otherwise, the bor-
                                   (d) After the Administrator has de-                         rower will be required to repay the
                                 termined the maximum size for a fiscal                        RUS zero-interest loan in full at such
                                 year, a notice of the calculation and                         time as a pass-through-loan has been
                                 amount will be published promptly in                          fully repaid to the borrower. If the bor-
                                 the FEDERAL REGISTER.Thereafter, the                          rower uses the proceeds of the RUS
                                 maximum size will remain in effect                            zero-interest loan to provide pass-
                                 until the Administrator has published
                                                                                               through-loans to more than one entity,
                                 the maximum size for the next fiscal
                                                                                               this requirement will only apply to
                                 year.
                                                                                               that portion of the zero-interest loan
                                   (e) All unselected applications on file
                                                                                               associated with the loan that has been
                                 at RUS, including both loan and grant
                                                                                               fully repaid to the borrower.
                                 applications, from the same borrower
                                 for the same project will be considered                         (d) If the Administrator determines
                                 to be one application in determining                          that, as a result of state law, court rul-
                                 that the maximum size of the applica-                         ings, or regulatory commission deci-
                                 tion is in accordance with this section.                      sions, it is necessary to ensure that the
                                   (f) The minimum size of an applica-                         borrower will repay the RUS zero-in-
                                 tion for assistance under this subpart                        terest loan, the borrower may be re-
                                 that will be considered for funding is                        quired to provide an irrevocable letter
                                 $10,000.                                                      of credit, or another form of guarantee
                                                                                               satisfactory to the Administrator. The
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59                letter of credit or other guarantee is to
                                 FR 11711, Mar. 14, 1994]
                                                                                               be made payable to RUS. The letter of
                                 § 1703.29 Terms of zero-interest loan                         credit or other guarantee may not be
                                      repayment.                                               secured by any assets under a RUS and/
                                                                                               or Rural Telephone Bank mortgage and
                                    (a) The Administrator will determine
                                                                                               must be in form and substance satisfac-
                                 the terms and repayment schedule of
                                                                                               tory to the Administrator. RUS must
                                 the zero-interest loan to the borrower
                                                                                               receive the letter of credit or other
                                 based on the nature of the project and
                                                                                               guarantee prior to the advance of any
                                 approved purposes. Ordinarily, the
                                 total term of the zero-interest loan, in-                     zero-interest loan funds.
                                 cluding any principal deferment period,                       § 1703.30   Approval of agreements.
                                 will not exceed 10 years. The repay-
                                 ment terms the borrower sets on a                               (a) The Administrator must approve
                                 pass-through-loan must equal the                              any agreements between the borrower
                                 terms of the loan provided to the bor-                        and the owner(s) of the project, those
                                 rower unless a written request from                           undertaking the project, or any inter-
                                 the borrower to provide a longer                              mediary that will re-lend or transfer
                                 deferment period, shorter total term of                       the proceeds of the RUS funds, that the
                                 the loan, or other benefits is approved                       Administrator deems necessary.
                                 by the Administrator.                                           (b) Borrowers must obtain the Ad-
                                    (b) The Administrator has the discre-                      ministrator’s approval of any loan,
                                 tion to defer the repayment of prin-                          grant or security agreement, mortgage
                                 cipal up to two years, based on an anal-                      or note between the borrower and the
                                 ysis of the feasibility of the project.                       owner(s) of the project, those under-
                                 Ordinarily, if the Administrator con-                         taking the project or any intermediary
                                 siders the project to be a business ex-                       that will re-lend or transfer the pro-
                                 pansion or going concern, the first re-                       ceeds of the RUS funds, prior to the ad-
                                 payment of principal will not begin                           vance of RUS zero-interest loan or

                                                                                          40



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                                 Rural Utilities Service, USDA                                                                     § 1703.33

                                 grant funds to the borrower. The bor-                         coastal barriers is strictly limited by
                                 rower must receive the Administrator’s                        the Coastal Barriers Resources Act.
                                 approval of the final draft version of                          (c) Application for zero-interest loans or
                                 the documents prior to their execution.                       grants for a project that is not considered
                                   (c) Borrowers must obtain the Ad-                           project feasibility studies. (1) The Admin-
                                 ministrator’s written approval prior to                       istrator will review support materials
                                 revising or amending any loan, grant                          in the application and initiate an envi-
                                 or security agreement, mortgage or                            ronmental review process pursuant to 7
                                 note that has been reviewed and ap-                           CFR part 1794. This process will focus
                                 proved by the Administrator pursuant                          on any environmental concerns or
                                 to paragraph (b) of this section. Addi-                       problems that are associated with the
                                 tionally, the borrower must obtain the                        project.
                                 Administrator’s written approval prior                          (2) The level and scope of the envi-
                                 to executing, revising or amending any                        ronmental review will be determined in
                                 other agreement, in connection with                           accordance with the National Environ-
                                 the project, between the borrower and                         mental Policy Act of 1969 (NEPA), as
                                 the owner(s) of the project, those un-                        amended, (42 U.S.C. 4321 et seq.), the
                                 dertaking the project or any inter-                           Council on Environmental Policy for
                                 mediary that will re-lend or transfer                         Implementing the Procedural Provi-
                                 the proceeds of the RUS funds.                                sions of NEPA (40 CFR parts 1500—
                                   (d) The borrower and the owner(s) of                        1508), RUS’s environmental policies and
                                 the project, or those undertaking the                         procedures (7 CFR part 1794) and other
                                 project, should make agreements and                           relevant Federal environmental laws,
                                 prepare documents in accordance with                          regulations and Executive Orders.
                                 all applicable laws.                                            (3) Activity related to the project
                                 (Approved by the Office of Management and                     that will adversely affect the environ-
                                 Budget under control number 0572–0090)                        ment or limit the choice of reasonable
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59
                                                                                               alternatives must not be undertaken
                                 FR 11711, Mar. 14, 1994; 59 FR 38341, July 28,                prior to completion of RUS’s environ-
                                 1994]                                                         mental review process.

                                 § 1703.31 Transfer of employment or                           § 1703.33 Other considerations.
                                     business.                                                    (a) Equal opportunity and non-
                                    The project must not result pri-                           discrimination requirements. All zero-in-
                                 marily in the transfer of any existing                        terest loans and grants made under
                                 employment or business activity from                          this subpart are subject to the non-
                                 one area to another.                                          discrimination provisions of title VI of
                                                                                               the Civil Rights Act of 1964, as amend-
                                 § 1703.32 Environmental requirements.                         ed, (42 U.S.C. 1971 et seq., 1975a et seq.,
                                    (a) Prospective recipients of zero-in-                     2000a et seq.; 7 CFR part 15); section 504
                                 terest loans or grants should consider                        of the Rehabilitation Act of 1973, as
                                 the potential environmental impact of                         amended, (29 U.S.C. 701 et seq.; 7 CFR
                                 their proposed projects at the earliest                       part 15b); the Age Discrimination Act
                                 planning stage and plan development                           of 1975, as amended, (42 U.S.C. 6101 et
                                 in a manner that reduces, to the extent                       seq.; 45 CFR part 90); and Executive
                                 practicable, the potential to affect the                      Order 11246, Equal Employment Oppor-
                                 quality of the human environment ad-                          tunity, (3 CFR, 1964—1965 Comp., p. 339)
                                 versely.                                                      as amended by Executive Order 11375,
                                    (b) Application for zero-interest loans or                 Amending Executive Order 11246, Re-
                                 grants for project feasibility studies. For a                 lating to Equal Employment Oppor-
                                 proposal to fund a project feasibility                        tunity (3 CFR, 1966—1970 Comp., p. 684).
                                 study, the only environmental infor-                             (b) Architectural barriers. All facilities
                                 mation normally required is whether                           financed with RUS zero-interest loans
                                 or not the proposed project being stud-                       or grants that are open to the public or
                                 ied or analyzed will be located within                        in which physically handicapped per-
                                 an area protected under the Coastal                           sons may be employed or reside must
                                 Barrier Resources Act (16 U.S.C. 3501 et                      be designed, constructed, and/or altered
                                 seq.) Generally, the use of Federal                           to be readily accessible to, and usable
                                 funds to promote development on                               by handicapped persons. Standards for

                                                                                          41



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                                 § 1703.34                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                 these facilities must comply with the                            (g) Intergovernmental review of Federal
                                 Architectural Barriers Act of 1968, as                        programs. (1) This program is subject to
                                 amended, (42 U.S.C. 4151 et seq.) and                         the requirements of Executive Order
                                 with the Uniform Federal Accessibility                        12372, Intergovernmental Review of
                                 Standards (UFAS), (Appendix A to 41                           Federal Programs (3 CFR, 1982 Comp.,
                                 CFR part 101.19, subpart 101–19.6).                           p. 197) and 7 CFR part 3015, subpart V,
                                   (c) Flood hazard area precautions. In                       Intergovernmental Review of Depart-
                                 accordance with 7 CFR part 1788, if the                       ment of Agriculture Programs and Ac-
                                 project is in an area subject to flood-                       tivities, which implements Executive
                                 ing, flood insurance must be provided                         Order 12372.
                                 to the extent available and required                             (2) With the exception of zero-inter-
                                 under the Flood Disaster Protection                           est loans and grants for project feasi-
                                 Act of 1973, as amended (42 U.S.C. 4001                       bility studies, proposed projects are
                                 et seq.). The insurance must cover, in                        subject to the state and local govern-
                                 addition to the buildings, any machin-                        ment review process set forth in 7 CFR
                                 ery, equipment, fixtures and fur-                             part 3015. Under the review process,
                                 nishings contained in the buildings.                          state and local governments have 60
                                 RUS will comply with Executive Order                          days to comment on the proposed
                                 11988, Floodplain Management (3 CFR,                          project.
                                 1977 Comp., p. 117), and § 1794.41 of this                       (3) The Administrator will not give
                                 chapter, in considering the application                       final approval to an application until
                                 for the project. As set forth in § 1794.41                    the requirements of 7 CFR part 3015,
                                 of this chapter, public notice is re-                         subpart V, regarding state and local
                                 quired if a project will be located in a                      government review have been satisfied.
                                 floodplain.
                                                                                                  (h) Restrictions on lobbying. (1) The re-
                                   (d) Uniform relocation assistance. Relo-
                                                                                               strictions and requirements imposed by
                                 cations in connection with this pro-
                                                                                               31 U.S.C. 1352, entitled ‘‘Limitation on
                                 gram are subject to 49 CFR part 24 as
                                                                                               Use of Appropriated Funds to Influence
                                 referenced by 7 CFR Part 21, Uniform
                                                                                               Certain Federal Contracting and Fi-
                                 Relocation Assistance and Real Prop-
                                                                                               nancial Transactions’’ and the imple-
                                 erty Acquisition for Federal and Feder-
                                                                                               menting regulation, 7 CFR part 3018,
                                 ally Assisted Programs except that the
                                                                                               New Restrictions on Lobbying, are ap-
                                 provisions in Title III, Uniform Real
                                                                                               plicable to this program.ca 7v15.018
                                 Property Acquisition Policy, of the
                                 Uniform Relocation Assistance and                                (2) The regulation that implements
                                 Real Property Acquisition Act of 1970,                        this statute requires applicants for a
                                 as amended, (42 U.S.C. 4601–4655) (the                        zero-interest loan in excess of $150,000
                                 ‘‘Uniform Act’’) do not apply to this                         and applicants for a grant in excess of
                                 program.                                                      $100,000 to file a certification state-
                                   (e) Drug-free workplace. Grants made                        ment regarding the use of Federal ap-
                                 under this program are subject to the                         propriated funds to lobby the Execu-
                                 requirements set forth in 7 CFR part                          tive and Legislative branches of the
                                 3017, subpart F, Drug-Free Workplace                          Federal Government, and to file a dis-
                                 Requirements, which implements the                            closure form if engaged in these activi-
                                 Drug-Free Workplace Act of 1988 (41                           ties using unappropriated funds.
                                 U.S.C. 701 et seq.). A borrower request-                         (3) In addition, persons that receive
                                 ing a grant will be required to certify                       contracts or subcontracts in excess of
                                 that it will establish and make a good                        $150,000 under a zero-interest loan and
                                 faith effort to maintain a drug-free                          persons that receive subgrants, con-
                                 workplace program.                                            tracts or subcontracts in excess of
                                   (f) Debarment and suspension. The re-                       $100,000 under a grant are required to
                                 quirements of Executive Order 12549,                          file certification statements regarding
                                 Debarment and Suspension (3 CFR, 1986                         lobbying the Executive and Legislative
                                 Comp., p. 189), and 7 CFR part 3017, sub-                     branches and, if engaged in these ac-
                                 parts A through E, Governmentwide                             tivities, to file disclosure forms.
                                 Debarment and Suspension (Non-
                                 procurement), regarding debarment                             § 1703.34   Applications.
                                 and suspension are applicable to this                           (a) Borrowers may file an application
                                 program.                                                      on any official workday during the

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                                 Rural Utilities Service, USDA                                                                     § 1703.34

                                 first 14 days of every month. A bor-                             (3) Miscellaneous Federal forms. The
                                 rower must send a copy of the applica-                        application must include the following
                                 tion, except for an application that re-                      completed forms:
                                 quests a zero-interest loan or grant for                         (i) Form AD-1047, ‘‘Certification Re-
                                 project feasibility studies, to the state                     garding Debarment, Suspension, and
                                 single point of contact for state and                         Other Responsibility Matters—Primary
                                 local governments at the same time it                         Covered Transactions,’’ as required in
                                 submits the application to RUS. As dis-                       part 3015, subparts A through E of this
                                 cussed in § 1703.33(g), state and local                       title; and
                                 governments have 60 days to review a                             (ii) Assurance statement or certifi-
                                 borrower’s proposal before the Admin-                         cation statement required under the
                                 istrator gives final approval to an ap-                       Uniform Act as set forth in § 1703.33(d).
                                 plication, except a proposal for project                      For     pass-through-loans       and    pass-
                                 feasibility studies. The Administrator                        through-grants, the ultimate recipient
                                 may establish a special application pe-
                                                                                               of the proceeds of the RUS zero-inter-
                                 riod if determined necessary.
                                                                                               est loan or grant must sign the assur-
                                   (b) A completed application will con-
                                                                                               ance statement that it will comply
                                 sist of an original and two copies of:
                                                                                               with the applicable provisions of the
                                   (1) An application form. The applica-                       Uniform Act or sign a certification
                                 tion must include a completed applica-
                                                                                               that the provisions of the Uniform Act
                                 tion form, ‘‘Application for Federal As-
                                                                                               will not apply to the rural development
                                 sistance,’’ Standard Form 424;
                                                                                               project which will be partially financed
                                   (2) A board resolution. The application
                                                                                               with the proceeds of RUS funds. If the
                                 must include a board resolution that:
                                                                                               borrower will not provide a pass-
                                   (i) Requests a zero-interest loan and/                      through-loan or pass-through-grant to
                                 or grant, including the amount of the
                                                                                               another entity, the borrower must sub-
                                 zero-interest loan and/or the amount of
                                                                                               mit a completed assurance statement
                                 the grant rounded to the nearest 1,000
                                                                                               or certification regarding the applica-
                                 dollars;
                                                                                               ble provisions of the Uniform Act, or
                                   (ii) Includes the total combined
                                                                                               have such an assurance statement on
                                 deferment and repayment period re-
                                                                                               file at RUS;
                                 quested for a zero-interest loan if less
                                 than 10 years;                                                   (4) Contingent certifications and disclo-
                                                                                               sures. As determined by the type and
                                   (iii) Includes the board’s endorse-
                                                                                               amount of requested funds, the applica-
                                 ment of the proposed rural economic
                                                                                               tion must include the following com-
                                 development project as described in the
                                                                                               pleted forms:
                                 application;
                                                                                                  (i) For an application for a zero-in-
                                   (iv) States the proposed project does
                                 not violate §§ 1703.20 and 1703.21; and                       terest loan in excess of $150,000 or for
                                 discloses any information regarding a                         an application for a grant in excess of
                                 conflict of interest, potential conflict                      $100,000, a certification statement,
                                 of interest, or appearance of a conflict                      ‘‘Certification Regarding Lobbying,’’
                                 of interest that would allow the Ad-                          and, if the borrower is engaged in lob-
                                 ministrator to make an informed deci-                         bying      activities    described     under
                                 sion;                                                         § 1703.33(h), a completed disclosure
                                   (v) Authorizes an official of the bor-                      form, ‘‘Disclosure of Lobbying Activi-
                                 rower to requisition zero-interest loan                       ties’’; and
                                 or grant funds under this program;                               (ii) For an application for a grant
                                   (vi) For an application for a grant                         only, a completed certification form,
                                 only, authorizes the chief executive of-                      ‘‘Certification Regarding Drug-Free
                                 ficer of the borrower to execute and de-                      Workplace Requirements (Grants),’’
                                 liver on behalf of the borrower the cer-                      Form AD-1049 as required in part 3017,
                                 tification Form AD-1049 regarding a                           subpart F of this title;
                                 drug-free workplace program as re-                               (5) Other requirements. The following:
                                 quired in part 3017, subpart F of this                           (i) A section entitled ‘‘Selection Fac-
                                 title; and                                                    tors’’ as set forth in § 1703.35;
                                   (vii) Any other matters deemed nec-                            (ii) A section entitled ‘‘Project De-
                                 essary by the Administrator;                                  scription’’ as set forth in § 1703.36;

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                                 § 1703.35                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                   (iii) Except for applications for                           potential of the labor force, industrial
                                 project feasibility studies, a section en-                    plant, infrastructure, natural resources
                                 titled ‘‘Environmental Impact of the                          and institutions by employing ad-
                                 Project’’ as set forth in § 1703.37;                          vanced technology, creating higher-
                                   (iv) Monitoring plan. For a pass-                           skilled occupations, adding higher
                                 through loan and/or grant, a copy of                          value to natural resources, creating
                                 the Borrower’s plan to monitor the                            jobs with higher-career potential, or is
                                 loan and/or grant and ensure that the                         considered part of a knowledge inten-
                                 requirements of this subpart are met;                         sive industry;
                                 and                                                              (d) ‘‘Diversifying the rural economy
                                   (v) Scope of work. For an application                       or      alleviating      underemployment’’
                                 for a loan and/or grant, a proposed
                                                                                               (§ 1703.46(g)(4)), which includes any in-
                                 scope of work for the project.
                                                                                               formation the borrower desires the Ad-
                                   (c) The Administrator may request
                                 additional information it considers rel-                      ministrator to consider;
                                 evant from the borrower.                                         (e)         ‘‘Supplemental        funds’’
                                   (d) During the application review                           (§ 1703.46(h)(1)), which includes the
                                 process, the borrower may change the                          name of each source and the respective
                                 amount of the zero-interest loan or                           amount of supplemental funds that was
                                 grant funds requested or other portions                       provided to the project within 6
                                 of its application, only if approved by                       months of submitting the application
                                 the Administrator. A borrower that                            to RUS, and the amount that will be
                                 changes its request from a grant to a                         provided within two years of receiving
                                 zero-interest loan must submit infor-                         RUS funds. Also indicate the nature
                                 mation necessary for the Adminis-                             and strength of the commitments to
                                 trator to evaluate a loan proposal as                         make these supplemental funds avail-
                                 set forth in this subsection, and submit                      able, when these funds are expected to
                                 a new board resolution requesting the                         be disbursed, any special terms and
                                 loan.                                                         conditions associated with the commit-
                                 (The information collection requirements                      ments, copies of the commitments,
                                 contained in paragraph (b) of this section                    and, if established, the interest rate,
                                 were approved by the Office of Management                     term and deferment period on any loan
                                 and Budget under control number 0572–0090)                    for the project;
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59                   (f) ‘‘Economic conditions and job cre-
                                 FR 11711, Mar. 14, 1994; 59 FR 38341, July 28,                ation’’ (§ 1703.46(h)(2)), which includes:
                                 1994]                                                            (1)        ‘‘Unemployment         rates’’
                                                                                               (§ 1703.46(h)(2)(i)). List the county or
                                 § 1703.35 Section of the application
                                      covering the selection factors.                          counties in which the project will be
                                                                                               located. It is not necessary to include
                                    The application must contain a sec-                        the county, state or national unem-
                                 tion addressing the ‘‘selection factors’’                     ployment rates. RUS obtains these
                                 consisting of the following:                                  rates from other Federal agencies;
                                    (a)    ‘‘Nature    of   the   project’’
                                                                                                  (2) ‘‘Per capita personal income’’
                                 (§ 1703.46(g)(1)), which includes any in-
                                                                                               (§ 1703.46(h)(2)(ii)). As with ‘‘Unemploy-
                                 formation considered appropriate in-
                                                                                               ment rates,’’ it is not necessary to in-
                                 cluding aspects of the project that may
                                                                                               clude the county, state or national per
                                 not be obvious to an outside observer;
                                                                                               capita personal income levels;
                                    (b)      ‘‘Job    creation    project’’
                                 (§ 1703.46(g)(2)), which includes any in-                        (3)     ‘‘Change       in    population’’
                                 formation that is not readily apparent                        (§ 1703.46(h)(2)(iii)). It is not necessary
                                 concerning whether the project would                          to include the county population lev-
                                 directly create jobs in rural areas. The                      els;
                                 number of the jobs and the basis for                             (4) ‘‘Number of long-term jobs’’
                                 the job projection should be included                         (§ 1703.46(h)(2)(iv)). Include the number
                                 under ‘‘Number of long-term jobs’’;                           of long-term jobs that the project will
                                    (c) ‘‘Long-term improvements in eco-                       directly create in rural areas and the
                                 nomic development’’ (§ 1703.46(g)(3)),                        total project cost;
                                 which addresses the extent to which                              (5) ‘‘Community-based economic de-
                                 the project will improve the productive                       velopment program’’ (§ 1703.46(h)(2)(v)).

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                                 Rural Utilities Service, USDA                                                                    § 1703.36

                                 Explain if the project is part of a com-                        (I) The source of supplemental funds,
                                 munity-based economic development                             the nature and strength of commit-
                                 program; and                                                  ments from other sources of financing,
                                    (6) ‘‘Plan for improving the market-                       and the equity contribution;
                                 able skills of people in rural areas’’                          (J) The proposed ownership and man-
                                 (§ 1703.46(h)(2)(vi)). Include information                    agement of the project;
                                 on any written plan for the project to                          (K) A description of any coordination
                                 provide opportunities or incentives to                        with a local, regional or state develop-
                                 improve the marketable skills of rural                        ment organization; and
                                 residents through training and/or edu-                          (L) Other relevant information.
                                 cation. For projects that consist of pro-                       (ii) The scope of the plan should re-
                                 viding training or education, indicate                        flect the amount requested in the ap-
                                 how it will benefit rural residents;                          plication, the risks involved with de-
                                    (g) ‘‘Location’’ (§ 1703.46(h)(3)), which                  veloping and operating the project, and
                                 indicates whether or not the project                          the overall cost of the project. The
                                 will be located in a town and, if so, the                     plan should describe any coordination
                                 name of the town;                                             with a local, regional or state develop-
                                    (h) ‘‘Support for the program—cush-                        ment organization.
                                 ion of credit payments’’ (§ 1703.46(h)(4)),
                                 which mentions any cushion of credits                         § 1703.36 Section of the application
                                                                                                    covering the project description.
                                 payments made recently in accounts at
                                 RUS;                                                             In general, this section should be
                                    (i)      ‘‘Demonstration         project’’                 more detailed the larger the project for
                                 (§ 1703.46(h)(5)), which includes a discus-                   which the borrower is requesting fund-
                                 sion of any commitments from the                              ing. The section of the application on
                                 owner(s) of the project to be a dem-                          the ‘‘project description’’ must include:
                                 onstration project and a copy of the                             (a) A description of the proposed
                                 written commitment;                                           project including the nature of the
                                    (j)    ‘‘Probability        of   success’’                 project, the location of the project, or-
                                 (§ 1703.46(h)(6)), which includes:                            ganizations that will be involved in the
                                    (1) ‘‘Owners and management of the                         project and the primary beneficiaries
                                 project’’ (§ 1703.46(h)(6)(i)) that dis-                      of the project. Also include in this sub-
                                 cusses how the knowledge, experience,                         section a statement describing whether
                                 education and training of the proposed                        the borrower has or will have a direct
                                 owners and management of the project                          or indirect (through a subsidiary or af-
                                 increases the likelihood of long-term                         filiated organization) ownership or
                                 success; and                                                  similar beneficial interest in the facili-
                                                                                               ties to be constructed or in the entity
                                    (2) ‘‘Ultimate recipient’s business
                                                                                               that will occupy or utilize these facili-
                                 plan’’     (§ 1703.46(h)(6)(ii)), that   ref-
                                                                                               ties. In addition, explain whether it
                                 erences an attached copy of the busi-
                                                                                               seems likely that the proposed project
                                 ness plan.
                                                                                               will be undertaken or completed in the
                                    (i) The plan should include:
                                                                                               absence of an RUS zero-interest loan or
                                    (A) A description of the project;                          grant;
                                    (B) A description of the business, if                         (b) A separate paragraph entitled
                                 applicable, its products and the pros-                        ‘‘Uses of RUS Funds and Total Project
                                 pects of the industry;                                        Costs’’, that includes a breakdown of
                                    (C) What will be produced or accom-                        the specific uses of RUS funds and a
                                 plished;                                                      breakdown of the specific uses of all
                                    (D) The area to be served;                                 funds necessary to ensure completion
                                    (E) Any market research or mar-                            of the project. Project costs should be
                                 keting plan;                                                  limited to the amount to be spent over
                                    (F) Any operating plan;                                    the 2-year period after receiving RUS
                                    (G) Total project costs and projected                      funds;
                                 use of funds by purpose or category;                             (c) For a project that involves the es-
                                    (H) A financial plan, including a fea-                     tablishment of a new venture, such as
                                 sibility study with projected balance                         a rural business incubator or a similar
                                 sheets, income statements and cash                            start-up venture, a discussion of how
                                 flow statements;                                              the costs of establishing, organizing

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                                 § 1703.37                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 and arranging financing for the ven-                          cating interior walls or adding com-
                                 ture will be paid, how start-up costs in-                     puter     facilities)  and/or     external
                                 curred after the venture has been es-                         changes or additions to existing build-
                                 tablished will be paid, the expected                          ings, structures or facilities requiring
                                 sources of revenue necessary to sustain                       physical disturbance of less than 0.4
                                 the project and revenue and expense                           hectare (0.99 acre), the environmental
                                 projections for the first 3 years of the                      information normally required is:
                                 project;                                                        (1) A copy of a flood hazard zone map
                                   (d) If the borrower will provide a                          from the Federal Emergency Manage-
                                 pass-through-loan       or pass-through-                      ment Agency with the location of the
                                 grant to another entity, outline the                          project site marked;
                                 terms and conditions that the borrower                          (2) A statement of whether or not the
                                 intends to place on the recipient of the                      proposed project will be located within
                                 RUS funds including the security ar-                          an area protected under the Coastal
                                 rangements and collateral on a zero-in-                       Barrier Resources Act (16 U.S.C. 3501 et
                                 terest loan. The discussion of proposed                       seq.);
                                 security arrangements and collateral                            (3) A description of the internal
                                 should reflect the amount requested in                        modifications or equipment additions,
                                 the application, the risks involved with                      and the external changes or additions
                                 developing and operating the project,                         to existing buildings, structures or fa-
                                 and the overall cost of the project;                          cilities being proposed, the size of the
                                   (e) For pass-through-loans and pass-                        site in hectares, and the general nature
                                 through-grants, a description of the ul-                      of the proposed use of the facilities
                                 timate recipient, including the form of                       once the project is completed, includ-
                                 organization and ownership (i.e., cor-                        ing any hazardous materials to be used,
                                 poration, nonprofit corporation, coop-                        created or discharged, any substantial
                                 erative, partnership, sole proprietor),                       amount of air emissions, wastewater
                                 the owner(s) and the chief officers;                          discharge, or solid waste that will be
                                   (f) If the project involves construc-                       generated; and
                                 tion, a brief description of the con-                           (4) A statement of whether the
                                 struction necessary to make the                               project site contains or is near a prop-
                                 project operational and the organiza-                         erty listed or eligible for listing in the
                                 tion involved with the project that will                      National Register of Historic Places (16
                                 be responsible for building the project                       U.S.C. 470).
                                 facilities or having them built;                                (b) For all other proposed projects in-
                                   (g) A discussion of the manner in                           clude:
                                 which the borrower intends to monitor                           (1) A copy of a flood hazard zone map
                                 the zero-interest loan and/or grant pro-                      from the Federal Emergency Manage-
                                 ceeds to ensure that they are used only                       ment Agency with the location of the
                                 for approved purposes; and                                    project site marked (42 U.S.C. 4001 et
                                   (h) If applicable, a discussion on any                      seq.);
                                 potential conflict of interest or the ap-                       (2) A diagram showing the general
                                 pearance of a conflict of interest, a                         layout of the proposed facilities on the
                                 clarification of any aspect of the                            project site;
                                 project with respect to the restriction                         (3) The size of the project site in hec-
                                 that it must not result primarily in the                      tares;
                                 transfer of any existing employment or                          (4) A map (preferably a U.S. Geologi-
                                 business activity from one area to an-                        cal Survey map) of the project area in-
                                 other or a clarification of any aspect of                     dicating the boundaries of the project;
                                 the project with respect to limitations                         (5) A statement of whether or not the
                                 in §§ 1703.20 and 1703.21.                                    project will be located within an area
                                                                                               protected under the Coastal Barrier
                                 § 1703.37 Section of the application                          Resources Act;
                                     covering the environmental impact                           (6) The amount of property to be
                                     of the project.                                           cleared, excavated, fenced or otherwise
                                   (a) For a proposed project that only                        disturbed by the project;
                                 involves internal modifications or                              (7) The current land use and zoning of
                                 equipment additions to buildings or                           the project site and any vegetation on
                                 other structures (for example; relo-                          the project site;

