Debt Refinancing in 504 Loan Program, 33123-33126 [2016-12447]
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33123
Rules and Regulations
Federal Register
Vol. 81, No. 101
Wednesday, May 25, 2016
This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
Federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
RIN 3245–AG79
Debt Refinancing in 504 Loan Program
U.S. Small Business
Administration.
ACTION: Interim final rule with request
for comments.
AGENCY:
This interim final rule
implements Section 521 of Division E
the Consolidated Appropriations Act,
2016, which authorizes projects
approved for financing under Title V of
the Small Business Investment Act to
include the refinancing of qualified
debt.
SUMMARY:
Effective Date: This rule is
effective June 24, 2016.
Comment Date: Comments must be
received on or before July 25, 2016.
ADDRESSES: You may submit comments,
identified by RIN 3245–AG79, by any of
the following methods:
Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Linda Reilly. Chief, 504 Branch,
Office of Financial Assistance, U.S.
Small Business Administration, 409
Third Street SW., 8th Floor,
Washington, DC 20416.
Hand Delivery/Courier: Linda Reilly,
Chief, 504 Branch, Office of Financial
Assistance, U.S. Small Business
Administration, 409 Third Street SW.,
8th Floor, Washington, DC 20416.
SBA will post all comments on https://
www.regulations.gov. If you wish to
submit confidential business
information (CBI) as defined in the User
Notice at https://www.regulations.gov,
please submit the information to Linda
Reilly, Chief, 504 Branch, Office of
Financial Assistance, 409 Third Street
SW., Washington, DC 20416, or send an
email to 504refi@sba.gov. Highlight the
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DATES:
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information that you consider to be CBI
and explain why you believe SBA
should hold this information as
confidential. SBA will review the
information and make the final
determination whether it will publish
the information.
FOR FURTHER INFORMATION CONTACT:
Linda Reilly at linda.reilly@sba.gov or
202–205–9949.
SUPPLEMENTARY INFORMATION:
I. Background Information
The 504 Loan Program is an SBA
financing program authorized under
Title V of the Small Business
Investment Act of 1958, 15 U.S.C. 695
et seq. The core mission of the 504 Loan
Program is to provide long-term
financing to small businesses for the
purchase or improvement of land,
buildings, and major equipment, in an
effort to facilitate the creation or
retention of jobs and local economic
development. Under the 504 Loan
Program, loans are made to small
business applicants by Certified
Development Companies (‘‘CDCs’’),
which are certified and regulated by
SBA to promote economic development
within their community. In general, a
project in the 504 Loan Program (a ‘‘504
Project’’) includes: A loan obtained from
a private sector lender with a senior lien
covering at least 50 percent of the
project cost; a loan obtained from a CDC
(a ‘‘504 Loan’’) with a junior lien
covering up to 40 percent of the total
cost (backed by a 100 percent SBAguaranteed debenture); and a
contribution from the Borrower of at
least 10 percent equity.
The Small Business Jobs Act of 2010
(Jobs Act), Public Law 111–240, 124
Stat. 2504, enacted on September 27,
2010, temporarily expanded the ability
of a small business to use the 504 Loan
Program to refinance certain qualifying
debt. Prior to the Jobs Act, a 504 Project
could include a refinancing component
only if the project involved an
expansion of the small business and the
existing indebtedness did not exceed
50% of the project cost of the
expansion. See 13 CFR 120.882(e). The
temporary Jobs Act program authorized
the use of the 504 Loan Program for the
refinancing of debt where there is no
expansion of the small business concern
(the ‘‘Debt Refinancing Program’’). The
regulations governing this program are
found at 13 CFR 120.882(g) (referred to
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herein as ‘‘Current Rules’’). SBA’s
authority to guarantee loans under the
Debt Refinancing Program expired on
September 27, 2012.
Section 521 of Division E of the
Consolidated Appropriations Act, 2016
(the Act), Public Law 114–113, enacted
on December 22, 2015, reauthorizes the
Debt Refinancing Program with three
modifications:
(1) The Act provides that the Debt
Refinancing Program shall be in effect in
any fiscal year during which the cost to
the Federal Government of making
guarantees under the Debt Refinancing
Program and under the 504 Loan
Program is zero;
(2) the Act requires that a CDC limit
its financings under the 504 Loan
Program so that, during any fiscal year,
new financings under the Debt
Refinancing Program do not exceed 50%
of the dollars the CDC loaned under the
504 Loan Program during the previous
fiscal year. The Act provides that this
limitation may be waived upon
application by a CDC and after
determining that the refinance loan is
needed for good cause; and
(3) the Act eliminates the alternate job
retention goal authorized by the Jobs
Act for the Debt Refinancing Program.
As described in the section-by-section
analysis below, this interim final rule
modifies the Current Rules to conform
the Debt Refinancing Program to the
requirements of the Act. For an in-depth
discussion of the Current Rules, please
see the interim final rule and the final
rule that were issued to implement the
Debt Refinancing Program at 76 FR 9213
(February 17, 2011) and 76 FR 63151
(October 12, 2011). With this interim
final rule, SBA invites comments from
interested parties on all aspects of the
Debt Refinancing Program.
