Economic Development Administration Reauthorization Act of 2004 Implementation; Regulatory Revision, 56658-56705 [06-8035]

Agencies

• DEPARTMENT OF COMMERCE
• Economic Development Administration

[Federal Register Volume 71, Number 187 (Wednesday, September 27, 2006)]
[Rules and Regulations]
[Pages 56658-56705]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-8035]



[[Page 56657]]

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Part III





Department of Commerce





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Economic Development Administration



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13 CFR Chapter III



Economic Development Administration Reauthorization Act of 2004 
Implementation; Regulatory Revision; Final Rule

Federal Register / Vol. 71, No. 187 / Wednesday, September 27, 2006 / 
Rules and Regulations

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DEPARTMENT OF COMMERCE

Economic Development Administration

13 CFR Chapter III

[Docket No.: 05072910-6229-06]
RIN: 0610-AA63


Economic Development Administration Reauthorization Act of 2004 
Implementation; Regulatory Revision

AGENCY: Economic Development Administration, Department of Commerce.

ACTION: Final rule.

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SUMMARY: On August 11, 2005, the Economic Development Administration 
(``EDA'') published an interim final rule to reflect the amendments 
made to EDA's authorizing statute, the Public Works and Economic 
Development Act of 1965, by the Economic Development Administration 
Reauthorization Act of 2004. A ninety-three (93) day public comment 
period followed the publication of the interim final rule, specifically 
from August 11, 2005 through November 14, 2005. On December 15, 2005, 
EDA published an interim final rule that amended certain provisions of 
the August 11, 2005 interim final rule. EDA received a large number of 
public comments on different portions of the August 11, 2005 interim 
final rule. This final rule responds to all substantive comments 
received during the public comment period and finalizes this rulemaking 
proceeding based on comments received during the public comment period.

DATES: This rule is effective as of September 27, 2006.

FOR FURTHER INFORMATION CONTACT: Hina Shaikh, Esq., Attorney Advisor, 
Office of Chief Counsel, Economic Development Administration, 
Department of Commerce, Room 7005, 1401 Constitution Avenue, NW., 
Washington DC 20230; telephone: (202) 482-4687.

SUPPLEMENTARY INFORMATION:

Background

    EDA published an interim final rule in the Federal Register (70 FR 
47002) on August 11, 2005 (the ``Interim Final Rule''). The Interim 
Final Rule reflects the amendments made to EDA's authorizing statute, 
the Public Works and Economic Development Act of 1965 (42 U.S.C. 3121 
et seq.) (``PWEDA''), by the Economic Development Administration 
Reauthorization Act of 2004 (Pub. L. 108-373, 118 Stat. 1756 (2004)) 
(the ``2004 Act''). In addition, the Interim Final Rule reflects EDA's 
current practices and policies in administering its economic 
development programs that have evolved since the promulgation of EDA's 
former regulations. The Interim Final Rule provided for a public 
comment period from August 11, 2005 through October 11, 2005. EDA also 
held a public hearing on September 1, 2005 on the Interim Final Rule.
    On September 30, 2005, EDA published a final rule (70 FR 57124) 
that extended the deadline for submitting public comments on the 
Interim Final Rule from October 11, 2005 until November 14, 2005. The 
September 30, 2005 final rule also delayed the effective date, from 
October 1, 2005 until November 14, 2005, of (i) Sec.  304.2(c)(2) of 
the Interim Final Rule, pertaining to membership requirements of a 
District Organization's governing body; and (ii) Sec.  301.4 of the 
Interim Final Rule, as the provisions of this section pertain to 
Investment Rates for EDA Planning Investments. On November 14, 2005, 
EDA published another final rule (70 FR 69053) delaying the effective 
date of these provisions from November 14, 2005 until January 31, 2006. 
All other provisions of the Interim Final Rule became effective on 
October 1, 2005.
    The conference report (H.R. Rep. No. 109-272, at 136-138 (2006) 
(Conf. Rep.); the ``Conference Report'') accompanying the FY 2006 
Science, State, Justice, Commerce and Related Agencies Appropriations 
Act (Pub. L. 109-108, 119 Stat. 2290 (2005)) (the ``2006 Appropriations 
Act'') expressed Congressional intent as to specific provisions of the 
Interim Final Rule. On December 15, 2005, EDA published an interim 
final rule (70 FR 74193) to immediately effect only those changes to 
the Interim Final Rule specified in the Conference Report (the 
``December 15, 2005 Rulemaking'').
    After receiving extensive input from stakeholders, EDA is 
publishing this final rule to respond to all comments received during 
the public comment period on all aspects of the Interim Final Rule, and 
to make additional revisions. The majority of public comments were part 
of a mass mailing campaign, which resulted in EDA receiving hundreds of 
identical or nearly identical pieces of mail in a calendar month. For 
the most part, these comments expressed opinions on 13 CFR parts 300, 
301, 302, 303, 304 and 307. This final rule also explains changes made 
to the Interim Final Rule in response to the Congressional 
recommendations set forth in the Conference Report and effected by the 
December 15, 2005 Rulemaking. Capitalized terms used but not otherwise 
defined in this final rule have the meanings ascribed to them in the 
Interim Final Rule (see, e.g., 13 CFR 300.3, 303.2, 307.8, 314.1 and 
315.2). Specifically, this final rule makes the following revisions to 
the Interim Final Rule:

Part 300--General Information

    Part 300 of the regulations specifically states EDA's mission and 
highlights the policies and practices that EDA employs in order to 
attract private capital investments and higher-skill, higher-wage jobs 
to those Regions experiencing substantial and persistent economic 
distress. In drafting the Interim Final Rule, the main revisions 
occurred in Sec.  300.3, in which EDA introduced several new terms and 
revised existing terms. Anticipating that an improved section of 
definitions would assist readers in better understanding EDA's policies 
and requirements, EDA increased the number of defined terms to ensure 
clarity, consistency and technical precision.
    This final rule further revises part 300 of the Interim Final Rule 
by inserting the word ``development'' between the words ``economic'' 
and ``agenda'' in the second sentence in Sec.  300.1, to clarify that 
EDA's mission is to lead sustainable economic development throughout 
the United States.
    EDA received one comment expressing difficulty in understanding the 
difference between the definitions of ``District Organization'' and 
``Economic Development District.'' EDA believes that both terms are 
explained clearly in the Interim Final Rule and, therefore, this final 
rule does not amend these terms. A District Organization is any 
organization that meets the requirements of Sec.  304.2. The definition 
of Economic Development District conveys that EDA may (at the request 
of a District Organization) designate a geographic area, or a 
``Region,'' as an Economic Development District if the Region satisfies 
the requirements of Sec.  304.1. This final rule adds a minor 
clarifying point to the definition of Economic Development District to 
make clear that Districts designated prior to the effective date of the 
Interim Final Rule would have been designated pursuant to a previous 
version of this regulation at 13 CFR part 302.
    We received five comments that stated the following: ``Part 300 
eliminates the EDD designation and replaces it with `District 
Organization' and specifically adds reference to `community or faith-
based non-profit organization.' With numerous unfunded and under-funded 
EDDs around the nation[,] expanding the number of new

