Processing Requests for Farm Labor Housing (LH) Loans and Grants

[Federal Register Volume 64, Number 87 (Thursday, May 6, 1999)]

[Rules and Regulations]

[Pages 24476-24482]

From the Federal Register Online via the Government Publishing Office [www.gpo.gov]

[FR Doc No: 99-11256]

[[Page 24475]]

_______________________________________________________________________

Part V

Department of Agriculture

_______________________________________________________________________

Rural Housing Service

_______________________________________________________________________

Rural Business-Cooperative Service

_______________________________________________________________________

Rural Utilities Service

_______________________________________________________________________

Farm Service Agency

_______________________________________________________________________

7 CFR Parts 1940 and 1944

Processing Requests for Farm Labor Housing (LH) Loans and Grants; Final

Rule

Notice of Funds Availability (NOFA) for Section 514 Farm Labor Housing

Loans and Section 516 Farm Labor Housing Grants for Off-farm Housing;

Notice

Federal Register / Vol. 64, No. 87 / Thursday, May 6, 1999 / Rules

and Regulations

[[Page 24476]]

DEPARTMENT OF AGRICULTURE

Rural Housing Service

Rural Business-Cooperative Service

Rural Utilities Service

Farm Service Agency

7 CFR Parts 1940 and 1944

RIN 0575-AC19

Processing Requests for Farm Labor Housing (LH) Loans and Grants

AGENCIES: Rural Housing Service, Rural Business-Cooperative Service,

Rural Utilities Service, and Farm Service Agency, USDA.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Rural Housing Service (RHS), formerly Rural Housing and

Community Development Service (RHCDS), a successor Agency to the

Farmers Home Administration (FmHA), amends its regulations for the Farm

Labor Housing (LH) program. This action is taken to implement an annual

competitive funding cycle for off-farm proposals that will be announced

elsewhere in this Federal Register. The intended outcome is to improve

the effectiveness and efficiency of the application process and enable

the Agency to process applications in a more efficient and timely

manner. This rule also implements the provision of Public Law 105-276,

enacted October 21, 1998, that permits as an eligible LH borrower

entity a limited partnership with a nonprofit general partner.

EFFECTIVE DATE: June 7, 1999.

FOR FURTHER INFORMATION CONTACT: Linda Armour, Senior Loan Specialist,

Multi-Family Housing Processing Division, Rural Housing Service, U.S.

Department of Agriculture, Room 5349--South Building, Stop 0781, 1400

Independence Avenue, SW, Washington, DC 20250-0781, telephone (202)

720-1604 (voice) or (800) 877-8339 (TDD-Federal Information Relay

Service).

SUPPLEMENTARY INFORMATION:

Classification

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.

Paperwork Reduction Act

The information collection requirements contained in this

regulation have been previously approved by the Office of Management

and Budget (OMB) under the provisions of 44 U.S.C. chapter 35 and have

been assigned OMB control number 0575-0045, in accordance with the

Paperwork Reduction Act of 1995. Under the Paperwork Reduction Act of

1995, no persons are required to respond to a collection of information

unless it displays a valid OMB number. The valid OMB control number

assigned to the collection of information in these final regulations is

displayed at the end of the affected section of the regulation. This

rule does not impose any additional burden on the public.

The new competitive application process should increase the number

of applications each year, and only those applicants selected for

further processing for funding within the fiscal year will need to

submit a full application. The net effect is no new information

collection requirements from those approved by OMB.

Civil Justice Reform

This rule has been reviewed under Executive Order 12988, Civil

Justice Reform. In accordance with this rule: (1) All state and local

laws and regulations that are in conflict with this rule will be

preempted; (2) except as specifically provided, no retroactive effect

will be given to this rule; and (3) administrative proceedings in

accordance with 7 CFR part 11 must be exhausted before bringing suit in

court challenging action taken under this rule.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA),

establishes requirements for Federal agencies to assess the effects of

their regulatory actions on State, local, and tribal governments and

the private sector. Under section 202 of the UMRA, RHS generally must

prepare a written statement, including a cost-benefit analysis, for

proposed and final rules with ``Federal mandates'' that may result in

expenditures to State, local, or tribal governments, in the aggregate,

or to the private sector, of $100 million or more in any 1 year. When

such a statement is needed for a rule, section 205 of the UMRA

generally requires RHS to identify and consider a reasonable number of

regulatory alternatives and adopt the least costly, more cost-effective

or least burdensome alternative that achieves the objectives of the

rule.

This rule contains no Federal mandates (under the regulatory

provisions of title II of the UMRA) for State, local, and tribal

governments or the private sector. Therefore, this rule is not subject

to the requirements of sections 202 and 205 of the UMRA.

National Performance Review

This regulatory action is being taken in part as a result of the

National Performance Review program to eliminate unnecessary

regulations and improve those that remain in force.

Programs Affected

The affected program is listed in the Catalog of Federal Domestic

Assistance under Number 10.405, Farm Labor Housing Loans and Grants.

