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tion, or other public body (including sufficient credit to finance the local an intermunicipal agency of two or share of the project(s). Such documenmore of the foregoing entities) created tation shall include: by or pursuant to State law, or an (i) The results of any public solicitaIndian Tribe or an authorized Indian tion for bids for obligations to finance tribal organization, having jurisdiction the local share or (ii) a certification, over disposal of sewage, industrial

acceptable to the Administrator, from wastes, or other wastes, or a designat- municipal bond underwriter(s), ed and approved management agency which submitted or might normally under section 208 of the Act. This defi- have submitted a bid for the obliganition excludes a special district, such tions. An applicant with an obligation as a school district, which does not

to pay the local share not in excess of have as one of its principal responsibil- $250,000 may obtain certification from ities the treatment, transport, or dis

two or more local or regional banks to posal of liquid wastes.

meet paragraph (c)(1)(ii) of this sec(i) Reasonable terms. Rates deter

tion. An applicant representing commined by the Secretary of the Treas

munities with a population of 10,000 ury with relationship to the current

or less must also submit a written average yield on outstanding market

statement from an authorized repreable obligations of municipalities of

sentative of the Farmers Home Adcomparable maturity.

ministration that grants, loans, or loan 8 39.110 Application.

guarantees are not available from

Farmers Home Administration in an (a) Who may cpply. A public body

adequate amount or within a reasonawhich has applied for a grant under

ble time, as determined by the AdminTitle II of the Act (including grantees istrator. whose projects are eligible for reim

(2) Ability to repay. The application bursement under section 206 of that

for a loan guarantee shall be accompatitle) or which has committed itself to

nied by an official statement intended finance the local share of any

to provide EPA with the information project(s) for which a grant has been

needed to reach an informed judgment awarded, or for which an application is

as to whether there is reasonable asbeing processed, may apply through the State agency to the appropriate

surance of repayment. The official

statement must conform to the guideRegional Administrator for a loan and

lines for such statement which are the commitment to guarantee such loari to finance the local share of such

available to applicants from the EPA

regional office upon request. project. (b) Financing. Applications for loan

(3) Legal authority of applicant. The guarantees will be limited to:

application shall be accompanied by a (1; Financir:g that portion of the

legal opinion establishing that the aplocal share for which permanent fi

plicant has legal authority to obligate nancing has not been arranged.

itself for payment of the local share, (2) Refinancing that portion of the

to comply with the loan conditions, local share of those projects on which

and to issue the obligations, and that construction has not been completed

the obligations will be legal and bindand for which the public body initially

ing obligations. held a public solicitation on a bond (4) Assurances. The application shall issue, received no bids, and subse- be accompanied by assurances set quently accepted or negotiated financ- forth in an ordinance or other eviing at interest rates greater than 10

dence of authority acceptable to the percent.

Administrator that it can and will (c) Application requirements. The comply with all of the conditions set application shall include documenta- forth in 39.115. tion of the following:

(d) Fees. The following fees will be (1) Inability to obtain necessary fi- charged in order to make the program nancing. The applicant shall docu- self-sustaining. These fees may be rement that it is unable to obtain on rea- vised from time to time as determined sonable terms as defined in § 39.105(i) by the Administrator.

(1) Application processing. EPA will charge a non-refundable minimum fee of $1,000 or Yo of one percent of the loan amount, whichever is greater, but not to exceed $25,000 for processing applications. This fee will be submitted with the application and will be retained by the EPA whether or not a loan is consummated.

(2) Fee for issuance of a commitment to guarantee. A fee will be charged for the issuance of a commitment to guarantee a loan. This fee will be 42 of 1 percent of the principal amount of the loan, and shall be placed in a contingency reserve to offset defaults. This fee is contingent upon the loan being obtained by the applicant and is payable within 30 days of the date of loan approval.

(e) Format. The Administrator may, from time to time, prescribe a form or format for the submission of the application or any portion thereof.

8 39.115 Conditions of loan guarantee.