[[Page 56659]]

eligible recipients is not prudent use of already limited funding.'' 
The Interim Final Rule replaced the reference to an Economic 
Development District in the definition of ``Eligible Recipient'' with 
the term ``District Organization'' because a District Organization may 
apply for and receive EDA Investment Assistance. In contrast, an 
Economic Development District is a geographic description and cannot 
apply for EDA Investment Assistance until it establishes a structure to 
give voice to the interests in that Region. EDA has included faith-
based organizations in its investment portfolio since approximately 
1969; therefore, the Interim Final Rule did not expand the number of 
new Eligible Recipients. Rather, the Interim Final Rule demonstrates 
EDA's commitment to making its programs fully available to community 
and faith-based organizations by specifically identifying these non-
profit organizations as Eligible Recipients. For these reasons, this 
final rule does not amend the definition of Eligible Recipient.
    This final rule replaces the lead-in statement for the defined term 
Eligible Recipient to ``Eligible Recipient means any of the 
following:'', and clarifies that a consortium of Indian Tribes is 
qualified to be an Eligible Recipient, similar to consortia of 
political subdivisions and institutions of higher education. EDA did 
not intend to exclude a consortium of Indian Tribes from the definition 
of Eligible Recipient; this language was inadvertently dropped from the 
text of the Interim Final Rule. Additionally, the definition of ``In-
Kind Contributions'' is revised by replacing the phrase ``Uniform 
Administrative Requirements of 15 CFR parts 14 and 24 (as applicable)'' 
with the phrase ``requirements of 15 CFR parts 14 or 24, as 
applicable.'' This final rule also expands the definition of ``Indian 
Tribe'' to include a non-profit Indian corporation, Indian authority 
and other non-profit Indian tribal organization or entity, provided 
that the tribal organization or entity is wholly owned by, and 
established for the benefit of, the Indian tribe. This language was 
inadvertently dropped in the Interim Final Rule. EDA makes expressly 
clear that these types of organizations are included in the definition 
of Indian Tribe, consistent with the definition of Indian Tribe in 
EDA's former regulations.
    EDA received no public comments on the defined term ``Private 
Sector Representative'' in the Interim Final Rule. However, the 
Conference Report accompanying the 2006 Appropriations Act included a 
specific direction by Congress for EDA to expand the definition of 
Private Sector Representative. Accordingly, the December 15, 2005 
Rulemaking expanded the definition to include a designee of any senior 
management official or executive holding a key decision-making position 
in any for-profit enterprise.
    EDA received one question regarding ``whether the other Federal 
grant programs will allow EDA funds to match their programs.'' Section 
205 of PWEDA (42 U.S.C. 3145) and Sec.  301.6 of the Interim Final Rule 
authorize EDA to supplement a grant awarded in another designated 
Federal grant program up to the amount of the maximum allowable EDA 
investment rate, even if the other Federal grant program has a lower 
grant rate. An applicant should contact the Federal Agency making the 
grant award to determine if its governing statute conflicts with PWEDA.
    EDA received approximately 84 identical comments stating, ``While 
we appreciate the theory and practice of forging local partnerships 
based on shared economic interests of a `region,' the creation of 
competing regional boundaries and definitions is confusing and 
misleading.'' This final rule does not amend the definition of Region 
or the term ``Regional'' because it sufficiently explains that self-
sustained economic development should occur across communities and 
political boundaries. EDA believes that Regional partnerships, with 
human, natural, technological and capital components, are essential to 
the economic competitiveness of a Region.
    EDA received one comment on the definition of ``Special Need'' in 
Sec.  300.3. The commenter noticed a discrepancy between the phrase 
``closure or restructuring of industrial firms'' in the definition of 
Special Need and the phrase ``loss of a major community employer'' in 
the list of circumstances set forth in Sec.  307.1. In response to this 
comment, this final rule adds to the definition of Special Need the 
circumstance of a Region losing a major employer.

Part 301--Eligibility, Investment Rate and Proposal and Application 
Requirements

    Part 301 of the regulations sets forth eligibility, maximum 
allowable Investment Rate levels, and proposal and application 
requirements common to all PWEDA-enumerated programs (excluding Trade 
Adjustment Assistance for Firms at part 315). Part 301 presents these 
requirements in a more logical sequence than EDA's former regulations 
and provides the user with a helpful roadmap to navigate through these 
threshold issues.
    In general, subpart A presents an overview of eligibility 
requirements, subpart B addresses applicant eligibility, subpart C 
addresses Regional economic distress level requirements, subpart D sets 
forth the maximum allowable Investment Rates and corresponding Matching 
Share requirements for various Projects, and subpart E addresses the 
proposal and application requirements, as well as the evaluation 
criteria used by EDA in selecting Projects.
    The economic distress criteria referenced in Sec.  301.3(a) for 
Projects under parts 305 and 307 track sections 301 and 405 of PWEDA 
(42 U.S.C. 3161 and 3175). EDA received one comment stating that, 
``Requiring the per capita income to be eighty (80) percent or less of 
the national average [per capita income] will result in ineligibility 
of distressed areas located in higher income areas such as the 
northeast United States.'' This final rule does not amend Sec.  
301.3(a)(1)(ii) because it reflects the statutory provision set forth 
in section 301(a)(1) of PWEDA (42 U.S.C. 3161), which provides that for 
a Project to be eligible for a Public Works or Economic Adjustment 
Assistance Investment, the Project must be located in a Region that 
meets one or more of the following economic distress criteria: (i) Per 
capita income of 80 percent or less of the national average; (ii) an 
unemployment rate that is at least one percent greater than the 
national average; or (iii) a Special Need, as determined by EDA.
    EDA received approximately 100 identical or nearly identical 
comments on Sec.  301.3(a)(4)(i), which provides that EDA will 
determine economic distress levels according to unemployment rates or 
per capita income levels based upon the most recent American Community 
Survey (``ACS'') published by the U.S. Census Bureau for (i) the 
applicable Region where the Project will be located (for Projects 
seeking to qualify under Sec.  301.3(a)(1)), (ii) the geographic area 
where substantial direct Project benefits will occur (for Projects 
seeking to qualify under Sec.  301.3(a)(2)), or (iii) the geographic 
area of poverty or unemployment (for Projects seeking to qualify under 
Sec.  301.3(a)(3)). These comments stated, ``While we support the 
concept of the ACS tool, the vast majority of the nation's small 
metropolitan and rural communities are years away from having access to 
ACS data.''
    While EDA understands that the ACS is still not available for some 
geographies (e.g., census tracts,