Intergovernmental Consultation

For the reasons set forth in the Final Rule related Notice to 7 CFR

part 3015, subpart V, this program is subject to Executive Order 12372

which requires intergovernmental consultation with State and local

officials. RHS has conducted intergovernmental consultation in the

manner delineated in RD Instruction 1940-J.

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940,

subpart G, ``Environmental Program.'' It is the determination of RHS

that this action does not constitute a major Federal action

significantly affecting the quality of the human environment and in

accordance with the National Environmental Policy Act of 1969, Public

Law 91-190, an Environmental Impact Statement is not required.

Regulatory Flexibility Act

This rule has been reviewed with regard to the requirements of the

Regulatory Flexibility Act (5 U.S.C. 601-612). The undersigned has

determined and certified by signature of this document that this rule

will not have a significant economic impact on a substantial number of

small entities since this rulemaking action does not involve a new or

expanded program nor does it require any more action on the part of a

small business than required of a large entity.

Background

The farm labor housing program has two authorities in Title V of

the Housing Act of 1949: section 514 (42 U.S.C. 1484) for loans and

section 516 (42 U.S.C. 1486) for grants. As provided by the authorizing

statute, section 514 loans are subsidized to borrowers to a one percent

interest rate. The program also has tenant subsidies (rental

assistance, or RA) available through section 521 (42 U.S.C. 1490a).

Both ``on-farm'' and ``off-farm'' housing are financed by the LH

program. Occupancy in both is restricted to United States citizens or

aliens legally admitted for permanent residence.

[[Page 24477]]

On-farm housing is financed with section 514 loans to a farmer or

farm entity. Housing built is typically a single family dwelling unit,

and occupancy is restricted to farmworkers or a farmworker family with

at least one member of the household employed by the farm. No tenant

subsidies are available.

Off-farm housing proposals, which may be financed with both section

514 loans and section 516 grants, are typically designed like

conventional apartment complexes; however, occupancy is restricted to

farmworker households. Rental assistance is typically available to

occupants to assure unit affordability.

On October 29, 1998, the Agency published a proposed rule in the

Federal Register (63 FR 57932) to change to an annual competitive

funding cycle from the current system of accepting and processing off-

farm labor housing proposals on a first-come, first-served basis. These

regulation changes do not affect on-farm housing loan requests, which

will continue to be accepted and processed on a first-come, first-

served basis.

Discussion of Comments

Fifteen commentors responded during the comment period, three of

whom submitted duplicate letters. An additional comment was received

after the comment period had closed, expressing support of another

commentor's letter, making a total of sixteen responses. Commentors

included State agencies, farm labor housing technical assistance

providers, nonprofit groups, developers, and RHS field staff. The

Agency wishes to thank all respondents for their thorough and

constructive comments and suggestions. We have carefully considered all

comments in developing this final rule.

The comments we received are summarized and discussed below by

topic.

Annual Competitive Funding Cycle

The majority of commentors agreed with the Agency's proposal to

adopt an annual competitive funding cycle, with only two commentors

opposing this alternative to the current first-come, first-served

application process. The Agency is implementing the annual competitive

funding cycle as proposed.

Two commentors, while agreeing with the annual competitive process,

felt that the proposed 60-to 90-day application period was too short,

and offered suggestions for ways to give applicants more time to

complete and submit their loan requests. The first commentor suggested

that the Agency issue the notice of funding earlier in the year, based

on preliminary appropriations estimates, before funds actually become

available. The notice would specify that funds were subject to the

amount of the final appropriations. The second commentor suggested that

the Agency accept applications and issue letters of commitment in FY

1999 for FY 2000 funds; FY 1999 funds could then be used to fund

applications on hand for which the Agency has already issued an AD-622,

``Notice of Preapplication Review Action'', inviting a formal

application. A third commentor on this issue offered an opposing

opinion, stating that the Agency should not announce the availability

of funds prior to the appropriation of funds because funding levels can

vary from year to year.

The Agency feels that the funding announcement can be made as soon

as there is reasonable assurance of funding levels. The funding notice

will be published in the Federal Register as quickly as possible

thereafter to allow the maximum application period.

Several commentors stated that a minimum of 90 days should be

allowed for the application cycle to allow smaller or inexperienced

applicants time to complete their applications. We agree that a 90-day

Notice of Funds Availability (NOFA) is preferable and will make every

effort to accommodate this recommendation by publishing NOFA as soon as

funding levels are known. The Agency will also attempt to ensure,

through outreach efforts, that potential applicants are aware of the

program's annual funding cycle so that preliminary groundwork can be

done prior to the Agency's funding announcement.

Three-Stage Application Process

The Agency proposed adopting a three-stage application process with

a preliminary proposal stage. The majority of commentors were opposed

to this and recommended retaining the current two-stage process. They

noted that the preliminary stage was nearly as extensive as the

Agency's current first stage (preapplication) requirements and

unnecessarily complicated the process. Two commentors also noted that,

if the applicant is applying for other funds to leverage with RHS

funds, the information required in the Agency's current preapplication

stage is generally required by the other lenders. Based on these

comments, the Agency has decided to retain the current two-stage

application process.