The ‘‘zero cost’’ requirement
described in (1) above is satisfied for
Fiscal Year 2016. As announced in SBA
Information Notice 5000–1352, effective
September 28, 2015, ‘‘7(a) and 504 Fees
Effective October 1, 2015,’’ the 504 Loan
Program is operating at zero subsidy
during Fiscal Year 2016, with a zero
upfront fee and an annual guarantee fee
of 91.4 basis points on the outstanding
loan balance. To operate the Debt
Refinancing Program at zero cost to the
Federal Government during Fiscal Year
2016, SBA has determined that the
Borrower must pay a supplemental
annual guarantee fee of 4.4 basis points
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on the outstanding loan balance to cover
the additional cost attributable to the
refinancing, for a total annual guarantee
fee of 95.8 basis points. The
supplemental fee for the Debt
Refinancing Program will be assessed
and collected in the same manner as the
current annual guarantee fee under 13
CFR 120.971(d)(2).
Before the beginning of each new
fiscal year, SBA will issue a similar
notice indicating whether the Debt
Refinancing Program will be in effect
during the new fiscal year, in addition
to any changes in the fees for 504 Loans.
With the ‘‘zero cost’’ requirement
satisfied for Fiscal Year 2016, SBA will
begin to accept applications for
assistance under the Debt Refinancing
Program upon the effective date of this
rulemaking, June 24, 2016.
II. Section-by-Section Analysis
Except as set forth below, all other
sections of the Current Rules are
unchanged.
Section 120.882(g) Introductory
Text. This section currently includes the
application deadline for the Debt
Refinancing Program. Since that date is
no longer relevant, SBA is revising the
introductory text in this section to
remove the following phrase that is no
longer applicable: ‘‘For applications
received on or after February 17, 2011
and approved by SBA no later than
September 27, 2012’’. Also, with the
permanent reauthorization of the Debt
Refinancing Program by the Act, a
specific application period is
unnecessary.
Section 120.882(g)(3). In order to
manage the limited resources that were
available for the Debt Refinancing
Program between 2010 and 2012, this
section imposed a maturity date
requirement on the debt to be
refinanced that is no longer necessary.
Accordingly, SBA is revising this
section by removing this maturity date
requirement. In its place, SBA is
inserting the Act’s requirement that, for
the Debt Refinancing Program to be in
effect during any fiscal year, the cost to
the Federal government of making
guarantees under the Debt Refinancing
Program and under the 504 Loan
Program must be zero subsidy.
Section 120.882(g)(10). The Jobs Act
authorized an alternate job retention
goal for the Debt Refinancing Program
for Borrowers that did not meet the job
creation and retention goals under
sections 501(d) and (e) of the Small
Business Investment Act of 1958. The
Act eliminates this alternate job
retention goal and, accordingly, SBA is
removing the alternate job retention goal
provision from the regulations. With the
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elimination of the alternate job retention
standard, all applicants for a loan under
the Debt Refinancing Program will now
be required to meet the job creation and
retention goals under §§ 501(d) and (e).
Based on these goals, a 504 Project,
including a project financed under the
Debt Refinancing Program, must achieve
one of the economic development
objectives set forth in 13 CFR 120.861 or
120.862.
The revisions to § 120.882(g)(10) will
reflect the Act’s requirement that a CDC
limit its financings under the Debt
Refinancing Program so that, during any
fiscal year (October 1 to September 30),
new financings under the Debt
Refinancing Program do not exceed 50%
of the dollars loaned by the CDC under
the 504 Loan Program during the
previous fiscal year. In making this
calculation, the dollars will be deemed
loaned by the CDC on the date that the
504 loan application is approved, which
is when SBA obligates the funds for the
504 Project. The dollars loaned will be
calculated as of September 30 of each
fiscal year, which will reflect any
increases or decreases to the approved
504 loan amount that occurred within
that fiscal year. Because the Act
provides that the 50% limitation applies
to the dollars loaned under the 504 Loan
Program during the previous fiscal year,
all financings made by the CDC during
the previous fiscal year will be included
in determining this number, including
those financings made under the Debt
Refinancing Program.
As authorized by the Act,
§ 120.882(g)(10) will provide that the
50% limitation may be waived upon
application by a CDC and a
determination by SBA that the refinance
loan is needed for good cause. SBA will
provide guidance regarding the good
cause determination in its Standard
Operating Procedures or other guidance
documents.
Section 120.882(g)(13). This section
prohibits the Third Party Loan from
being sold on the secondary market as
a part of a pool guaranteed under
subpart J of part 120 when the debt
being refinanced is same institution
debt. Subpart J of part 120, the
Secondary Market Guarantee Program
for First Lien Position 504 Loan Pools,
expired on September 23, 2012;
however, should this program be
reauthorized, SBA wants to ensure that
this prohibition remains in effect.
Accordingly, SBA is revising this
provision to make it clear that the
prohibition would apply to any
successor to the program described in
subpart J of part 120.
Section 120.882(g)(15) (Definition of
‘‘qualified debt’’). To meet the definition
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of ‘‘qualified debt’’, paragraph (vii) of
this provision requires that the
applicant be current on all payments
due for not less than one year preceding
the date of application. When SBA
initially implemented the Debt
Refinancing Program under the Jobs Act,
it defined ‘‘current on all payments
due’’ to mean that no payment
scheduled to be made during the one
year period was either deferred or more
than 30 days past due. See 76 FR 9213
(February 17, 2011). In response to
comments received, SBA revised this
definition to mean that no payment was
more than 30 days past due from either
the original payment terms or modified
payment terms (including deferments)
‘‘if such modification was agreed to in
writing by the Borrower and the lender
of the existing debt prior to the (sic)
October 12, 2011.’’ See 76 FR 63151
(October 12, 2011). This date was the
effective date of the final rule for the
Debt Refinancing Program under the
Jobs Act, and was intended to ensure
that no debt that was modified after the
definition was revised would be
refinanced under the program. SBA also
reserved the right to determine, at its
discretion on a loan-by-loan basis,
whether modified repayment terms
would preclude refinancing under the
program.
