# Economic Development Administration Regulatory Revision

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2014-28806

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** December 19, 2014
- **Citation:** 79 FR 76108

## Text

DEPARTMENT OF COMMERCE
Economic Development Administration
13 CFR Parts 300, 301, 302, 303, 304, 305, 306, 307, 308, 310, and 314
[Docket No.: 110726429-4508-02]
RIN 0610-AA66
Economic Development Administration Regulatory Revision

AGENCY:

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

ACTION:

Final rule.

SUMMARY:

The Economic Development Administration (“EDA” or “Agency”), U.S. Department of Commerce (“DOC”), is amending its regulations implementing the Public Works and Economic Development Act of 1965, as amended (“PWEDA”). These comprehensive changes are intended to reflect EDA's current practices and policies in administering its economic development assistance programs.

DATES:

This rule is effective on January 20, 2015.

ADDRESSES:

For convenience, the full text of EDA's regulations as amended is available on EDA's Web site at
http://www.eda.gov/.

FOR FURTHER INFORMATION CONTACT:

Stephen D. Kong, Chief Counsel, Office of the Chief Counsel, Economic Development Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., 7th Floor, Washington, DC 20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION:

Background

The mission of EDA is to lead the Federal economic development agenda by promoting competitiveness and preparing the nation's regions for growth and success in the worldwide economy. EDA makes investments in and provides technical assistance to economically distressed communities in order to facilitate job creation for U.S. workers, increase private sector investment, promote American innovation, and accelerate long-term sustainable economic growth. EDA's regulations, codified at 13 CFR Chapter III, provide the framework through which the Agency administers its economic development assistance programs.

Although EDA had amended its regulations in 2006 (71 FR 56675), 2008 (73 FR 62865), and 2010 (75 FR 4262), since early 2011 the Agency has undertaken an across-the-board review of its regulations to ensure consistency with the Agency's emphasis on incentivizing innovation and regional collaboration and to reduce burdens on stakeholders and the public by removing outdated provisions and streamlining and clarifying existing requirements.

On December 12, 2011, EDA published a Notice of Proposed Rulemaking (“NPRM”) in the
Federal Register
(76 FR 76492) requesting public comments on EDA's proposed changes to its regulations. Subsequently, EDA extended the deadline for submitting comments to NPRM from the original date of February 8, 2012 to February 15, 2012 (77 FR 6517).

The NPRM proposed a number of substantive and non-substantive revisions intended to ensure that the regulations reflect the Agency's focus on innovation and regional collaboration and provide EDA's stakeholders with the flexibility and local control needed to achieve these ends. From a programmatic standpoint, the most significant proposed changes were to the Comprehensive Economic Development Strategies requirements outlined in Part 303 and the Revolving Loan Fund program described in Part 307. The revisions proposed in the NPRM are summarized below. Capitalized terms used but not otherwise defined in this Final Rule have the meanings ascribed to them in EDA's current regulations.

Part 300—General Information

• The NPRM inserted the term “new and better jobs” in place of “higher-skill, higher-wage jobs” (§ 300.1), revised EDA's Headquarters address in Washington, DC (§ 300.2(a)), and replaced and/or deleted certain words in § 300.2(b).

• EDA also proposed changes and/or corrections to the definitions of “Cooperative Agreement,” “Grant,” “Eligible Recipient,” “Federal Funding Opportunity,” “Federally Declared Disaster,” “Indian Tribe,” “Investment or Investment Assistance, “Investment Rate,” “Local Share or Matching Share,” “Presidentially Declared Disaster,” “Region or Regional” and “Trade Act” in § 300.3.

• In addition, EDA proposed removing the definition of “Private Sector Representative” to be consistent with proposed changes to Parts 303 and 304 and adding a definition for “Regional Innovation Clusters or RICs.”

Part 301—Eligibility, Investment Rate and Application Requirements

• The NPRM proposed amending § 301.1 to more accurately describe EDA's application process.

• EDA proposed non-substantive changes to §§ 301.3(a)(1) and 301.3(c)(1).

• EDA proposed updates to § 301.3(a)(4) to clarify the data requirements Eligible Recipients must follow to demonstrate economic distress.

• The NPRM provided, via revisions to Table 2 of § 301.4(b)(5), that EDA may authorize a grant rate of up to 80 percent to incentivize Projects that encourage broad, innovative Regional planning or demonstrate effective leveraging of other Federal Agency resources.

• The NPRM proposed amending Table 2 of § 301.4(b)(5) to make clear that EDA may provide up to a 100 percent grant rate when “EDA receives appropriations under section 703 of PWEDA (42 U.S.C. 3233),” which authorizes disaster economic recovery activities.

• To provide added flexibility when warranted, EDA proposed to remove the requirement in Table 2 of § 301.4(b)(5) that a disaster-related application must be submitted within 18 months of the relevant disaster declaration to receive a 100 percent grant rate.

• The NPRM proposed removing a number of repetitive numerical references in § 301.4.

• EDA proposed clarifying, non-substantive revisions to § 301.6.

• The NPRM modified the language in § 301.7 to reflect the Agency's improved grant review and selection process under its Public Works and Economic Adjustment Assistance programs.

• Besides minor changes to the text, EDA's revised § 301.8 outlined EDA's updated criteria for evaluating applications. Under the NPRM's approach, EDA would evaluate applications based on the extent to which they: (a) Ensure regional collaboration; (b) leverage public-private partnerships; (c) advance national strategic priorities; (d) enhance global competitiveness; (e) encourage environmentally sustainable development; and (f) support economically distressed and underserved communities.

• EDA proposed minor changes to the language of § 301.9.

• In § 301.10, the NPRM provides for a new paragraph (d) that would require a feasibility study to be conducted by an impartial third party, and an operational plan for any “Project” involving the

construction of business, technology or other types of incubators or accelerators. The NPRM also proposed other clarifying revisions to § 301.10.

• EDA proposed to add a new § 301.11 entitled “Infrastructure.” In § 301.11(a), EDA provides examples of innovation- and entrepreneurship-related infrastructure and definitions of these terms, including business incubation, business acceleration, venture development organizations, proof of concept centers and technology transfer. In paragraph (b), EDA notes that it will seek to fund Projects that effectively leverage Federal, State and local resources and reiterates its prohibition under PWEDA on providing funds to any for-profit entity.

Part 302—General Terms and Conditions for Investment Assistance

• EDA proposed minor, non-substantive changes to §§ 302.1, 302.3, 302.6, 302.8, 302.9(a)-(b), and 302.11.

• EDA proposed updates to § 302.10, which includes a “post-employment” restriction on the employment of certain EDA employees by Eligible Applicants, as required by PWEDA. The NPRM provides for greater flexibility in the application of the post-employment restriction, putting particular focus on those situations where there is a greater chance of undue influence. In addition, EDA proposed restructuring this section to separate the post-employment restriction from expediter requirements, along with several minor corrections.

• EDA proposed a revision to § 302.16 outlining EDA's accountability expectations; namely, in new paragraph (d), EDA emphasizes that it expects Recipients to use good faith efforts to meet Project goals and sets forth the ramifications should the Recipient fail to undertake such efforts. Also, the NPRM adds additional paragraph headings and several clarifying changes to the text.

• In § 302.18, EDA proposed a revision to clarify that post-approval requirements apply to all EDA awards.

• EDA proposed minor, non-substantive changes to §§ 302.17 and 302.20(b)(1).

Part 303—Planning Investments and Comprehensive Economic Development Strategies

• The NPRM proposed numerous non-substantive revisions to §§ 303.1, 303.3, 303.4, 303.6 and 303.9.

• In § 303.1, EDA proposed two substantive revisions. First, EDA proposed to replace the phrase “Private Sector Representative” with “the private sector.” Although “Private Sector Representative” was removed as a defined term in § 300.1, EDA wanted to emphasize that it still expects the private sector to play a key role in the Regions' planning processes. Second, EDA proposed to add “non-profit organizations” and “educational institutions” to the list of entities that EDA expects to will be actively involved in the planning process.

• EDA proposed a significant restructuring of, and important substantive revisions to, § 303.6, which sets forth the process requirements for developing Comprehensive Economic Development Strategies (CEDS). In order to ensure that there exists sufficient flexibility for all types of communities and Regions, the NPRM proposed maintaining the requirement that a Strategy Committee represent the main economic interests of the Region (
e.g.,
private sector, public officials, community leaders, private individuals, representatives of workforce development boards, institutions of higher education, minority and labor groups), but eliminated the requirement for a majority or membership threshold from any type of economic stakeholder. EDA also proposed adding language to § 303.6(b)(1) to capture any stakeholders not specifically mentioned in the list. Although the membership threshold would be removed, EDA proposed adding a sentence to emphasize that the capability of each Strategy Committee to undertake a collaborative Regional planning process is still of principal importance. Finally, besides a minor correction to § 303.6(b), EDA proposed a change to this paragraph that emphasizes broader and on-going stakeholder input in the Regional planning process. More specifically, under the proposed § 303.6(b)(2) describing the revised public comment requirements, the Planning Organization, before submission of a CEDS to EDA, must provide the public and appropriate governments and interest groups with adequate notice and opportunity to comment on the CEDS. The Planning Organization, as before, would still be required to keep the comment period open for at least 30 days. In addition, the Planning Organization must make the CEDS available in electronic or other appropriate form, throughout the comment period. Also, the updated § 303.6(b)(2) requires the Planning Organization to provide to EDA, upon request, any comments received on the CEDS and demonstrate how the comments were addressed.

• In § 303.7(b), several discrete changes were proposed for clarity purposes and to emphasize certain concepts. But the most significant revision proposed was streamlining the CEDS requirements from a laundry-list of ten detailed items to the following four essential planning elements in § 303.7(b)(1)(i)-(iv): (a) A summary of economic development conditions of the Region; (b) an in-depth analysis of the economic and community strengths, weaknesses, opportunities and threats; (c) strategies and an implementation plan to build upon the Region's strengths and opportunities and resolve or mitigate the weaknesses and threats facing the Region, but should not be inconsistent with applicable State and local economic development or workforce development strategies; and (d) performance measures used to evaluate the Planning Organization's successful development and implementation of the CEDS. Moreover, as noted in the NPRM, EDA intends to provide further content to stakeholders through the publication of periodically-updated CEDS guidelines, which will be based on best practices and developed in collaboration with EDA's economic development and research partners. All of these substantive changes are expected to enhance local control and allow EDA's planning partners to focus on strategies, performance, and outputs.

Part 304—Economic Development Districts

• The NPRM proposed to correct minor errors and/or remove redundancies in §§ 304.1, 304.2, and 304.4, as well as make a conforming change in § 304.2(c)(2).

• To allow District Organizations to focus on an effective planning process rather than constant compliance with membership requirements, EDA proposed to revise § 304.2(c)(2) to eliminate the current membership thresholds. However, EDA's new provision would maintain the requirement that governing bodies demonstrate that they are broadly representative of the principal economic interests of the Region and added a sentence emphasizing that governing bodies must have the capability to implement the relevant CEDS.

• In order to increase public participation in District Organization operations and provide for greater public awareness of the importance of these entities, the NPRM provided in § 304.2(c)(4) that District Organizations must meet at least twice a year, instead of only once a year.

Part 305—Public Works and Economic Development Investments

• EDA proposed minor, non-substantive revisions to §§ 305.1, 305.2(c), 305.6, and 305.8.

• The NPRM proposed substantive changes to § 305.6(a), which addresses allowable methods of procurement for construction services. EDA was seeking to ensure that Recipients, if they wished to use alternate construction procurement methods to the traditional design/bid/build approach, still followed correct procedures and that the maximum amount of project costs were allowable under applicable regulations and Federal cost principles. A proposed change to the first sentence clarifies that Recipients must obtain EDA's prior written approval before any such alternate construction procurement method can be used. The justification for using an alternate method must include a brief analysis of the appropriateness and benefits of using the method to successfully execute the Project, as well as the Recipient's past experience in using the method.