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townships, or certain cities and counties), EDA believes that the ACS 
is the most accurate and reliable metric currently available to measure 
the economic distress of a Region (or other geographic area). Where a 
recent ACS is not yet available, or will not be available, the 
regulation makes clear that EDA will use the most recent Federal data 
from other sources, including data available from the Census Bureau and 
the Bureaus of Economic Analysis, Labor Statistics, Indian Affairs or 
any other Federal source determined by EDA to be appropriate. For 
improved clarity and understanding, this final rule amends the last 
sentence in Sec.  301.3(a)(4)(i) by rephrasing ``the most recent data 
available through the government of the State in which the Region is 
located'' as ``the most recent data available from the State.''
    For economic distress based upon a Special Need, EDA will conduct 
an independent analysis of the facts and circumstances in a given case. 
See Sec.  301.3(a)(4)(ii).
    Section 301.4 reflects the new Investment Rate determination 
structure in section 204 of PWEDA (42 U.S.C. 3144; see also sections 
205 and 206 of PWEDA (42 U.S.C. 3145 and 3146)). Generally, as stated 
in section 204(a) of PWEDA and in Sec.  301.4(b)(1), the maximum 
Investment Rate for a Project must not exceed the sum of fifty (50) 
percent, plus an additional thirty (30) percent, based on the 
``relative needs'' of the Region where the Project is located.
    EDA received approximately 812 identical or nearly identical 
comments on the Investment Rate provisions for all EDA programs. The 
majority of these comments stated: ``We are very concerned about 
changes to EDA matching rates for all agency investments, including 
planning grants, public works investments and economic adjustment 
assistance. We fear the increased costs to our local communities for 
both EDA planning grants and infrastructure projects will put our 
future economic progress in jeopardy.'' We received approximately 153 
comments that opposed the change in EDA Investment Rates for Planning 
grants only. These comments stated that the ``new range from a minimum 
of 30% Federal to 70% local to a maximum of 80% Federal and 20% local'' 
is likely to put a greater financial burden on rural local governments. 
The December 15, 2005 Rulemaking addressed these two sets of comments, 
as described in detail below.
    In the Interim Final Rule, EDA provided maximum allowable 
Investment Rate categories of 30% and 40% for those Regions eligible 
for Investment Assistance under PWEDA, but which are experiencing lower 
levels of economic distress. The Conference Report accompanying the 
2006 Appropriations Act directed EDA to revise this regulation. 
Accordingly, the December 15, 2005 Rulemaking provided that Projects 
located in Regions demonstrating (i) a 24-month unemployment rate at 
least 1% greater than the national average or (ii) per capita income 
not more than 80% of the national average will be eligible to receive a 
maximum allowable Investment Rate of 50%. This revision eliminated the 
30% and 40% maximum allowable Investment Rate categories. The higher 
threshold levels of economic distress for the 60%, 70% and 80% maximum 
allowable Investment Rate categories remain the same as provided in the 
Interim Final Rule.
    The December 15, 2005 Rulemaking also revised Sec.  301.4(b) to the 
extent that it applies to Planning Investments, by placing a subsection 
titled Projects under part 303 at Sec.  301.4(b)(3), which includes the 
following provisions for determining the Investment Rates for Planning 
Investments: (i) All Planning Investments will receive a minimum 
Investment Rate of 50%; (ii) except as otherwise provided in section 
204(c) of PWEDA (42 U.S.C. 3144) and Sec.  301.4(b)(5), the maximum 
allowable Investment Rate for Planning Investments will be the maximum 
allowable Investment Rate set forth in Table 1 of Sec.  301.4 for the 
most economically distressed county or other equivalent political unit 
(e.g., parish) within the Region; (iii) the maximum allowable 
Investment Rate will not exceed 80%; and (iv) in compelling 
circumstances, the Assistant Secretary may waive the requirement in 
paragraph (ii) above. The Assistant Secretary cannot delegate the 
authority to grant this waiver.
    This final rule revises Sec.  301.4(b)(2) by replacing the phrase 
``paragraphs (b)(3) and (4)'' with ``paragraph (b)(5).'' References to 
paragraphs (b)(3) and (b)(4) were inapplicable in the Interim Final 
Rule, as Special Need Projects concern Investments under parts 305 and 
307 only. Such Projects are, however, eligible for a maximum allowable 
Investment Rate of one hundred (100) percent under Sec.  301.4(b)(5). 
For subject-verb agreement, this final rule also revises Table 2 of 
Sec.  301.4 by amending the phrase ``Projects of non-profit 
organizations that the Assistant Secretary determines has exhausted its 
effective borrowing capacity'' to ``Projects of non-profit 
organizations that the Assistant Secretary determines have exhausted 
their effective borrowing capacity.''
    Additionally, this final rule revises Sec.  301.7 by replacing the 
phrase ``an EDA Pre-application for Federal Assistance'' with the 
phrase ``a Pre-application for Investment Assistance.'' This amendment 
corresponds to a similar change EDA made to the title of its pre-
application (Form ED-900P) after publication of the Interim Final Rule. 
This final rule also designates the paragraph under Sec.  301.7 as (a) 
and re-designates provisions (a), (b) and (c) as (1), (2) and (3), in 
order to add a second paragraph (b) which states that for certain 
programs, EDA may instruct an Eligible Applicant to submit an 
application for Investment Assistance in lieu of the pre-application 
for Investment Assistance. EDA adds this provision to ensure clarity 
regarding EDA's proposal and application requirements.
    To clarify the distinction between proposal evaluation criteria and 
proposal selection criteria, this final rule deletes the third sentence 
in Sec.  301.8 in its entirety, and replaces the phrase ``the 
applicable FFO'' in Sec.  301.9(a)(3) with ``the funding priority 
considerations identified in the applicable FFO.'' In the lead-in 
statement to paragraphs (a) through (e) of Sec.  301.8, we also replace 
the word ``may'' with ``will,'' to have consonant wording with relevant 
FFOs. This final rule also adds the word ``criteria'' to the title of 
Sec.  301.9.

Part 302--General Terms and Conditions for Investment Assistance

    Part 302 sets forth the general terms and conditions for EDA 
Investment Assistance. The majority of provisions in this part were 
transferred from part 316 of EDA's former regulations. Part 302 applies 
to all Investments under PWEDA and certain provisions, such as Sec.  
302.5, apply to the Trade Adjustment Assistance for Firms program under 
the Trade Act (see part 315). This part covers a variety of EDA 
requirements for Investment Assistance, including environmental reviews 
of Projects, relocation assistance and land acquisition requirements, 
inter-governmental review of Projects, and Recipients' reporting, 
record-keeping, post-approval and civil rights requirements. EDA 
received no public comments on Sec. Sec.  302.1 through 302.15 of the 
Interim Final Rule. For consistency throughout the chapter, this final 
rule amends the last sentence in Sec.  302.1 by replacing the phrase 
``annual FFO'' with ``applicable FFO.'' This final rule makes

