Rural Development Grants

DEPARTMENT OF AGRICULTURE

Rural Utilities Service

Rural Business-Cooperative Service

Rural Housing Service

7 CFR Parts 1703, 1780, 3570, 4280, 4284, and 5002

RIN 0570-AA68

Rural Development Grants

AGENCIES:

Rural Business-Cooperative Service, Rural Housing Service, and Rural Utilities Service, USDA.

ACTION:

Proposed rule.

SUMMARY:

Rural Development, a mission area within the U.S. Department of Agriculture, is proposing a unified grant platform for enhanced delivery of eight existing Rural Development grant programs—Community Facility; Distance Learning and Telemedicine; Economic Impact Initiatives; Renewable Energy Systems and Energy Efficiency Improvement Projects; Rural Cooperative Development; Tribal College; Value-Added Producer; and Water and Waste Disposal Facilities. This proposed rule would eliminate or revise the grant regulations for the eight existing programs and consolidate them under a new, single regulation.

DATES:

Comments on the proposed rule must be received on or before December 15, 2008. The comment period for the information collection under the Paperwork Reduction Act of 1995 continues through December 15, 2008.

ADDRESSES:

You may submit comments to this rule by any of the following methods:

•

Federal eRulemaking Portal: http://www.regulations.gov

. Follow the instructions for submitting comments.

•

Mail:

Submit written comments via the U.S. Postal Service to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, STOP 0742, 1400 Independence Avenue, SW., Washington, DC 20250-0742.

•

Hand Delivery/Courier:

Submit written comments via Federal Express Mail or other courier service requiring a street address to the Branch Chief, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, 300 7th Street, SW., 7th Floor, Washington, DC 20024.

All written comments will be available for public inspection during regular work hours at the 300 7th Street, SW., 7th Floor address listed above.

FOR FURTHER INFORMATION CONTACT:

Mr. Michael Foore, Rural Development, Business and Cooperative Programs, U.S. Department of Agriculture, 1400 Independence Avenue, SW., Stop 3201, Washington, DC 20250-3201;

e-mail

:

Michael.Foore@wdc.usda.gov;

telephone (202) 690-4730.

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This proposed rule has been reviewed under Executive Order (EO) 12866 and has been determined to be significant by the Office of Management and Budget. The EO defines a “significant regulatory action” as one that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect, in a material way, the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this EO.

The Agency conducted a qualitative benefit-cost analysis to fulfill the requirements of Executive Order 12866. The Agency has identified potential benefits to the prospective grantee and to the Agency. These benefits are associated with the increase in program transparency, Administrative flexibility, and increased efficiency in delivering the programs. While unable to quantify any costs or benefits associated with this rulemaking, the agency believes that the overall effect of the rule may be beneficial.

Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act 1995 (UMRA) of Public Law 104-4 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, Rural Development 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 one year. When such a statement is needed for a rule, section 205 of UMRA generally requires Rural Development 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 proposed 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. Thus, this rule is not subject to the requirements of sections 202 and 205 of the UMRA.

Environmental Impact Statement

This document has been reviewed in accordance with 7 CFR part 1940, subpart G, “Environmental Program.” Rural Development has determined 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 (NEPA) of 1969, 42 U.S.C. 4321

et seq.,

an Environmental Impact Statement is not required. Grant applications will be reviewed individually to determine compliance with NEPA.

Executive Order 12988, Civil Justice Reform

This proposed 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) no retroactive effect will be given this rule; and (3) administrative proceedings in accordance with the regulations of the Department of Agriculture's National Appeals Division (7 CFR part 11) must be exhausted before bringing suit in court challenging action taken under this rule unless those regulations specifically allow bringing suit at an earlier time.

Executive Order 13132, Federalism

It has been determined, under Executive Order 13132, Federalism, that this proposed rule does not have sufficient federalism implications to warrant the preparation of a Federalism Assessment. The provisions contained in the proposed rule will not have a substantial direct effect on States or their political subdivisions or on the distribution of power and responsibilities among the various government levels.

Regulatory Flexibility Act

The Regulatory Flexibility Act (5 U.S.C. 601-602) (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies

that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions.

In compliance with the RFA, Rural Development has determined that this action will not have a significant economic impact on a substantial number of small entities. Rural Development made this determination based on the fact that this regulation only impacts those who choose to participate in the program. Small entity applicants will not be affected to a greater extent than large entity applicants.

Executive Order 12372, Intergovernmental Review of Federal Programs

Rural Development grants are subject to the Provisions of Executive Order 12372, which require intergovernmental consultation with State and local officials. Rural Development will conduct intergovernmental consultation in the manner delineated in RD Instruction 1940-J, “Intergovernmental Review of Rural Development Programs and Activities,” available in any Rural Development office, on the Internet at

http://www.rurdev.usda.gov/regs

, and in 7 CFR part 3015, subpart V.

Executive Order 13175, Consultation and Coordination With Indian Tribal Governments

This executive order imposes requirements on Rural Development in the development of regulatory policies that have tribal implications or preempt tribal laws. Rural Development has determined that the proposed rule does not have a substantial direct effect on one or more Indian tribe(s) or on either the relationship or the distribution of powers and responsibilities between the Federal Government and the Indian tribes. Thus, the proposed rule is not subject to the requirements of Executive Order 13175.

Programs Affected

The Catalog of Federal Domestic Assistance Program numbers assigned to this program are 10.766, Community Facilities Loans and Grants; 10.855, Distance Learning and Telemedicine Loans and Grants; 10.766, Economic Impact Initiatives Grants; 10.775, Renewable Energy Systems and Energy Efficiency Improvements Program; 10.771, Rural Cooperative Development Grants; 10.352, Value-Added Producer Grants; and 10.760, Water and Waste Disposal Loans and Grants (Section 306a); and 10.221, Tribal College Educational Equity Grants.

Paperwork Reduction Act

In accordance with the Paperwork Reduction Act of 1995, Rural Development will seek OMB approval of the reporting and recordkeeping requirements contained in this proposed rule and hereby opens a 60-day public comment period.

Title:

Rural Development Grants.

Type of Request:

New collection.

Abstract:

Rural Development is implementing a new consolidated grant platform. The new grant platform would combine the following existing grant regulations into a consolidate rule: (1) The Community Facility Program, (2) the Distance Learning and Telemedicine Program; (3) the Economic Impact Initiatives Program; (4) the Rural Cooperative Development Program, (5) the Tribal College Grant Program, (6) the Value-Added Producer Program, (7) the Water and Waste Disposal Facilities Program, and (8) the Renewable Energy Systems and Energy Efficiency Improvement Program (now known as the Rural Energy for America program). These programs provide grants for a variety of projects intended to assist and improve rural America.

The information required under the proposed rule is similar to much of the information currently being required under the separate regulations. Under these separate regulations, the current information being collected is approved under OMB control numbers as follows:

0570-0006 (Rural Cooperative Development Grants).

0570-0039 (Value-Added Producer Grants).

0570-0050 (Renewable Energy Systems and Energy . Efficiency Improvement Grants).

0572-0096 (Distance Learning and Telemedicine).

0572-0121 (Water and Waste Loan and Grant Program).

0575-0173 (Community Facilities Grants).

The proposed rule creates a single set of common forms that applicants can use across all eight programs, thereby creating efficiencies in reporting.

The collection of information is vital to Rural Development to make wise decisions regarding the eligibility of projects and applicants in order to ensure compliance with the regulations and to ensure that the funds obtained from the Government are used appropriately (i.e., being used for the purposes for which the grant funds were awarded). In sum, this collection of information is necessary in order to implement the consolidated grant regulation being proposed.

The following estimates are based on the average over the first three years the program is in place.

Estimate of Burden:

Public reporting burden for this collection of information is estimated to average 4.8 hours per response.

Respondents:

Rural developers, farmers and ranchers, rural businesses, public bodies, local governments, institutions of higher learning, hospitals and medical facilities, Indian tribes, agricultural producers groups, farmer and rancher cooperatives, independent producers, majority controlled producer-based businesses, private corporations, non-profit organizations, rural electric cooperatives, public power entities, faith-based organizations, and incorporated organizations and partnerships.

Estimated Number of Respondents:

2.045.

Estimated Number of Responses per Respondent:

4.8.

Estimated Number of Responses:

24,650.

Estimated Total Annual Burden (hours) on Respondents:

118,802.

Copies of this information collection may be obtained from Cheryl Thompson, Regulations and Paperwork Management Branch, Support Services Division, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250-0742 or by calling (202) 692-0043.

Comments

Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of Rural Development, including whether the information will have practical utility; (b) the accuracy of the new Rural Development estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology. Comments may be sent to Cheryl Thompson, Regulations and Paperwork Management Branch, U.S. Department of Agriculture, Rural Development, STOP 0742, 1400 Independence Ave., SW., Washington, DC 20250. All responses to this proposed rule will be summarized and

included in the request for OMB approval. All comments will also become a matter of public record.

E-Government Act Compliance

Rural Development is committed to complying with the E-Government Act, to promote the use of the Internet and other information technologies to provide increased opportunities for citizen access to Government information and services, and for other purposes.

I. Background

Rural Development proposes a unified platform for delivery of eight existing Rural Development grant programs—Community Facility; Distance Learning and Telemedicine; Economic Impact Initiatives; Renewable Energy Systems and Energy Efficiency Improvement Projects (now known as the Rural Energy for America program); Rural Cooperative Development; Value-Added Producer; Water and Waste Disposal Facilities; and Tribal College. These programs are administered by the Rural Housing Service (Community Facilities, Economic Impact Initiatives, Tribal Grants), Rural Utilities Service (Distance Learning and Telemedicine, Water and Waste Disposal Facilities), and Rural Business-Cooperative Service (Rural Cooperative Development, Value-Added Producer, Rural Energy for America). Collectively, Rural Development's programs work together to assist in building and maintaining entire, sustainable rural communities.

For the reasons cited below, the Agency is proposing to incorporate eight of its 39 existing grant programs into this proposed new platform.

First.

In selecting grant programs for inclusion in the proposed consolidated grant program, the Agency's two principal priorities are to include (1) grant programs associated with programs being included in the consolidated guaranteed loan rule and (2) grant programs that are representative of both State-allocated grant programs and nationally-competed grant programs, which are the two main types of grant programs administered by Rural Development.

As such, three of the seven grant programs are being proposed for inclusion because their guaranteed loan programs are being included in the Agency's new guaranteed loan program consolidating four of the Agency's guaranteed loan programs. These three programs are: Community Facilities, Water and Waste Disposal, and Rural Energy for America.

The Community Facilities and Water and Waste Disposal grant programs are both State-allocated grant programs, while the Rural Energy for America grant program is a nationally-competed grant program. To “round these out,” the Agency is proposing to add three additional nationally-competed grant programs—Rural Cooperative Development grants, Value-Added Producer grants, and Distance Learning and Telemedicine grants.

The Agency is proposing to include the Economic Impact Initiative grant program because it is administered under the same regulation as Community Facilities.

Second.

The Agency is proposing to include Tribal College grants. As mentioned elsewhere in this preamble, the Tribal College grants program is neither a State-allocated or nationally-competed grant program. However, it does rely on portions of the Community Facilities grant program for its administration requirements. Because the proposed rule would eliminate the Community Facilities grant rule once the proposed rule is finalized, the Tribal College grant program would no longer have a grant regulation for its administration. Thus, the Agency was faced with two options—incorporate the Tribal College grant program into the proposed rule or develop a new regulation specific to Tribal College grants. The Agency believes that it makes more sense to include Tribal College grants in the new rule, then to develop a completely separate regulation for that one specific grant program.

As noted later in this preamble, the Agency is seeking specific comment on the grant programs being proposed for inclusion in the consolidated grant rule. Please see section II.C of this preamble.

The purpose of this proposed rule is to initiate the process of developing a single regulation covering all grant programs of the Rural Development Mission Area. Given the logistical and administrative challenges for the Agency and the stakeholders associated with such a consolidation, the Agency has decided to conduct this effort in stages. The proposed rule represents the first stage of this process. In this proposed rule stage the Agency selected grant programs to be included that: (1) Represented a cross section of the Agency's grant programs to ensure that the single regulatory platform being developed would be flexible enough the accommodate all of the Agency's grant programs; (2) corresponded to the loan guarantee programs that are covered by the regulatory consolidation taking place with respect to the Agency's loan guarantee programs (see 7 FR 52618, September 14, 2007); and (3) allowed whole regulatory parts of the current program regulations to be deleted.

After the Agency has the opportunity to determine the success of this initial phase of this regulatory consolidation effort, the Agency will decide whether it would be appropriate to continue to the next phase of incorporating additional grant programs into this regulatory platform and the schedule for the next phase. A key assumption the Agency has made in deciding to initiate the process of consolidating these regulations is that the platform is flexible enough to accommodate all of the various grant programs of the Rural Development Mission Area. Therefore, the Agency's decision to move forward to the next phase of this effort and to add the regulations of new grant programs to this platform will hinge on the degree the rulemaking process of this proposed rule either supports or challenges this assumption.

Under the unified grant platform, Rural Development will simplify, improve, and enhance the delivery of these grant programs across their service areas. The remainder of this section describes Rural Development's mission, the eight grant programs being aligned under the new platform, why the new platform is being proposed, and how the new platform will work.

A. Rural Development's Mission

By statutory authority, Rural Development is the leading Federal advocate for rural America, administering a multitude of programs, ranging from housing and community facilities to infrastructure and business development. Its mission is to increase economic opportunity and improve the quality of life in rural communities by providing the leadership, infrastructure, venture capital, and technical support that enables rural communities to prosper and supports them in the dynamic global environment defined by the Internet revolution, and the rise of new technologies, products, and markets.