• In an apparent oversight, § 305.10 currently only addresses construction contract bid underrun procedures. To correct this problem, EDA proposed a new heading entitled “Bid Underrun and Overrun.” The existing provision regarding bid underrun procedures would become a new paragraph (a). A new paragraph (b), simply codifying EDA's existing practice, would set forth EDA's procedures in the event of an overrun at construction contract bid opening. If there is an overrun, the proposed provision allows the Recipient to take deductive alternatives if provided for in the bid documents, reject all bids and re-advertise, or augment the Matching Share. But if the Recipient demonstrates to EDA's satisfaction that these options are not feasible and the Project cannot be completed otherwise, the Recipient may submit a written request to EDA for additional funding. The final decision will be in the sole discretion of EDA and considered in accordance with EDA's competitive process requirements.

• EDA also sought a change to the newly-proposed § 305.10(a) requiring the Recipient, in the event of a bid underrun, to contact EDA immediately to determine the relevant procedures.

Part 306—Training, Research and Technical Assistance Investments

• The NPRM proposed minor, non-substantive changes to §§ 306.1, 306.3, 306.4, 306.6 and 306.7.

Part 307—Economic Adjustment Assistance Investments

• Through the NPRM, EDA sought to clarify award requirements for the Economic Adjustment Assistance (“EAA”) Program as well as incorporate all Revolving Loan Fund (“RLF”) requirements under Subpart B, which EDA proposed renaming “Revolving Loan Fund Program.” For example, the NPRM incorporated the RLF application review and post-approval requirements under the new § 307.7 entitled “Revolving Loan Fund award requirements” in Subpart B.

• EDA proposed minor, non-substantive changes to § 307.1.

• In EDA's interim final rule published in the
Federal Register
on October 22, 2008 (73 FR 62858), EDA made clear it would no longer allow RLF Recipients to use RLF capital to guarantee loans. The NPRM proposed a revision to § 307.3(b)(2) to remove the reference to “loan guaranties” that was inadvertently missed in the 2008 regulatory revision.

• Because of an omission in § 307.4(c)(2), EDA proposed changes to the text of new § 307.7(a)(1)(ii) to specify that EDA will review disaster-related RLF applications to assess the need to provide appropriate support for post-disaster economic recovery efforts in Presidentially Declared Disaster areas.

• Without changing the requirements applicable to EAA awards, EDA proposed relocating portions of current § 307.6 to § 307.4, making minor yet necessary additional revisions to the language of § 307.4, and making conforming changes to the table of contents of Part 307.

• The NPRM proposed redesignating the current § 307.7 as § 307.6 and incorporating redesignated § 307.6 under Subpart B. EDA also proposed a minor change to the wording of redesignated § 307.6.

• EDA also proposed an amendment to § 307.9(a)(2) to clarify the existing requirement that the RLF Recipient is responsible for complying with applicable environmental laws as outlined in § 307.10, meaning that the Recipient must adopt compliance procedures and otherwise ensure that borrowers adhere to relevant environmental laws and regulations.

• The NPRM proposed minor, non-substantive changes to §§ 307.9(b), 307.10(a)-(b), 307.11(b), (d), (e), (f), 307.12(a)-(b) and 307.13(a)-(b).

• EDA proposed additional language to § 307.14(c) to provide that EDA may waive the requirement to submit the RLF Income and Expense Statement (Form ED-209I), required of any RLF Recipient that uses either 50 percent or more (or more than $100,000) of RLF Income for administrative costs in a six-month Reporting Period, for small RLFs as determined by the Agency. The NPRM also proposed to remove repetitive numerical references from § 307.14(c).

• EDA proposed a revision to § 307.15(b)(1), which contains the requirement that an accountant certify to the adequacy of an RLF Recipient's accounting system before EDA can disburse funds. The proposed language, to address concerns raised in prior programmatic audits, imposes a rigorous standard that the certification be made by “a qualified independent accountant who preferably has audited the RLF recipient in accordance with OMB Circular A-133 requirements.”

• Besides removing several repetitive references in §§ 307.15(b)-(d), EDA proposed a change to § 307.15(d)(1)(iii) so that any Federal loans, not just those from the U.S. Small Business Administration's 7(a) and 504 debenture programs, can be used by the RLF Recipient to meet its leveraging requirement. In addition, the NPRM provides additional clarity by listing loans from U.S. Department of Agriculture as a type of Federal loan than can be used as leverage.

• In its current form, § 307.16(c)(1)(ii) creates an exception to EDA's capitalization utilization standard of 75 percent of RLF Capital if the RLF Recipient anticipates making large loans relative to the size of its RLF Capital base. EDA, recognizing that such an approach is a deviation from the rule, rather than an exception, proposed to delete this provision. At the same time, EDA proposed to make related conforming amendments to §§ 307.16(c)(1) and (c)(2)(i).

• EDA proposed non-substantive revisions to various portions of §§ 307.16(a), (c) and (d).

• In general, RLF Capital cannot be used to refinance existing debt, but EDA may allow the RLF Recipient to use RLF Capital to purchase the rights of a prior lien holder during a foreclosure action in order to prevent a significant loss on an RLF loan. To make use of RLF Capital in this manner, the RLF Recipient must currently demonstrate under § 307.17(b)(6)(ii) that there is a high probability that the sale of assets will result in compensation sufficient to cover the RLF's costs, plus a reasonable portion of the outstanding loan, within 18 months of the refinancing. To provide greater flexibility in uncertain economic conditions, EDA proposed to change the 18-month time limit to “a reasonable period of time, as determined by EDA.” The NPRM also proposed to remove a repetitive numerical reference in § 307.17(c).

• The NPRM proposed amending § 307.18(a) to allow EDA to approve, at the request of an RLF Recipient, the

addition of a new lending area before the full amount of the RLF Grant is disbursed to the Recipient. To effect this revision, EDA proposed to remove § 307.18(a)(1)(i) and renumber the remainder of the subparagraph accordingly.

• To clarify that all RLF loans must be made in accordance with the RLF Plan, the NPRM also proposed removing the phrase “to implement and assist economic activity” from the first sentence of § 307.18(a)(1) as well as proposing other minor, non-substantive revisions to this subparagraph.

• EDA proposed textual changes to § 307.18(b) to help clarify the distinction between a “consolidation,” when a single RLF Recipient that has multiple RLF awards obtains EDA approval for the consolidation of the multiple awards into a single RLF, and a “merger,” when two or more RLF recipients obtain EDA approval for the merger of their respective RLF awards to form a single RLF award. The NPRM also corrects repetitive numbering found in §§ 307.18(b)(1) and (b)(2).

• EDA proposed amending § 307.19 that outlines the requirements for an RLF Recipient to sell or securitize RLF loans. Pursuant to this section, EDA may approve the Sale or Securitization of all or a portion of an RLF loan portfolio if,
inter alia,
the RLF Recipient requests that EDA subordinate the Agency's interest in all or a portion of the RLF loan portfolio to be sold or securitized. Put simply, however, if after seeking and receiving EDA approval, the RLF Recipient sells a portion of its loan portfolio, there is no “interest' for EDA to subordinate. Thus, the NPRM proposed removing paragraph (b) that contains the subordination request requirement and renumbered the other paragraphs accordingly.

• The NPRM proposed removing unnecessary phrases from §§ 307.20(a) and 307.21(a)(1), eliminating redundant numerical references in § 307.20 and making small non-substantive changes in § 307.21(a)(1)(viii).

Part 308—Performance Incentives

• EDA proposed minor, non-substantive revisions to §§ 308.2 and 308.3.

Part 310—Special Impact Areas

• The NPRM proposed minor, non-substantive changes to §§ 310.1 and 310.2(b).

Part 311—America COMPETES

• EDA proposed revising the heading for this Part to “America COMPETES” in preparation for any regulations needed for implementation of the America Competes Reauthorization Act of 2010 (Pub. L. 111-358, January 4, 2011).

Part 314—Property

• EDA proposed to amend the table of contents for this Part, which sets forth the rules controlling property acquired or improved, in whole or in part, with EDA Investment Assistance. More specifically, EDA would eliminate Subparts A through D to enhance comprehension and revise the headings for §§ 314.8 and 314.9.

• The NPRM proposed a non-substantive revision to § 314.1.

• EDA proposed changes to § 314.3(a) to clarify that the terms and conditions of the award are the reference point for determining the purpose of a given Project. Also, the NPRM added the clause “during the Estimated Useful Life of the Project” to both §§ 314.3(a) and 314.3(b) to clarify that EDA's use restrictions apply only during the Estimated Useful Life of Project Property.

• EDA proposed additional minor changes to §§ 314.3(c), 314.4(c) and 314.5(b).

• EDA proposed a number of revisions to § 314.6(b), which sets forth the exceptions to the general rule that Property must be free from encumbrances.

○ The NPRM reorders paragraph (b) and makes appropriate changes to headings and text so that requirements will apply based on the point in time when a Recipient asks EDA to subordinate the Federal Interest (
i.e.,
Recipient has already mortgaged the Project Property before EDA's award decision, request for subordination made at same time as award decision, or after award decision made).

○ EDA proposed adding a new subsection (b)(1), titled “Shared first lien position,” to set forth the Agency's authority to enter into an inter-creditor agreement under which EDA and another lien holder share a first lien position.

○ The NPRM redesignates current § 314.6(b)(1) as subsection (b)(3) and then makes a clarifying change to the new § 314.(b)(3).

○ Current § 314.6(b)(3), addressing when EDA can consider requests to subordinate its interest, is unclear whether it requires an Eligible Applicant to request subordination prior to the Grant award decision or whether it applies after EDA has awarded funds to the Recipient, or both. To provide clarity, EDA adds a new subsection (b)(4) with the heading “Encumbrances proposed proximate to Project approval,” which outlines the requirements applicable to subordination requests made contemporaneously with the Grants award decision. The list of determinations that EDA must make to subordinate its interest are similar to those in current § 314.6(b)(3), but EDA has proposed adding the requirement that the terms and conditions of the encumbrance are acceptable to the Agency.

○ EDA proposed a revision to subsection (b)(4)(i), adding the clause “and legal authority” to indicate that EDA may waive the restriction against encumbrances if it finds that there is both “good cause” to waive the restriction and legal authority to waive.

○ In § 314.6(b)(4)(ii), EDA proposed to expand the availability of the equity in Project Property for other economic development projects, so long as EDA determines that those projects are consistent with EDA's mission.

○ The NPRM designates each of the requirements under subsection (b)(4)(v) with the letters “A” through “D” to improve organization, with a new subsection (b)(4)(v)(C) that requires the submission of an appraisal so that EDA can weigh the risk to the Federal Interest if EDA agrees to subordinate at a time that may be several years after the original award decision.

○ EDA also proposed to add a phrase to the introductory text of subsection (b)(4) specifying that the kind of “debt” that may be the subject of a subordination request includes “time and maturity-limited debt, that finances the Project Property,” with the intention of better accommodating New Market Tax Credits and other financing mechanisms.

• The NPRM redesignated the text of current § 314.6(b)(3) as § 314.6(b)(5) and adds the heading “Encumbrances proposed after Project approval.”

○ EDA proposed to amend redesignated subparagraph (b)(5) to provide additional flexibility to waive the prohibition on encumbrances subsequent to Grant award. Similar to the requirements of revised (b)(4), revised (b)(5) provides that EDA may subordinate its interest after Grant award when EDA determines that: (1) There is good cause and legal authority to waive the general requirement; (2) all of the proceeds will be used to enhance Project Property or for related activities or other activities consistent with EDA's programs; (3) the grantor or lender will not provide funds without the security of a lien; (4) the terms and conditions of the encumbrance are satisfactory to EDA; and (5) the risk of the encumbrance is acceptable based on a number of factors, including the

approximate value of the Project Property at the time the encumbrance is requested, and the financial strength of the Recipient. Essentially, under revised (b)(5), a Recipient can request that EDA agree to subordinate its interest when the appraised value of the Real Property provides sufficient collateral for the EDA award even if EDA takes a second lien position.