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                                 Rural Utilities Service, USDA                                                                    § 1703.46

                                   (8) A description of buildings or other                     review    being   satisfactorily  docu-
                                 major structures, including dimen-                            mented. The Administrator reserves
                                 sions, to be constructed or modified;                         the discretion to consider applications
                                   (9) A statement of whether the pres-                        outside the normal selection period.
                                 ence of wetlands or existing agricul-
                                 tural operations are present at the                           § 1703.46 Documenting the evaluation
                                 project site (7 CFR part 1794); whether                           and selection of applications for
                                                                                                   zero-interest loans and grants.
                                 properties listed or eligible for listing
                                 in the National Register of Historic                             (a) The Administrator will only con-
                                 Places are on or near the project site;                       sider for selection applications that re-
                                 whether threatened or endangered spe-                         quest funds for purposes as set forth in
                                 cies or critical habitat are on or near                       §§ 1703.17 and 1703.18 and are not ineli-
                                 the project site (16 U.S.C. 1531 et seq.);                    gible under § 1703.20, as determined by
                                   (10) The general nature of the pro-                         the Administrator. The Administrator
                                 posed use of the facilities once the                          will not consider applications that do
                                 project is completed, including any                           not conform with all of the provisions
                                 hazardous materials to be used, created                       of this subpart, as determined by the
                                 or discharged, any substantial amount                         Administrator. The Administrator will
                                 of air emissions, wastewater discharge,                       make the determination of all num-
                                 or solid waste that will be generated (7                      bers, dollars, levels and rates, as well
                                 CFR part 1794); and                                           as the nature, costs, location and other
                                   (11) A copy of any environmental re-                        characteristics of the proposed project,
                                 view, study, assessment, report or                            to calculate the number of points as-
                                 other document that has been prepared                         signed to an application for each selec-
                                 in connection with obtaining permits,                         tion factor. Applications for zero-inter-
                                 approvals or other financing for the                          est loans and grants will be ranked sep-
                                 proposed project from state, local or                         arately. In addition, applications re-
                                 other Federal agencies. Such material,                        questing less than 5 percent of the
                                 to the extent relevant, may be used to                        total project costs as provided in
                                 fulfill the requirements of this section.                     § 1703.25 will be ranked separately, sub-
                                   (c) The Administrator may request                           ject to § 1703.46(j). The Administrator
                                 additional environmental information                          will select applications that receive
                                 in specific cases to satisfy § 1703.32.                       the greatest number of total points
                                                                                               under paragraphs (f) and (g) of this sec-
                                 §§ 1703.38–1703.44         [Reserved]                         tion, subject to available funds and the
                                                                                               provisions of § § 1703.25, 1703.46(i), and
                                 § 1703.45 Review and analysis of appli-                       1703.46(j).
                                     cations.                                                     (b) After reviewing an application,
                                   Completed applications received at                          the Administrator may decline to se-
                                 RUS by the 14th day of the month will                         lect an application:
                                 be considered at the first selection date                        (1) That would result in a conflict of
                                 which occurs at least 40 days after the                       interest or the appearance of a conflict
                                 application was received. Completed                           of interest;
                                 applications received at RUS after the                           (2) Based on the management and fi-
                                 14th day of a month will be either be                         nancial situation of the borrower ap-
                                 held for the next application period or                       plying for the zero-interest loan or
                                 returned to the borrower, at the bor-                         grant. In determining the borrower’s fi-
                                 rower’s option. The review period of at                       nancial situation, the Administrator
                                 least 40 days should allow sufficient                         will consider, among other things, the
                                 time for state and local governments                          borrower’s existing and projected cash
                                 to review the proposed projects under                         flows, equity to asset ratios, times in-
                                 the intergovernmental review process,                         terest earned ratios, debt service cov-
                                 as set forth in 7 CFR part 3015, and to                       erage ratios, the level of its invest-
                                 provide sufficient time for the Admin-                        ments, the level of its cash and other
                                 istrator to fully review and analyze                          liquid assets, its working capital and
                                 these applications. In the event state                        repayment of its debts;
                                 and local government review has not                              (3) Based on a determination that
                                 been completed, the Administrator’s                           limitations under state laws will lessen
                                 approval may be contingent upon the                           the likelihood of repayment of the RUS

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                                 § 1703.46                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 zero-interest loan in the event that the                      cle(s); however, nursing homes pro-
                                 borrower does not receive funds from                          viding medical care, as determined by
                                 the project necessary to cover the RUS                        the Administrator, will not be consid-
                                 zero-interest loan payments;                                  ered to be residential dwellings;
                                   (4) Based on the unwillingness of the                         (3) Will be used primarily to finance
                                 borrower applying for the zero-interest                       the purchase of an established business
                                 loan or grant to exercise diligence in                        or operation rather than for economic
                                 repaying RUS loans or loan guaran-                            development in rural areas or job cre-
                                 tees, and comply with RUS’s legal doc-                        ation purposes; or
                                 uments and regulations;                                         (4) Will be used primarily to transfer
                                   (5) For an otherwise eligible project                       property or real estate between owners
                                 when any of the revenues of the project                       without making any improvements or
                                 are derived from a legalized gambling                         additions that will promote economic
                                 activity; or                                                  development in rural areas or job cre-
                                   (6) For any illegal activity.                               ation.
                                   (c)(1) The Administrator will first                           (e) After the above determinations,
                                 evaluate the application and the                              the Administrator will evaluate the ap-
                                 project with respect to the three fac-                        plications and assign points with re-
                                 tors in this paragraph. The Adminis-                          spect to the factors in paragraph (f) of
                                 trator will not select applications re-                       this section. Applications evaluated
                                 questing funds for projects that in the                       under paragraph (f) of this section that
                                 Administrator’s best judgment have a                          do not receive at least 35 points or are
                                 low probability of:                                           not within the top 75 percent when all
                                   (i) Being a viable business or oper-                        applications being assigned points are
                                 ation;                                                        ranked from high to low by total num-
                                   (ii) Being successful as measured by                        ber of points will not be evaluated with
                                 long-term job creation or retention;                          respect to the factors in paragraph (g)
                                 and                                                           of this section. The only exception to
                                   (iii) Producing long-term economic                          this evaluation process would be the
                                 development in rural areas.                                   Administrator’s determination that ad-
                                   (2) The Administrator’s determina-                          ditional applications must be selected
                                 tion in paragraph (c) of this section                         in accordance with § 1703.14. After such
                                 will be based on the ultimate recipi-                         a determination, the remaining appli-
                                 ent’s feasibility studies, income state-                      cations evaluated in paragraph (f) of
                                 ments, cash flow statements, existing                         this section will be also evaluated
                                 and projected balance sheets, market                          under the factors in paragraph (g) of
                                 research, job creation potential, indus-                      this section.
                                 try trends, and current economic con-                           (f) Selection factors pertaining to the
                                 ditions given the nature of the project.                      type of project. The number of points as-
                                 Long-term job creation and economic                           signed for each selection factor will be
                                 development in rural areas as used for                        determined as follows:
                                 this factor will mean jobs or economic                          (1) Nature of the project. The extent to
                                 development that would generally be                           which the nature of the project will
                                 expected to last at least five years.                         promote economic development in
                                   (d) The Administrator will not award                        rural areas and/or job creation—up to
                                 points under the selection factors in                         50 points. The determination for this
                                 paragraphs (f) and (g) of this section                        factor will be based on whether the
                                 for applications that:                                        project:
                                   (1) Involve the purchase land that                            (i) Is considered a start-up, expan-
                                 will not be developed or used as a site                       sion, or enhancement of a business, a
                                 for a project structure during the cur-                       business incubator, an industrial build-
                                 rent phase of the project, as deter-                          ing or park, infrastructure necessary
                                 mined by the Administrator;                                   to connect these types of projects to
                                   (2) Will be used for residential pur-                       existing infrastructure, necessary for
                                 poses or entertainment purposes at the                        the development and operation of these
                                 residential level, such as residential                        types of projects, or, in the Adminis-
                                 dwellings and land sites, facilities to                       trator’s determination, basic infra-
                                 provide entertainment television, or                          structure necessary for successful busi-
                                 personal, non-business related vehi-                          nesses in the rural economy;

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                                 Rural Utilities Service, USDA                                                                    § 1703.46

                                   (ii) Will provide technical assistance                      that in the judgement of the Adminis-
                                 to rural businesses or rural residents,                       trator will diversify the rural economic
                                 train or educate rural residents, pro-                        base or assist in alleviating chronic
                                 mote economic development in rural                            underemployment for rural residents—
                                 areas on a non-profit basis, or provide                       10 points. The Administrator will as-
                                 medical care to rural residents; and                          sign points only to the extent the ap-
                                   (iii) Will succeed as envisioned in the                     plication contains convincing evidence
                                 application, and the possibility that                         pertaining to this factor.
                                 the owners or operators may become                              (g) Other selection factors. The number
                                 delinquent on their loan payments.                            of points assigned for each selection
                                   (2) Job creation project. The extent to                     factor will be determined as follows:
                                 which the project will directly lead to
                                                                                                 (1) Supplemental funds. (i) A deter-
                                 job creation given the size of the
                                                                                               mination of the amount of supple-
                                 project and the amount of RUS funds
                                                                                               mental funds provided or to be pro-
                                 requested or the project is necessary
                                 for job creation—up to 25 points. As                          vided to the project from the project
                                 part of the determination, the Admin-                         owner in the form of equity funds, pri-
                                 istrator will consider whether the                            vate sources, state and local govern-
                                 project will provide long-term employ-                        ment sources, other Federal Govern-
                                 ment for rural residents. For industrial                      ment sources, the borrower or other
                                 parks, industrial buildings, and similar                      sources of funds. The supplemental
                                 projects, the Administrator will con-                         funds used in this calculation must be
                                 sider whether the application includes                        disbursed to the project during the pe-
                                 information on businesses or tenants                          riod covering six months prior to the
                                 that will occupy the building(s) and the                      receipt of the application by RUS and
                                 nature and extent of the commitments                          two years after the first advance of
                                 to use the buildings in determining the                       RUS funds for the project. Supple-
                                 number of points to award. The Admin-                         mental funds must be committed to
                                 istrator will also consider the prob-                         the project before RUS will advance its
                                 ability that the project will not result                      funds. RUS loan or grant funds from
                                 in job creation as envisioned in the ap-                      the borrower or RUS loan or grant
                                 plication in terms of both the number                         funds from any other organization will
                                 of jobs and the duration of the jobs.                         not be included in the calculations.
                                   (3) Long-term improvements in economic                      The Administrator will determine what
                                 development. Projects that lead directly                      constitutes     expenditures     on   the
                                 to an increase in long-term produc-                           project. If supplemental funds as a per-
                                 tivity and per capita income in rural                         centage of the RUS zero-interest loan
                                 areas—up to 25 points. The Administra-                        and/or grant to be provided to the
                                 tor’s determination will be based on                          project is:
                                 the extent to which the project will im-                        (A) Equal to 20%—10 points, the min-
                                 prove the productive potential of the                         imum number of points;
                                 labor force, industrial plant, natural                          (B) Equal to 100%—20 points;
                                 resources, institutions, and infrastruc-
                                                                                                 (C) Equal to 500%—30 points, the
                                 ture necessary for economic develop-
                                                                                               maximum number of points.
                                 ment and job creation by utilizing ad-
                                 vanced technology, creating higher                              (ii) Ratios of supplemental funds to
                                 skilled occupations, creating jobs with                       RUS funds falling between these levels
                                 higher career potential or jobs that are                      will be assigned points based on a
                                 considered part to be of a knowledge                          straight-line interpolation calculated
                                 intensive industry, or adding higher                          to the nearest whole point. The result
                                 value to natural resources. In consid-                        will be rounded based on the standard
                                 ering infrastructure projects, the Ad-                        convention of a fraction of 1/2 or great-
                                 ministrator will award points only for                        er equals 1.
                                 the facilities, such as water and sewer                         (2) Economic conditions and job cre-
                                 facilities, that will serve and are nec-                      ation. (i) A comparison will be made of
                                 essary for commercial activities de-                          the unemployment rate in the county
                                 scribed under this factor.                                    where the project will be located to the
                                   (4) Diversifying the rural economy or al-                   state and national unemployment
                                 leviating    underemployment.     Projects                    rates.

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                                 § 1703.46                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                   (A) If the unemployment rate in the                           (B) If the per capita personal income
                                 county where the project will be lo-                          level in the county where the project
                                 cated exceeds the National unemploy-                          will be located is equal to the National
                                 ment rate by 30 percent or more—10                            per capita personal income level—5
                                 points, the maximum number of points                          points.
                                 awarded.                                                        (C) If the per capita personal income
                                   (B) If the unemployment rate in the                         level in the county where the project
                                 county where the project will be lo-                          will be located exceeds the National
                                 cated is equal to the National unem-                          per capita personal income level by 15
                                 ployment rate—5 points.                                       percent or more—0 points.
                                   (C) If the unemployment rate in the                           (D) If the per capita personal income
                                 county where the project will be lo-                          level in the county where the project
                                 cated is equal to or less than 75 percent                     will be located is less than or equal to
                                 of the National unemployment rate—0                           90 percent of the state per capita per-
                                 points.                                                       sonal income level—8 points, the max-
                                   (D) If the unemployment rate in the                         imum number of points awarded.
                                 county where the project will be lo-                            (E) If the per capita personal income
                                 cated exceeds the state unemployment                          level in the county where the project
                                 rate by 30 percent or more—8 points,                          will be located is equal to the state per
                                 the maximum number of points award-                           capita personal income level—4 points.
                                 ed.                                                             (F) If the per capita personal income
                                   (E) If the unemployment rate in the                         level in the county where the project
                                 county where the project will be lo-                          will be located exceeds the state per
                                 cated is equal to the state unemploy-                         capita personal income level by 15 per-
                                 ment rate—4 points.                                           cent or more—0 points.
                                   (F) If the unemployment rate in the                           (G) For both the state and national
                                 county where the project will be lo-                          per capita personal income calcula-
                                 cated is equal to or less than 75 percent                     tions, incomes falling between the lev-
                                 of the state unemployment rate—0                              els will be assigned points based on
                                 points.                                                       straight-line interpolation calculated
                                   (G) For both the state and national                         to the nearest whole point. The result
                                 unemployment rate calculations, rates                         will be rounded based on the standard
                                 falling between the levels will be as-                        convention of a fraction of 1/2 or great-
                                 signed points based on straight-line in-                      er equals 1. If the project will be lo-
                                 terpolation calculated to the nearest                         cated in several counties, the Adminis-
                                 whole point. The result will be rounded                       trator will use a simple average (mean)
                                 based on the standard convention of a                         of the counties for the comparison. The
                                 fraction of 1/2 or greater equals 1. If the                   Administrator will use the most recent
                                 project will be located in several coun-                      annual per capita personal income lev-
                                 ties, the Administrator will use a sim-                       els it has obtained from the Bureau of
                                 ple average (mean) of the counties for                        Economic Analysis, U.S. Department
                                 the comparison. The Administrator                             of Commerce or other government
                                 will use the average of the most recent                       sources and processed into a suitable
                                 twelve months of unemployment rates                           format.
                                 it has obtained from the Bureau of                              (iii) A calculation will be made of the
                                 Labor Statistics, U.S. Department of                          change in total population over the
                                 Labor or other government sources and                         most recent two-year period in the
                                 processed into a suitable format.                             county where the project will be lo-
                                   (ii) A comparison will be made of the                       cated. The population change will be
                                 per capita personal income in the coun-                       the based on the total percentage
                                 ty where the project will be located to                       change over the two-year period cal-
                                 the state and national per capita per-                        culated as follows: the population for
                                 sonal income levels.                                          the most recent year less the popu-
                                   (A) If the per capita personal income                       lation as of two years prior to that
                                 level in the county where the project                         year with the difference being divided
                                 will be located is less than or equal to                      by the population as of two years prior
                                 90 percent of the National per capita                         to the most recent year.
                                 personal income level—10 points, the                            (A) If the percentage growth over the
                                 maximum number of points awarded.                             two-year period is negative 2.00 percent

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                                 Rural Utilities Service, USDA                                                                    § 1703.46

                                 or higher negative amount (a popu-                            will locate in the building(s), and any
                                 lation decline)—8 points, the maximum                         commitments from businesses to lo-
                                 number of points.                                             cate in the building(s). This factor will
                                   (B) If the percentage growth over the                       not count indirect job creation that re-
                                 two-year period is equal to zero or is                        sults from an overall increase in the
                                 positive     (population      increase)—0                     local economy once the project is com-
                                 points.                                                       pleted. If total project costs per job
                                   (C) Population growth percentages                           falls between these levels, points will
                                 falling between these levels will be as-                      be assigned based on straight-line in-
                                 signed points based on straight-line in-                      terpolation calculated to the nearest
                                 terpolation calculated to the nearest                         whole point. The result will be rounded
                                 whole point. The result will be rounded                       based on the standard convention of a
                                 based on the standard convention of a                         fraction of 1/2 or greater equals 1.
                                 fraction of 1/2 or greater equals 1. If the                     (v) Projects that are part of a local,
                                 project will be located in several coun-                      community-based rural economic de-
                                 ties, the Administrator will use a sim-                       velopment program that would im-
                                 ple average (mean) of the counties for                        prove the local economy and enhance
                                 the comparison. The Administrator                             the well-being of rural residents—10
                                 will use the most recent population                           points. The determination will be based
                                 data for all counties it has obtained                         on information submitted by the bor-
                                 from the Bureau of Economic Analysis,                         rower in its application and other in-
                                 U.S. Department of Commerce or other                          formation the Administrator considers
                                 government sources and processed into                         appropriate.
                                 a suitable format. The data provide one                         (vi) Projects that have a written plan
                                 population figure for the year.                               to provide opportunities or incentives
                                   (iv) The number of long-term jobs                           to improve marketable skills for rural
                                 that the project will directly create in                      residents through training and/or edu-
                                 rural areas.                                                  cation, or projects which consist of
                                   (A) For five or more direct long-term                       providing this training and/or edu-
                                 jobs per $100,000 of total project costs—                     cation—5 points.
                                 15 points, the maximum number of                                (3) Location. Projects that will be
                                 points awarded.                                               physically in a rural area—20 points.
                                   (B) For two direct long-term jobs per                         (4) Support for program—cushion of
                                 $100,000 of total project costs—8 points.                     credit payments. (i) Applications sub-
                                   (C) For no direct long-term jobs—0                          mitted by borrowers that have made
                                 points.                                                       cushion of credit payments as set forth
                                   (D) Direct, long-term jobs under this                       in section 313 of the Act based on the
                                 factor are jobs that would generally be                       following:
                                 expected to last at least five years.                           (A) If the borrower has $300,000 or
                                 Long-term jobs that would provide 6                           three percent of total assets, whichever
                                 months per year of equivalent full-time                       is less, in cushion of credit payments—
                                 employment will be counted under this                         15 points;
                                 factor. Long-term jobs that would pro-                          (B) If the borrower has $100,000 or one
                                 vide fewer months of employment                               percent of total assets, whichever is
                                 would be given points based on the                            less, in cushion of credit payments—10
                                 ratio of the number of months per year                        points;
                                 of employment to 12 months. Jobs of at                          (C) If the borrower has at least $5,000
                                 least 20 hours per week will be counted                       or 0.5 percent of total assets, whichever
                                 under this factor. For construction of                        is less, in cushion of credit payments—
                                 an industrial building, extension of                          5 points.
                                 water and/or sewer lines to a building,                         (ii) The amount of cushion of credit
                                 or a similar project, the Administrator                       payments will be based on the amount
                                 will require a reasonable analysis of                         at the time the Administrator evalu-
                                 the number of jobs that will be created                       ates the project. The calculation of a
                                 before awarding points for this factor.                       borrower’s total assets will be based on
                                 The Administrator reserves the right                          RUS’s most recently published Statis-
                                 to adjust the number based on its anal-                       tical Report, Rural Electric Borrowers
                                 ysis of the project, the explanation in                       (RUS Informational Publication 201–1)
                                 the application of the businesses that                        or Statistical Report, Rural Telephone

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                                 § 1703.46                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 Borrowers (RUS Informational Publi-                             (K) A description of any coordination
                                 cation 300–4). These publications are                         with a local, regional or state develop-
                                 available from the Rural Utilities                            ment organization; and
                                 Service, Administrative Services Divi-                          (L) Other relevant information.
                                 sion, Washington, DC 20250. If the                              (iii) The Administrator expects the
                                 amount of cushion of credits payments                         ultimate recipient’s business plan ref-
                                 falls between these levels, points will                       erenced in paragraph (g)(6)(ii) of this
                                 be based on a straight-line interpola-                        section to be comparable to a plan nor-
                                 tion calculated to the nearest whole                          mally submitted to a bank for long-
                                 point. The result will be rounded based                       term financing. In evaluating an appli-
                                 on the standard convention of a frac-                         cation for this selection factor, the Ad-
                                 tion of 1/2 or greater equals 1.                              ministrator will consider the prob-
                                   (5) Demonstration project. If the appli-                    ability that the project will result in
                                 cation contains a written commitment                          long-term economic development in
                                 from the owner(s) of the project that                         rural areas and/or job creation as envi-
                                 the project will be a demonstration                           sioned in the application.
                                 project—5 points.                                               (iv) Quality and completeness of bor-
                                   (6) Probability of Success. (i) The                         rower’s initial application submitted to
                                 knowledge, experience, education and                          RUS—up to 10 points. The Administra-
                                 training of the proposed owners and                           tor’s determination will be based on
                                 management of the project—up to 10
                                                                                               the completeness and quality of the ap-
                                 points.
                                                                                               plication as measured by the additional
                                   (ii) The ultimate recipient’s business
                                                                                               information required from the bor-
                                 plan and indications that the project
                                                                                               rower to complete the analysis. For a
                                 will successfully result in economic de-
                                                                                               pass-through loan and grant, the qual-
                                 velopment in rural areas and/or job cre-
                                                                                               ity of the Borrower’s plan to monitor
                                 ation—up to 40 points. The Administra-
                                                                                               the loan and grant and assure that the
                                 tor’s evaluation of the success of the
                                                                                               requirements of this subpart and 7 CFR
                                 project will be based on indications in
                                                                                               parts 3015 and 3016 are met will also be
                                 the application and RUS’s analysis
                                                                                               considered.
                                 that the project will be a viable busi-
                                 ness or operation, be successful in cre-                        (7) Special economic status. The Ad-
                                 ating or retaining long-term jobs, and                        ministrator has the discretion to des-
                                 be successful in producing economic                           ignate special economic status (up to
                                 development that will result in long-                         25 points) to applications submitted by
                                 term benefits to rural areas. The plan                        borrowers that have documented one or
                                 should include:                                               more of the following four conditions
                                   (A) A description of the project;                           in one or more county(ies) to be served
                                   (B) A description of the business, if                       by the proposed project:
                                 applicable, its products and the pros-                          (i) A designation of disaster area by
                                 pects of the industry;                                        the President of the United States
                                   (C) What will be produced or accom-                         which has been so designated within
                                 plished;                                                      three years prior to applying to RUS;
                                   (D) The area to be served;                                    (ii) The loss, removal, or closing of a
                                   (E) Any market research or mar-                             major source or sources of employment
                                 keting plan;                                                  in the last 3 years which causes an in-
                                   (F) Any operating plan;                                     crease of 2 percentage points or more
                                   (G) Total project costs and projected                       in the area’s most recent unemploy-
                                 use of funds by purpose or category;                          ment rate compared with the period
                                   (H) A financial plan, including a fea-                      immediately before the dislocation;
                                 sibility study with projected balance                           (iii) Chronic or long-term economic
                                 sheets, income statements and cash                            deterioration, documented by one or
                                 flow statements;                                              both of the following conditions:
                                   (I) The source of supplemental funds,                         (A) An unemployment level equal to
                                 the nature and strength of commit-                            or greater than 1.5 times the National
                                 ments from other sources of financing,                        average     unemployment      percentage
                                 and the equity contribution;                                  from 4 out of the last 5 years, starting
                                   (J) The proposed ownership and man-                         with the most current statistics avail-
                                 agement of the project;                                       able. The applicant, when calculating

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                                 Rural Utilities Service, USDA                                                                    § 1703.46

                                 recent years’ unemployment percent-                             (ii) Ultimate recipient’s business plan—
                                 ages, should compare county statistics                        40 points; and
                                 with the National Average unemploy-                             (iii) Completeness of borrower’s initial
                                 ment for the corresponding year. Sta-                         application—10 points;
                                 tistics on unemployment will be based                           (11) Special economic status—25 points.
                                 on figures provided by the U.S. Bureau                          (i) Regardless of the number of points
                                 of Labor Statistics. However, the Ad-                         assigned to a borrower’s application,
                                 ministrator may, at his discretion, also                      the Administrator may:
                                 consider verifiable, published State                            (1) Limit the number of applications
                                 statistical data provided by the appli-                       selected in any one state during any
                                 cant in situations where county-wide                          fiscal year to the ratio of borrowers in
                                 statistical data is not representative of                     that state to the total number of bor-
                                 local conditions. Such statistical data                       rowers multiplied by three, or ten per-
                                 must be part of a recognized database                         cent of the total number selections
                                 which reflects information for other                          that have been made during the cur-
                                 areas within the State;                                       rent fiscal year, or ten, whichever is
                                   (B) A 15% loss of population due to                         greatest. The number of borrowers will
                                 out-migration over the most recent 10-                        be determined as of the latest pub-
                                 year decennial census, based on the                           lished RUS statistical reports (Statis-
                                 U.S. Bureau of the Census decennial                           tical Report, Rural Electric Borrowers,
                                 data;                                                         RUS Informational Publication 201–1
                                   (iv) A designation as a Rural Em-                           and Statistical Report, Rural Tele-
                                 powerment Zone or Rural Enterprise                            phone Borrowers, RUS Informational
                                 Community by the Empowerment Zone                             Publication 300–4. These publications
                                 Program authorized by Section 13301 of                        are available from the Rural Utilities
                                 the Omnibus Reconciliation Act of                             Service, Administrative Services Divi-
                                 1993, Public Law 103–66 (107 Stat. 312),                      sion, Washington, DC 20250);
                                 26 U.S.C. 1391–1393.                                            (2) Limit a borrower to one selected
                                   (h) Outline of selection factors. The se-                   application during any selection pe-
                                 lection factors contained in §§ 1703.46(f)                    riod;
                                 and 1703.46(g) and the maximum num-                             (3) Limit the number of applications
                                 ber of points that may be assigned to                         selected for a particular project;
                                 each is listed below:                                           (4) Allocate available funds between
                                   (1) Nature of the project—50 points;                        applications from electric and tele-
                                   (2) Job creation project—25 points;                         phone borrowers;
                                   (3) Long-term improvements in economic                        (5) Select an application receiving
                                 development—25 points;                                        fewer points than another application
                                   (4) Diversifying the rural economy or al-                   if there are insufficient funds during a
                                 leviating underemployment—10 points;                          particular budget period to select the
                                   (5) Supplemental funds—30 points;                           higher ranked application; except that
                                   (6) Economic conditions and job cre-                        the Administrator may ask the bor-
                                 ation:                                                        rower that submitted the higher
                                   (i) Unemployment rates—18 points;                           ranked application if it desires to re-
                                   (ii) Per capita personal income—18                          duce the amount of its application to
                                 points;                                                       the amount of funds available. The re-
                                   (iii) Change in population—8 points;                        duction may require additional supple-
                                   (iv) Number of long-term jobs—15                            mental funds to ensure a successful
                                 points;                                                       project. Based on information the bor-
                                   (v) Community-based economic develop-                       rower provides, the Administrator will
                                 ment program—10 points;                                       re-analyze the project to ensure that
                                   (vi) Plan for improving the marketable                      the project will still be feasible with
                                 skills of people in rural areas—5 points;                     reduced funding; or
                                   (7) Location—20 points;                                       (6) Select the highest ranking appli-
                                   (8) Support for program—cushion of                          cations for funds to finance projects
                                 credit payments—15 points;                                    that the Administrator classifies as
                                   (9) Demonstration project—5 points;                         project feasibility studies.
                                   (10) Probability of success:                                  (j) During each selection period, the
                                   (i) Owners and management of the                            highest ranking application from
                                 project—10 points;                                            among the applications requesting less

