Temporary Loan Processing Procedures for Insured Electric Loans

SUMMARY: The Rural Utilities Service (RUS) is amending its rule to

allow RUS to process loans with a loan period of more than 2 years in

two parts when applications substantially exceed available funds. RUS

amended its rules in 1995 to lengthen the allowable loan period for

insured electric loans from 2 years to 4 years. Since borrowers may now

apply for loans to cover construction financing needs for a longer

period of time, the average loan has become larger. At the same time,

loan authority for FY 1997 is less than for 1996. This situation has

produced long delays between the time applications are submitted and

the time loans can be approved. RUS believes that this is a temporary

situation that will disappear as more and more borrowers get on a

longer loan application cycle. The rule is intended to reduce

processing delays.

DATES: This rule is effective February 21, 1997. Written comments must

be received by RUS or bear a postmark or equivalent not later than May

22, 1997.

ADDRESSES: Submit written comments to Sue Arnold, Financial Analyst,

U.S. Department of Agriculture, Rural Utilities Service, Room 4032-S,

1400 Independence Avenue, SW, STOP 1522, Washington, DC 20250-1500. RUS

requires, in hard copy, a signed original and 3 copies of all comments

(7 CFR 1700.30(e)). Comments will be available for public inspection

during regular business hours (7 CFR 1.27(b)).

FOR FURTHER INFORMATION CONTACT: Sue Arnold, Financial Analyst, U.S.

Department of Agriculture, Rural Utilities Service, Room 4032-S, 1400

Independence Avenue, SW., STOP 1522, Washington, DC 20250-1522.

Telephone: 202-720-0736. FAX: 202-720-4120. E-mail:

[email protected].

SUPPLEMENTARY INFORMATION: This regulatory action has been determined

to be not significant for the purposes of Executive Order 12866,

Regulatory Planning and Review, and, therefore has not been reviewed by

the Office of Management and Budget (OMB). The Administrator of RUS has

determined that a rule relating to the RUS electric loan program is not

a rule as defined in the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.) for which RUS published a general notice of proposed rulemaking

pursuant to 5 U.S.C. 553(b), or any other law. Therefore, the

Regulatory Flexibility Act does not apply to this rule. The

Administrator of RUS 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. This rule is excluded from the scope of

Executive Order 12372, Intergovernmental Consultation, which may

require consultation with State and local officials. A Notice of Final

Rule titled Department Programs and Activities Excluded from Executive

Order 12372 (50 FR 47034) exempts RUS electric loans and loan

guarantees from coverage under this Order. This rule has been reviewed

under Executive Order 12988, Civil Justice Reform. RUS has determined

that this rule meets the applicable standards provided in Sec. 3 of the

Executive Order.

The program described by this rule is listed in the Catalog of

Federal Domestic Assistance Programs under number 10.850 Rural

Electrification Loans and Loan Guarantees. This catalog is available on

a subscription basis from the Superintendent of Documents, the United

States Government Printing Office, Washington, DC 20402-9325.

Information Collection and Recordkeeping Requirements

The recordkeeping and reporting burdens contained in this rule were

approved by the Office of Management and Budget (OMB) pursuant to the

Paperwork Reduction Act of 1995 (44 U.S.C. Chapter 35, as amended)

under control number 0572-0032.

Background

On January 21, 1995, at 60 FR 3726, RUS amended its rules to

lengthen the maximum allowable loan period from 2 years to 4 years for

most insured loans. The loan period, sometimes referred to as the

financing period, means the period of time during which the facilities

listed in a loan application will be constructed. The loan period was

lengthened in order to reduce administrative costs to borrowers,

supplemental lenders, and RUS of submitting and processing multiple

applications.

Since borrowers may now apply for loans covering financing needs

for a longer period of time, the average loan size has become larger.

At the same time, budget authority for FY 1997 is less than for FY

1996. In FY 1996, RUS used all its budget authority for municipal rate

loans and hardship rate loans, approving 97 municipal rate loans (a

total of $544,616,858) and 23 hardship rate loans ($90,577,664). On

September 30, 1996, the end of the FY, RUS had a backlog of 106

applications for municipal rate loans ($709.0 million) and 28

applications for hardship rate loans ($119.9 million). Additional

applications have been received during FY 97. Total budget authority

for FY 1997 for municipal rate and hardship rate loans is only

$455,564,561 and $68,785,578, respectively.

