the

OED policy that such financial assistance be generally limited to loan guarantees, rather than be in the form of direct loans. This policy derives from three factors: (1) The availability of direct loan funds from non-title VII funding sources, including commercial lending institutions; (2) "leveraging" effect of loan guarantees in attracting outside debt capital into the special impact area; and (3) direct loan programs impose a significant administrative burden on the CDC and require substantial staff resources to service the loans once they are approved.

(c) Finally, since the primary thrust of title VII is community economic development for low-income residents, rather than support to individual entrepreneurs, non-equity business programs assisted with section 712 funds should also further the title VII objective of promoting ownership or employment opportunities for low-income special impact area residents.

(d) Accordingly, CDC use of financial assistance under section 712 for non-equity business programs is subject to three basic policy limitations: (1) Such assistance shall be accorded a lower priority than, and shall not supplant opportunities for equity investments; (2) except in unusual circumstances direct loans may not be made to non-equity business programs from CDC investment capital funds, and only then as approved by OED on a case by case basis; and (3) financial assistance to non-equity business programs, whether in the form of direct loans, loan guarantees, or some other debt captial mechanism, may not be provided from CDC investment capital funds unless such assistance will provide ownership or employment opportunities to low-income residents of the special impact

area.

§ 1076.20-4 Procedures, requirements, and limitations.

(a) No CDC administrative funds under section 712 (cost categories other than 2.5) may be used for financial assistance, whether direct loans or loan guarantees, to non-equity business programs.

NOTE: This does not preclude the use of administrative funds for technical assistance,

e.g., by CDC staff, to non-equity business programs.

(b) Except as provided in any venture autonomy agreement approved by OED, or as provided in any revolving loan guarantee funds approved by OED, no CDC investment capital funds (cost category 2.5) may be used for any individual loan or loan guarantee for any non-equity business program without prior written approval by OED.

(c) In requesting OED approval for any non-equity business program, whether it be an individual loan, individual loan guarantee, or revolving loan guarantee fund, the CDC must demonstrate how the program will directly benefit low-income residents of the special impact area, by providing either ownership or employment opportunities, or both. The CDC must also demonstrate, in requesting approval for any loan guarantee, that loans from commercial or other public sources would not be available without such guarantee. The CDC must also demonstrate, in requesting approval for any direct loan, that either loans from commercial or other public sources would not be available even if the CDC were to guarantee such loans, or that control rights necessary to promote the purposes of title VII would be obtainable only through a direct loan.

(d) No loan guarantee may exceed 50% of the loan(s) to any recipient, thereby providing at a minimum twofor-one leverage. Where the CDC can devise effective relationships with the lending institution and/or SBA, guarantees of less than 50% providing much greater leverage, should be arranged. Subpart 1076.41-Waiver of Non

Federal Share of Program Costs for Certain Title VII Programs (CSA Instruction 7641

grams

AUTHORITY: Sec. 602, 78 Stat. 530; 42 U.S.C.

2942.

SOURCE: 44 FR 56586, Oct. 1, 1979, unless otherwise noted.

§ 1076.41-1 Applicability.

This subpart applies to all grantees financially assisted under title VII of the Economic Opportunity Act of 1964,

as amended, if such assistance is administered by the Community Services Administration.

$1076.41-2 Effective date.

October 16, 1972 (CSA Instruction 7641-1).

§ 1076.41-3 Purpose.

The purpose of this subpart is to set forth the criteria for waiving the requirement of non-Federal share of program costs for programs carried out with financial assistance pursuant to title VII of the Economic Opportunity Act of 1964, as amended (EOA).

§ 1076.41-4 Background.

(a) Section 714 of the EOA prescribes two types of non-Federal share requirements. The first requirement relates to the cost of the program including costs of administration. Section 714 permits the Director of CSA to issue regulations establishing objective criteria under which more than 90 per cent of the cost of title VII program may be supported by Federal Assistance. This subpart sets forth those criteria and is limited to the program costs non-Federal share requirements.