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no further revisions to Sec. Sec.  302.1 through 302.15.
    EDA received approximately 109 identical or nearly identical 
comments on Sec.  302.16(b) of the Interim Final Rule, in connection 
with Recipients' reporting requirements. This section implements 
section 212 of PWEDA (42 U.S.C. 3152), which requires recipients to 
submit reports that contain an evaluation of the effectiveness of the 
investment assistance provided under PWEDA. These comments expressed 
concern ``about the new requirement that all performance data and 
information submitted by grantees be from independent sources.'' 
Subsection 302.16(b) provides that data used by Recipients in preparing 
reports must be accurate and verifiable, as determined by EDA, and must 
come from independent sources (whenever possible). While EDA 
appreciates that locating independent sources has time and cost 
implications, we believe it is very important that the data used by a 
Recipient is verified when possible by a reliable source independent of 
the Recipient. The Recipient is the primary source for information on 
the effectiveness of the Investment Assistance provided and fulfillment 
of the objectives of PWEDA, and therefore, reported data must be 
accurate and verifiable as determined by EDA. Whenever possible, the 
Recipient should cross-check these data with an independent secondary 
source to avoid conscious or unconscious biases and errors. For the 
reasons stated above, this final rule does not change Sec.  302.16(b).
    Section 302.17 of the regulations states EDA's conflicts of 
interest policy. In the Interim Final Rule, EDA moved the conflicts of 
interest provisions for revolving loan fund (``RLF'') Grants from Sec.  
308.15(e) of EDA's former regulations to Sec.  302.17(c) to improve 
organization and referencing facility. EDA received approximately 87 
identical or nearly identical comments on Sec.  302.17(c)(3), which 
provides that former board members of a Recipient of an RLF Grant and 
members of his or her Immediate Family cannot receive a loan from the 
RLF for a period of two years from the date that the board member last 
served on the RLF's board of directors. Generally, these comments 
expressed opposition to ``the change in the waiting period from one 
year to two years, along with the elimination of the `exemption clause' 
with [regard to] public disclosure.'' Some comments also expressed 
concern that Sec.  302.17(c)(3) ``place[s] an undue burden on those 
individuals that serve in the local public arena and are now unable to 
participate in the RLF for a proposed two year period.''
    EDA does not intend for Sec.  302.17(c)(3) to burden or penalize 
local community business participants for their membership on a 
District Organization's governing body or on an RLF Recipient's board 
of directors. We increased the one-year period to a two-year period in 
Sec.  302.17(c)(3) to be consistent with section 606 of PWEDA (42 
U.S.C. 3216), which directs an Eligible Applicant to execute a binding 
agreement, for the two-year period beginning on the date on which the 
Investment Assistance is awarded, requiring it to refrain from 
employing, offering any office or employment to, or retaining for 
professional services, certain persons associated with EDA or the 
Department. Because of the importance of section 606 of PWEDA, EDA's 
formal application for Investment Assistance includes a certification 
that must be signed by an authorized official of the Eligible 
Applicant.
    Similarly, Sec.  302.17(c)(3) prohibits the conduct of any business 
(e.g., the issuance of an RLF loan) by a former RLF Recipient board 
member and the RLF Recipient for a two-year period after leaving the 
board member position. As a general matter, if a potential or actual 
conflict arises, a former RLF Recipient board member has a fiduciary 
duty to disclose the conflict. We removed the conflict waiver exception 
found in Sec.  308.15(e) of EDA's former regulations because public 
disclosure of an actual or potential conflict, regardless of whether 
the benefit conferred is substantial or de minimus, can potentially 
damage the credibility of the RLF Recipient's decision-making process. 
The removal of the conflict waiver exception makes EDA's conflicts of 
interest rules for RLFs consistent with its general conflicts of 
interest policy (see Sec.  302.17(a)). For these reasons, this final 
rule does not amend Sec.  302.17(c)(3). EDA received no comments on the 
conflicts of interest provisions for the Trade Adjustment Assistance 
for Firms program, as set forth in Sec.  315.15.
    EDA received no public comments on Sec. Sec.  302.18 through 302.20 
of the Interim Final Rule. These sections of part 302 remain as 
provided in the Interim Final Rule.

Part 303--Planning Investments and Comprehensive Economic Development 
Strategies

    Part 303 was revised in the Interim Final Rule to emphasize that 
results-driven implementation, not just the writing of a 
``Comprehensive Economic Development Strategy'' (or ``CEDS''), is vital 
to successful performance under EDA's Planning program. The CEDS is a 
crucial part of EDA's program portfolio and is required to be in place 
before a Recipient may receive a Public Works Investment or Economic 
Adjustment Assistance under parts 305 or 307. Part 303 discusses the 
application and award requirements for Planning Investments and the 
requirements for CEDS, State plans and short-term Planning Investments.
    To ensure clarity, this final rule revises the first sentence in 
Sec.  303.1 by amending the phrase ``related to short-term Planning 
Investments and State plans'' to ``and for related short-term Planning 
Investments and State plans.'' For consistency with the definition of 
Eligible Recipient in Sec.  300.3, this final rule also amends the 
second sentence in Sec.  303.1 by replacing the phrase ``Economic 
Development Districts'' with ``District Organizations.'' We received 
one comment stating that Sec.  303.1 ``expand[s] eligibility for 
planning assistance to community development corporations and non-
profit regional development organizations.'' EDA did not expand the 
list of Eligible Recipients for Planning Investments because public and 
private non-profit organizations already are included in the definition 
of Eligible Recipient in Sec.  300.3. Rather, we included community 
development corporations and non-profit regional development 
organizations in our introductory discussion addressing the purpose and 
scope of Planning Investments.
    We received approximately 130 identical comments expressing 
``concern about several of the application requirements, including the 
primary focus on creating `higher-skill, higher-wage jobs' and 
involving business leaders in every phase of the CEDS process.'' 
Section 303.1 states that the purpose of EDA Planning Investments in 
part includes assistance for short-term Planning Investments and State 
plans designed to create and retain higher-skill, higher-wage jobs. EDA 
believes this goal must be achieved particularly in the most 
economically distressed Regions, as that is where high levels of 
unemployment and underemployment exist. Additionally, in considering an 
application for a Planning Investment under Sec.  303.3(a), EDA will 
consider the involvement of the Region's business leadership in the 
preparation of the CEDS, short-term planning activities, or in the 
development of State plans. In line with its goal of fostering Regional 
partnerships, EDA believes that communities and Regions must access 
expert resources and interact with business leaders and entrepreneurs 
in

[[Page 56662]]