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                                 §§ 1703.47–1703.57                                                    7 CFR Ch. XVII (1–1–04 Edition)

                                 than 5 percent of the total project                           mit a new application to RUS for con-
                                 costs as provided in § 1703.25 will be                        sideration. The selection may not be
                                 considered with the applications re-                          transferred to another project, as de-
                                 questing 5 percent or more of total                           termined by the Administrator. At any
                                 project costs.                                                time after the selection of an applica-
                                   (k) The Administrator reserves the                          tion, the Administrator may, upon a
                                 right to use the region or data it con-                       request from the borrower and receipt
                                 siders most appropriate if ‘‘county’’                         of any documentation the Adminis-
                                 data are unavailable for a particular                         trator considers necessary, approve
                                 area.                                                         changes in the method of carrying out
                                 [57 FR 44317, Sept. 25, 1992, as amended at 59
                                                                                               the purpose of the project as long as
                                 FR 11711, Mar. 14, 1994; 59 FR 38341, July 28,                the overall purpose of the project re-
                                 1994; 59 FR 53931, Oct. 27, 1994]                             mains the same, revise the amount of
                                                                                               the zero-interest loan and/or grant, re-
                                 §§ 1703.47–1703.57         [Reserved]                         vise the loan maturity date and prin-
                                                                                               cipal deferment period and make other
                                 § 1703.58 Post selection period.                              adjustments. The Administrator may
                                    (a) RUS will inform a borrower                             reduce the amount of the RUS loan or
                                 whether the Administrator has se-                             grant to reflect reductions in the
                                 lected its application. The advance of                        amount of supplemental funds to be
                                 RUS funds after the selection has oc-                         provided to the project. For substantial
                                 curred is contingent upon the borrower                        reductions in amount of supplemental
                                 meeting any terms and conditions the                          funds to be provided to the project, the
                                 Administrator determines are nec-                             Administrator may require the bor-
                                 essary. A borrower that submitted an                          rower to re-apply for the RUS loan or
                                 application which was not selected will                       grant funds.
                                 be asked to inform RUS whether it de-                           (d) If state or local governments raise
                                 sires to be reconsidered at a later date.                     objections to a proposed project under
                                 The borrower may modify the applica-                          the intergovernmental review process
                                 tion after it has been considered with-                       that are not resolved within three
                                 out resubmitting all the required mate-                       months of the Administrator’s selec-
                                 rial in an application, except if it                          tion of the application, the Adminis-
                                 changes the request from a grant to a                         trator may consider the selection of
                                 zero-interest loan it must submit infor-                      the application cancelled.
                                 mation necessary for the Adminis-
                                 trator to evaluate a loan proposal as                         § 1703.59 Final application processing
                                 set forth in §§ 1703.35 and 1703.36 and                            and legal documents.
                                 submit a new board resolution request-                           (a) After a borrower has submitted
                                 ing a loan. If the borrower so desires,                       all information the Administrator de-
                                 the Administrator will consider an ap-                        termines is necessary for the selected
                                 plication for up to one year after the                        application, RUS will send the nec-
                                 date RUS originally received the appli-                       essary legal documents to the borrower
                                 cation. A borrower may submit new ap-                         to execute and return to RUS. The
                                 plications as often as it desires.                            legal documents will include a letter of
                                    (b) During the period between the se-                      agreement and any legal documents
                                 lection of the application and the exe-                       the Administrator deems appropriate,
                                 cution of RUS’s legal documents, the                          including any loan agreements, notes,
                                 borrower must inform the Adminis-                             security instruments, certifications or
                                 trator if the project is no longer viable                     legal opinions. The letter of agreement
                                 or the borrower no longer desires a                           will, among other things, constitute
                                 zero-interest loan or grant for the                           the Administrator’s approval of funds
                                 project. Upon a determination by the                          for the project subject to certain terms
                                 Administrator to that effect, the se-                         and conditions as determined by the
                                 lected application will be considered                         Administrator, and include a project
                                 cancelled.                                                    description, approved purposes of the
                                    (c) If an application has been selected                    zero-interest loan and/or grant, the
                                 and the nature of the project changes,                        maximum amount of zero-interest loan
                                 as determined by the Administrator,                           and/or grant, supplemental funds to be
                                 the borrower may be required to sub-                          provided to the project and certain

                                                                                          54



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                                 Rural Utilities Service, USDA                                                                     § 1703.61

                                 agreements or commitments the bor-                            project funds have been utilized and
                                 rower proposed in its application.                            evidence is provided that the project
                                   (b) The Administrator has the discre-                       has been completed. Grants to Bor-
                                 tion to include as an approved purpose                        rowers for establishment of revolving
                                 the reimbursement of short-term fi-                           loan funds will be disbursed in accord-
                                 nancing and expenditures that were                            ance with § 1703.22 of this subpart.
                                 used for costs incurred on the project                          (c) If the borrower fails to satisfy all
                                 in accordance with § 1703.20(a)(2).                           conditions, requirements, and terms
                                   (c) If the borrower fails to submit                         prerequisite to the advance of zero-in-
                                 within one month from the date of the                         terest loan and/or grant funds as set
                                 Administrator’s selection of an appli-                        forth in the letter of agreement or
                                 cation all of the information that the                        other RUS legal documents within 120
                                 Administrator determines to be nec-                           days from the date the borrower signs
                                 essary for RUS to prepare legal docu-                         the letter of agreement agreeing and
                                 ments, the Administrator may consider                         accepting the conditions, require-
                                 the selection of the application can-
                                                                                               ments, and terms of the RUS zero-in-
                                 celled.
                                                                                               terest loan and/or grant, or such later
                                 § 1703.60      [Reserved]                                     date as the Administrator may ap-
                                                                                               prove, the Administrator may rescind
                                 § 1703.61 Disbursement of zero-interest                       the zero-interest loan and/or grant
                                     loan and grant funds.                                     commitment.
                                   (a) RUS will disburse zero-interest                           (d) During the period between the
                                 loan funds to the borrower which must                         execution of RUS’s legal documents
                                 disburse zero-interest loan proceeds to                       and the disbursement of funds, the bor-
                                 the project for approved purposes in ac-                      rower must provide the Administrator
                                 cordance with the legal documents exe-                        written notification if the project is no
                                 cuted by the Administrator and the                            longer viable or the borrower no longer
                                 borrower and applicable RUS regula-                           desires a zero-interest loan or grant for
                                 tions. The borrower must make pay-                            the project. After RUS has received the
                                 ments on a zero-interest loan as set                          borrower’s notification, the Adminis-
                                 forth in the legal documents executed                         trator will rescind the commitment.
                                 by the Administrator and the bor-                               (e) The borrower must return to RUS
                                 rower. The Borrower or project owner’s                        all proceeds of the zero-interest loan
                                 share in the cost of the project must be                      and/or grant, including any interest
                                 utilized in advance of RUS zero-inter-                        earned on the funds being returned,
                                 est loan funds, or upon RUS approval,                         which have not been lent or disbursed
                                 on a pro-rata distribution basis with                         by the borrower for approved purposes
                                 loan funds during the disbursement pe-                        during the six months following the ad-
                                 riod. The Borrower or project owner                           vance of the loan or grant funds from
                                 will not be permitted to provide its                          RUS to the borrower, or such later date
                                 contribution at the end of the loan dis-                      as the Administrator may approve. If
                                 bursement period.                                             the project is under the control of the
                                   (b) RUS will disburse grant funds to                        borrower, all proceeds of the zero-inter-
                                 the borrower which must disburse                              est loan and/or grant must be returned
                                 grant proceeds to the project for ap-                         to RUS, including any interest earned
                                 proved purposes in accordance with the                        on the funds being returned, which
                                 provisions of 7 CFR part 3015 and 7 CFR                       have not been expended by the bor-
                                 part 3016, as appropriate, the legal doc-                     rower for approved purposes before the
                                 uments executed by the Administrator                          first anniversary of the date of the ad-
                                 and the borrower, and applicable RUS                          vance of the loan or grant funds from
                                 regulations. Prior to the disbursement
                                                                                               RUS to the borrower, or such later date
                                 of grant funds under this subpart, the
                                                                                               as the Administrator may approve. Au-
                                 Borrower will provide evidence of fidel-
                                                                                               thorization of any extension rests sole-
                                 ity bond coverage as required by 7 CFR
                                                                                               ly within the discretion of the Admin-
                                 3015.17. The grant portion of a pass-
                                                                                               istrator.
                                 through zero-interest loan and grant
                                 will be disbursed to the Borrower on a                        [57 FR 44317, Sept. 25, 1992, as amended at 59
                                 reimbursement basis after all other                           FR 11712, Mar. 14, 1994]

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                                 §§ 1703.62–1703.65                                                    7 CFR Ch. XVII (1–1–04 Edition)

                                 §§ 1703.62–1703.65         [Reserved]                           (c) RUS’s legal documents may re-
                                                                                               quire the borrower to include in its
                                 § 1703.66 Review and other require-                           legal documents with the recipient of a
                                      ments.                                                   pass-through loan or a pass-through-
                                    (a) RUS will review borrowers receiv-                      grant the requirement to expend the
                                 ing zero-interest loans or grants, as                         funds for approved purposes by a cer-
                                 necessary, to ensure that funds are ex-                       tain date specified in RUS’s legal docu-
                                 pended for approved purposes. Bor-                            ments or return to the borrower all
                                 rowers receiving zero-interest loans or                       funds that have not been expended by
                                 grants must monitor the project to the                        such date. The borrower must prompt-
                                 extent necessary to ensure that the                           ly return to RUS all unexpended funds
                                 project is in compliance with all appli-                      that the recipient returns to the bor-
                                 cable regulations, including ensuring                         rower under the terms set forth in the
                                 that funds are expended for approved                          legal documents executed between the
                                 purposes. The borrower is responsible                         Administrator and the borrower. The
                                 for ensuring that disbursements and                           borrower may request an extension due
                                 expenditures of funds are properly sup-                       to delays in the project. Authorization
                                 ported with certifications, invoices,                         of any extension rests solely within the
                                 contracts, bills of sale, or any other                        discretion of the Administrator.
                                 forms of evidence determined appro-                             (d) The legal documents executed be-
                                 priate by the Administrator and that                          tween the Borrower and the Adminis-
                                 such supporting material is available,                        trator in connection with a zero-inter-
                                 at the borrower’s premises, for review                        est loan and/or grant must contain cer-
                                 by the RUS field accountant, bor-                             tain provisions giving the Adminis-
                                 rower’s certified public accountant, the                      trator discretionary rights and rem-
                                 Office of Inspector General, the Gen-                         edies in the event a Borrower fails to
                                 eral Accounting Office and any other                          comply with this subpart, other Fed-
                                 accountant conducting an audit of the                         eral regulations and statutes, or the
                                 borrower’s financial statements or this                       terms, conditions and requirements of
                                 rural economic development program.                           the executed legal documents. Regard-
                                 Borrowers will be required to permit                          less of any right or remedy the Admin-
                                 RUS to inspect and copy its records                           istrator chooses to assert, if the Bor-
                                 and documents that pertain to the                             rower uses any zero-interest loan and/
                                 project.                                                      or grant funds other than for approved
                                    (b) The Borrower must require the re-                      purposes, the Borrower will be required
                                 cipient of a pass-through loan and                            to return to RUS the amount used for
                                 grant to provide an itemized list to the                      unapproved purposes. An unauthorized
                                 Borrower that shows the expenditures                          zero-interest loan amount which is re-
                                 made on the project for approved pur-                         turned will be considered a prepayment
                                 poses, including a certification to that                      on the RUS note.
                                 effect. The Borrower will also require                          (e) Borrowers receiving zero-interest
                                 the recipient to attach invoices, re-                         loans and/or grants will be subject to a
                                 ceipts, bills of sale, and other evidence                     rural economic development review of
                                 representing the items on the list of                         zero-interest loan and grant funds.
                                 expenditures that at least total the                            (f) The borrower must promptly no-
                                 amount of the RUS zero-interest loan                          tify the Administrator in writing if an-
                                 and grant. In addition, the Borrower                          other entity is in default on a pass-
                                 will also require the recipient to fur-                       through-loan between the borrower and
                                 nish a record of itemized receipts show-                      the entity.
                                 ing total project costs in such detail                          (g) Grants provided under this pro-
                                 that will permit auditors to establish                        gram will be administered in accord-
                                 the RUS funding percentage. RUS’s                             ance with 7 CFR part 3015 and 7 CFR
                                 legal agreements will include the                             part 3016, as appropriate. Copies of
                                 terms and conditions that the Bor-                            these USDA Uniform Assistance regu-
                                 rower must require in its agreement                           lations can be obtained by contacting
                                 with the recipient of a pass-through                          RUS in Washington, DC. A Borrower
                                 loan and grant covering the use and in-                       that receives a grant for the establish-
                                 tended schedule of expenditures of the                        ment of a revolving loan fund, or
                                 loan funds.                                                   project owner that receives a pass-

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                                 Rural Utilities Service, USDA                                                                      § 1703.68

                                 through loan and grant, will be subject                         (j) Monitoring requirements for Bor-
                                 to requirements under these regula-                           rowers receiving grants for revolving
                                 tions which cover, among other things,                        loan funds are specified in § 1703.22.
                                 financial      reporting,     accounting
                                                                                               [57 FR 44317, Sept. 25, 1992, as amended at 59
                                 records, budget controls, record reten-                       FR 11712, Mar. 14, 1994]
                                 tion and audit requirements. For pass-
                                 through loans and grants, RUS Bor-                            § 1703.67 Changes in project objective
                                 rowers will be required to include in                             or scope.
                                 their legal documents the requirement                           For loans and grants awarded under
                                 for project owners to provide sufficient                      this subpart, the Borrower must obtain
                                 financial, accounting and budget infor-                       prior approval for any material change
                                 mation and other records deemed nec-                          to the scope or objectives of the ap-
                                 essary to facilitate audits in accord-                        proved project, including changes to
                                 ance with 7 CFR part 3015 and 7 CFR                           the scope of work or budget. Failure to
                                 part 3016 for non-profit entities, and                        obtain prior approval of changes can
                                 RUS rural economic development loan                           result in suspension or termination of
                                 reviews for projects in a for-profit sta-                     grant funds.
                                 tus.
                                   (h) For pass-through loans and grants                       [59 FR 11712, Mar. 14, 1994]
                                 awarded under this subpart, the Bor-
                                 rower must diligently monitor per-                            § 1703.68 Loan and grant termination
                                 formance to ensure that time schedules                            provisions.
                                 are being met, projected work by time                           (a) Termination for cause. The Admin-
                                 periods is being accomplished, and                            istrator may terminate any loan and/or
                                 other performance objectives are being                        grant in whole, or in part, at any time
                                 achieved. The Borrower must submit                            before the date of completion of loan
                                 an original and one copy of each report                       and/or grant disbursement, whenever
                                 to RUS on an annual basis. The project                        the Borrower has failed to comply with
                                 performance reports shall include, but                        the conditions of the loan and/or grant.
                                 not be limited to, the following:                             The Administrator will promptly no-
                                   (1) A comparison of actual accom-                           tify the Borrower in writing of the de-
                                 plishments to the objectives estab-                           termination and the reasons for the
                                 lished for that period;                                       termination, together with the effec-
                                   (2) Reasons why any established ob-                         tive date. The termination date will be
                                 jectives were not met;                                        no less than 30 days following receipt
                                   (3) A description of any problems,                          of the termination notice. The Bor-
                                 delays, or adverse conditions which                           rower will have such time to cure the
                                 have occurred, or are anticipated, and                        default, or to state why it feels the
                                 which may affect the attainment of                            loan and/or grant should not be termi-
                                 overall project objectives, prevent                           nated. The Administrator will stay the
                                 meeting of time schedules or objec-                           termination upon the curing of the de-
                                 tives, or preclude the attainment of                          fault, and may delay termination if,
                                 particular project work elements dur-                         sufficient cause has been given by the
                                 ing established time periods. This dis-                       Borrower.
                                 closure shall be accompanied by a                               (b) Termination for convenience. The
                                 statement of the action taken or                              Administrator or the Borrower may
                                 planned to resolve the situation; and                         terminate a loan and/or grant in whole,
                                   (4) Objectives and timetable estab-                         or in part, when both parties agree that
                                 lished for the next reporting period.                         the continuation of the project would
                                   (i) For pass-through loans and                              not produce beneficial results commen-
                                 grants, a final project performance re-                       surate with further expenditure of
                                 port will be required with the last SF                        funds. The two parties will agree upon
                                 269, ‘‘Financial Status Report,’’ avail-                      termination conditions, including the
                                 able from RUS in Washington, DC. The                          effective date, and in the case of par-
                                 final report also must provide an eval-                       tial terminations, the portion to be
                                 uation of the success of the project in                       terminated. The Borrower will not
                                 meeting the objectives of the program.                        incur new obligations for the termi-
                                 The final report may serve as the last                        nated portion after the effective date,
                                 annual report.                                                and will cancel as many outstanding

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                                 §§ 1703.69–1703.79                                                    7 CFR Ch. XVII (1–1–04 Edition)

                                 obligations as possible. The Adminis-                         services. RUS believes that generally
                                 trator will allow full credit to the Bor-                     the need is greatest in areas that are
                                 rower for the Federal share of                                economically challenged, costly to
                                 unfulfilled   contractual     obligations                     serve, and experiencing outward migra-
                                 which were incurred in good faith by                          tion. This program is consistent with
                                 the Borrower prior to grant termi-                            the provisions of the Telecommuni-
                                 nation.                                                       cations Act of 1996 that designate tele-
                                 [59 FR 11712, Mar. 14, 1994]                                  communications service discounts for
                                                                                               schools, libraries, and rural health care
                                 §§ 1703.69–1703.79         [Reserved]                         centers. RUS will take into consider-
                                                                                               ation the community’s involvement in
                                       Subpart C—Rural Business                                the proposed project and the appli-
                                     Incubator Program [Reserved]                              cant’s ability to leverage grant funds.
                                                                                                 (c) In administering this subpart,
                                 §§ 1703.80–1703.99         [Reserved]                         RUS will not favor or mandate the use
                                                                                               of one particular technology over an-
                                 Subpart D—Distance Learning and                               other.
                                    Telemedicine Loan and Grant                                  (d) Rural institutions are encouraged
                                    Program—General                                            to cooperate with each other, with ap-
                                                                                               plicants, and with end-users to pro-
                                                                                               mote the program being implemented
                                   SOURCE: 64 FR 14357, Mar. 25, 1999, unless
                                 otherwise noted.
                                                                                               under this subpart.
                                                                                                 (e) RUS staff will make diligent ef-
                                 § 1703.100 Purpose.                                           forts to inform potential applicants in
                                    The purpose of the Distance Learning                       rural areas of the programs being im-
                                 and Telemedicine (DLT) Loan and                               plemented under this subpart.
                                 Grant Program is to encourage and im-                           (f) The Administrator will provide
                                 prove telemedicine services and dis-                          only loans under this subpart to any
                                 tance learning services in rural areas                        entity that has received a tele-
                                 through the use of telecommuni-                               communications or electric loan under
                                 cations, computer networks, and re-                           the Rural Electrification Act of 1936.
                                 lated advanced technologies by stu-                           Telecommunications and Electric bor-
                                 dents, teachers, medical professionals,                       rowers are encouraged to seek a loan
                                 and rural residents. This subpart de-                         under this subpart to bolster edu-
                                 scribes the general policies for admin-                       cational and health care opportunities
                                 istering the DLT program. Subpart E                           in the rural communities they serve. A
                                 contains the policies and procedures re-                      borrower receiving a loan shall:
                                 lated to grants; subpart F contains the                         (1) Make the loan available to enti-
                                 policies and procedures related to a                          ties that qualify as distance learning
                                 combination loan and grant; and sub-                          or telemedicine projects satisfying the
                                 part G contains the policies and proce-                       requirements of this subpart, under
                                 dures related to loans.                                       any terms it so chooses as long as the
                                                                                               terms are no more stringent than the
                                 § 1703.101 Policy.                                            terms under which it received the fi-
                                    (a) The transmission of information                        nancial assistance.
                                 is vital to the economic development,                           (2) Use the loan to acquire, install,
                                 education, and health of rural Ameri-                         improve, or extend a distance learning
                                 cans. To further this objective, RUS                          or telemedicine system referred to in
                                 will provide financial assistance to dis-                     this subpart.
                                 tance     learning    and   telemedicine                        (g) The Administrator will allocate
                                 projects that will improve the access of                      funds that are appropriated each fiscal
                                 people residing in rural areas to edu-                        year for the subparts E, F, and G, of
                                 cational, learning, training, and health                      this part respectively. Not more than
                                 care services.                                                30 days before the end of the fiscal
                                    (b) In providing financial assistance,                     year, the Administrator may transfer
                                 RUS will give priority to rural areas                         any funds not committed to grants in
                                 that it believes have the greatest need                       the combination loan and grant pro-
                                 for distance learning and telemedicine                        gram to the grant program.

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                                 Rural Utilities Service, USDA                                                                  § 1703.102

                                   (h) Financial assistance may be pro-                        transmission, or received, via tele-
                                 vided for end user sites. Financial as-                       communications terminal equipment
                                 sistance may also be provided for hubs                        and telecommunications transmission
                                 located in rural or non-rural areas if                        facilities.
                                 they are necessary to provide distance                          Consortium means a combination or
                                 learning or telemedicine services to                          group of entities formed to undertake
                                 rural residents at end user sites.                            the purposes for which the distance
                                   (i) The Administrator will publish, at                      learning and telemedicine financial as-
                                 the end of each fiscal year, a notice in                      sistance is provided. At least one of the
                                 the FEDERAL REGISTER of all applica-                          entities in a consortium must meet the
                                 tions receiving financial assistance                          requirements of § 1703.103.
                                 under this subpart. Subject to the pro-                         Construct means to acquire, con-
                                 visions of the Freedom of Information                         struct, extend, improve, or install a fa-
                                 Act, (5 U.S.C. 552), applications will be                     cility or system.
                                 available for public inspection at the                          Data terminal equipment means equip-
                                 U.S. Department of Agriculture, 1400                          ment that converts user information
                                 Independence Avenue, SW., Wash-                               into data signals for transmission, or
                                 ington, DC, 20250.                                            reconverts the received data signals
                                 § 1703.102 Definitions.                                       into user information, and is normally
                                                                                               found on the terminal of a circuit and
                                    1996 Act means the Federal Agri-                           on the premises of the end user.
                                 culture Improvement Act of 1996.                                Distance learning means a tele-
                                    Act means the Rural Electrification                        communications link to an end user
                                 Act of 1936 (7 U.S.C. 901 et seq.).                           through the use of eligible equipment
                                    Administrator means the Adminis-                           to:
                                 trator of the Rural Utilities Service, or
                                                                                                 (1) Provide educational programs, in-
                                 designee or successor.
                                                                                               struction, or information originating
                                    Applicant means an eligible organiza-
                                                                                               in one area, whether rural or not, to
                                 tion that applies for financial assist-
                                                                                               students and teachers who are located
                                 ance under this subpart.
                                                                                               in rural areas; or
                                    Approved purposes means project pur-
                                 poses for which grant, loan, or com-                            (2) Connect teachers and students, lo-
                                 bination loan and grant financial as-                         cated in one rural area with teachers
                                 sistance may be expended.                                     and students that are located in a dif-
                                    Champion community means any com-                          ferent rural area.
                                 munity that submitted a valid applica-                          DLT borrower means an entity that
                                 tion to become a USDA Empowerment                             has an outstanding loan under the pro-
                                 Zone/Enterprise Community (EZ/EC)                             visions of the DLT program.
                                 area, that met the requirements to be                           DLT program means the Distance
                                 designated an EZ/EC area, but not cho-                        Learning and Telemedicine Loan and
                                 sen because their score was not high                          Grant Program administered by RUS.
                                 enough to be selected.                                          Economic useful life as applied to
                                    Combination loan and grant means a                         equipment and facilities financed
                                 grant in combination with a loan made                         under the DLT program means the
                                 under the DLT program.                                        number of years resulting from divid-
                                    Completed application means an appli-                      ing 100 percent by the depreciation rate
                                 cation that includes all those items                          (expressed as a percent) based on Inter-
                                 specified in §§ 1703.125, 1703.134, and                       nal Revenue Service depreciation rules
                                 1703.144 in form and substance satisfac-                      or recognized telecommunications in-
                                 tory to the Administrator.                                    dustry guidelines.
                                    Computer networks mean computer                              Eligible equipment means computer
                                 hardware and software, terminals, sig-                        hardware and software, audio or video
                                 nal conversion equipment including                            equipment, computer network compo-
                                 both modulators and demodulators, or                          nents, telecommunications terminal
                                 related devices, used to communicate                          equipment, data terminal equipment,
                                 with other computers to process and                           inside wiring, interactive video equip-
                                 exchange data through a telecommuni-                          ment, or other facilities that would
                                 cation network in which signals are                           further telemedicine services or dis-
                                 generated, modified, or prepared for                          tance learning services.

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                                 § 1703.102                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                   Eligible facilities means land, build-                      software, which would be used for edu-
                                 ings, or building construction needed                         cational purposes in connection with
                                 to carry out an eligible distance learn-                      eligible equipment but does not include
                                 ing or telemedicine project for loan fi-                      salaries, benefits, and overhead of med-
                                 nancial assistance only.                                      ical or educational personnel.
                                   Empowerment Zone and Enterprise                               Interactive equipment means equip-
                                 Community (EZ/EC) means any commu-                            ment used to produce and prepare for
                                 nity whose designation as such by                             transmission audio and visual signals
                                 USDA pursuant to 26 U.S.C. 1391 et seq.,                      from at least two distant locations so
                                 is in effect at the time RUS agrees to                        that individuals at such locations can
                                 provide financial assistance.                                 orally and visually communicate with
                                   End user is one or more of the fol-                         each other. Such equipment includes
                                 lowing:                                                       monitors, other display devices, cam-
                                   (1) Rural elementary, secondary                             eras or other recording devices, audio
                                 schools, and other educational institu-                       pickup devices, and other related
                                 tions, such as institutions of higher                         equipment.
                                 education, vocational and adult train-                          Loan means a loan made under the
                                 ing and education centers, libraries,                         DLT program bearing interest at a rate
                                 and teacher training centers, and stu-                        equal to the then current cost-of-
                                 dents, teachers and instructors using                         money to the government.
                                 such rural educational facilities, that                         Loan documents mean the loan agree-
                                 participate in a rural distance learning                      ment, note, and security instrument,
                                 telecommunications program through                            including any amendments and supple-
                                 a project funded under this subpart;                          ments thereto, between RUS and the
                                   (2) Rural hospitals, primary care cen-                      DLT borrower.
                                 ters or facilities, such as medical cen-                        Local exchange carrier means a com-
                                 ters, nursing homes, and clinics, and                         mercial, cooperative or mutual-type
                                 physicians and staff using such rural                         association, or public body that is en-
                                 medical facilities, that participate in a                     gaged in the provision of telephone ex-
                                 rural telemedicine program through a                          change service or exchange access.
                                 project funded under this subpart; and                          Matching contribution means the ap-
                                   (3) Other rural community facilities,                       plicant’s contribution for approved
                                 institutions, or entities that receive                        purposes.
                                 distance learning or telemedicine serv-                         National school lunch program (NSLP)
                                 ices.                                                         means the federally assisted meal pro-
                                   End user site means a facility that is                      gram established under the National
                                 part of a network or telecommuni-                             School Lunch Act of 1946 (42 U.S.C.
                                 cations system that is utilized by end                        1751).
                                 users.                                                          Project means approved purposes for
                                   Financial assistance means a grant,                         which financial assistance has been
                                 combination loan and grant, or loan.                          provided.
                                   GFR means RUS telecommunications                              Project service area means the area in
                                 program General Field Representative.                         which at least 90 percent of the persons
                                   Grant documents means the grant                             to be served by the project are likely to
                                 agreement, including any amendments                           reside.
                                 and supplements thereto, between RUS                            Recipient means a grantee, borrower,
                                 and the grantee.                                              or both of a DLT program grant, loan
                                   Grantee means a recipient of a grant                        or combination loan and grant.
                                 from RUS to carry out the purposes of                           Rural community facility means a fa-
                                 the DLT program.                                              cility such as a school, library, learn-
                                   Guarantee means a guarantee for a                           ing center, training facility, hospital,
                                 loan provided by a RUS borrower or                            or medical facility that provides edu-
                                 other qualified third party.                                  cational or health care benefits pri-
                                   Hub means a facility that is part of a                      marily to residents of rural areas.
                                 network or telecommunications sys-                              RUS means the Rural Utilities Serv-
                                 tem that provides educational or med-                         ice, an agency of the United States De-
                                 ical services to end user sites.                              partment of Agriculture, successor to
                                   Instructional programming means edu-                        the Rural Electrification Administra-
                                 cational material, including computer                         tion.