Description of Proposed Financing

Three respondents commented on the provisions of

Sec. 1944.170(a)(2)(ii), ``Description of proposed financing.'' One

questioned whether the requirement that leveraged funds not exceed the

cost of 100 percent LH loan financing was realistic. Based on our

experience with the section 515 Rural Rental Housing program, we have

found this to be a realistic requirement, with many applicants

obtaining grants, deferred loans, or 1 percent loans. We have modified

this provision, however, to indicate that this condition applies only

if RHS Rental Assistance is being provided. Regarding the provisions

for donated land, one commentor felt that the requirement that site

costs cannot exceed the cost of purchasing and developing an

alternative site was too inflexible, citing instances where no other

site is available or the site is mandated by local conditions. The

Agency agrees there may be exceptional cases; however, these will be

handled on a case-by-case exception basis. A third commentor objected

to the requirement that the funding dates of leveraged funds permit

funding within the current funding cycle, noting that this was not

appropriate for on-going operating subsidies. The same commentor also

noted that, for many leveraged sources, the funds may be committed but

not actually received in the funding cycle. The Agency feels there is

merit to these criticisms and has modified the language for this

requirement accordingly.

Environmental Review

Two commentors recommended that the Agency require Form RD 1940-20,

``Request for Environmental Information,'' at the initial application

stage and consider requiring a Phase I Environmental Review at this

stage. The Agency agrees that the environmental process should begin

with the initial loan request. Form RD 1940-20 is required with the

preapplication submission, and Agency staff will be required to conduct

a site visit to establish preliminary site eligibility and to identify

potential environmental concerns. In coordination with the

environmental site review, Agency staff will be required to conduct a

civil rights impact analysis in accordance with RD Instruction 2006-P.

Appraisal Requirements

One commentor noted that Sec. 1944.169(a)(1) requires appraisals to

be performed by RHS employees and questioned whether this precluded

contract appraisals. We agree that the

[[Page 24478]]

Agency may wish to use contract appraisers in some instances and have

changed the wording in this section to remove the reference to RHS

employees.

Loan Selection Criteria

The Agency proposed awarding points in nine different loan

selection categories: (1) the presence and extent of leveraged

assistance; (2) units to be built in communities with a high need for

farmworker housing; (3) proposals in support of an Agency initiative

announced in Notice of Funds Availability (NOFA); (4) proposals with

support services; (5) proposals with a minimum ten percent private

agriculture producer leveraged funds; (6) projects whose occupants will

derive the highest percentage of income from on-farm agriculture work;

(7) proposals in market areas not previously served by LH projects; (8)

seasonal, temporary, or migrant housing; and (9) for FY 1999 and FY

2000, proposals that were issued an AD-622, ``Notice of Preapplication

Review Action,`` inviting a formal application, or had been reviewed

and authorized by the National Office prior to October 29, 1998 (the

date the proposed rule was published in the Federal Register). The

comments on each category are discussed below:

The presence and extent of leveraged assistance, and proposals with

a minimum ten percent private agriculture producer leveraged funds. The

majority of commentors felt that the two criteria dealing with

leveraged assistance should be combined into one, both to simplify the

process and to preclude giving too much weight to leveraged assistance.

In addition, commentors felt that the Agency should establish point

ranges for percentages of leveraging, rather than the proposed method

of comparing applications to each other. The Agency agrees with both of

these suggestions and has adopted them in this rule.

High-need areas for farmworker housing. Seven commentors objected

to the proposed loan score factor for projects that would be located in

high need areas for farmworker housing as identified in the state

Consolidated Plan or state needs assessment. It was noted that many

states do not identify farmworker housing needs at all, or do not give

these needs any special priority. Several commentors noted that the

Agency should rely on the market analysis to determine need and demand.

Because of the strong opposition by commentors, and in the absence of

uniformly available data or state plans, the Agency is not adopting

this factor.

Agency initiative. Five comments were received on the proposal to

award zero to twenty points for an optional Agency initiative announced

in NOFA. One commentor suggested that the Agency announce any

initiative well in advance of NOFA and keep the same initiative for

more than one year. Three commentors noted that, since applicants would

not be able to plan ahead for the initiative, twenty points gave it too

much weight. Another commentor objected to the range of scores, feeling

that the proposal would either comply with the initiative or not. The

Agency appreciates these comments and concerns and will take them into

consideration in developing any Agency initiatives. In addition, we

have modified the point score for this factor so that ten points will

be awarded to proposals that support the Agency initiative and zero

points for those that do not.

Supportive services. Commentors expressed a variety of opinions on

the proposal to award five points for one supportive service and ten

points for two or more. One commentor supported this factor as

proposed, while two others felt the Agency needed to better define

supportive services and should differentiate between simple and more

complex services. One suggested using a range of points for each

service based on the financial investment or value. One commentor noted

that a services package should be required of all multi-family housing

and updated every few years. Another commented that services should not

be required on-site if they are available in close proximity to the

housing and the service providers have committed that the services are

available, accessible, and affordable to farmworkers and their

families. Still another commentor suggested a change in regulations to

make the provision of services an eligible operating expense. Although

the suggestions varied, all commentors agreed that a supportive

services package is critical to the successful operation of multi-

family housing. Based on this and the lack of consensus on a fair way

to distinguish between services in awarding points, the Agency has

decided not to use this as a loan scoring factor but, instead, will

require a supportive services plan as part of the application. Services

may be provided on-site or through cooperative agreements with service

providers in the community. At the initial application stage, letters

of intent from service providers will be acceptable documentation.