• EDA proposed numerous changes to § 314.7 to streamline EDA's title requirements and make them more understandable, including providing paragraph and subparagraph headings to act as a useful guide for Recipients and others.

○ The NPRM revised the heading of § 314.7(b)(1), removes an unnecessary phrase from this subparagraph, and adds headings to subparagraphs (c)(1) through (c)(5) to clarify the exceptions to the general title requirement.

○ EDA proposed adding the substance of § 314.7(c)(6) to § 314.7(c)(5) and then removing § 317.(c)(6). The change is proposed because the requirements of current subsections (c)(5) and (c)(6) are similar and address analogous situations where the EDA-approved purpose of a Project is to construct facilities that benefit Real Property owned by the Recipient (§ 314.7(c)(5)) or privately owned Real Property (§ 314.7(c)(6)), where the benefitted Real Property ultimately will be sold or leased to private parties in order to spur economic development. The requirements of the two provisions will be set forth in revised § 314.7(c)(5)(i), which will also be amended to make clear that these provisions apply to both Recipients and private Owners.

○ EDA proposed removing current § 314.7(c)(5)(i)(D), which provides that 10 years after an award is made EDA may waive the requirement that a sale of project property during the Estimated Useful life be for Adequate Consideration and that the purpose of the award continued to be fulfilled, because it is inconsistent with EDA's policy on Estimated Useful Life and has created uncertainty in situations involving the sale of Property. In addition, EDA proposed removing an unnecessary phrase and a repetitive numerical reference from § 314.7(c)(5)(i).

○ The NPRM proposed other revisions to current § 314.7(c)(5), a regulation that has caused confusion because it refers to both the authorized scope of the work and the Property that is to be benefitted by the scope of the work as the “Project.” The proposed changes distinguish between these two different concepts by clarifying that the Recipient is responsible for completing the “Project.” The “Project” encompasses: (1) The activities to be completed under the EDA-approved scope of work and supported by the Grant; and (2) in appropriate situations, ensuring that the development of land and improvements on the Real Property is completed in accordance with the terms and conditions of the Investment Assistance. By contrast, the revisions refer to Real Property to be benefitted by the “Project” as “development of land and improvements on the Real Property to be served by or that provides the economic justification for the Project.”

○ EDA proposed to add a heading to § 314.7(c)(5)(i) and remove an unnecessary phrase from § 314.7(c)(5)(ii). The NPRM relocated to § 314.7(c)(5)(iii), the requirement in current § 314.7(c)(6)(i)(B) that the Recipient and Owner must agree to use the Real Property improved or benefitted by the EDA Investment Assistance only for authorized uses of the Project and consistent with the terms and conditions of the Investment Assistance when an authorized use is to construct facilities to benefit privately owned Real Property. In addition, the NPRM relocated the statement, currently set forth in §§ 314.7(c)(5)(i)(F) and (c)(6)(i)(F), that EDA may deem that a violation of § 314.7(c)(5) constitutes an Unauthorized Use of Project Property to new § 314.7(c)(5)(iv).

• Consistent with the removal of the subpart B designation, EDA proposed to amend the heading of § 314.8 to clarify that this section outlines the recordation requirements specifically for Real Property.

• Given the removal of the subpart C heading for Personal Property, the NPRM proposed to change the heading of § 314.9 to clarify that the requirements of this specific regulation apply only to Personal Property. EDA also proposed removing an unnecessary phrase in this section as well as specifying the security interest EDA requires with respect to Personal Property; namely, a “Uniform Commercial Code Financing Statement (Form UCC-1, as provided by State law).”

• In § 314.10, EDA proposed to streamline the procedures for the release of the Federal Interest in connection with EDA-assisted Property.

○ The NPRM reorganizes § 314.10 to add a new § 314.10(a), which provides additional information on EDA's practice in establishing the Estimated Useful Life of Projects. Since 1999, EDA has typically established useful lives between 15 and 20 years, depending on the nature of the asset.

○ EDA proposed to redesignate current paragraph (a), which details the process for EDA's release of the Federal Interest before the expiration of the Estimated Useful Life but at least 20 years after the date of the award, as new paragraph (d) accompanied by a clarifying heading, additional clarifying language and removal of a repetitive reference.

○ EDA proposed to delete the content of current paragraph (b) as unnecessary and replace it with new language that outlines the general rule that upon written request, EDA may release the Federal Interest in Project Property at the expiration of the Project's Estimated Useful Life, so long as the Recipient has made a good faith effort to fulfill the terms and conditions of the award, as determined by EDA. Accordingly, EDA would also revise the heading of new § 314.10(b).

○ The NPRM proposed to remove, revise and relocate certain portions of current § 314.10(c). The new paragraph (c) would provide that EDA can release its interest before the expiration of the Estimated Useful Life of Project Property only if the Agency receives compensation for the fair market value of the Federal Interest, and would have a new heading.

○ EDA proposed to remove the content of current § 314.10(c)(1)(ii), which provides that notwithstanding the release of the Federal Interest, Project Property may not be used for inherently religious activities prohibited by applicable Federal law. In the NPRM, EDA acknowledged that this prohibition may not be required and in fact, may serve to prevent religious institutions from fully participating in EDA's economic development assistance programs by treating them as less than equal in their ability to obtain a release of the Federal Interest.

○ Paragraph (e), as proposed by EDA in the NPRM, would provide that EDA may not approve a release of its interest if the Agency lacks the legal authority to do so (including under the Establishment Clause), if the Recipient has not performed in accordance with the terms and conditions of the Investment or has used Project Property in violation of §§ 314.3 or 314.4, or other such factors as EDA deems appropriate. Reserving such authority would allow EDA to review its legal authority to release the Federal Interest at the time of the request.

○ However, notwithstanding any release of the Federal Interest under § 314.10, in accordance with DOC's regulations at 15 CFR part 8, compliance with nondiscrimination requirements is a continuing obligation. Additionally,

upon consideration of the public comments and EDA's own review, EDA is reserving its proposed change to the covenant requirements for releasing Federal interest in new § 314.10(e)(2) and (3). Thus, EDA proposed to retain the content of current § 314.10(c)(1)(i), but relocate the provision to new paragraph §§ 314.10(e)(3).

EDA did not propose any changes to Parts 309 (“Redistributions of Investment Assistance”), 311-312 (“[Reserved]”), 313 (“Community Trade Adjustment Assistance”) and 315 (“Trade Adjustment Assistance for Firms”).

Summary of Final Rule

After careful review of the public comments received and additional internal deliberations, EDA has determined that the policy and legal rationales underlying the changes proposed in NPRM remain compelling. Thus, with one exception, EDA has not made any substantive changes to the NPRM in this Final Rule.

With respect to § 314.10(e) addressing EDA's review process and requirements for releasing the Federal Interest in Property, EDA will revise the language proposed in the NPRM. More specifically, for the reasons outlined below (
see
Agency Response to Topic 18), in the final version of § 314.10(e) EDA will: (a) Delete the reference to “governing Establishment Clause law” in (e)(2); and (b) retain the express prohibition on using Property acquired or improved with Investment Assistance for “inherently religious activities in violation of applicable Federal law” that is provided for in the current rule at §§ 314.10(c)(1)(ii) and (d)(2)(i)(A). While it maintains its legal position on the validity of the proposed change to this requirement, EDA would like to further examine its options at this time.

Summary of Comments and EDA's Responses

EDA received over 120 comments from a variety of respondents on the NPRM. Most of the comments supported EDA's proposals. They believed that the flexibility provided by the changes would have a significant positive impact on the quality of EDA projects, which would now better reflect regional composition and needs. The comments, organized by topic and directly followed by a specific Agency response, are discussed and addressed in further detail below.

Comment Topic 1: Regulatory Review Process and Purpose of Regulations

Multiple commenters provided general feedback on EDA's approach to amending its regulations. Several commenters provided specific, strict rules that they would like to see applied, now and in the future, to EDA's regulatory review process (
e.g.,
mandatory schedule of review, requirement for EDA to immediately remove provisions once they become obsolete, cutting regulatory language by 10% to enhance comprehension). Others were of the view that EDA should draft its regulations with the overarching goal of supporting communities and businesses.

Agency Response to Topic 1

EDA is committed to ensuring that its regulations provide a framework and the flexibility needed to allow the Agency's programs and resources to be leveraged to respond to current and future economic conditions in communities across the nation. EDA aims to ensure that all regulations are clear and as easy-to-follow and implement as possible, while balancing the need to ensure sufficient oversight and controls on the expenditure of Federal funds and the needs to be good stewards of taxpayer resources. EDA reviews its regulations periodically to determine whether, and if so, how, updates or adjustments are needed to best support businesses and communities across the nation, and to ensure that EDA's operations are conducted in an appropriate manner that balances the need for efficient and streamlined processes with sufficient controls and due diligence. EDA will maintain its existing approach of reviewing and updating regulations on an as-needed basis, rather than instituting universal sunsets or rigid timelines, in order to ensure business continuity. It is essential that effective regulatory provisions remain in place while the time-consuming, yet necessary, dialogue on whether certain requirements should be added or removed from EDA's regulatory scheme moves forward. Overall, EDA emphasizes that this regulatory revision represents a significant clarification and streamlining of the requirements (
e.g.,
composition of CEDS Strategy Committees, CEDS content requirements) contained in previous regulations.

Comment Topic 2: Third-Party Feasibility Analysis for Incubators

EDA received three comments expressing concern with the Agency's new proposed § 301.10(d) that would require a feasibility study when proposing the development of a business incubator.

Agency Response to Topic 2

Despite these concerns, EDA will move forward with the revision. EDA believes that business incubators can play a pivotal role in a community's job development effort by stimulating and nurturing business enterprises. Incubators have been proven to increase the probability of survival and growth of small businesses at a precarious time in their formation. Because support of these activities closely parallels EDA's objectives, the number of funding requests for incubators is increasing. However, EDA's experience has demonstrated that there are best practices that are strong predictors of incubator (and other innovation-focused projects) success that should be considered during the project selection phase. In particular, EDA believes that a feasibility study is a critical element in the grant-making process by helping EDA understand and confirm the market demand for the specific start-up companies proposed for incubation (
e.g.,
technology, general business, biotechnology, manufacturing, etc.) while demonstrating that there are adequate resources to operate the incubator.

Although there was no objection from the commenters regarding EDA's additional substantive requirement in § 301.10(d) that projects proposing construction of an incubator must include an operational plan, EDA notes that verification of the financial health of the incubator and a clear management direction (including tenant selection, graduation policies, etc.) are also helpful in determining the future success and sustainability of the incubator.

Comment Topic 3: Use of American Community Survey (“ACS”) Data

One commenter noted the difficulty, especially in rural areas, of using ACS data to capture a reliable picture of economic distress and urged EDA to rely on more current data.

Agency Response to Topic 3

Pursuant to the proposed and now final § 301.3(a)(4)(i), EDA requires, for eligibility purposes, applications for Investment Assistance to document the Region's per capita income from a variety of possible sources. While EDA strongly encourages and prefers the use of the ACS, EDA recognizes that for some communities, this is not the most current Federal data available. EDA's regulations are designed to provide flexibility in such circumstances for an applicant to use other, more current Federal data. In those rare cases where

no other Federal data is available, applicants may use the most current State data available. However, EDA requires the ACS or other Federal data in the first instance as it provides a more consistent mechanism to evaluate and compare economic distress across applications.

Comment Topic 4: Investment Rates and Matching Share

Several commenters expressed the need for grant rates higher than the traditional 50%. These commenters collectively praised EDA's proposal to amend Section 301.4 to authorize an Investment Rate of up to 80 percent for Projects that: (a) Involve broad Regional planning and coordination with other entities outside the Eligible Applicant's political jurisdiction or area of authority, under special circumstances as determined by EDA; and/or (b) effectively leverage other Federal Agency resources.