Any loan guarantee made pursuant to this part shall be subject to the following conditions:

(a) Step 1 or Step 2. Each public body applying for a loan guarantee for the local share of Step 1 or Step 2 costs must assure that:

(1) It will repay the loan using all local resources legally available; and

(2) Any funds due to the public body from the amounts appropriated under section 206 of the Act may be used if such use is necessary for repayment.

(b) Step 3. Each public body applying for a loan for the local share of Step 3 costs must assure that:

(1) It will repay the loan using all local resources legally available and, if necessary, (i) all or any portion of the funds retained by it under section 204(b)(3) of the Act, and (ii) any funds due to such grantee from the amounts appropriated under section 206 of the Act;

(2) The facilities are maintained in good repair and operating condition during the period in which the notes or the obligations financed by the Bank are outstanding;

(3) Adequate insurance and bonding are maintained to protect the guarantor;

(4) Financial reports and records necessary to reflect the planned and actual receipt of revenues for repay. ment are maintained and preserved until 3 years after the notes or the obligations financed by the Bank have been retired.

(5) Revenue plans adequate to assure repayment of principal and interest of the notes or the obligations financed by the Bank are adopted; and

(6) The Administrator is promptly notified whenever it appears that projected annual revenues will be insufficient to meet payments for principal, interest, and operating and maintenance costs. Such notification shall include a description of the steps being taken to remedy the problem.

(c) Other covenants. Among other covenants made by the public body in the loan guarantee are the following;

(1) Application of loan proceeds. The loan proceeds shall only be applied to the payment of costs associated with the project for which EPA has awarded grant assistance in accordance with $ 39.140.

(2) Payment. The public body covenants that if amounts adequate for the payment of principal and interest are not available when due and payable, appropriate steps will be taken to levy sufficient additional taxes, fees, or charges and to make such payments in a timely manner.

(3) Accounts and reports. The public body shall keep complete and accurate books, records, and accounts relating to the loan, the loan guarantee, and the funds and accounts used to pay the amounts due on the loan. Such books, records, and accounts shall be subject to inspection by the Administrator or the Comptroller General of the United States at reasonable times.

(4) Status of other encumbrances. The public body will not on or after the date of execution of the loan guar. antee by EPA, create or suffer to be created any lien or charge, which would constitute a lien prior to the lien created to secure the loan. Any bonded indebtedness or liens created by the public body on or after the date of execution of the loan guarantee by EPA and associated with the treatment works being constructed with Federal grant assistance may, at the discretion of the Administrator, be on a parity with the lien of the loan guaranteed by the Administrator.

(d) Enforcement. The public body agrees to the enforcement of the foregoing conditions by the Administrator in a court of appropriate jurisdiction pursuant to any of the remedies provided for under $ 39.150, Defaults and remedies, in order to avert an Event of Default.

8 39.135 Loan terms.

(a) Interest rates. The interest rate(s), to be charged for each loan shall be determined by the Secretary of the Treasury in accordance with section 6(b) of the Federal Financing Bank Act of 1973.

(b) Repayment period. The repayment period for any obligation guaranteed by the Environmental Protection Agency shall be for a reasonable term not to exceed the useful life of the project or forty years whichever is less.

8 39.120 Limitation on assistance.

The amount of any grant, loan, loan guarantee, or other assistance available from another Federal agency, a State, or other third parties on reasonable terms shall be deducted from the local share amount before the loan guarantee amount is determined.

8 39.140 Loan proceeds.

The loan proceeds shall be applied solely to pay costs associated with the construction of the treatment works for which EPA has awarded a grant. Loan proceeds may be dispensed in a lumnp sum upon execution of the loan agreement, or drawdowns under the loan agreement may be made pursuant to a schedule or requests submitted to the Bank by the borrower. Any loan proceeds or drawdown requests which are paid in advance of the current need for funds to pay costs associated with the EPA grant will be placed by the borrower in investments approved by the Bank under the loan agreement until such time as the proceeds are applied to such costs.

