commitments or otherwise from industry and/or governments, that major employment generators will locate within the Project at an early development stage specified in the plan for development of the Project.

(2) New-towns-in-town. In the case of new-towns-in-town, as described in § 720.12(b)(3), prior to issuance of guarantees, there shall be such local government commitments of funds and other support for basic infrastructure and other municipal services as may be necessary to provide reason-, able assurance of successful development of the Project.

§ 720.25 Financial plan.

(a) General requirement. A Project must be developed according to a Financial Plan which sets forth, in a format prescribed by the Secretary, the projected revenues and costs of the Developer, any community association as may be established pursuant to §720.14(d), and each Subsidiary over the development period. The Financial Plan must demonstrate compliance with all of the criteria and standards of these Regulations and shall contain or provide for:

(1) An optimal financial strategy based upon consideration of alternative assumptions with regard to costs, market demand, interest rates and other factors critical to the Project;

(2) Projections of the sources and uses of cash for each year of the development period (based upon the planned development of the Project), projections of the financial position statements and statements of operations for short-term development and an analysis of the escrow funds and security requirements;

(3) Achievement of a break-even point or a positive cash surplus after all costs, debt and borrowings have been repaid and assurance that investments in the land will be recovered by the end of the development period;

(4) An appropriate allowance for contingencies;

(5) Separate financial projections for all community associations and Subsidiaries which demonstrate the ability of such entities to attain financial self-sufficiency, based upon the devel

opment of regular and recurrent reve

nue.

All assumptions of the Financial Plan shall be set forth with specificity and fully documented in a format prescribed by the Secretary.

(b) Revenues. Revenues shall include funds derived from land sales and all other sources. Land sales revenues shall be reflected in a marketing schedule which is based upon the criteria and factors set forth in § 720.24. Projected land sales revenues may assume reasonable increases in property value due to population pressures and growth of the Project. Revenues should reflect actual cash receipts expected in any given year based on actual and anticipated contracts of sale and financing arrangements. Other sources of revenues may include, but shall not be limited to, rebates from utility companies, sale of land not within the Project, income from the sale of timber, minerals and agricultural products, and rental income from the use of Project property.

(c) Costs. Costs shall include the estimated Actual Cost of Land Acquisition and Land Development. Costs of the Developer other than the Actual Cost of Land Development and Land Acquisition shall be identified as being for Non-Project Activities and must be specifically approved by the Secretary. The costs of Land Acquisition shall be based on the terms of actual purchase agreements and options as well as on reasonable terms of contracts for anticipated land purchases. Actual Cost of Land Development shall be supported by detailed engineering estimates or recent bid prices for comparable work in the area where the Project is located. The Actual Cost of Land Development and Land Acquisition shall also include the cost of providing those public facilities and municipal services normally funded by local government or otherwise which are consistent with the plan for development of the Project and which must be or are reasonably expected to be funded by the Developer, any community association, or any Subsidiary. The costs of such facilities and services shall be supported, among other things, by a

projection of the total cost of providing such public facilities and services.

(d) Determination of eligibility. In those instances where the Developer has requested only a Determination of Eligibility, the determination that the Project is economically feasible will be based on an analysis of the Financial Plan which takes into consideration any financial resources or support to be provided. In such cases, the Financial Plan need not include the extensive documentation required for a loan guarantee. In lieu thereof, the Secretary will specify the type of documentation needed for each Project.

§ 720.26 Other financial review criteria. The following other financial review criteria must be met.

(a) Experience. The Developer and its principals must be determined by the Secretary to have the experience appropriate to develop the Project based upon consideration of credit ratings, earnings history, previous and current lender and investor relationships and growth prospects of all other ventures sponsored by the Developer and its principals.

(b) Borrowings. The Developer shall demonstrate (1) its ability to obtain any necessary borrowings within the next two-year period, and (2) the extent to which it is likely to obtain any necessary borrowings beyond such two-year period.