Agency Response to Topic 4

EDA emphasizes that both the existing and revised regulations provide authority for applying a higher Federal grant rate than 50% under certain conditions. EDA remains committed to evaluating current economic conditions and adjusting regulation requirements, including those for Matching Share, as necessary to ensure that distressed communities have ample opportunity to compete for assistance as part of the Agency's grant competitions. EDA, by amending § 301.4(b)(5) to permit up to a 100% grant rate for projects to be funded by appropriations authorizing disaster economic recovery activities, also recognizes that in the wake of a disaster event, securing matching funds can be difficult and that there is a need for flexibility in the regulations to be able to provide timely assistance to impacted communities that they can effectively leverage.

Comment Topic 5: Quarterly Cycle v. Rolling Admissions

EDA received a number of comments about the pros and cons of the Agency's quarterly cycle approach and their view that improvements should continue to be made to the grant awarding and monitoring process.

Agency Response to Topic 5

Under the present system, EDA accepts applications for review four times a year, based on the quarters of the Federal fiscal year (
i.e.,
October to December, January to March, April to June, and July to September). The NPRM proposed an amendment to § 301.7(a) to reflect the Agency's current practice. At this time, EDA will continue with the quarterly application cycle process and adopt § 301.7(a) as proposed.

EDA is committed to process improvements that will enhance the Agency's efficiency and effectiveness in working with communities to support economic development projects in rural and urban communities across the nation. Implementing more specific deadlines and an established response framework and timeline is an important part of this process improvement. While EDA recognizes that in some cases the quarterly cycle process limits the Agency's ability to move quickly to support time-sensitive economic development objectives, overall this approach provides a level of transparency and accountability to stakeholders that many communities have appreciated. Moreover, processes do exist for grant applications to be considered for “out-of-cycle” consideration if the circumstances warrant. EDA will continue to implement steps to make applying and administering awards more streamlined and more efficient.

EDA's regulations are intended to outline core requirements, with specific process improvements and priorities being articulated through specific funding opportunities, program guidance, and related materials. EDA is moving forward with its regulatory changes under this approach and is committed to ensuring that while improvements are made to streamline the organization's processes it does not deleteriously impact the Agency's ability to support rural and urban communities. Importantly, as it continues to consider process improvements EDA strives to implement and advance best practices. However, contrary to one of the public comments, EDA's support for best practices is not intended to constrain the adoption and implementation of novel approaches that may serve as the best practices for tomorrow. Instead, EDA emphasizes best practices because they provide the empirical foundation needed for the prudent consideration of new ideas and which contribute, ultimately, to successful Agency investments.

Comment Topic 6: Grant Award Notification

The position of one commenter is that the regulations should require that the Economic Development District (EDD) be notified before all others when an award decision on a project is made by EDA.

Agency Response to Topic 6

EDA does not believe that the protocol for notification of award decisions warrants documentation in the regulations. However, EDA would like to highlight that the Agency appreciates the hard work that applicants invest in completing applications for EDA assistance. As such, EDA is committed to the timely notification of its grant award decisions. EDA encourages all of its stakeholders, including the EDDs, to stay in close communication with the appropriate Economic Development Representative or Economic Development Specialist throughout the application process in order to successfully address all their information needs while staying abreast of the latest developments.

Comment Topic 7: Regional Innovation Clusters and Innovation- and Entrepreneurship-Related Infrastructure

In the NPRM, EDA proposed a definition in § 300.3 for the phrase “regional innovation cluster” (RIC), an important economic development strategy designed to spark job creation and help communities and Regions become more competitive in the global economy. EDA also proposed adding a new section, § 301.11, to make clear that EDA funds a broad portfolio of construction and non-construction infrastructure to meet a community's strategic goals, from basic assets to innovation- and entrepreneurship-related infrastructure. In proposed § 301.11(a), for the first time EDA provided some examples of innovation and entrepreneurship-related infrastructure, including business incubation, business acceleration, venture development organizations, proof of concept centers and technology transfer.

These proposed changes engendered a number of comments. They were generally supportive of EDA's explicit recognition of RICs and the flexibility provided by the Agency's description of non-traditional infrastructure. Two commenters, however, were concerned that the definitions and examples proposed in §§ 300.3 and 300.11(a) were too narrow and thus, might foreclose the funding of certain Projects.

Agency Response to Topic 7

EDA will adopt the definition of RICs and the new § 300.11, as proposed. In response to the concerns expressed by the commenters, EDA emphasizes that the amendments will not prevent potential, innovation- and entrepreneurship-related infrastructure projects from being funded. Instead,

EDA's regulations will simply provide necessary context by clarifying the meaning of key terms and the type of investments that may be supported. The definitions and examples do not in any way limit what type or scope of investment may be construed to support innovation- and entrepreneurship-related infrastructure, nor do they assume that a cluster, an empirically defined, measurable concept based on independent research and analysis, will only need hard infrastructure investments. EDA agrees with the other commenters that investments supporting a broad range of infrastructure activities may fall into the category of innovation- and entrepreneurship-related infrastructure, and that clusters require both hard and soft infrastructure to thrive. EDA's regulations are designed to allow flexibility in funding announcements, guidance and other policy documents so that EDA remains nimble and best able to support diverse Project types from both rural and urban communities across the nation.

Comment Topic 8: Attorneys and Consultants of Eligible Applicants

EDA received a comment that § 302.10(a) should be amended to require that the Eligible Applicant certify the name of the law firm or consulting firm retained by the Eligible Applicant to expedite its Investment Assistance application rather than the name of the specific individual(s) that performed the work.

Agency Response to Topic 8

EDA is not adopting this recommendation in the Final Rule. Having a specific name allows the Agency to more easily contact those involved on the project if necessary. Also, this requirement allows the Agency to better monitor and otherwise ensure that the Eligible Applicant, because of the activities or relationships of the entities providing assistance on the application, does not itself have a conflict of interest.

Comment Topic 9: Composition of CEDS Strategy Committees and District Organization Governing Bodies

EDA proposed, and now revises §§ 303.6(b)(1) and 304.2(c)(2) to provide additional flexibilities with respect to the composition of CEDS Strategy Committees and District Organization governing bodies (also referred to as “EDD policy boards”). These revisions will properly shift the focus of these entities from membership structure to performance and outcomes by maintaining the requirement that CEDS Strategy Committees and District Organization governing bodies represent the main interests of the Region, including the private sector, public officials, community leaders, private individuals, representatives of workforce development boards, institutions of higher education and minority and labor groups, but will no longer require a majority or membership threshold from any type of economic stakeholder. However, the new regulations make clear that these organizations are still expected to retain strong private sector representation and must continue to demonstrate the capacity to effectively undertake planning processes and implement strategies, as applicable.

EDA received numerous comments addressing these provisions. Most commenters supported the new streamlined requirements because Planning Organizations and District Organizations will now have more flexibility to appoint committees and boards, respectively, which better reflect their own unique local qualities and priorities. By contrast, others expressed their view that the current composition requirements should stay the same, with a particular focus on maintaining the requirement for majority representation of elected officials or designated appointees on District Organization governing bodies because of their accountability to the general public.

Agency Response to Topic 9

As noted above, EDA agrees with those supporting new, less restrictive composition requirements. EDA is committed to ensuring that its regulations provide a general framework and the flexibility needed to respond to current and future economic conditions in communities across the nation. EDA believes (and the new regulations require) that effective economic development planning needs the input of multiple sectors (
e.g.,
private, public, non-profit, educational) to reflect regional interests effectively. By removing the requirement for specific sector percentages (
i.e.,
majority private sector representation for CEDS Strategy Committees and majority public sector representation for EDD boards), EDA intends to empower communities to decide how best to structure these entities to meet the varying needs and priorities of each Region while ensuring broad stakeholder input is achieved. EDA believes that the flexibility to develop regional composition based on regional economic interests and dynamics will better contribute to the overall effectiveness of the planning process.

Comment Topic 10: CEDS Content Requirements

The NPRM proposed streamlining the rigid list of required CEDS items in § 303.7(b) to four essential planning elements. A number of commenters praised the more concise and flexible format of the proposed content requirements, while two were of the view that the existing list of guidelines should not be simplified because they encouraged thoughtful deliberation and provided needed structure in the planning process. EDA also received comments requesting more guidance from EDA with respect to developing the content of the CEDS.

Agency Response to Topic 10

EDA, on balance, believes that the static list of ten CEDS requirements may be of limited value and even counterproductive to many Regions attempting to develop dynamic, responsive and relevant economic development strategies, and will adopt the proposed changes to § 303.7(b) in the final regulations. Nor does this Final Rule preclude inclusion of lists of proposed projects in the CEDS (
see
Agency Response to Topic 12).

Moreover, EDA emphasizes that it is in the process of developing new CEDS Content Guidelines to help regional Planning Organizations prepare more impactful CEDS. The Content Guidelines will offer suggestions on what should be included in each of the required sections (as outlined in the regulations), and recommends tools, resources and examples to help in the development of the CEDS document. EDA has sought the review and feedback of key stakeholders such as the National Association of Development Organizations (NADO) and its members in developing the Content Guidelines, which will be released shortly after publication of this Final Rule.

Comment Topic 11: CEDS Public Comment Requirement

EDA received a number of comments that were generally supportive of EDA's proposed changes to the CEDS public review and comment period requirement in § 303.6(b)(2). Instead of keeping the existing bare-bones requirement intact—namely, that the CEDS be made available to the public for comment for at least 30 days before submission to EDA—EDA proposed adding more details to the requirement. While maintaining the mandate that the comment period be for at least 30 days, the NPRM specified that the Planning Organization must provide the public and appropriate governments and

interest groups with adequate notice and opportunity to comment, make the CEDS available electronically or otherwise throughout the period, and that the Planning Organization, upon request by EDA, provide to EDA any comments received on the CEDS and demonstrate how those comments were resolved.

Agency Response to Topic 11

EDA is adopting this change in the Final Rule. EDA is committed to a high level of transparency and accountability in its programs. Public participation, as a key component of the planning process, is viewed as critical to the success of the CEDS process. The more detailed requirement in the Final Rule reinforces the importance of a robust, broad-based participatory process that is inclusive of the economic interests of multiple stakeholders while at the same time, providing Planning Organizations with some degree of flexibility in determining what is adequate and appropriate in terms of input.

Comment Topic 12: CEDS Project Lists/Project Consistency with CEDS

The NPRM proposed streamlining CEDS requirements outlined in § 303.7(b) from ten detailed specifications to four essential planning elements. One of the specifications EDA proposed removing was the “project list,” which requires that a CEDS include “[a] section listing all suggested Projects and the projected numbers of jobs to be created as a result thereof.” Multiple comments were received about EDA's proposal to no longer require a project list in the CEDS document. Many of these respondents objected to this proposed change, expressing their view that listing specific projects was an important and unique part of the CEDS process that ensured that the project was critical to the Region. In a related concern, a number of these respondents expressed their disapproval of EDA's proposed revision § 301.8 that would remove the specific references that an EDA project “be part of an overarching, long-term Comprehensive Economic Development Strategy . . .” and “demonstrate [ ] a high degree of local commitment.”

Agency Response to Topic 12

Despite the concerns voiced by the commenters, EDA will adopt the new § 303.7(b), as proposed. Although a listing of projects is no longer required, the proposed regulations do not prohibit the CEDS contents from including a list of projects. EDA firmly believes that a successful CEDS should be a strategy-driven plan based on regional visioning, prioritized actions and performance outcomes rather than a stand-alone list of projects and programs. This is not to say, however, that the CEDS should not include an action or implementation plan. EDA recommends that a strong CEDS include a robust action plan with a collection of worthwhile capacity building activities. However, the action plan should not simply be a list of projects and programs. Nor should it exclusively reflect those activities which EDA alone could support. The action plan should include a wide-range of activity types (housing, transportation, environmental, etc.) and must be clearly linked to the strategic direction within the plan. The emphasis of the CEDS should be on its strategic direction—and any subsequent actions should flow from the corresponding goals and objectives. The action plan should provide a guide to prioritizing resources and efforts. It should not be used to limit the identification and implementation of other projects and activities that effectively align with the strategic direction that was established as part of the vision goals and objectives within the CEDS.