8 39.125 Determination of eligibility for

assistance and issuance of guarantee. (a) The Administrator shall make the following determinations before is. suing a loan guarantee:

(1) The project for which the loan guarantee is requested is eligible for grant assistance under Title II of the Act;

(2) The applicant is unable to obtain, on reasonable terms, sufficient credit to finance the local share without such a loan guarantee; and

(3) There is reasonable assurance that the applicant will be able to repay the loan or obligation to the Bank.

(b) If the application is approved, the Administrator will issue the loan guarantee and subsequent to grant award, will request issuance by the Bank.

(c) If the loan application is disapproved, such disapproval shall he final and conclusive unless appealed within 30 days after receipt of the notice of disapproval pursuant to Subpart J, Disputes, of the general grant regulations (40 CFR 30.1100 et seq.).

8 39.145 Loan payments by borrower.

The borrower will submit his payments of principal and interest on the loan directly to the Bank in accordance with the loan agreement. A late payment penalty of 1 percent per month of the payment amount due shall be charged pursuant to the loan agreement and the provisions of the loan guarantee agreement in the event any payment of principal and interest is not paid when due.

8 39.130 Determination o$ reasonable

rates. The Secretary of the Treasury in accordance with the Act shall make a determination of whether financing is available at reasonable rates.

8 39.150 Defaults and remedies.

(a) Each of the following events shall be defined as an "Event of Default":

(1) Default by the public body in the payment of any Principal Installment, if any, on any loan guaranteed by the Administrator when due;

a court having jurisdiction for other appropriate administrative and judicial relief.


(2) Default by the public body in the payment of any installment of interest on the loan when due; and

(3) Failure or refusal by the public body to comply with section 213 of the Act, or default in the performance or obs rvance of any other of the covenants, agreements, or conditions contained in the loan agreement, or loan guarantee agreement, where such failure, refusal or default shall continue for a period of 45 days after written notice thereof is issued by the Administrator.

(b) The loan agreement and guarantee shall provide that upon the happening and continuance of any event described in paragraph (a) of this section, the Administrator may proced on behalf of the Environmental Protection Agency and the United States to protect and enforce its rights and the rights of the Federal Financing Bank by such of the following remedies as the Administrator being advised by counsel, shall deem most effectual:

(1) Enforce by mandamus or other suit, action or proceedings at law or in equit all rights of the Administrator including the rights to require the public body to enforce, collect and receive taxes, fees, or charges adequate to carry out the covenant or payment of principal and interest when due, and to require the public body to carry out any other covenant or agreement with the Administrator to perform its duties under the Act, these regulations and the loan agreement and loan guarantee agreement;

(2) Bring suit upon the loan;

(3) Require the public body by action or suit to account as if it were the trustee of an express trust for the holders of the evidence of indebtedness of the loan;

(4) Enjoin by action or suit any acts or things which may be unlawful or in violation of the rights of the Administrator or the Bank;

(5) Declare all remaining payments of principal and interest on the loan due and payable, and, if all default shall be made good, then, to annul such declaration and its consequences; and

(6) In the event that all the remaining principal and interest on the loan be declared due and payable, apply to

Sec. 40.100 Purpose of regulation. 40.105 Applicability and scope. 40.110 Authority. 40.115 Definitions. 40.115-1 Construction. 40.115-2 Intermunicipal agency. 40.115-3 Interstate agency. 40.115-4 Municipality. 40.115-5 Person. 40.115-6 State. 40.120 Publication of EPA research objec

tives. 40.125 Grant limitations. 40.125-1 Limitations on duration. 40.125-2 Limitations on assistance. 40.130 Eligibility. 40.135 Application. 40.135-1 Preapplication coordination. 40.135-2 Application requirements. 40.140 Criteria for award. 40.140-1 All applications. 40.140-2 (Reserved) 40.140-3 Federal Water Pollution Control

Act. 40.145 Supplemental grant conditions. 40.145-1 Resource Conservation and Re

covery Act. 40.145-2 Federal Water Pollution Control

Act. 40.145-3 Projects involving construction. 40.150 Evaluation of applications. 40.155 Availability of information. 40.160 Reports. 40.160-1 Progress reports. 40.160-2 Financial status report. 40.160-3 Reporting of inventions. 40.160-4 Equipment report. 40.160-5 Final report. 40.165 Continuation grants.