The large difference between loan funds requested for eligible

purposes, and loan funds available for lending has caused long delays

between the time a loan application is submitted and the time RUS can

act on the application. Currently the queue for municipal rate loans is

about a year, and the queue for hardship rate loans is approaching 16

months.

In spite of the smaller budget authority, RUS believes that the

loan queue will be significantly shortened as more and more borrowers

get used to a longer loan application cycle. However, in those years

when there is a significant shortfall in available funding, the agency

must have the flexibility to manage the limited resources. This interim

final rule will give RUS such flexibility, and will

[[Page 7922]]

provide borrowers with a degree of financial certainty.

The rule will allow RUS to process applications for loans with a

loan period of more than 2 years in two parts during a fiscal year when

applications substantially exceed available funds. RUS will notify all

electric borrowers in writing before invoking these procedures.

RUS recognizes that the success of the electric program in

maintaining high quality electric service at reasonable rates in rural

areas depends on the ability of electric borrowers to maintain and

improve their electric systems. The temporary procedures in this rule

will assist borrowers in the essential task of planning and managing

their cash flows.

Concurrent with the publication of this rule, RUS is issuing

Bulletin 1710C-1, Temporary Processing Procedures for Insured Electric

Loans, a compliance guide to assist borrowers, supplemental lenders,

and other interested parties. RUS is mailing the rule and the bulletin

to all electric borrowers and to supplemental lenders. RUS believes

that the procedures in the bulletin will allow all borrowers to share

the limited loan appropriations on a fair and equitable basis.

Because of: (1) The exceptionally large backlog of applications for

municipal rate and hardship rate loans, and (2) The urgent need for

processing procedures that will allow RUS to advance loan funds during

the spring construction season, RUS is putting these procedures into

effect immediately for FY 1997. RUS requests comments and suggestions,

especially on alternate methods of allocating the limited amount of

loan funds.

List of Subjects in 7 CFR Part 1710

Electric power, Electric utilities, Loan programs--energy,

Reporting and recordkeeping requirements, Rural areas.

For the reasons set out in the preamble, and under the authority of

7 U.S.C. 901 et seq., RUS amends 7 CFR Part 1710 as follows:

PART 1710--GENERAL AND PRE-LOAN POLICIES AND PROCEDURES COMMON TO

INSURED AND GUARANTEED ELECTRIC LOANS

1. The authority citation for part 1710 continues to read as

follows:

Authority: 7 U.S.C. 901-950(b); Pub. L. 99-591, 100 Stat. 3341;

Pub. L. 103-354, 108 Stat. 3178 (7 U.S.C. 6941 et seq.).

2. Section 1710.106 is amended by revising paragraph (e) to read as

follows:

Sec. 1710.106 Uses of loan funds.

* * * * *

(e)(1) If, in the sole discretion of the Administrator, the amount

authorized for lending for municipal rate loans, hardship rate loans,

and loan guarantees in a fiscal year is substantially less than the

total amount eligible for RUS financing, RUS may limit the size of all

loans of that type approved during the fiscal year. Depending on the

amount of the shortfall between the amount authorized for lending and

the loan application inventory on hand for each type of loan, RUS may

either reduce the amount on an equal proportion basis for all

applicants for that type of loan based on the amount of funds for which

the applicant is eligible, or may shorten the loan period for which

funding will be approved to less than the maximum of 4 years. All

applications for the same type of loan approved during a fiscal year

will be treated in the same manner, except that RUS will not limit

funding to any borrower requesting an RUS loan or loan guarantee of $1

million or less.

(2) If RUS limits the amount of loan funds approved for borrowers,

the Administrator shall notify all electric borrowers early in the

fiscal year of the manner in which funding will be limited. The portion

of the loan application that is not funded during that fiscal year may,

at the borrower's option, be treated as a second loan application

received by RUS at a later date. This date will be determined by RUS in

the same manner for all affected loans and will be based on the

availability of loan funds. The second loan application shall be

considered complete except that the borrower must submit a

certification from a duly authorized corporate official stating that

funds are still needed for loan purposes specified in the original

application and must notify RUS of any changes in its circumstances

that materially affects the information contained in the original loan

application or the primary support documents. See 7 CFR 1710.401(f).

* * * * *

Dated: February 13, 1997.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 97-4334 Filed 2-20-97; 8:45 am]

BILLING CODE 3410-15-P