To achieve its mission, Rural Development provides financial support (including direct loans, grants, and loan guarantees) and technical assistance to help enhance the quality of life and provide the foundation for economic development in rural areas. To improve the delivery of this financial support for all of its programs and thereby enhance its mission, Rural Development in February 2006 initiated the Delivery Enhancement Task Force (DET). The DET is working to develop consolidated program delivery platforms.

This proposed rulemaking presents the Agency's proposed consolidated

grant platform. The Agency has already published a proposed rule in support of its unified guaranteed loan platform, which was published in the

Federal Register

on September 14, 2007 (72 FR 52618).

B. Current Grant Programs

The following paragraphs describe briefly the scope of each of the current programs with regard to eligible projects and applicants.

Community Facilities Grant Program.

The Community Facilities grant program provides grants to develop essential community facilities in rural areas. However, eligible utility-type service facilities, such as telecommunications and hydroelectric, that serve both rural and non-rural areas can be located in either rural or non-rural areas. Grant funds may be used to construct, enlarge, or improve community facilities for health care, public safety, and public services. This can include costs to acquire land needed for a facility, pay necessary professional fees, and purchase equipment required for its operation.

Eligible applicants for community facilities grants are public bodies, such as municipalities, counties, districts authorities, or other political subdivisions of a State; non-profit corporations and associations, and Federally-recognized tribes. Further, applicants must have the legal authority to own, construct, operate, and maintain the proposed facility.

The amount of grant assistance provided under this program must be the minimum amount sufficient for feasibility which will provide for facility operation and maintenance, reasonable reserves, and debt repayment. As statutorily required, grants may be made up to 75 percent of the cost of developing essentially community facilities. Recently, these grants have averaged $29,916, which is approximately 7 percent of the average costs of the projects that the grants are funding.

Economic Impact Initiatives Grant Program.

This program is administered under the same regulations as the Community Facilities grant program, but provides grants to rural communities with extreme unemployment and severe economic depression. In addition, the essential community facility must be located in a rural community where the “not employed rate” is greater than the percentage specified in section 306(a)(20) of the Consolidated Farm and Rural Development Act (7 U.S.C. 1926(a)(20)(B)). (The “not employed rate” is the percentage of individuals over the age of 18 who reside within the community and who are ready, willing, and able to be employed but are unable to find employment, as determined by the department of labor of the State in which is the community is located.)

Notwithstanding the above, eligible applicants are otherwise the same as under the Community Facilities grant program. Eligible projects are also the same as under the Community Facilities grant program.

Under this program, the minimum grant amount awarded is that amount needed to achieve financial feasibility for the project. Recently, these grants have averaged $42,890, which is approximately 19 percent of the average costs of the projects that the grants are funding.

Tribal College Grant Program.

The Tribal College grant program is designed to enhance educational opportunities at the Tribal colleges and universities designated as the 1994 Land-Grant Institutions (1994 Institutions) by strengthening their educational programs. The program provides funding for essential community facilities and equipment for the Tribal colleges and universities.

To be eligible to receive a grant under this program, the applicant must be one of the Tribal colleges or universities designated as the 1994 Institutions. Grant funds are disbursed in an attempt to provide an equal distribution of funds to each of the 1994 Institutions when possible. Recently, these grants have averaged $572,837, which is approximately 32 percent of the average costs of the projects that the grants are funding.

Distance Learning and Telemedicine Grant Program.

The purpose of the Distance Learning and Telemedicine (DLT) Loan and Grant program is to encourage and improve telemedicine services and distance learning services in rural areas through the use of telecommunications, computer networks, and related advanced technologies by students, teachers, medical professionals, and rural residents.

To be eligible to receive a grant under this program, the applicant must be legally organized as an incorporated organization or partnership, an Indian tribe or tribal organization, as defined in 25 U.S.C. 450b (b) and (c), a state or local unit of government, a consortium, as defined in § 1703.102, or other legal entity, including a private corporation organized on a for profit or not-for profit basis. In addition, each applicant must provide written evidence of its legal capacity to contract with the Agency to obtain the grant, loan and grant combination, or the loan, and comply with all applicable requirements. If a consortium lacks the legal capacity to contract, each individual entity must contract with the Agency in its own behalf.

As implemented by the program office, an applicant is responsible for providing at least 15 percent of the grant amount requested and the minimum amount of a grant under this program is $50,000. Recently, these grants have averaged $294,950, which is approximately 60 percent of the average costs of the projects that the grants are funding.

Renewable Energy Systems and Energy Efficiency Improvement Grant Program.

The current Renewable Energy Systems and Energy Efficiency Improvement grant program provides grants for the purchase and installation of renewable energy systems and energy efficiency improvements. Eligible applicants are farmers, ranchers, and rural small businesses who can demonstrate financial need, as determined by the Agency.

The amount of the grant made available to an eligible project cannot exceed 25 percent of total eligible project costs, as required by the authorizing statute. Currently, the program office sets the minimum amount of a grant at $2,500 and the maximum amount at $500,000 for renewable energy systems and $2,500 and $250,000, respectively, for energy efficiency improvement projects. Unlike the 25 percent limitation, these minimum and maximum grant amounts are not statutorily specified, but are set by the Agency in implementing the program. Recently, these grants have averaged $35,703, which is approximately 17 percent of the average costs of the projects that the grants are funding.

Rural Cooperative Development Grant Program.

The Rural Cooperative Development grant program provides grants for the development or continuation of the cooperative development center concept. Grant funds and matching funds may be used for, but are not limited to, providing the following to individuals, cooperatives, small businesses and other similar entities in rural areas served by the Center:

• Applied research, feasibility, environmental and other studies that may be useful for the purpose of cooperative development.

• Collection, interpretation and dissemination of principles, facts, technical knowledge, or other information for the purpose of cooperative development.

• Providing training and instruction for the purpose of cooperative development.

• Providing loans and grants for the purpose of cooperative development in accordance with the annual Notice of Solicitation of Applications and applicable regulations.

• Providing technical assistance, research services and advisory services for the purpose of cooperative development.

Applicants eligible for rural cooperative development grants are non-profit organizations and institutions, including institutions of higher education. Public bodies are not eligible to receive grants.

Under the current Rural Cooperative Development grant regulation, grant funds may be used to pay up to 75 percent (95 percent where the grantee is a 1994 Institution) of the cost of establishing and operating centers for rural cooperative development. Applicants must verify in their application that all matching funds are available for the time period of the grant. Recently, these grants have averaged $189,000, which is approximately 58 percent of the average costs of the projects that the grants are funding.

Value-added Producer Grant Program.

The purpose of this program is to provide grants to enable producers to develop businesses that produce and market value-added agricultural products, including the development of strategies, creation of marketing opportunities, and development of business plans. The program distinguishes between planning grants and working capital grants. Grant funds for planning grants may be used for such purposes as, but not necessarily limited to: Obtaining legal advice and assistance; conducting a feasibility study; developing a business plan; and developing a marketing plan. Grant funds for working capital grant may be used for such purposes as, but not necessarily limited to: Designing or purchasing an accounting system, paying for salaries, utilities, and rental office space; and purchasing inventory, office equipment, and office supplies.

Applicants eligible for grants under this program are independent producers, agricultural producer groups, farmer or rancher cooperatives, and majority-controlled producer-based business ventures. Except for independent producers, all other applicants must be entering an emerging market in order to be eligible.

As required by its authorizing statute, grant funds may be used to pay up to 50 percent of the costs for carrying out eligible projects. Recently, these grants have averaged $150,000, which is approximately 50 percent of the average costs of the projects that the grants are funding.

Water and Waste Disposal Facilities Grant Program.

The Water and Waste Disposal Facilities grant program provides grants to develop water and wastewater systems, including solid waste disposal and storm drainage, in rural areas and to cities and towns with a population of 10,000 or less. Example projects include construction of water lines, pumping stations, wells, storage tanks, and sewage treatment facilities.

Eligible applicants for water and waste disposal facilities grants are public bodies, such as municipalities, counties, districts authorities, or other political subdivisions of a State, territory, or commonwealth; non-profit organizations, such as corporations and associations; Indian tribes on Federal and State reservations or other federally-recognized Indian tribes. Further, applicants must have the legal authority to own, construct, operate, and maintain the proposed facility.

As required by its authorizing statute, grant funds are limited to no more than 75 percent of the Agency eligible project development costs. As implemented by the program office, grant funds are limited to: (1) No more than 75 percent of the Agency eligible project development costs when the median household income of the service area is below the higher of the poverty line or 80 percent of the state non-metropolitan median income and the project is necessary to alleviate a health or sanitary problem and (2) no more than 45 percent of the Agency eligible project development costs when the median household income of the service area exceeds 80 percent of the state non-metropolitan median income but is not more than 100 percent of the statewide non-metropolitan median household income. Recently, these grants have averaged $663,190, which is approximately 20 percent of the average costs of the projects that the grants are funding.

How the Current Programs Work

The grant programs being included in today's proposed rulemaking have many similarities, with a few major differences. A major difference between seven of the eight grant programs is whether the grant program is administered as a Nationally-competed grant program or a State-allocated grant program. The eighth grant program, Tribal College grants, is a program with a small statutorily defined set of beneficiaries.

The following paragraphs provide an overview of how the Nationally-competed and State-allocated grant programs are currently implemented.

Nationally-competed grant programs.

The following paragraphs describe how the Agency currently administers its nationally-competed grant programs, four of which are being consolidated under this proposed rule—Distance Learning and Telemedicine, Renewable Energy Systems and Energy Efficiency Improvement (now known as the Rural Energy for America Program), Rural Cooperative Development, and Value-added Producer.

As it currently administers its nationally-competed grant programs, the Agency typically publishes a

Federal Register

notice announcing that it is accepting applications for the program, either as a Notice of Solicitation of Application (NOSA) or a Notice of Funding Availability (NOFA). The primary purpose of this notice is to alert the public to the opening of a period during which the Agency will accept applications for the program. This creates a “window” for submitting applications.

The amount and type of information contained in these NOSAs and NOFAs varies from program to program and may vary greatly year to year. Most notices include information on applicant and project eligibility, application submittal and content requirements, minimum and/or maximum grant amounts, and project priority categories and scoring.

Under the current administration of the nationally-competed grant programs, applications are either submitted to a Rural Development State Office or to the Rural Development National Office, depending on the program, for review, evaluation, and scoring. For most of the nationally-competed grant programs, the applicant will receive a letter from the Agency acknowledging receipt and confirmation that a full application was received. If an incomplete application is received, the Agency notifies, for some nationally-competed grant programs, the applicant as to what information is missing and the applicant has a set period of time in which to provide the missing information. For other nationally-competed grant programs, however, if an incomplete application is received, the Agency does not go back to the applicant for the missing information. This is done because some nationally-competed grant programs receive a sufficient number of complete applications to use all of the funds in a fiscal year and, accordingly, the Agency does not pursue incomplete applications. If this is the situation, the

NOSA or NOFA indicates this to the public.

As noted above, the nationally-competed grant programs provide a window for which applications are accepted. This results generally in a one time review and then scoring and ranking of applications. As currently implemented, the Agency reviews an application upon its receipt to determine whether the applicant and project are eligible for that program. If the Agency determines that the applicant and/or project are ineligible, the Agency notifies the applicant of such determination. Applications that are determined to be eligible are scored and ranked by National Office program staff. Depending on the nationally-competed grant program, independent reviewers may be used to evaluate and score applications. In addition, the nationally-competed grant programs currently limit the Administrator's discretionary points that can be included in the scoring of applications to 10 percent or less of the total potential points that an application can score.

Based on this pool of applications, a nationally-competed grant program's National Office selects applications for funding. Applicants that are not selected due to a low priority rating are notified. The Agency then proceeds to work with the applicants selected for funding in order to make awards by the end of the Federal fiscal year.

In currently administering its nationally-competed grant programs, the Agency begins the process of obligating funds and making awards (disburse the grant) by sending the applicant a letter of conditions that must be agreed to before the Agency and the grantee enter into a binding agreement, such as a grant agreement.

Once the Agency has initiated funds disbursement, it monitors the grantee to ensure conformance with the terms and conditions of the grant agreement. Depending on the nationally-competed grant program, the grantee is currently required to submit reports to the Agency during the grant period. Once the project has been completed, the Agency closes out the grant. If a grantee violates the terms and conditions of the grant agreement, the Agency takes appropriate steps, including, depending on the severity of the violation, the suspension or termination of the agreement.

State-allocated grant programs.

These paragraphs describe how the Agency currently administers its State-allocated grant programs, three which are being consolidated under this proposed rule—Community Facilities, Economic Impact Initiatives, and Water and Waste Disposal Facilities. In contrast to the Nationally-competed grant programs, the Agency typically does not publish

Federal Register

(FR) notices for its State-allocated programs, but instead relies on other methods for alerting the public to the programs and the submittal of applications. In addition, the Agency tends to accept applications for State-allocated grant programs at any point during the course of the year.

Using Community Facilities (and the Economic Impact Initiatives) as an example of how the Agency currently implements a State-allocated grant program, applicants file a preapplication with requisite documentation and supporting information to the Rural Development field office. The Rural Development field office then reviews the package for completeness of the documentation and for applicant and project eligibility. If needed, the Rural Development field office will request the opinion of the Office of General Counsel on the applicant's legal existence and authority to perform the proposed project.

As currently being administered, the Rural Development field office submits a copy of the application package to the Rural Development State Office with a letter of recommendation. The Rural Development State Office reviews the package and notifies the Rural Development field office of its findings. If an application is determined to be ineligible, the Rural Development field office notifies the applicant, who has the right of appeal.

If an application is determined to be eligible, the Rural Development field office provides the applicant with the necessary forms and instructions for filing a complete application. For example, the Community Facilities program requires Form SF 424, a preliminary architecture report, a financial feasibility report, and environmental information. If the project is small, the architectural and financial feasibility reports may not be required.