The October 12, 2011 date is no
longer relevant after the expiration of
the Debt Refinancing Program in 2012,
and SBA is removing it from the rules.
However, SBA believes that a debt
should not be considered ‘‘current on all
payments due for not less than one year
preceding the date of application’’ if the
payment terms were modified during
the one year period. Accordingly, SBA
is revising this provision to require that
the modification must have been agreed
to in writing by the Borrower and the
lender of the existing debt no less than
one year preceding the date of
application. As under the Debt
Refinancing Program under the Jobs Act,
SBA reserves the right to determine, at
its discretion on a loan-by-loan basis,
whether modified repayment terms
would preclude refinancing under the
program.
III. Justification for Publication as
Interim Final Rule
In general, before issuing a final rule,
SBA publishes the rule for public
comment in accordance with the
Administrative Procedure Act (APA), 5
U.S.C. 553. The APA provides an
exception to this standard rulemaking
process where the agency finds good
cause to adopt a rule without prior
public participation. 5 U.S.C.
553(c)(3)(B). The good cause
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requirement is satisfied when prior
public participation can be shown to be
impracticable, unnecessary, or contrary
to the public interest. Under such
circumstances, an agency may publish
an interim final rule without soliciting
public comment. In enacting the good
cause exception to standard rulemaking
procedures, Congress recognized that
emergency and other situations arise
where an agency can issue a rule
without public participation.
With regard to the Debt Refinancing
Program, SBA finds that good cause
exists to publish this rule as an interim
final rule for two reasons. First, the
public has already had the opportunity
to comment on the rules implementing
the Debt Refinancing Program and this
interim final rule simply modifies these
rules to conform the Debt Refinancing
Program to the requirements of the Act.
Second, in order to meet the
immediate debt refinancing needs of
small businesses, it is essential to be
able to implement the Debt Refinancing
Program as expeditiously as possible.
According to data presented to the
Federal Open Market Committee before
its January 2016 meeting, there is a
concerning trend toward tighter credit
sentiment by bank officers since the
Debt Refinancing Program expired in
2012. The combination of tighter credit
sentiment and the recent increase in
interest rates has made it increasingly
difficult for small businesses to find
lenders willing to refinance small
business commercial loans. The Debt
Refinancing Program will fill that gap by
providing an affordable refinancing
product that lenders and the small
business community are eagerly
awaiting.
Although this rule is being published
as an interim final rule, comments are
solicited from interested members of the
public. These comments must be
submitted on or before the deadline for
comments stated in this rule. The SBA
will consider any comments it receives
and the need for making any
amendments as a result of the
comments.
Compliance With Executive Orders
12866, 12988, 13132, and 13563, the
Paperwork Reduction Act (44 U.S.C.,
Ch. 35), and the Regulatory Flexibility
Act (5 U.S.C. 601–612)
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Executive Order 12866
The Office of Management and Budget
has determined that this rule does not
constitute a ‘‘significant regulatory
action’’ under Executive Order 12866.
This rule is also not a major rule under
the Congressional Review Act.
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Executive Order 12988
This action meets applicable
standards set forth in sections 3(a) and
3(b)(2) of Executive Order 12988, Civil
Justice Reform, to minimize litigation,
eliminate ambiguity, and reduce
burden. The action does not have
preemptive effect or retroactive effect.
Executive Order 13132
This rule does not have federalism
implications as defined in Executive
Order 13132. It will not have substantial
direct effects on the States, on the
relationship between the national
government and the States, or on the
distribution of power and
responsibilities among the various
levels of government, as specified in the
Executive Order. As such it does not
warrant the preparation of a Federalism
Assessment.
Executive Order 13563
The Consolidated Appropriations Act,
2016, reauthorizes the Debt Refinancing
Program, which was first authorized by
the Jobs Act. The Agency received
significant public comments on the
interim final rule that was issued to
implement this program (see 76 FR
9213, February 17, 2011). SBA
considered and discussed these
comments in the final rule that was
published in the Federal Register on
October 12, 2011 (76 FR 63151). To
assist in developing that interim final
rule, the Agency also held a public
forum on November 17, 2010 in Boston,
Massachusetts.
Except for the modifications to the
Debt Refinancing Program made by the
Act, the Agency is not making any other
substantive changes to the Current
Rules, codified at 13 CFR 120.882(g), in
this interim final rule.
Paperwork Reduction Act
In order to re-establish the Debt
Refinancing Program, SBA has
determined that it is necessary to also
modify two existing collections of
information (OMB Control Number
3245–0071, Application for Section 504
Loans and OMB Control Number 32450346, PCLP Quarterly Loan Loss Reserve
Report and PCLP Guarantee Request) to
include the requirements to apply for
and report on debt refinancing loans.
These requirements were previously
part of these collections but were
removed following expiration of the
temporary Debt Refinancing Program in
2012. OMB has approved the revised
collections on an emergency basis to
enable SBA to move forward with reestablishing the Debt Refinancing
Program as expeditiously as possible.
The Paperwork Reduction Act requires
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33125
agencies to follow the standard approval
process following receipt of an
emergency approval. In light of that
requirement, SBA will also publish the
required notices in the Federal Register
to solicit comments from the public on
the revised forms and will subsequently
resubmit the collections of information
to OMB for final review and approval.
Any changes to the collection of
information as a result of the comments
will be reflected in that submission.