order to improve their economy and to create private sector jobs.
    EDA received approximately 136 identical comments on the definition 
of ``Planning Organization'' found in Sec.  303.2, which expressed 
strong opposition to ``the removal of the specific reference to 
District Organizations and Indian tribes as the primary planning 
partners of the agency.'' The Interim Final Rule simplified the former 
definition of Planning Organization by replacing the references to 
Economic Development Districts and Indian Tribes with the term 
``Recipient.'' The definition of Eligible Recipient in Sec.  300.3 
includes District Organizations and Indian Tribes; therefore, the 
definition of Planning Organization in Sec.  303.2 involves no 
substantive change from EDA's former regulations. To clarify the 
functions of a Planning Organization, this final rule amends the 
definition of Planning Organization by inserting the phrase ``and 
implement'' after the word ``develop.''
    EDA received two comments on the application requirements for 
Planning Investments set forth in Sec.  303.3(a). The comments 
expressed, ``It seems redundant to require a `pre-application' when 
seeking a planning grant, as mentioned in the interim final rule; it 
seems that this is unnecessary with the mid-year and annual reports 
required currently.'' The commenters questioned whether a pre-
application for Investment Assistance is necessary for all Planning 
Investments. By adding a new subsection to Sec.  301.7 as discussed in 
detail above, EDA makes it clear in this final rule that in certain 
circumstances, EDA may instruct an Eligible Applicant or Recipient to 
submit an application for Investment Assistance rather than a pre-
application. To ensure that the title of Sec.  303.3 conforms to its 
content, this final rule adds ``and evaluation criteria'' to the title. 
In addition, we restate the lead-in statement for paragraphs (a)(1) 
through (5) as ``In addition, applications for Planning Investments 
must include information about the following,'' and delete the phrase 
``Quality of'' in paragraph (a)(1) to make clear that EDA requires 
Eligible Applicants to provide the information described in Sec.  
303.3(a) for all Planning Investment applications. We also make a 
grammatical revision to Sec.  303.3(a)(5) by replacing the word 
``during'' with ``through.''
    Section 303.3(b) provides that funded Recipients will be evaluated 
on the extent of continuing distress within the Region, their past 
performance, and the overall effectiveness of their CEDS. For 
conformity with the revisions we make to Sec.  303.3(a) in this final 
rule, we replace the phrase ``requirements of'' with ``criteria set 
forth in'' in Sec.  303.3(b).
    We received approximately 212 comments on Sec.  303.4(c). The 
majority of these comments expressed ``concern about the lack of 
details on the funding of [P]lanning grants'' and stated that the 
Interim Final Rule is ``vague on the link between receiving a 
designation as a District Organization and annual and long-term 
financial support from EDA.'' EDA did not intend for Sec.  303.4(c) to 
suggest that Investment Assistance to Planning Organizations would be 
``one-time only'' awards. We fully expect to continue our successful 
partnership with Planning Organizations representing Economic 
Development Districts (as well as to fund designated but unfunded 
Districts). This final rule clarifies the regulation by stating that 
EDA will provide a Planning Investment for the period of time required 
to develop, revise or replace, and implement a CEDS, generally in 
``thirty-six (36) month renewable Investment award periods.'' The 
phrase ``thirty-six (36) month renewable Investment award periods'' 
clarifies that the regulation contemplates continuation of EDA's 
historic relationship with Districts.
    Consistent with the focus on obtaining a well-prepared and 
demonstrable CEDS, Sec.  303.5 provides that Planning Investments may 
be used to pay only direct and indirect costs (administrative or 
otherwise) attributable to the development and implementation of a 
CEDS. EDA received approximately 279 identical or nearly identical 
comments on this provision, which expressed strong opposition to 
limiting direct and indirect costs to activities related to the CEDS. 
As provided in Sec.  303.5(a), EDA determines allowable costs by 
reference to ``applicable Federal cost principles,'' namely, the 
following Office of Management and Budget (``OMB'') Circulars: Circular 
No. A-122 titled ``Cost Principles for Nonprofit Organizations'' (2 CFR 
part 230); Circular No. A-21 titled ``Cost Principles for Education 
Institutions'' (2 CFR part 220); and Circular No. A-87 titled ``Cost 
Principles for State, Local and Indian Tribal Governments'' (2 CFR part 
225). Upon closer examination of Sec.  303.5, EDA believes subsection 
(c) regarding allowable ``indirect costs'' is superfluous inasmuch as 
these costs would be eligible consistent with EDA's application of 
these OMB circulars to indirect cost rates. Therefore, this final rule 
removes Sec.  303.5(c) in its entirety.
    This final rule also removes Sec.  303.5(b) in its entirety because 
the express statement that Planning Investments may only be used to pay 
the costs attributable to the EDA-approved scope of work (i.e., for the 
purpose of developing and implementing a CEDS) does not distinguish 
Planning Investments from any other EDA Investment. Generally, all EDA 
Investment Assistance may be used to pay costs of activities that are 
directly attributable to the Project's scope of work. To ensure clarity 
and better understanding of the concepts explained above, this final 
rule reformats Sec.  303.5 and revises the sentence to indicate that 
Planning Investments may be used to pay the direct and indirect costs 
incurred by a Planning Organization in the development, replacement or 
revision, and implementation of a CEDS and for related short-term 
planning activities. Rewritten in this manner, EDA believes Sec.  303.5 
is consistent with the Senate Report accompanying the 2004 Act, which 
states that authorized uses of funds under section 203 of PWEDA include 
``administrative expenses to support the on-going formulation and 
implementation of comprehensive economic development strategies.'' S. 
Rep. No. 108-382, at 4 (2004).
    Section 303.6(a) requires that a Strategy Committee (appointed by a 
Planning Organization) represent the main economic interests of the 
relevant Region by including a majority of its representatives from 
businesses within the Region. The Strategy Committee is tasked with 
developing (and revising or replacing as necessary) the Planning 
Organization's CEDS. EDA received approximately 585 identical or nearly 
identical comments on Sec.  303.6(a), which expressed strong 
``oppos[ition] to efforts [that] reduce the involvement and control of 
local government officials in strategic planning and development 
activities.'' In order to sustain long-term Regional economic growth, 
EDA believes that contributions from the private sector are paramount 
for the CEDS development. We do not believe this requirement is 
restrictive or that it minimizes local government participation in 
local development activities. Rather, when Sec.  303.6(a) is read in 
its entirety, it requires that innovative public and private leaders 
create a strong sense of Regional cooperation in order to develop a 
viable CEDS.
    We received one comment on Sec.  303.6(c). This section requires 
Planning Organizations to be accountable to EDA for updated CEDS 
performance. The commenter opined that this provision ``does not go far 
enough,'' and stated that ``[t]here needs

[[Page 56663]]