If there is a concern (e.g., incomplete, not properly assembled) with the application, the Rural Development field office will notify the applicant as to what information is needed. If the applicant fails to submit a complete application by the date specified by the Rural Development State Office or in an otherwise timely manner, the Agency may discontinue processing the application. If the application is complete, the Agency will notify the applicant as to eligibility and anticipated availability of funds.

Completed applications returned to the Rural Development field office are evaluated. The Rural Development field office reviews the application package for the amount of grant funds allowed and scores the application for selection priority. As currently implemented, applications may also receive discretionary points from the State Director.

Generally, the Rural Development State Office authorizes grant assistance to those eligible applicants with the highest priority score. Other factors, however, may enter into selecting applications for funding including the amount of funding being requested relative to available funds and whether the application is for the continuation of a project. Applicants who are eligible for funding, but cannot be funded due to lack of Agency funds are advised by the State Office that grant assistance is not available. If, based upon the application, it appears that funds will be available for the project within a feasible period of time, the Agency notifies the applicant that the application will be retained until funding becomes available. If, based upon the application, it is not likely that the project will be funded in the near future, the Agency returns the application to the applicant at the end of the fiscal year.

As for nationally-competed grant programs, the process the Agency currently uses to obligate funds and make awards (disburse the grant) for State-allocated grant programs begins with the Agency sending the applicant a letter of conditions that must be agreed to before the Agency and the grantee enter into a binding agreement, such as a grant agreement.

Once funds have been disbursed, the Agency monitors the grantee to ensure conformance with the terms and conditions of the grant agreement. Depending on the State-allocated grant program, the grantee is currently required to submit reports to the Agency during the grant period. Once the project has been completed, the Agency closes out the grant. If a grantee violates the terms and conditions of the grant agreement, the Agency takes appropriate steps, including, depending on the severity of the violation, the suspension or termination of the agreement.

C. Goals of the New Platform

The grant programs that are being combined under the proposed new platform were developed separately, and are administered independently of each other. The platform being proposed seeks to achieve the following objectives:

• Reduce the burden to applicants;

• Increase the efficiency in delivering grant programs; and

• Improve the Agency's program monitoring and reporting capabilities.

Reduce the burden to applicants.

The new platform can potentially reduce the burden to applicants in several ways.

First

. When applicants seek grants under more than one of the programs, they are required to learn how to fill out multiple forms. This is inefficient and costly to the applicants and makes the programs less attractive to the applicants. By combining common elements into a single subpart, the new platform can reduce the burden to applicants applying to multiple grant programs covered in this regulation.

Second.

Many grant programs receive applications from applicants or projects that are ineligible. In some cases, the applicant spends a significant amount of resources in putting together such applications. To help reduce the number of such applications, the new platform incorporates a voluntary preapplication process that applicants can use to help assess whether they and their projects are eligible. By getting an early assessment of eligibility, the Agency believes that fewer “non-eligible” applications will be submitted, thereby saving the applicant expenses in assembling and submitting a complete application.

Third

. Under the new platform, applicants would be allowed to submit applications, including preapplications, to any Rural Development office or on-line through grants.gov. Allowing applicants to submit applications to any Rural Development office, including Rural Development field offices, provides applicants with additional submittal options than under the current programs, which specify locations where applications are to be submitted. For some applicants, the ability to submit applications to their local Rural Development field office will be more convenient. In addition, to the extent that this platform can leverage and further promote the utilization of field offices, it will serve to improve communication between the Agency and the applicants.

Increase efficiency in delivering grant programs.

There are several ways in which the new platform will help the Agency improve the efficiency in delivering the grant programs.

First

. The new platform would improve the work flow for the National and State Rural Development office personnel. The current delivery platform creates significant processing peaks and valleys in the delivery of the grant programs. The new platform seeks to “smooth out” these peaks and valleys through an open application period. This will also allow the Agency to better manage staffing requirements and provide administrative consistency among the various grant programs.

Second

. The new platform improves program delivery efficiency by “separating” the application process from the funding process. Currently, consideration of grants waits until funds are made available through the appropriations process. This creates uncertainty in work flow and, at times, compresses the effort and resources required to review applications and make decisions into a very short timeframe.

The new platform incorporates two different application submittal schemes. Under the first scheme, applications are accepted at any time. Under the second scheme, applications are submitted once each year. These processes will occur regardless of when funds are available and under what mechanism they are made available. By separating the application submittal and review process from funding availability, the Agency is creating a process that will allow both applicants and Agency staff to better manage their resources.

Third.

The new platform would streamline the Agency's efforts in administering the grant programs. Maintaining separate sets of basic requirements creates complexity in administrative activities. For example, with each program administered under separate regulations, any change to basic requirements calls for multiple concurrences. Similarly, adding a new program requires the addition of a new set of basic requirements as these are not currently shared. The proposed combined platform will streamline basic grant requirements, allowing all the grant programs included in this regulation to reach a uniform functionality of process.

Further, when new programs are implemented under the current delivery platform, a new regulation is developed that, in many respects, addresses or adopts many of the same requirements. Time and effort are wasted in readdressing issues during the development of new program regulations leading to inefficient rulemaking and a delay in program implementation. The structure of the new platform provides for the addition of other Agency, or newly authorized, grant programs as needed without the addition of new sets of basic requirements. The common elements (proposed subpart A) of the proposed rule are intended to remain unchanged, while additional programs would be added to proposed subpart B.

Fourth.

Having a common rule for multiple programs will be easier to administer, improve communication of basic program characteristics, and reduce confusion among both staff and the public. A common regulation will reduce the staff time, effort, and training necessary for issuing grants. Efficiencies will be realized as common program elements facilitate consolidation of information technology platforms and systems' maintenance cost. Internal management controls will improve with standardized servicing and oversight. Uniform processes will facilitate electronic commerce between Rural Development and its customers.

Improve the Agency's program monitoring and reporting capabilities.

Building on the efficiency improvements under a common grants platform, monitoring and reporting program performance of grant recipients will be conducted in conformance with uniform standards. With standardized servicing and oversight, Agency staff will be better able to monitor grant recipients to the extent necessary to ensure that facilities are functioning in accordance with project performance goals.

Through the grantee's uniform standard semiannual performance reporting and a final performance report, the Agency will be able to compare actual accomplishments against the objectives and benchmarks stated in the project's performance plan. To account for the diversity in grant programs, additional grantee performance data may be needed for a thorough evaluation. Any special reporting requirements not specified in the rule or subsequent notices will be established in the Agency's letter of conditions provided to the grantee.

Project monitoring and report data will be captured and retained through the Agency's management information systems and data warehouse. Drawing on standardized collected data, the Agency will be able to generate more comprehensive program performance reports both within a program and comparisons across several programs. This will be especially useful where programs with common or complementary performance measures may have a compounded impact on a community's social and economic development.

D. The New Platform

By way of this rule, the Agency is initiating the process of developing a single regulation covering all 39 grant programs of the Rural Development Mission Area. For the grant programs listed in this regulation, the proposed

new platform simplifies, improves, and enhances the delivery of the grant programs. By applying the requirements shared among the eight grant programs included in this rule while maintaining required programmatic differences, this new structure will streamline the promulgation of regulations for new grant programs.

As noted earlier, the Agency is proposing to include eight grant programs within this proposed rule. Under the new platform, the common features of the programs are incorporated into a single subpart (subpart A), with program-specific features provided in a separate subpart (subpart B). While key features (e.g., applicant and project eligibility, funding) of the existing programs remain under the new platform, key differences can be found in applying for a grant, in the process in which applications are submitted, evaluated, and selected for funding, and in the manner in which notifications will be used to provide information to the public on the grant programs.

The following paragraphs address the new platform by examining the proposed delivery mechanisms, beginning with a discussion on the use of notifications under the new platform and concluding with grant close-out. Figure 1 illustrates the overall application process for grant programs with an application deadline. Figure 2 illustrates the overall application process for grant programs with an open application period.

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1.

Notifications.

Under the new platform, the Agency will use notifications to provide information on program funding and on programmatic changes relevant to applications and to program administration. The primary notification method used to disseminate this information depends on whether the program is a Nationally-competed grant program or a State-allocated grant program. In addition, the timing of when the Agency issues a notification depends on the type of information the notification contains.

Funding.

The Agency will issue notifications identifying the level of funds are available for each program and their minimum and maximum grant amounts.

The Agency may elect to provide additional funding information in these notifications. Such information may include, but would not be limited to:

• Type of award;

• Fiscal year funds;

• Approximate total funding;

• Approximate number of awards;

• Approximate average award;

• Floor of award range;

• Ceiling of award range;

• Budget period length; and

• Project period length.

For Nationally-competed grant programs, the primary notification method that the Agency will use will be a

Federal Register

notice. One or more notices may be necessary to do this. For State-allocated grant programs, the primary notification method will be through a link found on Rural Development's Web site

http://www.rurdev.usda.gov.

Funding information for both types of grant programs would also be available at any Rural Development office. The Agency will provide funding information on each program every fiscal year.

Programmatic changes.

The Agency will also issue notifications that identify changes to a program that would affect the applicant or the applicant's application. These circumstances are discussed below.

•

Administrator and State Director priority categories.

Subpart A provides lists of Administrator and State Director priority categories. Administrator priority categories apply to both State-allocated grant programs and nationally-competed grant programs, while State Director priority categories apply only to State-allocated grant programs. Individual programs may elect to use any or all of the priority categories identified in subpart A in scoring applications, but would not be able to add to these lists (unless done through a change to the rule). Subpart B specifies the specific sets of Administrator and State Director priority categories that each program can use each year to score applications.

If a program office determines that a different set of priority categories (but still within the priority categories identified in subpart A) will be applicable for a given fiscal year, the Agency will issue a notification to announce the priority categories that will be used in scoring applications for that fiscal year.

•

Administrator and State Director points.

Subpart B identifies how points will be allocated for both Administrator and State Director priority categories for each of the grant programs. If a program office determines that a different allocation of these points is appropriate, whether or not in conjunction with a change in priority categories, then that program office would issue a notification, as applicable, to indicate the point allocation to be used in that fiscal year.

•

Additional reports.

A program office may determine that additional reports on project performance that are generally applicable across projects within the program are necessary in addition to those required under the proposed rule. In such instances, the Agency would issue a notification to the public.

•

Ranking dates.

A program office may elect to change one (or more) of the ranking dates specified in subpart B of the proposed rule. For example, a program office that has a specified ranking date (July 15) may determine that it is necessary to move the ranking date to earlier in the year because the program office has determined that additional time may be needed to rank the applications in order to ensure sufficient time to obligate funds. In such instances, the Agency would issue a notification to the public.

•

Application deadline.

For those programs with a specified application deadline, a program office may elect to change the application deadline date specified in subpart B of the proposed rule. For example, a program office that has a specified application deadline (March 1) may determine that it is necessary to move the application deadline to earlier in the year in order to better manage Agency resources and program funds. In such instances, the Agency would issue a notification to the public.

For changes in Administrator and State Director priority categories and/or points, the program office would issue the notification(s) at least 30 days prior to the first ranking date in the upcoming fiscal year or the application deadline, as applicable, to allow sufficient time for applicants to finish their applications. If multiple program offices seek to make these types of changes, the Agency may issue, where feasible, a single notification covering all of the affected programs rather than individual notifications for each of the affected programs. For other programmatic changes, the Agency would issue notifications on an as needed basis.

Finally, a program's eligibility requirements may change or the Agency may determine that certain types of projects are no longer eligible for grants or certain ineligible projects may become eligible. Such instances would require the Agency to change to the regulation. In order to help ensure the public is aware of such changes, the Agency may include such information in the programmatic change notifications discussed above.

Administrator approval.

Under the new platform, State Directors would propose to the Administrator each year the minimum and maximum grant amounts for each State-allocated grant program included in this part. Upon approval from the Administrator, the Agency would then notify the public of the minimum and maximum grant amounts approved by the Administrator. Similarly, each State Director may propose to the Administrator changes in State Director priority categories and associated points for State-allocated grant programs included in this part. Upon approval from the Administrator, the Agency would then notify the public of the priority categories and associated points approved by the Administrator for each affected State-allocated program.

2.

Acceptance of Applications.

As noted above, Nationally-competed grant programs establish defined “windows” for when applications can be submitted and both types of programs (Nationally-competed and State-allocated) frequently specify the Rural Development office (field, State, National) to which applications are to be submitted. Under the new platform, the Agency is proposing to implement two application submittal schemes, depending on the needs of the individual program:

• An open application period; and

• A specified application deadline.

Under the open application period scheme, the Agency would accept applications at any time during the year. By accepting applications at any time, there would no longer be any “window” for when to submit an application. This feature eliminates the need for the public to wait on the Agency to publish

Federal Register

notices, or use other methods, to solicit applications. It is

important to note, however, that the Agency will still undertake activities to promote the various grant programs.

The second scheme (a specified application deadline) is similar to current Nationally-competed grant programs, but the date for application submittal would be fixed in the regulation in subpart B. By providing a date, the public will not have to wait for the Agency to publish a notice identifying when applications are due. This will allow applicants to plan for the preparation of their applications with certainty.

By accepting applications at any Rural Development office under either scheme, the Agency is seeking to make it more convenient for applicants to submit their applications. To the extent that this facilitates interaction between Rural Development staff and the applicants, the Agency expects better communication will occur. The Agency will implement internal procedures to ensure all applications are delivered to the appropriate Agency program office.

3.

Eligibility.

Under the current programs, Rural Development offices (National and State offices, as appropriate) determine both applicant and project eligibility based on the individual grant program's requirements. As described below, the proposed rule continues this determination process mainly unchanged.

Applicant eligibility

is based on the applicant meeting the common requirements, which are citizenship and legal authority and responsibility, and program-specific criteria, which are contained in proposed subpart B. The proposed rule also identifies applicants who would be categorically ineligible. In terms of eligible and ineligible applicants, little has changed under the new platform compared to the current programs. In addition, these criteria cannot be voided under the exception authority provided in the proposed rule.