Regulatory Flexibility Act
Because this rule is an interim final
rule, there is no requirement for SBA to
prepare a Regulatory Flexibility Act
(RFA) analysis. The RFA requires
administrative agencies to consider the
effect of their actions on small entities,
including small non-profit businesses,
and small local governments. Pursuant
to the RFA, when an agency issues a
rule, the agency must prepare an
analysis that describes whether the
impact of the rule will have a significant
economic impact on a substantial
number of these small entities.
However, the RFA requires such
analysis only where notice and
comment rulemaking is required. As
discussed above, SBA has determined
that there is good cause to publish this
rule without soliciting public comment.
This rule is, therefore, exempt from the
RFA requirements.
List of Subjects in 13 CFR Part 120
Loan programs—business, Small
businesses, Reporting and
recordkeeping requirements.
For the reasons stated in the
preamble, SBA amends 13 CFR part 120
as follows:
PART 120—BUSINESS LOANS
1. The authority citation for part 120
is revised to read as follows:
■
Authority: 15 U.S.C. 634(b)(6), (b)(7),
(b)(14), (h), and note, 636(a), (h) and (m), 650,
687(f), 696(3), and 697(a) and (e); Public Law
111–5, 123 Stat. 115, Public Law 111–240,
124 Stat. 2504; Public Law 114–113, 129 Stat.
2242.
2. Amend § 120.882 by revising
paragraph (g) introductory text,
paragraphs (g)(3), (g)(10), (g)(13), and
the second sentence of paragraph (vii) in
the definition of ‘‘Qualified debt’’ in
paragraph (g)(15)(vii) to read as follows:
■
§ 120.882
loans.
Eligible project costs for 504
*
*
*
*
*
(g) SBA may approve a Refinancing
Project of a qualified debt subject to the
following conditions and requirements:
*
*
*
*
*
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(3) The cost to the Federal
Government of making guarantees under
this subsection (g) and under section
503 of the Small Business Investment
Act of 1958 (15 U.S.C. 697) during the
fiscal year in which the guarantee is
made is zero;
*
*
*
*
*
(10) A CDC must limit the amount of
its loans under this paragraph (g) so
that, during any Federal fiscal year, the
amount of the new loans approved
under this paragraph (g) does not exceed
50% of the total dollar amount of the
CDC’s 504 loans approved (including
the loans approved under this paragraph
(g)) during the previous fiscal year. This
limitation may be waived upon
application by the CDC and upon a
determination by SBA that the refinance
loan is needed for good cause.
*
*
*
*
*
(13) The Third Party Loan may not be
sold on the secondary market as a part
of a pool guaranteed under subpart J of
this part, or any successor to this
program, when the debt being
refinanced is same institution debt;
*
*
*
*
*
(15) * * *
Qualified debt * * *
(vii) * * * For the purposes of this
paragraph (vii), ‘‘current on all
payments due’’ means that no payment
was more than 30 days past due from
either the original payment terms or
modified payment terms (including
deferments) if such modification was
agreed to in writing by the Borrower and
the lender of the existing debt no less
than one year preceding the date of
application. * * *
*
*
*
*
*
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016–12447 Filed 5–23–16; 4:15 pm]
BILLING CODE 8025–01–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
14 CFR part 93
[Docket No.: FAA–2006–25755]
Operating Limitations at New York
Laguardia Airport
Federal Aviation
Administration (FAA), DOT.
ACTION: Extension to order.
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AGENCY:
This action extends the Order
Limiting Operations at New York
LaGuardia Airport (LGA) published on
December 27, 2006, and most recently
SUMMARY:
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14:51 May 24, 2016
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extended March 27, 2014. The Order
remains effective until October 27, 2018.
DATES: This action is effective on May
25, 2016.
ADDRESSES: Requests may be submitted
by mail to Slot Administration Office,
AGC–240, Office of the Chief Counsel,
800 Independence Avenue SW.,
Washington, DC 20591, or by email to:
7-awa-slotadmin@faa.gov.
FOR FURTHER INFORMATION CONTACT: For
questions concerning this Order contact:
Susan Pfingstler, System Operations
Services, Air Traffic Organization,
Federal Aviation Administration, 600
Independence Avenue SW.,
Washington, DC 20591; telephone (202)
267–6462; email susan.pfingstler@
faa.gov.
SUPPLEMENTARY INFORMATION:
Availability of Rulemaking Documents
You may obtain an electronic copy
using the Internet by:
(1) Searching the Federal
eRulemaking Portal (https://
www.regulations.gov);
(2) Visiting the FAA’s Regulations and
Policies Web page at https://
www.faa.gov/regulations_policies/; or
(3) Accessing the Government
Printing Office’s Web page at https://
www.gpoaccess.gov/fr/.
You also may obtain a copy by
sending a request to the Federal
Aviation Administration, Office of
Rulemaking, ARM–1, 800 Independence
Avenue SW., Washington, DC 20591, or
by calling (202) 267–9680. Make sure to
identify the amendment number or
docket number of this rulemaking.
Background
The FAA has long limited the number
of arrivals and departures at LGA during
peak demand periods through the
implementation of the High Density
Rule (HDR), to address constraints based
on LGA’s limited runway capacity.1 By
statute enacted in April 2000, the HDR’s
applicability to LGA operations
terminated as of January 1, 2007.2
In anticipation of the HDR’s
expiration, the FAA proposed a longterm rule that would limit the number
of scheduled and unscheduled
operations at LGA.3 The FAA issued an
1 33 FR 17896 (Dec. 3, 1968). The FAA codified
the rules for operating at high density traffic
airports in 14 CFR part 93, subpart K. The HDR
required carriers to hold a reservation, which came
to be known as a ‘‘slot,’’ for each takeoff or landing
under instrument flight rules at the high density
traffic airports.