to be some requirement that [Planning] [O]rganizations put a plan for 
self-sufficiency in each CEDS, and that they attain self-sufficiency 
within 10 years of first receiving EDA Investment Assistance.'' EDA 
does not intend to implement such a requirement absent Congressional 
authorization.
    To improve the structure of Sec.  303.7(a) and improve readability, 
this final rule amends the second sentence in Sec.  303.7(a) by 
deleting the phrase ``, and assigning lead organizations 
responsibilities for execution of the CEDS'' and placing ``and'' before 
the word ``identifying.'' We received one comment asking for EDA to 
define the word ``critical'' in the last sentence of Sec.  303.7(a). 
This final rule does not revise this sentence in Sec.  303.7(a) at this 
time because EDA believes it sufficiently relates that the creation of 
a successful CEDS depends heavily on its participants. If CEDS 
development galvanizes a partnership between business and government, 
it will play a ``critical'' or essential role in enabling and 
strengthening Regional economies.
    Section 303.7(b) lists specific technical requirements related to 
the preparation of the CEDS document. These requirements include (i) a 
discussion of private sector participation in the CEDS work, rather 
than community participation, (ii) a specific plan of action with 
certain criteria for gauging the implementation of the goals and 
objectives of the CEDS, and (iii) specific performance measures for 
appraising the Planning Organization's development and execution of the 
CEDS. We received approximately 83 identical comments stating support 
of these requirements. The commenters stated that ``the new technical 
requirements of the CEDS process are sound and beneficial to local 
development efforts.'' This final rule amends Sec.  303.7(b)(7) by 
replacing the phrase, ``A section identifying economic clusters that 
are growing or in decline within the Region'' with ``A section 
identifying economic clusters within the Region, focusing on those that 
are growing or in decline.'' We revise Sec.  303.7(b)(7) as such to 
clarify that Planning Organizations should identify all economic 
clusters in the Region and specify those that are growing or in 
decline. For clarity, we also insert the word ``development'' after 
``economic'' in Sec.  303.7(b)(10).
    Section 303.9 outlines EDA's requirements for short-term Planning 
Investment Assistance. This final rule amends Sec.  303.9(c) by 
replacing the phrase ``program reports'' with ``progress reports,'' as 
the incorrect use of the word ``program'' in the Interim Final Rule was 
an oversight.
    EDA received two comments expressing that part 303 ``focus[es] 
solely on the CEDS without clearly defining who will be responsible for 
implementation of the [CEDS].'' As noted earlier, the Strategy 
Committee is tasked with developing (and revising or replacing as 
necessary) the CEDS. EDA believes it is the responsibility of the 
District Organization as a whole to implement the technical elements of 
the CEDS, which are set forth in Sec.  303.7(b).
    We received one comment asking if there are any changes in the 
Interim Final Rule for Planning Investments to Indian Tribes. All 
Planning Investments, whether awarded to District Organizations, Indian 
Tribes, community development corporations, non-profit regional 
planning organizations or other Eligible Recipients (as listed in Sec.  
303.1), are governed by the requirements of part 303. The Interim Final 
Rule made no specific changes to this part with respect to Planning 
Investments to Indian Tribes. Investments to Indian Tribes are subject 
to the same requirements as other Eligible Recipients and the 
discussion in this preamble applies equally to them.
    EDA received approximately 81 identical comments expressing concern 
that the Interim Final Rule is ``silent on the transition period and 
guidelines for thousands of local communities already covered by an 
existing CEDS, whether prepared by a District Organization, Indian 
[T]ribe or other [P]lanning [O]rganization.'' EDA does not believe that 
administrative or instructional guidelines on how Planning 
Organizations will transition to comply with the requirements of parts 
303 and 304 belong in a set of regulations. This final rule does not 
amend the regulations at this time. However, EDA is cognizant that 
Recipients require a reasonable amount of time to comply with the new 
requirements. To that end, EDA is providing a one-year period for all 
Planning Organizations to demonstrate compliance with the requirements 
with parts 303 and 304. For all awards made in FY 2006, the Planning 
Organization must demonstrate compliance with all new requirements one 
year from the date of receiving EDA Investment Assistance.

Part 304--Economic Development Districts

    Part 304 on Economic Development Districts (also referred to as a 
``District'' or an ``EDD'' in Sec.  300.3) sets forth the Regional 
eligibility requirements that must be satisfied in order for EDA to 
consider a District Organization's request to designate a Region as an 
EDD, including submission of an EDA-approved CEDS, and the District 
Organization's formation and organizational requirements. This part 
also contains provisions relating to termination and performance 
evaluations of District Organizations. As described in detail below, 
the December 15, 2005 Rulemaking revised sections in this part in 
accordance with the Conference Report accompanying the 2006 
Appropriations Act.
    All provisions with respect to formation, organization and 
operation of a District Organization are contained in Sec.  304.2. EDA 
received over one thousand identical or nearly identical comments on 
the provision in Sec.  304.2(c)(2), which requires a District 
Organization's governing body to include a majority of Private Sector 
Representatives (as defined in Sec.  300.3). The majority of these 
comments ``adamantly opposed [ ] the new requirements that shift the 
governing bodies of [District Organizations] from the majority control 
of local government officials to unnamed private sector 
representatives.'' Section 304.2(c)(2) never became effective on 
October 1, 2005, as the September 30, 2005 and November 14, 2005 final 
rules delayed its effective date until January 31, 2006.
    As directed in the Conference Report accompanying the 2006 
Appropriations Act, EDA revised Sec.  304.2(c)(2) in the December 15, 
2005 Rulemaking as follows: (i) A District Organization's governing 
body must, unless otherwise prohibited by applicable State or local 
law, include at least one (1) Private Sector Representative, together 
with one (1) or more of the following: Executive directors of chambers 
of commerce, or representatives of institutions of post-secondary 
education, workforce development groups, or labor groups, all of which 
(including the Private Sector Representative) must comprise in the 
aggregate a minimum of 35% of the District Organization's governing 
body; and (ii) if the District Organization demonstrates an inability 
to locate a Private Sector Representative to serve on its governing 
body following extensive due diligence (as determined by EDA), the 
Assistant Secretary may waive the Private Sector Representative 
requirement. The December 15, 2005 Rulemaking also added a provision 
stating that the District Organization's governing body will also have 
at least a simple majority of its membership who are elected officials 
and/or employees of a general purpose unit of local government who have 
been appointed to represent the government.

[[Page 56664]]

    EDA received approximately 795 identical or nearly identical 
comments on Sec.  304.2(d), which provides that District Organizations 
may contract for services to accomplish approved scopes of work for 
Planning Investments. The majority of these comments stated, ``We are 
specifically opposed to * * * minimizing local government participation 
in local planning and development activities.'' As directed in the 
Conference Report accompanying the 2006 Appropriations Act, EDA revised 
Sec.  304.2(d) in the December 15, 2005 Rulemaking to specify that a 
District Organization will engage in the full range of economic 
development activities listed in its EDA-approved CEDS, which may 
include (i) coordinating and implementing economic development 
activities in the District; (ii) carrying out economic development 
research, planning, implementation and advisory functions identified in 
the CEDS; and (iii) coordinating the development and implementation of 
the CEDS with other local, State, Federal and private organizations. 
This subsection continues to give District Organizations the discretion 
to contract for services as necessary.
    EDA also received public comment on sections describing District 
termination, specifically subsections 304.3(b) and (c). EDA received 
approximately 520 identical or nearly identical comments on Sec.  
304.3(b). These comments expressed concern ``that the agency has added 
new criteria for the termination of District Organizations that are 
subjective and lack any appeals process.'' We received approximately 87 
identical or nearly identical comments on Sec.  304.3(c), which 
expressed concern ``that the agency may use the [Federal Funding 
Opportunity] process to change its policies, guidelines and performance 
standards without public comment.''
    Section 304.3(b)(2) provides that EDA may terminate a Region's 
designation as an Economic Development District when EDA determines 
that the District Organization fails to execute its CEDS according to 
the development, implementation and other performance measures set 
forth in the CEDS. In accordance with the Conference Report 
accompanying the 2006 Appropriations Act, the December 15, 2005 
Rulemaking added a new subsection (c) to Sec.  304.3 to clarify that 
prior to terminating a District's designation under subsection 
304.3(b)(2), EDA will consult with the District Organization and 
consider all facts and circumstances surrounding the District 
Organization's operations. Section 304.3(c) also provides that EDA will 
not terminate a District's designation based on circumstances beyond 
the control of the District Organization (e.g., natural disaster, plant 
closure, overall economic downturn, sudden and severe economic 
dislocation, or other situation).
    This final rule does not amend Sec.  304.3(d). We believe that the 
December 15, 2005 Rulemaking changes to Sec.  304.3 safeguard District 
Organizations adequately with respect to District termination. EDA 
cannot use the Federal Funding Opportunity announcement process to 
change the regulatory standards for termination or modification of the 
designation of Economic Development Districts.
    Information with respect to the performance evaluations of District 
Organizations, formerly codified in part 318 of EDA's former 
regulations, is now incorporated into Sec.  304.4. Pursuant to PWEDA, 
EDA will evaluate each District Organization within three (3) years 
after the initial Investment award and at least once every three (3) 
years thereafter, so long as the District Organization continues to 
receive Investment Assistance. On Sec.  304.4(a), we received 
approximately 415 identical comments stating that ``most of the 
requirements for grantee performance measurements are very vague and 
open to varying agency interpretations among the different regional 
offices.'' We do not believe that the provisions of Sec.  304.4(a) are 
vague. In fact, unlike EDA's former regulations, the performance 
evaluation provisions of Sec.  304.4(a) contain specific requirements 
for Economic Development Districts, such as the continuation of 
Regional eligibility of the District, the management of the District 
Organization, and the implementation of its CEDS. EDA's regional 
offices are directed to interpret and apply EDA's regulations 
consistently and uniformly across all regions in the United States. For 
these reasons, this final rule does not amend Sec.  304.4(a).
    Last, EDA received four comments expressing ``concern with the 
elimination of up to 10% additional assistance if a project is located 
within a designated Economic Development District.'' Because former 
section 403 of PWEDA was eliminated by the 2004 Act, EDA removed from 
its regulations the ten (10) percent EDA ``bonus'' funding for certain 
Projects located in Economic Development Districts. Because EDA must 
implement its statutory mandate of PWEDA, EDA is unable to reinstate 
the ten (10) percent bonus.