Project eligibility

is based on the proposed project meeting criteria found in Subparts A and B, as applicable. Subpart A requires each project to meet the following criteria, as applicable and unless otherwise modified by a specific provision in subpart B for a program:

• Being primarily for the benefit of a rural area;

• For those projects and purposes that acquire or improve real or personal property, the applicant must be the owner of the property or have leasehold interest acceptable to the Agency in the property and control the revenues and expenses of the project, including operation and maintenance; and

• For projects and purposes that are determined by a service area, on the boundaries of the proposed service area meeting a non-discrimination criterion.

Projects that do not meet the applicable proposed criteria (as found in Subparts A and B, as applicable) would be ineligible under the new platform. In addition, these criteria (as found in subpart A and as may be modified in subpart B) cannot be voided under the exception authority provided in the proposed rule.

The applicable program-specific project eligibility requirements, which are located in subpart B, remain essentially unchanged for those of the current programs. Some differences are being proposed and these are discussed in section II of this preamble.

In addition to identifying eligible projects, the proposed rule identifies specific projects and purposes that are ineligible under all circumstances from receiving a grant. The Agency assembled this list from the list of ineligible projects and purposes identified in the regulations and associated program notices for the programs being included in the proposed rule. In addition, the Agency added the following projects and purposes as ineligible:

• Investment or arbitrage, or speculative real estate investment;

• Prostitution or projects generating income from activities of a prurient sexual nature;

• Any project eligible for Rural Rental Housing and Rural Cooperative Housing loans under sections 515, 521, and 538 of the Housing Act of 1949, as amended;

• Any project generating income from the sale of illegal drugs, drug paraphernalia, or any other illegal product or activity;

• Any project located in a special flood or mudslide hazard area as designated by the Federal Emergency Management Agency in a community that is not participating in the National Flood Insurance Program unless the project is an integral part of a community's flood control plan; and

• Any other similar project or purpose that the Agency determines is ineligible for funding under this part and publishes in a

Federal Register

notice.

4.

Applying for a Grant

. All applicants would be required to submit an application. For some applicants (i.e., a government that is proposing a project that is for construction, land acquisition, or land development and that would require more than $100,000 of Federal funding), a preapplication would be required (as is currently the situation). For all other applicants, however, the submittal of a preapplication would be optional. The following paragraphs discuss briefly preapplications and applications.

Preapplications

. The primary purpose of the preapplication is for the Agency to make an assessment as to both applicant eligibility and project eligibility. In addition, use of preapplications facilitates early communication between the Agency and the applicant. By reviewing preapplications, the Agency reduces the time and effort spent by applicants in preparing full applications where the applicant and/or project are clearly not eligible.

Applications

. Because of the varying nature of the projects that are associated with the grant programs, the Agency has determined that the information to be included in a grant application should be program specific, as it is currently. The contents of grant applications will be made available to applicants through any Rural Development office, the Agency's Web site, or National Headquarters. The information associated with a grant application will not be significantly different than currently required under the current programs.

However, an applicant would be allowed to submit an application (including preapplications) to any Rural Development office. Under the current programs, applications are submitted to specified locations. As noted earlier, the Agency is proposing this change to make it more convenient for applicants to submit their applications and to foster communication between Rural Development staff and applicants.

Rather than identifying the specific documents that must accompany each application for each program in the regulation, the Agency would provide all the necessary forms and instructions in program-specific application packages. This proposed process is similar to the current process for several existing grant programs, but represents a change for those Nationally-competed programs where the regulations and/or

Federal Register

notice identify specifically what is required in each application under each of those programs. The Agency believes that implementing the proposed process for all grant programs affected by this rule will provide administrative flexibility to each program as well as consistency in implementation.

5.

Processing Applications

. The Agency would review each application for the determination of applicant and project eligibility and the likelihood of the project's feasibility. It is at this stage of the process that the Agency would

make the formal determination of eligibility, unless it has already been made.

In order to determine eligibility, the application must contain sufficient and necessary information to allow the Agency to make the eligibility determination. The Agency will also review the application for assessing whether or not the project is likely to be feasible. To further process an application for a project or purpose that is likely to be unfeasible would be an inefficient use of Agency resources. At the same time, the amount of information that is needed to make this assessment varies between programs because of the differing complexity of projects and purposes. The information provided to the applicant for preparation of an application will assist the applicant in identifying the amount of information necessary to allow the Agency to make this feasibility assessment.

When reviewing an application for applicant and project eligibility, if the Agency finds that there is insufficient information, including for example if a form has not been signed, to make an eligibility determination, the Agency will notify the applicant. Once an eligibility determination has been made, the Agency will notify the applicant. If the Agency determines that either the applicant or the project is ineligible, the applicant would have the right to appeal the decision to the National Appeals Division (NAD). The steps associated with eligibility under the new platform are essentially the same as under the current programs.

Similarly, if the Agency makes an assessment that a project is not likely to be feasible, the Agency will notify the applicant of its concerns. The applicant will then have the opportunity to address those concerns before the Agency continues processing the application.

For programs with open application periods, an application that is revised and resubmitted to the Agency will be processed at the next applicable ranking date for that program. For example, if a revised application is received on January 15, the Agency will consider it at the March 15 ranking date, which is the next applicable ranking date. For grant programs with a specified application deadline, each revised grant application will be processed by the Agency if it is received on or before the application deadline for that grant program. If such revised applications are not received by the specified application deadline for the grant program, the Agency will not process the application.

6.

Scoring Applications

. For those applications for which the applicant and project are eligible and the project is feasible (or is likely to be feasible), the Agency will continue processing the application by scoring it. The Agency will score applications on the basis of the information provided when the Agency receives the application. Thus, it is the responsibility of the applicant to provide all information necessary at the time of application for the Agency to score the application.

The Agency will score each application using a set of program-specific priority categories, a set of State Director priority categories, and a set of Administrator priority categories and their associated points that are specific to each grant program. State Director priority categories and points are only applicable to State-allocated grant programs. In addition, Administrator priority categories and points may be applied to State-allocated grant applications only when applications are submitted for the national pool of funds.

These sets of priority categories are identified in subpart B of the proposed rule. As noted earlier (Section I. D. 1.), the Agency may use a revised set of Administrator and State Director priority categories and point allocations through the issuance of a notification.

Priority Categories

. As noted above, the Agency is distinguishing between program-specific priority categories and Administrator and State Director priority categories. Program-specific priority categories are those priority categories that the Agency must use in scoring each application for that grant program. In contrast, Administrator and State Director priority categories are not mandatory; that is, the Administrator and State Director are not obligated to use their specified priority categories in scoring applications. If the Administrator or State Director elects not to use their priority categories, then neither can affect the scoring of an application.

The specification of priority categories for the Administrator and the State Directors is a major difference from the current process. Currently, the Administrator and State Directors have significant discretion to reflect their priorities. In contrast, the proposed rule eliminates this discretionary aspect by specifying the sets of Administrator and State Director priority categories for each program that will be considered each year. This change provides the public with a much greater understanding of how their applications can be evaluated by the Administrator and the State Directors. Furthermore, these priority categories would be used each year, unless otherwise specified in a notification issued under proposed § 5002.15. Note that program-specific priority categories can only change, however, if the Agency subsequently revises subpart B of the regulation.

Points

. Currently, the total available points vary considerably between grant programs. The Agency is proposing to standardize the total points (to 100) that can be awarded to an application under any of the grant programs. Standardizing point totals is intended to help the Agency administer the grant programs.

One difference from the current programs is the proposed Administrator and State Director points that could be awarded to an application. Except for the Community Facilities grant program, as discussed in the following paragraph, both State Director points and Administrator points would be each limited to 10 points (10 percent of the total potential points) and can only be awarded for the specific set of priority categories in effect for that program. In other words, the Administrator or State Director could not use discretionary categories to establish specific earmarks. Note that only State-allocated grant programs would be allowed to award points for State Director priority categories.

For the Community Facilities grant program, the Agency is proposing to limit Administrator points to 20 points (20 percent of the total potential points). The Community Facilities grant program applies to projects that are “essential community facilities.” The types of projects that may qualify as essential community facilities are very broad, much broader than any of the other grant programs being included in the new platform. This diversity of community facility projects presents unique challenges for meeting the overall goals of the program. The Agency believes, regarding these broad based programs, that it is appropriate to provide greater flexibility in order to meet the goals and objectives of the program. Therefore, the Administrator would be allowed to award up to 20 points for community facilities applications. As noted earlier, Administrator points may be applied to State-allocated programs only when the National Office makes the determination of which grant applications to fund from the national pool of funds.

As with the sets of Administrator and State Director priority categories, the procedures used for awarding Administrator and State Director points each year would be as specified in subpart B, unless a notification is issued as specified in proposed § 5002.15. The

maximum number of points that the Administrator and the State Director can award, however, can only be changed through a revision to the regulation.

Changes in Administrator and State Director priority categories and points

. As noted earlier in this preamble, if there is a change in Administrator or State Director priority categories and/or point allocation to be considered for a particular year, the proposed rule allows the Administrator or State Director to change the priority categories and/or point allocation (but not the Administrator's or State Director's point total) contained in the rule by issuing an appropriate notification in a timely fashion. To illustrate the award of Administrator and State Director priority categories and points under the new platform, consider the following examples.

Examples

. These examples are for State Director priority categories for community facility grants, which allow the State Director to award up to 10 points to an individual application. These examples are also illustrative of the award of State Director priority categories and points for other programs.

•

Example 1

. The Agency does not issue a notification for an upcoming fiscal year and an application meets each of the 10 priority categories listed in subpart A of § 5002.42(b)(2). In this situation, the scoring procedure specified in subpart B for community facility grants (§ 5002.101(f)(3)) would be used to score the application for awarding State Director points. The Agency determines that the application can be awarded full points for all 10 priority categories. This would total 100 points. However, because the rule limits the total number of State Director points to 10 points for any one application, this application would receive 10 State Director points.

•

Example 2

. The Agency issues a notification indicating that only four of the 10 State Director priority categories in subpart A will receive consideration. In this case, the notification also identifies the specific points to be awarded to the four priority categories, such that the total points to be awarded do not exceed 10 points. For example, Priority Category 6—up to 3 points; Priority Category 7—up to 3 points; Priority Category 8—up to 2 points; and Priority Category 9—up to 2 points. Note that in this example the point distribution totals 10. In evaluating this application, the Agency determines that the application should be awarded full points for Priority Categories 6, 7, and 8, but only one point for Priority Category 9. The application would, therefore, receive nine (9) State Director points.

7.

Award process for applications

. The Agency is establishing a consistent process for selecting applications for funding. The two main areas of the proposed award process are:

• Ranking of applications; and

• Selection of applications for funding.

In addition, the proposed rule addresses the disposition of applications not selected for funding.

Ranking of applications

. For those grant programs that have an open application period, which would receive applications on a continuous basis, the Agency is establishing a process for ranking applications that sufficiently demonstrates competition for grant funds. To accomplish this, the Agency is proposing that all scored applications for a program be ranked by the Agency four times per year. The four proposed ranking dates are, in order of occurrence during the fiscal year, December 15, March 15, July 15, and August 15. If any of these dates fall on a weekend or a Federally-observed holiday, the affected ranking date would move to the next Federal business day. Further, as noted earlier in this preamble, a program may change one or more ranking dates in a fiscal year if it publishes a notification as specified in proposed § 5002.15.

The first three ranking dates were selected to provide an even spacing of ranking dates to help even out the work flow. The first date was selected with enough time after the beginning of the fiscal year and after the publication of any applicable notification for the upcoming fiscal year to allow applicants to prepare and submit an application to be considered during the first ranking period. The last date, August 15, was included because some programs need to obligate funds prior to the end of the fiscal year and this date provides sufficient lead time to accommodate such obligations. While only a month after the July 15 date, the Agency is including it because it provides additional time for applicants to submit applications for consideration during the current fiscal year.

Applications submitted after August 15 of a given fiscal year, however, will not be ranked until December 15 of the following fiscal year. In this situation, the Agency will retain these applications through the next ranking date (i.e., through December 15 of the following fiscal year). Such applications would be evaluated and scored based on that program's priority categories for the following fiscal year. Therefore, if a program's Administrator and/or State Director priority categories selected to score applications were to change between the current fiscal year and the next, applicants should consider whether their retained applications need to be resubmitted in order to better address the change in the program's selected Administrator and/or State Director priority categories.

It is important to note that the ranking dates for programs with an open application period are not the same as application deadlines. Under the new platform, applicants can submit applications for such programs at any time. Once the application is determined to be eligible, the Agency will rank the application on or after the next ranking date. Consider the following examples for grant programs with an open application period.

Example 1

. Applicant A submits an application to the Agency on November 1, 2008. The Agency determines that the application is eligible for further processing on November 30, 2008. The Agency will rank the application on or after December 15, 2008.

Example 2

. Applicant B submits an application to the Agency on December 16, 2008. The Agency determines that the application eligible for further processing on January 5, 2009. The Agency will rank the application on or after March 15, 2009.

Example 3

. Applicant C submits an application to the Agency on August 17, 2009. The Agency determines that the application is eligible for further processing on September 23, 2009. The Agency will rank the application on or after December 15, 2009.

Example 4

. Applicant D submits an application to the Agency on November 15, 2009. The Agency determines that the application is eligible on December 20, 2009, after the December 15 ranking date has passed. The Agency will rank Applicant D's application at the next scheduled ranking date after December 15, which would be, in this example, on or after March 15, 2010.

For grant programs that have a specified application deadline, such as the Distance Learning and Telemedicine grant program, either a single ranking date—July 15—or two ranking dates—March 15 and July 15—is being proposed, depending on the needs of the specific program. The July 15 date was selected to ensure sufficient time for the Agency to obligate funds to those applications selected for funding. As noted earlier in this preamble, a program office may determine that it is necessary to move the application deadline to earlier in the year in order to better manage Agency resources and program funds. In such instances, the

Agency would provide notification to the public.