We also disagree with the commenters' suggestions regarding § 301.8 and maintain the revisions proposed in the NPRM. First, EDA believes that the updated evaluation criteria does not diminish the Agency's emphasis on projects that demonstrate local commitment and in fact, are geared towards selecting projects that best reflect the ability to help the impacted community grow the local economy effectively, create new and better jobs and coherently engage local partners. Second, even with the proposed elimination of the regulatory language, EDA is not eliminating the need for certain projects to be aligned with a CEDS. PWEDA itself requires projects under EDA's Public Works and EAA programs to be consistent with a relevant CEDS.
See
42 U.S.C. 3141, 3149.

Comment Topic 13: CEDS Consistency with Other Plans

As discussed above, EDA proposed streamlining the CEDS content requirements in § 303.7(b) from a laundry-list of ten items to four essential planning elements. One of these proposed elements was “[s]trategies and an implementation plan to build upon the Region's strengths and opportunities and resolve the weaknesses and threats facing the Regions, which should not be inconsistent with applicable State and local economic development or workforce development strategies.” A number of respondents felt that the language in the regulation that states that the CEDS “should not be inconsistent” with other strategies is misleading and should be clarified because it implies that CEDS are somehow subordinate to, or developed after, other plans.

Agency's Response to Topic 13

EDA does not see any ambiguity in the language of the proposed rule and thus, adopts such language in the Final Rule. EDA is highly committed to the process of cross-pollination when it comes to crafting impactful CEDS. EDA believes that related plans should build upon and be linked to each other to leverage existing information and approaches while avoiding duplication and actions or activities that may be at cross-purposes. The language in proposed (and now final) § 303.7(b) was not intended to suggest that CEDS were secondary to, or must await the development of, other plans. Instead, this element was intended to promote the concept that other community and regional planning efforts, if already crafted, should be used to inform the development or update of the CEDS as appropriate, and vice versa.

Comment Topic 14: RLF Audits

EDA received several comments on the proposed new requirement that the certification of prudent management of RLF funds be made by “a qualified independent accountant who preferably has audited the RLF Recipient in accordance with OMB Circular A-133 requirements.” The commenters expressed concern with the change to § 307.15(b)(1), arguing that in many Regions it would be difficult and costly to find a firm qualified, and even willing because of liability issues, to make such a certification.

Agency's Response to Topic 14

EDA disagrees with the position of the commenters, and the proposed language will be adopted in the Final Rule. The concerns of the commenters are speculative, and in any event, issues raised in prior programmatic audits have created the need for the revision. EDA also emphasizes that it is the Agency's aim to ensure that all regulations are clear and as easy to follow and implement as possible, while also balancing the need to ensure sufficient oversight and controls on the expenditure of Federal funds and the need to be good stewards of taxpayer resources. RLF audits are governed by OMB Circular A-133, and are required either when a Recipient expends $500,000 or more in combined Federal funds from all Federal agencies in a

given year or when the thresholds outlined by program specific A-133 compliance supplementals are met. EDA's A-133 Compliance Supplemental for the RLF program provides specific instruction on how RLF funds should be used to calculate towards the $500,000 expenditure threshold requirement. EDA's definition of prudent management is not prescriptive of specific activities that must be followed and is not intended to limit the scope of the audit beyond conformity to OMB Circular A-133.

EDA notes that on December 26, 2013, the Office of Management and Budget (OMB) issued the Final Rule to the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (78 FR 78590). This rule, commonly known as the “Super Circular,” streamlines a number of OMB Circulars, including A-133, into a single, comprehensive guidance document and has important implications for Federal grant-making entities, Federal grant recipients, and applicants for Federal grant assistance. For example, the Super Circular raises the threshold for compliance audits of Federal grant recipients from $500,000 to $750,000 per fiscal year. The Super Circular, although effective on December 26, 2013, provided that Federal agencies have until December 26, 2014 to promulgate regulations implementing this guidance. When DOC finalizes its Department-wide regulations, EDA will take appropriate steps to amend its own regulations and issue additional policy guidance to its stakeholders.

One of the above commenters also expressed concern that the requirement that the certification be made within 60 days before “the initial disbursement of EDA funds” is ambiguous. EDA believes that the language is clear: The certification is only required prior to the initial disbursement, not after each subsequent disbursement.

Comment Topic 15: RLF Advisory Committee

One commenter points out that in the narrative of the proposed rule, EDA acknowledged that it had “identified the need to create an internal RLF task force to improve communications and resolve program issues, and currently is in the process of establishing one.” (76 FR 76512). The commenter suggested that any EDA RLF task force should include external members as well.

Agency's Response to Topic 15

We agree with the commenter's opinion that feedback from practitioners and others outside of EDA would benefit the RLF program, but there is no current need for a specific regulatory change or provision to address this issue. EDA is committed to a high-level of transparency and accountability in its programs. Although EDA has identified the need to create an internal task force to improve communications and resolve RLF program issues, public participation is viewed as critical to the success of the initiative. EDA believes that the process improvements require the input of multiple sectors (
e.g.,
private, public, non-profit) and intends to interact with our external stakeholders to better contribute to the overall effectiveness of the RLF program.

Comment Topic 16: RLF Flexibility

Several comments were received regarding the need for flexibility in the RLF program and alternative uses of RLF funds. For example, one commenter suggested that EDA outline a process in its regulations for converting RLF funds into an approved public infrastructure investment.

Agency's Response to Topic 16

Although at this time EDA will not be incorporating any of these proposals into its Final Rule, EDA emphasizes that it is committed to ensuring its regulations provide a general framework and the flexibility needed to respond to current and future economic conditions in communities across the nation. Within the confines of its statutory authority, EDA has taken a critical and comprehensive look-back at its regulations to reduce burdens by removing outmoded provisions and streamlining and clarifying requirements. EDA will continue this process going forward to ensure that EDA's operations are conducted in an appropriate manner that balances the need for efficient and streamlined processes with sufficient controls and due diligence.

Comment Topic 17: RLF Defederalization

Multiple commenters provided feedback on the need to release the Federal interest in RLF assets after all of the initial funds have been fully disbursed.

Agency's Response to Topic 17

EDA recognizes the challenges presented by the present requirement that EDA maintain its interest in RLF assets in theoretic perpetuity. One result of particular concern to stakeholders is that RLFs must then comply with reporting and audit requirements in perpetuity. However, unlike the case with Real Property and tangible Personal Property, currently there is no statutory authority for EDA to release its interest in RLF assets.

However, the RLF program has grown significantly in its capital base because of its longevity and continues to support its original purpose of fostering economic development and supporting businesses and communities throughout the nation. Recognizing the value of the program and the need to reduce burdens when appropriate, EDA will continually review its regulations to determine whether updates or adjustments can be made to provide greater flexibility for RLF Recipients.

Comment Topic 18: Inherently Religious Activities

EDA received three comments on its proposal to modify § 314.10(c)(1)(ii), which required that Real or tangible Personal Property “acquired or improved with Investment Assistance [from EDA] . . . not be used . . . [f]or inherently religious activities prohibited by applicable Federal law.” EDA proposed to modify this language to read, in new § 314.10(e)(2): “In determining whether to release the Federal Interest, EDA will review EDA's legal authority to release its interest, including governing Establishment Clause law; the Recipient's performance under and conformance with the terms and conditions of the Investment Assistance; any use of Project Property in violation of §§ 314.3 or 314.4 of this part; and other such factors as EDA deems appropriate.”

The commenters object to this change on the grounds that it would violate the Establishment Clause of the United States Constitution (U.S. Const. amend. I), and may allow sectarian organizations that receive EDA funds to use such Federal money for religious purposes. More specifically, as summarized by one of the commenters, they contend that “the current rule [prior § 314.10(c)(1)(ii)] prohibits entities from using property built or rehabilitated with taxpayer funding for religious activities,” while the proposed rule “would abolish this current—constitutionally necessary—provision.” Two of the commenters also argue that EDA's reliance on a 2003 opinion from the Department of Justice's Office of Legal Counsel (“OLC”) on whether grant money could be used to restore the Old North Church in Boston, Massachusetts, Authority of the Department of the Interior to Provide Historic Preservation Grants to Historic Religious Properties Such as the Old North Church, 27 Op. O.L.C. 91, 2003 WL 21246893 (April 30, 2003) (“
Old North Church
opinion”),

was misplaced. Rather, they argue, the U.S. Supreme Court decision in
Tilton
v.
Richardson,
403 U.S. 672 (1971) is controlling here. There, as we noted in the NPRM, the Supreme Court held that recipients of Federal grants cannot use that grant money to purchase or renovate a building that is later used for religious or sectarian purposes, even after the expiration of the 20-year useful life period of the Federal government's interest in the acquired property. All three commenters claim that the regulatory change EDA proposed contradicts this Supreme Court precedent, and thus, violates the Establishment Clause.

Agency's Response to Topic 18

EDA disagrees that the revision proposed would fundamentally alter the current provision. First, EDA notes that the proposed text would have specifically required EDA to take into account the current law on the Establishment Clause. It states that, “In determining whether to release the Federal Interest, EDA will review EDA's legal authority to release its interest, including governing Establishment Clause law.” This proposed change would not, therefore, have ignored EDA's constitutional obligations, but rather reinforced them. Nor would the proposed clause have prevented EDA from taking any action it could take under the current rules, such as prohibiting a grantee from using for any religious or sectarian purpose any buildings that were constructed, purchased, or renovated using Federal funds. Instead, the proposed provision would have allowed EDA to take into account the specific situation of any grantee seeking a release of EDA's interest in Property acquired or improved using EDA funding. If EDA found or believed that the Property may be used for a religious or sectarian purpose following the release, EDA could refuse to release its interest, require the grantee to file a covenant on the Property upon release that the property will not be used for a religious or sectarian purpose, or require the Recipient to compensate EDA for the Federal Share of such Property.

Moreover, the proposed amendment to EDA's regulations is not precluded by
Tilton
or subsequent Federal case law on the Establishment Clause. The language in the NPRM would have specifically required EDA to take into account any Establishment Clause concerns raised by the release of the Federal Interest on a case-by-basis.
Tilton
does not preclude this kind of case-by-case review.

Were Property, previously acquired or improved with EDA funding and after the project's useful life, sold by a grantee to a church or religious organization for its then fair market value, there would be no violation of the Establishment Clause as there could be no subsidy of any religious activity through the EDA grant. OLC's
Old North Church
opinion also indicates that there are certain circumstances in which the Establishment Clause does not preclude the use of federal grants to maintain buildings that are used in part for religious purposes.

The proposed regulation at § 314.10(e)(2) would have allowed EDA to take all of the relevant circumstances into account. If a Recipient that has otherwise fulfilled the terms of the grant award asks for a release of Federal Interest on the Property, EDA would have been required to consider current Establishment Clause jurisprudence, and could impose restrictions on the future use of the Property for religious or sectarian purposes, as appropriate to the circumstances presented. For example, if a church or faith-based organization is the grantee and seeks to have EDA release its interest on Property it purchased, built, or renovated using, in part, EDA-provided funds, then EDA could require the organization to execute a covenant on the land prohibiting the future use of the Property for any religious or sectarian use as long as the organization owns the Property, prior to or contemporaneously with the release of EDA's interest in the Property. EDA could also seek to have the religious organization or successor-in-interest compensate EDA for the Federal Share of such Property, as current § 314.10(d)(2)(ii) already allows. Conversely, if a non-sectarian grantee seeks a release of the Federal interest after 20 years and after fulfilling the terms of its grant, under the proposed rule EDA could have allowed the release without the above conditions of future use, if EDA's due diligence indicates that the Property will not be used for religious purposes.