Part 305--Public Works and Economic Development Investments

    Part 305 describes general information about the scope of EDA's 
Public Works program, award and application requirements, and 
provisions for EDA's and Recipients' duties. EDA received no public 
comments on this part. Section 305.1 provides information on the 
purpose and scope of Public Works and Economic Development Investments. 
The criteria section (Sec.  305.2) specifies the scope of activities 
eligible for consideration of a Public Works Investment in subsection 
(a), and sets forth a list of determinations in subsection (b) that EDA 
must reach in order to award a Public Works Investment.
    The application requirements for Public Works Investments are set 
forth in Sec.  305.3. The section on Public Works Projects for design 
and engineering work was moved from subpart B and placed as Sec.  305.4 
under subpart A. This section includes a provision to ensure awareness 
that EDA's funding of a Project for design and engineering work does 
not in any way commit EDA to fund construction of the Project.
    The first section under subpart B is Sec.  305.5, titled Project 
administration by District Organization. These provisions are included 
in this subpart because the provisions are applicable to construction 
projects only. Section 305.6 combines two former sections titled 
Construction Management services and Design/Build method of 
construction (Sec. Sec.  305.10 and 305.11 of EDA's former regulations) 
and addresses and accounts for the majority of Public Works Investments 
that lend themselves to the traditional design/build method of 
construction. However, Recipients may employ other construction 
methods, too. This final rule amends the second sentence of Sec.  
305.6(a) by replacing the phrase ``design-build'' with ``design/bid/
build.''
    Similar to the provisions in Sec.  305.6, Sec.  305.7 includes 
information that the Recipient must submit to EDA to justify the use of 
``in-house forces.'' Section 305.8 provides that Recipients of EDA 
construction awards must obtain prior approval for the use of furnished 
equipment and materials. Requests must show that costs claimed for 
furnished equipment and materials are competitive with local market 
costs for similar equipment and materials. Section 305.9 contains 
specific information that the Recipient must provide to EDA for 
approval of any Project that necessitates phasing, including a 
description of elements to be completed in each phase and

[[Page 56665]]

detailed construction cost estimates for each phase. The last five (5) 
sections in subpart B, Sec. Sec.  305.10 (Bid underrun), 305.11 
(Contract awards; early construction start), 305.12 (Project sign), 
305.13 (Contract change orders) and 305.14 (Occupancy prior to 
completion), contain the same substance as found in EDA's former 
regulations. However, EDA rewrote these sections in the Interim Final 
Rule to eliminate ambiguity or extraneous provisions.
    Except for the revision made in Sec.  305.6(a) stated above, this 
final rule does not amend part 305 of the Interim Final Rule.

Part 306--Training, Research and Technical Assistance Investments

    Part 306 was primarily reorganized, shortened and rewritten in the 
Interim Final Rule for increased understanding and inclusiveness of all 
pertinent information. Section 306.1(a), dealing with the scope of 
Local and National Technical Assistance Investments, captures diverse 
purposes for such Investments. Section 306.2, titled Award 
requirements, is the combination of Sec. Sec.  307.2 and 307.10 of 
EDA's former regulations. Similarly, the content of Sec. Sec.  307.3 
and 307.11 in EDA's former regulations was merged into Sec.  306.3 and 
re-titled Application requirements. Section 306.3(c) specifically 
cross-references Sec.  301.4(b)(4), which sets forth the governing 
provisions for determining applicable Investment Rates for Projects 
under part 306. A cross-reference to Sec.  301.4(b) is made in 
applicable sections of all parts relating to specific EDA programs 
(i.e., parts 303-307).
    EDA received approximately seven comments on Sec.  306.3(c) which 
stated that the provision is ``much too demanding in terms of local 
match required.'' Section 301.4(b)(4) ties the maximum allowable 
Investment Rate for Local and National Technical Assistance Projects to 
that otherwise applicable to the Region in which the Project will be 
located. Section 301.4(b)(4) also authorizes a maximum Investment Rate 
of up to a one hundred (100) percent for Projects of a national scope 
under 13 CFR part 306 and for all other projects under 13 CFR part 306, 
in appropriate circumstances. We believe the maximum allowable 
Investment Rates for Local and National Technical Assistance 
Investments are fair and will preserve the Local Share requirement to 
make certain Recipients commit their own funds to help ensure the 
success of the Projects.
    In the Interim Final Rule, the title of subpart B was changed from 
University Center Program to University Center Economic Development 
Program. To mirror the organization and sequence of Sec. Sec.  306.2 
and 306.3 in subpart A, Sec. Sec.  306.5 and 306.6 are named Award 
requirements and Application requirements, respectively. Section 306.5 
states that EDA provides Investment Assistance to University Center 
Projects based on the selection criteria in part 301, the competitive 
selection process outlined in the applicable FFO, and the extent to 
which the Eligible Applicant demonstrates other more specific, related 
criteria.
    Section 306.6 sets forth application requirements for University 
Center Projects. Section 306.6(c) cross-references Sec.  301.4(b)(4) 
for information regarding the applicable Investment Rate for University 
Center Projects. EDA received approximately fourteen comments on Sec.  
306.6(c), each that stated ``we are very troubled by the proposal to 
change the match requirements on the EDA [U]niversity [C]enter grant[s] 
and strongly oppose such a move.'' Section 206 of PWEDA (42 U.S.C. 
3146) requires EDA to consider the ``relative needs'' of eligible 
areas. As noted above, we believe Sec.  301.4(b) appropriately takes 
``relative needs'' into account for purposes of determining the maximum 
allowable Investment Rates and the Local Share requirements for EDA 
Investments. Accordingly, this final rule does not amend Sec.  
306.6(c).
    The University Center Economic Development Program establishes a 
three-year competitive cycle in which performance evaluations occurring 
within three (3) years after the initial Investment award will 
determine if a University Center may qualify to compete again for 
Investment Assistance. Consistent with section 506(d)(2) of PWEDA (42 
U.S.C. 3196), Sec.  306.7 contains an additional performance evaluation 
standard by which University Centers will be evaluated. At a minimum, 
University Centers will be evaluated specifically with regard to their 
contributions to providing technical assistance, conducting applied 
research, meeting program performance objectives and disseminating 
Project results in accordance with the scope of work funded during the 
evaluation period.
    This final rule adopts part 306 of the Interim Final Rule in its 
entirety.