Whether for a grant program with an open application period or for a grant program with a specified application deadline, applications that are ranked in a given fiscal year will be considered for selection for funding or for potential funding, as applicable, during that fiscal year. For grant programs with an open application period, this means that applications received early in the fiscal year will have a longer timeframe to be considered for selection for potential funding than those received later in the fiscal year.

Selection of applications for funding or potential funding

. For all grant programs, the Agency will create, on or after each ranking date, a priority list of ranked applications from which to select applications for consideration for (potential) funding. In considering which applications to select for (potential) funding, the Agency will consider three basic criteria, which are discussed below, and any program-specific criteria, as specified in subpart B. For each application that is selected for (potential) funding, the Agency will so notify the applicant.

As noted in the previous paragraph, the Agency will consider three basic criteria selecting applications for (potential) funding. These criteria are: (1) Ranking, (2) availability of funds, and (3) other funding sources.

•

Ranking

. This refers to an application's place on the program's priority list, which is based on the score each application receives. Higher scoring applications would receive first consideration for (potential) funding. However, as discussed below for the two other basic criteria and as may be specified in subpart B for a specific program, a lower scoring application may be selected for (potential) funding ahead of a higher scoring application. For example, if there is insufficient funding for the higher scoring project, the Agency may pass over that project to fund a lower scoring project in order to fully expend the budget authority.

•

Availability of funds

. This refers to the size of the grant request relative to the program funds that remain available to the program during the fiscal year. In order for the Agency to better manage the availability of program funds, the Agency could select, under the new platform, a lower scoring application before an eligible, higher-scoring application when the higher scoring application:

• Would require grant assistance in an amount greater than the funds remaining in a particular funding period,

• Would require more than 25 percent of a State's allocated funds, or

• Would require more than 25 percent of a Nationally-competed grant program's funds.

In these situations, the Agency would notify the applicant associated with the higher scoring application and provide the applicant an opportunity to revise the amount of funds being requested in their application, provided the reduced funding request does not change the project's purposes and financial feasibility. The applicant would then be able to resubmit the application before the Agency selects the next highest scoring application for funding.

The Agency is proposing the 25 percent threshold for nationally-competed grant programs based on current practice in the Agency's water and waste disposal grant program. The Agency is willing to consider a different threshold. The Agency is concerned that too low of a threshold might create a situation, especially in smaller nationally-competed grant programs, where this provision could be used to override the selection of applications based on their scores. The Agency is also concerned that too high of a threshold might not be effective at limiting applications that commit too high a percentage of a fiscal year's available funding for a particular program. As stated later in this preamble, the Agency is requesting comment on this threshold level.

•

Availability of other funding sources

. This refers to whether Rural Development loans and other, non-Rural Development funding sources should be available to an applicant. If an applicant with a higher scoring application can accomplish the project using Rural Development loans or other non-Rural Development funding sources, the Agency may consider the next highest scoring application ahead of the higher scoring application.

Disposition of applications not selected for potential funding—grant programs with an open application period

. There are four scenarios in which a ranked application may not receive funding:

• Application selected for potential funding, but not funded due to the Agency's lack of funds;

• Application selected for potential funding, but not funded due to missing information;

• Application not selected for potential funding due to its ranking and the available level of funds to the Agency; and

• Application not selected for potential funding due to very low ranking.

As summarized in Table 1 and described in the following paragraph, the process for handling these four situations would be slightly different.

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An application that is selected for potential funding, but is not funded due to the Agency's lack of funds, will be carried forward in the fiscal year in which it was selected for potential funding until either it is funded or the end of the fiscal year in which it was selected, whichever occurs first. If the selected application is not funded by the end of the fiscal year in which it was selected for potential funding, the Agency will carry the application forward into the next fiscal year unless the applicant requests in writing the Agency to withdraw the application from further consideration. Unless there is a change to the regulation or authorizing statute that would affect this process, a selected application that is carried forward into the next fiscal year would not be subject to re-evaluation or re-scoring, even if the priority categories applicable to that application change for the next fiscal year, because it has already been completed. However, the application may be required to be updated if information in it becomes outdated.

If a ranked application has been selected for potential funding, but has not been funded because additional information is needed, the Agency will notify the applicant as to what information is needed, including a timeframe for the applicant to provide the information. If the applicant does not provide the information within the specified timeframe, the Agency will remove the application from further processing.

If a ranked application has not been selected for potential funding because of its ranking and the available level of funds to the Agency, it will be included in the set of applications considered in each subsequent ranking date in the fiscal year in which it was ranked until it is either selected for potential funding, funded, or the end of the fiscal year in which the application was ranked is reached, whichever occurs first. The Agency will retain the application for consideration in the next fiscal year. All such retained applications must be updated by the applicant as required by the Agency (e.g., financial conditions, change in supporting documentation requirements). In this instance and in addition to satisfying Agency requirements, the applicant is afforded the opportunity to otherwise revise the application. The application will then be re-evaluated and re-scored along with new applications received for consideration for funding in the next fiscal year.

If a ranked application has not been selected for potential funding because it is determined by the Agency to be non-competitive due to its very low score by the end of the fiscal year in which it was scored, the Agency will remove the application from further consideration and will notify the applicant that the Agency is no longer considering the application.

Disposition of applications not selected for funding—grant programs with an application deadline

. All ranked applications that are not funded in the fiscal year in which they were submitted will not be carried forward into the next fiscal year. The Agency will so notify the applicant in writing.

If an application has been selected for funding, but has not been funded because additional information is needed, the Agency will notify the applicant as to what information is needed, including a timeframe for the applicant to provide the information. If the applicant does not provide the information within the specified timeframe, the Agency will remove the application for further consideration and will so notify the applicant. In this situation, the application is also not carried forward into the next fiscal year.

8.

Grant agreement and conditions

. This section of the new platform addresses the mechanism the Agency will use an Agency-approved grant agreement to make awards to those applicants selected for funding. This section also identifies additional conditions that must be met by grantees both prior to the award being made and after the award is made. In general, the proposed requirements are the same as those for the grant programs currently in place. The proposed rule, though, provides a consistent structure for the administration of all of the grant programs covered by the proposed rule.

9.

Post-award activities and requirements

. As for grant agreements and conditions, the proposed rule generally adopts current practices and provides a consistent structure for all of the grant programs covered by the proposed rule.

10.

Grant close out and related activities

. As for the previous two sections, the requirements in this section generally adopt current practices and provide a consistent structure for all of the grant programs covered by the proposed rule.

II. Discussion of Proposed Rule

In this section, the proposed rule is further described. First, an overall organization of the proposed rule is presented, followed by a section-by-section discussion of each part. Please note that the discussion in this section applies in its entirety to seven of the eight grant programs being included; it does not apply in its entirety to Tribal College grants. The provisions discussed in this section that apply to Tribal College grants are contained in proposed §§ 5002.1 through 5002.14 and in proposed §§ 5002.60 through 5002.80. The discussions in this section on eligibility, applying for a grant, processing applications, application scoring, and award process do not apply to Tribal College grants. A discussion of these aspects of the proposed rule for Tribal College grants is presented in section II.B.

A. Overall Organization of the Rule

The proposed rule is divided into two main parts, subparts A and B. Subpart A, contains the provisions that apply to all of the grant programs, except for Tribal College grants as described in the previous paragraph, covered by the proposed rule. In addition, subpart A contains provisions applicable to cooperative agreements. These subpart A provisions would not become effective until cooperative agreements are provided and published in subpart B to this part.

Subpart B, contains the provisions specific to the grant programs covered by the proposed rule. The Agency is not proposing to include cooperative agreements in subpart B at this time, but may consider adding cooperative agreements to subpart B at a future date.

Subpart A

. Subpart A is divided into nine major elements. The first element, General Provisions, covers general provisions associated with this part, and addresses the purpose of this part (§ 5002.1), the definitions and abbreviations used in this part (§ 5002.2), appeal rights (§ 5002.3), exception authority (§ 5002.4), compliance with other Federal laws (§ 5002.5) and with State and local laws (§ 5002.6), environmental requirements (§ 5002.7), and forms, regulations, and instructions (§ 5002.8).

The second element, Funding and Programmatic Change Notifications, covers funding and programmatic change notifications (§ 5002.15).

The third element, Eligibility, covers the basic eligibility requirements for eligible applicants (§ 5002.20), ineligible applicants (§ 5002.21), eligible projects and purposes (§ 5002.22), and ineligible projects and purposes (§ 5002.23).

The fourth element, Applying for a Grant, covers the basic requirements associated with applying for a grant (§ 5002.30), including preapplications (§ 5002.31) and applications (§ 5002.32).

The fifth element, Processing and Scoring Applications, addresses the steps that the Agency will use in

processing and scoring applications. The steps associated with processing applications (§ 5002.40) cover initial review of applications by the Agency, notifications to the applicants, resubmittal of applications by applicants, and applications that are subsequently found to be ineligible. This element also addresses the processes for dealing with application withdrawal (§ 5002.41) and the scoring of applications (§ 5002.42), including the priority categories that the Administrator and the State Directors may use in scoring applications. Specific priority categories and points to be used are found in subpart B for each individual program.

The sixth element, Awarding Grants, covers the award process (§ 5002.50). In this element, the process that the Agency will use in ranking and selecting applications for funding is presented. In addition, this element covers processes associated with applications that are not selected and those that are selected, but do not receive funding.

The seventh element, Grant Agreements and Conditions, addresses the grant agreement and conditions for applications that are funded. This element covers actions that must occur prior to grant closing or start of construction (§ 5002.60), the process used in making the grant agreement (§ 5002.61), and the use of remaining funds (§ 5002.62).

The eighth element, Post Award Activities and Requirements, addresses activities and requirements once an award has been made. This element covers the following areas:

• Monitoring and reporting program performance (§ 5002.70);

• Programmatic changes and budget revisions (§ 5002.71); and

• Transfer of obligations (§ 5002.72).

The ninth element, Grant Close Out and Related Activities, covers grant close out, non-compliance, and termination (§ 5002.80).

Subpart B

. This subpart addresses provisions that are specific to the individual programs as follows:

• Provisions specific to the Community Facilities grant program are in found in § 5002.101;

• Provisions specific to the Rural Energy for America grant program are found in § 5002.102;

• Provisions specific to the Rural Cooperative Development grant program are found in § 5002.103;

• Provisions specific to the Distance Learning and Telemedicine grant program are found in § 5002.104;

• Provisions specific to the Value-Added Producer grant program are found in § 5002.105;

• Provisions specific to the Water and Waste Disposal Facilities grant program are found in § 5002.106;

• Provisions specific to the Economic Impact Initiatives grant program are found in § 5002.107; and

• Provisions specific to the Tribal College grant program are found in § 5002.108.

The intent of subpart B is to identify all of the provisions specific to each of the eight programs. In this way, each program maintains its integrity under the new platform. Within subpart B, each program specific provisions are related back, where applicable, to a corresponding section in subpart A. For example, each section has subsections that address applicant and project eligibility. In addition, some program-specific requirements in subpart B supersede specific subpart A requirements. For example, there is a subpart B provision for value-added producer grants that indicates that the subpart A requirement for the project to primarily serve a rural area does not apply to value-added producer grants.

B. Discussion of Sections

Purpose and Scope (§ 5002.1)

This section defines the purpose, scope, and applicability of this part (§ 5002.1(a), (b), and (c)), respectively.

This rule applies to “grant only” applications and not to loan grant applications (§ 5002.1(c)(1)). A loan and grant combination application is one in which an entity is seeking both a loan and a grant in order to fund its project. This part would apply only to “grant only” applications, unless another 7 CFR part incorporates provisions from the proposed rule. If an applicant is seeking a grant as part of a “grant and loan” application, this part would not apply to the grant portion of the grant and loan application, unless another 7 CFR part incorporates provisions from the proposed rule.

This section also includes the incorporation by reference (§ 5002.1(d)) of all of the regulations of the Department of Agriculture's Office of Chief Financial Officer (or successor office) as codified in 7 CFR parts 3000 through 3099, including, but not necessarily limited to, 7 CFR parts 3015 through 3019, 7 CFR part 3021, and 7 CFR part 3052, and successor regulations. These parts are referred to in the preamble and the rule as the “Departmental regulations,” and constitute the existing Department's regulations affecting all grant programs. Note that this phrase is not used in all sections of the rule. The absence of this phrase from a section of the rule does not mean that the Departmental regulations do not apply to that section.

Definitions and Abbreviations (§ 5002.2)

This section presents the definitions and abbreviations used in this part, including terms that may be specific to one of the eight programs found in subpart B. It also incorporates by reference terms used in the Departmental regulations.

The proposed rule contains fewer definitions than found in the existing regulations, primarily because the deleted terms are not used. Some definitions have been added or revised.

The proposed rule includes a definition for “poverty line.” Poverty line is used determining project eligibility under the Community Facilities program. The Agency determines the poverty line in a manner consistent with criteria established by the Department of Health and Human Services (DHHS) and the Department of Housing and Urban Development. Current poverty line information published by DHHS, however, does not cover Puerto Rico, the Western Pacific Islands, and the Virgin Islands. As it is possible for the Community Facilities grant program to award grants to applications from these locations, the Agency has established poverty lines for these locations, based on the level of income.

Appeal Rights (§ 5002.3)

As currently provided, this paragraph provides the legal basis for a person to file an appeal of an adverse decision made by the Agency in implementing the proposed program. When the Agency makes an adverse decision, a person may file an appeal to the National Appeals Division in accordance with 7 CFR part 11.

Exception Authority (§ 5002.4)

This section identifies the situations under which the Administrator may make exceptions to the requirements contained in the regulation.

Unlike the current regulations, the proposed rule identifies three exceptions to this Exception Authority, where the Administrator would not be allowed to make exceptions. These three exceptions are:

• Applicant eligibility;

• Project eligibility; and

• Rural area definition.