(c) Equity. There shall be an equity contribution (including loans to the Developer that are subordinated, both as to principal and interest, to the Government guaranteed debt obligations) in an amount sufficient to assure Project liquidity and to assure that the Developer and its principals have sufficient financial incentive in the Project to complete it in accordance with the Development Plan. The amount of equity required in relation to the total amount of funds needed for development of the project shall be determined by the Secretary.

(d) Agreement and compliance. The Developer and other Persons shall, as appropriate, comply with the provisions of § 720.27 through § 720.34.

(e) Strategic risk factors. The Secretary must be satisfied with certain

strategic risk factors including, without limitation: completeness of land assembly; competitive location of large parcels of land under single ownership or control; dependence of the Project on an interstate highway or other major public improvement that is not yet in place; the structure of local government; diversity and favorable recent history of local building industry; availability and interest of successful small residential developers; and availability of local sources or outlets of mortgage credit for homeowners.

(f) Developer's statement of estimated disbursements. Prior to the issuance of guaranteed debt obligations, the Secretary must approve the Developer's statement of estimated disbursements from the Escrow Account.

§ 720.27 Amount of Federal guarantee.

(a) General formula and limitations. The maximum outstanding indebtedness which may be guaranteed under the Act for any Project shall be as follows:

(1) Public developer. In the case of a Public Developer, an amount not exceeding 100 percent of the sum of the Secretary's estimate of the value of the real property before development and the estimated Actual Cost of the Land Development, or

(2) Private developer. In the case of a Private Developer, an amount not exceeding the sum of 80 percent of the Secretary's estimate of the value of the real property before development and 90 percent of the estimated Actual Cost of the Land Development. In no event shall the principal amount of the outstanding debt obligations guaranteed under the Act with respect to a single Project exceed $50 million.

(b) Future transactions. The value of land which is yet to be acquired and the Actual Cost of Land Development which is yet to be incurred at the time an offer of commitment is made, may be included as a basis for determining the maximum commitment.

(c) Prior transactions. To assist the Secretary in the determination of the value of the real property before development, the Developer shall notify the Secretary of all transactions in

be employed within or near the Project, based upon the employment plan and program specified in paragraph (c)(3) of this section and using methods of computation acceptable to the Secretary;

(ii) Current and projected need for housing by age, household size and income for the region and market area;

(iii) Impact of any commitments which may be required of the Developer, in connection with the provision of low and moderate income housing, upon the economic feasibility of the Project; and

(iv) Other factors (including, but not limited to, marketing, economic and social factors) as the Secretary may determine to be relevant to the overall success of the Project and its consistency with the purposes of the Act.

(2) Periodic readjustment of goals. The initial housing goals shall be subject to periodic readjustment by the Secretary based upon consideration, in addition to factors specified in paragraph (b)(1) of this section, of the following factors:

(i) Past performance and experience; (ii) Changes in the income of low and moderate income Project residents;

(iii) Changes in supply and demand factors; and

(iv) Such other factors as the Secretary may determine to be appropriate.

(3) Definition of low and moderate income. As used in this Section, lowincome refers to the income levels of families classified as "very low-income families" eligible for assistance under Section 8 of the United States Housing Act of 1937 (42 U.S.C. 1437(f)), or under any program designated as a successor program by the Secretary, or, if no such program exists, families within income levels to be established by the Secretary. Moderate-income refers to the income levels of families classified as "lower income families" eligible for assistance under the said Section 8 program, or under any program designated as a successor program by the Secretary, or, if no such program exists, families within income levels to be established by the Secretary. Currently effective income levels

shall be provided by the New Communities Administration upon written request.