(b) The second non-Federal share requirement in section 714 states that where capital investment is required under a contract with a private organization (other than a non-profit organization) the Federal share of such capital investment shall not exceed 90 per cent. That requirement is not affected by this subpart.

1076.41-5 Policy.

(a) General. Each recipient of financial assistance under title VII is ordinarily required to provide from nonFederal sources 10% of the cost of operating its program. However, under certain circumstances this requirement may be waived. A request for waiver shall be submitted by the applicant or recipient's Chairperson of the Board or comparable official to the Associate Director of Economic Development or other officer having authority to make the grant or otherwise furnish the financial assistance in question (hereinafter referred to as the responsible officer) and a determination shall be made by such officer.

(b) Operating program. (1) The requirement for a non-Federal share of program costs shall be waived in whole or in part where it is shown to the satisfaction of the responsible officer that:

(i) The applicant for financial assistance or recipient of financial assistance has made a vigorous effort to raise the non-Federal share but has not been and will not be able to do so in whole or in part.

(ii) The per capita income in the community served by the program is less than one-half the per capita income in the U.S. as a whole. (On the basis of the 1970 Census, one-half the per capita income was $1570 and in February 1972, one-half the estimated per capita income in the U.S. as a whole was approximately $1800). For programs operating in Alaska, the figure representing the per capita income for the United States as a whole shall be adjusted upward by 25% and in Hawaii by 15% to allow for the substantially higher cost of living in those States.

(iii) If the per capita income figures submitted in support of the request for waiver are other than direct U.S. Census data, Census data shall be shown. The Officer determining the request for a waiver may request a full description of the procedures used in developing such data.

(c) Support Programs. The requirement of non-Federal share program costs shall also be waived in whole or in part for programs funded to conduct evaluations or research or to furnish support services to other title VII programs or to CSA, the Department of Commerce, the Department of Labor or the Department of Agriculture, provided that the applicant for financial assistance has made a vigorous effort to raise the non-Federal share but has not been and will not be able to do so in whole or in part.

(d) Procurement Contracts. No nonFederal share is required for procurement contracts. Accordingly no waiver is needed.

§ 1076.41-6 Valuation of non-Federal share.

Non-Federal contributions may be in cash or in-kind, fairly evaluated, including but not limited to plant, equipment and services. See part 1050 of this

150-173 0-94-20

chapter, Subpart F-Cost Sharing and Matching (CSA Instruction 6800-6).

Subpart 1076.50-Rural Development Loan Fund

AUTHORITY: The Omnibus Budget Reconciliation Act of 1981, Pub. L. 97-35, secs. 623 through 624, 42 U.S.C. 9812, and sec. 681, 42 U.S.C. 9910.

SOURCE: 48 FR 57491, Dec. 30, 1983, unless otherwise noted.

§ 1076.50-1 Applicability.

(a) This regulation implements Public Law 97-35, sections 623 through 624, 42 U.S.C. 9812, and section 681, 42 U.S.C. 9910. It governs the use of RDLF funds obligated by CSA in FY '80 and '81 and by HHS in FY '84 and subsequent years unless amended or superseded by new regulations. It does not, however, negate legal contractual arrangements that CSA or intermediaries operating relending programs have already entered into with borrowers under the previous regulations.

(b) For example, it does not change the interest rates of loans already made to existing intermediaries, nor does it change the conditions or terms of sub-loans made by intermediaries under the previous regulations. Existing intermediaries however, must abide by the requirements of this rule in the making of all future RDLF sub-loans, such as: determining an applicant's eligibility, whether the proposed activities and priorities are appropriate, and the terms or conditions under which loans may be made. They must also abide by the relevant sections of §1076.50-8 through §1076.50-13 in the administration of all sub-loans, past and future, and in accounting to OCS for such administration. Generally, where loan agreements between a recipient and CSA/OCS or other funding documents refer to RDLF regulations, that reference will mean this rule, when it becomes final, rather than the previous regulations.