The Agency believes that applicant and project eligibility criteria must be maintained at all times in order to be consistent with statutory authority.

Compliance With Other Federal Laws (§ 5002.5)

This section states that applicants must comply with other applicable Federal laws including, but not limited to, Equal Employment Opportunities, Americans with Disabilities Act, Equal Credit Opportunity Act, Fair Housing Act, and the Civil Rights Act of 1964.

State Laws, Local Laws, and Regulatory Commission Regulations (§ 5002.6)

This section states that the provisions of this part will be controlling in all cases where there are conflicts between the provisions of this part and State or local laws or regulatory commissions regulations.

Environmental Requirements (§ 5002.7)

The applicant would be required to comply with Agency environmental requirements as found under subpart G of either 7 CFR part 1940 (for Rural Housing, Business-Cooperative, and Utilities Services) or 7 CFR part 1794 (for Rural Utilities Services), as appropriate. These requirements are consistent with those under the eight current programs.

In addition, the applicant must not take any action or incur any obligation with respect to the proposed project that would either limit the range of alternatives to be considered during the Agency's environmental review process or which would have an adverse effect on the environment. If such actions or obligations have been incurred that would limit the range of alternatives, the project will be ineligible for a grant under this part.

Forms, Regulations, and Instructions (§ 5002.8)

This section states that all forms, regulations, instructions, and other materials necessary to submit applications for each of the grant programs included in this part may be obtained through the Agency. This material, including application packages, will be available from Agency offices, including but not limited to Rural Development State Offices, and the Agency's Web site.

Funding and Programmatic Change Notifications

This part of the proposed rule identifies the types of information to be included in the notifications, the methods that the Agency will use to disseminate this information, and when the notifications will be made.

Notifications (§ 5002.15)

This section identifies the types of information the Agency will include in the notifications, which includes the level of available funds, the minimum and maximum grant amounts, and various programmatic changes (e.g., changes in Administrator and State Director priority categories and points, changes in ranking dates, changes in application deadlines for those programs with specified application deadlines). The primary notification methods that the Agency will use to make this information are

Federal Register

notices for Nationally-competed grant programs and Rural Development's Web site for State-allocated grant programs. All information contained in these notifications would also be available at any Rural Development office.

Notifications involving funding will be made each fiscal year for each grant program. Notifications involving changes in Administrator and State Director priority categories and points will be made at least 30 days prior to the first ranking date in the year or the application deadline, as applicable. Notifications involving all other programmatic changes will be made on an as needed basis.

Eligibility

This section covers requirements associated with both applicant and project eligibility and is divided into four sections, which are described below. In order for a project to be considered for a grant, both the applicant and the project must be determined by the Agency to be eligible.

Applicant Eligibility (§ 5002.20)

This section identifies the requirements for applicant eligibility. For an applicant to be eligible for a grant under this part, the applicant must meet the criteria in this section and the applicant eligibility criteria in subpart B for the applicable grant program. The program-specific applicant eligibility requirements found in subpart B for the program under which their project falls are discussed later in this preamble when the individual programs are presented.

This section identifies two common applicant eligibility requirements that all applicants must meet. These two criteria address citizenship (§ 5002.20(a)) and legal authority and responsibility (§ 5002.20(b)).

To be eligible, an applicant must either (1) be a citizen of the United States (U.S.), the Republic of Palau, the Federated States of Micronesia, the Republic of the Marshall Islands, or American Samoa or (2) reside in the U.S. after legal admittance for permanent residence. If the applicant is an entity other than an individual, the applicant must be at least 51 percent owned by persons who are either citizens of one of the countries identified above or legally admitted permanent residents residing in the U.S.

In addition, the applicant must have, or be able to obtain, the legal authority to carry out the purposes of the grant.

Ineligible Applicants (§ 5002.21)

This section identifies criteria that would make an applicant ineligible for a grant under this part. An applicant would be ineligible if the applicant (1) Is debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs under Executive Order 12549, (2) has an outstanding judgment obtained by the U.S. in a Federal Court (other than U.S. Tax Court), (3) is delinquent on the payment of Federal income taxes, or (4) is delinquent on Federal debt. These conditions are generally consistent with those found in the current programs.

Project Eligibility (§ 5002.22)

This section identifies three criteria required for a project to be eligible to receive a grant under this part. To be eligible, a project must meet the criteria in this section that are applicable to the project, unless otherwise specified in subpart B for a specific program. For most programs, additional project eligibility criteria are found in subpart B for specific programs. Thus, for a project to be eligible for a grant under this part, the project must meet both the applicable criteria in this section (unless otherwise specified in subpart B) and the criteria in subpart B for the applicable grant program.

A grant application for a project that meets its applicable project eligibility criteria as specified in subparts A and B will not automatically receive grant funding. However, a project that fails to meet any one of its applicable project eligibility criteria would be automatically ineligible for consideration for a grant, regardless of the other attributes of the project.

Primarily serve a rural area

. The first criterion (§ 5002.22(a)), which applies to all projects and purposes, except those under the Value-Added Producer grant program (§ 5002.105) and the Rural Energy for America grant program (§ 5002.102), addresses the purpose of the project—the project must primarily serve a rural area. This criterion is generally consistent with what the current programs require, but, unless otherwise specified in subpart B, does not require the project to be physically located within a rural area.

For both the Value-Added Producer grant program and the Rural Energy for America grant program, the rule would require all projects to be located in a rural area. For the Rural Energy for America grant program, the Agency is proposing to continue the current requirement that the project must be located in a rural area. For the Value-Added Producer grant program, however, this is a new requirement from the current program.

Ownership and control requirement

. The second criterion (§ 5002.22(b)) applies only to those projects and purposes that acquire or improve real or personal property, unless otherwise specified in subpart B. This criterion requires the applicant to be the owner of the property or have leasehold interest acceptable to the Agency in the project and control the revenues and expenses of the project, including operation and maintenance.

Service area selection

. The third criterion (§ 5002.22(c)) applies only to those projects and purposes that are determined by a service area. This criterion specifies that the proposed service area of the project must be chosen in a way that no user or area is excluded because of race, color, religion, sex, marital status, age, disability, or national origin. This criterion, where applicable, is the same as found under the current regulations of the Community Facilities and the Water and Waste Disposal Facilities grant programs.

To reiterate, a project or purpose must meet each one of the project eligibility criteria applicable to it in order to be eligible for a grant. Meeting only some of the criteria is insufficient to be eligible. These criteria cannot be waived under the Exception Authority (§ 5002.4).

Ineligible Projects and Purposes (§ 5002.23)

This section identifies projects and purposes that are ineligible for grants under this part regardless of whether the project meets the conditions specified in subpart B and § 5002.22. These projects represent primarily an aggregation of projects and purposes already prohibited under the programs being included in today's proposed rulemaking. The Agency added to this aggregation a number of additional projects and purposes as ineligible, which are identified earlier in this preamble.

As also noted earlier in this preamble, the Agency will provide a notification as needed to identify additional projects or purposes that the Agency has determined are ineligible for grants under this part.

Applying for a Grant

Applying for a Grant (§ 5002.30)

This section discusses the submittal of preapplications and applications when applying for a grant. For most applicants, submitting a preapplication is optional, but is required by the Departmental regulation incorporated herein for certain government applicants based on criteria contained in the Departmental regulations. This section also points out that the submission of a preapplication, or the lack thereof, does not affect in any way the evaluation and scoring of the subsequent application, and applicants who submit a preapplication do not receive any priority for funding.

This section also contains requirements for the filing of preapplications and applications, including:

• When they are to be submitted;

• Where to submit them; and

• Their format.

Lastly, this section addresses

incomplete applications

. The Agency will reject incomplete applications. If the Agency receives an incomplete application, the Agency will notify the applicant of the elements that made the application incomplete. The Agency points out that applicants need to consider that applications must be submitted sufficiently ahead of the applicable application deadline to allow for Agency review, notification to the applicant of missing elements, and resubmittal of the application before the applicable application deadline. If a resubmitted application is received by the applicable application deadline, the Agency will reconsider the application.

Preapplications (§ 5002.31)

This section presents the requirements associated for submitting preapplications, and applies to both Nationally-competed grants and to State-allocated grants. Submittal of a preapplication or, in lieu of a preapplication, a written request for an eligibility determination, is optional unless otherwise required under the Departmental regulations (as defined in § 5002.2). In addition, all applicants (governmental and non-governmental) must comply with the provisions of the Departmental regulations when submitting a preapplication.

This section also points out that, unless the preapplication is required by department regulations, the Agency's assessment of applicant and project eligibility based on a preapplication is advisory in nature and does not constitute a formal determination by the Agency of either applicant or project eligibility. The formal determination of eligibility would be made once the application is received. If the preapplication is submitted because it is required by the Departmental regulations, the Agency will assess it in accordance with the Departmental regulations.

Applications (§ 5002.32)

This section identifies the application forms required for grant applications under this part and states that the Agency will make available to the public program-specific application packages, which will include the necessary forms and instructions for filing an application for the specific grant program. For some programs, additional application requirements are being proposed. These are found in subpart B and are discussed later in this preamble.

Finally, all applications must be consistent with Departmental regulations and must be submitted with the appropriate standard form (

i.e.

, forms in the SF 424 series).

Processing Applications

Processing Applications (§ 5002.40)

This section identifies the process that the Agency will use to review and process applications including the initial review of application, notification to the applicants of the Agency's review results, the resubmittal of applications, and subsequent ineligibility determinations. The processing of applications was discussed earlier in the preamble (see Section D, Item 5).

Application Withdrawal (§ 5002.41)

This section outlines actions to be performed by the applicant and the Agency if, during the period between the submission of an application and the execution of documents, the project is no longer viable or the applicant no longer is requesting financial assistance for the project. Upon such notification by the applicant, the Agency will either withdraw the application or, if it has already been selected for funding, rescind the selection of the application.

Application Scoring

Scoring Applications (§ 5002.42)

This section identifies the process that the Agency will use to score applications. As noted earlier in this preamble, the Agency will only score applications for which it has determined that both the applicant and

project are eligible and the project is feasible or is likely to be feasible.

As provided under § 5002.42(a), for grant programs with an open application period, all such applications received in a Federal fiscal year will be scored in the fiscal year in which it was submitted unless it is received after the last ranking date of the fiscal year for that program. Unless a program issues a notification indicating otherwise, this would be August 15. If the application is received after the last ranking date of the fiscal year, the Agency will score the application no later than the first ranking date of the next fiscal year. Such applications will be scored against the priority categories and their point values effective for the next fiscal year.

For grant programs with a specified application deadline, each such application received will be scored in the year it was received unless it is received after the applicable application deadline. Any application received after the application deadline for that program will not be considered by the Agency.

As stated in § 5002.42(b), the Agency will score applications for each grant program based on the priority categories and their associated points using the procedures specified in subpart B. This paragraph also states that the Agency will score applications based on the information supplied by the applicant at the time the applicant submits the application to the Agency.

Paragraphs (b)(1) and (2) of this section present, respectively, the inclusive list of Administrator and State Director priority categories that each grant program may consider when awarding points for these priority categories. The specific set of priority categories that each program will consider in scoring applications, and the points that can be awarded for these priority categories, are found in subpart B for each grant program.

Awarding Grants

Award Process (§ 5002.50)

This section describes the award process that will be used in selecting application for (potential) funding.

As stated in § 5002.50(a), the Agency will rank all scored applications for each program on or after each ranking date for that program to create a priority list of all scored applications for consideration for (potential) funding. (Note that the ranking dates for each program are found in subpart B.) If the ranking date falls on a weekend or a Federally-observed holiday, the next Federal business day will become the applicable ranking date. Finally, applications that are ranked in a given Federal fiscal year will be considered for selection for funding for the fiscal year in which the application was ranked.

Paragraph (b) of this section describes the process the Agency will use in selecting applications for funding or for potential funding. From a program's priority list, the Agency will select applications for funding using criteria specified in § 5002.50(b)(1)(i) through (iii) (which were discussed earlier in this preamble in Section D, Item 7) and any additional program-specific criteria found in subpart B for the grant program. Selection of applications for funding will also be conducted in a manner consistent with the Departmental regulations. For each application selected for (potential) funding, the Agency will notify the applicant in writing.

Paragraph (c) of this section identifies the process the Agency will use for applications that are selected for (potential) funding, but are not funded. This process was described earlier in this preamble in Section D, Item 7.

Lastly, § 5002.50(d) addresses the process the Agency will use if a State or local government raises objections to a proposed project under the intergovernmental review process and the objections are not resolved within 90 days of the Agency's selection of the application.

Grant Agreements and Conditions

This section addresses the grant agreement and conditions that recipients (and subrecipients) of grants are required to satisfy in order to receive the grant funds and to be complied with once the grant agreement has been signed and funds awarded.

Actions Prior to Grant Closing or Start of Construction, Whichever Occurs First (§ 5002.60)

This section addresses three areas—excess grant funds (§ 5002.60(a)), evidence and disbursement of other funds (§ 5002.60(b), and the acquisition of land, easements, water rights, and existing facilities (§ 5002.60(c)). The proposed requirements in this section are consistent with existing program implementation.

As stated in § 5002.60(a), which addresses excess grant funds, the Agency will reassess the applicant's funding needs whenever there is a significant reduction in project cost or a change in project scope. This paragraph identifies the factors and procedures that the Agency will use in making this reassessment and any attending decreases in funding needs. The Agency will deobligate any obligated grant funds not needed to complete the project.

Under § 5002.60(b), which addresses evidence of and disbursement of other funds, applicants expecting funds from other sources for use in completing projects being partially financed with Agency funds would be required to present evidence of the commitment of these funds from such other sources. An agreement should be reached with all funding sources on how funds are to be disbursed before the start of construction.

