Rural Economic Development Loan and Grant Program: Empowerment Zones

DEPARTMENT OF AGRICULTURE

Rural Electrification Administration

7 CFR Part 1703

RIN 0572-AB04

Rural Economic Development Loan and Grant Program: Empowerment

Zones

AGENCY: Rural Electrification Administration, USDA.

ACTION: Final rule.

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SUMMARY: The Rural Electrification Administration (REA) hereby amends

its regulation for the Rural Economic Development Loan and Grant

Program by adding a provision which will enhance the potential of

funding for applications from areas that: Were recently designated by

the President as natural disaster areas; have experienced severe

economic dislocation due to the loss, removal, or closing of a major

source of employment; have experienced long-term and severe economic

deterioration, demonstrated by severe unemployment or a high percentage

of population out-migration; or have been designated as a Rural

Empowerment Zone or Rural Enterprise Community.

EFFECTIVE DATE: This regulation is effective on November 28, 1994.

FOR FURTHER INFORMATION CONTACT: Lawrence L. Bryant, Jr., Chief,

Planning Branch, Rural Development Assistance Staff, Rural

Electrification Administration, Room 2237, South Building, U.S.

Department of Agriculture, 14th and Independence Avenue, SW.,

Washington, DC 20250-1500 (202) 690-3594.

SUPPLEMENTARY INFORMATION: This rule has been determined to be not

significant for purposes of Executive Order 12866 and therefore has not

been reviewed by the Office of Management and Budget. This rule has

been reviewed under Executive Order 12778, Civil Justice Reform. This

rule: (1) Will not preempt any State or local laws, regulations, or

policies; (2) Will not have any retroactive effect; and (3) Will not

require administrative proceedings before parties may file suit

challenging the provisions of this rule.

In compliance with the Regulatory Flexibility Act, the

Administrator certifies that this action would not have a significant

economic impact on a substantial number of small entities as defined in

the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Based on current

and historical funding levels for this program and a projected average

size loan and/or grant in the range of $300,000 to $400,000, it is

estimated that 50 to 60 loans and/or grants will be made nationwide

each year under the existing rule. Applicants whose rural development

projects are enhanced by this action are projected to be less numerous,

and therefore, the rule will have a limited impact upon small

businesses. Since credit will be channeled to areas which are generally

underdeveloped and financially depressed, job creation and economic

development resulting from newly emerging businesses and community

facilities funded by REA will not pose undue competition or other

adverse effects upon existing businesses. Therefore, this rule will

have no effect upon businesses or entities other than those to be

funded through this program.

In compliance with the Office of Management and Budget (OMB)

regulations (5 CFR part 1320) implementing the Paperwork Reduction Act

of 1980 (Pub. L. 96-511) and Section 3504 of that Act, the information

collection and recordkeeping requirements contained in this rule have

been approved by OMB under control number 0572-0090. Comments

concerning these requirements should be directed to the Office of

Information and Regulatory Affairs of OMB, Attention: Desk Officer for

USDA, room 10102, NEOB, Washington, DC, 20503.

The Administrator has determined that this rule will not

significantly affect the quality of the human environment as defined by

the National Environmental Policy Act of 1969 (42 U.S.C. 4321 et seq.).

Therefore, this action does not require an environmental impact

statement or assessment.

The program is subject to the provisions of Executive Order 12372,

which requires intergovernmental consultation with State and local

officials, with the exception of applications for Project Feasibility

Studies.

This program is listed in the Catalog of Federal Domestic

Assistance under No. 10.854, Rural Economic Development Loans and

Grants. This catalog is available on a subscription basis from the

Superintendent of Documents, United States Government Printing Office,

Washington, DC 20402-9325.

Background

On February 15, 1989, REA published the final rule, 7 CFR 1709,

subpart B, in the Federal Register (54 FR 6867) that implemented the

Rural Economic Development Loan and Grant Program, also known as the

Cushion of Credit Payments Program, established by Section 313 of the

Rural Electrification Act of 1936, as amended (Act). This program

provides funds to Act borrowers for the promotion of rural economic

development and job creation projects. On September 27, 1990, REA

changed the designation of this rule from 7 CFR part 1709 to part 1703

(55 FR 39393) and on September 25, 1992, published an amendment (57 FR

44314) to refine and improve the structure of the rule. On March 14,

1994, REA published a final rule (59 FR 11702) establishing procedures

to approve and administer grants and grants in conjunction with zero-

interest loans.

On July 28, 1994, a proposed rule was published (59 FR 38378) to

amend the rule to enhance the funding potential of Rural Economic

Development Loan and Grant Program (REDLGP) applications from

economically devastated areas. This constitutes the finalization of

that proposed rule.

Synopsis

This rule amends the Rural Economic Development Loan and Grant

Program as follows:

The Administrator will have the discretion to designate

special economic status under the REDLGP selection factors, adding up

to 25 points to an applicant's score if at least one of the four

conditions outlined in Sec. 1703.46(g)(7) has occurred.

The prohibition on funding community antenna television

systems or facilities has been reinstated except in special cases as

outlined in Sec. 1703.17(d).