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                                 Rural Utilities Service, USDA                                                                   § 1703.105

                                    Secretary means the Secretary of Ag-                         Telemedicine means a telecommuni-
                                 riculture.                                                    cations link to an end user through the
                                    Technical assistance means:                                use of eligible equipment which elec-
                                    (1) Assistance in learning to manage,                      tronically links medical professionals
                                 operate, or use equipment or systems;                         at separate sites in order to exchange
                                 and                                                           health care information in audio,
                                    (2) Studies, analyses, designs, re-                        video, graphic, or other format for the
                                 ports, manuals, guides, literature, or                        purpose of providing improved health
                                 other forms of creating, acquiring, or                        care services primarily to residents of
                                 disseminating information.                                    rural areas.
                                    Telecommunications carrier means any                       [64 FR 14357, Mar. 25, 1999, as amended at 67
                                 provider of telecommunications serv-                          FR 3040, Mar. 11, 2002]
                                 ices.
                                                                                               § 1703.103 Applicant eligibility and al-
                                    Telecommunications or electric borrower                          location of funds.
                                 means an entity that has outstanding
                                 RUS or Rural Telephone Bank electric                             (a) To be eligible to receive a grant,
                                 or telecommunications loans or loan                           loan and grant combination, or loan
                                                                                               under this subpart:
                                 guarantees under the provisions of the
                                                                                                  (1) The applicant must be legally or-
                                 Act.
                                                                                               ganized as an incorporated organiza-
                                    Telecommunications      systems    plan                    tion or partnership, an Indian tribe or
                                 means the plan submitted by an appli-                         tribal organization, as defined in 25
                                 cant in accordance with § 1703.125 for                        U.S.C. 450b (b) and (c), a state or local
                                 grants, § 1703.134 for a combination loan                     unit of government, a consortium, as
                                 and grant, or § 1703.144 for loans.                           defined in § 1703.102, or other legal enti-
                                    Telecommunications terminal equipment                      ty, including a private corporation or-
                                 means the assembly of telecommuni-                            ganized on a for profit or not-for profit
                                 cations equipment at the end of a cir-                        basis. Each applicant must provide
                                 cuit or path of a signal, including but                       written evidence of its legal capacity
                                 not limited to facilities that receive or                     to contract with RUS to obtain the
                                 transmit over the air broadcast, sat-                         grant, loan and grant combination, or
                                 ellite, and microwave, normally lo-                           the loan, and comply with all applica-
                                 cated on the premises of the end user,                        ble requirements. If a consortium lacks
                                 that interfaces with telecommuni-                             the legal capacity to contract, each in-
                                 cations transmission facilities, and                          dividual entity must contract with
                                 that is used to modify, convert, encode,                      RUS in its own behalf.
                                 or otherwise prepare signals to be                               (2) The applicant proposes to utilize
                                 transmitted via such telecommuni-                             the financing to:
                                 cations facilities, or that is used to                           (i) Operate a rural community facil-
                                 modify, reconvert, or carry signals re-                       ity; or
                                 ceived from such facilities, the purpose                         (ii) Deliver distance learning or tele-
                                 of which is to accomplish the goal for                        medicine services to entities that oper-
                                 which the circuit or signal was estab-                        ate a rural community facility or to
                                 lished.                                                       residents of rural areas at rates cal-
                                    Telecommunications transmission facili-                    culated to ensure that the benefit of
                                 ties means facilities that transmit, re-                      the financial assistance is passed
                                 ceive, or carry voice, video, or data be-                     through to such entities or to residents
                                 tween the telecommunications ter-                             of rural areas.
                                 minal equipment at each end of the                               (b) Electric or telecommunications
                                 telecommunications circuit or path.                           borrowers are not eligible for grants.
                                 Such facilities include microwave an-                         [64 FR 14357, Mar. 25, 1999, as amended at 67
                                 tennae, relay stations and towers,                            FR 3040, Mar. 11, 2002]
                                 other telecommunications antennae,
                                 fiber-optic cables and repeaters, co-                         § 1703.104   [Reserved]
                                 axial cables, communication satellite
                                 ground station complexes, copper cable                        § 1703.105 Processing of selected appli-
                                 electronic equipment associated with                               cations.
                                 telecommunications          transmissions,                       (a) During the period between the
                                 and similar items.                                            submission of an application and the

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                                 § 1703.105                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 execution of documents, the applicant                         tional assurance that loans will be re-
                                 must inform RUS if the project is no                          paid and the purposes of the loan will
                                 longer viable or the applicant no longer                      be accomplished.
                                 is requesting financial assistance for                          (3) The recipient of a loan will be re-
                                 the project. When the applicant so in-                        quired to execute a security instru-
                                 forms RUS, the selection will be re-                          ment in form and substance satisfac-
                                 scinded or the application withdrawn                          tory to RUS and must, before receiving
                                 and written notice to that effect sent                        any advance of loan funds, provide se-
                                 to the applicant.                                             curity that is adequate, in the opinion
                                   (b) If an application has been selected                     of RUS, to assure repayment, within
                                 and the scope of the project changes
                                                                                               the time agreed, of all loans to the bor-
                                 substantially, the applicant may be re-
                                                                                               rower under the DLT program. This as-
                                 quired to submit a new application to
                                 RUS for review and consideration de-                          surance will generally be provided by a
                                 pending on the degree of change. A new                        first lien upon all facilities and equip-
                                 application will be subject to review in                      ment financed by the loan. RUS may
                                 accordance with this subpart. The fi-                         require additional security as it deems
                                 nancial assistance may not be trans-                          necessary.
                                 ferred by the applicant for use for an-                         (4) Adequate security may also be
                                 other project.                                                provided by third-party guarantees,
                                   (c) If State or local governments                           letters of credit, pledges of revenue, or
                                 raise objections to a proposed project                        other forms of security satisfactory to
                                 under the intergovernmental review                            RUS.
                                 process that are not resolved within 90                         (5) The security instrument and
                                 days of the Administrator’s selection                         other loan documents required by RUS
                                 of the application, the Administrator                         in connection with a loan under the
                                 will rescind the selection and written                        DLT program shall contain such
                                 notice to that effect will be sent to the                     pledges, covenants, and other provi-
                                 applicant. The Administrator, in his                          sions as may, in the opinion of RUS, be
                                 sole discretion may extend the 90 day                         required to secure repayment of the
                                 period if it appears resolution is immi-                      loan.
                                 nent.
                                                                                                 (6) If the project does not constitute
                                   (d) RUS may request additional in-
                                 formation to complete the appropriate                         a complete operating system, the DLT
                                 documents covering financial assist-                          recipient shall provide evidence, in
                                 ance.                                                         form and substance satisfactory to
                                   (e) Financial assistance documents. (1)                     RUS, demonstrating that the recipient
                                 The documents will include a grant                            has sufficient contractual, financing,
                                 agreement for grants; loan documents,                         or other arrangements to assure that
                                 including third party guarantees, notes                       the project will provide adequate and
                                 and security instruments for loans; or                        efficient service.
                                 any other legal documents the Admin-                            (f) Prior to the execution of a grant
                                 istrator deems appropriate, including                         and loan document, RUS reserves the
                                 suggested forms of certifications and                         right to require any changes in the
                                 legal opinions.                                               project or legal documents covering
                                   (2) The grant agreement and the loan                        the project to protect the integrity of
                                 documents will include, among other                           the DLT program and the interests of
                                 things, conditions on the release or ad-                      the government.
                                 vance of funds and include at a min-                            (g) If the applicant fails to submit,
                                 imum, a project description, approved                         within 120 calendar days from the date
                                 purposes, the maximum amount of the                           of RUS’ selection of an application, all
                                 financial    assistance,    supplemental                      of the information that RUS deter-
                                 funds required for the project, and cer-                      mines to be necessary to prepare legal
                                 tain agreements or commitments the
                                                                                               documents and satisfy other require-
                                 applicant may have proposed in its ap-
                                                                                               ments of this subpart, RUS may re-
                                 plication. In addition, the loan docu-
                                                                                               scind the selection of the application.
                                 ments may contain covenants and con-
                                 ditions the Administrator deems nec-                          [64 FR 14357, Mar. 25, 1999; 64 FR 25422, May
                                 essary or desirable to provide addi-                          12, 1999]

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                                 Rural Utilities Service, USDA                                                                   § 1703.108

                                 § 1703.106 Disbursement of loans and                          projects are completed in accordance
                                      grants.                                                  with the approved scope of work and
                                    (a) For financial assistance of $100,000                   that the financial assistance is ex-
                                 or greater, prior to the disbursement of                      pended for approved purposes.
                                 a grant and a loan, the recipient, if it                        (d) Recipients shall diligently mon-
                                 is not a unit of government, will pro-                        itor performance to ensure that time
                                 vide evidence of fidelity bond coverage                       schedules are being met, projected
                                 as required by 7 CFR part 3019.                               work by time periods is being accom-
                                    (b) Grants and loans will be disbursed                     plished, and other performance objec-
                                 to recipients on a reimbursement basis,                       tives are being achieved. Recipients are
                                 or with unpaid invoices for the eligible                      to submit an original and one copy of
                                 purposes contained in this subpart, by                        all project performance reports, includ-
                                 the following process:                                        ing, but not limited to, the following:
                                    (1) An SF 270, ‘‘Request for Advance
                                                                                                 (1) A comparison of actual accom-
                                 or Reimbursement,’’ will be completed
                                                                                               plishments to the objectives estab-
                                 by the recipient and submitted to RUS
                                 not more frequently than once a                               lished for that period;
                                 month;                                                          (2) A description of any problems,
                                    (2) RUS will review the SF 270 for ac-                     delays, or adverse conditions which
                                 curacy when received and will schedule                        have occurred, or are anticipated, and
                                 payment if the form is satisfactory.                          which may affect the attainment of
                                 Payment will ordinarily be made with-                         overall project objectives, prevent the
                                 in 30 days; and                                               meeting of time schedules or objec-
                                    (3) For financial assistance approved                      tives, or preclude the attainment of
                                 during and subsequent to FY 1999,                             particular project work elements dur-
                                 funds will be advanced in accordance                          ing established time periods. This dis-
                                 with 7 CFR 1744.69.                                           closure shall be accompanied by a
                                    (c) The recipient’s share in the cost                      statement of the action taken or
                                 of the project must be disbursed in ad-                       planned to resolve the situation; and
                                 vance of the loan and grant, or if the                          (3) Objectives and timetable estab-
                                 recipient agrees, on a pro rata distribu-                     lished for the next reporting period.
                                 tion basis with financial assistance
                                 during the disbursement period. Recipi-                       § 1703.108   Audit requirements.
                                 ents will not be permitted to provide
                                 their contributions at the end of the                           A recipient of financial assistance
                                 project.                                                      shall provide RUS with an audit for
                                    (d) A combination loan and grant will                      each year, beginning with the year in
                                 be disbursed on a pro rata basis based                        which a portion of the financial assist-
                                 on the respective amounts of financial                        ance is expended, in accordance with
                                 assistance provided.                                          the following:
                                                                                                 (a) If the recipient is a for-profit en-
                                 § 1703.107 Reporting and oversight re-                        tity, a Telecommunications or Electric
                                      quirements.                                              borrower, or any other entity not cov-
                                    (a) A project performance activity re-                     ered by the following paragraph, the
                                 port will be required of all recipients                       recipient shall provide an independent
                                 on an annual basis until the project is                       audit report in accordance with 7 CFR
                                 complete and the funds are expended                           part 1773, ‘‘Policy on Audits of RUS
                                 by the applicant.                                             Borrowers.’’
                                    (b) A final project performance re-                          (b) If the recipient is a State or local
                                 port must be provided by the recipient.                       government, or non-profit organiza-
                                 It must provide an evaluation of the                          tion, the recipient shall provide an
                                 success of the project in meeting the
                                                                                               audit in accordance with 7 CFR part
                                 objectives of the program. The final re-
                                                                                               3052, ‘‘Audits of States, Local Govern-
                                 port may serve as the last annual re-
                                                                                               ments, and Non-Profit Organizations.’’
                                 port.
                                    (c) RUS will monitor recipients, as it                     [64 FR 14357, Mar. 25, 1999; 64 FR 25422, May
                                 determines necessary, to assure that                          12, 1999]




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                                 § 1703.109                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 § 1703.109 Grant and loan administra-                         cation to RUS, providing the reasons
                                     tion.                                                     for such termination, the effective
                                    RUS will conduct reviews as nec-                           date, and, in the case of a partial ter-
                                 essary to determine whether the finan-                        mination, the portion of the financial
                                 cial assistance was expended for ap-                          assistance to be terminated. In the
                                 proved purposes. The recipient is re-                         case of a partial termination, if RUS
                                 sponsible for ensuring that the project                       believes that the remaining portion of
                                 complies with all applicable regula-                          the financial assistance will not ac-
                                 tions, and that the grants and loans are                      complish the approved purposes, then,
                                 expended only for approved purposes.                          RUS may terminate the financial as-
                                 The recipient is responsible for ensur-                       sistance in its entirety, pursuant to
                                 ing that disbursements and expendi-                           the provisions of paragraph (a) of this
                                 tures of funds are properly supported                         section.
                                 by invoices, contracts, bills of sale,
                                 canceled checks, or other appropriate                         § 1703.112 Expedited          telecommuni-
                                 forms of evidence, and that such sup-                             cations loans
                                 porting material is provided to RUS,                            RUS will expedite consideration and
                                 upon request, and is otherwise made                           determination of an application sub-
                                 available, at the recipient’s premises,                       mitted by an RUS telecommunications
                                 for review by the RUS representatives,                        borrower for a loan under the Act or an
                                 the recipient’s certified public account-                     advance of such loan funds to be used
                                 ant, the Office of Inspector General, U.                      in conjunction with financial assist-
                                 S. Department of Agriculture, the Gen-                        ance under subparts E, F, or G of this
                                 eral Accounting Office, and any other                         part. See 7 CFR part 1737 for loans and
                                 official conducting an audit of the re-                       7 CFR part 1744 for advances under this
                                 cipient’s   financial    statements    or                     section.
                                 records, and program performance for
                                 the grants and loans made under this                          §§ 1703.113–1703.119   [Reserved]
                                 subpart. The recipient shall permit
                                 RUS to inspect and copy any records                           Subpart E—Distance Learning and
                                 and documents that pertain to the
                                 project.
                                                                                                 Telemedicine Grant Program

                                 § 1703.110 Changes in project objec-                            SOURCE: 64 FR 14360, Mar. 25, 1999, unless
                                     tives or scope.                                           otherwise noted.
                                    The recipient shall obtain prior writ-
                                 ten approval by RUS for any material                          § 1703.120   [RESERVED]
                                 change to the scope or objectives of the
                                                                                               § 1703.121 Approved          purposes   for
                                 project, including any changes to the                             grants.
                                 scope of work or the budget submitted
                                 to RUS. Any material change shall be                             For distance learning and telemedi-
                                 contained in a revised scope of work                          cine projects, grants shall finance only
                                 plan to be prepared by the recipient,                         the costs for approved purposes. Grants
                                 submitted to, and approved by RUS in                          shall be expended only for the costs as-
                                 writing.                                                      sociated with the initial capital assets
                                                                                               associated with the project. The fol-
                                 § 1703.111 Grant and loan termination.                        lowing are approved grant purposes:
                                    (a) The financial assistance may be                           (a) Acquiring, by lease or purchase,
                                 terminated when RUS and the recipi-                           eligible equipment as defined in
                                 ent agree upon the conditions of the                          § 1703.102;
                                 termination, the effective date of the                           (b) Acquiring instructional program-
                                 termination, and, in the case of a par-                       ming; and
                                 tial termination of the financial assist-                        (c) Providing technical assistance
                                 ance, any unadvanced portion of the fi-                       and instruction for using eligible
                                 nancial assistance to be terminated                           equipment, including any related soft-
                                 and any advanced portion of the finan-                        ware; developing instructional pro-
                                 cial assistance to be returned.                               gramming; providing engineering or
                                    (b) The recipient may terminate the                        environmental studies relating to the
                                 financial assistance by written notifi-                       establishment or expansion of the

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                                 Rural Utilities Service, USDA                                                                   § 1703.124

                                 phase of the project that is being fi-                           (3) To pay salaries, wages, or em-
                                 nanced with the grant (this purpose                           ployee benefits to medical or edu-
                                 shall not exceed 10 percent of the                            cational personnel;
                                 grant).                                                          (4) To pay for the salaries or adminis-
                                                                                               trative expenses of the applicant or the
                                 [64 FR 14357, Mar. 25, 1999, as amended at 67                 project;
                                 FR 3040, Mar. 11, 2002]
                                                                                                  (5) To purchase equipment that will
                                                                                               be owned by the local exchange carrier
                                 § 1703.122      Matching contributions.
                                                                                               or another telecommunications service
                                   (a) The grant applicant’s minimum                           provider unless that service provider is
                                 matching contribution must equal 15                           the applicant.
                                 percent of the grant amount requested                            (6) To duplicate facilities providing
                                 and shall be used for approved purposes                       distance learning or telemedicine serv-
                                 for grants listed in § 1703.121. Matching                     ices in place or to reimburse the appli-
                                 contributions generally must be in the                        cant or others for costs incurred prior
                                 form of cash. However, in-kind con-                           to RUS’ receipt of the completed appli-
                                 tributions solely for the purposes listed                     cation;
                                 in § 1703.121 may be substituted for                             (7) To pay costs of preparing the ap-
                                 cash.                                                         plication package for financial assist-
                                   (b) In-kind items listed in § 1703.121                      ance under this program;
                                 must be non-depreciated or new assets                            (8) For projects whose sole objective
                                 with established monetary values.                             is to provide links between teachers
                                 Manufacturers’ or service providers’                          and students or between medical pro-
                                                                                               fessionals who are located at the same
                                 discounts are not considered in-kind
                                                                                               facility;
                                 matching.
                                                                                                  (9) For site development and the de-
                                   (c) Costs incurred by the applicant,                        struction or alteration of buildings;
                                 or others on behalf of the applicant, for                        (10) For the purchase of land, build-
                                 facilities or equipment installed, or                         ings, or building construction;
                                 other services rendered prior to sub-                            (11) For projects located in areas cov-
                                 mission of a completed application,                           ered by the Coastal Barrier Resources
                                 shall not be considered as an eligible                        Act (16 U.S.C. 3501 et seq.);
                                 in-kind matching contribution.                                   (12) For any purpose that the Admin-
                                   (d) Costs incurred for non-approved                         istrator has not specifically approved;
                                 purposes for grant outlined in § 1703.123                        (13) Except for leases provided for in
                                 shall not be used as an in-kind match-                        § 1703.121, to pay the cost of recurring
                                 ing contribution.                                             or operating expenses for the project;
                                   (e) Any financial assistance from                           or
                                 Federal sources will not be considered                           (14) For any other purposes not spe-
                                 as matching contributions under this                          cifically contained in § 1703.121.
                                 subpart unless there is a Federal statu-                         (b) Except as otherwise provided in
                                 tory exception specifically authorizing                       § 1703.112, grants shall not be used to fi-
                                 the Federal financial assistance to be                        nance a project, in part, when the suc-
                                 considered as a matching contribution.                        cess of the project is dependent upon
                                                                                               the receipt of additional financial as-
                                 [64 FR 14357, Mar. 25, 1999, as amended at 67                 sistance under this subpart or is de-
                                 FR 3040, Mar. 11, 2002]                                       pendent upon the receipt of other fi-
                                                                                               nancial assistance that is not assured.
                                 § 1703.123 Nonapproved purposes for
                                     grants.                                                   [64 FR 14360, Mar. 25, 1999; 64 FR 25422, May
                                                                                               12, 1999, as amended at 64 FR 25423, May 12,
                                   (a) A grant made under this subpart                         1999; 67 FR 3040, Mar. 11, 2002]
                                 will not be provided or used:
                                   (1) To cover the costs of acquiring,                        § 1703.124 Maximum and minimum
                                 installing    or   constructing   tele-                           grant amounts.
                                 communications transmission facili-                              Applications for grants under this
                                 ties;                                                         subpart will be subject to limitations
                                   (2) To pay for medical equipment not                        on the proposed amount of grant funds.
                                 having telemedicine as its essential                          The Administrator will establish the
                                 function;                                                     maximum amount of a grant to be

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                                 § 1703.125                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 made available to an individual recipi-                          (9) A listing of the location of each
                                 ent for each fiscal year under this sub-                      end user site (city, town, village, bor-
                                 part by publishing notice of the max-                         ough, or rural areas) plus the State.
                                 imum amount in the FEDERAL REG-                                  (c) Scoring criteria documentation.
                                 ISTER not sooner than 45 days before                          Each grant applicant must address and
                                 the period for accepting applications                         provide documentation on how it meets
                                 begins. The minimum amount of a                               each of the scoring criteria contained
                                 grant is $50,000.                                             in § 1703.126.
                                                                                                  (d) A scope of work. The scope of work
                                 § 1703.125 Completed application.                             must include, at a minimum:
                                    The following items are required to                           (1) The specific activities to be per-
                                 be submitted to RUS in support of an                          formed under the project;
                                 application for grant funds:                                     (2) Who will carry out the activities;
                                    (a) An application for Federal Assist-                        (3) The time-frames for accom-
                                 ance. A completed Standard Form 424.                          plishing the project objectives and ac-
                                    (b) An executive summary of the                            tivities; and
                                 project. The applicant must provide                              (4) A budget for all capital expendi-
                                 RUS with a general project overview                           tures reflecting the line item costs for
                                 that addresses the following 8 cat-                           approved purposes for both the grant
                                 egories:                                                      funds and other sources of funds for the
                                    (1) A description of why the project is                    project. Separately, the budget must
                                 needed;                                                       specify any line item costs that are
                                    (2) An explanation of how the appli-                       nonapproved purposes for grants as
                                 cant will address the need cited in                           contained in § 1703.123.
                                 paragraph (b)(1) of this section, why                            (e) Financial information and sustain-
                                 the applicant requires financial assist-                      ability. The applicant must provide a
                                 ance, the types of educational or med-                        narrative description demonstrating:
                                 ical services to be offered by the                            feasibility of the project, including
                                 project, and the benefits to rural resi-                      having sufficient resources and exper-
                                 dents;                                                        tise necessary to undertake and com-
                                    (3) A description of the applicant,                        plete the project; and, how the project
                                 documenting eligibility in accordance                         will be sustained following completion
                                 with § 1703.103;                                              of the project.
                                    (4) An explanation of the total                               (f) A statement of experience. The ap-
                                 project cost including a breakdown of                         plicant must provide a written nar-
                                 the grant required and the source of                          rative (not exceeding three single
                                 matching contribution and other finan-                        spaced pages) describing its dem-
                                 cial assistance for the remainder of the                      onstrated capability and experience, if
                                 project;                                                      any, in operating an educational or
                                    (5) A statement specifying whether                         health care endeavor and any project
                                 the project is either a distance learning                     similar to the project. Experience in a
                                 or telemedicine facility as defined in                        similar project is desirable but not re-
                                 § 1703.102. If the project provides both                      quired.
                                 distance learning and telemedicine                               (g) Funding commitment from other
                                 services, the applicant must identify                         sources. The applicant must provide
                                 the predominant use of the system;                            evidence, in form and substance satis-
                                    (6) A general overview of the tele-                        factory to RUS, that funding agree-
                                 communications system to be devel-                            ments have been obtained to ensure
                                 oped, including the types of equipment,                       completion of the project. These agree-
                                 technologies, and facilities used;                            ments shall be sufficient to ensure:
                                    (7) A description of the participating                        (1) Payment of all proposed expendi-
                                 hubs and end user sites and the number                        tures for the project;
                                 of rural residents that will be served by                        (2) All required matching contribu-
                                 the project at each end user site; and                        tion in 1703.120;
                                    (8) A certification by the applicant                          (3) any additional matching funding
                                 that facilities constructed with grants                       provided       in     accordance     with
                                 do not duplicate adequate established                         § 1703.126(b)(4); and
                                 telemedicine or distance learning serv-                          (4) Any other funds necessary to com-
                                 ices.                                                         plete the project.

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                                 Rural Utilities Service, USDA                                                                  § 1703.125

                                   (h) A telecommunications system plan.                          (6) E.O.s 12549 and 12689, Debarment
                                 A telecommunications system plan                              and Suspension;
                                 consisting of the following:                                     (7) Byrd Anti-Lobbying Amendment
                                   (1) The capabilities of the tele-                           (31 U.S.C. 1352).
                                 communications terminal equipment,                               (j) Environmental impact and historic
                                 including a description of the specific                       preservation. (1) The applicant must
                                 equipment which will be used to de-                           provide details of the project’s impact
                                 liver the proposed service. The appli-                        on the environment and historic pres-
                                 cant must document discussions with                           ervation. Grants made under this part
                                 various technical sources which could                         are subject to part 1794 of this chapter
                                 include consultants, engineers, product                       which contains RUS’ policies and pro-
                                 vendors, or internal technical experts,                       cedures for implementing a variety of
                                 provide detailed cost estimates for op-                       Federal statutes, regulations, and exec-
                                 erating and maintaining the end user                          utive orders generally pertaining to
                                 equipment and provide evidence that                           the protection of the quality of the
                                 alternative     equipment     and  tech-                      human environment that are listed in 7
                                 nologies were evaluated.                                      CFR 1794.1. The application shall con-
                                   (2) A listing of the proposed tele-                         tain a separate section entitled ‘‘Envi-
                                 communications terminal equipment,                            ronmental Impact of the Project.’’
                                 telecommunications transmission fa-                              (2) The applicant may use the ‘‘Envi-
                                 cilities, data terminal equipment,                            ronmental Questionnaire,’’ available
                                 interactive video equipment, computer                         from RUS, to assist in complying with
                                 hardware and software systems, and                            the requirements of this section.
                                 components that process data for                                 (k) Evidence of legal authority and ex-
                                 transmission via telecommunications,                          istence. The applicant must provide evi-
                                 computer network components, com-                             dence of its legal existence and author-
                                 munication satellite ground station                           ity to enter into a grant agreement
                                 equipment, or any other elements of                           with RUS and perform the activities
                                 the telecommunications system de-                             proposed under the grant application.
                                 signed to further the purposes of this                           (l) Federal debt certification. The ap-
                                 subpart, that the applicant intends to                        plicant must provide a certification
                                 build or fund using RUS financial as-                         that it is not delinquent on any obliga-
                                 sistance.                                                     tion owed to the government (7 CFR
                                   (3) A description of the consultations                      parts 3016 and 3019).
                                 with the appropriate telecommuni-                                (m) Consultation with USDA State Di-
                                 cations carriers (including other inter-                      rector, Rural Development. The applicant
                                 exchange carriers, cable television op-                       must provide evidence that it has con-
                                 erators, enhanced service providers,                          sulted with the USDA State Director,
                                 providers of satellite services and tele-                     Rural Development, concerning the
                                 communications equipment manufac-                             availability of other sources of funding
                                 turers and distributors) and the antici-                      available at the State or local level.
                                 pated role of such providers in the pro-                         (n) State strategic plan conformity. The
                                 posed telecommunications system.                              applicant must provide evidence from
                                   (i) Compliance with other Federal stat-                     the USDA State Director, Rural Devel-
                                 utes. The applicant must provide evi-                         opment, that the application conforms
                                 dence of compliance with other Federal                        with the State strategic plan as pre-
                                 statutes and regulations including, but                       pared under section 381D of the Con-
                                 not limited to the following:                                 solidated Farm and Rural Development
                                   (1) E.O. 11246, Equal Employment Op-                        Act (7 U.S.C. 1921 et seq.). The applicant
                                 portunity, as amended by E.O. 11375                           should indicate if such a plan does not
                                 and as supplemented by regulations                            exist.
                                 contained in 41 CFR part 60;                                     (o) Supplemental information. The ap-
                                   (2) Architectural barriers;                                 plicant should provide any additional
                                   (3) Flood hazard area precautions;                          information it considers relevant to
                                   (4) Assistance and Real Property Ac-                        the project and likely to be helpful in
                                 quisition Policies Act of 1970;                               determining the extent to which the
                                   (5) Drug-Free Workplace Act of 1998                         project would further the purposes of
                                 (41 U.S.C. 701);                                              the 1996 Act.