Overall, the commenters overstate the effect of EDA's proposed change for § 314.10. We agree with the commenters that Federal grant funds or money cannot be awarded for religious or sectarian purposes, but the rule as proposed does not change EDA's obligation to ensure that such an event does not occur. Rather, it recognizes that a blanket prohibition on the use of Property that has been disposed of by the grant Recipient in an arm's length transaction for its then-fair market value, whether during or after its useful life, would not be appropriate. In such a case, EDA's interest in the Property—the performance of the terms of a grant to help create jobs—has been fulfilled and terminated. The proposed rule would allow EDA to take into account such case-specific circumstances within the boundaries set by governing Establishment Clause law.

Nevertheless, despite our disagreement with the position of the commenters, EDA will not adopt proposed § 314.10(e)(2) in its entirety, but may do so in the future. EDA is sensitive to the legal and practical ramifications of a change to our regulatory language that involves the Establishment Clause. Thus, we wish to proceed carefully, deliberately, and in a fashion consistent with the approaches of other agencies in the Executive Branch. We will continue to review this change, but in the interim EDA will: (a) Remove the reference to “governing Establishment Clause law” in proposed § 314.10(e)(2); and (b) restore in (e)(2) and (e)(3) the express prohibition on using Property acquired or improved with Investment Assistance for “inherently religious activities in violation of applicable Federal law” that is provided for in the current rule at §§ 314.10(c)(1)(ii) and (d)(2)(i)(A), but otherwise retain the remainder of proposed § 314.10(e) in the final version.

Classification

Regulatory Flexibility Act

As noted in the NPRM, prior notice and opportunity for public comment are not legally required for rules concerning public property, loans, grants, benefits, and contracts (5 U.S.C. 553(a)(2)). However, as matter of policy, EDA put the rule out for notice and comment because it constituted a comprehensive regulatory overhaul.

Nevertheless, because prior notice and an opportunity for public comment are not required pursuant to 5 U.S.C. 553, or any other law, the analytical requirements of the Regulatory Flexibility Act (5 U.S.C. 601
et seq.
) are not applicable to this Final Rule. Therefore, a regulatory flexibility analysis has not been prepared.

Executive Orders No. 12866 and No. 13563

This rule was drafted in accordance with Executive Orders 12866 and 13563. It was reviewed by the Office of Management and Budget (OMB), which found the rule to be “significant” according to Executive Order 12866 and Executive Order 13563. Accordingly,

the rule has undergone interagency review.

Congressional Review Act

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

Executive Order No. 13132

It has been determined that this Final Rule does not contain policies with federalism implications as that term is defined in under Executive Order 13132.

Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (44 U.S.C. 3501
et seq.
) (“
PRA
”) requires that a Federal Agency consider the impact of paperwork and other information collection burdens imposed on the public and, under the provisions of PRA section 3507(d), obtain approval from OMB for each collection of information it conducts, sponsors, or requires through regulations. Notwithstanding any other provision of law, no person is required to respond to, nor shall any person be subject to a penalty for failure to comply with a collection of information subject to the PRA unless that collection displays a currently valid OMB Control Number.

The following table provides a complete list of the collections of information (and corresponding OMB Control Numbers) set forth in this Final Rule. These collections of information are necessary for the proper performance and functions of EDA.

Part or section of this final rule
Nature of request
Form/title/OMB control No.

301.2; 301.10
With an application for Investment Assistance, a non-profit Eligible Applicant must include a resolution passed by an authorized representative of a political subdivision of a State
ED-900, Application for Investment Assistance (0610-0094).

301.3(a); 301.10; 305.3(a)(1)
An Eligible Applicant must substantiate Regional eligibility and justify the requested EDA Investment Assistance based on, for example, the unemployment rate, per capita income levels, or a Special Need (as determined by EDA) in the Region in which the Project will be located. The Eligible Applicant also must identify and submit to EDA the source of data used to substantiate Regional eligibility (e.g., ACS or BLS data, other Federal data for the Region in which the Project will be located, or data available through the State government)
ED-900, Application for Investment Assistance (0610-0094).

301.4(b)(1)(i); 305.3(a)(1)
An Eligible Applicant must provide information on the severity of the Region's unemployment and its duration, the per capita income levels and extent of the Region's unemployment or outmigration
ED-900, Application for Investment Assistance (0610-0094).

301.4(b)(4)
An Eligible Applicant for a Project under part 306 must provide information to show that the Project merits an increase to the Investment Rate because of the Project's infeasibility without such an increase, or because the Project will be of no or only incidental benefit to the Eligible Applicant
ED-900, Application for Investment Assistance (0610-0094).

301.5; 301.10
An Eligible Applicant must provide information to show that Matching Share funds will be available for the Project
ED-900, Application for Investment Assistance (0610-0094).

301.10(c).
An Eligible Applicant for a Project under parts 305 or 307 must include with its application for Investment Assistance a CEDS acceptable to EDA (pursuant to part 303) or otherwise incorporate by reference a current CEDS that EDA approves for the proposed Project
ED-900, Application for Investment Assistance (0610-0094).

301.10(d)
An Eligible Applicant for a Project to construct a business, technology, or other type of incubator or accelerator, must include a feasibility study demonstrating the need for the Project and an operational plan based on industry best practices demonstrating the Eligible Applicant's plan for ongoing successful operations
ED-900, Application for Investment Assistance (0610-0094).

302.7(a)
Recipients must submit requests for amendments to Investment awards in writing to EDA for approval and provide information and documentation as EDA deems necessary
Award Amendment Request (0610-0102).

302.9(a)
An Eligible Applicant must furnish comments on the Project from the relevant governmental authority in the Region or proof of efforts to obtain comments if none were provided by the governmental authority
ED-900, Application for Investment Assistance (0610-0094).

302.10(a)
An Eligible Applicant must certify to EDA the names of any persons engaged by or on behalf of the Eligible Applicant for the purpose of expediting Investment Assistance applications made to EDA
ED-900, Application for Investment Assistance (0610-0094).

302.14(a)
Recipients shall keep records of the amount and disposition of awards of Investment Assistance, the total cost of the Project, the amount and nature of the portion of the Project costs provided by other sources and other records that would facilitate an effective audit
Audits of States, Local Governments, and Non-Profit Organizations, OMB Circular A-133

302.15
An Eligible Applicant must certify (and submit evidence thereof satisfactory to EDA) that it meets the requirements for receiving Investment Assistance
ED-900, Application for Investment Assistance (0610-0094).

302.16(b)
Recipients are required to submit reports consisting of data-specific evaluations of the Project's effectiveness
GPRA Performance Validation Forms (0610-0098).

302.16(c)
EDA may require a Recipient to provide a “Project service map” and other information in order to determine which segments of the Region are being assisted with the Investment Assistance
Project Service Map (0610-0102).

302.20(d)
Recipients and Other Parties must submit written assurances to EDA that they will comply with nondiscrimination laws and regulations
ED-900, Application for Investment Assistance (0610-0094).

303.9(c)
Eligible Applicants for short-term Planning Investment Assistance must provide performance measures acceptable to EDA, and provide EDA with progress reports during the term of the Planning Investment
GPRA Performance Validation Forms (0610-0098).

304.1; 304.4(a)
To have a Region certified as an EDD, a District Organization must submit information showing that the Region contains at least one area subject to the relevant economic distress criteria, is able to foster development on a larger scale than in a single area, has an EDA-approved CEDS, and obtains commitments from a majority of the relevant counties and States
Comprehensive Economic Development Strategies and Planning Investments (0610-0093).

304.2(c)(2); 304.4(b)
The District Organization must demonstrate that its governing body is broadly representative of the principal economic interests of the Region
ED-900, Application for Investment Assistance (0610-0094); Comprehensive Economic Development Strategies and Planning Investments (0610-0093).

304.2(c)(4)
The District Organization must notify the public of its annual meetings, its decisions, the results of programs, and as reasonably requested, the results of audited statements, annual budgets, and minutes of public meetings
Comprehensive Economic Development Strategies and Planning Investments (0610-0093).

305.2(b); 305.3(a)(3)
An Eligible Applicant must show that the Public Works Project will promote: the growth of industrial or commercial plants, the creation of long-term employment opportunities primarily for low-income families, and the fulfillment of the Region's pressing needs
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.4(c)
In order to receive any portion of the Investment Assistance for design and engineering work, an Eligible Applicant must submit and certify information that documents compliance with the Investment awards of all design and engineering contracts
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.5
In order to allow a District Organization to administer the Project for another Recipient, the Recipient must make this request and submit information to EDA showing that the Recipient does not have the current staff capacity to administer the Project, the District Organization would be more effective than another local business or organization, the District Organization would not subcontract the work, and the costs of District Organization administration will not exceed the allowable costs were the Recipient administering it
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.6
A Recipient shall seek EDA's prior written approval to use an alternate construction procurement method to the traditional design/bid/build. If an alternate method is used, the Recipient must submit to EDA for approval a construction services procurement plan and the Recipient must use a design professional to oversee the process
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.7
The Recipient may use “in-house forces” for design, construction, inspection, legal services or other work on the Project if it submits a sufficient justification to EDA
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.8(a); 305.8(b)
Recipients of EDA construction awards must obtain prior approval for the use of furnished equipment and materials. Requests must show that costs claimed for furnished equipment and materials are competitive with local market costs for similar equipment and materials
ED-900. Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.9
An EDA construction award Recipient must submit information to EDA regarding why phasing is necessary, a description of the phasing, related costs and schedules, and certification that the Recipient will pay for overruns and that it is capable of paying for incurred costs before the first disbursement
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

305.10(a)
If at the construction contract bid opening, the lowest responsive bid is less than total Project cost, the Recipient will notify EDA to determine relevant procedures
Construction Investments (0610-0096).

305.10(b)
In case of an overrun at construction contract bid opening, the Recipient may take deductive alternatives if provided for in the bid documents, reject all bids and re-advertise if there is a rational basis to believe that such action will result in a lower bid, or augment the Matching Share by an amount sufficient to cover the excess cost. If EDA determines that these options are not feasible, the Recipient may submit a written request for additional EDA funding
Construction Investments (0610-0096).

305.11
Recipients may issue a notice permitting construction under contract to commence prior to an EDA determination of award compliance and eligibility for cost reimbursement, but will proceed at their own risk until EDA review and concurrence. The EDA regional office may request information from the Recipient to make a determination of award compliance
Construction Investments (0610-0096).

305.12
EDA requires a Recipient to erect a Project sign or signs at the Project construction site to indicate that the Federal government is participating in the Project. The regional office will provide mandatory specifications for Project signage
Construction Investments (0610-0096).

305.13
Recipients involved in a contract change order must submit them to EDA for review
Construction Investments (0610-0096).

306.2
EDA selects Projects for Local and National Technical Assistance based on the criteria in part 301 and the extent to which the Eligible Applicant demonstrates that the Project will achieve more specific objectives in the Region (as set forth in § 306.2) and meets the criteria in the applicable FFO
ED-900, Application for Investment Assistance (0610-0094).

306.5
EDA provides Investment Assistance to University Center Projects based on the selection criteria in part 301, the competitive selection process outlined in the applicable FFO, and the extent to which the Eligible Applicant demonstrates other more specific, related criteria
ED-900, Application for Investment Assistance (0610-0094).

307.5(a)
Each application for Economic Adjustment Assistance must include or incorporate by reference (if so approved by EDA) a CEDS
ED-900, Application for Investment Assistance (0610-0094).

307.9
All RLF Recipients must submit to EDA an RLF Plan
RLF Standard Terms and Conditions (0610-0095).

307.11(a)
Prior to the disbursement of EDA funds, RLF Recipients must provide in a form acceptable to EDA evidence of fidelity bond coverage and evidence of certification in accordance with § 307.15(b)(1)
RLF Standard Terms and Conditions (0610-0095).