(c) Program for achieving housing goals. The Project must provide for a program acceptable to the Secretary which provides reasonable assurance that the housing goals established pursuant to paragraph (b) of this section will be met. Such program shall include the following elements:

(1) An obligation of the Developer to develop land in accordance with the plan, to use its best efforts to sell such land and, in connection with the sale of land, to bind the buyer thereof to use such land to provide housing in accordance with the plan;

(2) A commitment by the Developer to undertake such other actions as may be determined by the Secretary to be necessary to assure achievement of housing goals, including:

(i) Seeking, or causing others to seek, such assistance as may be available from Federal, State and local low and moderate income housing programs;

(ii) Causing, if economically feasible, unassisted housing for low and moderate income persons to be provided;

(iii) Reducing lot prices and making other financial contributions, subject to overall limitations of the latest approved Financial Plan;

(iv) Requesting and assisting officials of local political jurisdictions to take such action as may be needed to achieve housing goals;

(v) Complying with applicable local property and construction standards and FHA Minimum Property Standards; (MPS) (HUD 4900.1, 4910.1, 4920.1 and 4930.1); and

(vi) Assuring that adequate counseling services related to home maintenance and operation are provided to assist low and moderate income persons residing in the Project.

(3) The Project shall provide for a program, consistent with market considerations as set forth in § 720.24, to attract a mix of commercial, industrial and institutional enterprises which will offer employment opportunities for persons with a broad range of skills and other qualifications, including, to the maximum extent feasible,

employment opportunities for persons of low and moderate income.

(d) Federal housing assistance prcgrams. It is the policy of the Secretary to encourage and assist, within budgetary constraints, the construction of a substantial number of housing units for persons of low and moderate income in approved Projects. Accordingly, to the extent determined by the Secretary to be necessary, taking into consideration among other things the elements set forth in paragraph (c)(2) of this section, to meet the then current annual housing goals (as determined under paragraph (b) of this section, for provision of low and moderate income housing within the Project), the Secretary shall assure that approved Projects receive a sufficient share of available federal assistance during a given fiscal year.

$720.16 Governmental reviews and approvals.

The Developer shall secure all Federal, State and local governmental reviews and approvals required by law or determined by the Secretary to be necessary for initiating and continuing the Project. To the extent significant Project activities will require or depend upon future approvals that are necessarily unobtainable at the time an offer of commitment is made or a Project Agreement is executed, reasonable assurance shall be provided that such approvals will be secured in a timely fashion, as needed. Unless otherwise specified by the Secretary, such assurance shall include the adoption by the governing body of the unit of general local government of a resolution in a form satisfactory to the Secretary, approving the general plan for the development of the new community. In addition, before an offer of commitment shall be accepted, the land proposed to be developed in the initial stage shall be subject to specific zoning which permits development of such land in accordance with the Project plans.

§ 720.17 Environmental quality.

(a) General requirement. The Project must be determined by the Secretary to contribute to the preservation

or enhancement of desirable aspects of the natural and urban environment.

(b) Planning and execution. All factors affecting the environment must be considered at every stage of planning and execution of the Project, including site selection and suitability analyses, land use planning, urban design and architecture, engineering, construction and management. The effects of and on probable surrounding development shall also be considered.

(c) Factors to be considered― (1) Environmental components. The components making up the environment, which must be taken into account in preparing applications and in determining whether the Project meets environmental requirements, include without limitation: air, water, energy, biota, geology, historic resources, soils, facilities and services, special physical features, climate, safety, physical and mental health, aesthetics, comfort and sense of community.

(2) Relevant statutes and regulations. Project planning and development must be determined to be in compliance with all applicable Federal, State and local laws and ordinances including, but not limited to, the following Federal statutes, regulations and guidelines which establish substantive environmental requirements and standards:

(i) National Flood Insurance Act (42 U.S.C. 4001 et seq.);

(ii) National Historic Preservation Act of 1966 (16 U.S.C. 470);

(iii) Clean Air Act (42 U.S.C. 1857 et seq.);

(iv) Water Pollution Control Act (33 U.S.C. 1251 et seq.);

(v) HUD Circular 1390.2, Noise Abatement and Control;

(vi) Archaeological and Historic Preservation Act of 1974 (16 U.S.C. 469);

(vii) Executive Order 11593 ("Protection and Enhancement of the Cultural Environment");

(viii) Advisory Council Procedures on Historic Preservation (36 CFR Part 800);

(ix) Safe Water Drinking Act of 1973 (21 U.S.C. 349; 42 U.S.C. 201, 300f300j-9);