(c) In the event that any provision of applicability to previous RDLF loan recipients is found to be invalid, that finding shall not affect any other provision of this regulation.

§ 1076.50-2 Definitions.

(a) Business facility. A commercial or industrial enterprise operated primarily for the profit of its owners and which is located in a rural area as defined in paragraph (n).

(b) Community-based organization. A private non-profit organization that serves a local community and that has a governing body of which at least 50 percent of the members are residents of that community.

(c) Community development. Activity aimed at (1) stimulating the creation of commercial and industrial enterprises which result in increased income, ownership and employment opportunities for low-income rural residents; or (2) improving the physical infrastructure of a rural community, such as land development, constructing or improving community facilities, such as water and waste water facilities, etc.

(d) Community development corporation. Any non-profit organization responsible to residents of the area it serves which has received financial assistance under title VII of the Economic Opportunity Act of 1964 or part 1 of the Community Economic Development Act of 1981 (42 U.S.C. 9801) and any organization more than 50 percent of which is owned by such an organization, or otherwise controlled by such an organization, or designated by such an organization for the purpose of this subchapter (see 42 U.S.C. 9802).

(e) Community facility. A facility designed to aid in the development of private business and industry in rural areas such as land acquisition and site preparation of land for industrial parks, installation of water and waste water facilities necessary for the establishment or expansion of business facilities, access roads to industrial sites, etc.

(f) Cooperative. An incorporated or unincorporated association, the majority of whose members are low-income rural residents, whose members have one vote each, and which conducts for the mutual benefit of its members such operations as producing, purchasing, marketing, processing or other activities aimed at improving the income of its members as producers or their purchasing power as consumers.

(g) Economic development. Activity aimed at increasing income, ownership or employment opportunities for lowincome rural residents.

(h) Indian Groups. Public and private agencies including, but not limited to: governing bodies of any Indian tribe, band, nation, or other organized group or community, including Alaska Native villages, a consortium of villages, or regional corporations recognized by the Secretary of the Interior as having special rights and responsibilities, and as eligible for the unique services provided by the United States to Indians because of their status as Indians; any organized group or consortium of such Indian tribes; organized groups of Indians that the State in which they reside has determined are Indian tribes; and Indian organizations in rural non-reservation areas.

(i) Intermediary. An organization provided a loan by the Department for the purpose of relending the funds to other eligible subrecipients.

(j) Low-income. The level of income of a person or family which is at or below the Poverty Guidelines as published periodically in the FEDERAL REGISTER by the Secretary.

(k) Ownership. Possession of incomeproducing property. Such possession may be in the form of (1) ownership, by an entrepreneur, of the business he/she operates (e.g., a sole proprietorship) or ownership by a group of enterpreneurs, (e.g., a partnership); (2) ownership, by an investor, of shares of stock issued by a corporation (with the investor's voting power determined by the number of shares he owns); (3) ownership, by an investor, of shares in a cooperative (with control based, not on the number of shares owned, but on the one-member-one-vote principle).

(1) Private non-profit. An organization incorporated under not-for-profit laws and not part of or controlled by a public agency.

(m) Public agency. Any State or local government, or any branch or agency of such government having the authority to act on behalf of that government, borrow funds, and engage in activities eligible for funding under this subpart.

(n) Rural. That land area of a State or Territory that is not within the

boundary of any city or town with a population greater than 25,000 nor within its immediately adjacent urbanized area with a population density of more than 100 persons per square mile, as reflected by the latest Decennial Census.

(0) Secretary. The Secretary of Health and Human Services (HHS) or designee. (p) Supportive organization of cooperatives. Any organization whose purpose is to provide economic, technical, or financial assistance to cooperatives.

§ 1076.50-3 Purpose of the RDLF.

(a) The purpose of the Rural Development Loan Fund is to alleviate rural poverty by promoting economic and community development activities which result in expanded opportunities for low-income rural residents to increase their ownership of, employment in, or income from local economic enterprise.