The provision for disbursement of grant funds has been

revised to allow REA Borrowers with limited financial resources, or for

other reasons, to receive funds based on invoices from project owners

rather than committing their own funds under the reimbursement

provision. This arrangement will require prior REA approval. See

Sec. 1703.22(e).

The definition of ``Rural economic development'' has been

revised to clarify REA policy on funding projects located outside rural

areas as defined in Section 13 of the Rural Electrification (RE) Act

but which provide significant benefits to rural areas.

Comments

REA received seven comments regarding this regulation, which were

taken into consideration in preparing this final rule. Comments were

received from the following:

(1) Minnesota Rural Electric Association.

(2) Riverside County Economic Development Agency, Riverside,

California.

(3) City of Hollister, California.

(4) Maine Ambulatory Care Coalition, Manchester, Maine.

(5) Crown Economic Development Corporation, Hanford, California.

(6) Merced County Board of Supervisors, Merced, California.

(7) Community Development Division, Fresno, California.

Of the comments received, one commenter suggested that REA accept

``local'' unemployment data, if available, instead of county-wide data

because of significant variances in larger counties. We recognize that

large geographical counties are at a disadvantage if only countywide

data is accepted. Therefore the use, where appropriate, of State-

published information, would be a reasonable alternative and have

amended Sec. 1703.46(g)(7)(iii) is hereby amended to allow the REA

Administrator to consider State-published statistics, provided by the

applicant, in those situations where the Census material is clearly not

representative of the project location. However, the data must be

verifiable and part of a recognized database which reflects information

for other areas within the State.

One community expressed concern that requiring disbursement of

funds up front and awaiting reimbursement could be a hardship on small

rural communities. However, this requirement does not actually impact

community government entities because the reimbursement policy is

applicable only in cases where REA Borrowers receive grants to

establish revolving loan funds. This final rule provides special

arrangements only for REA Borrowers establishing revolving loan funds,

who are unable to fund projects using the reimbursement method.

Another comment was that REA's definition of ``rural'' in this rule

was too broad and would allow reviewers to fund projects not directly

benefiting rural communities. The commenter suggested that the funds

either be restricted to the 2500 population limit or controlled by

organizations from such communities, that at least 70 percent of the

funds be spent in communities under 2500 and that the urban entity

provide at least 60 percent in matching funds. All REDLGP applications

are reviewed by the REA staff and selected based on the evaluation

criteria outlined in Sec. 1703.46, much of which is based on benefit to

rural areas. Moreover, REA borrowers serve primarily rural areas, and

they are well-suited to determine that the final benefits are directed

toward the local community. As discussed previously in this preamble,

the rule has been revised to allow projects which are not located in

rural areas. However, those projects must result in significant benefit

to rural areas.

Another recommendation was to assign bonus points to areas

``nominated'' by State and local governments for designation as Rural

Empowerment Zones or Rural Enterprise Communities as well as those

areas primarily designated by USDA as Rural Empowerment Zones or Rural

Enterprise Communities. It was suggested that these communities be

rewarded for the development of the plans and partnerships required by

the nominating process and receive a portion of the points they would

have received if actually designated as Rural Empowerment Zones or

Rural Enterprise Communities. REA recognizes that community strategic

planning is a key component of the Empowerment initiative, however,

this additional planning aspect will directly benefit the communities

in other ways such as allowing them to realize and unlock their own

potential to partnership with the private sector and other federal and

state entities. The strategic planning process also improves the

applicant's overall REDLGP application which should be reflected under

the normal evaluation criteria.

List of Subjects in 7 CFR Part 1703

Community development, Grant programs--housing and community

development, Loan programs--housing and community development,

Reporting and recordkeeping requirements, Rural areas.

For the reasons set out in the preamble, chapter XVII of title 7 of

the Code of Federal Regulations is amended as follows:

PART 1703--RURAL DEVELOPMENT

1. The authority citation for 7 CFR part 1703 continues to read as

follows:

Authority: 7 U.S.C. 901 et seq. and 950aaa et seq.

Subpart B--Rural Economic Development Loan and Grant Program

2. In Sec. 1703.12 of this subpart B, the following definition is

revised to read as follows:

Sec. 1703.12 Definitions.

* * * * *

Rural economic development--job creation or preservation or

community facilities improvement projects that clearly demonstrate

significant benefits to rural areas.

* * * * *

3. In Sec. 1703.17, paragraph (d) is added to read as follows:

Sec. 1703.17 Uses of zero-interest loans and grants.

* * * * *

(d) Zero-interest loans and grants may be used for community

antenna television systems or facilities. The borrower will document

that such facilities provide a tangible economic benefit to the

proposed service area in accordance with Sec. 1703.46 of this subpart.

Notwithstanding this, the Administrator reserves the right to deny any

proposal for community antenna television systems or facilities.

Community antenna television systems or facilities will be considered

for funding in accordance with Sec. 1703.46 of this subpart and this

section only when all of the following conditions exist:

(1) The proposed community antenna television system or facility is

established in cooperation with a local educational and/or medical

entity(ies) to provide educational and/or medical programming which

addresses specific needs of rural residents;

(2) Services to be provided by the proposed community antenna

television systems or facilities are not available in the area to be

served, or services are not being provided by the existing television

programming carrier at an affordable cost to residents; and

(3) Such community antenna systems or facilities will not present

undue competition for existing television programming carriers in the

area.