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                                 § 1703.126                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                   (p) Additional information required by                      NSLP percentage less than 50 percent
                                 RUS. The applicant must provide any                           as determined in paragraph (b)(3) of
                                 additional information RUS may con-                           this section may receive up to an addi-
                                 sider relevant to the application and                         tional 10 points based on information
                                 necessary to adequately evaluate the                          submitted that evidences the economic
                                 application. RUS may request modi-                            need of the project’s service area. This
                                 fications or changes, including changes                       determination will be made by RUS
                                 in the amount of financial assistance                         based on information submitted by the
                                 requested, in any proposal described in                       applicant under paragraph (b)(1) of this
                                 an application submitted under this                           section.
                                 subpart.                                                        (ii) RUS will consider the extent of
                                 [64 FR 14360, Mar. 25, 1999, as amended at 64
                                                                                               the applicant’s documentation explain-
                                 FR 25423, May 12, 1999; 67 FR 3040, Mar. 11,                  ing the economic, education, or health
                                 2002]                                                         care challenges facing the community;
                                                                                               the applicant’s proposed plan to ad-
                                 § 1703.126 Criteria for scoring grant                         dress these challenges; how the grant
                                      applications.                                            can help; and why the applicant cannot
                                    (a) Criteria. The criteria in this sec-                    complete the project without a grant.
                                 tion will be used by RUS to score appli-                      RUS will also consider the extent to
                                 cations that have been determined to                          which the applicant provides evidence
                                 be in compliance with the require-                            that economic, education, or health
                                 ments of this subpart. Applications for                       care challenges could not be addressed
                                 grants must meet the rurality require-                        without employing advanced tech-
                                 ments in paragraph (b)(2)(iv) of this                         nology. The Administrator will also
                                 section and address each of the fol-                          consider any support by recognized ex-
                                 lowing scoring criteria:                                      perts in the related educational or
                                    (1) The need for services and benefits                     health care field, any documentation
                                 derived from services (up to 55 points);                      substantiating the educational or
                                    (2) The comparative rurality of the                        health care underserved nature of the
                                 project service area (up to 45 points);                       applicant’s proposed service area, and
                                    (3) The economic need of the appli-                        any justification for specific edu-
                                 cant’s service area as estimated by the                       cational or medical services which are
                                 NSLP or other supplemental objective                          needed and will provide direct benefits
                                 criteria (up to 35 points);                                   to rural residents.
                                    (4) The ability of the applicant to le-                      (A) Some examples of benefits to be
                                 verage resources (up to 35 points);                           provided by the project include, but are
                                    (5) Innovativeness of the project (up                      not limited to:
                                 to 15 points);                                                  (1) Improved educational opportuni-
                                    (6) The cost effectiveness of the sys-                     ties for a specified number of students;
                                 tem (up to 35 points);                                          (2) Travel time and money saved by
                                    (7) Project participation in EZ/ECs                        telemedicine diagnoses;
                                 (Empowerment Zone and Enterprise                                (3) Number of doctors retained in
                                 Communities) and Champion Commu-                              rural areas;
                                 nities (up to 15 points).                                       (4) Number of additional students
                                    (b) Scoring criteria:                                      electing to attend higher education in-
                                    (1) The need for services and benefits                     stitutions;
                                 derived from services—Up to 55 Points. (i)                      (5) Lives saved due to prompt med-
                                 This criterion will be used by RUS to                         ical diagnoses and treatment;
                                 score applications based on the docu-                           (6) New education courses offered, in-
                                 mentation in support of the need for                          cluding college level courses;
                                 services, benefits derived from the                             (7) Expanded use of educational fa-
                                 services proposed by the project, and                         cilities such as night training;
                                 local community involvement in plan-                            (8) Number of patients receiving tele-
                                 ning, implementing, and financial as-                         medicine diagnoses;
                                 sistance of the project. Applicants may                         (9) Provision of training, information
                                 receive up to 45 points for documenting                       resources, library assets, adult edu-
                                 the need for services and benefits de-                        cation, lifetime learning, community
                                 rived from service as explained in this                       use of technology, jobs, connection to
                                 section. Applicants with an average                           region, nation, and world.

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                                 Rural Utilities Service, USDA                                                                  § 1703.126

                                   (B) Other matters that will be consid-                        (C) Mid-Rural Area means any area
                                 ered by RUS under this criterion in-                          of the United States included within
                                 clude:                                                        the boundaries of any incorporated or
                                   (1) That rural residents, and other                         unincorporated city, village, or bor-
                                 beneficiaries, desire the educational or                      ough having a population over 10,000
                                 medical services to be provided by the                        and not in excess of 20,000 inhabitants.
                                 project. A strong indication of need is                         (D) Urban Area means any area of
                                 the willingness of local end users or in-                     the United States included within the
                                 stitutions, to the extent possible, to                        boundaries of any incorporated or un-
                                 contribute to the capital costs of estab-                     incorporated city, village, or borough
                                 lishing the project. This could include                       having a population in excess of 20,000
                                 letters of financial commitment to-                           inhabitants.
                                 ward the project from local institu-                            (ii) There are a total of 45 possible
                                 tions.                                                        points for this criterion. Each end user
                                   (2) The extent of the project’s plan-                       site will receive points based on its lo-
                                 ning, development, and support by                             cation in accordance with paragraph
                                 local residents and institutions. This                        (b)(2)(i) of this section. If a hub is uti-
                                 may include evidence of community in-                         lized as an end user site, the hub will
                                 volvement, as exemplified in commu-                           be considered as an end user site. The
                                 nity meetings, public forums, and sur-                        applicant will receive points as follows:
                                 veys. In addition, applicants should                            (A) If the end user site is located in
                                 provide evidence of local residents’ par-                     an Exceptionally Rural Area, it will re-
                                 ticipation in the project planning and                        ceive 45 points.
                                 development.                                                    (B) If the end user site is located in a
                                   (3) The extent to which the applica-                        Rural Area, it will receive 30 points.
                                 tion addresses the problems of popu-                            (C) If the end user site is located in a
                                 lation out-migration and how the                              Mid-Rural Area, it will receive 15
                                 project seeks to slow, halt, or prevent                       points.
                                 population loss.                                                (D) If the end user site is located in
                                   (4) The extent to which the applica-                        an Urban Area, it will receive 0 points.
                                 tion is consistent with the State stra-                         (iii) The total score for this criterion
                                 tegic plan prepared by the Rural Devel-                       will be based on the average score for
                                 opment State Director of the United                           all the end user sites included in the
                                 States Department of Agriculture.                             project.
                                   (2) The comparative rurality of the                           (iv) An application must receive a
                                 project service area—Up to 45 Points.                         minimum of 20 points as an average
                                 This criterion will be used to evaluate                       score for all the end user sites under
                                 the relative rurality of service areas                        this criterion to be eligible for a grant.
                                 for various projects. Under this system,                        (3) The economic need of the applicant’s
                                 the end user sites and hubs (as defined                       service area as estimated by NSLP—Up to
                                 in § 1703.102) contained within the                           35 points. This criterion will be used to
                                 project service area are identified and                       evaluate the relative financial need of
                                 given a score according to the popu-                          the applicant, community, and project.
                                 lation of the area where the end user                         All applicants are required to provide
                                 sites are located.                                            the applicable percentage of students
                                   (i) The following definitions are used                      eligible to participate in the NSLP for
                                 in the evaluation of rurality:                                each area to be served by the end user
                                   (A) Exceptionally Rural Area means                          site. The appropriate State or local or-
                                 any area of the United States not in-                         ganization administering the program
                                 cluded within the boundaries of any in-                       must certify the percentages as being
                                 corporated or unincorporated city, vil-                       correct. The applicant must provide
                                 lage, or borough having a population in                       RUS with a listing of the location of
                                 excess of 5,000 inhabitants.                                  each end user site (city, town, village,
                                   (B) Rural Area means any area of the                        borough or rural area plus the State)
                                 United States included within the                             discussing how the appropriate NSLP
                                 boundaries of any incorporated or un-                         percentage was determined in accord-
                                 incorporated city, village, or borough                        ance with this section. These percent-
                                 having a population over 5,000 and not                        ages may be obtained from the State or
                                 in excess of 10,000 inhabitants.                              local organization that administers the

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                                 § 1703.126                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 program and must be certified by that                         imum matching contribution of 15 per-
                                 organization as being correct. For pur-                       cent as required by § 1703.122. The appli-
                                 poses of this subpart, the NSLP per-                          cant must include evidence, from au-
                                 centage will reflect the percentage of                        thorized representatives of the sources,
                                 eligibility rather than the percentage                        of a commitment that the funds are
                                 of actual participation.                                      available and will be used for the
                                   (i) The following guidelines will be                        project. The applicant will receive
                                 used to determine the applicable NSLP                         points as follows:
                                 percent for a particular application:                           (i) Matching contribution for ap-
                                   (A) Public schools or non-profit pri-                       proved purposes greater than 15 per-
                                 vate schools of high school grade or                          cent, but less than or equal to 30 per-
                                 under will use the actual eligibility                         cent of the grant requested—0 points.
                                 percentage for that particular school.                          (ii) Matching contribution for ap-
                                   (B) Schools and institutions of higher                      proved purposes greater than 30 per-
                                 learning ineligible to participate in the                     cent, but less than or equal to 50 per-
                                 NSLP and non-school end user sites                            cent of the grant requested—15 points.
                                 (medical facilities, libraries, etc.) will                      (iii) Matching contribution for ap-
                                 use the eligibility percentage of all                         proved purposes greater than 50 per-
                                 students in the school district where                         cent, but less than or equal to 75 per-
                                 the end user will be located.                                 cent of the grant requested—25 points.
                                   (C) Percentage ratios will be rounded
                                                                                                 (iv) Matching contribution for ap-
                                 up to the next highest or rounded down
                                                                                               proved purposes greater than 75 per-
                                 to the next lowest whole number for
                                                                                               cent, but less than or equal to 100 per-
                                 fraction of percentages at or greater
                                                                                               cent of the grant requested—30 points.
                                 than .5 or less than .5, respectively.
                                                                                                 (v) Matching contribution for a grant
                                   (D) The project NSLP percentage will
                                                                                               for approved purposes greater than 100
                                 be determined by the average of the
                                                                                               percent of the grant requested—35
                                 NSLP percentages of the end user sites.
                                                                                               points.
                                 If end user sites fall within different
                                 percentile categories, the eligibility                          (5) Innovativeness of the project—Up to
                                 percentages associated with each end                          15 points. This criterion will be used to
                                 user site will be averaged to determine                       evaluate the innovativeness of applica-
                                 the percentile category. For purposes                         tion based on documentation that
                                 of averaging, if a hub is also utilized as                    shows how the project utilizes ad-
                                 an end user site, the hub will be consid-                     vanced     telecommunications       in  a
                                 ered as an end user site.                                     unique way to address the needs of the
                                   (ii) The applicant will receive points                      community. Innovativeness should be
                                 as follows:                                                   addressed in the context of how the
                                   (A) NSLP percentage greater than or                         project will deliver distance learning
                                 equal to 75 percent—35 points                                 or telemedicine services more effec-
                                   (B) NSLP percentage greater than or                         tively or at a lower cost. The following
                                 equal to 50 percent but less than 75 per-                     issues may be addressed to show how
                                 cent—25 points                                                the project differs from a typical dis-
                                   (C) NSLP percentage greater than or                         tance learning and telemedicine net-
                                 equal to 25 percent but less than 50 per-                     work as follows:
                                 cent—15 points                                                  (i) The extent to which the project
                                   (D) NSLP percentage less than 25%                           differs from a technical standpoint;
                                 percent—0 points                                                (ii) The extent to which the project
                                   (4) The ability of the applicant to le-                     differs from an educational or medical
                                 verage financial resources—Up to 35                           programmatic standpoint;
                                 points. This criterion will be used to                          (iii) The extent to which the project
                                 evaluate the ability of the applicant to                      reflects a unique adaptation of tech-
                                 provide a matching contribution for                           nology based on the special needs or
                                 the project using other non-Federal fi-                       circumstances of the proposed area to
                                 nancial    assistance.     Documentation                      be served by the project; and
                                 submitted in support of the application                         (iv) The potential of the project to
                                 should reflect any additional financial                       influence or lead changes in how tele-
                                 support for the project from non-Fed-                         communications services can be deliv-
                                 eral sources above the applicant’s min-                       ered in other areas.

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                                 Rural Utilities Service, USDA                                                                   § 1703.127

                                    (6) The cost-effectiveness of the                          of end user sites within an EZ/EC and
                                 project—Up to 35 points. This criterion                       Champion Community. Ten (10) points
                                 will be used to evaluate the cost effec-                      will be assigned if at least one end user
                                 tiveness of the application based on the                      site is located in an EZ/EC. Five (5)
                                 extent that cost-efficiency is consid-                        points will be assigned if at least one
                                 ered in delivering the services in the                        end user site is located in a Champion
                                 project. The following issues should be                       Community.
                                 addressed under this criterion:
                                                                                               [64 FR 14360, Mar. 25, 1999; 64 FR 25422, May
                                    (i) The extent to which the applicant
                                                                                               12, 1999, as amended at 67 FR 3040, Mar. 11,
                                 has considered various technological                          2002; 67 FR 16011, Apr. 4, 2002]
                                 options for delivering the services. The
                                 applicant must provide sufficient docu-                       § 1703.127   Application selection provi-
                                 mentation reflecting accepted analyt-                             sions.
                                 ical and financial methodologies to
                                 substantiate its choice of technology                           (a) Applications will be selected for
                                 as the most cost-effective option. RUS                        approval based on scores assigned,
                                 will consider the applicant’s docu-                           availability of funds, and the provi-
                                 mentation and analysis comparing var-                         sions of this section. RUS will make
                                 ious systems and technologies.                                determinations regarding the reason-
                                    (ii) Whether buying or leasing spe-                        ableness of all numbers; dollar levels;
                                 cific equipment is more cost effective.                       rates; the nature and design of the
                                    (iii) The extent to which the project                      project; costs; location; and other char-
                                 will utilize other existing networks at                       acteristics of the application and the
                                 the regional, statewide, national or                          project to determine the number of
                                 international levels. To the extent pos-                      points assigned to a grant application
                                 sible, educational and health care net-                       for all selection criteria.
                                 works should be designed to utilize the                         (b) Regardless of the number of
                                 widest practicable number of other net-                       points an application receives in ac-
                                 works that expand the capabilities of                         cordance with § 1703.126, the Adminis-
                                 the project, thereby affording rural                          trator may, based on a review of the
                                 residents opportunities that may not                          applications in accordance with the re-
                                 be available at the local level. The                          quirements of this subpart:
                                 ability to connect to the Internet alone                        (1) Limit the number of applications
                                 cannot be used as the sole basis to ful-                      selected for projects located in any one
                                 fill this criteria.                                           State during a fiscal year;
                                    (iv) The extent to which the facilities                      (2) Limit the number of selected ap-
                                 being constructed with financial assist-                      plications for a particular project;
                                 ance, particularly financial assistance                         (3) Select an application receiving
                                 under this chapter provided to entities                       fewer points than another higher scor-
                                 other than the applicant, will be uti-                        ing application if there are insufficient
                                 lized to extend or enhance the benefits                       funds during a particular funding pe-
                                 of the project.                                               riod to select the higher scoring appli-
                                    (v) The extent to which the project                        cation. In this case, however, the Ad-
                                 utilizes existing telecommunications                          ministrator will provide the applicant
                                 transmission facilities that could pro-                       of the higher scoring application the
                                 vide the transmission path for the                            opportunity to reduce the amount of
                                 needed services. For projects that do                         its grant request to the amount of
                                 not utilize existing transmission facili-                     funds available. If the applicant agrees
                                 ties, RUS will consider documentation                         to lower its grant request, it must cer-
                                 explaining the necessity of this option.                      tify that the purposes of the project
                                 RUS will also consider any agreements                         can be met, and the Administrator
                                 between the applicant and other enti-                         must determine the project is finan-
                                 ties for sharing transmission facilities                      cially feasible at the lower amount in
                                 to lower the fixed costs of such facili-                      accordance with § 1703.125(e)(1). An ap-
                                 ties.                                                         plicant or multiple applicants affected
                                    (7) Project participation in EZ/ECs and                    under this paragraph will have the op-
                                 champion communities—(Up to 15 Points).                       portunity to be considered for loan fi-
                                 This criterion will be used by RUS to                         nancing in accordance with subparts F
                                 score applications based on the number                        and G of this part.

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                                 § 1703.128                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                   (c) RUS will not approve a grant if                         vided 15 days from the date of RUS’ let-
                                 RUS determines that:                                          ter to respond, provide clarification, or
                                   (1) The applicant’s proposal does not                       make any adjustments or corrections
                                 indicate financial feasibility or is not                      to the project. If, in the opinion of the
                                 sustainable in accordance with the re-                        Administrator, the applicant fails to
                                 quirements of § 1703.125(e)(1);                               adequately respond to any determina-
                                   (2) The applicant’s proposal indicates                      tions or other findings made by the Ad-
                                 technical flaws, which, in the opinion                        ministrator, the project will not be
                                 of RUS, would prevent successful im-                          funded, and the applicant will be noti-
                                 plementation, operation, or sustain-                          fied of this determination. If the appli-
                                 ability of the project;                                       cant does not agree with this finding
                                   (3) Other applications would provide                        an appeal may be filed in accordance
                                 more benefit to rural America based on                        with § 1703.129.
                                 a review of the financial and technical                         (g) Grantees shall comply with all ap-
                                 information submitted in accordance                           plicable provisions of 7 CFR parts 3015,
                                 with § 1703.125(e).                                           3016, and 3019.
                                   (4) Any other aspect of the appli-                          [64 FR 14360, Mar. 25, 1999; 64 FR 25422, May
                                 cant’s proposal fails to adequately ad-                       12, 1999]
                                 dress any requirement of this subpart
                                 or contains inadequacies which would,                         § 1703.128 Submission of applications.
                                 in the opinion of RUS, undermine the                             (a) Applications for grants shall be
                                 ability of the project to meet the gen-                       submitted to the RUS, U.S. Depart-
                                 eral purpose of this subpart or comply                        ment of Agriculture, 1400 Independence
                                 with policies of the DLT Program con-                         Avenue, SW., STOP 1590, Washington,
                                 tained in § 1703.101.                                         DC 20250–1590. Applications should be
                                   (d) Grant applications will be ranked                       marked ‘‘Attention: Assistant Admin-
                                 by the type of application (health care                       istrator,   Telecommunications      Pro-
                                 or educational) and total points scored.                      gram’’.
                                 Grants available for medical and edu-                            (b) Applications must be submitted
                                 cational applicants may be allocated                          to RUS postmarked not later than the
                                 based on the total number of medical                          application filing deadline established
                                 and educational applications scoring in                       by the Administrator if the applica-
                                 the top 50 percent of all applications                        tions are to be considered during the
                                 received for that fiscal year. Based on                       period for which the application was
                                 the number and type of applications re-                       submitted. The deadline for submission
                                 ceived, applications may be ranked                            of applications each fiscal year will be
                                 only in one category based on the pre-                        published, and provided through other
                                 dominant use of the project.                                  notices, by RUS in the FEDERAL REG-
                                   (e) RUS may reduce the amount of                            ISTER, at least 30 days before the dead-
                                 the applicant’s grant based on insuffi-                       line occurs. It is suggested that appli-
                                 cient program funding for the fiscal                          cations be submitted prior to the re-
                                 year in which the project is reviewed.                        spective deadline to ensure they can be
                                 RUS will discuss its findings infor-                          reviewed and considered complete by
                                 mally with the applicant and make                             the deadline. RUS will review each ap-
                                 every effort to reach a mutually ac-                          plication for completeness in accord-
                                 ceptable agreement with the applicant.                        ance with § 1703.125, and notify the ap-
                                 Any discussions with the applicant and                        plicant, within 15 working days of the
                                 agreements made with regard to a re-                          receipt of the application, of the re-
                                 duced grant amount will be confirmed                          sults of this review, citing any infor-
                                 in writing, and these actions shall be                        mation that is incomplete. To be con-
                                 deemed to have met the notification                           sidered for a grant, the applicant must
                                 requirements set forth in paragraph (f)                       submit the information to complete
                                 of this section.                                              the application within 15 working days
                                   (f) RUS will provide the applicant                          of the date of RUS’ written response. If
                                 with an explanation of any determina-                         the applicant has submitted an applica-
                                 tions made with regard to paragraphs                          tion prior to the application filing
                                 (c)(1) through (c)(4) of this section prior                   deadline, the applicant will have 15
                                 to making final project selections for                        working days from RUS’ response or
                                 the year. The applicant will be pro-                          until the application filing deadline to

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                                 Rural Utilities Service, USDA                                                                  § 1703.131

                                 submit information, whichever pro-                            Subpart F—Distance Learning and
                                 vides the applicant more time. If the                            Telemedicine    Combination
                                 applicant fails to submit such informa-                          Loan and Grant Program
                                 tion by the appropriate deadline, the
                                 application will be considered during
                                                                                                 SOURCE: 64 FR 14366, Mar. 25, 1999, unless
                                 the next established application period.                      otherwise noted.
                                    (c) All applicants must submit an
                                 original and two copies of a completed                        § 1703.130 Use of combination loan and
                                 application. Applicants must also sub-                             grant.
                                 mit a copy of the application to the                             (a) A combination loan and grant
                                 State government point of contact, if                         may be used by eligible organizations
                                 one has been designated for the State,                        as defined in § 1703.103 for distance
                                 at the same time it submits an applica-                       learning and telemedicine projects to
                                 tion to RUS. All applications must in-                        finance 100 percent of the cost of ap-
                                 clude the information required by                             proved purposes contained in § 1703.131
                                 § 1703.125.                                                   provided that no financial assistance
                                                                                               may exceed the maximum amount for
                                 § 1703.129      Appeals.                                      the year in which the combination loan
                                   All qualifying applications under this                      and grant is made.
                                 subpart will be scored based on the cri-                         (b) Applicants must meet the min-
                                 teria contained in § 1703.126. Awards                         imum eligibility requirement for deter-
                                 will be made by RUS based on the high-                        mining the extent to which the project
                                 est ranking applications and the                              serves rural areas as determined in
                                 amount of financial assistance avail-                         § 1703.126(b)(2) (the applicant must re-
                                 able for grants. All applicants will be                       ceive at least 20 points to be eligible to
                                 notified in writing of the score each ap-                     receive financial assistance under this
                                 plication receives, and included in this                      subpart).
                                 notification will be a tentative min-                         § 1703.131 Approved purposes for a
                                 imum required score to receive finan-                              combination loan and grant.
                                 cial assistance. If the score received by
                                                                                                  The approved purposes for a combina-
                                 the applicant could result in the denial
                                                                                               tion loan and grant are:
                                 of its application, or if its score, while
                                                                                                  (a) Acquiring, by lease or purchase,
                                 apparently sufficient to qualify for fi-                      eligible equipment or facilities as de-
                                 nancial assistance, may be surpassed                          fined in § 1703.102;
                                 by the score awarded to a competing                              (b) Acquiring instructional program-
                                 application after appeal, that applicant                      ming;
                                 may appeal its numerical scoring. Any                            (c) Providing technical assistance
                                 appeal must be based on inaccurate                            and instruction for using eligible
                                 scoring of the application by RUS and                         equipment, including any related soft-
                                 no new information or data that was                           ware; developing instructional pro-
                                 not included in the original application                      gramming; providing engineering or
                                 will be considered. The appeal must be                        environmental studies relating to the
                                 made, in writing, within 10 days after                        establishment or expansion of the
                                 the applicant is notified of the scoring                      phase of the project that is being fi-
                                 results. Appeals shall be submitted to                        nanced with a combination loan and
                                 the Administrator, RUS, U.S. Depart-                          grant (this purpose shall not exceed 10
                                 ment of Agriculture, 1400 Independence                        percent of the total requested financial
                                 Ave., SW., STOP 1590, Washington, DC                          assistance);
                                 20250–1590. Thereafter, the Adminis-                             (d) Paying for medical or educational
                                 trator will review the original scoring                       equipment and facilities that are
                                 to determine whether to sustain, re-                          shown to be necessary to implement
                                 verse, or modify the original scoring                         the project, including vehicles utilizing
                                 determination. Final determinations                           distance learning and telemedicine
                                 will be made after consideration of all                       technology to deliver educational and
                                 appeals. The Administrator’s deter-                           health care services. The applicant
                                 mination will be final. A copy of the                         must demonstrate that such items are
                                 Administrator’s decision will be fur-                         necessary to meet the purposes under
                                 nished promptly to the applicant.                             this subpart and financial assistance

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                                 § 1703.132                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 for such equipment and facilities is not                      local exchange carrier or other tele-
                                 available from other sources at a cost                        communications service provider;
                                 which would not adversely affect the                             (4) To duplicate facilities providing
                                 economic viability of the project;                            distance learning or telemedicine serv-
                                   (e) Providing links between teachers                        ices in place or to reimburse the appli-
                                 and students or medical professionals                         cant or others for costs incurred prior
                                 who are located at the same facility,                         to RUS’ receipt of the completed appli-
                                 provided that such facility receives or                       cation;
                                 provides distance learning or telemedi-                          (5) For projects located in areas cov-
                                 cine services as part of a distance                           ered by the Coastal Barrier Resources
                                 learning or telemedicine network                              Act (16 U.S.C. 3501 et seq.);
                                 which meets the purposes of this sub-                            (6) For any purpose that the Admin-
                                 part;                                                         istrator has not specifically approved;
                                   (f) Providing for site development                             (7) Except for leases (see § 1703.131), to
                                 and alteration of buildings in order to                       pay the cost of recurring or operating
                                 meet the purposes of this subpart. Fi-                        expenses for the project; or,
                                 nancial assistance for this purpose                              (8) For any other purposes not spe-
                                 must be necessary and incidental to                           cifically outlined in § 1703.131.
                                 the total amount of financial assist-
                                                                                                  (b) Except as otherwise provided in
                                 ance requested;
                                                                                               § 1703.112, funds shall not be used to fi-
                                   (g) Purchasing of land, buildings, or
                                                                                               nance a project, in part, when the suc-
                                 building construction determined by
                                                                                               cess of the project is dependent upon
                                 RUS to be necessary and incidental to
                                                                                               the receipt of additional financial as-
                                 the project. The applicant must dem-
                                                                                               sistance under this subpart or is de-
                                 onstrate that financial assistance fund-
                                                                                               pendent upon the receipt of other fund-
                                 ing from other sources is not available
                                                                                               ing that is not assured.
                                 at a cost that does not adversely im-
                                 pact the economic viability of the                            § 1703.133 Maximum            and   minimum
                                 project as determined by the Adminis-                             amounts.
                                 trator. Financial assistance for this
                                 purpose must be necessary and inci-                             Applications for a combination loan
                                 dental to the total amount of financial                       and grant under this subpart will be
                                 assistance requested; and                                     subject to limitations on the proposed
                                   (h) Acquiring telecommunications                            amount of loans and grants. The Ad-
                                 transmission facilities provided that no                      ministrator will establish the max-
                                 telecommunications carrier will install                       imum amount of loans and grants and
                                 such facilities under the Act or                              the portion of grant funds as a percent-
                                 through other financial procedures                            age of total assistance for each project
                                 within a reasonable time period and at                        to be made available to an individual
                                 a cost to the applicant that does not                         recipient for each fiscal year under this
                                 impact the economic viability of the                          subpart, by publishing notice of the
                                 project, as determined by the Adminis-                        maximum amount in the FEDERAL
                                 trator.                                                       REGISTER before the beginning of the
                                                                                               fiscal year to carry out this subpart.
                                 § 1703.132 Nonapproved purposes for a                         The minimum amount of a combina-
                                      combination loan and grant.                              tion loan and grant is $50,000.
                                    (a) Without limitation, a combina-
                                                                                               § 1703.134   Completed application.
                                 tion loan and grant made under this
                                 subpart shall not be expended:                                  The following items are required to
                                    (1) To pay salaries, wages, or em-                         be submitted to RUS in support of an
                                 ployee benefits to medical or edu-                            application for a combination loan and
                                 cational personnel;                                           grant:
                                    (2) To pay for the salaries or adminis-                      (a) An application for federal assist-
                                 trative expenses of the applicant or the                      ance: A completed Standard Form 424.
                                 project;                                                        (b) An executive summary of the
                                    (3) To purchase equipment that will                        project: The applicant must provide
                                 be owned by the local exchange carrier                        RUS with a general project overview
                                 or another telecommunications service                         that addresses each of the following 9
                                 provider, unless the applicant is the                         categories:

