This part implements section 213 of the Federal Water Pollution Control Act Amendments of 1972, as amended, by establishing policies and procedures to ensure that inability to borrow necessary funds from other sources on reasonable terms does not prevent the construction of any wastewater treatment works for which a grant has been, or will be, awarded in compliance with the Act. It provides for the guarantee by the Administrator of full and timely payment of principal and interest on any obligation of the State, municipality, or intermunicipal or interstate agency issued directly and exclusively to the Federal Financing Bank to finance the local share of the costs of any such project.

(d) Loan agreement. A written agreement between the Bank and the guaranteed borrower stating the terms of the loan.

(e) Loan guarantee agreement. A written agreement between EPA and the guaranteed borrower stating the terms of the loan guarantee.

(f) Local share. The amount of the total grant eligible and allowable project costs which a public body is obligated to pay under the grant.

(g) Note. An evidence of the debt, including a bond, obligation to pay, or other evidence of indebtedness where appropriate.

(h) Public body. A State, interstate agency, a municipality, or an intermunicipal agency, as defined below:

(1) State. A State, the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Trust Territory of the Pacific Islands.

(2) Interstate agency. An agency of two or more States established by or pursuant to an agreement or compact approved by the Congress, or any other agency of two or more States, having substantial powers or duties pertaining to the control of water pollution.

(3) Municipality. A city, town, borough, county, parish, district, association, or other public body (including an intermunicipal agency of two or more of the foregoing entities) created by or pursuant to State law, or an Indian Tribe or an authorized Indian tribal organization, having jurisdiction over disposal of sewage, industrial wastes, or other wastes, or a designated and approved management agency under section 208 of the Act. This definition excludes a special district, such as a school district, which does not have as one of its principal responsibilities the treatment, transport, or disposal of liquid wastes.

(i) Reasonable terms. Rates determined by the Secretary of the Treasury with relationship to the current average yield on outstanding marketable obligations of municipalities of comparable maturity.

§ 39.110 Application.

(a) Who may apply. A public body which has applied for a grant under Title II of the Act (including grantees whose projects are eligible for reimbursement under section 206 of that title) or which has committed itself to finance the local share of any project(s) for which a grant has been awarded, or for which an application is being processed, may apply through the State agency to the appropriate Regional Administrator for a loan and the commitment to guarantee such loan to finance the local share of such project.

(b) Financing. Applications for loan guarantees will be limited to:

(1) Financing that portion of the local share for which permanent financing has not been arranged.

(2) Refinancing that portion of the local share of those projects on which construction has not been completed and for which the public body initially held a public solicitation on a bond issue, received no bids, and subsequently accepted or negotiated financing at interest rates greater than 10 percent.

(c) Application requirements. The application shall include documentation of the following:

(1) Inability to obtain necessary financing. The applicant shall document that it is unable to obtain on reasonable terms as defined in § 39.105(i) sufficient credit to finance the local share of the project(s). Such documentation shall include: (i) The results of any public solicitation for bids for obligations to finance the local share or (ii) a certification, acceptable to the Administrator, from a municipal bond underwriter(s), which submitted or might normally have submitted a bid for the obligations. An applicant with an obligation to pay the local share not in excess of $250,000 may obtain certification from two or more local or regional banks to meet paragraph (c)(1)(ii) of this section. An applicant representing communities with a population of 10,000 or less must also submit a written statement from an authorized representative of the Farmers Home Administration that grants, loans, or loan guarantees are not available from Farmers Home Ad

ministration in an adequate amount or within a reasonable time, as determined by the Administrator.

(2) Ability to repay. The application for a loan guarantee shall be accompanied by an official statement intended to provide EPA with the information needed to reach an informed judgment as to whether there is reasonable assurance of repayment. The official statement must conform to the guidelines for such statement which are available to applicants from the EPA regional office upon request.

(3) Legal authority of applicant. The application shall be accompanied by a legal opinion establishing that the applicant has legal authority to obligate itself for payment of the local share, to comply with the loan conditions, and to issue the obligations, and that the obligations will be legal and binding obligations.

(4) Assurances. The application shall be accompanied by assurances set forth in an ordinance or other evidence of authority acceptable to the Administrator that it can and will comply with all of the conditions set forth in § 39.115.

(d) Fees. The following fees will be charged in order to make the program self-sustaining. These fees may be revised from time to time as determined by the Administrator.

(1) Application processing. EPA will charge a non-refundable minimum fee of $1,000 or % 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 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.

§ 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 repayment 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 award

ed 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 guarantee 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.

§ 39.125 Determination of eligibility for assistance and issuance of guarantee. (a) The Administrator shall make the following determinations before issuing 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 be 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.).

§ 39.130 Determination rates.

of

reasonable

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.

§ 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.

§ 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;

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

Sec.

PART 40-RESEARCH AND DEMONSTRATION GRANTS

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.