Highest percentage of income from on-farm agricultural work. Five

respondents commented on this factor. All five objected to its

inclusion in the loan selection criteria, pointing out the difficulty

in projecting future occupancy and the lack of reliable data. One of

the commentors further noted that this factor is more appropriate as a

preliminary eligibility assessment. The Agency feels these are valid

criticisms and, therefore, has not adopted this factor in the final

rule.

Market areas not previously served by LH projects. We received two

comments on this loan scoring factor. Both recommended that the Agency

modify this category to reflect the degree of need for farmworker

housing in the market area based on the number of farmworker households

and available housing units. We considered this suggestion but decided

against adopting it because of the difficulty in obtaining accurate

data on farmworker housing needs. We agree, however, that housing

should go to areas of greatest need based on the market analysis, which

may or may not have existing LH units. Therefore, we have not adopted

this factor in the final rule.

Seasonal, temporary, or migrant housing. The proposed rule provided

that five points would be awarded for proposals with up to 50 percent

of its units serving seasonal, temporary, or migrant farmworkers, and

ten points for 51 percent or more. Three commentors felt that more

weight should be given to this factor, with one noting that this factor

should be on a par with leveraged assistance to help accomplish a

balanced program. Two of these commentors suggested a point range of

zero to twenty points, based on the percentage of units serving

seasonal, temporary, or migrant farmworkers. As mentioned above (under

the heading ``The presence and extent of leveraged assistance and

proposals with a minimum 10 percent private agriculture producer

leveraged funds''), the two proposed leveraging factors have been

combined into one, reducing the maximum points for leveraging from

forty to twenty. Few applications will receive the maximum twenty

points, so we do not believe leveraging will arbitrarily outweigh other

factors. With limited program funds, we have attempted to balance the

need for leveraging with other Agency objectives. Therefore, we have

retained the points for seasonal, temporary, or migrant housing as

proposed.

Loan requests that have been issued an AD-622. The proposed rule

provided that, for Fiscal Years 1999 and 2000, ten points would be

awarded to applications or loan requests that had been issued an AD-

622, ``Notice of Preapplication Review Action,'' inviting a formal

application, or had been authorized by the National Office prior

[[Page 24479]]

to October 29, 1998 (the date the proposed rule was published). Five

respondents commented on this issue. Two agreed with this provision,

with one stressing support for the two-year limitation. One commentor

disagreed with this provision, stating that each proposal should

compete on its own merits. Another commentor felt that proposals with

an AD-622 should not have to compete with other proposals, since they

were developed under the previous regulations. The fifth commentor

suggested funding only those proposals with AD-622s in fiscal year 1999

and implementing the new process in fiscal year 2000.

Commentors were divided on this issue and, after considering the

comments and arguments on both sides, the Agency has decided to

implement this measure as proposed, i.e., to give preference to loan

requests that were issued an AD-622 or authorized by the National

Office by awarding points for two funding cycles. However, to address

the concerns of commentors who felt AD-622s should be given more

consideration, we have increased the number of points from ten to

fifteen.

Other Suggested Loan Selection Criteria

Several commentors suggested other loan selection criteria for the

Agency's consideration. Two commentors suggested project readiness and

development team experience; others suggested cost effectiveness and

construction quality. The Agency considered these and similar criteria

in drafting the proposed rule; however, we found it impossible to

develop standards for factors that require subjective judgments, such

as an assessment of quality or experience. In addition, we were

concerned that the readiness to proceed factor could result in delays

or obstacles by communities that oppose the development of farm labor

housing. Therefore, we have not adopted these suggestions.

Point-score Ties

The proposed rule provided that, in case of point-score ties for

requests from the same State, the proposal with the most supportive

services would be given priority, with further same-State ties

determined by lottery. One commentor objected to these tie breakers,

proposing instead that, with limited funds and the emphasis on

leveraging, primary priority be given to requests that are the most

cost effective and have the most leveraged assistance, with secondary

priority to requests with the greatest market need for LH units. The

same commentor felt the regulation should also address point-score ties

between requests from different States. With regard to the ``most

supportive services'', we are not adopting this loan scoring factor in

the final rule, so it is no longer appropriate as a tie breaker (see

discussion above under ``Loan Selection Criteria''). With regard to the

suggested tie breakers, we believe it would be difficult to obtain

reliable and objective data to establish ``most cost effective'' and

``greatest market need''. We agree, however, that there is merit to

using the actual percentage of leveraged assistance as a tie-breaker.

In addition, the Agency believes there is merit to giving a preference

to applications to develop units in states that have no existing RHS-

financed off-farm LH units. Therefore, the actual percentage of

leveraged assistance will be used as a tie-breaker for point-score ties

within the State; in the case of point-score ties in the National

ranking, preference will be given to applications in States that have

no existing RHS-financed off-farm LH units. In the event of further

point-score ties at the National level, preference will be given to

States that have not been selected in the current cycle.