2 Aviation Investment and Reform Act for the 21st
Century (AIR–21), Public Law 106–181 (Apr. 5,
2000), 49 U.S.C. 41715(a)(2).
3 71 FR 51360 (August 29, 2006); Docket FAA–
2006–25709. The FAA subsequently published a
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Order on December 27, 2006, adopting
temporary limits pending the
completion of the rulemaking.4 This
Order was amended on November 8,
2007, and August 19, 2008.5 On October
10, 2008, the FAA published the
Congestion Management Rule for
LaGuardia Airport, which would have
become effective on December 9, 2008.6
That rule was stayed by the U.S. Court
of Appeals for the District of Columbia
Circuit and subsequently rescinded by
the FAA.7 The FAA extended the
December 27, 2006, Order placing
temporary limits on operations at LGA,
as amended, on October 7, 2009,8 on
April 4, 2011,9 on May 14, 2013,10 and
on March 27, 2014.11
Under the Order, as amended, the
FAA (1) maintains the current hourly
limits on scheduled and unscheduled
operations at LGA during the peak
period; (2) imposes an 80 percent
minimum usage requirement for
Operating Authorizations (OAs) with
defined exceptions; (3) provides a
mechanism for withdrawal of OAs for
FAA operational reasons; (4) provides
for a lottery to reallocate withdrawn,
surrendered, or unallocated OAs; and
(5) allows for trades and leases of OAs
for consideration for the duration of the
Order.
The reasons for issuing the Order
have not changed appreciably since it
was implemented. Runway capacity at
LGA remains limited, while demand for
access to LGA remains high and average
weekday hourly flights are generally
scheduled to a level consistent with the
limits under this Order. The FAA has
reviewed the on-time and other
performance metrics in the peak May to
August 2014 and 2015 months and
found continuing improvements relative
to the same period in 2007.12 Without
the operational limitations imposed by
this Order, the FAA expects severe
congestion-related delays would occur
at LGA and at other airports throughout
the National Airspace System (NAS).
The FAA will continue to monitor
performance and runway capacity at
LGA to determine if changes are
warranted.
Supplemental Notice of Proposed Rulemaking. 73
FR 20846 (Apr. 17, 2008).
4 71 FR 77854.
5 72 FR 63224; 73 FR 48428.
6 73 FR 60574, amended by 73 FR 66517 (Nov.
10, 2008).
7 74 FR 52132 (Oct. 9, 2009).
8 74 FR 51653.
9 76 FR 18616, amended by 77 FR 30585 (May 23,
2012).
10 78 FR 28278.
11 79 FR 17222.
12 Docket No. FAA–2006–25755 includes a copy
of the MITRE analysis completed for the FAA.
E:\FR\FM\25MYR1.SGM
25MYR1
Agencies
[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Rules and Regulations]
[Pages 33123-33126]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12447]
========================================================================
Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
Prices of new books are listed in the first FEDERAL REGISTER issue of each
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========================================================================
Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Rules
and Regulations
[[Page 33123]]
SMALL BUSINESS ADMINISTRATION
13 CFR Part 120
RIN 3245-AG79
Debt Refinancing in 504 Loan Program
AGENCY: U.S. Small Business Administration.
ACTION: Interim final rule with request for comments.
-----------------------------------------------------------------------
SUMMARY: This interim final rule implements Section 521 of Division E
the Consolidated Appropriations Act, 2016, which authorizes projects
approved for financing under Title V of the Small Business Investment
Act to include the refinancing of qualified debt.
DATES: Effective Date: This rule is effective June 24, 2016.
Comment Date: Comments must be received on or before July 25, 2016.
ADDRESSES: You may submit comments, identified by RIN 3245-AG79, by any
of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov. Follow the
instructions for submitting comments.
Mail: Linda Reilly. Chief, 504 Branch, Office of Financial
Assistance, U.S. Small Business Administration, 409 Third Street SW.,
8th Floor, Washington, DC 20416.
Hand Delivery/Courier: Linda Reilly, Chief, 504 Branch, Office of
Financial Assistance, U.S. Small Business Administration, 409 Third
Street SW., 8th Floor, Washington, DC 20416.
SBA will post all comments on https://www.regulations.gov. If you
wish to submit confidential business information (CBI) as defined in
the User Notice at https://www.regulations.gov, please submit the
information to Linda Reilly, Chief, 504 Branch, Office of Financial
Assistance, 409 Third Street SW., Washington, DC 20416, or send an
email to 504refi@sba.gov. Highlight the information that you consider
to be CBI and explain why you believe SBA should hold this information
as confidential. SBA will review the information and make the final
determination whether it will publish the information.
FOR FURTHER INFORMATION CONTACT: Linda Reilly at linda.reilly@sba.gov
or 202-205-9949.
SUPPLEMENTARY INFORMATION:
I. Background Information
The 504 Loan Program is an SBA financing program authorized under
Title V of the Small Business Investment Act of 1958, 15 U.S.C. 695 et
seq. The core mission of the 504 Loan Program is to provide long-term
financing to small businesses for the purchase or improvement of land,
buildings, and major equipment, in an effort to facilitate the creation
or retention of jobs and local economic development. Under the 504 Loan
Program, loans are made to small business applicants by Certified
Development Companies (``CDCs''), which are certified and regulated by
SBA to promote economic development within their community. In general,
a project in the 504 Loan Program (a ``504 Project'') includes: A loan
obtained from a private sector lender with a senior lien covering at
least 50 percent of the project cost; a loan obtained from a CDC (a
``504 Loan'') with a junior lien covering up to 40 percent of the total
cost (backed by a 100 percent SBA-guaranteed debenture); and a
contribution from the Borrower of at least 10 percent equity.