(b) In accomplishing this purpose, the program seeks to provide loans and loan gurantees at the lowest reasonable cost; to leverage other governmental and private resources in a coordinated attempt to arrest tendencies toward dependency, chronic unemployment, and community deterioration; and to provide adequate technical assistance to assure the success of projects funded under the program.

§ 1076.50 4 Organizations eligible for financial assistance under this program.

The Department will provide financial assistance in the form of loans and/ or loan gurantees. Such assistance may be made available directly to eligible applicants or indirectly through intermediary organizations which operate lending programs. Those eligible to receive assistance under this program

are:

(a) Low-income rural families or individuals;

(b) Businesses organized for profit which are controlled by low-income residents or which provide for significantly increased income, ownership and/or employment opportunities for low-income rural residents;

(c) Community development corporations;

(d) Private non-profit organizations;

(e) Local cooperatives;

(f) Designated supportive organizations of cooperatives eligible for financial assistance under subchapter A of subtitle A of title VI, Public Law 97-35; (g) Public agencies; and (h) Indian groups.

§ 1076.50-5 Eligible activities.

(a) Loans or guarantees made under this program may be used only to finance the establishment, expansion or preservation of business facilities or the undertaking of community development projects in rural areas. Examples of such activities are:

(1) The establishment or expansion of individual or family-owned businesses in rural areas engaged in various commercial or industrial activities, such as farming, manufacturing, construction, sales, service, etc.;

(2) The establishment or expansion of cooperatives in rural areas engaged in the production and marketing of farm products, equipment or supplies; the manufacture and sale of industrial, commercial or consumer products; or the provision of various services; etc.

(3) The undertaking of community development projects aimed at improving the economic conditions of a community such as:

(i) The creation of industrial parks; (ii) The improvement of community facilities, such as water and waste water facilities essential to the establishment or expansion of businesses;

(iii) The establishment of businesses in "enterprise zones", or the improvement of the infrastructure in such zones, etc.

(b) Applicants seeking loans to carry out community development activities, such as those described in (a)(3) above, should consult with appropriate local governments during the planning and application process.

(c) Loans or guarantees may be made for the purchase of land and buildings, machinery and equipment, and for working capital.

(d) Loans or guarantees will not be available for the financing of social services, such as job training, day care, health services, etc.

(e) Loans or guarantees under this program generally will not be made for the refinancing of existing debt.

Relenders must obtain prior written approval from the Department for any exceptions to this policy.

(f) Financial assistance shall be only in the form of loans or loan guarantees. No other form of financial assistance is authorized, including provision of collateral, assignment of assets, compensating balances, or co-signing without specific prior written approval from the Department. No assets of the RDLF program may be pledged, assigned, mortgaged, or otherwise encumbered or devoted outside the RDLF program, or for non-RDLF activities of a recipient.

§1076.50-6 Priorities.

In making financial assistance available to eligible organizations for business facilities and community development projects, the Department and intermediaries operating relending programs will give priority to projects which:

(a) Provide the greatest number of jobs to and/or significantly increased income and ownership opportunities for low-income rural residents;

(b) Are part of a coordinated community, regional or statewide effort; (c) Employ a strategy of significantly leveraging or mobilizing other resources;

(d) Demonstrate a positive cost/benefit ratio; and

(e) Are managed by persons who have been successful in operating profit or non-profit enterprises.

§ 1076.50-7 Terms of loans/guarantees.

(a) No loans or guarantees shall be extended for a period exceeding 30 years.

(b) No loans or guarantees will be extended to an applicant unless:

(1) There is reasonable assurance of repayment of the loan based on the fiscal and managerial capabilities of the applicant;

(2) The loan is not otherwise available on reasonable (i.e., usual and customary) terms from private sources or other Federal, State or local programs; and

(3) The amount of the loan, together with other funds available, is adequate to assure completion of the project or