307.11(e)
If the Recipient receives Grant funds and the RLF loan disbursement is subsequently delayed beyond 30 days, the Recipient must notify the applicable grants officer and return such non-disbursed funds to EDA
RLF Standard Terms and Conditions (0610-0095).

307.13(a)
RLF Recipients must maintain Closed Loan files and all related documents, books of account, computer data files, and other records over the term of the Closed Loan and for a three-year period from the date of final disposition of such Closed Loan
RLF Standard Terms and Conditions (0610-0095).

307.13(b)
RLF Recipients must maintain adequate accounting records to substantiate the amount of RLF Income expended for eligible administrative costs and retain records of administrative expenses incurred for activities and equipment relating to the operation of the RLF
RLF Standard Terms and Conditions (0610-0095).

307.14(a)
All RLF Recipients must submit semi-annual reports in electronic format to EDA, unless EDA approves a paper submission
ED-209, Semi-Annual Report (0610-0095).

307.14(b)
All Recipients must certify as part of the semi-annual report that the RLF is operating in accordance with the RLF Plan, and describe any modifications to the RLF Plan to ensure effective use of the RLF
ED-209, Semi-Annual Report (0610-0095) ED-209A, Annual Report (0610-0095).

307.14(c)
An RLF Recipient using either fifty percent or more (or more than $100,000) of RLF Income for administrative costs in a 12-month reporting period must submit a completed Income and Expense Statement annually to the appropriate EDA regional office. EDA may waive this requirement for an RLF Grant with a small RLF Capital Base
ED-209I, Income and Expense Statement (0610-0095).

307.15(b)(1)
Within 60 days prior to the initial disbursement of EDA funds, a qualified independent accountant who preferably has audited the RLF Recipient in accordance with OMB Circular A-133 requirements, shall certify to EDA and the Recipient that such system is adequate to identify, safeguard and account for all RLF operations
RLF Standard Terms and Conditions (0610-0095).

307.15(b)(2)
Prior to the disbursement of any EDA funds, an RLF Recipient must certify that standard loan documents necessary for lending are in place and that these documents have been reviewed by its legal counsel for adequacy and compliance with the terms and conditions of the Grant and applicable State and local law
RLF Standard Terms and Conditions (0610-0095).

307.16(b)
Recipients must promptly notify EDA in writing of any condition that may adversely affect their ability to meet prescribed schedule deadlines. Recipients must submit a written request for continued use of Grant funds beyond a missed deadline for disbursement of RLF funds
RLF Standard Terms and Conditions (0610-0095).

307.19
With prior approval from EDA, a Recipient may enter into a Sale or Securitization of all or a portion of its RLF loan portfolio
RLF Standard Terms and Conditions (0610-0095).

307.21(b)
EDA may approve a request from a Recipient to terminate an RLF Grant
RLF Standard Terms and Conditions (0610-0095).

part 310
Upon the application of an Eligible Applicant, EDA may designate the Region which the Project will serve as a Special Impact Area and waive the CEDS requirement if the Eligible Applicant demonstrates that its proposed Project will directly fulfill a pressing need and assist in preventing excessive unemployment
Comprehensive Economic Development Strategies and Planning Investments (0610-0093).

314.3(f)
With EDA's prior written approval, a Recipient may undertake an incidental use of Property that does not interfere with the scope of the Project or the economic purpose for which the Investment was made, provided it satisfies the conditions set forth in § 314.3(f)
Property Management 0610-0103.

314.6(b)
In order to use EDA-funded property to secure a mortgage or deed of trust or encumber the property, the Recipient must provide information that satisfies one or more of the exceptions set forth in § 314.6(b)
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

314.7(a) and (c)
The Recipient must provide information that satisfies EDA that the Recipient has title to the Real Property and all easements, rights-of-way, permits or long-term leases, unless it can provide information proving it meets an exception to the rule
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

314.7(b)
The Recipient must provide information regarding all encumbrances on the Real Property to EDA
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

314.8
Recipients must execute a lien, covenant, or other statement of EDA's interest in all Property acquired or improved with EDA Investment Assistance and record it in the proper jurisdiction
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

314.9
Recipients must execute a security interest or other statement of EDA's interest in Personal Property acquired or improved by EDA funds and record the interest in accordance with applicable law
ED-900, Application for Investment Assistance (0610-0094); Construction Investments (0610-0096).

314.10
If a Recipient wishes for EDA to release its Real Property or tangible Personal Property interest before or after the expiration of the Property's Estimated Useful Life, it must submit a request for such release to EDA. EDA's release is not automatic and may require some action on behalf of the Recipient
Property Management (0610-0103).

315.5(b)
Current or prospective TAACs must submit either a new or amended application to EDA, along with a proposed budget, narrative scope of work and other information as may be requested by EDA
ED-900, Application for Investment Assistance (0610-0094).

315.5(c)
TAACs must submit information regarding performance to be evaluated by EDA
GPRA Performance Validation Form (0610-0098).

315.6(a)(1); 315.7; 315.8
Firms must provide specific information to EDA in order to be certified for participation in the TAAF program
ED-840P, Petition by a Firm for Certification of Eligibility to Apply for Trade Adjustment Assistance (0610-0091).

315.6(a)(2); 315.6(a)(3); 315.16
A Certified Firm must submit an Adjustment Proposal to EDA for approval. If EDA approves the Adjustment Proposal, the Firm may then request Adjustment Assistance from the TAAC
ED-840P, Petition by a Firm for Certification of Eligibility to Apply for Trade Adjustment Assistance (0610-0091).

315.9
In order to have a public hearing, a Person with a Substantial Interest in an accepted petition for TAAF certification must submit a request that follows this section's procedures
ED-840P, Petition by a Firm for Certification of Eligibility to Apply for Trade Adjustment Assistance (0610-0091).

315.12
Each TAAC shall keep records disclosing the use of all TAAF funds
GPRA Performance Validation Form (0610-0098).

List of Subjects

13 CFR Part 300
Distressed region, Financial assistance, Headquarters, Organization and functions (Government agencies), Regional offices.

13 CFR Part 301
Applicant requirements, Application requirements, Economic distress levels, Eligibility requirements, Investment rates, Match share requirements.

13 CFR Part 302
Civil rights, Community development, Conflicts-of-interest, Environmental review, Federal policy and procedures, Fees, Inter-governmental review,, Post-approval requirements Pre-approval requirements, Project administration, Reporting and audit requirements, Technical assistance..

13 CFR Part 303
Award and application requirements, Comprehensive economic development strategy, Planning, Short-term planning investments, State plans.

13 CFR Part 304
District modification and termination, Economic development district, Organizational requirements, Performance evaluations.

13 CFR Part 305
Award and application requirements, Economic development, Public works, Requirements for approved projects.

13 CFR Part 306
Award and application requirements, Community development, Grant programs—housing and community development, Performance evaluations, Research, Technical assistance, Training, University centers.

13 CFR Part 307
Award and application requirements, Business and industry, Economic adjustment assistance, Grant programs, Income, Liquidation, Merger, Pre-loan requirements, Reporting and recordkeeping requirements, Revolving loan fund, Sales and securitizations, Termination.

13 CFR Part 308
Business and industry, Community development, Performance awards, Planning performance awards.

13 CFR Part 310
Excessive unemployment, Special impact area, Special need.

13 CFR Part 314
Authorized use, Community development, Federal interest, Federal share, Property, Property interest, Release, Title.

Regulatory Text

For the reasons discussed above, EDA is amending title 13, chapter III of the
Code of Federal Regulations
as follows:

PART 300—GENERAL INFORMATION

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

Authority:

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

2. Revise § 300.1 to read as follows:

§ 300.1
Introduction and mission.
EDA was created by Congress pursuant to the Public Works and Economic Development Act of 1965 to provide financial assistance to both rural and urban distressed communities. EDA's mission is to lead the Federal economic development agenda by promoting innovation and competitiveness, preparing American regions for growth and success in the worldwide economy. EDA will fulfill its mission by fostering entrepreneurship, innovation and productivity through Investments in infrastructure development, capacity building and business development in order to attract private capital investments and new and better jobs to Regions experiencing substantial and persistent economic distress. EDA works in partnership with distressed Regions to address problems associated with long-term economic distress as well as to assist those Regions experiencing sudden and severe economic dislocations, such as those resulting from natural disasters, conversions of military installations, changing trade patterns and the depletion of natural resources. EDA Investments generally take the form of Grants to or Cooperative Agreements with Eligible Recipients.

3. Revise § 300.2 to read as follows:

§ 300.2
EDA Headquarters and regional offices.
(a) EDA's Headquarters Office is located at: U.S. Department of Commerce, Economic Development Administration, 1401 Constitution Avenue NW., Washington, DC 20230.

(b) EDA has regional offices throughout the United States and each regional office's contact information may be found on EDA's Internet Web site at
http://www.eda.gov
or in the applicable announcement of Federal Funding Opportunity issued by EDA. Please contact the appropriate regional office to learn about EDA Investment opportunities in your Region.

4. Amend § 300.3 by:

a. Revising the definition of
Cooperative Agreement,
paragraph (7) of the definition of
Eligible Recipient,
and the definitions of
Federal Funding Opportunity
or
FFO, Federally Declared Disaster,

Grant, Indian Tribe,

Investment
or
Investment Assistance, Investment Rate,

Local Share
or
Matching Share,
and
Presidentially-Declared Disaster;

b. Removing the definition of
Private Sector Representative;

c. Revising the definitions of
PWEDA,
and
Region
or
Regional;

d. Adding in alphabetical order a definition of
Regional Innovation Clusters
or
RICs;
and

e. Revising the definition of
Trade Act;

The revisions and addition read as follows:

§ 300.3
Definitions.

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

Eligible Recipient
* * *

(7) Private individual or for-profit organization, but only for Training, Research and Technical Assistance Investments pursuant to § 306.1(d)(3) of this chapter.

Federal Funding Opportunity
or
FFO
means an announcement EDA publishes during the fiscal year at
http://www.grants.gov
and on EDA's Internet Web site at
http://www.eda.gov
that provides the funding amounts, application and programmatic requirements, funding priorities, special circumstances, and other information concerning a specific competitive solicitation for EDA's economic development assistance programs. EDA also may periodically publish FFOs on specific programs or initiatives.

Federally Declared Disaster
means a Presidentially Declared Disaster, a fisheries resource disaster pursuant to section 312(a) of the Magnuson-Stevens Fishery Conservation and Management Act, as amended (16 U.S.C. 1861a(a)), or other Federally declared disasters pursuant to applicable law.

Grant
means the financial assistance award of EDA funds to an Eligible Recipient, under which the Eligible Recipient bears responsibility for carrying out a purpose or activity authorized under PWEDA or another statute.
See
31 U.S.C. 6304.

Indian Tribe
means an entity on the list of recognized tribes published pursuant to the Federally Recognized Indian Tribe List Act of 1994, as amended (Pub. L. 103-454) (25 U.S.C. 479a
et seq.
), and any Alaska Native Village or Regional Corporation (as defined in or established under the Alaska Native Claims Settlement Act (43 U.S.C. 1601
et seq.
). This term includes the governing body of an Indian Tribe, non-profit Indian corporation (restricted to Indians), Indian authority, or other non-profit Indian tribal organization or entity; provided that the Indian tribal organization or entity is wholly owned by, and established for the benefit of, the Indian Tribe or Alaska Native Village.

Investment
or
Investment Assistance
means a Grant or Cooperative Agreement entered into by EDA and a Recipient.

Investment Rate
means, as set forth in § 301.4 of this chapter, the amount of the EDA Investment in a particular Project expressed as a percentage of the total Project cost.

Local Share
or
Matching Share
means the non-EDA funds and any In-Kind Contributions that are approved by EDA and provided by a Recipient or third party as a condition of an Investment. The Matching Share may include funds from another Federal Agency only if authorized by statute that allows such use, which may be determined by EDA's reasonable interpretation of such authority.

Presidentially Declared Disaster
means a major disaster or emergency declared under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (42 U.S.C. 5121
et seq.
).