The Small Business Jobs Act of 2010 (Jobs Act), Public Law 111-240,
124 Stat. 2504, enacted on September 27, 2010, temporarily expanded the
ability of a small business to use the 504 Loan Program to refinance
certain qualifying debt. Prior to the Jobs Act, a 504 Project could
include a refinancing component only if the project involved an
expansion of the small business and the existing indebtedness did not
exceed 50% of the project cost of the expansion. See 13 CFR 120.882(e).
The temporary Jobs Act program authorized the use of the 504 Loan
Program for the refinancing of debt where there is no expansion of the
small business concern (the ``Debt Refinancing Program''). The
regulations governing this program are found at 13 CFR 120.882(g)
(referred to herein as ``Current Rules''). SBA's authority to guarantee
loans under the Debt Refinancing Program expired on September 27, 2012.
Section 521 of Division E of the Consolidated Appropriations Act,
2016 (the Act), Public Law 114-113, enacted on December 22, 2015,
reauthorizes the Debt Refinancing Program with three modifications:
(1) The Act provides that the Debt Refinancing Program shall be in
effect in any fiscal year during which the cost to the Federal
Government of making guarantees under the Debt Refinancing Program and
under the 504 Loan Program is zero;
(2) the Act requires that a CDC limit its financings under the 504
Loan Program so that, during any fiscal year, new financings under the
Debt Refinancing Program do not exceed 50% of the dollars the CDC
loaned under the 504 Loan Program during the previous fiscal year. The
Act provides that this limitation may be waived upon application by a
CDC and after determining that the refinance loan is needed for good
cause; and
(3) the Act eliminates the alternate job retention goal authorized
by the Jobs Act for the Debt Refinancing Program.
As described in the section-by-section analysis below, this interim
final rule modifies the Current Rules to conform the Debt Refinancing
Program to the requirements of the Act. For an in-depth discussion of
the Current Rules, please see the interim final rule and the final rule
that were issued to implement the Debt Refinancing Program at 76 FR
9213 (February 17, 2011) and 76 FR 63151 (October 12, 2011). With this
interim final rule, SBA invites comments from interested parties on all
aspects of the Debt Refinancing Program.
The ``zero cost'' requirement described in (1) above is satisfied
for Fiscal Year 2016. As announced in SBA Information Notice 5000-1352,
effective September 28, 2015, ``7(a) and 504 Fees Effective October 1,
2015,'' the 504 Loan Program is operating at zero subsidy during Fiscal
Year 2016, with a zero upfront fee and an annual guarantee fee of 91.4
basis points on the outstanding loan balance. To operate the Debt
Refinancing Program at zero cost to the Federal Government during
Fiscal Year 2016, SBA has determined that the Borrower must pay a
supplemental annual guarantee fee of 4.4 basis points
[[Page 33124]]
on the outstanding loan balance to cover the additional cost
attributable to the refinancing, for a total annual guarantee fee of
95.8 basis points. The supplemental fee for the Debt Refinancing
Program will be assessed and collected in the same manner as the
current annual guarantee fee under 13 CFR 120.971(d)(2).
Before the beginning of each new fiscal year, SBA will issue a
similar notice indicating whether the Debt Refinancing Program will be
in effect during the new fiscal year, in addition to any changes in the
fees for 504 Loans.
With the ``zero cost'' requirement satisfied for Fiscal Year 2016,
SBA will begin to accept applications for assistance under the Debt
Refinancing Program upon the effective date of this rulemaking, June
24, 2016.
II. Section-by-Section Analysis
Except as set forth below, all other sections of the Current Rules
are unchanged.
Section 120.882(g) Introductory Text. This section currently
includes the application deadline for the Debt Refinancing Program.
Since that date is no longer relevant, SBA is revising the introductory
text in this section to remove the following phrase that is no longer
applicable: ``For applications received on or after February 17, 2011
and approved by SBA no later than September 27, 2012''. Also, with the
permanent reauthorization of the Debt Refinancing Program by the Act, a
specific application period is unnecessary.
Section 120.882(g)(3). In order to manage the limited resources
that were available for the Debt Refinancing Program between 2010 and
2012, this section imposed a maturity date requirement on the debt to
be refinanced that is no longer necessary. Accordingly, SBA is revising
this section by removing this maturity date requirement. In its place,
SBA is inserting the Act's requirement that, for the Debt Refinancing
Program to be in effect during any fiscal year, the cost to the Federal
government of making guarantees under the Debt Refinancing Program and
under the 504 Loan Program must be zero subsidy.
Section 120.882(g)(10). The Jobs Act authorized an alternate job
retention goal for the Debt Refinancing Program for Borrowers that did
not meet the job creation and retention goals under sections 501(d) and
(e) of the Small Business Investment Act of 1958. The Act eliminates
this alternate job retention goal and, accordingly, SBA is removing the
alternate job retention goal provision from the regulations. With the
elimination of the alternate job retention standard, all applicants for
a loan under the Debt Refinancing Program will now be required to meet
the job creation and retention goals under Sec. Sec. 501(d) and (e).
Based on these goals, a 504 Project, including a project financed under
the Debt Refinancing Program, must achieve one of the economic
development objectives set forth in 13 CFR 120.861 or 120.862.