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                                 Rural Utilities Service, USDA                                                                  § 1703.134

                                   (1) A description of why the project is                     sibility; and provide evidence that it
                                 needed;                                                       can execute a note for a loan with a
                                   (2) An explanation of how the appli-                        maturity period greater than one year.
                                 cant will address the need cited in                           For educational institutions partici-
                                 paragraph (b)(1) of this section, why                         pating in a project application (includ-
                                 the applicant requires financial assist-                      ing all members of a consortium), the
                                 ance, the types of educational or med-                        financial data must reflect revenue and
                                 ical services to be offered by the                            expense reports and balance sheet re-
                                 project, and the benefits to the rural                        ports, reflecting net worth, for the
                                 residents;                                                    most recent annual reporting period
                                   (3) A description of the applicant,                         preceding the date of the application.
                                 documenting eligibility in accordance                         For medical institutions participating
                                 with § 1703.103;                                              in a project application (including all
                                   (4) An explanation of the total                             members of a consortium), the finan-
                                 project cost including a breakdown of                         cial data must include income state-
                                 the combination loan and grant re-                            ment and balance sheet reports, re-
                                 quired and the source of funding, if ap-                      flecting net worth, for the most recent
                                 plicable, for the remainder of the                            completed fiscal year preceding the
                                 project;                                                      date of the application. When the ap-
                                   (5) A statement specifying whether                          plicant is a partnership, company, cor-
                                 the project provides predominantly dis-                       poration, or other entity, current bal-
                                 tance learning or telemedicine services                       ance sheets, reflecting net worth, are
                                 as defined in § 1703.102. If the project                      needed from each of the entities that
                                 provides both distance learning and                           has at least a 20 percent interest in
                                 telemedicine services, the applicant                          such partnership, company, corpora-
                                 must identify the predominant use of                          tion or other entity. When the appli-
                                 the system;                                                   cant is a consortium, a current balance
                                   (6) A general overview of the tele-                         sheet, reflecting net worth, is needed
                                 communications system to be devel-                            from each member of the consortium
                                 oped, including the types of equipment,                       and from each of the entities that has
                                 technologies, and facilities used;                            at least a 20 percent interest in such
                                   (7) A description of the participating                      member of the consortium.
                                 hubs and end user sites and the number                          (1) Applicants must include sufficient
                                 of rural residents that will be served by                     pro-forma financial data that ade-
                                 the project at each end user site;                            quately reflects the financial capa-
                                   (8) A certification by the applicant                        bility of project participants and the
                                 that facilities constructed with a com-                       project as a whole to continue a sus-
                                 bination loan and grant do not dupli-                         tainable project for a minimum of 10
                                 cate adequately established telemedi-                         years and repay the loan portion of the
                                 cine or distance learning services.                           combination loan and grant. This docu-
                                   (9) A listing of the location of each                       mentation should include sources of
                                 end user site (city, town, village, bor-                      sufficient income or revenues to pay
                                 ough, or rural area plus the State).                          operating expenses including tele-
                                   (c) A scope of work. The scope of work                      communications      access    and    toll
                                 must include, at a minimum:                                   charges, system maintenance, salaries,
                                   (1) The specific activities to be per-                      training, and any other general oper-
                                 formed under the project;                                     ating expenses, provide for replace-
                                   (2) Who will carry out the activities;                      ment of depreciable items, and show
                                   (3) The time-frames for accom-                              repayment of interest and principal for
                                 plishing the project objectives and ac-                       the loan portion of the combination
                                 tivities; and                                                 loan and grant.
                                   (4) A budget for capital expenditures                         (2) A list of property which will be
                                 reflecting the line item costs for both                       used as collateral to secure repayment
                                 the combination loan and grant and                            of the loan. The applicant shall pur-
                                 any other sources of funds for the                            chase and own collateral that secures
                                 project.                                                      the loan free from liens or security in-
                                   (d) Financial information. The appli-                       terests and take all actions necessary
                                 cant must show its financial ability to                       to perfect a security interest in the
                                 complete the project; show project fea-                       collateral that secures the loan. RUS

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                                 § 1703.134                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 considers as adequate security for a                          alternative      equipment    and   tech-
                                 loan, a guarantee by a RUS tele-                              nologies were evaluated.
                                 communications or electric borrower                             (2) A listing of the proposed pur-
                                 or by another qualified party. Addi-                          chases or leases of telecommunications
                                 tional forms of security, including let-                      terminal      equipment,   telecommuni-
                                 ters of credit, real estate, or any other                     cations transmission facilities, data
                                 items will be considered. RUS will de-                        terminal equipment, interactive video
                                 termine the adequacy of the security                          equipment, computer hardware and
                                 offered.                                                      software systems, and components that
                                    (3) As applicable, a depreciation                          process data for transmission via tele-
                                 schedule covering all assets of the                           communications, computer network
                                 project. Those assets for which a com-                        components, communication satellite
                                 bination loan and grant are being re-
                                                                                               ground station equipment, or any other
                                 quested should be clearly indicated.
                                                                                               elements of the telecommunications
                                    (4) For each hub and end user site,
                                                                                               system designed to further the pur-
                                 the applicant must identify and pro-
                                                                                               poses of this subpart, that the appli-
                                 vide reasonable evidence of each source
                                 of revenue. If the projection relies on                       cant intends to build or fund using a
                                 cost sharing arrangements among hub                           combination loan and grant.
                                 and end user sites, the applicant must                          (3) A description of the consultations
                                 provide evidence of agreements made                           with the appropriate telecommuni-
                                 among project participants.                                   cations carriers (including other inter-
                                    (5) For applicants eligible under                          exchange carriers, cable television op-
                                 § 1703.103(a)(3), an explanation of the                       erators, enhanced service providers,
                                 economic analysis justifying the rate                         providers of satellite services, and tele-
                                 structure to ensure that the benefit,                         communications equipment manufac-
                                 including cost saving, of the financial                       turers and distributors) and the antici-
                                 assistance is passed through to the                           pated role of such providers in the pro-
                                 other persons receiving telemedicine or                       posed telecommunications system.
                                 distance learning services.                                     (4) Results of discussions with local
                                    (e) A statement of experience. The ap-                     exchange carriers serving the project
                                 plicant must provide a written nar-                           area addressing the concerns contained
                                 rative (not exceeding three single                            in § 1703.131(h).
                                 spaced pages) describing its dem-                               (5) The capabilities of the tele-
                                 onstrated capability and experience, if                       communications transmission facili-
                                 any, in operating an educational or                           ties, including bandwidth, networking
                                 health care endeavor similar to the                           topology,      switching,   multiplexing,
                                 project. Experience in a similar project                      standards, and protocols for intra-net-
                                 is desirable but not required.
                                                                                               working and open systems architecture
                                    (f) A telecommunications system plan. A
                                                                                               (the ability to effectively communicate
                                 telecommunications system plan, con-
                                                                                               with other networks). In addition, the
                                 sisting of the following (the items in
                                 paragraphs (f)(4) and (f)(5) of this sec-                     applicant must explain the manner in
                                 tion are required only when the appli-                        which the transmission facilities will
                                 cant is requesting a combination loan                         deliver the proposed services. For ex-
                                 and grant for telecommunications                              ample, for medical diagnostics, the ap-
                                 transmission facilities):                                     plicant might indicate whether or not
                                    (1) The capabilities of the tele-                          a guest or other diagnosticians can join
                                 communications terminal equipment,                            the network from locations off the net-
                                 including a description of the specific                       work. For educational services, indi-
                                 equipment which will be used to de-                           cate whether or not all hub and end-
                                 liver the proposed service. The appli-                        user sites are able to simultaneously
                                 cant must document discussions with                           hear in real-time and see each other or
                                 various technical sources which could                         the instructional material in real-time.
                                 include consultants, engineers, product                       The applicant must include detailed
                                 vendors, or internal technical experts,                       cost estimates for operating and main-
                                 provide detailed cost estimates for op-                       taining the network, and include evi-
                                 erating and maintaining the end user                          dence that alternative delivery meth-
                                 equipment and provide evidence that                           ods and systems were evaluated.

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                                 Rural Utilities Service, USDA                                                                   § 1703.135

                                    (g) Compliance with other Federal stat-                    application. RUS may also request
                                 utes. The applicant must provide evi-                         modifications or changes, including
                                 dence of compliance with other federal                        changes in the amount of funds re-
                                 statutes and regulations including, but                       quested, in any proposal described in
                                 not limited to the following:                                 an application submitted under this
                                    (1) E.O. 11246, Equal Employment Op-                       subpart.
                                 portunity, as amended by E.O. 11375                           [64 FR 14366, Mar. 25, 1999; 64 FR 25422, May
                                 and as supplemented by regulations                            12, 1999, as amended at 64 FR 25423, May 12,
                                 contained in 41 CFR part 60;                                  1999]
                                    (2) Architectural barriers;
                                    (3) Flood hazard area precautions;                         § 1703.135 Application selection provi-
                                    (4) Assistance and Real Property Ac-                            sions.
                                 quisition Policies Act of 1970;                                  (a) A combination loan and grant will
                                    (5) Drug-Free Workplace Act of 1998                        be approved based on availability of
                                 (41 U.S.C. 701);                                              funds, the financial feasibility of the
                                    (6) E.O.s 12549 and 12689, Debarment                       project in accordance with § 1703.134(d),
                                 and Suspension;                                               the services to be provided which dem-
                                    (7) Byrd Anti-Lobbying Amendment                           onstrate that the project meets the
                                 (31 U.S.C. 1352).                                             general requirements of this subpart,
                                    (h) Environmental impact and historic                      the design of the project; costs; loca-
                                 preservation. (1) The applicant must                          tion; and other characteristics of the
                                 provide details of the project’s impact                       application.
                                 on the environment and historic pres-                            (b) RUS will determine, from the in-
                                 ervation. Loans and grants made under                         formation submitted with each appli-
                                 this part are subject to 7 CFR part 1794                      cation for a combination loan and
                                 which contains RUS’ policies and pro-                         grant,      whether     the     application
                                 cedures for implementing a variety of                         achieves sufficient priority, based on
                                 Federal statutes, regulations, and Ex-                        the criteria set forth in the 1996 Act, to
                                 ecutive orders generally pertaining to                        receive a combination loan and grant
                                 the protection of the quality of the                          from funds available for the fiscal year.
                                 human environment that are listed in 7                        If such priority is achieved, RUS will
                                 CFR 1794.1. The application shall con-                        process the combination loan and grant
                                 tain a separate section entitled ‘‘Envi-                      application on a first-in, first-out
                                 ronmental Impact of the Project.’’                            basis, provided that the total amount
                                    (2) The applicant may use the ‘‘Envi-                      of applications on-hand for combina-
                                 ronmental Questionnaire,’’ available                          tion loans and grants does not exceed
                                 from RUS, to assist in complying with                         90 percent of the total loan and grant
                                 the requirements of this section.                             funding available for the fiscal year. At
                                    (i) Evidence of legal authority and ex-                    such time as the total amount of appli-
                                 istence. The applicant must provide evi-                      cations eligible for combination loans
                                 dence of its legal existence and author-                      and grants, if such applications were
                                 ity to enter into a grant and incur debt                      approved, exceeds 90 percent of amount
                                 with RUS.                                                     of combination loan and grant funding
                                    (j) Federal debt certification. The ap-                    available, RUS will process the remain-
                                 plicant must provide evidence that it is                      ing applications using the evaluation
                                 not delinquent on any obligation owed                         criteria set forth in § 1703.126.
                                 to the government.                                               (c) RUS will not approve a combina-
                                    (k) Supplemental information. The ap-                      tion loan and grant if RUS determines
                                 plicant should provide any additional                         that:
                                 information it considers relevant to                             (1) The applicant’s proposal does not
                                 the project and likely to be helpful in                       indicate financial feasibility, or will
                                 determining the extent to which the                           not be adequately secured in accord-
                                 project would further the purposes of                         ance with the requirements contained
                                 this subpart.                                                 in § 1703.134(d);
                                    (l) Additional information required by                        (2) The applicant’s proposal indicates
                                 RUS. The applicant must provide any                           technical flaws, which, in the opinion
                                 additional information RUS may con-                           of RUS, would prevent successful im-
                                 sider relevant to the application and                         plementation, or operation of the
                                 necessary to adequately evaluate the                          project; or

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                                 § 1703.136                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                   (3) Any other aspect of the appli-                          submit any additional information re-
                                 cant’s proposal fails to adequately ad-                       quested to complete the application
                                 dress any requirements of this subpart                        within 15 working days of the date of
                                 or contains inadequacies which would,                         the State Director’s written response.
                                 in the opinion of RUS, undermine the                          If the applicant fails to submit such in-
                                 ability of the project to meet the gen-                       formation, the application will be re-
                                 eral purpose of this subpart or comply                        turned to the applicant.
                                 with policies of the DLT program con-                           (2) Within 30 days of the determina-
                                 tained in § 1703.101.                                         tion of a completed application in ac-
                                   (d) RUS will provide the applicant                          cordance with paragraph (b)(1) of this
                                 with a statement of any determina-                            section, review the application to de-
                                 tions made with regard to paragraphs                          termine suitability for financial assist-
                                 (c)(1) through (c)(3) of this section. The                    ance in accordance with § 1703.135, and
                                 applicant will be provided 15 days from                       other requirements of this subpart.
                                 the date of RUS’ letter to respond, pro-                      Based on its review, the State Director
                                 vide clarification, or make any adjust-                       will work with the applicant to resolve
                                 ments or corrections to the project. If,                      any questions or obtain any additional
                                 in the opinion of the Administrator,                          information. The applicant will be no-
                                 the applicant fails to adequately re-                         tified, in writing, of any additional in-
                                 spond to any determinations or other                          formation required to allow a financial
                                 findings made by the Administrator,
                                                                                               assistance recommendation and will be
                                 the project will not be funded, and the
                                                                                               provided a reasonable period of time to
                                 applicant will be notified of this deter-
                                                                                               furnish the additional information.
                                 mination. If the applicant does not
                                 agree with this finding, an appeal may                          (3) Based on the review in accordance
                                 be filed in accordance with § 1703.137.                       with § 1703.135 and other requirements
                                                                                               of this subpart, make a preliminary de-
                                 § 1703.136 Submission of applications.                        termination of suitability for financial
                                                                                               assistance. A combination loan and
                                    (a) RUS will accept applications for a
                                                                                               grant recommendation will be prepared
                                 combination loan and grant submitted
                                 by RUS telecommunications General                             by the State Director with concurrence
                                 Field representatives (GFRs), by Rural                        of the RUS telecommunications GFR
                                 Development State Directors, or by ap-                        that addresses the provisions of sec-
                                 plicants themselves. Applications for a                       tions § 1703.134 and § 1703.135 and other
                                 combination loan and grant under this                         applicable requirements of this sub-
                                 subpart may be filed at any time and                          part.
                                 will be evaluated as received.                                  (4) If the application is determined
                                    (b) Applications submitted to the                          suitable for further consideration by
                                 State Director, Rural Development, in                         RUS, forward an original and one copy
                                 the State serving the headquarters of                         of the application with a financial as-
                                 the project will be evaluated as they                         sistance recommendation, signed joint-
                                 are submitted. All applicants must sub-                       ly, to the Assistant Administrator,
                                 mit an original and two copies of a                           Telecommunications Program, Rural
                                 completed application. The applicant                          Utilities Service, Washington, DC. The
                                 must also submit a copy of the applica-                       applicant will be notified by letter of
                                 tion to the State government point of                         this action. Upon receipt of the appli-
                                 contact, if one has been designated for                       cation from the State Director, RUS
                                 the State, at the same time it submits                        will conduct a review of the applica-
                                 an application to the State Director.                         tion and the financial assistance rec-
                                 The State Director will:                                      ommendation. A final determination
                                    (1) Review each application for com-                       will be made within 15 days. If the Ad-
                                 pleteness in accordance with § 1703.134,                      ministrator determines that a com-
                                 and notify the applicant, within 15                           bination loan and grant can be ap-
                                 working days of receiving the applica-                        proved, the State Director will be noti-
                                 tion, of the results of this review, ac-                      fied and the State Director will notify
                                 knowledging a complete application, or                        the applicant. A combination loan and
                                 citing any information that is incom-                         grant will be processed, approved, and
                                 plete. To be considered for a combina-                        serviced in accordance with §§ 1703.105
                                 tion loan and grant, the applicant must                       through 1703.112 of subpart D.

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                                 Rural Utilities Service, USDA                                                                  § 1703.140

                                   (5) If the State Director determines                        A combination loan and grant will be
                                 that the application is not suitable for                      processed, approved, and serviced in ac-
                                 further consideration by RUS, notify                          cordance     with    §§ 1703.105 through
                                 the applicant with the reasons for this                       1703.112 of subpart D.
                                 determination. The applicant may ap-                            (4) If RUS determines that the appli-
                                 peal this determination pursuant to                           cation is not suitable for further con-
                                 section § 1703.137 of this subpart.                           sideration, notify the applicant with
                                   (c) Applications submitted by RUS                           the reasons for this determination. The
                                 telecommunications GFRs or directly                           applicant will be able to appeal in ac-
                                 by applicants will be evaluated as they                       cordance with § 1703.137 of this subpart.
                                 are submitted. All applicants must sub-
                                 mit an original and two copies of a                           § 1703.137 Appeals.
                                 completed application. The applicant                             Any appeal must be made, in writing,
                                 must also submit a copy of the applica-                       within 10 days after the applicant is
                                 tion to the State government point of                         notified of the determination to deny
                                 contact, if one has been designated for                       the application. Appeals shall be sub-
                                 the State, at the same time it submits                        mitted to the Administrator, RUS,
                                 an application to RUS. RUS will:                              U.S. Department of Agriculture, 1400
                                   (1) Review each application for com-                        Independence Ave., SW., STOP 1590,
                                 pleteness in accordance with § 1703.134,                      Washington, DC 20250–1590. Thereafter,
                                 and notify the applicant, within 15                           the Administrator will review the ap-
                                 working days of receiving the applica-                        peal to determine whether to sustain,
                                 tion, of the results of this review, ac-                      reverse, or modify the original deter-
                                 knowledging a complete application, or                        mination. Final determinations will be
                                 citing any information that is incom-                         made after consideration of all appeals.
                                 plete. To be considered for a combina-                        The Administrator’s determination
                                 tion loan and grant assistance, the ap-                       will be final. A copy of the Administra-
                                 plicant must submit any additional in-                        tor’s decision will be furnished prompt-
                                 formation requested to complete the                           ly to the applicant.
                                 application within 15 working days of
                                 the date of the RUS written response.                         §§ 1703.138–1703.139   [Reserved]
                                 If the applicant fails to submit such in-
                                 formation, the application will be re-                          Subpart G—Distance Learning
                                 turned to the applicant.                                       and Telemedicine Loan Program
                                   (2) Within 30 days of the determina-
                                 tion of a completed application in ac-                          SOURCE: 64 FR 14369, Mar. 25, 1999, unless
                                 cordance with paragraph (c)(1) of this                        otherwise noted.
                                 section, review the application to de-
                                 termine suitability for financial assist-                     § 1703.140 Use of loan funds.
                                 ance in accordance with § 1703.135, and                          A loan may be used by eligible orga-
                                 other requirements of this subpart.                           nizations as defined in § 1703.103 for dis-
                                 Based on its review, RUS will work                            tance     learning    and   telemedicine
                                 with the applicant to resolve any ques-                       projects to finance 100 percent of the
                                 tions or obtain any additional informa-                       cost of approved purposes contained in
                                 tion. The applicant will be notified, in                      § 1703.141 provided that no financial as-
                                 writing, of any additional information                        sistance may exceed the maximum
                                 required to allow a financial assistance                      amount for the year in which the loan
                                 recommendation and will be provided a                         is made. Entities seeking a loan must
                                 reasonable period of time to furnish                          be able to provide security and execute
                                 the additional information.                                   a note with a maturity period greater
                                   (3) If the application is determined                        than one year. The following entities
                                 suitable for further consideration by                         are eligible for loans under this sub-
                                 RUS, conduct a review of the applica-                         part:
                                 tion and financial assistance rec-                               (a) Organizations as defined in
                                 ommendation. A final determination                            § 1703.103. If a RUS telecommunications
                                 will be made within 15 days. If the Ad-                       borrower is seeking a loan, the bor-
                                 ministrator determines that a com-                            rower does not need to submit all of
                                 bination loan and grant can be ap-                            the financial security information re-
                                 proved, the applicant will be notified.                       quired by § 1703.144(d). The borrower’s

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                                 § 1703.141                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 latest financial report (Form 479) filed                      this subpart and financial assistance
                                 with RUS and any additional informa-                          for such equipment and facilities is not
                                 tion relevant to the project, as deter-                       available from other sources at a cost
                                 mined by RUS, will suffice;                                   which would not adversely affect the
                                    (b) Any non-profit or for-profit enti-                     economic viability of the project;
                                 ty, public or private entity, urban or                          (e) Providing links between teachers
                                 rural institution, or rural educational                       and students or medical professionals
                                 broadcaster, which proposes to provide                        who are located at the same facility,
                                 and receive distance learning and tele-                       provided that such facility receives or
                                 medicine services to carry out the pur-
                                                                                               provides distance learning or telemedi-
                                 poses of this subpart; or
                                                                                               cine services as part of a distance
                                    (c) Any entity that contracts with an
                                 eligible organization in paragraphs (a)                       learning or telemedicine network
                                 or (b) of this section for constructing                       which meets the purposes of this sub-
                                 distance learning or telemedicine fa-                         part;
                                 cilities for the purposes contained in                          (f) Providing for site development
                                 § 1703.141, except for those purposes in                      and alteration of buildings in order to
                                 § 1703.141(h).                                                meet the purposes of this subpart.
                                    (d) Applicants must meet the min-                          Loans for this purpose must be nec-
                                 imum eligibility requirement for deter-                       essary and incidental to the total
                                 mining the extent to which the project                        amount of financial assistance re-
                                 serves rural areas as contained in                            quested;
                                 § 1703.126(b)(2) (the applicant must re-                        (g) Purchasing of land, buildings, or
                                 ceive at least 20 points to be eligible to                    building construction, where such costs
                                 receive financial assistance under this                       are demonstrated necessary to con-
                                 subpart).                                                     struct distance learning and telemedi-
                                 [64 FR 14369, Mar. 25, 1999, as amended at 64                 cine facilities. The applicant must
                                 FR 25423, May 12, 1999]                                       demonstrate that funding from other
                                                                                               sources is not available at a cost which
                                 § 1703.141 Approved      purposes     for                     does not adversely impact the eco-
                                      loans.                                                   nomic viability of the project as deter-
                                    The following are approved purposes                        mined by the Administrator. Financial
                                 for loans:                                                    assistance for this purpose must be
                                    (a) Acquiring, by lease or purchase,                       necessary and incidental to the total
                                 eligible equipment or facilities as de-                       amount of financial assistance re-
                                 fined in § 1703.102;                                          quested;
                                    (b) Acquiring instructional program-                         (h) Acquiring of telecommunications
                                 ming;                                                         transmission facilities provided that no
                                    (c) Providing technical assistance                         telecommunications carrier will install
                                 and instruction for using eligible
                                                                                               such facilities under the Act or
                                 equipment, including any related soft-
                                                                                               through other financial procedures
                                 ware; developing instructional pro-
                                                                                               within a reasonable time period and at
                                 gramming; providing engineering or
                                 environmental studies relating to the                         a cost to the applicant that does not
                                 establishment or expansion of the                             impact the economic viability of the
                                 phase of the project that is being fi-                        project, as determined by the Adminis-
                                 nanced with the loan (financial assist-                       trator;
                                 ance for this purpose shall not exceed                          (i) Any project costs, except for sala-
                                 10 percent of the requested financial as-                     ries and administrative expenses, not
                                 sistance);                                                    included in paragraphs (a) through (h)
                                    (d) Paying for medical or educational                      of this section, incurred during the
                                 equipment and facilities which are                            first two years of operation after the fi-
                                 shown to be necessary to implement                            nancial assistance has been approved.
                                 the project, including vehicles utilizing                     The applicant must show that financ-
                                 distance learning and telemedicine                            ing such costs are necessary for the es-
                                 technology to deliver educational and                         tablishment or continued operation of
                                 health care services. The applicant                           the project and that financing is not
                                 must demonstrate that such items are                          available for such costs elsewhere, in-
                                 necessary to meet the purposes under                          cluding from the applicant’s financial

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                                 Rural Utilities Service, USDA                                                                   § 1703.144

                                 resources. The Administrator will de-                         sistance under this subpart G or is de-
                                 termine whether such costs will be fi-                        pendent upon the receipt of other fund-
                                 nanced based on information submitted                         ing that is not assured.
                                 by the applicant. Loans shall not be                          [64 FR 14369, Mar. 25, 1999, as amended at 64
                                 made exclusively to finance such costs,                       FR 25423, May 12, 1999]
                                 and financing for such costs will not
                                 exceed 20 percent of the loan provided                        § 1703.143 Maximum and minimum
                                 to a project under this section; and                              amounts.
                                   (j) All of the costs needed to provide                         Applications for loans under this sub-
                                 distance learning broadcasting to rural                       part will be subject to limitations on
                                 areas. Loans may be used to cover the                         the proposed amount of loans. The Ad-
                                 costs of facilities and end-user equip-                       ministrator will establish the max-
                                 ment dedicated to providing edu-                              imum amount of a loan available to an
                                 cational broadcasting to rural areas for                      applicant under this subpart, by pub-
                                 distance learning purposes. If the fa-                        lishing notice of the maximum amount
                                 cilities are not 100 percent dedicated to                     in the FEDERAL REGISTER before the
                                 broadcasting, a portion of the financ-                        opening of the application window. The
                                 ing may be used to fund such facilities                       minimum amount of a loan is $50,000.
                                 based on a percentage of use factor
                                 that approximates the distance learn-                         § 1703.144 Completed application.
                                 ing broadcasting portion of use.                                 The following items are required to
                                 [64 FR 14369, Mar. 25, 1999, as amended at 64                 be submitted in support of an applica-
                                 FR 25423, May 12, 1999]                                       tion for a loan:
                                                                                                  (a) An application for federal assist-
                                 § 1703.142 Nonapproved purposes for                           ance: A completed standard form 424.
                                      loans.                                                      (b) An executive summary of the
                                    (a) Loans made under this subpart                          project. The applicant must provide
                                 will not be provided to pay the costs of                      RUS with a general project overview
                                 recurring or operating expenses in-                           that addresses each of the following 9
                                 curred after two years from approval of                       categories:
                                 the project except for leases (see                               (1) A description of why the project is
                                 § 1703.141).                                                  needed;
                                    (b) Loans made under this subpart                             (2) An explanation of how the appli-
                                 will not be provided for any of the fol-                      cant will address the need (see para-
                                 lowing costs:                                                 graph (b)(1) of this section), why the
                                    (1) To purchase equipment that will                        applicant requires financial assistance,
                                 be owned by the local exchange carrier                        the types of educational or medical
                                 or another telecommunications service                         services to be offered by the project,
                                 provider, unless the applicant is the                         and the benefits to the rural residents;
                                 local exchange carrier or other tele-                            (3) A description of the applicant,
                                 communications service provider;                              documenting eligibility in accordance
                                    (2) To duplicate facilities providing                      with § 1703.103;
                                 distance learning or telemedicine serv-                          (4) An explanation of the total
                                 ices in place or to reimburse the appli-                      project cost including a breakdown of
                                 cant or others for costs incurred prior                       the loan required and the source of
                                 to RUS’ receipt of the completed appli-                       funding, if applicable, for the remain-
                                 cation;                                                       der of the project;
                                    (3) For projects located in areas cov-                        (5) A statement specifying whether
                                 ered by the Coastal Barrier Resources                         the project provides predominantly dis-
                                 Act (16 U.S.C. 3501 et seq.); or                              tance learning or telemedicine services
                                    (4) To pay for salaries, wages, or ad-                     as defined in § 1703.102. If the project
                                 ministrative expenses; or                                     provides both distance learning and
                                    (5) For any purpose that the Admin-                        telemedicine services, the applicant
                                 istrator has not specifically approved.                       must identify the predominant use of
                                    (c) Except as otherwise provided in                        the system;
                                 § 1703.112, funds shall not be used to fi-                       (6) A general overview of the tele-
                                 nance a project, in part, when the suc-                       communications system to be devel-
                                 cess of the project is dependent upon                         oped, including the types of equipment,
                                 the receipt of additional financial as-                       technologies, and facilities used;