Geographic Diversity

The proposed rule provided that the Agency could select a lower

scoring loan request over one with a higher score in order to achieve

geographic diversity. Five commentors strongly objected to this

provision, stating that it undermined the objectivity of the point

system. We agree that the selection process should be fair and

objective and, therefore, we have not adopted this provision in the

final rule.

Statutory Amendments

Public Law 105-276, enacted October 21, 1998, included two

amendments to the Farm Labor Housing (LH) program. The first extends

eligibility for low-income housing tax credit financing to the LH

program by adding as eligible borrowers for section 514 loans ``any

nonprofit limited partnership in which the general partner is a

nonprofit entity''. This wording is interpreted by the Agency to mean

``any limited partnership in which the general partner is a nonprofit

entity.'' We have included this provision in the final rule and will

interpret ``nonprofit limited partnership'' to mean ``any limited

partnership in which the general partner is a nonprofit entity.'' This

will be consistent with the wording found in section 515(w) (42 U.S.C.

1485(w)). The second LH legislative amendment provides that rental

assistance payments may be used for project operating costs in housing

for migrant farmworkers financed under section 514 or section 516. This

provision is not included in this rule because of the need to make

changes to the Agency's project management regulations and automated

systems but will be included in the Agency's reinvented regulation,

which is scheduled to be published as a proposed rule in fall of 1999.

Implementation Proposal

Under the annual competitive system that is being implemented with

this rule, the amount of available funds and application deadlines will

be announced each funding cycle in the Federal Register through a NOFA.

Loan requests received by the application deadline will be reviewed and

selected based on objective criteria in accordance with the revised

regulations. Loan requests not selected for funding will be returned to

the applicant.

Applications on hand are subject to the new competitive process. In

fiscal years 1999 and 2000, points will be awarded to applications on

hand that were issued an AD-622 inviting a formal application or that

had been reviewed and authorized by the National Office as of October

29, 1998 (the publication date of the proposed rule). A new proposal

that ranks higher under the selection criteria than an existing

application will take priority over the existing one.

Agency staff were directed by the proposed rule to return proposals

on hand that had not been issued an AD-622 or reviewed and authorized

by the National Office as of October 29, 1998 (the publication date of

the proposed rule). Loan requests thus returned may, of course, be

submitted for consideration during the application period announced in

NOFA.

List of Subjects

7 CFR Part 1940

Administrative practice and procedure, Agriculture, Grant

programs--housing and community development, Loan programs--

agriculture, Reporting and recordkeeping requirements, Rural areas.

7 CFR Part 1944

Grant programs--housing and community development, Loan programs--

housing and community development, Migrant labor, Nonprofit

organizations, Public housing, Rent subsidies, Reporting and

recordkeeping requirements.

Therefore, chapter XVIII, title 7, Code of Federal Regulations is

amended to read as follows:

[[Page 24480]]

PART 1940--GENERAL

1. The authority citation for part 1940 is revised to read as

follows:

Authority: 5 U.S.C. 301; 7 U.S.C. 1989; and 42 U.S.C. 1480.

Subpart L--Methodology and Formulas for Allocation of Loan and

Grant Program Funds

2. Revise section 1940.579 to read as follows:

Sec. 1940.579 Multiple Family Housing appropriations not allocated by

State.

Funds are not allocated to States. The following program funds are

kept in a National Office reserve and are available as determined

administratively:

(a) Section 514 Farm Labor Housing Loans.

(b) Section 516 Farm Labor Housing Grants.

PART 1944--HOUSING

3. The authority citation for part 1944 continues to read as

follows:

Authority: 5 U.S.C. 301; 42 U.S.C. 1480.

Subpart D--Farm Labor Housing Loan and Grant Policies, Procedures,

and Authorizations

4. Amend section 1944.153 in the definition of ``Domestic farm

laborer'' by revising the words ``FmHA or its successor agency under

Public Law 103-354'' to read ``Rural Housing Service''; in the

definition of ``Farm owner'' by revising the words ``subpart A of part

1944 of this chapter'' to read ``this section''; in the definition of

``Self-employed'' by revising the words ``FmHA or its successor agency

under Public Law 103-354'' to read ``Rural Housing Service'' and the

words ``District or State Director'' to read ``Loan Official or State

Director''; and by adding in alphabetical order definitions to read as

follows:

Sec. 1944.153 Definitions.

Agency. The Rural Housing Service, an agency of the U.S. Department

of Agriculture which administers section 514 loans and section 516

grants.

* * * * *

Farm. A tract or tracts of land, improvements, and other

appurtenances considered to be farm property which is used or will be

used in the production of crops or livestock, including the production

of fish under controlled conditions, for sale in sufficient quantities

so that the property is recognized as a farm rather than a rural

residence. It may also include a residence which, although physically

separate from the farm acreage, is ordinarily treated as part of the

farm in the local community.

* * * * *

HUD. The U.S. Department of Housing and Urban Development.

* * * * *

LH. Farm Labor Housing.