AUTHORITY: Cited in $ 40.110.

SOURCE: 38 FR 12784, May 15, 1973, unless otherwise noted.

8 40.100 Purpose of regulation. These provisions establish

and codify policies and procedures governing the award of research and demonstration grants by the Environmental Protection Agency.

§ 40.105 Applicability and scope.

This part establishes mandatory policies and procedures for all EPA research and demonstration grants. The provisions of this part supplement the EPA general grant regulations and procedures (40 CFR Part 30). Accordingly, all EPA research and demonstration grants are awarded subject to the EPA interim general grant regulations and procedures (40 CFR Part 30) and to the applicable provisions of this Part 40.

8 40.110 Authority.

EPA research and demonstration grants are authorized under the following statutes:

(a) The Clean Air Act, as amended, 42 U.S.C. 1857 et seq.

(1) Section 103 (42 U.S.C. 1857b) authorizes grants for research and demonstration projects relating to the causes, effects, extent, prevention, and control of air pollution.

(2) Section 104 (42 U.S.C. 1857b-1) authorizes grants for research and development of new and improved methods for the prevention and control of air pollution resulting from the combustion of fuels.

(b) The Federal Water Pollution Control Act, as amended, Pub. L. 92500.

(1) Section 104(b) (33 U.S.C. 1254(b)) authorizes grants for research and demonstration projects relating to the causes, effects, extent, prevention, reduction, and elimination of water pollation.

(2) Section 104(h) (33 U.S.C. 1254(h)) authorizes grants for research and development of new and improved methods for the prevention, removal, reduction, and elimination of pollution in lakes, including the undesirable effects of nutrients and vegetatiori, and for construction of publicly owned research facilities for such purpose.

(3) Section 104(i) (33 U.S.C. 1254(i)) authorizes grants for research, studies, experiments, and demonstrations relative to the removal of oil from any waters and for the prevention, control, and elimination of oil and hazardous substances pollution.

(4) Section 104(r) (33 U.S.C. 1254(r)) authorized grants for the conduct of basic research into the structure and function of freshwater aquatic ecosystems, and to improve understanding of the ecological characteristics neces

sary to the maintenance of the chemical, physical, and biological integrity of freshwater aquatic ecosystems.

(5) Section 104(s) (33 U.S.C. (s)) authorizes grants to conduct and report on interdisciplinary studies on river systems, including hydrology, biology, ecology, economics, the relationship between river uses and land uses, and the effects of development within river basins on river systems and on the value of water resources and water-related activities.

(6) Section 105(a) (33 U.S.C. 1255(a)) authorizes grants for research and demonstration of new or improved methods for preventing, reducing, and eliminating the discharge into any waters of pollutants from sewers which carry storm water or both storm water and pollutants; and for the demonstration of advanced waste treatment and water purification methods (including the temporary use of new or improved chemical additives which provide substantial immediate improvement to existing treatment processes), or new or improved methods of joint treatment systems for municipal and industrial wastes.

(7) Section 105(b) (33 U.S.C. 1255(b)) authorizes grants for demonstrating, in river basins or portions thereof, advanced treatment and environmental enhancement techniques to control pollution from all sources, within such basin or portions thereof, including nonpoint sources, together with instream water quality improvement techniques.

(8) Section 105(c) (33 U.S.C. 1255(c)) authorizes grants for research and demonstration projects for prevention of pollution of any waters by industry including, but not limited to, the prevention, reduction, and elimination of the discharge of pollutants.

(9) Section 105(e)(1) (33 U.S.C. 1255(e)(1)) authorizes grants for research and demonstration projects with respect to new and improved methods of preventing, reducing, and eliminating pollution from agriculture.

(10) Section 105(e)(2) (33 U.S.C. 1255(e)(2)) authorizes grants for demonstration projects with respect to new and improved methods of preventing, reducing, storing, collecting, treating, or otherwise eliminating pollution

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