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                                 § 1703.144                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                   (7) A description of the participating                         (1) Applicants must include sufficient
                                 hubs and end user sites and the number                        pro-forma financial data which ade-
                                 of rural residents which will be served                       quately reflects the financial capa-
                                 by the project at each end user site;                         bility of project participants and the
                                   (8) A certification by the applicant                        project as a whole to continue a sus-
                                 that facilities funded by a loan do not                       tainable project for a minimum of 10
                                 duplicate adequate established tele-                          years and repay the requested loan.
                                 medicine or distance learning services.                       This documentation should include
                                   (9) A listing of the location of each                       sources of sufficient income or reve-
                                 end user site (city, town, village, bor-                      nues to pay operating expenses includ-
                                 ough, or rural area plus the State).                          ing telecommunications access and toll
                                   (c) A scope of work. The scope of work                      charges, system maintenance, salaries,
                                 must include, at a minimum:                                   training, and any other general oper-
                                                                                               ating expenses, provide for replace-
                                   (1) The specific activities to be per-
                                                                                               ment of depreciable items, and show
                                 formed under the project;
                                                                                               repayment of interest and principal for
                                   (2) Who will carry out the activities;
                                                                                               the loan.
                                   (3) The time-frames for accom-                                 (2) A list of property which will be
                                 plishing the project objectives and ac-                       used as collateral to secure repayment
                                 tivities; and                                                 of the proposed loan. The applicant
                                   (4) A budget for capital expenditures                       shall purchase and own collateral that
                                 reflecting the line item costs for the                        secures the loan free from liens or se-
                                 loan and any other sources of funds for                       curity interests and take all actions
                                 the project.                                                  necessary to perfect a first lien in the
                                   (d) Financial information. The appli-                       collateral that secures the loan. RUS
                                 cant must show its financial ability to                       will consider as adequate security a
                                 complete the project; show project fea-                       loan guarantee by a telecommuni-
                                 sibility; and provide evidence that it                        cations or electric borrower or by an-
                                 can execute a note for a loan for a ma-                       other qualified party. Additional forms
                                 turity period greater than one year.                          of security, including letters of credit,
                                 For educational institutions partici-                         real estate, or any other items will be
                                 pating in a project application (includ-                      considered. RUS will determine the
                                 ing all members of a consortium), the                         adequacy of the security offered.
                                 financial data must reflect revenue and                          (3) As applicable, a depreciation
                                 expense reports and balance sheet re-                         schedule covering all assets of the
                                 ports, reflecting net worth, for the                          project. Those assets for which a loan
                                 most recent annual reporting period                           is being requested should be clearly in-
                                 preceding the date of the application.                        dicated.
                                 For medical institutions participating                           (4) For each hub and end user site,
                                 in a project application (including all                       the applicant must identify and pro-
                                 members of a consortium), the finan-                          vide reasonable evidence of each source
                                 cial data must include income state-                          of revenue. If the projection relies on
                                 ment and balance sheet reports, re-                           cost sharing arrangements among hub
                                 flecting net worth, for the most recent                       and end user sites, the applicant must
                                 completed fiscal year preceding the                           provide evidence of agreements made
                                 date of the application. When the ap-                         among project participants.
                                 plicant is a partnership, company, cor-                          (5) For applicants eligible under
                                 poration, or other entity, current bal-                       § 1703.103(a)(3), an explanation of the
                                 ance sheets, reflecting net worth, are                        economic analysis justifying the rate
                                 needed from each of the entities that                         structure to ensure that the benefit,
                                 has at least a 20 percent interest in                         including cost saving, of the financial
                                 such partnership, company, corpora-                           assistance is passed through to the
                                 tion or other entity. When the appli-                         other persons receiving telemedicine or
                                 cant is a consortium, a current balance                       distance learning services.
                                 sheet, reflecting net worth, is needed                           (e) A statement of experience. The ap-
                                 from each member of the consortium                            plicant must provide a written nar-
                                 and from each of the entities that has                        rative (not exceeding three single
                                 at least a 20 percent interest in such                        spaced pages) describing its dem-
                                 member of the consortium.                                     onstrated capability and experience, if

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                                 Rural Utilities Service, USDA                                                                  § 1703.144

                                 any, in operating an educational or                           ties, including bandwidth, networking
                                 health care endeavor and any project                          topology,     switching,    multiplexing,
                                 similar to the project. Experience in a                       standards, and protocols for intra-net-
                                 similar project is desirable but not re-                      working and open systems architecture
                                 quired.                                                       (the ability to effectively communicate
                                   (f) A telecommunications system plan. A                     with other networks). In addition, the
                                 telecommunications system plan, con-                          applicant must explain the manner in
                                 sisting of the following (the items in                        which the transmission facilities will
                                 paragraphs (f)(4) and (f)(5) of this sec-                     deliver the proposed services. For ex-
                                 tion are required only when the appli-                        ample, for medical diagnostics, the ap-
                                 cant is requesting a loan for tele-                           plicant might indicate whether or not
                                 communications transmission facili-                           a guest or other diagnosticians can join
                                 ties):                                                        the network from locations off the net-
                                   (1) The capabilities of the tele-                           work. For educational services, indi-
                                 communications terminal equipment,                            cate whether or not all hub and end-
                                 including a description of the specific                       user sites are able to simultaneously
                                 equipment which will be used to de-                           hear in real-time and see each other or
                                 liver the proposed service. The appli-                        the instructional material in real-time.
                                 cant must document discussions with                           The applicant must include detailed
                                 various technical sources which could                         cost estimates for operating and main-
                                 include consultants, engineers, product                       taining the network, and include evi-
                                 vendors, or internal technical experts,                       dence that alternative delivery meth-
                                 provide detailed cost estimates for op-                       ods and systems were evaluated.
                                 erating and maintaining the end user                            (g) Compliance with other Federal stat-
                                 equipment and provide evidence that                           utes. The applicant must provide evi-
                                 alternative      equipment   and    tech-                     dence of compliance with other Federal
                                 nologies were evaluated.                                      statutes and regulations including, but
                                   (2) A listing of the proposed pur-                          not limited to the following:
                                 chases or leases of telecommunications                          (1) E.O. 11246, Equal Employment Op-
                                 terminal      equipment,   telecommuni-                       portunity, as amended by E.O. 11375
                                 cations transmission facilities, data                         and as supplemented by regulations
                                 terminal equipment, interactive video                         contained in 41 CFR part 60;
                                 equipment, computer hardware and                                (2) Architectural barriers;
                                 software systems, and components that                           (3) Flood hazard area precautions;
                                 process data for transmission via tele-                         (4) Assistance and Real Property Ac-
                                 communications, computer network                              quisition Policies Act of 1970;
                                 components, communication satellite                             (5) Drug-Free Workplace Act of 1998
                                 ground station equipment, or any other                        (41 U.S.C. 701);
                                 elements of the telecommunications                              (6) E.O.s 12549 and 12689, Debarment
                                 system designed to further the pur-                           and Suspension;
                                 poses of this subpart, that the appli-                          (7) Byrd Anti-Lobbying Amendment
                                 cant intends to build or fund using a                         (31 U.S.C. 1352).
                                 loan.                                                           (h) Environmental impact and historic
                                   (3) A description of the consultations                      preservation. (1) The applicant must
                                 with the appropriate telecommuni-                             provide details of the project’s impact
                                 cations carriers (including other inter-                      on the environment and historic pres-
                                 exchange carriers, cable television op-                       ervation. Loans made under this part
                                 erators, enhanced service providers,                          are subject to 7 CFR part 1794 which
                                 providers of satellite services, and tele-                    contains RUS’ policies and procedures
                                 communications equipment manufac-                             for implementing a variety of Federal
                                 turers and distributors) and the antici-                      statutes, regulations, and executive or-
                                 pated role of such providers in the pro-                      ders generally pertaining to the protec-
                                 posed telecommunications system.                              tion of the quality of the human envi-
                                   (4) Results of discussions with local                       ronment that are listed in 7 CFR 1794.1.
                                 exchange carriers serving the project                         The application shall contain a sepa-
                                 area addressing the concerns contained                        rate section entitled ‘‘Environmental
                                 in § 1703.141(h).                                             Impact of the Project.’’
                                   (5) The capabilities of the tele-                             (2) The applicant may use the ‘‘Envi-
                                 communications transmission facili-                           ronmental Questionnaire,’’ available

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                                 § 1703.145                                                             7 CFR Ch. XVII (1–1–04 Edition)

                                 from RUS, to assist in complying with                         cations were approved, exceeds 90 per-
                                 the requirements of this section.                             cent of amount of loan funding avail-
                                    (i) Evidence of legal authority and ex-                    able, RUS will process the remaining
                                 istence. The applicant must provide evi-                      applications using the evaluation cri-
                                 dence of its legal existence and author-                      teria set forth in § 1703.126.
                                 ity to enter into debt with RUS and                             (c) A loan will not be approved if it is
                                 perform the activities proposed under                         determined that:
                                 the loan application.                                           (1) The applicant’s proposal does not
                                    (j) Federal debt certification. The ap-                    indicate financial feasibility, or is not
                                 plicants must provide a certification                         adequately secured in accordance with
                                 that it is not delinquent on any obliga-                      the requirements of § 1703.144(d);
                                 tion owed to the government (7 CFR                              (2) The applicant’s proposal indicates
                                 parts 3016 and 3019).                                         technical flaws, which, in the opinion
                                    (k) Supplemental information. The ap-                      of RUS, would prevent successful im-
                                 plicant should provide any additional                         plementation, or operation of the
                                 information it considers relevant to                          project; or
                                 the project and likely to be helpful in                         (3) Any other aspect of the appli-
                                 determining the extent to which the                           cant’s proposal fails to adequately ad-
                                 project would further the purposes of                         dress any requirements of this subpart
                                 this subpart.                                                 or contains inadequacies which would,
                                    (l) Additional information required by                     in the opinion of RUS, undermine the
                                 RUS. The applicant must provide any                           ability of the project to meet the gen-
                                 additional information RUS deter-                             eral purpose of this subpart or comply
                                 mines is necessary to adequately evalu-                       with policies of the DLT program con-
                                 ate the application. Modifications or                         tained in § 1703.101.
                                 changes, including changes in the loan                          (d) RUS will provide the applicant
                                 amount requested, may be requested in                         with a statement of any determina-
                                 any project described in an application                       tions made with regard to paragraphs
                                 submitted under this subpart.                                 (c)(1) through (c)(3) of this section. The
                                                                                               applicant will be provided 15 days from
                                 [64 FR 14369, Mar. 25, 1999; 64 FR 25422, May                 the date of the RUS letter to respond,
                                 12, 1999, as amended at 64 FR 25423, May 12,
                                 1999]
                                                                                               provide clarification, or make any ad-
                                                                                               justments or corrections to the project.
                                 § 1703.145 Application selection provi-                       If, in the opinion of the Administrator,
                                      sions.                                                   the applicant fails to adequately re-
                                    (a) Loans will be approved based on                        spond to any determinations or other
                                 availability of funds, the financial fea-                     findings made by the Administrator,
                                 sibility of the project in accordance                         the loan will not be approved, and the
                                 with § 1703.144(d), the services to be pro-                   applicant will be notified of this deter-
                                 vided which demonstrate that the                              mination. If the applicant does not
                                 project meets the general requirements                        agree with this finding an appeal may
                                 of this subpart, the design of the                            be filed in accordance with § 1703.147.
                                 project; costs; location; and other char-                     [64 FR 14369, Mar. 25, 1999; 64 FR 25422, May
                                 acteristics of the application.                               12, 1999]
                                    (b) RUS will determine, from the in-
                                 formation submitted with each appli-                          § 1703.146 Submission of applications.
                                 cation for a loan, whether the applica-                          (a) RUS will accept applications for
                                 tion achieves sufficient priority, based                      loans submitted by RUS telecommuni-
                                 on the criteria set forth in the 1996 Act,                    cations General Field Representatives
                                 to receive a loan from funds available                        (GFRs), by Rural Development State
                                 for the fiscal year. If such priority is                      Directors, or by applicants themselves.
                                 achieved, RUS will process the loan ap-                       Applications for loans under this sub-
                                 plication on a first-in, first-out basis,                     part may be filed at any time and will
                                 provided that the total amount of ap-                         be evaluated as received on a non-com-
                                 plications on-hand for loans does not                         petitive basis.
                                 exceed 90 percent of the total loan                              (b) Applications submitted to the
                                 funding available for the fiscal year. At                     State Director, Rural Development, in
                                 such time as the total amount of appli-                       the State serving the headquarters of
                                 cations eligible for loans, if such appli-                    the project will be evaluated as they

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                                 Rural Utilities Service, USDA                                                                  § 1703.146

                                 are submitted. All applicants must sub-                       plicant will be notified by letter of this
                                 mit an original and two copies of a                           action. Upon receipt of the application
                                 completed application. The applicant                          from the State Director, RUS will con-
                                 must also submit a copy of the applica-                       duct a cursory review of the applica-
                                 tion to the State government point of                         tion and the recommendation. A final
                                 contact, if one has been designated for                       determination will be made within 15
                                 the State, at the same time it submits                        days. If the Administrator determines
                                 an application to the State Director.                         that a loan can be approved, the State
                                 The State Director will:                                      Director will be notified and the State
                                   (1) Review each application for com-                        Director will notify the applicant. Ap-
                                 pleteness in accordance with § 1703.144,                      plications for loans will be processed,
                                 and notify the applicant, within 15                           and approved loans serviced, in accord-
                                 working days of receiving the applica-                        ance with §§ 1703.105 through 1703.112.
                                 tion, of the results of this review, ac-                        (5) If the State Director determines
                                 knowledging a complete application, or                        that the application is not suitable for
                                 citing any information that is incom-                         further consideration by RUS, notify
                                 plete. To be considered for a loan, the                       the applicant with the reasons for this
                                 applicant must submit any additional                          determination. The applicant will be
                                 information requested to complete the                         offered appeal rights in accordance
                                 application within 15 working days of                         with § 1703.147.
                                 the date of the State Director’s written                        (c) Applications submitted by RUS
                                 response. If the applicant fails to sub-                      telecommunications GFRs or directly
                                 mit such information, the application                         by applicants will be evaluated as they
                                 will be returned to the applicant.                            are submitted. All applicants must sub-
                                   (2) Within 30 days of the determina-                        mit an original and two copies of a
                                 tion of a completed application in ac-                        completed application. The applicant
                                 cordance with paragraph (b)(1) of this                        must also submit a copy of the applica-
                                 section, review the application to de-                        tion to the State government point of
                                 termine suitability for financial assist-                     contact, if one has been designated for
                                 ance in accordance with § 1703.145, and                       the State, at the same time it submits
                                 other requirements of this subpart.                           an application to the RUS. RUS will:
                                 Based on its review, the State Director                         (1) Review each application for com-
                                 will work with the applicant to resolve                       pleteness in accordance with § 1703.144,
                                 any questions or obtain any additional                        and notify the applicant, within 15
                                 information. The applicant will be no-                        working days of receiving the applica-
                                 tified, in writing, of any additional in-                     tion, of the results of this review, ac-
                                 formation required to allow a financial                       knowledging a complete application, or
                                 assistance recommendation and will be                         citing any information that is incom-
                                 provided a reasonable period of time to                       plete. To be considered for a loan, the
                                 furnish the additional information.                           applicant must submit any additional
                                   (3) Based on the review in accordance                       information requested to complete the
                                 with § 1703.145 and other requirements                        application within 15 working days of
                                 of this subpart, make a preliminary de-                       the date of the RUS written response.
                                 termination of suitability for financial                      If the applicant fails to submit such in-
                                 assistance. A loan recommendation                             formation, the application will be re-
                                 will be prepared by the State Director                        turned to the applicant.
                                 with concurrence of the RUS tele-                               (2) Within 30 days of the determina-
                                 communications GFR that addresses                             tion of a completed application in ac-
                                 the provisions of §§ 1703.144 and 1703.145                    cordance with paragraph (c)(1) of this
                                 and other applicable requirements of                          section, review the application to de-
                                 this subpart.                                                 termine suitability for financial assist-
                                   (4) If the application is determined                        ance in accordance with this subpart.
                                 suitable for further consideration by                         Based on its review, RUS will work
                                 RUS, forward an original and one copy                         with the applicant to resolve any ques-
                                 of the application with a loan rec-                           tions or obtain any additional informa-
                                 ommendation, signed jointly, to the                           tion. The applicant will be notified, in
                                 Assistant       Administrator,      Tele-                     writing, of any additional information
                                 communications Program, Rural Utili-                          required to allow a financial assistance
                                 ties Service, Washington DC. The ap-                          recommendation and will be provided a

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                                 § 1703.147                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 reasonable period of time to furnish                          deferments are provided for the pur-
                                 the additional information.                                   pose of promoting rural development
                                   (3) If the application is determined                        opportunities.
                                 suitable for further consideration by
                                 RUS, conduct a review of the applica-                         § 1703.301   Policy.
                                 tion and financial assistance rec-                              It is RUS’s policy to encourage bor-
                                 ommendation. A final determination                            rowers to invest in and promote rural
                                 will be made within 15 days. If the Ad-                       development and rural job creation
                                 ministrator determines that a loan can                        projects that are based on sound eco-
                                 be approved, the applicant will be noti-                      nomic and financial analyses. Bor-
                                 fied. Applications will be processed,                         rowers are encouraged to use this pro-
                                 and approved loans serviced, in accord-                       gram to promote economic, business
                                 ance with §§ 1703.105 through 1703.112 of                     and community development projects
                                 subpart D.                                                    that will benefit rural areas.
                                   (4) If RUS determines that the appli-
                                 cation is not suitable for further con-                       § 1703.302 Definitions and rules of con-
                                 sideration, notify the applicant with                             struction.
                                 the reasons for this determination. The
                                 applicant will be offered appeal rights                         (a) Definitions. For the purpose of this
                                 in accordance with § 1703.147 of this                         subpart, the following terms will have
                                 subpart.                                                      the following meanings:1
                                                                                                 Administrator means the Adminis-
                                 § 1703.147 Appeals.                                           trator of RUS.
                                    Any appeal must be made, in writing,                         Borrower means any organization
                                 within 10 days after the applicant is                         which has an outstanding direct loan
                                 notified of the determination to deny                         or insured loan made by RUS for the
                                 the application. Appeals shall be sub-                        provision of electric or telephone serv-
                                 mitted to the Administrator, RUS,                             ice.
                                 U.S. Department of Agriculture, 1400                            Cushion of credit payment means a
                                 Independence Ave., SW., STOP 1590,                            voluntary unscheduled payment on an
                                 Washington, DC 20250–1590. Thereafter,                        RUS note made after October 1, 1987,
                                 the Administrator will review the ap-                         credited to the cushion of credit ac-
                                 peal to determine whether to sustain,                         count of a borrower.
                                 reverse, or modify the original deter-                          Deferment means a re-amortization of
                                 mination. Final determinations will be                        a payment of principal and/or interest
                                 made after consideration of all appeals.                      on an RUS direct loan or insured loan
                                 The Administrator’s determination                             for over either a 5- or 10 year period,
                                 will be final. A copy of the Administra-                      with the first payment beginning on
                                 tor’s decision will be furnished prompt-                      the date of the deferment.
                                 ly to the applicant.                                            Direct loan means a loan that is made
                                                                                               by the Administrator pursuant to sec-
                                 Subpart H—Deferments of RUS                                   tion 4 or section 201 of the RE Act (7
                                    Loan Payments for Rural De-                                U.S.C. 901 et seq.) for the provision of
                                    velopment Projects                                         electric or telephone service in rural
                                                                                               areas and does not include a loan made
                                                                                               to promote economic development in
                                   SOURCE: 58 FR 21639, Apr. 23, 1993, unless
                                 otherwise noted. Redesignated at 64 FR 14356,
                                                                                               rural areas.
                                 Mar. 25, 1999.                                                  Financially distressed borrower means
                                                                                               an RUS-financed borrower determined
                                 § 1703.300 Purpose.                                           by the Administrator to be either:
                                    This subpart E sets forth RUS’s poli-                        (i) In default or near default on inter-
                                 cies and procedures for making loan                           est or principal payments due on loans
                                 deferments of principal and interest                          made or guaranteed under the RE Act;
                                 payments on direct loans or insured                             (ii) A borrower that was in default or
                                 loans made for electric or telephone                          near default, but is currently partici-
                                 purposes, but not for loans made for                          pating in a workout or debt restruc-
                                 rural economic development purposes,                          turing plan with RUS; or
                                 in accordance with subsection (b) of                            (iii) Experiencing a financial hard-
                                 section 12 of the RE Act. Loan                                ship.

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                                 Rural Utilities Service, USDA                                                                   § 1703.304

                                    Insured loan means a loan that is                          fined in § 1703.302(a) include both the
                                 made, held, and serviced by the Admin-                        plural and the singular.
                                 istrator, and sold and insured by the                         [58 FR 21639, Apr. 23, 1993, as amended at 59
                                 Administrator, pursuant to Section 305                        FR 66440, Dec. 27, 1994]
                                 of the RE Act (7 U.S.C. 901 et seq.) for
                                 the provision of electric or telephone                        § 1703.303 Eligibility    criteria   for
                                 service in rural areas and does not in-                            deferment of loan payments.
                                 clude a loan made to promote eco-                                The deferment of loan payments may
                                 nomic development in rural areas.                             be granted to any borrower that is not
                                    Job creation means the creation of                         financially distressed, delinquent on
                                 jobs in rural areas, or in close enough                       any Federal debt, or in bankruptcy
                                 proximity to rural areas so that it is                        proceedings. However, the deferment of
                                 likely that the majority of the jobs                          loan payments will not be granted to a
                                 created will be held by residents of                          borrower during any period in which
                                 rural areas.                                                  the Administrator has determined that
                                    Project means a rural development                          no additional financial assistance of
                                                                                               any nature should be provided to the
                                 project that a borrower proposes and
                                                                                               borrower pursuant to any provision of
                                 the Administrator approves as quali-
                                                                                               the RE Act. The determination to sus-
                                 fying under this subpart.
                                                                                               pend eligibility for the deferment of
                                    RE Act means the Rural Electrifica-                        loan payments under this subpart will
                                 tion Act of 1936, as amended (7 U.S.C.                        be based on:
                                 901 et seq.).                                                    (a) The borrower’s demonstrated un-
                                    REA means the Rural Electrification                        willingness to exercise diligence in re-
                                 Administration formerly an agency of                          paying loans made by RUS or RTB or
                                 the United States Department of Agri-                         guaranteed by RUS that results in the
                                 culture and predecessor agency to RUS                         Administrator being unable to find
                                 with respect to administering certain                         that such loans, would be repaid within
                                 electric and telephone loan programs.                         the time agreed; or
                                    RTB means the Rural Telephone                                 (b) The borrower’s demonstrated un-
                                 Bank (telephone bank), a body cor-                            willingness to meet the requirements
                                 porate and an instrumentality of the                          in RUS’s or RTB’s legal documents or
                                 United States, that obtains supple-                           regulations.
                                 mental funds from non-Federal sources
                                 and utilizes them in making loans, op-                        § 1703.304 Restrictions         on   the
                                                                                                    deferment of loan payments.
                                 erating on a self-sustaining basis to the
                                 extent practicable (section 401, RE                              (a) The deferment must not impair
                                 Act).                                                         the security of any loans made RUS or
                                    RUS means the Rural Utilities Serv-                        RTB, or guaranteed by RUS, pursuant
                                 ice, an agency of the United States De-                       to the RE Act.
                                 partment of Agriculture established                              (b) At no point in time may the
                                 pursuant to Section 232 of the Federal                        amount of the debt service payments
                                                                                               deferred exceed 50 percent of the total
                                 Crop Insurance Reform and Depart-
                                                                                               cost of a community, business, or eco-
                                 ment of Agriculture Reorganization
                                                                                               nomic development project for which a
                                 Act of 1994 (Pub. L. 103–354, 108 Stat.
                                                                                               deferment is provided.
                                 3178), successor to REA with respect to
                                                                                                  (c) A borrower may defer debt service
                                 administering certain electric and tele-                      payments only in an amount equal to
                                 phone programs. See 7 CFR 1700.1.                             the investment made by such borrower
                                    Technical assistance means market re-                      in a rural development project. The in-
                                 search, product or service improve-                           vestment must not be made from:
                                 ment, feasibility studies, environ-                              (1) Proceeds of loans made or guaran-
                                 mental studies, and similar activities                        teed pursuant to the RE Act, or grants
                                 that benefit rural development or rural                       made pursuant to the RE Act or sec-
                                 job creation projects.                                        tion 2331 through section 2335A of the
                                    (b) Rules of construction. Unless the                      Rural Economic Development Act of
                                 context otherwise indicates; ‘‘includes’’                     1990 (7 U.S.C. 950aaa et seq.);
                                 and ‘‘including’’ are not limiting, and                          (2) Funds necessary to make timely
                                 ‘‘or’’ is not exclusive. The terms de-                        payments of principal and interest on

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                                 § 1703.305                                                            7 CFR Ch. XVII (1–1–04 Edition)

                                 loans made, guaranteed or lien accom-                         credit payment is due under paragraph
                                 modated pursuant to the RE Act;                               (a)(1) of this section.
                                   (3) Insurance proceeds from mort-
                                 gaged property;                                               § 1703.306 Limitation on funds derived
                                   (4) Damage awards and sale proceeds                             from the deferment of loan pay-
                                                                                                   ments.
                                 resulting from eminent domain and
                                 similar proceedings involving mort-                             Funds derived from the deferment of
                                 gaged property;                                               loan payments will not be used:
                                   (5) Sale proceeds from mortgaged                              (a) To fund or assist projects which
                                 property sales requiring specific Ad-                         would, in the judgement of the Admin-
                                 ministrator approval; and                                     istrator, create a conflict of interest or
                                   (6) Funds which are restricted by                           the appearance of a conflict of interest.
                                 RUS or RTB loan instruments to be                             The borrower must disclose to the Ad-
                                 held in trust for the Government or to                        ministrator information regarding any
                                 be held for any other specific purpose.                       potential conflict of interest or appear-
                                   (d) Any investment made in a rural                          ance of a conflict of interest;
                                 development project prior to the date                           (b) For any purpose not reasonably
                                 of the application for a deferment                            related to the project as determined by
                                 based on such project cannot be used to                       the Administrator;
                                 satisfy the requirements of this sec-                           (c) To transfer existing employment
                                 tion.                                                         or business activities from one area to
                                                                                               another; or
                                 § 1703.305 Requirements for deferment                           (d) For the borrower’s electric or
                                     of loan payments.                                         telephone operations, nor for any oper-
                                   (a) Except as otherwise provided in                         ations affiliated with the borrower un-
                                 paragraph (b) of this section, the bor-                       less the Administrator has specifically
                                 rower must make a cushion of credit                           informed the borrower in writing that
                                 payment equal to the amount of the                            the affiliated operations are part of the
                                 payment deferred and subject to the                           approved purposes.
                                 following rules:
                                   (1) Cushion of credit payments made                         § 1703.307 Uses of the deferments of
                                 prior to the date that an application                             loan payments.
                                 for deferral has been approved by RUS                           The deferment of loan payments will
                                 cannot be used to satisfy the require-                        be made to enable the borrower to pro-
                                 ments of this section;                                        vide funding and assistance for rural
                                   (2) Once a cushion of credit payment                        development and job creation projects.
                                 has been made to satisfy the require-                         This includes, but is not limited to, the
                                 ments of paragraph (a) of this section,                       borrower providing financing to local
                                 it must remain on deposit in the cush-                        businesses, community development
                                 ion of credit account on the date of the                      assistance, technical assistance to
                                 deferral or the deferral will not take                        businesses, and other community, busi-
                                 place; and                                                    ness, or economic development projects
                                   (3) The cushion of credit payment                           that will benefit rural areas.
                                 must be received by RUS on the date
                                 the payment being deferred is due, or                         § 1703.308 Amount of deferment funds
                                 within 30 days prior to this date.                                available.
                                   (b) A borrower may elect to consoli-                          (a) The total amount of deferments
                                 date in one application filed pursuant                        made available for each fiscal year
                                 to § 1703.311, all of the related deferrals                   under this program will not exceed 3
                                 it wishes to receive in a twelve month                        percent of the total payments due dur-
                                 period following application approval.                        ing fiscal year 1993 from all borrowers
                                 In such a case, the requirement con-                          on direct loans and insured loans made
                                 tained in paragraph (a)(1) of this sec-                       under the RE Act. For each subsequent
                                 tion may alternatively be satisfied by                        fiscal year after 1993, the total amount
                                 depositing an amount equal to the ag-                         of deferments will not exceed 5 percent
                                 gregate deferrals covered by such ap-                         of the total payments due for the year
                                 plication into the cushion of credit ac-                      from all borrowers on direct loans and
                                 count at the time the first cushion of                        insured loans.