* * * * *

MFH. Multi-Family Housing.

* * * * *

NOFA. Notice of Funds Availability.

* * * * *

Off-Farm Labor Housing. Housing for farm laborers regardless of the

farm where they work.

On-Farm Labor Housing. Housing for farm laborers specific to the

farm where they work.

* * * * *

RHS. Rural Housing Service.

* * * * *

5. Amend section 1944.157 to revise paragraphs (a)(1) and (a)(3) to

read as follows:

Sec. 1944.157 Eligibility requirements.

(a) * * *

(1) Be a farmowner, family farm partnership, family farm

corporation, or an association of farmers whose farming operations

demonstrate a need for farm labor housing, or an organization, as these

terms are defined in Sec. 1944.153, which will own the housing and

operate it on a nonprofit basis; or a nonprofit limited partnership in

which the general partner is a nonprofit entity.

* * * * *

(3) Provide from its own resources the borrower contribution

required by Sec. 1944.160 and have sufficient initial operating capital

to pay costs such as property and liability insurance premiums,

fidelity bond premiums if required, utility hookup deposits,

maintenance equipment, movable furnishings and equipment, printing

lease forms, and other initial expenses. LH loans made to nonprofit

organizations and to State or local public agencies or political

subdivisions thereof may include up to 2 percent of the development

cost for initial operating expenses.

* * * * *

6. Add section 1944.160 to read as follows:

Sec. 1944.160 Off-farm loan limits.

(a) For all applicants, including its members, who will be

receiving any benefits from Low-Income Housing Tax Credits (LIHTC), the

amount of the RHS loan will be limited to no more than 95 percent of

the total development cost or 95 percent of the security value,

whichever is less.

(b) For all applicants, including its members, not receiving any

benefits from LIHTC, who are nonprofit entities or State or local

public agencies, the amount of the RHS loan will be limited to the

total development cost or the security value, whichever is less, plus

the 2 percent initial operating capital.

(c) For all other applicants, including its members, not receiving

any benefits from LIHTC, the amount of the RHS loan will be limited to

no more than 97 percent of the development cost or the security value,

whichever is less.

7. Amend section 1944.164 in the introductory text of paragraph (d)

in the first sentence to revise the words ``District Director'' to read

``Loan Official'' and the words ``FmHA or its successor agency under

Public Law 103-354'' to read ``RHS''; in paragraph (d)(1)(i) by

revising the words ``FmHA or its successor agency under Public Law 103-

354'' to read ``RHS''; and to revise paragraph (b) to read as follows:

Sec. 1944.164 Limitations and conditions.

* * * * *

(b) Maximum amount of grant. The amount of any grant may not exceed

the lesser of:

(1) Ninety percent of the total development cost; or

(2) That portion of the total cash development cost which exceeds

the sum of any amount the applicant can provide from its own resources

plus the amount of a loan which the applicant will be able to repay,

with interest, from income from rentals which low-income farmworker

families can be reasonably expected to be able to pay. The availability

of rental assistance and HUD section 8 subsidies will be considered in

determining the rentals that farmworkers will pay.

* * * * *

8. Amend section 1944.169 to revise paragraph (a)(1) to read as

follows:

Sec. 1944.169 Technical, legal, and other services.

(a) * * *

(1) An appraisal is required when real estate is taken as security.

The appraisal must be made in accordance with the Uniform Standards of

Professional Appraisal Practices (available in any Rural Development

office).

* * * * *

9. Amend section 1944.170 to redesignate paragraph (c) as paragraph

(f); in newly redesignated paragraph (f)(5)(i) to revise the reference

``Sec. 1944.164(b)(2)'' to read ``Sec. 1944.164(b)'', in newly

redesignated paragraph (f)(5)(ii)(B) to revise the words ``an LH loan''

to read ``a LH loan''; in newly redesignated paragraph

[[Page 24481]]

(f)(5)(ii)(C) to revise the reference ``paragraph (c)(5)(ii)(A)'' to

read ``paragraph (f)(5)(ii)(A)''; to remove newly redesignated

paragraph (f)(7); to revise the section heading, the introductory text,

and paragraphs (a) and (b); and to add new paragraphs (c) through (e)

to read as follows:

Sec. 1944.170 Preapplication requirements and processing.

A two-stage application process is used. In stage one, applicants

submit a preapplication, which is used to determine preliminary

eligibility and feasibility. Preapplications selected for further

processing will be invited to submit an application. The preapplication

consists of SF-424.2, ``Application for Federal Assistance (For

Construction)'' and the information listed in exhibit A-1 or A-2 of

this subpart, as applicable. Preapplications for off-farm new

construction loans and grants will be accepted and processed in

accordance with this section when NOFA is announced in the Federal

Register. Applicants are advised to read the notice carefully for any

restrictions on loan or grant amounts. Preapplications for repair and

rehabilitation of existing off-farm LH units and new units of on-farm

housing may be submitted any time during the year and will be processed

on a first-come, first-served basis in accordance with subpart L of

part 1940 of this chapter.