Part 307--Economic Adjustment Assistance Investments

    EDA extensively considered and examined part 308 of EDA's former 
regulations in order to draft part 307 of the Interim Final Rule. This 
part was greatly improved by making effective use of defined terms in 
subpart A (covering Economic Adjustment Assistance Investments) and in 
subpart B (covering special requirements for RLF Grants). EDA did not 
receive any public comments on subpart A of part 307, covering 
Sec. Sec.  307.1 through 307.6. This final rule amends Sec. Sec.  
307.1, 307.2 and 307.4 as described below.
    To ensure conformity between the titles of Sec. Sec.  307.1 and 
307.2 and their respective contents, this final rule changes the title 
of Sec.  307.1 to Purpose and the title of Sec.  307.2 to Criteria for 
Economic Adjustment Assistance Investments. For improved clarity, we 
also move Sec.  307.1(b) to Sec.  307.2 and delete Sec.  307.2(b) in 
its entirety because an identical statement is already in Sec.  
307.4(d). This final rule revises Sec.  307.4(d) to read as ``Funding 
priority considerations for Economic Adjustment Assistance may be set 
forth in an FFO.''
    In drafting the Interim Final Rule, EDA revised subpart A to follow 
PWEDA and read more concisely. For example, in Sec.  307.3 (titled Use 
of Economic Adjustment Assistance Investments), EDA introduced the new 
defined terms ``Strategy Grant,'' referring to Economic Adjustment 
Assistance Investments that help develop CEDS to alleviate long-term 
economic deterioration or a sudden and severe economic dislocation, and 
``Implementation Grant,'' defined as an Economic Adjustment Assistance 
Investment used to fund a Project implementing a CEDS. Section 308.4 in 
EDA's former regulations, titled Selection and evaluation factors, was 
renamed Award requirements in Sec.  307.4, parallel with similar 
provisions in other program parts, and reorganized and sub-titled for 
clarity.
    EDA redrafted in the Interim Final Rule Sec.  307.6 to emphasize 
and cross-reference relevant parts or subparts in the chapter with 
respect to Strategy Grants and Implementation Grants. For instance, 
Implementation Grants involving construction must meet the requirements 
for Public Works Investments, whereas Implementation Grants not 
involving construction must follow the requirements for Local and 
National Technical Assistance Investments. Accordingly, the Interim 
Final Rule references parts 303, 305 and 306 in Sec.  307.6 for 
additional requirements that Strategy Grants and Implementation Grants, 
as appropriate, must fulfill (in addition to the post-approval 
stipulations set forth in Sec.  302.18).
    Except for an amendment made to Sec.  307.9 as explained below, 
this final rule does not substantively amend subpart B of part 307. 
However, we have

[[Page 56666]]

re-ordered some of the sections in subpart B to logically separate pre-
approval actions from post-approval actions. The following discussion 
summarizes the provisions of this subpart. The first section, Sec.  
307.7, states that subpart B sets forth the requirements applicable to 
Economic Adjustment Assistance Grants used to capitalize or 
recapitalize RLFs. To ensure accuracy and completeness in this subpart, 
EDA rewrote in the Interim Final Rule the defined terms in Sec.  307.8, 
which relate to RLF Grants. EDA also introduced new defined terms, such 
as ``Exempt Security,'' ``Sale,'' ``SEC,'' ``Security'' and ``RLF Third 
Party,'' in large part to interpret the provisions of section 209(d)(2) 
and (4) of PWEDA (42 U.S.C. 3149).
    The requirements for RLF Plans are set forth in Sec.  307.9, which 
states that EDA will evaluate an RLF Plan based on its ability to 
``demonstrate an adequate understanding of commercial loan portfolio 
management procedures, including loan processing, underwriting, 
closing, disbursements, collections, monitoring, and foreclosures'' 
(see Sec.  307.9(b)(3)). We received two comments opposing the 
provision in Sec.  307.9 that requires the RLF Plan be submitted to and 
approved by EDA and passed by resolution of the RLF Recipient's 
governing board prior to initial disbursement of EDA funds. The 
commenters indicated that from a practical standpoint, it may not be 
possible for a State or large city to pass a resolution accepting an 
RLF Plan; however, a resolution requirement may be more reasonable for 
a non-profit organization. In response to these comments and in order 
to maintain necessary flexibility in EDA's grant-making processes and 
requirements, this final rule revises the second sentence in Sec.  
307.9 to require that the Plan be submitted to and approved by EDA. EDA 
will require a resolution by the RLF Recipient's governing board on a 
case-by-case basis.
    This final rule moves Sec.  307.16, titled Disbursement of funds to 
Revolving Loan Funds, to Sec.  307.11 because it describes certain pre-
approval requirements that must be satisfied prior to any disbursement 
of EDA funds (e.g., evidence of fidelity bond coverage; establishment 
of an EDA funds account). This section was revised and reorganized in 
the Interim Final Rule from Sec.  308.16 of EDA's former regulations. 
Section 307.12 makes explicit the general rule that RLF Income must be 
placed into the RLF Capital base for the purpose of making loans or 
paying for eligible and reasonable administrative costs associated with 
the RLF's operations. Section 307.12(c) provides a priority of payment 
schedule for proceeds on a defaulted RLF loan that is not subject to 
liquidation pursuant to Sec.  307.20.
    The next three sections, Sec. Sec.  307.13, 307.14 and 307.15 
(titled Records and retention; Revolving Loan Fund semi-annual and 
annual reports; and Prudent management of Revolving Loan Funds), are 
substantively the same as Sec. Sec.  308.13, 308.14 and 308.15 of EDA's 
former regulations. The main focus of the revision to these sections, 
as seen in the Interim Final Rule, was to incorporate defined terms to 
improve the explanation of the specific documentation, accounting and 
reporting requirements. Additionally, the conflicts of interest 
provisions in Sec.  308.15(e) in EDA's former regulations were moved to 
Sec.  302.17(c) to improve organization and referencing facility.
    This final rule moves Sec.  307.17 (titled Effective utilization of 
Revolving Loan Funds) to Sec.  307.16. This section was slightly 
reworded in the Interim Final Rule from what appeared in Sec.  308.17 
of EDA's former regulations. Those revisions largely incorporated