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                                 Rural Utilities Service, USDA                                                                  § 1703.311

                                   (b) The total amount of annual                              ments are encouraged to consider the
                                 deferments are subject to limitations                         potential environmental impact of
                                 established by appropriations Acts.                           their proposed projects at the earliest
                                                                                               planning stage and plan development
                                 § 1703.309 Terms of repayment of de-                          in a manner that reduces, to the extent
                                      ferred loan payments.                                    practicable, the potential to affect the
                                    (a) Deferments made to enable the                          quality of the human environment ad-
                                 borrower to provide financing to local                        versely.
                                 businesses will be repaid over a period
                                 of 60 months, in equal installments,                          § 1703.311 Application procedures for
                                 with payments beginning on the date                                 deferment of loan payments.
                                 of the deferment, and continuing in                              (a) A borrower applying for a
                                 such a manner until the total amount                          deferment must:
                                 of the deferment is repaid. The                                  (1) Submit a certified board resolu-
                                 deferment payments will be made on                            tion to the Administrator requesting a
                                 either a monthly or quarterly basis de-                       deferment of principal and interest.
                                 pending on the existing repayment                             The resolution must:
                                 terms of the direct loan or insured loan                         (i) Be signed by the president or vice
                                 being deferred. The deferment will not                        president of the borrower;
                                 accrue interest.                                                 (ii) Contain information on the total
                                    (b) In the case of deferments made to                      amount of deferment requested for
                                 enable the borrower to provide commu-                         each specific project;
                                 nity development assistance, technical                           (iii) Contain information on the type
                                 assistance to businesses, and for other                       of project and the length of deferment
                                 community, business, or economic de-                          requested as defined in § 1703.309; and
                                 velopment projects not included in                               (iv) Specify which officer of the bor-
                                 paragraph (a) of this section, the                            rower has been given the authority to
                                 deferment will be repaid over a period                        certify to those matters required in
                                 of 120 months, in equal installments,                         this section;
                                 with payments beginning on the date                              (2) Submit certification by the appro-
                                 of the deferment and continuing in                            priate officer to the Administrator
                                 such a manner until the total amount                          that the proposed project will not vio-
                                 of the deferment is repaid. The                               late the limitations set forth in
                                 deferment payments will be made on                            § 1703.306 and disclose all information
                                 either a monthly or quarterly basis de-                       regarding any potential conflict of in-
                                 pending on the existing repayment                             terest or appearance of a conflict of in-
                                 terms of the direct loan or insured loan                      terest that would allow the Adminis-
                                 being deferred. The deferment will not                        trator to make an informed decision;
                                 accrue interest.                                                 (3) Submit certification by the appro-
                                    (c) The maturity date of a loan may                        priate officer to the Administrator
                                 not be extended as a result of a                              that an investment in the rural devel-
                                 deferment.                                                    opment project will be made by the
                                    (d) If the required payment is not                         borrower in an amount equal to the de-
                                 made by the borrower or received by                           ferred debt service payment;
                                 the Administrator when due, the Ad-                              (4) Submit certification by the appro-
                                 ministrator will reduce the borrower’s                        priate officer to the Administrator
                                 cushion of credit account established                         that the amount of the deferment will
                                 under this subpart in an amount equal                         not exceed 50 percent of the total cost
                                 to the deferment payment required.                            of the project for which the deferment
                                    (e) The balance in a borrower’s cush-                      is provided;
                                 ion of credit account shall not be re-                           (5) Submit certification by the appro-
                                 duced by the borrower below the level                         priate officer to the Administrator
                                 of the unpaid balance of the payment                          that it will make a cushion of credit
                                 deferred.                                                     payment necessary to satisfy the re-
                                                                                               quirement of § 1703.305(a);
                                 § 1703.310 Environmental      consider-                          (6) Submit certification by the appro-
                                     ations.                                                   priate officer to the Administrator
                                    Prospective recipients of funds re-                        that it will comply with § 1703.313 and
                                 ceived from the deferment of loan pay-                        provide documentation showing that

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                                 § 1703.312                                                               7 CFR Ch. XVII (1–1–04 Edition)

                                 its total investments, including the                          rowers     receiving    loan   payment
                                 proposed investment, will not exceed                          deferments as necessary to ensure that
                                 the investment limitations specified in                       the investments in the rural develop-
                                 7 CFR part 1717, Subpart N, Invest-                           ment project are in accordance with
                                 ments, Loans and Guarantees by Elec-                          this subpart and the representations
                                 tric Borrowers, or 7 CFR Part 1744,                           and purposes stated in the borrower’s
                                 Post Loan Policies and Procedures                             completed application. If an audit dis-
                                 Common to Guaranteed and Insured                              closes that the amount deferred was
                                 Loans. The documentation must pro-                            not used for the purposes stated in the
                                 vide a list of each rural development                         completed application, the borrower
                                 project the borrower has invested in to                       shall be required to promptly repay the
                                 date,    including      the  investment                       amount deferred and the benefits of the
                                 amounts;                                                      deferment to the borrower will be re-
                                   (7) Submit to the Administrator writ-                       captured by RUS. The borrower is re-
                                 ten identification of the direct loan(s)                      sponsible for ensuring that disburse-
                                 and/or insured loan(s) for which pay-                         ments and expenditures of funds cov-
                                 ments are to be deferred;                                     ering the investment in the rural de-
                                   (8) Submit to the Administrator a                           velopment project are properly sup-
                                 written narrative which contains infor-                       ported with certifications, invoices,
                                 mation regarding the proposed rural                           contracts, bills of sale, cancelled
                                 development or job creation project                           checks, or any other forms of evidence
                                 such as the manner in which the                               determined appropriate by the Admin-
                                 project will promote community, busi-                         istrator and that such supporting ma-
                                 ness, or economic development in rural                        terial is available at the borrower’s
                                 areas, the nature of the project, its lo-                     premises for review by the RUS field
                                 cation, the primary beneficiaries, and,                       accountant, borrower’s certified public
                                 if applicable, the number and type of                         accountant, the Office of Inspector
                                 jobs to be created; and                                       General, the General Accounting Office
                                   (9) Submit to the Administrator a                           and any other accountant conducting
                                 letter of approval from the state regu-                       an audit of the borrower’s financial
                                 latory authority, if applicable, grant-                       statements for this rural development
                                 ing its approval for the borrower to                          program.
                                 defer direct loan payment(s) and/or in-
                                 sured loan payment(s) and invest the                          § 1703.313 Compliance with other reg-
                                 amount in a rural development project.                            ulations.
                                   (b) The Administrator reserves the                            (a) Investments in a rural economic
                                 right to determine that special cir-                          development project made by an elec-
                                 cumstances require additional data                            tric borrower under this subpart are
                                 from borrowers before acting on a                             subject to the provisions of 7 CFR part
                                 deferment. The Administrator also re-                         1717, Subpart N, Investments, Loans
                                 serves the right to require, as a condi-                      and Guarantees by Electric Borrowers.
                                 tion of approving a loan payment                                (b) Investments in a rural economic
                                 deferment pursuant to this subpart,                           development project made by a tele-
                                 that the borrower execute and deliver                         phone borrower under this subpart are
                                 any amendments or supplements to its                          subject to the provisions of 7 CFR Part
                                 loan documents that may be necessary                          1744, Post Loan Policies and Proce-
                                 or appropriate to achieve the purposes                        dures Common to Guaranteed and In-
                                 outlined in § 1703.300.                                       sured Loans.
                                   (c) The Administrator will decide
                                 whether the borrower is eligible for the                      PART 1710—GENERAL AND PRE-
                                 deferment and will notify the borrower
                                 of the decision.
                                                                                                 LOAN POLICIES AND PROCE-
                                                                                                 DURES COMMON TO ELECTRIC
                                 § 1703.312 RUS review requirements.                             LOANS AND GUARANTEES
                                    Borrowers shall ensure that funds are
                                 invested in the rural development                                          Subpart A—General
                                 project as approved by RUS. The Ad-                           Sec.
                                 ministrator reserves the right to re-                         1710.1   General statement.
                                 view the books and copy records of bor-                       1710.2   Definitions and rules of construction.

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                                 Rural Utilities Service, USDA                                                                         Pt. 1710
                                 1710.3 Form and bulletin revisions.                           1710.201 General.
                                 1710.4 Exception authority.                                   1710.202 Requirement to prepare a load fore-
                                 1710.5 Availability of forms.                                     cast-power supply borrowers.
                                 1710.6 Applicability of certain provisions to                 1710.203 Requirement to prepare a load fore-
                                     completed loan applications.                                  cast-distribution borrowers.
                                 1710.7–1710.49 [Reserved]                                     1710.204 Filing requirements for borrowers
                                                                                                   that must maintain a current RUS ap-
                                     Subpart B—Types of Loans and Loan                             proved load forecast on an ongoing basis.
                                                Guarantees                                     1710.205 Minimum requirements for all bor-
                                                                                                   rower load forecasts.
                                 1710.50 Insured loans.                                        1710.206 Requirements for load forecasts
                                 1710.51 Direct loans.                                             prepared pursuant to RUS approved load
                                 1710.52 Loan guarantees.                                          forecast work plans.
                                 1710.53–1710.99 [Reserved]                                    1710.207 RUS approval criteria for approval
                                                                                                   of load forecasts by distribution bor-
                                     Subpart C—Loan Purposes and Basic                             rowers not required to maintain a cur-
                                                 Policies.                                         rent load forecast on an ongoing basis.
                                                                                               1710.208 RUS approval criteria for load fore-
                                 1710.100 General.                                                 casts submitted by all power supply bor-
                                 1710.101 Types of eligible borrowers.                             rowers and by distribution borrowers re-
                                 1710.102 Borrower eligibility for different                       quired to maintain a current load fore-
                                     types of loans.                                               cast on an ongoing basis.
                                 1710.103 Area coverage.
                                                                                               1710.209 Requirements for load forecast
                                 1710.104 Service to non-RE Act bene-
                                                                                                   work plans.
                                     ficiaries.
                                                                                               1710.210 Waiver of requirements or approval
                                 1710.105 State regulatory approvals.
                                                                                                   criteria.
                                 1710.106 Uses of loan funds.
                                                                                               1710.211–1710.249 [Reserved]
                                 1710.107 Amount lent for acquisitions.
                                 1710.108 Mergers and consolidations.
                                 1710.109 Reimbursement of general funds
                                                                                                Subpart F—Construction Work Plans and
                                     and interim financing.                                                Related Studies
                                 1710.110 Supplemental financing.                              1710.250 General.
                                 1710.111 Refinancing.
                                                                                               1710.251 Construction work plans—distribu-
                                 1710.112 Loan feasibility.
                                                                                                   tion borrowers.
                                 1710.113 Loan security.
                                                                                               1710.252 Construction work plans—power
                                 1710.114 TIER, DSC, OTIER and ODSC re-
                                                                                                   supply borrowers.
                                     quirements.
                                                                                               1710.253 Engineering and cost studies—addi-
                                 1710.115 Final maturity.
                                                                                                   tion of generation capacity.
                                 1710.116 [Reserved]
                                                                                               1710.254 Alternative sources of power.
                                 1710.117 Environmental considerations.
                                                                                               1710.255–1710.299 [Reserved]
                                 1710.118 [Reserved]
                                 1710.119 Loan processing priorities.
                                 1710.120 Construction standards and con-                          Subpart G—Long-Range Financial
                                     tracting.                                                                Forecasts
                                 1710.121 Insurance requirements.
                                                                                               1710.300 General.
                                 1710.122 Equal      opportunity   and  non-
                                                                                               1710.301 Financial     forecasts—distribution
                                     discrimination.
                                                                                                   borrowers.
                                 1710.123 Debarment and suspension.
                                                                                               1710.302 Financial forecasts—power supply
                                 1710.124 Uniform Relocation Act.
                                                                                                   borrowers.
                                 1710.125 Restrictions on lobbying.
                                                                                               1710.303 Power cost studies—power supply
                                 1710.126 Federal debt delinquency.
                                                                                                   borrowers.
                                 1710.127 Drug free workplace.
                                                                                               1710.304–1710.349 [Reserved]
                                 1710.128–1710.149 [Reserved]

                                   Subpart D—Basic Requirements for Loan                                  Subpart H [Reserved]
                                                 Approval                                      Subpart I—Application Requirements and
                                 1710.150 General.                                                Procedures for Insured and Guaran-
                                 1710.151 Required findings for all loans.                        teed Loans
                                 1710.152 Primary support documents.
                                 1710.153 Additional requirements and proce-                   1710.400 Initial contact.
                                     dures.                                                    1710.401 Loan application documents.
                                 1710.154–1710.199 [Reserved]                                  1710.402–1710.403 [Reserved]
                                                                                               1710.404 Additional requirements.
                                             Subpart E—Load Forecasts                          1710.405 Supplemental financing documents.
                                                                                               1710.406 Loan approval.
                                 1710.200    Purpose.                                          1710.407 Loan documents.

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                                 § 1710.1                                                              7 CFR Ch. XVII (1–1–04 Edition)
                                   AUTHORITY: 7 U.S.C. 901 et seq., 1921 et seq.,              § 1710.2 Definitions and rules of con-
                                 6941 et seq.                                                       struction.
                                   SOURCE: 57 FR 1053, Jan. 9, 1992, unless oth-                  (a) Definitions. For the purpose of this
                                 erwise noted.                                                 part, the following terms shall have
                                                                                               the following meanings:
                                             Subpart A—General                                    Administrator means the Adminis-
                                                                                               trator of RUS or his or her designee.
                                 § 1710.1     General statement.                                  Approved load forecast means a load
                                                                                               forecast that RUS has determined is
                                   (a) This part establishes general and                       current for RUS purposes and has been
                                 pre-loan policies and requirements that                       approved by RUS pursuant to 7 CFR
                                 apply to both insured and guaranteed                          part 1710, subpart E.
                                 loans to finance the construction and                            Approved load forecast work plan
                                 improvement of electric facilities in                         means a load forecast work plan that
                                 rural areas, including generation,                            RUS has determined is current for
                                 transmission, and distribution facili-                        RUS’ purposes and has been approved
                                 ties.                                                         pursuant to 7 CFR part 1710, subpart E.
                                   (b) Additional pre-loan policies, pro-                         APRR means Average Adjusted Plant
                                 cedures, and requirements that apply                          Revenue Ratio calculated as a simple
                                 specifically to guaranteed and/or in-                         average of the adjusted plant revenue
                                 sured loans are set forth elsewhere:                          ratios for 1978, 1979 and 1980 as follows:
                                   (1) For guaranteed loans in 7 CFR
                                                                                                                      A+B
                                 part 1712 and RUS Bulletins 20–22, 60–                                     APRR =
                                 10, 86–3, 105–5, and 111–3, or the succes-                                           C−D
                                 sors to these bulletins; and                                  where:
                                   (2) For insured loans in 7 CFR part                         A=Distribution (plant), which equals Part E,
                                 1714 and in RUS Bulletins 60–10, 86–3,                         Line 14(e) of RUS Form 7;
                                 105–5, and 111–3, or the successors to                        B=General Plant, which equals Part E, Line
                                 these bulletins.                                               24(e) of RUS Form 7;
                                                                                               C=Operating Revenue and Patronage Capital,
                                   (c) This part supersedes those por-                          which equals Part A, Line 1 of RUS Form
                                 tions of the following RUS Bulletins                           7; and
                                 and supplements that are in conflict.                         D=Cost of Power, which equals the sum of
                                                                                                Part A, Lines 2, 3, and 4 of RUS Form 7.
                                 20–5 Extensions of Payments of Principal
                                   and Interest                                                  Area Coverage means the provision of
                                 20–20 Deferment of Principal Repayments                       adequate electric service to the widest
                                   for Investment in Supplemental Lending                      practical number of rural users in the
                                   Institutions                                                borrower’s service area during the life
                                 20–22 Guarantee of Loans for Bulk Power                       of the loan.
                                   Supply Facilities                                             Borrower means any organization
                                 20–23 Section 12 Extensions for Energy Re-                    that has an outstanding loan made or
                                   sources Conservation Loans                                  guaranteed by RUS for rural elec-
                                 60–10 Construction Work Plans, Electric                       trification, or that is seeking such fi-
                                   Distribution Systems                                        nancing.
                                 86–3 Headquarters Facilities for Electric                       Bulk Transmission Facilities means the
                                   Borrowers                                                   transmission     facilities    connecting
                                 105–5 Financial Forecast-Electric Distribu-                   power supply facilities to the subtrans-
                                   tion Systems                                                mission facilities, including both the
                                 111–3 Power Supply Surveys                                    high and low voltage sides of the trans-
                                 120–1 Development, Approval, and Use of                       former used to connect to the subtrans-
                                   Power Requirements Studies
                                                                                               mission facilities, as well as related su-
                                   (d) When parts 1710, 1712, and 1714 are                     pervisory control and data acquisition
                                 published in final form, the bulletins                        systems.
                                 cited in paragraph (b) of this section                          Call provision has the same meaning
                                 will be rescinded, in whole or in part,                       as ‘‘prepayment option’’.
                                 or revised.                                                     Consolidation means the combination
                                                                                               of 2 or more borrower or nonborrower
                                 [57 FR 1053, Jan. 9, 1992, as amended at 58 FR                organizations, pursuant to state law,
                                 66262, Dec. 20, 1993]                                         into a new successor organization that

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                                 Rural Utilities Service, USDA                                                                          § 1710.2

                                 takes over the assets and assumes the                           DSC means Debt Service Coverage of
                                 liabilities of those organizations.                           the borrower calculated as:
                                   Consumer means a retail customer of
                                 electricity, as reported on RUS Form 7,                                             A + B+C
                                 Part R, Lines 1–7.                                                         DSC =
                                   Demand side management (DSM)                                                          D
                                 means the deliberate planning and/or                          Where:
                                 implementation of activities to influ-                        All amounts are for the same calendar year
                                 ence consumer use of electricity pro-                          and are based on the RUS system of ac-
                                 vided by a distribution borrower to                            counts and RUS Forms 7 and 12. References
                                 produce beneficial modifications to the                        to line numbers in the RUS Forms 7 and 12
                                 system load profile. Beneficial modi-                          refer to the June 1994 version of RUS Form
                                 fications to the system load profile or-                       7 and the December 1993 version of RUS
                                 dinarily improve load factor or other-                         Form 12, and will apply to corresponding
                                 wise help in utilizing electric system                         information in future versions of the
                                                                                                forms;
                                 resources to best advantage consistent
                                                                                               A=Depreciation and Amortization Expense of
                                 with acceptable standards of service
                                                                                                the borrower, which equals Part A, Line 12
                                 and lowest system cost. Load profile                           of RUS Form 7 (distribution borrowers) or
                                 modifications are characterized as                             Section A, Line 20 of RUS Form 12a (power
                                 peak clipping, valley filling, load shift-                     supply borrowers);
                                 ing, strategic conservation, strategic                        B=Interest expense on total long-term debt
                                 load growth, and flexible load profile.                        of the borrower, which equals Part A, Line
                                 (See, for example, publications of the                         15 of RUS Form 7 or Section A, Line 22 of
                                 Electric Power Research Institute                              RUS Form 12a, except that interest ex-
                                 (EPRI), 3412 Hillview Avenue, Palo                             pense shall be increased by 1⁄3 of the
                                 Alto, CA 94304, especially ‘‘Demand-                           amount, if any, by which restricted rentals
                                 Side Management Glossary’’ EPRI TR–                            of the borrower (Part M, Line 3 of RUS
                                 101158, Project 1940–25, Final Report,                         Form 7 or Section K, Line 4 of RUS Form
                                 October 1992.) DSM includes energy                             12h) exceed 2 percent of the borrower’s eq-
                                 conservation programs. It does not in-                         uity (RUS Form 7, Part C, Line 36 [Total
                                                                                                Margins & Equities] less Line 26 [Regu-
                                 clude sources of electrical energy such
                                                                                                latory Assets] or RUS Form 12a, Section B,
                                 as renewable energy systems, fuel cells,
                                                                                                Line 38 [Total Margins & Equities] less
                                 or traditionally fueled generation, such                       Line 28 [Regulatory Assets]);
                                 as fossil or nuclear fueled generators.                       C=Patronage Capital or Margins of the bor-
                                   Distributed generation is the genera-                        rower, which equals Part A, Line 28 of RUS
                                 tion of electricity by a sufficiently                          Form 7 or Section A, Line 35 of RUS Form
                                 small electric generating system as to                         12a; and
                                 allow interconnection of the electric                         D=Debt Service Billed (RUS + other), which
                                 generating system near the point of                            equals the sum of all payments of principal
                                 service at distribution voltages includ-                       and interest required to be made on ac-
                                 ing points on the customer side of the                         count of total long-term debt of the bor-
                                 meter. A distributed generating system                         rower during the calendar year, plus 1⁄3 of
                                 may be operated in parallel or inde-                           the amount, if any, by which restricted
                                 pendent of the electric power system. A                        rentals of the borrower (Part M, Line 3 of
                                 distributed generating system may be                           RUS Form 7 or Section K, Line 4 of RUS
                                                                                                Form 12h) exceed 2 percent of the bor-
                                 fueled by any source, including but not
                                                                                                rower’s equity (RUS Form 7, Part C, Line
                                 limited to renewable energy sources. A                         36 [Total Margins & Equities] less Line 26
                                 distributed generation project may in-                         [Regulatory Assets] or RUS Form 12a, Sec-
                                 clude one or more distributed genera-                          tion B, Line 38 [Total Margins & Equities]
                                 tion systems.                                                  less Line 28 [Regulatory Assets]);
                                   Distribution Borrower means a bor-
                                 rower that sells or intends to sell elec-                       DSM activities means activities of the
                                 tric power and energy at retail in rural                      type referred to in § 1710.354(f).
                                 areas.                                                          DSM plan means a plan that de-
                                   Distribution Facilities means all elec-                     scribes the implementation at the dis-
                                 trical lines and related facilities begin-                    tribution level of the DSM activities
                                 ning at the consumer’s meter base, and                        identified in the integrated resource
                                 continuing back to and including the                          plan as having positive net benefits.
                                 distribution substation.                                      See § 1710.357.

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                                 § 1710.2                                                              7 CFR Ch. XVII (1–1–04 Edition)

                                   Electric system means all of the bor-                       costs of the full range of alternatives,
                                 rower’s interests in all electric produc-                     including new generating capacity,
                                 tion, transmission, distribution, con-                        power purchases, DSM programs, sys-
                                 servation, load management, general                           tem operating efficiency, and renew-
                                 plant and other related facilities,                           able energy systems.
                                 equipment or property and in any                                Interest rate cap means a maximum
                                 mine, well, pipeline, plant, structure or                     interest rate of 7 percent applicable to
                                 other facility for the development, pro-                      certain municipal rate loans as set
                                 duction, manufacture, storage, fabrica-                       forth in § 1710.7.
                                 tion or processing of fossil, nuclear, or                       Interest rate term means a period of
                                 other fuel or in any facility or rights                       time selected by the borrower for the
                                 with respect to the supply of water, in                       purpose of determining the interest
                                 each case for use, in whole or in major                       rate on an advance of funds. See 7 CFR
                                 part, in any of the borrower’s gener-                         1714.6.
                                 ating plants, including any interest or                         Load forecast means the thorough
                                 participation of the borrower in any                          study of a borrower’s electric loads and
                                 such facilities or any rights to the out-                     the factors that affect those loads in
                                 put or capacity thereof, together with                        order to determine, as accurately as
                                 all lands, easements, rights-of-way,                          practicable, the borrower’s future re-
                                 other works, property, structures, con-                       quirements for energy and capacity.
                                 tract rights and other tangible and in-
                                                                                                 Load forecast work plan means the
                                 tangible assets of the borrower in each
                                                                                               plan that contains the resources, meth-
                                 case used or useful in such electric sys-
                                                                                               ods, schedules, and milestones to be
                                 tem.
                                                                                               used in the preparation and mainte-
                                   Equity means total margins and equi-
                                                                                               nance of a load forecast.
                                 ties, which equals Part C, Line 33 of
                                 RUS Form 7 (distribution borrowers) or                          Loan means any loan made or guar-
                                 Section B, Line 34 of RUS Form 12a                            anteed by RUS.
                                 (power supply borrowers).                                       Loan Contract means the agreement,
                                   Final maturity means the final date                         as amended, supplemented, or restated
                                 on which all outstanding principal and                        from time to time, between a borrower
                                 accrued interest on an electric loan is                       and RUS providing for loans made or
                                 due and payable.                                              guaranteed pursuant to the RE Act.
                                   Five percent hardship rate means an                           Loan Feasibility means that the bor-
                                 interest rate of 5 percent applicable to                      rower has the capability of repaying
                                 a hardship rate loan.                                         the loan in full as scheduled, in accord-
                                   Fund advance period means the period                        ance with the terms of the mortgage,
                                 of time during which the Government                           note, and loan contract.
                                 may advance loan funds to the bor-                              Loan Guarantee means a loan guar-
                                 rower. See 7 CFR 1714.56.                                     antee made by RUS pursuant to the RE
                                   Generation Facilities means the gener-                      Act.
                                 ating plant and related facilities, in-                         Loan period means the period of time
                                 cluding the building containing the                           during which the facilities included in
                                 plant, all fuel handling facilities, and                      a loan application will be constructed.
                                 the stepup substation used to convert                         It commences with the date shown on
                                 the generator voltage to transmission                         page 1, in the block headed ‘‘Cost Esti-
                                 voltage, as well as related energy man-                       mates as of,’’ of RUS Form 740c, Cost
                                 agement (dispatching) systems.                                Estimates and Loan Budget for Elec-
                                   Hardship rate loan means a loan made                        tric Borrowers, which is the same as
                                 at the 5 percent hardship rate pursuant                       the date on the Financial and Statis-
                                 to 7 CFR 1714.8.                                              tical Report submitted with the loan
                                   Insured Loan means a loan made pur-                         application. The loan period may be up
                                 suant to Section 305 of the RE Act, and                       to 4 years for distribution borrowers
                                 may include a direct loan made under                          and, except in the case of a loan for
                                 Section 4 of the RE Act.                                      new generating and associated trans-
                                   Integrated Resources Plan (IRP) means                       mission facilities, up to 4 years for the
                                 a plan resulting from the planning and                        transmission facilities and improve-
                                 selection process for new energy re-                          ments or replacements of generation
                                 sources that evaluates the benefits and                       facilities for power supply borrowers.

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                                 Rural Utilities Service, USDA                                                                          § 1710.2

                                 The loan period for new generating fa-                         gins & Equities] less Line 26 [Regulatory
                                 cilities is determined on a case by case                       Assets]).
                                 basis.                                                           Off-grid renewable energy system is a
                                   Merger means the combining, pursu-                          renewable energy system not inter-
                                 ant to state law, of borrower or nonbor-                      connected to an area electric power
                                 rower organizations into an existing                          system (EPS). An off-grid renewable
                                 survivor organization that takes over                         energy system in areas without access
                                 the assets and assumes the liabilities                        to an area EPS may include energy
                                 of the merged organizations.                                  consuming devices and electric wiring
                                   Mortgage means any and all instru-                          to provide for more effective or more
                                 ments creating a lien on or security in-                      efficient use of the electricity produced
                                 terest in the borrower’s assets in con-                       by the system.
                                 nection with loans or guarantees under
                                                                                                  On-grid renewable energy system is a
                                 the RE Act.
                                                                                               renewable      energy    system     inter-
                                   Municipal rate loan means a loan
                                                                                               connected to an area electric power
                                 made at a municipal interest rate pur-
                                                                                               system (EPS) through a normally open
                                 suant to 7 CFR 1714.5.
                                                                                               or normally closed device. It can be
                                   ODSC means Operating Debt Service
                                                                                               interconnected to the EPS on either
                                 Coverage of the electric system cal-
                                                                                               side of a customer’s meter.
                                 culated as:
                                                                                                  Ordinary Replacement means replac-
                                                             A + B+C                           ing one or more units of plant, called
                                                ODSC =                                         ‘‘retirement units’’, with similar units
                                                                   D                           when made necessary by normal wear
                                 Where:                                                        and tear, damage beyond repair, or ob-
                                 All amounts are for the same calendar year                    solescence of