(a) Preapplications for new units in off-farm facilities. (1) The

Agency will publish NOFA annually in the Federal Register with

deadlines for submitting preapplications. The notice will include the

amount of funds available, any limit on the amount of individual loan

and grant requests, any limit on the amount of funds that any one State

may receive, and the loan scoring criteria.

(2) The preapplication must be submitted in accordance with NOFA

and consists of SF-424.2, ``Application for Federal Assistance (For

Construction)'', and the information required by exhibit A-1 of this

subpart. The preapplication will be used by the Agency to determine

preliminary eligibility and to score and rank proposals.

(b) Preliminary eligibility assessment of preapplications received

in response to NOFA. The Agency will make a preliminary eligibility

assessment using the following criteria:

(1) The preapplication was received by the submission deadline

specified in NOFA;

(2) The preapplication is complete as specified in NOFA;

(3) The applicant is an eligible entity and is not currently

debarred, suspended, or delinquent on any Federal debt; and

(4) The proposal is for authorized purposes.

(c) Scoring and ranking off-farm preapplications. The Agency will

score and rank off-farm preapplications for new units that meet the

criteria of paragraph (b) of this section.

(1) The following criteria will be used to score project proposals:

(i) The presence and extent of leveraged assistance, including

donated land, for the units that will serve program-eligible tenants,

calculated as a percentage of the RHS total development cost (TDC). RHS

TDC excludes non-RHS eligible costs such as a developer's fee.

Leveraged assistance includes, but is not limited to, funds for hard

construction costs, Section 8 or other non-RHS tenant subsidies, and

state or federal funds. A minimum of ten percent leveraged assistance

is required to earn points. (0 to 20 points)

(A) To count as leveraged funds for purpose of the selection

criteria:

(1) A commitment of funds must be received within a timeframe that

permits processing of the loan request within the current funding cycle

(the latest commitment date for leveraged funds will be announced in

NOFA); and

(2) If RHS RA is being provided, the interest cost to the project

using leveraged loan funds may not exceed the cost of 100 percent LH

loan financing.

(B) For donated land to be scored as leveraged assistance, all of

the following conditions must be met.

(1) Based on a preliminary review, the land is suitable and meets

Agency requirements. Final site acceptance is subject to a completed

environmental review.

(2) Site development costs do not exceed what they would be to

purchase and develop an alternative site.

(3) The overall cost of the project is reduced by the donation of

the land.

(C) Points for leveraged assistance will be awarded in accordance

with the following table. Percentages will be rounded to the nearest

whole number, rounding up at .50 and above and down at .49 and below.

For example, 25.50 becomes 26; 25.49 becomes 25. If the total

percentage of leveraged assistance is less than ten percent, and it

includes donated land, two points will be awarded for the donated land.

------------------------------------------------------------------------

Percentage Points

------------------------------------------------------------------------

75 or more................................................... 20

60-74........................................................ 18

50-59........................................................ 16

40-49........................................................ 12

30-39........................................................ 10

20-29........................................................ 8

10-19........................................................ 5

0-9.......................................................... 0

Donated land in proposals with less than ten percent total 2

leveraged assistance........................................

------------------------------------------------------------------------

(ii) The loan request is in support of an Agency initiative

announced in NOFA. (10 points)

(iii) Seasonal, temporary, or migrant housing. (5 points for up to

and including 50 percent of the units; 10 points for 51 percent or

more)

(iv) For Fiscal Year 1999 and Fiscal Year 2000 funding cycles,

outstanding applications or requests that were issued an AD-622,

``Notice of Preapplication Review Action,'' inviting a formal

application, or had been reviewed and authorized by the National Office

prior to October 29, 1998. (15 points)

(2) The Agency will rank preapplications by point score. For point-

score ties within the State, rank order will be determined by giving

first preference to the application with the greatest actual percentage

of leveraged assistance. In case of further same-State ties, rank order

will be determined by lottery.

(d) Selection of preapplications for further processing. (1) States

will make a preliminary eligibility and feasibility assessment, score

and rank the preapplications, and provide this information to the

National Office with their review comments.

(2) The National Office will rank the preapplications nationwide.

In case of point-score ties in the National ranking, first preference

will be given to a preapplication to develop units in a state that does

not have existing RHS-financed off-farm LH units; second preference to

a preapplication from a State that has not yet been selected in the

current funding cycle. In the event there are multiple preapplications

in either category, one preapplication from each State (the highest

State-ranked) will compete by computer-based random lottery. If

necessary, the process will be completed until all same-pointed

preapplications are selected or funds are exhausted.

(3) The Agency will not select a preapplication for a new LH loan

in an area with competing or problem projects when:

(i) The Agency has selected another LH proposal in the same market

area for further processing;

[[Page 24482]]

(ii) A previously authorized or approved Agency, HUD, or similar

assisted MFH project in the same market area serving farmworkers has

not been completed or reached its projected occupancy level; or

(iii) An existing Agency, HUD, or similar assisted MFH project in

the same market area serving farmworkers is experiencing high vacancy

levels, unless such vacancy is planned as part of the occupancy cycle

of a seasonally-operated migrant farmworker facility.