PWEDA
means the Public Works and Economic Development Act of 1965, as amended (42 U.S.C. 3121
et seq.
).

Region
or
Regional
means an economic unit of human, natural, technological, capital or other resources, defined geographically. Geographic areas comprising a Region need not be contiguous or defined by political boundaries, but should constitute a cohesive area capable of undertaking self-sustained economic development. For the limited purposes of determining economic distress levels and Investment Rates pursuant to part 301 of this chapter, a Region also may comprise a specific geographic area defined solely by its level of economic distress, as set forth in §§ 301.3(a)(2) and 301.3(a)(3) of this chapter.

Regional Innovation Clusters
or
RICs
means networks of similar, synergistic, or complementary entities that support a single industry sector and its various supply chains. In general, RICs:

(1) Are based on a geographic area that may cross municipal, county, and other jurisdictional boundaries;

(2) May include catalysts of innovation and drivers of Regional economic growth, such as universities, government research centers, and other research and development resources;

(3) Have active channels for business transactions and communication; and

(4) Depend upon specialized infrastructure, labor markets, and services that build on the unique competitive assets of a location, including talent, technology, services, and hard and soft infrastructure, to spur innovation, job creation, and business expansion.

Trade Act,
for purposes of EDA, means title II, chapters 3, 4 and 5, of the Trade Act of 1974, as amended (19 U.S.C. 2341
et seq.
).

PART 301—ELIGIBILITY, INVESTMENT RATE AND APPLICATION REQUIREMENTS

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

Authority:

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

Subpart A—General

6. Amend § 301.1 by revising the introductory text and paragraphs (d) and (e) and adding paragraph (f) to read as follows:

§ 301.1
Overview of eligibility requirements.
In order to receive EDA Investment Assistance, the following requirements must be met:

(d) The Eligible Applicant must satisfy the formal application requirements set forth in subpart E of this part;

(e) The Project must meet the general requirements set forth in part 302 (General Terms and Conditions for Investment Assistance) and the specific program requirements (as applicable) set forth in part 303 (Planning Investments and Comprehensive Economic Development Strategies), part 304 (Economic Development Districts), part 305 (Public Works and Economic Development Investments), part 306 (Training, Research and Technical Assistance Investments), or part 307 (Economic Adjustment Assistance Investments) of this chapter; and

(f) EDA must select the Eligible Applicant's proposed Project.

Subpart C—Economic Distress Criteria

7. In § 301.3, revise paragraphs (a)(1) and (2), (a)(4) introductory text, (a)(4)(i), and (c)(1) to read as follows:

§ 301.3
Economic distress levels.

(a)
Part 305 (Public Works and Economic Development Investments) and part 307 (Economic Adjustment Assistance Investments).
(1) Except as otherwise provided by this paragraph (a), for a Project to be eligible for Investment Assistance under parts 305 or 307 of this chapter, the Project must be located in a Region that, on the date EDA receives an application for Investment Assistance, is subject to one or more of the following economic distress criteria:

(i) An unemployment rate that is, for the most recent 24-month period for which data are available, at least one percentage point greater than the national average unemployment rate;

(ii) Per capita income that is, for the most recent period for which data are available, 80 percent or less of the national average per capita income; or

(iii) A Special Need, as determined by EDA.

(2) A Project located within an Economic Development District, which is located in a Region that does not meet the economic distress criteria described in paragraph (a)(1) of this section, also is eligible for Investment Assistance under parts 305 or 307 of this chapter if EDA determines that the Project will be of “substantial direct benefit” to a geographic area within the District that meets the criteria of paragraph (a)(1) of this section. For this purpose, a Project provides a “substantial direct benefit” if it provides significant employment opportunities for unemployed, underemployed or low-income residents of the geographic area within the District.

(4)
Data requirements to demonstrate economic distress levels.
EDA will determine the economic distress levels pursuant to this subsection at the time EDA receives an application for Investment Assistance as follows:

(i) For economic distress levels based upon per capita income requirements, EDA will base its determination upon the most recent American Community Survey (“
ACS
”) published by the U.S. Census Bureau. For economic distress levels based upon the unemployment rate, EDA will base its determination upon the most recent data published by the Bureau of Labor Statistics (“
BLS
”), within the U.S. Department of Labor. For eligibility based upon either per capita income requirements or the unemployment rate, when the ACS or BLS data, as applicable, are not the most recent Federal data available, EDA will base its decision upon the most recent Federal data from other sources (including data available from the Census Bureau and the Bureaus of Economic Analysis, Labor Statistics, Indian Affairs, or any other Federal source determined by EDA to be appropriate). If no Federal data are available, an Eligible Applicant must submit to EDA the most recent data available from the State. The required data must be for the Region where the Project will be located (paragraph (a)(1) of this section), the geographic area where substantial direct Project benefits will occur (paragraph (a)(2) of this section), or the geographic area of poverty or high unemployment (paragraph (a)(3) of this section), as applicable.

(c) * * *

(1) Contain at least one geographic area that fulfills the economic distress criteria set forth in paragraph (a)(1) of this section and is identified in an approved CEDS; and

Subpart D—Investment Rates and Matching Share Requirements

8. In § 301.4, revise paragraphs (b)(1) introductory text, (b)(1)(ii), (b)(2), (b)(3)(i) through (iii), (b)(4) introductory text, (b)(5), and (c) to read as follows:

§ 301.4
Investment rates.

(b)
Maximum Investment Rate
—(1)
General rule.
Except as otherwise provided by this paragraph (b) or paragraph (c) of this section, the maximum EDA Investment Rate for all Projects shall be determined in accordance with Table 1 in paragraph (b)(1)(ii) of this section. The maximum EDA Investment Rate shall not exceed the sum of 50 percent, plus up to an additional 30 percent based on the relative needs of the Region in which the Project is located, as determined by EDA.

(ii)
Table 1.
Table 1 of this paragraph sets forth the maximum allowable Investment Rate for Projects located in Regions subject to certain levels of economic distress. In cases where Table 1 produces divergent results (
i.e.,
where Table 1 produces more than one maximum allowable Investment Rate based on the Region's levels of economic distress), the higher Investment Rate produced by Table 1 shall be the maximum allowable Investment Rate for the Project.

Table 1

Projects located in regions in which:

Maximum
allowable
investment rates
(percentage)

(A) The 24-month unemployment rate is at least 225% of the national average; or
80

(B) The per capita income is not more than 50% of the national average
80

(C) The 24-month unemployment rate is at least 200% of the national average; or
70

(D) The per capita income is not more than 60% of the national average
70

(E) The 24-month unemployment rate is at least 175% of the national average; or
60

(F) The per capita income is not more than 65% of the national average
60

(G) The 24-month unemployment rate is at least one percentage point greater than the national average; or
50

(H) The per capita income is not more than 80% of the national average
50

(2)
Projects subject to a Special Need.
EDA shall determine the maximum allowable Investment Rate for Projects subject to a Special Need (as determined by EDA pursuant to § 301.3(a)(1)(iii)) based on the actual or threatened overall economic situation of the Region in which the Project is located. However, unless the Project is eligible for a higher Investment Rate pursuant to paragraph (b)(5) of this section, the maximum allowable Investment Rate for any Project subject to a Special Need shall be 80 percent.

(3) * * *

(i) The minimum Investment Rate for Projects under part 303 of this chapter shall be 50 percent.

(ii) Except as otherwise provided in paragraph (b)(3)(iii) of this section or in paragraph (b)(5) of this section, the maximum allowable Investment Rate for Projects under part 303 of this chapter shall be the maximum allowable Investment Rate set forth in Table 1 for the most economically distressed county or other equivalent political unit (
e.g.,
parish) within the Region. The maximum allowable Investment Rate shall not exceed 80 percent.

(iii) In compelling circumstances, the Assistant Secretary may waive the application of the first sentence in paragraph (b)(3)(ii) of this section.

(4)
Projects under part 306.
Except as otherwise provided in paragraph (b)(5) of this section, the maximum allowable Investment Rate for Projects under part 306 of this chapter shall generally be determined based on the relative needs (as determined under paragraph (b)(1) of this section) of the Region which the Project will serve. As specified in section 204(c)(3) of PWEDA, the Assistant Secretary has the discretion to establish a maximum Investment Rate of up to 100 percent where the Project:

(i) * * *

(ii) * * *

(5)
Special Projects.
Table 2 of this paragraph sets forth the maximum allowable Investment Rate for certain special Projects as follows:

Table 2

Projects

Maximum
allowable
investment rates
(percentage)

Projects that involve broad Regional planning and coordination with other entities outside the Eligible Applicant's political jurisdiction or area of authority, under special circumstances determined by EDA, and Projects that effectively leverage other Federal Agency resources
80

Projects of Indian Tribes
100

Projects for which EDA receives appropriations under section 703 of PWEDA (42 U.S.C. 3233) and Projects to address and implement post-disaster economic recovery efforts in Presidentially Declared Disaster areas in a timely manner
100

Projects of States or political subdivisions of States that the Assistant Secretary determines have exhausted their effective taxing and borrowing capacity, or Projects of non-profit organizations that the Assistant Secretary determines have exhausted their effective borrowing capacity
100

Projects under parts 305 or 307 that receive performance awards pursuant to § 308.2 of this chapter
100

Projects located in a District that receive planning performance awards pursuant to § 308.3 of this chapter
100

(c) Federal Funding Opportunity announcements may provide additional Investment Rate criteria and standards to ensure that the level of economic distress of a Region, rather than a preference for a geographic area or a specific type of economic distress, is the primary factor in allocating Investment Assistance.

9. In § 301.6, revise the section heading and paragraphs (a) introductory text and (b) to read as follows:

§ 301.6
Supplementary Investment Assistance.
(a) Pursuant to a request made by an Eligible Applicant, EDA Investment Assistance may supplement a grant awarded in another “designated Federal grant program,” if the Eligible Applicant qualifies for financial assistance under such program, but is unable to provide the required non-Federal share because of the Eligible Applicant's economic situation. For purposes of this section, a “designated Federal grant program” means a Federal grant program that:

(b) For a Project that meets the economic distress criteria provided in § 301.3(a), the Investment Assistance, combined with funds from a designated Federal grant program, may be at the maximum allowable Investment Rate, even if the designated Federal grant program has a lower grant rate. If the designated Federal grant program has a grant rate higher than the maximum EDA Investment Rate, the EDA Investment and other Federal funds together may exceed the EDA Investment Rate, provided that the EDA share of total funding does not exceed the maximum allowable Investment Rate.

Subpart E—Application Requirements; Evaluation Criteria

10. In § 301.7, revise paragraph (a) to read as follows:

§ 301.7
Investment Assistance application.

(a) The EDA Investment Assistance process begins with the submission of an application. The
Application for Investment Assistance
(Form ED-900 or any successor form) may be obtained electronically from
http://www.grants.gov
or from the appropriate regional office. In general, EDA accepts applications on a continuing basis and competitively evaluates all applications received in quarterly funding cycles throughout the fiscal year. Subject to the availability of funds, the timing in which EDA receives complete and competitive applications affects EDA's ability to participate in a given Project. EDA will evaluate all applications in accord with the criteria set forth in the applicable FFO and in § 301.8 and will:

(1) Return the application to the applicant for specified deficiencies and suggest resubmission after corrections are made; or

(2) Deny the application for specifically stated reasons and notify the applicant.

11. Revise § 301.8 to read as follows:

§ 301.8
Application evaluation criteria.
EDA will screen all applications for the feasibility of the budget presented and conformance with EDA's statutory and regulatory requirements. EDA will assess the economic development needs of the affected Region in which the proposed Project will be located (or will service), as well as the capability of the Eligible Applicant to implement the proposed Project. In addition to criteria set out in the applicable FFO, EDA will consider the degree to which an Investment in the proposed Project will satisfy one or more of the following criteria:

(a)
Ensures collaborati

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2014-28806. Public record. Not legal advice.