4. In Sec. 1703.20, paragraphs (a)(10) and (a)(11) are redesignated

as paragraphs (a)(11) and (a)(12) and a new paragraph (a)(10) is added

to read as follows:

Sec. 1703.20 Ineligible uses of zero-interest loans and grants.

(a) * * *

(10) For community antenna television systems or facilities except

as provided in Sec. 1703.17(d) of this subpart;

* * * * *

5. In Sec. 1703.22, paragraphs (e) introductory text, (e)(1),

(e)(3) and (e)(4) are revised to read as follows:

Sec. 1703.22 Revolving loan program.

* * * * *

(e) Disbursement of grant funds. Borrowers are not authorized to

commence projects to be funded under this section until those projects

have been submitted for authorization in accordance with paragraph

(c)(1) of this section, or the projects have been submitted for

authorization subsequent to grant approval in accordance with paragraph

(e)(2) of this section. REA grant funds will be disbursed on a

reimbursement basis. However, upon written justification by borrowers

and approval by the Administrator, borrowers unable to fund projects

under reimbursement provisions, for financial or other extraordinary

reasons, may receive grant funds under the special disbursement method

by submitting unpaid invoices from project owners, and grant funds will

be disbursed to borrowers and passed directly to project owners. In

either case, REA grant funds will be disbursed in accordance with the

provisions of 7 CFR Part 3015, Uniform Federal Assistance Regulations,

the applicable requirements of this subpart, the administrative

provisions outlined in paragraph (g) of this section, and the following

requirements:

(1) Only projects authorized by REA in accordance with paragraphs

(c)(1) and (e)(2) of this section, for which adequate documentation is

submitted, including receipts for expenditures under the reimbursement

method or unpaid invoices under the special disbursement method, as

applicable, and certification of approved purposes, will be considered

for disbursement;

* * * * *

(3) Under the reimbursement method, grant funds requisitioned for

individual projects in increments of less than $100,000, or less than

25 percent of the amount approved for the revolving loan fund,

whichever is less, may be disbursed semi-annually. Submission periods

for requisitioning grant funds on a semi-annual disbursement basis will

be 14 days commencing from the 6-month anniversary date of grant

approval. Grant funds under the special disbursement method will be

requisitioned in accordance with the applicable provision in paragraph

(e)(4) of this section;

(4) For the reimbursement method, grant funds requisitioned for

individual projects in increments of $100,000 or greater, or at least

25 percent of the amount approved for the revolving loan fund,

whichever is less, may be submitted for disbursement at any time. Under

the special disbursement method, grant funds of less than $100,000 may

be requisitioned for disbursement at any time. However, the minimum

requisition will be $50,000, or the total grant award, whichever is

less.

* * * * *

6. In Sec. 1703.46, the period at the end of paragraph (h)(10)(iii)

is removed and a semicolon is added in its place, and paragraphs (g)(7)

and (h)(11) are added to read as follows:

Sec. 1703.46 Documenting the evaluation and selection of applications

for zero-interest loans and grants.

* * * * *

(g) Other selection factors. * * *

* * * * *

(7) Special economic status. The Administrator has the discretion

to designate special economic status (up to 25 points) to applications

submitted by borrowers that have documented one or more of the

following four conditions in one or more county(ies) to be served by

the proposed project:

(i) A designation of disaster area by the President of the United

States which has been so designated within three years prior to

applying to REA;

(ii) The loss, removal, or closing of a major source or sources of

employment in the last 3 years which causes an increase of 2 percentage

points or more in the area's most recent unemployment rate compared

with the period immediately before the dislocation;

(iii) Chronic or long-term economic deterioration, documented by

one or both of the following conditions:

(A) An unemployment level equal to or greater than 1.5 times the

National average unemployment percentage from 4 out of the last 5

years, starting with the most current statistics available. The

applicant, when calculating recent years' unemployment percentages,

should compare county statistics with the National Average unemployment

for the corresponding year. Statistics on unemployment will be based on

figures provided by the U.S. Bureau of Labor Statistics. However, the

Administrator may, at his discretion, also consider verifiable,

published State statistical data provided by the applicant in

situations where county-wide statistical data is not representative of

local conditions. Such statistical data must be part of a recognized

database which reflects information for other areas within the State;

(B) A 15% loss of population due to out-migration over the most

recent 10-year decennial census, based on the U.S. Bureau of the Census

decennial data;

(iv) A designation as a Rural Empowerment Zone or Rural Enterprise

Community by the Empowerment Zone Program authorized by Section 13301

of the Omnibus Reconciliation Act of 1993, Public Law 103-66 (107 Stat.

312), 26 U.S.C. 1391-1393.

(h) * * *

(11) Special economic status--25 points.

* * * * *

Dated: October 19, 1994.

Bob J. Nash,

Under Secretary, Small Community and Rural Development.

[FR Doc. 94-26418 Filed 10-26-94; 8:45 am]

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