The revisions to Sec. 120.882(g)(10) will reflect the Act's
requirement that a CDC limit its financings under the Debt Refinancing
Program so that, during any fiscal year (October 1 to September 30),
new financings under the Debt Refinancing Program do not exceed 50% of
the dollars loaned by the CDC under the 504 Loan Program during the
previous fiscal year. In making this calculation, the dollars will be
deemed loaned by the CDC on the date that the 504 loan application is
approved, which is when SBA obligates the funds for the 504 Project.
The dollars loaned will be calculated as of September 30 of each fiscal
year, which will reflect any increases or decreases to the approved 504
loan amount that occurred within that fiscal year. Because the Act
provides that the 50% limitation applies to the dollars loaned under
the 504 Loan Program during the previous fiscal year, all financings
made by the CDC during the previous fiscal year will be included in
determining this number, including those financings made under the Debt
Refinancing Program.
As authorized by the Act, Sec. 120.882(g)(10) will provide that
the 50% limitation may be waived upon application by a CDC and a
determination by SBA that the refinance loan is needed for good cause.
SBA will provide guidance regarding the good cause determination in its
Standard Operating Procedures or other guidance documents.
Section 120.882(g)(13). This section prohibits the Third Party Loan
from being sold on the secondary market as a part of a pool guaranteed
under subpart J of part 120 when the debt being refinanced is same
institution debt. Subpart J of part 120, the Secondary Market Guarantee
Program for First Lien Position 504 Loan Pools, expired on September
23, 2012; however, should this program be reauthorized, SBA wants to
ensure that this prohibition remains in effect. Accordingly, SBA is
revising this provision to make it clear that the prohibition would
apply to any successor to the program described in subpart J of part
120.
Section 120.882(g)(15) (Definition of ``qualified debt''). To meet
the definition of ``qualified debt'', paragraph (vii) of this provision
requires that the applicant be current on all payments due for not less
than one year preceding the date of application. When SBA initially
implemented the Debt Refinancing Program under the Jobs Act, it defined
``current on all payments due'' to mean that no payment scheduled to be
made during the one year period was either deferred or more than 30
days past due. See 76 FR 9213 (February 17, 2011). In response to
comments received, SBA revised this definition to mean that no payment
was more than 30 days past due from either the original payment terms
or modified payment terms (including deferments) ``if such modification
was agreed to in writing by the Borrower and the lender of the existing
debt prior to the (sic) October 12, 2011.'' See 76 FR 63151 (October
12, 2011). This date was the effective date of the final rule for the
Debt Refinancing Program under the Jobs Act, and was intended to ensure
that no debt that was modified after the definition was revised would
be refinanced under the program. SBA also reserved the right to
determine, at its discretion on a loan-by-loan basis, whether modified
repayment terms would preclude refinancing under the program.
The October 12, 2011 date is no longer relevant after the
expiration of the Debt Refinancing Program in 2012, and SBA is removing
it from the rules. However, SBA believes that a debt should not be
considered ``current on all payments due for not less than one year
preceding the date of application'' if the payment terms were modified
during the one year period. Accordingly, SBA is revising this provision
to require that the modification must have been agreed to in writing by
the Borrower and the lender of the existing debt no less than one year
preceding the date of application. As under the Debt Refinancing
Program under the Jobs Act, SBA reserves the right to determine, at its
discretion on a loan-by-loan basis, whether modified repayment terms
would preclude refinancing under the program.
III. Justification for Publication as Interim Final Rule
In general, before issuing a final rule, SBA publishes the rule for
public comment in accordance with the Administrative Procedure Act
(APA), 5 U.S.C. 553. The APA provides an exception to this standard
rulemaking process where the agency finds good cause to adopt a rule
without prior public participation. 5 U.S.C. 553(c)(3)(B). The good
cause
[[Page 33125]]
requirement is satisfied when prior public participation can be shown
to be impracticable, unnecessary, or contrary to the public interest.
Under such circumstances, an agency may publish an interim final rule
without soliciting public comment. In enacting the good cause exception
to standard rulemaking procedures, Congress recognized that emergency
and other situations arise where an agency can issue a rule without
public participation.
With regard to the Debt Refinancing Program, SBA finds that good
cause exists to publish this rule as an interim final rule for two
reasons. First, the public has already had the opportunity to comment
on the rules implementing the Debt Refinancing Program and this interim
final rule simply modifies these rules to conform the Debt Refinancing
Program to the requirements of the Act.
Second, in order to meet the immediate debt refinancing needs of
small businesses, it is essential to be able to implement the Debt
Refinancing Program as expeditiously as possible. According to data
presented to the Federal Open Market Committee before its January 2016
meeting, there is a concerning trend toward tighter credit sentiment by
bank officers since the Debt Refinancing Program expired in 2012. The
combination of tighter credit sentiment and the recent increase in
interest rates has made it increasingly difficult for small businesses
to find lenders willing to refinance small business commercial loans.
The Debt Refinancing Program will fill that gap by providing an
affordable refinancing product that lenders and the small business
community are eagerly awaiting.
Although this rule is being published as an interim final rule,
comments are solicited from interested members of the public. These
comments must be submitted on or before the deadline for comments
stated in this rule. The SBA will consider any comments it receives and
the need for making any amendments as a result of the comments.
Compliance With Executive Orders 12866, 12988, 13132, and 13563, the
Paperwork Reduction Act (44 U.S.C., Ch. 35), and the Regulatory
Flexibility Act (5 U.S.C. 601-612)
Executive Order 12866
The Office of Management and Budget has determined that this rule
does not constitute a ``significant regulatory action'' under Executive
Order 12866. This rule is also not a major rule under the Congressional
Review Act.