(4) If any selected preapplications cannot meet the processing

deadlines established by the Agency to enable processing and fund

obligation within the current funding cycle, or if requested leveraged

funds are not committed within the timeframe established in NOFA, the

Agency will select the next ranked preapplication for processing.

(e) Notification to applicants. States will notify all applicants

of the results of the selection process.

(1) Applicants selected for further processing will be notified and

processed in accordance with this section and Sec. 1944.171.

(2) Project proposals not selected for further processing,

including incomplete proposals or those that failed to meet NOFA

requirements, or those that could not be reached because of

insufficient funds, will be returned to the applicant with the reason

they were not selected.

* * * * *

10. Exhibit A to subpart D is amended by revising the first

paragraph to read as follows:

Exhibit A to Subpart D--Labor Housing Loan and Grant Application

Handbook

Introduction

The section 514 Labor Housing loan and section 516 Labor Housing

grant programs are administered by the Rural Development's Rural

Housing Service (RHS), herein referred to as the Agency. Interested

parties are advised to contact any Rural Development office

processing Labor Housing (LH) loans and grants to obtain information

on program and application requirements prior to developing an

application. Notice of Funds Availability (NOFA) for off-farm

facilities will be announced annually in the Federal Register, along

with application requirements and the deadline for applying.

Requests received during the application period will be selected

competitively, based on the objective selection criteria in the

regulation and announced in the NOFA. Applications for on-farm

facilities are accepted any time during the year and are funded on a

first-come, first-served basis, based on the availability of funds.

* * * * *

11. Exhibit A-1 to subpart D is amended by revising paragraphs

I.A.1 and I.A.3, the introductory text of paragraph I.B., paragraph

I.B.3, the text of paragraph I.B.6 preceding the note, paragraph I.C.,

and paragraph I.E. to read as follows:

Exhibit A-1 to Subpart D--Information To Be Submitted by Organizations

and Associations of Farmers for Labor Housing Loan or Grant

I. Information to be submitted with SF 424.2 (for preapplication

submission).

A. * * *

1. Financial Statement--A current, dated, and signed financial

statement showing assets and liabilities with information on the

repayment schedule and status of all debts. If the applicant is an

association of farmers, a current financial statement will also be

required from each member who holds an interest in the association

in excess of 10 percent. If the applicant is a limited partnership,

financial statements are required from each general partner who

holds an interest in the organization, and from each limited partner

who will have 10 percent or more ownership. The financial statement

must reflect sufficient financial capacity to meet the initial

operating capital requirements. Loan or grant funds may be used to

provide the required initial operating capital for nonprofit

entities and State or local public agencies. If the applicant is a

limited partnership, the financial statement must also demonstrate

sufficient capacity to meet the applicant's equity contribution.

* * * * *

3. If a Labor Housing (LH) grant is requested, the applicant

should provide a statement on their projected use of Rental

Assistance (RA) and their need for a LH grant. This statement should

include preliminary estimates of the rents required with and without

a grant and the relative need for a grant if RA is provided to

supplement market rents for eligible farmworkers. [LH grants and RA

are not available to associations of farmers; LH grants are not

available to limited partnerships.]

* * * * *

B. * * *

A preliminary survey should be conducted to identify the supply

and demand for LH in the market area. The market area must be

clearly identified and may include only the area from which tenants

can reasonably be drawn for the proposed project. The applicant must

provide documentation to justify need within the intended market

area. The market survey should address or include the following

items:

* * * * *

3. General information concerning the type of labor intensive

crops grown in the area and prospects for continued demand for farm

laborers (i.e., prospects for mechanization, etc.). Information may

be available from the local U.S. Department of Agriculture (USDA)

Cooperative, State, Research, Education and Extension Service office

or from the Farm Service Agency.

* * * * *

6. A description of the units proposed, including number, type,

size, rental rates, amenities such as carpets and drapes, related

facilities such as a laundry room or community room and other

facilities providing supportive services in connection with the

housing and the needs of the prospective tenants such as a health

clinic or day care facility; estimated development timeline;

estimated total development cost and applicant contribution. If the

application includes leveraged funds, include documentation of the

dollar amount, source, and commitment status.

* * * * *

C. Environmental Information

The applicant will complete Form RD 1940-20, ``Request for

Environmental Information,'' along with a description of anticipated

environmental issues or concerns.

* * * * *

E. Additional Information

1. Evidence of site control such as an option or sales contract;

a map and description of the proposed site, including the

availability of water, sewer, and utilities, and proximity to

community facilities and services such as shopping, schools,

transportation, doctors, dentists, and hospitals.

2. Preliminary plans and specifications, including plot plans,

building layouts, and type of construction and materials.

3. A supportive services plan describing services that will be

provided on-site or made available to tenants through cooperative

agreements with service providers in the community, such as a health

clinic or day care facility. Off-site services must be accessible

and affordable to farmworkers and their families. Letters of intent

from service providers are acceptable documentation at the

preapplication stage.

* * * * *

Dated: April 29, 1999.

Jill Long Thompson,

Under Secretary, Rural Development.

[FR Doc. 99-11256 Filed 5-5-99; 8:45 am]

BILLING CODE 3410-XV-U