Lastly, under § 5002.60(c), which addresses acquisition of land, easements, water rights, and existing facilities, applicants would be responsible for acquiring all property rights necessary for the project and determining that prices paid are reasonable and fair. The Agency may require an appraisal by an independent appraiser or Agency employee. Requirements are specified for rights-of-way and easements (§ 5002.60(c)(1)), for title for land and for existing facilities (§ 5002.60(c)(2)), for water rights, and for lease agreements (§ 5002.60(c)(3)).

Grant Agreement (§ 5002.61)

The section identifies the documents and steps that the Agency will use to enter into a grant agreement with the applicant.

Section 5002.61(a) states that the Agency will notify each applicant whose application has been selected for funding using a letter of conditions. The letter of conditions will set out the conditions under which the grant will be made. After reviewing the conditions and requirements set forth in the letter of conditions, if the applicant agrees with those conditions, the applicant would be required to acknowledge, in writing, acceptance of the conditions. If, however, the applicant believes that certain conditions cannot be met, the applicant may propose alternate conditions to the Agency. The Agency must concur with any changes proposed to the letter of conditions by the applicant before the application will be further processed.

As provided under § 5002.61(b), the Agency will execute grant awards through the issuance of an Agency-approved grant agreement between the Agency and the grantee. In addition, other documents as identified by the Agency will be executed. The Agency notes that it will not advance any grant funds to the grantee until this agreement is signed by the grantee.

As provided under § 5002.61(c), the Agency will execute cooperative agreements through the issuance of an

Agency-approved cooperative agreement, or similar Agency-approved document, between the Agency and the recipient of the cooperative agreement. In addition, other documents as identified by the Agency will be executed. Finally, this paragraph states that there will be significant Agency involvement in cooperative agreements.

Lastly, § 5002.61(d) states that the Agency will disburse grant funds according to the letter of conditions or the grant agreement, as applicable.

Use of Remaining Funds (§ 5002.62)

This section provides requirements on the handling of funds that remain after all costs incident to the basic project have been paid or provided for as follows:

• Remaining funds are not to include grantee contributions (§ 5002.62(a)).

• Remaining funds may be refunded to each source in direct proportion to the amounts obtained from each source (§ 5002.62(b)).

• Remaining funds may be used for eligible grant purposes, provided the use will not result in major changes to the project, the purpose of the grant remains the same, and the project remains within its original scope (§ 5002.62(c)).

Under § 5002.62(d), grant funds not expended after being used for eligible grant purposes will be canceled. Before the Agency cancels these unexpended grant funds, the Agency will provide written notification to the grantee of the Agency's intent to cancel the remaining funds.

Post Award Activities and Requirements

Monitoring and Reporting Program Performance (§ 5002.70)

In § 5002.70(a), the Agency will monitor grantees to the extent necessary to ensure that facilities are constructed in accordance with Agency-approved plans and specifications and to ensure that funds are expended for approved purposes.

Section 5002.70(b) would require grantees to submit performance reports on a semiannual basis, unless otherwise specified in subpart B, and a final performance report. The semiannual performance reports are to include a comparison of accomplishments with the objectives stated in the application.

The grantee would also be required to submit additional reports that may be specified in the grant agreement, in a notification issued under § 5002.15, or as specified in subpart B.

Finally, the Agency is reserving the right to collect additional project and/or performance data for projects that have received grant funds.

Programmatic Changes and Budget Revisions (§ 5002.71)

In addition to the requirements specified in the Departmental regulations, this section would allow the Agency, at its sole discretion, to require an applicant to submit a new application if there is a change to the scope of the project whose application has been selected. If a new application is submitted, it would be re-ranked in accordance with this part.

Transfer of Obligations (§ 5002.72)

This section addresses the conditions under which an obligation of funds established for an applicant can be transferred to a different (substituted) applicant. The two conditions are:

• The substituted applicant is eligible, has a close and genuine relationship with the original applicant, and has the authority to receive the assistance approved for the original applicant (§ 5002.72(a)); and

• The need, purpose(s), and scope of the project for which the Agency funds will be used remain substantially unchanged (§ 5002.72(b)).

Grant Close Out and Related Activities

Grant Close Out and Related Activities (§ 5002.80)

This section addresses grant close out for all grants awarded under this part. In addition to requiring compliance with the Departmental regulations, this section allows the Agency to suspend or terminate a grant if the grantee fails to submit satisfactory reports on time under the provisions of § 5002.70(b).

Subpart B—Program-Specific Provisions

Subpart B presents the program-specific requirements for each of the programs covered by this subpart.

Community Facilities (§ 5002.101)

This section identifies program-specific requirements for community facility projects. The prospective grantee must comply both with subpart A provisions and the provisions in this section when seeking a community facilities grant. The program-specific provisions for community facility projects follow.

Applicant Eligibility

To be eligible for a community facilities grant, an applicant must not only meet the applicant eligibility criteria specified in subpart A, but also the applicant eligibility criteria specified in subpart B for this program. Specifically, the subpart B criteria (§ 5002.101(a)), which are the same as for the current program, are:

• The applicant must be a public body, such as a municipality, county, district, authority, or other political subdivision of a State; a non-profit corporation or association; or a Federally recognized Indian tribe; and

• The applicant must have significant ties with the local rural community. Such ties are necessary to ensure to the greatest extent possible that a facility under private control will carry out a public purpose and continue to primarily serve rural areas.

The proposed rule identifies two conditions under which ties with the local rural community can be evidenced. These conditions, which are not exclusive, are:

• Association with, or controlled by, a local public body or bodies or broadly based ownership and controlled by members of the community, and

• Substantial public funding through taxes, revenue bonds, or other local government sources, or substantial voluntary community funding such as would be obtained through a community-wide funding campaign.

These community tie provisions are the same as found in the current Community Facilities regulation.

Project Eligibility

To be eligible for community facilities grant funding, the project would have to meet the applicable project eligibility requirements specified in subpart A and be for an essential community facility (§ 5002.101(b)). Essential community facilities include, but are not limited to, fire, rescue, health and public safety facilities or equipment, telecommunications, supplemental and supporting structures for other rural electrification or telephone systems, the purchase of major equipment that in themselves provide an essential service to rural residents, and the purchase of facilities necessary to improve or prevent a loss of service.

In addition, subpart B requires community facility projects to:

• Be located in a rural area (except for eligible utility-type of facilities such as hydroelectric and telecommunication systems);

• Meet certain median household income and population requirements for those to be served by the project;

• Be based on satisfactory sources of revenue;

• Have an applicant who is responsible for operating, maintaining, and managing the facility and providing for its continued availability and use at reasonable rates and terms; and

• Be unable to finance the proposed project from their own resources or

through commercial credit at reasonable rates and terms.

These conditions are the same as found in the current grant program for community facilities.

Uses of Grant Funds

Subpart B for community facilities grants identifies additional eligible and ineligible uses of grant funds ((§ 5002.101(c) and (d), respectively). These uses are the same as found in the current implementation of the Community Facilities grant program, with the exception, as discussed below, of adding two additional eligible uses and identifying recreational facilities (except for community parks and community wellness centers) as an ineligible use. Eligible uses of grant funds (§ 5002.101(c)) include:

• Construction, enlargement, extension, or otherwise improvement of essential community facilities providing essential service primarily to rural residents and rural businesses;

• Construction or relocation of public buildings, roads, bridges, fences, or utilities and to make other public improvements necessary to the successful operation or protection of eligible facilities;

• Relocation of private buildings, roads, bridges, fences, or utilities, and other private improvements necessary to the successful operation or protection of eligible facilities;

• Facilities that have no more than 25 percent of the floor space occupied by Federal Agencies, State Agencies, or other ineligible entities or purposes, when these entities enhance the primary purpose of the facility; and

• Payment of certain expenses that are a necessary part of a project to finance eligible facilities.

The proposed rule also adds the following eligible purpose:

• Facilities that house State funded organizations that are typically housed in community funded facilities and offering services provided by an essential community facility.

Examples of ineligible uses of grant funds, which are listed in § 5002.101(d), are:

• Payment of initial operating expenses or annual recurring costs, including purchases or rentals that are generally considered to be operating and maintenance expenses (unless a Community Facilities loan is part of the funding package, in which case the grant would be part of a grant-loan combination and would not be subject to this proposed rule);

• Construction or repair of electric generating plants, electric transmission lines, or gas distribution lines to provide services for commercial sale;

• Refinancing of existing indebtedness;

• Payment of interest;

• Payment of any costs when the median household income of the population to be served is higher than specified percentages of the State non-metropolitan median household income;

• Recreational facilities, except for community parks and community wellness centers; and

• Payment for any purposes restricted by the Community Facilities direct loan program (see 7 CFR 1942.17(d)(2)).

One type of project that the Agency is adding to the list of ineligible projects under the Community Facilities grant program is recreational facilities, with two exceptions as discussed below. The Community Facilities grant program is, and has been, oversubscribed; that is, it receives more grant requests than it can fund. The Agency has found that the types of grant requests it receives are usually for projects that more directly address essential community needs, such as health and safety needs, than do most recreational facilities. Given this situation, it is highly unlikely that recreational facilities would be funded. Thus, the Agency is proposing to include recreational facilities, except as discussed below, in the list of ineligible projects. If the Agency does not explicitly exclude recreational facilities, except as indicated, applicants might be otherwise encouraged to submit applications with little chance of scoring high enough relative to other types of projects to be funded.

As noted above, the Agency is proposing to allow grants to be used for two types of recreational facilities. These are community parks and community wellness centers. Community parks could include sport fields that would be used for citizen-based sports (e.g., youth soccer league fields, community softball fields), but would exclude professional and semi-professional sports venues. Many communities have found that providing community parks and community wellness centers allow them to attract and, equally important, retain citizens. The Agency believes that these two types of recreational facilities provide an essential service to such communities and should be eligible for grants under the Community Facilities grant program.

Finally, with regard to recreational facilities that would be excluded from the Community Facilities grant program, the Agency recognizes that conditions may change in the future such that the Agency would accept applications for other types of recreational facilities. If this occurs, the Agency would propose to allow specific types of recreational facilities, through a proposed rulemaking change, to apply for a Community Facilities grant.

Funding Limitations and Matching Funds

The proposed rule incorporates the current Community Facilities grant program's maximum grant assistance and funding limitations (§ 5002.101(e)(1) and (e)(2), respectively). The proposed rule (§ 5002.101(e)(3)), consistent with the current program, allows funding of the balance of project costs to consist of other Community Facilities financial assistance, applicant contributions, and loans and grants from other sources. However, other Federal grant funds cannot be used as matching funds unless provide by other authorizing legislation.

Scoring Applications

The priority categories and points associated with those priority categories that would be used to score applications are identified in § 5002.101(f)(1) through (3), and are divided into program-specific priority categories and points, Administrator priority categories and points, and State Director priority categories and points. The maximum number of points an application can receive would be 100 points.

The program-specific priority categories and points are in § 5002.101(f)(1). These priority categories are the same as currently used in scoring community facilities grant applications, with two minor differences (i.e., the population levels for a couple of scoring criteria changed and under “Other priorities,” the proposed rule replaces conformance with State strategic plan with educational facility). The points associated with the priority categories, however, have been modified to total 70 points. The relative point values were not changed between priority categories.

The Administrator and State Director priority categories and points are identified in § 5002.101(f)(2) and (f)(3), respectively. With regard to Administrator priority categories and points, the Community Facilities grant program would allow the Administrator to award up to 20 points (compared to 10 points for the other grant programs) to improve the geographic diversity of awardees in a fiscal year. The current Community Facilities grant program identifies additional Administrator priority categories, which are generally

covered in subpart A of the proposed rule.

With regard to State Director priority categories, the Community Facilities grant program would use the State Director priority categories identified in § 5002.42(b)(2)(i) through (x) under subpart A and could award up to 10 points for the State Director priority categories. The proposed State Director priority categories expand upon and repackage those found in the current regulation.

Ranking Applications

Unless otherwise specified in a notification, the Agency will rank grant applications under this program four times per year (§ 5002.101(g)). The proposed ranking dates are (in the order in which they occur each fiscal year): December 15, March 15, July 15, and August 15.

Additional Criteria for Selecting Applications

Consistent with Departmental regulations, § 5002.101(h) would allow the Agency to consider in selecting applications for funding whether an application is a subsequent request for a previously approved project. If the lower scoring application is for the continuation of an existing funded project, the Agency may give the lower scoring application consideration ahead of a higher scoring application. However, if the request for additional grant funds is due to cost overruns, the Agency will give consideration to the lower scoring application only if the cost overrun is due to certain causes. Specifically, the cost overruns must be due to either high bids or unexpected construction problems neither of which can be reduced by negotiations, redesign, use of bid alternatives, rebidding, or other means. However, if the cost overrun exceeds 20 percent of the development cost at time of grant approval or if the scope of the original purpose has changed, the Agency would not use this criterion as a factor in choosing a lower scoring application over a higher scoring application. Such an application could still be selected for funding, but it would need to compete based on its ranking and other award criteria.

Public Information Process

This section (§ 5002.101(i)) would require all grants awarded under this section to comply with the public information process specified for community facilities direct loan program (see 7 CFR part 1942.17(j)(9)), as is currently required for community facilities grants. This public information process, in part, requires the applicant to inform the general public regarding the development of any proposed project.

Rural Energy for America (§ 5002.102)

This section identifies program-specific requirements for renewable energy system or energy efficiency improvement projects. The prospective grantee must comply both with subpart A provisions and the provisions in this section when seeking a Rural Energy for America grant. The program-specific provisions for renewable energy systems and energy efficiency improvement projects follow.

Applicant Eligibility

To be eligible for a Rural Energy for America grant, an applicant must not only meet the applicant eligibility criteria specified in subpart A of the proposed rule, but also the applicant eligibility criteria specified in subpart B for this program. Specifically, the subpart B criteria (§ 5002.102(a)) require the applicant to be an agricultural producer or rural small business. This requirement is the same as in the current program for renewable energy systems and energy efficiency improvement grants. However, unlike the current program, the applicant would no longer be required to demonstrate financial need to be considered an eligible applicant. This change was made as a result of the 2008 Farm Bill. As noted below, the Agency, however, is incorporating financial need as a scoring criterion.