Executive Order 12988
This action meets applicable standards set forth in sections 3(a)
and 3(b)(2) of Executive Order 12988, Civil Justice Reform, to minimize
litigation, eliminate ambiguity, and reduce burden. The action does not
have preemptive effect or retroactive effect.
Executive Order 13132
This rule does not have federalism implications as defined in
Executive Order 13132. It will not have substantial direct effects on
the States, on the relationship between the national government and the
States, or on the distribution of power and responsibilities among the
various levels of government, as specified in the Executive Order. As
such it does not warrant the preparation of a Federalism Assessment.
Executive Order 13563
The Consolidated Appropriations Act, 2016, reauthorizes the Debt
Refinancing Program, which was first authorized by the Jobs Act. The
Agency received significant public comments on the interim final rule
that was issued to implement this program (see 76 FR 9213, February 17,
2011). SBA considered and discussed these comments in the final rule
that was published in the Federal Register on October 12, 2011 (76 FR
63151). To assist in developing that interim final rule, the Agency
also held a public forum on November 17, 2010 in Boston, Massachusetts.
Except for the modifications to the Debt Refinancing Program made
by the Act, the Agency is not making any other substantive changes to
the Current Rules, codified at 13 CFR 120.882(g), in this interim final
rule.
Paperwork Reduction Act
In order to re-establish the Debt Refinancing Program, SBA has
determined that it is necessary to also modify two existing collections
of information (OMB Control Number 3245-0071, Application for Section
504 Loans and OMB Control Number 3245- 0346, PCLP Quarterly Loan Loss
Reserve Report and PCLP Guarantee Request) to include the requirements
to apply for and report on debt refinancing loans. These requirements
were previously part of these collections but were removed following
expiration of the temporary Debt Refinancing Program in 2012. OMB has
approved the revised collections on an emergency basis to enable SBA to
move forward with re-establishing the Debt Refinancing Program as
expeditiously as possible. The Paperwork Reduction Act requires
agencies to follow the standard approval process following receipt of
an emergency approval. In light of that requirement, SBA will also
publish the required notices in the Federal Register to solicit
comments from the public on the revised forms and will subsequently
resubmit the collections of information to OMB for final review and
approval. Any changes to the collection of information as a result of
the comments will be reflected in that submission.
Regulatory Flexibility Act
Because this rule is an interim final rule, there is no requirement
for SBA to prepare a Regulatory Flexibility Act (RFA) analysis. The RFA
requires administrative agencies to consider the effect of their
actions on small entities, including small non-profit businesses, and
small local governments. Pursuant to the RFA, when an agency issues a
rule, the agency must prepare an analysis that describes whether the
impact of the rule will have a significant economic impact on a
substantial number of these small entities. However, the RFA requires
such analysis only where notice and comment rulemaking is required. As
discussed above, SBA has determined that there is good cause to publish
this rule without soliciting public comment. This rule is, therefore,
exempt from the RFA requirements.
List of Subjects in 13 CFR Part 120
Loan programs--business, Small businesses, Reporting and
recordkeeping requirements.
For the reasons stated in the preamble, SBA amends 13 CFR part 120
as follows:
PART 120--BUSINESS LOANS
0
1. The authority citation for part 120 is revised to read as follows:
Authority: 15 U.S.C. 634(b)(6), (b)(7), (b)(14), (h), and note,
636(a), (h) and (m), 650, 687(f), 696(3), and 697(a) and (e); Public
Law 111-5, 123 Stat. 115, Public Law 111-240, 124 Stat. 2504; Public
Law 114-113, 129 Stat. 2242.
0
2. Amend Sec. 120.882 by revising paragraph (g) introductory text,
paragraphs (g)(3), (g)(10), (g)(13), and the second sentence of
paragraph (vii) in the definition of ``Qualified debt'' in paragraph
(g)(15)(vii) to read as follows:
Sec. 120.882 Eligible project costs for 504 loans.
* * * * *
(g) SBA may approve a Refinancing Project of a qualified debt
subject to the following conditions and requirements:
* * * * *
[[Page 33126]]
(3) The cost to the Federal Government of making guarantees under
this subsection (g) and under section 503 of the Small Business
Investment Act of 1958 (15 U.S.C. 697) during the fiscal year in which
the guarantee is made is zero;
* * * * *
(10) A CDC must limit the amount of its loans under this paragraph
(g) so that, during any Federal fiscal year, the amount of the new
loans approved under this paragraph (g) does not exceed 50% of the
total dollar amount of the CDC's 504 loans approved (including the
loans approved under this paragraph (g)) during the previous fiscal
year. This limitation may be waived upon application by the CDC and
upon a determination by SBA that the refinance loan is needed for good
cause.
* * * * *
(13) The Third Party Loan may not be sold on the secondary market
as a part of a pool guaranteed under subpart J of this part, or any
successor to this program, when the debt being refinanced is same
institution debt;
* * * * *
(15) * * *
Qualified debt * * *
(vii) * * * For the purposes of this paragraph (vii), ``current on
all payments due'' means that no payment was more than 30 days past due
from either the original payment terms or modified payment terms
(including deferments) if such modification was agreed to in writing by
the Borrower and the lender of the existing debt no less than one year
preceding the date of application. * * *
* * * * *
Maria Contreras-Sweet,
Administrator.
[FR Doc. 2016-12447 Filed 5-23-16; 4:15 pm]
BILLING CODE 8025-01-P