Project Eligibility

To be eligible for a Rural Energy for America grant, a project would have to meet the applicable project eligibility requirements in subpart A and subpart B requirements (§ 5002.102(b)). Subpart B identifies two general types of projects—(1) those for renewable energy systems and energy efficiency improvements (§ 5002.102(b)(1)) and (2) those for feasibility studies (§ 5002.102(b)(2)).

Under § 5002.102(b)(1), the project must:

• Be for the purchase, installation, expansion, and/or other energy-related improvement of a renewable energy system or to make energy efficiency improvements;

• Be located in a rural area;

• Be for technology that is replicable and either pre-commercial or commercially available; and

• Have technical merit as determined by the Agency. If the Agency determines that the project is without technical merit, the project would be ineligible for a grant.

Under § 5002.102(b)(2), feasibility studies are eligible projects provided they are for a project that meets the criteria specified in § 5002.102(b)(1).

The project eligibility provisions in § 5002.102(b)(1), and those in subpart A for project eligibility, are found in the current regulations for this program. The project eligibility provisions in § 5002.102(b)(2) are being included in response to section 9007 of the 2008 Farm Bill.

Additional Preapplication and Application Requirements

In addition to the preapplication and application requirements specified in subpart A, subpart B for this program contains program-specific provisions for the submittal of preapplications and applications (§ 5002.102(c)). If an applicant elects to submit a preapplication, it must be received by the Agency on or before January 15 to be considered for funding by the Agency for that fiscal year.

For applications, the proposed rule would require applications to be received by the Agency on or before June 15 each year to be considered for funding for that fiscal year. Applications received by the Agency after June 15 would not receive consideration for funding for that fiscal year.

The proposed rule also allows for the submittal of lower documentation applications (referred to as “simplified applications” under the current program) for renewable energy systems and energy efficiency improvement projects. The proposed rule contains criteria to determine if an applicant is eligible to submit a lower documentation application. These criteria are:

• Total eligible project costs are $200,000 or less; and

• The proposed project uses either commercially available renewable energy systems or energy efficiency improvements.

In addition, the applicant would be required to agree to grant reimbursement after the project is completed. Project completion would be demonstrated when the applicant has provided a written final project development, testing, and performance report acceptable to the Agency.

The proposed criteria for submitting a lower documentation application are consistent with the current program. The current regulation, however, has additional criteria (e.g., addressing project construction, timeframe for project completion, and interim financing) that the Agency is not

including in this proposed rule. Such information would still be considered by the Agency in evaluating grant applications, but would use the application package for this program to ensure such information was included in the application.

As under the current program, it is the Agency's intent to allow lower documentation applications to exclude certain financial information and the business-level study for renewable energy systems from the application. In addition, the technical reports associated with lower documentation applications can be less detailed than other applications submitted under this program. For example, the technical reports for lower documentation applications are not required to provide authoritative evidence that project service providers have the necessary professional credentials or relevant experience to perform the required services. Instead, such technical reports are to list all key service providers.

Eligible Project Costs

Subpart B for Rural Energy for America grants identifies eligible project costs (§ 5002.102(d)(1) through (9)). These eligible project costs are the same as allowed under the current grant program for these types of projects.

The proposed rule would allow eligible project costs in mixed business and residential projects under certain circumstances. Eligible project costs would apply to a mixed business and residential renewable energy system or energy efficiency improvement project if the applicant is an agricultural producer. However, if the mixed business and residential project is from an applicant who is a rural small business, the proposed rule would allow these eligible project costs to apply to the applicant's project only if the residential portion of the project is less than 25 percent of the square footage of the entire project.

Funding Limitations, Matching Funds, Availability of Other Funding, and Grant-Loan Guarantee Combinations

The proposed funding limitation provisions (§ 5002.102(e)(1)), which are the same as in the current Renewable Energy Systems and Energy Efficiency Improvement regulation, would limit:

• The amount of grant assistance to an eligible project under this program to 25 percent of total eligible project costs, which are identified in § 5002.102(e); and

• The maximum amount of grant assistance to one individual or entity to no more than $750,000 in any one Federal fiscal year.

In meeting the applicant share of costs (§ 5002.102(e)(2)), other Federal grant funds and applicant in-kind contributions would not be allowed. Third-party, in-kind contributions, however, would be allowed, provided they do not exceed 10 percent of the matching fund requirement. Passive investor contributions would be acceptable.

Finally, the Agency seeks to leverage the amount of funds available to grantees by requiring certain applicants seeking grants of over $50,000 to seek loan guarantees before being considered for grant funds (§ 5002.102(e)(3)). In addition, the 2008 Farm Bill encourages the Agency to fund smaller grant requests. The Agency, therefore, is proposing provisions to make the program more available to those seeking smaller grants.

Specifically, if the size of the grant amount being requested in the application is $50,000 or less, the Agency will consider funding the application on its own merit, without consideration of other sources of funding. However, if the size of the grant amount being requested in the application is more than $50,000, the Agency will consider funding the application only to the extent that:

1. The applicant cannot obtain a loan guaranteed by the Agency for any portion of the project; or

2. The amount being requested in the grant application is necessary for the bank to make a guaranteed loan to the applicant.

If neither of the two situations described above exist, then the Agency will not consider the application under this rule.

As noted in this preamble, the proposed rule is specific to “grant only” projects. However, there is an associated issue with projects seeking a grant-loan guarantee combination under this program. In fiscal year 2008, the Agency began funding the grant portion of a grant-loan guarantee combination from the monies administratively allocated for loan guarantees. The Agency intends to continue this practice subject to future appropriations.

Grant Award Amount

As under the current grant program, the Agency will take into account certain criteria when determining the amount of a grant to be awarded (§ 5002.102(f)). The eight criteria being proposed are:

• The type of renewable energy system to be purchased;

• The estimated quantity of energy to be generated by the renewable energy system;

• The expected environmental benefits of the renewable energy system;

• The extent to which the renewable energy system will be replicable;

• The amount of energy savings expected to be derived from the activity, as demonstrated by an energy audit comparable to an energy audit under 7 U.S.C. 8105;

• The estimated length of time it would take for the energy savings generated by the activity to equal the cost of the activity;

• The expected energy efficiency of the renewable energy system; and

• The amount of energy output per amount of grant award.

Six of these eight criteria are in the current regulation. The seventh criterion, expected energy efficiency of the renewable energy system, is required under section 9007 of the Food, Conservation, and Energy Act of 2008 (2008 Farm Bill). The eighth criterion, energy output per amount of grant award, is being proposed as part of the results on an Office of Inspector General audit that recommended considering such a criterion for this program.

Scoring Applications

The priority categories and points associated with those priority categories that would be used to score applications are identified in § 5002.102(g)(1) and (g)(2), and are divided into program-specific priority categories and points and Administrator priority categories and points. The maximum number of points an application can receive would be 100 points.

The program-specific priority categories and points are in § 5002.102(g)(1). With two exceptions, these priority categories are the same as currently used in scoring renewable energy systems and energy efficiency improvement grant applications. One exception is the award of points for “hybrid technology” projects (i.e., a combination of two or more renewable energy technologies incorporated into a single project), which replaces the “previous grantee/borrowers” priority category. The other exception is the award of points for demonstrated financial need. Demonstrated financial need is being proposed as a scoring criterion because it is no longer an eligibility criterion and the Agency has determined that an applicant's financial need is an appropriate criterion for receiving a grant under this program.

The points associated with the priority categories, however, have been modified to total 90 points. The relative point values between priority categories have been modified slightly, with the

largest change associated with environmental benefits.

The Administrator priority categories and points are identified in § 5002.102(g)(2). The current program regulation does not address Administrator priority categories. The Rural Energy for America grant program would allow the Administrator to award an application up to 10 points in the following priority categories:

• Unserved or underserved areas;

• Geographic diversity;

• Emergency conditions;

• Public health and safety; and

• Presidential initiatives.

Ranking Applications

Unless otherwise specified in a notification, the Agency will rank grant applications under this program twice each year, on or after March 15 and on or after July 15 (§ 5002.102(h)).

Rural Cooperative Development Grants (§ 5002.103)

This section identifies program-specific requirements for rural cooperative development projects. The prospective grantee must comply both with subpart A provisions and the provisions in this section when seeking a rural cooperative development grant. The program-specific provisions for rural cooperative development projects follow.

Definition

The proposed rule provides a specific definition (§ 5002.103(a)) for the word “Center,” because this term has a unique meaning when used in the context of rural cooperative grants.

Applicant Eligibility

To be eligible for a rural development cooperative grant, an applicant must not only meet the applicant eligibility criteria specified in subpart A of the proposed rule, but also the applicant eligibility criterion specified in subpart B for this program. Specifically, this subpart B criterion (§ 5002.103(b)), which is the same as in the current Rural Cooperative Development grant regulation, requires that the applicant to be a non-profit organization or institution, including an accredited institution of higher education. Public bodies would not be eligible to receive grants under this section.

Project Eligibility

To be eligible for a rural cooperative development grant, a project would have to meet the applicable project eligibility requirements in subpart A and the following subpart B requirements (§ 5002.103(c)):

• Applications that focus on only one cooperative will not be considered for funding;

• Except for 1994 Institutions, the applicant must provide 25 percent of total project cost; and

• Applications that provide for the sharing of information among centers will not be considered for funding if more than 10 percent of the funding request is for the provision of sharing of information among centers.

The first and third project eligibility criteria are consistent with the current implementation of this program. The second criterion is being added as a result of the 2008 Farm Bill.

The Agency notes that it is proposing to include specifically in the regulation the “sharing of information among centers” as an eligible project purpose (§ 5002.103(c)(3)), but to limit the amount of funds that can be awarded to this purpose. The Agency is proposing to include sharing of information as an eligible project purpose because such sharing can assist other centers with proven strategies in cooperative development that could possibly be transferred to other areas of the nation. However, the goal of the Rural Community Development grant program is to facilitate the creation of jobs in rural areas through development of new rural cooperative, value added processing, and rural businesses. With a historically-limited funded program, the sharing of information among centers is not necessarily the highest priority for funding at the current time. Therefore, the Agency is proposing the 10 percent limit on the amount of grant funds that can be awarded to this purpose.

Additional Application Requirements

In addition to the application requirements specified in subpart A, subpart B for this program (§ 5002.103(d)) would require the applicant to include in the application a plan for the establishment and operation by the institution of a center or centers for cooperative development. This plan, which is required under the current regulations for rural cooperative development grants, must contain specific elements, which are statutorily required (§ 5002.103(d)(1) through (5)).

Uses of Grant Funds

Subpart B for rural cooperative development grants identifies eligible and ineligible uses of grant funds (§ 5002.103(e) and (f), respectively). These uses are generally consistent with those allowed under the current grant program (7 CFR 4284, subpart A) for these types of projects.

Grant Agreement and Conditions

Under paragraph § 5002.103(g), three conditions would affect the term of the grant agreement. The first two of the conditions (§ 5002.103(g)(1) and (2)) are required under section 6013 of the 2008 Farm Bill, while the third condition (§ 5002.103(g)(3)) is part of the current implementation of this program. These three conditions are:

• A grant awarded to a center that has received no prior funding under this section shall be made for a period of one year;

• If the Agency determines that it is in the best interest of the program, grants will be awarded for a period of more than one year, but not more than three years, to a center that has successfully met the parameters described in § 5002.103(i)(1)(i) through (v), as determined by the Agency; and

• The Agency will not approve requests to extend the grant period for more than 12 months.

Funding Limitations and Matching Funds

Under paragraph § 5002.103(h)(1), the maximum amount of a grant awarded under this section for 1994 Institutions would be no more than 95 percent of the total cost of the Center. The Agency would be prohibited from requiring a match of more than 5 percent of the total cost of the Center. This is consistent with current program requirements.

Paragraph § 5002.103(h)(2) addresses requirements associated with matching funds. The proposed matching fund requirements are the same as under the current program and address, in general, the form of the matching funds, the acceptable sources for matching funds, and the use of the matching funds.

Scoring Applications

The priority categories and points associated with those priority categories that would be used to score applications are identified in proposed § 5002.103(i)(1) and (i)(2), and are divided into program-specific priority categories and points and Administrator priority categories and points. The maximum number of points an application can receive would be 100 points.

The program-specific priority categories and points are in § 5002.103(i)(1). These priority categories are similar to those currently used in scoring rural community development grant applications, with some modification as required under section 6013 of the 2008 Farm Bill. Specifically, the priority categories of

“linkages” and “matching funds” have been removed, and a priority category for “networking and regional focus” has been added. In addition, the points associated with the priority categories have been modified to total 90 points. The relative point values were not changed between priority categories.

The Administrator priority categories and points are identified in § 5002.103(i)(2). The Administrator may award an application up to 10 points to improve the geographic diversity of awardees in a fiscal year.

Ranking Applications

Unless otherwise specified in a notification, the Agency will rank grant applications under this program once each year, on or after July 15 (§ 5002.103(j)).

Additional Criteria for Selecting Applications for Funding

If two projects obtain the same score, the Agency will select the project whose score for the five criteria identified in the authorizing statute for this program (§ 5002.103(i)(1)(i) through (v)) is higher (§ 5002.103(k)).

Distance Learning and Telemedicine Grants (§ 5002.104)

This section identifies program-specific requirements for distance learning and telemedicine projects. The prospective grantee must comply both with subpart A provisions and the provisions in this section when seeking a distance learning and telemedicine grant. The program-specific provisions for distance learning and telemedicine projects follow.

Definition

The proposed rule provides a specific definition (§ 5002.104(a)) for the term “Telecommunications or electric borrower,” because this term has a unique meaning when used i

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